Form N-CSR

Number of
Contracts

Notional
Amount
($)

Current Value/
Unrealized
Depreciation
($)

Futures Contracts

S&P 500 Index, e-mini, expires 12/21/18

Laudus MarketMasters Funds

Performance at a Glance

The performance data quoted represents past performance. Past performance does not guarantee future results. Investment returns and principal value of an investment 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/laudusfunds_prospectus.

Total Return for the 12 Months Ended October 31, 2018
Laudus Small-Cap MarketMasters Fund
Investor Shares (Ticker Symbol: SWOSX)	-1.99%
Select Shares^® (Ticker Symbol: SWMSX)	-1.79%
Russell 2000^® Index	1.85%
Fund Category: Morningstar Small Blend¹	-0.07%
Performance Details	pages 8-11

Laudus International MarketMasters Fund
Investor Shares² (Ticker Symbol: SWOIX)	-11.21% ³
Select Shares^®² (Ticker Symbol: SWMIX)	-11.09%
MSCI EAFE^® Index (Net)⁴	-6.85%
Fund Category: Morningstar Foreign Large Growth¹	-7.67%
Performance Details	pages 12-15

Minimum Initial Investment⁵
Investor Shares	$ 100
Select Shares^®	$ 50,000

All total returns on this page assume dividends and distributions were reinvested. Index figures do not include trading and management costs, which would lower performance. Indices are unmanaged and cannot be invested in directly. Performance results less than one year are not annualized.

For index definitions, please see the Glossary.

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

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

Foreign securities can involve risks such as political and economic instability and currency risk. These risks may be greater in emerging markets.

¹	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.
²	The fund’s performance relative to the index may be affected by fair-value pricing and timing differences in foreign exchange calculations. See financial note 2 for more information.
³	Total return for the report period presented in the table differs from the return in the Financial Highlights. The total return presented in the above table is calculated based on the net asset value (NAV) at which shareholder transactions were processed. The total return presented in the Financial Highlights section of the report is calculated in the same manner, but also takes into account certain adjustments that are necessary under generally accepted accounting principles required in the annual and semiannual reports.
⁴	The net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.
⁵	Please see the funds’ prospectus for further detail and eligibility requirements.

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Laudus MarketMasters Funds | Annual Report

Laudus MarketMasters Funds

From the CEO

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

Dear Shareholder,

Market downturns such as the one we experienced in October can be painful, but we can also learn from them. Every investor has a sense for how much risk they are willing to take. In fact, at many financial services firms, new clients are asked about their tolerance for risk, and specifically how they would feel under certain loss scenarios. It seems like a simple exercise, but it’s an important one, as it empowers investors to accept only those risks they are able to withstand.

But months like October—during which the S&P 500^® Index declined 6.8%—can rattle even the most experienced investors and make them start to reconsider their appetite for risk. At Charles Schwab Investment Management, we understand that every investor thinks about risk differently and that those perspectives can change. That’s why we focus on providing foundational products that suit a range of risk appetites, and on consistently offering transparency to investors in the face of ever-changing market conditions.

We also believe that one of the best methods for managing risk and weathering market ups and downs over time is diversification. The idea of spreading risk over a broad array of asset classes has been a key feature of risk management since the beginnings of modern portfolio theory, and remains true today.

The Laudus MarketMasters Funds play a role in our goal of providing our clients a diverse variety of investment choices. We introduced the Funds to help meet the needs of investors who want to diversify their portfolios with investments in international markets and small-cap stocks managed by multiple institutional investment managers. With a rigorous manager selection process and ongoing oversight by our sub-advisor oversight team, both funds include both growth- and value-oriented investment managers and can serve as a complement to our other funds in an investor’s portfolio.

For more than 25 years, Charles Schwab Investment Management has offered a straightforward lineup of products and solutions, while consistently offering quality and value to investors. When I joined the firm in 2010, I couldn’t have imagined how far we would advance that mission. We have led the way in bringing expenses down for many of our funds while building out a robust suite of products with our investors’ needs in mind. And a big reason we’ve been able to accomplish those objectives is the skilled group of people we have here who share my belief that investing can change lives.

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Laudus MarketMasters Funds | Annual Report

Laudus MarketMasters Funds

The Investment Environment

For the 12-month reporting period ended October 31, 2018, global equity markets were mixed. In the U.S., steady economic growth, solid corporate earnings, and robust consumer spending helped propel U.S. stock markets to record highs before falling back precipitously in a volatile October, giving back much of the gains achieved during the preceding 11 months. For the reporting period, the S&P 500^® Index, a bellwether for the overall U.S. stock market, returned 7.35% and the Russell 2000^® Index, a measure of U.S. small-cap stocks, returned 1.85%. Markets outside the U.S. were notably weaker as economic momentum slowed due to uncertainties from several fronts, including trade, inflation, and geopolitical concerns. This was compounded by October’s market volatility, which dampened European and Asian markets as well as those in the U.S. The MSCI EAFE^® Index (Net)*, a broad measure of developed international equity performance, returned -6.85%.

Global economic growth was uneven over the reporting period. The U.S. economy continued to grow steadily as it entered its tenth year of expansion, buoyed by tax reform, strong corporate earnings, and still-accommodative financial conditions. Nonfarm payrolls were steady and U.S. gross domestic product (GDP) grew at an annual rate of 3.5% in the third quarter of 2018, down from 4.2% in the second quarter but up from just over 2% for the previous two quarters. Consumer confidence rose to an 18-year high during the period, the highest since 2000. Despite a tight labor market and growing economy, inflation and wage growth remained in check, although pressure on wage growth rose toward the end of the reporting period. Conditions in other regions outside the U.S. softened, however. In the eurozone, growth slowed, subdued by higher inflation and tepid wage growth that constrained consumer spending. Over the third quarter of 2018, the eurozone economy expanded by just 0.2%, down from 0.4% in the first two quarters of 2018 and 0.7% in the last quarter of 2017. Japan’s economy contracted slightly in the first quarter of 2018—for the first time since late 2015—but had regained its modest upward trajectory by the end of the reporting period. The United Kingdom’s economy also contracted in the first quarter of 2018 but resumed its gradual, albeit modest, expansion by period-end.

Asset Class Performance Comparison % returns during the 12 months ended October 31, 2018

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.

For index definitions, please see the Glossary.

Data source: Index provider websites and CSIM.

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

Management views 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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Laudus MarketMasters Funds | Annual Report

Laudus MarketMasters Funds

The Investment Environment (continued)

Despite rising to a nearly three-year high during the reporting period, oil prices fell precipitously during October amid concerns of a global oil glut. As of the end of the reporting period, the Organization of the Petroleum Exporting Countries (OPEC) had cut its oil demand forecast for 2019. Demand has been particularly impacted by poor economic performance in China, Brazil, and Europe, while supply has risen, notably due to the growth of shale in the U.S. and strong increases in Russian oil production.

During the reporting period, monetary policy measures for the most part remained accommodative but were tightened in several developed international markets in anticipation of rising inflation due to elevated oil prices, expectations of increases in agricultural prices, and higher GDP growth. In the U.S., the Federal Reserve (Fed), in its efforts to achieve more normalized monetary policy, raised the federal funds rate by 0.25% four times over the reporting period—in December, March, June, and September—and signaled the likelihood of an additional rate hike before year-end as well as more to come in 2019. Short-term interest rates ended the reporting period in a target range of 2.00% to 2.25%. The Fed also continued its program to slowly reduce the size of its balance sheet by allowing securities to mature without reinvesting the proceeds. As of the end of the reporting period, the Fed’s balance sheet stood at under $4.2 trillion, down from $4.5 trillion when the program was announced in June 2017. Outside the U.S., most central banks maintained their existing monetary policies or, in some cases in the face of signs of rising inflation, tightened their policies. The European Central Bank held interest rates steady at its October meeting and reiterated that it would likely maintain those rates through next summer, but confirmed its plans to phase out its monthly asset purchase program by year-end. Also in October, the Bank of Japan upheld its short-term interest rate target of –0.1% and slightly trimmed its inflation forecasts. In August, the Bank of England raised its key official bank rate from 0.50% to 0.75%, following a quarter-point increase in November 2017, despite ongoing uncertainties over the United Kingdom’s economy’s wider direction.

After hitting its all-time low in November, the Cboe Volatility Index^® (VIX^®)¹, a gauge of equity market volatility, spiked to levels not seen since 2015. After moderating over the spring and summer, the VIX spiked again in October amid sharp swings in the stock market throughout the month, with key U.S. market indices erasing much of the hefty gains they had achieved over the spring and summer. Outside the U.S., markets generally followed suit but showed increasing weakness over the second half of the reporting period. Technology (tech) stocks were particularly hard-hit, with 80% of tech stocks entering bear-market territory after October’s stock market sell-off, due to a combination of rising interest rates, concerns about trade tensions with China that are impacting supply chains worldwide, and increased regulatory scrutiny that impacted several large tech companies. Value stocks underperformed growth stocks by a wide margin over the reporting period, largely the result of high levels of consumer optimism and tax reform that took effect in January.

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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Laudus MarketMasters Funds | Annual Report

Laudus Small-Cap MarketMasters Fund

The Laudus MarketMasters Funds use a multi-manager strategy. Charles Schwab Investment Management, Inc. (CSIM)—the funds’ investment adviser—selects investment subadvisers with strong long-term track records to manage a portion of each fund’s assets. In addition to selecting investment subadvisers and allocating assets among them, CSIM is responsible for monitoring and coordinating the overall management of the funds. Each subadviser manages its respective portfolio relative to a comparative index that reflects its individual process and philosophy. The subadviser comparative indices may differ from a fund’s comparative index.

Market Highlights. For most of the reporting period, U.S. small-cap stocks delivered strong returns. Volatility spiked in February, however, driving stocks lower. October also saw a marked increase in volatility, and stocks across sectors plunged, erasing nearly all of their gains of the preceding 11 months. From November to early March, small-cap stocks underperformed large-cap stocks but gained the advantage from mid-March through September, until falling more steeply than large-cap stocks during October. Though the Federal Reserve raised the federal funds rate four times during the reporting period, financial conditions remained generally accommodative, which—along with tax reform, strong corporate earnings, and low unemployment—supported U.S. stock market performance over most of the period. From a sector perspective, among U.S. small-cap stocks, the Health Care and Communications Services sectors were the top performers, while the Materials, Energy, and Industrials sectors were the weakest.

Performance. For the 12-month reporting period ended October 31, 2018, the Investor Shares of the Laudus Small-Cap MarketMasters Fund (the fund) returned -1.99%, underperforming the fund’s comparative index, the Russell 2000^® Index (the index), which returned 1.85%.

Positioning and Strategies. Over the 12-month reporting period, all three of the fund’s subadvisers underperformed their comparative indices, and two posted negative returns.

The fund’s value subadviser, Wellington Management Company, LLP, had the greatest drag on the fund’s total return, posting the largest negative return among the fund’s three subadvisers for the reporting period. It also detracted from the fund’s relative performance, due to both small-cap value’s weakness over the period as well as Wellington’s underperformance of its comparative index, the Russell 2000^® Value Index. That underperformance was primarily due to its sector allocations, with its underweight to the Consumer Discretionary sector the most detrimental, but also from its overweights to the Industrials and Materials sectors. Its underweight to the Real Estate sector contributed positively to relative performance. Wellington’s stock selection also detracted across multiple sectors, most significantly within the Information Technology and Real Estate sectors, although its stock selection within the Industrials and Materials sectors contributed positively.

Voya Investment Management Co. LLC, with its small-cap growth focus, also posted a negative return for the period, despite small-cap growth’s relative strength for the period. In addition, Voya underperformed its comparative index, the Russell 2000^® Growth Index, primarily due to its stock selection within the Health Care and Consumer Discretionary sectors. Voya’s allocation across sectors also detracted, although to a lesser degree, most notably due to its underweight to the Consumer Staples sector and overweight to the Materials sector.

During the first quarter of 2018, the fund’s subadviser The Boston Company Asset Management LLC became a part of BNY Mellon Asset Management North America Corp. BNY Mellon focuses on small- and mid-cap core stocks. The fund’s allocation to BNY Mellon contributed positively to the fund’s total return due to the subadviser’s positive return, but it detracted from relative performance due to BNY Mellon’s underperformance of its comparative index, the Russell 2500^TM Index. That underperformance was due primarily to its stock selection, particularly within the Materials and Consumer Discretionary sectors, although its stock selection within the Information Technology and Health Care sectors contributed positively. In terms of sector allocations, BNY Mellon’s overweights to the Materials and Energy sectors detracted the most from the fund’s relative performance. Its overweight to the Information Technology sector and significant underweight to the Real Estate sector contributed positively, but not enough to offset the detracting allocations.

Management views may have changed since the report date.

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Laudus MarketMasters Funds | Annual Report

Laudus Small-Cap MarketMasters Fund

Performance and Fund Facts as of October 31, 2018 (continued)

Average Annual Total Returns¹

Fund and Inception Date	1 Year	5 Years	10 Years
Investor Shares (9/16/97)	-1.99%	4.79%	9.54%
Select Shares^® (6/9/04)	-1.79%	4.94%	9.71%
Russell 2000^® Index	1.85%	8.01%	12.44%
Fund Category: Morningstar Small Blend²	-0.07%	6.75%	12.10%
Fund Expense Ratios³: Investor Shares: Net 1.39%; Gross 1.60% / Select Shares: Net 1.24%; Gross 1.55%

Investment Managers and Allocations⁴

Investment Managers	Investment Style	% of Net Assets
Wellington Management Company, LLP	Small-Cap Value	35.8%
Voya Investment Management Co. LLC	Small-Cap Growth	34.5%
BNY Mellon Asset Management North America Corp.	Small-/Mid-Cap Core	24.3%
BNY Mellon Asset Management North America Corp.	Small-Cap Blend	0.0% ⁵
Cash & other assets		5.4%

For index definitions, please see the Glossary.

¹	Fund expenses may have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
²	Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date.
³	As stated in the prospectus. Includes 0.04% 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 for so long as CSIM serves as the investment adviser to the fund. Gross Expense: Does not reflect the effect of contractual fee waivers. For actual ratios during the period, refer to the financial highlights section of the financial statements.
⁴	For more information about each of the investment manager’s investment styles, refer to the fund’s prospectus.
⁵	Less than 0.05%.

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Laudus MarketMasters Funds | Annual Report

Laudus International MarketMasters Fund

Market Highlights. Stocks in developed international markets struggled over the reporting period, underperforming U.S. stocks. Conditions in developed international markets softened from multiple fronts including slowing growth, rising oil prices, trade concerns, higher inflation, and tepid wage growth that constrained consumer spending. Volatility spiked in both February and October, driving stocks down. Many central banks, including the European Central Bank and the Bank of Japan, maintained generally accommodative monetary policies and the Bank of England raised its key interest rate twice during the period. Over the period the U.S. dollar appreciated against a basket of international currencies, putting pressure on overseas investments in U.S. dollar terms.

Performance. For the 12-month period ended October 31, 2018, the Investor Shares of the Laudus International MarketMasters Fund (the fund) returned -11.21%, underperforming the fund’s comparative index, the MSCI EAFE^® Index (Net) (the index), which returned -6.85%.

Positioning and Strategies. Over the 12-month reporting period, one in which international equities were particularly weak, all four of the fund’s active subadvisers posted negative returns, and two underperformed their comparative indices. All of the comparative indices of the fund’s subadvisers posted negative returns for the period.

Among the fund’s four active subadvisers, Harris Associates L.P. posted the weakest total return and underperformed its international value comparative index, detracting from the fund’s relative performance, as international value stocks were particularly weak for the reporting period. Harris’s underperformance was primarily due to its stock selection, although its sector allocations detracted but to a lesser degree. Its stock selection was weakest within the Consumer Discretionary sector, but was also weak within the Financials, Communications Services, and Health Care sectors. Stock selection contributed positively within the Information Technology and Consumer Staples sectors. From a sector allocation perspective, Harris’s significant underweight to the Energy sector was its single largest detractor, followed by its underweight to the Health Care sector and strong overweight to the Consumer Discretionary sector. Its overweight to Materials and underweight to Communications Services contributed modestly. From a geographic standpoint, Harris was weakest in the United Kingdom and its strongest contribution came from Spain.

American Century Investment Management, Inc., which focuses on international small-cap growth, also posted a negative total return, but slightly outperformed its comparative index contributing to relative performance. That outperformance of its comparative index was largely due to its stock selection, most notably within the Materials, Health Care, and Information Technology sectors. Its stock selection detracted within the Industrials, Consumer Discretionary, and Real Estate sectors, but not enough to overshadow the positive contribution. American Century’s sector allocations detracted somewhat from the fund’s relative performance, most notably due to its overweight of the Information Technology and Financials sectors. Its underweight to the Industrials sector contributed modestly. Geographically, American Century was weakest in Japan and its strongest contribution came from Brazil.

The fund’s subadviser William Blair Investment Management, LLC, with its focus on international multi-cap growth, also detracted from the fund’s overall relative performance. While William Blair’s allocations across sectors had no net impact, its stock selection detracted, particularly within the Financials, Communications Services, and Consumer Discretionary sectors. Its stock selection contributed positively within the Energy, Information Technology, and Real Estate sectors. From a geographic standpoint, William Blair was weakest within Japan and strongest in Germany.

Mondrian Investment Partners Limited, with its international small-cap value focus, also posted a negative total return but outperformed its comparative index, contributing to relative performance. That outperformance of its comparative index was largely due to effective stock selection, particularly within the Industrials sector but also within the Consumer Staples and Communications Services. Its stock selection within the Utilities, Consumer Discretionary and Information Technology sectors detracted somewhat. Mondrian’s sector allocations detracted somewhat primarily due to its underweight to the Real Estate sector, but also to its overweight to the Industrials sector and lack of exposure to the Energy sector. Its lack of exposure to the Financials sector, however, contributed positively. Geographically, Mondrian’s allocation to the United Kingdom provided the strongest contribution and its allocation to Germany was the weakest.

During the first quarter of 2018, the fund’s subadviser Mellon Capital Management Corp. became a part of BNY Mellon Asset Management North America Corp. BNY Mellon seeks to track the performance of the fund’s index by employing a strategic trading approach to minimize transaction costs and preserve value. Over the reporting period, the fund’s allocation to BNY Mellon performed in line with this objective, although it slightly underperformed the fund’s index.

The fund made no active adjustments to its investment manager exposures over the reporting period.

Management views may have changed since the report date.

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Laudus MarketMasters Funds | Annual Report

Laudus International MarketMasters Fund

Performance and Fund Facts as of October 31, 2018 (continued)

Average Annual Total Returns¹

Fund and Inception Date	1 Year	5 Years	10 Years
Investor Shares (10/16/96)	-11.21% ²	2.34%	9.57%
Select Shares^® (4/2/04)	-11.09%	2.49%	9.73%
MSCI EAFE^® Index (Net)³	-6.85%	2.02%	6.89%
Fund Category: Morningstar Foreign Large Growth⁴	-7.67%	3.03%	7.94%
Fund Expense Ratios⁵: Investor Shares: Net 1.40%; Gross 1.61% / Select Shares: Net 1.25%; Gross 1.53%

Investment Managers and Allocations⁶

Investment Managers	Investment Style	% of Net Assets
American Century Investment Management, Inc.	International Small-Cap Growth	24.4%
Mondrian Investment Partners Limited	International Small-Cap Value	24.3%
Harris Associates L.P.	International Large-Cap Value	21.1%
William Blair Investment Management, LLC	International Multi-Cap Growth	20.7%
BNY Mellon Asset Management North America Corp.	International Blend	5.5%
Cash & other assets		4.0%

For index definitions, please see the Glossary.

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

¹	Fund expenses may have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
²	Total return for the report period presented in the table differs from the return in the Financial Highlights. The total return presented in the above table is calculated based on the net asset value (NAV) at which shareholder transactions were processed. The total return presented in the Financial Highlights section of the report is calculated in the same manner, but also takes into account certain adjustments that are necessary under generally accepted accounting principles required in the annual and semiannual reports.
³	The net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.
⁴	Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date.
⁵	As stated in the prospectus. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as the investment adviser to the fund. Gross Expense: Does not reflect the effect of contractual fee waivers. For actual ratios during the period, refer to the financial highlights section of the financial statements.
⁶	For more information about each of the investment manager’s investment styles, refer to the fund’s prospectus.

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Laudus MarketMasters Funds | Annual Report

Laudus MarketMasters Funds

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 and shareholder services fees, and other fund expenses.

The expense examples below are intended to help you understand your ongoing cost (in dollars) of investing in a fund and to compare this cost with the ongoing cost of investing in other mutual funds. These examples are based on an investment of $1,000 invested for six months beginning May 1, 2018 and held through October 31, 2018.

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

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

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

Please note that the expenses shown in the table are meant to highlight your ongoing costs only, and do not reflect any transactional costs. 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	Beginning Account Value at 5/1/18	Ending Account Value (Net of Expenses) at 10/31/18	Expenses Paid During Period 5/1/18-10/31/18²
Laudus Small-Cap MarketMasters Fund
Investor Shares
Actual Return	1.35%	$1,000.00	$ 957.70	$6.66
Hypothetical 5% Return	1.35%	$1,000.00	$1,018.39	$6.87
Select Shares
Actual Return	1.20%	$1,000.00	$ 958.20	$5.92
Hypothetical 5% Return	1.20%	$1,000.00	$1,019.15	$6.11
Laudus International MarketMasters Fund
Investor Shares
Actual Return	1.40%	$1,000.00	$ 857.40	$6.55
Hypothetical 5% Return	1.40%	$1,000.00	$1,018.14	$7.12
Select Shares
Actual Return	1.25%	$1,000.00	$ 858.30	$5.85
Hypothetical 5% Return	1.25%	$1,000.00	$1,018.90	$6.36

¹	Based on the most recent six-month expense ratio; may differ from the expense ratio provided in the Financial Highlights which covers a 12-month period.
²	Expenses for each fund or share class are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by the 184 days of the period, and divided by the 365 days of the fiscal year.

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Laudus MarketMasters Funds | Annual Report

Laudus Small-Cap MarketMasters Fund

Financial Statements

Financial Highlights

Investor Shares	11/1/17– 10/31/18	11/1/16– 10/31/17	11/1/15– 10/31/16	11/1/14– 10/31/15	11/1/13– 10/31/14
Per-Share Data
Net asset value at beginning of period	$20.19	$16.22	$17.42	$18.02	$17.28
Income (loss) from investment operations:
Net investment income (loss)¹	(0.04)	0.00 ²	0.01	(0.05)	(0.05)
Net realized and unrealized gains (losses)	(0.24)	4.19	(0.15)	(0.17) ³	0.79
Total from investment operations	(0.28)	4.19	(0.14)	(0.22)	0.74
Less distributions:
Distributions from net investment income	—	(0.03)	—	(0.03)	—
Distributions from net realized gains	(2.47)	(0.19)	(1.06)	(0.35)	—
Total distributions	(2.47)	(0.22)	(1.06)	(0.38)	—
Net asset value at end of period	$17.44	$20.19	$16.22	$17.42	$18.02
Total return	(1.99%)	25.89%	(0.64%)	(1.18%)	4.28%
Ratios/Supplemental Data
Ratios to average net assets:
Net operating expenses	1.35%	1.35%	1.35%	1.35%	1.35%
Gross operating expenses	1.51%	1.56%	1.56%	1.55%	1.56%
Net investment income (loss)	(0.22%)	0.01%	0.04%	(0.26%)	(0.26%)
Portfolio turnover rate	75%	106%	85%	51%	79%
Net assets, end of period (x 1,000,000)	$57	$65	$55	$62	$70

Select Shares	11/1/17– 10/31/18	11/1/16– 10/31/17	11/1/15– 10/31/16	11/1/14– 10/31/15	11/1/13– 10/31/14
Per-Share Data
Net asset value at beginning of period	$20.60	$16.55	$17.73	$18.33	$17.56
Income (loss) from investment operations:
Net investment income (loss)¹	(0.02)	0.03	0.03	(0.02)	(0.02)
Net realized and unrealized gains (losses)	(0.23)	4.26	(0.15)	(0.17) ³	0.79
Total from investment operations	(0.25)	4.29	(0.12)	(0.19)	0.77
Less distributions:
Distributions from net investment income	—	(0.05)	—	(0.06)	—
Distributions from net realized gains	(2.47)	(0.19)	(1.06)	(0.35)	—
Total distributions	(2.47)	(0.24)	(1.06)	(0.41)	—
Net asset value at end of period	$17.88	$20.60	$16.55	$17.73	$18.33
Total return	(1.79%)	26.02%	(0.50%)	(0.99%)	4.39%
Ratios/Supplemental Data
Ratios to average net assets:
Net operating expenses	1.20%	1.20%	1.20%	1.20%	1.20%
Gross operating expenses	1.47%	1.51%	1.52%	1.51%	1.51%
Net investment income (loss)	(0.08%)	0.15%	0.19%	(0.09%)	(0.13%)
Portfolio turnover rate	75%	106%	85%	51%	79%
Net assets, end of period (x 1,000,000)	$121	$122	$98	$107	$122

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 sales and repurchases of fund shares in relation to fluctuating market values.

₁₇

Laudus MarketMasters Funds | Annual Report

See financial notes

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings as of October 31, 2018

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 15-20 days after calendar quarters on the fund’s website at www.schwabfunds.com/laudusfunds_prospectus.

Security	Number of Shares	Value ($)
Common Stock 91.2% of net assets

Automobiles & Components 1.6%
Cooper Tire & Rubber Co.	16,520	510,303
Dana, Inc.	32,649	508,345
Delphi Technologies plc	21,976	471,165
Gentherm, Inc. *	18,550	809,522
Visteon Corp. *	6,825	539,448
		2,838,783

Banks 9.2%
1st Source Corp.	14,210	662,044
Banc of California, Inc.	59,140	943,283
East West Bancorp, Inc.	10,140	531,742
FCB Financial Holdings, Inc., Class A *	8,250	322,822
First BanCorp *	14,348	132,432
First Busey Corp.	36,268	1,012,602
First Interstate BancSystem, Inc., Class A	11,502	476,873
First Midwest Bancorp, Inc.	75,299	1,728,865
Flushing Financial Corp.	38,535	874,359
Great Western Bancorp, Inc.	48,496	1,777,378
Home BancShares, Inc.	28,967	551,532
International Bancshares Corp.	27,828	1,076,944
MB Financial, Inc.	45,595	2,023,962
MGIC Investment Corp. *	37,927	463,089
Northwest Bancshares, Inc.	101,149	1,632,545
SVB Financial Group *	2,222	527,125
The Bank of N.T. Butterfield & Son Ltd.	7,597	306,083
Union Bankshares Corp.	25,620	874,667
United Community Banks, Inc.	19,391	482,254
		16,400,601

Capital Goods 10.9%
Actuant Corp., Class A	13,587	324,050
Albany International Corp., Class A	17,812	1,246,484
American Woodmark Corp. *	11,200	676,928
Astronics Corp. *	12,098	352,778
Beacon Roofing Supply, Inc. *	12,909	360,290
CIRCOR International, Inc.	24,665	801,859
Cubic Corp.	9,974	654,394
Curtiss-Wright Corp.	4,424	484,251
EMCOR Group, Inc.	9,604	681,692
EnPro Industries, Inc.	6,874	427,563
ESCO Technologies, Inc.	23,694	1,450,547
Fluor Corp.	5,951	261,011
GATX Corp.	10,931	819,060
Granite Construction, Inc.	14,551	665,272
John Bean Technologies Corp.	5,508	572,667
Lindsay Corp.	5,502	526,101
Luxfer Holdings plc	54,151	1,249,805
Mueller Industries, Inc.	56,272	1,370,223
Primoris Services Corp.	25,825	546,715
Regal Beloit Corp.	6,380	457,446
Simpson Manufacturing Co., Inc.	10,170	580,503
Tennant Co.	3,266	199,618
Thermon Group Holdings, Inc. *	49,152	1,060,700

Security	Number of Shares	Value ($)
TriMas Corp. *	67,262	1,980,866
Watts Water Technologies, Inc., Class A	8,533	597,737
Wesco Aircraft Holdings, Inc. *	36,478	371,346
Woodward, Inc.	10,019	737,799
		19,457,705

Commercial & Professional Services 6.5%
ACCO Brands Corp.	89,312	720,748
ASGN, Inc. *	11,664	782,421
Forrester Research, Inc.	28,747	1,157,929
FTI Consulting, Inc. *	7,204	497,868
Healthcare Services Group, Inc.	16,161	655,975
Huron Consulting Group, Inc. *	20,436	1,113,558
ICF International, Inc.	8,850	651,714
Knoll, Inc.	13,150	261,028
Korn/Ferry International	7,594	342,793
Matthews International Corp., Class A	24,335	1,012,823
Mistras Group, Inc. *	39,650	789,035
Navigant Consulting, Inc.	31,570	681,912
Nielsen Holdings plc	24,828	645,031
SP Plus Corp. *	23,610	754,576
Steelcase, Inc., Class A	42,305	702,263
The Brink's Co.	11,607	769,776
		11,539,450

Consumer Durables & Apparel 2.1%
Helen of Troy Ltd. *	4,050	502,686
iRobot Corp. *	4,012	353,738
Newell Brands, Inc.	33,738	535,759
Skechers U.S.A., Inc., Class A *	44,424	1,269,194
TopBuild Corp. *	8,313	379,239
TRI Pointe Group, Inc. *	59,280	705,432
		3,746,048

Consumer Services 4.0%
Adtalem Global Education, Inc. *	8,866	448,886
Bloomin' Brands, Inc.	28,307	564,725
Boyd Gaming Corp.	17,378	461,560
Dave & Buster's Entertainment, Inc.	12,350	735,442
Del Taco Restaurants, Inc. *	20,419	222,567
Eldorado Resorts, Inc. *	11,198	408,727
Extended Stay America, Inc.	20,628	335,824
Jack in the Box, Inc.	2,615	206,402
Marriott Vacations Worldwide Corp.	7,573	670,135
Norwegian Cruise Line Holdings Ltd. *	20,478	902,465
Penn National Gaming, Inc. *	22,576	548,145
Planet Fitness, Inc., Class A *	7,266	356,688
Sotheby's *	8,851	371,742
The Cheesecake Factory, Inc.	8,777	424,280
Weight Watchers International, Inc. *	6,628	438,111
		7,095,699

Diversified Financials 3.7%
Ally Financial, Inc.	6,261	159,092
BrightSphere Investment Group plc	22,103	251,974

₁₈

Laudus MarketMasters Funds | Annual Report

See financial notes

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings as of October 31, 2018 (continued)

Security	Number of Shares	Value ($)
E*TRADE Financial Corp.	8,713	430,597
Eaton Vance Corp.	10,661	480,278
FirstCash, Inc.	4,026	323,690
Green Dot Corp., Class A *	7,987	604,935
Houlihan Lokey, Inc.	13,319	548,477
Jefferies Financial Group, Inc.	46,114	990,068
Ladder Capital Corp.	1	17
Moelis & Co., Class A	11,103	448,117
OneMain Holdings, Inc. *	41,683	1,188,799
SLM Corp. *	56,915	577,118
Solar Capital Ltd.	27,590	568,354
		6,571,516

Energy 4.7%
Arch Coal, Inc., Class A	3,139	301,030
Cabot Oil & Gas Corp.	48,628	1,178,256
Carrizo Oil & Gas, Inc. *	25,175	458,437
Cheniere Energy, Inc. *	6,340	382,999
Delek US Holdings, Inc.	14,539	533,872
Dorian LPG Ltd. *	53,589	426,033
Dril-Quip, Inc. *	3,949	168,069
Era Group, Inc. *	32,786	371,138
Euronav N.V. *	13,655	125,626
Parsley Energy, Inc., Class A *	26,331	616,672
PBF Energy, Inc., Class A	16,112	674,287
Resolute Energy Corp. *	26,650	741,670
Scorpio Tankers, Inc.	374,066	669,578
SEACOR Holdings, Inc. *	15,654	751,235
SEACOR Marine Holdings, Inc. *	23,134	422,890
Unit Corp. *	11,519	266,435
US Silica Holdings, Inc.	14,597	204,358
		8,292,585

Food & Staples Retailing 0.1%
U.S. Foods Holding Corp. *	7,195	209,878

Food, Beverage & Tobacco 0.4%
Darling Ingredients, Inc. *	5,319	109,890
Ingredion, Inc.	6,659	673,758
		783,648

Health Care Equipment & Services 6.0%
Allscripts Healthcare Solutions, Inc. *	106,915	1,273,358
Amedisys, Inc. *	6,613	727,430
AMN Healthcare Services, Inc. *	21,204	1,073,346
CorVel Corp. *	11,506	666,888
Evolent Health, Inc., Class A *	43,027	955,199
HealthEquity, Inc. *	8,885	815,643
Hill-Rom Holdings, Inc.	4,392	369,279
LivaNova plc *	3,121	349,521
Medidata Solutions, Inc. *	10,027	704,898
Merit Medical Systems, Inc. *	11,440	653,453
Natus Medical, Inc. *	13,220	395,014
Omnicell, Inc. *	7,915	559,590
PetIQ, Inc. *	5,237	165,803
Select Medical Holdings Corp. *	28,048	465,036
Teladoc Health, Inc. *	10,890	755,113
Wright Medical Group N.V. *	26,390	712,002
		10,641,573

Security	Number of Shares	Value ($)
Insurance 1.1%
AMERISAFE, Inc.	6,192	403,037
Kemper Corp.	16,000	1,203,040
Primerica, Inc.	3,908	428,864
		2,034,941

Materials 7.2%
Boise Cascade Co.	13,355	411,200
Cabot Corp.	9,425	458,809
Commercial Metals Co.	22,013	419,568
Compass Minerals International, Inc.	6,972	338,212
Eagle Materials, Inc.	10,163	750,436
Ferroglobe Representation & Warranty Insurance *(a)	1,153	—
Goldcorp, Inc.	36,903	332,865
Greif, Inc., Class A	36,438	1,723,517
Huntsman Corp.	34,799	761,402
Kinross Gold Corp. *	192,952	499,746
Methanex Corp.	3,225	208,754
Minerals Technologies, Inc.	7,301	399,730
Neenah, Inc.	12,030	967,934
Orion Engineered Carbons S.A.	49,790	1,285,080
PolyOne Corp.	15,192	490,853
Sensient Technologies Corp.	22,216	1,440,930
Stepan Co.	6,030	498,018
Tahoe Resources, Inc. *	140,245	332,381
US Concrete, Inc. *	19,490	636,153
Westlake Chemical Corp.	3,494	249,122
Worthington Industries, Inc.	12,419	520,108
		12,724,818

Media & Entertainment 1.1%
Altice USA, Inc., Class A	27,863	454,446
Cardlytics, Inc. *	9,337	197,571
Criteo S.A. ADR *	27,921	628,781
Nexstar Media Group, Inc., Class A	4,114	308,097
Sinclair Broadcast Group, Inc., Class A	14,882	426,220
		2,015,115

Pharmaceuticals, Biotechnology & Life Sciences 7.1%
Aerie Pharmaceuticals, Inc. *	8,772	466,495
Amicus Therapeutics, Inc. *	26,283	293,844
Arena Pharmaceuticals, Inc. *	6,709	239,243
Array BioPharma, Inc. *	23,565	381,753
Blueprint Medicines Corp. *	5,038	306,159
Catalent, Inc. *	11,044	445,515
Clovis Oncology, Inc. *	11,753	136,688
Cymabay Therapeutics, Inc. *	19,654	207,350
Dermira, Inc. *	10,285	129,077
Epizyme, Inc. *	22,625	182,131
FibroGen, Inc. *	5,613	240,629
G1 Therapeutics, Inc. *	17,740	709,778
Global Blood Therapeutics, Inc. *	7,967	279,562
ImmunoGen, Inc. *	29,288	159,034
Immunomedics, Inc. *	15,759	355,050
Insmed, Inc. *	14,672	214,211
Intercept Pharmaceuticals, Inc. *	1,607	154,288
Jazz Pharmaceuticals plc *	5,087	807,917
Ligand Pharmaceuticals, Inc. *	1,969	324,511
Loxo Oncology, Inc. *	2,046	312,342
MacroGenics, Inc. *	9,372	154,263
Medpace Holdings, Inc. *	5,750	299,575
Mylan N.V. *	13,955	436,094
Portola Pharmaceuticals, Inc. *	9,902	194,970

₁₉

Laudus MarketMasters Funds | Annual Report

See financial notes

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings as of October 31, 2018 (continued)

Security	Number of Shares	Value ($)
PRA Health Sciences, Inc. *	8,107	785,325
Puma Biotechnology, Inc. *	5,462	202,367
REGENXBIO, Inc. *	4,397	293,148
Sage Therapeutics, Inc. *	5,388	693,328
Spectrum Pharmaceuticals, Inc. *	18,318	217,984
Supernus Pharmaceuticals, Inc. *	6,770	321,981
TherapeuticsMD, Inc. *	277,791	1,358,398
Ultragenyx Pharmaceutical, Inc. *	4,392	212,793
Zogenix, Inc. *	28,721	1,199,389
		12,715,192

Real Estate 4.7%
Alexander & Baldwin, Inc.	46,290	904,507
Americold Realty Trust	30,440	753,390
Corporate Office Properties Trust	38,637	998,380
DiamondRock Hospitality Co.	70,316	734,802
EastGroup Properties, Inc.	5,860	561,329
Physicians Realty Trust	63,110	1,046,364
PotlatchDeltic Corp.	29,937	1,085,216
Ramco-Gershenson Properties Trust	84,270	1,119,106
Summit Hotel Properties, Inc.	63,724	734,101
Urban Edge Properties	16,952	347,346
		8,284,541

Retailing 3.9%
American Eagle Outfitters, Inc.	29,705	684,997
At Home Group, Inc. *	21,706	593,442
Big Lots, Inc.	10,417	432,514
Etsy, Inc. *	11,833	503,139
Five Below, Inc. *	4,363	496,597
Hudson Ltd., Class A *	11,098	234,612
National Vision Holdings, Inc. *	13,866	574,468
Nutrisystem, Inc.	13,300	472,948
Ollie's Bargain Outlet Holdings, Inc. *	7,670	712,543
Stamps.com, Inc. *	2,396	484,399
The Cato Corp., Class A	18,130	349,546
The Children's Place, Inc.	4,800	717,120
The Gap, Inc.	22,875	624,488
		6,880,813

Semiconductors & Semiconductor Equipment 1.0%
Entegris, Inc.	24,732	656,387
Integrated Device Technology, Inc. *	10,417	487,620
Maxim Integrated Products, Inc.	2,171	108,594
Teradyne, Inc.	14,065	484,539
		1,737,140

Software & Services 6.8%
ACI Worldwide, Inc. *	19,563	490,836
Blackline, Inc. *	7,792	361,393
CACI International, Inc., Class A *	2,258	402,963
Ebix, Inc.	2,744	157,259
Envestnet, Inc. *	12,231	636,257
Everbridge, Inc. *	8,401	427,023
Evo Payments, Inc., Class A *	19,009	451,274
ExlService Holdings, Inc. *	6,367	408,125
First Data Corp., Class A *	32,999	618,401
Five9, Inc. *	9,223	363,017
HubSpot, Inc. *	4,727	641,217
Instructure, Inc. *	5,773	215,564
j2 Global, Inc.	11,455	834,382
LiveRamp Holdings, Inc. *	4,833	220,771
MINDBODY, Inc., Class A *	12,156	387,047
Nuance Communications, Inc. *	49,829	866,526

Security	Number of Shares	Value ($)
Paylocity Holding Corp. *	5,538	364,345
Q2 Holdings, Inc. *	6,191	329,547
Rapid7, Inc. *	13,397	485,507
Talend S.A., ADR *	21,867	1,354,661
The Trade Desk, Inc., Class A *	3,642	449,969
WNS Holdings Ltd. ADR *	31,670	1,589,517
		12,055,601

Technology Hardware & Equipment 4.2%
Belden, Inc.	27,550	1,489,077
CalAmp Corp. *	15,721	313,477
Ciena Corp. *	44,051	1,377,034
Cray, Inc. *	19,642	445,677
CTS Corp.	26,266	701,040
Finisar Corp. *	57,529	960,159
Infinera Corp. *	33,837	187,457
Keysight Technologies, Inc. *	7,200	410,976
Lumentum Holdings, Inc. *	8,519	465,563
ScanSource, Inc. *	12,864	500,152
Viavi Solutions, Inc. *	12,809	147,688
Xerox Corp.	14,617	407,376
		7,405,676

Telecommunication Services 0.5%
Boingo Wireless, Inc. *	11,431	358,133
Vonage Holdings Corp. *	43,121	571,785
		929,918

Transportation 3.6%
Avis Budget Group, Inc. *	32,565	915,728
Forward Air Corp.	16,549	992,774
Hub Group, Inc., Class A *	11,517	527,709
JB Hunt Transport Services, Inc.	4,588	507,479
Knight-Swift Transportation Holdings, Inc.	29,103	931,296
Saia, Inc. *	8,446	530,915
SkyWest, Inc.	17,497	1,002,403
US Xpress Enterprises, Inc., Class A *	14,457	139,221
Werner Enterprises, Inc.	25,256	812,991
		6,360,516

Utilities 0.8%
New Jersey Resources Corp.	11,863	535,021
PPL Corp.	12,886	391,734
Spire, Inc.	7,494	543,915
		1,470,670
Total Common Stock
(Cost $159,134,192)		162,192,427

Other Investment Companies 8.8% of net assets

Equity Fund 0.5%
iShares Russell 2000 Growth ETF	5,042	947,342

Money Market Fund 8.3%
State Street Institutional U.S. Government Money Market Fund, Premier Class 2.09% (b)	14,635,966	14,635,966
Total Other Investment Companies
(Cost $15,436,460)		15,583,308

₂₀

Laudus MarketMasters Funds | Annual Report

See financial notes

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings as of October 31, 2018 (continued)

Security	Number of Shares	Value ($)
Rights 0.0% of net assets

Pharmaceuticals, Biotechnology & Life Sciences 0.0%
Tobira Therapeutics, Inc. *(a)	77	872
Total Rights
(Cost $5)		872

	Number of Contracts	Notional Amount ($)	Current Value/ Unrealized Depreciation ($)
Futures Contracts
Long
Russell 2000 Index, e-mini expires 12/21/18	131	9,902,945	(1,099,122)

*	Non-income producing security.
(a)	Fair-valued by management using significant unobservable inputs in accordance with procedures approved by the fund’s Board of Trustees.
(b)	The rate shown is the 7-day yield.

ADR —	American Depositary Receipt
ETF —	Exchange-traded fund

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2018 (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	$149,467,609	$—	$—	$149,467,609
Materials	12,724,818	—	— ^*	12,724,818
Other Investment Companies¹	15,583,308	—	—	15,583,308
Rights ¹
Pharmaceuticals, Biotechnology & Life Sciences	—	—	872	872
Liabilities
Futures Contracts²	(1,099,122)	—	—	(1,099,122)
Total	$176,676,613	$—	$872	$176,677,485

*	Level 3 amount shown includes securities determined to have no value at October 31, 2018.
¹	As categorized in Portfolio Holdings.
²	Futures contracts are valued at unrealized appreciation or depreciation.

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.

₂₁

Laudus MarketMasters Funds | Annual Report

See financial notes

Laudus Small-Cap MarketMasters Fund

Statement of Changes in Net Assets

For the current and prior report periods

Operations
	11/1/17-10/31/18		11/1/16-10/31/17
Net investment income (loss)		($246,491)	$169,982
Net realized gains		17,913,231	21,845,686
Net change in unrealized appreciation (depreciation)	+	(20,611,603)	17,086,998
Increase (decrease) in net assets from operations		(2,944,863)	39,102,666
Distributions to Shareholders1
Investor Shares		(7,861,627)	(713,174)
Select Shares	+	(14,498,285)	(1,341,567)
Total distributions		($22,359,912)	($2,054,741)

Transactions in Fund Shares
		11/1/17-10/31/18		11/1/16-10/31/17
		SHARES	VALUE	SHARES	VALUE
Shares Sold
Investor Shares		36,231	$688,587	150,756	$2,838,923
Select Shares	+	546,203	10,406,537	470,039	9,097,237
Total shares sold		582,434	$11,095,124	620,795	$11,936,160
Shares Reinvested
Investor Shares		376,142	$6,887,162	33,695	$630,426
Select Shares	+	759,889	14,247,923	68,980	1,315,446
Total shares reinvested		1,136,031	$21,135,085	102,675	$1,945,872
Shares Redeemed
Investor Shares		(347,084)	($6,573,059)	(361,547)	($6,831,172)
Select Shares	+	(469,174)	(9,169,161)	(552,290)	(10,492,211)
Total shares redeemed		(816,258)	($15,742,220)	(913,837)	($17,323,383)
Net transactions in fund shares		902,207	$16,487,989	(190,367)	($3,441,351)
Shares Outstanding and Net Assets
		11/1/17-10/31/18		11/1/16-10/31/17
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		9,118,476	$186,533,590	9,308,843	$152,927,016
Total increase or decrease	+	902,207	(8,816,786)	(190,367)	33,606,574
End of period²		10,020,683	$177,716,804	9,118,476	$186,533,590

For the period ended October 31, 2017, the Investor Share class of the fund distributed to shareholders $88,307 from net investment income and $624,867 from net realized gains, respectively. The Select Share class of the fund distributed to shareholders $286,345 from net investment income and $1,055,222 from net realized gains, respectively. The SEC eliminated the requirement to disclose distributions to shareholders from net investment income and from net realized gains in 2018 (see financial note 10 for additional information).

End of period - Net assets of the fund had no undistributed net investment income at October 31, 2017. The SEC eliminated the requirement to disclose undistributed net investment income in 2018.

₂₄

Laudus MarketMasters Funds | Annual Report

See financial notes

Laudus International MarketMasters Fund

Financial Statements

Financial Highlights

Investor Shares	11/1/17– 10/31/18	11/1/16– 10/31/17	11/1/15– 10/31/16	11/1/14– 10/31/15	11/1/13– 10/31/14
Per-Share Data
Net asset value at beginning of period	$26.98	$21.17	$22.71	$22.95	$23.68
Income (loss) from investment operations:
Net investment income (loss)	0.20 ¹	0.18 ¹	0.17 ¹	0.18 ¹	0.25
Net realized and unrealized gains (losses)	(3.10)	5.78	(0.24)	(0.10)	(0.66)
Total from investment operations	(2.90)	5.96	(0.07)	0.08	(0.41)
Less distributions:
Distributions from net investment income	(0.32)	(0.15)	(0.27)	(0.32)	(0.32)
Distributions from net realized gains	(0.86)	—	(1.20)	—	—
Total distributions	(1.18)	(0.15)	(1.47)	(0.32)	(0.32)
Net asset value at end of period	$22.90	$26.98	$21.17	$22.71	$22.95
Total return	(11.25%)	28.35%	(0.14%)	0.39%	(1.73%)
Ratios/Supplemental Data
Ratios to average net assets:
Net operating expenses	1.40%	1.40%	1.40%	1.40%	1.40%
Gross operating expenses	1.59%	1.61%	1.61%	1.59%	1.59%
Net investment income (loss)	0.77%	0.76%	0.81%	0.76%	1.06%
Portfolio turnover rate	69%	71%	69%	72%	74%
Net assets, end of period (x 1,000,000)	$403	$512	$447	$536	$631

Select Shares	11/1/17– 10/31/18	11/1/16– 10/31/17	11/1/15– 10/31/16	11/1/14– 10/31/15	11/1/13– 10/31/14
Per-Share Data
Net asset value at beginning of period	$26.96	$21.16	$22.71	$22.95	$23.68
Income (loss) from investment operations:
Net investment income (loss)	0.24 ¹	0.22 ¹	0.19 ¹	0.21 ¹	0.28
Net realized and unrealized gains (losses)	(3.09)	5.76	(0.23)	(0.10)	(0.65)
Total from investment operations	(2.85)	5.98	(0.04)	0.11	(0.37)
Less distributions:
Distributions from net investment income	(0.36)	(0.18)	(0.31)	(0.35)	(0.36)
Distributions from net realized gains	(0.86)	—	(1.20)	—	—
Total distributions	(1.22)	(0.18)	(1.51)	(0.35)	(0.36)
Net asset value at end of period	$22.89	$26.96	$21.16	$22.71	$22.95
Total return	(11.09%)	28.52%	0.00% ²	0.56%	(1.57%)
Ratios/Supplemental Data
Ratios to average net assets:
Net operating expenses	1.25%	1.25%	1.25%	1.25%	1.25%
Gross operating expenses	1.51%	1.53%	1.54%	1.50%	1.47%
Net investment income (loss)	0.92%	0.92%	0.93%	0.91%	1.20%
Portfolio turnover rate	69%	71%	69%	72%	74%
Net assets, end of period (x 1,000,000)	$1,127	$1,229	$1,063	$1,395	$1,592

Calculated based on the average shares outstanding during the period.

Less than 0.005%.

₂₅

Laudus MarketMasters Funds | Annual Report

See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings as of October 31, 2018

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 93.8% of net assets

Argentina 0.3%
Globant S.A. *	86,460	4,450,961

Australia 4.9%
Afterpay Touch Group Ltd. *	172,369	1,536,402
AGL Energy Ltd.	4,065	51,912
ALS Ltd.	674,637	3,912,369
Altium Ltd.	264,912	4,129,814
Alumina Ltd.	15,839	28,745
Amcor Ltd.	7,179	67,743
AMP Ltd.	1,926,465	3,378,114
APA Group	7,395	50,360
Aristocrat Leisure Ltd.	73,953	1,393,565
ASX Ltd.	1,200	50,401
Aurizon Holdings Ltd.	12,602	37,546
AusNet Services	8,703	10,556
Australia & New Zealand Banking Group Ltd.	18,291	336,676
Bank of Queensland Ltd.	2,609	17,884
Bendigo & Adelaide Bank Ltd.	3,165	22,999
BHP Billiton Ltd.	230,126	5,309,846
Bingo Industries Ltd.	499,239	847,484
BlueScope Steel Ltd.	3,488	35,754
Boral Ltd.	7,551	30,081
Brambles Ltd.	96,563	727,404
Caltex Australia Ltd.	1,678	33,575
Challenger Ltd.	3,544	25,810
Charter Hall Retail REIT	1,703,006	5,132,781
CIMIC Group Ltd.	621	20,850
Cleanaway Waste Management Ltd.	1,516,216	1,938,235
Coca-Cola Amatil Ltd.	3,342	23,520
Cochlear Ltd.	361	45,491
Commonwealth Bank of Australia	10,965	539,158
Computershare Ltd.	2,902	40,752
Costa Group Holdings Ltd.	799,076	3,462,267
Crown Resorts Ltd.	2,402	21,373
CSL Ltd.	20,043	2,675,683
Dexus	6,378	46,083
Domino's Pizza Enterprises Ltd.	335	12,839
Flight Centre Travel Group Ltd.	276	9,104
Fortescue Metals Group Ltd.	9,650	27,467
Goodman Group	153,664	1,129,345
Harvey Norman Holdings Ltd.	2,689	6,087
Healthscope Ltd.	11,532	17,302
Incitec Pivot Ltd.	10,881	30,150
Inghams Group Ltd.	2,259,605	6,247,452
Insurance Australia Group *	14,323	69,275
InvoCare Ltd.	617,742	5,316,660
James Hardie Industries plc	2,769	36,988
LendLease Group	3,658	45,683
Macquarie Group Ltd.	35,400	2,952,082
Medibank Pvt Ltd.	17,679	35,053
Mirvac Group	23,311	35,858
National Australia Bank Ltd.	17,004	304,533
Newcrest Mining Ltd.	4,757	69,634

Security	Number of Shares	Value ($)
NEXTDC Ltd. *	567,137	2,370,785
Northern Star Resources Ltd.	787,854	4,921,899
Orica Ltd.	393,347	4,792,481
Origin Energy Ltd. *	10,900	56,487
Pact Group Holdings Ltd.	935,094	2,311,580
QBE Insurance Group Ltd.	8,427	67,709
Ramsay Health Care Ltd.	877	35,006
REA Group Ltd.	335	17,049
Rio Tinto Ltd.	2,556	139,078
Santos Ltd.	10,975	51,512
Scentre Group	33,002	92,975
SEEK Ltd.	2,153	27,354
Seven Group Holdings Ltd.	151,995	1,920,209
Shopping Centres Australasia Property Group	2,627,222	4,778,345
Sonic Healthcare Ltd.	2,519	40,316
South32 Ltd.	32,113	82,824
Stockland	15,262	39,042
Suncorp Group Ltd.	8,033	79,873
Sydney Airport	6,843	31,276
Tabcorp Holdings Ltd.	12,001	39,384
Telstra Corp., Ltd.	25,802	56,440
The GPT Group	11,324	41,414
TPG Telecom Ltd.	1,746	8,890
Transurban Group	15,927	128,106
Treasury Wine Estates Ltd.	4,455	47,952
Unibail-Rodamco-Westfield *(a)	3,020	27,326
Unibail-Rodamco-Westfield (a)	704	127,395
Vicinity Centres	20,665	38,765
Wesfarmers Ltd.	7,094	234,937
Westpac Banking Corp.	21,410	406,699
Woodside Petroleum Ltd.	5,832	143,585
Woolworths Group Ltd.	8,171	164,919
		75,648,357

Austria 0.3%
ANDRITZ AG	478	24,775
Erste Group Bank AG *	1,865	75,919
FACC AG	98,461	1,731,953
OMV AG	913	50,701
Raiffeisen Bank International AG	918	25,019
voestalpine AG	710	25,198
Wienerberger AG	120,387	2,769,021
		4,702,586

Belgium 0.9%
Ageas	1,168	58,441
Anheuser-Busch InBev S.A./N.V.	4,768	352,647
Colruyt S.A.	383	22,269
Galapagos N.V. *	36,451	3,744,913
Groupe Bruxelles Lambert S.A.	500	46,502
KBC Group N.V.	57,904	3,990,515
Proximus	943	24,026
Shurgard Self Storage Europe Sarl *	166,358	4,670,125
Solvay S.A.	459	52,283
Telenet Group Holding N.V.	355	17,199

₂₆

Laudus MarketMasters Funds | Annual Report

See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings as of October 31, 2018 (continued)

Security	Number of Shares	Value ($)
UCB S.A.	784	65,840
Umicore S.A.	1,298	61,101
		13,105,861

Bermuda 0.0%
The Bank of N.T. Butterfield & Son Ltd.	7,638	307,735

Brazil 0.6%
Azul S.A. *	169,529	4,133,117
M Dias Branco S.A.	58,500	699,044
Magazine Luiza S.A.	101,294	4,594,499
Via Varejo S.A.	76,900	348,597
		9,775,257

Canada 7.1%
Alimentation Couche-Tard, Inc., Class B	86,840	4,147,238
Altus Group Ltd.	47,018	1,028,971
Boralex, Inc., Class A	493,206	6,369,024
Brookfield Asset Management, Inc., Class A	64,783	2,639,907
BRP, Inc.	143,485	5,772,316
CAE, Inc.	306,530	5,406,682
Canada Goose Holdings, Inc. *	77,530	4,230,812
Canadian National Railway Co.	38,287	3,273,059
Cenovus Energy, Inc.	451,425	3,820,027
Cineplex, Inc.	294,537	8,119,372
Dollarama, Inc.	44,501	1,230,796
Finning International, Inc.	19,924	413,781
FirstService Corp.	35,491	2,603,761
Innergex Renewable Energy, Inc.	779,889	7,233,427
Kelt Exploration Ltd. *	374,811	1,731,058
Kirkland Lake Gold Ltd.	227,425	4,462,295
Largo Resources Ltd. *	887,668	2,690,414
lululemon Athletica, Inc. *	13,514	1,901,825
Northview Apartment Real Estate Investment Trust	172,894	3,324,051
Parex Resources, Inc. *	233,724	3,403,463
Ritchie Bros. Auctioneers, Inc.	159,352	5,359,950
Rogers Communications, Inc., Class B	89,300	4,598,463
Shopify, Inc., Class A *	10,171	1,405,124
Suncor Energy, Inc.	135,355	4,540,451
The Descartes Systems Group, Inc. *	82,785	2,533,009
The Toronto-Dominion Bank	104,162	5,778,382
TransAlta Renewables, Inc.	430,447	3,547,685
WSP Global, Inc.	149,748	7,475,741
		109,041,084

China 2.2%
Alibaba Group Holding Ltd. ADR *	28,086	3,996,076
Baidu, Inc. ADR *	11,225	2,133,424
Baozun, Inc. ADR *	58,884	2,344,172
China Mengniu Dairy Co., Ltd. *	314,000	929,089
China Resources Cement Holdings Ltd.	2,538,000	2,252,927
CSPC Pharmaceutical Group Ltd.	568,000	1,210,298
GDS Holdings Ltd. ADR *	110,393	2,590,924
Huazhu Group Ltd. ADR	26,688	698,158
Li Ning Co., Ltd. *	2,792,000	2,626,413
Microport Scientific Corp.	3,314,000	3,956,408
Nexteer Automotive Group Ltd.	2,409,288	3,397,281
Ping An Insurance Group Co. of China Ltd., Class H	333,500	3,152,918
Shenzhou International Group Holdings Ltd.	73,000	809,321

Security	Number of Shares	Value ($)
Tencent Holdings Ltd.	88,900	3,045,648
Weibo Corp., ADR *	8,703	513,564
		33,656,621

Denmark 0.8%
Ambu A/S, Class B	14,636	305,079
AP Moeller - Maersk A/S, Series A	23	27,294
AP Moeller - Maersk A/S, Series B	41	51,751
Carlsberg A/S, Class B	663	73,140
Chr. Hansen Holding A/S	613	61,877
Coloplast A/S, Class B	21,481	2,004,468
Danske Bank A/S	4,645	88,899
DSV A/S	42,528	3,411,790
Genmab A/S *	380	51,997
H. Lundbeck A/S	432	20,149
ISS A/S	1,052	34,549
Novo Nordisk A/S, Class B	11,342	489,822
Novozymes A/S, B Shares	1,402	69,238
Orsted A/S	42,430	2,690,517
Pandora A/S	697	43,607
Royal Unibrew A/S	46,199	3,278,384
Tryg A/S	772	18,610
Vestas Wind Systems A/S	1,269	79,579
William Demant Holding A/S *	657	21,597
		12,822,347

Finland 0.4%
Elisa Oyj	894	35,569
Fortum Oyj	2,753	57,952
Kone Oyj, Class B	2,096	102,022
Metso Oyj	691	21,816
Neste Oyj	29,609	2,431,347
Nokia Oyj	35,336	199,598
Nokian Renkaat Oyj	758	24,111
Nordea Bank Abp	19,019	165,292
Orion Oyj, Class B	691	23,770
Sampo Oyj, A Shares	2,748	126,372
Stora Enso Oyj, R Shares	3,416	51,326
UPM-Kymmene Oyj	3,308	106,348
Valmet Oyj	83,268	1,895,918
Wartsila Oyj Abp	2,751	46,810
		5,288,251

France 8.4%
Accor S.A.	86,066	3,932,563
Aeroports de Paris	184	38,484
Air Liquide S.A.	2,683	324,338
Airbus SE	49,105	5,426,801
Alstom S.A.	964	42,100
Amundi S.A.	375	22,277
Arkema S.A.	29,003	3,042,809
Atos SE	594	50,803
AXA S.A.	12,171	304,600
BioMerieux	257	19,598
BNP Paribas S.A.	245,056	12,770,859
Bollore S.A.	5,481	23,189
Bouygues S.A.	1,357	49,436
Bureau Veritas S.A.	125,537	2,832,125
Capgemini SE	36,213	4,421,778
Carrefour S.A.	3,601	69,837
Casino Guichard Perrachon S.A.	375	16,539
CNP Assurances	1,064	23,714
Compagnie de Saint-Gobain	3,088	116,329
Compagnie Generale des Etablissements Michelin	1,057	108,210

₂₇

Laudus MarketMasters Funds | Annual Report

See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings as of October 31, 2018 (continued)

Security	Number of Shares	Value ($)
Covivio	237	23,781
Credit Agricole S.A.	7,057	90,382
Danone S.A.	31,059	2,199,392
Dassault Aviation S.A.	15	24,890
Dassault Systemes S.A.	19,724	2,469,140
Edenred	1,475	55,951
Eiffage S.A.	486	47,464
Electricite de France S.A.	3,701	61,318
Engie S.A.	11,439	151,992
EssilorLuxottica S.A.	1,307	178,508
Eurazeo SE	299	21,835
Eurofins Scientific SE	3,815	1,922,541
Eutelsat Communications S.A.	1,152	23,333
Faurecia S.A.	471	22,833
Gaztransport Et Technigaz S.A.	38,629	2,855,069
Gecina S.A.	285	41,799
Getlink	2,938	36,955
Hermes International	2,174	1,241,140
ICADE	213	18,070
Iliad S.A.	164	18,956
Imerys S.A.	228	14,055
Ingenico Group S.A.	87,231	6,173,771
Ipsen S.A.	6,240	865,197
JCDecaux S.A.	477	15,659
Kering S.A.	8,730	3,880,384
Klepierre S.A.	1,267	42,935
Korian S.A.	287,979	11,346,366
L'Oreal S.A.	1,577	355,308
Legrand S.A.	1,649	107,681
LISI	111,978	3,261,477
LVMH Moet Hennessy Louis Vuitton SE	1,745	529,443
Natixis S.A.	5,834	34,058
Nexity S.A.	10,803	516,609
Orange S.A.	12,517	195,370
Orpea	8,510	1,047,690
Pernod-Ricard S.A.	5,232	797,810
Peugeot S.A.	3,646	86,668
Publicis Groupe S.A.	115,380	6,678,993
Remy Cointreau S.A.	146	17,330
Renault S.A.	1,191	88,937
Rexel S.A.	1,972	25,138
Rubis SCA	168,952	8,716,926
Safran S.A.	33,575	4,338,825
Sanofi	7,060	630,886
Schneider Electric SE	3,414	246,870
SCOR SE	1,034	47,782
SEB S.A.	140	20,074
SES S.A.	2,289	49,195
Societe BIC S.A.	142	13,594
Societe Generale S.A.	4,817	176,580
Sodexo S.A.	561	57,265
SOITEC *	31,246	2,226,418
Solutions 30 SE *	83,996	3,653,846
STMicroelectronics N.V.	4,233	64,348
Suez	2,318	33,436
Teleperformance	30,897	5,088,491
Thales S.A.	23,989	3,063,828
TOTAL S.A.	142,815	8,379,731
UbiSoft Entertainment S.A. *	19,464	1,745,970
Valeo S.A.	143,415	4,625,744
Veolia Environnement S.A.	3,317	66,106
Vinci S.A.	3,156	280,882
Vivendi S.A.	6,494	156,624
Wendel S.A.	182	23,583
Worldline S.A. *	75,477	3,970,936
		128,900,557

Security	Number of Shares	Value ($)
Germany 8.1%
1&1 Drillisch AG	329	14,675
adidas AG	1,180	277,493
Allianz SE	49,489	10,309,541
Axel Springer SE	308	20,453
BASF SE	5,746	440,939
Bayer AG	107,440	8,235,537
Bayerische Motoren Werke AG	123,388	10,625,039
Beiersdorf AG	625	64,623
Brenntag AG	958	50,031
Carl Zeiss Meditec AG, Class B	64,864	5,313,240
Commerzbank AG *	6,210	58,473
Continental AG	60,917	10,038,266
Covestro AG	1,192	76,871
Daimler AG	231,464	13,711,140
Delivery Hero SE *	582	23,434
Deutsche Bank AG	12,271	119,933
Deutsche Boerse AG	1,209	152,784
Deutsche Lufthansa AG	1,461	29,327
Deutsche Post AG	6,168	194,756
Deutsche Telekom AG	20,873	342,352
Deutsche Wohnen SE	2,198	100,537
Duerr AG	86,778	3,092,277
E.ON SE	13,643	131,929
Evonik Industries AG	1,011	31,276
Fielmann AG	135,886	8,428,942
Fraport AG Frankfurt Airport Services Worldwide	258	19,924
Fresenius Medical Care AG & Co. KGaA	1,337	104,977
Fresenius SE & Co. KGaA	2,610	165,881
GEA Group AG	1,089	33,090
Gerresheimer AG	48,716	3,433,290
Hannover Rueck SE	374	50,296
HeidelbergCement AG	922	62,571
Henkel AG & Co. KGaA	644	63,085
HOCHTIEF AG	120	17,783
Hugo Boss AG	399	28,514
Infineon Technologies AG	7,115	142,562
Innogy SE *	861	35,907
Isra Vision AG	21,165	907,883
JOST Werke AG	102,228	3,562,890
K&S AG	1,236	23,017
KION Group AG	10,232	597,917
LANXESS AG	546	33,796
MAN SE	218	22,710
Merck KGaA	801	85,710
METRO AG	1,216	18,293
MorphoSys AG *	35,339	3,272,281
MTU Aero Engines AG	15,969	3,390,730
Muenchener Rueckversicherungs-Gesellschaft AG	973	208,986
Nemetschek SE	24,339	3,199,546
Norma Group SE	83,597	4,513,558
OSRAM Licht AG	639	25,890
ProSiebenSat.1 Media SE	1,462	33,760
Puma SE	1,704	876,229
QIAGEN N.V. *(a)	1,430	51,907
QIAGEN N.V. *(a)	50,470	1,832,061
Rational AG	4,344	2,515,114
Rheinmetall AG	4,879	422,247
RTL Group S.A.	247	15,854
RWE AG	3,212	62,487
SAP SE	49,258	5,274,224
Scout24 AG	24,456	1,013,540
Siemens AG	4,786	550,135
Siemens Healthineers AG *	930	38,490
Stabilus S.A.	75,553	5,063,132

₂₈

Laudus MarketMasters Funds | Annual Report

See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings as of October 31, 2018 (continued)

Security	Number of Shares	Value ($)
Symrise AG	764	63,998
Telefonica Deutschland Holding AG	4,609	17,917
ThyssenKrupp AG	195,301	4,093,735
TUI AG	2,731	45,311
Uniper SE	1,248	36,015
United Internet AG	762	31,532
Volkswagen AG	201	33,090
Vonovia SE	72,667	3,320,626
Washtec AG	2,960	228,102
Wirecard AG	15,709	2,938,477
Zalando SE *	690	26,672
		124,489,610

Hong Kong 1.0%
AIA Group Ltd.	811,800	6,175,397
ASM Pacific Technology Ltd.	158,700	1,376,367
BOC Hong Kong (Holdings) Ltd.	23,000	86,105
China High Precision Automation Group Ltd. *(b)	766,000	—
CK Asset Holdings Ltd.	16,038	104,371
CK Hutchison Holdings Ltd.	17,038	171,609
CK Infrastructure Holdings Ltd.	4,074	29,816
CLP Holdings Ltd.	10,500	117,657
Dairy Farm International Holdings Ltd.	2,200	19,875
Galaxy Entertainment Group Ltd.	214,000	1,161,834
Hang Lung Group Ltd.	5,000	12,310
Hang Lung Properties Ltd.	13,000	23,565
Hang Seng Bank Ltd.	4,800	112,548
Henderson Land Development Co., Ltd.	8,807	41,077
HK Electric Investments & HK Electric Investments Ltd.	17,000	16,172
HKBN Ltd.	2,803,983	4,209,558
HKT Trust & HKT Ltd.	23,120	31,886
Hong Kong & China Gas Co., Ltd.	57,438	109,715
Hong Kong Exchanges & Clearing Ltd.	7,355	195,840
Hongkong Land Holdings Ltd.	7,300	43,230
Hysan Development Co., Ltd.	4,000	18,759
Kerry Properties Ltd.	4,000	12,593
Li & Fung Ltd.	28,000	5,557
Link REIT	13,500	119,976
Melco International Development Ltd.	551,000	945,672
Melco Resorts & Entertainment Ltd. ADR	1,527	25,394
MGM China Holdings Ltd.	6,000	8,516
Minth Group Ltd.	4,000	12,997
MTR Corp., Ltd.	9,559	46,382
New World Development Co., Ltd.	37,113	47,214
NWS Holdings Ltd.	9,572	18,999
PCCW Ltd.	17,000	9,334
Power Assets Holdings Ltd.	8,500	56,762
Sands China Ltd.	15,200	60,108
Shangri-La Asia Ltd.	8,000	10,928
Sino Land Co., Ltd.	20,000	31,420
SJM Holdings Ltd.	12,683	10,278
Sun Hung Kai Properties Ltd.	10,202	132,587
Swire Pacific Ltd., Class A	3,000	31,166
Swire Properties Ltd.	7,200	24,605
Techtronic Industries Co., Ltd.	8,500	40,025
The Bank of East Asia Ltd.	7,800	25,290
The Wharf Holdings Ltd.	7,349	18,371
WH Group Ltd.	54,500	38,273
Wharf Real Estate Investment Co., Ltd.	7,349	45,668
Wheelock & Co., Ltd.	5,000	26,730
Wynn Macau Ltd.	9,600	19,998
Yue Yuen Industrial Holdings Ltd.	4,000	10,983
		15,893,517

Security	Number of Shares	Value ($)
India 1.1%
Axis Bank Ltd. *	470,524	3,704,212
Bata India Ltd.	70,263	926,076
Graphite India Ltd.	162,347	2,090,264
HDFC Bank Ltd.	52,301	1,358,023
Hexaware Technologies Ltd.	90,689	411,768
Maruti Suzuki India Ltd.	11,163	998,852
Motherson Sumi Systems Ltd. *(b)(c)	64,286	141,986
Motherson Sumi Systems Ltd.	128,572	283,972
Pidilite Industries Ltd.	34,498	447,405
Satin Creditcare Network Ltd. *	150,536	465,112
Titan Co., Ltd.	48,713	557,330
WNS Holdings Ltd. ADR *	113,571	5,700,128
		17,085,128

Indonesia 0.6%
PT Bank Central Asia Tbk	1,905,500	2,966,979
PT Bank Mandiri (Persero) Tbk	13,580,100	6,101,828
		9,068,807

Ireland 1.4%
AIB Group plc	5,047	24,333
Bank of Ireland Group plc	5,995	42,358
CRH plc	5,266	157,075
Dalata Hotel Group plc	414,801	2,563,723
DCC plc	553	47,398
Glanbia plc	443,310	7,837,887
ICON plc *	13,710	1,893,077
Kerry Group plc, Class A	983	100,762
Kingspan Group plc	25,787	1,121,574
Paddy Power Betfair plc	524	45,226
Ryanair Holdings plc ADR *	72,700	6,019,560
Shire plc	5,692	343,517
Smurfit Kappa Group plc	46,572	1,514,084
		21,710,574

Israel 0.1%
Azrieli Group Ltd.	277	13,451
Bank Hapoalim B.M.	6,610	44,718
Bank Leumi Le-Israel B.M.	8,971	55,941
Bezeq The Israeli Telecommunication Corp., Ltd.	13,960	16,030
Check Point Software Technologies Ltd. *	810	89,910
Elbit Systems Ltd.	157	18,740
Israel Chemicals Ltd.	4,649	26,778
Mizrahi Tefahot Bank Ltd.	937	15,770
Nice Ltd. *	383	40,639
Teva Pharmaceutical Industries Ltd. ADR	5,988	119,640
Wix.com Ltd. *	7,969	775,782
		1,217,399

Italy 2.7%
Amplifon S.p.A.	239,332	4,239,598
Assicurazioni Generali S.p.A.	7,261	117,170
Atlantia S.p.A.	3,071	61,708
Banca Generali S.p.A.	43,418	835,989
Davide Campari-Milano S.p.A.	3,600	27,707
DiaSorin S.p.A.	6,302	597,764
Enel S.p.A.	50,960	249,860
Eni S.p.A.	15,937	283,037
EXOR N.V.	114,672	6,485,275
Ferrari N.V.	12,558	1,470,564
Fiat Chrysler Automobiles N.V. *	6,682	101,690

₂₉

Laudus MarketMasters Funds | Annual Report

See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings as of October 31, 2018 (continued)

Security	Number of Shares	Value ($)
FinecoBank Banca Fineco S.p.A.	623,420	6,515,751
Interpump Group S.p.A.	19,100	551,036
Intesa Sanpaolo S.p.A.	5,556,746	12,308,606
Leonardo S.p.A.	2,641	28,630
Luxottica Group S.p.A.	1,052	66,069
Mediobanca S.p.A.	3,892	34,085
Moncler S.p.A.	93,451	3,245,347
Pirelli & C S.p.A. *	2,479	18,218
Poste Italiane S.p.A	3,238	23,234
Prysmian S.p.A.	1,491	28,965
Recordati S.p.A.	31,679	1,072,450
Snam S.p.A.	14,104	58,314
Technogym S.p.A.	45,028	491,720
Telecom Italia S.p.A. *	70,677	41,569
Tenaris S.A.	130,058	1,914,537
Terna - Rete Elettrica Nationale S.p.A.	8,721	45,048
UniCredit S.p.A.	12,594	161,016
		41,074,957

Japan 14.2%
ABC-Mart, Inc.	200	11,693
Acom Co., Ltd.	2,600	9,570
Adastria Co., Ltd.	164,300	2,677,221
Aeon Co., Ltd.	3,800	87,218
AEON Financial Service Co., Ltd.	600	11,743
Aeon Mall Co., Ltd.	400	7,387
AGC, Inc.	1,200	39,305
Ain Holdings, Inc.	36,500	2,862,613
Air Water, Inc.	978	15,843
Aisin Seiki Co., Ltd.	1,000	39,111
Ajinomoto Co., Inc.	2,878	46,495
Alfresa Holdings Corp.	1,200	32,006
Alps Electric Co., Ltd.	1,200	28,287
Amada Holdings Co., Ltd.	2,226	20,971
ANA Holdings, Inc.	740	24,883
Anritsu Corp.	331,200	5,020,285
Aozora Bank Ltd.	800	27,605
Ariake Japan Co., Ltd.	68,600	6,079,327
Asahi Group Holdings Ltd.	2,300	101,074
Asahi Intecc Co., Ltd.	63,800	2,612,887
Asahi Kasei Corp.	7,863	94,344
Asics Corp.	900	13,026
Astellas Pharma, Inc.	12,300	190,037
Bandai Namco Holdings, Inc.	1,300	46,247
Benesse Holdings, Inc.	500	13,944
Bridgestone Corp.	3,800	146,525
Brother Industries Ltd.	1,400	25,622
Calbee, Inc.	500	16,589
Canon, Inc.	6,265	178,449
Casio Computer Co., Ltd.	1,336	20,164
Central Japan Railway Co.	900	172,718
Chubu Electric Power Co., Inc.	3,731	53,804
Chugai Pharmaceutical Co., Ltd.	1,400	81,965
Coca-Cola Bottlers Japan Holdings, Inc.	800	20,937
Concordia Financial Group Ltd.	6,900	31,580
Cosmos Pharmaceutical Corp.	22,100	4,517,176
Credit Saison Co., Ltd.	711	11,291
CyberAgent, Inc.	600	25,532
CYBERDYNE, Inc. *	500	3,522
Dai Nippon Printing Co., Ltd.	1,500	33,656
Dai-ichi Life Holdings, Inc.	6,700	125,728
Daicel Corp.	1,700	17,984
Daifuku Co., Ltd.	600	25,768
Daiichi Sankyo Co., Ltd.	3,600	137,603
Daikin Industries Ltd.	32,700	3,790,319
Daito Trust Construction Co., Ltd.	500	65,919
Daiwa House Industry Co., Ltd.	3,500	105,680

Security	Number of Shares	Value ($)
Daiwa House REIT Investment Corp.	12	26,297
Daiwa Securities Group, Inc.	10,000	57,347
Dena Co., Ltd.	500	8,317
Denso Corp.	2,700	120,435
Dentsu, Inc.	1,400	64,932
Digital Arts, Inc.	62,200	2,844,745
Disco Corp.	200	31,792
Don Quijote Holdings Co., Ltd.	800	47,790
East Japan Railway Co.	1,938	169,260
Eisai Co., Ltd.	1,600	133,249
Electric Power Development Co., Ltd.	1,000	27,225
en-Japan, Inc.	153,300	6,114,685
F.C.C. Co., Ltd.	123,500	3,058,596
FamilyMart UNY Holdings Co., Ltd.	400	46,364
Fancl Corp.	47,700	2,109,377
FANUC Corp.	1,199	208,586
Fast Retailing Co., Ltd.	330	166,157
Fuji Electric Co., Ltd.	800	24,420
FUJIFILM Holdings Corp.	2,400	103,801
Fujitsu Ltd.	1,200	73,006
Fukuoka Financial Group, Inc.	1,000	24,571
GMO Payment Gateway, Inc.	59,000	2,858,317
Hakuhodo DY Holdings, Inc.	1,500	25,018
Hamamatsu Photonics K.K.	900	30,087
Hankyu Hanshin Holdings, Inc.	1,400	46,243
Hikari Tsushin, Inc.	100	17,465
Hino Motors Ltd.	1,700	16,273
Hirose Electric Co., Ltd.	205	19,538
Hisamitsu Pharmaceutical Co., Inc.	400	22,539
Hitachi Chemical Co., Ltd.	700	11,033
Hitachi Construction Machinery Co., Ltd.	700	18,585
Hitachi High-Technologies Corp.	400	15,012
Hitachi Ltd.	6,064	185,378
Hitachi Metals Ltd.	1,000	11,759
Hogy Medical Co., Ltd.	46,700	1,379,523
Honda Motor Co., Ltd.	10,207	291,364
Hoshizaki Corp.	12,900	1,041,294
House Do Co., Ltd.	81,700	1,194,438
Hoya Corp.	2,400	135,782
Hulic Co., Ltd.	1,900	17,386
Ichikoh Industries Ltd.	135,300	939,376
Idemitsu Kosan Co., Ltd.	900	40,772
IHI Corp.	900	32,924
Iida Group Holdings Co., Ltd.	1,013	18,439
Infomart Corp.	435,900	4,523,991
Inpex Corp.	6,300	71,736
Isetan Mitsukoshi Holdings Ltd.	2,221	25,957
Isuzu Motors Ltd.	3,400	44,576
ITOCHU Corp.	8,829	163,742
J. Front Retailing Co., Ltd.	1,500	19,656
Japan Airlines Co., Ltd.	700	24,844
Japan Airport Terminal Co., Ltd.	200	7,704
Japan Exchange Group, Inc.	3,200	57,314
Japan Post Bank Co., Ltd.	2,500	29,147
Japan Post Holdings Co., Ltd.	9,800	116,213
Japan Prime Realty Investment Corp.	5	17,841
Japan Real Estate Investment Corp.	8	41,287
Japan Retail Fund Investment Corp.	17	31,399
Japan Tobacco, Inc.	6,900	177,298
JFE Holdings, Inc.	3,100	58,254
JGC Corp.	1,400	27,100
JSR Corp.	1,300	19,374
JTEKT Corp.	1,400	17,418
JXTG Holdings, Inc.	20,185	136,390
Kajima Corp.	3,000	38,630
Kakaku.com, Inc.	900	16,301
Kamigumi Co., Ltd.	500	10,317
Kaneka Corp.	267	11,160

₃₀

Laudus MarketMasters Funds | Annual Report

See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings as of October 31, 2018 (continued)

Security	Number of Shares	Value ($)
Kansai Paint Co., Ltd.	1,173	17,333
Kao Corp.	3,100	206,219
Kawasaki Heavy Industries Ltd.	900	21,329
KDDI Corp.	11,300	273,458
Keihan Holdings Co., Ltd.	625	23,716
Keikyu Corp.	1,400	20,720
Keio Corp.	700	38,020
Keisei Electric Railway Co., Ltd.	833	25,671
Keyence Corp.	8,400	4,103,564
KH Neochem Co., Ltd.	136,700	3,882,390
Kikkoman Corp.	914	50,076
Kintetsu Group Holdings Co., Ltd.	1,100	42,255
Kirin Holdings Co., Ltd.	5,100	121,699
Kobayashi Pharmaceutical Co., Ltd.	300	19,567
Kobe Steel Ltd.	1,700	13,669
Koito Manufacturing Co., Ltd.	685	32,610
Komatsu Ltd.	162,300	4,226,689
Konami Holdings Corp.	600	22,890
Konica Minolta, Inc.	3,000	29,695
Kose Corp.	7,400	1,105,906
Kubota Corp.	6,100	96,299
Kuraray Co., Ltd.	2,100	28,845
Kurita Water Industries Ltd.	700	17,241
Kyocera Corp.	2,000	108,246
Kyowa Hakko Kirin Co., Ltd.	1,600	30,987
Kyudenko Corp.	101,200	3,682,015
Kyushu Electric Power Co., Inc.	2,500	29,042
Kyushu Railway Co.	1,083	33,259
Lasertec Corp.	49,000	1,410,747
Lawson, Inc.	329	20,884
LINE Corp. *	500	15,941
Lion Corp.	1,500	28,201
LIXIL Group Corp.	1,700	26,725
M3, Inc.	66,900	1,084,250
Mabuchi Motor Co., Ltd.	300	10,671
Makita Corp.	1,400	48,401
Marubeni Corp.	9,745	79,019
Marui Group Co., Ltd.	1,300	27,991
Maruichi Steel Tube Ltd.	300	8,644
Mazda Motor Corp.	3,600	38,344
McDonald's Holdings Co., Ltd.	400	17,605
Mebuki Financial Group, Inc.	5,510	16,780
Medipal Holdings Corp.	1,100	23,547
MEIJI Holdings Co., Ltd.	800	53,080
Minebea Mitsumi, Inc.	2,387	36,516
MISUMI Group, Inc.	218,730	4,383,522
Mitsubishi Chemical Holdings Corp.	7,900	61,584
Mitsubishi Corp.	8,449	237,800
Mitsubishi Electric Corp.	11,400	144,318
Mitsubishi Estate Co., Ltd.	7,387	118,058
Mitsubishi Gas Chemical Co., Inc.	1,100	18,465
Mitsubishi Heavy Industries Ltd.	1,900	66,978
Mitsubishi Materials Corp.	704	19,490
Mitsubishi Motors Corp.	4,200	26,381
Mitsubishi Tanabe Pharma Corp.	1,600	23,633
Mitsubishi UFJ Financial Group, Inc.	73,700	446,068
Mitsubishi UFJ Lease & Finance Co., Ltd.	1,800	9,251
Mitsui & Co., Ltd.	10,600	177,111
Mitsui Chemicals, Inc.	1,200	26,909
Mitsui Fudosan Co., Ltd.	5,600	126,124
Mitsui O.S.K. Lines Ltd.	800	19,444
Mizuho Financial Group, Inc.	151,000	259,322
Modec, Inc.	116,700	3,498,352
Monotaro Co., Ltd.	28,900	637,146
MS&AD Insurance Group Holdings, Inc.	3,010	90,412
Murata Manufacturing Co., Ltd.	1,124	174,934
Musashi Seimitsu Industry Co., Ltd.	244,800	3,572,592
Nabtesco Corp.	700	15,366

Security	Number of Shares	Value ($)
Nagoya Railroad Co., Ltd.	1,200	28,982
NEC Corp.	1,600	45,928
Nexon Co., Ltd. *	2,700	30,800
NGK Insulators Ltd.	1,700	23,926
NGK Spark Plug Co., Ltd.	1,000	20,235
NH Foods Ltd.	604	20,829
Nichias Corp.	21,000	457,594
Nidec Corp.	1,400	179,823
Nifco, Inc.	370,800	8,450,344
Nihon Kohden Corp.	125,700	3,763,233
Nihon M&A Center, Inc.	441,000	10,567,377
Nikon Corp.	2,000	34,865
Nintendo Co., Ltd.	10,700	3,340,570
Nippon Building Fund, Inc.	8	45,717
Nippon Electric Glass Co., Ltd.	400	10,078
Nippon Express Co., Ltd.	500	31,554
Nippon Paint Holdings Co., Ltd.	900	28,113
Nippon Prologis REIT, Inc.	12	24,155
Nippon Steel & Sumitomo Metal Corp.	4,700	86,697
Nippon Telegraph & Telephone Corp.	4,300	177,326
Nippon Yusen K.K.	1,000	16,126
Nissan Chemical Corp.	800	37,721
Nissan Motor Co., Ltd.	14,400	131,008
Nisshin Seifun Group, Inc.	1,300	25,867
Nissin Foods Holdings Co., Ltd.	400	25,792
Nitori Holdings Co., Ltd.	7,705	1,006,068
Nitto Denko Corp.	1,000	62,475
NOK Corp.	300	4,317
Nomura Holdings, Inc.	21,500	103,242
Nomura Real Estate Holdings, Inc.	800	15,028
Nomura Real Estate Master Fund, Inc.	25	32,382
Nomura Research Institute Ltd.	21,460	951,398
NSK Ltd.	2,300	22,724
NTT Data Corp.	3,900	50,070
NTT DOCOMO, Inc.	8,500	210,790
Obayashi Corp.	4,100	36,196
Obic Co., Ltd.	400	36,416
Odakyu Electric Railway Co., Ltd.	1,900	40,167
Oji Holdings Corp.	5,000	35,506
Olympus Corp.	89,500	2,983,196
Omron Corp.	25,500	1,032,355
Ono Pharmaceutical Co., Ltd.	2,400	54,465
Oracle Corp., Japan	200	13,538
Oriental Land Co., Ltd.	1,300	122,296
ORIX Corp.	175,500	2,859,069
Osaka Gas Co., Ltd.	2,300	42,058
Otsuka Corp.	700	23,218
Otsuka Holdings Co., Ltd.	2,400	114,787
Outsourcing, Inc.	221,800	2,811,249
Panasonic Corp.	13,800	148,094
Park24 Co., Ltd.	700	18,416
Persol Holdings Co., Ltd.	1,200	22,766
Pigeon Corp.	57,500	2,431,802
Pola Orbis Holdings, Inc.	7,600	203,027
Pressance Corp.	194,400	2,210,893
Rakuten, Inc.	5,300	35,849
Recruit Holdings Co., Ltd.	6,900	185,193
Renesas Electronics Corp. *	5,200	27,393
Rengo Co., Ltd.	396,000	3,451,905
Resona Holdings, Inc.	13,000	68,380
Resorttrust, Inc.	372,100	5,730,510
Ricoh Co., Ltd.	4,200	41,926
Rinnai Corp.	200	14,529
Rohm Co., Ltd.	600	42,183
Rohto Pharmaceutical Co., Ltd.	139,500	4,418,315
Ryohin Keikaku Co., Ltd.	200	52,866
Sakata Seed Corp.	74,700	2,363,125
Sankyo Co., Ltd.	200	7,636

₃₁

Laudus MarketMasters Funds | Annual Report

See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings as of October 31, 2018 (continued)

Security	Number of Shares	Value ($)
Sankyu, Inc.	82,180	3,873,521
Santen Pharmaceutical Co., Ltd.	2,300	34,067
Sawai Pharmaceutical Co., Ltd.	59,500	3,016,176
SBI Holdings, Inc.	1,436	37,498
Secom Co., Ltd.	1,300	106,433
Seed Co., Ltd/Tokyo	130,800	2,020,682
Sega Sammy Holdings, Inc.	1,100	14,124
Seibu Holdings, Inc.	1,500	27,214
Seiko Epson Corp.	1,800	29,000
Sekisui Chemical Co., Ltd.	2,382	37,459
Sekisui House Ltd.	3,855	56,580
Seven & i Holdings Co., Ltd.	4,700	203,510
Seven Bank Ltd.	2,900	9,063
SG Holdings Co., Ltd.	600	15,105
Sharp Corp.	1,100	16,885
Shimadzu Corp.	66,400	1,678,127
Shimamura Co., Ltd.	142	11,944
Shimano, Inc.	445	60,776
Shimizu Corp.	3,500	28,411
Shin-Etsu Chemical Co., Ltd.	2,324	194,195
Shinsei Bank Ltd.	900	13,710
Shionogi & Co., Ltd.	34,500	2,206,057
Shiseido Co., Ltd.	51,400	3,243,108
SHO-BOND Holdings Co., Ltd.	51,800	3,685,568
Showa Denko K.K.	800	34,835
Showa Shell Sekiyu K.K.	1,200	22,903
SMC Corp.	337	107,414
SoftBank Group Corp.	5,131	406,061
Sohgo Security Services Co., Ltd.	500	22,271
Solasto Corp.	166,300	1,754,984
Sompo Holdings, Inc.	2,100	86,616
Sony Corp.	7,900	427,522
Sony Financial Holdings, Inc.	1,100	25,376
Stanley Electric Co., Ltd.	900	26,622
Subaru Corp.	3,900	105,201
Sumco Corp.	1,500	20,246
Sumitomo Chemical Co., Ltd.	9,000	45,084
Sumitomo Corp.	7,000	106,167
Sumitomo Dainippon Pharma Co., Ltd.	1,000	20,894
Sumitomo Electric Industries Ltd.	4,700	64,097
Sumitomo Heavy Industries Ltd.	700	22,016
Sumitomo Metal Mining Co., Ltd.	1,500	47,229
Sumitomo Mitsui Financial Group, Inc.	8,400	327,055
Sumitomo Mitsui Trust Holdings, Inc.	2,100	83,440
Sumitomo Realty & Development Co., Ltd.	2,495	85,728
Sumitomo Rubber Industries Ltd.	800	11,476
Sundrug Co., Ltd.	500	18,169
Suntory Beverage & Food Ltd.	900	36,679
Suzuken Co., Ltd.	500	25,308
Suzuki Motor Corp.	2,200	109,707
Sysmex Corp.	1,000	70,139
Systena Corp.	410,500	4,939,713
T&D Holdings, Inc.	3,500	55,950
Taiheiyo Cement Corp.	800	23,541
Taisei Corp.	27,800	1,188,963
Taisho Pharmaceutical Holdings Co., Ltd.	200	21,325
Taiyo Nippon Sanso Corp.	829	13,324
Takashimaya Co., Ltd.	1,000	15,738
Takeda Pharmaceutical Co., Ltd.	4,500	186,568
TDK Corp.	800	68,984
TechnoPro Holdings, Inc.	23,700	1,234,694
Teijin Ltd.	1,200	20,804
Terumo Corp.	73,000	3,940,679
The Bank of Kyoto Ltd.	400	17,961
The Chiba Bank Ltd.	3,800	24,040
The Chugoku Electric Power Co., Inc.	1,800	23,153
The Kansai Electric Power Co., Inc.	4,400	67,344
The Shizuoka Bank Ltd.	2,954	25,845

Security	Number of Shares	Value ($)
The Yokohama Rubber Co., Ltd.	600	11,623
THK Co., Ltd.	800	17,668
TIS, Inc.	25,300	1,130,078
Tobu Railway Co., Ltd.	1,200	33,375
Toho Co., Ltd.	700	22,838
Toho Gas Co., Ltd.	466	16,045
Tohoku Electric Power Co., Inc.	2,700	34,113
Tokio Marine Holdings, Inc.	76,700	3,613,500
Tokyo Century Corp.	300	16,102
Tokyo Electric Power Co. Holdings, Inc. *	9,100	46,575
Tokyo Electron Ltd.	1,000	134,949
Tokyo Gas Co., Ltd.	2,400	59,023
Tokyo Tatemono Co., Ltd.	1,300	13,982
Tokyu Corp.	3,100	51,213
Tokyu Fudosan Holdings Corp.	3,400	19,157
Topcon Corp.	41,800	607,347
Toppan Printing Co., Ltd.	1,630	23,044
Toray Industries, Inc.	8,600	61,002
Toshiba Corp. *	4,100	122,887
Tosoh Corp.	1,700	22,382
TOTO Ltd.	900	32,199
Toyo Seikan Group Holdings Ltd.	700	14,281
Toyo Suisan Kaisha Ltd.	565	19,422
Toyoda Gosei Co., Ltd.	300	6,470
Toyota Industries Corp.	914	44,898
Toyota Motor Corp.	129,777	7,602,457
Toyota Tsusho Corp.	1,300	46,915
Trend Micro, Inc.	800	46,053
Trust Tech, Inc.	114,000	3,470,691
Tsubakimoto Chain Co.	60,200	2,311,463
Tsuruha Holdings, Inc.	200	20,874
Unicharm Corp.	2,500	67,822
United Urban Investment Corp.	19	28,885
USS Co., Ltd.	1,400	25,245
Welcia Holdings Co., Ltd.	10,400	530,573
West Japan Railway Co.	1,041	70,015
Yahoo Japan Corp.	17,800	55,532
Yakult Honsha Co., Ltd.	23,100	1,635,746
Yamada Denki Co., Ltd.	4,200	19,804
Yamaguchi Financial Group, Inc.	1,274	13,414
Yamaha Corp.	900	39,550
Yamaha Motor Co., Ltd.	1,700	40,205
Yamato Holdings Co., Ltd.	1,900	51,943
Yamazaki Baking Co., Ltd.	800	14,420
Yaskawa Electric Corp.	1,521	43,962
Yokogawa Electric Corp.	1,500	29,451
Zenkoku Hosho Co., Ltd.	15,500	561,944
ZOZO, Inc.	31,200	748,613
		216,636,121

Luxembourg 0.0%
Millicom International Cellular S.A. SDR	419	23,645

Malaysia 0.1%
My EG Services Bhd	3,382,100	972,541

Mexico 0.6%
Alpek SAB de C.V. *	2,359,735	3,106,313
Gentera S.A.B. de C.V.	2,662,018	2,157,056
Grupo Televisa S.A.B. ADR	277,300	3,987,574
		9,250,943

₃₂

Laudus MarketMasters Funds | Annual Report

See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings as of October 31, 2018 (continued)

Security	Number of Shares	Value ($)
Netherlands 3.2%
ABN AMRO Group N.V. CVA	2,622	64,311
Aegon N.V.	11,534	70,734
AerCap Holdings N.V. *	843	42,217
Akzo Nobel N.V.	13,983	1,174,083
AMG Advanced Metallurgical Group N.V.	64,488	3,068,259
ArcelorMittal	4,117	102,731
ASML Holding N.V.	34,762	5,987,547
ASR Nederland N.V.	152,191	6,909,048
B&S Group Sarl *	261,137	4,559,105
Boskalis Westminster N.V.	141,699	4,074,245
Euronext N.V.	65,548	4,033,329
Heineken Holding N.V.	714	61,758
Heineken N.V.	1,643	147,816
ING Groep N.V.	24,334	287,895
InterXion Holding N.V. *	64,029	3,769,387
Koninklijke Ahold Delhaize N.V.	7,827	179,164
Koninklijke DSM N.V.	1,134	99,008
Koninklijke KPN N.V.	20,841	54,990
Koninklijke Philips N.V.	131,126	4,890,454
Koninklijke Vopak N.V.	447	20,215
NN Group N.V.	1,971	84,631
NXP Semiconductors N.V.	2,152	161,379
Randstad N.V.	738	37,131
Royal Dutch Shell plc, A Shares	162,253	5,153,389
Unilever N.V. CVA	9,655	518,812
Wolters Kluwer N.V.	47,650	2,703,401
		48,255,039

New Zealand 1.1%
a2 Milk Co., Ltd. *	4,711	32,326
Auckland International Airport Ltd.	1,476,366	6,751,523
Fisher & Paykel Healthcare Corp., Ltd.	3,686	32,788
Fletcher Building Ltd. *	5,581	22,106
Mercury NZ Ltd.	3,214,534	7,146,508
Meridian Energy Ltd.	8,588	17,618
Ryman Healthcare Ltd.	2,648	20,981
SKYCITY Entertainment Group Ltd.	1,124,809	2,816,962
Spark New Zealand Ltd.	11,900	30,733
		16,871,545

Norway 0.7%
Aker BP A.S.A.	115,912	3,801,305
DNB A.S.A.	6,058	109,446
Elkem A.S.A. *	1,870,550	5,556,237
Equinor A.S.A.	7,283	188,384
Gjensidige Forsikring A.S.A.	1,275	19,728
Marine Harvest A.S.A.	2,582	62,511
Norsk Hydro A.S.A.	8,336	43,229
Orkla A.S.A.	5,053	43,604
Schibsted A.S.A., B Shares	528	16,708
Telenor A.S.A.	4,653	85,315
TGS Nopec Geophysical Co., A.S.A.	31,354	1,047,370
Yara International A.S.A.	1,101	47,281
		11,021,118

Papua New Guinea 0.0%
Oil Search Ltd.	8,500	46,729

Peru 0.1%
Credicorp Ltd.	8,322	1,878,359

Security	Number of Shares	Value ($)
Portugal 0.0%
Banco Espirito Santo S.A. *(b)	42,176	—
EDP - Energias de Portugal S.A.	15,865	55,777
Galp Energia, SGPS, S.A.	3,107	54,025
Jeronimo Martins, SGPS, S.A.	1,560	19,148
		128,950

Republic of Korea 1.2%
Cafe24 Corp. *	20,590	2,011,486
Dentium Co., Ltd.	45,514	2,891,832
Doosan Bobcat, Inc.	101,921	3,160,911
Fila Korea Ltd.	99,262	3,676,116
Hotel Shilla Co., Ltd.	6,737	424,590
NAVER Corp.	16,200	1,631,410
Samsung Electronics Co., Ltd.	98,400	3,683,682
Samsung SDI Co., Ltd.	6,482	1,348,024
		18,828,051

Russia 0.1%
Globaltrans Investment plc GDR	34,600	339,080
Yandex N.V., Class A *	40,174	1,210,443
		1,549,523

Singapore 1.9%
Ascendas Real Estate Investment Trust	3,436,133	6,256,823
CapitaLand Commercial Trust	13,960	17,444
CapitaLand Ltd.	15,900	36,117
CapitaLand Mall Trust	4,983,800	7,590,883
City Developments Ltd.	2,627	15,013
ComfortDelGro Corp., Ltd.	14,100	22,958
DBS Group Holdings Ltd.	11,216	190,307
Genting Singapore Ltd.	37,500	23,864
Golden Agri-Resources Ltd.	34,700	6,398
Jardine Cycle & Carriage Ltd.	611	13,381
Jardine Matheson Holdings Ltd.	1,409	81,360
Jardine Strategic Holdings Ltd.	1,400	47,030
Keppel Corp., Ltd.	9,000	40,324
Oversea-Chinese Banking Corp., Ltd.	19,922	154,763
SATS Ltd.	2,411,500	8,678,900
Sembcorp Industries Ltd.	5,100	10,412
Sheng Siong Group Ltd.	6,612,300	5,157,957
Singapore Airlines Ltd.	3,331	22,834
Singapore Exchange Ltd.	5,200	25,723
Singapore Press Holdings Ltd.	10,600	20,314
Singapore Technologies Engineering Ltd.	9,900	25,405
Singapore Telecommunications Ltd.	50,600	115,581
Suntec Real Estate Investment Trust	14,224	18,204
United Overseas Bank Ltd.	8,341	147,473
UOL Group Ltd.	3,400	14,809
Venture Corp., Ltd.	1,800	19,926
Wilmar International Ltd.	11,900	27,183
Yangzijiang Shipbuilding Holdings Ltd.	10,500	9,415
		28,790,801

South Africa 0.8%
Bid Corp., Ltd.	26,434	494,945
Mr. Price Group Ltd.	54,989	860,974
Naspers Ltd., N Shares	51,830	9,091,026
RMB Holdings Ltd.	166,265	839,783
The Bidvest Group Ltd.	26,434	329,887
		11,616,615

₃₃

Laudus MarketMasters Funds | Annual Report

See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings as of October 31, 2018 (continued)

Security	Number of Shares	Value ($)
Spain 1.4%
ACS Actividades de Construccion y Servicios S.A.	51,270	1,919,623
Aena SME S.A.	418	66,789
Amadeus IT Group S.A.	37,543	3,023,134
Applus Services S.A.	172,645	2,347,102
Banco Bilbao Vizcaya Argentaria S.A.	41,773	230,549
Banco De Sabadell S.A.	34,878	45,921
Banco Santander S.A.	100,949	480,311
Bankia S.A.	7,649	24,026
Bankinter S.A.	219,428	1,797,773
CaixaBank S.A.	22,245	90,019
Enagas S.A.	1,426	37,808
Ence Energia y Celulosa S.A.	551,245	4,630,368
Endesa S.A.	1,969	41,170
Ferrovial S.A.	3,039	60,844
Grifols S.A.	1,849	52,678
Iberdrola S.A.	37,342	264,225
Industria de Diseno Textil S.A.	6,840	192,783
Inmobiliaria Colonial Socimi S.A.	363,111	3,645,824
International Consolidated Airlines Group S.A.	3,808	29,384
Mapfre S.A.	6,681	19,964
Naturgy Energy Group S.A.	2,171	53,358
Red Electrica Corp. S.A.	2,683	55,555
Repsol S.A.	8,530	152,421
Siemens Gamesa Renewable Energy S.A. *	1,478	16,369
Telefonica S.A.	29,292	240,284
Viscofan S.A.	37,193	2,224,746
		21,743,028

Sweden 4.2%
AAK AB	635,349	9,576,845
AF AB, B Shares	371,134	7,959,757
Alfa Laval AB	65,963	1,683,052
Assa Abloy AB, Class B	6,213	123,581
Atlas Copco AB, A Shares	81,005	2,002,585
Atlas Copco AB, B Shares	2,419	55,403
Boliden AB	57,820	1,320,419
Electrolux AB, B Shares	1,513	31,440
Elekta AB, B Shares	351,421	4,456,618
Epiroc AB, Class A *	130,816	1,148,749
Epiroc AB, Class B *	2,419	19,904
Essity AB, Class B	3,758	85,763
Fabege AB	196,860	2,513,780
Hennes & Mauritz AB, B Shares	711,732	12,571,150
Hexagon AB, B Shares	47,928	2,345,769
Husqvarna AB, B Shares	2,726	20,569
ICA Gruppen AB	543	19,211
Industrivarden AB, C Shares	1,099	22,827
Investor AB, B Shares	2,823	122,310
Kinnevik AB, Class B	1,468	40,698
LE Lundbergfortagen AB, B Shares	513	15,813
Lundin Petroleum AB	1,160	35,292
Nolato AB, B Shares	6,726	309,705
Paradox Interactive AB	47,648	687,509
Saab AB, Class B	96,341	3,777,157
Sandvik AB	6,998	110,630
Securitas AB, B Shares	2,025	34,706
Skandinaviska Enskilda Banken AB, A Shares	10,088	104,395
Skanska AB, B Shares	2,137	33,593
SKF AB, B Shares	268,373	4,302,588
SSAB AB, A Shares	231,865	925,669
Svenska Handelsbanken AB, A Shares	9,466	102,894

Security	Number of Shares	Value ($)
Swedbank AB, A Shares	5,613	126,262
Swedish Match AB	1,127	57,408
Swedish Orphan Biovitrum AB *	41,105	839,065
Tele2 AB, B Shares	2,352	26,708
Telefonaktiebolaget LM Ericsson, B Shares	19,246	167,570
Telia Co. AB	17,446	78,533
Thule Group AB	111,415	2,206,084
Volvo AB, B Shares	296,708	4,431,084
		64,493,095

Switzerland 4.9%
ABB Ltd.	11,532	232,042
Adecco Group AG	1,008	49,362
Baloise Holding AG	306	43,738
Barry Callebaut AG	14	27,364
Belimo Holding AG	681	3,046,125
Burckhardt Compression Holding AG	12,577	4,167,605
Chocoladefabriken Lindt & Spruengli AG	1	79,829
Chocoladefabriken Lindt & Spruengli AG - Participation Certificates	7	48,260
Cie Financiere Richemont S.A.	66,565	4,865,275
Clariant AG *	1,256	27,070
Credit Suisse Group AG *	816,553	10,675,333
Daetwyler Holding AG	15,018	2,279,979
Dufry AG *	204	22,987
EMS-Chemie Holding AG	51	28,100
Geberit AG	230	90,054
Georg Fischer AG	993	923,833
Givaudan S.A.	58	140,587
Idorsia Ltd. *	96,003	1,859,076
Julius Baer Group Ltd. *	1,387	63,254
Kuehne & Nagel International AG	23,725	3,297,411
LafargeHolcim Ltd. *	165,970	7,686,143
Landis+Gyr Group AG *	39,712	2,408,908
Logitech International S.A.	29,063	1,076,037
Lonza Group AG *	18,965	5,963,343
Nestle S.A.	63,063	5,323,973
Novartis AG	13,680	1,197,989
Pargesa Holding S.A.	245	17,985
Partners Group Holding AG	4,947	3,522,040
Roche Holding AG	4,394	1,069,334
Schindler Holding AG	377	79,095
SGS S.A.	33	78,377
Siegfried Holding AG *	9,031	3,622,488
Sika AG	811	103,988
Sonova Holding AG	344	56,101
Straumann Holding AG	2,588	1,766,585
Swiss Life Holding AG *	212	79,970
Swiss Prime Site AG *	449	36,433
Swiss Re AG	1,970	177,758
Swisscom AG	161	73,719
Tecan Group AG	15,011	3,386,297
Temenos AG *	373	51,264
The Swatch Group AG	346	23,096
The Swatch Group AG - Bearer Shares	191	64,515
U-Blox Holding AG *	29,998	3,758,909
UBS Group AG *	24,126	337,212
Vifor Pharma AG	282	40,757
Zurich Insurance Group AG	947	294,026
		74,263,626

Taiwan 1.4%
Chailease Holding Co., Ltd.	955,940	2,741,789
Chroma ATE, Inc.	460,000	1,620,490
Eclat Textile Co., Ltd.	372,000	4,429,293

₃₄

Laudus MarketMasters Funds | Annual Report

See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings as of October 31, 2018 (continued)

Security	Number of Shares	Value ($)
Taiwan Semiconductor Manufacturing Co., Ltd.	620,000	4,654,577
Taiwan Semiconductor Manufacturing Co., Ltd. ADR	127,260	4,848,606
TCI Co., Ltd.	239,700	3,357,924
		21,652,679

United Arab Emirates 0.1%
First Abu Dhabi Bank PJSC	126,595	476,585
NMC Health plc	15,344	691,854
		1,168,439

United Kingdom 16.5%
3i Group plc	178,990	2,004,205
Abcam plc	218,258	3,345,771
Admiral Group plc	1,267	32,569
Anglo American plc	6,530	139,372
Antofagasta plc	2,444	24,464
Ashtead Group plc	244,148	6,027,244
Associated British Foods plc	2,208	67,315
AstraZeneca plc	80,709	6,173,401
Auto Trader Group plc	6,193	32,361
Avast plc *	597,073	2,108,239
AVEVA Group plc	204,034	6,824,964
Aviva plc	25,137	137,371
Babcock International Group plc	1,689	13,171
BAE Systems plc	19,961	133,844
Barclays plc	106,760	235,225
Barratt Developments plc	6,350	41,649
Beazley plc	629,621	4,227,499
BHP Billiton plc	13,211	263,542
Big Yellow Group plc	57,353	631,453
BP plc	124,588	899,989
British American Tobacco plc	14,347	621,946
BT Group plc	52,823	161,744
Bunzl plc	2,082	61,419
Burberry Group plc	2,593	60,000
Burford Capital Ltd.	258,481	5,479,019
Carnival plc	50,838	2,770,950
Centrica plc	34,714	65,203
Cineworld Group plc	2,247,907	8,450,398
Close Brothers Group plc	22,942	430,900
CNH Industrial N.V.	945,756	9,831,424
Coca-Cola European Partners plc	1,351	61,457
Coca-Cola HBC AG *	1,252	36,982
Compass Group plc	210,708	4,144,372
ContourGlobal plc	2,587,164	6,150,860
ConvaTec Group plc	8,907	18,411
Croda International plc	25,155	1,549,437
Dechra Pharmaceuticals plc	64,107	1,873,083
Diageo plc	90,490	3,128,377
Diploma plc	287,237	4,816,663
Direct Line Insurance Group plc	8,637	36,295
easyJet plc	985	15,090
Electrocomponents plc	451,371	3,573,705
Elementis plc	1,393,192	3,640,041
Equiniti Group plc	1,839,914	5,061,270
Experian plc	175,487	4,036,060
Ferguson plc	18,195	1,226,699
Fevertree Drinks plc	109,330	3,881,297
Fresnillo plc	1,370	14,856
G4S plc	998,893	2,741,316
GlaxoSmithKline plc	31,016	600,710
Glencore plc *	2,536,557	10,322,923
Greene King plc	152,554	938,877
Greggs plc	48,448	718,450

Security	Number of Shares	Value ($)
GVC Holdings plc	3,419	40,954
Halma plc	371,026	6,296,450
Hammerson plc	5,108	28,518
Hargreaves Lansdown plc	1,764	42,053
Hikma Pharmaceuticals plc	253,828	6,156,588
Hiscox Ltd.	70,800	1,470,685
HomeServe plc	258,512	3,138,138
HSBC Holdings plc	125,158	1,030,001
IG Group Holdings plc	231,671	1,790,057
Imperial Brands plc	5,971	202,253
Informa plc	7,864	71,764
InterContinental Hotels Group plc	1,119	58,714
Intermediate Capital Group plc	394,370	4,789,866
Intertek Group plc	16,602	994,731
Investec plc	4,335	26,801
ITV plc	22,456	42,628
J. Sainsbury plc	10,861	43,151
JD Sports Fashion plc	382,362	1,992,788
John Wood Group plc	4,352	39,665
Johnson Matthey plc	1,200	45,496
Kindred Group plc SDR	66,949	713,756
Kingfisher plc	13,393	43,489
Land Securities Group plc	4,596	49,996
Legal & General Group plc	36,934	118,517
Liberty Global plc, Class A *	105,600	2,706,528
Liberty Global plc, Class C *	241,200	6,039,648
Lloyds Banking Group plc	17,768,004	12,965,998
London Stock Exchange Group plc	40,720	2,243,581
Marks & Spencer Group plc	10,428	39,441
Mediclinic International plc	2,451	11,779
Meggitt plc	148,254	1,003,028
Melrose Industries plc	629,467	1,354,989
Merlin Entertainments plc	4,701	19,414
Metro Bank plc *	8,089	229,550
Micro Focus International plc	2,732	42,352
Mondi plc	2,276	53,597
National Grid plc	21,085	222,743
Next plc	889	59,059
Pearson plc	4,839	55,590
Persimmon plc	1,915	56,046
Prudential plc	16,186	324,102
Randgold Resources Ltd.	592	46,563
Reckitt Benckiser Group plc	20,981	1,696,609
RELX plc	143,823	2,844,339
Renishaw plc	9,971	535,798
Rentokil Initial plc	1,085,414	4,377,074
Rio Tinto plc	7,493	363,791
Rolls-Royce Holdings plc *	10,322	110,695
Rotork plc	1,458,391	5,584,354
Royal Bank of Scotland Group plc	2,253,762	6,784,943
Royal Dutch Shell plc, A Shares	28,754	916,048
Royal Dutch Shell plc, B Shares	23,428	764,056
Royal Mail plc	5,659	25,980
RSA Insurance Group plc	6,340	45,598
Schroders plc	201,171	6,884,576
Schroders plc, Non-Voting Shares	1,100	31,399
Seadrill Ltd *	44,816	912,454
Segro plc	214,820	1,684,161
Severn Trent plc	1,484	35,266
Smith & Nephew plc	5,423	88,150
Smiths Group plc	168,753	3,008,109
Spectris plc	93,293	2,552,471
Spirax-Sarco Engineering plc	109,352	9,032,465
SSE plc	6,288	91,650
SSP Group plc	514,332	4,385,108
St. James's Place plc	3,313	42,815
Standard Chartered plc	17,552	123,017
Standard Life Aberdeen plc	14,542	50,224

₃₅

Laudus MarketMasters Funds | Annual Report

See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings as of October 31, 2018 (continued)

Security	Number of Shares	Value ($)
Synthomer plc	71,714	406,786
Taylor Wimpey plc	20,520	42,251
Tesco plc	60,916	165,900
The Berkeley Group Holdings plc	805	35,978
The British Land Co., plc	5,786	43,698
The Sage Group plc	6,715	46,689
The Unite Group plc	274,591	2,989,796
The Weir Group plc	44,113	892,694
Travis Perkins plc	1,638	23,135
Ultra Electronics Holdings plc	178,825	3,286,897
Unilever plc	7,680	406,807
United Utilities Group plc	4,279	39,652
Victrex plc	231,664	7,836,315
Vodafone Group plc	166,321	312,773
WH Smith plc	30,857	767,023
Whitbread plc	1,137	63,931
WM Morrison Supermarkets plc	14,037	44,472
WPP plc	522,772	5,915,549
		252,876,445

United States 0.4%
Willis Towers Watson plc	39,636	5,674,290
Total Common Stock
(Cost $1,341,245,007)		1,435,981,191

Preferred Stock 0.3% of net assets

Brazil 0.2%
Itau Unibanco Holding S.A.	235,500	3,116,586

Germany 0.1%
Bayerische Motoren Werke AG	357	26,888
Fuchs Petrolub SE	27,677	1,281,160
Henkel AG & Co. KGaA	1,104	120,617
Porsche Automobil Holding SE	949	60,352
Sartorius AG	229	33,123
Schaeffler AG	1,119	11,791
Volkswagen AG	1,164	195,556
		1,729,487

Italy 0.0%
Telecom Italia S.p.A. - RSP	25,361	12,812

United Kingdom 0.0%
Rolls-Royce Holdings plc, C Shares *(b)	474,812	607
Total Preferred Stock
(Cost $4,891,283)		4,859,492

Security	Number of Shares	Value ($)
Other Investment Companies 4.3% of net assets

Equity Fund 0.0%
iShares MSCI EAFE ETF	2,064	128,918

Money Market Fund 4.3%
State Street Institutional U.S. Government Money Market Fund, Premier Class 2.09% (d)	64,651,902	64,651,902
Total Other Investment Companies
(Cost $64,788,678)		64,780,820

Rights 0.0% of net assets

Spain 0.0%
Banco Santander S.A. expires 11/01/18 *	100,949	3,922
Total Rights
(Cost $4,065)		3,922
Security Rate, Maturity Date	Face Amount ($)	Value ($)
Short-Term Investments 0.0% of net assets

U.S. Treasury Obligations 0.0%
United States Treasury Bills
2.09%, 12/06/18 (e)(f)	25,000	24,949
2.12%, 12/06/18 (e)(f)	10,000	9,980
2.13%, 12/06/18 (e)(f)	25,000	24,948
Total Short-Term Investments
(Cost $59,877)		59,877

	Number of Contracts	Notional Amount ($)	Current Value/ Unrealized Depreciation ($)
Futures Contracts
Long
MSCI EAFE Index, expires 12/21/18	717	64,978,125	(3,542,224)

₃₆

Laudus MarketMasters Funds | Annual Report

See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings as of October 31, 2018 (continued)

Expiration
Date

Counterparty

Currency
to be
Received

Amount of
Currency
to be
Received

Currency
to be
Delivered

Amount of
Currency
to be
Delivered

Unrealized
Appreciation
($)

Forward Foreign Currency Exchange Contract

06/19/2019

State Street Bank & Trust Co.

USD

6,368,611

CHF

6,017,000

252,374

*	Non-income producing security.
(a)	Securities are traded on separate exchanges for the same entity.
(b)	Fair-valued by management using significant unobservable inputs in accordance with procedures approved by the fund’s Board of Trustees.
(c)	Security received as a result of a corporate action.
(d)	The rate shown is the 7-day yield.
(e)	All or a portion of this security is held as collateral for open futures contracts.
(f)	The rate shown is the purchase yield.

ADR —	American Depositary Receipt
CVA —	Dutch Certificate
ETF —	Exchange-traded fund
GDR —	Global Depositary Receipt
REIT —	Real Estate Investment Trust
RSP —	Risparmio (Convertible Savings Shares)
SDR —	Swedish Depositary Receipt

CHF —	Swiss franc
USD —	U.S. dollar

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2018 (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	$—	$383,150,648	$—	$383,150,648
Argentina	4,450,961	—	—	4,450,961
Australia	69,275	75,579,082	—	75,648,357
Austria	24,775	4,677,811	—	4,702,586
Belgium	4,670,125	8,435,736	—	13,105,861
Bermuda	307,735	—	—	307,735
Brazil	9,775,257	—	—	9,775,257
Canada	109,041,084	—	—	109,041,084
China	12,276,318	21,380,303	—	33,656,621
Denmark	348,686	12,473,661	—	12,822,347
France	92,155	128,808,402	—	128,900,557
Germany	1,867,968	122,621,642	—	124,489,610
Hong Kong	41,566	15,851,951	— ^*	15,893,517
India	5,700,128	11,243,014	141,986	17,085,128
Ireland	9,180,199	12,530,375	—	21,710,574
Israel	985,332	232,067	—	1,217,399
Mexico	9,250,943	—	—	9,250,943
Netherlands	8,532,088	39,722,951	—	48,255,039
Peru	1,878,359	—	—	1,878,359
Portugal	55,777	73,173	— ^*	128,950
Russia	1,549,523	—	—	1,549,523
Sweden	1,987,814	62,505,281	—	64,493,095

₃₇

Laudus MarketMasters Funds | Annual Report

See financial notes

Laudus International MarketMasters Fund

Statement of Operations

For the period November 1, 2017 through October 31, 2018

Investment Income
Dividends (net of foreign withholding tax of $3,947,390)		$37,972,695
Expenses
Investment adviser and administrator fees		22,220,191
Shareholder service fees:
Investor Shares		1,144,883
Select Shares		2,001,650
Custodian fees		962,535
Portfolio accounting fees		170,428
Shareholder reports		90,478
Professional fees		70,408
Registration fees		59,067
Transfer agent fees		48,494
Independent trustees’ fees		16,385
Interest expense		3,179
Other expenses	+	82,477
Total expenses		26,870,175
Expense reduction by CSIM and its affiliates	–	4,282,821
Net expenses	–	22,587,354
Net investment income		15,385,341
Realized and Unrealized Gains (Losses)
Net realized gains on investments (net of foreign capital gain tax paid of $76,727)		125,930,149
Net realized losses on futures contracts		(2,072,723)
Net realized losses on foreign currency transactions		(215,809)
Net realized gains on forward foreign currency exchange contracts	+	958,731
Net realized gains		124,600,348
Net change in unrealized appreciation (depreciation) on investments (net of change in foreign capital gains tax of ($528,648))		(326,864,836)
Net change in unrealized appreciation (depreciation) on futures contracts		(3,887,892)
Net change in unrealized appreciation (depreciation) on foreign currency translations		(82,785)
Net change in unrealized appreciation (depreciation) on forward foreign currency exchange contracts	+	(193,188)
Net change in unrealized appreciation (depreciation)	+	(331,028,701)
Net realized and unrealized losses		(206,428,353)
Decrease in net assets resulting from operations		($191,043,012)

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Laudus MarketMasters Funds | Annual Report

See financial notes

Laudus International MarketMasters Fund

Statement of Changes in Net Assets

For the current and prior report periods

Operations
	11/1/17-10/31/18		11/1/16-10/31/17
Net investment income		$15,385,341	$13,867,445
Net realized gains		124,600,348	72,381,795
Net change in unrealized appreciation (depreciation)	+	(331,028,701)	314,005,056
Increase (decrease) in net assets from operations		(191,043,012)	400,254,296
Distributions to Shareholders1
Investor Shares		(22,191,896)	(3,023,945)
Select Shares	+	(55,540,940)	(9,031,598)
Total distributions		($77,732,836)	($12,055,543)

Transactions in Fund Shares
		11/1/17-10/31/18		11/1/16-10/31/17
		SHARES	VALUE	SHARES	VALUE
Shares Sold
Investor Shares		768,475	$20,559,616	1,073,343	$26,268,397
Select Shares	+	6,716,472	175,934,966	3,940,536	93,709,180
Total shares sold		7,484,947	$196,494,582	5,013,879	$119,977,577
Shares Reinvested
Investor Shares		766,583	$19,831,502	128,906	$2,663,205
Select Shares	+	1,345,695	34,745,855	260,814	5,377,990
Total shares reinvested		2,112,278	$54,577,357	389,720	$8,041,195
Shares Redeemed
Investor Shares		(2,912,352)	($76,864,136)	(3,345,200)	($76,914,481)
Select Shares	+	(4,410,948)	(116,250,573)	(8,849,251)	(208,212,630)
Total shares redeemed		(7,323,300)	($193,114,709)	(12,194,451)	($285,127,111)
Net transactions in fund shares		2,273,925	$57,957,230	(6,790,852)	($157,108,339)
Shares Outstanding and Net Assets
		11/1/17-10/31/18		11/1/16-10/31/17
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		64,576,230	$1,741,418,973	71,367,082	$1,510,328,559
Total increase or decrease	+	2,273,925	(210,818,618)	(6,790,852)	231,090,414
End of period²		66,850,155	$1,530,600,355	64,576,230	$1,741,418,973

For the period ended October 31, 2017, the Investor Share class of the fund distributed to shareholders $3,023,945 from net investment income, and the Select Share class of the fund distributed to shareholders $9,031,598 from net investment income, respectively. The SEC eliminated the requirement to disclose distributions to shareholders from net investment income and from net realized gains in 2018 (see financial note 10 for additional information).

End of period - Net assets include net investment income not yet distributed of $12,569,530 at October 31, 2017. The SEC eliminated the requirement to disclose undistributed net investment income in 2018.

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See financial notes

Laudus MarketMasters Funds

Financial Notes

1. Business Structure of the Funds:

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

SCHWAB CAPITAL TRUST (ORGANIZED MAY 7, 1993)
Laudus Small-Cap MarketMasters Fund	Schwab Target 2035 Fund
Laudus International MarketMasters Fund	Schwab Target 2040 Fund
Schwab S&P 500 Index Fund	Schwab Target 2045 Fund
Schwab Small-Cap Index Fund^®	Schwab Target 2050 Fund
Schwab Total Stock Market Index Fund^®	Schwab Target 2055 Fund
Schwab U.S. Large-Cap Growth Index Fund	Schwab Target 2060 Fund
Schwab U.S. Large-Cap Value Index Fund	Schwab Fundamental US Large Company Index Fund
Schwab U.S. Mid-Cap Index Fund	Schwab Fundamental US Small Company Index Fund
Schwab International Index Fund^®	Schwab Fundamental International Large Company Index Fund
Schwab MarketTrack All Equity Portfolio™	Schwab Fundamental International Small Company Index Fund
Schwab MarketTrack Growth Portfolio™	Schwab Fundamental Emerging Markets Large Company Index Fund
Schwab MarketTrack Balanced Portfolio™	Schwab Fundamental Global Real Estate Index Fund
Schwab MarketTrack Conservative Portfolio™	Schwab Target 2010 Index Fund
Schwab Balanced Fund	Schwab Target 2015 Index Fund
Schwab Core Equity Fund	Schwab Target 2020 Index Fund
Schwab Dividend Equity Fund	Schwab Target 2025 Index Fund
Schwab Large-Cap Growth Fund	Schwab Target 2030 Index Fund
Schwab Small-Cap Equity Fund	Schwab Target 2035 Index Fund
Schwab Hedged Equity Fund	Schwab Target 2040 Index Fund
Schwab Health Care Fund	Schwab Target 2045 Index Fund
Schwab International Core Equity Fund	Schwab Target 2050 Index Fund
Schwab Target 2010 Fund	Schwab Target 2055 Index Fund
Schwab Target 2015 Fund	Schwab Target 2060 Index Fund
Schwab Target 2020 Fund	Schwab^® Monthly Income Fund - Moderate Payout
Schwab Target 2025 Fund	Schwab^® Monthly Income Fund - Enhanced Payout
Schwab Target 2030 Fund	Schwab ^® Monthly Income Fund - Maximum Payout

Each fund in this report offers two share classes: Investor Shares and Select Shares^®. Shares of each class represent an interest in the same portfolio, but each class has different expenses and investment minimums.

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

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

2. Significant Accounting Policies:

The following is a summary of the significant accounting policies the funds use in their preparation of financial statements. The funds follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board 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 funds invest in certain other investment companies (underlying funds). For more information about the underlying funds’ operations and policies, please refer to those funds’ semiannual and annual reports, which are filed with the U.S. Securities and Exchange Commission (SEC).

Effective November 5, 2018, the funds adopted SEC Regulation S-X disclosure requirement changes. The adopted changes are reflected throughout this report.

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Laudus MarketMasters Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):

(a) Security Valuation:

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

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

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

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

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

• Short-term securities (60 days or less to maturity): Securities with remaining maturities of 60 days or less are generally valued at an evaluated price; however, such securities may be valued at their amortized cost if it approximates the security’s market value.

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

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

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Laudus MarketMasters Funds

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, ETFs and futures contracts. Investments in mutual funds are valued daily at their NAVs, and investments in ETFs are valued daily at the last reported sale price or the official closing price, which are classified as Level 1 prices, without consideration to the classification level of the specific investments held by 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. In addition, international securities whose markets close hours before the funds value their holdings may require fair valuations due to significant movement in the U.S. markets occurring after the daily close of the foreign markets. The Board has approved a vendor that calculates fair valuations of international equity securities based on a number of factors that appear to correlate to the movements in the U.S. markets.

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

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

The levels associated with valuing the funds’ investments as of October 31, 2018 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.

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

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

Assets and liabilities denominated in foreign currencies are reported in U.S. dollars. For assets and liabilities held on a given date, the dollar value is based on market exchange rates in effect on that date. Transactions involving foreign currencies, including purchases, sales, income receipts and expense payments, are calculated using exchange rates in effect on the transaction date. Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the differences between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange appreciation or depreciation arises from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period. These realized and unrealized foreign exchange gains or losses are

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Laudus MarketMasters Funds | Annual Report

Laudus MarketMasters Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):

reported in foreign currency transactions or translations in the Statement of Operations. The funds do not isolate the portion of the fluctuations on investments resulting from changes in foreign currency exchange rates from the fluctuations in market prices of investments held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.

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

When a fund closes out a futures contract or forward position, it calculates the difference between the value of the position at the beginning and at the end of the contract, and records a realized gain or loss accordingly.

(d) Investment Income:

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

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

In 2015, the Laudus International MarketMasters Fund filed claims to recover taxes previously withheld in certain European Union countries on the basis that those countries had purportedly violated certain provisions in the Treaty on the Functioning of the European Union. These filings are subject to various administrative and judicial proceedings within these countries, and all professional fees associated with these filings have been paid by the investment adviser. For additional details, see Affiliates and Affiliated Transactions in financial note 4, Other Affiliated Transactions.

(e) Expenses:

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

(f) Distributions to Shareholders:

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

(g) Custody Credit:

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

(h) Accounting Estimates:

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

(i) Federal Income Taxes:

The funds intend to meet federal income and excise tax requirements for regulated investment companies under subchapter M of the Internal Revenue Code, as amended. Accordingly, the funds distribute substantially all of their net investment income and net realized capital gains, if any, to their respective shareholders each year. As long as a fund meets the tax requirements, it is not required to pay federal income tax.

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Laudus MarketMasters Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):

(j) Foreign Taxes:

The funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, corporate events, foreign currency exchanges and capital gains on investments. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in foreign markets in which the funds invest. These foreign taxes, if any, are paid by the funds and are disclosed in the Statement of Operations. Foreign taxes payable as of October 31, 2018, if any, are reflected in each fund’s Statement of Assets and Liabilities.

(k) Indemnification:

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

(l) Recent Accounting Standards:

In August 2018, the Financial Accounting Standards Board issued Accounting Standards Update “Fair Value Measurement (Topic 820)” (ASU 2018-13) which modifies the disclosure requirements for fair value measurement by removing, modifying, or adding certain disclosures. The amendments are effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods. The funds are permitted to early adopt any removed or modified disclosures upon issuance of this update and delay adoption of the additional disclosures until their effective date. The funds have early adopted certain removed or modified disclosures, including the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and the policy for timing of transfers between levels upon issuance of ASU 2018-13, and have delayed adoption of the additional disclosures until their effective date. At this time, management is currently evaluating the impact that the adoption of the additional disclosures will have on the funds’ financial statements.

3. Risk Factors:

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

Market Risk. 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 a fund will fluctuate, which means that an investor could lose money over short or long periods.

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 funds’ investment managers attempt to reduce the impact of the performance of any given investment style by investing in both value and growth style stocks. But whenever value stocks fall out of favor with investors, they may underperform growth stocks, and vice versa.

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, a fund’s performance could be impacted.

Small-Cap Company Risk. Securities issued by small-cap companies may be riskier than those issued by larger companies, and their prices may move sharply, especially during market upturns and downturns.

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.

Mid-Cap Company Risk. Mid-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and the value of securities issued by these companies may move sharply.

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Laudus MarketMasters Funds

Financial Notes (continued)

3. Risk Factors (continued):

Management Risk. As with all actively managed funds, a fund is subject to the risk that its investment adviser and investment managers will select investments or allocate assets in a manner that could cause the fund to underperform or otherwise not meet its objective. Poor stock selection or a focus on securities in a particular sector may cause a fund to underperform its benchmark or other funds with a similar investment objective.

Foreign Investment Risk. A 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 a 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 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. To the extent the fund’s investments in a single country or a limited number of countries represent a large percentage of the fund’s assets, the fund’s performance may be adversely affected by the economic, political, regulatory and social conditions in those countries, and the fund’s price may be more volatile than the price of a fund that is geographically diversified.

Emerging Markets Risk. Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. 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 a 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.

Currency Risk. As a result of a fund’s investments in securities denominated in, and/or receiving revenues in, foreign currencies, the fund will be subject to currency risk. This is the risk that those currencies will decline in value relative to the U.S. dollar. If such an event occurs, the dollar value of an investment in the fund would be adversely affected.

Derivatives Risk. A fund’s use of derivative instruments involves risks different from, or possibly greater than the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as liquidity risk, market risk and management risk, are discussed elsewhere in this section. A fund’s use of derivatives is also subject to credit risk, leverage risk, lack of availability risk, valuation risk, correlation risk and tax risk. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Credit risk is the risk that the counterparty to a derivatives transaction may not fulfill its obligations. Leverage risk is the risk that a small percentage of assets invested in derivatives can have a disproportionately large impact on a fund. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause a fund to realize higher amounts of short-term capital gains. A fund’s use of derivatives could reduce the fund’s performance, increase its volatility, and could cause the fund to lose more than the initial amount invested. The use of derivatives, that are subject to regulation by the Commodity Futures Trading Commission (CFTC), could cause a fund to become a commodity pool, which would require a fund to comply with certain CFTC rules.

Multi-Manager Risk. Although CSIM monitors and seeks to coordinate the overall management of a fund, each investment manager makes investment decisions independently, and it is possible that the investment styles of the investment managers may not complement one another. As a result, a fund’s exposure to a given stock, industry or investment style could unintentionally be smaller or larger than if a fund had a single manager.

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

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

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Laudus MarketMasters Funds

Financial Notes (continued)

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 each 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 funds, CSIM is entitled to receive an annual fee, payable monthly, based on a percentage of each fund’s average daily net assets as follows:

% of Average Daily Net Assets	Laudus Small-Cap MarketMasters Fund	Laudus International MarketMasters Fund
First $500 million	1.17%	1.29%
$500 million to $1 billion	1.13%	1.275%
Over $1 billion	1.07%	1.25%

For the period ended October 31, 2018, the aggregate advisory fees paid to CSIM by the Laudus Small-Cap MarketMasters Fund and the Laudus International MarketMasters Fund were 1.17% and 1.27%, respectively, as a percentage of each fund’s average daily net assets.

Shareholder Servicing

The Board has adopted a Shareholder Servicing Plan (the Plan) on behalf of the funds. The Plan enables a fund to bear expenses relating to the provision by financial intermediaries, including Charles Schwab & Co., Inc. (a broker-dealer affiliate of CSIM, Schwab) (together, “service providers”), of certain account maintenance, customer liaison and shareholder services to the current shareholders of the funds.

Pursuant to the Plan, each fund’s shares are subject to an annual shareholder servicing fee of up to 0.20% for Select Shares and 0.25% for Investor Shares. The shareholder servicing fee paid to a particular service provider is made pursuant to its written agreement with Schwab, as distributor of the funds (or, in the case of payments made to Schwab acting as a service provider, pursuant to Schwab’s written agreement with the funds), and a fund will pay no more than 0.20% for Select Shares and 0.25% for Investor Shares of the average annual daily net asset value of the fund shares owned by shareholders holding shares through such service provider. Payments under the Plan are made as described above without regard to whether the fee is more or less than the service provider’s actual cost of providing the services, and if more, such excess may be retained as profit by the service provider.

Expense Limitation

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

	Laudus Small-Cap MarketMasters Fund	Laudus International MarketMasters Fund
Investor Shares	1.35%	1.40%
Select Shares	1.20%	1.25%

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Financial Notes (continued)

4. Affiliates and Affiliated Transactions (continued):

Investments from Affiliates

Certain funds in the Fund Complex (for definition refer to Trustees and Officers section) may own shares of other funds in the Fund Complex. The table below reflects the percentage of shares of each fund in this report that are owned by other funds in the Fund Complex as of October 31, 2018, as applicable:

	Underlying Funds
	Laudus Small-Cap MarketMasters Fund	Laudus International MarketMasters Fund
Schwab Balanced Fund	25.1%	—%
Schwab Monthly Income Fund - Enhanced Payout	—%	0.4%
Schwab Monthly Income Fund - Maximum Payout	—%	0.1%
Schwab Monthly Income Fund - Moderate Payout	—%	0.4%
Schwab Target 2010 Fund	0.2%	0.2%
Schwab Target 2015 Fund	0.4%	0.4%
Schwab Target 2020 Fund	2.7%	2.8%
Schwab Target 2025 Fund	3.9%	3.5%
Schwab Target 2030 Fund	9.2%	7.2%
Schwab Target 2035 Fund	4.9%	3.7%
Schwab Target 2040 Fund	12.4%	8.8%
Schwab Target 2045 Fund	1.9%	1.3%
Schwab Target 2050 Fund	1.8%	1.2%
Schwab Target 2055 Fund	1.0%	0.8%
Schwab Target 2060 Fund	0.2%	0.1%

Other Affiliated Transactions

Laudus International MarketMasters Fund has recovered previously withheld foreign taxes from Finland. The payment received by the fund amounted to $206,926, and has been recorded in the Statement of Operations. The investment adviser has paid upfront professional fees associated with recovering these foreign taxes in the amount of $136,485 for Laudus International MarketMasters Fund and that amount has been reimbursed to the investment adviser by the fund.

As of October 31, 2018, there was no balance of professional fees related to foreign withholding tax subject to future reimbursement by the investment adviser for Laudus International MarketMasters Fund.

No other amounts for additional tax reclaims are reflected in the financial statements due to the uncertainty surrounding the ultimate resolution of proceedings, the likelihood of receipt of these claims, and the potential timing of payment.

Interfund Borrowing and Lending

Pursuant to an exemptive order issued by the SEC, the funds may enter into interfund borrowing and lending transactions with other funds in the Fund Complex. 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 funds had no interfund borrowing or lending activity during the period.

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Financial Notes (continued)

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 each 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 funds were participants with other U.S. registered investment companies managed by CSIM in a joint, syndicated, committed $605 million line of credit (the Syndicated Credit Facility), which matured on October 4, 2018. On October 4, 2018, the Syndicated Credit Facility was amended to run for a new 364 day period with an increased line of $750 million, maturing on October 3, 2019. 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.

On December 1, 2017, the funds became participants 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, which matures on November 30, 2018. Under the terms of the Uncommitted Credit Facility, each fund pays interest on the amount a fund borrows. There were no borrowings from either line of credit during the period.

The funds also have access to custodian overdraft facilities. A 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 of Investment Securities:

For the period ended October 31, 2018, purchases and sales of securities (excluding short-term obligations) were as follows:

	Purchases of Securities	Sales of Securities
Laudus Small-Cap MarketMasters Fund	$133,513,558	$145,076,866
Laudus International MarketMasters Fund	1,147,654,701	1,197,650,934

8. Derivatives:

The funds entered into equity index futures contracts during the report period. The funds invested in futures contracts to equitize available cash. The current value and variation margin for futures contracts held at October 31, 2018 are presented on the Portfolio Holdings and Statement of Assets and Liabilities, respectively. The net realized and change in unrealized gains (losses) on futures contracts are presented on the Statement of Operations. Refer to financial note 2(b) for the funds’ accounting policies with respect to futures contracts and financial note 3 for disclosures concerning the risks of investing in futures contracts. During the period ended October 31, 2018, the month-end average notional amounts of futures contracts held by the funds and the month-end average number of contracts held were as follows:

	Notional Amounts	Number of Contracts
Laudus Small-Cap MarketMasters Fund	$6,856,573	86
Laudus International MarketMasters Fund	62,144,700	622

The Laudus International MarketMasters Fund invested in forwards during the report period. The fund invested in forwards in connection with the purchase and sale of portfolio securities to minimize the uncertainty of changes in future foreign currency exchange rates and to hedge exposure to certain currencies. Refer to financial note 2(b) for the fund’s accounting policies with respect to forwards and financial note 3 for disclosures concerning the risks of investing in forwards. During the period ended October 31, 2018, the month-end average forward foreign currency notional amount and the month-end average unrealized appreciation were $22,083,299 and $322,762, respectively.

As of October 31, 2018, the derivatives contracts held by the funds, categorized by primary risk exposure, were:

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Financial Notes (continued)

8. Derivatives (continued):

	Laudus Small-Cap MarketMasters Fund	Laudus International MarketMasters Fund
Asset Derivatives	Fair Value
Equity Index Futures Contracts¹	$—	$—
Forward Foreign Currency Exchange Contracts²	—	252,374
Liability Derivatives	Fair Value
Equity Index Futures Contracts³	($1,099,122)	($3,542,224)
Forward Foreign Currency Exchange Contracts⁴	—	—

¹	Includes cumulative unrealized appreciation of futures contracts as reported in the Schedule of Portfolio Holdings. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.
²	Statement of Assets and Liabilities location: Unrealized appreciation on forward foreign currency exchange contracts.
³	Includes cumulative unrealized depreciation of futures contracts as reported in the Schedule of Portfolio Holdings. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.
⁴	Statement of Assets and Liabilities location: Unrealized depreciation on forward foreign currency exchange contracts.

The effects of the derivatives held by the funds in the Statement of Operations for the period ended October 31, 2018 were:

	Laudus Small-Cap MarketMasters Fund	Laudus International MarketMasters Fund
Equity Index Futures Contracts
Realized Gains (Losses)¹	$908,724	($2,072,723)
Change in Unrealized Appreciation (Depreciation)²	(1,293,923)	(3,887,892)
Forward Foreign Currency Exchange Contracts
Realized Gains (Losses)¹	$—	$958,731
Change in Unrealized Appreciation (Depreciation)²	—	(193,188)

¹	Statement of Operations location: Net realized gains (losses) on futures contracts and net realized gains (losses) on forward foreign currency exchange contracts.
²	Statement of Operations location: Net change in unrealized appreciation (depreciation) on futures contracts and net change in unrealized appreciation (depreciation) on forward foreign currency exchange contracts.

The funds’ forwards are entered into pursuant to International Swaps and Derivatives Association, Inc. (ISDA) agreements which govern certain terms of derivative transactions. ISDA agreements typically contain, among other things, master netting provisions in the event of a default or other termination event. Master netting provisions allow the funds and the counterparty, in the event of a default or other termination event, to offset payable and receivable amounts for each party related to derivative contracts to one net amount payable by either the funds or the counterparty. The Laudus International MarketMasters Fund’s forwards, which are reported gross in the Statement of Assets and Liabilities, are presented in the table below. The following table presents the fund’s forwards, net of amounts available for offset under a master netting agreement and net of any related collateral received by the fund for assets and pledged by the fund for liabilities as of October 31, 2018.

		Gross Amounts Not Offset in the Statement of Assets & Liabilities
Counterparty	Net Amounts of Assets Presented in the Statement of Assets and Liabilities	Financial Instruments	Cash Collateral Received	Net Amounts^(a)
State Street Bank & Trust Co.	$252,374	$—	$—	$252,374
Total	$252,374	$—	$—	$252,374

^a	Represents the net amount due from the counterparty in the event of default.

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Financial Notes (continued)

9. Redemption Fee:

Prior to February 28, 2017, the funds charged a 2.00% redemption fee on shares sold or exchanged within 30 days of the original purchase date. Such amounts were netted against redemption proceeds on the Statement of Changes in Net Assets. The redemption fees charged during the prior period were as follows:

	Prior Period (11/1/16-10/31/17)
Laudus Small-Cap MarketMasters Fund	$202
Laudus International MarketMasters Fund	2,865

10. Federal Income Taxes:

As of October 31, 2018, the tax basis cost of the funds’ investments and gross unrealized appreciation and depreciation were as follows:

	Laudus Small-Cap MarketMasters Fund	Laudus International MarketMasters Fund
Tax cost	$174,774,875	$1,432,260,548
Gross unrealized appreciation	$19,573,870	$184,599,757
Gross unrealized depreciation	(17,671,260)	(114,464,853)
Net unrealized appreciation (depreciation)	$1,902,610	$70,134,904

As of October 31, 2018, the components of distributable earnings on a tax basis were as follows:

	Laudus Small-Cap MarketMasters Fund	Laudus International MarketMasters Fund
Undistributed ordinary income	$6,703,751	$18,337,109
Undistributed long-term capital gains	10,363,806	115,632,896
Net unrealized appreciation (depreciation) on investments	1,902,610	70,134,904
Net other unrealized appreciation (depreciation)	—	(62,024)
Total	$18,970,167	$204,042,885

The primary differences between book basis and tax basis unrealized appreciation or unrealized depreciation of investments are the tax deferral of losses on wash sales, realization for tax purposes of unrealized gains (losses) on futures contracts and the realization for tax purposes of unrealized appreciation on investments in Passive Foreign Investment Companies (PFIC) and partnership investments. 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 October 31, 2018, the funds had no capital loss carryforwards available to offset future net capital gains.

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

	Laudus Small-Cap MarketMasters Fund	Laudus International MarketMasters Fund
Current period distributions
Ordinary income	$10,689,690	$35,462,454
Long-term capital gains	11,670,222	42,270,382
Prior period distributions
Ordinary income	$374,652	$12,055,543
Long-term capital gains	1,680,089	—

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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Financial Notes (continued)

10. Federal Income Taxes (continued):

Permanent book and tax basis differences may result in reclassifications between components of net assets as required. The adjustments will have no impact on net assets or the results of operations.

As of October 31, 2018, management has reviewed the tax positions for open periods (for federal purposes, three years from the date of filing and for state purposes, four years from the date of filing) as applicable to the funds, and has determined that no provision for income tax is required in the funds’ financial statements. The funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the period ended October 31, 2018, the funds did not incur any interest or penalties.

11. Subsequent Events:

At a meeting held on December 11, 2018, the Board of the Schwab Capital Trust (the Trust) approved the liquidation of the Laudus Small-Cap MarketMasters Fund (the Small-Cap Fund). The Small-Cap Fund will redeem all of its outstanding shares on or about February 26, 2019, and distribute the proceeds to the Small-Cap Fund’s shareholders in an amount equal to the shareholder’s proportionate interest in the net assets of the Small-Cap Fund after the Small-Cap Fund has paid or provided for all its charges, taxes, expenses and liabilities.

At a meeting held on December 11, 2018, the Board of the Trust approved the consolidation of the Investor Shares of the Laudus International MarketMasters Fund (the International Fund) into Select Shares of the International Fund. The share class consolidation will occur on or about February 26, 2019.

Other than the planned liquidation of the Small-Cap Fund and share class consolidation of the International Fund as discussed above, management has determined there are no other 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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Laudus MarketMasters Funds

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Schwab Capital Trust and Shareholders of Laudus Small-Cap MarketMasters Fund and Laudus International MarketMasters Fund

Opinions on the Financial Statements

We have audited the accompanying statements of assets and liabilities, including the portfolio holdings, of Laudus Small-Cap MarketMasters Fund and Laudus International MarketMasters Fund (two of the funds constituting Schwab Capital Trust, hereafter collectively referred to as the “Funds”) as of October 31, 2018, the related statements of operations for the year ended October 31, 2018, the statements of changes in net assets for each of the two years in the period ended October 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended October 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds as of October 31, 2018, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period ended October 31, 2018 and each of the financial highlights for each of the five years in the period ended October 31, 2018 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinions

These financial statements are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’ 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 Funds 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 October 31, 2018 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 opinions.

PricewaterhouseCoopers LLP
San Francisco, California
December 14, 2018

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

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Investment Advisory and Sub-Advisory Agreement Approval

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

The Board of Trustees (the Board or the Trustees, as appropriate) calls and holds one or more meetings each year that are dedicated, in whole or in part, to considering whether to renew the investment advisory and administration agreement between Schwab Capital Trust (the Trust) and Charles Schwab Investment Management, Inc. (CSIM) with respect to the existing funds in the Trust, including Laudus Small-Cap MarketMasters Fund and Laudus International MarketMasters Fund (each, a Fund and collectively, the Funds), and the individual sub-advisory agreements between CSIM and BNY Mellon Asset Management North America Corporation (formerly The Boston Company Asset Management, LLC and Mellon Capital Management Corp.), Voya Investment Management Co. LLC, and Wellington Management Company LLP relating to Laudus Small-Cap MarketMasters Fund; and CSIM and American Century Investment Management, Inc., Harris Associates L.P., BNY Mellon Asset Management North America Corporation (formerly Mellon Capital Management Corp.), Mondrian Investment Partners Limited and William Blair Investment Management, LLC, relating to the Laudus International MarketMasters Fund (collectively, the Sub-Advisers). Such investment advisory and administration agreement and sub-advisory agreements are collectively referred to herein as the Agreements. The Trustees also review certain other agreements pursuant to which CSIM provides investment advisory services to certain other registered investment companies. In preparation for the meeting(s), the Board requests and reviews a wide variety of materials provided by CSIM and the Sub-Advisers, including information about their affiliates, personnel, business goals and priorities, profitability, third-party oversight, corporate structure and operations. The Board also receives data provided by an independent provider of investment company data. This information is in addition to the detailed information about the Funds that the Board reviews during the course of each year, including information that relates to the Fund’s operations and performance, legal and compliance matters, risk management, portfolio turnover and sales and marketing activity. The Independent Trustees receive advice from Independent Trustees’ legal counsel, including a memorandum regarding the responsibilities of trustees for the approval of investment advisory agreements. In

addition, the Independent Trustees meet in executive session outside the presence of Fund management and participate in question and answer sessions with representatives of CSIM. The Board also discusses with CSIM the Funds’ operations and CSIM’s ability, consistent with the “manager of managers” structure of each of the Funds to (i) identify and recommend to the Trustees sub-advisers for each Fund, (ii) monitor and oversee the performance and investment capabilities of each sub-adviser, and (iii) recommend the replacement of a sub-adviser when appropriate. As part of the renewal process, Independent Trustees’ legal counsel sends an information request letter to CSIM and CSIM sends an information request letter to each of the Sub-Advisers seeking certain relevant information. The responses by CSIM and the Sub-Advisers are provided to the Trustees for their review prior to their meeting, and the Trustees are provided with the opportunity to request any additional materials.

The Board, including a majority of the Independent Trustees, considered information specifically relating to its consideration of the continuance of the Agreements with respect to the Funds at meetings held on April 26, 2018, and June 5, 2018, and approved the renewal of the Agreements with respect to the Funds for an additional one year term at the meeting held on June 5, 2018.

The Board’s approval of the Agreements with respect to the Funds was based on consideration and evaluation of a variety of specific factors discussed at these meetings and at prior meetings, including:

1.	the nature, extent and quality of the services provided to the Funds under the Agreements, including the resources of CSIM and its affiliates, and the Sub-Advisers, dedicated to the Funds;
2.	each Fund’s performance and how it compared to that of certain other comparable mutual funds;
3.	each Fund’s expenses and how those expenses compared to those of certain other comparable mutual funds, collective trust funds and other types of accounts;
4.	the profitability of CSIM and its affiliates, including Charles Schwab & Co., Inc. (Schwab), with respect to each Fund, including both direct and indirect benefits accruing to CSIM and its affiliates, as well as the profitability of the Sub-Advisers; and
5.	the extent to which economies of scale would be realized as the Funds grow and whether fee levels in the Agreements reflect those economies of scale for the benefit of Fund investors.

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among other things, CSIM’s experience, track record, compliance program, resources dedicated to hiring and retaining qualified personnel, and information security resources. The Trustees also considered information provided by CSIM relating to each Fund’s portfolio management team, portfolio strategy and risk oversight structure, and internal investment guidelines. The Trustees also considered investments in CSIM’s infrastructure. The Trustees also considered Schwab’s wide range of products, services, and channel alternatives such as investment and research tools, internet access, and an array of account features that benefit the Funds and certain of their shareholders. The Trustees also considered Schwab’s reputation as a full service brokerage firm and its overall financial condition. In addition, the Trustees considered that many of the Funds’ shareholders are also brokerage clients of Schwab. The Board also considered the nature, extent and quality of the sub-advisory services provided by the Sub-Advisers to the Funds and the resources each dedicates to the Funds. Following such evaluation, the Board concluded, within the context of its full deliberations, that the nature, extent and quality of services provided by CSIM and the Sub-Advisers to the Funds and the resources of CSIM, its affiliates, and the Sub-Advisers dedicated to the Funds supported renewal of the Agreements with respect to the Funds.

Fund Performance. The Board considered Fund performance in determining whether to renew the Agreements with respect to the Funds. Specifically, the Trustees considered each Fund’s performance relative to a peer category of other mutual funds and applicable indices/benchmarks, in light of total return, and market trends. As part of this review, the Trustees considered the selection criteria and composition of the peer category. In evaluating the performance of each Fund, the Trustees considered the risk profile for such Fund and the appropriateness of the benchmark used to compare the performance of each Fund. In addition, the Trustees considered whether irrespective of relative performance, each Sub-Adviser’s absolute performance was consistent with expectations for such Sub-Adviser’s unique investment methodology. The Trustees further considered the level of Fund performance in the context of their review of Fund expenses and adviser and Sub-Adviser profitability discussed below and also noted that performance is reviewed throughout the year by a designated committee of the Board and by the Board. Although Laudus Small-Cap MarketMasters Fund had performance that lagged that of a relevant peer group for certain (although not necessarily all) periods considered, the Board concluded that other factors relevant to performance supported renewal of the Agreements with respect to Laudus Small-Cap MarketMasters Fund, including that the underperformance was attributable, to a significant extent, to investment decisions by CSIM and the Sub-Advisers that were reasonable and consistent with the investment objective and policies of Laudus Small-Cap MarketMasters Fund and that CSIM and the Sub-Advisers had taken steps designed to help improve performance. Following such evaluation the Board concluded, within the context of its full deliberations, that the

performance of the Funds supported renewal of the Agreements with respect to the Funds.

Fund Expenses. With respect to the Funds’ expenses, the Trustees considered the rate of compensation called for by the Agreements, and each Fund’s net operating expense ratio, in each case, in comparison to those of a peer group of mutual funds, such peer groups and comparisons having been selected and calculated by an independent provider of investment company data. The Trustees considered the effects of CSIM’s and Schwab’s practice of voluntarily waiving management and other fees to prevent total Fund expenses from exceeding a specified cap. The Trustees also considered CSIM’s contractual commitment to keep each Fund’s expense cap for so long as CSIM serves as the adviser to such Fund. The Trustees also considered fees charged by CSIM and the Sub-Advisers to other mutual funds, and to other types of accounts, which may include collective trust funds and separately managed accounts, but, with respect to such other types of accounts, accorded less weight to such comparisons due to the different legal, regulatory, compliance and operating features of mutual funds as compared to these other types of accounts, and any differences in the nature and scope of the services CSIM provides to these other accounts, as well as differences in the market for these types of accounts. Following such evaluation, the Board concluded, within the context of its full deliberations, that the expenses of the Funds are reasonable and supported renewal of the Agreements with respect to the Funds.

Profitability. The Trustees considered the compensation flowing to CSIM and its affiliates, directly or indirectly, and reviewed profitability on a pre-tax basis, without regard to distribution expenses. In this connection, the Trustees reviewed management’s profitability analyses. The Trustees also reviewed profitability of CSIM relating to the Schwab fund complex as a whole, noting the benefit to Fund shareholders of being part of the Schwab fund complex, including the allocations of certain fixed costs across the funds in the complex. The Trustees also considered any other benefits derived by CSIM from its relationship with the Funds, such as whether, by virtue of its management of the Funds, CSIM obtains investment information or other research resources that aid it in providing advisory services to other clients. With respect to CSIM, the Trustees considered whether the compensation and profitability with respect to each Fund under the Agreements and other service agreements were reasonable and justified in light of the quality of all services rendered to such Fund by CSIM, and its respective affiliates. The Trustees also considered the compensation flowing to the Sub-Advisers, directly or indirectly. The Trustees also considered any other benefits derived by the Sub-Advisers from their relationship with the Funds, such as whether, by virtue of its management of the Funds, any Sub-Adviser obtains investment information or other research resources that aid it in providing advisory services to other clients. With respect to the Sub-Advisers, the Trustees considered whether the varied levels of compensation and profitability under the

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Agreements and other service agreements were reasonable and justified in light of the quality of all services rendered to each Fund by the Sub-Advisers, and their respective affiliates. The Board also considered the profitability of the Sub-Advisers with respect to the sub-advisory services they provide to the Funds, although, when doing so, the Board took into account the fact that the Sub-Advisers are compensated by CSIM, and not by the Funds directly, and such compensation with respect to any Sub-Adviser reflects an arms-length negotiation between the Sub-Adviser and CSIM. Based on this evaluation, the Board concluded, within the context of its full deliberations, that the profitability of CSIM and the Sub-Advisers is reasonable and supported renewal of the Agreements with respect to the Funds.

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

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

Approval of Amendments to Certain Sub-Advisory Agreements

At a meeting held on September 25, 2018, the Board, including a majority of the Independent Trustees, considered information specifically relating to its consideration of the approval of (1) an amendment to the sub-advisory agreement with Wellington Management Company LLP (Wellington) relating to Laudus Small-Cap MarketMasters Fund to reflect a

reduction to the rate paid by CSIM to Wellington as compensation for Wellington’s services rendered to Laudus Small-Cap MarketMasters Fund; (2) an amendment to the sub-advisory agreement with American Century Investment Management, Inc. (American Century) relating to Laudus International MarketMasters Fund to reflect a reduction to the rate paid by CSIM to American Century as compensation for American Century’s services rendered to Laudus International MarketMasters Fund; and (3) an amendment to the sub-advisory agreement with William Blair Investment Management, Inc. (William Blair) relating to Laudus International MarketMasters Fund to reflect a reduction to the rate paid by CSIM to William Blair for William Blair’s services rendered to Laudus International MarketMasters Fund. The Board reviewed materials provided at their September 25, 2018 meeting and also took into account the detailed information that the Board reviewed at the April 26, 2018 and June 5, 2018 meetings during the course of its consideration and approval of the renewal of the sub-advisory agreements between CSIM and each of Wellington, American Century and William Blair. The Board considered the savings to CSIM and the fact that each of Laudus Small-Cap MarketMasters Fund and Laudus International Small-Cap MarketMasters Fund is operating above its expense caps and CSIM does not anticipate lowering its management fee.

Based on the Trustees’ deliberation and their evaluation of the information described above, the Board, including a majority of the Independent Trustees, approved (1) an amendment to the sub-advisory agreement with Wellington relating to Laudus Small-Cap MarketMasters Fund to reflect a reduction to the rate paid by CSIM to Wellington as compensation for Wellington’s services rendered to Laudus Small-Cap MarketMasters Fund and concluded that the change to the rate paid by CSIM to Wellington would not result in any reduction in the nature or quality of services provided by Wellington under the sub-advisory agreement between CSIM and Wellington; (2) an amendment to the sub-advisory agreement with American Century relating to Laudus International MarketMasters Fund to reflect a reduction to the rate paid by CSIM to American Century as compensation for American Century’s services rendered to Laudus International MarketMasters Fund and concluded that the change to the rate paid by CSIM to American Century would not result in any reduction in the nature or quality of services provided by American Century under the sub-advisory agreement between CSIM and American Century; and (3) an amendment to the sub-advisory agreement with William Blair relating to Laudus International MarketMasters Fund to reflect a reduction to the rate paid by CSIM to William Blair for William Blair’s services rendered to Laudus International MarketMasters Fund and concluded that the change to the rate paid by CSIM to William Blair would not result in any reduction in the nature or quality of services provided by William Blair under the sub-advisory agreement between CSIM and William Blair.

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Laudus MarketMasters Funds

Trustees and Officers

The tables below give information about the trustees and officers of Schwab Capital Trust, which includes the funds covered in this report. The “Fund Complex” includes The Charles Schwab Family of Funds, Schwab Capital Trust, Schwab Investments, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust. The Fund Complex includes 101 funds.

The address for all trustees and officers is 211 Main Street, San Francisco, CA 94105. You can find more information about the trustees and officers in the funds’ Statement of Additional Information, which is available free by calling 1-877-824-5615.

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.	101	Director (2005 – 2012), PS Business Parks, Inc.
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 (Oct. 1979 – present), The Hoover Institution at Stanford University (public policy think tank); Senior Fellow (2000 – present), Stanford Institute for Economic Policy Research; Professor of Public Policy (1994 – 2015), Stanford University.	101	Director (2005 – present), Gilead Sciences, Inc.
Nancy F. Heller 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 2018)	President and Chairman (2014 – 2016), TIAA Charitable (financial services); Senior Managing Director (2003 – 2016), TIAA (financial services).	101	None
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 (May 2012 – present), Kochis Global (wealth management consulting); Chairman and CEO (Jan. 2008 – Apr. 2012), Aspiriant, LLC (wealth management).	101	None

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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
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.	101	Director (2003 – present), Symantec Corporation Director (2004 – present), Corcept Therapeutics Incorporated Director (2009 – present), Adamas Pharmaceuticals, Inc.
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 (Dec. 2008 – Sept. 2013), Intuit, Inc. (financial software and services firm for consumers and small businesses).	101	Director (2008 – present), KLA-Tencor Corporation
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 (2008 – present), Patmore Management Consulting (management consulting).	101	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 (Mar. 1990 – present), Smith Graham & Co. (investment advisors).	101	Director (2012 – present), Eaton Director and Chairman of the Audit Committee (2003 – 2013), Oneok Partners LP Director (2009 – 2013), Oneok, Inc. Lead Independent Director (2002 – 2012), Board of Cooper Industries
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 (Jan. 2008 – present), Goldman Sachs & Co., Inc. (investment banking and securities firm); Co-CEO (Feb. 1998 – present), Colgin Cellars, LLC (vineyards).	101	Board Member and Chairman of the Audit Committee (1994 – present), Ionis Pharmaceuticals Lead Independent Director and Chair of Audit Committee (2014 – present), OUTFRONT Media Inc.

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Laudus MarketMasters Funds

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 (Oct. 2008 – present), The Charles Schwab Corporation; President and Chief Executive Officer (Oct. 2008 – present) and Director (May 2008 – present), Charles Schwab & Co., Inc.; Director (Apr. 2006 – present), Charles Schwab Bank; Director (May 2008 – present) and President and Chief Executive Officer (Aug. 2017 – present), Schwab Holdings, Inc.; Director (July 2016 – present), Charles Schwab Investment Management, Inc.	101	Director (2008 – present), The Charles Schwab Corporation
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 and Chief Executive Officer (Dec. 2010 – present), President (Dec. 2010 – Oct. 2018), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; Trustee (Jan. 2016 – present), Chief Executive Officer (Dec. 2010 – present), President (Dec. 2010 – Oct. 2018), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Director (Jan. 2011 – present), Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited; Global Head of Fixed Income Business Division (Mar. 2007 – Aug. 2010), BlackRock, Inc. (formerly Barclays Global Investors) (investment management firm).	101	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)	Chief Operating Officer (Feb. 2018 – present) and Senior Executive Vice President (July 2015 – Feb. 2018), The Charles Schwab Corporation; Senior Executive Vice President (July 2015 – present), Charles Schwab & Co., Inc.; Chief Financial Officer (July 2015 – Aug. 2017) and Executive Vice President and Chief Financial Officer (May 2007 – July 2015), The Charles Schwab Corporation and Charles Schwab & Co., Inc.; Director (May 2007 – present), Charles Schwab & Co., Inc.; 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.	101	None

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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 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 and Chief Executive Officer (Dec. 2010 – present), President (Dec. 2010 – Oct. 2018), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; Trustee (Jan. 2016 – present), Chief Executive Officer (Dec. 2010 – present), President (Dec. 2010 – Oct. 2018), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Director (Jan. 2011 – present), Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited; Global Head of Fixed Income Business Division (Mar. 2007 – Aug. 2010), BlackRock, Inc. (formerly Barclays Global Investors) (investment management firm).
Jonathan de St. Paer 1973 President (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2018)	President (Oct. 2018 – present), Charles Schwab Investment Management, Inc.; Senior Vice President – Strategy and Product Development (CSIM) (Jan. 2014 – present) and Vice President (Jan. 2009 – Dec. 2013), Charles Schwab & Co., Inc.; President (Nov. 2018 – present), Schwab Funds, Laudus Funds and Schwab ETFs.
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 (Jan. 2016 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Assistant Treasurer (Dec. 2013 – Dec. 2015), Schwab Funds and Laudus Funds; Assistant Treasurer (Nov. 2013 – Dec. 2015), Schwab ETFs; Vice President (Oct. 2013 – present), Charles Schwab Investment Management, Inc.; Executive Director (Apr. 2011 – Sept. 2013), J.P. Morgan Investor Services; Assistant Treasurer (May 2005 – Mar. 2011), Massachusetts Financial Service Investment Management.
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) and Chief Operating Officer (Jan. 2011 – present), Charles Schwab Investment Management, Inc.; Senior Vice President and Chief Operating Officer (Jan. 2016 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Treasurer and Chief Financial Officer (June 2006 – Dec. 2015), Laudus Funds; Treasurer and Principal Financial Officer (Nov. 2004 – Dec. 2015), Schwab Funds; Treasurer and Principal Financial Officer (Oct. 2009 – Dec. 2015), Schwab ETFs; Director (Apr. 2005 – present), Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited.
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 (Apr. 2011 – present), Charles Schwab Investment Management, Inc.; Senior Vice President and Chief Investment Officer – Equities and Multi-Asset Strategies (June 2011 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Head of the Portfolio Management Group and Vice President of Portfolio Management (May 2009 – Apr. 2011), Financial Engines, Inc. (investment management firm); Head of Quantitative Equity (July 2004 – Jan. 2009), ING Investment Management.
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 (Apr. 2011 – present), Charles Schwab Investment Management, Inc.; Senior Vice President and Chief Investment Officer – Fixed Income (June 2011 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Senior Managing Director, Global Head of Active Fixed-Income Strategies (Jan. 2008 – Oct. 2010), State Street Global Advisors; Director of Alpha Strategies (Apr. 2006 – Jan. 2008), Loomis, Sayles & Company (investment management firm).
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) and Vice President (Mar. 2004 – Sept. 2011), Charles Schwab & Co., Inc.; Senior Vice President and Chief Counsel (Sept. 2011 – present) and 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 (Apr. 2011 – present), Laudus Funds; Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs.

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Laudus MarketMasters Funds

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
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 (July 2005 – present), Charles Schwab & Co., Inc.; Vice President (Sept. 2005 – present), Charles Schwab Investment Management, Inc.; Vice President (Dec. 2005 – present) and 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 (Oct. 2009 – present), Schwab ETFs.

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 CSIM. 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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Laudus MarketMasters Funds

Glossary

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

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

Bloomberg Barclays US Aggregate Bond Index An index that is a broad-based benchmark measuring the performance of the U.S. investment grade, taxable bond market, including U.S. Treasuries, government-related and corporate bonds, mortgage pass-through securities, commercial mortgage-backed securities, and asset-backed securities that are publicly available for sale in the United States. To be eligible for inclusion in the index, securities must be fixed rate, non-convertible, U.S. dollar denominated with at least $300 million or more of outstanding face value and have one or more years remaining to maturity. The index excludes certain types of securities, including tax-exempt 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. The index is market capitalization weighted and the securities in the index are updated on the last business day of each month.

Bloomberg Barclays US 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.

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

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

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

cap, capitalization See “market cap.”

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

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

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

MSCI EAFE Index (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.

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

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

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

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

restricted and illiquid securities Restricted securities are securities that are subject to legal restrictions on their sale. Restricted securities generally can be sold in privately negotiated transactions, pursuant to an exemption from registration under the Securities Act of 1933 (the 1933 Act), or in a registered public offering. Certain restricted securities, such as Section 4(a)(2) commercial paper and Rule 144A securities under the 1933 Act, may be considered to be liquid if they meet the criteria for liquidity established by the Board. Illiquid securities generally are any securities that cannot be disposed of promptly and in the ordinary course of business at approximately the amount at which a fund has valued the instruments. The liquidity of a fund’s investments is monitored under the supervision and direction of the Board. Investments currently not considered liquid include repurchase agreements not maturing within seven days and certain restricted securities.

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

Russell 2000 Index An index that measures the performance of the 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.

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

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

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

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

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Laudus MarketMasters Funds

PRIVACY NOTICE
THIS IS NOT PART OF THE SHAREHOLDER REPORT

A Commitment to Your Privacy

Your Privacy Is Not for Sale

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

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

How We Collect Information About You

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

• APPLICATION AND REGISTRATION
INFORMATION.

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

• TRANSACTION AND EXPERIENCE
INFORMATION.

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

• WEBSITE USAGE.

When you visit our websites, we may use devices known as “cookies,” graphic interchange format files (GIFs), or other similar web tools to enhance your web experience. These tools help us to recognize you, maintain your web session, and provide a more personalized experience. To learn more, please go to www.schwab.com/privacy.

How We Share and Use Your Information

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

• to help us process transactions for your account;

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

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

State Laws

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

Safeguarding Your Information — Security Is a
Partnership

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

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

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

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

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

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

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Laudus MarketMasters Funds

Laudus Funds^®

Laudus Funds offer investors access to some of the world’s leading investment managers. With a rigorous manager selection process and ongoing oversight by Charles Schwab Investment Management, Laudus Funds offer single and multi-manager strategies as a complement to other funds managed by Charles Schwab Investment Management. The list below shows all currently available Laudus Funds.

An investor should consider a fund’s investment objectives, risks, charges and expenses carefully before investing or sending money. This and other important information can be found in the fund’s prospectus or, if available, the summary prospectus. Please call 1-877-824-5615 for a prospectus for any Laudus Fund. Please read the prospectus carefully before you invest. This report must be preceded or accompanied by a current prospectus.

Proxy Voting Policies, Procedures and Results

A description of the proxy voting policies and procedures used to determine how to vote proxies on behalf of the funds is available without charge, upon request, by visiting the Laudus Funds’ website at www.schwabfunds.com/laudusfunds_prospectus, the SEC’s website at www.sec.gov, or by contacting Laudus Funds at 1-877-824-5615.

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

The Laudus Funds^®

Laudus^® U.S. Large Cap Growth

Laudus U.S. Large Cap Growth Fund

Laudus MarketMasters Funds^®

Laudus International MarketMasters Fund™

Laudus Small-Cap MarketMasters Fund™

Investment Adviser

Charles Schwab Investment Management, Inc.

211 Main Street, San Francisco, CA 94105

Funds

Laudus MarketMasters Funds

1-877-824-5615

Printed on recycled paper.

Schwab Active Equity Funds

Performance at a Glance

Total Return for the 12 Months Ended October 31, 2018
Schwab Core Equity Fund (Ticker Symbol: SWANX)	2.71%
S&P 500^® Index	7.35%
Fund Category: Morningstar Large Blend¹	5.28%
Performance Details	pages 8-10

Schwab Dividend Equity Fund (Ticker Symbol: SWDSX)	-0.63%
Russell 1000^® Value Index	3.03%
Fund Category: Morningstar Large Value¹	3.34%
Performance Details	pages 11-13

Schwab Large-Cap Growth Fund (Ticker Symbol: SWLSX)	4.46%
Russell 1000^® Growth Index	10.71%
Fund Category: Morningstar Large Growth¹	8.70%
Performance Details	pages 14-16

Schwab Small-Cap Equity Fund (Ticker Symbol: SWSCX)	1.37%
Russell 2000^® Index	1.85%
Fund Category: Morningstar Small Blend¹	-0.07%
Performance Details	pages 17-19

Total Return for the 12 Months Ended October 31, 2018
Schwab Hedged Equity Fund (Ticker Symbol: SWHEX)	1.75%
S&P 500^® Index	7.35%
Fund Category: Morningstar Long-Short Equity¹	0.15%
Performance Details	pages 20-22

Schwab Health Care Fund² (Ticker Symbol: SWHFX)	9.13%
Dow Jones Global Health Care Index	9.43%
Fund Category: Morningstar Health¹	9.71%
Performance Details	pages 23-25

Schwab International Core Equity Fund² (Ticker Symbol: SICNX)	-12.18%
MSCI EAFE^® Index (Net)³	-6.85%
Fund Category: Morningstar Foreign Large Blend¹	-8.26%
Performance Details	pages 26-28

Minimum Initial Investment⁴

$100

For index definitions, please see the Glossary.

¹	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.
²	The fund’s performance relative to the index may be affected by fair-value pricing and timing differences in foreign exchange calculations. See financial note 2 for more information.
³	The net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.
⁴	Please see the funds’ prospectus for further detail and eligibility requirements.

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Schwab Active Equity Funds | Annual Report

Schwab Active Equity Funds

From the CEO

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

Dear Shareholder,

The Schwab Active Equity Funds play a significant role in our goal of providing our clients a diverse variety of investment choices. The Funds offer actively-managed exposure to a broad range of strategies. The Funds use an integrated process of quantitative and qualitative research and analysis through a bottom-up approach to stock selection. They are designed to generate consistent, risk-adjusted excess returns over the long term. They are also built with an eye toward controlling known risks and minimizing the unknown ones. That’s a dynamic process, and the teams that run the funds are constantly assessing sources of outperformance and underperformance and incorporating those insights into their buy-and-sell decisions.

For more than 25 years, Charles Schwab Investment Management has offered a straightforward lineup of products and solutions, and advocated for investors of all sizes. When I joined the firm in 2010, I couldn’t have imagined how far we would advance that mission. We have led the way in bringing expenses down for many of our funds while building out a robust suite of products with our investors’ needs in mind. And a big reason we’ve been able

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Schwab Active Equity Funds | Annual Report

Schwab Active Equity Funds

The Investment Environment

Asset Class Performance Comparison % returns during the 12 months ended October 31, 2018

For index definitions, please see the Glossary.

Data source: Index provider websites and CSIM.

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

Management views 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 Active Equity Funds

The Investment Environment (continued)

After hitting its all-time low in November, in February the Cboe Volatility Index^® (VIX^®)¹, a gauge of equity market volatility, spiked to levels not seen since 2015. After moderating over the spring and summer, the VIX spiked again in October amid sharp swings in the stock market throughout the month, with key U.S. market indices erasing much of the hefty gains they had achieved over the spring and summer. Outside the U.S., markets generally followed suit but showed increasing weakness over the second half of the reporting period. Technology stocks were particularly hard-hit, with 80% of tech stocks entering bear-market territory after October’s stock market sell-off, due to a combination of rising interest rates, concerns about trade tensions with China that are impacting supply chains worldwide, and increased regulatory scrutiny that impacted several large tech companies. Value stocks underperformed growth stocks by a wide margin over the reporting period, largely the result of high levels of consumer optimism and tax reform that took effect in January.

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 Active Equity Funds | Annual Report

Schwab Active Equity Funds

Fund Management

Jonas Svallin, CFA, Vice President and Head of Active Equities, has overall responsibility for all aspects of the management of the funds and leads the Active Equity portfolio management and research team. Prior to joining CSIM in 2012, Mr. Svallin spent nearly three years as a partner and a director of quantitative analytics and research at Fiduciary Research & Consulting, where he provided oversight of quantitative analytics and risk management efforts. From 2003 to 2009, Mr. Svallin was a principal and head portfolio manager at Algert Coldiron Investors LLC (now known as Algert Global). Prior to joining Algert, Mr. Svallin worked as a quantitative research associate at RCM Capital Management and a senior consultant at FactSet Research Systems.

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

Iain Clayton, CFA, FRM, Senior Portfolio Manager, is responsible for the day-to-day co-management of the Schwab Core Equity Fund, Schwab International Core Equity Fund and Schwab Health Care Fund. Prior to joining CSIM in 2013, Mr. Clayton spent more than five years at SSI Investment Management, where he was a portfolio manager and director of quantitative research. In these roles, Mr. Clayton co-managed multiple investment strategies and developed quantitative models and valuation approaches. From 2004 to 2008, he worked as a portfolio manager and director at RCM Capital Management (now known as Allianz Global Investors) and helped manage various equity portfolios and developed fundamental-based stock selection models. Prior to that, he was a vice president at Eureka Investment Advisors for almost three years and also served as a senior quantitative analyst/assistant portfolio manager. He has also worked as a quantitative research analyst at RCM Capital Management.

Holly Emerson (formerly known as Xin Wen), CFA, Portfolio Manager, is responsible for the day-to-day co-management of the Schwab Large-Cap Growth Fund and the Schwab Dividend Equity Fund. Previously, she served as an Associate Portfolio Manager supporting the Schwab Active Equity Funds. Prior to joining CSIM in 2014, Ms. Emerson spent nearly 10 years at Algert Global (formerly Algert Coldiron Investors), a quantitative market neutral hedge fund manager, where she held a number of positions, including Assistant Portfolio Manager and Macroeconomic Research Analyst. In her various roles, she supported both U.S. and International funds and acted as the lead portfolio manager for the Canadian fund.

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Schwab Active Equity Funds | Annual Report

Schwab Core Equity Fund as of October 31, 2018

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

Performance. The fund returned 2.71% for the 12-month reporting period ended October 31, 2018, underperforming the S&P 500^® Index (the index), which the fund uses for performance comparisons. The index returned 7.35% for the reporting period.

Positioning and Strategies. The fund’s stock selection detracted from its relative performance. The fund’s allocation across market sectors as compared with the index also detracted, but to a lesser degree.

Across all sectors, the Consumer Discretionary sector was the largest detractor from the fund’s relative performance. Although the sector was the index’s second-strongest performer for the reporting period, after Information Technology, stock selection within the sector dampened relative performance. Within the sector, the fund’s position in Las Vegas Sands Corp., a U.S.–based casino and resort company with facilities both within and outside the U.S., was a particular drag on performance. This was due in part to weakness in the company’s Macau property holdings, which saw declining gaming revenue growth. The Materials sector, the index’s weakest sector by a large margin, also detracted from the fund’s total and relative performance. This was primarily due to stock selection, although the fund’s overweight of the sector also detracted. Constituting an average weight of approximately 4% of the fund, the fund’s Materials holdings fell approximately 21% versus the index’s holdings, which fell approximately 10%. Within the sector, the fund’s weakest position was Berry Global Group, Inc., a Fortune 500 global manufacturer and marketer of plastic packaging products. The stock returned approximately –19% on declining sentiment for the packaging industry and fears over rising input costs and interest rates. Berry Global Group, Inc. was a non-index stock.

The Energy sector was one of the few bright spots for the portfolio over the reporting period, contributing positively to the fund’s relative performance, primarily due to stock selection. The fund’s positions within the sector returned approximately 14% versus the index’s return of slightly more than 1%. Among the fund’s Energy sector holdings, ConocoPhillips was the largest contributor, amid higher oil prices over the reporting period, returning approximately 39% for the fund. The fund added to its position in the stock during the first half of the period, then began trimming in September on declining fundamentals.

Across all holdings, irrespective of sector, the fund’s single strongest position contributing to relative performance was The Boeing Co., which returned approximately 40% over the reporting period on strong profitability and passenger loads. The largest detractor from the fund’s relative performance across all holdings was Owens Corning, a global developer and producer of insulation, roofing, and fiberglass composites. The funds’ investment in Owens Corning returned approximately –42% amid weak performance by the homebuilding industry on late-cycle market fears, rising interest rates, and higher commodity costs. Owens Corning was a non-index stock.

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

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Schwab Active Equity Funds | Annual Report

Schwab Core Equity Fund

Performance and Fund Facts as of October 31, 2018

Performance of Hypothetical $10,000 Investment (October 31, 2008 – October 31, 2018)^1,2

Average Annual Total Returns^1,2

Fund and Inception Date	1 Year	5 Years	10 Years
Fund: Schwab Core Equity Fund (7/1/96)	2.71%	9.90%	11.58%
S&P 500^® Index	7.35%	11.34%	13.24%
Fund Category: Morningstar Large Blend³	5.28%	9.44%	12.14%
Fund Expense Ratio⁴: 0.74%

For index definitions, please see the Glossary.

¹	Fund expenses may have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
²	On May 21, 2009 and September 7, 2012, the Laudus U.S. MarketMasters Fund and the Schwab Premier Equity Fund, respectively, merged into the fund.
³	Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date.
⁴	As stated in the prospectus. Reflects the total annual 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 Active Equity Funds | Annual Report

Schwab Dividend Equity Fund as of October 31, 2018

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

Market Highlights. For most of the reporting period, U.S. stocks delivered strong returns. Volatility spiked in February, however, driving stocks lower. October also saw a marked increase in volatility, and stocks across sectors plunged, erasing nearly all of their gains of the preceding 11 months. Though the Federal Reserve raised the federal funds rate four times during the period, financial conditions remained generally accommodative, which—along with tax reform, strong corporate earnings, and low unemployment—supported U.S. stock market performance over most of the period. In this higher interest rate environment, growth stocks generally outperformed value, leading to the underperformance of high dividend-paying stocks compared to the broader stock market, although their relative performance improved toward the end of the reporting period as investors’ appetite for risk waned.

Performance. The fund returned -0.63% for the 12-month reporting period ended October 31, 2018, underperforming the Russell 1000^® Value Index (the index), which the fund uses for performance comparisons. The index returned 3.03% for the reporting period.

As of October 31, 2018, the fund’s dividend yield was 1.81%, lower than the 2.53% dividend yield of the index. As of October 31, 2018, the fund’s 30-Day SEC yield was 1.52%.

Positioning and Strategies. The fund’s stock selection detracted from the fund’s relative performance. Its allocation across market sectors as compared with the index also detracted, but to a lesser degree.

Across all sectors, the Materials sector was the largest detractor from fund’s total and relative return. The weakest among the index’s sectors for the reporting period, due in large part to tariff concerns and rising interest rates, the fund’s positions in the sector fell approximately 22% versus the index’s sector decline of just approximately 9%. This was primarily due to stock selection, although the fund’s overweight of the sector also detracted. Within the sector, the fund’s weakest position was Berry Global Group, Inc., a Fortune 500 global manufacturer and marketer of plastic packaging products. The stock returned approximately –27% on declining sentiment for the packaging industry and fears over rising input costs and interest rates. The Communications Services sector also detracted from the fund’s relative performance, also primarily due to stock selection. The largest detractor within the sector was the fund’s position in Verizon Communications Inc. Although a strong performer for the period, the fund’s allocation to the stock was significantly smaller than that of the index, thereby dampening the fund’s relative performance.

The Health Care and Energy sectors were two of the few bright spots for the portfolio over the period, both contributing positively to the fund’s relative performance, and both primarily due to stock selection. In the Health Care sector, the fund’s strongest contributor—also the fund’s overall strongest contributor to its relative performance across all sectors—was Express Scripts Holding Co., the largest benefit management organization in the U.S., which returned approximately 58% for the reporting period. The company rose on its proposed merger with Cigna, announced in March and approved by the Justice Department in October, as well as on the overall strength of the sector, particularly in the second half of the reporting period. Within the Energy sector, the fund’s positions returned approximately 8% versus the index’s return of approximately 4%. Among the fund’s Energy sector holdings, ConocoPhillips was the largest contributor amid higher oil prices over the period, returning approximately 39% for the reporting period.

Across all holdings, irrespective of sector, the largest detractor from the fund’s relative performance was Owens Corning, a global developer and producer of insulation, roofing, and fiberglass composites. The fund’s investment in Owens Corning returned approximately –28% amid weak performance by the homebuilding industry on late-cycle market fears, rising interest rates, and higher commodity costs. Owens Corning was a non-index stock.

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

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Schwab Dividend Equity Fund

Performance and Fund Facts as of October 31, 2018

Performance of Hypothetical $10,000 Investment (October 31, 2008 – October 31, 2018)^1,2

Average Annual Total Returns^1,2

Fund and Inception Date	1 Year	5 Years	10 Years
Fund: Schwab Dividend Equity Fund (9/2/03)	-0.63%	6.67%	10.10%
Russell 1000^® Value Index	3.03%	8.61%	11.30%
Dividend Equity Spliced Index	3.03%	9.12%	12.10%
S&P 500^® Index	7.35%	11.34%	13.24%
Fund Category: Morningstar Large Value³	3.34%	8.03%	11.13%
Fund Expense Ratio⁴: 0.88%

Yields¹

30-Day SEC Yield

1.52%

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

For index definitions, please see the Glossary.

¹	Fund expenses may have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
²	On October 7, 2009, the Investor Share class and Select Share class were combined into a single class of shares of the fund. The performance history of the fund prior to October 7, 2009 is that of the fund’s former Select Shares.
³	Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date.
⁴	As stated in the prospectus. Reflects the total annual 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 Large-Cap Growth Fund as of October 31, 2018

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

Performance. The fund returned 4.46% for the 12-month reporting period ended October 31, 2018, underperforming the Russell 1000^® Growth Index (the index), which the fund uses for performance comparisons. The index returned 10.71% for the reporting period.

Across all sectors, stock selection within the Financials sector provided the largest drag on the fund’s relative return, as the fund’s sector holdings significantly underperformed those of the index. Within the sector, the largest detractor was Affiliated Managers Group, Inc., an international investment management company that owns stakes in a number of boutique asset management, hedge fund, and specialized private equity firms. Stock selection within the Information Technology and Materials sectors also dragged on the fund’s relative performance. Among Information Technology positions, the fund’s overweight to Micron Technology, Inc. was the single largest detractor. The company suffered from impacts from tariffs, falling prices on NAND memory chips, and an apparent oversupply of DRAM memory chips. The fund’s exposure to the Materials sector, constituting an average weight of approximately 3% of the fund, fell approximately 29% versus the Materials holdings of the index, which were down approximately 10%. The fund’s largest drag on relative performance, both within the sector and across the entire fund, was Berry Global Group, Inc., a Fortune 500 global manufacturer and marketer of plastic packaging products. The stock returned approximately –19% on declining sentiment for the packaging industry and fears over rising input costs and interest rates. As of the end of the reporting period, the fund had eliminated its entire position in the stock.

The Energy sector was the sole sector that contributed positively to the fund’s relative performance, both from the fund’s underweight to the sector as compared to the index and from its stock selection. Although the fund’s Energy holdings posted a negative return for the period, which returned approximately 7%, that return was less negative than that of the index, which returned approximately -9%. The majority of the fund’s contribution from stock selection was due to its avoidance of Energy stocks that the index held, and which performed poorly. With the exception of the Materials sector, Energy was the index’s weakest-performing sector for the reporting period.

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

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Schwab Active Equity Funds | Annual Report

Schwab Large-Cap Growth Fund

Performance and Fund Facts as of October 31, 2018

Performance of Hypothetical $10,000 Investment (October 31, 2008 – October 31, 2018)^1,2

Average Annual Total Returns^1,2

Fund and Inception Date	1 Year	5 Years	10 Years
Fund: Schwab Large-Cap Growth Fund (10/3/05)	4.46%	11.19%	12.83%
Russell 1000^® Growth Index	10.71%	13.43%	15.45%
Fund Category: Morningstar Large Growth³	8.70%	11.05%	13.73%
Fund Expense Ratios⁴: Net 0.99%; Gross 1.04%

For index definitions, please see the Glossary.

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

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Schwab Active Equity Funds | Annual Report

Schwab Small-Cap Equity Fund as of October 31, 2018

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

Market Highlights. For most of the reporting period, U.S. small-cap stocks delivered strong returns. Volatility spiked in February, however, driving stocks lower. October also saw a marked increase in volatility, and stocks across asset classes plunged, erasing nearly all of their gains of the preceding 11 months. For nearly the first half of the period, small-caps underperformed large-caps but gained the advantage from mid-March through September, although they fell more steeply than large-caps during October’s decline. Though the Federal Reserve raised the federal funds rate four times during the period, financial conditions remained generally accommodative, which—along with tax reform, strong corporate earnings and low unemployment—supported U.S. stock market performance over most of the period.

Performance. The fund returned 1.37% for the 12-month reporting period ended October 31, 2018, underperforming the Russell 2000^® Index (the index), which the fund uses for performance comparisons. The index returned 1.85% for the reporting period.

Positioning and Strategies. The fund’s slight underperformance of the index came primarily from the fund’s stock selection.

Across all sectors, stock selection within the Information Technology sector detracted the most from the fund’s relative performance, as the fund’s sector holdings underperformed those of the index. Within the sector, Advanced Energy Industries, Inc., developer of power and control technologies for manufacturers of semiconductors, flat-panel displays, data storage, and solar cells, provided the largest drag on performance. The fund’s holdings of the company returned approximately -49% over the reporting period as its semiconductor clients delayed their capital spending due to pricing and tariff-related concerns. Stock selection within the Industrials sector also dragged on the fund’s relative performance. The fund’s overweight to GMS Inc., which supplies gypsum wallboard, acoustical products, and a wide range of other building materials to commercial and residential building contractors, represented its single largest detractor within the sector. The fund’s holdings of GMS Inc. returned approximately -53%. The company suffered due to acquisition costs of Canada’s WSB Titan during the period as well as a slowdown in residential construction starts.

The Financials sector was the strongest contributor to the fund’s relative performance. Constituting an average weight of approximately 18% of the fund, the sector returned approximately 6% for the fund on strong stock selection, versus the index’s loss of approximately 2%. Within the sector—as well as across the entire fund—the fund’s strongest contributor for the reporting period was its overweight to First BanCorp, a holding company that operates as First Bank in North and South Carolina. First BanCorp returned approximately 79% over the period on strong revenues and earnings surprises. The fund’s stock selection within the Energy sector also contributed strongly to its relative performance; the fund’s Energy holdings returned approximately 15% for the reporting period, compared to the index’s loss of approximately 5%.

Across all holdings, irrespective of sector, the fund’s weakest contributor for the period was its overweight to Dana Inc., a worldwide supplier of drivetrain, sealing, and thermal-management technologies to the transportation industry. The stock weakened throughout the reporting period as passenger and commercial vehicle suppliers, its primary customers, lagged.

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

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Schwab Active Equity Funds | Annual Report

Schwab Small-Cap Equity Fund

Performance and Fund Facts as of October 31, 2018

Performance of Hypothetical $10,000 Investment (October 31, 2008 – October 31, 2018)^1,2

Average Annual Total Returns^1,2

Fund and Inception Date	1 Year	5 Years	10 Years
Fund: Schwab Small-Cap Equity Fund (7/1/03)	1.37%	8.29%	13.45%
Russell 2000^® Index	1.85%	8.01%	12.44%
Fund Category: Morningstar Small Blend³	-0.07%	6.75%	12.10%
Fund Expense Ratio⁴: 1.10%

For index definitions, please see the Glossary.

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

Schwab Hedged Equity Fund as of October 31, 2018

The Schwab Hedged Equity Fund (the fund) seeks long-term capital appreciation over market cycles with lower volatility than the broad equity market. To pursue its investment objective, the fund establishes long and short positions in equity securities issued by U.S. companies. The fund typically purchases or sells short stocks of companies that have market capitalizations of $1 billion or more at the time the stock is purchased or sold short. To aid its stock selection, the fund uses Schwab Equity Ratings^®. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.

Performance. The fund returned 1.75% for the 12-month reporting period ended October 31, 2018, underperforming the S&P 500^® Index (the index), which the fund uses for performance comparisons. The index returned 7.35% for the reporting period.

Positioning and Strategies. The fund’s stock selection detracted from its relative performance, across both long and short positions. The fund’s allocation across market sectors as compared with the index also detracted, but to a much lesser degree. Given the strength of the U.S. stock market over the reporting period, and with short positions constituting a weighted average of approximately 40% of fund holdings, the fund’s short positions detracted from the fund’s relative performance, while its long positions as a whole contributed.

Across all sectors, the Materials sector was the largest detractor from both the fund’s total and relative performance, primarily due to stock selection. With China’s slowing growth, tariff concerns, and rising interest rates pressuring the sector, the fund’s long positions in the Materials sector returned approximately –23%, significantly underperforming the index, whose Materials sector returned approximately –9%. The fund’s overweight in long positions to the sector as compared to the index further dampened relative performance. The fund’s short positions, which returned approximately –2%, boosted the fund’s Materials sector performance slightly. Within the Materials sector, the fund’s long position in Berry Global Group, Inc., a Fortune 500 global manufacturer and marketer of plastic packaging products, was the largest detractor for the period. The stock returned approximately –27% for the period on declining sentiment for the packaging industry and fears over rising input costs and interest rates. Berry Global Group, Inc. was a non-index stock. The fund’s holdings in the Real Estate sector also detracted from the fund’s total return and relative performance, both from its long and its short positions. Within the sector, the fund’s long position in Realogy Holdings Corp. was the largest detractor. The fund’s short position in Education Realty Trust, Inc., which performed strongly over the period, further dampened the fund’s relative performance.

The Health Care sector was the strongest-contributing sector to the fund’s relative performance for the period, primarily due to its long positions, which returned approximately 15% for the reporting period. The fund’s short positions, however, were also strong, returning approximately 18%, contributing strongly to the fund’s total return but slightly dampening the contribution from the fund’s long positions to relative performance. The Utilities sector also contributed to the fund’s total and relative performance from a combination of stock selection among its long positions and from its short positions. The fund’s short positions returned approximately -13%. Within the sector, the fund’s short position in Ormat Technologies, Inc. was a strong positive contributor to its relative performance.

Across all holdings, irrespective of sector, the fund’s largest contributor to its relative performance was its overweight long position in Eli Lilly & Co. The stock returned approximately 36% for the reporting period on improved manufacturing efficiencies and cost cutting, as well as strong demand of several of the company’s newer drugs.

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

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Schwab Active Equity Funds | Annual Report

Schwab Hedged Equity Fund

Performance and Fund Facts as of October 31, 2018

Performance of Hypothetical $10,000 Investment (October 31, 2008 – October 31, 2018)^1,2

Average Annual Total Returns^1,2

Fund and Inception Date	1 Year	5 Years	10 Years
Fund: Schwab Hedged Equity Fund (9/3/02)	1.75%	6.51%	7.37%
S&P 500^® Index	7.35%	11.34%	13.24%
Fund Category: Morningstar Long-Short Equity³	0.15%	3.07%	5.82%
Fund Expense Ratios⁴: Net 1.64%; Gross 1.65%

For index definitions, please see the Glossary.

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

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

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Schwab Active Equity Funds | Annual Report

Schwab Health Care Fund as of October 31, 2018

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

Market Highlights. Global equity markets were mixed over the reporting period. In the U.S., equity markets reached record highs toward the end of the period, driven by continued economic growth, strong corporate earnings, and tax reform that took effect in January, but stocks plunged in October amid a spike in volatility, erasing nearly all of their gains of the preceding 11 months. International markets were weaker on multiple fronts including slowing growth, rising oil prices, trade concerns, higher inflation, and tepid wage growth that constrained consumer spending. Over the period the U.S. dollar appreciated against a basket of international currencies, putting pressure on overseas investments in U.S. dollar terms. U.S. health care stocks performed well over the reporting period, generally outperforming the broader U.S. stock market.

Performance. The fund returned 9.13% for the 12-month reporting period ended October 31, 2018, underperforming the Dow Jones Global Health Care Index (the index), which the fund uses for performance comparisons. The index returned 9.43% for the reporting period.

Positioning and Strategies. The fund’s slight underperformance of the index came primarily from its allocation across industries. Its stock selection contributed positively.

The fund’s positions in the Pharmaceuticals industry, the fund’s largest industry exposure, was the largest detractor from the fund’s relative performance, as the fund’s holdings underperformed those of the index. Among Pharmaceuticals, the largest drag on performance came from the fund’s overweight to Mylan N.V., which fell steeply toward the end of the reporting period. The company, a global generic and specialty pharmaceuticals company, slashed its full-year 2018 outlook in August due to significant problems in the U.S. market, including a drop in sales of its EpiPen in the wake of generic competition, as well as manufacturing problems uncovered during a five-week inspection by the U.S. Food and Drug Administration. Several of the fund’s Pharmaceutical holdings performed well and contributed positively to relative performance, however, including Takeda Pharmaceutical Co. Ltd., Pfizer, Inc., and Eli Lilly & Co.

The fund’s positions within the Biotechnology and Health Care Equipment & Supplies industries were the strongest industry contributors to the fund’s relative performance. Despite weakness in the Biotech industry for the reporting period, the fund’s Biotech holdings, constituting an average weight of approximately 24% of the portfolio, returned approximately 2% versus the index’s return of approximately –2%. Within the industry, Genomic Health, Inc. was the strongest contributor. The fund’s nearly 1% average weight in the position returned approximately 119% for the reporting period. A leader in genomic-based lab services that analyze the underlying biology of cancer, the company reported blockbuster earnings and raised its guidance in its most recent reporting period. Genomic Health, Inc. was a non-index stock. In the Health Care Equipment & Supplies industry, the fund’s top contributor to relative performance was Haemonetics Corp., which returned approximately 120% for the reporting period. A global provider of blood and plasma supplies and services, the company has posted robust earnings this year on strong margins and growth in both its plasma services and hospital businesses.

Within the Health Care Providers & Services industry, the index’s strongest-performing industry for the reporting period, despite the fund’s underweight as compared to the index, the fund’s positions outperformed those of the index. The fund’s strongest contributor to relative performance among the group was Express Scripts Holding Co., the largest benefit management organizations in the U.S., which returned approximately 58% for the reporting period. The company rose on its proposed merger with Cigna, announced in March and approved by the Justice Department in October, as well as on the overall strength of the industry, particularly in the second half of the reporting period.

Across all holdings, the fund’s largest detractor from relative performance was global pharmaceutical company Celgene Corp., which experienced a series of setbacks over the reporting period including a late-stage trial failure, slowing growth for a previously popular psoriasis drug, and an FDA rejection letter for the company’s oral multiple sclerosis drug.

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

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Schwab Active Equity Funds | Annual Report

Schwab Health Care Fund

Performance and Fund Facts as of October 31, 2018

Performance of Hypothetical $10,000 Investment (October 31, 2008 – October 31, 2018)¹

Average Annual Total Returns¹

Fund and Inception Date	1 Year	5 Years	10 Years
Fund: Schwab Health Care Fund (7/3/00)	9.13%	11.16%	14.61%
Dow Jones Global Health Care Index	9.43%	10.15%	13.02%
S&P 500^® Index	7.35%	11.34%	13.24%
Fund Category: Morningstar Health²	9.71%	11.89%	15.65%
Fund Expense Ratio³: 0.81%

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

For index definitions, please see the Glossary.

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

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

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

Schwab International Core Equity Fund as of October 31, 2018

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

Market Highlights. Stocks in developed international markets struggled over the reporting period, underperforming U.S. stocks. Conditions in developed international markets softened from multiple fronts including slowing growth, rising oil prices, trade concerns, higher inflation, and tepid wage growth that constrained consumer spending. Volatility spiked in both February and October, driving stocks lower around the globe. Many central banks, including the European Central Bank and the Bank of Japan, maintained generally accommodative monetary policies. The Bank of England raised its key interest rate twice during the period. Over the period, the U.S. dollar appreciated against a basket of international currencies, putting pressure on overseas investments in U.S. dollar terms.

Performance. The fund returned -12.18% for the 12-month reporting period ended October 31, 2018, underperforming the MSCI EAFE^® Index (Net) (the index), which the fund uses for performance comparisons. The index returned -6.85% for the reporting period.

Positioning and Strategies. The fund’s stock selection was the primary detractor from its relative performance. The fund’s allocation across market sectors as compared with the index contributed modestly.

Across all sectors, irrespective of sector, stock selection within the Materials sector provided the largest drag on the fund’s relative performance. One of the weakest among the index’s sectors, due in large part to tariff concerns and rising interest rates, the fund’s positions in the Materials sector fell approximately 23% versus the index’s decline of approximately 7%. Within the sector—and across the entire fund—the fund’s overweight to Covestro AG was the largest detractor from relative performance. The German company, a Bayer spinoff and global supplier of high-tech polymer materials to a range of industries, faced challenging economic conditions surrounding slowing global growth and potential excess industrial capacity. The Information Technology sector also dragged on the fund’s relative performance for the reporting period. Although the fund was underweighted to the sector as compared to the index, the fund’s holdings were down approximately 29% compared to the index’s sector return of approximately 8%. Within the sector, German silicon wafer supplier Siltronic AG provided the largest drag, down approximately 37% for the reporting period. The fund’s Communications Services stocks also dampened the fund’s relative return.

The Financials sector was the strongest contributor to the fund’s relative performance. Although the fund’s average weight of approximately 20% to the sector returned approximately –11%, the index’s Financials stocks were lower, returning approximately –13%. Within the sector, the fund’s two strongest relative performers were Aviva plc, a British multinational insurance company, and Banco Santander S.A., a Spanish multinational commercial bank and financial services company. The Health Care sector also contributed positively to the fund’s relative performance, both from the fund’s overweight to the sector as compared to the index and from stock selection. Within the sector, the two strongest contributors were Swiss pharmaceutical and diagnostics company Roche Holding AG. and Japanese pharmaceutical company Shionogi & Co., Ltd., best known for developing the cholesterol drug Crestor.

From a geographic standpoint, the fund’s Hong Kong stocks detracted the most from relative performance. Although constituting an average weight of just under 4% of the fund, the fund’s Hong Kong holdings fell approximately 29% for the period compared with the index’s approximately 9% decline. Among the fund’s Hong Kong positions, Tencent Holdings Ltd. detracted the most from relative performance, down approximately 33% on increasing government gaming regulation that is hampering the company’s growth prospects. The fund’s German holdings also detracted from relative performance, both from the fund’s position in Covestro AG (discussed above) and BASF SE, the world’s largest chemical producer. The fund’s holdings in Spain provided the greatest relative contribution to the fund’s return; its strongest contributor was Ence Energia y Celolosa S.A., a leading European producer of eucalyptus pulp and producer of renewable energy using forest biomass.

Across all holdings, irrespective of sector, the fund’s single strongest contributor to relative performance was its overweight to Sony Corp., which returned approximately 41% for the period on its growing market in 3D sensors for smart phones and autonomous vehicles, and strength from its gaming division due to higher sales of its PS4 gaming console and software.

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

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Schwab Active Equity Funds | Annual Report

Schwab International Core Equity Fund

Performance and Fund Facts as of October 31, 2018

Performance of Hypothetical $10,000 Investment (October 31, 2008 – October 31, 2018)^1,2

Average Annual Total Returns^1,2

Fund and Inception Date	1 Year	5 Years	10 Years
Fund: Schwab International Core Equity Fund (5/30/08)	-12.18%	2.34%	7.82%
MSCI EAFE^® Index (Net)³	-6.85%	2.02%	6.89%
Fund Category: Morningstar Foreign Large Blend⁴	-8.26%	1.62%	6.50%
Fund Expense Ratios⁵: Net 0.86%; Gross 0.90%

For index definitions, please see the Glossary.

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

¹	Fund expenses may have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
²	On October 7, 2009, the Investor Share class, Select Share class and Institutional Share class were combined into a single class of shares of the fund. The performance history of the fund prior to October 7, 2009 is that of the fund’s former Institutional Shares. On December 3, 2009, the Laudus Rosenberg International Equity Fund merged into the fund.
³	The net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.
⁴	Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date.
⁵	As stated in the prospectus. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as the investment adviser to the fund. Gross Expense: Does not reflect the effect of contractual fee waivers. For actual ratios during the period, refer to the financial highlights section of the financial statements.

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Schwab Active Equity Funds | Annual Report

Schwab Active Equity Funds

Fund Expenses (Unaudited)

Examples for a $1,000 Investment

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

	Expense Ratio (Annualized)¹	Beginning Account Value at 5/1/18	Ending Account Value (Net of Expenses) at 10/31/18	Expenses Paid During Period 5/1/18-10/31/18²
Schwab Core Equity Fund
Actual Return	0.73%	$1,000.00	$ 998.70	$3.68
Hypothetical 5% Return	0.73%	$1,000.00	$1,021.52	$3.72
Schwab Dividend Equity Fund
Actual Return	0.88%	$1,000.00	$ 982.10	$4.40
Hypothetical 5% Return	0.88%	$1,000.00	$1,020.76	$4.48
Schwab Large-Cap Growth Fund
Actual Return	0.99%	$1,000.00	$1,008.90	$5.01
Hypothetical 5% Return	0.99%	$1,000.00	$1,020.21	$5.04
Schwab Small-Cap Equity Fund
Actual Return	1.08%	$1,000.00	$ 985.80	$5.41
Hypothetical 5% Return	1.08%	$1,000.00	$1,019.76	$5.50
Schwab Hedged Equity Fund³
Actual Return	1.69%	$1,000.00	$ 987.70	$8.47
Hypothetical 5% Return	1.69%	$1,000.00	$1,016.68	$8.59
Schwab Health Care Fund
Actual Return	0.80%	$1,000.00	$1,070.80	$4.18
Hypothetical 5% Return	0.80%	$1,000.00	$1,021.17	$4.08
Schwab International Core Equity Fund
Actual Return	0.86%	$1,000.00	$ 867.70	$4.05
Hypothetical 5% Return	0.86%	$1,000.00	$1,020.86	$4.38

¹	Based on the most recent six-month expense ratio; may differ from the expense ratio provided in the Financial Highlights which covers a 12-month period.
²	Expenses for each fund are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by the 184 days of the period, and divided by the 365 days of the fiscal year.
³	Schwab Hedged Equity Fund’s expense ratio includes dividend expenses and stock loan fees paid on securities sold short.

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Schwab Active Equity Funds | Annual Report

Schwab Core Equity Fund

Portfolio Holdings as of October 31, 2018

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 calendar quarters on the fund’s website at www.schwabfunds.com/schwabfunds_prospectus.

Security	Number of Shares	Value ($)
Common Stock 99.4% of net assets

Banks 5.0%
Bank of America Corp.	392,992	10,807,280
CIT Group, Inc.	156,940	7,435,817
Citigroup, Inc.	640,428	41,922,417
Fifth Third Bancorp	249,506	6,734,167
JPMorgan Chase & Co.	205,380	22,390,528
Regions Financial Corp.	325,861	5,529,861
The PNC Financial Services Group, Inc.	87,121	11,194,177
		106,014,247

Capital Goods 6.9%
Allison Transmission Holdings, Inc.	784,478	34,579,790
EMCOR Group, Inc.	28,101	1,994,609
Honeywell International, Inc.	104,114	15,077,790
Illinois Tool Works, Inc.	167,419	21,357,642
Masco Corp.	844,500	25,335,000
Oshkosh Corp.	63,303	3,553,830
Owens Corning	60,840	2,875,907
PACCAR, Inc.	185,088	10,588,884
Raytheon Co.	16,820	2,944,173
Resideo Technologies, Inc. *	17,352	365,267
The Boeing Co.	82,780	29,375,311
		148,048,203

Commercial & Professional Services 1.2%
ManpowerGroup, Inc.	89,547	6,831,541
Robert Half International, Inc.	314,284	19,023,610
		25,855,151

Consumer Durables & Apparel 1.8%
Deckers Outdoor Corp. *	43,305	5,507,097
Michael Kors Holdings Ltd. *	388,714	21,538,643
Polaris Industries, Inc.	43,530	3,873,299
Whirlpool Corp.	60,265	6,614,686
		37,533,725

Consumer Services 1.3%
Darden Restaurants, Inc.	84,407	8,993,566
Las Vegas Sands Corp.	195,411	9,971,823
Penn National Gaming, Inc. *	132,865	3,225,962
Wyndham Destinations, Inc.	146,197	5,245,549
		27,436,900

Diversified Financials 5.7%
Affiliated Managers Group, Inc.	173,489	19,718,760
Ameriprise Financial, Inc.	62,809	7,991,817
Capital One Financial Corp.	310,461	27,724,167
Discover Financial Services	170,885	11,905,558
Evercore, Inc., Class A	137,289	11,215,138
Lazard Ltd., Class A	69,449	2,759,903
Morgan Stanley	424,029	19,361,164

Security	Number of Shares	Value ($)
Santander Consumer USA Holdings, Inc.	213,378	4,000,838
Synchrony Financial	418,214	12,078,020
The Goldman Sachs Group, Inc.	23,458	5,286,730
		122,042,095

Energy 5.7%
Chevron Corp.	321,458	35,890,786
ConocoPhillips	632,262	44,195,114
Exxon Mobil Corp.	213,008	16,972,477
Marathon Oil Corp.	595,727	11,312,856
National Oilwell Varco, Inc.	48,414	1,781,635
PBF Energy, Inc., Class A	71,203	2,979,845
Valero Energy Corp.	107,486	9,790,900
		122,923,613

Food & Staples Retailing 1.1%
The Kroger Co.	332,918	9,907,640
Walmart, Inc.	139,898	14,028,971
		23,936,611

Food, Beverage & Tobacco 4.3%
Flowers Foods, Inc.	631,873	12,201,468
Ingredion, Inc.	235,003	23,777,603
Molson Coors Brewing Co., Class B	277,524	17,761,536
PepsiCo, Inc.	140,253	15,761,632
Pilgrim's Pride Corp. *	415,350	7,335,081
Tyson Foods, Inc., Class A	233,964	14,019,123
		90,856,443

Health Care Equipment & Services 5.9%
Anthem, Inc.	35,464	9,772,814
Cerner Corp. *	157,449	9,018,679
Danaher Corp.	59,795	5,943,623
Hill-Rom Holdings, Inc.	54,740	4,602,539
Hologic, Inc. *	299,164	11,664,404
McKesson Corp.	26,351	3,287,551
Molina Healthcare, Inc. *	58,946	7,472,584
UnitedHealth Group, Inc.	140,816	36,802,262
Varian Medical Systems, Inc. *	320,796	38,293,419
		126,857,875

Household & Personal Products 1.1%
Energizer Holdings, Inc.	48,516	2,851,285
Herbalife Nutrition Ltd. *	187,758	9,999,991
Kimberly-Clark Corp.	38,648	4,030,987
The Procter & Gamble Co.	83,125	7,371,525
		24,253,788

Insurance 2.8%
Aflac, Inc.	296,535	12,771,763
Prudential Financial, Inc.	48,488	4,547,205

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Schwab Active Equity Funds | Annual Report

See financial notes

Schwab Core Equity Fund

Portfolio Holdings as of October 31, 2018 (continued)

Security	Number of Shares	Value ($)
The Allstate Corp.	373,381	35,740,029
The Travelers Cos., Inc.	59,703	7,470,636
		60,529,633

Materials 3.3%
Celanese Corp.	174,277	16,894,412
Domtar Corp.	262,020	12,134,146
Huntsman Corp.	688,760	15,070,069
LyondellBasell Industries N.V., Class A	166,675	14,879,077
PolyOne Corp.	151,711	4,901,783
Westlake Chemical Corp.	103,072	7,349,034
		71,228,521

Media & Entertainment 7.4%
Alphabet, Inc., Class A *	48,068	52,421,999
Alphabet, Inc., Class C *	10,791	11,619,425
Comcast Corp., Class A	769,761	29,358,685
Facebook, Inc., Class A *	157,542	23,913,300
The Walt Disney Co.	140,978	16,188,504
Viacom, Inc., Class B	804,159	25,717,005
		159,218,918

Pharmaceuticals, Biotechnology & Life Sciences 8.6%
AbbVie, Inc.	139,928	10,893,395
Agilent Technologies, Inc.	48,100	3,116,399
Amgen, Inc.	213,503	41,161,243
Biogen, Inc. *	35,644	10,845,400
Bruker Corp.	101,061	3,166,241
Celgene Corp. *	61,780	4,423,448
Charles River Laboratories International, Inc. *	50,237	6,119,871
Eli Lilly & Co.	76,300	8,273,972
Gilead Sciences, Inc.	181,079	12,345,966
Jazz Pharmaceuticals plc *	46,387	7,367,183
Johnson & Johnson	363,560	50,894,765
Pfizer, Inc.	407,204	17,534,204
Waters Corp. *	37,489	7,111,289
		183,253,376

Real Estate 2.2%
American Tower Corp.	51,870	8,081,864
Host Hotels & Resorts, Inc.	205,934	3,935,399
Senior Housing Properties Trust	780,054	12,535,468
Spirit Realty Capital, Inc.	376,240	2,942,197
Weyerhaeuser Co.	717,473	19,106,306
		46,601,234

Retailing 6.5%
Amazon.com, Inc. *	43,491	69,499,053
Best Buy Co., Inc.	244,479	17,152,647
Booking Holdings, Inc. *	7,323	13,727,549
Foot Locker, Inc.	143,844	6,780,806
Kohl's Corp.	87,859	6,653,562
Qurate Retail, Inc. *	684,586	15,019,817
The Home Depot, Inc.	58,214	10,238,678
		139,072,112

Semiconductors & Semiconductor Equipment 2.9%
Intel Corp.	697,450	32,696,456
Lam Research Corp.	44,695	6,334,622

Security	Number of Shares	Value ($)
Micron Technology, Inc. *	451,829	17,042,990
NVIDIA Corp.	23,082	4,866,378
		60,940,446

Software & Services 11.6%
Accenture plc, Class A	110,069	17,349,076
Adobe Systems, Inc. *	26,534	6,520,996
Cadence Design Systems, Inc. *	193,120	8,607,358
Citrix Systems, Inc. *	198,747	20,365,605
Cognizant Technology Solutions Corp., Class A	183,237	12,648,850
International Business Machines Corp.	206,651	23,853,725
Intuit, Inc.	98,054	20,689,394
Jack Henry & Associates, Inc.	30,401	4,554,982
Mastercard, Inc., Class A	30,530	6,034,865
Microsoft Corp.	885,450	94,574,914
Oracle Corp.	247,046	12,065,727
Visa, Inc., Class A	149,959	20,671,848
		247,937,340

Technology Hardware & Equipment 7.5%
Apple, Inc.	519,705	113,742,636
Cisco Systems, Inc.	390,233	17,853,160
F5 Networks, Inc. *	31,432	5,509,401
HP, Inc.	472,819	11,413,851
NetApp, Inc.	89,220	7,002,878
Western Digital Corp.	96,221	4,144,238
		159,666,164

Telecommunication Services 1.2%
Telephone & Data Systems, Inc.	128,557	3,963,412
Verizon Communications, Inc.	388,737	22,192,996
		26,156,408

Transportation 1.4%
Delta Air Lines, Inc.	299,179	16,374,067
Landstar System, Inc.	60,480	6,053,443
United Continental Holdings, Inc. *	83,628	7,151,030
		29,578,540

Utilities 4.0%
CenterPoint Energy, Inc.	524,731	14,172,984
Exelon Corp.	811,484	35,551,114
NRG Energy, Inc.	495,058	17,916,149
Portland General Electric Co.	247,810	11,171,275
UGI Corp.	135,794	7,205,230
		86,016,752
Total Common Stock
(Cost $1,833,022,768)		2,125,958,095

Other Investment Company 0.4% of net assets

Money Market Fund 0.4%
State Street Institutional U.S. Government Money Market Fund, Premier Class 2.09% (a)	7,202,935	7,202,935
Total Other Investment Company
(Cost $7,202,935)		7,202,935

*	Non-income producing security.
(a)	The rate shown is the 7-day yield.

₃₂

Schwab Active Equity Funds | Annual Report

See financial notes

Schwab Core Equity Fund

Statement of Changes in Net Assets

For the current and prior report periods

Operations
	11/1/17-10/31/18		11/1/16-10/31/17
Net investment income		$26,089,047	$33,683,880
Net realized gains		232,323,847	220,321,188
Net change in unrealized appreciation (depreciation)	+	(184,772,120)	252,770,154
Increase in net assets from operations		73,640,774	506,775,222
Distributions to Shareholders1
Total distributions		($252,002,689)	($35,084,460)

Transactions in Fund Shares
		11/1/17-10/31/18		11/1/16-10/31/17
		SHARES	VALUE	SHARES	VALUE
Shares sold		5,037,106	$115,966,940	4,988,532	$112,792,936
Shares reinvested		8,268,646	186,127,214	1,218,622	25,249,831
Shares redeemed	+	(14,419,212)	(338,357,426)	(15,242,604)	(331,861,293)
Net transactions in fund shares		(1,113,460)	($36,263,272)	(9,035,450)	($193,818,526)
Shares Outstanding and Net Assets
		11/1/17-10/31/18		11/1/16-10/31/17
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		96,589,548	$2,353,117,059	105,624,998	$2,075,244,823
Total increase or decrease	+	(1,113,460)	(214,625,187)	(9,035,450)	277,872,236
End of period²		95,476,088	$2,138,491,872	96,589,548	$2,353,117,059

¹	For the period ended October 31, 2017, the fund distributed to shareholders $35,084,460 from net investment income. The SEC eliminated the requirement to disclose distributions to shareholders from net investment income and from net realized gains in 2018 (see financial note 10 for additional information).
²	End of period - Net assets include net investment income not yet distributed of $26,704,798 at October 31, 2017. The SEC eliminated the requirement to disclose undistributed net investment income in 2018.

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Schwab Active Equity Funds | Annual Report

See financial notes

Schwab Dividend Equity Fund

Portfolio Holdings as of October 31, 2018

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 calendar quarters on the fund’s website at www.schwabfunds.com/schwabfunds_prospectus.

Security	Number of Shares	Value ($)
Common Stock 99.8% of net assets

Automobiles & Components 0.4%
Dana, Inc.	212,395	3,306,990
Lear Corp.	16,417	2,181,819
		5,488,809

Banks 11.1%
Bank of America Corp.	371,324	10,211,410
CIT Group, Inc.	272,094	12,891,814
Citigroup, Inc.	571,129	37,386,105
Citizens Financial Group, Inc.	377,732	14,108,290
JPMorgan Chase & Co.	245,952	26,813,687
MGIC Investment Corp. *	209,410	2,556,896
Regions Financial Corp.	1,321,490	22,425,685
The PNC Financial Services Group, Inc.	85,343	10,965,722
Wells Fargo & Co.	17,160	913,427
		138,273,036

Capital Goods 7.5%
Allison Transmission Holdings, Inc.	452,265	19,935,841
EMCOR Group, Inc.	140,831	9,996,184
General Electric Co.	230,995	2,333,050
Illinois Tool Works, Inc.	146,863	18,735,313
Masco Corp.	636,851	19,105,530
The Boeing Co.	67,151	23,829,204
		93,935,122

Commercial & Professional Services 0.9%
ASGN, Inc. *	34,668	2,325,529
ManpowerGroup, Inc.	63,679	4,858,071
Robert Half International, Inc.	75,586	4,575,221
		11,758,821

Consumer Durables & Apparel 1.0%
Michael Kors Holdings Ltd. *	222,013	12,301,740
Whirlpool Corp.	6,752	741,100
		13,042,840

Consumer Services 1.3%
Las Vegas Sands Corp.	140,747	7,182,319
Wyndham Destinations, Inc.	245,060	8,792,753
		15,975,072

Diversified Financials 8.9%
Affiliated Managers Group, Inc.	131,970	14,999,710
Ameriprise Financial, Inc.	47,425	6,034,357
Berkshire Hathaway, Inc., Class B *	44,563	9,147,893
Capital One Financial Corp.	290,326	25,926,112
Discover Financial Services	164,432	11,455,977
Evercore, Inc., Class A	12,853	1,049,962
Lazard Ltd., Class A	214,035	8,505,751

Security	Number of Shares	Value ($)
Morgan Stanley	479,829	21,908,992
Santander Consumer USA Holdings, Inc.	220,170	4,128,187
SEI Investments Co.	30,719	1,641,930
Synchrony Financial	207,060	5,979,893
		110,778,764

Energy 9.8%
Chevron Corp.	326,203	36,420,565
ConocoPhillips	451,477	31,558,243
Exxon Mobil Corp.	334,946	26,688,497
Halliburton Co.	193,548	6,712,245
Marathon Oil Corp.	166,477	3,161,398
Valero Energy Corp.	195,625	17,819,481
		122,360,429

Food & Staples Retailing 0.2%
Walmart, Inc.	26,666	2,674,066

Food, Beverage & Tobacco 4.3%
Flowers Foods, Inc.	587,248	11,339,759
Ingredion, Inc.	170,554	17,256,654
PepsiCo, Inc.	50,189	5,640,240
Pilgrim's Pride Corp. *	208,840	3,688,114
TreeHouse Foods, Inc. *	35,855	1,633,554
Tyson Foods, Inc., Class A	227,550	13,634,796
		53,193,117

Health Care Equipment & Services 6.9%
Abbott Laboratories	55,675	3,838,234
athenahealth, Inc. *	20,586	2,625,538
Cardinal Health, Inc.	24,248	1,226,949
Cerner Corp. *	44,189	2,531,146
Express Scripts Holding Co. *	262,099	25,415,740
Hill-Rom Holdings, Inc.	33,983	2,857,291
Hologic, Inc. *	208,476	8,128,479
McKesson Corp.	10,787	1,345,786
ResMed, Inc.	40,879	4,329,904
UnitedHealth Group, Inc.	30,917	8,080,158
Varian Medical Systems, Inc. *	212,888	25,412,441
		85,791,666

Household & Personal Products 2.1%
Energizer Holdings, Inc.	91,339	5,367,993
Herbalife Nutrition Ltd. *	140,465	7,481,166
The Procter & Gamble Co.	148,022	13,126,591
		25,975,750

Insurance 4.0%
Aflac, Inc.	176,185	7,588,288
American National Insurance Co.	11,805	1,454,848
CNA Financial Corp.	36,872	1,599,139
CNO Financial Group, Inc.	154,274	2,915,779
Prudential Financial, Inc.	11,599	1,087,754

₃₈

Schwab Active Equity Funds | Annual Report

See financial notes

Schwab Dividend Equity Fund

Portfolio Holdings as of October 31, 2018 (continued)

Security	Number of Shares	Value ($)
The Allstate Corp.	292,828	28,029,496
The Travelers Cos., Inc.	59,043	7,388,050
		50,063,354

Materials 4.7%
Berry Global Group, Inc. *	221,302	9,653,193
Celanese Corp.	177,522	17,208,983
Domtar Corp.	181,208	8,391,742
Huntsman Corp.	267,770	5,858,808
LyondellBasell Industries N.V., Class A	95,597	8,533,944
PolyOne Corp.	158,034	5,106,079
Trinseo S.A.	35,760	1,926,749
Westlake Chemical Corp.	36,135	2,576,425
		59,255,923

Media & Entertainment 3.1%
Alphabet, Inc., Class A *	12,157	13,258,181
Comcast Corp., Class A	368,551	14,056,535
IAC/InterActiveCorp *	19,462	3,826,035
News Corp., Class A	93,575	1,234,254
Viacom, Inc., Class B	199,614	6,383,656
		38,758,661

Pharmaceuticals, Biotechnology & Life Sciences 7.6%
Amgen, Inc.	113,364	21,855,446
Gilead Sciences, Inc.	6,174	420,943
Jazz Pharmaceuticals plc *	54,677	8,683,801
Johnson & Johnson	250,605	35,082,194
Pfizer, Inc.	610,234	26,276,676
Waters Corp. *	16,396	3,110,157
		95,429,217

Real Estate 4.7%
American Tower Corp.	46,977	7,319,486
Equity LifeStyle Properties, Inc.	114,477	10,839,827
Prologis, Inc.	39,445	2,543,019
Retail Properties of America, Inc., Class A	769,163	9,437,630
Ryman Hospitality Properties, Inc.	9,560	741,761
Senior Housing Properties Trust	1,117,898	17,964,621
Weyerhaeuser Co.	376,732	10,032,373
		58,878,717

Retailing 1.9%
Best Buy Co., Inc.	267,345	18,756,925
Dick's Sporting Goods, Inc.	73,189	2,588,695
Kohl's Corp.	27,660	2,094,692
		23,440,312

Semiconductors & Semiconductor Equipment 2.3%
Intel Corp.	446,008	20,908,855
Micron Technology, Inc. *	192,147	7,247,785
		28,156,640

Security	Number of Shares	Value ($)
Software & Services 3.4%
Accenture plc, Class A	27,670	4,361,345
Citrix Systems, Inc. *	202,443	20,744,334
International Business Machines Corp.	93,971	10,847,073
Microsoft Corp.	54,898	5,863,655
		41,816,407

Technology Hardware & Equipment 2.7%
Apple, Inc.	13,927	3,048,063
Cisco Systems, Inc.	127,600	5,837,700
F5 Networks, Inc. *	19,184	3,362,572
HP, Inc.	849,343	20,503,140
Western Digital Corp.	21,387	921,138
		33,672,613

Telecommunication Services 2.8%
AT&T, Inc.	598,324	18,356,580
T-Mobile US, Inc. *	36,888	2,528,673
Telephone & Data Systems, Inc.	41,254	1,271,861
Verizon Communications, Inc.	230,645	13,167,523
		35,324,637

Transportation 0.6%
Delta Air Lines, Inc.	141,122	7,723,607

Utilities 7.6%
CenterPoint Energy, Inc.	849,386	22,941,916
CMS Energy Corp.	36,701	1,817,433
Exelon Corp.	666,001	29,177,504
FirstEnergy Corp.	239,371	8,923,751
NRG Energy, Inc.	271,736	9,834,126
Portland General Electric Co.	305,184	13,757,695
UGI Corp.	160,885	8,536,558
		94,988,983
Total Common Stock
(Cost $1,131,419,316)		1,246,756,563
Security Rate, Maturity Date	Face Amount ($)	Value ($)
Short-Term Investment 0.0% of net assets

Time Deposit 0.0%
Sumitomo Mitsui Banking Corp.
1.54%, 11/01/18 (a)	346,028	346,028
Total Short-Term Investment
(Cost $346,028)		346,028

*	Non-income producing security.
(a)	The rate shown is the current daily overnight rate.

₃₉

Schwab Active Equity Funds | Annual Report

See financial notes

Schwab Dividend Equity Fund

Statement of Changes in Net Assets

For the current and prior report periods

Operations
	11/1/17-10/31/18		11/1/16-10/31/17
Net investment income		$19,019,115	$26,835,784
Net realized gains		100,779,824	129,829,514
Net change in unrealized appreciation (depreciation)	+	(119,244,775)	139,540,069
Increase in net assets from operations		554,164	296,205,367
Distributions to Shareholders1
Total distributions		($146,370,393)	($20,423,777)

Transactions in Fund Shares
		11/1/17-10/31/18		11/1/16-10/31/17
		SHARES	VALUE	SHARES	VALUE
Shares sold		4,465,871	$72,752,175	4,020,638	$64,372,892
Shares reinvested		5,882,999	95,048,975	811,045	13,160,752
Shares redeemed	+	(14,759,098)	(242,239,003)	(27,826,825)	(443,615,673)
Net transactions in fund shares		(4,410,228)	($74,437,853)	(22,995,142)	($366,082,029)
Shares Outstanding and Net Assets
		11/1/17-10/31/18		11/1/16-10/31/17
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		85,354,711	$1,469,377,892	108,349,853	$1,559,678,331
Total decrease	+	(4,410,228)	(220,254,082)	(22,995,142)	(90,300,439)
End of period²		80,944,483	$1,249,123,810	85,354,711	$1,469,377,892

¹	For the period ended October 31, 2017, the fund distributed to shareholders $20,423,777 from net investment income. The SEC eliminated the requirement to disclose distributions to shareholders from net investment income and from net realized gains in 2018 (see financial note 10 for additional information).
²	End of period - Net assets include net investment income not yet distributed of $8,029,021 at October 31, 2017. The SEC eliminated the requirement to disclose undistributed net investment income in 2018.

₄₃

Schwab Active Equity Funds | Annual Report

See financial notes

Schwab Large-Cap Growth Fund

Portfolio Holdings as of October 31, 2018

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 calendar quarters on the fund’s website at www.schwabfunds.com/schwabfunds_prospectus.

Security	Number of Shares	Value ($)
Common Stock 99.2% of net assets

Automobiles & Components 0.3%
Dana, Inc.	22,778	354,653
Lear Corp.	2,401	319,093
		673,746

Banks 0.4%
Citigroup, Inc.	4,131	270,415
MGIC Investment Corp. *	24,964	304,810
TCF Financial Corp.	15,652	326,814
		902,039

Capital Goods 7.8%
Allison Transmission Holdings, Inc.	90,713	3,998,629
Illinois Tool Works, Inc.	13,806	1,761,231
Masco Corp.	70,757	2,122,710
Oshkosh Corp.	11,890	667,505
Raytheon Co.	7,669	1,342,382
The Boeing Co.	22,149	7,859,794
United Rentals, Inc. *	8,981	1,078,349
		18,830,600

Commercial & Professional Services 2.5%
ASGN, Inc. *	14,963	1,003,718
Deluxe Corp.	22,040	1,040,509
Insperity, Inc.	19,486	2,140,537
Korn/Ferry International	13,974	630,786
Robert Half International, Inc.	9,702	587,262
Waste Management, Inc.	7,460	667,446
		6,070,258

Consumer Durables & Apparel 1.8%
Deckers Outdoor Corp. *	14,737	1,874,104
Michael Kors Holdings Ltd. *	19,105	1,058,608
NIKE, Inc., Class B	20,770	1,558,581
		4,491,293

Consumer Services 0.4%
Darden Restaurants, Inc.	2,214	235,902
Hilton Worldwide Holdings, Inc.	2,871	204,329
Penn National Gaming, Inc. *	25,033	607,801
		1,048,032

Diversified Financials 3.3%
Affiliated Managers Group, Inc.	17,483	1,987,118
Ameriprise Financial, Inc.	3,855	490,510
Capital One Financial Corp.	13,164	1,175,545
Evercore, Inc., Class A	11,880	970,477
SEI Investments Co.	13,106	700,516

Security	Number of Shares	Value ($)
Synchrony Financial	25,653	740,859
T. Rowe Price Group, Inc.	19,749	1,915,455
		7,980,480

Energy 0.3%
ConocoPhillips	7,567	528,933
Valero Energy Corp.	2,263	206,137
		735,070

Food, Beverage & Tobacco 4.1%
Flowers Foods, Inc.	85,620	1,653,322
Ingredion, Inc.	20,271	2,051,020
Molson Coors Brewing Co., Class B	19,495	1,247,680
PepsiCo, Inc.	39,936	4,488,008
TreeHouse Foods, Inc. *	12,179	554,875
		9,994,905

Health Care Equipment & Services 5.8%
Align Technology, Inc. *	3,513	777,076
athenahealth, Inc. *	9,518	1,213,926
Cerner Corp. *	38,797	2,222,292
Hill-Rom Holdings, Inc.	1,474	123,934
IDEXX Laboratories, Inc. *	6,933	1,470,628
ResMed, Inc.	20,560	2,177,715
UnitedHealth Group, Inc.	11,905	3,111,372
Varian Medical Systems, Inc. *	11,858	1,415,489
Veeva Systems, Inc., Class A *	4,200	383,670
WellCare Health Plans, Inc. *	4,487	1,238,367
		14,134,469

Household & Personal Products 0.7%
Herbalife Nutrition Ltd. *	24,652	1,312,966
Kimberly-Clark Corp.	3,207	334,490
		1,647,456

Insurance 1.2%
Aflac, Inc.	12,748	549,056
First American Financial Corp.	12,518	554,923
The Allstate Corp.	20,063	1,920,431
		3,024,410

Materials 2.2%
Celanese Corp.	20,599	1,996,867
Huntsman Corp.	71,837	1,571,794
PolyOne Corp.	38,430	1,241,673
Westlake Chemical Corp.	8,303	592,004
		5,402,338

Media & Entertainment 11.3%
Alphabet, Inc., Class A *	11,711	12,771,782
AMC Networks, Inc., Class A *	20,141	1,179,860
Comcast Corp., Class A	5,569	212,402

₄₅

Schwab Active Equity Funds | Annual Report

See financial notes

Schwab Large-Cap Growth Fund

Portfolio Holdings as of October 31, 2018 (continued)

Security	Number of Shares	Value ($)
Facebook, Inc., Class A *	51,383	7,799,426
Netflix, Inc. *	2,537	765,616
The Walt Disney Co.	28,092	3,225,804
Viacom, Inc., Class B	19,644	628,215
World Wrestling Entertainment, Inc., Class A	10,395	754,573
		27,337,678

Pharmaceuticals, Biotechnology & Life Sciences 7.9%
AbbVie, Inc.	36,558	2,846,040
Amgen, Inc.	33,259	6,412,003
Biogen, Inc. *	12,415	3,777,512
Charles River Laboratories International, Inc. *	6,725	819,239
Gilead Sciences, Inc.	28,661	1,954,107
Jazz Pharmaceuticals plc *	14,398	2,286,690
Thermo Fisher Scientific, Inc.	1,995	466,132
United Therapeutics Corp. *	2,208	244,779
Waters Corp. *	2,213	419,784
		19,226,286

Real Estate 2.5%
American Tower Corp.	15,202	2,368,624
Lamar Advertising Co., Class A	10,816	793,029
Senior Housing Properties Trust	60,645	974,565
Sun Communities, Inc.	5,211	523,549
Weyerhaeuser Co.	48,942	1,303,326
		5,963,093

Retailing 12.1%
Amazon.com, Inc. *	9,734	15,555,029
Best Buy Co., Inc.	26,450	1,855,732
Booking Holdings, Inc. *	1,127	2,112,652
Burlington Stores, Inc. *	11,736	2,012,607
Kohl's Corp.	3,400	257,482
Qurate Retail, Inc. *	39,845	874,199
Ross Stores, Inc.	13,122	1,299,078
The Home Depot, Inc.	26,385	4,640,594
The TJX Cos., Inc.	6,062	666,092
		29,273,465

Semiconductors & Semiconductor Equipment 3.9%
Lam Research Corp.	12,543	1,777,720
Micron Technology, Inc. *	69,139	2,607,923
NVIDIA Corp.	15,778	3,326,476
Texas Instruments, Inc.	18,216	1,690,991
		9,403,110

Software & Services 19.1%
Accenture plc, Class A	24,282	3,827,329
Adobe Systems, Inc. *	16,875	4,147,200
Automatic Data Processing, Inc.	14,686	2,115,959
Cadence Design Systems, Inc. *	47,366	2,111,102
Citrix Systems, Inc. *	24,015	2,460,817

Security	Number of Shares	Value ($)
Cognizant Technology Solutions Corp., Class A	23,665	1,633,595
Dell Technologies, Inc., Class V *	15,135	1,368,053
DXC Technology Co.	45,107	3,285,143
Fortinet, Inc. *	9,671	794,763
Intuit, Inc.	14,580	3,076,380
j2 Global, Inc.	19,492	1,419,797
Mastercard, Inc., Class A	12,914	2,552,710
Microsoft Corp.	128,761	13,752,962
Visa, Inc., Class A	27,409	3,778,331
		46,324,141

Technology Hardware & Equipment 10.0%
Apple, Inc.	90,708	19,852,353
F5 Networks, Inc. *	8,024	1,406,447
NetApp, Inc.	12,433	975,866
Palo Alto Networks, Inc. *	1,884	344,847
Zebra Technologies Corp., Class A *	10,681	1,776,250
		24,355,763

Transportation 1.4%
Landstar System, Inc.	20,246	2,026,422
United Continental Holdings, Inc. *	16,992	1,452,986
		3,479,408

Utilities 0.2%
Exelon Corp.	10,062	440,815
Total Common Stock
(Cost $192,492,493)		240,738,855
Security Rate, Maturity Date	Face Amount ($)	Value ($)
Short-Term Investment 0.3% of net assets

Time Deposit 0.3%
Sumitomo Mitsui Banking Corp.
1.54%, 11/01/18 (a)	780,573	780,573
Total Short-Term Investment
(Cost $780,573)		780,573

*	Non-income producing security.
(a)	The rate shown is the current daily overnight rate.

₄₆

Schwab Active Equity Funds | Annual Report

See financial notes

Schwab Large-Cap Growth Fund

Statement of Changes in Net Assets

For the current and prior report periods

Operations
	11/1/17-10/31/18		11/1/16-10/31/17
Net investment income		$787,740	$1,138,549
Net realized gains		23,386,823	18,360,856
Net change in unrealized appreciation (depreciation)	+	(12,202,184)	38,535,029
Increase in net assets from operations		11,972,379	58,034,434
Distributions to Shareholders1
Total distributions		($19,458,886)	($9,485,235)

Transactions in Fund Shares
		11/1/17-10/31/18		11/1/16-10/31/17
		SHARES	VALUE	SHARES	VALUE
Shares sold		1,778,882	$33,172,055	1,572,508	$26,376,506
Shares reinvested		679,342	12,058,316	371,671	5,649,403
Shares redeemed	+	(2,772,143)	(51,802,580)	(2,577,225)	(42,665,864)
Net transactions in fund shares		(313,919)	($6,572,209)	(633,046)	($10,639,955)
Shares Outstanding and Net Assets
		11/1/17-10/31/18		11/1/16-10/31/17
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		13,772,563	$256,829,052	14,405,609	$218,919,808
Total increase or decrease	+	(313,919)	(14,058,716)	(633,046)	37,909,244
End of period²		13,458,644	$242,770,336	13,772,563	$256,829,052

¹	For the period ended October 31, 2017, the fund distributed to shareholders $2,362,093 from net investment income and $7,123,142 from net realized gains. The SEC eliminated the requirement to disclose distributions to shareholders from net investment income and from net realized gains in 2018 (see financial note 10 for additional information).
²	End of period - Net assets include net investment income not yet distributed of $706,094 at October 31, 2017. The SEC eliminated the requirement to disclose undistributed net investment income in 2018.

₅₀

Schwab Active Equity Funds | Annual Report

See financial notes

Schwab Small-Cap Equity Fund

Portfolio Holdings as of October 31, 2018

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 calendar quarters on the fund’s website at www.schwabfunds.com/schwabfunds_prospectus.

Security	Number of Shares	Value ($)
Common Stock 99.7% of net assets

Automobiles & Components 2.4%
American Axle & Manufacturing Holdings, Inc. *	43,828	664,871
Cooper-Standard Holding, Inc. *	15,383	1,425,235
Dana, Inc.	316,373	4,925,928
Modine Manufacturing Co. *	54,788	712,792
Tenneco, Inc., Class A	90,358	3,111,026
Tower International, Inc.	97,647	2,899,139
		13,738,991

Banks 11.2%
1st Source Corp.	56,913	2,651,577
BancFirst Corp.	27,531	1,579,729
Bar Harbor Bankshares	6,380	163,137
BCB Bancorp, Inc.	18,421	229,157
Cadence BanCorp	91,744	2,023,873
Central Pacific Financial Corp.	73,083	1,976,164
Century Bancorp, Inc., Class A	10,642	799,427
Customers Bancorp, Inc. *	251,231	5,147,723
Eagle Bancorp, Inc. *	33,336	1,639,131
Essent Group Ltd. *	52,640	2,075,069
Federal Agricultural Mortgage Corp., Class C	33,738	2,356,262
Financial Institutions, Inc.	105,687	3,017,364
First BanCorp *	740,526	6,835,055
First Financial Corp.	28,362	1,300,681
Great Southern Bancorp, Inc.	12,741	689,925
Hancock Whitney Corp.	20,089	842,934
International Bancshares Corp.	207,223	8,019,530
Mercantile Bank Corp.	20,773	659,750
MGIC Investment Corp. *	522,924	6,384,902
OFG Bancorp	134,329	2,295,683
Peapack-Gladstone Financial Corp.	50,000	1,349,500
Radian Group, Inc.	280,821	5,388,955
RBB Bancorp	45,669	985,537
Republic Bancorp, Inc., Class A	25,091	1,125,833
Shore Bancshares, Inc.	22,623	364,683
TCF Financial Corp.	125,429	2,618,958
Timberland Bancorp, Inc.	7,071	205,200
United Community Banks, Inc.	62,811	1,562,110
		64,287,849

Capital Goods 8.5%
Advanced Drainage Systems, Inc.	64,762	1,799,736
Argan, Inc.	19,978	879,432
Atkore International Group, Inc. *	227,815	4,387,717
BMC Stock Holdings, Inc. *	66,711	1,116,742
Builders FirstSource, Inc. *	195,533	2,420,698
Columbus McKinnon Corp.	23,231	853,275
Comfort Systems USA, Inc.	26,681	1,426,900
Commercial Vehicle Group, Inc. *	107,841	721,456
EnerSys	11,789	938,051
Foundation Building Materials, Inc. *	50,801	484,133
Generac Holdings, Inc. *	42,170	2,139,284

Security	Number of Shares	Value ($)
General Finance Corp. *	57,805	751,465
Global Brass & Copper Holdings, Inc.	137,663	4,352,904
Hillenbrand, Inc.	63,435	3,038,536
JELD-WEN Holding, Inc. *	79,222	1,288,150
Kaman Corp.	46,966	2,983,280
Meritor, Inc. *	343,391	5,834,213
MYR Group, Inc. *	25,349	846,403
NCI Building Systems, Inc. *	193,013	2,364,409
Park-Ohio Holdings Corp.	17,095	565,503
Patrick Industries, Inc. *	25,721	1,119,121
PGT Innovations, Inc. *	77,956	1,579,389
Regal Beloit Corp.	13,187	945,508
Vectrus, Inc. *	73,669	1,974,329
Wabash National Corp.	77,731	1,173,738
Wesco Aircraft Holdings, Inc. *	88,989	905,908
WESCO International, Inc. *	35,044	1,758,508
		48,648,788

Commercial & Professional Services 4.4%
ACCO Brands Corp.	311,304	2,512,223
ASGN, Inc. *	22,194	1,488,774
Barrett Business Services, Inc.	71,620	4,506,330
Deluxe Corp.	51,476	2,430,182
Heidrick & Struggles International, Inc.	75,249	2,596,843
Insperity, Inc.	22,366	2,456,905
Interface, Inc.	122,597	1,997,105
Kelly Services, Inc., Class A	82,902	1,947,368
Korn/Ferry International	32,263	1,456,352
LSC Communications, Inc.	129,469	1,220,893
Quad Graphics, Inc.	68,591	1,058,359
TrueBlue, Inc. *	67,024	1,563,670
		25,235,004

Consumer Durables & Apparel 2.6%
Deckers Outdoor Corp. *	15,360	1,953,331
Helen of Troy Ltd. *	9,251	1,148,234
KB Home	123,653	2,469,350
Malibu Boats, Inc., Class A *	23,173	931,555
MCBC Holdings, Inc. *	37,539	1,114,158
Meritage Homes Corp. *	66,156	2,464,311
Taylor Morrison Home Corp., Class A *	49,601	820,401
Turtle Beach Corp. *(a)	28,503	505,928
Vera Bradley, Inc. *	85,816	1,131,913
William Lyon Homes, Class A *	51,600	699,696
ZAGG, Inc. *	126,236	1,528,718
		14,767,595

Consumer Services 3.5%
American Public Education, Inc. *	35,291	1,155,075
BJ's Restaurants, Inc.	59,584	3,645,349
Bloomin' Brands, Inc.	297,657	5,938,257
Carrols Restaurant Group, Inc. *	139,389	1,834,359
J Alexander's Holdings, Inc. *	32,568	343,592
K12, Inc. *	137,723	2,948,650
Penn National Gaming, Inc. *	80,354	1,950,995
Red Robin Gourmet Burgers, Inc. *	35,104	1,060,141

₅₂

Schwab Active Equity Funds | Annual Report

See financial notes

Schwab Small-Cap Equity Fund

Portfolio Holdings as of October 31, 2018 (continued)

Security	Number of Shares	Value ($)
Town Sports International Holdings, Inc. *	29,096	223,457
Weight Watchers International, Inc. *	17,364	1,147,760
		20,247,635

Diversified Financials 1.3%
Enova International, Inc. *	99,321	2,348,941
Evercore, Inc., Class A	22,672	1,852,076
Nelnet, Inc., Class A	14,189	798,699
Regional Management Corp. *	77,266	2,229,897
		7,229,613

Energy 6.0%
Abraxas Petroleum Corp. *	359,697	661,842
Basic Energy Services, Inc. *	55,989	435,035
Cactus, Inc., Class A *	128,205	4,289,739
California Resources Corp. *	21,072	660,396
CONSOL Energy, Inc. *	74,764	2,978,598
CVR Energy, Inc.	83,125	3,574,375
Delek US Holdings, Inc.	115,629	4,245,897
Exterran Corp. *	27,202	568,250
FTS International, Inc. *	244,510	3,132,173
ION Geophysical Corp. *	33,885	400,182
Keane Group, Inc. *	214,346	2,694,329
Liberty Oilfield Services, Inc., Class A (a)	40,226	763,490
Mammoth Energy Services, Inc.	72,511	1,809,875
Matrix Service Co. *	73,686	1,498,036
Par Pacific Holdings, Inc. *	56,649	1,001,554
Penn Virginia Corp. *	11,594	797,435
ProPetro Holding Corp. *	35,041	618,474
Renewable Energy Group, Inc. *	65,849	2,046,587
TETRA Technologies, Inc. *	226,690	673,269
World Fuel Services Corp.	43,254	1,384,128
		34,233,664

Food, Beverage & Tobacco 1.9%
Cal-Maine Foods, Inc.	63,797	3,105,000
Coca-Cola Bottling Co. Consolidated	21,438	3,700,842
Dean Foods Co.	546,467	4,366,271
		11,172,113

Health Care Equipment & Services 4.2%
Accuray, Inc. *	292,507	1,313,356
Allscripts Healthcare Solutions, Inc. *	114,602	1,364,910
AngioDynamics, Inc. *	39,320	803,308
Computer Programs & Systems, Inc.	88,615	2,215,375
Encompass Health Corp.	10,214	687,402
Globus Medical, Inc., Class A *	19,476	1,029,306
Haemonetics Corp. *	38,319	4,003,186
ICU Medical, Inc. *	5,940	1,513,096
Integer Holdings Corp. *	26,229	1,953,274
NextGen Healthcare, Inc. *	57,487	849,083
Orthofix Medical, Inc. *	58,476	3,556,510
Quidel Corp. *	29,115	1,873,841
RadNet, Inc. *	18,992	281,082
STAAR Surgical Co. *	6,962	279,246
Surmodics, Inc. *	18,067	1,145,990
The Ensign Group, Inc.	41,252	1,527,974
		24,396,939

Security	Number of Shares	Value ($)
Household & Personal Products 0.4%
USANA Health Sciences, Inc. *	22,067	2,582,280

Insurance 4.0%
Ambac Financial Group, Inc. *	125,530	2,583,407
American Equity Investment Life Holding Co.	81,771	2,552,891
CNO Financial Group, Inc.	204,148	3,858,397
Crawford & Co., Class B	38,882	358,103
Employers Holdings, Inc.	106,665	4,902,324
Health Insurance Innovations, Inc., Class A *	13,532	661,715
Heritage Insurance Holdings, Inc.	77,885	1,087,275
National Western Life Group, Inc., Class A	14,512	3,907,791
Universal Insurance Holdings, Inc.	67,337	2,826,807
		22,738,710

Materials 3.9%
Boise Cascade Co.	111,388	3,429,637
Century Aluminum Co. *	72,638	576,746
Kraton Corp. *	36,675	1,010,030
Louisiana-Pacific Corp.	112,048	2,439,285
OMNOVA Solutions, Inc. *	238,973	1,766,010
PolyOne Corp.	55,632	1,797,470
Ryerson Holding Corp. *	218,044	2,001,644
Schnitzer Steel Industries, Inc., Class A	71,412	1,920,983
SunCoke Energy, Inc. *	62,887	704,334
Tredegar Corp.	99,100	1,843,260
Trinseo S.A.	55,505	2,990,609
Verso Corp., Class A *	62,385	1,753,642
		22,233,650

Media & Entertainment 3.1%
AMC Networks, Inc., Class A *	92,475	5,417,185
Entravision Communications Corp., Class A	329,034	1,625,428
Gannett Co., Inc.	188,635	1,829,760
New Media Investment Group, Inc.	57,354	805,824
QuinStreet, Inc. *	34,409	547,103
Sinclair Broadcast Group, Inc., Class A	196,803	5,636,438
Travelzoo *	96,998	743,975
Tribune Publishing Co. *	69,625	1,050,641
		17,656,354

Pharmaceuticals, Biotechnology & Life Sciences 13.6%
Acorda Therapeutics, Inc. *	86,360	1,650,340
Akebia Therapeutics, Inc. *	105,917	793,318
AMAG Pharmaceuticals, Inc. *	74,356	1,598,654
ANI Pharmaceuticals, Inc. *	75,331	3,655,813
Ardelyx, Inc. *	152,793	420,181
ArQule, Inc. *	75,305	291,430
Array BioPharma, Inc. *	53,743	870,637
Assertio Therapeutics, Inc. *	124,919	606,482
BioSpecifics Technologies Corp. *	33,812	2,071,661
Cambrex Corp. *	6,603	351,874
CareDx, Inc. *	17,934	468,257
Catalent, Inc. *	70,796	2,855,911
Collegium Pharmaceutical, Inc. *	141,506	2,271,171
Concert Pharmaceuticals, Inc. *	51,066	761,905
CytomX Therapeutics, Inc. *	63,698	908,333
Durect Corp. *	133,403	133,403
Eagle Pharmaceuticals, Inc. *	16,530	813,937

₅₃

Schwab Active Equity Funds | Annual Report

See financial notes

Schwab Small-Cap Equity Fund

Portfolio Holdings as of October 31, 2018 (continued)

Security	Number of Shares	Value ($)
Emergent BioSolutions, Inc. *	76,648	4,690,091
Enanta Pharmaceuticals, Inc. *	15,514	1,197,060
Genomic Health, Inc. *	39,971	2,866,320
Halozyme Therapeutics, Inc. *	159,041	2,469,907
Horizon Pharma plc *	245,225	4,465,547
ImmunoGen, Inc. *	65,487	355,594
Innoviva, Inc. *	194,632	2,717,063
Intersect ENT, Inc. *	20,143	565,213
Ironwood Pharmaceuticals, Inc. *	21,867	286,458
Lannett Co., Inc. *(a)	72,970	267,070
Ligand Pharmaceuticals, Inc. *	22,925	3,778,269
Loxo Oncology, Inc. *	8,282	1,264,330
Luminex Corp.	51,989	1,495,724
MacroGenics, Inc. *	35,425	583,096
Medpace Holdings, Inc. *	66,372	3,457,981
MiMedx Group, Inc. *(a)	113,552	660,873
Myriad Genetics, Inc. *	61,462	2,767,634
Nektar Therapeutics *	48,149	1,862,403
OPKO Health, Inc. *(a)	184,697	624,276
Pacira Pharmaceuticals, Inc. *	16,419	802,725
PDL BioPharma, Inc. *	603,961	1,503,863
Phibro Animal Health Corp., Class A	67,593	2,901,092
Pieris Pharmaceuticals, Inc. *	117,357	483,511
PRA Health Sciences, Inc. *	20,279	1,964,427
Prestige Consumer Healthcare, Inc. *	52,178	1,886,757
PTC Therapeutics, Inc. *	55,289	2,129,732
Recro Pharma, Inc. *	127,166	821,492
REGENXBIO, Inc. *	24,983	1,665,617
Retrophin, Inc. *	47,934	1,229,986
Spectrum Pharmaceuticals, Inc. *	49,279	586,420
Supernus Pharmaceuticals, Inc. *	30,538	1,452,387
Vanda Pharmaceuticals, Inc. *	96,085	1,822,732
Veracyte, Inc. *	65,975	979,729
Vericel Corp. *	37,389	416,887
XOMA Corp. *	28,646	352,632
		77,898,205

Real Estate 7.0%
Ashford Hospitality Trust, Inc.	177,598	914,630
Braemar Hotels & Resorts, Inc.	302,846	3,222,281
Cedar Realty Trust, Inc.	745,873	2,811,941
Columbia Property Trust, Inc.	80,501	1,807,247
CoreCivic, Inc.	26,949	605,275
Gladstone Commercial Corp.	69,059	1,311,430
Marcus & Millichap, Inc. *	126,934	4,407,149
MedEquities Realty Trust, Inc.	291,516	2,410,837
National Health Investors, Inc.	61,282	4,501,776
Pennsylvania Real Estate Investment Trust	149,333	1,336,530
RE/MAX Holdings, Inc., Class A	30,099	1,125,402
Retail Properties of America, Inc., Class A	156,328	1,918,145
Ryman Hospitality Properties, Inc.	20,765	1,611,156
The GEO Group, Inc.	85,698	1,894,783
Tier REIT, Inc.	331,475	7,183,063
Xenia Hotels & Resorts, Inc.	141,917	2,916,394
		39,978,039

Retailing 3.0%
Abercrombie & Fitch Co., Class A	37,103	730,929
American Eagle Outfitters, Inc.	87,859	2,026,029
Barnes & Noble Education, Inc. *	77,181	440,704
Citi Trends, Inc.	48,451	1,227,264
DSW, Inc., Class A	21,941	582,534
Groupon, Inc. *	240,199	785,451

Security	Number of Shares	Value ($)
Liberty Expedia Holdings, Inc., Class A *	55,539	2,411,503
New York & Co., Inc. *	175,464	694,837
Stamps.com, Inc. *	3,601	728,014
Tailored Brands, Inc.	164,202	3,449,884
Tilly's, Inc., Class A	225,506	4,000,476
		17,077,625

Semiconductors & Semiconductor Equipment 3.0%
Advanced Energy Industries, Inc. *	98,010	4,217,370
Cirrus Logic, Inc. *	51,675	1,934,712
Diodes, Inc. *	104,837	3,165,029
Entegris, Inc.	95,683	2,539,427
MKS Instruments, Inc.	27,887	2,054,993
Nanometrics, Inc. *	32,987	1,057,563
SMART Global Holdings, Inc. *	46,021	1,289,048
Ultra Clean Holdings, Inc. *	104,326	1,097,510
		17,355,652

Software & Services 8.3%
Amber Road, Inc. *	155,218	1,381,440
Appfolio, Inc., Class A *	15,455	882,481
Box, Inc., Class A *	45,945	827,010
Cision Ltd. *	120,786	1,786,425
CommVault Systems, Inc. *	111,778	6,507,715
CSG Systems International, Inc.	7,691	269,954
Endurance International Group Holdings, Inc. *	257,614	2,542,650
EVERTEC, Inc.	45,047	1,174,826
j2 Global, Inc.	68,029	4,955,232
Model N, Inc. *	248,110	3,810,970
Progress Software Corp.	215,320	6,920,385
Qualys, Inc. *	42,687	3,041,022
Travelport Worldwide Ltd.	274,868	4,112,025
Verint Systems, Inc. *	158,631	7,244,678
Zix Corp. *	358,957	2,419,370
		47,876,183

Technology Hardware & Equipment 3.4%
CalAmp Corp. *	73,427	1,464,134
Ciena Corp. *	175,419	5,483,598
Extreme Networks, Inc. *	299,907	1,664,484
Immersion Corp. *	209,663	2,098,727
Insight Enterprises, Inc. *	42,930	2,219,052
Plantronics, Inc.	62,990	3,714,520
Tech Data Corp. *	24,776	1,750,672
Vishay Intertechnology, Inc.	47,576	870,641
		19,265,828

Telecommunication Services 1.3%
Telephone & Data Systems, Inc.	77,836	2,399,684
United States Cellular Corp. *	55,921	2,671,346
Vonage Holdings Corp. *	193,903	2,571,154
		7,642,184

Transportation 1.1%
ArcBest Corp.	62,154	2,307,157
Covenant Transportation Group, Inc., Class A *	30,593	765,743

₅₄

Schwab Active Equity Funds | Annual Report

See financial notes

Schwab Small-Cap Equity Fund

Portfolio Holdings as of October 31, 2018 (continued)

Security	Number of Shares	Value ($)
Echo Global Logistics, Inc. *	67,892	1,745,503
USA Truck, Inc. *	71,812	1,412,542
		6,230,945

Utilities 1.6%
AquaVenture Holdings Ltd. *	57,260	959,105
Atlantic Power Corp. *	647,465	1,424,423
Clearway Energy, Inc., Class A	38,363	745,009
Consolidated Water Co., Ltd.	35,326	434,510
NorthWestern Corp.	40,703	2,391,708
Spark Energy, Inc., Class A (a)	462,295	3,448,721
		9,403,476
Total Common Stock
(Cost $582,733,484)		571,897,322

Other Investment Company 1.1% of net assets

Securities Lending Collateral 1.1%
Wells Fargo Government Money Market Fund, Select Class 2.07% (b)	5,984,825	5,984,825
Total Other Investment Company
(Cost $5,984,825)		5,984,825

Security Rate, Maturity Date	Face Amount Local Currency	Value ($)
Short-Term Investments 0.0% of net assets

Time Deposits 0.0%
Brown Brothers Harriman
Canadian Dollar
0.80%, 11/01/18 (c)	477	362
Sumitomo Mitsui Banking Corp.
U.S. Dollar
1.54%, 11/01/18 (c)	64,712	64,712
Total Short-Term Investments
(Cost $65,074)		65,074

*	Non-income producing security.
(a)	All or a portion of this security is on loan. Securities on loan were valued at $5,844,050.
(b)	The rate shown is the 7-day yield.
(c)	The rate shown is the current daily overnight rate.

REIT —

Real Estate Investment Trust

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2018 (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	$571,897,322	$—	$—	$571,897,322
Other Investment Company¹	5,984,825	—	—	5,984,825
Short-Term Investments¹	—	65,074	—	65,074
Total	$577,882,147	$65,074	$—	$577,947,221

¹	As categorized in Portfolio Holdings.

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.

₅₅

Schwab Active Equity Funds | Annual Report

See financial notes

Schwab Small-Cap Equity Fund

Statement of Changes in Net Assets

For the current and prior report periods

Operations
	11/1/17-10/31/18		11/1/16-10/31/17
Net investment income (loss)		$389,215	($70,340)
Net realized gains		104,146,024	89,523,739
Net change in unrealized appreciation (depreciation)	+	(92,914,743)	52,242,477
Increase in net assets from operations		11,620,496	141,695,876
Distributions to Shareholders1
Total distributions		($82,566,358)	($2,651,266)

Transactions in Fund Shares
		11/1/17-10/31/18		11/1/16-10/31/17
		SHARES	VALUE	SHARES	VALUE
Shares sold		2,529,047	$55,468,967	2,656,779	$58,042,781
Shares reinvested		2,938,036	61,434,349	87,796	1,920,104
Shares redeemed	+	(5,346,501)	(117,486,079)	(5,773,585)	(125,530,925)
Net transactions in fund shares		120,582	($582,763)	(3,029,010)	($65,568,040)
Shares Outstanding and Net Assets
		11/1/17-10/31/18		11/1/16-10/31/17
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		27,354,578	$644,934,820	30,383,588	$571,458,250
Total increase or decrease	+	120,582	(71,528,625)	(3,029,010)	73,476,570
End of period²		27,475,160	$573,406,195	27,354,578	$644,934,820

¹	For the period ended October 31, 2017, the fund distributed to shareholders $2,651,266 from net investment income. The SEC eliminated the requirement to disclose distributions to shareholders from net investment income and from net realized gains in 2018 (see financial note 10 for additional information).
²	End of period - Net assets of the fund had no undistributed net investment income at October 31, 2017. The SEC eliminated the requirement to disclose undistributed net investment income in 2018.

₅₈

Schwab Active Equity Funds | Annual Report

See financial notes

Schwab Hedged Equity Fund

Portfolio Holdings as of October 31, 2018

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 calendar quarters on the fund’s website at www.schwabfunds.com/schwabfunds_prospectus.

Security	Number of Shares	Value ($)
Common Stock 98.2% of net assets

Automobiles & Components 1.5%
BorgWarner, Inc.	46,018	1,813,569
Dana, Inc.	98,152	1,528,227
General Motors Co.	1,638	59,934
Modine Manufacturing Co. *	11,636	151,384
Tenneco, Inc., Class A	28,734	989,312
		4,542,426

Banks 4.0%
Bank of America Corp. (a)	45,018	1,237,995
BankUnited, Inc.	25,998	860,534
Citigroup, Inc. (a)	96,792	6,336,004
Citizens Financial Group, Inc.	70,617	2,637,545
MGIC Investment Corp. *	45,154	551,330
Popular, Inc.	6,301	327,715
		11,951,123

Capital Goods 8.4%
AAR Corp.	6,821	324,543
Advanced Drainage Systems, Inc.	43,476	1,208,198
Allison Transmission Holdings, Inc. (a)	78,503	3,460,412
Argan, Inc.	2,613	115,024
Atkore International Group, Inc. *	57,632	1,109,992
BMC Stock Holdings, Inc. *	30,558	511,541
General Electric Co.	57,502	580,770
HD Supply Holdings, Inc. *	20,208	759,215
Hillenbrand, Inc. (a)	67,761	3,245,752
Kaman Corp.	18,902	1,200,655
Masco Corp.	41,011	1,230,330
Masonite International Corp. *	8,905	493,248
Meritor, Inc. *(a)	119,167	2,024,647
NCI Building Systems, Inc. *	59,449	728,250
Owens Corning	14,769	698,131
Patrick Industries, Inc. *	6,091	265,020
Raytheon Co. (a)	16,003	2,801,165
Textron, Inc.	52,339	2,806,941
The Boeing Co. (a)	4,981	1,767,558
		25,331,392

Commercial & Professional Services 0.9%
ACCO Brands Corp.	29,257	236,104
Insperity, Inc.	2,160	237,276
Korn/Ferry International	20,811	939,409
Navigant Consulting, Inc.	47,702	1,030,363
TrueBlue, Inc. *	8,673	202,341
		2,645,493

Consumer Durables & Apparel 2.6%
Deckers Outdoor Corp. *	14,359	1,826,034
KB Home (a)	25,920	517,622
Michael Kors Holdings Ltd. *	17,175	951,667
PulteGroup, Inc.	54,643	1,342,578

Security	Number of Shares	Value ($)
Skechers U.S.A., Inc., Class A *	27,760	793,103
Tapestry, Inc.	23,506	994,539
Toll Brothers, Inc.	30,924	1,040,902
TRI Pointe Group, Inc. *	32,012	380,943
		7,847,388

Consumer Services 1.4%
BJ's Restaurants, Inc.	16,177	989,709
Bloomin' Brands, Inc. (a)	6,702	133,705
Las Vegas Sands Corp. (a)	57,266	2,922,284
Penn National Gaming, Inc. *	4,584	111,299
		4,156,997

Diversified Financials 3.8%
Affiliated Managers Group, Inc. (a)	11,165	1,269,014
Capital One Financial Corp. (a)	62,492	5,580,535
Synchrony Financial (a)	153,569	4,435,073
Waddell & Reed Financial, Inc., Class A	5,912	112,742
		11,397,364

Energy 6.7%
Anadarko Petroleum Corp.	5,395	287,014
Chevron Corp.	4,527	505,439
ConocoPhillips (a)	60,669	4,240,763
CONSOL Energy, Inc. *	16,740	666,922
Continental Resources, Inc. *	34,978	1,842,641
Halliburton Co. (a)	114,448	3,969,057
Mammoth Energy Services, Inc.	53,086	1,325,027
Marathon Petroleum Corp. (a)	47,831	3,369,694
Occidental Petroleum Corp.	6,492	435,418
PBF Energy, Inc., Class A	29,568	1,237,421
Valero Energy Corp. (a)	3,708	337,762
Whiting Petroleum Corp. *	50,898	1,898,495
		20,115,653

Food & Staples Retailing 0.6%
Walmart, Inc. (a)	18,057	1,810,756

Food, Beverage & Tobacco 4.6%
Bunge Ltd.	5,865	362,457
Cal-Maine Foods, Inc. (a)	84,439	4,109,646
Coca-Cola Bottling Co. Consolidated	6,663	1,150,234
Dean Foods Co. (a)	51,862	414,377
Flowers Foods, Inc.	63,766	1,231,321
Fresh Del Monte Produce, Inc. (a)	11,456	378,392
Molson Coors Brewing Co., Class B	38,420	2,458,880
Mondelez International, Inc., Class A	9,714	407,794
PepsiCo, Inc.	2,359	265,104
Philip Morris International, Inc.	8,099	713,279
Pilgrim's Pride Corp. *	42,538	751,221
Tyson Foods, Inc., Class A	24,553	1,471,216
		13,713,921

₆₀

Schwab Active Equity Funds | Annual Report

See financial notes

Schwab Hedged Equity Fund

Portfolio Holdings as of October 31, 2018 (continued)

Security	Number of Shares	Value ($)
Health Care Equipment & Services 5.6%
Abbott Laboratories (a)	66,065	4,554,521
AmerisourceBergen Corp.	15,955	1,404,040
athenahealth, Inc. *	8,276	1,055,521
Cardinal Health, Inc.	3,989	201,844
Haemonetics Corp. *	14,719	1,537,694
Hologic, Inc. *	54,692	2,132,441
Magellan Health, Inc. *	8,870	577,082
McKesson Corp.	6,078	758,291
Quidel Corp. *	27,795	1,788,886
Varian Medical Systems, Inc. *	22,613	2,699,314
		16,709,634

Household & Personal Products 0.6%
Herbalife Nutrition Ltd. *	19,836	1,056,465
USANA Health Sciences, Inc. *	7,733	904,916
		1,961,381

Insurance 4.1%
American National Insurance Co. (a)	22,054	2,717,935
CNA Financial Corp. (a)	8,527	369,816
CNO Financial Group, Inc.	38,023	718,635
First American Financial Corp.	18,271	809,953
Lincoln National Corp.	10,994	661,729
National Western Life Group, Inc., Class A	499	134,371
The Allstate Corp. (a)	58,546	5,604,023
Universal Insurance Holdings, Inc.	6,423	269,638
Unum Group	28,813	1,044,759
		12,330,859

Materials 4.2%
Alcoa Corp. *(a)	65,681	2,298,178
Berry Global Group, Inc. *(a)	87,303	3,808,157
Boise Cascade Co.	55,879	1,720,514
Celanese Corp.	912	88,409
Freeport-McMoRan, Inc.	36,463	424,794
Huntsman Corp.	38,844	849,907
Kraton Corp. *	67,081	1,847,411
PolyOne Corp.	4,942	159,676
Trinseo S.A.	3,531	190,250
Verso Corp., Class A *	41,114	1,155,715
		12,543,011

Media & Entertainment 6.9%
Alphabet, Inc., Class A *(a)	5,645	6,156,324
AMC Networks, Inc., Class A *	33,191	1,944,329
Comcast Corp., Class A	43,666	1,665,421
Facebook, Inc., Class A *(a)	32,959	5,002,847
News Corp., Class A (a)	302,170	3,985,622
Viacom, Inc., Class B	62,468	1,997,727
		20,752,270

Pharmaceuticals, Biotechnology & Life Sciences 8.3%
AbbVie, Inc. (a)	37,980	2,956,743
Acorda Therapeutics, Inc. *	5,171	98,818
Amgen, Inc. (a)	23,897	4,607,103
Biogen, Inc. *(a)	6,829	2,077,860
Bristol-Myers Squibb Co.	13,170	665,612
Celgene Corp. *(a)	37,317	2,671,897
Eli Lilly & Co.	54,578	5,918,438
Emergent BioSolutions, Inc. *	10,357	633,745
Gilead Sciences, Inc.	7,746	528,122

Security	Number of Shares	Value ($)
Innoviva, Inc. *	20,412	284,952
Johnson & Johnson (a)	23,862	3,340,441
Ligand Pharmaceuticals, Inc. *	1,762	290,395
Nektar Therapeutics *	3,996	154,565
PTC Therapeutics, Inc. *	2,114	81,431
Zoetis, Inc.	6,311	568,937
		24,879,059

Real Estate 5.8%
Douglas Emmett, Inc.	7,845	283,911
Marcus & Millichap, Inc. *	44,198	1,534,555
Paramount Group, Inc.	1,752	25,036
Retail Properties of America, Inc., Class A (a)	315,339	3,869,209
Ryman Hospitality Properties, Inc.	25,386	1,969,700
Senior Housing Properties Trust (a)	155,617	2,500,765
SL Green Realty Corp. (a)	15,311	1,397,282
The RMR Group, Inc., Class A	1,116	84,682
Weyerhaeuser Co. (a)	180,520	4,807,248
Xenia Hotels & Resorts, Inc.	43,261	889,013
		17,361,401

Retailing 5.3%
Abercrombie & Fitch Co., Class A	44,546	877,556
Amazon.com, Inc. *(a)	2,561	4,092,504
American Eagle Outfitters, Inc.	49,124	1,132,799
Best Buy Co., Inc.	44,643	3,132,153
Kohl's Corp.	39,023	2,955,212
Qurate Retail, Inc. *(a)	69,620	1,527,463
Signet Jewelers Ltd.	10,819	606,405
Tailored Brands, Inc.	56,761	1,192,549
Urban Outfitters, Inc. *	10,401	410,423
		15,927,064

Semiconductors & Semiconductor Equipment 2.4%
Cypress Semiconductor Corp.	65,347	845,590
Diodes, Inc. *	26,773	808,277
Intel Corp.	39,283	1,841,587
Micron Technology, Inc. *(a)	57,964	2,186,402
SMART Global Holdings, Inc. *	5,560	155,736
Texas Instruments, Inc.	16,029	1,487,972
		7,325,564

Software & Services 7.4%
Accenture plc, Class A (a)	28,183	4,442,204
Cadence Design Systems, Inc. *	26,238	1,169,428
CDK Global, Inc.	5,426	310,584
Citrix Systems, Inc. *	3,061	313,661
Cognizant Technology Solutions Corp., Class A	3,610	249,198
Dell Technologies, Inc., Class V *	8,917	806,008
DXC Technology Co.	28,863	2,102,092
Endurance International Group Holdings, Inc. *	110,374	1,089,391
International Business Machines Corp. (a)	40,865	4,717,047
Intuit, Inc.	5,105	1,077,155
Microsoft Corp.	27,204	2,905,659
Progress Software Corp. (a)	92,947	2,987,317
		22,169,744

Technology Hardware & Equipment 7.7%
Apple, Inc. (a)	35,785	7,831,905
Cisco Systems, Inc. (a)	73,265	3,351,874
F5 Networks, Inc. *	11,572	2,028,340

₆₁

Schwab Active Equity Funds | Annual Report

See financial notes

Schwab Hedged Equity Fund

Portfolio Holdings as of October 31, 2018 (continued)

In addition to the above, the fund had the following short sale positions at October 31, 2018:

Security	Number of Shares	Value ($)
Short Sales (41.7%) of net assets

Automobiles & Components (2.2%)
Dorman Products, Inc. *	36,010	(2,845,150)
Fox Factory Holding Corp. *	4,675	(251,188)
Standard Motor Products, Inc.	6,425	(347,657)
Tesla, Inc. *	9,405	(3,172,494)
		(6,616,489)

Capital Goods (4.7%)
AAON, Inc.	97,286	(3,355,394)
GATX Corp.	26,539	(1,988,567)
Kratos Defense & Security Solutions, Inc. *	29,410	(368,507)
Mercury Systems, Inc. *	20,192	(946,197)
NOW, Inc. *	45,392	(582,833)
SiteOne Landscape Supply, Inc. *	13,542	(921,398)
Sunrun, Inc. *	90,110	(1,104,749)
Triton International Ltd.	20,030	(644,365)
Vicor Corp. *	4,360	(174,836)
Welbilt, Inc. *	218,263	(4,085,884)
		(14,172,730)

Commercial & Professional Services (0.9%)
CoStar Group, Inc. *	2,500	(903,550)
Equifax, Inc.	4,402	(446,539)
TriNet Group, Inc. *	30,269	(1,422,340)
		(2,772,429)

Consumer Durables & Apparel (2.2%)
Cavco Industries, Inc. *	1,379	(276,641)
iRobot Corp. *	6,480	(571,342)
Mattel, Inc. *	97,119	(1,318,876)
Newell Brands, Inc.	133,707	(2,123,267)
Roku, Inc. *	6,441	(358,120)
Tempur Sealy International, Inc. *	12,055	(557,062)
Under Armour, Inc., Class A *	63,185	(1,397,020)
		(6,602,328)

Consumer Services (0.7%)
Caesars Entertainment Corp. *	231,027	(1,984,522)

Diversified Financials (3.0%)
Cannae Holdings, Inc. *	17,440	(322,117)
Credit Acceptance Corp. *	5,296	(2,247,728)
FirstCash, Inc.	18,831	(1,514,013)
LendingClub Corp. *	379,091	(1,224,464)
PJT Partners, Inc., Class A	9,645	(437,304)
PRA Group, Inc. *	94,317	(2,908,736)
WisdomTree Investments, Inc.	59,332	(461,010)
		(9,115,372)

Energy (3.8%)
Callon Petroleum Co. *	33,067	(329,678)
Ensco plc, Class A	473,199	(3,378,641)
GasLog Ltd.	85,536	(1,750,067)
Golar LNG Ltd.	40,307	(1,079,421)
Oceaneering International, Inc. *	43,497	(823,833)
QEP Resources, Inc. *	52,397	(466,857)

Security	Number of Shares	Value ($)
SemGroup Corp., Class A	96,609	(1,786,300)
Ship Finance International Ltd.	133,387	(1,667,338)
Tellurian, Inc. *	25,000	(200,000)
		(11,482,135)

Food & Staples Retailing (0.2%)
The Chefs' Warehouse, Inc. *	13,636	(458,579)

Food, Beverage & Tobacco (0.6%)
Hostess Brands, Inc. *	67,887	(706,025)
Sanderson Farms, Inc.	10,441	(1,027,290)
Tootsie Roll Industries, Inc.	5,000	(157,850)
		(1,891,165)

Health Care Equipment & Services (2.9%)
AxoGen, Inc. *	52,944	(1,974,282)
Insulet Corp. *	9,029	(796,448)
iRhythm Technologies, Inc. *	7,497	(579,218)
LHC Group, Inc. *	34,487	(3,153,147)
Medidata Solutions, Inc. *	3,508	(246,612)
Tactile Systems Technology, Inc. *	10,655	(697,689)
Wright Medical Group N.V. *	43,529	(1,174,413)
		(8,621,809)

Household & Personal Products (0.2%)
Coty, Inc., Class A	52,020	(548,811)

Insurance (1.3%)
Alleghany Corp.	468	(281,118)
RenaissanceRe Holdings Ltd.	27,020	(3,300,763)
State Auto Financial Corp.	13,200	(419,628)
		(4,001,509)

Materials (3.7%)
AptarGroup, Inc.	5,649	(575,972)
Cleveland-Cliffs, Inc. *	137,831	(1,483,062)
Crown Holdings, Inc. *	62,800	(2,655,812)
Graphic Packaging Holding Co.	42,698	(470,105)
Martin Marietta Materials, Inc.	13,277	(2,274,085)
Sealed Air Corp.	31,853	(1,030,763)
Sensient Technologies Corp.	9,939	(644,643)
The Scotts Miracle-Gro Co.	10,156	(677,811)
Valvoline, Inc.	60,835	(1,211,833)
		(11,024,086)

Media & Entertainment (1.2%)
Cargurus, Inc. *	13,001	(577,505)
Liberty Broadband Corp., Class A *	26,537	(2,196,998)
TripAdvisor, Inc. *	13,643	(711,346)
		(3,485,849)

Pharmaceuticals, Biotechnology & Life Sciences (2.0%)
Accelerate Diagnostics, Inc. *	5,952	(88,923)
Aerie Pharmaceuticals, Inc. *	5,368	(285,470)
Alnylam Pharmaceuticals, Inc. *	7,874	(633,306)
Amneal Pharmaceuticals, Inc. *	19,303	(356,140)
Atara Biotherapeutics, Inc. *	7,466	(255,113)
Bluebird Bio, Inc. *	12,944	(1,484,677)
Immunomedics, Inc. *	22,050	(496,787)
Madrigal Pharmaceuticals, Inc. *	2,913	(555,975)

₆₃

Schwab Active Equity Funds | Annual Report

See financial notes

Schwab Hedged Equity Fund

Portfolio Holdings as of October 31, 2018 (continued)

Security	Number of Shares	Value ($)
MyoKardia, Inc. *	4,765	(252,259)
Syneos Health, Inc. *	9,609	(438,459)
The Medicines Co. *	33,032	(768,324)
Ultragenyx Pharmaceutical, Inc. *	10,151	(491,816)
		(6,107,249)

Real Estate (2.6%)
Acadia Realty Trust	154,294	(4,295,545)
Retail Opportunity Investments Corp.	124,951	(2,197,888)
Rexford Industrial Realty, Inc.	9,836	(311,506)
Seritage Growth Properties, Class A	13,231	(503,043)
Urban Edge Properties	30,639	(627,793)
		(7,935,775)

Retailing (0.6%)
At Home Group, Inc. *	4,229	(115,621)
CarMax, Inc. *	8,503	(577,438)
Floor & Decor Holdings, Inc., Class A *	9,110	(233,034)
Pool Corp.	6,957	(1,013,983)
		(1,940,076)

Semiconductors & Semiconductor Equipment (1.0%)
Ambarella, Inc. *	17,266	(600,512)
Brooks Automation, Inc.	14,465	(448,849)
Cree, Inc. *	10,643	(413,161)
MACOM Technology Solutions Holdings, Inc. *	27,625	(388,684)
NXP Semiconductors N.V.	6,106	(457,889)
Universal Display Corp.	4,835	(594,753)
		(2,903,848)

Software & Services (1.5%)
2U, Inc. *	11,167	(702,516)
ExlService Holdings, Inc. *	5,091	(326,333)
FireEye, Inc. *	33,551	(620,358)
MINDBODY, Inc., Class A *	34,904	(1,111,343)
Rapid7, Inc. *	21,172	(767,273)
Tableau Software, Inc., Class A *	8,179	(872,536)
		(4,400,359)

Security	Number of Shares	Value ($)
Technology Hardware & Equipment (4.8%)
Acacia Communications, Inc. *	34,879	(1,202,279)
Badger Meter, Inc.	38,124	(1,872,270)
Cognex Corp.	74,920	(3,209,573)
Finisar Corp. *	106,199	(1,772,461)
Rogers Corp. *	15,096	(1,857,714)
ViaSat, Inc. *	68,152	(4,345,371)
		(14,259,668)

Telecommunication Services (0.5%)
Iridium Communications, Inc. *	70,572	(1,398,031)

Transportation (1.1%)
Heartland Express, Inc.	15,979	(311,111)
Spirit Airlines, Inc. *	55,917	(2,902,092)
		(3,213,203)

Utilities 0.0%
Ormat Technologies, Inc.	2,718	(139,080)
Total Short Sales
(Proceeds $135,590,886)		(125,075,102)

*	Non-income producing security.
(a)	All or a portion of this security is held as collateral for short sales.
(b)	The rate shown is the 7-day yield.

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2018 (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	$294,943,675	$—	$—	$294,943,675
Other Investment Company¹	5,861,865	—	—	5,861,865
Liabilities
Short Sales¹	(125,075,102)	—	—	(125,075,102)
Futures Contracts²	(27,930)	—	—	(27,930)
Total	$175,702,508	$—	$—	$175,702,508

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

₆₄

Schwab Active Equity Funds | Annual Report

See financial notes

Schwab Hedged Equity Fund

Statement of Changes in Net Assets

For the current and prior report periods

Operations
	11/1/17-10/31/18		11/1/16-10/31/17
Net investment income		$1,176,893	$388,179
Net realized gains		18,114,481	15,228,535
Net change in unrealized appreciation (depreciation)	+	(16,574,229)	9,797,381
Increase in net assets from operations		2,717,145	25,414,095
Distributions to Shareholders1
Total distributions		($15,243,329)	($6,371,171)

Transactions in Fund Shares
		11/1/17-10/31/18		11/1/16-10/31/17
		SHARES	VALUE	SHARES	VALUE
Shares sold		6,194,796	$107,567,531	5,562,308	$94,777,684
Shares reinvested		728,755	12,461,727	311,206	5,290,506
Shares redeemed	+	(3,400,784)	(58,925,303)	(4,198,129)	(71,890,789)
Net transactions in fund shares		3,522,767	$61,103,955	1,675,385	$28,177,401
Shares Outstanding and Net Assets
		11/1/17-10/31/18		11/1/16-10/31/17
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		14,259,142	$251,712,398	12,583,757	$204,492,073
Total increase	+	3,522,767	48,577,771	1,675,385	47,220,325
End of period²		17,781,909	$300,290,169	14,259,142	$251,712,398

¹	For the period ended October 31, 2017, the fund distributed to shareholders $6,371,171 from net realized gains. The SEC eliminated the requirement to disclose distributions to shareholders from net investment income and from net realized gains in 2018 (see financial note 10 for additional information).
²	End of period - Net assets include net investment income not yet distributed of $124,921 at October 31, 2017. The SEC eliminated the requirement to disclose undistributed net investment income in 2018.

₆₈

Schwab Active Equity Funds | Annual Report

See financial notes

Schwab Health Care Fund

Portfolio Holdings as of October 31, 2018

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 calendar quarters on the fund’s website at www.schwabfunds.com/schwabfunds_prospectus.

Security	Number of Shares	Value ($)
Common Stock 99.6% of net assets

Australia 2.3%
Ansell Ltd.	307,435	5,068,468
Australian Pharmmaceutical Industries Ltd.	300,000	325,858
Cochlear Ltd.	28,083	3,538,826
CSL Ltd.	71,497	9,544,644
		18,477,796

Denmark 3.0%
Coloplast A/S, Class B	48,000	4,479,050
GN Store Nord A/S	52,000	2,205,770
H. Lundbeck A/S	85,009	3,964,959
Novo Nordisk A/S, Class B	287,493	12,415,833
William Demant Holding A/S *	35,359	1,162,311
		24,227,923

France 1.0%
Ipsen S.A.	22,091	3,062,992
Sanofi	59,706	5,335,362
		8,398,354

Germany 0.1%
Evotec AG *	43,738	862,152

Hong Kong 0.8%
China Medical System Holdings Ltd.	1,448,000	1,729,555
Consun Pharmaceutical Group Ltd.	774,000	538,738
Sino Biopharmaceutical Ltd.	5,028,000	4,538,230
		6,806,523

Ireland 4.4%
Allergan plc	75,561	11,939,394
Mallinckrodt plc *	16,543	414,568
Medtronic plc	220,665	19,820,130
Perrigo Co., plc	62,388	4,385,876
		36,559,968

Japan 2.7%
Astellas Pharma, Inc.	423,900	6,549,337
Eisai Co., Ltd.	5,400	449,714
EPS Holdings, Inc.	69,943	1,365,738
Hoya Corp.	160,800	9,097,382
Paramount Bed Holdings Co., Ltd.	8,700	366,052
Shionogi & Co., Ltd.	34,800	2,225,240
Takara Bio, Inc.	105,700	2,492,904
		22,546,367

Security	Number of Shares	Value ($)
Republic of Korea 0.6%
Celltrion, Inc. *	7,966	1,524,023
Hugel, Inc. *	4,039	975,588
Huons Co., Ltd.	17,560	1,046,476
Medy-Tox, Inc.	3,180	1,302,743
Samjin Pharmaceutical Co., Ltd.	7,800	254,226
		5,103,056

Sweden 0.9%
Swedish Orphan Biovitrum AB *	329,727	6,730,630
Vitrolife AB	58,000	859,106
		7,589,736

Switzerland 6.9%
Lonza Group AG *	45,485	14,302,277
Novartis AG	215,320	18,856,067
Roche Holding AG	90,696	22,071,997
Siegfried Holding AG *	1,130	453,262
Sonova Holding AG	7,490	1,221,500
		56,905,103

United Kingdom 1.5%
AstraZeneca plc	38,243	2,925,193
GlaxoSmithKline plc	434,176	8,409,015
Smith & Nephew plc	80,736	1,312,351
		12,646,559

United States 75.4%
Abbott Laboratories	280,200	19,316,988
AbbVie, Inc.	319,096	24,841,624
Agilent Technologies, Inc.	157,800	10,223,862
Alexion Pharmaceuticals, Inc. *	54,000	6,051,780
Align Technology, Inc. *	6,300	1,393,560
AMAG Pharmaceuticals, Inc. *	162,622	3,496,373
Amedisys, Inc. *	3,600	396,000
Amgen, Inc.	164,011	31,619,681
AngioDynamics, Inc. *	25,100	512,793
Anthem, Inc.	25,000	6,889,250
Baxter International, Inc.	70,001	4,375,762
Becton, Dickinson & Co.	21,537	4,964,278
Bio-Rad Laboratories, Inc., Class A *	1,400	381,990
Bio-Techne Corp.	28,100	4,712,932
Biogen, Inc. *	61,914	18,838,573
Boston Scientific Corp. *	180,700	6,530,498
Bristol-Myers Squibb Co.	314,434	15,891,494
Bruker Corp.	13,300	416,689
CareDx, Inc. *	17,200	449,092
Catalent, Inc. *	55,007	2,218,982
Celgene Corp. *	193,187	13,832,189
Charles River Laboratories International, Inc. *	3,400	414,188
Chemed Corp.	1,300	395,629
Cigna Corp.	24,200	5,174,202
CVS Health Corp.	147,896	10,706,191

₇₀

Schwab Active Equity Funds | Annual Report

See financial notes

Schwab Health Care Fund

Portfolio Holdings as of October 31, 2018 (continued)

Security	Number of Shares	Value ($)
Danaher Corp.	101,800	10,118,920
DaVita, Inc. *	4,084	275,017
Eagle Pharmaceuticals, Inc. *	6,400	315,136
Edwards Lifesciences Corp. *	21,400	3,158,640
Eli Lilly & Co.	213,429	23,144,241
Emergent BioSolutions, Inc. *	123,687	7,568,408
Encompass Health Corp.	2,914	196,112
Express Scripts Holding Co. *	160,239	15,538,376
Genomic Health, Inc. *	91,684	6,574,660
Gilead Sciences, Inc.	314,185	21,421,133
Haemonetics Corp. *	44,581	4,657,377
Halozyme Therapeutics, Inc. *	89,900	1,396,147
HCA Healthcare, Inc.	32,407	4,327,307
Hill-Rom Holdings, Inc.	35,957	3,023,265
Hologic, Inc. *	85,700	3,341,443
Humana, Inc.	16,000	5,126,560
IDEXX Laboratories, Inc. *	22,100	4,687,852
Illumina, Inc. *	23,840	7,417,816
ImmunoGen, Inc. *	47,600	258,468
Innoviva, Inc. *	145,800	2,035,368
Intuitive Surgical, Inc. *	14,600	7,609,228
Jazz Pharmaceuticals plc *	37,300	5,923,986
Johnson & Johnson	507,102	70,989,209
Ligand Pharmaceuticals, Inc. *	3,450	568,594
Luminex Corp.	49,300	1,418,361
McKesson Corp.	19,100	2,382,916
Merck & Co., Inc.	534,910	39,374,725
Meridian Bioscience, Inc.	101,500	1,645,315
Merit Medical Systems, Inc. *	7,000	399,840
Mylan N.V. *	243,400	7,606,250
Myriad Genetics, Inc. *	109,018	4,909,081
Pfizer, Inc.	1,148,300	49,445,798
PTC Therapeutics, Inc. *	9,700	373,644
Quest Diagnostics, Inc.	8,417	792,124
ResMed, Inc.	55,900	5,920,928

Security	Number of Shares	Value ($)
Select Medical Holdings Corp. *	47,000	779,260
Stryker Corp.	34,100	5,531,702
Tenet Healthcare Corp. *	153,200	3,941,836
Thermo Fisher Scientific, Inc.	68,850	16,086,802
Triple-S Management Corp., Class B *	90,100	1,546,116
UnitedHealth Group, Inc.	174,491	45,603,223
Vanda Pharmaceuticals, Inc. *	19,800	375,606
Varian Medical Systems, Inc. *	62,600	7,472,562
Vertex Pharmaceuticals, Inc. *	14,700	2,491,062
Waters Corp. *	18,919	3,588,745
Zimmer Biomet Holdings, Inc.	7,000	795,130
Zoetis, Inc.	182,600	16,461,390
		622,660,279
Total Common Stock
(Cost $595,694,437)		822,783,816
Security Rate, Maturity Date	Face Amount Local Currency	Value ($)
Short-Term Investments 0.2% of net assets

Time Deposits 0.2%
Barclays Capital, Inc.
U.S.Dollar
1.54%, 11/01/18 (a)	1,285,251	1,285,251
Brown Brothers Harriman
New Zealand Dollar
0.85%, 11/01/18 (a)	12	8
Total Short-Term Investments
(Cost $1,285,259)		1,285,259

*	Non-income producing security.
(a)	The rate shown is the current daily overnight rate.

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2018 (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	$659,220,247	$—	$—	$659,220,247
Australia	—	18,477,796	—	18,477,796
Denmark	—	24,227,923	—	24,227,923
France	—	8,398,354	—	8,398,354
Germany	—	862,152	—	862,152
Hong Kong	—	6,806,523	—	6,806,523
Japan	—	22,546,367	—	22,546,367
Republic of Korea	—	5,103,056	—	5,103,056
Sweden	6,730,630	859,106	—	7,589,736
Switzerland	—	56,905,103	—	56,905,103
United Kingdom	—	12,646,559	—	12,646,559
Short-Term Investments¹	—	1,285,259	—	1,285,259
Total	$665,950,877	$158,118,198	$—	$824,069,075

¹	As categorized in Portfolio Holdings.

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Schwab Active Equity Funds | Annual Report

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Schwab Health Care Fund

Statement of Changes in Net Assets

For the current and prior report periods

Operations
	11/1/17-10/31/18		11/1/16-10/31/17
Net investment income		$7,705,996	$7,623,515
Net realized gains		66,847,299	50,803,289
Net change in unrealized appreciation (depreciation)	+	(1,223,836)	103,078,127
Increase in net assets from operations		73,329,459	161,504,931
Distributions to Shareholders1
Total distributions		($58,703,388)	($21,703,758)

Transactions in Fund Shares
		11/1/17-10/31/18		11/1/16-10/31/17
		SHARES	VALUE	SHARES	VALUE
Shares sold		2,353,386	$60,438,285	2,602,137	$61,859,539
Shares reinvested		2,159,882	51,772,373	885,124	19,145,216
Shares redeemed	+	(6,109,931)	(154,310,987)	(9,509,826)	(220,486,601)
Net transactions in fund shares		(1,596,663)	($42,100,329)	(6,022,565)	($139,481,846)
Shares Outstanding and Net Assets
		11/1/17-10/31/18		11/1/16-10/31/17
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		33,537,830	$853,243,067	39,560,395	$852,923,740
Total increase or decrease	+	(1,596,663)	(27,474,258)	(6,022,565)	319,327
End of period²		31,941,167	$825,768,809	33,537,830	$853,243,067

¹	For the period ended October 31, 2017, the fund distributed to shareholders $7,795,978 from net investment income and $13,907,780 from net realized gains. The SEC eliminated the requirement to disclose distributions to shareholders from net investment income and from net realized gains in 2018 (see financial note 10 for additional information).
²	End of period - Net assets include net investment income not yet distributed of $6,387,444 at October 31, 2017. The SEC eliminated the requirement to disclose undistributed net investment income in 2018.

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Schwab Active Equity Funds | Annual Report

See financial notes

Schwab International Core Equity Fund

Portfolio Holdings as of October 31, 2018

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 calendar quarters on the fund’s website at www.schwabfunds.com/schwabfunds_prospectus.

Security	Number of Shares	Value ($)
Common Stock 99.4% of net assets

Australia 6.0%
AGL Energy Ltd.	91,464	1,168,036
Aristocrat Leisure Ltd.	515,799	9,719,681
Computershare Ltd.	97,600	1,370,565
CSL Ltd.	13,658	1,823,304
Inghams Group Ltd.	1,767,535	4,886,956
Macquarie Group Ltd.	96,429	8,041,422
McMillan Shakespeare Ltd.	64,850	760,575
National Australia Bank Ltd.	1,164,932	20,863,373
Qantas Airways Ltd.	1,405,620	5,456,271
REA Group Ltd.	7,640	388,825
Sandfire Resources NL	1,141,188	5,395,947
Telstra Corp., Ltd.	2,688,187	5,880,243
Whitehaven Coal Ltd.	1,088,144	3,758,746
		69,513,944

Austria 0.6%
Erste Group Bank AG *	28,944	1,178,236
OMV AG	95,419	5,298,864
		6,477,100

Belgium 0.3%
UCB S.A.	48,067	4,036,667

Canada 0.6%
Constellation Software, Inc.	1,831	1,260,135
Parex Resources, Inc. *	368,700	5,368,969
		6,629,104

Denmark 2.4%
Coloplast A/S, Class B	40,904	3,816,898
H. Lundbeck A/S	41,145	1,919,070
Novo Nordisk A/S, Class B	378,610	16,350,862
Topdanmark A/S	136,871	6,505,966
		28,592,796

Finland 1.8%
Fortum Oyj	622,899	13,112,461
UPM-Kymmene Oyj	228,559	7,347,883
		20,460,344

France 11.6%
Arkema S.A.	15,000	1,573,704
BNP Paribas S.A.	283,603	14,779,699
Christian Dior SE	4,829	1,868,184
Dassault Aviation S.A.	3,474	5,764,522
Electricite de France S.A.	264,555	4,383,160
Engie S.A.	603,280	8,015,900
Faurecia S.A.	58,656	2,843,545
Gaztransport Et Technigaz S.A.	100,328	7,415,242

Security	Number of Shares	Value ($)
Ipsen S.A.	114,582	15,887,183
Kering S.A.	8,261	3,671,919
L'Oreal S.A.	38,952	8,776,128
LVMH Moet Hennessy Louis Vuitton SE	17,500	5,309,595
Neopost S.A.	129,559	4,167,559
Peugeot S.A.	389,326	9,254,584
Sanofi	76,366	6,824,110
TOTAL S.A.	583,003	34,207,948
		134,742,982

Germany 8.8%
adidas AG	33,903	7,972,762
Allianz SE	150,345	31,319,846
BASF SE	268,217	20,582,573
Covestro AG	235,912	15,213,680
Deutsche Lufthansa AG	187,268	3,759,054
Deutsche Pfandbriefbank AG	825,455	10,960,791
Deutsche Wohnen SE	32,726	1,496,893
HOCHTIEF AG	5,449	807,478
Hugo Boss AG	17,499	1,250,539
MTU Aero Engines AG	11,730	2,490,655
Siltronic AG	71,400	6,539,152
		102,393,423

Greece 0.0%
Motor Oil (Hellas) Corinth Refineries S.A.	17,969	425,369

Hong Kong 2.4%
Anhui Conch Cement Co., Ltd., Class H (a)	428,000	2,218,384
China Petroleum & Chemical Corp., Class H (a)	1,458,000	1,187,651
CITIC Ltd.	1,655,000	2,486,653
CK Asset Holdings Ltd.	549,000	3,572,752
CNOOC Ltd.	657,000	1,118,857
Ping An Insurance Group Co. of China Ltd., Class H (a)	788,000	7,449,774
Tencent Holdings Ltd.	176,200	6,036,481
Weichai Power Co., Ltd., Class H (a)	2,657,000	2,626,712
Wynn Macau Ltd.	885,800	1,845,251
		28,542,515

Italy 1.2%
Eni S.p.A.	66,836	1,186,991
Fiat Chrysler Automobiles N.V. *	548,607	8,348,943
Moncler S.p.A.	136,797	4,750,657
		14,286,591

Japan 23.8%
AEON REIT Investment Corp.	2,469	2,719,423
Arcs Co., Ltd.	23,000	555,778
Astellas Pharma, Inc.	1,024,700	15,831,813
Capcom Co., Ltd.	48,700	1,015,149
Cocokara fine, Inc.	7,800	429,343
Daikyonishikawa Corp.	190,402	1,818,769

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Schwab Active Equity Funds | Annual Report

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Schwab International Core Equity Fund

Portfolio Holdings as of October 31, 2018 (continued)

Security	Number of Shares	Value ($)
DyDo Group Holdings, Inc.	22,400	1,137,037
Eisai Co., Ltd.	15,000	1,249,206
en-Japan, Inc.	76,398	3,047,291
Fancl Corp.	28,000	1,238,209
Fuji Electric Co., Ltd.	154,400	4,713,131
Fukuoka Financial Group, Inc.	47,000	1,154,824
Haseko Corp.	605,100	7,667,590
Hazama Ando Corp.	768,500	5,306,774
Hitachi Ltd.	435,000	13,298,035
Hoya Corp.	315,000	17,821,365
Idemitsu Kosan Co., Ltd.	24,000	1,087,264
Invincible Investment Corp.	8,698	3,602,699
Japan Airlines Co., Ltd.	290,400	10,306,629
Japan Aviation Electronics Industry Ltd.	76,000	1,006,388
Japan Post Holdings Co., Ltd.	507,100	6,013,435
Japan Securities Finance Co., Ltd.	512,000	2,867,428
Kanamoto Co., Ltd.	156,800	5,239,581
Kenedix Office Investment Corp.	1,097	6,798,040
Kirin Holdings Co., Ltd.	445,300	10,625,983
Matsumotokiyoshi Holdings Co., Ltd.	146,800	5,307,383
Mitsubishi UFJ Financial Group, Inc.	1,830,800	11,080,896
Mitsubishi UFJ Lease & Finance Co., Ltd.	744,300	3,825,114
Mitsui & Co., Ltd.	151,000	2,522,999
Mixi, Inc.	194,300	4,245,443
Nexon Co., Ltd. *	146,600	1,672,303
Nihon Unisys Ltd.	205,452	4,502,325
NTT DOCOMO, Inc.	94,000	2,331,091
ORIX Corp.	909,000	14,808,514
Pola Orbis Holdings, Inc.	29,200	780,050
Sankyu, Inc.	122,380	5,768,331
Seino Holdings Co., Ltd.	465,000	6,439,488
Shionogi & Co., Ltd.	202,119	12,924,231
Shiseido Co., Ltd.	33,700	2,126,318
Sinfonia Technology Co., Ltd.	43,000	562,328
SoftBank Group Corp.	13,000	1,028,804
Sony Corp.	504,598	27,307,191
Sumitomo Mitsui Construction Co., Ltd.	1,410,200	8,846,733
Sumitomo Mitsui Financial Group, Inc.	147,400	5,739,032
T-Gaia Corp.	99,800	2,259,525
Taisei Corp.	48,195	2,061,226
TOKAI Holdings Corp.	111,300	929,945
Tokuyama Corp.	569,800	12,741,709
Toshiba Corp. *	7,700	230,789
Toshiba TEC Corp.	208,600	6,222,645
Tosoh Corp.	109,900	1,446,920
Tsubakimoto Chain Co.	25,000	959,910
United Arrows Ltd.	52,600	1,977,879
		277,200,306

Netherlands 5.7%
Airbus SE	36,839	4,071,233
ASR Nederland N.V.	13,329	605,100
Heineken Holding N.V.	236,824	20,484,398
Koninklijke Ahold Delhaize N.V.	946,910	21,675,254
Koninklijke Philips N.V.	59,835	2,231,596
SBM Offshore N.V.	726,410	12,516,335
Unilever N.V. CVA	69,678	3,744,148
Wolters Kluwer N.V.	21,539	1,222,005
		66,550,069

New Zealand 0.1%
Spark New Zealand Ltd.	500,460	1,292,496

Security	Number of Shares	Value ($)
Norway 1.1%
Aker A.S.A., A Shares	17,254	1,310,749
DNB A.S.A.	31,816	574,801
DNO A.S.A.	530,592	1,014,254
Telenor A.S.A.	547,566	10,039,818
		12,939,622

Portugal 0.1%
The Navigator Co., S.A.	164,389	818,178

Republic of Korea 1.3%
Samsung Electronics Co., Ltd.	323,780	12,120,960
SK Holdings Co., Ltd.	5,357	1,233,482
SK Hynix, Inc.	28,610	1,723,047
		15,077,489

Singapore 0.9%
CapitaLand Ltd.	4,065,000	9,233,591
DBS Group Holdings Ltd.	82,000	1,391,328
		10,624,919

Spain 3.4%
ACS Actividades de Construccion y Servicios S.A.	536,281	20,079,138
Amadeus IT Group S.A.	95,159	7,662,638
Banco Santander S.A.	383,440	1,824,390
Cia de Distribucion Integral Logista Holdings S.A.	100,490	2,426,187
Ence Energia y Celulosa S.A.	507,094	4,259,507
Telefonica S.A.	415,915	3,411,775
		39,663,635

Sweden 2.0%
Boliden AB	315,828	7,212,476
Hemfosa Fastigheter AB	144,970	1,791,006
Hexagon AB, B Shares	45,571	2,230,409
Kindred Group plc SDR	695,521	7,415,086
Swedish Orphan Biovitrum AB *	213,213	4,352,260
		23,001,237

Switzerland 8.6%
Adecco Group AG	59,672	2,922,140
Barry Callebaut AG	350	684,101
Cembra Money Bank AG	79,734	6,687,103
Georg Fischer AG	1,159	1,078,270
Kardex AG *	9,950	1,293,401
Nestle S.A.	156,050	13,174,222
Novartis AG	160,298	14,037,664
OC Oerlikon Corp. AG *	180,000	2,142,214
Pargesa Holding S.A.	111,523	8,186,907
Partners Group Holding AG	15,118	10,763,330
Roche Holding AG	160,536	39,068,428
UBS Group AG *	40,537	566,590
		100,604,370

Taiwan 0.3%
Ruentex Industries Ltd.	1,456,800	3,660,523

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Schwab Active Equity Funds | Annual Report

See financial notes

Schwab International Core Equity Fund

Portfolio Holdings as of October 31, 2018 (continued)

Security	Number of Shares	Value ($)
United Kingdom 16.4%
Ashtead Group plc	646,669	15,964,218
Auto Trader Group plc	468,083	2,445,903
Barclays plc	1,701,639	3,749,230
BHP Billiton plc	60,212	1,201,151
BP plc	360,000	2,600,539
Carnival plc	159,104	8,672,040
Direct Line Insurance Group plc	3,475,667	14,605,718
Ferguson plc	107,536	7,250,028
Great Portland Estates plc	377,930	3,362,683
Imperial Brands plc	322,667	10,929,572
International Consolidated Airlines Group S.A.	1,221,384	9,416,248
Lloyds Banking Group plc	32,711,431	23,870,794
Man Group plc	2,766,824	5,489,674
Mondi plc	74,407	1,752,199
Next plc	131,032	8,704,823
Pagegroup plc	15,489	99,284
Paragon Banking Group plc	116,720	634,312
Pearson plc	439,572	5,049,777
Persimmon plc	32,091	939,211
Phoenix Group Holdings	204,282	1,570,140
RELX plc	24,069	476,004
Rightmove plc	2,723,400	15,721,027
Royal Dutch Shell plc, A Shares	178,342	5,681,637
Tesco plc	5,750,176	15,660,162
The British Land Co., plc	399,778	3,019,254

Security	Number of Shares	Value ($)
Unilever plc	298,669	15,820,384
Victrex plc	136,474	4,616,398
WH Smith plc	83,956	2,086,923
		191,389,333
Total Common Stock
(Cost $1,224,259,529)		1,158,923,012

Other Investment Company 0.3% of net assets

Money Market Fund 0.3%
State Street Institutional U.S. Government Money Market Fund, Premier Class 2.09% (b)	4,081,393	4,081,393
Total Other Investment Company
(Cost $4,081,393)		4,081,393

*	Non-income producing security.
(a)	Represents a China based company which is listed on the Hong Kong exchange and traded in Hong Kong dollars.
(b)	The rate shown is the 7-day yield.

CVA —	Dutch Certificate
REIT —	Real Estate Investment Trust
SDR —	Swedish Depositary Receipt

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2018 (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	$—	$994,124,320	$—	$994,124,320
Canada	6,629,104	—	—	6,629,104
France	9,932,081	124,810,901	—	134,742,982
Greece	425,369	—	—	425,369
Sweden	4,352,260	18,648,977	—	23,001,237
Other Investment Company¹	4,081,393	—	—	4,081,393
Total	$25,420,207	$1,137,584,198	$—	$1,163,004,405

¹	As categorized in Portfolio Holdings.

₇₈

Schwab Active Equity Funds | Annual Report

See financial notes

Schwab International Core Equity Fund

Statement of Changes in Net Assets

For the current and prior report periods

Operations
	11/1/17-10/31/18		11/1/16-10/31/17
Net investment income		$30,286,755	$20,043,289
Net realized gains (losses)		(5,255,760)	62,524,779
Net change in unrealized appreciation (depreciation)	+	(202,582,332)	122,354,781
Increase (decrease) in net assets from operations		(177,551,337)	204,922,849
Distributions to Shareholders1
Total distributions		($32,281,172)	($18,825,782)

Transactions in Fund Shares
		11/1/17-10/31/18		11/1/16-10/31/17
		SHARES	VALUE	SHARES	VALUE
Shares sold		43,839,389	$487,710,481	45,026,202	$469,685,880
Shares reinvested		2,423,051	26,411,257	1,739,337	15,723,609
Shares redeemed	+	(34,071,759)	(364,936,798)	(21,803,712)	(216,356,541)
Net transactions in fund shares		12,190,681	$149,184,940	24,961,827	$269,052,948
Shares Outstanding and Net Assets
		11/1/17-10/31/18		11/1/16-10/31/17
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		108,821,803	$1,226,927,343	83,859,976	$771,777,328
Total increase or decrease	+	12,190,681	(60,647,569)	24,961,827	455,150,015
End of period²		121,012,484	$1,166,279,774	108,821,803	$1,226,927,343

¹	For the period ended October 31, 2017, the fund distributed to shareholders $18,825,782 from net investment income. The SEC eliminated the requirement to disclose distributions to shareholders from net investment income and from net realized gains in 2018 (see financial note 10 for additional information).
²	End of period - Net assets include net investment income not yet distributed of $20,102,206 at October 31, 2017. The SEC eliminated the requirement to disclose undistributed net investment income in 2018.

₈₁

Schwab Active Equity Funds | Annual Report

See financial notes

Schwab Active Equity Funds

Financial Notes

1. Business Structure of the Funds:

SCHWAB CAPITAL TRUST (ORGANIZED MAY 7, 1993)
Schwab Core Equity Fund	Schwab Target 2035 Fund
Schwab Dividend Equity Fund	Schwab Target 2040 Fund
Schwab Large-Cap Growth Fund	Schwab Target 2045 Fund
Schwab Small-Cap Equity Fund	Schwab Target 2050 Fund
Schwab Hedged Equity Fund	Schwab Target 2055 Fund
Schwab Health Care Fund	Schwab Target 2060 Fund
Schwab International Core Equity Fund	Schwab Fundamental US Large Company Index Fund
Schwab S&P 500 Index Fund	Schwab Fundamental US Small Company Index Fund
Schwab Small-Cap Index Fund^®	Schwab Fundamental International Large Company Index Fund
Schwab Total Stock Market Index Fund^®	Schwab Fundamental International Small Company Index Fund
Schwab U.S. Large-Cap Growth Index Fund	Schwab Fundamental Emerging Markets Large Company Index Fund
Schwab U.S. Large-Cap Value Index Fund	Schwab Fundamental Global Real Estate Index Fund
Schwab U.S. Mid-Cap Index Fund	Schwab Target 2010 Index Fund
Schwab International Index Fund^®	Schwab Target 2015 Index Fund
Schwab MarketTrack All Equity Portfolio™	Schwab Target 2020 Index Fund
Schwab MarketTrack Growth Portfolio™	Schwab Target 2025 Index Fund
Schwab MarketTrack Balanced Portfolio™	Schwab Target 2030 Index Fund
Schwab MarketTrack Conservative Portfolio™	Schwab Target 2035 Index Fund
Laudus Small-Cap MarketMasters Fund™	Schwab Target 2040 Index Fund
Laudus International MarketMasters Fund™	Schwab Target 2045 Index Fund
Schwab Balanced Fund	Schwab Target 2050 Index Fund
Schwab Target 2010 Fund	Schwab Target 2055 Index Fund
Schwab Target 2015 Fund	Schwab Target 2060 Index Fund
Schwab Target 2020 Fund	Schwab^® Monthly Income Fund - Moderate Payout
Schwab Target 2025 Fund	Schwab^® Monthly Income Fund - Enhanced Payout
Schwab Target 2030 Fund	Schwab ^® Monthly Income Fund - Maximum Payout

Each 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 funds’ Board of Trustees (the Board) may authorize the issuance of as many shares as necessary.

2. Significant Accounting Policies:

Effective November 5, 2018, the funds adopted SEC Regulation S-X disclosure requirement changes. The adopted changes are reflected throughout this report.

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Schwab Active Equity Funds | Annual Report

Schwab Active Equity Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):

(a) Security Valuation:

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

• 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.

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Schwab Active Equity Funds | Annual Report

Schwab Active Equity Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

The levels associated with valuing the funds’ investments as of October 31, 2018 are disclosed in the Portfolio Holdings.

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

Securities Lending: Under the trust’s Securities Lending Program, a fund (lender) may make short-term loans of its securities to another party (borrower) to generate additional revenue for the fund. The borrower pledges collateral in the form of cash, securities issued or fully guaranteed by the U.S. government or foreign governments, or letters of credit issued by a bank. Collateral at the individual loan level is required to be maintained on a daily marked-to-market basis in an amount at least equal to the current value of the securities loaned. The lending agent provides a fund with indemnification against borrower default (the borrower fails to return the security on loan) reducing the risk of loss as a result of default. The cash collateral of securities loaned is currently invested in money market portfolios operating under Rule 2a-7 of the 1940 Act. Each fund bears the risk of loss with respect to the investment of cash collateral. The terms of the securities lending agreement allow the funds 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 each fund’s Statement of Operations, if applicable, represents the income earned from the investment of the cash collateral plus any fees paid by borrowers, less the fees paid to the lending agent and broker rebates which are subject to adjustments pursuant to the securities lending agreement. On loans not collateralized by cash, a fee is received from the borrower, and is allocated between a fund and the lending agent. The aggregate market value of securities loaned will not at any time exceed one-third of the total assets of a fund, including collateral received from the loan. Securities lending fees paid to the unaffiliated lending agents start at 10% of gross lending revenue, with subsequent breakpoints to a low of 7.5%. Any expenses charged by the cash collateral fund are in addition to these fees.

As of October 31, 2018, the funds had securities on loan, all of which were classified as common stocks. The value of the securities on loan and the related collateral as of October 31, 2018, if any, are disclosed in each fund’s Portfolio Holdings. The value of the securities on loan and the investment of cash collateral are also disclosed in each fund’s Statement of Assets and Liabilities.

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Schwab Active Equity Funds | Annual Report

Schwab Active Equity Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):

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 funds 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 funds bear 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.

Short Sales: Dividends declared on short positions are recorded on the ex-date as an expense. When a fund sells securities short (sells securities it does not own), the fund identifies assets worth at least 100% of the value of the short securities as collateral. If the market value of the short securities subsequently falls, the fund can realize a gain by closing the short position. However, if the value rises, the fund typically would have to add to its collateral or close out its short position at a loss. The potential for losses associated with short positions is much greater than the original value of the securities sold short and may exceed amounts recorded in the Statement of Assets and Liabilities.

If a fund sells securities short, it records the proceeds received as an asset and the obligation to buy back the securities as a liability. At the time a short sale is initiated, the asset and liability are of equal value and effectively cancel each other out. Subsequently, the fund values the liability side of the transaction according to the market price of the securities sold short, and values the asset side according to the value of the proceeds. When a fund closes out a short position (buys the security), it records the outcome as a realized gain or loss. Dividends accrued on securities sold short are recorded as an expense on a fund’s records and presented in the Statement of Operations. A fund may also incur stock loan fees which represent the cost of borrowing securities used for short sale transactions. A fund may also earn rebates as an element of the broker arrangement, which are recorded as an offset to stock loan fees on short sales transactions. The stock loan fees on short sales are recognized on the Statement of Operations. In the event that rebates exceed the stock loan fees on short sales, the net rebates are recognized as a component of investment income on the Statement of Operations.

(d) Investment Income:

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Financial Notes (continued)

2. Significant Accounting Policies (continued):

(e) Expenses:

(f) Distributions to Shareholders:

The funds make distributions from net investment income, if any, once a year, with the exception of Schwab Dividend Equity Fund which typically pays quarterly dividends. The funds make distributions from net realized capital gains, if any, once a year.

(g) Custody Credit:

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

(h) Accounting Estimates:

(i) Federal Income Taxes:

(j) Foreign Taxes:

(k) Indemnification:

(l) Recent Accounting Standards:

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Financial Notes (continued)

2. Significant Accounting Policies (continued):

modified disclosures, including the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and the policy for timing of transfers between levels upon issuance of ASU 2018-13, and have delayed adoption of the additional disclosures until their effective date. At this time, management is currently evaluating the impact that the adoption of the additional disclosures will have on the funds’ financial statements.

3. Risk Factors:

Management Risk. The funds’ investment adviser makes investment decisions for the funds using a strategy based largely on historical information. There is no guarantee that a strategy based on historical information will produce the desired results in the future. In addition, the portfolio optimization process used by each fund to assist in constructing the fund’s portfolio does not assure successful investment. Securities selected with the assistance of the process may be negatively impacted by factors or events not foreseen in developing the process. As a result, a fund may have a lower return than if it were managed using another process or strategy.

Growth Investing Risk. Growth stocks can be volatile. Growth companies usually invest a high portion of earnings in their businesses and may lack the dividends of value stocks that can cushion stock prices in a falling market. The prices of growth stocks are based largely on projections of the issuer’s future earnings and revenues. If a company’s earnings or revenues fall short of expectations, its stock price may fall dramatically. Growth stocks may also be more expensive relative to their earnings or assets compared to value or other stocks.

Dividend Paying Stock Risk. To the extent that a fund invests in dividend paying stocks, the fund’s performance will correlate with the performance of the dividend paying stock segment of the stock market, and the fund may underperform funds that do not limit their investments to dividend paying stocks. If stocks held by a fund reduce or stop paying dividends, the fund’s ability to generate income may be affected.

Derivatives Risk. The principal type of derivative used by a fund is a futures contract. A futures contract is an agreement to buy or sell a financial instrument at a specific price on a specific day. The use of derivatives that are subject to regulation by the Commodity Futures Trading Commission (CFTC), could cause a fund to become a commodity pool, which would require the fund to comply with certain CFTC rules. A fund’s use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as liquidity risk, market risk and management risk, are discussed elsewhere in this section. A fund’s use of derivatives is also subject to lack of availability risk, credit risk, leverage risk, valuation risk, correlation risk and tax risk. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Credit risk is the risk that the counterparty to a derivatives transaction may not fulfill its obligations. Leverage risk is the risk that a small percentage of assets invested in derivatives can have a disproportionately large impact on a fund. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or

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Financial Notes (continued)

3. Risk Factors (continued):

index. Tax risk is the risk that the use of derivatives may cause a fund to realize higher amounts of short-term capital gains. A fund’s use of derivatives could reduce the fund’s performance, increase its volatility, and could cause the fund to lose more than the initial amount invested.

Liquidity Risk. A 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.

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

REITs Risk. A fund’s investments in real estate investment trusts (REITs) will be subject to the risks associated with the direct ownership of real estate, including fluctuations in the value of underlying properties, defaults by borrowers or tenants, changes in interest rates and risks related to general or local economic conditions. REITs are also subject to certain additional risks; for example, REITs are dependent upon specialized management skills and cash flows, and may have their investments in relatively few properties, a small geographic area or a single property type. Failure of a company to qualify as a REIT under federal tax law may have adverse consequences on a fund. In addition, REITs have their own expenses, and a fund will bear a proportionate share of those expenses.

Short Sales Risk. To the extent a fund establishes both long and short positions in equity securities the fund’s long positions could decline in value at the same time that the value of the stocks sold short increase, thereby increasing the fund’s overall potential for loss. The price of a borrowed security in a short sale transaction may be more or less than the price at which the security was sold by the fund. A fund’s short sales may result in a loss if the prices of the borrowed securities rise and it costs more to replace the borrowed securities. In contrast to a fund’s long positions, the potential loss on the fund’s short positions is unlimited. In addition, the lender of the borrowed securities may require a fund to return the securities on short notice, which may require the fund to purchase the borrowed securities at an unfavorable price and could result in a loss to the fund.

Foreign Investment Risk. A 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 a 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 to the U.S. dollar. To the extent a fund’s investments in a single country or a limited number of countries represent a large percentage of the fund’s assets, the fund’s performance may be adversely affected by the economic, political, regulatory and social conditions in those countries, and the fund’s price may be more volatile than the price of a fund that is geographically diversified.

Concentration Risk. The investments of certain funds are concentrated in issuers doing business in the same sector, and therefore, the companies in which a fund invests will be affected by many of the same factors, such as legislative or regulatory changes, intense competition for market share and other competitive challenges. In addition, a fund is subject to the risks that stocks of these companies may underperform other segments of the equity market or stock market as a whole and are likely to have above-average volatility.

Securities Lending Risk. 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 funds’ prospectus for a more complete description of the principal risks of investing in the funds.

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Financial Notes (continued)

4. Affiliates and Affiliated Transactions:

Investment Adviser

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

% of Average Daily Net Assets	Schwab Core Equity Fund	Schwab Dividend Equity Fund	Schwab Large-Cap Growth Fund	Schwab Small-Cap Equity Fund	Schwab Hedged Equity Fund	Schwab International Core Equity Fund
Flat rate	0.47%	0.62%	0.72%	0.81%	1.05%	0.58%

% of Average Daily Net Assets	Schwab Health Care Fund
First $500 million	0.54%
$500 million to $1 billion	0.515%
Over $1 billion	0.49%

For the period ended October 31, 2018, the aggregate advisory fee paid to CSIM by the Schwab Health Care Fund was 0.53%, as a percentage of the fund’s average daily net assets.

Shareholder Servicing

The Board has adopted a Shareholder Servicing Plan (the Plan) on behalf of the funds. The Plan enables each fund to bear expenses relating to the provision by financial intermediaries, including Charles Schwab & Co., Inc. (a broker-dealer affiliate of CSIM, Schwab) (together, service providers), of certain account maintenance, customer liaison and shareholder services to the current shareholders of the funds.

Pursuant to the Plan, each fund’s shares are subject to an annual shareholder servicing fee up to 0.25%. The shareholder servicing fee paid to a particular service provider is made pursuant to its written agreement with Schwab, as distributor of the funds (or, in the case of payments made to Schwab acting as a service provider, pursuant to Schwab’s written agreement with the funds), and a fund will pay no more than 0.25% of the average annual daily net asset value of the fund shares owned by shareholders holding shares through such service provider. Payments under the Plan are made as described above without regard to whether the fee is more or less than the service provider’s actual cost of providing the services, and if more, such excess may be retained as profit by the service provider.

Expense Limitation

Schwab Core Equity Fund	Schwab Dividend Equity Fund	Schwab Large-Cap Growth Fund	Schwab Small-Cap Equity Fund	Schwab Hedged Equity Fund	Schwab Health Care Fund	Schwab International Core Equity Fund
0.75%	0.89%	0.99%	1.12%	1.33%*	0.82%	0.86%

*	Excludes dividend expenses and stock loan fees paid on securities sold short.

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Financial Notes (continued)

4. Affiliates and Affiliated Transactions (continued):

Investments from Affiliates

Certain funds in the Fund Complex (for definition refer to Trustees and Officers section) may own shares of other funds in the Fund Complex. The table below reflects the percentages of shares of each fund in this report that are owned by other funds in the Fund Complex as of October 31, 2018, as applicable:

	Underlying Funds
	Schwab Core Equity Fund	Schwab Dividend Equity Fund	Schwab Small-Cap Equity Fund	Schwab International Core Equity Fund
Schwab Balanced Fund	7.3%	—%	—%	—%
Schwab Monthly Income Fund - Enhanced Payout	—%	1.3%	—%	—%
Schwab Monthly Income Fund - Maximum Payout	—%	0.4%	—%	—%
Schwab Monthly Income Fund - Moderate Payout	—%	1.1%	—%	—%
Schwab Target 2010 Fund	0.1%	0.0%*	0.1%	0.2%
Schwab Target 2015 Fund	0.2%	0.0%*	0.2%	0.3%
Schwab Target 2020 Fund	1.8%	0.1%	1.6%	2.5%
Schwab Target 2025 Fund	2.3%	0.2%	2.4%	3.0%
Schwab Target 2030 Fund	4.7%	0.9%	5.3%	6.4%
Schwab Target 2035 Fund	2.4%	0.6%	2.9%	3.3%
Schwab Target 2040 Fund	5.6%	1.9%	7.1%	7.6%
Schwab Target 2045 Fund	0.8%	0.3%	1.1%	1.2%
Schwab Target 2050 Fund	0.8%	0.3%	1.0%	1.0%
Schwab Target 2055 Fund	0.5%	0.2%	0.7%	0.7%
Schwab Target 2060 Fund	0.1%	0.0%*	0.1%	0.1%

*	Less than 0.05%

Interfund Borrowing and Lending

5. Board of Trustees:

6. Borrowing from Banks:

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Financial Notes (continued)

6. Borrowing from Banks (continued):

7. Purchases and Sales of Investment Securities:

For the period ended October 31, 2018, purchases and sales of securities (excluding short-term obligations) were as follows:

	Purchases of Securities	Sales of Securities
Schwab Core Equity Fund	$2,313,186,669	$2,571,359,788
Schwab Dividend Equity Fund	1,090,276,797	1,284,019,396
Schwab Large-Cap Growth Fund	227,578,068	251,083,790
Schwab Small-Cap Equity Fund	690,824,521	767,737,103
Schwab Hedged Equity Fund*	501,032,192	480,429,293
Schwab Health Care Fund	373,882,422	466,816,526
Schwab International Core Equity Fund	1,475,037,083	1,306,749,488

*	Including securities sold short.

8. Derivatives:

Certain funds entered into equity index futures contracts during the report period. The funds invested in futures contracts to equitize available cash. The current value and variation margin for futures contracts held at October 31, 2018 are presented on the Portfolio Holdings and Statement of Assets and Liabilities, respectively. The net realized and change in unrealized gains (losses) on futures contracts are presented on the Statement of Operations. Refer to financial note 2(b) for the funds’ accounting policies with respect to futures contracts and financial note 3 for disclosures concerning the risks of investing in futures contracts. During the period ended October 31, 2018, the month-end average notional amounts of futures contracts held by the funds and the month-end average number of contracts held were as follows:

	Notional Amounts	Number of Contracts
Schwab Core Equity Fund	$3,045,542	23
Schwab Dividend Equity Fund	1,568,608	12
Schwab Large-Cap Growth Fund	1,634,880	12
Schwab Small-Cap Equity Fund	2,260,350	28
Schwab Hedged Equity Fund	1,286,281	9
Schwab Health Care Fund	259,062	2
Schwab International Core Equity Fund	10,974,763	108

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Financial Notes (continued)

9. Redemption Fee:

	Prior Period (11/1/16-10/31/17)
Schwab Core Equity Fund	$1,679
Schwab Dividend Equity Fund	11,570
Schwab Large-Cap Growth Fund	2,514
Schwab Small-Cap Equity Fund	4,073
Schwab Hedged Equity Fund	9,890
Schwab Health Care Fund	8,956
Schwab International Core Equity Fund	3,125

10. Federal Income Taxes:

As of October 31, 2018, the tax basis cost of the funds’ investments and gross unrealized appreciation and depreciation were as follows:

	Schwab Core Equity Fund	Schwab Dividend Equity Fund	Schwab Large-Cap Growth Fund	Schwab Small-Cap Equity Fund	Schwab Hedged Equity Fund	Schwab Health Care Fund	Schwab International Core Equity Fund
Tax cost	$1,842,792,528	$1,131,627,556	$193,196,113	$589,951,564	$166,598,801	$596,952,569	$1,233,878,839
Gross unrealized appreciation	$394,734,283	$190,319,031	$61,188,392	$58,615,326	$42,259,610	$246,576,803	$51,950,568
Gross unrealized depreciation	(104,365,781)	(74,843,996)	(12,955,203)	(70,619,669)	(33,155,903)	(19,460,297)	(122,825,002)
Net unrealized appreciation (depreciation)	$290,368,502	$115,475,035	$48,233,189	($12,004,343)	$9,103,707	$227,116,506	($70,874,434)

As of October 31, 2018, the components of distributable earnings on a tax basis were as follows:

	Schwab Core Equity Fund	Schwab Dividend Equity Fund	Schwab Large-Cap Growth Fund	Schwab Small-Cap Equity Fund	Schwab Hedged Equity Fund
Undistributed ordinary income	$43,894,258	$2,868,644	$6,333,001	$47,741,718	$1,871,059
Undistributed long-term capital gains	208,706,949	98,919,264	17,392,200	57,318,761	17,187,468
Net unrealized appreciation (depreciation) on investments	290,368,502	115,475,035	48,233,189	(12,004,343)	9,103,707
Total	$542,969,709	$217,262,943	$71,958,390	$93,056,136	$28,162,234

	Schwab Health Care Fund	Schwab International Core Equity Fund
Undistributed ordinary income	$12,319,442	$28,327,482
Undistributed long-term capital gains	60,135,400	—
Net unrealized appreciation (depreciation) on investments	227,116,506	(70,874,434)
Net other unrealized appreciation (depreciation)	(32,634)	(89,310)
Total	$299,538,714	($42,636,262)

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Financial Notes (continued)

10. Federal Income Taxes (continued):

Capital loss carryforwards may be used to offset future realized capital gains for federal income tax purposes. As of October 31, 2018, the funds had capital loss carryforwards available to offset future net capital gains as follows:

Expiration Date	Schwab Core Equity Fund	Schwab Dividend Equity Fund	Schwab Large-Cap Growth Fund	Schwab Small-Cap Equity Fund	Schwab Hedged Equity Fund
No expiration	$—	$—	$—	$—	$—

Expiration Date	Schwab Health Care Fund	Schwab International Core Equity Fund
No expiration	$—	$8,481,486
Total	$—	$8,481,486

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

	Schwab Core Equity Fund	Schwab Dividend Equity Fund	Schwab Large-Cap Growth Fund	Schwab Small-Cap Equity Fund	Schwab Hedged Equity Fund
Current period distributions
Ordinary income	$106,313,933	$66,835,738	$8,808,544	$20,943,065	$125,442
Long-term capital gains	145,688,756	79,534,655	10,650,342	61,623,293	15,117,887
Prior period distributions
Ordinary income	$35,084,460	$20,423,777	$2,362,093	$2,651,266	$4,574,882
Long-term capital gains	—	—	7,123,142	—	1,796,289

	Schwab Health Care Fund	Schwab International Core Equity Fund
Current period distributions
Ordinary income	$14,878,678	$28,754,784
Long-term capital gains	43,824,710	3,526,388
Prior period distributions
Ordinary income	$7,795,978	$18,825,782
Long-term capital gains	13,907,780	—

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.

11. Subsequent Events:

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

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Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Schwab Capital Trust and Shareholders of Schwab Core Equity Fund, Schwab Dividend Equity Fund, Schwab Large-Cap Growth Fund, Schwab Small-Cap Equity Fund, Schwab Hedged Equity Fund, Schwab Health Care Fund and Schwab International Core Equity Fund

Opinions on the Financial Statements

We have audited the accompanying statements of assets and liabilities, including the portfolio holdings, of Schwab Core Equity Fund, Schwab Dividend Equity Fund, Schwab Large-Cap Growth Fund, Schwab Small-Cap Equity Fund, Schwab Hedged Equity Fund, Schwab Health Care Fund and Schwab International Core Equity Fund (seven of the funds constituting Schwab Capital Trust, hereafter collectively referred to as the “Funds”) as of October 31, 2018, the related statements of operations for the year ended October 31, 2018, the statements of changes in net assets for each of the two years in the period ended October 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended October 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds as of October 31, 2018, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period ended October 31, 2018 and each of the financial highlights for each of the five years in the period ended October 31, 2018 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinions

PricewaterhouseCoopers LLP
San Francisco, California
December 14, 2018

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

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Other Federal Tax Information (unaudited)

Schwab International Core Equity Fund elects to pass through under section 853 of the Internal Revenue Code foreign tax credit of $4,431,427 to its shareholders for the year ended October 31, 2018. The respective foreign source income on the fund is $46,279,495.

For corporate shareholders, the following percentage of the funds’ dividend distributions paid during the fiscal year ended October 31, 2018, qualify for the corporate dividends received deduction:

	Percentage
Schwab Core Equity Fund	45.03
Schwab Dividend Equity Fund	65.22
Schwab Large-Cap Growth Fund	34.56
Schwab Small-Cap Equity Fund	16.66
Schwab Hedged Equity Fund	100.00
Schwab Health Care Fund	66.92
Schwab International Core Equity Fund	—

For the fiscal year ended October 31, 2018, the funds designate the following amounts of the dividend distributions as qualified dividends for the purpose of the maximum rate under section 1(h)(11) of the Internal Revenue Code. Shareholders will be notified in January 2019 via IRS Form 1099 of the amounts for use in preparing their 2018 income tax return.


Schwab Core Equity Fund	$48,848,828
Schwab Dividend Equity Fund	44,209,685
Schwab Large-Cap Growth Fund	3,158,376
Schwab Small-Cap Equity Fund	4,236,754
Schwab Hedged Equity Fund	125,442
Schwab Health Care Fund	14,878,678
Schwab International Core Equity Fund	29,953,545

Under section 852(b)(3)(C) of the Internal Revenue Code, the funds hereby designate the following amounts as long-term capital gain dividends for the fiscal year ended October 31, 2018:


Schwab Core Equity Fund	$145,688,756
Schwab Dividend Equity Fund	79,534,655
Schwab Large-Cap Growth Fund	10,650,342
Schwab Small-Cap Equity Fund	61,623,293
Schwab Hedged Equity Fund	15,117,887
Schwab Health Care Fund	43,824,710
Schwab International Core Equity Fund	3,526,388

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Investment Advisory Agreement Approval

The Board of Trustees (the Board or the Trustees, as appropriate) calls and holds one or more meetings each year that are dedicated, in whole or in part, to considering whether to renew the investment advisory and administration agreement (the Agreement) between Schwab Capital Trust (the Trust) and Charles Schwab Investment Management, Inc. (CSIM) with respect to the existing funds in the Trust, including Schwab Core Equity Fund, Schwab Dividend Equity Fund, Schwab Large-Cap Growth Fund, Schwab Small-Cap Equity Fund, Schwab Hedged Equity Fund, Schwab Health Care Fund and Schwab International Core Equity Fund (each, a Fund and collectively, the Funds), and to review certain other agreements pursuant to which CSIM provides investment advisory services to certain other registered investment companies. In preparation for the meeting(s), the Board requests and reviews a wide variety of materials provided by CSIM, including information about affiliates, personnel, business goals and priorities, profitability, third-party oversight, corporate structure and operations The Board also receives data provided by an independent provider of investment company data. This information is in addition to the detailed information about the Funds that the Board reviews during the course of each year, including information that relates to the Funds’ operations and performance, legal and compliance matters, risk management, portfolio turnover, and sales and marketing activity. The Independent Trustees receive advice from Independent Trustees’ legal counsel, including a memorandum regarding the responsibilities of trustees for the approval of investment advisory agreements. In addition, the Independent Trustees meet in executive session outside the presence of Fund management and participate in question and answer sessions with representatives of CSIM.

The Board, including a majority of the Independent Trustees, considered information specifically relating to its consideration of the continuance of the Agreement with respect to the Funds at meetings held on April 26, 2018 and June 5, 2018, and approved the renewal of the Agreement with respect to the Funds for an additional one year term at the meeting held on June 5, 2018.

The Board’s approval of the continuance of the Agreement with respect to the Funds was based on consideration and evaluation of a variety of specific factors discussed at these meetings and at prior meetings, including:

1.	the nature, extent and quality of the services provided to the Funds under the Agreement, including the resources of CSIM and its affiliates dedicated to the Funds;
2.	each Fund’s investment performance and how it compared to that of certain other comparable mutual funds;
3.	each Fund’s expenses and how those expenses compared to those of certain other comparable mutual funds, exchange-traded funds and other accounts;
4.	the profitability of CSIM and its affiliates, including Charles Schwab & Co., Inc. (Schwab), with respect to each Fund, including both direct and indirect benefits accruing to CSIM and its affiliates; and
5.	the extent to which economies of scale would be realized as the Funds grow and whether fee levels in the Agreement reflect those economies of scale for the benefit of Fund investors.

Nature, Extent and Quality of Services. The Board considered the nature, extent and quality of the services provided by CSIM to the Funds and the resources of CSIM and its affiliates dedicated to the Funds. In this regard, the Trustees evaluated, among other things, CSIM’s experience, track record, compliance program, resources dedicated to hiring and retaining qualified personnel, and information security resources. The Trustees also considered information provided by CSIM relating to each Fund’s portfolio management team, portfolio strategy and risk oversight structure, and internal investment guidelines. The Trustees also considered investments in CSIM’s infrastructure. The Trustees also considered Schwab’s wide range of products, services, and channel alternatives such as investment and research tools, internet access, and an array of account features that benefit the Funds and certain of their shareholders. The Trustees also considered Schwab’s reputation as a full service brokerage firm and its overall financial condition. Finally, the Trustees considered that the vast majority of the Funds’ shareholders are also brokerage clients of Schwab. Following such evaluation, the Board concluded, within the context of its full deliberations, that the nature, extent and quality of services provided by CSIM to the Funds and the resources of CSIM and its affiliates dedicated to the Funds supported renewal of the Agreement with respect to the Funds.

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Schwab Active Equity Funds

and applicable indices/benchmarks, in light of total return, and market trends. As part of this review, the Trustees considered the selection criteria and composition of the peer category. In evaluating the performance of each Fund, the Trustees considered the risk profile for such Fund and the appropriateness of the benchmark used to compare the performance of each Fund. The Trustees further considered the level of Fund performance in the context of their review of Fund expenses and adviser profitability discussed below and also noted that performance is reviewed throughout the year by a designated committee of the Board and by the Board. Following such evaluation the Board concluded, within the context of its full deliberations, that the performance of the Funds supported renewal of the Agreement with respect to the Funds.

Fund Expenses. With respect to the Funds’ expenses, the Trustees considered the rate of compensation called for by the Agreement, and each Fund’s net operating expense ratio, in each case, in comparison to those of a peer group of mutual funds, such peer groups and comparisons having been selected and calculated by an independent provider of investment company data. The Trustees also considered fees charged by CSIM to other mutual funds and to other types of accounts, which may include exchange-traded funds and separately managed accounts, but, with respect to such other types of accounts, accorded less weight to such comparisons due to the different legal, regulatory, compliance and operating features of mutual funds as compared to these other types of accounts, and any differences in the nature and scope of the services CSIM provides to these other accounts, as well as differences in the market for these types of accounts. Following such evaluation, the Board concluded, within the context of its full deliberations, that the expenses of the Funds are reasonable and supported renewal of the Agreement with respect to the Funds.

derived by CSIM from its relationship with the Funds, such as whether, by virtue of its management of the Funds, CSIM obtains investment information or other research resources that aid it in providing advisory services to other clients. The Trustees considered whether the compensation and profitability with respect to each Fund under the Agreement and other service agreements were reasonable and justified in light of the quality of all services rendered to such Fund by CSIM and its affiliates. Based on this evaluation, the Board concluded, within the context of its full deliberations, that the profitability of CSIM is reasonable and supported renewal of the Agreement with respect to the Funds.

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

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

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Schwab Active Equity Funds | Annual Report

Schwab Active Equity Funds

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.	101	Director (2005 – 2012), PS Business Parks, Inc.
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 (Oct. 1979 – present), The Hoover Institution at Stanford University (public policy think tank); Senior Fellow (2000 – present), Stanford Institute for Economic Policy Research; Professor of Public Policy (1994 – 2015), Stanford University.	101	Director (2005 – present), Gilead Sciences, Inc.
Nancy F. Heller 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 2018)	President and Chairman (2014 – 2016), TIAA Charitable (financial services); Senior Managing Director (2003 – 2016), TIAA (financial services).	101	None
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 (May 2012 – present), Kochis Global (wealth management consulting); Chairman and CEO (Jan. 2008 – Apr. 2012), Aspiriant, LLC (wealth management).	101	None

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Schwab Active Equity Funds | Annual Report

Schwab Active Equity Funds

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
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.	101	Director (2003 – present), Symantec Corporation Director (2004 – present), Corcept Therapeutics Incorporated Director (2009 – present), Adamas Pharmaceuticals, Inc.
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 (Dec. 2008 – Sept. 2013), Intuit, Inc. (financial software and services firm for consumers and small businesses).	101	Director (2008 – present), KLA-Tencor Corporation
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 (2008 – present), Patmore Management Consulting (management consulting).	101	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 (Mar. 1990 – present), Smith Graham & Co. (investment advisors).	101	Director (2012 – present), Eaton Director and Chairman of the Audit Committee (2003 – 2013), Oneok Partners LP Director (2009 – 2013), Oneok, Inc. Lead Independent Director (2002 – 2012), Board of Cooper Industries
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 (Jan. 2008 – present), Goldman Sachs & Co., Inc. (investment banking and securities firm); Co-CEO (Feb. 1998 – present), Colgin Cellars, LLC (vineyards).	101	Board Member and Chairman of the Audit Committee (1994 – present), Ionis Pharmaceuticals Lead Independent Director and Chair of Audit Committee (2014 – present), OUTFRONT Media Inc.

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Schwab Active Equity Funds | Annual Report

Schwab Active Equity Funds

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 (Oct. 2008 – present), The Charles Schwab Corporation; President and Chief Executive Officer (Oct. 2008 – present) and Director (May 2008 – present), Charles Schwab & Co., Inc.; Director (Apr. 2006 – present), Charles Schwab Bank; Director (May 2008 – present) and President and Chief Executive Officer (Aug. 2017 – present), Schwab Holdings, Inc.; Director (July 2016 – present), Charles Schwab Investment Management, Inc.	101	Director (2008 – present), The Charles Schwab Corporation
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 and Chief Executive Officer (Dec. 2010 – present), President (Dec. 2010 – Oct. 2018), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; Trustee (Jan. 2016 – present), Chief Executive Officer (Dec. 2010 – present), President (Dec. 2010 – Oct. 2018), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Director (Jan. 2011 – present), Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited; Global Head of Fixed Income Business Division (Mar. 2007 – Aug. 2010), BlackRock, Inc. (formerly Barclays Global Investors) (investment management firm).	101	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)	Chief Operating Officer (Feb. 2018 – present) and Senior Executive Vice President (July 2015 – Feb. 2018), The Charles Schwab Corporation; Senior Executive Vice President (July 2015 – present), Charles Schwab & Co., Inc.; Chief Financial Officer (July 2015 – Aug. 2017) and Executive Vice President and Chief Financial Officer (May 2007 – July 2015), The Charles Schwab Corporation and Charles Schwab & Co., Inc.; Director (May 2007 – present), Charles Schwab & Co., Inc.; 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.	101	None

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Schwab Active Equity Funds | Annual Report

Schwab Active Equity Funds

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 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 and Chief Executive Officer (Dec. 2010 – present), President (Dec. 2010 – Oct. 2018), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; Trustee (Jan. 2016 – present), Chief Executive Officer (Dec. 2010 – present), President (Dec. 2010 – Oct. 2018), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Director (Jan. 2011 – present), Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited; Global Head of Fixed Income Business Division (Mar. 2007 – Aug. 2010), BlackRock, Inc. (formerly Barclays Global Investors) (investment management firm).
Jonathan de St. Paer 1973 President (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2018)	President (Oct. 2018 – present), Charles Schwab Investment Management, Inc.; Senior Vice President – Strategy and Product Development (CSIM) (Jan. 2014 – present) and Vice President (Jan. 2009 – Dec. 2013), Charles Schwab & Co., Inc.; President (Nov. 2018 – present), Schwab Funds, Laudus Funds and Schwab ETFs.
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 (Jan. 2016 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Assistant Treasurer (Dec. 2013 – Dec. 2015), Schwab Funds and Laudus Funds; Assistant Treasurer (Nov. 2013 – Dec. 2015), Schwab ETFs; Vice President (Oct. 2013 – present), Charles Schwab Investment Management, Inc.; Executive Director (Apr. 2011 – Sept. 2013), J.P. Morgan Investor Services; Assistant Treasurer (May 2005 – Mar. 2011), Massachusetts Financial Service Investment Management.
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) and Chief Operating Officer (Jan. 2011 – present), Charles Schwab Investment Management, Inc.; Senior Vice President and Chief Operating Officer (Jan. 2016 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Treasurer and Chief Financial Officer (June 2006 – Dec. 2015), Laudus Funds; Treasurer and Principal Financial Officer (Nov. 2004 – Dec. 2015), Schwab Funds; Treasurer and Principal Financial Officer (Oct. 2009 – Dec. 2015), Schwab ETFs; Director (Apr. 2005 – present), Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited.
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 (Apr. 2011 – present), Charles Schwab Investment Management, Inc.; Senior Vice President and Chief Investment Officer – Equities and Multi-Asset Strategies (June 2011 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Head of the Portfolio Management Group and Vice President of Portfolio Management (May 2009 – Apr. 2011), Financial Engines, Inc. (investment management firm); Head of Quantitative Equity (July 2004 – Jan. 2009), ING Investment Management.
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 (Apr. 2011 – present), Charles Schwab Investment Management, Inc.; Senior Vice President and Chief Investment Officer – Fixed Income (June 2011 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Senior Managing Director, Global Head of Active Fixed-Income Strategies (Jan. 2008 – Oct. 2010), State Street Global Advisors; Director of Alpha Strategies (Apr. 2006 – Jan. 2008), Loomis, Sayles & Company (investment management firm).
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) and Vice President (Mar. 2004 – Sept. 2011), Charles Schwab & Co., Inc.; Senior Vice President and Chief Counsel (Sept. 2011 – present) and 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 (Apr. 2011 – present), Laudus Funds; Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs.

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Schwab Active Equity Funds | Annual Report

Schwab Active Equity Funds

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
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 (July 2005 – present), Charles Schwab & Co., Inc.; Vice President (Sept. 2005 – present), Charles Schwab Investment Management, Inc.; Vice President (Dec. 2005 – present) and 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 (Oct. 2009 – present), Schwab ETFs.

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 CSIM. 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 Active Equity Funds | Annual Report

Schwab Active Equity Funds

Glossary

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

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

cap, capitalization See “market cap.”

Dividend Equity Spliced Index An internally calculated index, comprised of the S&P 500 Index from inception of the Schwab Dividend Equity Fund until the close of business on February 27, 2015, and the Russell 1000 Value Index thereafter.

Dow Jones Global Health Care Index An index that measures the performance of healthcare providers, researchers, and supplies producers around the world. The index is quoted in U.S. dollars.

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

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

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

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

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

Russell 1000 Growth Index An index that measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.

Russell 1000 Index An index that measures the performance of the 1,000 largest companies in the Russell 3000 Index, and represents approximately 92% of the total market capitalization of 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.

Russell 1000 Value Index An index that measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 Index companies with lower price-to-book ratios and lower expected growth values.

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

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

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

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

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

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Schwab Active Equity Funds | Annual Report

Schwab Active Equity Funds

PRIVACY NOTICE
THIS IS NOT PART OF THE SHAREHOLDER REPORT

A Commitment to Your Privacy

Your Privacy Is Not for Sale

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

How We Collect Information About You

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

• APPLICATION AND REGISTRATION
INFORMATION.

• TRANSACTION AND EXPERIENCE
INFORMATION.

• WEBSITE USAGE.

How We Share and Use Your Information

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

• to help us process transactions for your account;

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

State Laws

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

Safeguarding Your Information — Security Is a
Partnership

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

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

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

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

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

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Schwab Active Equity Funds | Annual Report

Schwab Active Equity Funds

Charles Schwab Investment Management

With a straightforward lineup of core products and solutions for building the foundation of a portfolio, Charles Schwab Investment Management advocates for investors of all sizes with a steadfast focus on lowering costs and reducing unnecessary complexity. The list below shows all currently available Schwab Funds.

Investors should carefully consider information contained in the prospectus, or if available, the summary prospectus, including investment objectives, risks, charges and expenses before investing. Please call 1-877-824-5615 for a prospectus for any Schwab Fund. Please read the prospectus carefully before you invest. This report must be preceded or accompanied by a current prospectus.

Proxy Voting Policies, Procedures and Results

A description of the proxy voting policies and procedures used to determine how to vote proxies on behalf of the funds is available without charge, upon request, by visiting the Schwab Funds’ website at www.schwabfunds.com/schwabfunds_prospectus, the SEC’s website at www.sec.gov, or by contacting Schwab Funds at 1-877-824-5615.

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

The Schwab Funds Family^®

Equity Funds

Schwab Core Equity Fund

Schwab Dividend Equity Fund

Schwab Large-Cap Growth Fund

Schwab Small-Cap Equity Fund

Schwab Hedged Equity Fund

Schwab Health Care Fund

Schwab International Core Equity Fund

Schwab Fundamental US Large Company Index Fund

Schwab Fundamental US Small Company Index Fund

Schwab Fundamental International Large Company Index Fund

Schwab Fundamental International Small Company Index Fund

Schwab Fundamental Emerging Markets Large Company Index Fund

Schwab Fundamental Global Real Estate Index Fund

Schwab Global Real Estate Fund™

Schwab S&P 500 Index Fund

Schwab 1000 Index^® Fund

Schwab Small-Cap Index Fund^®

Schwab Total Stock Market Index Fund^®

Schwab U.S. Large-Cap Growth Index Fund

Schwab U.S. Large-Cap Value Index Fund

Schwab U.S. Mid-Cap Index Fund

Schwab International Index Fund^®

Asset Allocation Funds

Schwab Balanced Fund

Schwab MarketTrack Portfolios^®

Schwab Target Funds

Schwab Target Index Funds

Schwab^® Monthly Income Funds

Bond Funds

Schwab Intermediate-Term Bond Fund™

Schwab^® Treasury Inflation Protected Securities Index Fund

Schwab^® U.S. Aggregate Bond Index Fund

Schwab^® Short-Term Bond Index Fund

Schwab Tax-Free Bond Fund™¹

Schwab California Tax-Free Bond Fund™¹

Schwab Money Funds

Schwab offers an array of money market funds.² Choose from taxable or tax-advantaged alternatives. Some are linked to your eligible Schwab account to “sweep” cash balances automatically, subject to availability, when you’re between investments. Or, for your larger cash reserves, choose one of our Investor or Ultra fund share classes.

Investment Adviser

Charles Schwab Investment Management, Inc.

211 Main Street, San Francisco, CA 94105

Funds

Schwab Funds^®

1-877-824-5615

State, local, and the Federal Alternative Minimum Tax may apply. Capital gains are not exempt from Federal Taxation.

You could lose money by investing in the Schwab Money Funds. All Schwab Money Funds with the exception of Schwab Variable Share Price Money Fund seek to preserve the value of your investment at $1.00 per share, but cannot guarantee they will do so. Because the share price of Schwab Variable Share Price Money Fund will fluctuate, when you sell your shares they may be worth more or less than what you originally paid for them. All Schwab Money Funds with the exception of Schwab Government Money Fund, Schwab Retirement Government Money Fund, Schwab U.S. Treasury Money Fund, Schwab Treasury Obligations Money Fund and Schwab Government Money Market Portfolio may impose a fee upon the sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the Schwab Money Funds is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Schwab Money Funds’ sponsor has no legal obligation to provide financial support to the Funds, and you should not expect that the sponsor will provide financial support to the Funds at any time.

Schwab Balanced Fund

Performance at a Glance

Total Return for the 12 Months Ended October 31, 2018
Schwab Balanced Fund (Ticker Symbol: SWOBX)	1.94%
Balanced Blended Index	3.36%
Fund Category: Morningstar Allocation—50% to 70% Equity¹	0.34%
Performance Details	pages 8-10

Minimum Initial Investment²	$ 100

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

¹	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.
²	Please see the fund’s prospectus for further detail and eligibility requirements.

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Schwab Balanced Fund | Annual Report

Schwab Balanced Fund

From the CEO

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

Dear Shareholder,

Market downturns such as we experienced in October can be painful, but we can also learn from them. Every investor has a sense for how much risk they are willing to take. In fact, at many financial services firms, new clients are asked about their tolerance for risk, and specifically how they would feel under certain loss scenarios. It seems like a simple exercise, but it’s an important one, as it helps investors select a portfolio they will be comfortable owning—even during market turmoil.

At Charles Schwab Investment Management, we focus on providing foundational products that suit a range of risk appetites, and we hold to the principle that diversification is one of the best methods for managing risk. The idea of spreading risk over a broad array of asset classes has been a key feature of money management since the beginnings of modern portfolio theory, and remains true today.

When we encounter a turbulent period, as happened in October with the S&P 500^® Index declining 6.8%, it underscores the importance of portfolio diversification and having the proper balance between riskier and more conservative investments. We offer the Schwab Balanced Fund as an all-in-one portfolio solution for those who want to pursue both growth and income without taking on complicated asset allocation decisions by themselves. The fund invests across a mix of affiliated equity and bond funds, balancing the growth potential of equities and the income potential of fixed income, while offering the benefits of more diversification than investing in an individual stock or bond. The management team also has the flexibility to increase the fund’s cash and cash equivalent holdings when they deem a defensive posture appropriate.

For more than 25 years, Charles Schwab Investment Management has offered a straightforward lineup of products and solutions at a great value to investors. When I joined the firm in 2010, I couldn’t have imagined how far we would advance that mission. We have led the way in bringing expenses down for many of our funds while building out a robust suite of products with our investors’ needs in mind. And a big reason we’ve been able to accomplish those objectives is the skilled group of people we have here who share my belief that investing can change lives.

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Schwab Balanced Fund | Annual Report

Schwab Balanced Fund

The Investment Environment

For the 12-month reporting period ended October 31, 2018, global equity and fixed income markets were mixed. In the U.S., steady economic growth, solid corporate earnings, and robust consumer spending helped propel U.S. stock markets to record highs before falling back precipitously in a volatile October, giving back much of the gains achieved during the previous 11 months. U.S. bond yields generally rose as bond prices fell, with the exception of the shortest-term bonds. For the reporting period, the S&P 500^® Index, a bellwether for the overall U.S. stock market, returned 7.35% and the Russell 2000^® Index, a measure of U.S. small-cap stocks, returned 1.85%. The Bloomberg Barclays US Aggregate Bond Index returned –2.05% for the reporting period, and the Bloomberg Barclays US Treasury Bills 1–3 Month Index returned 1.62%. Equity markets outside the U.S. were notably weaker as economic momentum slowed due to uncertainties from several fronts, including trade, inflation, and geopolitical concerns. This was compounded by October’s market volatility, which dampened European and Asian markets as well as those in the U.S. The MSCI EAFE^® Index (Net)*, a broad measure of developed international equity performance, returned -6.85%.

Asset Class Performance Comparison % returns during the 12 months ended October 31, 2018

For index definitions, please see the Glossary.

Data source: Index provider websites and CSIM.

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

Management views 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 Balanced Fund | Annual Report

Schwab Balanced Fund

The Investment Environment (continued)

Both in the U.S. and overseas, bond yields generally rose over the period as bond prices fell. (Bond yields and bond prices move in opposite directions.) In the U.S., the yield curve flattened over most of the period, as short-term yields, which typically respond to changes in the federal funds rate, rose faster than longer-term yields, which are influenced more by economic growth and inflation expectations. Over the period, the three-month Treasury yield rose from 1.18% to 2.34% and the 10-year Treasury yield rose from 2.37% to 3.14%. Outside the U.S., bond yields generally remained low.

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 Balanced Fund | Annual Report

Schwab Balanced Fund

The Schwab Balanced Fund (the fund) seeks capital growth and income. To pursue its goal, the fund generally invests in a diversified group of other Schwab and/or Laudus Funds, in accordance with its target portfolio allocation. Normally, the fund invests 55% to 65% of its assets in equity securities (including stocks and equity funds) and 35% to 45% in fixed-income securities (including bonds and fixed income funds), and cash and cash equivalents (including money market funds). The fund’s allocation is designed to provide a mix of the growth opportunities of stock investing with the income opportunities of bonds and other fixed-income securities. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.

Market Highlights. Over the 12-month reporting period, steady economic growth, solid corporate earnings, and robust consumer spending helped propel U.S. stock markets to record highs before falling back precipitously in a volatile October, giving back much of the gains previously achieved. U.S. bond yields generally rose, driving returns lower with the exception of the shortest-term bonds.

Performance. For the 12-month reporting period ended October 31, 2018, the fund returned 1.94%. The fund’s internally calculated comparative index, the Balanced Blended Index (the index), returned 3.36%.

Positioning and Strategies. Over the reporting period, the fund’s asset allocations were broadly in line with those of the index.

The fund’s fixed-income allocation detracted from the fund’s total return over the reporting period. The Schwab U.S. Aggregate Bond Index Fund was the largest detractor from the fund’s total return. The Schwab U.S. Aggregate Bond Index Fund returned approximately -2.1%, slightly underperforming the Bloomberg Barclays US Aggregate Bond Index, the composite index’s underlying diversified bond component. The fund’s intermediate-term bond holding, the Schwab Intermediate-Term Bond Fund, also detracted from total return of the fund, returning approximately -1.8% over the reporting period.

The fund’s U.S. small-cap equity exposure was also a detractor from the fund’s total return and relative performance to the composite index. The Laudus Small-Cap MarketMasters Fund (Select Shares) returned approximately -1.8% for the reporting period, underperforming its comparative index, the Russell 2000^® Index, which returned approximately 1.9%.

The fund’s U.S. large-cap equity exposure provided the greatest contribution to total return. The top contributor to the total return of the fund was the Laudus U.S. Large Cap Growth Fund, which returned approximately 11.2% and outperformed its comparative index, the Russell 1000^® Growth Index, for the reporting period. The Schwab Core Equity Fund also contributed to the total return of the fund, returning approximately 2.7% over the reporting period. However, the Schwab Core Equity Fund significantly underperformed its comparative index, the S&P 500^® Index, and was the largest detractor from relative performance.

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

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Schwab Balanced Fund | Annual Report

Schwab Balanced Fund

Performance and Fund Facts as of October 31, 2018

Performance of Hypothetical $10,000 Investment (October 31, 2008 – October 31, 2018)¹

Average Annual Total Returns¹

Fund and Inception Date	1 Year	5 Years	10 Years
Fund: Schwab Balanced Fund (11/18/96)	1.94%	6.60%	8.69%
Balanced Blended Index	3.36%	7.22%	9.51%
S&P 500^® Index	7.35%	11.34%	13.24%
Bloomberg Barclays US Aggregate Bond Index	-2.05%	1.83%	3.94%
Fund Category: Morningstar Allocation—50% to 70% Equity²	0.34%	5.03%	8.56%
Fund Expense Ratios³: Net 0.56%; Gross 0.62%

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

For index definitions, please see the Glossary.

¹	Fund expenses may have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
²	Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date.
³	As stated in the prospectus. Includes 0.56% of acquired fund fees and expenses, which are based on estimated amounts for the current fiscal year and 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 for so long as CSIM serves as the investment adviser to the fund. Gross Expense: Does not reflect the effect of contractual fee waivers. For actual ratios during the period, refer to the financial highlights section of the financial statements.

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Schwab Balanced Fund | Annual Report

Schwab Balanced Fund

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 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 May 1, 2018 and held through October 31, 2018.

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

Hypothetical Return lines in the table below provide information about hypothetical account values and hypothetical expenses based on 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.

	Expense Ratio (Annualized)^1,2	Effective Expense Ratio (Annualized)^3,4	Beginning Account Value at 5/1/18	Ending Account Value (Net of Expenses) at 10/31/18	Expenses Paid During Period 5/1/18-10/31/18^2,5	Effective Expenses Paid During Period 5/1/18-10/31/18^4,5
Schwab Balanced Fund
Actual Return	0.00%	0.55%	$1,000.00	$ 996.80	$0.00	$2.77
Hypothetical 5% Return	0.00%	0.55%	$1,000.00	$1,025.20	$0.00	$2.80

¹	Based on the most recent six-month expense ratio.
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 Balanced Fund | Annual Report

Schwab Balanced Fund

Financial Statements

Financial Highlights

	11/1/17– 10/31/18	11/1/16– 10/31/17	11/1/15– 10/31/16	11/1/14– 10/31/15	11/1/13– 10/31/14
Per-Share Data
Net asset value at beginning of period	$15.60	$14.51	$15.40	$15.56	$14.28
Income (loss) from investment operations:
Net investment income (loss)¹	0.23	0.21	0.19	0.18	0.16
Net realized and unrealized gains (losses)	0.08 ²	1.96	0.00 ³	0.42	1.33
Total from investment operations	0.31	2.17	0.19	0.60	1.49
Less distributions:
Distributions from net investment income	(0.48)	(0.22)	(0.32)	(0.34)	(0.21)
Distributions from net realized gains	(0.02)	(0.86)	(0.76)	(0.42)	—
Total distributions	(0.50)	(1.08)	(1.08)	(0.76)	(0.21)
Net asset value at end of period	$15.41	$15.60	$14.51	$15.40	$15.56
Total return	1.94%	15.90%	1.41%	3.95%	10.52%
Ratios/Supplemental Data
Ratios to average net assets:
Net operating expenses⁴	0.00%	0.00%	0.00% ⁵	0.00% ⁵	0.00% ⁵
Gross operating expenses⁴	0.04%	0.06%	0.06%	0.07%	0.09%
Net investment income (loss)	1.44%	1.39%	1.34%	1.18%	1.09%
Portfolio turnover rate	6%	28% ⁶	19%	5%	27%
Net assets, end of period (x 1,000,000)	$447	$386	$282	$305	$202

Calculated based on the average shares outstanding during the period.

The per share amount does not agree with the change in aggregate gains and losses in securities during the period because of the timing of fund share transactions in relation to fluctuating market values for the investments.

Less than $0.005.

⁴

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

⁵

Less than 0.005%; the ratio of net operating expenses would have been 0.00%, if certain non-routine expenses and/or interest expense had not been incurred.

⁶

The portfolio turnover rate increased due to the in-kind transactions relating to Schwab Total Bond Market Fund and Schwab U.S. Aggregate Bond Index Fund. For comparison purposes, the portfolio turnover rate would have been 7% without including these transactions. There were no transaction costs associated with these transactions.

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Schwab Balanced Fund | Annual Report

See financial notes

Schwab Balanced Fund

Portfolio Holdings as of October 31, 2018

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 99.7% of net assets

Equity Funds 60.2%
Large-Cap 50.1%
Laudus U.S. Large Cap Growth Fund *	3,177,052	66,622,785
Schwab Core Equity Fund	7,016,940	157,179,451
		223,802,236
Small-Cap 10.1%
Laudus Small-Cap MarketMasters Fund, Select Shares *	2,511,917	44,913,075
		268,715,311

Fixed-Income Funds 37.2%
Intermediate-Term Bond 37.2%
Schwab Intermediate-Term Bond Fund	5,260,417	50,815,631
Schwab U.S. Aggregate Bond Index Fund	12,021,232	115,403,823
		166,219,454

Security	Number of Shares	Value ($)
Money Market Fund 2.3%
Schwab Variable Share Price Money Fund, Ultra Shares 2.20% (a)	10,362,908	10,364,980
Total Affiliated Underlying Funds
(Cost $418,727,594)		445,299,745

Unaffiliated Underlying Fund 0.6% of net assets

Money Market Fund 0.6%
State Street Institutional U.S. Government Money Market Fund, Premier Class 2.09% (a)	2,632,130	2,632,130
Total Unaffiliated Underlying Fund
(Cost $2,632,130)		2,632,130

*	Non-income producing security.
(a)	The rate shown is the 7-day yield.

Below is a summary of the fund’s transactions with its affiliated underlying funds during the period ended October 31, 2018:

Affiliated Underlying Funds	Balance of Shares Held at 10/31/17	Gross Purchases	Gross Sales	Balance of Shares Held at 10/31/18	Net Change in Unrealized Appreciation (depreciation)	Realized Gains (Losses)	Distributions Received*
Laudus Small-Cap MarketMasters Fund, Select Shares	1,897,385	717,099	(102,567)	2,511,917	($5,728,523)	$68,006	$4,587,452
Laudus U.S. Large Cap Growth Fund	2,755,633	603,554	(182,135)	3,177,052	(1,110,704)	290,584	7,044,874
Schwab Core Equity Fund	5,525,048	1,712,194	(220,302)	7,016,940	(11,414,793)	106,264	14,357,821
Schwab Intermediate-Term Bond Fund	4,160,907	1,202,923	(103,413)	5,260,417	(1,722,862)	(75,490)	1,007,135
Schwab U.S. Aggregate Bond Index Fund	9,820,402	3,409,271	(1,208,441)	12,021,232	(4,893,145)	(390,327)	2,968,663
Schwab Variable Share Price Money Fund, Ultra Shares	5,224,167	5,138,741	—	10,362,908	(780)	—	147,992
Total					($24,870,807)	($963)	$30,113,937

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

At October 31, 2018, all of the fund’s investment securities were classified as Level 1. 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 (see financial note 2(a) for additional information).

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Schwab Balanced Fund | Annual Report

See financial notes

Schwab Balanced Fund

Statement of Changes in Net Assets

For the current and prior report periods

Operations
	11/1/17-10/31/18		11/1/16-10/31/17
Net investment income		$6,070,669	$4,489,134
Net realized gains		24,111,718	833,195
Net change in unrealized appreciation (depreciation)	+	(24,870,807)	41,957,733
Increase in net assets from operations		5,311,580	47,280,062
Distributions to Shareholders1
Total distributions		($12,185,118)	($21,130,582)

Transactions in Fund Shares
		11/1/17-10/31/18		11/1/16-10/31/17
		SHARES	VALUE	SHARES	VALUE
Shares sold		10,224,123	$162,133,182	8,260,904	$122,413,364
Shares reinvested		690,392	10,707,988	1,382,977	19,168,062
Shares redeemed	+	(6,642,949)	(104,866,438)	(4,360,274)	(64,024,141)
Net transactions in fund shares		4,271,566	$67,974,732	5,283,607	$77,557,285
Shares Outstanding and Net Assets
		11/1/17-10/31/18		11/1/16-10/31/17
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		24,705,622	$385,525,231	19,422,015	$281,818,466
Total increase	+	4,271,566	61,101,194	5,283,607	103,706,765
End of period²		28,977,188	$446,626,425	24,705,622	$385,525,231

¹	For the period ended October 31, 2017, the fund distributed to shareholders $4,244,870 from net investment income and $16,885,712 from net realized gains. The SEC eliminated the requirement to disclose distributions to shareholders from net investment income and from net realized gains in 2018 (see financial note 9 for additional information).
²	End of period - Net assets include net investment income not yet distributed of $2,261,130 at October 31, 2017. The SEC eliminated the requirement to disclose undistributed net investment income in 2018.

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Schwab Balanced Fund | Annual Report

See financial notes

Schwab Balanced Fund

Financial Notes

1. Business Structure of the Fund:

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

SCHWAB CAPITAL TRUST (ORGANIZED MAY 7, 1993)
Schwab Balanced Fund	Schwab Target 2035 Fund
Schwab S&P 500 Index Fund	Schwab Target 2040 Fund
Schwab Small-Cap Index Fund^®	Schwab Target 2045 Fund
Schwab Total Stock Market Index Fund^®	Schwab Target 2050 Fund
Schwab U.S. Large-Cap Growth Index Fund	Schwab Target 2055 Fund
Schwab U.S. Large-Cap Value Index Fund	Schwab Target 2060 Fund
Schwab U.S. Mid-Cap Index Fund	Schwab Fundamental US Large Company Index Fund
Schwab International Index Fund^®	Schwab Fundamental US Small Company Index Fund
Schwab MarketTrack All Equity Portfolio™	Schwab Fundamental International Large Company Index Fund
Schwab MarketTrack Growth Portfolio™	Schwab Fundamental International Small Company Index Fund
Schwab MarketTrack Balanced Portfolio™	Schwab Fundamental Emerging Markets Large Company Index Fund
Schwab MarketTrack Conservative Portfolio™	Schwab Fundamental Global Real Estate Index Fund
Laudus Small-Cap MarketMasters Fund™	Schwab Target 2010 Index Fund
Laudus International MarketMasters Fund™	Schwab Target 2015 Index Fund
Schwab Core Equity Fund	Schwab Target 2020 Index Fund
Schwab Dividend Equity Fund	Schwab Target 2025 Index Fund
Schwab Large-Cap Growth Fund	Schwab Target 2030 Index Fund
Schwab Small-Cap Equity Fund	Schwab Target 2035 Index Fund
Schwab Hedged Equity Fund	Schwab Target 2040 Index Fund
Schwab Health Care Fund	Schwab Target 2045 Index Fund
Schwab International Core Equity Fund	Schwab Target 2050 Index Fund
Schwab Target 2010 Fund	Schwab Target 2055 Index Fund
Schwab Target 2015 Fund	Schwab Target 2060 Index Fund
Schwab Target 2020 Fund	Schwab^® Monthly Income Fund - Moderate Payout
Schwab Target 2025 Fund	Schwab^® Monthly Income Fund - Enhanced Payout
Schwab Target 2030 Fund	Schwab ^® Monthly Income Fund - Maximum Payout

The Schwab Balanced Fund is a single class “fund of funds” which seeks to achieve its investment objective by investing in a diversified group of other affiliated Schwab and/or Laudus Funds (the underlying funds), but also may invest in other unaffiliated, third party mutual funds, including exchange-traded funds (ETFs). In addition, the fund may invest a portion of its assets directly in equity and fixed-income securities to maintain its allocations.

The fund 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 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 November 5, 2018, the fund adopted SEC Regulation S-X disclosure requirement changes. The adopted changes are reflected throughout this report.

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Schwab Balanced Fund | Annual Report

Schwab Balanced Fund

Financial Notes (continued)

2. Significant Accounting Policies (continued):

(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.

• 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 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 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.

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Schwab Balanced Fund | Annual Report

Schwab Balanced Fund

Financial Notes (continued)

2. Significant Accounting Policies (continued):

(b) Security Transactions:

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.

(d) 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.

(e) Distributions to Shareholders:

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

(f) 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.

(g) Accounting Estimates:

(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 its respective shareholders 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.

(j) Recent Accounting Standards:

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Schwab Balanced Fund | Annual Report

Schwab Balanced Fund

Financial Notes (continued)

2. Significant Accounting Policies (continued):

disclosures, including the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and the policy for timing of transfers between levels upon issuance of ASU 2018-13, and has delayed adoption of the additional disclosures until their effective date. At this time, management is currently evaluating the impact that the adoption of the additional disclosures will have on the fund’s financial statements.

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.

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. Before investing in the fund, investors should assess the risks associated with the underlying funds in which the fund may invest, which include any combination of the risks described below.

• 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.

• Management Risk. Generally, the underlying funds are actively managed mutual funds. Any actively managed mutual fund is subject to the risk that its investment adviser (or subadviser(s)) will select or allocate assets that could cause the fund to underperform or otherwise not meet its objective. An underlying fund’s adviser applies its own investment techniques and risk analyses in making investment decisions for the underlying fund, but there can be no guarantee that they will produce the desired results.

• 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.

• 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, an underlying fund’s performance could be impacted.

• Growth Investing Risk. An underlying fund’s investments in growth stocks can be volatile. Growth companies usually invest a high portion of earnings in their businesses and may lack the dividends of value stocks that can cushion stock prices in a falling market. The prices of growth stocks are based largely on projections of the issuer’s future earnings and revenues. If a company’s earnings or revenues fall short of expectations, its stock price may fall dramatically. Growth stocks may also be more expensive relative to their earnings or assets compared to value or other stocks.

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Schwab Balanced Fund

Financial Notes (continued)

3. Risk Factors (continued):

portfolio investment or the counterparty to a derivatives contract fails to make timely principal or interest payments or otherwise honor its obligations. Fixed income securities may be paid off earlier or later than expected. Either situation could cause an underlying fund to hold securities paying lower-than-market rates of interest, which could hurt the fund’s yield or share price. Below investment-grade bonds (junk bonds) involve greater credit risk, are more volatile, involve greater risk of price declines and may be more susceptible to economic downturns than investment-grade securities.

• 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.

• 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 an underlying fund’s investments, and could impair the underlying 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 to the U.S. dollar.

• Emerging Markets Risk. Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. 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.

• Derivatives Risk. An underlying fund may use derivatives to enhance returns or hedge against market declines. Examples of derivatives are options, futures, options on futures and swaps. An option is the right to buy or sell an instrument at a specific price before a specific date. A future is an agreement to buy or sell a financial instrument at a specific price on a specific day. A swap is an agreement whereby two parties agree to exchange payment streams calculated in relation to a rate, index, instrument or certain securities and a predetermined amount. A credit default swap is an agreement in which the seller agrees to make a payment to the buyer in the event of a specified credit event in exchange for a fixed payment or series of fixed payments.

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. Certain of these risks, such as credit risk, leverage risk, liquidity risk, market risk and management risk, are discussed elsewhere in this section. An underlying fund’s use of derivatives is also subject to lack of availability risk, valuation risk, correlation risk and tax risk. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause an underlying fund to realize higher amounts of short-term capital gain. An underlying fund’s use of derivatives could reduce the underlying fund’s performance, increase its volatility, and could cause the fund to lose more than the initial amount invested. The use of derivatives that are subject to regulation by the Commodity Futures Trading Commission (CFTC) by an underlying fund could cause the fund to become a commodity pool, which would require the fund to comply with certain CFTC rules.

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Financial Notes (continued)

3. Risk Factors (continued):

• Leverage Risk. Certain underlying fund transactions, such as derivatives transactions, short sales, reverse repurchase agreements, and mortgage dollar rolls, may give rise to a form of leverage and may expose an underlying fund to greater risk. Leverage tends to magnify the effect of any decrease or increase in the value of an underlying fund’s portfolio securities, which means even a small amount of leverage can have a disproportionately large impact on the underlying fund.

• 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.

• 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.

• 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.

• 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.

• Mortgage Dollar Rolls Risk. Mortgage dollar rolls are transactions in which an underlying fund sells mortgage-backed securities to a dealer and simultaneously agrees to repurchase similar securities in the future at a predetermined price. An underlying fund’s mortgage dollar rolls could lose money if the price of the mortgage-backed securities sold falls below the agreed upon repurchase price, or if the counterparty is unable to honor the agreement.

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.

Shareholder Servicing

The Board has adopted a Shareholder Servicing Plan (the Plan) on behalf of the fund. The Plan enables the fund to bear expenses relating to the provision by financial intermediaries, including Charles Schwab & Co., Inc. (a broker-dealer affiliate of CSIM) (together, service providers), of certain account maintenance, customer liaison and shareholder services to the current shareholders of the fund. The fund is not subject to any fee under the Plan.

Expense Limitation

CSIM and its affiliates have agreed 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 to 0.00%.

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 underlying fund fees and expenses, which are indirect expenses incurred by a fund through its investments in the underlying funds.

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Financial Notes (continued)

4. Affiliates and Affiliated Transactions (continued):

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 October 31, 2018, the fund’s ownership percentages of other related funds’ shares are:

Laudus Small-Cap MarketMasters Fund, Select Shares	25.1%
Laudus U.S. Large Cap Growth Fund	3.1%
Schwab Core Equity Fund	7.3%
Schwab Intermediate-Term Bond Fund	16.8%
Schwab U.S. Aggregate Bond Index Fund	5.7%
Schwab Variable Share Price Money Fund, Ultra Shares	0.3%

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 $605 million line of credit (the Syndicated Credit Facility), which matured on October 4, 2018. On October 4, 2018, the Syndicated Credit Facility was amended to run for a new 364 day period with an increased line of $750 million, maturing on October 3, 2019. Under the terms of the Syndicated Credit Facility, in addition to the interest charged on any borrowings by a 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, 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.

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 of Investment Securities:

For the period ended October 31, 2018, purchases and sales of securities (excluding short-term obligations) were as follows:

Purchases of Securities	Sales of Securities
$115,364,683	$24,010,000

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Financial Notes (continued)

8. Redemption Fee:

Prior to February 28, 2017, the fund charged a 2.00% redemption fee on shares sold or exchanged within 30 days of the original purchase date. Such amounts were netted against redemption proceeds on the Statement of Changes in Net Assets. The redemption fees charged during the period 11/1/16 to 10/31/17 were $1,999.

9. Federal Income Taxes:

As of October 31, 2018, the tax basis cost of the fund’s investments and gross unrealized appreciation and depreciation were as follows:

Tax cost	$424,273,520
Gross unrealized appreciation	$30,920,134
Gross unrealized depreciation	(7,261,779)
Net unrealized appreciation (depreciation)	$23,658,355

As of October 31, 2018, the components of distributable earnings on a tax basis were as follows:

Undistributed ordinary income	$3,540,823
Undistributed long-term capital gains	17,520,713
Net unrealized appreciation (depreciation) on investments	23,658,355
Total	$44,719,891

The primary difference between book basis and tax basis unrealized appreciation or unrealized depreciation of investments is the tax deferral of losses on wash sales. 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 October 31, 2018, the fund had no capital loss carryforwards available to offset future net capital gains.

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

Current period distributions
Ordinary income	$11,740,011
Long-term capital gains	445,107
Prior period distributions
Ordinary income	$6,186,610
Long-term capital gains	14,943,972

Permanent book and tax basis differences may result in reclassifications between components of net assets as required. The adjustments will have no impact on net assets or the results of operations.

As of October 31, 2018, management has reviewed the tax positions for open periods (for federal purposes, three years from the date of filing and for state purposes, four years from the date of filing) as applicable to the fund, and has determined that no provision for income tax is required in the fund’s financial statements. The fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the period ended October 31, 2018, the fund did not incur any interest or penalties.

10. Subsequent Events:

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Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Schwab Capital Trust and Shareholders of Schwab Balanced Fund

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities, including the portfolio holdings, of Schwab Balanced Fund (one of the funds constituting Schwab Capital Trust, referred to hereafter as the “Fund”) as of October 31, 2018, the related statement of operations for the year ended October 31, 2018, the statement of changes in net assets for each of the two years in the period ended October 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended October 31, 2018 (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 October 31, 2018, 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 October 31, 2018 and the financial highlights for each of the five years in the period ended October 31, 2018 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.

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 October 31, 2018 by correspondence with the custodian, transfer agents and broker; when replies were not received from the broker, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
San Francisco, California
December 14, 2018

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

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Investment Advisory Agreement Approval

The Board, including a majority of the Independent Trustees, considered information specifically relating to its consideration of the continuance of the Agreement with respect to the Fund at meetings held on April 26, 2018 and June 5, 2018, and approved the renewal of the Agreement with respect to the Fund for an additional one year term at the meeting held on June 5, 2018.

The Board’s approval of the continuance of the Agreement with respect to the Fund was based on consideration and

evaluation of a variety of specific factors discussed at these meetings and at prior meetings, including:

1.	the nature, extent and quality of the services provided to the Fund under the Agreement, including the resources of CSIM and its affiliates dedicated to the Fund;
2.	the Fund’s investment performance and how it compared to that of certain other comparable mutual funds;
3.	the Fund’s expenses and how those expenses compared to those of certain other comparable mutual funds, exchange-traded funds and other accounts;
4.	the profitability of CSIM and its affiliates, including Charles Schwab & Co., Inc. (Schwab), with respect to the Fund, including both direct and indirect benefits accruing to CSIM and its affiliates; and
5.	the extent to which economies of scale would be realized as the Fund grows and whether fee levels in the Agreement reflect those economies of scale for the benefit of Fund investors.

Nature, Extent and Quality of Services. The Board considered the nature, extent and quality of the services provided by CSIM to the Fund and the resources of CSIM and its affiliates dedicated to the Fund. In this regard, the Trustees evaluated, among other things, CSIM’s experience, track record, compliance program, resources dedicated to hiring and retaining qualified personnel, and information security resources. The Trustees also considered information provided by CSIM relating to the Fund’s portfolio management team, portfolio strategy and risk oversight structure, and internal investment guidelines. The Trustees also considered investments in CSIM’s infrastructure. The Trustees also considered Schwab’s wide range of products, services, and channel alternatives such as investment and research tools, internet access, and an array of account features that benefit the Fund and certain of its shareholders. The Trustees also considered Schwab’s reputation as a full service brokerage firm and its overall financial condition. Finally, the Trustees considered that many of the Fund’s shareholders are also brokerage clients of Schwab. Following such evaluation, the Board concluded, within the context of its full deliberations, that the nature, extent and quality of services provided by CSIM to the Fund and the resources of CSIM and its affiliates dedicated to the Fund supported renewal of the Agreement with respect to the Fund.

Fund Performance. The Board considered Fund performance in determining whether to renew the Agreement with respect to the Fund. Specifically, the Trustees considered the Fund’s performance relative to a peer category of other mutual funds and applicable indices/benchmarks, in light of total return, and market trends. As part of this review, the Trustees considered

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the selection criteria and composition of the peer category. In evaluating the performance of the Fund, the Trustees considered the risk profile for the Fund and the appropriateness of the benchmark used to compare the performance of the Fund. The Trustees further considered the level of Fund performance in the context of their review of Fund expenses and adviser profitability discussed below and also noted that performance is reviewed throughout the year by a designated committee of the Board and by the Board. Following such evaluation the Board concluded, within the context of its full deliberations, that the performance of the Fund supported renewal of the Agreement with respect to the Fund.

Fund Expenses. With respect to the Fund’s expenses, the Trustees considered the rate of compensation called for by the Agreement, and the Fund’s net operating expense ratio, in each case, in comparison to those of a peer group of mutual funds, such peer groups and comparisons having been selected and calculated by an independent provider of investment company data. The Trustees also considered fees charged by CSIM to other mutual funds and to other types of accounts, which may include exchange-traded funds and separately managed accounts, but, with respect to such other types of accounts, accorded less weight to such comparisons due to the different legal, regulatory, compliance and operating features of mutual funds as compared to these other types of accounts, and any differences in the nature and scope of the services CSIM provides to these other accounts, as well as differences in the market for these types of accounts. The Trustees noted that shareholders of the Fund indirectly pay their pro rata share of the fees and expenses of the underlying funds in which the Fund invests. Following such evaluation, the Board concluded, within the context of its full deliberations, that the expenses of the Fund are reasonable and supported renewal of the Agreement with respect to the Fund.

that there is a management fee at the underlying fund level. The Trustees also considered any other benefits derived by CSIM from its relationship with the Fund, such as whether, by virtue of its management of the Fund, CSIM obtains investment information or other research resources that aid it in providing advisory services to other clients. Also, because the Fund invests a portion of its assets in other funds within the Schwab fund complex, the Trustees considered whether CSIM indirectly benefits from the Fund’s investments in other underlying funds managed by CSIM. The Trustees considered whether the compensation and profitability under the Agreement and other service agreements were reasonable and justified in light of the quality of all services rendered to the Fund by CSIM and its affiliates. Based on this evaluation, the Board concluded, within the context of its full deliberations, that the profitability of CSIM is reasonable and supported renewal of the Agreement with respect to the Fund.

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

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

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Trustees and Officers

The tables below give information about the trustees and officers of Schwab Capital Trust, which includes the fund covered in this report. The “Fund Complex” includes The Charles Schwab Family of Funds, Schwab Capital Trust, Schwab Investments, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust. The Fund Complex includes 101 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.	101	Director (2005 – 2012), PS Business Parks, Inc.
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 (Oct. 1979 – present), The Hoover Institution at Stanford University (public policy think tank); Senior Fellow (2000 – present), Stanford Institute for Economic Policy Research; Professor of Public Policy (1994 – 2015), Stanford University.	101	Director (2005 – present), Gilead Sciences, Inc.
Nancy F. Heller 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 2018)	President and Chairman (2014 – 2016), TIAA Charitable (financial services); Senior Managing Director (2003 – 2016), TIAA (financial services).	101	None
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 (May 2012 – present), Kochis Global (wealth management consulting); Chairman and CEO (Jan. 2008 – Apr. 2012), Aspiriant, LLC (wealth management).	101	None

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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
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.	101	Director (2003 – present), Symantec Corporation Director (2004 – present), Corcept Therapeutics Incorporated Director (2009 – present), Adamas Pharmaceuticals, Inc.
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 (Dec. 2008 – Sept. 2013), Intuit, Inc. (financial software and services firm for consumers and small businesses).	101	Director (2008 – present), KLA-Tencor Corporation
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 (2008 – present), Patmore Management Consulting (management consulting).	101	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 (Mar. 1990 – present), Smith Graham & Co. (investment advisors).	101	Director (2012 – present), Eaton Director and Chairman of the Audit Committee (2003 – 2013), Oneok Partners LP Director (2009 – 2013), Oneok, Inc. Lead Independent Director (2002 – 2012), Board of Cooper Industries
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 (Jan. 2008 – present), Goldman Sachs & Co., Inc. (investment banking and securities firm); Co-CEO (Feb. 1998 – present), Colgin Cellars, LLC (vineyards).	101	Board Member and Chairman of the Audit Committee (1994 – present), Ionis Pharmaceuticals Lead Independent Director and Chair of Audit Committee (2014 – present), OUTFRONT Media Inc.

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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 (Oct. 2008 – present), The Charles Schwab Corporation; President and Chief Executive Officer (Oct. 2008 – present) and Director (May 2008 – present), Charles Schwab & Co., Inc.; Director (Apr. 2006 – present), Charles Schwab Bank; Director (May 2008 – present) and President and Chief Executive Officer (Aug. 2017 – present), Schwab Holdings, Inc.; Director (July 2016 – present), Charles Schwab Investment Management, Inc.	101	Director (2008 – present), The Charles Schwab Corporation
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 and Chief Executive Officer (Dec. 2010 – present), President (Dec. 2010 – Oct. 2018), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; Trustee (Jan. 2016 – present), Chief Executive Officer (Dec. 2010 – present), President (Dec. 2010 – Oct. 2018), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Director (Jan. 2011 – present), Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited; Global Head of Fixed Income Business Division (Mar. 2007 – Aug. 2010), BlackRock, Inc. (formerly Barclays Global Investors) (investment management firm).	101	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)	Chief Operating Officer (Feb. 2018 – present) and Senior Executive Vice President (July 2015 – Feb. 2018), The Charles Schwab Corporation; Senior Executive Vice President (July 2015 – present), Charles Schwab & Co., Inc.; Chief Financial Officer (July 2015 – Aug. 2017) and Executive Vice President and Chief Financial Officer (May 2007 – July 2015), The Charles Schwab Corporation and Charles Schwab & Co., Inc.; Director (May 2007 – present), Charles Schwab & Co., Inc.; 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.	101	None

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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 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 and Chief Executive Officer (Dec. 2010 – present), President (Dec. 2010 – Oct. 2018), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; Trustee (Jan. 2016 – present), Chief Executive Officer (Dec. 2010 – present), President (Dec. 2010 – Oct. 2018), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Director (Jan. 2011 – present), Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited; Global Head of Fixed Income Business Division (Mar. 2007 – Aug. 2010), BlackRock, Inc. (formerly Barclays Global Investors) (investment management firm).
Jonathan de St. Paer 1973 President (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2018)	President (Oct. 2018 – present), Charles Schwab Investment Management, Inc.; Senior Vice President – Strategy and Product Development (CSIM) (Jan. 2014 – present) and Vice President (Jan. 2009 – Dec. 2013), Charles Schwab & Co., Inc.; President (Nov. 2018 – present), Schwab Funds, Laudus Funds and Schwab ETFs.
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 (Jan. 2016 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Assistant Treasurer (Dec. 2013 – Dec. 2015), Schwab Funds and Laudus Funds; Assistant Treasurer (Nov. 2013 – Dec. 2015), Schwab ETFs; Vice President (Oct. 2013 – present), Charles Schwab Investment Management, Inc.; Executive Director (Apr. 2011 – Sept. 2013), J.P. Morgan Investor Services; Assistant Treasurer (May 2005 – Mar. 2011), Massachusetts Financial Service Investment Management.
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) and Chief Operating Officer (Jan. 2011 – present), Charles Schwab Investment Management, Inc.; Senior Vice President and Chief Operating Officer (Jan. 2016 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Treasurer and Chief Financial Officer (June 2006 – Dec. 2015), Laudus Funds; Treasurer and Principal Financial Officer (Nov. 2004 – Dec. 2015), Schwab Funds; Treasurer and Principal Financial Officer (Oct. 2009 – Dec. 2015), Schwab ETFs; Director (Apr. 2005 – present), Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited.
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 (Apr. 2011 – present), Charles Schwab Investment Management, Inc.; Senior Vice President and Chief Investment Officer – Equities and Multi-Asset Strategies (June 2011 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Head of the Portfolio Management Group and Vice President of Portfolio Management (May 2009 – Apr. 2011), Financial Engines, Inc. (investment management firm); Head of Quantitative Equity (July 2004 – Jan. 2009), ING Investment Management.
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 (Apr. 2011 – present), Charles Schwab Investment Management, Inc.; Senior Vice President and Chief Investment Officer – Fixed Income (June 2011 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Senior Managing Director, Global Head of Active Fixed-Income Strategies (Jan. 2008 – Oct. 2010), State Street Global Advisors; Director of Alpha Strategies (Apr. 2006 – Jan. 2008), Loomis, Sayles & Company (investment management firm).
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) and Vice President (Mar. 2004 – Sept. 2011), Charles Schwab & Co., Inc.; Senior Vice President and Chief Counsel (Sept. 2011 – present) and 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 (Apr. 2011 – present), Laudus Funds; Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs.

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Schwab Balanced Fund

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
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 (July 2005 – present), Charles Schwab & Co., Inc.; Vice President (Sept. 2005 – present), Charles Schwab Investment Management, Inc.; Vice President (Dec. 2005 – present) and 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 (Oct. 2009 – present), Schwab ETFs.

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 CSIM. 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 Balanced Fund

Glossary

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

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

Balanced Blended Index A custom blended index developed by CSIM that, effective August 1, 2013, is composed of 50% S&P 500 Index, 10% Russell 2000 Index, 25% Bloomberg Barclays US Aggregate Bond Index, 12% Bloomberg Barclays US Intermediate Aggregate Bond Index and 3% Bloomberg Barclays US Treasury Bills 1 – 3 Month Index. Prior to August 1, 2013 the Balanced Blended Index was composed of 60% S&P 500 Index and 40% Bloomberg Barclays US Aggregate Bond Index.

Bloomberg Barclays US Intermediate 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.

cap, capitalization See “market cap.”

FTSE non-US 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.