N-CSRS

The Investment Environment

The Schwab MarketTrack Growth Portfolio II focuses on stock investments, while including some bonds and cash investments in seeking to reduce the portfolio’s volatility.

For the six-month reporting period ended June 30, 2015, U.S. and international stocks generated overall positive performances. In the U.S., the Federal Reserve maintained historically low short-term interest rates, while consumer sentiment improved toward the end of the reporting period. Weaker-than-expected economic data for early 2015 surprised many investors, though the economy was able to recover in the following months. As a result, the Dow Jones U.S. Broad Stock Market Index returned 1.9%.

Outside the U.S., stocks in both developed international and emerging markets rallied over the reporting period. Geopolitical tensions subsided in many areas, though uncertainty around the Greece debt crisis and the Chinese economy contributed to market volatility. The U.S. dollar remained strong against most foreign currencies, as many central banks increased economic measures to stimulate growth and combat threats of deflation. When the U.S. dollar rises against foreign currencies, returns on overseas investments will generally be reduced in U.S. dollar terms. However, as developed international and emerging markets performed well this reporting period, returns on many of these investments were positive even when translated into U.S. dollars. Reflecting these conditions, the MSCI EAFE Index (Net)—representing the performance of developed international stocks—returned 5.5%, and the MSCI Emerging Markets Index (Net) returned 3.0%.

U.S. bonds generated negative overall returns during the reporting period, though still outperformed international bonds. Speculation surrounding a potential short-term rate increase in the U.S. contributed to rising yields on U.S. bonds, and generally weakened demand for these securities. International bonds also generated negative returns, in part due to the strength of the U.S. dollar. The Barclays U.S. Aggregate Bond Index—representing the broad U.S. bond market—returned -0.1% for the reporting period, and the Citigroup Non-U.S. Dollar World Government Bond Index returned -5.8%.

Asset Class Performance Comparison % returns during the 6 months ended 6/30/2015

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

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

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

Schwab MarketTrack Growth Portfolio II1

Schwab MarketTrack Growth Portfolio II

Performance and Fund Facts as of 06/30/15

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

Average Annual Total Returns^1,2

Portfolio and inception Date	6 Months	1 Year	5 Years	10 Years
Portfolio: Schwab MarketTrack Growth Portfolio II (11/01/96)	2.50%	3.19%	12.44%	6.47%
Growth Composite Index II³	2.65%	3.87%	12.90%	6.95%
S&P 500^® Index	1.23%	7.42%	17.34%	7.89%
Barclays U.S. Aggregate Bond Index	-0.10%	1.86%	3.35%	4.44%
Fund Category: Morningstar Aggressive Allocation	1.95%	1.69%	11.75%	6.00%

Portfolio Expense Ratios⁴: Net 0.68%; Gross 0.90%

Statistics
Number of Holdings	10
Portfolio Turnover Rate⁵	2%

Asset Class Weightings % of Investments⁶
Equity Funds – Large-Cap	39.8%
Equity Funds – Small-Cap	20.6%
Equity Funds – International	20.0%
Fixed-Income Funds – Intermediate-Term Bond	14.7%
Short-Term Investments	3.2%
Money Market Funds	1.7%
Total	100.0%

Top Holdings % of Net Assets^7,8
Schwab S&P 500 Index Fund	29.9%
Schwab Small-Cap Index Fund	20.6%
Schwab International Index Fund	20.0%
Schwab Total Bond Market Fund	14.6%
Schwab 1000 Index Fund	10.0%
Schwab Value Advantage Money Fund, Institutional Prime Shares	1.7%
Total	96.8%

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

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

Portfolio holdings may have changed since the report date.

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

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

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	Portfolio expenses have been partially absorbed by CSIM and its affiliates. Without these reductions, the portfolio’s returns would have been lower. Portfolio performance does not reflect the additional fees and expenses imposed by the insurance company under the variable insurance product contract. If those contract fees and expenses were included, the performance would be less than that shown. Please refer to the variable insurance product prospectus for a complete listing of these expenses.
³	Prior to April 30, 2015, the Growth Composite Index II was known as the Growth Composite Index.
⁴	As stated in the prospectus. Includes expenses of the underlying funds in which the portfolio invests. The annualized weighted average expense ratio of the underlying funds was 0.18%. Net Expense: Expenses reduced by a contractual fee waiver in effect through at least 4/29/17. Gross Expense: Does not reflect the effect of contractual fee waivers. For actual ratios during the period, refer to the financial highlights section of the financial statements.
⁵	Not annualized.
⁶	The portfolio invests mainly in other Schwab Funds and/or Laudus Funds.
⁷	This list is not a recommendation of any security by the investment adviser.
⁸	The holdings listed exclude any temporary liquidity investments.

Schwab MarketTrack Growth Portfolio II3

Fund Expenses (Unaudited)

Examples for a $1,000 Investment

The portfolio incurs ongoing costs, such as management fees, transfer agent and shareholder services fees, and other fund expenses.

The expense examples below are intended to help you understand your ongoing cost (in dollars) of investing in a fund and to compare this cost with the ongoing cost of investing in other mutual funds. These examples are based on an investment of $1,000 invested for six months beginning January 1, 2015 and held through June 30, 2015.

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

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

You may use this information to compare the ongoing costs of investing in the portfolio 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.

	Expense Ratio¹ (Annualized)	Beginning Account Value at 1/1/15	Ending Account Value (Net of Expenses) at 6/30/15	Expenses Paid During Period² 1/1/15–6/30/15
Schwab MarketTrack Growth Portfolio II
Actual Return	0.50%	$1,000.00	$1,025.00	$2.51
Hypothetical 5% Return	0.50%	$1,000.00	$1,022.32	$2.51

¹	Based on the most recent six-month expense ratio; may differ from the expense ratio provided in the Financial Highlights. The expenses incurred by the underlying funds in which the portfolio invests are not included in this ratio.
²	Expenses for the portfolio are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by 181 days of the period, and divided by 365 days of the fiscal year.

4Schwab MarketTrack Growth Portfolio II

Schwab MarketTrack Growth Portfolio II

Financial Statements

Financial Highlights

	1/1/15– 6/30/15*	1/1/14– 12/31/14	1/1/13– 12/31/13	1/1/12– 12/31/12	1/1/11– 12/31/11	1/1/10– 12/31/10
Per-Share Data ($)
Net asset value at beginning of period	19.43	19.30	16.04	14.50	14.89	13.40
Income (loss) from investment operations:
Net investment income (loss)¹	(0.02)	0.28	0.23	0.29	0.27	0.20
Net realized and unrealized gains (losses)	0.51	0.77	3.48	1.64	(0.40)	1.62
Total from investment operations	0.49	1.05	3.71	1.93	(0.13)	1.82
Less distributions:
Distributions from net investment income	(0.31)	(0.26)	(0.30)	(0.39)	(0.26)	(0.33)
Distributions from net realized gains	(0.49)	(0.66)	(0.15)	—	—	—
Total distributions	(0.80)	(0.92)	(0.45)	(0.39)	(0.26)	(0.33)
Net asset value at end of period	19.12	19.43	19.30	16.04	14.50	14.89
Total return (%)	2.50 ²	5.46	23.56	13.46	(1.01)	13.62
Ratios/Supplemental Data (%)
Ratios to average net assets:
Net operating expenses	0.50 ³	0.50	0.50	0.50	0.50	0.50
Gross operating expenses	0.73 ³	0.72	0.80	0.83	0.80	0.77
Net investment income (loss)	(0.18) ³	1.45	1.28	1.85	1.78	1.41
Portfolio turnover rate	2 ²	14	13	8	20	22
Net assets, end of period ($ x 1,000,000)	32	33	32	28	28	29

*	Unaudited.

Calculated based on the average shares outstanding during the period.

Not annualized.

Annualized.

See financial notes 5

Schwab MarketTrack Growth Portfolio II

Portfolio Holdings as of June 30, 2015 (Unaudited)

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.csimfunds.com/schwabfunds_prospectus.

Holdings by Category		Cost ($)	Value ($)
96.8%	Other Investment Companies	19,596,498	30,681,368
3.3%	Short-Term Investments	1,022,796	1,022,796
100.1%	Total Investments	20,619,294	31,704,164
(0.1%)	Other Assets and Liabilities, Net		(15,887)
100.0%	Net Assets		31,688,277

Security	Number of Shares	Value ($)
Other Investment Companies 96.8% of net assets
Equity Funds 80.5%
International 20.0%
Schwab International Index Fund (a)	329,746	6,347,612
Large-Cap 39.9%
Schwab 1000 Index Fund (a)	59,241	3,157,531
Schwab S&P 500 Index Fund (a)	291,049	9,470,739
		12,628,270
Small-Cap 20.6%
Schwab Small-Cap Index Fund (a)	230,912	6,525,579
		25,501,461

Security	Number of Shares	Value ($)
Fixed-Income Fund 14.6%
Intermediate-Term Bond 14.6%
Schwab Total Bond Market Fund (a)	490,904	4,643,949
Money Market Fund 1.7%
Schwab Value Advantage Money Fund, Institutional Prime Shares 0.06% (a)(b)	535,958	535,958
Total Other Investment Companies
(Cost $19,596,498)		30,681,368
Issuer Rate, Maturity Date	Face Amount ($)	Value ($)
Short-Term Investments 3.3% of net assets
Time Deposits 3.3%
BNP Paribas
0.03%, 07/01/15	316,386	316,386
DNB
0.03%, 07/01/15	316,386	316,386
JPMorgan Chase Bank
0.03%, 07/01/15	316,386	316,386
Sumitomo Mitsui Banking Corp.
0.03%, 07/01/15	73,638	73,638
Total Short-Term Investments
(Cost $1,022,796)		1,022,796

End of Investments.

At 06/30/15, the tax basis cost of the fund's investments was $21,373,382 and the unrealized appreciation and depreciation were $10,330,782 and ($0) respectively, with a net unrealized appreciation of $10,330,782.

(a)	Issuer is affiliated with the fund's adviser.
(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 June 30, 2015 (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
Other Investment Companies¹	$30,681,368	$—	$—	$30,681,368
Short-Term Investments¹	—	1,022,796	—	1,022,796
Total	$30,681,368	$1,022,796	$—	$31,704,164

¹	As categorized in Portfolio Holdings.

The fund's policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were no transfers between Level 1, Level 2 and Level 3 for the period ended June 30, 2015.

6 See financial notes

Schwab MarketTrack Growth Portfolio II

Statement of

Changes in Net Assets

For the current and prior report periods

Figures for the current period are unaudited

Operations
	1/1/15-6/30/15		1/1/14-12/31/14
Net investment income (loss)		($29,144)	$459,869
Net realized gains		218,886	797,691
Net change in unrealized appreciation (depreciation)	+	592,235	447,536
Increase in net assets from operations		781,977	1,705,096
Distributions to Shareholders
Distributions from net investment income		(487,490)	(416,505)
Distributions from net realized gains	+	(779,283)	(1,060,180)
Total distributions		($1,266,773)	($1,476,685)

Transactions in Fund Shares
		1/1/15-6/30/15		1/1/14-12/31/14
		SHARES	VALUE	SHARES	VALUE
Shares sold		29,911	$587,879	192,517	$3,699,470
Shares reinvested		66,254	1,266,773	76,512	1,476,685
Shares redeemed	+	(115,300)	(2,264,500)	(226,925)	(4,364,176)
Net transactions in fund shares		(19,135)	($409,848)	42,104	$811,979
Shares Outstanding and Net Assets
		1/1/15-6/30/15		1/1/14-12/31/14
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		1,676,614	$32,582,921	1,634,510	$31,542,531
Total increase or decrease	+	(19,135)	(894,644)	42,104	1,040,390
End of period		1,657,479	$31,688,277	1,676,614	$32,582,921
Distributions in excess of net investment income/Net investment income not yet distributed			($29,175)		$487,459

See financial notes 9

Schwab MarketTrack Growth Portfolio II

Financial Notes, unaudited

1. Business Structure of the Fund:

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

Schwab Annuity Portfolios (organized January 21, 1994)

Schwab Money Market Portfolio

Schwab MarketTrack Growth Portfolio II

Schwab S&P 500 Index Portfolio

Schwab VIT Balanced Portfolio

Schwab VIT Balanced with Growth Portfolio

Schwab VIT Growth Portfolio

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

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

The fund is intended as an investment vehicle for variable annuity contracts and variable life insurance policies to be offered by separate accounts of participating life insurance companies and for pension and retirement plans qualified under the Internal Revenue Code of 1986, as amended. At June 30, 2015, 100% of the fund's shares were held through one insurance company. Subscriptions and redemptions of these insurance separate accounts could have a material impact on the fund.

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

2. Significant Accounting Policies:

The following is a summary of the significant accounting policies the fund uses in its preparation of financial statements. The fund follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standard Codification Topic 946 Financial Services — Investment Companies. The accounting policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

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

(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.

Schwab MarketTrack Growth Portfolio II

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):

employ techniques such as the review of related or comparable assets or liabilities, related market activities, recent transactions, market multiples, book values, transactional back-testing, disposition analysis and other relevant information. The Pricing Committee regularly reviews these inputs and assumptions to calibrate the valuations. Due to the subjective and variable nature of fair value pricing, there can be no assurance that a fund could obtain the fair value assigned to the security upon the sale of such security. The Board convenes on a regular basis to review fair value determinations made by the fund pursuant to the valuation procedures.

• Short-term securities (60 days or less to maturity): A short-term security may be valued at its amortized cost when it approximates the security's market value.

In accordance with the authoritative guidance on fair value measurements and disclosures under GAAP, the fund discloses the fair value of its investments in a hierarchy that prioritizes the significant inputs to valuation techniques used to measure the fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). If inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the valuation. If the fund determines that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value.

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

• Level 1—quoted prices in active markets for identical securities—Investments whose values are based on quoted market prices in active markets, and whose values are therefore classified as Level 1 prices, include active listed equities. Investments in mutual funds are valued daily at their NAVs, which are classified as Level 1 prices, without consideration to the classification level of the specific investments held by an underlying fund.

• Level 2—other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)—Investments that trade in markets that are not considered to be active, but whose values are based on quoted market prices, dealer quotations or valuations provided by alternative pricing sources supported by observable inputs are classified as Level 2 prices. These generally include U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, certain mortgage products, less liquid listed equities, and state, municipal and provincial obligations. As investments whose values are classified as Level 2 prices include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.

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

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

The levels associated with valuing the fund's investments as of June 30, 2015 are disclosed in the Portfolio Holdings.

(b) Security Transactions:

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

Schwab MarketTrack Growth Portfolio II

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):

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 a fund are charged directly to the fund. Expenses that are common to all funds within the trust generally are allocated among the funds in proportion to their average daily net assets. The fund bears its share of the allocable expenses of the underlying funds in which it invests. 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) 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.

(g) Federal Income Taxes:

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

(h) Indemnification:

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

3. Risk Factors:

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

Asset Allocation Risk. The fund is subject to asset allocation risk, which is 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 will cause the fund to underperform other funds with a similar investment objective.

Affiliated Fund Risk. The investment adviser’s authority to select and substitute underlying funds from a variety of affiliated and unaffiliated mutual funds may create a conflict of interest because the fees paid to it by some underlying funds are higher than the fees paid by other underlying funds. However, the portfolio manager is a fiduciary to the fund and is legally obligated to act in the fund’s best interests when selecting underlying funds, without taking fees into consideration.

Market Risk. Equity and bond markets rise and fall daily. 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.

Schwab MarketTrack Growth Portfolio II

Financial Notes, unaudited (continued)

3. Risk Factors (continued):

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

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

• Investment Risk. An investment in an underlying fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The fund may experience losses with respect to its investment in an underlying fund. Further, there is no guarantee that an underlying fund will be able to achieve its objective.

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

• Equity Risk. The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, the equity market tends to move in cycles, which may cause stock prices to fall over short or extended periods of time.

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

• Large-Cap Risk. Many of the risks of the underlying funds are associated with their investment in the large-cap segments of the stock market. Large-cap stocks tend to go in and out of favor based on market and economic conditions.

• Money Market Risk. Although an underlying money market fund seeks to maintain a stable $1 net asset value, it is possible to lose money by investing in a money market fund. In exchange for their emphasis on stability and liquidity, money market instruments may offer lower long term performance than stock.

• Foreign Investment Risk. An underlying fund's investments in securities of foreign issuers may involve certain risks that are greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of the 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. To the extent an underlying fund's investment in a single country or a limited number of countries represents a large percentage of the underlying fund's assets, the underlying fund's performance may be adversely affected by the economic, political and social conditions in those countries and it may be subject to increased price volatility.

Schwab MarketTrack Growth Portfolio II

Financial Notes, unaudited (continued)

3. Risk Factors (continued):

• Currency Risk. As a result of an underlying 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, or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency hedged. In either event, the dollar value of an investment in an underlying fund would be adversely affected.

• Derivatives Risk. An underlying fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments and could cause the fund to lose more than the principal amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on an underlying fund.

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

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

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

• Liquidity Risk. An underlying fund may be unable to sell illiquid securities at an advantageous time or price.

• 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 the collateral or delay in recovery of the collateral if the borrower fails to return the security loaned or becomes insolvent.

Direct Investment Risk. The fund may invest directly in individual securities as well as other mutual funds, ETFs and cash equivalents, 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.

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:

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

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

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

Schwab MarketTrack Growth Portfolio II

Financial Notes, unaudited (continued)

4. Affiliates and Affiliated Transactions (continued):

CSIM and its affiliates have made an additional agreement with the fund, for so long as CSIM serves as the investment adviser to the fund, which may only be amended or terminated with the approval of the Board, to limit the total annual fund operating expenses charged, excluding interest, taxes and certain non-routine expenses (“expense limitation”) to 0.50% through April 29, 2017.

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.

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 June 30, 2015, the Schwab MarketTrack Growth Portfolio II's ownership percentages of other related funds' shares are:

Schwab International Index Fund	0.2%
Schwab 1000 Index Fund	0.0%*
Schwab S&P 500 Index Fund	0.0%*
Schwab Small-Cap Index Fund	0.2%
Schwab Total Bond Market Fund	0.4%
Schwab Value Advantage Money Fund, Institutional Prime Shares	0.0%*

*	Less than 0.05%

Below is a summary of the fund's transactions with its affiliated underlying funds during the period ended June 30, 2015.

Underlying Funds	Balance of Shares Held at 12/31/14	Gross Purchases	Gross Sales	Balance of Shares Held at 06/30/15	Market Value at 06/30/15	Realized Gains (Losses) 01/01/15 to 06/30/15	Distributions Received* 01/01/15 to 06/30/15
Schwab International Index Fund	349,591	6,273	(26,118)	329,746	$6,347,612	($17,476)	$—
Schwab 1000 Index Fund	63,213	801	(4,773)	59,241	3,157,531	$27,486	—
Schwab S&P 500 Index Fund	308,110	4,052	(21,113)	291,049	9,470,739	$180,713	—
Schwab Small-Cap Index Fund	245,414	3,506	(18,008)	230,912	6,525,579	$17,368	—
Schwab Total Bond Market Fund	502,667	39,259	(51,022)	490,904	4,643,949	10,467	50,434
Schwab Value Advantage Money Fund, Institutional Prime Shares	535,869	89	—	535,958	535,958	—	102
Total					$30,681,368	$218,558	$50,536

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

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 only. The interest rate to be charged on a loan is the average of the overnight repurchase agreement rate and the short-term bank loan rate. The interfund lending facility is subject to the oversight and periodic review by the Board. The 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.

Schwab MarketTrack Growth Portfolio II

Financial Notes, unaudited (continued)

6. Borrowing from Banks:

The fund has access to custodian overdraft facilities, a committed line of credit of $150 million with State Street Bank and Trust Company (“State Street”), an uncommitted line of credit of $100 million with Bank of America, N.A. and an uncommitted line of credit of $50 million with Brown Brothers Harriman & Co. The fund pays interest on the amounts it borrows at rates that are negotiated periodically. The fund also pays an annual fee to State Street for the committed line of credit.

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

7. Purchases and Sales/Maturities of Investment Securities:

For the period ended June 30, 2015, purchases and sales/maturities of securities (excluding short-term obligations) were as follows:

Purchases of Securities		Sales/Maturities of Securities
$761,525		$2,417,000

8. Federal Income Taxes:

Capital loss carryforwards may be used to offset future realized capital gains for federal income tax purposes. As of December 31, 2014, the fund had no capital loss carryforwards.

For tax purposes, realized net capital losses and late-year ordinary losses incurred after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the year ended December 31, 2014, the fund had no capital losses deferred and no capital loss carryforwards utilized.

As of December 31, 2014, management has reviewed the tax positions for open periods (for federal purposes, three years from the date of filing and for state purposes, four years from the date of filing) as applicable to the fund, and has determined that no provision for income tax is required in the fund’s financial statements. The fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the period ended December 31, 2014, the fund did not incur any interest or penalties.

9. 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.

Investment Advisory Agreement Approval

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

The Board of Trustees (the “Board” or the “Trustees”, as appropriate) calls and holds one or more meetings each year that are dedicated, in whole or in part, to considering whether to renew the investment advisory agreement between Schwab Annuity Portfolios (the “Trust”) and Charles Schwab Investment Management, Inc. (“CSIM”) (the “Agreement”) with respect to the existing funds in the Trust, including Schwab MarketTrack Growth Portfolio II (the “Fund”), and to review certain other agreements pursuant to which CSIM provides investment advisory services to certain other registered investment companies. In preparation for the meeting(s), the Board requests and reviews a wide variety of materials provided by CSIM, including information about CSIM’s affiliates, personnel and operations. The Board also receives extensive data provided by third parties. This information is in addition to the detailed information about the Fund that the Board reviews during the course of each year, including information that relates to Fund operations and Fund performance. The Independent Trustees receive advice from independent counsel to the Independent Trustees, including a memorandum regarding the responsibilities of trustees for the approval of investment advisory agreements. In addition, the Independent Trustees meet in executive session outside the presence of Fund management and participate in question and answer sessions with representatives of CSIM.

The Board, including a majority of the Independent Trustees, considered information specifically relating to its consideration of the continuance of the Agreement with respect to the Fund at meetings held on April 29, 2015, and June 1, 2015, and approved the renewal of the Agreement with respect to the Fund for an additional one year term at the meeting held on June 1, 2015. The Board’s approval of the Agreement with respect to the Fund was based on

consideration and evaluation of a variety of specific factors discussed at these meetings and at prior meetings, including:

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

Nature, Extent and Quality of Services. The Board considered the nature, extent and quality of the services provided by CSIM to the Fund and the resources of CSIM and its affiliates dedicated to the Fund. In this regard, the Trustees evaluated, among other things, CSIM’s personnel, experience, track record and compliance program. The Trustees also considered Schwab’s wide range of products, services, and channel alternatives such as investment research tools and Internet access and an array of account features that benefit the Fund and certain of its shareholders. 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 the Fund’s 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 appropriate indices/benchmarks, in light of total return and market trends. As part of this review, the Trustees considered the composition of the peer category, selection criteria and the reputation of the third party who prepared the peer category analysis. In evaluating the performance of the Fund, the Trustees considered both risk and shareholder risk expectations for the Fund and the appropriateness of the benchmark used to compare the performance of the Fund. The Trustees further considered the level of Fund performance in the context of its review of Fund expenses

and adviser profitability discussed below. Following such evaluation the Board concluded, within the context of its full deliberations, that the performance of the Fund supported renewal of the Agreement with respect to the Fund.

Fund Expenses. With respect to the Fund’s expenses, the Trustees considered the rate of compensation called for by the Agreement, and the Fund’s net operating expense ratio, in each case, in comparison to those of other comparable mutual funds, such peer groups and comparisons having been selected and calculated by an independent third party. The Trustees considered the effects of CSIM’s and Schwab’s practice of waiving management and other fees to prevent total fund expenses from exceeding a specified cap. The Trustees also considered fees charged by CSIM to other mutual funds and to other types of accounts, such as 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 the unique insurance dedicated distribution arrangements of the Fund as compared to other funds managed by CSIM. Following such evaluation, the Board concluded, within the context of its full deliberations, that the expenses of the Fund are reasonable and supported renewal of the Agreement with respect to the Fund.

Profitability. With regard to profitability, the Trustees considered the compensation flowing to CSIM and its affiliates, directly or indirectly. In this connection, the Trustees reviewed management’s profitability analyses, together with certain commentary thereon from an independent accounting firm. The Trustees also considered any other benefits derived by CSIM from its relationship with the Fund, such as whether, by virtue of its management of the Fund, CSIM obtains investment

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

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

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

Trustees and Officers

The tables below give information about the trustees and officers of Schwab Annuity Portfolios, which includes the fund covered in this report. The “Fund Complex” includes The Charles Schwab Family of Funds, Schwab Capital Trust, Schwab Investments, Schwab Annuity Portfolios, Schwab Strategic Trust, Laudus Trust and Laudus Institutional Trust. The Fund Complex includes 95 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 1-800-435-4000.

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
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 and Laudus Institutional Trust since 2010)	Senior Fellow, The Hoover Institution at Stanford University (Oct. 1979 – present); Senior Fellow Stanford Institute for Economic Policy Research (2000 – present); Professor of Public Policy, Stanford University (1994 – present).	74	Director, Gilead Sciences, Inc. (2005 – present)
David L. Mahoney 1954 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011)	Private Investor.	74	Director, Symantec Corporation (2003 – present) Director, Corcept Therapeutics Incorporated (2004 – present) Director, Adamas Pharmaceuticals, Inc. (2009 – present)
Kiran M. Patel 1948 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011)	Retired. Executive Vice President and General Manager of Small Business Group, Intuit, Inc. (financial software and services firm for consumers and small businesses) (Dec. 2008 – Sept. 2013)	74	Director, KLA-Tencor Corporation (2008 – present)
Charles A. Ruffel 1956 Trustee (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2015)	Managing Partner and Co-Founder, Kudu Advisors, LLC (financial services) (May 2009 – present); Director, Asset International, Inc. (publisher of financial services information) (Jan. 2009 – Nov. 2014).	95	None.

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
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 and Laudus Institutional Trust since 2010)	Chairman, Chief Executive Officer and Founder of Smith Graham & Co. (investment advisors) (1990 – present).	74	Director, Eaton (2012 – present) Director and Chairman of the Audit Committee, Oneok Partners LP (2003 – 2013) Director, Oneok, Inc. (2009 – 2013) Lead Independent Director, Board of Cooper Industries (2002 – 2012)
Joseph H. Wender 1944 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust and Laudus Institutional Trust since 2010)	Senior Consultant, Goldman Sachs & Co., Inc. (investment banking and securities firm) (Jan. 2008 – present); Partner, Colgin Partners, LLC (vineyards) (Feb. 1998 – present).	74	Board Member and Chairman of the Audit Committee, Isis Pharmaceuticals (1994 – present)

Interested Trustees
Name, Year of Birth, and Position(s) with the trust; (Terms of office, and length of Time Served)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Charles R. Schwab² 1937 Chairman and Trustee (Chairman and Trustee of The Charles Schwab Family of Funds since 1989; Schwab Investments since 1991; Schwab Capital Trust since 1993; Schwab Annuity Portfolios since 1994; Laudus Trust and Laudus Institutional Trust since 2010)	Chairman and Director, The Charles Schwab Corporation (1986 – present); Chairman and Director of Charles Schwab & Co., Inc. (1971 – present); Chairman and Director of Charles Schwab Investment Management, Inc. (1989 – present); Chairman and Director of Charles Schwab Bank (2003 – present); Chairman and Chief Executive Officer of Schwab (SIS) Holdings Inc. I and Schwab International Holdings, Inc. (1996 – present); and Director, Chairman and Chief Executive Officer, Schwab Holdings, Inc. (1979 – present).	74	Chairman and Director, The Charles Schwab Corporation (1986 – present) Director, Yahoo! Inc. (2014 – present)
Walter W. Bettinger II² 1960 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 and Laudus Institutional Trust since 2010)	Director, President and Chief Executive Officer, The Charles Schwab Corporation and Charles Schwab & Co., Inc. (2008 – present); Director, Charles Schwab Bank (2006 – present); and Director, Schwab Holdings, Inc. (2008 – present).	95	Director, The Charles Schwab Corporation (2008 – present)

Officers of the Trust
Name, Year of Birth, and Position(s) with the trust; (Terms of office, and length of Time Served³)	Principal Occupations During the Past Five Years
Marie Chandoha 1961 President and Chief Executive Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2010)	Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; President, Chief Executive Officer (Dec. 2010 – present), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (January 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (March 2007 – August 2010).
George Pereira 1964 Treasurer and Principal Financial Officer, Schwab Funds Treasurer and Chief Financial Officer, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2004; Laudus Trust and Laudus Institutional Trust since 2006)	Senior Vice President and Chief Financial Officer (Nov. 2004 – present), Chief Operating Officer (Jan. 2011 – present), Charles Schwab Investment Management, Inc.; Treasurer and Chief Financial Officer, Laudus Funds (June 2006 – present); Treasurer and Principal Financial Officer, Schwab Funds (Nov. 2004 – present) and Schwab ETFs (Oct. 2009 – present); Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (April 2005 – present).
Omar Aguilar 1970 Senior Vice President and Chief Investment Officer – Equities (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011)	Senior Vice President and Chief Investment Officer – Equities, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer – Equities, Schwab Funds, Laudus Funds and Schwab ETFs (June 2011 – present); Head of the Portfolio Management Group and Vice President of Portfolio Management, Financial Engines, Inc. (May 2009 – April 2011); Head of Quantitative Equity, ING Investment Management (July 2004 – Jan. 2009).
Brett Wander 1961 Senior Vice President and Chief Investment Officer – Fixed Income (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011)	Senior Vice President and Chief Investment Officer – Fixed Income, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer – Fixed Income, Schwab Funds, Laudus Funds and Schwab ETFs (June 2011 – present); Senior Managing Director, Global Head of Active Fixed-Income Strategies, State Street Global Advisors (Jan. 2008 – Oct. 2010); Director of Alpha Strategies Loomis, Sayles & Company (April 2006 – Jan. 2008).
David Lekich 1964 Chief Legal Officer and Secretary, Schwab Funds Vice President and Assistant Clerk, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011)	Senior Vice President (Sept. 2011 – present), Vice President (March 2004 – Sept. 2011), Charles Schwab & Co., Inc.; Senior Vice President and Chief Counsel (Sept. 2011 – present), Vice President (Jan. 2011 – Sept. 2011), Charles Schwab Investment Management, Inc.; Secretary (April 2011 – present) and Chief Legal Officer (Dec. 2011 – present), Schwab Funds; Vice President and Assistant Clerk, Laudus Funds (April 2011 – present); Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs.
Catherine MacGregor 1964 Vice President and Assistant Secretary, Schwab Funds 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, Laudus Trust and Laudus Institutional Trust since 2005)	Vice President, Charles Schwab & Co., Inc., Charles Schwab Investment Management, Inc. (July 2005 – present); Vice President (Dec. 2005 – present), Chief Legal Officer and Clerk (March 2007 – present), Laudus Funds; Vice President (Nov. 2005 – present) and Assistant Secretary (June 2007 – present), Schwab Funds; Vice President and Assistant Secretary, Schwab ETFs (Oct. 2009 – present).

¹	Trustees remain in office until they resign, retire or are removed by shareholder vote. The Schwab and Laudus Funds’ retirement policy requires that independent trustees retire at age 72 or after twenty years as a trustee, whichever comes first. In addition, the retirement policy requires any independent trustee of Schwab Funds or Laudus Funds to retire from all Boards upon their required retirement date from either Board.
²	Mr. Schwab and Mr. Bettinger are Interested Trustees because they own stock of The Charles Schwab Corporation, the parent company of the investment adviser.
³	The President, Treasurer and Secretary/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 Boards.

Glossary

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

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

Citigroup Non-U.S. Dollar World Government Bond Index An index that measures the total rate of return performance for the government bonds of 23 countries, excluding the U.S., with a remaining maturity of at least one year.

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

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

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

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

MSCI Emerging Markets Index A free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. 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.

Russell 2000 Index An index that measures the performance of the small-cap segment of the U.S. equity universe.

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

The Investment Environment

For the six-month reporting period ended June 30, 2015, yields on taxable money market securities remained low as short-term interest rates hovered near zero percent. Speculation continued around the timing of a potential short-term rate increase, which contributed to heightened market uncertainty and volatility. Outside the U.S., many central banks, including the European Central Bank and the Bank of Japan, increased measures aimed at stimulating economic growth and combatting deflation. These divergent policies between the U.S. and other central banks impacted bond markets, currencies, and equities, adding to global market volatility.

In related industry matters, in July 2014, the Securities and Exchange Commission (SEC) released final amendments to the rules that govern money market funds. We believe that these amendments strike the right balance of preserving an important cash management tool for investors, while protecting investors from the possibility of significant money market fund redemptions during a crisis. In response, CSIM is currently evaluating options to provide the best outcome and least disruptions to the portfolio’s shareholders when the new SEC regulations go into effect.

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

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

Schwab Money Market Portfolio1

Schwab Money Market Portfolio

The Schwab Money Market Portfolio (the portfolio) seeks the highest current income consistent with stability of capital and liquidity. To pursue its goal, the portfolio invests in high-quality, short-term money market investments issued by U.S. and foreign issuers. Examples of these securities include commercial paper, certificates of deposit, repurchase agreements, variable-and floating-rate debt securities, and obligations issued by the U.S. government or its agencies and instrumentalities. For more information concerning the portfolio’s investment objective, strategy, and risks, please see the portfolio’s prospectus.

Since December 2008, when the Federal Reserve (the Fed) first cut short-term interest rates to present-day levels, yields on money market securities have remained historically low—a trend that continued throughout the period. As a result, and to help the portfolio maintain a positive net yield, the portfolio’s investment adviser and its affiliates voluntarily waived certain fees or expenses during the reporting period.¹ For more information about the portfolio’s yield and other important characteristics, please review the charts and footnotes that follow this discussion.

Market Highlights. For the six-month reporting period ended June 30, 2015, the global economic outlook began to show signs of improvement. Outside the U.S., several central banks increased stimulative measures, though uncertainty remained around Greece and the eurozone. In the U.S., the economy continued to rebound, despite weak economic data in early 2015, and the Fed left short-term interest rates historically low. The Fed also continued to perform daily test operations of its Reverse Repurchase Facility, which has essentially helped establish a floor for short-term interest rates through the sale and repurchase of securities. This program has become an important source of taxable money market supply and serves as another tool to help the Fed manage its policies. The program is set to continue through January 29, 2016.

Available supply of money market securities largely remains constrained as stricter regulatory mandates have increased the costs of selling short-term securities for many issuers. These higher costs and persistently low interest rates have instead encouraged the issuance of longer-term securities, most of which are not money market eligible.

Performance, Positioning, and Strategies. Throughout the reporting period, the portfolio’s investment adviser remained focused on ensuring liquidity and stability of capital as market conditions evolved. As the timing for a rise in rates remained uncertain, the weighted average maturity (WAM) of the portfolio was relatively unchanged versus the prior reporting period, remaining, on average, in the upper 40-day range. Although rates on short-term government securities remained low, a steeper money market curve and the availability of the Fed’s Reverse Repurchase Facility resulted in generally more stable short-term markets.

As noted above, the portfolio continued to waive certain fees and expenses in order to maintain a 0.01% yield.

As of 6/30/15:

Portfolio Composition By Maturity²
% of investments
1-7 Days	42.9%
8-30 Days	19.7%
31-60 Days	14.5%
61-90 Days	6.3%
91-180 Days	15.1%
More than 180 Days	1.5%
Total	100.0%

Statistics
Weighted Average Maturity³	39 Days
Credit Quality Of Holdings⁴ % of portfolio	100% Tier 1

Portfolio Composition by Security Type
% of investments
Government Agency Debt	52.1%
Repurchase Agreement
Treasury	42.8%
Treasury Debt	5.0%
Other Investment Company	0.1%
Total	100.0%

An investment in a money fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Although money funds seek to preserve the value of your investment at $1 per share, it is possible to lose money by investing in a money fund.

Portfolio holdings may have changed since the report date.

¹	The investment adviser and its affiliates may recapture expenses or fees they waived under a voluntary yield waiver until the third anniversary of the end of the fiscal year in which such waiver occurs, subject to certain limitations. For more information on the potential impact of such recapture on future yields, see financial note 4.
²	As shown in the Portfolio Holdings section of the shareholder report.
³	Money funds must maintain a dollar-weighted average maturity of no longer than 60 days and cannot invest in any security whose effective maturity is longer than 397 days (approximately 13 months).
⁴	Tier 1 securities are rated in one of the two highest rating categories by two nationally recognized statistical rating organizations (“NRSROs”), or by one if only one NRSRO has rated the securities, or, if unrated, determined to be of comparable quality by CSIM pursuant to guidelines adopted by the Board of Trustees. Money market fund shares and U.S. government securities are also Tier 1 securities. The portfolio uses NRSRO credit ratings from Standard & Poor’s Corp., Moody’s Investors Service, Fitch Ratings, and/or DBRS. The portfolio may use different ratings provided by other rating agencies for purposes of determining compliance with the portfolio’s investment policies. The portfolio itself has not been rated by an independent credit rating agency.

Schwab Money Market Portfolio3

Schwab Money Market Portfolio

Performance and Fund Facts as of 6/30/15

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

Seven-Day Average Yield Trend for previous 12 months

Seven-Day Yields^1,2

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

	Schwab Money Market Portfolio
Seven-Day Yield	0.01%
Seven-Day Effective Yield	0.01%

Portfolio holdings may have changed since the report date.

¹	Portfolio yields do not reflect the additional fees and expenses imposed by the insurance company under the variable insurance product contract. If those contract fees and expenses were included, the yields would be less than those shown. Please refer to the variable insurance product prospectus for a complete listing of these expenses.
²	The investment adviser and its affiliates have voluntarily waived expenses to maintain a positive net yield for the portfolio (voluntary yield waiver). Without the voluntary yield waiver, the portfolio’s yield would have been lower. The voluntary yield waiver added 0.39% to the seven-day yield. Please see financial note 4 for additional details.

4Schwab Money Market Portfolio

Fund Expenses (Unaudited)

Examples for a $1,000 Investment

The portfolio incurs ongoing costs, such as management fees, transfer agent and shareholder services fees, and other fund expenses.

Please note that the expenses shown in the table are meant to highlight your ongoing costs.

	Expense Ratio¹ (Annualized)	Beginning Account Value at 1/1/15	Ending Account Value (Net of Expenses) at 6/30/15	Expenses Paid During Period² 1/1/15–6/30/15
Schwab Money Market Portfolio
Actual Return	0.09%	$1,000.00	$1,000.10	$0.45
Hypothetical 5% Return	0.09%	$1,000.00	$1,024.35	$0.45

¹	Based on the most recent six-month expense ratio; may differ from the expense ratio provided in the Financial Highlights.
²	Expenses for the portfolio are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by 181 days of the period, and divided by 365 days of the fiscal year.

Schwab Money Market Portfolio5

Schwab Money Market Portfolio

Financial Statements

Financial Highlights

	1/1/15– 6/30/15*	1/1/14– 12/31/14	1/1/13– 12/31/13	1/1/12– 12/31/12	1/1/11– 12/31/11	1/1/10– 12/31/10
Per-Share Data ($)
Net asset value at beginning of period	1.00	1.00	1.00	1.00	1.00	1.00
Income (loss) from investment operations:
Net investment income (loss)	0.00 ¹^,²	0.00 ²	0.00 ²	0.00 ²	0.00 ²	0.00 ²
Net realized and unrealized gains (losses)	0.00 ²	0.00 ²	0.00 ²^,³	0.00 ²	(0.00) ²	(0.00) ²
Total from investment operations	0.00 ²	0.00 ²	0.00 ²	0.00 ²	0.00 ²	0.00 ²
Less distributions:
Distributions from net investment income	(0.00) ²	(0.00) ²	(0.00) ²	(0.00) ²	(0.00) ²	(0.00) ²
Distributions from net realized gains	—	—	—	—	—	(0.00) ²
Total distributions	(0.00) ²	(0.00) ²	(0.00) ²	(0.00) ²	(0.00) ²	(0.00) ²
Net asset value at end of period	1.00	1.00	1.00	1.00	1.00	1.00
Total return (%)	0.01 ⁴	0.01	0.01	0.01	0.01	0.05
Ratios/Supplemental Data (%)
Ratios to average net assets:
Net operating expenses	0.09 ⁵^,⁶	0.07 ⁶	0.08 ⁶	0.12 ⁶	0.10 ⁶	0.18 ⁶
Gross operating expenses	0.51 ⁵	0.49	0.52	0.49	0.45	0.46
Net investment income (loss)	0.01 ⁵	0.01	0.01	0.01	0.01	0.01
Net assets, end of period ($ x 1,000,000)	100	117	106	116	144	149

*	Unaudited.

Calculated based on the average shares outstanding during the period.

Per-share amount was less than $0.005.

Net realized and unrealized gains (losses) ratio includes payment from affiliate of $45,600. (See financial note 4)

⁴

Not annualized.

⁵

Annualized.

⁶

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

6 See financial notes

Schwab Money Market Portfolio

Portfolio Holdings as of June 30, 2015 (Unaudited)

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

The fund files its complete schedule of portfolio holdings with the SEC for the first and third quarter of each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's website at www.sec.gov and may be viewed and copied at the SEC's Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the Public Reference Room. The fund also files a complete schedule of portfolio holdings with the SEC monthly on Form N-MFP which is available 60 days after the end of the month to which the information pertains. The fund also makes available its complete schedule of portfolio holdings 5 business days after month end on the fund's website at www.csimfunds.com/schwabfunds_prospectus along with a link to the fund's Form N-MFP filings on the SEC's website.

For fixed rate obligations, the rate shown is the coupon rate (the rate established when the obligation was issued) and if the coupon rate is not available, the effective yield at the time of purchase is shown. For variable-rate obligations, the rate shown is the interest rate as of the report date. If the security's structure includes one of a number of maturity-shortening provisions set forth in Rule 2a-7, such as an interest rate reset, demand feature or put feature, the effective maturity date is disclosed. In addition, the second maturity date shown is either the date on which the principal amount must be paid or the date payment must be made pursuant to a demand feature. If the effective maturity and maturity date are the same, the date will appear in the maturity date column.

Holdings by Category		Cost ($)	Value ($)
52.5%	Fixed-Rate Obligations	52,446,661	52,446,661
4.7%	Variable-Rate Obligations	4,702,122	4,702,122
0.0%	Other Investment Company	45,600	45,600
42.9%	Repurchase Agreements	42,830,254	42,830,254
100.1%	Total Investments	100,024,637	100,024,637
(0.1%)	Other Assets and Liabilities, Net		(130,934)
100.0%	Net Assets		99,893,703

Issuer	Footnotes	Rate	Effective Maturity	Maturity Date	Face Amount ($)	Value ($)
Fixed-Rate Obligations 52.5% of net assets
Government Agency Debt 47.5%
Fannie Mae		0.50%		09/28/15	3,000,000	3,002,444
Farm Credit System		4.88%		12/16/15	1,500,000	1,531,942
		3.68%		01/12/16	1,525,000	1,552,788
Federal Home Loan Bank		0.09%		07/17/15	10,000,000	9,999,622
		0.14%		08/21/15	8,500,000	8,498,326
		0.09%		08/25/15	6,000,000	5,999,894
		0.20%		09/29/15	3,800,000	3,800,823
		0.12%		10/21/15	5,000,000	4,998,133
		0.24%		12/18/15	4,800,000	4,801,278
Freddie Mac		1.75%		09/10/15	3,251,000	3,261,203
						47,446,453
Treasury Debt 5.0%
United States Treasury Department		0.25%		07/15/15	5,000,000	5,000,208
Total Fixed-Rate Obligations
(Cost $52,446,661)						52,446,661

Variable-Rate Obligations 4.7% of net assets
Government Agency Debt 4.7%
Fannie Mae		0.20%	07/16/15	08/12/16	2,100,000	2,100,942
		0.21%	07/15/15	08/15/16	2,600,000	2,601,180
Total Variable-Rate Obligations
(Cost $4,702,122)						4,702,122

See financial notes 7

Schwab Money Market Portfolio

Portfolio Holdings (Unaudited) continued

Security

Footnotes

Rate

Number
of
Shares

Value
($)

Other Investment Company 0.0% of net assets

Money Market Fund 0.0%

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

(a)

0.00%

n/a

45,600

Total Other Investment Company

(Cost $45,600)

45,600

Issuer

Footnotes

Rate

Effective
Maturity

Maturity
Date

Maturity
Amount
($)

Value
($)

Repurchase Agreements 42.9% of net assets

Treasury Repurchase Agreements 42.9%

Barclays Capital, Inc

Issued 06/30/15, repurchase date 07/01/15
(Collateralized by U.S. Treasury Securities valued at
$15,300,071, 0.50% - 8.75%, due 02/15/16 - 08/15/44)

0.10%

07/01/15

15,000,042

15,000,000

BNP Paribas Securities Corp

Issued 06/30/15, repurchase date 07/01/15
(Collateralized by U.S. Treasury Securities valued at
$10,200,020, 0.00% - 2.50%, due 07/23/15 - 02/15/45)

0.09%

07/01/15

10,000,025

10,000,000

JP Morgan Securities, LLC

Issued 06/30/15, repurchase date 07/01/15
(Collateralized by U.S. Treasury Securities valued at $18,186,875, 2.00% - 2.63%, due 07/31/20 - 11/15/20)

0.12%

07/01/15

17,830,313

17,830,254

Total Repurchase Agreements

(Cost $42,830,254)

42,830,254

End of Investments.

At 06/30/15, the tax basis cost of the fund's investments was $100,024,637.

(a)	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 June 30, 2015 (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
Fixed-Rate Obligations¹	$—	$52,446,661	$—	$52,446,661
Variable-Rate Obligations¹	—	4,702,122	—	4,702,122
Other Investment Companies¹	45,600	—	—	45,600
Repurchase Agreements¹	—	42,830,254	—	42,830,254
Total	$45,600	$99,979,037	$—	$100,024,637

¹	As categorized in Portfolio Holdings.

8 See financial notes

Schwab Money Market Portfolio

Financial Notes, unaudited

1. Business Structure of the Fund:

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

Schwab Annuity Portfolios (organized January 21, 1994)

Schwab Money Market Portfolio

Schwab MarketTrack Growth Portfolio II

Schwab S&P 500 Index Portfolio

Schwab VIT Balanced Portfolio

Schwab VIT Balanced with Growth Portfolio

Schwab VIT Growth Portfolio

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

The fund is intended as an investment vehicle for variable annuity contracts and variable life insurance policies to be offered by separate accounts of participating life insurance companies and for pension and retirement plans qualified under the Internal Revenue Code of 1986, as amended. At June 30, 2015, 100% of the fund's shares were held through three insurance companies. Subscriptions and redemptions of these insurance separate accounts could have a material impact on the fund.

2. Significant Accounting Policies:

(a) Security Valuation:

Securities in the fund are valued at amortized cost (which approximates market value) as permitted in accordance with Rule 2a-7 of the 1940 Act. In the event that security valuations do not approximate market value, securities may be fair valued as determined in accordance with procedures adopted by the Board. The Pricing Committee considers a number of factors, including unobservable market inputs when arriving at fair value. The Pricing Committee may employ techniques such as the review of related or comparable assets or liabilities, related market activities, recent transactions, market multiples, book values, transactional back-testing, disposition analysis and other relevant information. The Pricing Committee regularly reviews these inputs and assumptions to calibrate the valuations. Due to the subjective and variable nature of fair value pricing, there can be no assurance that a fund could obtain the fair value assigned to the security upon the sale of such security. The Board convenes on a regular basis to review fair value determinations made by the fund pursuant to the valuation procedures.

Schwab Money Market Portfolio

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):

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

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

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

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

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

Repurchase Agreements: In a repurchase agreement, a fund buys a security from another party (the “counter-party”), usually a financial institution, with the agreement that it be sold back in the future. Repurchase agreements subject a fund to counter-party risk, meaning that the fund could lose money if the other party fails to perform under the terms of the agreement. The fund mitigates this risk by ensuring that a fund's repurchase agreements are collateralized by cash, U.S. government securities, fixed income securities, equity securities or other types of securities. These risks are magnified to the extent that a repurchase agreement is secured by collateral other than cash and government securities, such as debt securities, equity securities and high yield securities that are rated below investment grade. All collateral is held by the fund's custodian (or, with multi-party agreements, the agent's bank) and is monitored daily to ensure that its market value is at least equal to the repurchase price under the agreement. In the event of a default by the counter-party, realization of the collateral proceeds could be delayed or limited and the value of the collateral may decline. Investments in repurchase agreements are also based on a review of the credit quality of the repurchase agreement counter-party.

As of June 30, 2015, the fund had investments in repurchase agreements with a gross value of $26,713,606 as disclosed in the Portfolio Holdings and the Statement of Assets and Liabilities. The value of the related collateral disclosed in the Portfolio Holdings exceeded the value of the repurchase agreements at period end.

Schwab Money Market Portfolio

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):

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

(d) Investment Income:

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

(e) Expenses:

(f) Distributions to Shareholders:

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

(g) Custody Credit:

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

(h) Accounting Estimates:

(i) Federal Income Taxes:

(j) Indemnification:

Schwab Money Market Portfolio

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):

(k) New Accounting Pronouncements:

In June 2014, Accounting Standards Update (“ASU”) No. 2014-11, Topic 860 Transfers and Servicing — Repurchase-to-Maturity Transactions, Repurchase Financings and Disclosures, was issued and is effective for interim periods beginning after March 15, 2015 and annual periods beginning after December 15, 2014. The ASU modifies accounting guidance and enhances disclosure requirements for repurchase agreement and securities lending transactions. Management is currently evaluating the impact the adoption of ASU 2014-11 may have on the fund’s financial statement disclosures.

3. Risk Factors:

Investment Risk. An investment in the fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of a shareholder's investment at $1 per share, it is possible to lose money by investing in the fund.

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

Repurchase Agreements Risk. When the fund enters into a repurchase agreement, the fund is exposed to the risk that the counter-party will not fulfill its contractual obligation. In a repurchase agreement, there exists the risk that, when the fund buys a security from a counter-party that agrees to repurchase the security at an agreed upon price (usually higher) and time, the counter-party will not repurchase the security. These risks are magnified to the extent that a repurchase agreement is secured by collateral other than cash and government securities, such as debt securities, equity securities and high yield securities that are rated below investment grade (“Alternative Collateral”). High yield securities that are used as Alternative Collateral are subject to greater levels of credit and liquidity risk, and are considered primarily speculative with respect to the issuer’s continuing ability to make principal and interest payments. Alternative Collateral may be subject to greater price volatility and may be more volatile or less liquid than other types of collateral, increasing the risk that the fund will be unable to recover fully in the event of a counter-party’s default.

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

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

Schwab Money Market Portfolio

Financial Notes, unaudited (continued)

3. Risk Factors (continued):

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

Foreign Investment Risk. Although the fund may invest only in U.S. dollar denominated securities, the fund's investments in securities of foreign issuers or securities with credit or liquidity enhancements provided by foreign entities may involve certain risks that are greater than those associated with investments in securities of U.S. issuers or securities with credit or liquidity enhancements provided by U.S. entities. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; 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. In addition, sovereign risk, or the risk that a government may become unwilling or unable to meet its loan obligations or guarantees, could increase the credit risk of financial institutions connected to that particular country.

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

Liquidity Risk. Liquidity risk exists when particular investments are difficult to purchase or sell. The market for certain investments may become illiquid due to specific adverse changes in the conditions of a particular issuer or under adverse market or economic conditions independent of the issuer, including, for example, during periods of rising interest rates. In addition, dealer inventories of certain securities—an indication of the ability of dealers to engage in “market making”—are at, or near, historic lows in relation to market size, which could potentially lead to decreased liquidity. The fund’s investments in illiquid securities may reduce the returns of the fund because it may be unable to sell the illiquid securities at an advantageous time or price. Further, transactions in illiquid securities may entail transaction costs that are higher than those for transactions in liquid securities.

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

Regulatory Risk. The Securities and Exchange Commission (“SEC”) recently adopted changes to the rules that govern SEC-registered money market funds. These rule changes include: (i) allowing money market funds to impose liquidity fees and redemption gates when their liquidity levels fall below certain thresholds; (ii) requiring money market funds that do not qualify as “retail” or “government”money market funds to operate with a floating share price; (iii) imposing new disclosure and reporting requirements; and (iv) enhancing portfolio diversification requirements. The compliance dates for these rule changes vary, ranging from mid-2015 for certain new reporting requirements to October 2016 for the new liquidity fees, redemption gates and floating share price requirements. The SEC has also proposed additional rule changes that, if adopted, will impact how SEC-registered money market funds may use nationally recognized statistical rating organizations for the purposes of determining the credit quality of their investments. These regulatory developments may affect the fund’s investment strategies, performance, yield and operating expenses. As of the date of this prospectus, the fund’s investment adviser is evaluating the potential impact of these regulatory changes and will provide updates as future compliance deadlines approach.

Schwab Money Market Portfolio

Financial Notes, unaudited (continued)

3. Risk Factors (continued):

Money Market Risk. Although a money market fund seeks to maintain a stable $1 NAV, it is possible to lose money by investing in a money market fund. In addition, a money market fund is not designed to offer capital appreciation. In exchange for their emphasis on stability and liquidity, money market instruments may offer lower long term performance than stock or bond instruments.

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:

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

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

Contractual Expense Limitation

CSIM and its affiliates have made an additional agreement with the fund, for so long as CSIM serves as the investment adviser to the fund, which may only be amended or terminated with the approval of the Board, to limit the total annual fund operating expenses charged, excluding interest, taxes, and certain non-routine expenses (“expense limitation”) to 0.50% through April 29, 2017.

During the period ended June 30, 2015, the fund waived $207,276 in expenses of which $11,935 was waived in accordance with the contractual expense limitation agreement noted above and the remainder to maintain a positive net yield as noted below.

Voluntary Yield Waiver/Reimbursement

In addition to the contractual expense limitation agreement noted above, CSIM and its affiliates also may waive and/or reimburse expenses to the extent necessary to maintain a positive net yield for the fund. CSIM and its affiliates may recapture from the fund any of these expenses or fees they have waived and/or reimbursed until the third anniversary of the end of the fiscal year in which such waiver and/or reimbursement occurs, subject to certain limitations. These reimbursement payments by the fund to CSIM and its affiliates are considered “non-routine expenses” and are not subject to any net operating expense limitations in effect at the time of such payment. This recapture could negatively affect the fund’s future yield. There were no prior year amounts recaptured. As of June 30, 2015, the balance of recoupable waivers is as follows:

Expiration Date
December 31, 2015	December 31, 2016	December 31, 2017	December 31, 2018	Total
$464,329	$472,070	$450,302	$195,342	$1,582,043

As of December 31, 2014, the fund had recoupable waivers expire in the amount of $495,734.

Schwab Money Market Portfolio

Financial Notes, unaudited (continued)

5. Board of Trustees:

6. Borrowing from Banks:

The fund has access to custodian overdraft facilities, a committed line of credit of $150 million with State Street, an uncommitted line of credit of $100 million with Bank of America, N.A. and an uncommitted line of credit of $50 million with Brown Brothers Harriman & Co. The fund pays interest on the amount it borrows at rates that are negotiated periodically. The fund also pays an annual fee to State Street for the committed line of credit.

7. Federal Income Taxes:

Capital loss carryforwards may be used to offset future realized capital gains for federal income tax purposes. As of December 31, 2014, the fund had no capital loss carryforwards.

For tax purposes, realized net capital losses and late-year ordinary losses incurred after October 31 may be deferred and treated as occurring on the first day of the following year. For the year ended December 31, 2014, the fund had no capital losses deferred and no capital loss carryforwards utilized.

8. Recent Regulatory Development:

On July 23, 2014 the SEC passed new amendments to the rules governing money market funds. The new amendments have mandatory compliance dates, which are staggered over the next two years. Management is currently evaluating the impact of the new amendments and their impact to the fund's future financial statements and related disclosures.

9. Subsequent Events:

Investment Advisory Agreement Approval

The Board of Trustees (the “Board” or the “Trustees”, as appropriate) calls and holds one or more meetings each year that are dedicated, in whole or in part, to considering whether to renew the investment advisory agreement between Schwab Annuity Portfolios (the “Trust”) and Charles Schwab Investment Management, Inc. (“CSIM”) (the “Agreement”) with respect to the existing funds in the Trust, including Schwab Money Market Portfolio (the “Fund”), and to review certain other agreements pursuant to which CSIM provides investment advisory services to certain other registered investment companies. In preparation for the meeting(s), the Board requests and reviews a wide variety of materials provided by CSIM, including information about CSIM’s affiliates, personnel and operations. The Board also receives extensive data provided by third parties. This information is in addition to the detailed information about the Fund that the Board reviews during the course of each year, including information that relates to Fund operations and Fund performance. The Independent Trustees receive advice from independent counsel to the Independent Trustees, including a memorandum regarding the responsibilities of trustees for the approval of investment advisory agreements. In addition, the Independent Trustees meet in executive session outside the presence of Fund management and participate in question and answer sessions with representatives of CSIM.

consideration and evaluation of a variety of specific factors discussed at these meetings and at prior meetings, including:

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

Fund Expenses. With respect to the Fund’s expenses, the Trustees considered the rate of compensation called for by the Agreement, and the Fund’s net operating expense ratio, in each case, in comparison to those of other comparable mutual funds, such peer groups and comparisons having been selected and calculated by an independent third party. The Trustees considered the effects of CSIM’s and Schwab’s historical practice of waiving management and other fees to prevent total fund expenses from exceeding a specified cap. The Trustees also considered fees charged by CSIM to other mutual funds and to other types of accounts, such as 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 the unique insurance dedicated distribution arrangements of the Fund as compared to other funds managed by CSIM. 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.

considered whether the compensation and profitability with respect to the Fund under the Agreement and other service agreements were reasonable and justified in light of the quality of all services rendered to the Fund by CSIM and its affiliates. Based on this evaluation, the Board concluded, within the context of its full deliberations, that the profitability of CSIM is reasonable and supported renewal of the Agreement with respect to the Fund.

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

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
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 and Laudus Institutional Trust since 2010)	Senior Fellow, The Hoover Institution at Stanford University (Oct. 1979 – present); Senior Fellow Stanford Institute for Economic Policy Research (2000 – present); Professor of Public Policy, Stanford University (1994 – present).	74	Director, Gilead Sciences, Inc. (2005 – present)
David L. Mahoney 1954 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011)	Private Investor.	74	Director, Symantec Corporation (2003 – present) Director, Corcept Therapeutics Incorporated (2004 – present) Director, Adamas Pharmaceuticals, Inc. (2009 – present)
Kiran M. Patel 1948 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011)	Retired. Executive Vice President and General Manager of Small Business Group, Intuit, Inc. (financial software and services firm for consumers and small businesses) (Dec. 2008 – Sept. 2013)	74	Director, KLA-Tencor Corporation (2008 – present)
Charles A. Ruffel 1956 Trustee (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2015)	Managing Partner and Co-Founder, Kudu Advisors, LLC (financial services) (May 2009 – present); Director, Asset International, Inc. (publisher of financial services information) (Jan. 2009 – Nov. 2014).	95	None.

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
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 and Laudus Institutional Trust since 2010)	Chairman, Chief Executive Officer and Founder of Smith Graham & Co. (investment advisors) (1990 – present).	74	Director, Eaton (2012 – present) Director and Chairman of the Audit Committee, Oneok Partners LP (2003 – 2013) Director, Oneok, Inc. (2009 – 2013) Lead Independent Director, Board of Cooper Industries (2002 – 2012)
Joseph H. Wender 1944 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust and Laudus Institutional Trust since 2010)	Senior Consultant, Goldman Sachs & Co., Inc. (investment banking and securities firm) (Jan. 2008 – present); Partner, Colgin Partners, LLC (vineyards) (Feb. 1998 – present).	74	Board Member and Chairman of the Audit Committee, Isis Pharmaceuticals (1994 – present)

Interested Trustees
Name, Year of Birth, and Position(s) with the trust; (Terms of office, and length of Time Served)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Charles R. Schwab² 1937 Chairman and Trustee (Chairman and Trustee of The Charles Schwab Family of Funds since 1989; Schwab Investments since 1991; Schwab Capital Trust since 1993; Schwab Annuity Portfolios since 1994; Laudus Trust and Laudus Institutional Trust since 2010)	Chairman and Director, The Charles Schwab Corporation (1986 – present); Chairman and Director of Charles Schwab & Co., Inc. (1971 – present); Chairman and Director of Charles Schwab Investment Management, Inc. (1989 – present); Chairman and Director of Charles Schwab Bank (2003 – present); Chairman and Chief Executive Officer of Schwab (SIS) Holdings Inc. I and Schwab International Holdings, Inc. (1996 – present); and Director, Chairman and Chief Executive Officer, Schwab Holdings, Inc. (1979 – present).	74	Chairman and Director, The Charles Schwab Corporation (1986 – present) Director, Yahoo! Inc. (2014 – present)
Walter W. Bettinger II² 1960 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 and Laudus Institutional Trust since 2010)	Director, President and Chief Executive Officer, The Charles Schwab Corporation and Charles Schwab & Co., Inc. (2008 – present); Director, Charles Schwab Bank (2006 – present); and Director, Schwab Holdings, Inc. (2008 – present).	95	Director, The Charles Schwab Corporation (2008 – present)

Officers of the Trust
Name, Year of Birth, and Position(s) with the trust; (Terms of office, and length of Time Served³)	Principal Occupations During the Past Five Years
Marie Chandoha 1961 President and Chief Executive Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2010)	Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; President, Chief Executive Officer (Dec. 2010 – present), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (January 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (March 2007 – August 2010).
George Pereira 1964 Treasurer and Principal Financial Officer, Schwab Funds Treasurer and Chief Financial Officer, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2004; Laudus Trust and Laudus Institutional Trust since 2006)	Senior Vice President and Chief Financial Officer (Nov. 2004 – present), Chief Operating Officer (Jan. 2011 – present), Charles Schwab Investment Management, Inc.; Treasurer and Chief Financial Officer, Laudus Funds (June 2006 – present); Treasurer and Principal Financial Officer, Schwab Funds (Nov. 2004 – present) and Schwab ETFs (Oct. 2009 – present); Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (April 2005 – present).
Omar Aguilar 1970 Senior Vice President and Chief Investment Officer – Equities (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011)	Senior Vice President and Chief Investment Officer – Equities, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer – Equities, Schwab Funds, Laudus Funds and Schwab ETFs (June 2011 – present); Head of the Portfolio Management Group and Vice President of Portfolio Management, Financial Engines, Inc. (May 2009 – April 2011); Head of Quantitative Equity, ING Investment Management (July 2004 – Jan. 2009).
Brett Wander 1961 Senior Vice President and Chief Investment Officer – Fixed Income (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011)	Senior Vice President and Chief Investment Officer – Fixed Income, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer – Fixed Income, Schwab Funds, Laudus Funds and Schwab ETFs (June 2011 – present); Senior Managing Director, Global Head of Active Fixed-Income Strategies, State Street Global Advisors (Jan. 2008 – Oct. 2010); Director of Alpha Strategies Loomis, Sayles & Company (April 2006 – Jan. 2008).
David Lekich 1964 Chief Legal Officer and Secretary, Schwab Funds Vice President and Assistant Clerk, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011)	Senior Vice President (Sept. 2011 – present), Vice President (March 2004 – Sept. 2011), Charles Schwab & Co., Inc.; Senior Vice President and Chief Counsel (Sept. 2011 – present), Vice President (Jan. 2011 – Sept. 2011), Charles Schwab Investment Management, Inc.; Secretary (April 2011 – present) and Chief Legal Officer (Dec. 2011 – present), Schwab Funds; Vice President and Assistant Clerk, Laudus Funds (April 2011 – present); Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs.
Catherine MacGregor 1964 Vice President and Assistant Secretary, Schwab Funds 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, Laudus Trust and Laudus Institutional Trust since 2005)	Vice President, Charles Schwab & Co., Inc., Charles Schwab Investment Management, Inc. (July 2005 – present); Vice President (Dec. 2005 – present), Chief Legal Officer and Clerk (March 2007 – present), Laudus Funds; Vice President (Nov. 2005 – present) and Assistant Secretary (June 2007 – present), Schwab Funds; Vice President and Assistant Secretary, Schwab ETFs (Oct. 2009 – present).

¹	Trustees remain in office until they resign, retire or are removed by shareholder vote. The Schwab and Laudus Funds’ retirement policy requires that independent trustees retire at age 72 or after twenty years as a trustee, whichever comes first. In addition, the retirement policy requires any independent trustee of Schwab Funds or Laudus Funds to retire from all Boards upon their required retirement date from either Board.
²	Mr. Schwab and Mr. Bettinger are Interested Trustees because they own stock of The Charles Schwab Corporation, the parent company of the investment adviser.
³	The President, Treasurer and Secretary/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 Boards.

The Investment Environment

U.S. equities generated modest performances for the six-month reporting period ended June 30, 2015, with the S&P 500 Index returning 1.2%. Despite weaker-than-expected economic data in early 2015, continued low short-term interest rates and the stabilization of oil prices helped to support U.S. stocks. These factors, along with improvements in both the U.S. labor market and in consumer sentiment, helped to offset market volatility tied to Greece and investor concerns that the strength of the U.S. dollar would hurt some large-cap companies due to their larger percentage of sales revenue from overseas operations.

Within the S&P 500 Index, the Health Care, Consumer Discretionary, and Telecommunication sectors were some of the better performers, while the Utilities, Energy, and Industrials sectors underperformed by comparison.

Asset Class Performance Comparison % returns during the 6 months ended 6/30/2015

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

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

Schwab S&P 500 Index Portfolio1

Portfolio Management

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

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

David Rios, Portfolio Manager, is responsible for the day-to-day co-management of the portfolio. He joined CSIM in 2008 and became a Portfolio Manager in September 2014. Prior to this role, Mr. Rios served as an Associate Portfolio Manager on the Schwab Equity Index Strategies team for four years. His first role with CSIM was as a trade operation specialist. He also previously worked as a senior fund accountant at Investors Bank & Trust (subsequently acquired by State Street Corporation).

2Schwab S&P 500 Index Portfolio

Schwab S&P 500 Index Portfolio

Performance and Fund Facts as of 06/30/15

Average Annual Total Returns^1,2

Portfolio and inception Date	6 Months	1 Year	5 Years	10 Years
Portfolio: Schwab S&P 500 Index Portfolio (11/01/96)	1.14%	7.20%	17.05%	7.74%
S&P 500^® Index	1.23%	7.42%	17.34%	7.89%
Fund Category: Morningstar Large-Cap Blend	1.08%	5.49%	15.84%	7.26%

Portfolio Expense Ratio³: 0.23%

Statistics
Number of Holdings	504
Weighted Average Market Cap ($ x 1,000,000)	$134,659
Price/Earnings Ratio (P/E)	20.8
Price/Book Ratio (P/B)	2.6
Portfolio Turnover Rate⁴	2%

Sector Weightings % of Investments
Information Technology	19.5%
Financials	16.5%
Health Care	15.3%
Consumer Discretionary	12.7%
Industrials	10.1%
Consumer Staples	9.3%
Energy	7.8%
Materials	3.1%
Utilities	2.8%
Telecommunication Services	2.3%
Other	0.6%
Total	100.0%

Top Equity Holdings % of Net Assets⁵
Apple, Inc.	3.9%
Microsoft Corp.	1.9%
Exxon Mobil Corp.	1.9%
Johnson & Johnson	1.5%
General Electric Co.	1.5%
Wells Fargo & Co.	1.4%
JPMorgan Chase & Co.	1.4%
Berkshire Hathaway, Inc., Class B	1.4%
The Procter & Gamble Co.	1.2%
Pfizer, Inc.	1.1%
Total	17.2%

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

Portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.

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

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	Portfolio expenses have been partially absorbed by CSIM and its affiliates. Without these reductions, the portfolio’s returns would have been lower. Portfolio performance does not reflect the additional fees and expenses imposed by the insurance company under the variable insurance product contract. If those contract fees and expenses were included, the performance would be less than that shown. Please refer to the variable insurance product prospectus for a complete listing of these expenses.
³	As stated in the prospectus. Reflects the total annual operating expenses without contractual fee waivers. For actual ratios during the period, refer to the financial highlights section of the financial statements.
⁴	Not annualized.
⁵	This list is not a recommendation of any security by the investment adviser.

Schwab S&P 500 Index Portfolio3

Fund Expenses (Unaudited)

Examples for a $1,000 Investment

The portfolio incurs ongoing costs, such as management fees, transfer agent and shareholder services fees, and other fund expenses.

Please note that the expenses shown in the table are meant to highlight your ongoing costs.

	Expense Ratio¹ (Annualized)	Beginning Account Value at 1/1/15	Ending Account Value (Net of Expenses) at 6/30/15	Expenses Paid During Period² 1/1/15–6/30/15
Schwab S&P 500 Index Portfolio
Actual Return	0.23%	$1,000.00	$1,011.40	$1.15
Hypothetical 5% Return	0.23%	$1,000.00	$1,023.66	$1.15

¹	Based on the most recent six-month expense ratio; may differ from the expense ratio provided in the Financial Highlights.
²	Expenses for the portfolio are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by 181 days of the period, and divided by 365 days of the fiscal year.

4Schwab S&P 500 Index Portfolio

Schwab S&P 500 Index Portfolio

Financial Statements

Financial Highlights

	1/1/15– 6/30/15*	1/1/14– 12/31/14	1/1/13– 12/31/13	1/1/12– 12/31/12	1/1/11– 12/31/11	1/1/10– 12/31/10
Per-Share Data ($)
Net asset value at beginning of period	30.21	27.03	20.82	18.30	18.27	16.24
Income (loss) from investment operations:
Net investment income (loss)	0.31 ¹	0.48	0.42	0.41	0.34	0.38
Net realized and unrealized gains (losses)	0.03	3.12	6.19	2.45	0.02 ²	2.00
Total from investment operations	0.34	3.60	6.61	2.86	0.36	2.38
Less distributions:
Distributions from net investment income	(0.47)	(0.42)	(0.40)	(0.34)	(0.33)	(0.35)
Net asset value at end of period	30.08	30.21	27.03	20.82	18.30	18.27
Total return (%)	1.14 ³	13.41	32.06	15.74	1.89	14.68
Ratios/Supplemental Data (%)
Ratios to average net assets:
Net operating expenses	0.23 ⁴	0.22	0.24	0.28	0.27	0.28
Gross operating expenses	0.24 ⁴	0.23	0.26	0.29	0.28	0.30
Net investment income (loss)	2.02 ⁴	1.79	1.84	2.03	1.82	1.79
Portfolio turnover rate	2 ³	2	2	4	4	3
Net assets, end of period ($ x 1,000,000)	237	229	193	139	122	123

*	Unaudited.

Calculated based on the average shares outstanding during the period.

The per share amount does not accord with the change in aggregate gains and losses in securities during the period because of the timing of fund transactions in relation to fluctuating market values.

Not annualized.

⁴

Annualized.

See financial notes 5

Schwab S&P 500 Index Portfolio

Portfolio Holdings as of June 30, 2015 (Unaudited)

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

Holdings by Category		Cost ($)	Value ($)
99.6%	Common Stock	118,837,380	236,171,633
0.1%	Other Investment Companies	221,118	221,118
0.4%	Short-Term Investments	1,084,747	1,084,747
100.1%	Total Investments	120,143,245	237,477,498
(0.1%)	Other Assets and Liabilities, Net		(267,466)
100.0%	Net Assets		237,210,032

Security	Number of Shares	Value ($)
Common Stock 99.6% of net assets
Automobiles & Components 1.1%
BorgWarner, Inc.	2,800	159,152
Delphi Automotive plc	3,858	328,277
Ford Motor Co.	51,702	776,047
General Motors Co.	17,695	589,774
Harley-Davidson, Inc.	2,702	152,258
Johnson Controls, Inc.	8,594	425,661
The Goodyear Tire & Rubber Co.	3,262	98,349
		2,529,518
Banks 6.2%
Bank of America Corp.	137,164	2,334,531
BB&T Corp.	9,192	370,529
Citigroup, Inc.	39,376	2,175,130
Comerica, Inc.	2,130	109,312
Fifth Third Bancorp	10,405	216,632
Hudson City Bancorp, Inc.	6,250	61,750
Huntington Bancshares, Inc.	10,456	118,257
JPMorgan Chase & Co.	48,058	3,256,410
KeyCorp	11,200	168,224
M&T Bank Corp.	1,871	233,744
People's United Financial, Inc.	3,700	59,977
Regions Financial Corp.	17,127	177,436
SunTrust Banks, Inc.	6,600	283,932
The PNC Financial Services Group, Inc.	6,620	633,203
U.S. Bancorp	22,954	996,204
Wells Fargo & Co.	60,515	3,403,364
Zions Bancorp	2,408	76,418
		14,675,053

Security	Number of Shares	Value ($)
Capital Goods 7.4%
3M Co.	8,351	1,288,559
Allegion plc	1,233	74,153
AMETEK, Inc.	3,009	164,833
Caterpillar, Inc.	7,931	672,707
Cummins, Inc.	2,179	285,863
Danaher Corp.	7,907	676,760
Deere & Co.	4,357	422,847
Dover Corp.	2,100	147,378
Eaton Corp. plc	6,134	413,984
Emerson Electric Co.	9,011	499,480
Fastenal Co.	3,452	145,605
Flowserve Corp.	1,700	89,522
Fluor Corp.	2,000	106,020
General Dynamics Corp.	4,045	573,136
General Electric Co.	130,529	3,468,156
Honeywell International, Inc.	9,969	1,016,539
Illinois Tool Works, Inc.	4,173	383,040
Ingersoll-Rand plc	3,300	222,486
Jacobs Engineering Group, Inc. *	1,583	64,301
Joy Global, Inc.	1,300	47,060
L-3 Communications Holdings, Inc.	1,100	124,718
Lockheed Martin Corp.	3,430	637,637
Masco Corp.	3,821	101,906
Northrop Grumman Corp.	2,554	405,141
PACCAR, Inc.	4,630	295,440
Pall Corp.	1,325	164,896
Parker-Hannifin Corp.	1,835	213,466
Pentair plc	2,399	164,931
Precision Castparts Corp.	1,791	357,967
Quanta Services, Inc. *	2,597	74,846
Raytheon Co.	4,013	383,964
Rockwell Automation, Inc.	1,785	222,482
Rockwell Collins, Inc.	1,600	147,760
Roper Technologies, Inc.	1,279	220,576
Snap-on, Inc.	788	125,489
Stanley Black & Decker, Inc.	2,023	212,900
Textron, Inc.	3,674	163,971
The Boeing Co.	8,319	1,154,012
United Rentals, Inc. *	1,200	105,144
United Technologies Corp.	10,754	1,192,941
W.W. Grainger, Inc.	842	199,259
Xylem, Inc.	2,295	85,076
		17,516,951
Commercial & Professional Supplies 0.6%
Cintas Corp.	1,357	114,789
Equifax, Inc.	1,542	149,713
Nielsen N.V.	4,983	223,089
Pitney Bowes, Inc.	2,900	60,349
Republic Services, Inc.	3,136	122,837
Robert Half International, Inc.	1,750	97,125
Stericycle, Inc. *	1,100	147,301
The ADT Corp.	2,300	77,211
The Dun & Bradstreet Corp.	500	61,000
Tyco International plc	5,313	204,444
Waste Management, Inc.	5,655	262,109
		1,519,967

6 See financial notes

Schwab S&P 500 Index Portfolio

Portfolio Holdings (Unaudited) continued

Security	Number of Shares	Value ($)
Consumer Durables & Apparel 1.4%
Coach, Inc.	3,394	117,466
D.R. Horton, Inc.	4,522	123,722
Fossil Group, Inc. *	600	41,616
Garmin Ltd.	1,500	65,895
Hanesbrands, Inc.	5,646	188,125
Harman International Industries, Inc.	900	107,046
Hasbro, Inc.	1,475	110,315
Leggett & Platt, Inc.	1,900	92,492
Lennar Corp., Class A	2,300	117,392
Mattel, Inc.	4,300	110,467
Michael Kors Holdings Ltd. *	2,700	113,643
Mohawk Industries, Inc. *	800	152,720
Newell Rubbermaid, Inc.	3,424	140,761
NIKE, Inc., Class B	8,957	967,535
PulteGroup, Inc.	4,442	89,506
PVH Corp.	1,086	125,107
Ralph Lauren Corp.	742	98,211
Under Armour, Inc., Class A *	2,252	187,907
VF Corp.	4,440	309,646
Whirlpool Corp.	1,033	178,761
		3,438,333
Consumer Services 1.8%
Carnival Corp.	5,922	292,488
Chipotle Mexican Grill, Inc. *	409	247,441
Darden Restaurants, Inc.	1,591	113,088
H&R Block, Inc.	3,338	98,972
Marriott International, Inc., Class A	2,657	197,654
McDonald's Corp.	12,482	1,186,664
Royal Caribbean Cruises Ltd.	2,100	165,249
Starbucks Corp.	19,088	1,023,403
Starwood Hotels & Resorts Worldwide, Inc.	2,161	175,235
Wyndham Worldwide Corp.	1,580	129,418
Wynn Resorts Ltd.	1,057	104,294
Yum! Brands, Inc.	5,500	495,440
		4,229,346
Diversified Financials 5.1%
Affiliated Managers Group, Inc. *	700	153,020
American Express Co.	11,372	883,832
Ameriprise Financial, Inc.	2,363	295,209
Berkshire Hathaway, Inc., Class B *	23,516	3,200,763
BlackRock, Inc.	1,650	570,867
Capital One Financial Corp.	7,080	622,828
CME Group, Inc.	4,131	384,431
Discover Financial Services	5,890	339,382
ETRADE Financial Corp.	3,576	107,101
Franklin Resources, Inc.	4,900	240,247
Intercontinental Exchange, Inc.	1,459	326,247
Invesco Ltd.	5,704	213,843
Legg Mason, Inc.	1,300	66,989
Leucadia National Corp.	3,939	95,639
McGraw Hill Financial, Inc.	3,530	354,588
Moody's Corp.	2,423	261,587
Morgan Stanley	20,099	779,640
Navient Corp.	5,000	91,050
Northern Trust Corp.	2,831	216,458

Security	Number of Shares	Value ($)
State Street Corp.	5,400	415,800
T. Rowe Price Group, Inc.	3,523	273,843
The Bank of New York Mellon Corp.	14,278	599,248
The Charles Schwab Corp. (a)	14,949	488,085
The Goldman Sachs Group, Inc.	5,170	1,079,444
The NASDAQ OMX Group, Inc.	1,400	68,334
		12,128,475
Energy 7.8%
Anadarko Petroleum Corp.	6,483	506,063
Apache Corp.	4,808	277,085
Baker Hughes, Inc.	5,563	343,237
Cabot Oil & Gas Corp.	5,120	161,485
Cameron International Corp. *	2,413	126,369
Chesapeake Energy Corp. (b)	6,356	70,996
Chevron Corp.	24,416	2,355,411
Cimarex Energy Co.	1,151	126,967
ConocoPhillips	16,205	995,149
CONSOL Energy, Inc.	3,119	67,807
Devon Energy Corp.	5,032	299,354
Diamond Offshore Drilling, Inc. (b)	800	20,648
Ensco plc, Class A	3,000	66,810
EOG Resources, Inc.	7,075	619,416
EQT Corp.	1,900	154,546
Exxon Mobil Corp.	54,192	4,508,774
FMC Technologies, Inc. *	3,246	134,677
Halliburton Co.	10,795	464,941
Helmerich & Payne, Inc.	1,300	91,546
Hess Corp.	3,233	216,223
Kinder Morgan, Inc.	22,200	852,258
Marathon Oil Corp.	8,768	232,703
Marathon Petroleum Corp.	7,064	369,518
Murphy Oil Corp.	2,032	84,470
National Oilwell Varco, Inc.	5,001	241,448
Newfield Exploration Co. *	2,141	77,333
Noble Corp., plc	2,900	44,631
Noble Energy, Inc.	5,212	222,448
Occidental Petroleum Corp.	9,897	769,690
ONEOK, Inc.	2,600	102,648
Phillips 66	7,158	576,648
Pioneer Natural Resources Co.	1,885	261,431
Range Resources Corp.	2,214	109,327
Schlumberger Ltd.	16,424	1,415,585
Southwestern Energy Co. *	4,973	113,036
Spectra Energy Corp.	8,748	285,185
Tesoro Corp.	1,600	135,056
The Williams Cos., Inc.	8,890	510,197
Transocean Ltd. (b)	4,624	74,539
Valero Energy Corp.	6,665	417,229
		18,502,884
Food & Staples Retailing 2.4%
Costco Wholesale Corp.	5,775	779,972
CVS Health Corp.	14,519	1,522,753
Sysco Corp.	7,764	280,280
The Kroger Co.	6,455	468,052
Wal-Mart Stores, Inc.	20,582	1,459,881

See financial notes 7

Schwab S&P 500 Index Portfolio

Portfolio Holdings (Unaudited) continued

Security	Number of Shares	Value ($)
Walgreens Boots Alliance, Inc.	11,121	939,057
Whole Foods Market, Inc.	4,500	177,480
		5,627,475
Food, Beverage & Tobacco 5.1%
Altria Group, Inc.	25,206	1,232,826
Archer-Daniels-Midland Co.	8,235	397,092
Brown-Forman Corp., Class B	2,127	213,083
Campbell Soup Co.	2,245	106,974
Coca-Cola Enterprises, Inc.	2,700	117,288
ConAgra Foods, Inc.	5,778	252,614
Constellation Brands, Inc., Class A	2,220	257,564
Dr Pepper Snapple Group, Inc.	2,500	182,250
General Mills, Inc.	7,758	432,276
Hormel Foods Corp.	1,704	96,055
Kellogg Co.	3,200	200,640
Keurig Green Mountain, Inc.	1,600	122,608
Kraft Foods Group, Inc.	7,536	641,615
McCormick & Co., Inc. - Non Voting Shares	1,600	129,520
Mead Johnson Nutrition Co.	2,600	234,572
Molson Coors Brewing Co., Class B	1,978	138,084
Mondelez International, Inc., Class A	21,496	884,345
Monster Beverage Corp. *	1,900	254,638
PepsiCo, Inc.	19,092	1,782,047
Philip Morris International, Inc.	20,071	1,609,092
Reynolds American, Inc.	5,247	391,741
The Coca-Cola Co.	50,645	1,986,803
The Hershey Co.	1,844	163,803
The JM Smucker Co.	1,246	135,079
Tyson Foods, Inc., Class A	3,808	162,335
		12,124,944
Health Care Equipment & Services 5.2%
Abbott Laboratories	19,707	967,220
Aetna, Inc.	4,582	584,022
AmerisourceBergen Corp.	2,660	282,864
Anthem, Inc.	3,436	563,985
Baxter International, Inc.	6,927	484,405
Becton, Dickinson & Co.	2,687	380,614
Boston Scientific Corp. *	16,977	300,493
C.R. Bard, Inc.	920	157,044
Cardinal Health, Inc.	4,274	357,520
Cerner Corp. *	4,000	276,240
Cigna Corp.	3,391	549,342
DaVita HealthCare Partners, Inc. *	2,230	177,218
DENTSPLY International, Inc.	1,800	92,790
Edwards Lifesciences Corp. *	1,403	199,829
Express Scripts Holding Co. *	9,437	839,327
HCA Holdings, Inc. *	3,800	344,736
Henry Schein, Inc. *	1,100	156,332
Humana, Inc.	1,980	378,734
Intuitive Surgical, Inc. *	441	213,665
Laboratory Corp. of America Holdings *	1,404	170,193
McKesson Corp.	2,968	667,236
Medtronic plc	18,505	1,371,221
Patterson Cos., Inc.	980	47,677

Security	Number of Shares	Value ($)
Quest Diagnostics, Inc.	1,960	142,139
St. Jude Medical, Inc.	3,678	268,751
Stryker Corp.	3,707	354,278
Tenet Healthcare Corp. *	1,125	65,115
UnitedHealth Group, Inc.	12,381	1,510,482
Universal Health Services, Inc., Class B	1,200	170,520
Varian Medical Systems, Inc. *	1,300	109,629
Zimmer Biomet Holdings, Inc.	2,183	238,449
		12,422,070
Household & Personal Products 1.9%
Colgate-Palmolive Co.	11,178	731,153
Kimberly-Clark Corp.	4,813	510,034
The Clorox Co.	1,600	166,432
The Estee Lauder Cos., Inc., Class A	2,900	251,314
The Procter & Gamble Co.	35,110	2,747,006
		4,405,939
Insurance 2.7%
ACE Ltd.	4,297	436,919
Aflac, Inc.	5,663	352,239
American International Group, Inc.	17,095	1,056,813
Aon plc	3,610	359,845
Assurant, Inc.	800	53,600
Cincinnati Financial Corp.	1,699	85,256
Genworth Financial, Inc., Class A *	6,400	48,448
Lincoln National Corp.	3,262	193,176
Loews Corp.	3,891	149,842
Marsh & McLennan Cos., Inc.	6,998	396,787
MetLife, Inc.	14,462	809,727
Principal Financial Group, Inc.	3,663	187,875
Prudential Financial, Inc.	5,814	508,841
The Allstate Corp.	5,421	351,660
The Chubb Corp.	2,980	283,517
The Hartford Financial Services Group, Inc.	5,615	233,415
The Progressive Corp.	7,273	202,408
The Travelers Cos., Inc.	4,239	409,742
Torchmark Corp.	1,900	110,618
Unum Group	2,953	105,570
XL Group plc	4,100	152,520
		6,488,818
Materials 3.1%
Air Products & Chemicals, Inc.	2,509	343,306
Airgas, Inc.	734	77,642
Alcoa, Inc.	15,255	170,093
Allegheny Technologies, Inc.	1,315	39,713
Avery Dennison Corp.	1,100	67,034
Ball Corp.	1,800	126,270
CF Industries Holdings, Inc.	3,075	197,661
E.I. du Pont de Nemours & Co.	11,800	754,610
Eastman Chemical Co.	2,000	163,640
Ecolab, Inc.	3,497	395,406
FMC Corp.	1,700	89,335
Freeport-McMoRan, Inc.	13,377	249,080
International Flavors & Fragrances, Inc.	1,000	109,290

8 See financial notes

Schwab S&P 500 Index Portfolio

Portfolio Holdings (Unaudited) continued

Security	Number of Shares	Value ($)
International Paper Co.	5,598	266,409
LyondellBasell Industries N.V., Class A	5,063	524,122
Martin Marietta Materials, Inc.	800	113,208
MeadWestvaco Corp.	2,118	99,948
Monsanto Co.	6,262	667,466
Newmont Mining Corp.	6,452	150,719
Nucor Corp.	3,999	176,236
Owens-Illinois, Inc. *	2,000	45,880
PPG Industries, Inc.	3,508	402,438
Praxair, Inc.	3,662	437,792
Rock-Tenn Co., Class A	1,676	100,895
Sealed Air Corp.	2,828	145,303
Sigma-Aldrich Corp.	1,582	220,452
The Dow Chemical Co.	14,205	726,870
The Mosaic Co.	3,900	182,715
The Sherwin-Williams Co.	993	273,095
Vulcan Materials Co.	1,755	147,297
		7,463,925
Media 3.7%
Cablevision Systems Corp., Class A	3,000	71,820
CBS Corp., Class B - Non Voting Shares	6,080	337,440
Comcast Corp., Class A	32,792	1,972,111
DIRECTV *	6,480	601,279
Discovery Communications, Inc., Class A *	1,700	56,542
Discovery Communications, Inc., Class C *	3,500	108,780
Gannett Co., Inc. *	1,480	20,705
News Corp., Class A *	6,148	89,699
Omnicom Group, Inc.	3,340	232,097
Scripps Networks Interactive, Inc., Class A	1,200	78,444
TEGNA, Inc.	2,960	94,927
The Interpublic Group of Cos., Inc.	4,997	96,292
The Walt Disney Co.	20,158	2,300,834
Time Warner Cable, Inc.	3,627	646,223
Time Warner, Inc.	10,627	928,906
Twenty-First Century Fox, Inc., Class A	23,058	750,423
Viacom, Inc., Class B	4,816	311,306
		8,697,828
Pharmaceuticals, Biotechnology & Life Sciences 10.1%
AbbVie, Inc.	22,009	1,478,785
Agilent Technologies, Inc.	4,301	165,933
Alexion Pharmaceuticals, Inc. *	2,939	531,283
Allergan plc *	5,047	1,531,563
Amgen, Inc.	9,903	1,520,309
Biogen, Inc. *	3,036	1,226,362
Bristol-Myers Squibb Co.	21,573	1,435,467
Celgene Corp. *	10,375	1,200,751
Eli Lilly & Co.	12,705	1,060,740
Endo International plc *	2,400	191,160
Gilead Sciences, Inc.	19,161	2,243,370
Hospira, Inc. *	2,187	194,009
Johnson & Johnson	36,110	3,519,281

Security	Number of Shares	Value ($)
Mallinckrodt plc *	1,500	176,580
Merck & Co., Inc.	36,327	2,068,096
Mylan N.V. *	5,291	359,047
PerkinElmer, Inc.	1,500	78,960
Perrigo Co., plc	1,934	357,461
Pfizer, Inc.	79,576	2,668,183
Regeneron Pharmaceuticals, Inc. *	987	503,498
Thermo Fisher Scientific, Inc.	5,150	668,264
Vertex Pharmaceuticals, Inc. *	3,101	382,911
Waters Corp. *	1,100	141,218
Zoetis, Inc.	6,522	314,491
		24,017,722
Real Estate 2.5%
American Tower Corp.	5,548	517,573
Apartment Investment & Management Co., Class A	1,877	69,318
AvalonBay Communities, Inc.	1,708	273,058
Boston Properties, Inc.	2,109	255,273
CBRE Group, Inc., Class A *	3,600	133,200
Crown Castle International Corp.	4,303	345,531
Equinix, Inc.	700	177,800
Equity Residential	4,700	329,799
Essex Property Trust, Inc.	900	191,250
General Growth Properties, Inc.	8,400	215,544
HCP, Inc.	6,016	219,403
Health Care REIT, Inc.	4,562	299,404
Host Hotels & Resorts, Inc.	9,560	189,575
Iron Mountain, Inc.	2,287	70,897
Kimco Realty Corp.	5,420	122,167
Plum Creek Timber Co., Inc.	2,268	92,013
Prologis, Inc.	6,410	237,811
Public Storage	1,852	341,453
Realty Income Corp.	2,800	124,292
Simon Property Group, Inc.	4,001	692,253
SL Green Realty Corp.	1,300	142,857
The Macerich Co.	1,807	134,802
Ventas, Inc.	4,019	249,540
Vornado Realty Trust	2,360	224,035
Weyerhaeuser Co.	6,966	219,429
		5,868,277
Retailing 4.8%
Amazon.com, Inc. *	4,904	2,128,777
AutoNation, Inc. *	900	56,682
AutoZone, Inc. *	400	266,760
Bed Bath & Beyond, Inc. *	2,316	159,758
Best Buy Co., Inc.	3,721	121,342
CarMax, Inc. *	2,726	180,488
Dollar General Corp.	3,985	309,794
Dollar Tree, Inc. *	2,600	205,374
Expedia, Inc.	1,350	147,622
Family Dollar Stores, Inc.	1,348	106,236
GameStop Corp., Class A (b)	1,454	62,464
Genuine Parts Co.	1,900	170,107
Kohl's Corp.	2,682	167,920
L Brands, Inc.	3,164	271,250
Lowe's Cos., Inc.	12,273	821,923
Macy's, Inc.	4,322	291,605
Netflix, Inc. *	791	519,640

See financial notes 9

Schwab S&P 500 Index Portfolio

Portfolio Holdings (Unaudited) continued

Security	Number of Shares	Value ($)
Nordstrom, Inc.	1,750	130,375
O'Reilly Automotive, Inc. *	1,309	295,808
Ross Stores, Inc.	5,278	256,564
Staples, Inc.	8,250	126,307
Target Corp.	8,176	667,407
The Gap, Inc.	3,476	132,679
The Home Depot, Inc.	16,874	1,875,208
The Priceline Group, Inc. *	669	770,266
The TJX Cos., Inc.	8,820	583,619
Tiffany & Co.	1,426	130,907
Tractor Supply Co.	1,700	152,898
TripAdvisor, Inc. *	1,500	130,710
Urban Outfitters, Inc. *	1,200	42,000
		11,282,490
Semiconductors & Semiconductor Equipment 2.4%
Altera Corp.	3,977	203,622
Analog Devices, Inc.	4,130	265,084
Applied Materials, Inc.	15,655	300,889
Avago Technologies Ltd.	3,257	432,953
Broadcom Corp., Class A	6,914	356,002
First Solar, Inc. *	900	42,282
Intel Corp.	61,584	1,873,077
KLA-Tencor Corp.	2,000	112,420
Lam Research Corp.	2,112	171,811
Linear Technology Corp.	3,030	134,017
Microchip Technology, Inc.	2,600	123,305
Micron Technology, Inc. *	13,657	257,298
NVIDIA Corp.	6,368	128,061
Qorvo, Inc. *	1,750	140,473
Skyworks Solutions, Inc.	2,600	270,660
Texas Instruments, Inc.	13,468	693,737
Xilinx, Inc.	3,513	155,134
		5,660,825
Software & Services 10.4%
Accenture plc, Class A	8,134	787,209
Adobe Systems, Inc. *	6,235	505,097
Akamai Technologies, Inc. *	2,175	151,858
Alliance Data Systems Corp. *	816	238,223
Autodesk, Inc. *	2,820	141,212
Automatic Data Processing, Inc.	6,115	490,606
CA, Inc.	4,044	118,449
Citrix Systems, Inc. *	2,060	144,530
Cognizant Technology Solutions Corp., Class A *	7,840	478,946
Computer Sciences Corp.	1,900	124,716
eBay, Inc. *	13,997	843,179
Electronic Arts, Inc. *	4,052	269,458
Facebook, Inc., Class A *	27,353	2,345,930
Fidelity National Information Services, Inc.	3,800	234,840
Fiserv, Inc. *	3,120	258,430
Google, Inc., Class A *	3,675	1,984,647
Google, Inc., Class C *	3,740	1,946,707
International Business Machines Corp.	11,978	1,948,341
Intuit, Inc.	3,696	372,446
MasterCard, Inc., Class A	12,486	1,167,191
Microsoft Corp.	104,812	4,627,450

Security	Number of Shares	Value ($)
Oracle Corp.	41,562	1,674,949
Paychex, Inc.	4,046	189,676
Red Hat, Inc. *	2,274	172,665
salesforce.com, Inc. *	7,869	547,918
Symantec Corp.	9,187	213,598
Teradata Corp. *	1,780	65,860
The Western Union Co.	6,559	133,344
Total System Services, Inc.	2,100	87,717
VeriSign, Inc. *	1,425	87,951
Visa, Inc., Class A	24,984	1,677,676
Xerox Corp.	14,267	151,801
Yahoo! Inc. *	11,294	443,741
		24,626,361
Technology Hardware & Equipment 6.7%
Amphenol Corp., Class A	4,100	237,677
Apple, Inc.	74,621	9,359,339
Cisco Systems, Inc.	66,361	1,822,273
Corning, Inc.	16,665	328,800
EMC Corp.	25,146	663,603
F5 Networks, Inc.	895	107,713
FLIR Systems, Inc.	1,834	56,524
Harris Corp.	1,400	107,674
Hewlett-Packard Co.	23,169	695,302
Juniper Networks, Inc.	4,700	122,059
Motorola Solutions, Inc.	2,249	128,958
NetApp, Inc.	3,900	123,084
QUALCOMM, Inc.	21,150	1,324,624
SanDisk Corp.	2,771	161,328
Seagate Technology plc	4,279	203,252
TE Connectivity Ltd.	5,232	336,418
Western Digital Corp.	2,800	219,576
		15,998,204
Telecommunication Services 2.3%
AT&T, Inc.	67,568	2,400,016
CenturyLink, Inc.	7,485	219,909
Frontier Communications Corp.	12,705	62,890
Level 3 Communications, Inc. *	3,667	193,141
Verizon Communications, Inc.	52,938	2,467,440
		5,343,396
Transportation 2.1%
American Airlines Group, Inc.	9,281	370,637
C.H. Robinson Worldwide, Inc.	1,900	118,541
CSX Corp.	12,901	421,218
Delta Air Lines, Inc.	10,622	436,352
Expeditors International of Washington, Inc.	2,600	119,873
FedEx Corp.	3,385	576,804
JB Hunt Transport Services, Inc.	1,192	97,851
Kansas City Southern	1,400	127,680
Norfolk Southern Corp.	4,000	349,440
Ryder System, Inc.	662	57,839
Southwest Airlines Co.	8,873	293,607
Union Pacific Corp.	11,506	1,097,327
United Parcel Service, Inc., Class B	8,958	868,120
		4,935,289

10 See financial notes

Schwab S&P 500 Index Portfolio

Portfolio Holdings (Unaudited) continued

Security	Number of Shares	Value ($)
Utilities 2.8%
AES Corp.	9,089	120,520
AGL Resources, Inc.	1,643	76,498
Ameren Corp.	3,100	116,808
American Electric Power Co., Inc.	6,269	332,069
CenterPoint Energy, Inc.	5,250	99,908
CMS Energy Corp.	3,196	101,761
Consolidated Edison, Inc.	3,735	216,182
Dominion Resources, Inc.	7,726	516,638
DTE Energy Co.	2,138	159,580
Duke Energy Corp.	9,137	645,255
Edison International	4,080	226,766
Entergy Corp.	2,527	178,153
Eversource Energy	3,836	174,193
Exelon Corp.	11,260	353,789
FirstEnergy Corp.	5,381	175,152
NextEra Energy, Inc.	5,832	571,711
NiSource, Inc.	4,092	186,554
NRG Energy, Inc.	4,386	100,352
Pepco Holdings, Inc.	3,150	84,861
PG&E Corp.	6,014	295,287
Pinnacle West Capital Corp.	1,550	88,180
PPL Corp.	8,667	255,416
Public Service Enterprise Group, Inc.	6,714	263,726
SCANA Corp.	1,800	91,170
Sempra Energy	3,031	299,887
TECO Energy, Inc.	2,740	48,388
The Southern Co.	11,629	487,255
Wec Energy Group, Inc.	4,396	197,688
Xcel Energy, Inc.	6,333	203,796
		6,667,543
Total Common Stock
(Cost $118,837,380)		236,171,633

Other Investment Companies 0.1% of net assets
Securities Lending Collateral 0.1%
Wells Fargo Advantage Government Money Market Fund, Institutional Class 0.01% (c)	221,118	221,118
Total Other Investment Company
(Cost $221,118)		221,118

Issuer Rate, Maturity Date	Face Amount ($)	Value ($)
Short-Term Investments 0.4% of net assets
Time Deposit 0.4%
JPMorgan Chase Bank
0.03%, 07/01/15	1,084,747	1,084,747
Total Short-Term Investment
(Cost $1,084,747)		1,084,747

End of Investments.

At 06/30/15, the tax basis cost of the fund's investments was $123,142,100 and the unrealized appreciation and depreciation were $117,181,452 and ($2,846,054), respectively, with a net unrealized appreciation of $114,335,398.

*	Non-income producing security.
(a)	Issuer is affiliated with the fund's adviser.
(b)	All or a portion of this security is on loan. Securities on loan were valued at $217,187.
(c)	The rate shown is the 7-day yield.

REIT —

Real Estate Investment Trust

In addition to the above, the fund held the following at 06/30/15:

	Number of Contracts	Contract Value ($)	Unrealized Depreciation ($)
Futures Contracts
S&P 500 Index, e-mini, Long expires 09/18/15	10	1,027,200	(18,211)

See financial notes 11

Schwab S&P 500 Index Portfolio

Statement of

Assets and Liabilities

As of June 30, 2015; unaudited

Assets
Investments in affiliated issuers, at value (cost $188,927)		$488,085
Investments in unaffiliated issuers, at value (cost $119,733,200) including securities on loan of $217,187		236,768,295
Collateral invested for securities on loan, at value (cost $221,118)	+	221,118
Total investments, at value (cost $120,143,245)		237,477,498
Deposit with broker for futures contracts		216,200
Receivables:
Investments sold		35,223
Dividends		270,892
Fund shares sold		103,912
Variation margin on futures contracts		2,753
Income from securities on loan	+	709
Total assets		238,107,187
Liabilities
Collateral held for securities on loan		221,118
Payables:
Investments bought		198,775
Investment adviser and administrator fees		6,964
Fund shares redeemed		439,271
Accrued expenses	+	31,027
Total liabilities		897,155
Net Assets
Total assets		238,107,187
Total liabilities	–	897,155
Net assets		$237,210,032
Net Assets by Source
Capital received from investors		124,371,017
Net investment income not yet distributed		2,424,516
Net realized capital losses		(6,901,543)
Net unrealized capital appreciation		117,316,042

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$237,210,032		7,886,133		$30.08

See financial notes 13

Schwab S&P 500 Index Portfolio

Statement of

Operations

For the period January 1, 2015 through June 30, 2015; unaudited

Investment Income
Dividends received from affiliated issuer		$1,740
Dividends received from unaffiliated issuers (net of foreign withholding taxes of $366)		2,644,233
Interest		328
Securities on loan	+	6,528
Total investment income		2,652,829
Expenses
Investment adviser and administrator fees		177,153
Portfolio accounting fees		22,928
Professional fees		21,491
Shareholder reports		16,104
Independent trustees' fees		11,471
Transfer agent fees		10,655
Index fee		9,667
Custodian fees		6,902
Interest expense		11
Other expenses	+	1,782
Total expenses		278,164
Expense reduction by CSIM	–	10,655
Net expenses	–	267,509
Net investment income		2,385,320
Realized and Unrealized Gains (Losses)
Net realized gains on unaffiliated investments		1,552,889
Net realized gains on futures contracts	+	180,807
Net realized gains		1,733,696
Net change in unrealized appreciation (depreciation) on affiliated issuer		37,791
Net change in unrealized appreciation (depreciation) on unaffiliated investments		(1,419,698)
Net change in unrealized appreciation (depreciation) on futures contracts	+	(35,287)
Net change in unrealized appreciation (depreciation)	+	(1,417,194)
Net realized and unrealized gains		316,502
Increase in net assets resulting from operations		$2,701,822

14 See financial notes

Schwab S&P 500 Index Portfolio

Financial Notes, unaudited

1. Business Structure of the Fund:

Schwab S&P 500 Index Portfolio (the “fund”) is a series of Schwab Annuity Portfolios (the “trust”), a no-load, open-end management investment company. The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The list below shows all the funds in the trust as of the end of the period, including the fund discussed in this report, which is highlighted:

Schwab Annuity Portfolios (organized January 21, 1994)

Schwab Money Market Portfolio

Schwab MarketTrack Growth Portfolio II

Schwab S&P 500 Index Portfolio

Schwab VIT Balanced Portfolio

Schwab VIT Balanced with Growth Portfolio

Schwab VIT Growth Portfolio

2. Significant Accounting Policies:

(a) Security Valuation:

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

• Securities traded on an exchange or over-the-counter: Traded securities are valued at the closing value for the day, or, on days when no closing value has been reported, at halfway between the most recent bid and ask quotes. Securities that are primarily traded on foreign exchanges are valued at the official closing price or the last sales price on the exchange where the securities are principally traded with these values then translated into U.S. dollars at the current exchange rate, unless these securities are fair valued as discussed below.

• Securities for which no quoted value is available: The Board has adopted procedures to fair value the 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. 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

Schwab S&P 500 Index Portfolio

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):

the subjective and variable nature of fair value pricing, there can be no assurance that a fund could obtain the fair value assigned to the security upon the sale of such security. The Board convenes on a regular basis to review fair value determinations made by the fund pursuant to the valuation procedures.

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

• Short-term securities (60 days or less to maturity): A short-term security may be valued at its amortized cost when it approximates the security's market value.

• 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.

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

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

The levels associated with valuing the fund's investments as of June 30, 2015 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

Schwab S&P 500 Index Portfolio

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):

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.

Securities Lending: Under the trust's Securities Lending Program, a fund (lender) may make short-term loans of its securities to another party (borrower) to generate additional revenue for the fund. The borrower pledges collateral in the form of cash, securities issued or fully guaranteed by the U.S. government or foreign governments, or letters of credit issued by a bank. Collateral at the individual loan level is required to be maintained on a daily marked-to-market basis in an amount at least equal to the current value of the securities loaned. The lending agent provides the fund with indemnification against borrower default (the borrower fails to return the security on loan) reducing the risk of loss as a result of default. The cash collateral of securities loaned is currently invested in money market portfolios operating under Rule 2a-7 of the 1940 Act. The fund bears the risk of loss with respect to the investment of cash collateral. The terms of the securities lending agreement allow the fund to terminate any loans at any given time. Securities lending income, as disclosed in the fund’s Statement of Operations, if applicable, represents the income earned from the investment of the cash collateral plus any fees paid by borrowers, less the fees paid to the lending agent and broker rebates which are subject to adjustments pursuant to the securities lending agreement. On loans not collateralized by cash, a fee is received from the borrower, and is allocated between the fund and the lending agent. The fund retains the right to recall a security on loan. The aggregate market value of securities loaned will not at any time exceed one-third of the total assets of the fund, including collateral received from the loan (at market value computed at the time of the loan). Total costs and expenses, including agent fees, associated with securities lending activities under the trust's Securities Lending Program paid to the unaffiliated lending agent are approximately 15% of the gross lending revenues.

The values of the securities on loan and the related collateral as of June 30, 2015, if any, are disclosed in the fund's Portfolio Holdings. The value of the securities on loan and the investments of cash collateral are also disclosed in the fund's Statement of Assets and Liabilities.

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

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

(d) Investment Income:

(e) Expenses:

(f) Distributions to Shareholders:

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

Schwab S&P 500 Index Portfolio

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):

(g) Accounting Estimates:

(h) Federal Income Taxes:

(i) Indemnification:

(j) New Accounting Pronouncements:

3. Risk Factors:

Investment Risk. 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.

Market Risk. Equity markets rise and fall daily. 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.

Equity Risk. The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

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

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

Tracking Error Risk. As an index fund, the fund seeks to track the performance of its comparative index, although it may not be successful in doing so. The divergence between the performance of a fund and its index, positive or negative, is called “tracking error.” Tracking error can be caused by many factors and it may be significant. For example, a fund may not invest in certain securities in the index, or match the securities’ weightings to the index, due to regulatory, operational, custodial or liquidity constraints; corporate transactions; asset valuations; transaction costs and timing; tax considerations; and index rebalancing, which may result in tracking error.

Schwab S&P 500 Index Portfolio

Financial Notes, unaudited (continued)

3. Risk Factors (continued):

Large Cap Risk. Although the S&P 500 Index encompasses stocks from many different sectors of the economy, its performance primarily reflects that of large-cap stocks, which tend to go in and out of favor based on market and economic conditions. As a result, during a period when these stocks fall behind other types of investment — bonds or mid- or small-cap stocks, for instance — the fund’s performance also will lag those investments.

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

Derivatives Risk. The fund’s use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments and could cause the fund to lose more than the principal amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund.

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

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

Lack of Governmental Insurance or Guarantee. An investment in the fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.

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:

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

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

The fund may engage in certain transactions involving affiliates. For instance, the fund may own shares of The Charles Schwab Corporation if that company is included in its index. Below is the summary of investment activities involving The Charles Schwab Corporation shares owned by the fund during the report period:

Balance of Shares Held at 12/31/14		Gross Purchases		Gross Sales		Balance of Shares Held at 06/30/15		Market Value at 06/30/15		Realized Gains (Losses) 01/01/15 to 06/30/15		Dividends Received 01/01/15 to 06/30/15
14,049		900		—		14,949		$488,085		$—		$1,740

Schwab S&P 500 Index Portfolio

Financial Notes, unaudited (continued)

4. Affiliates and Affiliated Transactions (continued):

5. Board of Trustees:

6. Borrowing from Banks:

7. Purchases and Sales/Maturities of Investment Securities:

For the period ended June 30, 2015, purchases and sales/maturities of securities (excluding short-term obligations) were as follows:

Purchases of Securities		Sales/Maturities of Securities
$14,242,998		$4,473,501

8. Derivatives:

The fund entered into equity index futures contracts during the report period. The fund invested in futures contracts to equitize available cash. The fair value and variation margin for futures contracts held at June 30, 2015 are presented on the Portfolio Holdings and Statement of Assets and Liabilities, respectively. The net realized and change in unrealized gains (losses) on futures contracts are presented on the Statement of Operations. Refer to financial note 2(b) for the fund’s accounting policies with respect to futures contracts and financial note 3 for disclosures concerning the risks of investing in futures contracts. During the period, the month-end average contract values of futures contracts held by the fund was $1,716,066 and the month-end average number of contracts held was 17.

Schwab S&P 500 Index Portfolio

Financial Notes, unaudited (continued)

9. Federal Income Taxes:

Capital loss carryforwards may be used to offset future realized capital gains, for federal income tax purposes. As of December 31, 2014, the fund had capital loss carryforwards available to offset future net capital gains before the expiration date as follows:

Expiration Date
December 31, 2016	$2,623,397
December 31, 2017	1,365,160
December 31, 2018	257,470
Total	$4,246,027

For tax purposes, realized net capital losses and late-year ordinary losses incurred after October 31 may be deferred and treated as occurring on the first day of the following year. For the year ended December 31, 2014, the fund had capital losses deferred of $1,247,083 and capital loss carryforwards utilized of $1,157,395.

10. Subsequent Events:

Investment Advisory Agreement Approval

The Board of Trustees (the “Board” or the “Trustees”, as appropriate) calls and holds one or more meetings each year that are dedicated, in whole or in part, to considering whether to renew the investment advisory agreement between Schwab Annuity Portfolios (the “Trust”) and Charles Schwab Investment Management, Inc. (“CSIM”) (the “Agreement”) with respect to the existing funds in the Trust, including Schwab S&P 500 Index Portfolio (the “Fund”), and to review certain other agreements pursuant to which CSIM provides investment advisory services to certain other registered investment companies. In preparation for the meeting(s), the Board requests and reviews a wide variety of materials provided by CSIM, including information about CSIM’s affiliates, personnel and operations. The Board also receives extensive data provided by third parties. This information is in addition to the detailed information about the Fund that the Board reviews during the course of each year, including information that relates to Fund operations and Fund performance. The Independent Trustees receive advice from independent counsel to the Independent Trustees, including a memorandum regarding the responsibilities of trustees for the approval of investment advisory agreements. In addition, the Independent Trustees meet in executive session outside the presence of Fund management and participate in question and answer sessions with representatives of CSIM.

consideration and evaluation of a variety of specific factors discussed at these meetings and at prior meetings, including:

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

Fund Expenses. With respect to the Fund’s expenses, the Trustees considered the rate of compensation called for by the Agreement, and the Fund’s net operating expense ratio, in each case, in comparison to those of other comparable mutual funds, such peer groups and comparisons having been selected and calculated by an independent third party. The Trustees considered the effects of CSIM’s and Schwab’s historical practice of waiving management and other fees to prevent total fund expenses from exceeding a specified cap. The Trustees also considered fees charged by CSIM to other mutual funds and to other types of accounts, such as 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 the unique insurance dedicated distribution arrangements of the Fund as compared to other funds managed by CSIM. 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.

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

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
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 and Laudus Institutional Trust since 2010)	Senior Fellow, The Hoover Institution at Stanford University (Oct. 1979 – present); Senior Fellow Stanford Institute for Economic Policy Research (2000 – present); Professor of Public Policy, Stanford University (1994 – present).	74	Director, Gilead Sciences, Inc. (2005 – present)
David L. Mahoney 1954 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011)	Private Investor.	74	Director, Symantec Corporation (2003 – present) Director, Corcept Therapeutics Incorporated (2004 – present) Director, Adamas Pharmaceuticals, Inc. (2009 – present)
Kiran M. Patel 1948 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011)	Retired. Executive Vice President and General Manager of Small Business Group, Intuit, Inc. (financial software and services firm for consumers and small businesses) (Dec. 2008 – Sept. 2013)	74	Director, KLA-Tencor Corporation (2008 – present)
Charles A. Ruffel 1956 Trustee (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2015)	Managing Partner and Co-Founder, Kudu Advisors, LLC (financial services) (May 2009 – present); Director, Asset International, Inc. (publisher of financial services information) (Jan. 2009 – Nov. 2014).	95	None.

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
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 and Laudus Institutional Trust since 2010)	Chairman, Chief Executive Officer and Founder of Smith Graham & Co. (investment advisors) (1990 – present).	74	Director, Eaton (2012 – present) Director and Chairman of the Audit Committee, Oneok Partners LP (2003 – 2013) Director, Oneok, Inc. (2009 – 2013) Lead Independent Director, Board of Cooper Industries (2002 – 2012)
Joseph H. Wender 1944 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust and Laudus Institutional Trust since 2010)	Senior Consultant, Goldman Sachs & Co., Inc. (investment banking and securities firm) (Jan. 2008 – present); Partner, Colgin Partners, LLC (vineyards) (Feb. 1998 – present).	74	Board Member and Chairman of the Audit Committee, Isis Pharmaceuticals (1994 – present)

Interested Trustees
Name, Year of Birth, and Position(s) with the trust; (Terms of office, and length of Time Served)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Charles R. Schwab² 1937 Chairman and Trustee (Chairman and Trustee of The Charles Schwab Family of Funds since 1989; Schwab Investments since 1991; Schwab Capital Trust since 1993; Schwab Annuity Portfolios since 1994; Laudus Trust and Laudus Institutional Trust since 2010)	Chairman and Director, The Charles Schwab Corporation (1986 – present); Chairman and Director of Charles Schwab & Co., Inc. (1971 – present); Chairman and Director of Charles Schwab Investment Management, Inc. (1989 – present); Chairman and Director of Charles Schwab Bank (2003 – present); Chairman and Chief Executive Officer of Schwab (SIS) Holdings Inc. I and Schwab International Holdings, Inc. (1996 – present); and Director, Chairman and Chief Executive Officer, Schwab Holdings, Inc. (1979 – present).	74	Chairman and Director, The Charles Schwab Corporation (1986 – present) Director, Yahoo! Inc. (2014 – present)
Walter W. Bettinger II² 1960 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 and Laudus Institutional Trust since 2010)	Director, President and Chief Executive Officer, The Charles Schwab Corporation and Charles Schwab & Co., Inc. (2008 – present); Director, Charles Schwab Bank (2006 – present); and Director, Schwab Holdings, Inc. (2008 – present).	95	Director, The Charles Schwab Corporation (2008 – present)

Officers of the Trust
Name, Year of Birth, and Position(s) with the trust; (Terms of office, and length of Time Served³)	Principal Occupations During the Past Five Years
Marie Chandoha 1961 President and Chief Executive Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2010)	Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; President, Chief Executive Officer (Dec. 2010 – present), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (January 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (March 2007 – August 2010).
George Pereira 1964 Treasurer and Principal Financial Officer, Schwab Funds Treasurer and Chief Financial Officer, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2004; Laudus Trust and Laudus Institutional Trust since 2006)	Senior Vice President and Chief Financial Officer (Nov. 2004 – present), Chief Operating Officer (Jan. 2011 – present), Charles Schwab Investment Management, Inc.; Treasurer and Chief Financial Officer, Laudus Funds (June 2006 – present); Treasurer and Principal Financial Officer, Schwab Funds (Nov. 2004 – present) and Schwab ETFs (Oct. 2009 – present); Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (April 2005 – present).
Omar Aguilar 1970 Senior Vice President and Chief Investment Officer – Equities (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011)	Senior Vice President and Chief Investment Officer – Equities, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer – Equities, Schwab Funds, Laudus Funds and Schwab ETFs (June 2011 – present); Head of the Portfolio Management Group and Vice President of Portfolio Management, Financial Engines, Inc. (May 2009 – April 2011); Head of Quantitative Equity, ING Investment Management (July 2004 – Jan. 2009).
Brett Wander 1961 Senior Vice President and Chief Investment Officer – Fixed Income (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011)	Senior Vice President and Chief Investment Officer – Fixed Income, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer – Fixed Income, Schwab Funds, Laudus Funds and Schwab ETFs (June 2011 – present); Senior Managing Director, Global Head of Active Fixed-Income Strategies, State Street Global Advisors (Jan. 2008 – Oct. 2010); Director of Alpha Strategies Loomis, Sayles & Company (April 2006 – Jan. 2008).
David Lekich 1964 Chief Legal Officer and Secretary, Schwab Funds Vice President and Assistant Clerk, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011)	Senior Vice President (Sept. 2011 – present), Vice President (March 2004 – Sept. 2011), Charles Schwab & Co., Inc.; Senior Vice President and Chief Counsel (Sept. 2011 – present), Vice President (Jan. 2011 – Sept. 2011), Charles Schwab Investment Management, Inc.; Secretary (April 2011 – present) and Chief Legal Officer (Dec. 2011 – present), Schwab Funds; Vice President and Assistant Clerk, Laudus Funds (April 2011 – present); Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs.
Catherine MacGregor 1964 Vice President and Assistant Secretary, Schwab Funds 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, Laudus Trust and Laudus Institutional Trust since 2005)	Vice President, Charles Schwab & Co., Inc., Charles Schwab Investment Management, Inc. (July 2005 – present); Vice President (Dec. 2005 – present), Chief Legal Officer and Clerk (March 2007 – present), Laudus Funds; Vice President (Nov. 2005 – present) and Assistant Secretary (June 2007 – present), Schwab Funds; Vice President and Assistant Secretary, Schwab ETFs (Oct. 2009 – present).

¹	Trustees remain in office until they resign, retire or are removed by shareholder vote. The Schwab and Laudus Funds’ retirement policy requires that independent trustees retire at age 72 or after twenty years as a trustee, whichever comes first. In addition, the retirement policy requires any independent trustee of Schwab Funds or Laudus Funds to retire from all Boards upon their required retirement date from either Board.
²	Mr. Schwab and Mr. Bettinger are Interested Trustees because they own stock of The Charles Schwab Corporation, the parent company of the investment adviser.
³	The President, Treasurer and Secretary/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 Boards.

The Investment Environment

Asset Class Performance Comparison % returns during the 6 months ended 6/30/2015

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

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

Schwab VIT Balanced Portfolio1

Schwab VIT Balanced Portfolio

Performance and Fund Facts as of 06/30/15

Average Annual Total Returns^1,2

Portfolio and inception Date	6 Months	1 Year	Since Inception
Portfolio: Schwab VIT Balanced Portfolio (07/25/12)	0.61%	0.01%	5.68%
VIT Balanced Composite Index	1.10%	0.74%	6.43%
S&P 500^® Index	1.23%	7.42%	18.38%
Barclays U.S. Aggregate Bond Index	-0.10%	1.86%	1.36%
Fund Category: Morningstar Conservative Allocation	0.60%	-0.20%	6.62%

Portfolio Expense Ratios³: Net 0.75%; Gross 0.87%

Statistics
Number of Holdings	19
Portfolio Turnover Rate⁴	5%

Asset Class Weightings % of Investments⁵
Fixed Income	37.9%
Stocks – U.S.	20.2%
Stocks – International	18.5%
Money Market Fund	12.7%
Real Assets	8.6%
Short-Term Investments	2.1%
Total	100.0%

Top Holdings % of Net Assets^6,7
Schwab U.S. Large-Cap ETF	15.0%
iShares MBS ETF	12.8%
Schwab Value Advantage Money Fund, Institutional Prime Shares	12.6%
Schwab Intermediate-Term U.S. Treasury ETF	11.6%
Schwab International Equity ETF	11.3%
iShares Core U.S. Credit Bond ETF	6.6%
Schwab U.S. REIT ETF	5.8%
Schwab Emerging Markets Equity ETF	5.2%
Schwab U.S. Small-Cap ETF	4.2%
Credit Suisse Commodity Return Strategy Fund, Class I	2.8%
Total	87.9%

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

Portfolio holdings may have changed since the report date.

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	Portfolio expenses have been partially absorbed by CSIM and its affiliates. Without these reductions, the portfolio’s returns would have been lower. Portfolio performance does not reflect the additional fees and expenses imposed by the insurance company under the variable insurance product contract. If those contract fees and expenses were included, the performance would be less than that shown. Please refer to the variable insurance product prospectus for a complete listing of these expenses.
³	As stated in the prospectus. Includes expenses of the underlying funds in which the portfolio invests. The annualized weighted average expense ratio of the underlying funds was 0.17%. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as adviser to the portfolio. 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	Not annualized.
⁵	The portfolio intends to primarily invest in affiliated Schwab exchange traded funds (ETFs) and unaffiliated third-party ETFs. The portfolio may also invest in affiliated Schwab and Laudus Funds and unaffiliated third party mutual funds (all such ETFs and mutual funds referred to as “underlying funds”). The portfolio may also invest directly in equity or fixed income securities, and money market investments to achieve its investment objectives.
⁶	This list is not a recommendation of any security by the investment adviser.
⁷	The holdings listed exclude any temporary liquidity investments.

Schwab VIT Balanced Portfolio3

Fund Expenses (Unaudited)

Examples for a $1,000 Investment

The portfolio incurs ongoing costs, such as management fees, transfer agent and shareholder services fees, and other fund expenses.

Please note that the expenses shown in the table are meant to highlight your ongoing costs.

	Expense Ratio¹ (Annualized)	Beginning Account Value at 1/1/15	Ending Account Value (Net of Expenses) at 6/30/15	Expenses Paid During Period² 1/1/15–6/30/15
Schwab VIT Balanced Portfolio
Actual Return	0.58%	$1,000.00	$1,006.10	$2.88
Hypothetical 5% Return	0.58%	$1,000.00	$ 1,021.92	$ 2.91

¹	Based on the most recent six-month expense ratio; may differ from the expense ratio provided in the Financial Highlights. The expenses incurred by the underlying funds in which the portfolio invests are not included in this ratio.
²	Expenses for the portfolio are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by 181 days of the period, and divided by 365 days of the fiscal year.

4Schwab VIT Balanced Portfolio

Schwab VIT Balanced Portfolio

Financial Statements

Financial Highlights

	1/1/15– 6/30/15*	1/1/14– 12/31/14	1/1/13– 12/31/13	7/25/12 ¹– 12/31/12
Per-Share Data ($)
Net asset value at beginning of period	11.61	11.21	10.50	10.00
Income (loss) from investment operations:
Net investment income (loss)	0.03 ²	0.15 ²	0.17 ²	0.08
Net realized and unrealized gains (losses)	0.04	0.31	0.55	0.42
Total from investment operations	0.07	0.46	0.72	0.50
Less distributions:
Distributions from net investment income	(0.12)	(0.06)	(0.01)	—
Distributions from net realized gains	(0.01)	(0.00) ³	—	—
Total distributions	(0.13)	(0.06)	(0.01)	—
Net asset value at end of period	11.55	11.61	11.21	10.50
Total return (%)	0.61 ⁴	4.15	6.89	5.00 ⁴
Ratios/Supplemental Data (%)
Ratios to average net assets:
Net operating expenses⁵	0.58 ⁶	0.57	0.58	0.58 ⁶
Gross operating expenses⁵	0.64 ⁶	0.70	1.07	10.58 ⁶
Net investment income (loss)	0.46 ⁶	1.29	1.55	3.94 ⁶
Portfolio turnover rate	5 ⁴	14	18	1 ⁴
Net assets, end of period ($ x 1,000,000)	48	44	28	2

*	Unaudited.

Commencement of operations.

Calculated based on the average shares outstanding during the period.

Per-share amount was less than $0.005.

⁴

Not annualized.

⁵

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

⁶

Annualized.

See financial notes 5

Schwab VIT Balanced Portfolio

Portfolio Holdings as of June 30, 2015 (Unaudited)

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

Holdings by Category		Cost ($)	Value ($)
97.7%	Other Investment Companies	44,984,951	46,913,768
2.1%	Short-Term Investments	993,211	993,211
99.8%	Total Investments	45,978,162	47,906,979
0.2%	Other Assets and Liabilities, Net		89,266
100.0%	Net Assets		47,996,245

Security	Number of Shares	Value ($)
Other Investment Companies 97.7% of net assets
U.S. Stocks 20.2%
Large-Cap 15.0%
Schwab U.S. Large-Cap ETF (a)	146,071	7,202,761
Micro-Cap 1.0%
iShares Micro-Cap ETF	6,144	500,921
Small-Cap 4.2%
Schwab U.S. Small-Cap ETF (a)	34,718	1,994,549
		9,698,231
International Stocks 18.5%
Developed-Market Large-Cap 11.3%
Schwab International Equity ETF (a)	177,886	5,420,187
Developed-Market Small-Cap 2.0%
Schwab International Small-Cap Equity ETF (a)	30,862	966,289
Emerging-Market 5.2%
Schwab Emerging Markets Equity ETF (a)	100,950	2,481,351
		8,867,827
Real Assets 8.6%
Commodity 2.8%
Credit Suisse Commodity Return Strategy Fund, Class I *	228,219	1,341,925
Real Estate 5.8%
Schwab U.S. REIT ETF (a)	76,455	2,776,846
		4,118,771

Security	Number of Shares	Value ($)
Fixed Income 37.8%
Agency Bond 2.0%
iShares Agency Bond ETF	8,553	968,028
Corporate Bond 6.6%
iShares Core U.S. Credit Bond ETF	29,142	3,163,947
High Yield Bond 1.1%
SPDR Barclays High Yield Bond ETF	14,149	543,746
Inflation-Protected Bond 1.7%
Schwab U.S. TIPS ETF (a)	15,043	815,481
International Developed-Market Bond 2.0%
SPDR Barclays International Treasury Bond ETF	18,292	951,550
Mortgage-Backed Bond 12.8%
iShares MBS ETF	56,693	6,157,994
Treasury Bond 11.6%
Schwab Intermediate-Term U.S. Treasury ETF (a)	103,428	5,544,774
		18,145,520
Money Market Fund 12.6%
Schwab Value Advantage Money Fund, Institutional Prime Shares 0.06% (a)(b)	6,083,419	6,083,419
Total Other Investment Companies
(Cost $44,984,951)		46,913,768
Issuer Rate, Maturity Date	Face Amount ($)	Value ($)
Short-Term Investments 2.1% of net assets
Time Deposits 2.1%
BNP Paribas
0.03%, 07/01/15	31,227	31,227
DNB
0.03%, 07/01/15	480,992	480,992
JPMorgan Chase Bank
0.03%, 07/01/15	480,992	480,992
Total Short-Term Investments
(Cost $993,211)		993,211

End of Investments.

At 06/30/15, the tax basis cost of the fund's investments was $46,184,853 and the unrealized appreciation and depreciation were $2,179,748 and ($457,622) respectively, with a net unrealized appreciation of $1,722,126.

*	Non-income producing security.
(a)	Issuer is affiliated with the fund's adviser.
(b)	The rate shown is the 7-day yield.

ETF —	Exchange Traded Fund
MBS —	Mortgage-Backed Security
REIT —	Real Estate Investment Trust
SPDR —	Standard & Poor's Depositary Receipts
TIPS —	Treasury Inflation Protected Securities

6 See financial notes

Schwab VIT Balanced Portfolio

Financial Notes, unaudited

1. Business Structure of the Fund:

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

Schwab Annuity Portfolios (organized January 21, 1994)

Schwab Money Market Portfolio

Schwab MarketTrack Growth Portfolio II

Schwab S&P 500 Index Portfolio

Schwab VIT Balanced Portfolio

Schwab VIT Balanced with Growth Portfolio

Schwab VIT Growth Portfolio

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

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

2. Significant Accounting Policies:

(a) Security Valuation:

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

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

Schwab VIT Balanced Portfolio

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):

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 fund pursuant to the valuation procedures.

• Short-term securities (60 days or less to maturity): A short-term security may be valued at its amortized cost when it approximates the security's market 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 and ETFs. Investments in mutual funds are valued daily at their NAVs, and investments in ETFs are valued daily at the last reported sale price or the official closing price, which are classified as Level 1 prices, without consideration to the classification level of the specific investments held by an underlying fund.

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

The levels associated with valuing the fund's investments as of June 30, 2015 are disclosed in the Portfolio Holdings.

Schwab VIT Balanced Portfolio

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):

(b) Security Transactions:

(d) Expenses:

(e) Distributions to Shareholders:

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

(f) Accounting Estimates:

(g) Federal Income Taxes:

(h) Indemnification:

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.

Affiliated Fund Risk. The investment adviser’s authority to select and substitute underlying funds from a variety of affiliated and unaffiliated ETFs and mutual funds may create a conflict of interest because the fees paid to it by some underlying funds are higher than the fees paid by other underlying funds. However, the portfolio manager is a fiduciary to the fund and is legally obligated to act in the fund’s best interests when selecting underlying funds, without taking fees into consideration.

Schwab VIT Balanced Portfolio

Financial Notes, unaudited (continued)

3. Risk Factors (continued):

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

Underlying Fund Investment Risk. The value of an investment in the fund is based primarily on the prices of the underlying funds that the fund purchases. In turn, the price of each underlying fund is based on the value of its securities. The fund is subject to the performance and expenses of the underlying funds in which it invests. Before investing in the fund, investors should assess the risks associated with the underlying funds in which the fund may invest and the types of investments made by those underlying funds. The risks below summarize certain principal investment risks of the underlying funds that are also principal investment risks to which the fund is subject because of the fund's investment allocation in the underlying funds and the underlying funds' asset allocation.

• Large-Cap Risk. Large-cap stocks tend to go in and out of favor based on market and economic conditions. During a period when large-cap stocks fall behind other types of investments — bonds or mid- or small- cap stocks, for instance — an underlying fund's performance also will lag those investments.

• Small-Cap Risk. Historically, small-cap stocks have been riskier than large- and mid-cap stocks, and their prices may move sharply, especially during market upturns and downturns. Small-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies. During a period when small-cap stocks fall behind other types of investments—bonds or large-cap stocks, for instance—an underlying fund's performance also will lag those investments.

• Foreign Investment Risk. An underlying fund's investments in securities of foreign issuers may involve certain risks that are greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of the 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. These risks may be heightened in connection with investments in emerging markets.

• Emerging Market Risk. An underlying fund's investments in securities of emerging market countries may involve certain risks that are greater than those associated with investments in securities of developed countries. Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Such countries often have less uniformity in accounting and reporting requirements and greater risk associated with the custody of securities. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in other countries. As a result, there will tend to be an increased risk of price volatility associated with an underlying fund's investments in emerging market countries and, at times, it may be difficult to value such investments.

• Growth Investing Risk. Certain of the underlying funds pursue a “growth style” of investing. Growth stocks can be volatile for several reasons. Since growth companies usually invest a high portion of earnings in their businesses, they 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. Growth stocks may also be more expensive relative to their earnings or assets compared to value or other stocks.

Schwab VIT Balanced Portfolio

Financial Notes, unaudited (continued)

3. Risk Factors (continued):

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

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

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

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

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

Schwab VIT Balanced Portfolio

Financial Notes, unaudited (continued)

3. Risk Factors (continued):

changes in the value of the underlying properties owned by the trusts, and mortgage REITs may be affected by the quality of any credit extended. Further, REITs may have their investments in relatively few properties, a small geographic area or a single property type. In addition, REITs have their own expenses, and the underlying fund will bear a proportionate share of those expenses.

• 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 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. 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.

• 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 gain distributions.

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

• Liquidity Risk. An underlying fund may be unable to sell illiquid securities at an advantageous time or price.

• Derivatives Risk. An underlying fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. An underlying fund’s use of derivatives could reduce the underlying fund’s performance, increase volatility, and could cause the underlying fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on an underlying fund.

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

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

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

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

• Money Market Risk. Although an underlying money market fund seeks to maintain a stable $1 net asset value, it is possible to lose money by investing in a money market fund.

Schwab VIT Balanced Portfolio

Financial Notes, unaudited (continued)

3. Risk Factors (continued):

Direct Investment Risk. The fund may invest directly in individual 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 and instruments.

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:

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

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

The fund may engage in certain transactions involving related parties. Pursuant to an exemptive order issued by the SEC, the fund may invest in other related ETFs and mutual funds. As of June 30, 2015, the Schwab VIT Balanced Portfolio's ownership percentages of other related funds' shares are:

Schwab U.S. Large-Cap ETF	0.2%
Schwab U.S. Small-Cap ETF	0.1%
Schwab International Equity ETF	0.1%
Schwab International Small-Cap Equity ETF	0.2%
Schwab Emerging Markets Equity ETF	0.2%
Schwab U.S. REIT ETF	0.2%
Schwab U.S. TIPS ETF	0.1%
Schwab Intermediate-Term U.S. Treasury ETF	1.6%
Schwab Value Advantage Money Fund, Institutional Prime Shares	0.1%

Schwab VIT Balanced Portfolio

Financial Notes, unaudited (continued)

4. Affiliates and Affiliated Transactions (continued):

Below is a summary of the fund's transactions with its affiliated underlying funds during the period ended June 30, 2015.

Underlying Funds	Balance of Shares Held at 12/31/14	Gross Purchases	Gross Sales	Balance of Shares Held at 06/30/15	Market Value at 06/30/15	Realized Gains (Losses) 01/01/15 to 06/30/15	Distributions Received* 01/01/15 to 06/30/15
Schwab U.S. Large-Cap ETF	141,801	13,524	(9,254)	146,071	$7,202,761	$8,898	$71,317
Schwab U.S. Small-Cap ETF	31,894	4,080	(1,256)	34,718	1,994,549	1,358	12,300
Schwab International Equity ETF	159,264	29,471	(10,849)	177,886	5,420,187	(21,205)	—
Schwab International Small-Cap Equity ETF	30,897	2,491	(2,526)	30,862	966,289	(6,491)	—
Schwab Emerging Markets Equity ETF	96,332	12,120	(7,502)	100,950	2,481,351	(8,447)	—
Schwab U.S. REIT ETF	70,944	11,307	(5,796)	76,455	2,776,846	9,985	29,787
Schwab U.S. TIPS ETF	13,958	1,675	(590)	15,043	815,481	(1,552)	—
Schwab Intermediate-Term U.S. Treasury ETF	95,231	13,717	(5,520)	103,428	5,544,774	149	34,831
Schwab Value Advantage Money Fund, Institutional Prime Shares	5,182,485	900,934	—	6,083,419	6,083,419	—	1,082
Total					$33,285,657	($17,305)	$149,317

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

5. Board of Trustees:

6. Borrowing from Banks:

Schwab VIT Balanced Portfolio

Financial Notes, unaudited (continued)

7. Purchases and Sales/Maturities of Investment Securities:

For the period ended June 30, 2015, purchases and sales/maturities of securities (excluding short-term obligations) were as follows:

Purchases of Securities		Sales/Maturities of Securities
$6,056,152		$2,196,308

8. Federal Income Taxes:

Capital loss carryforwards may be used to offset future realized capital gains for federal income tax purposes. As of December 31, 2014, the fund had no capital loss carryforwards.

9. Subsequent Events:

Investment Advisory Agreement Approval

The Board of Trustees (the “Board” or the “Trustees”, as appropriate) calls and holds one or more meetings each year that are dedicated, in whole or in part, to considering whether to renew the investment advisory agreement between Schwab Annuity Portfolios (the “Trust”) and Charles Schwab Investment Management, Inc. (“CSIM”) (the “Agreement”) with respect to Schwab VIT Balanced Portfolio (the “Fund”), and to review certain other agreements pursuant to which CSIM provides investment advisory services to certain other registered investment companies. In preparation for the meeting(s), the Board requests and reviews a wide variety of materials provided by CSIM, including information about CSIM’s affiliates, personnel and operations. The Board also receives extensive data provided by third parties. This information is in addition to the detailed information about the Fund that the Board reviews during the course of each year, including information that relates to Fund operations and Fund performance. The Independent Trustees receive advice from independent counsel to the Independent Trustees, including a memorandum regarding the responsibilities of trustees for the approval of investment advisory agreements. In addition, the Independent Trustees meet in executive session outside the presence of Fund management and participate in question and answer sessions with representatives of CSIM.

consideration and evaluation of a variety of specific factors discussed at these meetings and at prior meetings, including:

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

Fund Expenses. With respect to the Fund’s expenses, the Trustees considered the rate of compensation called for by the Agreement, and the Fund’s net operating expense ratio, in each case, in comparison to those of other comparable mutual funds, such peer groups and comparisons having been selected and calculated by an independent third party. The Trustees considered the effects of CSIM’s and Schwab’s historical practice of waiving management and other fees to prevent total fund expenses from exceeding a specified cap. The Trustees also considered fees charged by CSIM to other mutual funds and to other types of accounts, such as exchange-traded funds and wrap accounts, but, with respect to such other types of accounts, accorded less weight to such comparisons due to the different legal, regulatory, compliance and operating features of mutual funds as compared to these other types of accounts, and the unique insurance dedicated distribution arrangements of the Fund as compared to other funds managed by CSIM. 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.

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

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
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 and Laudus Institutional Trust since 2010)	Senior Fellow, The Hoover Institution at Stanford University (Oct. 1979 – present); Senior Fellow Stanford Institute for Economic Policy Research (2000 – present); Professor of Public Policy, Stanford University (1994 – present).	74	Director, Gilead Sciences, Inc. (2005 – present)
David L. Mahoney 1954 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011)	Private Investor.	74	Director, Symantec Corporation (2003 – present) Director, Corcept Therapeutics Incorporated (2004 – present) Director, Adamas Pharmaceuticals, Inc. (2009 – present)
Kiran M. Patel 1948 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011)	Retired. Executive Vice President and General Manager of Small Business Group, Intuit, Inc. (financial software and services firm for consumers and small businesses) (Dec. 2008 – Sept. 2013)	74	Director, KLA-Tencor Corporation (2008 – present)
Charles A. Ruffel 1956 Trustee (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2015)	Managing Partner and Co-Founder, Kudu Advisors, LLC (financial services) (May 2009 – present); Director, Asset International, Inc. (publisher of financial services information) (Jan. 2009 – Nov. 2014).	95	None.

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
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 and Laudus Institutional Trust since 2010)	Chairman, Chief Executive Officer and Founder of Smith Graham & Co. (investment advisors) (1990 – present).	74	Director, Eaton (2012 – present) Director and Chairman of the Audit Committee, Oneok Partners LP (2003 – 2013) Director, Oneok, Inc. (2009 – 2013) Lead Independent Director, Board of Cooper Industries (2002 – 2012)
Joseph H. Wender 1944 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust and Laudus Institutional Trust since 2010)	Senior Consultant, Goldman Sachs & Co., Inc. (investment banking and securities firm) (Jan. 2008 – present); Partner, Colgin Partners, LLC (vineyards) (Feb. 1998 – present).	74	Board Member and Chairman of the Audit Committee, Isis Pharmaceuticals (1994 – present)

Interested Trustees
Name, Year of Birth, and Position(s) with the trust; (Terms of office, and length of Time Served)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Charles R. Schwab² 1937 Chairman and Trustee (Chairman and Trustee of The Charles Schwab Family of Funds since 1989; Schwab Investments since 1991; Schwab Capital Trust since 1993; Schwab Annuity Portfolios since 1994; Laudus Trust and Laudus Institutional Trust since 2010)	Chairman and Director, The Charles Schwab Corporation (1986 – present); Chairman and Director of Charles Schwab & Co., Inc. (1971 – present); Chairman and Director of Charles Schwab Investment Management, Inc. (1989 – present); Chairman and Director of Charles Schwab Bank (2003 – present); Chairman and Chief Executive Officer of Schwab (SIS) Holdings Inc. I and Schwab International Holdings, Inc. (1996 – present); and Director, Chairman and Chief Executive Officer, Schwab Holdings, Inc. (1979 – present).	74	Chairman and Director, The Charles Schwab Corporation (1986 – present) Director, Yahoo! Inc. (2014 – present)
Walter W. Bettinger II² 1960 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 and Laudus Institutional Trust since 2010)	Director, President and Chief Executive Officer, The Charles Schwab Corporation and Charles Schwab & Co., Inc. (2008 – present); Director, Charles Schwab Bank (2006 – present); and Director, Schwab Holdings, Inc. (2008 – present).	95	Director, The Charles Schwab Corporation (2008 – present)

Officers of the Trust
Name, Year of Birth, and Position(s) with the trust; (Terms of office, and length of Time Served³)	Principal Occupations During the Past Five Years
Marie Chandoha 1961 President and Chief Executive Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2010)	Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; President, Chief Executive Officer (Dec. 2010 – present), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (January 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (March 2007 – August 2010).
George Pereira 1964 Treasurer and Principal Financial Officer, Schwab Funds Treasurer and Chief Financial Officer, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2004; Laudus Trust and Laudus Institutional Trust since 2006)	Senior Vice President and Chief Financial Officer (Nov. 2004 – present), Chief Operating Officer (Jan. 2011 – present), Charles Schwab Investment Management, Inc.; Treasurer and Chief Financial Officer, Laudus Funds (June 2006 – present); Treasurer and Principal Financial Officer, Schwab Funds (Nov. 2004 – present) and Schwab ETFs (Oct. 2009 – present); Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (April 2005 – present).
Omar Aguilar 1970 Senior Vice President and Chief Investment Officer – Equities (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011)	Senior Vice President and Chief Investment Officer – Equities, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer – Equities, Schwab Funds, Laudus Funds and Schwab ETFs (June 2011 – present); Head of the Portfolio Management Group and Vice President of Portfolio Management, Financial Engines, Inc. (May 2009 – April 2011); Head of Quantitative Equity, ING Investment Management (July 2004 – Jan. 2009).
Brett Wander 1961 Senior Vice President and Chief Investment Officer – Fixed Income (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011)	Senior Vice President and Chief Investment Officer – Fixed Income, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer – Fixed Income, Schwab Funds, Laudus Funds and Schwab ETFs (June 2011 – present); Senior Managing Director, Global Head of Active Fixed-Income Strategies, State Street Global Advisors (Jan. 2008 – Oct. 2010); Director of Alpha Strategies Loomis, Sayles & Company (April 2006 – Jan. 2008).
David Lekich 1964 Chief Legal Officer and Secretary, Schwab Funds Vice President and Assistant Clerk, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011)	Senior Vice President (Sept. 2011 – present), Vice President (March 2004 – Sept. 2011), Charles Schwab & Co., Inc.; Senior Vice President and Chief Counsel (Sept. 2011 – present), Vice President (Jan. 2011 – Sept. 2011), Charles Schwab Investment Management, Inc.; Secretary (April 2011 – present) and Chief Legal Officer (Dec. 2011 – present), Schwab Funds; Vice President and Assistant Clerk, Laudus Funds (April 2011 – present); Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs.
Catherine MacGregor 1964 Vice President and Assistant Secretary, Schwab Funds 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, Laudus Trust and Laudus Institutional Trust since 2005)	Vice President, Charles Schwab & Co., Inc., Charles Schwab Investment Management, Inc. (July 2005 – present); Vice President (Dec. 2005 – present), Chief Legal Officer and Clerk (March 2007 – present), Laudus Funds; Vice President (Nov. 2005 – present) and Assistant Secretary (June 2007 – present), Schwab Funds; Vice President and Assistant Secretary, Schwab ETFs (Oct. 2009 – present).

¹	Trustees remain in office until they resign, retire or are removed by shareholder vote. The Schwab and Laudus Funds’ retirement policy requires that independent trustees retire at age 72 or after twenty years as a trustee, whichever comes first. In addition, the retirement policy requires any independent trustee of Schwab Funds or Laudus Funds to retire from all Boards upon their required retirement date from either Board.
²	Mr. Schwab and Mr. Bettinger are Interested Trustees because they own stock of The Charles Schwab Corporation, the parent company of the investment adviser.
³	The President, Treasurer and Secretary/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 Boards.

Glossary

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

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

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

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

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

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

Barclays 3 – 10 Year U.S. Treasury Bond Index An index that measures the performance of U.S. Treasury securities that have a remaining maturity of greater than or equal to three years and less than 10 years.

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

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

Dow Jones U.S. Select REIT Index A float-adjusted market capitalization weighted index comprised of real estate investment trusts (REITs).

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

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

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

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

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

Russell 2000 Index An index that measures the performance of the small-cap segment of the U.S. equity universe.

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

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

VIT Balanced Composite Index A custom blended index developed by CSIM based on a comparable portfolio asset allocation and calculated using the following portion allocations: 15% Dow Jones U.S. Large Cap Total Stock Market

Index, 4% Dow Jones U.S. Small-Cap Total Stock Market Index, 1% Russell Microcap Index, 11% FTSE Developed ex-US Index (Net), 2% FTSE Developed Small Cap ex-US Liquid Index (Net), 5% FTSE Emerging Index (Net), 6% Dow Jones U.S. Select REIT Index, 3% Dow Jones UBS Commodity Index, 2% Barclays U.S. TIPS Index (Series-L), 12% Barclays 3 – 10 Year U.S. Treasury Bond Index, 2% Barclays U.S. Aggregate: Agencies Index, 6% Barclays U.S. Credit Index, 13% Barclays U.S. MBS: Agency Fixed Rate MBS Index, 2% Barclays Global Treasury ex-U.S. [Capped] Index, 1% Barclays High Yield Bond Very Liquid Index, 15% Barclays U.S. Treasury Bills: 1 – 3 Month Index. The index is maintained by CSIM. The components that make up the composite index may vary over time.

The Investment Environment

Asset Class Performance Comparison % returns during the 6 months ended 6/30/2015

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

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

Schwab VIT Balanced with Growth Portfolio1

Schwab VIT Balanced with Growth Portfolio

Performance and Fund Facts as of 06/30/15

Average Annual Total Returns^1,2

Portfolio and inception Date	6 Months	1 Year	Since Inception
Portfolio: Schwab VIT Balanced with Growth Portfolio (07/25/12)	1.41%	0.02%	8.00%
VIT Balanced with Growth Composite Index	1.73%	0.71%	8.91%
S&P 500^® Index	1.23%	7.42%	18.38%
Barclays U.S. Aggregate Bond Index	-0.10%	1.86%	1.36%
Fund Category: Morningstar Moderate Allocation	1.22%	2.06%	10.92%

Portfolio Expense Ratios³: 0.73%

Statistics
Number of Holdings	19
Portfolio Turnover Rate⁴	4%

Asset Class Weightings % of Investments⁵
Fixed Income	29.7%
Stocks – U.S.	29.2%
Stocks – International	26.4%
Real Assets	9.6%
Short-Term Investments	2.6%
Money Market Fund	2.5%
Total	100.0%

Top Holdings % of Net Assets^6,7
Schwab U.S. Large-Cap ETF	22.0%
Schwab International Equity ETF	17.3%
iShares MBS ETF	10.8%
Schwab Intermediate-Term U.S. Treasury ETF	8.5%
Schwab U.S. Small-Cap ETF	6.1%
Schwab Emerging Markets Equity ETF	6.1%
Schwab U.S. REIT ETF	5.8%
iShares Core U.S. Credit Bond ETF	4.6%
Credit Suisse Commodity Return Strategy Fund, Class I	3.9%
Schwab International Small-Cap Equity ETF	3.0%
Total	88.1%

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

Portfolio holdings may have changed since the report date.

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	Portfolio expenses have been partially absorbed by CSIM and its affiliates. Without these reductions, the portfolio’s returns would have been lower. Portfolio performance does not reflect the additional fees and expenses imposed by the insurance company under the variable insurance product contract. If those contract fees and expenses were included, the performance would be less than that shown. Please refer to the variable insurance product prospectus for a complete listing of these expenses.
³	As stated in the prospectus. Includes expenses of the underlying funds in which the portfolio invests. The annualized weighted average expense ratio of the underlying funds was 0.16%. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as adviser to the portfolio. 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	Not annualized.
⁵	The portfolio intends to primarily invest in affiliated Schwab exchange traded funds (ETFs) and unaffiliated third-party ETFs. The portfolio may also invest in affiliated Schwab and Laudus Funds and unaffiliated third party mutual funds (all such ETFs and mutual funds referred to as “underlying funds”). The portfolio may also invest directly in equity or fixed income securities, and money market investments to achieve its investment objectives.
⁶	This list is not a recommendation of any security by the investment adviser.
⁷	The holdings listed exclude any temporary liquidity investments.

Schwab VIT Balanced with Growth Portfolio3

Fund Expenses (Unaudited)

Examples for a $1,000 Investment

The portfolio incurs ongoing costs, such as management fees, transfer agent and shareholder services fees, and other fund expenses.

Please note that the expenses shown in the table are meant to highlight your ongoing costs.

	Expense Ratio¹ (Annualized)	Beginning Account Value at 1/1/15	Ending Account Value (Net of Expenses) at 6/30/15	Expenses Paid During Period² 1/1/15–6/30/15
Schwab VIT Balanced with Growth Portfolio
Actual Return	0.53%	$1,000.00	$1,014.10	$ 2.65
Hypothetical 5% Return	0.53%	$1,000.00	$1,022.17	$2.66

¹	Based on the most recent six-month expense ratio; may differ from the expense ratio provided in the Financial Highlights. The expenses incurred by the underlying funds in which the portfolio invests are not included in this ratio.
²	Expenses for the portfolio are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by 181 days of the period, and divided by 365 days of the fiscal year.

4Schwab VIT Balanced with Growth Portfolio

Schwab VIT Balanced with Growth Portfolio

Financial Statements

Financial Highlights

	1/1/15– 6/30/15*	1/1/14– 12/31/14	1/1/13– 12/31/13	7/25/12 ¹– 12/31/12
Per-Share Data ($)
Net asset value at beginning of period	12.26	11.86	10.71	10.00
Income (loss) from investment operations:
Net investment income (loss)	0.04 ²	0.19 ²	0.23 ²	0.09
Net realized and unrealized gains (losses)	0.13	0.30	0.93	0.62
Total from investment operations	0.17	0.49	1.16	0.71
Less distributions:
Distributions from net investment income	(0.15)	(0.09)	(0.01)	—
Distributions from net realized gains	(0.01)	(0.00) ³	—	—
Total distributions	(0.16)	(0.09)	(0.01)	—
Net asset value at end of period	12.27	12.26	11.86	10.71
Total return (%)	1.41 ⁴	4.15	10.79	7.10 ⁴
Ratios/Supplemental Data (%)
Ratios to average net assets:
Net operating expenses⁵	0.53 ⁶	0.55	0.58	0.58 ⁶
Gross operating expenses⁵	0.55 ⁶	0.57	0.75	16.10 ⁶
Net investment income (loss)	0.57 ⁶	1.53	2.07	4.80 ⁶
Portfolio turnover rate	4 ⁴	8	14	1 ⁴
Net assets, end of period ($ x 1,000,000)	110	99	70	2

*	Unaudited.

Commencement of operations.

Calculated based on the average shares outstanding during the period.

Per-share amount was less than $0.005.

⁴

Not annualized.

⁵

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

⁶

Annualized.

See financial notes 5

Schwab VIT Balanced with Growth Portfolio

Portfolio Holdings as of June 30, 2015 (Unaudited)

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

Holdings by Category		Cost ($)	Value ($)
97.6%	Other Investment Companies	101,600,916	107,477,689
2.6%	Short-Term Investments	2,905,304	2,905,304
100.2%	Total Investments	104,506,220	110,382,993
(0.2%)	Other Assets and Liabilities, Net		(233,687)
100.0%	Net Assets		110,149,306

Security	Number of Shares	Value ($)
Other Investment Companies 97.6% of net assets
U.S. Stocks 29.2%
Large-Cap 22.0%
Schwab U.S. Large-Cap ETF (a)	490,830	24,202,827
Micro-Cap 1.1%
iShares Micro-Cap ETF	14,427	1,176,233
Small-Cap 6.1%
Schwab U.S. Small-Cap ETF (a)	118,253	6,793,635
		32,172,695
International Stocks 26.4%
Developed-Market Large-Cap 17.3%
Schwab International Equity ETF (a)	624,475	19,027,753
Developed-Market Small-Cap 3.0%
Schwab International Small-Cap Equity ETF (a)	106,397	3,331,290
Emerging-Market 6.1%
Schwab Emerging Markets Equity ETF (a)	274,970	6,758,763
		29,117,806
Real Assets 9.7%
Commodity 3.9%
Credit Suisse Commodity Return Strategy Fund, Class I *	720,749	4,238,004
Real Estate 5.8%
Schwab U.S. REIT ETF (a)	176,139	6,397,368
		10,635,372

Security	Number of Shares	Value ($)
Fixed Income 29.8%
Agency Bond 2.0%
iShares Agency Bond ETF	19,826	2,243,907
Corporate Bond 4.6%
iShares Core U.S. Credit Bond ETF	46,500	5,048,505
High Yield Bond 1.2%
SPDR Barclays High Yield Bond ETF	32,855	1,262,618
Inflation-Protected Bond 1.7%
Schwab U.S. TIPS ETF (a)	34,744	1,883,472
International Developed-Market Bond 1.0%
SPDR Barclays International Treasury Bond ETF	20,346	1,058,399
Mortgage-Backed Bond 10.8%
iShares MBS ETF	109,621	11,907,033
Treasury Bond 8.5%
Schwab Intermediate-Term U.S. Treasury ETF (a)	174,840	9,373,172
		32,777,106
Money Market Fund 2.5%
Schwab Value Advantage Money Fund, Institutional Prime Shares 0.06% (a)(b)	2,774,710	2,774,710
Total Other Investment Companies
(Cost $101,600,916)		107,477,689
Issuer Rate, Maturity Date	Face Amount ($)	Value ($)
Short-Term Investments 2.6% of net assets
Time Deposits 2.6%
Australia & New Zealand Banking Group Ltd.
0.03%, 07/01/15	1,102,510	1,102,510
JPMorgan Chase Bank
0.03%, 07/01/15	1,102,510	1,102,510
Nordea Bank
0.03%, 07/01/15	700,284	700,284
Total Short-Term Investments
(Cost $2,905,304)		2,905,304

End of Investments.

At 06/30/15, the tax basis cost of the fund's investments was $104,835,930 and the unrealized appreciation and depreciation were $6,651,044 and ($1,103,981) respectively, with a net unrealized appreciation of $5,547,063.

*	Non-income producing security.
(a)	Issuer is affiliated with the fund's adviser.
(b)	The rate shown is the 7-day yield.

ETF —	Exchange Traded Fund
MBS —	Mortgage-Backed Security
REIT —	Real Estate Investment Trust
SPDR —	Standard & Poor's Depositary Receipts
TIPS —	Treasury Inflation Protected Securities

6 See financial notes

Schwab VIT Balanced with Growth Portfolio

Statement of

Changes in Net Assets

For the current and prior report periods

Figures for the current period are unaudited

Operations
	1/1/15-6/30/15		1/1/14-12/31/14
Net investment income		$295,290	$1,355,907
Net realized gains (losses)		31,410	(30,819)
Net change in unrealized appreciation (depreciation)	+	926,964	1,972,105
Increase in net assets from operations		1,253,664	3,297,193
Distributions to Shareholders
Distributions from net investment income		(1,356,819)	(672,772)
Distributions from net realized gains	+	(87,737)	(12,459)
Total distributions		($1,444,556)	($685,231)

Transactions in Fund Shares
		1/1/15-6/30/15		1/1/14-12/31/14
		SHARES	VALUE	SHARES	VALUE
Shares sold		1,010,229	$12,740,699	2,491,882	$30,247,487
Shares reinvested		117,730	1,444,556	55,127	685,231
Shares redeemed	+	(248,313)	(3,121,661)	(325,359)	(3,961,691)
Net transactions in fund shares		879,646	$11,063,594	2,221,650	$26,971,027
Shares Outstanding and Net Assets
		1/1/15-6/30/15		1/1/14-12/31/14
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		8,098,662	$99,276,604	5,877,012	$69,693,615
Total increase	+	879,646	10,872,702	2,221,650	29,582,989
End of period		8,978,308	$110,149,306	8,098,662	$99,276,604
Net investment income not yet distributed			$294,611		$1,356,140

10 See financial notes

Schwab VIT Balanced with Growth Portfolio

Financial Notes, unaudited

1. Business Structure of the Fund:

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

Schwab Annuity Portfolios (organized January 21, 1994)

Schwab Money Market Portfolio

Schwab MarketTrack Growth Portfolio II

Schwab S&P 500 Index Portfolio

Schwab VIT Balanced Portfolio

Schwab VIT Balanced with Growth Portfolio

Schwab VIT Growth Portfolio

2. Significant Accounting Policies:

(a) Security Valuation:

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

Schwab VIT Balanced with Growth Portfolio

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):

• Short-term securities (60 days or less to maturity): A short-term security may be valued at its amortized cost when it approximates the security's market 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 and ETFs. Investments in mutual funds are valued daily at their NAVs, and investments in ETFs are valued daily at the last reported sale price or the official closing price, which are classified as Level 1 prices, without consideration to the classification level of the specific investments held by an underlying fund.

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

The levels associated with valuing the fund's investments as of June 30, 2015 are disclosed in the Portfolio Holdings.

Schwab VIT Balanced with Growth Portfolio

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):

(b) Security Transactions:

(d) Expenses:

(e) Distributions to Shareholders:

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

(f) Accounting Estimates:

(g) Federal Income Taxes:

(h) Indemnification:

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.

Schwab VIT Balanced with Growth Portfolio

Financial Notes, unaudited (continued)

3. Risk Factors (continued):

Underlying Fund Investment Risk. The value of an investment in the fund is based primarily on the prices of the underlying funds that the fund purchases. In turn, the price of each underlying fund is based on the value of its securities. The fund is subject to the performance and expenses of the underlying funds in which it invests. Before investing in the fund, investors should assess the risks associated with the underlying funds in which the fund may invest and the types of investments made by those underlying funds. The risks below summarize certain principal investment risks of the underlying funds that are also principal investment risks to which the fund is subject because of the fund's investment allocation in the underlying funds and the underlying funds' asset allocation.

• Foreign Investment Risk. An underlying fund's investments in securities of foreign issuers may involve certain risks that are greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of the 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. These risks may be heightened in connection with investments in emerging markets.

• Growth Investing Risk. Certain of the underlying funds pursue a “growth style” of investing. Growth investing focuses on a company's prospects for growth of revenue and earnings. Growth stocks can be volatile for several reasons. Since growth companies usually invest a high portion of earnings in their businesses, they may lack the dividends of value

Schwab VIT Balanced with Growth Portfolio

Financial Notes, unaudited (continued)

3. Risk Factors (continued):

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.

Schwab VIT Balanced with Growth Portfolio

Financial Notes, unaudited (continued)

3. Risk Factors (continued):

• Real Estate Investment Trust (REITs) Risk. An underlying fund may invest in REITs. An underlying fund's investments in REITs will be subject to the risks associated with the direct ownership of real estate, including fluctuations in the value of underlying properties, defaults by borrowers or tenants, changes in interest rates and risks related to general or local economic conditions. REITs are also subject to certain additional risks. For example, equity REITs may be affected by changes in the value of the underlying properties owned by the trusts, and mortgage REITs may be affected by the quality of any credit extended. Further, REITs may have their investments in relatively few properties, a small geographic area or a single property type. In addition, REITs have their own expenses, and the underlying fund will bear a proportionate share of those expenses.

• Liquidity Risk. An underlying fund may be unable to sell illiquid securities at an advantageous time or price.

• Derivatives Risk. An underlying fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. An underlying fund’s use of derivatives could reduce the underlying fund’s performance, increase volatility, and could cause the underlying fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on an underlying fund.

Schwab VIT Balanced with Growth Portfolio

Financial Notes, unaudited (continued)

3. Risk Factors (continued):

• Money Market Risk. Although an underlying money market fund seeks to maintain a stable $1 net asset value, it is possible to lose money by investing in a money market fund.

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

4. Affiliates and Affiliated Transactions:

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

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

The fund may engage in certain transactions involving related parties. Pursuant to an exemptive order issued by the SEC, the fund may invest in other related ETFs and mutual funds. As of June 30, 2015, the Schwab VIT Balanced with Growth Portfolio's ownership percentages of other related funds' shares are:

Schwab U.S. Large-Cap ETF	0.5%
Schwab U.S. Small-Cap ETF	0.2%
Schwab International Equity ETF	0.5%
Schwab International Small-Cap Equity ETF	0.5%
Schwab Emerging Markets Equity ETF	0.5%
Schwab U.S. REIT ETF	0.4%
Schwab U.S. TIPS ETF	0.3%
Schwab Intermediate-Term U.S. Treasury ETF	2.8%
Schwab Value Advantage Money Fund, Institutional Prime Shares	0.0%*

*	Less than 0.05%

Schwab VIT Balanced with Growth Portfolio

Financial Notes, unaudited (continued)

4. Affiliates and Affiliated Transactions (continued):

Below is a summary of the fund's transactions with its affiliated underlying funds during the period ended June 30, 2015.

Underlying Funds	Balance of Shares Held at 12/31/14	Gross Purchases	Gross Sales	Balance of Shares Held at 06/30/15	Market Value at 06/30/15	Realized Gains (Losses) 01/01/15 to 06/30/15	Distributions Received* 01/01/15 to 06/30/15
Schwab U.S. Large-Cap ETF	458,286	55,312	(22,768)	490,830	$24,202,827	$75,534	$231,784
Schwab U.S. Small-Cap ETF	107,162	12,517	(1,426)	118,253	6,793,635	2,659	40,386
Schwab International Equity ETF	562,561	86,432	(24,518)	624,475	19,027,753	(57,166)	—
Schwab International Small-Cap Equity ETF	103,790	10,032	(7,425)	106,397	3,331,290	(19,923)	—
Schwab Emerging Markets Equity ETF	258,260	26,806	(10,096)	274,970	6,758,763	(12,432)	—
Schwab U.S. REIT ETF	158,515	28,694	(11,070)	176,139	6,397,368	63,833	66,165
Schwab U.S. TIPS ETF	31,344	4,724	(1,324)	34,744	1,883,472	(3,184)	—
Schwab Intermediate-Term U.S. Treasury ETF	156,770	25,474	(7,404)	174,840	9,373,172	2,161	56,497
Schwab Value Advantage Money Fund, Institutional Prime Shares	2,774,250	460	—	2,774,710	2,774,710	—	528
Total					$80,542,990	$51,482	$395,360

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

5. Board of Trustees:

6. Borrowing from Banks:

Schwab VIT Balanced with Growth Portfolio

Financial Notes, unaudited (continued)

7. Purchases and Sales/Maturities of Investment Securities:

For the period ended June 30, 2015, purchases and sales/maturities of securities (excluding short-term obligations) were as follows:

Purchases of Securities		Sales/Maturities of Securities
$13,625,749		$4,084,803

8. Federal Income Taxes:

Capital loss carryforwards may be used to offset future realized capital gains for federal income tax purposes. As of December 31, 2014, the fund had no capital loss carryforwards.

9. Subsequent Events:

Investment Advisory Agreement Approval

The Board of Trustees (the “Board” or the “Trustees”, as appropriate) calls and holds one or more meetings each year that are dedicated, in whole or in part, to considering whether to renew the investment advisory agreement between Schwab Annuity Portfolios (the “Trust”) and Charles Schwab Investment Management, Inc. (“CSIM”) (the “Agreement”) with respect to Schwab VIT Balanced with Growth Portfolio (the “Fund”), and to review certain other agreements pursuant to which CSIM provides investment advisory services to certain other registered investment companies. In preparation for the meeting(s), the Board requests and reviews a wide variety of materials provided by CSIM, including information about CSIM’s affiliates, personnel and operations. The Board also receives extensive data provided by third parties. This information is in addition to the detailed information about the Fund that the Board reviews during the course of each year, including information that relates to Fund operations and Fund performance. The Independent Trustees receive advice from independent counsel to the Independent Trustees, including a memorandum regarding the responsibilities of trustees for the approval of investment advisory agreements. In addition, the Independent Trustees meet in executive session outside the presence of Fund management and participate in question and answer sessions with representatives of CSIM.

consideration and evaluation of a variety of specific factors discussed at these meetings and at prior meetings, including:

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

Fund Expenses. With respect to the Fund’s expenses, the Trustees considered the rate of compensation called for by the Agreement, and the Fund’s net operating expense ratio, in each case, in comparison to those of other comparable mutual funds, such peer groups and comparisons having been selected and calculated by an independent third party. The Trustees considered the effects of CSIM’s and Schwab’s historical practice of waiving management and other fees to prevent total fund expenses from exceeding a specified cap. The Trustees also considered fees charged by CSIM to other mutual funds and to other types of accounts, such as 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 the unique insurance dedicated distribution arrangements of the Fund as compared to other funds managed by CSIM. 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.

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

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
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 and Laudus Institutional Trust since 2010)	Senior Fellow, The Hoover Institution at Stanford University (Oct. 1979 – present); Senior Fellow Stanford Institute for Economic Policy Research (2000 – present); Professor of Public Policy, Stanford University (1994 – present).	74	Director, Gilead Sciences, Inc. (2005 – present)
David L. Mahoney 1954 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011)	Private Investor.	74	Director, Symantec Corporation (2003 – present) Director, Corcept Therapeutics Incorporated (2004 – present) Director, Adamas Pharmaceuticals, Inc. (2009 – present)
Kiran M. Patel 1948 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011)	Retired. Executive Vice President and General Manager of Small Business Group, Intuit, Inc. (financial software and services firm for consumers and small businesses) (Dec. 2008 – Sept. 2013)	74	Director, KLA-Tencor Corporation (2008 – present)
Charles A. Ruffel 1956 Trustee (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2015)	Managing Partner and Co-Founder, Kudu Advisors, LLC (financial services) (May 2009 – present); Director, Asset International, Inc. (publisher of financial services information) (Jan. 2009 – Nov. 2014).	95	None.

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
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 and Laudus Institutional Trust since 2010)	Chairman, Chief Executive Officer and Founder of Smith Graham & Co. (investment advisors) (1990 – present).	74	Director, Eaton (2012 – present) Director and Chairman of the Audit Committee, Oneok Partners LP (2003 – 2013) Director, Oneok, Inc. (2009 – 2013) Lead Independent Director, Board of Cooper Industries (2002 – 2012)
Joseph H. Wender 1944 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust and Laudus Institutional Trust since 2010)	Senior Consultant, Goldman Sachs & Co., Inc. (investment banking and securities firm) (Jan. 2008 – present); Partner, Colgin Partners, LLC (vineyards) (Feb. 1998 – present).	74	Board Member and Chairman of the Audit Committee, Isis Pharmaceuticals (1994 – present)

Interested Trustees
Name, Year of Birth, and Position(s) with the trust; (Terms of office, and length of Time Served)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Charles R. Schwab² 1937 Chairman and Trustee (Chairman and Trustee of The Charles Schwab Family of Funds since 1989; Schwab Investments since 1991; Schwab Capital Trust since 1993; Schwab Annuity Portfolios since 1994; Laudus Trust and Laudus Institutional Trust since 2010)	Chairman and Director, The Charles Schwab Corporation (1986 – present); Chairman and Director of Charles Schwab & Co., Inc. (1971 – present); Chairman and Director of Charles Schwab Investment Management, Inc. (1989 – present); Chairman and Director of Charles Schwab Bank (2003 – present); Chairman and Chief Executive Officer of Schwab (SIS) Holdings Inc. I and Schwab International Holdings, Inc. (1996 – present); and Director, Chairman and Chief Executive Officer, Schwab Holdings, Inc. (1979 – present).	74	Chairman and Director, The Charles Schwab Corporation (1986 – present) Director, Yahoo! Inc. (2014 – present)
Walter W. Bettinger II² 1960 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 and Laudus Institutional Trust since 2010)	Director, President and Chief Executive Officer, The Charles Schwab Corporation and Charles Schwab & Co., Inc. (2008 – present); Director, Charles Schwab Bank (2006 – present); and Director, Schwab Holdings, Inc. (2008 – present).	95	Director, The Charles Schwab Corporation (2008 – present)

Officers of the Trust
Name, Year of Birth, and Position(s) with the trust; (Terms of office, and length of Time Served³)	Principal Occupations During the Past Five Years
Marie Chandoha 1961 President and Chief Executive Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2010)	Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; President, Chief Executive Officer (Dec. 2010 – present), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (January 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (March 2007 – August 2010).
George Pereira 1964 Treasurer and Principal Financial Officer, Schwab Funds Treasurer and Chief Financial Officer, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2004; Laudus Trust and Laudus Institutional Trust since 2006)	Senior Vice President and Chief Financial Officer (Nov. 2004 – present), Chief Operating Officer (Jan. 2011 – present), Charles Schwab Investment Management, Inc.; Treasurer and Chief Financial Officer, Laudus Funds (June 2006 – present); Treasurer and Principal Financial Officer, Schwab Funds (Nov. 2004 – present) and Schwab ETFs (Oct. 2009 – present); Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (April 2005 – present).
Omar Aguilar 1970 Senior Vice President and Chief Investment Officer – Equities (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011)	Senior Vice President and Chief Investment Officer – Equities, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer – Equities, Schwab Funds, Laudus Funds and Schwab ETFs (June 2011 – present); Head of the Portfolio Management Group and Vice President of Portfolio Management, Financial Engines, Inc. (May 2009 – April 2011); Head of Quantitative Equity, ING Investment Management (July 2004 – Jan. 2009).
Brett Wander 1961 Senior Vice President and Chief Investment Officer – Fixed Income (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011)	Senior Vice President and Chief Investment Officer – Fixed Income, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer – Fixed Income, Schwab Funds, Laudus Funds and Schwab ETFs (June 2011 – present); Senior Managing Director, Global Head of Active Fixed-Income Strategies, State Street Global Advisors (Jan. 2008 – Oct. 2010); Director of Alpha Strategies Loomis, Sayles & Company (April 2006 – Jan. 2008).
David Lekich 1964 Chief Legal Officer and Secretary, Schwab Funds Vice President and Assistant Clerk, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011)	Senior Vice President (Sept. 2011 – present), Vice President (March 2004 – Sept. 2011), Charles Schwab & Co., Inc.; Senior Vice President and Chief Counsel (Sept. 2011 – present), Vice President (Jan. 2011 – Sept. 2011), Charles Schwab Investment Management, Inc.; Secretary (April 2011 – present) and Chief Legal Officer (Dec. 2011 – present), Schwab Funds; Vice President and Assistant Clerk, Laudus Funds (April 2011 – present); Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs.
Catherine MacGregor 1964 Vice President and Assistant Secretary, Schwab Funds 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, Laudus Trust and Laudus Institutional Trust since 2005)	Vice President, Charles Schwab & Co., Inc., Charles Schwab Investment Management, Inc. (July 2005 – present); Vice President (Dec. 2005 – present), Chief Legal Officer and Clerk (March 2007 – present), Laudus Funds; Vice President (Nov. 2005 – present) and Assistant Secretary (June 2007 – present), Schwab Funds; Vice President and Assistant Secretary, Schwab ETFs (Oct. 2009 – present).

¹	Trustees remain in office until they resign, retire or are removed by shareholder vote. The Schwab and Laudus Funds’ retirement policy requires that independent trustees retire at age 72 or after twenty years as a trustee, whichever comes first. In addition, the retirement policy requires any independent trustee of Schwab Funds or Laudus Funds to retire from all Boards upon their required retirement date from either Board.
²	Mr. Schwab and Mr. Bettinger are Interested Trustees because they own stock of The Charles Schwab Corporation, the parent company of the investment adviser.
³	The President, Treasurer and Secretary/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 Boards.

Glossary

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

Dow Jones U.S. Select REIT Index A float-adjusted market capitalization weighted index comprised of real estate investment trusts (REITs).

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

Russell 2000 Index An index that measures the performance of the small-cap segment of the U.S. equity universe.

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

VIT Balanced with Growth Composite Index A custom blended index developed by CSIM based on a comparable portfolio asset allocation and calculated using the following portion allocations: 22% Dow Jones U.S. Large Cap Total Stock

Market Index, 6% Dow Jones U.S. Small-Cap Total Stock Market Index, 1% Russell Microcap Index, 17% FTSE Developed ex-US Index (Net), 3% FTSE Developed Small Cap ex-US Liquid Index (Net), 6% FTSE Emerging Index (Net), 6% Dow Jones U.S. Select REIT Index, 4% Dow Jones UBS Commodity Index, 2% Barclays U.S. TIPS Index (Series-L), 9% Barclays 3 – 10 Year U.S. Treasury Bond Index, 2% Barclays U.S. Aggregate: Agencies Index, 4% Barclays U.S. Credit Index, 11% Barclays U.S. MBS: Agency Fixed Rate MBS Index, 1% Barclays Global Treasury ex-U.S. [Capped] Index, 1% Barclays High Yield Bond Very Liquid Index, 5% Barclays U.S. Treasury Bill: 1 – 3 Month Index. The index is maintained by CSIM. The components that make up the composite index may vary over time.

The Investment Environment

Asset Class Performance Comparison % returns during the 6 months ended 6/30/2015

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

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

Schwab VIT Growth Portfolio1

Schwab VIT Growth Portfolio

Performance and Fund Facts as of 06/30/15

Average Annual Total Returns^1,2

Portfolio and inception Date	6 Months	1 Year	Since Inception
Portfolio: Schwab VIT Growth Portfolio (07/25/12)	2.05%	0.13%	10.56%
VIT Growth Composite Index	2.33%	0.86%	11.33%
S&P 500^® Index	1.23%	7.42%	18.38%
Barclays U.S. Aggregate Bond Index	-0.10%	1.86%	1.36%
Fund Category: Morningstar Aggressive Allocation	1.95%	1.69%	12.78%

Portfolio Expense Ratios³: 0.70%

Statistics
Number of Holdings	17
Portfolio Turnover Rate⁴	4%

Asset Class Weightings % of Investments⁵
Stocks – U.S.	38.0%
Stocks – International	34.2%
Fixed Income	12.6%
Real Assets	9.6%
Short-Term Investments	3.1%
Money Market Fund	2.5%
Total	100.0%

Top Holdings % of Net Assets^6,7
Schwab U.S. Large-Cap ETF	29.1%
Schwab International Equity ETF	21.3%
Schwab Emerging Markets Equity ETF	8.2%
Schwab U.S. Small-Cap ETF	7.2%
Schwab U.S. REIT ETF	5.8%
Schwab International Small-Cap Equity ETF	5.0%
iShares MBS ETF	4.8%
Schwab Intermediate-Term U.S. Treasury ETF	4.5%
Credit Suisse Commodity Return Strategy Fund, Class I	3.9%
iShares Core U.S. Credit Bond ETF	2.7%
Total	92.5%

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

Portfolio holdings may have changed since the report date.

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	Portfolio expenses have been partially absorbed by CSIM and its affiliates. Without these reductions, the portfolio’s returns would have been lower. Portfolio performance does not reflect the additional fees and expenses imposed by the insurance company under the variable insurance product contract. If those contract fees and expenses were included, the performance would be less than that shown. Please refer to the variable insurance product prospectus for a complete listing of these expenses.
³	As stated in the prospectus. Includes expenses of the underlying funds in which the portfolio invests. The annualized weighted average expense ratio of the underlying funds was 0.14%. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as adviser to the portfolio. 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	Not annualized.
⁵	The portfolio intends to primarily invest in affiliated Schwab exchange traded funds (ETFs) and unaffiliated third-party ETFs. The portfolio may also invest in affiliated Schwab and Laudus Funds and unaffiliated third party mutual funds (all such ETFs and mutual funds referred to as “underlying funds”). The portfolio may also invest directly in equity or fixed income securities, and money market investments to achieve its investment objectives.
⁶	This list is not a recommendation of any security by the investment adviser.
⁷	The holdings listed exclude any temporary liquidity investments.

Schwab VIT Growth Portfolio3

Fund Expenses (Unaudited)

Examples for a $1,000 Investment

The portfolio incurs ongoing costs, such as management fees, transfer agent and shareholder services fees, and other fund expenses.

Please note that the expenses shown in the table are meant to highlight your ongoing costs.

	Expense Ratio¹ (Annualized)	Beginning Account Value at 1/1/15	Ending Account Value (Net of Expenses) at 6/30/15	Expenses Paid During Period² 1/1/15–6/30/15
Schwab VIT Growth Portfolio
Actual Return	0.52%	$1,000.00	$1,020.50	$2.61
Hypothetical 5% Return	0.52%	$1,000.00	$1,022.22	$2.61

¹	Based on the most recent six-month expense ratio; may differ from the expense ratio provided in the Financial Highlights. The expenses incurred by the underlying funds in which the portfolio invests are not included in this ratio.
²	Expenses for the portfolio are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by 181 days of the period, and divided by 365 days of the fiscal year.

4Schwab VIT Growth Portfolio

Schwab VIT Growth Portfolio

Financial Statements

Financial Highlights

	1/1/15– 6/30/15*	1/1/14– 12/31/14	1/1/13– 12/31/13	7/25/12 ¹– 12/31/12
Per-Share Data ($)
Net asset value at beginning of period	13.05	12.65	10.95	10.00
Income (loss) from investment operations:
Net investment income (loss)	0.03 ²	0.20 ²	0.33 ²	0.13
Net realized and unrealized gains (losses)	0.24	0.30	1.37	0.82
Total from investment operations	0.27	0.50	1.70	0.95
Less distributions:
Distributions from net investment income	(0.17)	(0.10)	(0.00) ³	—
Distributions from net realized gains	(0.02)	(0.00) ³	—	—
Total distributions	(0.19)	(0.10)	(0.00) ³	—
Net asset value at end of period	13.13	13.05	12.65	10.95
Total return (%)	2.05 ⁴	3.97	15.56	9.50 ⁴
Ratios/Supplemental Data (%)
Ratios to average net assets:
Net operating expenses⁵	0.52 ⁶	0.54	0.58	0.59 ⁶^,⁷
Gross operating expenses⁵	0.54 ⁶	0.56	0.77	26.08 ⁶
Net investment income (loss)	0.49 ⁶	1.56	2.72	3.96 ⁶
Portfolio turnover rate	4 ⁴	9	9	29 ⁴
Net assets, end of period ($ x 1,000,000)	120	107	77	1

*	Unaudited.

Commencement of operations.

Calculated based on the average shares outstanding during the period.

Per-share amount was less than $0.005.

⁴

Not annualized.

⁵

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

⁶

Annualized.

⁷

The ratio of net operating expenses would have been 0.58%, if interest expense had not been incurred.

See financial notes 5

Schwab VIT Growth Portfolio

Portfolio Holdings as of June 30, 2015 (Unaudited)

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

Holdings by Category		Cost ($)	Value ($)
97.9%	Other Investment Companies	109,899,374	117,640,073
3.1%	Short-Term Investments	3,805,292	3,805,292
101.0%	Total Investments	113,704,666	121,445,365
(1.0%)	Other Assets and Liabilities, Net		(1,249,157)
100.0%	Net Assets		120,196,208

Security	Number of Shares	Value ($)
Other Investment Companies 97.9% of net assets
U.S. Stocks 38.4%
Large-Cap 29.1%
Schwab U.S. Large-Cap ETF (a)	709,309	34,976,027
Micro-Cap 2.1%
iShares Micro-Cap ETF	31,222	2,545,529
Small-Cap 7.2%
Schwab U.S. Small-Cap ETF (a)	150,835	8,665,471
		46,187,027
International Stocks 34.5%
Developed-Market Large-Cap 21.3%
Schwab International Equity ETF (a)	842,473	25,670,152
Developed-Market Small-Cap 5.0%
Schwab International Small-Cap Equity ETF (a)	191,927	6,009,234
Emerging-Market 8.2%
Schwab Emerging Markets Equity ETF (a)	399,163	9,811,427
		41,490,813
Real Assets 9.7%
Commodity 3.9%
Credit Suisse Commodity Return Strategy Fund, Class I *	788,492	4,636,333
Real Estate 5.8%
Schwab U.S. REIT ETF (a)	192,913	7,006,600
		11,642,933

Security	Number of Shares	Value ($)
Fixed Income 12.7%
Corporate Bond 2.7%
iShares Core U.S. Credit Bond ETF	29,968	3,253,626
Inflation-Protected Bond 0.7%
Schwab U.S. TIPS ETF (a)	15,492	839,821
Mortgage-Backed Bond 4.8%
iShares MBS ETF	52,816	5,736,874
Treasury Bond 4.5%
Schwab Intermediate-Term U.S. Treasury ETF (a)	100,918	5,410,214
		15,240,535
Money Market Fund 2.6%
Schwab Value Advantage Money Fund, Institutional Prime Shares 0.06% (a)(b)	3,078,765	3,078,765
Total Other Investment Companies
(Cost $109,899,374)		117,640,073
Issuer Rate, Maturity Date	Face Amount ($)	Value ($)
Short-Term Investments 3.1% of net assets
Time Deposits 3.1%
Australia & New Zealand Banking Group Ltd.
0.03%, 07/01/15	1,202,883	1,202,883
DNB
0.03%, 07/01/15	196,643	196,643
JPMorgan Chase Bank
0.03%, 07/01/15	1,202,883	1,202,883
Nordea Bank
0.03%, 07/01/15	1,202,883	1,202,883
Total Short-Term Investments
(Cost $3,805,292)		3,805,292

End of Investments.

At 06/30/15, the tax basis cost of the fund's investments was $114,132,439 and the unrealIzed appreciation and depreciation were $8,199,385 and ($886,459), respectively, with a net unrealized appreciation of $7,312,926.

*	Non-income producing security.
(a)	Issuer is affiliated with the fund's adviser.
(b)	The rate shown is the 7-day yield.

ETF —	Exchange Traded Fund
MBS —	Mortgage-Backed Security
REIT —	Real Estate Investment Trust
TIPS —	Treasury Inflation Protected Securities

6 See financial notes

Schwab VIT Growth Portfolio

Statement of

Changes in Net Assets

For the current and prior report periods

Figures for the current period are unaudited

Operations
	1/1/15-6/30/15		1/1/14-12/31/14
Net investment income		$277,419	$1,520,782
Net realized losses		(9,793)	(3,129)
Net change in unrealized appreciation (depreciation)	+	1,730,777	2,093,968
Increase in net assets from operations		1,998,403	3,611,621
Distributions to Shareholders
Distributions from net investment income		(1,520,306)	(780,922)
Distributions from net realized gains	+	(172,844)	(5,297)
Total distributions		($1,693,150)	($786,219)

Transactions in Fund Shares
		1/1/15-6/30/15		1/1/14-12/31/14
		SHARES	VALUE	SHARES	VALUE
Shares sold		1,178,922	$15,920,619	2,461,736	$31,697,774
Shares reinvested		128,953	1,693,150	59,114	786,219
Shares redeemed	+	(326,143)	(4,343,104)	(398,632)	(5,197,010)
Net transactions in fund shares		981,732	$13,270,665	2,122,218	$27,286,983
Shares Outstanding and Net Assets
		1/1/15-6/30/15		1/1/14-12/31/14
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		8,170,364	$106,620,290	6,048,146	$76,507,905
Total increase	+	981,732	13,575,918	2,122,218	30,112,385
End of period		9,152,096	$120,196,208	8,170,364	$106,620,290
Net investment income not yet distributed			$277,248		$1,520,135

10 See financial notes

Schwab VIT Growth Portfolio

Financial Notes, unaudited

1. Business Structure of the Fund:

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

Schwab Annuity Portfolios (organized January 21, 1994)

Schwab Money Market Portfolio

Schwab MarketTrack Growth Portfolio II

Schwab S&P 500 Index Portfolio

Schwab VIT Balanced Portfolio

Schwab VIT Balanced with Growth Portfolio

Schwab VIT Growth Portfolio

2. Significant Accounting Policies:

(a) Security Valuation:

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

Schwab VIT Growth Portfolio

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):

• Short-term securities (60 days or less to maturity): A short-term security may be valued at its amortized cost when it approximates the security's market 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 and ETFs. Investments in mutual funds are valued daily at their NAVs, and investments in ETFs are valued daily at the last reported sale price or the official closing price, which are classified as Level 1 prices, without consideration to the classification level of the specific investments held by an underlying fund.

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

The levels associated with valuing the fund's investments as of June 30, 2015 are disclosed in the Portfolio Holdings.

Schwab VIT Growth Portfolio

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):

(b) Security Transactions:

(d) Expenses:

(e) Distributions to Shareholders:

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

(f) Accounting Estimates:

(g) Federal Income Taxes:

(h) Indemnification:

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.

Schwab VIT Growth Portfolio

Financial Notes, unaudited (continued)

3. Risk Factors (continued):

Underlying Fund Investment Risk. The value of an investment in the fund is based primarily on the prices of the underlying funds that the fund purchases. In turn, the price of each underlying fund is based on the value of its securities. The fund is subject to the performance and expenses of the underlying funds in which it invests. Before investing in the fund, investors should assess the risks associated with the underlying funds in which the fund may invest and the types of investments made by those underlying funds. The risks below summarize certain principal investment risks of the underlying funds that are also principal investment risks to which the fund is subject because of the fund's investment allocation in the underlying funds and the underlying funds' asset allocation.

• Foreign Investment Risk. An underlying fund's investments in securities of foreign issuers may involve certain risks that are greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of the 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. These risks may be heightened in connection with investments in emerging markets.

• Growth Investing Risk. Certain of the underlying funds pursue a “growth style” of investing. Growth investing focuses on a company’s prospects for growth of revenue and earnings. If a company’s earnings or revenues fall short of expectations, its stock price may fall dramatically. Growth stocks also can perform differently from the market as a whole

Schwab VIT Growth Portfolio

Financial Notes, unaudited (continued)

3. Risk Factors (continued):

and other types of stocks and can be more volatile than other types of stocks. Since growth companies usually invest a high portion of earnings in their business, they may lack the dividends of value stocks that can cushion stock prices in a falling market. Growth stocks may also be more expensive relative to their earnings or assets compared to value or other stocks.

Schwab VIT Growth Portfolio

Financial Notes, unaudited (continued)

3. Risk Factors (continued):

• Liquidity Risk. An underlying fund may be unable to sell illiquid securities at an advantageous time or price.

• Derivatives Risk. An underlying fund's use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. An underlying fund’s use of derivatives could reduce the underlying fund’s performance, increase volatility, and could cause the underlying fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on an underlying fund.

Schwab VIT Growth Portfolio

Financial Notes, unaudited (continued)

3. Risk Factors (continued):

• Money Market Risk. Although an underlying money market fund seeks to maintain a stable $1 net asset value, it is possible to lose money by investing in a money market fund.

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

4. Affiliates and Affiliated Transactions:

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

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

The fund may engage in certain transactions involving related parties. Pursuant to an exemptive order issued by the SEC, the fund may invest in other related ETFs and mutual funds. As of June 30, 2015, the Schwab VIT Growth Portfolio's ownership percentages of other related funds' shares are:

Schwab U.S. Large-Cap ETF	0.8%
Schwab U.S. Small-Cap ETF	0.3%
Schwab International Equity ETF	0.6%
Schwab International Small-Cap Equity ETF	1.0%
Schwab Emerging Markets Equity ETF	0.7%
Schwab U.S. REIT ETF	0.5%
Schwab U.S. TIPS ETF	0.1%
Schwab Intermediate-Term U.S. Treasury ETF	1.6%
Schwab Value Advantage Money Fund, Institutional Prime Shares	0.0%*

*	Less than 0.05%

Schwab VIT Growth Portfolio

Financial Notes, unaudited (continued)

4. Affiliates and Affiliated Transactions (continued):

Below is a summary of the fund's transactions with its affiliated underlying funds during the period ended June 30, 2015.

Underlying Funds	Balance of Shares Held at 12/31/14	Gross Purchases	Gross Sales	Balance of Shares Held at 06/30/2015	Market Value at 06/30/2015	Realized Gains (Losses) 01/01/15 to 06/30/2015	Distributions Received* 01/01/15 to 06/30/2015
Schwab U.S. Large-Cap ETF	642,848	79,750	(13,289)	709,309	$34,976,027	$27,122	$335,613
Schwab U.S. Small-Cap ETF	134,191	21,090	(4,446)	150,835	8,665,471	4,593	51,700
Schwab International Equity ETF	750,998	116,160	(24,685)	842,473	25,670,152	(67,474)	—
Schwab International Small-Cap Equity ETF	185,661	18,677	(12,411)	191,927	6,009,234	(30,020)	—
Schwab Emerging Markets Equity ETF	366,374	56,436	(23,647)	399,163	9,811,427	(21,168)	—
Schwab U.S. REIT ETF	170,419	39,702	(17,208)	192,913	7,006,600	120,584	72,643
Schwab U.S. TIPS ETF	13,459	2,260	(227)	15,492	839,821	(765)	—
Schwab Intermediate-Term U.S. Treasury ETF	88,127	18,994	(6,203)	100,918	5,410,214	4,253	31,897
Schwab Value Advantage Money Fund, Institutional Prime Shares	3,078,254	511	—	3,078,765	3,078,765	—	585
Total					$101,467,711	$37,125	$492,438

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

5. Board of Trustees:

6. Borrowing from Banks:

Schwab VIT Growth Portfolio

Financial Notes, unaudited (continued)

7. Purchases and Sales/Maturities of Investment Securities:

For the period ended June 30, 2015, purchases and sales/maturities of securities (excluding short-term obligations) were as follows:

Purchases of Securities		Sales/Maturities of Securities
$16,386,173		$4,506,578

8. Federal Income Taxes:

Capital loss carryforwards may be used to offset future realized capital gains for federal income tax purposes. As of December 31, 2014, the fund had no capital loss carryforwards.

9. Subsequent Events:

Investment Advisory Agreement Approval

The Board of Trustees (the “Board” or the “Trustees”, as appropriate) calls and holds one or more meetings each year that are dedicated, in whole or in part, to considering whether to renew the investment advisory agreement between Schwab Annuity Portfolios (the “Trust”) and Charles Schwab Investment Management, Inc. (“CSIM”) (the “Agreement”) with respect to Schwab VIT Growth Portfolio (the “Fund”), and to review certain other agreements pursuant to which CSIM provides investment advisory services to certain other registered investment companies. In preparation for the meeting(s), the Board requests and reviews a wide variety of materials provided by CSIM, including information about CSIM’s affiliates, personnel and operations. The Board also receives extensive data provided by third parties. This information is in addition to the detailed information about the Fund that the Board reviews during the course of each year, including information that relates to Fund operations and Fund performance. The Independent Trustees receive advice from independent counsel to the Independent Trustees, including a memorandum regarding the responsibilities of trustees for the approval of investment advisory agreements. In addition, the Independent Trustees meet in executive session outside the presence of Fund management and participate in question and answer sessions with representatives of CSIM.

consideration and evaluation of a variety of specific factors discussed at these meetings and at prior meetings, including:

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

Fund Expenses. With respect to the Fund’s expenses, the Trustees considered the rate of compensation called for by the Agreement, and the Fund’s net operating expense ratio, in each case, in comparison to those of other comparable mutual funds, such peer groups and comparisons having been selected and calculated by an independent third party. The Trustees considered the effects of CSIM’s and Schwab’s historical practice of waiving management and other fees to prevent total fund expenses from exceeding a specified cap. The Trustees also considered fees charged by CSIM to other mutual funds and to other types of accounts, such as 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 the unique insurance dedicated distribution arrangements of the Fund as compared to other funds managed by CSIM. 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.

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

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
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 and Laudus Institutional Trust since 2010)	Senior Fellow, The Hoover Institution at Stanford University (Oct. 1979 – present); Senior Fellow Stanford Institute for Economic Policy Research (2000 – present); Professor of Public Policy, Stanford University (1994 – present).	74	Director, Gilead Sciences, Inc. (2005 – present)
David L. Mahoney 1954 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011)	Private Investor.	74	Director, Symantec Corporation (2003 – present) Director, Corcept Therapeutics Incorporated (2004 – present) Director, Adamas Pharmaceuticals, Inc. (2009 – present)
Kiran M. Patel 1948 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011)	Retired. Executive Vice President and General Manager of Small Business Group, Intuit, Inc. (financial software and services firm for consumers and small businesses) (Dec. 2008 – Sept. 2013)	74	Director, KLA-Tencor Corporation (2008 – present)
Charles A. Ruffel 1956 Trustee (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2015)	Managing Partner and Co-Founder, Kudu Advisors, LLC (financial services) (May 2009 – present); Director, Asset International, Inc. (publisher of financial services information) (Jan. 2009 – Nov. 2014).	95	None.

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
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 and Laudus Institutional Trust since 2010)	Chairman, Chief Executive Officer and Founder of Smith Graham & Co. (investment advisors) (1990 – present).	74	Director, Eaton (2012 – present) Director and Chairman of the Audit Committee, Oneok Partners LP (2003 – 2013) Director, Oneok, Inc. (2009 – 2013) Lead Independent Director, Board of Cooper Industries (2002 – 2012)
Joseph H. Wender 1944 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust and Laudus Institutional Trust since 2010)	Senior Consultant, Goldman Sachs & Co., Inc. (investment banking and securities firm) (Jan. 2008 – present); Partner, Colgin Partners, LLC (vineyards) (Feb. 1998 – present).	74	Board Member and Chairman of the Audit Committee, Isis Pharmaceuticals (1994 – present)

Interested Trustees
Name, Year of Birth, and Position(s) with the trust; (Terms of office, and length of Time Served)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Charles R. Schwab² 1937 Chairman and Trustee (Chairman and Trustee of The Charles Schwab Family of Funds since 1989; Schwab Investments since 1991; Schwab Capital Trust since 1993; Schwab Annuity Portfolios since 1994; Laudus Trust and Laudus Institutional Trust since 2010)	Chairman and Director, The Charles Schwab Corporation (1986 – present); Chairman and Director of Charles Schwab & Co., Inc. (1971 – present); Chairman and Director of Charles Schwab Investment Management, Inc. (1989 – present); Chairman and Director of Charles Schwab Bank (2003 – present); Chairman and Chief Executive Officer of Schwab (SIS) Holdings Inc. I and Schwab International Holdings, Inc. (1996 – present); and Director, Chairman and Chief Executive Officer, Schwab Holdings, Inc. (1979 – present).	74	Chairman and Director, The Charles Schwab Corporation (1986 – present) Director, Yahoo! Inc. (2014 – present)
Walter W. Bettinger II² 1960 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 and Laudus Institutional Trust since 2010)	Director, President and Chief Executive Officer, The Charles Schwab Corporation and Charles Schwab & Co., Inc. (2008 – present); Director, Charles Schwab Bank (2006 – present); and Director, Schwab Holdings, Inc. (2008 – present).	95	Director, The Charles Schwab Corporation (2008 – present)

Officers of the Trust
Name, Year of Birth, and Position(s) with the trust; (Terms of office, and length of Time Served³)	Principal Occupations During the Past Five Years
Marie Chandoha 1961 President and Chief Executive Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2010)	Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; President, Chief Executive Officer (Dec. 2010 – present), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (January 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (March 2007 – August 2010).
George Pereira 1964 Treasurer and Principal Financial Officer, Schwab Funds Treasurer and Chief Financial Officer, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2004; Laudus Trust and Laudus Institutional Trust since 2006)	Senior Vice President and Chief Financial Officer (Nov. 2004 – present), Chief Operating Officer (Jan. 2011 – present), Charles Schwab Investment Management, Inc.; Treasurer and Chief Financial Officer, Laudus Funds (June 2006 – present); Treasurer and Principal Financial Officer, Schwab Funds (Nov. 2004 – present) and Schwab ETFs (Oct. 2009 – present); Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (April 2005 – present).
Omar Aguilar 1970 Senior Vice President and Chief Investment Officer – Equities (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011)	Senior Vice President and Chief Investment Officer – Equities, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer – Equities, Schwab Funds, Laudus Funds and Schwab ETFs (June 2011 – present); Head of the Portfolio Management Group and Vice President of Portfolio Management, Financial Engines, Inc. (May 2009 – April 2011); Head of Quantitative Equity, ING Investment Management (July 2004 – Jan. 2009).
Brett Wander 1961 Senior Vice President and Chief Investment Officer – Fixed Income (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011)	Senior Vice President and Chief Investment Officer – Fixed Income, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer – Fixed Income, Schwab Funds, Laudus Funds and Schwab ETFs (June 2011 – present); Senior Managing Director, Global Head of Active Fixed-Income Strategies, State Street Global Advisors (Jan. 2008 – Oct. 2010); Director of Alpha Strategies Loomis, Sayles & Company (April 2006 – Jan. 2008).
David Lekich 1964 Chief Legal Officer and Secretary, Schwab Funds Vice President and Assistant Clerk, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011)	Senior Vice President (Sept. 2011 – present), Vice President (March 2004 – Sept. 2011), Charles Schwab & Co., Inc.; Senior Vice President and Chief Counsel (Sept. 2011 – present), Vice President (Jan. 2011 – Sept. 2011), Charles Schwab Investment Management, Inc.; Secretary (April 2011 – present) and Chief Legal Officer (Dec. 2011 – present), Schwab Funds; Vice President and Assistant Clerk, Laudus Funds (April 2011 – present); Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs.
Catherine MacGregor 1964 Vice President and Assistant Secretary, Schwab Funds 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, Laudus Trust and Laudus Institutional Trust since 2005)	Vice President, Charles Schwab & Co., Inc., Charles Schwab Investment Management, Inc. (July 2005 – present); Vice President (Dec. 2005 – present), Chief Legal Officer and Clerk (March 2007 – present), Laudus Funds; Vice President (Nov. 2005 – present) and Assistant Secretary (June 2007 – present), Schwab Funds; Vice President and Assistant Secretary, Schwab ETFs (Oct. 2009 – present).

¹	Trustees remain in office until they resign, retire or are removed by shareholder vote. The Schwab and Laudus Funds’ retirement policy requires that independent trustees retire at age 72 or after twenty years as a trustee, whichever comes first. In addition, the retirement policy requires any independent trustee of Schwab Funds or Laudus Funds to retire from all Boards upon their required retirement date from either Board.
²	Mr. Schwab and Mr. Bettinger are Interested Trustees because they own stock of The Charles Schwab Corporation, the parent company of the investment adviser.
³	The President, Treasurer and Secretary/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 Boards.

Glossary

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

Dow Jones U.S. Select REIT Index A float-adjusted market capitalization weighted index comprised of real estate investment trusts (REITs).

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

Russell 2000 Index An index that measures the performance of the small-cap segment of the U.S. equity universe.

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

VIT Growth Composite Index A custom blended index developed by CSIM based on a comparable portfolio asset allocation and calculated using the following portion allocations: 29% Dow Jones U.S. Large Cap Total Stock Market Index, 7% Dow Jones U.S. Small-Cap Total Stock Market Index, 2% Russell Microcap Index, 21% FTSE Developed ex-US Index (Net), 5% FTSE Developed Small Cap ex-US Liquid Index (Net), 8% FTSE Emerging Index (Net), 6% Dow Jones U.S. Select REIT Index, 4% Dow Jones UBS Commodity Index, 1% Barclays U.S. TIPS Index (Series-L), 5% Barclays 3 – 10 Year U.S. Treasury Bond Index, 2% Barclays U.S. Credit Index, 5% Barclays U.S. MBS: Agency Fixed Rate MBS Index, 5% Barclays U.S. Treasury Bills: 1 – 3 Month Index. The index is maintained by CSIM. The components that make up the composite index may vary over time.

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

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

Item 9: Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

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

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

Operations
	1/1/15-6/30/15		1/1/14-12/31/14
Net investment income		$4,943	$11,324
Net realized gains	+	70	579
Increase in net assets from operations		5,013	11,903
Distributions to Shareholders
Distributions from net investment income		($4,943)	($11,324)
Transactions in Fund Shares*
Shares sold		41,935,211	158,550,893
Shares reinvested		4,538	11,321
Shares redeemed	+	(58,730,549)	(147,670,781)
Net transactions in fund shares		(16,790,800)	10,891,433
Net Assets
Beginning of period		116,684,433	105,792,421
Total increase or decrease	+	(16,790,730)	10,892,012
End of period		$99,893,703	$116,684,433

Assets
Investments in affiliated underlying funds, at value (cost $19,596,498)		$30,681,368
Investments in unaffiliated issuers, (cost $1,022,796)	+	1,022,796
Total investments, at value (cost $20,619,294)		31,704,164
Receivables:
Dividends		8,512
Fund shares sold	+	6,210
Total assets		31,718,886
Liabilities
Payables:
Investments bought		8,494
Investment adviser and administrator fees		1,625
Fund shares redeemed		2,010
Accrued expenses	+	18,480
Total liabilities		30,609
Net Assets
Total assets		31,718,886
Total liabilities	–	30,609
Net assets		$31,688,277
Net Assets by Source
Capital received from investors		21,158,652
Distributions in excess of net investment income		(29,175)
Net realized capital losses		(526,070)
Net unrealized capital appreciation		11,084,870

Investment Income
Dividends received from affiliated underlying funds		$50,536
Interest	+	154
Total investment income		50,690
Expenses
Investment adviser and administrator fees		70,254
Professional fees		15,531
Transfer agent fees		10,439
Shareholder reports		10,277
Independent trustees' fees		4,717
Portfolio accounting fees		3,534
Custodian fees		1,480
Other expenses	+	408
Total expenses		116,640
Expense reduction by CSIM	–	36,806
Net expenses	–	79,834
Net investment loss		(29,144)
Realized and Unrealized Gains (Losses)
Net realized gains on sales of affiliated underlying funds		218,558
Net realized gains on unaffiliated investments	+	328
Net realized gains		218,886
Net change in unrealized appreciation (depreciation) on affiliated underlying funds	+	592,235
Net realized and unrealized gains		811,121
Increase in net assets resulting from operations		$781,977

Assets
Investments, at cost and value		$57,194,383
Repurchase agreements, at cost and value	+	42,830,254
Total investments, at cost and value (Note 2a)		100,024,637
Receivables:
Fund shares sold		1,004,408
Interest		64,153
Receivable from investment adviser	+	1,206
Total assets		101,094,404
Liabilities
Payables:
Fund shares redeemed		1,179,187
Distributions to shareholders		404
Accrued expenses	+	21,110
Total liabilities		1,200,701
Net Assets
Total assets		101,094,404
Total liabilities	–	1,200,701
Net assets		$99,893,703
Net Assets by Source
Capital received from investors		99,847,453
Net realized capital gains		46,250

Investment Income
Interest		$51,477
Expenses
Investment adviser and administrator fees		172,995
Portfolio accounting fees		21,878
Professional fees		19,160
Shareholder reports		15,291
Transfer agent fees		10,992
Independent trustees' fees		7,420
Custodian fees		5,046
Other expenses	+	1,028
Total expenses		253,810
Expense reduction by CSIM and its affiliates	–	207,276
Net expenses	–	46,534
Net investment income		4,943
Realized Gains (Losses)
Net realized gains on investments		70
Increase in net assets resulting from operations		$5,013

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


(a)	(1)	Code of ethics – not applicable to this semi-annual report.

	(2)	Separate certifications for Registrant’s principal executive officer and principal financial officer, as required by Rule 30a-2(a) under the 1940 Act, are attached.

	(3)	Not applicable.

(b)	A certification for Registrant’s principal executive officer and principal financial officer, as required by Rule 30a-2(b) under the 1940 Act, is attached. This certification is being furnished to the Securities and Exchange Commission solely pursuant to 18 U.S.C. section 1350 and is not being filed as part of the Form N-CSRS with the Commission.


By:		/s/ Marie Chandoha
		Marie Chandoha
		Chief Executive Officer

Date:		August 11, 2015