Schwab Core Equity Fund NCSR Certified annual shareholder report (management investment company)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORMN-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number:811-7704

Schwab Capital Trust

(Exact name of registrant as specified in charter)

211 Main Street, San Francisco, California 94105

(Address of principal executive offices) (Zip code)

Jonathan de St. Paer

Schwab Capital Trust

211 Main Street, San Francisco, California 94105

(Name and address of agent for service)

Registrant’s telephone number, including area code: (415)636-7000

Date of fiscal year end: October 31

Date of reporting period: October 31, 2019

Item 1: Report(s) to Shareholders.

Annual Report | October 31, 2019

Laudus International MarketMasters Fund^™

New Notice Regarding Shareholder Report Delivery Options

Beginning on January 1, 2021, paper copies of a fund’s shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from a fund or from your financial intermediary (such as a bank or broker-dealer). Instead, the reports will be made available on a fund’s websitewww.schwabfunds.com/laudusfunds_prospectus, and you will be notified by mail each time a report is posted and the mailing will provide a website link to access the report. You will continue to receive other fund regulatory documents (such as prospectuses or supplements) in paper unless you have elected to receive all fund documents electronically.

If you would like to receive a fund’s future shareholder reports in paper free of charge after January 1, 2021, you can make that request:

• If you invest through Charles Schwab & Co, Inc. (broker-dealer), by calling 1-866-345-5954 and using the unique identifier attached to this mailing;

• If you invest through another financial intermediary (such as a bank or broker-dealer) by contacting them directly; or

• If owned directly through a fund by calling 1-800-407-0256.

If you already receive shareholder reports and other fund documents electronically, you will not be affected by this change and you need not take any action.

Laudus International MarketMasters Fund

In This Report

Performance at a Glance	2
From the President	3
The Investment Environment	4
Fund Management	6
Performance and Fund Facts	7
Fund Expenses	10
Financial Statements and Portfolio Holdings	11
Financial Notes	28
Report of Independent Registered Public Accounting Firm	39
Other Federal Tax Information	40
Investment Advisory and Sub-Advisory Agreement Approval	41
Trustees and Officers	44
Glossary	48

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

Distributor: Charles Schwab & Co., Inc. (Schwab)

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

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Laudus International MarketMasters Fund

Performance at a Glance

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

Total Return for the 12 Months Ended October 31, 2019
Laudus International MarketMasters Fund^1,2 (Ticker Symbol: SWMIX)	10.50%
MSCI EAFE^® Index (Net)³	11.04%
Fund Category: Morningstar Foreign Large Growth⁴	14.78%
Performance Details	pages 7-9

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

For index definitions, please see the Glossary.

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

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

¹	On February 26, 2019, the Investor Share class and Select Share class of the fund were consolidated into a single class of shares of the fund. The performance and financial history of the fund is that of the fund’s former Select Shares. Accordingly, the past performance shown is that of the fund’s former Select Shares.
²	The fund’s performance relative to the index may be affected by fair-value pricing and timing differences in foreign exchange calculations. See financial note 2 for more information.
³	The net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.
⁴	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.

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Laudus International MarketMasters Fund

From the President

Jonathan de St. Paer
President of Charles Schwab
Investment Management, Inc.
and the fund covered
in this report.

Dear Shareholder,

At the crux of every investment decision, one consideration that may be top of mind is your risk tolerance. It may seem like a straightforward consideration, but it’s often not. Most of us are risk-averse by nature. This can sometimes lead us to make decisions that may get in the way of the performance of our investments. Risk aversion can also sometimes prompt us to focus our assets in areas we deem to be safer, resulting in an increased exposure to potential losses through overconcentration.

One example of how a desire to avoid risk might actually elevate it is a tendency called “home bias.” Investors tend to have an innate predisposition toward the familiar, and this can often lead us to focus primarily on domestic stocks which could leave us more vulnerable to market volatility here at home. Building a portfolio that has an allocation to both U.S. and international stocks may be a better strategy to counteract the home bias tendency. In addition to almost doubling the available universe of stock market opportunities, regions and countries often go through economic cycles at different times and are exposed to different market influences. This can lead to meaningful differences in the performance of international companies.

The Laudus International MarketMasters Fund plays a role in our goal to provide investors with a diverse variety of investment choices. The fund provides exposure to international developed and emerging markets, large- and small-capitalization, and growth and value stocks. Each of several subadvisers is analyzed based on their investment style and consistency of returns, as well as their measures for managing risk. We believe this offers the opportunity for investors to gain access to the collective expertise of multiple managers in a diversified, one-stop solution.

The Laudus International MarketMasters Fund is just one example of our commitment to providing products and solutions that can help investors build well-diversified portfolios. It’s important to have a long-term investing plan and a portfolio based on your individual goals and risk tolerance. It can at times be tough to maintain that discipline in the face of day-to-day uncertainty. We aim to offer products with clear objectives, straightforward pricing, and a consistent approach to investing to help simplify investing decisions, so investors can focus on their long-term goals without unnecessary complexity.

Thank you for investing with Charles Schwab Investment Management, and for trusting us to help you achieve your financial goals. For more information about the Laudus International MarketMasters Fund, please continue reading this report. In addition, you can find further details about this fund by visiting our website at www.schwabfunds.com. We are also happy to hear from you at 1-877-824-5615.

Sincerely,

“Investors tend to have an innate predisposition toward the familiar, and this can often lead us to focus primarily on domestic stocks which could leave us more vulnerable to market volatility here at home.”

Diversification and asset allocation strategies do not ensure a profit and cannot protect against losses in a declining market.

Management views may have changed since the report date.

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Laudus International MarketMasters Fund

The Investment Environment

For the 12-month reporting period ended October 31, 2019, global equity markets generated positive returns. The final two months of 2018 were marked by significant market volatility and steep declines across global equity markets, driven by concerns about slowing international growth, a trade war between the U.S. and China, falling oil prices, the waning strength of the U.S. economy, and the pace of future interest rate hikes despite low inflation. By late December, major market indices had fallen to near-bear market territory. However, as the Federal Reserve (Fed) put interest rate hikes on hold, stocks, particularly in the U.S., staged a strong recovery in the first four months of 2019, which generally continued through the end of the reporting period despite several setbacks. Over the period, the U.S. dollar strengthened slightly against a basket of foreign currencies, generally reducing the returns on overseas investments in U.S. dollar terms. For the reporting period, the S&P 500^® Index, a bellwether for the overall U.S. stock market, returned 14.33%. Despite headwinds, markets outside the U.S. also rose, particularly toward the end of the reporting period with the MSCI EAFE^® Index (Net)*, a broad measure of developed international equity performance, returning 11.04%.

Economic growth around the globe was uneven over the reporting period, largely as a result of manufacturing weakness in developed international markets. Despite escalating trade tensions with China, the U.S. maintained its steady growth in its tenth year of expansion, although at a declining pace. In the last two months of 2018, economies around the globe showed increasing signs of weakness, but many regained economic momentum in the first six months of 2019, demonstrating resilient growth despite lingering uncertainties on various fronts. As the year progressed, signs of slowing growth increased amid a weakening global economy, waning manufacturing activity, and the ongoing U.S.-China trade war. However, toward the end of the period, prospects of a partial trade resolution relieved some of the pressure. U.S. gross domestic product (GDP) grew at an annual rate of 2.1% in the third quarter of 2019, up slightly from 2.0% in the second quarter, but down from 3.1% in the first quarter of 2019. Unemployment declined in September 2019 to a 50-year low. While, consumer confidence edged lower in October to hit a four-month low, it remained a stable source of GDP growth in the U.S. Inflation remained benign.

Asset Class Performance Comparison % returns during the 12 months ended October 31, 2019

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

For index definitions, please see the Glossary.

Data source: Index provider websites and CSIM.

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

Management views may have changed since the report date.

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

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The Investment Environment(continued)

Outside the U.S., conditions continued to soften, dampened by trade issues, slowing economic output, and geopolitical concerns. Oil prices, which had fallen steeply in the fourth quarter of 2018, recovered through the first four months of 2019, as major exporters sought to curb supply and central banks took steps to ease growth-related fears, before dipping in May when trade concerns escalated. Oil prices remained volatile through period end. In the eurozone, growth slowed in the second and third quarters of 2019, down slightly from the first quarter. Growth was subdued by tepid wage growth and constrained consumer spending. The United Kingdom’s economy contracted in the second quarter of 2019 amid growing Brexit-related economic and political uncertainty that dampened industrial output, construction, and services sectors. Japan’s economy, however, experienced growth in recent quarters after contracting sharply in the third quarter of 2018.

In response to the economic environment and flat or inverted yield curves around the world, to bolster growth, and to ensure stability given ongoing trade tensions, a number of central banks reduced their policy rates, including the U.S., while others maintained their generally low—and for some international central banks, negative—interest rates. In the U.S., after raising interest rates four times in 2018, the Fed held rates unchanged through the first half of 2019. But amid growing signs of global economic weakness that threatened to dampen U.S. economic growth, along with continued low inflation and weakness in manufacturing, the Fed enacted three interest rate cuts by the end of the period—in July, September, and October. Following the October interest rate cut, the Fed signaled that subsequent interest rate cuts would be put on hold provided the economy continues to expand moderately and the labor market remains strong. The federal funds rate ended the reporting period in a range of 1.50% to 1.75%. Outside the U.S., the European Central Bank held interest rates steady and launched an asset-purchase program to help stimulate the economy. The Bank of Japan maintained its short-term interest rate target of –0.1% throughout the period. Despite growing Brexit-related division, the Bank of England maintained its key official bank rate at 0.75% throughout the period, where it has remained since August 2018. Central banks in several key emerging market economies—including India, Thailand, and China—lowered their policy rates in response to inflation and trade-related pressures.

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Fund Management

Omar Aguilar, Ph.D., Senior Vice President and Chief Investment Officer of Equities and Multi-Asset Strategies, has overall responsibility for all aspects of the management of the fund. Prior to joining CSIM in 2011, Mr. Aguilar was with Financial Engines, where he was responsible for managing assets from leading retirement plan sponsors in the defined contribution market. Prior to joining Financial Engines in 2009, Mr. Aguilar was the head of quantitative equity for ING Investment Management, where he was responsible for building and developing the firm’s quantitative equity group. He joined ING in 2004 from Lehman Brothers, where he served as the head of quantitative research for its alternative investment management business. Prior to that, he was a director of quantitative research and portfolio manager with Merrill Lynch Investment Management and Bankers Trust.

Jane Shi, Portfolio Manager, is responsible for the day-to-day co-management of the fund. Prior to joining CSIM in 2011, Ms. Shi was a vice president investment analyst at Bailard, Inc. since 2006, where she developed quantitative models for domestic equity and tactical asset allocation strategies, and was also responsible for performance measurement and attribution. Prior to that, she was a treasury analyst at Sun Microsystems, Inc.

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

Market Highlights. Over the reporting period, international equity markets generated positive returns. The final two months of 2018 were marked by significant market volatility and steep declines across global equity markets, driven by concerns about slowing international economic growth, a trade war between the U.S. and China, falling oil prices, the waning strength of the U.S. economy, and the pace of future interest rate hikes. However, stocks staged a recovery in the first four months of 2019, which generally continued through the end of the reporting period. A number of central banks reduced their policy rates, including the U.S., while others maintained their generally low—and for some international central banks, negative—interest rates. Over the period, the U.S. dollar strengthened slightly against a basket of foreign currencies, generally reducing the returns on overseas investments in U.S. dollar terms.

Performance. For the 12-month period ended October 31, 2019, the fund returned 10.50%, underperforming the fund’s comparative index, the MSCI EAFE^® Index (Net) (the index), which returned 11.04%.

Positioning and Strategies. Over the 12-month reporting period, all four of the fund’s active subadvisers posted positive returns and outperformed their comparative indices. Underperformance of the fund was a result of allocation across subadvisers.

Among the fund’s four active subadvisers, William Blair Investment Management, LLC posted the strongest total return and outperformed its international multi-cap growth comparative index, contributing to the fund’s relative performance. Stock selection was strongest in the industrials and consumer discretionary sectors and weakest in the information technology and communications services sectors. From a sector allocation standpoint, William Blair’s overweight to the financials and information technology sectors also contributed to relative performance, while an overweight to the energy and health care sectors detracted from relative performance. From a geographic perspective, stock selection in Japan and the United Kingdom contributed, while stock selection in France and the United States detracted.

Harris Associates L.P. posted a positive return and outperformed its comparative index. Harris’s stock selection contributed positively to its performance relative to its comparative index, primarily due to selection in the financials and information technology sectors, and within Japan and the United Kingdom. Harris’s allocation across country segments and sectors also contributed positively to relative performance, most notably in the United States and South Korea and in the energy and industrials sectors.

American Century Investment Management, Inc., which focuses on international small-cap growth, also posted a positive return and outperformed it comparative index. Stock selection contributed to performance relative to the comparative index, primarily due to selection in the information technology and financials sectors, and within Hong Kong and Germany. American Century’s allocation across sectors and country segments detracted from performance relative to the comparative index, most notably in the energy and communication services sectors and in China and Hong Kong.

Mondrian Investment Partners Limited, with its international small-cap value focus, also posted a positive total return and outperformed its comparative index. From a sector allocation perspective, an underweight to the energy sector and an overweight to the utilities sector contributed to performance relative to the comparative index and an underweight to the real estate sector and an overweight to the consumer staples sector detracted. Stock selection in the industrials and information technology sectors contributed, while stock selection in the materials and communications services sectors detracted. From a geographic perspective, stock selection in Canada and France contributed to relative performance, while stock selection in the Netherlands and Switzerland detracted.

Mellon Investment Corporation seeks to track the performance of the fund’s index by employing a strategic trading approach to minimize transaction costs and preserve value. Over the 12-month reporting period, the fund’s allocation to Mellon performed in line with this objective, slightly outperforming the fund’s index.

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

Management views may have changed since the report date.

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Performance and Fund Factsas of October 31, 2019

Performance of Hypothetical $10,000 Investment (October 31, 2009 – October 31, 2019)^1,2

Average Annual Total Returns^1,2

Fund and Inception Date	1 Year	5 Years	10 Years
Fund: Laudus International MarketMasters Fund (4/2/04)	10.50%	4.88%	7.65%
MSCI EAFE^® Index (Net)³	11.04%	4.31%	5.41%
Fund Category: Morningstar Foreign Large Growth⁴	14.78%	5.56%	6.84%
Fund Expense Ratios⁵: Net 1.25%; Gross 1.51%

Investment Managers and Allocations⁶

Investment Managers	Investment Style	% of Net Assets
William Blair Investment Management, LLC	International Multi-Cap Growth	26.2%
American Century Investment Management, Inc.	International Small-Cap Growth	22.4%
Mondrian Investment Partners Limited	International Small-Cap Value	22.2%
Harris Associates L.P.	International Large-Cap Value	19.9%
Mellon Investment Corporation	International Blend	6.6%
Cash & other assets		2.7%

For index definitions, please see the Glossary.

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

¹	Fund expenses may have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
²	On February 26, 2019, the Investor Share class and Select Share class of the fund were consolidated into a single class of shares of the fund. The performance and financial history of the fund is that of the fund’s former Select Shares. Accordingly, the past performance shown is that of the fund’s former Select Shares.
³	The net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.
⁴	Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date.
⁵	As stated in the prospectus. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as the investment adviser to the fund. Gross Expense: Does not reflect the effect of contractual fee waivers. For actual expense ratios during the period, refer to the financial highlights section of the financial statements.
⁶	For more information about each of the investment manager’s investment styles, refer to the fund’s prospectus.

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Laudus International MarketMasters Fund

Performance and Fund Factsas of October 31, 2019 (continued)

Statistics¹

Number of Holdings	1,222
Weighted Average Market Cap (millions)	$31,954
Price/Earnings Ratio (P/E)	20.1
Price/Book Ratio (P/B)	2.4
Portfolio Turnover Rate	54%

Sector Weightings % of Investments¹

Top Equity Holdings % of Net Assets²

Top Country Weightings % of Investments³

Portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.

International investments are subject to additional risks such as currency fluctuation, geopolitical risk and the potential for illiquid markets. Investing in emerging markets may accentuate these risks.

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

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Fund Expenses(Unaudited)

Examples for a $1,000 Investment

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

The expense examples below are intended to help you understand your ongoing cost (in dollars) of investing in a fund and to compare this cost with the ongoing cost of investing in other mutual funds. These examples are based on an investment of $1,000 invested for six months beginning May 1, 2019 and held through October 31, 2019.

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

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

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

Please note that the expenses shown in the table are meant to highlight your ongoing costs only, and do not reflect any transactional costs. Therefore, the hypothetical return lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Expense Ratio (Annualized)¹	Beginning Account Value at 5/1/19	Ending Account Value (Net of Expenses) at 10/31/19	Expenses Paid During Period 5/1/19-10/31/19²
Laudus International MarketMasters Fund
Actual Return	1.25%	$1,000.00	$1,015.50	$6.35
Hypothetical 5% Return	1.25%	$1,000.00	$1,018.90	$6.36

¹	Based on the most recent six-month expense ratio.
²	Expenses for each fund are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by the 184 days of the period, and divided by the 365 days of the fiscal year.

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Financial Statements

Financial Highlights

	11/1/18– 10/31/19¹	11/1/17– 10/31/18	11/1/16– 10/31/17	11/1/15– 10/31/16	11/1/14– 10/31/15
Per-Share Data
Net asset value at beginning of period	$22.89	$26.96	$21.16	$22.71	$22.95
Income (loss) from investment operations:
Net investment income (loss)²	0.31	0.24	0.22	0.19	0.21
Net realized and unrealized gains (losses)	1.74	(3.09)	5.76	(0.23)	(0.10)
Total from investment operations	2.05	(2.85)	5.98	(0.04)	0.11
Less distributions:
Distributions from net investment income	(0.29)	(0.36)	(0.18)	(0.31)	(0.35)
Distributions from net realized gains	(1.76)	(0.86)	—	(1.20)	—
Total distributions	(2.05)	(1.22)	(0.18)	(1.51)	(0.35)
Net asset value at end of period	$22.89	$22.89	$26.96	$21.16	$22.71
Total return	10.50%	(11.09%)	28.52%	0.00%³	0.56%
Ratios/Supplemental Data
Ratios to average net assets:
Net operating expenses	1.25%	1.25%	1.25%	1.25%	1.25%
Gross operating expenses	1.50%	1.51%	1.53%	1.54%	1.50%
Net investment income (loss)	1.43%	0.92%	0.92%	0.93%	0.91%
Portfolio turnover rate	54%	69%	71%	69%	72%
Net assets, end of period (x 1,000,000)	$1,413	$1,127	$1,229	$1,063	$1,395

Effective February 26, 2019, the Investor Share class, and the Select Share class were consolidated into a single class of shares of the fund. The financial history as shown in the financial highlights is that of the former Select Shares (see financial note 1).

Calculated based on the average shares outstanding during the period.

Less than 0.005%.

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Laudus International MarketMasters Fund

Portfolio Holdings as of October 31, 2019

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 U.S. Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. Effective March 31, 2019, Form N-PORT Part F has replaced Form N-Q. The fund’s Form N-Q and Form N-PORT Part F are available on the SEC’s website atwww.sec.gov. The fund also makes available its complete schedule of portfolio holdings 15-20 days after calendar quarters on the fund’s website atwww.schwabfunds.com/laudusfunds_prospectus.

Security	Number of Shares	Value ($)
Common Stock95.4% of net assets

Argentina 0.2%
Globant S.A. *	26,981	2,516,248

Australia 4.1%
Afterpay Touch Group Ltd. *	108,738	2,158,669
AGL Energy Ltd.	4,261	58,165
Altium Ltd.	148,007	3,276,458
Alumina Ltd.	15,839	24,726
AMP Ltd.	1,701,165	2,149,490
APA Group	7,395	59,399
Aristocrat Leisure Ltd.	74,124	1,616,276
ASX Ltd.	1,258	71,406
Aurizon Holdings Ltd.	12,602	51,268
AusNet Services	12,875	16,446
Australia & New Zealand Banking Group Ltd.	18,435	338,782
Bank of Queensland Ltd.	2,609	16,283
Bendigo & Adelaide Bank Ltd.	3,165	23,228
BHP Group Ltd.	19,113	468,506
BHP Group plc	13,723	291,072
BlueScope Steel Ltd.	3,488	31,930
Boral Ltd.	7,551	26,216
Brambles Ltd.	200,683	1,659,056
Breville Group Ltd.	80,743	855,116
Caltex Australia Ltd.	1,678	31,544
Challenger Ltd.	3,544	19,438
Charter Hall Retail REIT	1,534,530	4,662,316
CIMIC Group Ltd.	621	14,152
Cleanaway Waste Management Ltd.	609,757	774,997
Coca-Cola Amatil Ltd.	3,342	23,453
Cochlear Ltd.	361	52,666
Coles Group Ltd.	7,158	74,077
Commonwealth Bank of Australia	11,481	622,501
Computershare Ltd.	3,120	34,056
Costa Group Holdings Ltd.	867,548	1,706,202
Crown Resorts Ltd.	2,402	20,635
CSL Ltd.	25,987	4,582,970
Dexus	7,099	58,542
Flight Centre Travel Group Ltd.	408	11,986
Fortescue Metals Group Ltd.	8,954	54,804
Goodman Group	154,136	1,530,456
Harvey Norman Holdings Ltd.	4,438	12,522
Incitec Pivot Ltd.	10,881	25,891
Inghams Group Ltd.	1,305,797	2,795,599
Insurance Australia Group Ltd.	14,962	81,978
InvoCare Ltd.	262,325	2,370,969
James Hardie Industries plc	2,769	47,555
LendLease Group	3,658	47,282
Macquarie Group Ltd.	35,483	3,276,408
Magellan Financial Group Ltd.	559	18,541
Medibank Pvt Ltd.	17,679	41,205
Mirvac Group	25,906	57,405
National Australia Bank Ltd.	18,049	354,286
Newcrest Mining Ltd.	4,954	108,138
Northern Star Resources Ltd.	250,478	1,697,819

Security	Number of Shares	Value ($)
Orica Ltd.	168,079	2,656,270
Origin Energy Ltd.	11,450	62,076
Pact Group Holdings Ltd. *	888,151	1,482,753
QBE Insurance Group Ltd.	8,427	73,318
Ramsay Health Care Ltd.	877	41,439
REA Group Ltd.	335	25,142
Rio Tinto Ltd.	2,393	149,641
Santos Ltd.	11,532	64,504
Saracen Mineral Holdings Ltd. *	1,569,479	4,060,893
Scentre Group	33,702	89,046
SEEK Ltd.	2,153	33,695
Seven Group Holdings Ltd.	350,150	4,525,780
Shopping Centres Australasia Property Group	2,102,971	3,900,848
Sonic Healthcare Ltd.	2,841	55,953
South32 Ltd.	32,113	56,196
Stockland	15,262	51,524
Suncorp Group Ltd.	7,985	74,137
Sydney Airport	6,843	41,444
Tabcorp Holdings Ltd.	12,868	42,640
Telstra Corp., Ltd.	27,061	65,175
The GPT Group	12,852	52,754
TPG Telecom Ltd.	2,733	12,318
Transurban Group	17,171	175,864
Treasury Wine Estates Ltd.	4,455	54,009
Unibail-Rodamco-Westfield	887	137,162
Vicinity Centres	20,665	38,039
Washington H Soul Pattinson & Co., Ltd.	769	11,495
Wesfarmers Ltd.	7,305	200,704
Westpac Banking Corp.	22,382	434,557
WiseTech Global Ltd.	62,228	1,117,537
Woodside Petroleum Ltd.	6,038	133,823
Woolworths Group Ltd.	8,456	218,047
Worley Ltd.	2,205	20,697
		58,562,365

Austria 0.0%
ANDRITZ AG	478	21,494
Erste Group Bank AG *	1,952	69,038
OMV AG	913	53,375
Raiffeisen Bank International AG	918	22,619
Verbund AG	468	25,354
voestalpine AG	710	17,816
		209,696

Belgium 1.1%
Ageas	1,168	67,359
Anheuser-Busch InBev S.A./N.V.	4,947	399,309
Argenx SE *	20,446	2,489,690
Barco N.V.	6,648	1,447,831
Colruyt S.A.	383	21,290
Galapagos N.V. *	12,586	2,317,294
Groupe Bruxelles Lambert S.A.	500	50,228
KBC Group N.V.	1,589	111,729
Melexis N.V.	49,243	3,455,373
Proximus	943	28,979
Shurgard Self Storage S.A.	128,163	4,338,234

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Table of Contents

Laudus International MarketMasters Fund

Portfolio Holdings as of October 31, 2019 (continued)

Security	Number of Shares	Value ($)
Solvay S.A.	459	49,905
Telenet Group Holding N.V. *	355	17,442
UCB S.A.	822	66,252
Umicore S.A.	1,298	53,582
Warehouses De Pauw CVA	4,174	773,704
		15,688,201

Brazil 1.1%
Azul S.A. *	65,914	2,569,328
B3 S.A. - Brasil Bolsa Balcao	151,400	1,826,389
Cia de Locacao das Americas	707,800	3,046,161
CVC Brasil Operadora e Agencia de Viagens S.A.	43,700	558,222
IRB Brasil Resseguros S.A.	116,100	1,093,983
Localiza Rent a Car S.A.	73,900	795,662
Lojas Renner S.A.	60,830	769,760
Magazine Luiza S.A.	104,800	1,166,506
Notre Dame Intermedica Participacoes S.A.	291,300	4,358,060
		16,184,071

Canada 6.1%
Alimentation Couche-Tard, Inc., Class B	89,436	2,682,197
ATS Automation Tooling Systems, Inc. *	94,575	1,283,882
Badger Daylighting Ltd.	55,095	1,632,228
Boralex, Inc., Class A	374,439	6,197,533
Brookfield Asset Management, Inc., Class A	91,873	5,075,983
BRP, Inc.	54,304	2,436,279
CAE, Inc.	173,546	4,352,156
Canada Goose Holdings, Inc. *	67,418	2,820,095
Canadian National Railway Co.	46,445	4,153,991
Canadian Pacific Railway Ltd.	12,883	2,928,435
Cenovus Energy, Inc.	445,825	3,797,856
Cineplex, Inc.	287,695	4,903,768
ECN Capital Corp.	436,433	1,441,412
FirstService Corp.	27,270	2,380,198
Gibson Energy, Inc.	168,910	2,944,479
Innergex Renewable Energy, Inc.	547,767	6,837,210
Kirkland Lake Gold Ltd.	60,585	2,845,025
lululemon Athletica, Inc. *	8,200	1,675,014
Northview Apartment Real Estate Investment Trust	173,458	3,800,773
Open Text Corp.	37,200	1,503,139
Parkland Fuel Corp.	15,578	517,453
Ritchie Bros. Auctioneers, Inc.	94,375	3,882,910
TFI International, Inc.	64,504	2,055,450
The Descartes Systems Group, Inc. *	63,971	2,489,191
The Toronto-Dominion Bank	59,074	3,373,286
Toromont Industries Ltd.	10,986	567,275
WSP Global, Inc.	114,686	7,155,793
		85,733,011

China 4.8%
A-Living Services Co., Ltd., H Shares	1,548,500	4,686,052
Aier Eye Hospital Group Co. Ltd	169,000	947,451
Alibaba Group Holding Ltd. ADR *	39,890	7,047,366
Baidu, Inc. ADR *	33,190	3,380,402
Baozun, Inc. ADR *	23,664	1,029,857
Bosideng International Holdings Ltd.	3,684,000	1,905,032
Centre Testing International Group Co., Ltd., Class A	480,000	952,877
China Mengniu Dairy Co., Ltd. *	316,000	1,259,811
China Merchants Bank Co., Ltd., H Shares	806,500	3,846,384

Security	Number of Shares	Value ($)
Country Garden Services Holdings Co., Ltd.	282,000	955,521
GDS Holdings Ltd. ADR *	107,905	4,497,480
GSX Techedu, Inc. *	126,230	2,163,582
Huazhu Group Ltd. ADR	21,037	796,461
Kweichow Moutai Co., Ltd., Class A	11,600	1,939,200
Li Ning Co., Ltd.	2,072,500	7,027,473
Microport Scientific Corp.	1,829,513	1,878,737
NetEase, Inc. ADR	9,819	2,806,859
Nexteer Automotive Group Ltd.	1,877,288	1,749,669
Ping An Insurance Group Co. of China Ltd., H Shares	441,000	5,089,925
Shenzhou International Group Holdings Ltd.	100,000	1,381,865
Tencent Holdings Ltd.	164,100	6,656,374
Tencent Music Entertainment Group ADR *	35,809	495,597
Trip.Com Group Ltd. *	19,684	649,375
Vitasoy International Holdings Ltd.	106,000	431,029
Zhongsheng Group Holdings Ltd.	1,269,500	4,208,667
		67,783,046

Denmark 1.3%
AP Moeller - Maersk A/S, Series A	23	27,629
AP Moeller - Maersk A/S, Series B	41	52,300
Carlsberg A/S, Class B	691	97,309
Chr. Hansen Holding A/S	17,143	1,316,165
Coloplast A/S, Class B	21,515	2,590,318
Danske Bank A/S	4,339	62,007
Demant A/S *	724	19,125
DSV PANALPINA A/S	35,526	3,452,740
Genmab A/S *	10,681	2,333,740
H. Lundbeck A/S	432	14,762
ISS A/S	1,052	27,543
Novo Nordisk A/S, Class B	65,685	3,611,932
Novozymes A/S, B Shares	1,402	66,090
Orsted A/S	33,659	2,954,307
Pandora A/S	697	34,297
Royal Unibrew A/S	9,506	779,864
Tryg A/S	18,847	526,793
Vestas Wind Systems A/S	1,269	103,383
		18,070,304

Faeroe Islands 0.3%
Bakkafrost P/F	60,739	3,803,534

Finland 0.7%
Elisa Oyj	894	48,827
Fortum Oyj	2,890	70,625
Kone Oyj, Class B	2,217	141,169
Metso Oyj	691	26,159
Neste Oyj	89,141	3,220,883
Nokia Oyj	36,750	134,910
Nokian Renkaat Oyj	758	21,663
Nordea Bank Abp	19,705	144,227
Orion Oyj, Class B	691	30,656
Sampo Oyj, A Shares	2,863	117,325
Stora Enso Oyj, R Shares	3,711	48,212
UPM-Kymmene Oyj	74,176	2,415,871
Valmet Oyj	143,372	3,208,739
Wartsila Oyj Abp	2,751	29,064
		9,658,330

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Laudus International MarketMasters Fund | Annual Report

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Table of Contents

Laudus International MarketMasters Fund

Portfolio Holdings as of October 31, 2019 (continued)

Security	Number of Shares	Value ($)
France 8.7%
Accor S.A.	125,563	5,400,915
Aeroports de Paris	184	34,995
Air Liquide S.A.	3,067	407,792
Airbus SE	50,589	7,257,409
Alstom S.A.	1,258	54,425
Alten S.A.	27,314	3,004,594
Amundi S.A.	375	26,800
Arkema S.A.	423	43,289
Atos SE	610	47,340
AXA S.A.	12,608	333,749
BioMerieux	257	21,045
BNP Paribas S.A.	207,012	10,818,352
Bollore S.A.	5,540	24,001
Bollore S.A. New *	32	136
Bouygues S.A.	1,435	60,870
Bureau Veritas S.A.	98,679	2,522,883
Capgemini SE	31,509	3,552,014
Carrefour S.A.	3,950	67,251
Casino Guichard Perrachon S.A.	375	20,230
Cie Plastic Omnium S.A.	67,602	1,846,649
CNP Assurances	1,064	21,120
Coface S.A. *	261,103	2,853,839
Compagnie de Saint-Gobain	3,150	128,293
Compagnie Generale des Etablissements Michelin	1,102	134,176
Covivio	322	36,466
Credit Agricole S.A.	7,533	98,293
Danone S.A.	4,006	331,862
Dassault Aviation S.A.	15	20,837
Dassault Systemes SE	19,764	3,001,692
Edenred	1,588	83,700
Eiffage S.A.	508	54,562
Electricite de France S.A.	3,980	41,117
Engie S.A.	11,911	199,447
EssilorLuxottica S.A.	17,636	2,692,917
Eurazeo SE	263	18,352
Eurofins Scientific SE	71	35,997
Eutelsat Communications S.A.	1,152	21,853
Faurecia SE	471	21,981
Gaztransport Et Technigaz S.A.	54,922	5,010,997
Gecina S.A.	285	48,926
Getlink SE	2,938	49,214
Hermes International	2,185	1,573,970
ICADE	213	20,858
Iliad S.A.	164	16,996
Imerys S.A.	228	8,807
Ingenico Group S.A.	29,592	3,164,304
Ipsen S.A.	6,240	665,107
JCDecaux S.A.	477	13,039
Kering S.A.	6,391	3,636,455
Klepierre S.A.	1,267	47,228
Korian S.A.	173,020	7,337,249
L'Oreal S.A.	14,631	4,273,154
Legrand S.A.	1,746	136,405
LISI	82,862	2,912,602
LVMH Moet Hennessy Louis Vuitton SE	13,971	5,966,394
Natixis S.A.	5,834	26,803
Orange S.A.	12,999	209,212
Orpea	8,510	1,024,971
Pernod-Ricard S.A.	1,381	255,116
Peugeot S.A.	3,724	94,315
Publicis Groupe S.A.	127,918	5,505,402
Remy Cointreau S.A.	146	19,538
Renault S.A.	1,217	62,139
Rubis SCA	136,740	7,929,227
Safran S.A.	33,611	5,323,642

Security	Number of Shares	Value ($)
Sanofi	7,282	671,306
Sartorius Stedim Biotech	190	28,464
Schneider Electric SE	3,538	328,823
SCOR SE	1,034	43,613
SEB S.A.	140	21,273
SES S.A.	2,289	44,372
Societe BIC S.A.	181	12,566
Societe Generale S.A.	4,933	140,289
Sodexo S.A.	561	61,692
SOITEC *	42,997	4,742,613
STMicroelectronics N.V.	4,431	100,567
Suez	2,318	36,155
Teleperformance	8,828	2,002,927
Thales S.A.	24,003	2,346,524
TOTAL S.A.	15,413	814,858
UbiSoft Entertainment S.A. *	545	32,209
Valeo S.A.	167,856	6,251,072
Veolia Environnement S.A.	3,483	91,686
Verallia SASU *	105,956	3,072,490
Vinci S.A.	3,304	370,696
Vivendi S.A.	5,942	165,470
Wendel S.A.	182	25,807
Worldline S.A. *	14,197	863,849
		122,942,634

Germany 8.6%
1&1 Drillisch AG	329	8,812
adidas AG	1,171	361,570
Allianz SE	25,498	6,227,186
Axel Springer SE *	308	21,470
BASF SE	5,964	453,378
Bayer AG	108,579	8,423,143
Bayerische Motoren Werke AG	120,034	9,191,566
Beiersdorf AG	654	77,426
Brenntag AG	958	48,015
Carl Zeiss Meditec AG, Class B	9,381	1,022,567
Commerzbank AG	6,528	39,062
Continental AG	70,156	9,396,750
Covestro AG	1,124	53,977
Daimler AG	177,805	10,393,210
Delivery Hero SE *	714	33,503
Deutsche Bank AG	12,653	91,756
Deutsche Boerse AG	1,239	191,871
Deutsche Lufthansa AG	1,461	25,309
Deutsche Post AG	6,345	224,772
Deutsche Telekom AG	21,651	380,961
Deutsche Wohnen SE	2,367	89,242
Duerr AG	70,225	2,071,888
E.ON SE	14,197	143,169
Evonik Industries AG	1,185	31,229
Evotec SE *	81,747	1,872,470
Fielmann AG	113,567	8,758,480
Fraport AG Frankfurt Airport Services Worldwide	258	21,564
Fresenius Medical Care AG & Co. KGaA	1,398	100,907
Fresenius SE & Co. KGaA	2,682	141,221
GEA Group AG	1,089	33,291
Gerresheimer AG	48,804	3,935,804
GRENKE AG	6,655	629,784
Hannover Rueck SE	393	69,641
HeidelbergCement AG	965	71,543
HelloFresh SE *	202,608	3,529,630
Henkel AG & Co. KGaA	6,275	603,767
HOCHTIEF AG	166	20,740
Hugo Boss AG	399	16,823
Infineon Technologies AG	7,993	154,815
Isra Vision AG	35,052	1,657,918

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Laudus International MarketMasters Fund | Annual Report

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Table of Contents

Laudus International MarketMasters Fund

Portfolio Holdings as of October 31, 2019 (continued)

Security	Number of Shares	Value ($)
JOST Werke AG	75,313	2,116,713
KION Group AG	10,232	680,814
Knorr-Bremse AG	294	29,671
LANXESS AG	546	35,479
Merck KGaA	818	97,560
METRO AG	1,216	19,857
MorphoSys AG *	20,460	2,233,319
MTU Aero Engines AG	15,984	4,274,617
Muenchener Rueckversicherungs-Gesellschaft AG	973	270,338
Nemetschek SE	84,003	4,286,034
Norma Group SE	72,633	2,666,365
Puma SE	17,040	1,281,867
QIAGEN N.V. *(a)	1,504	45,239
QIAGEN N.V. *(a)	50,470	1,504,511
Rheinmetall AG	20,009	2,413,217
RTL Group S.A.	247	12,551
RWE AG	3,496	106,539
SAP SE	36,054	4,777,207
Siemens AG	4,962	572,615
Siemens Healthineers AG	930	39,513
Sixt SE	22,966	2,245,875
Stabilus S.A.	56,742	3,185,591
Stroeer SE & Co. KGaA	38,176	3,075,778
Symrise AG	823	79,096
Teamviewer AG *	25,491	672,656
Telefonica Deutschland Holding AG	5,662	17,966
ThyssenKrupp AG	400,901	5,717,082
TUI AG	2,731	35,728
Uniper SE	1,248	38,896
United Internet AG	762	23,004
Varta AG *	30,112	3,403,857
Volkswagen AG	201	37,997
Vonovia SE	80,790	4,302,459
Wirecard AG	768	97,164
Zalando SE *	797	34,556
		121,051,961

Hong Kong 1.6%
AIA Group Ltd.	736,600	7,335,223
ASM Pacific Technology Ltd.	217,500	3,036,915
Ausnutria Dairy Corp., Ltd. *	985,000	1,469,135
BeiGene Ltd. ADR *	218	30,158
BOC Hong Kong (Holdings) Ltd.	24,000	82,455
Budweiser Brewing Co. APAC Ltd. *	6,600	24,131
CK Asset Holdings Ltd.	16,538	115,067
CK Hutchison Holdings Ltd.	17,538	161,930
CK Infrastructure Holdings Ltd.	4,074	29,319
CLP Holdings Ltd.	10,500	109,047
Dairy Farm International Holdings Ltd.	2,200	13,266
Fortune REIT	1,156,000	1,356,116
Galaxy Entertainment Group Ltd.	291,000	2,003,720
Hang Lung Properties Ltd.	13,000	28,577
Hang Seng Bank Ltd.	4,900	102,239
Henderson Land Development Co., Ltd.	9,687	48,382
HK Electric Investments & HK Electric Investments Ltd.	17,000	16,965
HKBN Ltd.	2,128,983	3,799,586
HKT Trust & HKT Ltd.	25,120	39,078
Hong Kong & China Gas Co., Ltd.	65,381	126,898
Hong Kong Exchanges & Clearing Ltd.	7,745	241,288
Hongkong Land Holdings Ltd.	7,300	40,102
Hysan Development Co., Ltd.	4,000	15,765
Kerry Properties Ltd.	4,000	12,935
Link REIT	13,500	147,034
Melco International Development Ltd.	319,000	845,460
Melco Resorts & Entertainment Ltd. ADR	1,346	28,993

Security	Number of Shares	Value ($)
MGM China Holdings Ltd.	6,000	9,501
MTR Corp., Ltd.	10,249	58,766
New World Development Co., Ltd.	39,113	55,949
NWS Holdings Ltd.	9,572	14,246
PCCW Ltd.	27,000	16,036
Power Assets Holdings Ltd.	9,000	64,225
Sands China Ltd.	15,600	76,840
Shangri-La Asia Ltd.	8,000	8,211
Sino Land Co., Ltd.	22,000	32,887
SJM Holdings Ltd.	12,683	13,548
Sun Hung Kai Properties Ltd.	10,202	154,594
Swire Pacific Ltd., Class A	3,500	33,363
Swire Properties Ltd.	7,200	22,644
Techtronic Industries Co., Ltd.	9,000	70,335
The Bank of East Asia Ltd.	8,057	19,408
The Wharf Holdings Ltd.	7,349	16,677
WH Group Ltd.	61,000	64,388
Wharf Real Estate Investment Co., Ltd.	8,349	49,107
Wheelock & Co., Ltd.	5,000	30,923
Wynn Macau Ltd.	9,600	20,833
Yue Yuen Industrial Holdings Ltd.	5,000	14,091
		22,106,356

India 1.1%
Axis Bank Ltd.	173,724	1,799,980
Bata India Ltd.	106,298	2,705,517
HDFC Bank Ltd.	104,602	1,812,364
Hexaware Technologies Ltd.	90,689	425,452
Hindustan Unilever Ltd.	46,297	1,419,013
Maruti Suzuki India Ltd.	11,163	1,189,403
Pidilite Industries Ltd.	34,498	681,209
Titan Co., Ltd.	48,713	913,918
WNS Holdings Ltd. ADR *	76,497	4,730,574
		15,677,430

Indonesia 0.6%
Bank Tabungan Pensiunan Nasional Syariah Tbk PT *	8,607,800	2,354,100
PT Bank Central Asia Tbk	1,905,500	4,265,133
PT Bank Mandiri (Persero) Tbk	4,035,500	2,017,221
		8,636,454

Ireland 1.5%
AIB Group plc	5,047	16,166
Bank of Ireland Group plc	5,995	28,896
CRH plc	5,266	191,734
DCC plc	624	58,518
Flutter Entertainment plc	524	54,129
Glanbia plc	375,289	4,181,412
Grafton Group plc	279,719	2,832,503
ICON plc *	13,710	2,013,999
Kerry Group plc, Class A	19,315	2,335,154
Kingspan Group plc	37,980	1,968,003
Ryanair Holdings plc ADR *	105,021	7,838,768
Smurfit Kappa Group plc	1,397	46,656
		21,565,938

Israel 0.6%
Azrieli Group Ltd.	277	21,351
Bank Hapoalim B.M.	7,230	57,866
Bank Leumi Le-Israel B.M.	9,560	69,637
Check Point Software Technologies Ltd. *	23,402	2,630,619
CyberArk Software Ltd. *	4,418	448,780
Elbit Systems Ltd.	157	25,741

₁₅

Laudus International MarketMasters Fund | Annual Report

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Table of Contents

Laudus International MarketMasters Fund

Portfolio Holdings as of October 31, 2019 (continued)

Security	Number of Shares	Value ($)
Israel Chemicals Ltd.	4,649	20,665
Israel Discount Bank Ltd., Class A	7,084	32,373
Kornit Digital Ltd. *	108,549	3,689,581
Mizrahi Tefahot Bank Ltd.	937	23,248
Nice Ltd. *	403	63,569
Teva Pharmaceutical Industries Ltd. ADR *	6,938	56,545
Wix.com Ltd. *	8,260	1,008,298
		8,148,273

Italy 2.0%
Amplifon S.p.A.	129,060	3,245,642
Assicurazioni Generali S.p.A.	7,074	143,443
Atlantia S.p.A.	3,210	79,306
Autogrill S.p.A.	192,493	1,903,135
Banca Generali S.p.A.	27,546	899,279
Davide Campari-Milano S.p.A.	3,600	33,020
Enel S.p.A.	311,690	2,415,709
Eni S.p.A.	16,547	251,034
Ferrari N.V.	12,574	2,013,813
Fiat Chrysler Automobiles N.V.	7,019	108,926
FinecoBank Banca Fineco S.p.A.	144,288	1,626,607
Interpump Group S.p.A.	136,170	3,732,868
Intesa Sanpaolo S.p.A.	4,129,962	10,348,959
Leonardo S.p.A.	2,641	30,682
Mediobanca Banca di Credito Finanziario S.p.A.	3,892	46,281
Moncler S.p.A.	17,631	680,358
Pirelli & C S.p.A.	2,479	14,331
Poste Italiane S.p.A	3,238	39,330
Prysmian S.p.A.	1,491	34,490
Recordati S.p.A.	663	27,862
Snam S.p.A.	13,465	69,128
Technogym S.p.A.	45,028	496,781
Telecom Italia S.p.A. *	59,665	34,922
Terna - Rete Elettrica Nationale S.p.A.	9,165	60,575
UniCredit S.p.A.	12,886	163,485
		28,499,966

Japan 13.5%
ABC-Mart, Inc.	200	13,713
Acom Co., Ltd.	2,600	10,446
Advantest Corp.	1,300	59,161
Aeon Co., Ltd.	4,200	84,505
AEON Financial Service Co., Ltd.	600	9,144
Aeon Mall Co., Ltd.	800	12,799
AGC, Inc.	1,200	42,192
Air Water, Inc.	978	18,309
Aisin Seiki Co., Ltd.	1,000	39,910
Ajinomoto Co., Inc.	2,878	54,717
Alfresa Holdings Corp.	1,200	26,795
Alps Alpine Co., Ltd.	1,400	30,014
Amada Holdings Co., Ltd.	2,226	25,350
ANA Holdings, Inc.	740	25,410
Anritsu Corp.	196,100	3,739,678
Aozora Bank Ltd.	800	20,527
Ariake Japan Co., Ltd.	87,100	6,761,383
Aruhi Corp.	110,300	2,479,757
Asahi Group Holdings Ltd.	2,300	115,178
Asahi Intecc Co., Ltd.	61,800	1,700,451
Asahi Kasei Corp.	8,163	90,620
Astellas Pharma, Inc.	12,300	211,101
Bandai Namco Holdings, Inc.	1,300	79,936
Benefit One, Inc.	42,100	852,208
Benesse Holdings, Inc.	500	13,385
Bridgestone Corp.	3,700	153,735
Brother Industries Ltd.	1,400	26,312

Security	Number of Shares	Value ($)
Calbee, Inc.	500	16,713
Canon, Inc.	6,465	177,398
Casio Computer Co., Ltd.	1,336	21,688
Central Japan Railway Co.	900	184,621
Chubu Electric Power Co., Inc.	4,131	61,974
Chugai Pharmaceutical Co., Ltd.	1,500	126,234
Coca-Cola Bottlers Japan Holdings, Inc.	800	18,163
Concordia Financial Group Ltd.	6,900	28,138
Cosmos Pharmaceutical Corp.	13,400	2,767,245
Credit Saison Co., Ltd.	1,111	16,088
CyberAgent, Inc.	600	19,501
Dai Nippon Printing Co., Ltd.	1,600	42,734
Dai-ichi Life Holdings, Inc.	7,100	115,726
Daicel Corp.	1,700	15,197
Daifuku Co., Ltd.	700	37,143
Daiichi Sankyo Co., Ltd.	3,700	243,289
Daikin Industries Ltd.	28,700	4,016,840
Daito Trust Construction Co., Ltd.	500	66,260
Daiwa House Industry Co., Ltd.	3,600	123,930
Daiwa House REIT Investment Corp.	12	34,942
Daiwa Securities Group, Inc.	10,000	44,948
Denso Corp.	2,800	130,004
Dentsu, Inc.	1,400	50,050
Digital Arts, Inc.	28,200	1,655,838
Disco Corp.	200	43,647
East Japan Railway Co.	2,038	185,012
Eisai Co., Ltd.	1,600	115,822
Electric Power Development Co., Ltd.	1,000	24,280
en-Japan, Inc.	176,700	7,478,962
F.C.C. Co., Ltd.	118,200	2,445,598
FamilyMart Co., Ltd.	1,600	39,690
Fancl Corp.	68,500	1,935,743
FANUC Corp.	1,299	256,227
Fast Retailing Co., Ltd.	330	203,508
Fuji Electric Co., Ltd.	800	25,425
Fuji Soft, Inc.	48,900	2,130,130
FUJIFILM Holdings Corp.	2,300	100,975
Fujitsu Ltd.	1,300	115,218
Fukuoka Financial Group, Inc.	1,000	19,277
GMO Payment Gateway, Inc.	45,600	3,360,680
Hakuhodo DY Holdings, Inc.	1,500	22,384
Hamamatsu Photonics K.K.	900	34,946
Hankyu Hanshin Holdings, Inc.	1,500	60,025
Harmonic Drive Systems, Inc.	51,100	2,369,850
Hikari Tsushin, Inc.	100	21,920
Hino Motors Ltd.	1,700	16,072
Hirose Electric Co., Ltd.	205	25,824
Hisamitsu Pharmaceutical Co., Inc.	300	13,962
Hitachi Chemical Co., Ltd.	700	23,044
Hitachi Construction Machinery Co., Ltd.	700	18,069
Hitachi High-Technologies Corp.	500	31,108
Hitachi Ltd.	6,264	233,788
Hitachi Metals Ltd.	1,200	15,060
Honda Motor Co., Ltd.	10,607	286,962
Hoshizaki Corp.	400	34,001
Hoya Corp.	52,700	4,657,479
Hulic Co., Ltd.	1,900	20,628
Idemitsu Kosan Co., Ltd.	1,392	40,918
IHI Corp.	900	22,179
Iida Group Holdings Co., Ltd.	1,013	16,874
Infomart Corp.	310,400	4,673,275
Inpex Corp.	6,500	60,089
Isetan Mitsukoshi Holdings Ltd.	2,221	17,713
Isuzu Motors Ltd.	3,600	41,832
ITOCHU Corp.	8,629	180,414
Itochu Techno-Solutions Corp.	600	16,158
J. Front Retailing Co., Ltd.	1,500	19,074
Japan Airlines Co., Ltd.	700	21,813

₁₆

Laudus International MarketMasters Fund | Annual Report

See financial notes

Table of Contents

Laudus International MarketMasters Fund

Portfolio Holdings as of October 31, 2019 (continued)

Security	Number of Shares	Value ($)
Japan Airport Terminal Co., Ltd.	300	14,819
Japan Exchange Group, Inc.	3,200	52,827
Japan Post Bank Co., Ltd.	2,500	24,869
Japan Post Holdings Co., Ltd.	10,000	91,792
Japan Prime Realty Investment Corp.	5	24,030
Japan Real Estate Investment Corp.	9	61,432
Japan Retail Fund Investment Corp.	17	39,670
Japan Tobacco, Inc.	7,700	174,041
JFE Holdings, Inc.	3,100	38,774
JGC Holdings Corp.	1,400	20,249
JSR Corp.	1,300	24,406
JTEKT Corp.	1,400	17,856
JXTG Holdings, Inc.	20,585	96,219
Kajima Corp.	3,000	41,228
Kakaku.com, Inc.	900	20,898
Kamigumi Co., Ltd.	700	15,828
Kaneka Corp.	267	8,888
Kansai Paint Co., Ltd.	1,173	28,252
Kao Corp.	3,200	257,276
Kawasaki Heavy Industries Ltd.	900	21,598
KDDI Corp.	11,400	315,451
Keihan Holdings Co., Ltd.	625	29,511
Keikyu Corp.	1,400	27,868
Keio Corp.	700	43,304
Keisei Electric Railway Co., Ltd.	833	34,058
Keyence Corp.	9,700	6,133,275
KH Neochem Co., Ltd.	63,700	1,551,218
Kikkoman Corp.	914	43,966
Kintetsu Group Holdings Co., Ltd.	1,100	59,957
Kirin Holdings Co., Ltd.	5,400	114,557
Kobayashi Pharmaceutical Co., Ltd.	300	23,988
Kobe Bussan Co., Ltd.	101,800	3,012,340
Kobe Steel Ltd.	1,700	9,140
Koito Manufacturing Co., Ltd.	685	35,835
Komatsu Ltd.	209,900	4,914,789
Konami Holdings Corp.	600	26,339
Konica Minolta, Inc.	3,000	22,019
Kose Corp.	200	35,459
Kubota Corp.	6,700	106,418
Kuraray Co., Ltd.	2,100	24,984
Kurita Water Industries Ltd.	700	20,151
Kyocera Corp.	2,100	137,774
Kyowa Kirin Co., Ltd.	1,600	29,440
Kyudenko Corp.	138,600	4,528,980
Kyushu Electric Power Co., Inc.	2,500	24,984
Kyushu Railway Co.	1,083	35,780
Lasertec Corp.	47,900	3,443,341
Lawson, Inc.	329	18,150
LINE Corp. *	500	18,393
Lion Corp.	1,500	31,391
LIXIL Group Corp.	1,700	31,616
M3, Inc.	2,700	64,701
Makita Corp.	1,400	47,083
Marubeni Corp.	10,145	71,401
Marui Group Co., Ltd.	1,300	28,899
Maruichi Steel Tube Ltd.	400	10,923
Matsumotokiyoshi Holdings Co., Ltd.	91,700	3,230,061
Mazda Motor Corp.	3,600	33,049
McDonald's Holdings Co., Ltd.	400	20,077
Mebuki Financial Group, Inc.	5,510	13,999
Medipal Holdings Corp.	1,100	25,132
MEIJI Holdings Co., Ltd.	800	57,662
Meitec Corp.	8,000	417,042
Mercari, Inc. *	500	11,273
Minebea Mitsumi, Inc.	2,387	45,333
MISUMI Group, Inc.	185,730	4,669,018
Mitsubishi Chemical Holdings Corp.	8,100	61,732
Mitsubishi Corp.	8,749	222,526

Security	Number of Shares	Value ($)
Mitsubishi Electric Corp.	11,800	168,592
Mitsubishi Estate Co., Ltd.	7,587	147,304
Mitsubishi Gas Chemical Co., Inc.	1,100	15,518
Mitsubishi Heavy Industries Ltd.	2,100	84,986
Mitsubishi Materials Corp.	704	20,244
Mitsubishi Motors Corp.	4,200	19,176
Mitsubishi Tanabe Pharma Corp.	1,600	19,149
Mitsubishi UFJ Financial Group, Inc.	79,900	414,225
Mitsubishi UFJ Lease & Finance Co., Ltd.	2,600	15,961
Mitsui & Co., Ltd.	10,600	182,044
Mitsui Chemicals, Inc.	1,200	28,538
Mitsui Fudosan Co., Ltd.	5,800	148,380
Mitsui O.S.K. Lines Ltd.	800	21,791
Mizuho Financial Group, Inc.	157,100	243,894
MonotaRO Co., Ltd.	29,700	897,254
MS&AD Insurance Group Holdings, Inc.	3,010	97,197
Murata Manufacturing Co., Ltd.	3,672	199,934
Musashi Seimitsu Industry Co., Ltd.	200,800	2,789,404
Nabtesco Corp.	214,500	6,828,565
Nagoya Railroad Co., Ltd.	1,200	38,145
NEC Corp.	1,600	63,409
Nexon Co., Ltd. *	3,100	35,924
NGK Insulators Ltd.	1,700	26,117
NGK Spark Plug Co., Ltd.	1,000	20,274
NH Foods Ltd.	604	25,378
Nidec Corp.	1,500	220,839
Nifco, Inc.	312,600	8,251,353
Nihon Kohden Corp.	99,500	2,976,809
Nihon M&A Center, Inc.	343,000	10,428,940
Nikon Corp.	2,000	25,501
Nintendo Co., Ltd.	700	256,751
Nippon Building Fund, Inc.	9	68,279
Nippon Electric Glass Co., Ltd.	500	11,263
Nippon Express Co., Ltd.	500	28,528
Nippon Gas Co., Ltd.	63,500	1,797,399
Nippon Paint Holdings Co., Ltd.	900	49,014
Nippon Prologis REIT, Inc.	12	33,519
Nippon Steel Corp.	5,100	74,437
Nippon Telegraph & Telephone Corp.	4,200	208,500
Nippon Yusen K.K.	1,000	17,965
Nissan Chemical Corp.	800	32,846
Nissan Motor Co., Ltd.	15,200	95,921
Nisshin Seifun Group, Inc.	1,300	25,771
Nissin Foods Holdings Co., Ltd.	400	30,215
Nitori Holdings Co., Ltd.	7,705	1,172,786
Nitto Denko Corp.	1,000	55,326
Nomura Holdings, Inc.	21,900	99,535
Nomura Real Estate Holdings, Inc.	800	18,959
Nomura Real Estate Master Fund, Inc.	25	47,789
Nomura Research Institute Ltd.	83,080	1,763,847
NS Solutions Corp.	16,400	557,569
NSK Ltd.	2,300	21,386
NTT Data Corp.	4,200	55,150
NTT DOCOMO, Inc.	8,700	238,511
Obayashi Corp.	4,100	42,195
Obic Co., Ltd.	400	50,082
Odakyu Electric Railway Co., Ltd.	1,900	46,250
Oji Holdings Corp.	5,500	28,436
Olympus Corp.	121,500	1,653,175
Omron Corp.	10,100	590,868
Ono Pharmaceutical Co., Ltd.	2,400	45,208
Oracle Corp., Japan	300	26,369
Oriental Land Co., Ltd.	1,300	190,581
ORIX Corp.	8,700	136,720
Orix JREIT, Inc.	1,403	3,172,348
Osaka Gas Co., Ltd.	2,500	48,887
Otsuka Corp.	700	28,223
Otsuka Holdings Co., Ltd.	2,500	104,226

₁₇

Laudus International MarketMasters Fund | Annual Report

See financial notes

Table of Contents

Laudus International MarketMasters Fund

Portfolio Holdings as of October 31, 2019 (continued)

Security	Number of Shares	Value ($)
Pan Pacific International Holdings Corp.	2,800	44,076
Panasonic Corp.	14,200	119,342
Park24 Co., Ltd.	700	16,532
PeptiDream, Inc. *	600	30,116
Persol Holdings Co., Ltd.	40,700	781,766
Pigeon Corp.	700	34,173
Pola Orbis Holdings, Inc.	600	13,539
Pressance Corp.	154,000	2,516,566
Rakuten, Inc.	5,600	53,387
Recruit Holdings Co., Ltd.	8,600	285,813
Renesas Electronics Corp. *	5,200	35,202
Resona Holdings, Inc.	13,900	60,445
Resorttrust, Inc.	278,700	4,447,531
Ricoh Co., Ltd.	4,200	37,404
Rinnai Corp.	200	14,701
Rohm Co., Ltd.	600	47,537
Ryohin Keikaku Co., Ltd.	2,000	44,525
Sankyo Co., Ltd.	300	10,499
Santen Pharmaceutical Co., Ltd.	2,300	40,741
SBI Holdings, Inc.	1,536	33,405
SCSK Corp.	53,500	2,723,382
Secom Co., Ltd.	1,400	129,729
Sega Sammy Holdings, Inc.	1,100	15,480
Seibu Holdings, Inc.	1,500	26,475
Seiko Epson Corp.	1,800	25,454
Sekisui Chemical Co., Ltd.	2,382	41,532
Sekisui House Ltd.	4,055	87,444
Seven & i Holdings Co., Ltd.	4,900	185,123
Seven Bank Ltd.	3,800	11,017
SG Holdings Co., Ltd.	900	22,287
Sharp Corp.	1,300	14,913
SHIFT, Inc. *	27,500	1,568,630
Shimadzu Corp.	37,500	1,001,478
Shimamura Co., Ltd.	142	12,028
Shimano, Inc.	445	74,071
Shimizu Corp.	3,800	35,424
Shin-Etsu Chemical Co., Ltd.	2,324	259,129
Shinsei Bank Ltd.	900	14,031
Shionogi & Co., Ltd.	1,800	108,041
Shiseido Co., Ltd.	51,600	4,254,311
SHO-BOND Holdings Co., Ltd.	65,900	2,557,608
Showa Denko K.K.	900	25,251
SMC Corp.	8,537	3,688,333
Softbank Corp.	10,800	148,147
SoftBank Group Corp.	10,662	410,129
Sohgo Security Services Co., Ltd.	500	27,159
Sompo Holdings, Inc.	2,200	86,473
Sony Corp.	8,300	505,214
Sony Financial Holdings, Inc.	1,100	23,665
Stanley Electric Co., Ltd.	900	24,906
Subaru Corp.	3,900	111,764
Sumco Corp.	1,500	24,916
Sumitomo Chemical Co., Ltd.	9,500	43,457
Sumitomo Corp.	7,600	123,442
Sumitomo Dainippon Pharma Co., Ltd.	1,000	17,453
Sumitomo Electric Industries Ltd.	5,000	68,569
Sumitomo Heavy Industries Ltd.	700	21,743
Sumitomo Metal Mining Co., Ltd.	1,500	50,175
Sumitomo Mitsui Financial Group, Inc.	8,600	305,327
Sumitomo Mitsui Trust Holdings, Inc.	2,100	76,535
Sumitomo Realty & Development Co., Ltd.	2,195	79,675
Sumitomo Rubber Industries Ltd.	1,100	14,579
Sundrug Co., Ltd.	500	16,545
Suntory Beverage & Food Ltd.	900	38,476
Sushiro Global Holdings Ltd.	7,900	543,148
Suzuken Co., Ltd.	500	26,697
Suzuki Motor Corp.	2,400	113,314
Sysmex Corp.	1,100	71,773

Security	Number of Shares	Value ($)
T&D Holdings, Inc.	3,500	38,982
Taiheiyo Cement Corp.	800	22,631
Taisei Corp.	1,300	51,263
Taisho Pharmaceutical Holdings Co., Ltd.	300	21,352
Taiyo Nippon Sanso Corp.	829	19,407
Takeda Pharmaceutical Co., Ltd.	9,637	348,214
TDK Corp.	900	88,806
TechnoPro Holdings, Inc.	15,700	965,642
Teijin Ltd.	1,200	24,046
Terumo Corp.	116,400	3,798,915
The Bank of Kyoto Ltd.	300	11,874
The Chiba Bank Ltd.	3,800	20,654
The Chugoku Electric Power Co., Inc.	1,800	23,979
The Kansai Electric Power Co., Inc.	4,400	51,331
The Shizuoka Bank Ltd.	2,954	22,447
The Yokohama Rubber Co., Ltd.	800	17,868
THK Co., Ltd.	800	23,004
TIS, Inc.	25,300	1,534,028
Tobu Railway Co., Ltd.	1,200	40,044
Toho Co., Ltd.	700	28,270
Toho Gas Co., Ltd.	466	18,150
Tohoku Electric Power Co., Inc.	2,700	27,750
Tokio Marine Holdings, Inc.	4,200	227,075
Tokyo Century Corp.	300	13,853
Tokyo Electric Power Co. Holdings, Inc. *	9,700	44,922
Tokyo Electron Ltd.	1,000	202,599
Tokyo Gas Co., Ltd.	2,500	61,028
Tokyu Corp.	3,300	62,415
Tokyu Fudosan Holdings Corp.	3,900	25,868
Toppan Printing Co., Ltd.	1,630	30,147
Toray Industries, Inc.	9,000	63,604
Toshiba Corp.	3,600	123,106
Tosoh Corp.	1,700	23,277
TOTO Ltd.	900	36,743
Toyo Seikan Group Holdings Ltd.	900	14,223
Toyo Suisan Kaisha Ltd.	565	23,789
Toyoda Gosei Co., Ltd.	400	9,358
Toyota Industries Corp.	914	54,842
Toyota Motor Corp.	79,577	5,521,123
Toyota Tsusho Corp.	1,400	48,298
Trend Micro, Inc.	800	40,379
Trust Tech, Inc.	183,400	2,324,553
Tsuruha Holdings, Inc.	300	33,747
Unicharm Corp.	2,600	88,116
United Urban Investment Corp.	19	38,331
USS Co., Ltd.	1,400	27,115
UT Group Co., Ltd.	155,500	3,862,555
Welcia Holdings Co., Ltd.	300	17,238
West Japan Railway Co.	1,041	90,453
Yakult Honsha Co., Ltd.	800	45,848
Yamada Denki Co., Ltd.	4,200	20,301
Yamaha Corp.	900	41,912
Yamaha Motor Co., Ltd.	1,700	33,274
Yamato Holdings Co., Ltd.	1,900	31,868
Yamazaki Baking Co., Ltd.	800	13,639
Yaskawa Electric Corp.	1,521	57,855
Yokogawa Electric Corp.	1,500	27,484
Z Holdings Corp.	17,800	54,801
Zenkoku Hosho Co., Ltd.	15,500	647,109
ZOZO, Inc.	1,300	30,281
		190,389,611

₁₈

Laudus International MarketMasters Fund | Annual Report

See financial notes

Table of Contents

Laudus International MarketMasters Fund

Portfolio Holdings as of October 31, 2019 (continued)

Security	Number of Shares	Value ($)
Luxembourg 0.1%
Aroundtown S.A.	5,251	44,385
Millicom International Cellular S.A. SDR	419	19,101
Tenaris S.A.	76,255	773,598
		837,084

Mexico 0.3%
Grupo Aeroportuario del Sureste S.A.B. de C.V. ADR	4,168	682,510
Grupo Televisa S.A.B. ADR	277,300	3,064,165
		3,746,675

Netherlands 4.0%
ABN AMRO Group N.V. CVA	2,752	51,297
Adyen N.V. *	2,652	1,867,048
Aegon N.V.	12,422	53,891
AerCap Holdings N.V. *	843	48,793
Akzo Nobel N.V.	7,926	730,725
ArcelorMittal	4,202	62,479
ASML Holding N.V.	35,318	9,257,353
B&S Group Sarl	360,038	4,384,929
Boskalis Westminster N.V.	178,005	3,918,079
Euronext N.V.	55,550	4,481,335
EXOR N.V.	81,372	6,238,304
Heineken Holding N.V.	748	71,371
Heineken N.V.	1,670	170,539
IMCD N.V.	4,521	353,018
ING Groep N.V.	25,306	286,552
InterXion Holding N.V. *	48,275	4,258,820
Koninklijke Ahold Delhaize N.V.	7,608	189,592
Koninklijke DSM N.V.	1,193	141,595
Koninklijke KPN N.V.	22,835	70,888
Koninklijke Philips N.V.	89,281	3,917,121
Koninklijke Vopak N.V.	447	24,556
Marel Hf *	677,764	3,144,585
NN Group N.V.	2,091	79,786
NXP Semiconductors N.V.	1,923	218,607
Prosus N.V. *	32,234	2,222,824
Randstad N.V.	738	40,957
Royal Dutch Shell plc, A Shares	141,827	4,119,660
Takeaway.com N.V. *	33,264	2,713,291
Unilever N.V.	9,455	558,854
Wolters Kluwer N.V.	42,033	3,095,856
		56,772,705

New Zealand 0.7%
a2 Milk Co., Ltd. *	4,711	39,112
Auckland International Airport Ltd.	915,119	5,453,947
Fisher & Paykel Healthcare Corp., Ltd.	3,686	45,209
Fletcher Building Ltd.	5,581	16,398
Mercury NZ Ltd.	1,597,190	5,079,038
Meridian Energy Ltd.	8,588	25,315
Ryman Healthcare Ltd.	2,648	21,886
Spark New Zealand Ltd.	11,900	34,137
		10,715,042

Norway 0.5%
Aker BP A.S.A.	670	18,584
DNB A.S.A.	6,180	112,521
Elkem A.S.A.	913,207	2,170,449
Equinor A.S.A.	6,529	121,215
Gjensidige Forsikring A.S.A.	1,275	23,836
Mowi A.S.A.	2,853	69,647

Security	Number of Shares	Value ($)
Norsk Hydro A.S.A.	8,336	29,456
Orkla A.S.A.	5,053	48,569
Schibsted A.S.A., B Shares	669	18,666
Subsea 7 S.A.	153,220	1,439,458
Telenor A.S.A.	4,753	88,956
TGS NOPEC Geophysical Co., A.S.A.	102,026	2,649,748
Yara International A.S.A.	1,178	45,890
		6,836,995

Papua New Guinea 0.0%
Oil Search Ltd.	8,500	41,950

Peru 0.1%
Credicorp Ltd.	10,316	2,208,037

Poland 0.2%
Dino Polska S.A. *	68,781	2,680,394

Portugal 0.1%
Banco Espirito Santo S.A. *(b)	42,176	—
EDP - Energias de Portugal S.A.	16,652	68,593
Galp Energia, SGPS, S.A.	3,107	49,696
Jeronimo Martins, SGPS, S.A.	1,560	26,214
NOS SGPS, S.A.	267,120	1,588,094
		1,732,597

Republic of Korea 1.1%
Douzone Bizon Co., Ltd.	42,524	2,682,750
Fila Korea Ltd.	15,736	776,459
Kakao Corp.	6,454	783,208
NAVER Corp.	42,200	5,950,050
Samsung Electronics Co., Ltd.	90,600	3,915,718
Samsung SDI Co., Ltd.	6,482	1,264,934
Studio Dragon Corp. *	12,505	838,360
		16,211,479

Russia 0.1%
Yandex N.V., Class A *	40,174	1,341,410

Singapore 1.3%
Ascendas Real Estate Investment Trust	1,359,033	3,165,257
CapitaLand Commercial Trust	17,860	26,897
CapitaLand Ltd.	15,900	42,027
CapitaLand Mall Trust	1,631,600	3,044,311
City Developments Ltd.	3,127	24,763
ComfortDelGro Corp., Ltd.	14,100	23,810
DBS Group Holdings Ltd.	11,516	219,505
Genting Singapore Ltd.	37,500	25,872
Golden Agri-Resources Ltd.	34,700	5,209
Jardine Cycle & Carriage Ltd.	611	14,690
Jardine Matheson Holdings Ltd.	1,409	80,329
Jardine Strategic Holdings Ltd.	1,400	45,209
Keppel Corp., Ltd.	9,000	45,318
Oversea-Chinese Banking Corp., Ltd.	21,516	172,972
SATS Ltd.	1,857,000	6,886,627
Sembcorp Industries Ltd.	7,100	11,920
Sheng Siong Group Ltd.	5,481,700	4,711,828
Singapore Airlines Ltd.	3,331	23,023
Singapore Exchange Ltd.	5,200	34,141
Singapore Press Holdings Ltd.	10,600	17,250
Singapore Technologies Engineering Ltd.	9,900	29,001
Singapore Telecommunications Ltd.	53,400	129,308

₁₉

Laudus International MarketMasters Fund | Annual Report

See financial notes

Table of Contents

Laudus International MarketMasters Fund

Portfolio Holdings as of October 31, 2019 (continued)

Security	Number of Shares	Value ($)
Suntec Real Estate Investment Trust	14,224	19,432
United Overseas Bank Ltd.	8,141	160,275
UOL Group Ltd.	3,400	19,468
Venture Corp., Ltd.	1,800	20,879
Wilmar International Ltd.	11,900	32,719
Yangzijiang Shipbuilding Holdings Ltd.	16,800	11,761
		19,043,801

South Africa 0.4%
Bid Corp., Ltd.	26,434	616,684
Mr. Price Group Ltd.	35,798	378,522
Naspers Ltd., N Shares	26,145	3,699,740
RMB Holdings Ltd.	166,265	875,244
The Bidvest Group Ltd.	26,434	360,846
		5,931,036

Spain 0.8%
ACS Actividades de Construccion y Servicios S.A.	54,021	2,192,071
Aena SME S.A.	437	80,217
Amadeus IT Group S.A.	61,727	4,566,455
Applus Services S.A.	133,604	1,614,525
Banco Bilbao Vizcaya Argentaria S.A.	43,398	228,570
Banco De Sabadell S.A.	34,878	38,339
Banco Santander S.A.	108,809	436,900
Bankia S.A.	7,649	14,593
Bankinter S.A.	4,179	28,943
CaixaBank S.A.	22,717	65,143
Cellnex Telecom S.A. *	1,294	55,835
Cellnex Telecom S.A., Interim Shares *(b)	369	15,922
Enagas S.A.	1,426	35,286
Endesa S.A.	2,109	57,438
Ferrovial S.A.	3,153	93,023
Grifols S.A.	1,977	63,779
Iberdrola S.A.	38,710	397,900
Industria de Diseno Textil S.A.	7,106	221,429
Mapfre S.A.	6,681	18,647
Naturgy Energy Group S.A.	1,958	53,346
Red Electrica Corp. S.A.	2,817	56,615
Repsol S.A.	9,490	156,392
Siemens Gamesa Renewable Energy S.A.	1,478	20,347
Telefonica S.A.	30,410	233,527
		10,745,242

Sweden 4.3%
AAK AB	414,218	7,347,832
AF POYRY AB	179,260	3,816,097
Alfa Laval AB	2,005	46,406
Assa Abloy AB, Class B	6,469	153,628
Atlas Copco AB, A Shares	143,361	5,060,142
Atlas Copco AB, B Shares	2,535	78,657
Boliden AB	1,695	45,710
Bravida Holding AB	241,224	2,222,780
Electrolux AB, B Shares	1,513	39,779
Elekta AB, B Shares	149,472	2,082,268
Embracer Group AB *	198,670	1,351,801
Epiroc AB, Class A	4,162	46,894
Epiroc AB, Class B	2,419	26,346
Essity AB, Class B	3,969	123,994
Evolution Gaming Group AB	38,458	919,827
Fabege AB	272,406	4,068,235
Fastighets AB Balder, B Shares *	82,819	3,212,087
Hennes & Mauritz AB, B Shares	293,187	6,145,053
Hexagon AB, B Shares	48,035	2,459,291
Husqvarna AB, B Shares	2,726	20,884

Security	Number of Shares	Value ($)
ICA Gruppen AB	543	24,029
Industrivarden AB, C Shares	1,099	23,812
Indutrade AB	22,841	704,252
Investor AB, B Shares	2,941	150,886
Kinnevik AB, Class B	1,583	43,323
LE Lundbergfortagen AB, B Shares	513	19,335
Lifco AB, B Shares	13,541	675,389
Lindab International AB	176,588	1,975,200
Loomis AB, Class B	128,597	4,979,201
Lundin Petroleum AB	1,160	38,417
Nibe Industrier AB, B Shares	42,061	575,917
Nolato AB, B Shares	11,968	670,564
Sandvik AB	7,380	130,385
Securitas AB, B Shares	2,025	32,425
Skandinaviska Enskilda Banken AB, A Shares	10,296	98,752
Skanska AB, B Shares	2,137	45,533
SKF AB, B Shares	265,573	4,808,504
Svenska Handelsbanken AB, A Shares	9,661	96,956
Swedbank AB, A Shares	5,726	80,240
Swedish Match AB	1,127	52,945
Tele2 AB, B Shares	3,118	44,635
Telefonaktiebolaget LM Ericsson, B Shares	20,029	175,029
Telia Co. AB	17,826	78,415
Vitrolife AB	22,229	346,829
Volvo AB, B Shares	345,572	5,178,660
		60,317,344

Switzerland 5.6%
ABB Ltd.	11,995	251,895
Adecco Group AG	1,008	59,922
Alcon, Inc. *	30,658	1,813,057
Baloise Holding AG	306	56,596
Barry Callebaut AG	14	29,586
Belimo Holding AG	325	2,038,567
Burckhardt Compression Holding AG	17,580	4,187,836
Chocoladefabriken Lindt & Spruengli AG	1	81,906
Chocoladefabriken Lindt & Spruengli AG - Participation Certificates	7	52,012
Cie Financiere Richemont S.A.	47,094	3,700,701
Clariant AG *	1,256	25,764
Credit Suisse Group AG *	756,015	9,357,850
Daetwyler Holding AG	10,880	1,875,063
Dufry AG *	272	23,657
EMS-Chemie Holding AG	51	31,951
Geberit AG	238	120,925
Georg Fischer AG	2,304	2,200,438
Givaudan S.A.	60	176,276
Glencore plc *	3,662,235	11,054,011
Julius Baer Group Ltd. *	1,454	64,388
Kuehne & Nagel International AG	12,625	2,039,659
LafargeHolcim Ltd. *	78,732	4,064,025
Landis+Gyr Group AG *	26,355	2,447,147
Logitech International S.A.	29,063	1,192,951
Lonza Group AG *	16,856	6,075,449
Nestle S.A.	21,137	2,261,264
Novartis AG	14,006	1,223,777
Pargesa Holding S.A.	245	19,367
Partners Group Holding AG	3,933	3,073,487
Roche Holding AG	4,552	1,369,951
Schindler Holding AG	125	29,602
Schindler Holding AG - Participation Certificates	265	64,924
SGS S.A.	34	88,676
SIG Combibloc Group AG *	55,707	772,359
Sika AG	25,635	4,406,823
Sonova Holding AG	360	82,612

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Laudus International MarketMasters Fund | Annual Report

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Table of Contents

Laudus International MarketMasters Fund

Portfolio Holdings as of October 31, 2019 (continued)

Security	Number of Shares	Value ($)
Straumann Holding AG	67	59,863
Swiss Life Holding AG	217	108,677
Swiss Prime Site AG *	484	49,887
Swiss Re AG	1,970	206,631
Swisscom AG	168	85,931
Tecan Group AG	14,722	3,482,919
Temenos AG *	15,332	2,193,563
The Swatch Group AG	346	18,575
The Swatch Group AG - Bearer Shares	9,516	2,638,578
u-blox Holding AG *	22,875	1,854,190
UBS Group AG *	25,072	296,731
VAT Group AG *	5,759	846,755
Vifor Pharma AG	282	44,409
Zurich Insurance Group AG	984	385,433
		78,686,616

Taiwan 1.9%
Accton Technology Corp.	250,000	1,487,169
Airtac International Group	143,000	1,943,465
Chailease Holding Co., Ltd.	765,918	3,451,241
Eclat Textile Co., Ltd.	45,000	603,388
Globalwafers Co. Ltd.	57,000	680,082
Macronix International Co., Ltd.	1,993,000	2,023,184
MediaTek, Inc.	178,000	2,377,163
Merida Industry Co., Ltd.	585,000	3,385,275
Nien Made Enterprise Co., Ltd.	175,000	1,587,450
Taiwan Semiconductor Manufacturing Co., Ltd.	258,000	2,528,348
Taiwan Semiconductor Manufacturing Co., Ltd. ADR	141,717	7,316,849
		27,383,614

Thailand 0.1%
Airports of Thailand PCL	309,700	805,148
Tisco Financial Group PCL	240,800	777,546
		1,582,694

Turkey 0.1%
Ulker Biskuvi Sanayi AS *	441,867	1,421,513

United Arab Emirates 0.1%
First Abu Dhabi Bank PJSC	210,636	871,775
NMC Health plc	645	18,284
		890,059

United Kingdom 15.6%
3i Group plc	122,952	1,796,683
Abcam plc	132,511	1,997,984
Admiral Group plc	1,267	33,160
Anglo American plc	6,792	174,806
Antofagasta plc	2,444	27,526
Ashtead Group plc	173,296	5,276,138
Associated British Foods plc	2,311	66,706
AstraZeneca plc	8,397	818,852
Auto Trader Group plc	6,193	45,124
Avast plc	824,670	4,427,986
AVEVA Group plc	76,346	4,136,786
Aviva plc	25,137	135,490
BAE Systems plc	20,568	153,637
Barclays plc	109,758	238,073
Barratt Developments plc	6,350	51,929
BBA Aviation plc	868,978	3,418,676
Beazley plc	117,677	894,383

Security	Number of Shares	Value ($)
Bellway plc	29,082	1,190,309
Big Yellow Group plc	57,353	848,810
BP plc	131,316	832,722
British American Tobacco plc	14,884	520,581
BT Group plc	53,948	143,170
Bunzl plc	2,187	56,894
Burberry Group plc	2,593	68,758
Burford Capital Ltd.	21,601	245,931
Carnival plc	1,127	45,099
Centrica plc	37,101	34,915
Cineworld Group plc	1,665,702	4,799,835
CNH Industrial N.V.	855,321	9,312,436
Coats Group plc	4,192,795	3,872,401
Coca-Cola European Partners plc	1,513	80,961
Coca-Cola HBC AG *	1,335	40,649
Compass Group plc	204,498	5,444,573
ContourGlobal plc	1,991,578	5,430,460
Croda International plc	24,555	1,532,028
Dechra Pharmaceuticals plc	71,806	2,449,417
Diageo plc	122,467	5,012,694
Diploma plc	195,388	4,047,003
Direct Line Insurance Group plc	8,637	30,452
easyJet plc	985	15,801
Electrocomponents plc	421,134	3,715,713
Elementis plc	1,781,726	3,428,739
Equiniti Group plc	2,165,756	6,050,430
Evraz plc	3,074	14,669
Experian plc	143,368	4,519,146
Ferguson plc	41,134	3,512,569
Fevertree Drinks plc	53,749	1,295,140
Fresnillo plc	1,370	12,657
G4S plc	1,027,293	2,755,138
GlaxoSmithKline plc	32,202	737,585
Greggs plc	52,813	1,214,762
GVC Holdings plc	3,713	42,836
Halma plc	81,171	1,969,649
Hargreaves Lansdown plc	1,854	42,574
Hikma Pharmaceuticals plc	108,217	2,818,272
Hill & Smith Holdings plc	208,080	3,530,928
Hiscox Ltd.	70,800	1,367,211
HomeServe plc	209,230	3,141,193
HSBC Holdings plc	129,939	981,703
IMI plc	108,175	1,406,725
Imperial Brands plc	6,146	134,815
Informa plc	8,232	82,742
InterContinental Hotels Group plc	1,117	67,595
Intermediate Capital Group plc	370,980	7,139,773
Intertek Group plc	16,650	1,154,441
Investec plc	4,335	24,577
ITV plc	22,456	38,956
J. Sainsbury plc	10,861	28,622
John Wood Group plc	4,352	19,108
Johnson Matthey plc	1,200	47,672
Kingfisher plc	13,393	35,928
Land Securities Group plc	4,828	58,808
Legal & General Group plc	38,469	131,500
Liberty Global plc, Class A *	112,100	2,819,315
Liberty Global plc, Class C *	99,539	2,375,996
Lloyds Banking Group plc	12,013,675	8,837,332
London Stock Exchange Group plc	40,808	3,677,569
M&G plc *	16,845	46,652
Marks & Spencer Group plc	12,513	29,478
Meggitt plc	108,254	875,919
Melrose Industries plc	630,945	1,743,734
Merlin Entertainments plc	4,701	27,696
Micro Focus International plc	2,266	31,101
Mondi plc	2,937	60,895
Moneysupermarket.com Group plc	356,111	1,584,572

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Laudus International MarketMasters Fund | Annual Report

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Table of Contents

Laudus International MarketMasters Fund

Portfolio Holdings as of October 31, 2019 (continued)

Security	Number of Shares	Value ($)
National Grid plc	23,057	269,589
Network International Holdings plc *	247,913	1,737,336
Next plc	889	75,820
Nomad Foods Ltd. *	140,095	2,733,253
Ocado Group plc *	3,031	52,243
Pearson plc	5,092	44,970
Persimmon plc	1,976	58,285
Prudential plc	16,845	294,229
Reckitt Benckiser Group plc	29,896	2,313,401
RELX plc	134,741	3,243,937
Renishaw plc	13,319	654,731
Rentokil Initial plc	387,576	2,280,960
Rio Tinto plc	7,400	385,257
Rolls-Royce Holdings plc *	689,575	6,345,296
Rotork plc	619,005	2,417,321
Royal Bank of Scotland Group plc	1,728,726	4,778,611
Royal Dutch Shell plc, A Shares	28,493	825,957
Royal Dutch Shell plc, B Shares	24,283	699,345
RSA Insurance Group plc	6,831	46,214
Schroders plc	155,971	6,252,785
Schroders plc, Non-Voting Shares	1,100	33,021
Segro plc	234,994	2,570,671
Severn Trent plc	1,484	43,348
Smith & Nephew plc	5,726	122,917
Smiths Group plc	114,853	2,400,845
Softcat plc	45,655	556,416
Spectris plc	123,627	3,832,639
Spirax-Sarco Engineering plc	52,684	5,406,630
SSE plc	6,643	110,513
SSP Group plc	83,859	691,512
St. James's Place plc	123,685	1,668,271
Standard Chartered plc	17,990	163,240
Standard Life Aberdeen plc	16,394	64,456
Taylor Wimpey plc	20,520	44,009
Tesco plc	63,078	192,549
The Berkeley Group Holdings plc	805	45,885
The British Land Co., plc	5,786	46,520
The Sage Group plc	7,051	65,716
The Unite Group plc	253,674	3,694,679
The Weir Group plc	1,655	28,908
Trainline plc *	390,712	2,107,943
Ultra Electronics Holdings plc	199,866	5,048,183
Unilever plc	7,207	431,548
United Utilities Group plc	4,279	48,317
Victrex plc	219,257	6,228,759
Vodafone Group plc	173,783	354,642
WH Smith plc	30,857	874,409
Whitbread plc	941	49,531
WM Morrison Supermarkets plc	15,116	39,050
WPP plc	391,661	4,887,756
		220,744,696

United States 0.1%
Willis Towers Watson plc	4,616	862,730
Total Common Stock
(Cost $1,133,810,785)		1,347,961,142

Preferred Stock0.3% of net assets

Brazil 0.2%
Randon SA Implementos e Participacoes	986,900	2,546,918

Security	Number of Shares	Value ($)
Germany 0.1%
Bayerische Motoren Werke AG	357	21,975
Fuchs Petrolub SE	457	19,470
Henkel AG & Co. KGaA	9,167	952,201
Porsche Automobil Holding SE	995	73,262
Sartorius AG	229	44,500
Volkswagen AG	1,209	229,837
		1,341,245

Italy 0.0%
Telecom Italia S.p.A. - RSP	41,648	24,106

United Kingdom 0.0%
Rolls-Royce Holdings plc *(b)	30,809,972	39,910
Total Preferred Stock
(Cost $3,830,588)		3,952,179

Other Investment Companies4.0% of net assets

Equity Funds 0.0%
iShares MSCI EAFE ETF	4,864	327,931

Money Market Fund 4.0%
State Street Institutional U.S. Government Money Market Fund, Premier Class 1.75%(c)	56,151,564	56,151,564
Total Other Investment Companies
(Cost $56,461,106)		56,479,495

Rights0.0% of net assets

Australia 0.0%
Costa Group Holdings Ltd. *	216,887	100,172
Total Rights
(Cost $—)		100,172
Security Rate, Maturity Date	Face Amount ($)	Value ($)
Short-Term Investment0.0% of net assets

U.S. Treasury Obligation 0.0%
United States Treasury Bill
1.88%, 12/12/19(d)(e)	35,000	34,926
Total Short-Term Investment
(Cost $34,926)		34,926

	Number of Contracts	Notional Amount ($)	Current Value/ Unrealized Appreciation ($)
Futures Contracts
Long
MSCI Emerging Markets Index, expires 12/20/19	775	40,354,250	1,914,124
MSCI EAFE Index, expires 12/20/19	5	489,300	12,511
Net Unrealized Appreciation			1,926,635

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Laudus International MarketMasters Fund | Annual Report

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Table of Contents

Laudus International MarketMasters Fund

Portfolio Holdings as of October 31, 2019 (continued)

Expiration
Date

Counterparty

Currency
to be
Received

Amount of
Currency
to be
Received

Currency
to be
Delivered

Amount of
Currency
to be
Delivered

Unrealized
Appreciation
($)

Forward Foreign Currency Exchange Contract

12/18/2019

State Street Bank & Trust Co.

USD

3,144,583

CHF

3,076,000

15,610

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

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

CHF —	Swiss franc
USD —	U.S. dollar

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2019 (see financial note 2(a) for additional information):

Description	Quoted Prices in Active Markets for Identical Assets (Level 1)	Other Significant Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Assets
Common Stock¹	$—	$167,935,172	$—	$167,935,172
Argentina	2,516,248	—	—	2,516,248
Australia	137,162	58,425,203	—	58,562,365
Belgium	5,133,228	10,554,973	—	15,688,201
Brazil	16,184,071	—	—	16,184,071
Canada	85,733,011	—	—	85,733,011
China	22,866,979	44,916,067	—	67,783,046
Finland	48,827	9,609,503	—	9,658,330
France	6,041,811	116,900,823	—	122,942,634
Germany	20,721,829	100,330,132	—	121,051,961
Hong Kong	113,513	21,992,843	—	22,106,356
India	5,156,026	10,521,404	—	15,677,430
Ireland	18,407,631	3,158,307	—	21,565,938
Israel	7,833,823	314,450	—	8,148,273
Japan	63,700	190,325,911	—	190,389,611
Mexico	3,746,675	—	—	3,746,675
Netherlands	14,278,558	42,494,147	—	56,772,705
Peru	2,208,037	—	—	2,208,037
Portugal	—	1,732,597	—^*	1,732,597
Republic of Korea	838,360	15,373,119	—	16,211,479
Russia	1,341,410	—	—	1,341,410
Spain	—	10,729,320	15,922	10,745,242
Switzerland	4,321,754	74,364,862	—	78,686,616

₂₃

Laudus International MarketMasters Fund | Annual Report

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Table of Contents

Laudus International MarketMasters Fund

Portfolio Holdings as of October 31, 2019 (continued)

Description	Quoted Prices in Active Markets for Identical Assets (Level 1)	Other Significant Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Taiwan	$7,316,849	$20,066,765	$—	$27,383,614
Thailand	1,582,694	—	—	1,582,694
United Kingdom	33,964,773	186,779,923	—	220,744,696
United States	862,730	—	—	862,730
Preferred Stock¹	—	1,365,351	—	1,365,351
Brazil	2,546,918	—	—	2,546,918
United Kingdom	—	—	39,910	39,910
Other Investment Companies¹	56,479,495	—	—	56,479,495
Rights¹	100,172	—	—	100,172
Short-Term Investment¹	—	34,926	—	34,926
Futures Contracts²	1,926,635	—	—	1,926,635
Forward Foreign Currency Exchange Contracts²	—	15,610	—	15,610
Total	$322,472,919	$1,087,941,408	$55,832	$1,410,470,159

*	Level 3 amount shown includes securities determined to have no value at October 31, 2019.
¹	As categorized in Portfolio Holdings.
²	Futures contracts and forward foreign currency exchange contracts are valued at unrealized appreciation or depreciation.

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

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Laudus International MarketMasters Fund | Annual Report

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Table of Contents

Laudus International MarketMasters Fund

Statement of Assets and Liabilities

As of October 31, 2019

Assets
Investments in unaffiliated issuers, at value (cost $1,194,137,405)		$1,408,527,914
Foreign currency, at value (cost $833,712)		836,668
Deposit with broker for futures contracts		478,871
Receivables:
Investments sold		5,076,609
Variation margin on futures contracts		1,928,171
Dividends		1,808,421
Foreign tax reclaims		970,392
Fund shares sold		207,895
Unrealized appreciation on forward foreign currency exchange contracts		15,610
Prepaid expenses	+	18,012
Total assets		1,419,868,563
Liabilities
Payables:
Investments bought		3,342,760
Investment adviser and administrator fees		1,070,411
Shareholder service fees		197,308
Independent trustees’ fees		11
Fund shares redeemed		1,930,111
Accrued expenses	+	429,686
Total liabilities		6,970,287
Net Assets
Total assets		1,419,868,563
Total liabilities	–	6,970,287
Net assets		$1,412,898,276
Net Assets by Source
Capital received from investors		1,204,989,773
Total distributable earnings		207,908,503

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$1,412,898,276		61,724,690		$22.89

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Laudus International MarketMasters Fund | Annual Report

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Table of Contents

Laudus International MarketMasters Fund

Statement of Operations

For the period November 1, 2018 through October 31, 2019

Investment Income
Dividends (net of foreign withholding tax of $3,432,350)		$36,568,887
Expenses
Investment adviser and administrator fees		18,225,664
Shareholder service fees:
Investor Shares¹		290,453
Select Shares¹		2,123,549
Custodian fees		420,104
Portfolio accounting fees		175,127
Professional fees		87,253*
Registration fees		77,852
Transfer agent fees		44,526
Shareholder reports		39,646
Independent trustees’ fees		15,311
Other expenses	+	77,029
Total expenses		21,576,514
Expense reduction by CSIM and its affiliates	–	3,502,987
Net expenses	–	18,073,527
Net investment income		18,495,360
Realized and Unrealized Gains (Losses)
Net realized gains on investments		480,831
Net realized losses on futures contracts		(6,078,253)
Net realized losses on foreign currency transactions		(248,516)
Net realized gains on forward foreign currency exchange contracts	+	253,359
Net realized losses		(5,592,579)
Net change in unrealized appreciation (depreciation) on investments		119,694,117
Net change in unrealized appreciation (depreciation) on futures contracts		5,468,859
Net change in unrealized appreciation (depreciation) on foreign currency translations		73,818
Net change in unrealized appreciation (depreciation) on forward foreign currency exchange contracts	+	(236,764)
Net change in unrealized appreciation (depreciation)	+	125,000,030
Net realized and unrealized gains		119,407,451
Increase in net assets resulting from operations		$137,902,811

*	Includes professional fees of $27,425 associated with the filing of tax claims in the European Union deemed to be non-routine expenses of the fund. See financial notes 2(d) and 4 for additional information.
¹	Effective February 26, 2019, all outstanding Investor Shares were consolidated into the Select Shares, resulting in a single class of shares of the fund (see financial note 1).

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Laudus International MarketMasters Fund

Statement of Changes in Net Assets

For the current and prior report periods

Operations
	11/1/18-10/31/19		11/1/17-10/31/18
Net investment income		$18,495,360	$15,385,341
Net realized gains (losses)		(5,592,579)	124,600,348
Net change in unrealized appreciation (depreciation)	+	125,000,030	(331,028,701)
Increase (decrease) in net assets from operations		137,902,811	(191,043,012)
Distributions to Shareholders1
Investor Shares		(34,719,762)	(22,191,896)
Select Shares	+	(99,317,431)	(55,540,940)
Total distributions		($134,037,193)	($77,732,836)

Transactions in Fund Shares¹
		11/1/18-10/31/19		11/1/17-10/31/18
		SHARES	VALUE	SHARES	VALUE
Shares Sold
Investor Shares		103,775	$2,181,854	768,475	$20,559,616
Select Shares	+	21,106,679	454,485,861	6,716,472	175,934,966
Total shares sold		21,210,454	$456,667,715	7,484,947	$196,494,582
Shares Reinvested
Investor Shares		1,583,820	$30,947,842	766,583	$19,831,502
Select Shares	+	3,532,129	68,841,189	1,345,695	34,745,855
Total shares reinvested		5,115,949	$99,789,031	2,112,278	$54,577,357
Shares Redeemed
Investor Shares		(19,296,537)	($416,594,739)	(2,912,352)	($76,864,136)
Select Shares	+	(12,155,331)	(261,429,704)	(4,410,948)	(116,250,573)
Total shares redeemed		(31,451,868)	($678,024,443)	(7,323,300)	($193,114,709)
Net transactions in fund shares		(5,125,465)	($121,567,697)	2,273,925	$57,957,230
Shares Outstanding and Net Assets
		11/1/18-10/31/19		11/1/17-10/31/18
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		66,850,155	$1,530,600,355	64,576,230	$1,741,418,973
Total increase or decrease	+	(5,125,465)	(117,702,079)	2,273,925	(210,818,618)
End of period		61,724,690	$1,412,898,276	66,850,155	$1,530,600,355

¹	Effective February 26, 2019, all outstanding Investor Shares (17,685,944 shares valued at $382,997,961) were consolidated into the Select Shares, resulting in a single class of shares of the fund (see financial note 1).

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Financial Notes

1. Business Structure of the Fund:

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

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

Prior to February 26, 2019, the fund offered two share classes: Investor Shares and Select Shares^®. Shares of each class represented an interest in the same portfolio, but each class had different expenses and investment minimums.

Effective February 26, 2019, the Investor Shares and Select Shares were consolidated into a single share class and the fund no longer offers separate share classes. Shares are bought and sold at closing net asset value per share (NAV), which is the price for all outstanding shares of the fund. Each share has a par value of 1/1,000 of a cent, and the fund’s Board of Trustees (the Board) may authorize the issuance of as many shares as necessary.

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

2. Significant Accounting Policies:

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

The fund invests in certain other investment companies (underlying funds). For more information about the underlying funds’ operations and policies, please refer to those funds’ semiannual and annual reports, which are filed with the U.S. Securities and Exchange Commission (SEC) and are available on the SEC’s website at www.sec.gov.

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Financial Notes(continued)

2. Significant Accounting Policies (continued):

(a) Security Valuation:

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

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

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

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

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

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

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

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

In accordance with the authoritative guidance on fair value measurements and disclosures under GAAP, the 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.

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Financial Notes(continued)

2. Significant Accounting Policies (continued):

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

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

• Level 2—other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)—Investments that trade in markets that are not considered to be active, but whose values are based on quoted market prices, dealer quotations or valuations provided by alternative pricing sources supported by observable inputs are classified as Level 2 prices. These generally include U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, certain mortgage products, less liquid listed equities, and state, municipal and provincial obligations. In addition, international securities whose markets close hours before the fund values its holdings may require fair valuations due to significant movement in the U.S. markets occurring after the daily close of the foreign markets. The Board has approved a vendor that calculates fair valuations of international equity securities based on a number of factors that appear to correlate to the movements in the U.S. markets.

• Level 3—significant unobservable inputs (including the 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 October 31, 2019 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. The fund must give the broker a deposit of cash and/or securities (initial margin) whenever it enters into a futures contract. The amount of the deposit may vary from one contract to another. Subsequent payments (variation margin) are made or received by the fund depending on the daily fluctuations in the value of the futures contract and are accounted for as unrealized appreciation or depreciation until the contract is closed, at which time the gains or losses are realized. Futures contracts are traded publicly on exchanges, and their market value may change daily.

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

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

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

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Financial Notes(continued)

2. Significant Accounting Policies (continued):

reported in foreign currency transactions or translations in the Statement of Operations. 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.

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

When the 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:

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

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

The Laudus International MarketMasters Fund filed claims to recover taxes previously withheld in certain European Union countries on the basis that those countries had purportedly violated certain provisions in the Treaty on the Functioning of the European Union. These filings are subject to various administrative and judicial proceedings within these countries, and all professional fees associated with these filings have been paid by the investment adviser.

(e) Expenses:

(f) Distributions to Shareholders:

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

(g) Accounting Estimates:

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

(h) Federal Income Taxes:

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

(i) Foreign Taxes:

The fund may be subject to foreign taxes (a portion of which may be reclaimable) on income, corporate events, foreign currency exchanges and capital gains on investments. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in foreign markets in which the fund invests. These foreign taxes, if any, are paid by the fund and are disclosed in the Statement of Operations. Foreign taxes payable as of October 31, 2019, if any, are reflected in the fund’s Statement of Assets and Liabilities.

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Financial Notes(continued)

2. Significant Accounting Policies (continued):

(j) 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.

(k) Recent Accounting Standards:

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

3. Risk Factors:

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

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

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

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

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

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

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

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

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

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Financial Notes(continued)

3. Risk Factors (continued):

investment objective or invest in accordance with its investment strategy. There is a risk that investments in securities denominated in, and/or receiving revenues in, foreign currencies will decline in value relative to the U.S. dollar or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency hedged, resulting in the dollar value of the fund’s investment being adversely affected. To the extent the fund’s investments in a single country or a limited number of countries represent a large percentage of the fund’s assets, the fund’s performance may be adversely affected by the economic, political, regulatory and social conditions in those countries, and the fund’s price may be more volatile than the price of a fund that is geographically diversified.

Emerging Markets Risk. Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting and reporting requirements and greater risk associated with the custody of securities. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there may be an increased risk of illiquidity and price volatility associated with the fund’s investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

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

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

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

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

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

4. Affiliates and Affiliated Transactions:

Investment Adviser

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

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

First $500 million	1.29%
$500 million to $1 billion	1.275%
Over $1 billion	1.25%

For the period ended October 31, 2019, the aggregate advisory fees paid to CSIM by the fund was 1.27% as a percentage of the fund’s average daily net assets.

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Financial Notes(continued)

4. Affiliates and Affiliated Transactions (continued):

Shareholder Servicing

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

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

Prior to February 26, 2019, the fund’s shares were subject to an annual shareholder servicing fee up to 0.20% for Select Shares and 0.25% for Investor Shares.

Expense Limitation

Although these agreements specify certain fees for these services, 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 to 1.25% as a continuation of the Select Shares agreement.

Prior to February 26, 2019, CSIM and its affiliates had an agreement with the fund to limit the total annual fund operating expenses charged, excluding interest, taxes and certain non-routine expenses at 1.40% for Investor Shares and 1.25% for Select Shares.

Investments from Affiliates

Certain funds in the Fund Complex (for definition refer to Trustees and Officers section) may own shares of other funds in the Fund Complex. The table below reflects the percentage of shares of the fund in this report that are owned by other funds in the Fund Complex as of October 31, 2019, as applicable:

	Underlying Fund
Schwab Monthly Income Fund - Enhanced Payout	0.5%
Schwab Monthly Income Fund - Maximum Payout	0.2%
Schwab Monthly Income Fund - Moderate Payout	0.4%
Schwab Target 2010 Fund	0.2%
Schwab Target 2015 Fund	0.4%
Schwab Target 2020 Fund	2.9%
Schwab Target 2025 Fund	4.0%
Schwab Target 2030 Fund	8.1%
Schwab Target 2035 Fund	4.3%
Schwab Target 2040 Fund	9.9%
Schwab Target 2045 Fund	1.7%
Schwab Target 2050 Fund	1.7%
Schwab Target 2055 Fund	1.0%
Schwab Target 2060 Fund	0.2%

Other Affiliated Transactions

The professional fees related to foreign withholding tax claims discussed in financial note 2 were non-routine expenses. The investment adviser agreed to pay these professional fees for this reporting period, subject to reimbursement by the fund to the extent the fund is able to successfully recover taxes withheld in the future.

As of October 31, 2019, the balance of professional fees related to foreign withholding tax subject to future reimbursement by the fund to the investment adviser was $27,425.

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Financial Notes(continued)

4. Affiliates and Affiliated Transactions (continued):

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

Interfund Borrowing and Lending

Pursuant to an exemptive order issued by the SEC, the fund may enter into interfund borrowing and lending transactions with other funds in the Fund Complex. All loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the overnight repurchase agreement rate and the short-term bank loan rate. All loans are subject to numerous conditions designed to ensure fair and equitable treatment of all participating funds. The interfund lending facility is subject to the oversight and periodic review by the Board. The fund had no interfund borrowing or lending activity during the period.

5. Board of Trustees:

The Board may include people who are officers and/or directors of CSIM or its affiliates. Federal securities law limits the percentage of such “interested persons” who may serve on a trust’s board, and the trust was in compliance with these limitations throughout the report period. The trust did not pay any of these interested persons for their services as trustees, but it did pay non-interested persons (independent trustees), as noted on the fund’s Statement of Operations. For information regarding the trustees, please refer to the Trustees and Officers table at the end of this report.

6. Borrowing from Banks:

During the period, the fund was a participant with other U.S. registered investment companies managed by CSIM in a joint, syndicated, committed $750 million line of credit (the Syndicated Credit Facility), which matured on October 3, 2019. On October 3, 2019, the Syndicated Credit Facility was amended to run for a new 364 day period with the line of credit amount remaining unchanged, maturing on October 1, 2020. Under the terms of the Syndicated Credit Facility, in addition to the interest charged on any borrowings by a fund, the fund paid a commitment fee of 0.15% per annum on the fund’s proportionate share of the unused portion of the Syndicated Credit Facility.

During the period, the fund was a participant with other U.S. registered investment companies managed by CSIM in a joint, unsecured, uncommitted $500 million line of credit (the Uncommitted Credit Facility), with State Street Bank and Trust Company, which matured on November 30, 2018. On November 30, 2018, the Uncommitted Credit Facility was amended to run for a new 364 day period with the line of credit amount remaining unchanged, maturing on November 29, 2019. Under the terms of the Uncommitted Credit Facility, the fund pays interest on the amount it borrows. There were no borrowings from either line of credit during the period.

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

7. Purchases and Sales of Investment Securities:

For the period ended October 31, 2019, purchases and sales of securities (excluding short-term obligations) were as follows:

	Purchases of Securities	Sales of Securities
	$744,250,176	$955,833,523

8. Derivatives:

The fund entered into equity index futures contracts during the report period. The fund invested in futures contracts to equitize available cash. The current value and variation margin for futures contracts held at October 31, 2019 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

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Financial Notes(continued)

8. Derivatives (continued):

to futures contracts and financial note 3 for disclosures concerning the risks of investing in futures contracts. During the period ended October 31, 2019, the month-end average notional amounts of futures contracts held by the fund and the month-end average number of contracts held were as follows:

	Notional Amounts	Number of Contracts
	$34,384,308	550

The fund invested in forwards in connection with the purchase and sale of portfolio securities to minimize the uncertainty of changes in future foreign currency exchange rates and to hedge exposure to certain currencies. Refer to financial note 2(b) for the fund’s accounting policies with respect to forwards and financial note 3 for disclosures concerning the risks of investing in forwards. During the period ended October 31, 2019, the month-end average forward foreign currency notional amount and the month-end average unrealized appreciation were $5,656,589 and $165,192, respectively.

As of October 31, 2019, the derivatives contracts held by the fund, categorized by primary risk exposure, were:

Asset Derivatives	Fair Value
Equity Index Futures Contracts¹	$1,926,635
Forward Foreign Currency Exchange Contracts²	15,610
Liability Derivatives	Fair Value
Equity Index Futures Contracts³	$—
Forward Foreign Currency Exchange Contracts⁴	—

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

The effects of the derivatives held by the fund in the Statement of Operations for the period ended October 31, 2019 were:

Equity Index Futures Contracts
Realized losses¹	($6,078,253)
Net change in unrealized appreciation (depreciation)²	5,468,859
Forward Foreign Currency Exchange Contracts
Realized gains¹	$253,359
Net change in unrealized appreciation (depreciation)²	(236,764)

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

The fund’s forwards are entered into pursuant to International Swaps and Derivatives Association, Inc. (ISDA) agreements which govern certain terms of derivative transactions. ISDA agreements typically contain, among other things, master netting provisions in the event of a default or other termination event. Master netting provisions allow the fund and the counterparty, in the event of a default or other termination event, to offset payable and receivable amounts for each party related to derivative contracts to one net amount payable by either the fund or the counterparty. The fund’s forwards, which are reported gross in the Statement of Assets

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Financial Notes(continued)

8. Derivatives (continued):

and Liabilities, are presented in the table below. The following table presents the fund’s forwards, net of amounts available for offset under a master netting agreement and net of any related collateral received by the fund for assets and pledged by the fund for liabilities as of October 31, 2019.

		Gross Amounts Not Offset in the Statement of Assets & Liabilities
Counterparty	Net Amounts of Assets Presented in the Statement of Assets and Liabilities	Financial Instruments	Cash Collateral Received	Net Amounts^(a)
State Street Bank & Trust Co.	$15,610	$—	$—	$15,610
Total	$15,610	$—	$—	$15,610

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

9. Federal Income Taxes:

As of October 31, 2019, the tax basis cost of the fund’s investments and gross unrealized appreciation and depreciation were as follows:

Tax cost	$1,229,886,193
Gross unrealized appreciation	$247,779,184
Gross unrealized depreciation	(67,195,218)
Net unrealized appreciation (depreciation)	$180,583,966

As of October 31, 2019, the components of distributable earnings on a tax basis were as follows:

Undistributed ordinary income	$24,921,676
Undistributed long-term capital gains	2,391,067
Net unrealized appreciation (depreciation) on investments	180,583,966
Net other unrealized appreciation (depreciation)	11,794
Total	$207,908,503

The primary differences between book basis and tax basis unrealized appreciation or unrealized depreciation of investments are the tax deferral of losses on wash sales, realization for tax purposes of unrealized gains (losses) on futures contracts and the realization for tax purposes of unrealized appreciation on investments in Passive Foreign Investment Companies (PFIC) and partnership investments. The tax cost of the funds’ investments, disclosed above, have been adjusted from their book amounts to reflect these unrealized appreciation or depreciation differences, as applicable.

Capital loss carryforwards may be used to offset future realized capital gains for federal income tax purposes. As of October 31, 2019, the fund had no capital loss carryforwards available to offset future net capital gains.

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

Current period distributions
Ordinary income	$18,404,188
Long-term capital gains	115,633,005
Prior period distributions
Ordinary income	$35,462,454
Long-term capital gains	42,270,382

Distributions paid to shareholders are based on net investment income and net realized gains determined on a tax basis, which may differ from net investment income and net realized gains for financial reporting purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements.

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Financial Notes(continued)

9. Federal Income Taxes (continued):

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

As of October 31, 2019, 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 fiscal year ended October 31, 2019, the fund did not incur any interest or penalties.

10. Subsequent Events:

On December 12, 2019, the Board of Trustees for Schwab Capital Trust approved the hiring of Baillie Gifford Overseas Limited (Baillie Gifford) as a new investment manager to the fund. Baillie Gifford will begin managing fund assets on or around January 31, 2020.

Other than the investment manager change to the fund as discussed above, management has determined there are no other subsequent events or transactions through the date the financial statements were issued that would have materially impacted the financial statements as presented.

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Report of Independent Registered Public Accounting Firm

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

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities, including the portfolio holdings, of Laudus International MarketMasters Fund (one of the funds constituting Schwab Capital Trust, referred to hereafter as the “Fund”) as of October 31, 2019, the related statement of operations for the year ended October 31, 2019, the statement of changes in net assets for each of the two years in the period ended October 31, 2019, including the related notes, and the financial highlights for each of the five years in the period ended October 31, 2019 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of October 31, 2019, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended October 31, 2019 and the financial highlights for each of the five years in the period ended October 31, 2019 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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

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

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of October 31, 2019 by correspondence with the custodian and brokers; when replies were not received from the brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP
San Francisco, California
December 16, 2019

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

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Other Federal Tax Information (unaudited)

The Laudus International MarketMasters Fund elects to pass through, under section 853 of the Internal Revenue Code, the foreign tax credit of $3,357,229 to its shareholders for the fiscal year ended October 31, 2019. The respective foreign source income on the fund is $23,675,483.

For the fiscal year ended October 31, 2019, the fund designates $21,761,417 of the dividend distributions as qualified dividends for the purposes of the maximum rate under section 1(h)(11) of the Internal Revenue Code. Shareholders will be notified in January 2020 via IRS Form 1099 of the amounts for use in preparing their 2019 income tax return.

Under section 852(b)(3)(C) of the Internal Revenue Code, the fund hereby designates $115,633,005 as long-term capital gain dividends for the fiscal year ended October 31, 2019.

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Investment Advisory and Sub-Advisory Agreement Approval

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

The Board of Trustees (the Board or the Trustees, as appropriate) calls and holds one or more meetings each year that are dedicated, in whole or in part, to considering whether to renew the investment advisory and administration agreement between Schwab Capital Trust (the Trust) and Charles Schwab Investment Management, Inc. (CSIM) with respect to the existing funds in the Trust, including Laudus International MarketMasters Fund (the Fund), and the individual sub-advisory agreements between CSIM and American Century Investment Management, Inc., Harris Associates L.P. (Harris), Mellon Investments Corporation (formerly BNY Mellon Asset Management North America Corporation), Mondrian Investment Partners Limited (Mondrian) and William Blair Investment Management, LLC, relating to Laudus International MarketMasters Fund (each, a Sub-Adviser and collectively, the Sub-Advisers). Such investment advisory and administration agreement and sub-advisory agreements are collectively referred to herein as the Agreements. The Trustees also review certain other agreements pursuant to which CSIM provides investment advisory services to certain other registered investment companies. In preparation for the meeting(s), the Board requests and reviews a wide variety of materials provided by CSIM and the Sub-Advisers, including information about their affiliates, personnel, business goals and priorities, profitability, third-party oversight, corporate structure and operations. As part of the renewal process, the Independent Trustees’ legal counsel sends an information request letter to CSIM and CSIM sends an information request letter to each of the Sub-Advisers seeking certain relevant information. The responses by CSIM and the Sub-Advisers are provided to the Trustees for their review prior to their meeting, and the Trustees are provided with the opportunity to request any additional materials. The Board also receives data provided by an independent provider of investment company data. 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 the Fund’s operations and performance, legal and compliance matters, risk management, portfolio turnover, and sales and marketing activity. The

Independent Trustees receive advice from Independent Trustees’ legal counsel, including a memorandum regarding the responsibilities of trustees for the approval of investment advisory agreements. In addition, the Independent Trustees meet in executive session outside the presence of Fund management and participate in question and answer sessions with representatives of CSIM. The Board also discusses with CSIM the Fund’s operations and CSIM’s ability, consistent with the “manager of managers” structure of the Fund, to (i) identify and recommend to the Trustees sub-advisers for the Fund, (ii) monitor and oversee the performance and investment capabilities of each Sub-Adviser, and (iii) recommend the replacement of a Sub-Adviser when appropriate.

The Board, including a majority of the Independent Trustees, considered information specifically relating to the continuance of the Agreements with respect to the Fund at meetings held on May 13, 2019 and June 4, 2019, and approved the renewal of the Agreements with respect to the Fund for an additional one-year term at the June 4, 2019 in person meeting called for the purpose of voting on such approval.

The Board’s approval of the Agreements 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 Agreements, including the resources of CSIM and its affiliates, and the Sub-Advisers, dedicated to the Fund;
2.	the Fund’s investment performance and how it compared to that of certain other comparable mutual funds and benchmark data;
3.	the Fund’s expenses and how those expenses compared to those of certain other similar 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, as well as the profitability of the Sub-Advisers; and
5.	the extent to which economies of scale would be realized as the Fund grows and whether fee levels in the Agreements reflect those economies of scale for the benefit of Fund investors.

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retaining skilled personnel and specialized talent, and information security resources. The Trustees also considered information provided by CSIM and the Sub-Advisers relating to the Fund’s portfolio management team, portfolio strategy, and internal investment guidelines, as well as trading infrastructure, liquidity management, product design and analysis, shareholder communications, securities valuation, fund accounting and custody, and vendor and risk oversight. The Trustees also considered investments CSIM has made in its infrastructure, including modernizing CSIM’s technology and use of data, increasing expertise in key areas (including portfolio management and trade operations), and improving business continuity, cybersecurity, due diligence, risk management processes, and information security programs, which are designed to provide enhanced services to the Fund and its shareholders. The Trustees also considered that many of the Fund’s shareholders are also brokerage clients of Schwab and considered Schwab’s wide range of products, services, and channel alternatives such as investment research tools and an array of account features that benefit the Fund and shareholders who are brokerage clients of Schwab. The Trustees also considered Schwab’s reputation as a full service brokerage firm and the firm’s overall financial condition. The Board also considered the nature, extent and quality of the sub-advisory services provided by the Sub-Advisers to the Fund and the resources each dedicates to the Fund. Following such evaluation, the Board concluded, within the context of its full deliberations, that the nature, extent and quality of services provided by CSIM and the Sub-Advisers to the Fund and the resources of CSIM, its affiliates, and the Sub-Advisers dedicated to the Fund supported renewal of the Agreements with respect to the Fund.

Fund Performance. The Board considered the Fund’s performance in determining whether to renew the Agreements with respect to the Fund. Specifically, the Trustees considered the Fund’s performance relative to a peer category of other mutual funds and an applicable benchmark index, in light of total return, and market trends, as well as in consideration of the Fund’s investment style and strategy attributes and disclosures. As part of this review, the Trustees considered the composition of the peer category, selection criteria and the reputation of the independent provider of investment company data who prepared the peer category analysis. In addition, the Trustees considered whether irrespective of relative performance, each Sub-Adviser’s absolute performance was consistent with expectations for such Sub-Adviser’s unique investment methodology. The Trustees further considered the level of Fund performance in the context of their review of Fund expenses and adviser and Sub-Adviser profitability discussed below and also noted that performance is reviewed throughout the year by a designated committee of the Board and by the Board. Following such evaluation, the Board concluded, within the context of its full deliberations, that the performance of the Fund supported renewal of the Agreements 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 similar mutual funds, such peer groups and comparisons having been selected and calculated by an independent provider of investment company data. CSIM reported to the Board, and the Board took into account, the risk assumed by CSIM in the development of products and provision of services as well as the competitive marketplace for financial products. When applicable, the Trustees considered the effects of CSIM’s and Schwab’s practice of voluntarily waiving management and other fees to prevent total Fund expenses from exceeding a specified cap. The Trustees also considered CSIM’s contractual commitment to keep the Fund’s expense cap for so long as CSIM serves as the adviser to the Fund. The Trustees also considered fees charged by CSIM and the Sub-Advisers to other mutual funds and to other types of accounts, but, with respect to such other types of accounts, accorded less weight to such comparisons due to the different legal, regulatory, compliance and operating features of mutual funds as compared to these other types of accounts, and any differences in the nature and scope of the services CSIM provides to these other accounts, as well as differences in the market for these types of accounts. Following such evaluation, the Board concluded, within the context of its full deliberations, that the expenses of the Fund are reasonable and supported renewal of the Agreement with respect to the Fund.

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

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

Economies of Scale. Although the Trustees recognized the difficulty of determining economies of scale with precision, the Trustees considered the potential existence of any economies of scale and whether those are passed along to the Fund’s shareholders through (i) the enhancement of services provided to the Fund in return for fees paid, including through investments by CSIM in CSIM’s infrastructure, including modernizing CSIM’s technology and use of data, increasing expertise and capabilities in key areas (including portfolio and trade operations), and improving business continuity, cybersecurity, due diligence, and information security programs, which are designed to provide enhanced services to the Fund and its shareholders; (ii) graduated investment advisory fee schedule, fee waivers, or expense caps by CSIM and its affiliates for those funds in the Schwab Funds complex with such features; and (iii) pricing a fund to scale and keeping overall expenses down as the fund grows. The Trustees acknowledged that, in addition, CSIM has shared any economies of scale with the Fund by investing in CSIM’s infrastructure, as discussed above, over time and that CSIM’s internal costs of providing investment management, technology, administrative, legal and compliance services to the Fund continues to increase as a result of regulatory or other developments. The Trustees considered that CSIM and its affiliates may employ contractual expense caps to protect shareholders from high fees when fund assets are relatively small, for example, in the case of newer funds or funds with investment strategies that are from time to time out of favor, because, among other reasons, 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 benefits from economies of scale.

In the course of their deliberations, the Trustees may have accorded different weights to various factors and did not identify any particular information or factor that was all important or controlling. Based on the Trustees’ deliberation and their evaluation of the information described above, the Board, including all of the Independent Trustees, approved the continuation of the Agreements with respect to the Fund and concluded that the compensation under the Agreements 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.

Approval of Amendments to Certain Sub-Advisory Agreements

At a meeting held on February 26, 2019, the Board, including a majority of the Independent Trustees, approved (1) an amendment to the sub-advisory agreement with Harris relating to the Fund to ensure that the rate paid by CSIM to Harris for services rendered to the Fund remains in line with the rate paid to Harris for similar services that Harris provides to other mutual funds; and (2) an amendment to the sub-advisory agreement with Mondrian relating to the Fund to reflect a change to the graduated sub-advisory fee schedule that provides for potential future savings for CSIM. The Board reviewed materials provided at its February 26, 2019 meeting and also took into account the detailed information that the Board reviewed at the April 26, 2018 and June 5, 2018 meetings during the course of its consideration and approval of the renewal of the sub-advisory agreements between CSIM and each of Harris and Mondrian. The Board considered the potential future savings to CSIM and the fact that and CSIM does not anticipate lowering its management fee.

Based on the Trustees’ deliberation and their evaluation of the information described above, the Board, including a majority of the Independent Trustees, approved (1) an amendment to the sub-advisory agreement with Harris relating to the Fund to reflect and ensure that the rate paid by CSIM to Harris for services rendered to the Fund remains in line with the rate paid to Harris for similar services that Harris provides to other mutual funds and concluded that the change would not result in any reduction in the nature or quality of services provided by Harris under the sub-advisory agreement between CSIM and Harris; (2) an amendment to the sub-advisory agreement with Mondrian relating to the Fund to reflect a change to the graduated sub-advisory fee schedule that provides for potential future savings for CSIM and concluded that the change would not result in any reduction in the nature or quality of services provided by Mondrian under the sub-advisory agreement between CSIM and Mondrian.

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Trustees and Officers

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

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

Independent Trustees
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Robert W. Burns 1959 Trustee (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016)	Retired/Private Investor (Jan. 2009 – present). Formerly, Managing Director, Pacific Investment Management Company, LLC (PIMCO) (investment management firm) and President, PIMCO Funds.	101	None
John F. Cogan 1947 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Senior Fellow (Oct. 1979 – present), The Hoover Institution at Stanford University (public policy think tank); Senior Fellow (2000 – present), Stanford Institute for Economic Policy Research; Professor of Public Policy (1994 – 2015), Stanford University.	101	Director (2005 – present), Gilead Sciences, Inc.
Nancy F. Heller 1956 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2018)	President and Chairman (2014 – 2016), TIAA Charitable (financial services); Senior Managing Director (2003 – 2016), TIAA (financial services).	101	None
Stephen Timothy Kochis 1946 Trustee (Trustee of Schwab Strategic Trust since 2012; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016)	CEO and Owner (May 2012 – present), Kochis Global (wealth management consulting).	101	None

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Independent Trustees (continued)
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
David L. Mahoney 1954 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016)	Private Investor.	101	Director (2003 – present), Symantec Corporation Director (2004 – present), Corcept Therapeutics Incorporated Director (2009 – present), Adamas Pharmaceuticals, Inc.
Jane P. Moncreiff 1961 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2019)	Chief Investment Officer (2009-2017), CareGroup Healthcare System, Inc. (healthcare).	101	None
Kiran M. Patel 1948 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016)	Retired. Executive Vice President and General Manager of Small Business Group (Dec. 2008 – Sept. 2013), Intuit, Inc. (financial software and services firm for consumers and small businesses).	101	Director (2008 – present), KLA-Tencor Corporation
Kimberly S. Patmore 1956 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016)	Consultant (2008 – present), Patmore Management Consulting (management consulting).	101	None
Gerald B. Smith 1950 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2000; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Chairman, Chief Executive Officer and Founder (Mar. 1990 – present), Smith Graham & Co. (investment advisors).	101	Director (2012 – present), Eaton Corporation plc

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Interested Trustees
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Walter W. Bettinger II² 1960 Chairman and Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Schwab Strategic Trust since 2009; Laudus Trust since 2010)	Director, President and Chief Executive Officer (Oct. 2008 – present), The Charles Schwab Corporation; President and Chief Executive Officer (Oct. 2008 – present) and Director (May 2008 – present), Charles Schwab & Co., Inc.; Director (Apr. 2006 – present), Charles Schwab Bank; Director (Nov. 2017 – present), Charles Schwab Premier Bank; Director (May 2008 – present) and President and Chief Executive Officer (Aug. 2017 – present), Schwab Holdings, Inc.; Director (July 2016 – present), Charles Schwab Investment Management, Inc.	101	Director (2008 – present), The Charles Schwab Corporation
Jonathan de St. Paer² 1973 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2019)	Director (Apr. 2019 – present), President (Oct. 2018 – present), and Chief Executive Officer (Apr. 2019 – Nov. 2019), Charles Schwab Investment Management, Inc.; Trustee and Chief Executive Officer (Apr. 2019 – present) and President (Nov. 2018 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Director (Apr. 2019 – present), Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited; Senior Vice President (Apr. 2019 – present), Senior Vice President – Strategy and Product Development (CSIM) (Jan. 2014 – Mar. 2019), and Vice President (Jan. 2009 – Dec. 2013), Charles Schwab & Co., Inc.	101	None
Joseph R. Martinetto² 1962 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016)	Chief Operating Officer (Feb. 2018 – present) and Senior Executive Vice President (July 2015 – Feb. 2018), The Charles Schwab Corporation; Senior Executive Vice President (July 2015 – present), Charles Schwab & Co., Inc.; Chief Financial Officer (July 2015 – Aug. 2017) and Executive Vice President and Chief Financial Officer (May 2007 – July 2015), The Charles Schwab Corporation and Charles Schwab & Co., Inc.; Director (May 2007 – present), Charles Schwab & Co., Inc.; Director (Apr. 2010 – present) and Chief Executive Officer (July 2013 – Apr. 2015), Charles Schwab Bank; Director (Nov. 2017 – present), Charles Schwab Premier Bank; Director (May 2007 – present), Chief Financial Officer (May 2007 – Aug. 2017), Senior Executive Vice President (Feb. 2016 – present), and Executive Vice President (May 2007 – Feb. 2016), Schwab Holdings, Inc.	101	None

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
Jonathan de St. Paer 1973 President and Chief Executive Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2018)	Director (Apr. 2019 – present), President (Oct. 2018 – present), and Chief Executive Officer (Apr. 2019 – Nov. 2019), Charles Schwab Investment Management, Inc.; Trustee and Chief Executive Officer (Apr. 2019 – present) and President (Nov. 2018 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Director (Apr. 2019 – present), Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited; Senior Vice President (Apr. 2019 – present), Senior Vice President – Strategy and Product Development (CSIM) (Jan. 2014 – Mar. 2019), and Vice President (Jan. 2009 – Dec. 2013), Charles Schwab & Co., Inc.

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Officers of the Trust (continued)
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served³)	Principal Occupations During the Past Five Years
Mark Fischer 1970 Treasurer and Chief Financial Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2013)	Treasurer and Chief Financial Officer (Jan. 2016 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Assistant Treasurer (Dec. 2013 – Dec. 2015), Schwab Funds and Laudus Funds; Assistant Treasurer (Nov. 2013 – Dec. 2015), Schwab ETFs; Vice President (Oct. 2013 – present), Charles Schwab Investment Management, Inc.; Executive Director (Apr. 2011 – Sept. 2013), J.P. Morgan Investor Services; Assistant Treasurer (May 2005 – Mar. 2011), Massachusetts Financial Service Investment Management.
George Pereira 1964 Senior Vice President and Chief Operating Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2004; Laudus Trust since 2006; Schwab Strategic Trust since 2009)	Senior Vice President and Chief Financial Officer (Nov. 2004 – present) and Chief Operating Officer (Jan. 2011 – present), Charles Schwab Investment Management, Inc.; Senior Vice President and Chief Operating Officer (Jan. 2016 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Treasurer and Chief Financial Officer (June 2006 – Dec. 2015), Laudus Funds; Treasurer and Principal Financial Officer (Nov. 2004 – Dec. 2015), Schwab Funds; Treasurer and Principal Financial Officer (Oct. 2009 – Dec. 2015), Schwab ETFs; Director (Apr. 2005 – present), Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited.
Omar Aguilar 1970 Senior Vice President and Chief Investment Officer – Equities and Multi-Asset Strategies (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President and Chief Investment Officer (Apr. 2011 – present), Charles Schwab Investment Management, Inc.; Senior Vice President and Chief Investment Officer – Equities and Multi-Asset Strategies (June 2011 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Head of the Portfolio Management Group and Vice President of Portfolio Management (May 2009 – Apr. 2011), Financial Engines, Inc. (investment management firm); Head of Quantitative Equity (July 2004 – Jan. 2009), ING Investment Management.
Brett Wander 1961 Senior Vice President and Chief Investment Officer – Fixed Income (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President and Chief Investment Officer (Apr. 2011 – present), Charles Schwab Investment Management, Inc.; Senior Vice President and Chief Investment Officer – Fixed Income (June 2011 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Senior Managing Director and Global Head of Active Fixed-Income Strategies (Jan. 2008 – Oct. 2010), State Street Global Advisors; Director of Alpha Strategies (Apr. 2006 – Jan. 2008), Loomis, Sayles & Company (investment management firm).
David Lekich 1964 Chief Legal Officer and Secretary, Schwab Funds and Schwab ETFs Vice President and Assistant Clerk, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President (Sept. 2011 – present) and Vice President (Mar. 2004 – Sept. 2011), Charles Schwab & Co., Inc.; Senior Vice President and Chief Counsel (Sept. 2011 – present) and Vice President (Jan. 2011 – Sept. 2011), Charles Schwab Investment Management, Inc.; Secretary (Apr. 2011 – present) and Chief Legal Officer (Dec. 2011 – present), Schwab Funds; Vice President and Assistant Clerk (Apr. 2011 – present), Laudus Funds; Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs.
Catherine MacGregor 1964 Vice President and Assistant Secretary, Schwab Funds and Schwab ETFs Chief Legal Officer, Vice President and Clerk, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2005; Schwab Strategic Trust since 2009)	Vice President (July 2005 – present), Charles Schwab & Co., Inc.; Vice President (Sept. 2005 – present), Charles Schwab Investment Management, Inc.; Vice President (Dec. 2005 – present) and Chief Legal Officer and Clerk (Mar. 2007 – present), Laudus Funds; Vice President (Nov. 2005 – present) and Assistant Secretary (June 2007 – present), Schwab Funds; Vice President and Assistant Secretary (Oct. 2009 – present), Schwab ETFs.

¹	Each Trustee shall hold office until the election and qualification of his or her successor, or until he or she dies, resigns or is removed. The retirement policy requires that each independent trustee retire by December 31 of the year in which the Trustee turns 74 or the Trustee’s twentieth year of service as an independent trustee on any trust in the Fund Complex, whichever occurs first.
²	Mr. Bettinger, Mr. de St. Paer and Mr. Martinetto are Interested Trustees. Mr. Bettinger is an Interested Trustee because he owns stock of The Charles Schwab Corporation (CSC), the parent company of Charles Schwab Investment Management, Inc. (CSIM), the investment adviser for the trusts in the Fund Complex, is an employee and director of Charles Schwab & Co., Inc. (CS&Co), the principal underwriter for The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust, and is a director of CSIM. Mr. de St. Paer is an Interested Trustee because he owns stock of CSC and is an employee and director of CSIM. Mr. Martinetto is an Interested Trustee because he owns stock of CSC and is an employee and director of CS&Co.
³	The President, Treasurer and Secretary/Clerk hold office until their respective successors are chosen and qualified or until he or she sooner dies, resigns, is removed or becomes disqualified. Each of the other officers serves at the pleasure of the Board.

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Laudus International MarketMasters Fund

Glossary

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

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

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

Bloomberg Barclays US Treasury Bills 1–3 Month Index An index that includes all publicly issued zero-coupon U.S. Treasury Bills that have a remaining maturity of less than 3 months but more than 1 month, are rated investment grade and have $300 million or more of outstanding face value. It excludes zero-coupon STRIPS.

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

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

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

cap, capitalization See “market cap.”

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Laudus International MarketMasters Fund

PRIVACY NOTICE
THIS IS NOT PART OF THE SHAREHOLDER REPORT

A Commitment to Your Privacy

Your Privacy Is Not for Sale

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

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

How We Collect Information About You

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

• APPLICATION AND REGISTRATION
INFORMATION.

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

• TRANSACTION AND EXPERIENCE
INFORMATION.

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

• WEBSITE USAGE.

When you visit our websites, we may use devices known as “cookies,” graphic interchange format files (GIFs), or other similar web tools to enhance your web experience. These tools help us to recognize you, maintain your web session, and

provide a more personalized experience. To learn more, please go to www.schwab.com/privacy.

How We Share and Use Your Information

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

• to help us process transactions for your account;

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

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

State Laws

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

Safeguarding Your Information — Security Is a Partnership

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

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

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

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

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

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

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Laudus International MarketMasters Fund | Annual Report

Notes

Notes

Notes

Laudus International MarketMasters Fund

Laudus Funds^®

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

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

Proxy Voting Policies, Procedures and Results

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

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

Laudus Funds^®

Laudus^® U.S. Large Cap Growth Fund

Laudus International MarketMasters Fund™

Investment Adviser

Charles Schwab Investment Management, Inc.

211 Main Street, San Francisco, CA 94105

Fund

Laudus International MarketMasters Fund

1-877-824-5615

Printed on recycled paper.

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MFR13812-22
00237232

Annual Report | October 31, 2019

Schwab Active Equity Funds

Schwab Core Equity Fund

Schwab Dividend Equity Fund

Schwab Large-Cap Growth Fund

Schwab Small-Cap Equity Fund

Schwab Hedged Equity Fund

Schwab Health Care Fund

Schwab International Core Equity Fund

New Notice Regarding Shareholder Report Delivery Options

Beginning on January 1, 2021, paper copies of a fund’s shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from a fund or from your financial intermediary (such as a bank or broker-dealer). Instead, the reports will be made available on a fund’s websitewww.schwabfunds.com/schwabfunds_prospectus, and you will be notified by mail each time a report is posted and the mailing will provide a website link to access the report. You will continue to receive other fund regulatory documents (such as prospectuses or supplements) in paper unless you have elected to receive all fund documents electronically.

If you would like to receive a fund’s future shareholder reports in paper free of charge after January 1, 2021, you can make that request:

• If you invest through Charles Schwab & Co, Inc. (broker-dealer), by calling 1-866-345-5954 and using the unique identifier attached to this mailing;

• If you invest through another financial intermediary (such as a bank or broker-dealer) by contacting them directly; or

• If owned directly through a fund by calling 1-800-407-0256.

If you already receive shareholder reports and other fund documents electronically, you will not be affected by this change and you need not take any action.

This page is intentionally left blank.

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

Distributor: Charles Schwab & Co., Inc. (Schwab)

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Schwab Active Equity Funds | Annual Report

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Schwab Active Equity Funds

Performance at a Glance

Total Return for the 12 Months Ended October 31, 2019
Schwab Core Equity Fund (Ticker Symbol: SWANX)	12.02%
S&P 500^® Index	14.33%
Fund Category: Morningstar Large Blend¹	12.66%
Performance Details	pages 7-9

Schwab Dividend Equity Fund (Ticker Symbol: SWDSX)	8.78%
Russell 1000^® Value Index	11.21%
Fund Category: Morningstar Large Value¹	9.63%
Performance Details	pages 10-12

Schwab Large-Cap Growth Fund (Ticker Symbol: SWLSX)	12.18%
Russell 1000^® Growth Index	17.10%
Fund Category: Morningstar Large Growth¹	14.51%
Performance Details	pages 13-15

Schwab Small-Cap Equity Fund (Ticker Symbol: SWSCX)	0.08%
Russell 2000^® Index	4.90%
Fund Category: Morningstar Small Blend¹	4.42%
Performance Details	pages 16-18

Total Return for the 12 Months Ended October 31, 2019
Schwab Hedged Equity Fund (Ticker Symbol: SWHEX)	-1.31%
S&P 500^® Index	14.33%
Fund Category: Morningstar Long-Short Equity¹	3.57%
Performance Details	pages 19-21

Schwab Health Care Fund² (Ticker Symbol: SWHFX)	6.51%
Dow Jones Global Health Care Index	9.73%
Fund Category: Morningstar Health¹	4.98%
Performance Details	pages 22-24

Schwab International Core Equity Fund² (Ticker Symbol: SICNX)	7.08%
MSCI EAFE^® Index (Net)³	11.04%
Fund Category: Morningstar Foreign Large Blend¹	10.26%
Performance Details	pages 25-27

For index definitions, please see the Glossary.

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

¹	Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date.
²	The fund’s performance relative to the index may be affected by fair-value pricing and timing differences in foreign exchange calculations. See financial note 2 for more information.
³	The net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.

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Schwab Active Equity Funds | Annual Report

Table of Contents

Schwab Active Equity Funds

From the President

Jonathan de St. Paer
President of Charles Schwab
Investment Management, Inc.
and the funds covered
in this report.

Dear Shareholder,

At the crux of every investment decision, one consideration that may be top of mind is your risk tolerance. It may seem like a straightforward consideration, but it’s often not. Most of us are risk-averse by nature and as investors, the fear of a significant market decline is ever-present in our minds. This can sometimes lead us to make decisions that may get in the way of the performance of our investments. Our feelings about risk are also fluid, impacted by changes in market conditions and our progress toward our financial goals. For example, some investors may have been prompted to rethink their risk appetite as a result of the latest bout of market volatility.

At Charles Schwab Investment Management, we provide a range of foundational products that are designed to suit a variety of risk appetites and help investors remain focused on their long-term investment plans despite market volatility. One way we do this is through actively managed strategies, such as the Schwab Active Equity Funds, which take on the job of sifting through the latest market developments and researching company fundamentals, identifying trends that could impact valuations, and factoring that analysis into investment decisions.

The Schwab Active Equity Funds’ investment team uses an integrated investment process that combines quantitative and qualitative research and analysis through a bottom-up approach to stock selection. The investment team seeks consistent, long-term returns by systematically investing in high-quality companies with attractive valuations and favorable sentiment. The team also continually assesses risks related to volatility, valuation, momentum, specific securities, and overweighted and underweighted positions to an industry or country to determine whether those risks are balanced relative to the possible rewards. When assessed risks fall outside the team’s desired parameters, they will consider a change, potentially scaling back the position or exiting it altogether. During the 12 month reporting period ended October 31, 2019, most active managers struggled and each of the Schwab Active Equity Funds underperformed their respective indices.

When it comes to investing, it’s important to have a long-term investing plan and a portfolio based on your individual goals and risk tolerance. It can at times be tough to maintain that discipline in the face of day-to-day uncertainty. We aim to offer products with clear objectives, straightforward pricing, and a consistent approach to investing to help simplify investing decisions, so investors can focus on their long-term goals without unnecessary complexity.

Thank you for investing with Charles Schwab Investment Management, and for trusting us to help you achieve your financial goals. For more information about the Schwab Active Equity Funds, including performance during the 12 months ended October 31, 2019, please continue reading this report. In addition, you can find further details about these funds by visiting our website at www.schwabfunds.com. We are also happy to hear from you at 1-877-824-5615.

Sincerely,

“During the 12 month reporting period ended October 31, 2019, most active managers struggled and each of the Schwab Active Equity Funds underperformed their respective indices.”

Management views may have changed since the report date.

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Schwab Active Equity Funds | Annual Report

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Schwab Active Equity Funds

The Investment Environment

For the 12-month reporting period ended October 31, 2019, both U.S. and international equity markets generated positive returns. The final two months of 2018 were marked by significant market volatility and steep declines across global equity markets, driven by concerns about slowing international growth, a trade war between the U.S. and China, falling oil prices, the waning strength of the U.S. economy, and the pace of future interest rate hikes despite low inflation. By late December, major market indices had fallen to near-bear market territory. However, as the Federal Reserve (Fed) put interest rate hikes on hold, stocks, particularly in the U.S., staged a strong recovery in the first four months of 2019, which generally continued through the end of the reporting period despite several setbacks. Over the period, the U.S. dollar strengthened slightly against a basket of foreign currencies, generally reducing the returns on overseas investments in U.S. dollar terms. For the reporting period, the S&P 500^® Index, a bellwether for the overall U.S. stock market, returned 14.33% and the Russell 2000^® Index, a measure of U.S. small-cap stocks, returned 4.90%. Despite headwinds, markets outside the U.S. also rose, particularly toward the end of the reporting period with the MSCI EAFE^® Index (Net)*, a broad measure of developed international equity performance, returning 11.04%.

Economic growth around the globe was uneven over the reporting period, largely as a result of manufacturing weakness in developed international markets. Despite escalating trade tensions with China, the U.S. maintained its steady growth in its tenth year of expansion, although at a declining pace. In the last two months of 2018, economies around the globe showed increasing signs of weakness, but many regained economic momentum in the first six months of 2019, demonstrating resilient growth despite lingering uncertainties on various fronts. As the year progressed, signs of slowing growth increased amid a weakening global economy, waning manufacturing activity, and the ongoing U.S.-China trade war. However, toward the end of the period, prospects of a partial trade resolution relieved some of the pressure. U.S. gross domestic product (GDP) grew at an annual rate of 2.1% in the third quarter of 2019, up slightly from 2.0% in the second quarter, but down from 3.1% in the first quarter of 2019. Unemployment declined in September 2019 to a 50-year low. While consumer confidence edged lower in October to hit a four-month low, it remained a stable source of GDP growth in the U.S. Inflation remained benign.

Asset Class Performance Comparison % returns during the 12 months ended October 31, 2019

For index definitions, please see the Glossary.

Data source: Index provider websites and CSIM.

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

Management views may have changed since the report date.

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

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Schwab Active Equity Funds

The Investment Environment(continued)

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Schwab Active Equity Funds

Fund Management

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

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

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

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

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Schwab Core Equity Fundas of October 31, 2019

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

Market Highlights.Over the reporting period, the U.S. equity market generated positive returns. The final two months of 2018 were marked by significant market volatility and steep declines, driven by concerns about slowing international growth, a trade war between the U.S. and China, falling oil prices, the waning strength of the U.S. economy, and the pace of future interest rate hikes despite low inflation. However, as the Federal Reserve (Fed) put interest rate hikes on hold, stocks, particularly in the U.S., staged a strong recovery in the first four months of 2019, which generally continued through the end of the reporting period. After raising interest rates four times in 2018, the Fed enacted three interest rate cuts by the end of the period—in July, September, and October.

Performance.The fund returned 12.02% for the 12-month reporting period ended October 31, 2019, underperforming the S&P 500^® Index (the index), which the fund uses for performance comparisons. The index returned 14.33% for the reporting period.

Positioning and Strategies. The fund’s overweight investment in oil and gas company ConocoPhillips weighed on the fund’s relative performance. The fund’s holdings of ConocoPhillips returned approximately -19% for the reporting period, in line with its peers in the energy sector. A supply and demand imbalance has helped keep crude oil prices down.

Viacom, Inc., which produces media entertainment content, was another detractor from the fund’s relative performance over the reporting period. The fund’s Class B holdings of Viacom returned approximately -20% for the reporting period, as the company struggled in an increasingly tough, competitive landscape.

The fund’s performance relative to the index was enhanced by an overweight to Masco Corp., a manufacturer of home improvement and building products. The fund’s holdings of Masco returned approximately 56% for the reporting period. Masco benefitted from a recovery in residential construction as a result of a healthy labor market and lower interest rates.

The fund’s underweight position in oil and gas company Exxon Mobile Corp. was another contributor to the fund’s relative performance as Exxon Mobile suffered amid lower energy prices. The return of fund’s holding of this company was flat for the reporting period.

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

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Schwab Core Equity Fund

Performance and Fund Factsas of October 31, 2019

Performance of Hypothetical $10,000 Investment (October 31, 2009 – October 31, 2019)^1,2

Average Annual Total Returns^1,2

Fund and Inception Date	1 Year	5 Years	10 Years
Fund: Schwab Core Equity Fund (7/1/96)	12.02%	8.78%	11.97%
S&P 500^® Index	14.33%	10.78%	13.70%
Fund Category: Morningstar Large Blend³	12.66%	8.94%	12.22%
Fund Expense Ratio⁴: 0.73%

For index definitions, please see the Glossary.

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

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Schwab Core Equity Fund

Performance and Fund Factsas of October 31, 2019 (continued)

Statistics

Number of Holdings	136
Weighted Average Market Cap (millions)	$257,239
Price/Earnings Ratio (P/E)	18.1
Price/Book Ratio (P/B)	3.1
Portfolio Turnover Rate	98%

Sector Weightings % of Investments¹

Top Equity Holdings % of Net Assets²

Portfolio holdings may have changed since the report date.

Source of Sector Classification: S& P and MSCI.

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

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Schwab Dividend Equity Fundas of October 31, 2019

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

Performance.The fund returned 8.78% for the 12-month reporting period ended October 31, 2019, underperforming the Russell 1000^® Value Index (the index), which the fund uses for performance comparisons. The index returned 11.21% for the reporting period.

As of October 31, 2019, the fund’s dividend yield was 2.60%, in line with the 2.60% dividend yield of the index. As of October 31, 2019, the fund’s 30-Day SEC yield was 1.67%.

Positioning and Strategies. The fund’s overweight position in oil and gas company ConocoPhillips weighed on the fund’s relative performance. The fund’s holdings of ConocoPhillips returned approximately -19% for the reporting period, in line with its peers in the energy sector. A supply and demand imbalance has kept crude oil prices down.

Affiliated Managers Group, Inc., a global asset management company, was another detractor from the fund’s relative performance. The fund’s holdings of Affiliated Managers Group returned approximately -29% for the reporting period. Affiliated Managers Group experienced outflows as their funds continued to underperform during the period.

The fund’s performance relative to the index was enhanced by an overweight investment in Masco Corp., a manufacturer of home improvement and building products. The fund’s holdings of Masco returned approximately 56% for the reporting period. Masco benefitted from a recovery in residential construction as a result of a healthy labor market and lower interest rates.

Tyson Foods, Inc. was another contributor to relative performance. Tyson Foods produces, distributes, and markets chicken, beef, pork, prepared foods, and related products. The fund’s Class A holdings of Tyson Foods returned approximately 41% for the reporting period, driven by rising protein prices as swine flu drove up pork prices around the world.

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

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Schwab Dividend Equity Fund

Performance and Fund Factsas of October 31, 2019

Performance of Hypothetical $10,000 Investment (October 31, 2009 – October 31, 2019)¹

Average Annual Total Returns¹

Fund and Inception Date	1 Year	5 Years	10 Years
Fund: Schwab Dividend Equity Fund (9/2/03)	8.78%	5.63%	10.43%
Russell 1000^® Value Index	11.21%	7.61%	11.96%
Dividend Equity Spliced Index	11.21%	7.97%	12.25%
S&P 500^® Index	14.33%	10.78%	13.70%
Fund Category: Morningstar Large Value²	9.63%	7.22%	11.07%
Fund Expense Ratio³: 0.88%

Yields¹

30-Day SEC Yield

1.67%

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

For index definitions, please see the Glossary.

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

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Schwab Dividend Equity Fund

Performance and Fund Factsas of October 31, 2019 (continued)

Statistics

Number of Holdings	146
Weighted Average Market Cap (millions)	$107,095
Price/Earnings Ratio (P/E)	14.5
Price/Book Ratio (P/B)	2.0
Portfolio Turnover Rate	70%

Sector Weightings % of Investments¹

Top Equity Holdings % of Net Assets²

Portfolio holdings may have changed since the report date.

Source of Sector Classification: S& P and MSCI.

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

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Schwab Large-Cap Growth Fundas of October 31, 2019

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

Market Highlights.Over the reporting period, the U.S. equity market generated positive returns with growth stocks outperforming value stocks. The final two months of 2018 were marked by significant market volatility and steep declines, driven by concerns about slowing international growth, a trade war between the U.S. and China, falling oil prices, the waning strength of the U.S. economy, and the pace of future interest rate hikes despite low inflation. However, as the Federal Reserve (Fed) put interest rate hikes on hold, stocks, particularly in the U.S., staged a strong recovery in the first four months of 2019, which generally continued through the end of the reporting period. After raising interest rates four times in 2018, the Fed enacted three interest rate cuts by the end of the period—in July, September, and October.

Performance.The fund returned 12.18% for the 12-month reporting period ended October 31, 2019, underperforming the Russell 1000^® Growth Index (the index), which the fund uses for performance comparisons. The index returned 17.10% for the reporting period.

Positioning and Strategies. The fund’s investment in biopharmaceutical company Regeneron Pharmaceuticals, Inc. weighed on the fund’s relative performance. The fund’s holdings of Regeneron returned approximately -28% for the reporting period, driven by higher than expected expenses.

Alexion Pharmaceuticals, Inc., a biopharmaceutical company that researches and develops proprietary compounds for the treatment of autoimmune and cardiovascular diseases, was another detractor from the fund’s relative performance. The fund’s holdings of Alexion returned approximately -12% for the reporting period. Alexion suffered as a result of the U.S. Patent Trial and Appeal Board agreeing to review a challenge to patents on one of Alexion’s rare disease drugs.

The fund’s performance relative to the index was enhanced by Lam Research Corp., which manufactures, markets, and services semiconductor processing equipment used in the making of integrated circuits. The fund’s holdings of Lam Research returned approximately 96% for the reporting period, benefitting from a rebound in semiconductor demand and strong earnings.

Cadence Design Systems, Inc., which provides software technology, design, and consulting services and technology, was another contributor to relative performance. The fund’s holdings of Cadence Design Systems returned approximately 47% for the reporting period, driven by contract wins for the company.

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

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Schwab Large-Cap Growth Fund

Performance and Fund Factsas of October 31, 2019

Performance of Hypothetical $10,000 Investment (October 31, 2009 – October 31, 2019)¹

Average Annual Total Returns¹

Fund and Inception Date	1 Year	5 Years	10 Years
Fund: Schwab Large-Cap Growth Fund (10/3/05)	12.18%	10.06%	12.91%
Russell 1000^® Growth Index	17.10%	13.43%	15.41%
Fund Category: Morningstar Large Growth²	14.51%	11.00%	13.63%
Fund Expense Ratios³: Net 0.99%; Gross 1.02%

For index definitions, please see the Glossary.

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

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Schwab Large-Cap Growth Fund

Performance and Fund Factsas of October 31, 2019 (continued)

Statistics

Number of Holdings	112
Weighted Average Market Cap (millions)	$366,931
Price/Earnings Ratio (P/E)	22.7
Price/Book Ratio (P/B)	5.8
Portfolio Turnover Rate	67%

Sector Weightings % of Investments¹

Top Equity Holdings % of Net Assets²

Portfolio holdings may have changed since the report date.

Source of Sector Classification: S& P and MSCI.

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

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Schwab Small-Cap Equity Fundas of October 31, 2019

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

Market Highlights.Over the reporting period, the U.S. equity market generated positive returns with large-cap stocks outperforming small-cap stocks. The final two months of 2018 were marked by significant market volatility and steep declines, driven by concerns about slowing international growth, a trade war between the U.S. and China, falling oil prices, the waning strength of the U.S. economy, and the pace of future interest rate hikes despite low inflation. However, as the Federal Reserve (Fed) put interest rate hikes on hold, stocks, particularly in the U.S., staged a strong recovery in the first four months of 2019, which generally continued through the end of the reporting period. After raising interest rates four times in 2018, the Fed enacted three interest rate cuts by the end of the period—in July, September, and October.

Performance.The fund returned 0.08% for the 12-month reporting period ended October 31, 2019, underperforming the Russell 2000^® Index (the index), which the fund uses for performance comparisons. The index returned 4.90% for the reporting period.

Positioning and Strategies.The fund’s investments in Tailored Brands, Inc., a retail holding company for various men’s apparel stores, weighed on the fund’s relative performance. The fund’s holdings of Tailored Brands returned approximately -75% for the reporting period as a result of weak retail trends.

CONSUL Energy, Inc., an energy company with interests in coal, was another detractor from the fund’s relative performance over the reporting period. The fund’s overweight position in CONSUL Energy returned approximately -67% over the reporting period, driven by declining coal prices that are tied to oil and natural gas prices.

In contrast, the fund’s overweight position in Atkore International Group, Inc. enhanced the fund’s relative performance. The fund’s holdings in Atkore International Group, a manufacturer and supplier of metal products and electrical raceway solutions, returned approximately 80% for the reporting period, as a result of growth in the company’s end markets. The company was also able to shift business to higher margin products driving free cash flow conversion.

Progress Software Corp. was another contributor to the fund’s relative performance. Progress Software develops, markets, and distributes applications. The fund’s investment in Progress Software returned approximately 26% for the reporting period. Progress Software reported strong earnings over the period, with a healthy core business and well-executed acquisitions.

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

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Schwab Small-Cap Equity Fund

Performance and Fund Factsas of October 31, 2019

Performance of Hypothetical $10,000 Investment (October 31, 2009 – October 31, 2019)¹

Average Annual Total Returns¹

Fund and Inception Date	1 Year	5 Years	10 Years
Fund: Schwab Small-Cap Equity Fund (7/1/03)	0.08%	5.95%	12.84%
Russell 2000^® Index	4.90%	7.37%	12.27%
Fund Category: Morningstar Small Blend²	4.42%	6.20%	11.55%
Fund Expense Ratio³: 1.09%

For index definitions, please see the Glossary.

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

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Schwab Small-Cap Equity Fund

Performance and Fund Factsas of October 31, 2019 (continued)

Statistics

Number of Holdings	272
Weighted Average Market Cap (millions)	$2,218
Price/Earnings Ratio (P/E)	15.7
Price/Book Ratio (P/B)	2.0
Portfolio Turnover Rate	117%

Sector Weightings % of Investments¹

Top Equity Holdings % of Net Assets²

Portfolio holdings may have changed since the report date.

Source of Sector Classification: S& P and MSCI.

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

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

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Schwab Hedged Equity Fundas of October 31, 2019

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

Performance.The fund returned -1.31% for the 12-month reporting period ended October 31, 2019, underperforming the S&P 500^® Index (the index), which the fund uses for performance comparisons. The index returned 14.33% for the reporting period.

Positioning and Strategies.Over the reporting period, stock selection within sectors detracted from the fund’s performance relative to the index. Allocation across sectors also detracted.

From a sector standpoint, the fund’s short positions in the information technology and real estate sectors and long positions in the energy sector detracted from relative performance. Short positions in the energy and health care sectors and long positions in the real estate sector, however, contributed to the fund’s relative performance.

Looking at stock selection, long positions in the consumer discretionary and consumer staples sectors and short positions in the industrials sector detracted from relative performance. Long positions in the information technology and health care sectors and short positions in the communication services sector, however, contributed to the fund’s relative performance.

At the security level, the fund’s largest detractor from total return was the fund’s short position in ViaSat, Inc., a company that provides advanced broadband digital satellite communications and other wireless networking and signal processing equipment and services. ViaSat returned approximately 8% for the reporting period. In contrast, the fund’s long position in software company Microsoft Corp. contributed the most to the fund’s total return. The fund’s holdings of Microsoft returned approximately 36% for the reporting period.

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

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Schwab Hedged Equity Fund

Performance and Fund Factsas of October 31, 2019

Performance of Hypothetical $10,000 Investment (October 31, 2009 – October 31, 2019)¹

Average Annual Total Returns¹

Fund and Inception Date	1 Year	5 Years	10 Years
Fund: Schwab Hedged Equity Fund (9/3/02)	-1.31%	4.02%	6.47%
S&P 500^® Index	14.33%	10.78%	13.70%
Fund Category: Morningstar Long-Short Equity²	3.57%	2.70%	5.32%
Fund Expense Ratio³: 1.67%

For index definitions, please see the Glossary.

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

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

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Schwab Hedged Equity Fund

Performance and Fund Factsas of October 31, 2019 (continued)

Statistics

Number of Holdings
Long Holdings	199
Short Holdings	110
Weighted Average Market Cap (millions)
Long Holdings	$191,526
Short Holdings	$15,043
Price/Earnings Ratio (P/E)
Long Holdings	16.9
Short Holdings	17.5
Price/Book Ratio (P/B)
Long Holdings	2.5
Short Holdings	2.2
Portfolio Turnover Rate including short sales	176%
Portfolio Turnover Rate excluding short sales	96%

Top Equity Long Holdings % of Net Assets¹

Top Equity Short Holdings % of Net Assets¹

Portfolio holdings may have changed since the report date.

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

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Schwab Health Care Fundas of October 31, 2019

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

Performance.The fund returned 6.51% for the 12-month reporting period ended October 31, 2019, underperforming the Dow Jones Global Health Care Index (the index), which the fund uses for performance comparisons. The index returned 9.73% for the reporting period.

Positioning and Strategies. The fund’s overweight investment in Johnson & Johnson, which manufactures health care products and provides related services for the consumer, pharmaceutical, and medical devices and diagnostics markets, weighed on the fund’s performance. The fund’s holdings of Johnson & Johnson returned approximately -3% for the reporting period, driven by high profile lawsuits and legal verdicts.

Pharmaceutical company Pfizer, Inc. was another detractor from the fund’s relative performance over the reporting period. The fund’s holdings of Pfizer returned approximately -8%, hindered by an ongoing reorganization, merger and acquisition activity, and a poor growth outlook.

The fund’s performance relative to the index was enhanced by an overweight position in Hoya Corp., a Japanese manufacturer of electro-optics products. The fund’s holdings of Hoya returned approximately 58% for the reporting period, driven by strong demand that boosted earnings and sales.

Zoetis, Inc. was another contributor to the fund’s relative performance. The fund’s holdings of Zoetis, a company that discovers, develops, manufactures, and commercializes animal health medicines and vaccines, returned approximately 43% for the reporting period. Zoetis benefited as a result of its strong companion animal, or pet, business, particularly in the U.S.

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

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Schwab Health Care Fund

Performance and Fund Factsas of October 31, 2019

Performance of Hypothetical $10,000 Investment (October 31, 2009 – October 31, 2019)¹

Average Annual Total Returns¹

Fund and Inception Date	1 Year	5 Years	10 Years
Fund: Schwab Health Care Fund (7/3/00)	6.51%	7.30%	14.49%
Dow Jones Global Health Care Index	9.73%	7.60%	12.91%
S&P 500^® Index	14.33%	10.78%	13.70%
Fund Category: Morningstar Health²	4.98%	6.99%	14.93%
Fund Expense Ratio³: 0.80%

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

For index definitions, please see the Glossary.

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

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

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

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Schwab Health Care Fund

Performance and Fund Factsas of October 31, 2019 (continued)

Statistics

Number of Holdings	83
Weighted Average Market Cap (millions)	$127,676
Price/Earnings Ratio (P/E)	22.1
Price/Book Ratio (P/B)	4.9
Portfolio Turnover Rate	45%

Industry Weightings % of Investments

Top Equity Holdings % of Net Assets¹

Portfolio holdings may have changed since the report date.

Source of Industry Classification: S&P and MSCI.

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

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Schwab International Core Equity Fundas of October 31, 2019

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

Market Highlights.Over the reporting period, international equity markets generated positive returns. The final two months of 2018 were marked by significant market volatility and steep declines across global equity markets, driven by concerns about slowing international economic growth, a trade war between the U.S. and China, falling oil prices, the waning strength of the U.S. economy, and the pace of future interest rate hikes. However, stocks staged a recovery in the first four months of 2019, which generally continued through the end of the reporting period. A number of central banks reduced their policy rates, including the U.S., while others maintained their generally low—and for some international central banks, negative—interest rates. Over the period, the U.S. dollar strengthened slightly against a basket of foreign currencies, generally reducing the returns on overseas investments in U.S. dollar terms.

Performance.The fund returned 7.08% for the 12-month reporting period ended October 31, 2019, underperforming the MSCI EAFE^® Index (Net) (the index), which the fund uses for performance comparisons. The index returned 11.04% for the reporting period.

Positioning and Strategies. The fund’s overweight position in Covestro AG weighed on the fund’s relative performance. The fund’s holdings of Covestro, a German-based company engaged in the manufacture of plastic materials, retuned approximately -24% for the reporting period. A decline in global economic activity and fears over increased Chinese supply contributed to a decline in earnings for Covestro.

The fund’s underweight to ASML Holding NV was another detractor from the fund’s relative performance as ASML, a Dutch semiconductor manufacturer, benefitted from demand for semiconductor capital equipment driven by the buildout of 5G networks. ASML returned approximately 20% over the reporting period.

Invincible Investment Corp. was another contributor to the fund’s relative performance. The fund’s holdings of Invincible Investment, a Japanese-based real estate investment trust company, returned approximately 63% for the reporting period, benefitting from strong tourism in Japan related to the Rugby World Cup.

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

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Schwab International Core Equity Fund

Performance and Fund Factsas of October 31, 2019

Performance of Hypothetical $10,000 Investment (October 31, 2009 – October 31, 2019)^1,2

Average Annual Total Returns^1,2

Fund and Inception Date	1 Year	5 Years	10 Years
Fund: Schwab International Core Equity Fund (5/30/08)	7.08%	3.30%	6.09%
MSCI EAFE^® Index (Net)³	11.04%	4.31%	5.41%
Fund Category: Morningstar Foreign Large Blend⁴	10.26%	3.74%	5.13%
Fund Expense Ratios⁵: Net 0.86%; Gross 0.89%

For index definitions, please see the Glossary.

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

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

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Schwab International Core Equity Fund

Performance and Fund Factsas of October 31, 2019 (continued)

Statistics

Number of Holdings	178
Weighted Average Market Cap (millions)	$64,472
Price/Earnings Ratio (P/E)	13.6
Price/Book Ratio (P/B)	1.8
Portfolio Turnover Rate	91%

Sector Weightings % of Investments

Top Equity Holdings % of Net Assets¹

Top Country Weightings % of Investments²

Portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.

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

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

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Schwab Active Equity Funds

Fund Expenses(Unaudited)

Examples for a $1,000 Investment

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

	Expense Ratio (Annualized)¹	Beginning Account Value at 5/1/19	Ending Account Value (Net of Expenses) at 10/31/19	Expenses Paid During Period 5/1/19-10/31/19²
Schwab Core Equity Fund
Actual Return	0.73%	$1,000.00	$1,029.20	$3.73
Hypothetical 5% Return	0.73%	$1,000.00	$1,021.52	$3.72
Schwab Dividend Equity Fund
Actual Return	0.89%	$1,000.00	$1,015.10	$4.52
Hypothetical 5% Return	0.89%	$1,000.00	$1,020.71	$4.53
Schwab Large-Cap Growth Fund
Actual Return	0.99%	$1,000.00	$1,021.50	$5.04
Hypothetical 5% Return	0.99%	$1,000.00	$1,020.21	$5.04
Schwab Small-Cap Equity Fund
Actual Return	1.09%	$1,000.00	$959.70	$5.38
Hypothetical 5% Return	1.09%	$1,000.00	$1,019.71	$5.55
Schwab Hedged Equity Fund³
Actual Return	2.01%	$1,000.00	$985.40	$10.06
Hypothetical 5% Return	2.01%	$1,000.00	$1,015.07	$10.21
Schwab Health Care Fund
Actual Return	0.80%	$1,000.00	$1,052.50	$4.14
Hypothetical 5% Return	0.80%	$1,000.00	$1,021.17	$4.08
Schwab International Core Equity Fund
Actual Return	0.86%	$1,000.00	$1,008.00	$4.35
Hypothetical 5% Return	0.86%	$1,000.00	$1,020.86	$4.38

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

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Schwab Core Equity Fund

Financial Statements

Financial Highlights

	11/1/18– 10/31/19	11/1/17– 10/31/18	11/1/16– 10/31/17	11/1/15– 10/31/16	11/1/14– 10/31/15
Per-Share Data
Net asset value at beginning of period	$22.40	$24.36	$19.65	$23.10	$25.48
Income (loss) from investment operations:
Net investment income (loss)¹	0.21	0.26	0.34	0.38	0.30
Net realized and unrealized gains (losses)	1.99	0.41	4.71	(0.52)	1.05
Total from investment operations	2.20	0.67	5.05	(0.14)	1.35
Less distributions:
Distributions from net investment income	(0.27)	(0.34)	(0.34)	(0.36)	(0.33)
Distributions from net realized gains	(2.46)	(2.29)	—	(2.95)	(3.40)
Total distributions	(2.73)	(2.63)	(0.34)	(3.31)	(3.73)
Net asset value at end of period	$21.87	$22.40	$24.36	$19.65	$23.10
Total return	12.02%	2.71%	26.00%	(0.50%)	5.61%
Ratios/Supplemental Data
Ratios to average net assets:
Net operating expenses	0.73%	0.73%	0.73%	0.73%	0.74%
Gross operating expenses	0.73%	0.73%	0.74%	0.73%	0.74%
Net investment income (loss)	1.01%	1.12%	1.53%	1.93%	1.29%
Portfolio turnover rate	98%	101%	86%	80%	81%
Net assets, end of period (x 1,000,000)	$2,182	$2,138	$2,353	$2,075	$2,363

Calculated based on the average shares outstanding during the period.

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Table of Contents

Schwab Core Equity Fund

Portfolio Holdings as of October 31, 2019

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 U.S. Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. Effective March 31, 2019, Form N-PORT Part F has replaced Form N-Q. The fund’s Form N-Q and Form N-PORT Part F are available on the SEC’s website atwww.sec.gov. The fund also makes available its complete schedule of portfolio holdings 15 to 20 days after calendar quarters on the fund’s website atwww.schwabfunds.com/schwabfunds_prospectus.

Security	Number of Shares	Value ($)
Common Stock99.8% of net assets

Automobiles & Components 0.2%
Lear Corp.	39,169	4,612,933

Banks 4.2%
Bank of America Corp.	461,564	14,433,106
Citigroup, Inc.	505,047	36,292,677
Fifth Third Bancorp	95,621	2,780,659
JPMorgan Chase & Co.	138,211	17,265,318
MGIC Investment Corp.	240,001	3,290,414
Regions Financial Corp.	667,615	10,748,602
The PNC Financial Services Group, Inc.	19,566	2,870,332
Wells Fargo & Co.	89,533	4,622,589
		92,303,697

Capital Goods 7.1%
Allison Transmission Holdings, Inc.	695,390	30,325,958
AMETEK, Inc.	173,614	15,911,723
Caterpillar, Inc.	19,774	2,724,857
Dover Corp.	184,818	19,200,742
Eaton Corp. plc	91,851	8,001,141
HEICO Corp.	66,591	8,213,334
Honeywell International, Inc.	37,016	6,393,774
L3Harris Technologies, Inc.	78,140	16,121,063
Lockheed Martin Corp.	14,634	5,512,335
Masco Corp.	322,190	14,901,287
Oshkosh Corp.	197,499	16,862,465
Spirit AeroSystems Holdings, Inc., Class A	52,407	4,287,941
Teledyne Technologies, Inc. *	16,664	5,492,454
		153,949,074

Commercial & Professional Services 0.8%
Robert Half International, Inc.	321,243	18,397,587

Consumer Durables & Apparel 1.4%
LVMH Moet Hennessy Louis Vuitton SE ADR	84,504	7,212,417
NIKE, Inc., Class B	87,227	7,811,178
PulteGroup, Inc.	391,089	15,346,332
		30,369,927

Consumer Services 3.1%
Darden Restaurants, Inc.	94,898	10,654,199
Hilton Worldwide Holdings, Inc.	141,129	13,683,868
Starbucks Corp.	397,895	33,646,001
Wyndham Destinations, Inc.	219,693	10,195,952
		68,180,020

Diversified Financials 5.0%
Ameriprise Financial, Inc.	195,031	29,428,228
Capital One Financial Corp.	269,781	25,157,078
Discover Financial Services	143,175	11,491,225
E*TRADE Financial Corp.	60,993	2,548,897

Security	Number of Shares	Value ($)
LPL Financial Holdings, Inc.	85,695	6,927,584
Morgan Stanley	385,874	17,769,498
Synchrony Financial	339,745	12,016,781
T. Rowe Price Group, Inc.	39,138	4,532,180
		109,871,471

Energy 3.9%
Cabot Oil & Gas Corp.	276,031	5,145,218
Chevron Corp.	259,780	30,170,849
ConocoPhillips	626,433	34,579,102
Valero Energy Corp.	151,424	14,685,099
		84,580,268

Food & Staples Retailing 2.0%
Casey's General Stores, Inc.	79,655	13,605,870
Sysco Corp.	262,069	20,931,451
Walmart, Inc.	71,514	8,385,732
		42,923,053

Food, Beverage & Tobacco 4.1%
Campbell Soup Co.	372,165	17,234,961
General Mills, Inc.	150,353	7,646,954
Nestle S.A. ADR	136,034	14,577,403
PepsiCo, Inc.	205,727	28,219,573
The JM Smucker Co.	57,058	6,029,889
Tyson Foods, Inc., Class A	201,086	16,647,910
		90,356,690

Health Care Equipment & Services 6.8%
Anthem, Inc.	48,873	13,150,747
Cardinal Health, Inc.	196,671	9,725,381
HCA Healthcare, Inc.	126,581	16,903,627
Hill-Rom Holdings, Inc.	282,113	29,534,410
Hologic, Inc. *	434,420	20,986,830
McKesson Corp.	172,939	23,000,887
Medtronic plc	177,139	19,290,437
Molina Healthcare, Inc. *	74,422	8,755,004
UnitedHealth Group, Inc.	24,400	6,165,880
		147,513,203

Household & Personal Products 0.7%
Kimberly-Clark Corp.	22,919	3,045,477
The Procter & Gamble Co.	45,183	5,625,735
Unilever N.V.	102,824	6,091,294
		14,762,506

Insurance 3.1%
Loews Corp.	366,309	17,949,141
MetLife, Inc.	634,341	29,680,815
The Allstate Corp.	183,711	19,550,525
		67,180,481

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Table of Contents

Schwab Core Equity Fund

Portfolio Holdings as of October 31, 2019 (continued)

Security	Number of Shares	Value ($)
Materials 3.2%
Berry Global Group, Inc. *	191,739	7,959,086
BHP Group plc ADR	200,849	8,520,015
Celanese Corp.	66,090	8,006,803
CF Industries Holdings, Inc.	123,038	5,579,773
Reliance Steel & Aluminum Co.	238,243	27,645,718
The Sherwin-Williams Co.	22,448	12,847,439
		70,558,834

Media & Entertainment 7.7%
Activision Blizzard, Inc.	177,420	9,940,843
Alphabet, Inc., Class A *	61,329	77,200,945
Alphabet, Inc., Class C *	9,569	12,057,993
Altice USA, Inc., Class A *	207,516	6,422,620
Discovery, Inc., Class A *	279,411	7,531,524
Facebook, Inc., Class A *	161,776	31,004,370
Live Nation Entertainment, Inc. *	190,061	13,399,300
Tencent Holdings Ltd. ADR	134,940	5,465,070
Zynga, Inc., Class A *	995,777	6,143,944
		169,166,609

Pharmaceuticals, Biotechnology & Life Sciences 7.3%
Agilent Technologies, Inc.	71,961	5,451,046
Alexion Pharmaceuticals, Inc. *	253,575	26,726,805
Amgen, Inc.	43,428	9,261,021
Biogen, Inc. *	62,801	18,759,287
Gilead Sciences, Inc.	231,999	14,780,656
Jazz Pharmaceuticals plc *	88,893	11,167,628
Johnson & Johnson	147,135	19,427,705
Merck & Co., Inc.	101,324	8,780,738
Novartis AG ADR	425,360	37,193,478
Novo Nordisk A/S ADR	48,612	2,684,355
Roche Holding AG ADR	114,207	4,296,467
		158,529,186

Real Estate 3.5%
American Tower Corp.	157,143	34,269,745
Boston Properties, Inc.	222,818	30,570,630
Medical Properties Trust, Inc.	252,385	5,231,941
PS Business Parks, Inc.	29,221	5,275,852
		75,348,168

Retailing 6.5%
Amazon.com, Inc. *	39,203	69,650,402
AutoZone, Inc. *	23,552	26,952,438
Booking Holdings, Inc. *	4,218	8,641,712
eBay, Inc.	247,283	8,716,726
Expedia Group, Inc.	94,790	12,954,001
Target Corp.	55,109	5,891,703
The Home Depot, Inc.	40,247	9,441,141
		142,248,123

Semiconductors & Semiconductor Equipment 2.6%
Intel Corp.	500,189	28,275,684
Lam Research Corp.	67,714	18,353,203
Qorvo, Inc. *	86,416	6,987,598
Xilinx, Inc.	35,072	3,182,433
		56,798,918

Security	Number of Shares	Value ($)
Software & Services 13.8%
Accenture plc, Class A	47,355	8,780,564
Akamai Technologies, Inc. *	176,498	15,267,077
Amdocs Ltd.	111,418	7,264,454
Automatic Data Processing, Inc.	40,802	6,619,309
Booz Allen Hamilton Holding Corp.	195,625	13,766,131
Cadence Design Systems, Inc. *	167,141	10,922,664
Genpact Ltd.	158,319	6,201,355
Mastercard, Inc., Class A	55,148	15,265,518
MAXIMUS, Inc.	174,789	13,413,308
Microsoft Corp.	909,805	130,438,743
Oracle Corp.	177,066	9,648,326
PayPal Holdings, Inc. *	169,623	17,657,754
VeriSign, Inc. *	142,258	27,031,865
Visa, Inc., Class A	105,461	18,862,755
		301,139,823

Technology Hardware & Equipment 6.6%
Apple, Inc.	450,694	112,114,640
CDW Corp.	48,285	6,176,134
HP, Inc.	230,008	3,995,239
Jabil, Inc.	271,150	9,983,743
Keysight Technologies, Inc. *	118,899	11,998,098
		144,267,854

Telecommunication Services 0.9%
AT&T, Inc.	256,157	9,859,483
Verizon Communications, Inc.	156,526	9,465,127
		19,324,610

Transportation 0.5%
Norfolk Southern Corp.	15,832	2,881,424
United Airlines Holdings, Inc. *	77,851	7,071,985
		9,953,409

Utilities 4.8%
Exelon Corp.	827,830	37,657,987
IDACORP, Inc.	114,857	12,360,910
NRG Energy, Inc.	703,293	28,216,115
Portland General Electric Co.	284,854	16,202,495
UGI Corp.	207,331	9,883,469
		104,320,976
Total Common Stock
(Cost $1,703,725,390)		2,176,657,420

Other Investment Company0.0% of net assets

Money Market Fund 0.0%
State Street Institutional U.S. Government Money Market Fund, Premier Class 1.75%(a)	879,481	879,481
Total Other Investment Company
(Cost $879,481)		879,481

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

ADR —

American Depositary Receipt

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Table of Contents

Schwab Core Equity Fund

Portfolio Holdings as of October 31, 2019 (continued)

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2019 (see financial note 2(a) for additional information):

Description	Quoted Prices in Active Markets for Identical Assets (Level 1)	Other Significant Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Assets
Common Stock¹	$2,176,657,420	$—	$—	$2,176,657,420
Other Investment Company¹	879,481	—	—	879,481
Total	$2,177,536,901	$—	$—	$2,177,536,901

¹	As categorized in Portfolio Holdings.

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

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Table of Contents

Schwab Core Equity Fund

Statement of Assets and Liabilities

As of October 31, 2019

Assets
Investments in unaffiliated issuers, at value (cost $1,704,604,871)		$2,177,536,901
Deposit with broker for futures contracts		3,300,000
Receivables:
Investments sold		4,340,436
Dividends		1,266,261
Fund shares sold		97,357
Foreign tax reclaims		6,638
Prepaid expenses	+	19,143
Total assets		2,186,566,736
Liabilities
Payables:
Investments bought		1,982,421
Investment adviser and administrator fees		853,143
Shareholder service fees		444,600
Independent trustees’ fees		14
Fund shares redeemed		1,095,405
Accrued expenses	+	147,040
Total liabilities		4,522,623
Net Assets
Total assets		2,186,566,736
Total liabilities	–	4,522,623
Net assets		$2,182,044,113
Net Assets by Source
Capital received from investors		1,650,628,660
Total distributable earnings		531,415,453

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$2,182,044,113		99,795,452		$21.87

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Schwab Core Equity Fund

Statement of Operations

For the period November 1, 2018 through October 31, 2019

Investment Income
Dividends (net of foreign withholding tax of $22,335)		$37,171,483
Securities on loan, net	+	44,251
Total investment income		37,215,734
Expenses
Investment adviser and administrator fees		10,055,962
Shareholder service fees		5,221,155
Portfolio accounting fees		77,139
Custodian fees		52,913
Shareholder reports		45,572
Transfer agent fees		40,861
Professional fees		38,549
Registration fees		36,423
Independent trustees’ fees		18,842
Other expenses	+	35,339
Total expenses		15,622,755
Expense reduction by CSIM and its affiliates	–	40,861
Net expenses	–	15,581,894
Net investment income		21,633,840
Realized and Unrealized Gains (Losses)
Net realized gains on investments		44,492,163
Net realized gains on futures contracts	+	1,136,930
Net realized gains		45,629,093
Net change in unrealized appreciation (depreciation) on investments	+	179,996,703
Net realized and unrealized gains		225,625,796
Increase in net assets resulting from operations		$247,259,636

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Table of Contents

Schwab Core Equity Fund

Statement of Changes in Net Assets

For the current and prior report periods

Operations
	11/1/18-10/31/19		11/1/17-10/31/18
Net investment income		$21,633,840	$26,089,047
Net realized gains		45,629,093	232,323,847
Net change in unrealized appreciation (depreciation)	+	179,996,703	(184,772,120)
Increase in net assets from operations		247,259,636	73,640,774
Distributions to Shareholders
Total distributions		($258,813,892)	($252,002,689)

Transactions in Fund Shares
		11/1/18-10/31/19		11/1/17-10/31/18
		SHARES	VALUE	SHARES	VALUE
Shares sold		11,415,378	$217,630,660	5,037,106	$115,966,940
Shares reinvested		10,439,291	193,753,240	8,268,646	186,127,214
Shares redeemed	+	(17,535,305)	(356,277,403)	(14,419,212)	(338,357,426)
Net transactions in fund shares		4,319,364	$55,106,497	(1,113,460)	($36,263,272)
Shares Outstanding and Net Assets
		11/1/18-10/31/19		11/1/17-10/31/18
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		95,476,088	$2,138,491,872	96,589,548	$2,353,117,059
Total increase or decrease	+	4,319,364	43,552,241	(1,113,460)	(214,625,187)
End of period		99,795,452	$2,182,044,113	95,476,088	$2,138,491,872

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Table of Contents

Schwab Dividend Equity Fund

Financial Statements

Financial Highlights

	11/1/18– 10/31/19	11/1/17– 10/31/18	11/1/16– 10/31/17	11/1/15– 10/31/16	11/1/14– 10/31/15
Per-Share Data
Net asset value at beginning of period	$15.43	$17.21	$14.39	$16.43	$19.17
Income (loss) from investment operations:
Net investment income (loss)¹	0.23	0.22	0.29	0.31	0.29
Net realized and unrealized gains (losses)	0.93	(0.27)	2.75	(0.29)	(0.21)
Total from investment operations	1.16	(0.05)	3.04	0.02	0.08
Less distributions:
Distributions from net investment income	(0.24)	(0.30)	(0.22)	(0.32)	(0.27)
Distributions from net realized gains	(1.28)	(1.43)	—	(1.74)	(2.55)
Total distributions	(1.52)	(1.73)	(0.22)	(2.06)	(2.82)
Net asset value at end of period	$15.07	$15.43	$17.21	$14.39	$16.43
Total return	8.78%	(0.63%)	21.19%	0.26%	0.12%
Ratios/Supplemental Data
Ratios to average net assets:
Net operating expenses	0.89%	0.88%	0.88%	0.88%	0.88%
Gross operating expenses	0.89%	0.88%	0.88%	0.89%	0.88%
Net investment income (loss)	1.58%	1.36%	1.78%	2.18%	1.71%
Portfolio turnover rate	70%	79%	70%	74%	73%
Net assets, end of period (x 1,000,000)	$847	$1,249	$1,469	$1,560	$1,872

Calculated based on the average shares outstanding during the period.

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Schwab Active Equity Funds | Annual Report

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Table of Contents

Schwab Dividend Equity Fund

Portfolio Holdings as of October 31, 2019

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 U.S. Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. Effective March 31, 2019, Form N-PORT Part F has replaced Form N-Q. The fund’s Form N-Q and Form N-PORT Part F are available on the SEC’s website atwww.sec.gov. The fund also makes available its complete schedule of portfolio holdings 15 to 20 days after calendar quarters on the fund’s website atwww.schwabfunds.com/schwabfunds_prospectus.

Security	Number of Shares	Value ($)
Common Stock99.8% of net assets

Banks 10.8%
Bank of America Corp.	76,267	2,384,869
CIT Group, Inc.	176,428	7,566,997
Citigroup, Inc.	330,136	23,723,573
JPMorgan Chase & Co.	206,173	25,755,131
MGIC Investment Corp.	488,053	6,691,207
Popular, Inc.	15,000	816,900
Regions Financial Corp.	911,618	14,677,050
The PNC Financial Services Group, Inc.	64,826	9,509,974
		91,125,701

Capital Goods 6.7%
Allison Transmission Holdings, Inc.	321,049	14,000,947
Builders FirstSource, Inc. *	232,890	5,265,643
Cummins, Inc.	12,597	2,172,730
Dover Corp.	80,358	8,348,392
Illinois Tool Works, Inc.	5,715	963,435
L3Harris Technologies, Inc.	7,870	1,623,660
Lockheed Martin Corp.	9,138	3,442,102
Masco Corp.	281,183	13,004,714
Parker-Hannifin Corp.	13,385	2,456,014
Spirit AeroSystems Holdings, Inc., Class A	25,424	2,080,192
W.W. Grainger, Inc.	9,960	3,076,046
		56,433,875

Commercial & Professional Services 1.4%
ManpowerGroup, Inc.	98,455	8,951,528
Nielsen Holdings plc	60,000	1,209,600
Robert Half International, Inc.	27,474	1,573,436
		11,734,564

Consumer Durables & Apparel 0.9%
Hanesbrands, Inc.	112,318	1,708,357
PulteGroup, Inc.	73,551	2,886,141
Whirlpool Corp.	21,501	3,270,732
		7,865,230

Consumer Services 3.0%
Hilton Worldwide Holdings, Inc.	38,410	3,724,233
International Game Technology plc	343,004	4,541,373
Starbucks Corp.	144,677	12,233,887
Wyndham Destinations, Inc.	97,809	4,539,316
		25,038,809

Diversified Financials 8.8%
Affiliated Managers Group, Inc.	57,973	4,630,883
Ameriprise Financial, Inc.	69,650	10,509,489
Berkshire Hathaway, Inc., Class B *	44,855	9,535,276
Capital One Financial Corp.	171,838	16,023,893
Discover Financial Services	37,254	2,990,006
Evercore, Inc., Class A	42,004	3,093,175

Security	Number of Shares	Value ($)
Legg Mason, Inc.	41,777	1,556,611
Morgan Stanley	226,119	10,412,780
MSCI, Inc.	4,168	977,646
Navient Corp.	274,260	3,776,560
Synchrony Financial	253,852	8,978,745
T. Rowe Price Group, Inc.	15,396	1,782,857
		74,267,921

Energy 8.5%
Chevron Corp.	259,600	30,149,944
ConocoPhillips	320,755	17,705,676
CVR Energy, Inc.	57,086	2,707,018
Exxon Mobil Corp.	268,269	18,126,936
Helmerich & Payne, Inc.	10,995	412,313
Patterson-UTI Energy, Inc.	13,402	111,505
Valero Energy Corp.	32,396	3,141,764
		72,355,156

Food & Staples Retailing 0.4%
Koninklijke Ahold Delhaize N.V. ADR	79,065	1,967,928
Walmart, Inc.	14,480	1,697,925
		3,665,853

Food, Beverage & Tobacco 5.1%
Campbell Soup Co.	153,815	7,123,173
Coca-Cola Consolidated, Inc.	6,012	1,649,452
Flowers Foods, Inc.	207,041	4,496,930
Ingredion, Inc.	43,937	3,471,023
Nestle S.A. ADR	41,817	4,481,110
PepsiCo, Inc.	85,246	11,693,194
Philip Morris International, Inc.	42,441	3,456,395
The JM Smucker Co.	47,367	5,005,744
Tyson Foods, Inc., Class A	22,243	1,841,498
		43,218,519

Health Care Equipment & Services 4.9%
Cardinal Health, Inc.	99,501	4,920,325
HCA Healthcare, Inc.	53,906	7,198,607
Hill-Rom Holdings, Inc.	29,138	3,050,457
Hologic, Inc. *	17,402	840,691
McKesson Corp.	65,604	8,725,332
Medtronic plc	156,129	17,002,448
		41,737,860

Household & Personal Products 2.2%
Kimberly-Clark Corp.	57,201	7,600,869
The Procter & Gamble Co.	85,905	10,696,031
		18,296,900

Insurance 5.1%
Allianz SE ADR	79,896	1,950,261
First American Financial Corp.	42,059	2,598,405
Loews Corp.	96,409	4,724,041

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Schwab Active Equity Funds | Annual Report

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Table of Contents

Schwab Dividend Equity Fund

Portfolio Holdings as of October 31, 2019 (continued)

Security	Number of Shares	Value ($)
MetLife, Inc.	358,458	16,772,250
The Allstate Corp.	162,809	17,326,134
		43,371,091

Materials 4.8%
Axalta Coating Systems Ltd. *	90,295	2,662,800
BHP Group plc ADR	99,711	4,229,741
Celanese Corp.	40,003	4,846,363
CF Industries Holdings, Inc.	28,039	1,271,569
NewMarket Corp.	23,311	11,317,257
PPG Industries, Inc.	43,318	5,419,948
Reliance Steel & Aluminum Co.	49,126	5,700,581
Steel Dynamics, Inc.	109,032	3,310,211
The Sherwin-Williams Co.	2,987	1,709,520
		40,467,990

Media & Entertainment 4.1%
Activision Blizzard, Inc.	16,225	909,087
Alphabet, Inc., Class A *	1,843	2,319,968
Altice USA, Inc., Class A *	182,269	5,641,225
Cinemark Holdings, Inc.	98,391	3,601,111
Comcast Corp., Class A	56,035	2,511,489
Discovery, Inc., Class A *	120,308	3,242,902
Live Nation Entertainment, Inc. *	34,096	2,403,768
Meredith Corp.	23,708	893,792
Sinclair Broadcast Group, Inc., Class A	47,819	1,905,109
The Interpublic Group of Cos., Inc.	286,905	6,240,184
Viacom, Inc., Class B	231,015	4,980,683
		34,649,318

Pharmaceuticals, Biotechnology & Life Sciences 6.9%
Alexion Pharmaceuticals, Inc. *	24,547	2,587,254
Amgen, Inc.	13,108	2,795,281
Biogen, Inc. *	11,028	3,294,174
Gilead Sciences, Inc.	91,816	5,849,597
GlaxoSmithKline plc ADR	9,841	450,718
Johnson & Johnson	115,725	15,280,329
Novartis AG ADR	24,356	2,129,689
Novo Nordisk A/S ADR	50,771	2,803,574
Pfizer, Inc.	183,778	7,051,562
Regeneron Pharmaceuticals, Inc. *	9,204	2,819,001
Roche Holding AG ADR	348,632	13,115,536
		58,176,715

Real Estate 6.9%
Alexander & Baldwin, Inc.	144,845	3,405,306
American Tower Corp.	69,667	15,192,979
Boston Properties, Inc.	73,706	10,112,463
Brandywine Realty Trust	324,769	4,962,470
Colony Capital, Inc.	245,021	1,372,118
EPR Properties	21,000	1,633,590
Equity LifeStyle Properties, Inc.	39,974	2,795,782
First Industrial Realty Trust, Inc.	46,784	1,970,074
Gaming & Leisure Properties, Inc.	30,880	1,246,317
Outfront Media, Inc.	21,422	563,613
Park Hotels & Resorts, Inc.	85,641	1,991,153
PS Business Parks, Inc.	60,970	11,008,134
Retail Properties of America, Inc., Class A	36,696	504,937
VEREIT, Inc.	173,547	1,707,702
		58,466,638

Security	Number of Shares	Value ($)
Retailing 0.5%
Best Buy Co., Inc.	34,440	2,473,825
Target Corp.	15,026	1,606,430
		4,080,255

Semiconductors & Semiconductor Equipment 2.1%
Broadcom, Inc.	11,549	3,382,125
Intel Corp.	262,105	14,816,795
		18,198,920

Software & Services 2.2%
Amdocs Ltd.	32,321	2,107,329
International Business Machines Corp.	6,356	849,988
MAXIMUS, Inc.	12,542	962,473
Microsoft Corp.	25,988	3,725,900
VeriSign, Inc. *	57,295	10,887,196
		18,532,886

Technology Hardware & Equipment 3.3%
Apple, Inc.	15,331	3,813,739
Cisco Systems, Inc.	258,919	12,301,242
HP, Inc.	390,361	6,780,571
Jabil, Inc.	47,671	1,755,246
Keysight Technologies, Inc. *	26,997	2,724,267
Sanmina Corp. *	23,667	727,287
		28,102,352

Telecommunication Services 2.9%
AT&T, Inc.	243,366	9,367,157
BT Group plc	190,720	506,143
CenturyLink, Inc.	251,622	3,255,989
Telephone & Data Systems, Inc.	28,040	731,564
Verizon Communications, Inc.	174,248	10,536,777
		24,397,630

Transportation 0.8%
Delta Air Lines, Inc.	65,717	3,619,692
Southwest Airlines Co.	61,107	3,429,936
		7,049,628

Utilities 7.5%
AES Corp.	106,354	1,813,336
Exelon Corp.	394,296	17,936,525
IDACORP, Inc.	48,280	5,195,894
NRG Energy, Inc.	421,582	16,913,870
Portland General Electric Co.	285,239	16,224,394
UGI Corp.	115,893	5,524,619
		63,608,638
Total Common Stock
(Cost $721,563,424)		844,842,449

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Schwab Active Equity Funds | Annual Report

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Table of Contents

Schwab Dividend Equity Fund

Portfolio Holdings as of October 31, 2019 (continued)

Security Rate, Maturity Date	Face Amount ($)	Value ($)
Short-Term Investment0.3% of net assets

Time Deposit 0.3%
Citibank
1.18%, 11/01/19(a)	2,904,772	2,904,772
Total Short-Term Investment
(Cost $2,904,772)		2,904,772

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

ADR —

American Depositary Receipt

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2019 (see financial note 2(a) for additional information):

Description	Quoted Prices in Active Markets for Identical Assets (Level 1)	Other Significant Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Assets
Common Stock¹	$820,444,819	$—	$—	$820,444,819
Telecommunication Services	23,891,487	506,143	—	24,397,630
Short-Term Investment¹	—	2,904,772	—	2,904,772
Total	$844,336,306	$3,410,915	$—	$847,747,221

¹	As categorized in Portfolio Holdings.

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Schwab Active Equity Funds | Annual Report

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Table of Contents

Schwab Dividend Equity Fund

Statement of Assets and Liabilities

As of October 31, 2019

Assets
Investments in unaffiliated issuers, at value (cost $724,468,196)		$847,747,221
Receivables:
Dividends		733,313
Fund shares sold		556,887
Foreign tax reclaims		15,019
Income from securities on loan		94
Interest		83
Prepaid expenses	+	19,228
Total assets		849,071,845
Liabilities
Payables:
Investments bought		1,047,123
Investment adviser and administrator fees		441,458
Shareholder service fees		170,546
Independent trustees’ fees		9
Fund shares redeemed		353,834
Accrued expenses	+	104,170
Total liabilities		2,117,140
Net Assets
Total assets		849,071,845
Total liabilities	–	2,117,140
Net assets		$846,954,705
Net Assets by Source
Capital received from investors		679,823,303
Total distributable earnings		167,131,402

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$846,954,705		56,193,727		$15.07

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Schwab Active Equity Funds | Annual Report

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Table of Contents

Schwab Dividend Equity Fund

Statement of Operations

For the period November 1, 2018 through October 31, 2019

Investment Income
Dividends (net of foreign withholding tax of $19,668)		$23,246,124
Interest		55,187
Securities on loan, net	+	1,660
Total investment income		23,302,971
Expenses
Investment adviser and administrator fees		5,850,081
Shareholder service fees		2,268,274
Portfolio accounting fees		69,504
Custodian fees		40,060
Professional fees		37,156
Registration fees		30,364
Transfer agent fees		25,201
Shareholder reports		24,757
Independent trustees’ fees		12,924
Other expenses	+	25,445
Total expenses		8,383,766
Expense reduction by CSIM and its affiliates	–	25,201
Net expenses	–	8,358,565
Net investment income		14,944,406
Realized and Unrealized Gains (Losses)
Net realized gains on investments		41,885,822
Net realized gains on futures contracts	+	1,770,698
Net realized gains		43,656,520
Net change in unrealized appreciation (depreciation) on investments	+	7,941,778
Net realized and unrealized gains		51,598,298
Increase in net assets resulting from operations		$66,542,704

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Schwab Active Equity Funds | Annual Report

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Table of Contents

Schwab Dividend Equity Fund

Statement of Changes in Net Assets

For the current and prior report periods

Operations
	11/1/18-10/31/19		11/1/17-10/31/18
Net investment income		$14,944,406	$19,019,115
Net realized gains		43,656,520	100,779,824
Net change in unrealized appreciation (depreciation)	+	7,941,778	(119,244,775)
Increase in net assets from operations		66,542,704	554,164
Distributions to Shareholders
Total distributions		($116,674,245)	($146,370,393)

Transactions in Fund Shares
		11/1/18-10/31/19		11/1/17-10/31/18
		SHARES	VALUE	SHARES	VALUE
Shares sold		4,035,151	$55,294,907	4,465,871	$72,752,175
Shares reinvested		5,687,633	76,661,106	5,882,999	95,048,975
Shares redeemed	+	(34,473,540)	(483,993,577)	(14,759,098)	(242,239,003)
Net transactions in fund shares		(24,750,756)	($352,037,564)	(4,410,228)	($74,437,853)
Shares Outstanding and Net Assets
		11/1/18-10/31/19		11/1/17-10/31/18
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		80,944,483	$1,249,123,810	85,354,711	$1,469,377,892
Total decrease	+	(24,750,756)	(402,169,105)	(4,410,228)	(220,254,082)
End of period		56,193,727	$846,954,705	80,944,483	$1,249,123,810

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Schwab Active Equity Funds | Annual Report

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Table of Contents

Schwab Large-Cap Growth Fund

Financial Statements

Financial Highlights

	11/1/18– 10/31/19	11/1/17– 10/31/18	11/1/16– 10/31/17	11/1/15– 10/31/16	11/1/14– 10/31/15
Per-Share Data
Net asset value at beginning of period	$18.04	$18.65	$15.20	$17.68	$18.38
Income (loss) from investment operations:
Net investment income (loss)¹	0.06	0.06	0.08	0.20	0.13
Net realized and unrealized gains (losses)	1.79	0.75	4.04	(0.12)	1.08
Total from investment operations	1.85	0.81	4.12	0.08	1.21
Less distributions:
Distributions from net investment income	(0.07)	(0.07)	(0.17)	(0.20)	(0.09)
Distributions from net realized gains	(1.75)	(1.35)	(0.50)	(2.36)	(1.82)
Total distributions	(1.82)	(1.42)	(0.67)	(2.56)	(1.91)
Net asset value at end of period	$18.07	$18.04	$18.65	$15.20	$17.68
Total return	12.18%	4.46%	28.10%	0.54%	7.00%
Ratios/Supplemental Data
Ratios to average net assets:
Net operating expenses	0.99%	0.99%	0.99%	1.00%²	0.99%
Gross operating expenses	1.03%	1.02%	1.04%	1.04%	1.03%
Net investment income (loss)	0.34%	0.30%	0.48%	1.32%	0.75%
Portfolio turnover rate	67%	88%	81%	84%	90%
Net assets, end of period (x 1,000,000)	$181	$243	$257	$219	$251

Calculated based on the average shares outstanding during the period.

The ratio of net operating expenses would have been 0.99%, if certain non-routine expenses had not been incurred.

₄₃

Schwab Active Equity Funds | Annual Report

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Table of Contents

Schwab Large-Cap Growth Fund

Portfolio Holdings as of October 31, 2019

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 U.S. Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. Effective March 31, 2019, Form N-PORT Part F has replaced Form N-Q. The fund’s Form N-Q and Form N-PORT Part F are available on the SEC’s website atwww.sec.gov. The fund also makes available its complete schedule of portfolio holdings 15 to 20 days after calendar quarters on the fund’s website atwww.schwabfunds.com/schwabfunds_prospectus.

Security	Number of Shares	Value ($)
Common Stock99.7% of net assets

Banks 1.1%
Essent Group Ltd.	3,223	167,886
MGIC Investment Corp.	107,752	1,477,280
Regions Financial Corp.	24,104	388,075
		2,033,241

Capital Goods 6.2%
Allison Transmission Holdings, Inc.	68,015	2,966,134
Dover Corp.	11,198	1,163,360
Honeywell International, Inc.	4,917	849,313
Lockheed Martin Corp.	4,578	1,724,441
Masco Corp.	25,611	1,184,509
MasTec, Inc. *	20,533	1,292,347
Oshkosh Corp.	15,639	1,335,258
Spirit AeroSystems Holdings, Inc., Class A	8,307	679,679
		11,195,041

Commercial & Professional Services 0.7%
Robert Half International, Inc.	13,890	795,480
Waste Management, Inc.	4,159	466,682
		1,262,162

Consumer Durables & Apparel 0.6%
NIKE, Inc., Class B	6,613	592,194
Sony Corp. ADR	8,976	546,010
		1,138,204

Consumer Services 2.5%
Darden Restaurants, Inc.	6,229	699,330
Hilton Worldwide Holdings, Inc.	12,979	1,258,444
Starbucks Corp.	31,103	2,630,069
		4,587,843

Diversified Financials 2.4%
Ameriprise Financial, Inc.	5,266	794,587
E*TRADE Financial Corp.	20,759	867,519
Evercore, Inc., Class A	6,050	445,522
MSCI, Inc.	2,842	666,619
Synchrony Financial	5,248	185,622
T. Rowe Price Group, Inc.	11,395	1,319,541
		4,279,410

Energy 1.0%
Chevron Corp.	3,597	417,755
ConocoPhillips	25,028	1,381,546
		1,799,301

Security	Number of Shares	Value ($)
Food, Beverage & Tobacco 3.8%
Campbell Soup Co.	20,481	948,475
Flowers Foods, Inc.	56,207	1,220,816
Nestle S.A. ADR	6,618	709,185
PepsiCo, Inc.	28,588	3,921,416
		6,799,892

Health Care Equipment & Services 7.2%
Cardinal Health, Inc.	8,800	435,160
Edwards Lifesciences Corp. *	2,198	523,959
HCA Healthcare, Inc.	4,666	623,098
Hill-Rom Holdings, Inc.	18,000	1,884,420
Hologic, Inc. *	51,114	2,469,317
McKesson Corp.	5,742	763,686
Medtronic plc	11,067	1,205,196
Omnicell, Inc. *	5,483	385,948
Steris plc	3,801	538,108
The Cooper Cos., Inc.	2,229	648,639
UnitedHealth Group, Inc.	12,186	3,079,402
Veeva Systems, Inc., Class A *	3,397	481,797
		13,038,730

Household & Personal Products 0.3%
Unilever N.V.	8,839	523,622

Materials 0.7%
Berry Global Group, Inc. *	19,491	809,071
CF Industries Holdings, Inc.	9,313	422,345
		1,231,416

Media & Entertainment 11.4%
Alphabet, Inc., Class A *	7,673	9,658,773
Altice USA, Inc., Class A *	45,215	1,399,404
Comcast Corp., Class A	19,328	866,281
Discovery, Inc., Class A *	31,269	842,856
Facebook, Inc., Class A *	26,851	5,145,994
Live Nation Entertainment, Inc. *	14,548	1,025,634
Netflix, Inc. *	2,213	636,038
Nintendo Co. Ltd	7,275	338,433
Tencent Holdings Ltd. ADR	17,936	726,408
		20,639,821

Pharmaceuticals, Biotechnology & Life Sciences 7.4%
Agilent Technologies, Inc.	8,760	663,570
Alexion Pharmaceuticals, Inc. *	25,918	2,731,757
Amgen, Inc.	5,305	1,131,291
Biogen, Inc. *	5,303	1,584,059
Charles River Laboratories International, Inc. *	2,478	322,091
Jazz Pharmaceuticals plc *	3,368	423,122
Novartis AG ADR	18,757	1,640,112
Novo Nordisk A/S ADR	20,913	1,154,816
PRA Health Sciences, Inc. *	7,932	775,036

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Schwab Active Equity Funds | Annual Report

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Table of Contents

Schwab Large-Cap Growth Fund

Portfolio Holdings as of October 31, 2019 (continued)

Security	Number of Shares	Value ($)
Regeneron Pharmaceuticals, Inc. *	2,915	892,806
Roche Holding AG ADR	53,720	2,020,946
		13,339,606

Real Estate 3.1%
American Tower Corp.	10,290	2,244,043
Boston Properties, Inc.	13,844	1,899,397
Equinix, Inc.	655	371,241
PS Business Parks, Inc.	6,199	1,119,229
		5,633,910

Retailing 10.3%
Amazon.com, Inc. *	6,762	12,013,775
AutoZone, Inc. *	1,198	1,370,967
Best Buy Co., Inc.	14,403	1,034,568
Expedia Group, Inc.	4,110	561,673
The Home Depot, Inc.	15,328	3,595,642
		18,576,625

Semiconductors & Semiconductor Equipment 3.7%
Broadcom, Inc.	2,686	786,595
Lam Research Corp.	7,641	2,071,017
NVIDIA Corp.	4,051	814,332
Teradyne, Inc.	7,901	483,699
Texas Instruments, Inc.	16,794	1,981,524
Xilinx, Inc.	6,196	562,225
		6,699,392

Software & Services 24.6%
Accenture plc, Class A	6,380	1,182,980
Adobe, Inc. *	5,978	1,661,466
Akamai Technologies, Inc. *	18,618	1,610,457
Amdocs Ltd.	10,891	710,093
Autodesk, Inc. *	5,852	862,351
Booz Allen Hamilton Holding Corp.	25,574	1,799,642
Cadence Design Systems, Inc. *	23,444	1,532,065
Citrix Systems, Inc.	2,013	219,135
Genpact Ltd.	14,987	587,041
Intuit, Inc.	5,029	1,294,968
j2 Global, Inc.	5,792	550,008
Mastercard, Inc., Class A	11,525	3,190,235
MAXIMUS, Inc.	15,763	1,209,653
Microsoft Corp.	103,916	14,898,437
Nuance Communications, Inc. *	32,123	524,247
Oracle Corp.	17,656	962,075

Security	Number of Shares	Value ($)
PayPal Holdings, Inc. *	23,779	2,475,394
Proofpoint, Inc. *	3,022	348,648
ServiceNow, Inc. *	3,818	944,039
SS&C Technologies Holdings, Inc.	22,872	1,189,573
Synopsys, Inc. *	4,749	644,677
VeriSign, Inc. *	14,565	2,767,641
Visa, Inc., Class A	18,825	3,367,039
		44,531,864

Technology Hardware & Equipment 10.8%
Apple, Inc.	62,503	15,548,247
Cisco Systems, Inc.	43,969	2,088,967
Jabil, Inc.	17,605	648,216
Keysight Technologies, Inc. *	11,368	1,147,145
		19,432,575

Transportation 1.3%
Southwest Airlines Co.	11,999	673,504
Union Pacific Corp.	10,096	1,670,484
		2,343,988

Utilities 0.6%
Exelon Corp.	13,746	625,306
NRG Energy, Inc.	13,037	523,044
		1,148,350
Total Common Stock
(Cost $123,392,518)		180,234,993
Security Rate, Maturity Date	Face Amount ($)	Value ($)
Short-Term Investment0.5% of net assets

Time Deposit 0.5%
JPMorgan Chase Bank
1.18%, 11/01/19(a)	903,413	903,413
Total Short-Term Investment
(Cost $903,413)		903,413

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

ADR —

American Depositary Receipt

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2019 (see financial note 2(a) for additional information):

Description	Quoted Prices in Active Markets for Identical Assets (Level 1)	Other Significant Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Assets
Common Stock¹	$180,234,993	$—	$—	$180,234,993
Short-Term Investment¹	—	903,413	—	903,413
Total	$180,234,993	$903,413	$—	$181,138,406

¹	As categorized in Portfolio Holdings.

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Table of Contents

Schwab Large-Cap Growth Fund

Statement of Assets and Liabilities

As of October 31, 2019

Assets
Investments in unaffiliated issuers, at value (cost $124,295,931)		$181,138,406
Receivables:
Investments sold		90,702
Fund shares sold		300,725
Dividends		50,741
Foreign tax reclaims		1,432
Interest		30
Prepaid expenses	+	14,631
Total assets		181,596,667
Liabilities
Payables:
Investments bought		498,212
Investment adviser and administrator fees		103,080
Shareholder service fees		36,164
Independent trustees’ fees		7
Fund shares redeemed		100,529
Accrued expenses	+	49,933
Total liabilities		787,925
Net Assets
Total assets		181,596,667
Total liabilities	–	787,925
Net assets		$180,808,742
Net Assets by Source
Capital received from investors		114,495,291
Total distributable earnings		66,313,451

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$180,808,742		10,004,676		$18.07

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Table of Contents

Schwab Large-Cap Growth Fund

Statement of Operations

For the period November 1, 2018 through October 31, 2019

Investment Income
Dividends (net of foreign withholding tax of $2,996)		$2,269,090
Interest		23,956
Securities on loan, net	+	256,462
Total investment income		2,549,508
Expenses
Investment adviser and administrator fees		1,374,929
Shareholder service fees		457,748
Professional fees		36,104
Portfolio accounting fees		27,245
Registration fees		27,228
Custodian fees		14,381
Shareholder reports		11,598
Transfer agent fees		9,543
Independent trustees’ fees		8,926
Other expenses	+	7,394
Total expenses		1,975,096
Expense reduction by CSIM and its affiliates	–	84,017
Net expenses	–	1,891,079
Net investment income		658,429
Realized and Unrealized Gains (Losses)
Net realized gains on investments		9,087,973
Net realized gains on futures contracts	+	178,599
Net realized gains		9,266,572
Net change in unrealized appreciation (depreciation) on investments		8,596,113
Net change in unrealized appreciation (depreciation) on futures contracts	+	90,126
Net change in unrealized appreciation (depreciation)	+	8,686,239
Net realized and unrealized gains		17,952,811
Increase in net assets resulting from operations		$18,611,240

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Table of Contents

Schwab Large-Cap Growth Fund

Statement of Changes in Net Assets

For the current and prior report periods

Operations
	11/1/18-10/31/19		11/1/17-10/31/18
Net investment income		$658,429	$787,740
Net realized gains		9,266,572	23,386,823
Net change in unrealized appreciation (depreciation)	+	8,686,239	(12,202,184)
Increase in net assets from operations		18,611,240	11,972,379
Distributions to Shareholders
Total distributions		($24,256,179)	($19,458,886)

Transactions in Fund Shares
		11/1/18-10/31/19		11/1/17-10/31/18
		SHARES	VALUE	SHARES	VALUE
Shares sold		1,083,640	$17,768,963	1,778,882	$33,172,055
Shares reinvested		1,033,263	15,729,023	679,342	12,058,316
Shares redeemed	+	(5,570,871)	(89,814,641)	(2,772,143)	(51,802,580)
Net transactions in fund shares		(3,453,968)	($56,316,655)	(313,919)	($6,572,209)
Shares Outstanding and Net Assets
		11/1/18-10/31/19		11/1/17-10/31/18
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		13,458,644	$242,770,336	13,772,563	$256,829,052
Total decrease	+	(3,453,968)	(61,961,594)	(313,919)	(14,058,716)
End of period		10,004,676	$180,808,742	13,458,644	$242,770,336

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Schwab Active Equity Funds | Annual Report

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Table of Contents

Schwab Small-Cap Equity Fund

Financial Statements

Financial Highlights

	11/1/18– 10/31/19	11/1/17– 10/31/18	11/1/16– 10/31/17	11/1/15– 10/31/16	11/1/14– 10/31/15
Per-Share Data
Net asset value at beginning of period	$20.87	$23.58	$18.81	$21.19	$25.11
Income (loss) from investment operations:
Net investment income (loss)¹	0.02	0.01	(0.00)²	0.07	0.05
Net realized and unrealized gains (losses)	(0.35)³	0.32	4.86	0.12	0.63
Total from investment operations	(0.33)	0.33	4.86	0.19	0.68
Less distributions:
Distributions from net investment income	(0.01)	—	(0.09)	(0.04)	(0.02)
Distributions from net realized gains	(3.85)	(3.04)	—	(2.53)	(4.58)
Total distributions	(3.86)	(3.04)	(0.09)	(2.57)	(4.60)
Net asset value at end of period	$16.68	$20.87	$23.58	$18.81	$21.19
Total return	0.08%	1.37%	25.87%	1.47%	3.01%
Ratios/Supplemental Data
Ratios to average net assets:
Net operating expenses	1.09%	1.09%	1.10%	1.09%	1.09%
Gross operating expenses	1.09%	1.09%	1.10%	1.10%	1.09%
Net investment income (loss)	0.09%	0.06%	(0.01%)	0.37%	0.22%
Portfolio turnover rate	117%	111%	99%	85%	95%
Net assets, end of period (x 1,000,000)	$579	$573	$645	$571	$630

Calculated based on the average shares outstanding during the period.

Per-share amount was less than $0.005.

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

₄₉

Schwab Active Equity Funds | Annual Report

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Table of Contents

Schwab Small-Cap Equity Fund

Portfolio Holdings as of October 31, 2019

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 U.S. Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. Effective March 31, 2019, Form N-PORT Part F has replaced Form N-Q. The fund’s Form N-Q and Form N-PORT Part F are available on the SEC’s website atwww.sec.gov. The fund also makes available its complete schedule of portfolio holdings 15 to 20 days after calendar quarters on the fund’s website atwww.schwabfunds.com/schwabfunds_prospectus.

Security	Number of Shares	Value ($)
Common Stock99.5% of net assets

Automobiles & Components 2.3%
American Axle & Manufacturing Holdings, Inc. *	125,634	1,050,300
Cooper Tire & Rubber Co.	94,887	2,679,609
Dana, Inc.	343,800	5,579,874
Gentherm, Inc. *	94,670	3,954,366
Superior Industries International, Inc.	118,420	307,892
		13,572,041

Banks 10.8%
1st Source Corp.	37,837	1,936,498
Amalgamated Bank, Class A	49,487	901,158
BancFirst Corp.	17,652	1,021,874
Banner Corp.	43,681	2,357,900
Boston Private Financial Holdings, Inc.	30,955	348,244
Century Bancorp, Inc., Class A	1,365	118,769
Customers Bancorp, Inc. *	96,559	2,276,861
Essent Group Ltd.	83,194	4,333,575
Financial Institutions, Inc.	113,439	3,565,388
First BanCorp	763,062	8,027,412
First Defiance Financial Corp.	49,862	1,541,733
First Financial Corp.	68,377	2,999,699
First Foundation, Inc.	49,449	791,678
Flagstar Bancorp, Inc.	56,559	2,055,354
Great Southern Bancorp, Inc.	12,741	769,811
Hilltop Holdings, Inc.	182,670	4,267,171
International Bancshares Corp.	148,697	6,090,629
MGIC Investment Corp.	283,970	3,893,229
MMA Capital Holdings, Inc. *	7,320	232,996
NMI Holdings, Inc., Class A *	96,821	2,832,014
OFG Bancorp	226,091	4,591,908
Peapack-Gladstone Financial Corp.	7,023	205,072
Radian Group, Inc.	225,579	5,662,033
Republic Bancorp, Inc., Class A	36,826	1,637,652
Sierra Bancorp	6,698	182,454
Timberland Bancorp, Inc.	7,071	187,382
		62,828,494

Capital Goods 11.6%
Albany International Corp., Class A	44,463	3,734,003
Astronics Corp. *	43,296	1,252,986
Atkore International Group, Inc. *	232,309	8,061,122
AZZ, Inc.	22,522	873,628
Builders FirstSource, Inc. *	116,550	2,635,196
Columbus McKinnon Corp.	15,323	574,919
Commercial Vehicle Group, Inc. *	145,429	1,060,177
EMCOR Group, Inc.	94,297	8,270,790
Encore Wire Corp.	54,000	3,034,800
EnerSys	13,649	912,572
Federal Signal Corp.	35,355	1,146,916
Foundation Building Materials, Inc. *	67,977	1,263,692
Generac Holdings, Inc. *	22,020	2,126,692
General Finance Corp. *	14,423	141,057
GMS, Inc. *	34,481	1,033,051

Security	Number of Shares	Value ($)
Great Lakes Dredge & Dock Corp. *	306,870	3,298,852
Hillenbrand, Inc.	116,717	3,593,716
MasTec, Inc. *	20,420	1,285,235
Moog, Inc., Class A	57,967	4,852,418
Mueller Industries, Inc.	85,560	2,632,681
Navistar International Corp. *	24,702	772,679
Park-Ohio Holdings Corp.	29,706	913,757
PGT Innovations, Inc. *	68,383	1,207,644
Powell Industries, Inc.	11,653	456,331
Regal Beloit Corp.	13,430	994,492
Rexnord Corp. *	130,551	3,693,288
SPX Corp. *	45,192	2,058,044
Universal Forest Products, Inc.	17,787	895,753
Vectrus, Inc. *	5,624	257,073
Watts Water Technologies, Inc., Class A	46,630	4,348,247
		67,381,811

Commercial & Professional Services 4.0%
Barrett Business Services, Inc.	55,530	4,871,647
Heidrick & Struggles International, Inc.	25,597	728,491
Herman Miller, Inc.	32,904	1,530,036
Insperity, Inc.	28,611	3,022,180
Kelly Services, Inc., Class A	65,787	1,579,546
Kimball International, Inc., Class B	114,701	2,335,312
Knoll, Inc.	14,599	390,377
McGrath RentCorp	29,071	2,218,408
Steelcase, Inc., Class A	26,203	457,766
Tetra Tech, Inc.	14,126	1,235,601
TriNet Group, Inc. *	73,998	3,921,154
UniFirst Corp.	4,876	979,296
		23,269,814

Consumer Durables & Apparel 2.8%
Crocs, Inc. *	11,257	393,883
Deckers Outdoor Corp. *	6,258	956,848
Installed Building Products, Inc. *	71,682	4,675,100
M/I Homes, Inc. *	43,247	1,910,653
Malibu Boats, Inc., Class A *	114,402	3,731,793
Rocky Brands, Inc.	19,595	544,937
Taylor Morrison Home Corp. *	80,308	2,011,715
TopBuild Corp. *	12,644	1,314,091
YETI Holdings, Inc. *(a)	27,214	906,498
		16,445,518

Consumer Services 2.4%
Bloomin' Brands, Inc.	65,442	1,296,406
Boyd Gaming Corp.	78,720	2,145,120
Collectors Universe, Inc.	79,572	2,280,534
Cracker Barrel Old Country Store, Inc.	2,245	349,097
Everi Holdings, Inc. *	65,843	662,381
International Game Technology plc	39,637	524,794
K12, Inc. *	172,134	3,406,532
Red Robin Gourmet Burgers, Inc. *	26,855	819,077

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Schwab Active Equity Funds | Annual Report

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Table of Contents

Schwab Small-Cap Equity Fund

Portfolio Holdings as of October 31, 2019 (continued)

Security	Number of Shares	Value ($)
SeaWorld Entertainment, Inc. *	64,722	1,709,955
The Habit Restaurants, Inc., Class A *	52,901	555,990
		13,749,886

Diversified Financials 3.0%
Enova International, Inc. *	195,223	4,585,788
Navient Corp.	577,406	7,950,881
On Deck Capital, Inc. *	486,112	2,168,059
Regional Management Corp. *	92,218	2,667,867
		17,372,595

Energy 2.2%
Arch Coal, Inc., Class A	7,564	596,724
Archrock, Inc.	141,196	1,361,129
CONSOL Energy, Inc. *	158,631	2,098,688
CVR Energy, Inc.	31,175	1,478,318
Dorian LPG Ltd. *	42,331	527,021
Evolution Petroleum Corp.	103,627	582,384
Matrix Service Co. *	219,935	4,125,981
World Fuel Services Corp.	43,254	1,806,720
		12,576,965

Food & Staples Retailing 0.1%
Natural Grocers by Vitamin Cottage, Inc. *	65,010	570,138

Food, Beverage & Tobacco 2.5%
Coca-Cola Consolidated, Inc.	13,403	3,677,247
Darling Ingredients, Inc. *	25,216	486,669
John B. Sanfilippo & Son, Inc.	22,424	2,379,635
Lancaster Colony Corp.	2,970	413,365
The Boston Beer Co., Inc., Class A *	3,962	1,483,610
The Simply Good Foods Co. *	146,950	3,606,153
Universal Corp.	41,166	2,255,897
		14,302,576

Health Care Equipment & Services 5.0%
Accuray, Inc. *	336,951	876,073
CONMED Corp.	11,452	1,259,949
Haemonetics Corp. *	5,149	621,639
HMS Holdings Corp. *	56,302	1,840,512
Integer Holdings Corp. *	95,305	7,380,419
Invacare Corp.	57,447	443,491
Lantheus Holdings, Inc. *	95,277	1,986,525
Natus Medical, Inc. *	134,929	4,544,409
NextGen Healthcare, Inc. *	26,328	445,075
Novocure Ltd. *	11,188	801,508
NuVasive, Inc. *	14,354	1,012,531
Surmodics, Inc. *	21,419	1,017,617
Tactile Systems Technology, Inc. *	22,219	1,009,187
Tandem Diabetes Care, Inc. *	49,094	3,023,209
Varex Imaging Corp. *	82,694	2,481,647
		28,743,791

Household & Personal Products 1.1%
Inter Parfums, Inc.	24,110	1,866,837
Lifevantage Corp. *	38,360	520,162
Medifast, Inc.	34,215	3,795,812
		6,182,811

Security	Number of Shares	Value ($)
Insurance 2.9%
American Equity Investment Life Holding Co.	80,749	1,992,885
Argo Group International Holdings Ltd.	32,979	2,040,411
Crawford & Co., Class B	15,928	148,130
Employers Holdings, Inc.	30,735	1,301,320
MBIA, Inc. *	92,064	855,275
National General Holdings Corp.	122,573	2,613,256
National Western Life Group, Inc., Class A	16,598	4,524,615
Selective Insurance Group, Inc.	48,199	3,331,515
		16,807,407

Materials 2.2%
Cabot Corp.	15,591	679,612
Domtar Corp.	18,741	681,985
Hawkins, Inc.	6,815	291,341
Innospec, Inc.	20,481	1,871,144
Materion Corp.	14,049	798,545
Minerals Technologies, Inc.	16,360	809,002
Orion Engineered Carbons S.A.	94,393	1,563,148
PolyOne Corp.	34,579	1,108,257
Ryerson Holding Corp. *	268,936	2,337,054
Trinseo S.A.	8,936	379,780
Tronox Holdings plc, Class A *	234,592	1,991,686
		12,511,554

Media & Entertainment 2.0%
AMC Networks, Inc., Class A *	14,903	649,026
IMAX Corp. *	28,798	614,837
Liberty Latin America Ltd., Class A *	244,402	4,567,873
Meredith Corp.	28,227	1,064,158
Sinclair Broadcast Group, Inc., Class A	106,394	4,238,737
Yelp, Inc. *	15,314	528,486
		11,663,117

Pharmaceuticals, Biotechnology & Life Sciences 13.6%
Affimed N.V. *	180,950	531,993
Agenus, Inc. *	110,381	285,887
Akcea Therapeutics, Inc. *(a)	19,043	349,058
ANI Pharmaceuticals, Inc. *	41,544	3,245,002
Anika Therapeutics, Inc. *	35,165	2,475,264
Arena Pharmaceuticals, Inc. *	43,551	2,121,587
Arrowhead Pharmaceuticals, Inc. *	30,367	1,216,198
BioDelivery Sciences International, Inc. *	306,861	1,773,657
BioSpecifics Technologies Corp. *	27,843	1,348,437
CareDx, Inc. *	29,892	783,469
Collegium Pharmaceutical, Inc. *	142,530	1,710,360
Eagle Pharmaceuticals, Inc. *	53,366	3,346,048
Emergent BioSolutions, Inc. *	127,728	7,300,932
Enanta Pharmaceuticals, Inc. *	9,525	579,882
Endo International plc *	166,873	765,947
Esperion Therapeutics, Inc. *	84,923	3,377,388
FibroGen, Inc. *	64,321	2,518,167
Halozyme Therapeutics, Inc. *	120,979	1,853,398
Harvard Bioscience, Inc. *	13,450	37,660
Horizon Therapeutics plc *	184,116	5,322,794
Lannett Co., Inc. *	69,361	824,702
Ligand Pharmaceuticals, Inc. *	26,764	2,912,191
Medpace Holdings, Inc. *	63,635	4,685,445
Myriad Genetics, Inc. *	24,011	808,450
Pacira BioSciences, Inc. *	80,395	3,255,194
PDL BioPharma, Inc. *	758,380	2,138,632
Prestige Consumer Healthcare, Inc. *	57,330	2,032,922
Puma Biotechnology, Inc. *	152,814	1,039,135
Radius Health, Inc. *	81,099	2,306,456

₅₁

Schwab Active Equity Funds | Annual Report

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Table of Contents

Schwab Small-Cap Equity Fund

Portfolio Holdings as of October 31, 2019 (continued)

Security	Number of Shares	Value ($)
Repligen Corp. *	57,756	4,591,024
Retrophin, Inc. *	71,159	853,908
Seres Therapeutics, Inc. *	100,245	350,858
Supernus Pharmaceuticals, Inc. *	89,398	2,484,370
Syneos Health, Inc. *	78,830	3,953,325
Vanda Pharmaceuticals, Inc. *	180,359	2,436,650
Veracyte, Inc. *	77,329	1,773,154
Vericel Corp. *	45,406	720,593
Voyager Therapeutics, Inc. *	54,418	837,493
		78,947,630

Real Estate 9.3%
Alexander & Baldwin, Inc.	306,106	7,196,552
Brandywine Realty Trust	399,498	6,104,329
CareTrust REIT, Inc.	30,558	740,726
Cedar Realty Trust, Inc.	361,978	1,209,007
Colony Capital, Inc.	557,986	3,124,722
Columbia Property Trust, Inc.	275,026	5,643,534
CoreCivic, Inc.	203,418	3,104,159
CorEnergy Infrastructure Trust, Inc.	50,691	2,441,785
Essential Properties Realty Trust, Inc.	23,682	607,680
First Industrial Realty Trust, Inc.	106,157	4,470,271
Hannon Armstrong Sustainable Infrastructure Capital, Inc.	79,717	2,380,350
Lexington Realty Trust	336,663	3,662,893
Marcus & Millichap, Inc. *	21,823	779,518
Office Properties Income Trust	14,473	461,399
Paramount Group, Inc.	271,134	3,652,175
Piedmont Office Realty Trust, Inc., Class A	183,642	4,120,926
PS Business Parks, Inc.	11,179	2,018,368
RE/MAX Holdings, Inc., Class A	48,596	1,625,536
The RMR Group, Inc., Class A	13,832	669,469
		54,013,399

Retailing 1.6%
1-800-Flowers.com, Inc., Class A *	119,511	1,704,227
America's Car-Mart, Inc. *	20,218	1,839,636
Funko, Inc., Class A *	48,089	865,602
Lithia Motors, Inc., Class A	10,851	1,708,815
Sally Beauty Holdings, Inc. *	98,614	1,528,517
Tailored Brands, Inc.(a)	408,800	1,896,832
		9,543,629

Semiconductors & Semiconductor Equipment 2.6%
Diodes, Inc. *	43,638	2,035,713
Enphase Energy, Inc. *(a)	43,872	852,433
Inphi Corp. *	29,258	2,103,065
NeoPhotonics Corp. *	307,193	2,021,330
Synaptics, Inc. *	16,760	705,764
Xperi Corp.	347,122	7,048,312
		14,766,617

Software & Services 9.9%
ACI Worldwide, Inc. *	12,892	404,680
Agilysys, Inc. *	54,288	1,367,515
Alarm.com Holdings, Inc. *	13,779	680,683
Box, Inc., Class A *	89,294	1,510,855
CACI International, Inc., Class A *	24,263	5,428,846
Cardtronics plc, Class A *	37,921	1,299,173
ChannelAdvisor Corp. *	76,481	719,686
CommVault Systems, Inc. *	138,559	6,882,226
Cornerstone OnDemand, Inc. *	106,455	6,235,069
Digital Turbine, Inc. *	31,154	217,766
eGain Corp. *	50,455	379,674

Security	Number of Shares	Value ($)
EVERTEC, Inc.	134,287	4,107,839
j2 Global, Inc.	39,000	3,703,440
MAXIMUS, Inc.	23,957	1,838,460
MobileIron, Inc. *	435,546	2,726,518
Perspecta, Inc.	32,519	863,054
Progress Software Corp.	187,092	7,461,229
Qualys, Inc. *	23,465	2,002,268
SPS Commerce, Inc. *	14,006	739,097
Synchronoss Technologies, Inc. *(a)	214,556	1,287,336
Telenav, Inc. *	240,827	1,134,295
Verint Systems, Inc. *	72,254	3,279,609
Workiva, Inc. *	70,186	2,924,651
		57,193,969

Technology Hardware & Equipment 2.5%
AstroNova, Inc.	11,736	186,133
Ciena Corp. *	141,884	5,266,734
Extreme Networks, Inc. *	334,150	2,151,926
KEMET Corp.	5,912	128,527
Plantronics, Inc.	32,669	1,287,812
Sanmina Corp. *	109,634	3,369,053
Viavi Solutions, Inc. *	96,705	1,543,412
Vishay Precision Group, Inc. *	11,488	391,166
		14,324,763

Telecommunication Services 1.1%
Consolidated Communications Holdings, Inc.	100,105	400,420
Shenandoah Telecommunications Co.	52,866	1,700,170
Telephone & Data Systems, Inc.	142,031	3,705,589
United States Cellular Corp. *	20,226	752,812
		6,558,991

Transportation 1.8%
Controladora Vuela Cia de Aviacion S.A.B. de C.V. ADR *	140,726	1,525,470
Grupo Aeroportuario del Centro Norte S.A.B. de C.V. ADR	103,038	5,739,217
Mesa Air Group, Inc. *	96,033	731,771
Radiant Logistics, Inc. *	402,319	2,168,499
SkyWest, Inc.	5,329	317,342
		10,482,299

Utilities 2.2%
AquaVenture Holdings Ltd. *	109,292	2,144,309
Atlantic Power Corp. *	893,829	2,082,622
Avista Corp.	27,616	1,326,396
Consolidated Water Co., Ltd.	90,546	1,588,177
Spark Energy, Inc., Class A	301,355	2,883,967
Unitil Corp.	44,380	2,763,543
		12,789,014
Total Common Stock
(Cost $544,289,717)		576,598,829

Other Investment Company0.7% of net assets

Securities Lending Collateral 0.7%
Wells Fargo Government Money Market Fund, Select Class 1.75%(b)	4,026,334	4,026,334
Total Other Investment Company
(Cost $4,026,334)		4,026,334

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Table of Contents

Schwab Small-Cap Equity Fund

Portfolio Holdings as of October 31, 2019 (continued)

Security Rate, Maturity Date	Face Amount ($)	Value ($)
Short-Term Investment0.5% of net assets

Time Deposits 0.5%
JPMorgan Chase Bank
1.18%, 11/01/19(c)	2,717,728	2,717,728
Total Short-Term Investment
(Cost $2,717,728)		2,717,728

*	Non-income producing security.
(a)	All or a portion of this security is on loan. Securities on loan were valued at $3,862,897.
(b)	The rate shown is the 7-day yield.
(c)	The rate shown is the current daily overnight rate.

ADR —	American Depositary Receipt
REIT —	Real Estate Investment Trust

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2019 (see financial note 2(a) for additional information):

Description	Quoted Prices in Active Markets for Identical Assets (Level 1)	Other Significant Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Assets
Common Stock¹	$576,598,829	$—	$—	$576,598,829
Other Investment Company¹	4,026,334	—	—	4,026,334	��
Short-Term Investment¹	—	2,717,728	—	2,717,728
Total	$580,625,163	$2,717,728	$—	$583,342,891

¹	As categorized in Portfolio Holdings.

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Table of Contents

Schwab Small-Cap Equity Fund

Statement of Assets and Liabilities

As of October 31, 2019

Assets
Investments in unaffiliated issuers, at value (cost $547,007,445) including securities on loan of $3,862,897		$579,316,557
Collateral invested for securities on loan, at value (cost $4,026,334)		4,026,334
Receivables:
Investments sold		237,472
Fund shares sold		300,062
Dividends		82,442
Income from securities on loan		8,527
Interest		91
Prepaid expenses	+	14,953
Total assets		583,986,438
Liabilities
Collateral held for securities on loan		4,026,334
Payables:
Investment adviser and administrator fees		389,853
Shareholder service fees		117,208
Independent trustees’ fees		8
Fund shares redeemed		221,985
Accrued expenses	+	88,291
Total liabilities		4,843,679
Net Assets
Total assets		583,986,438
Total liabilities	–	4,843,679
Net assets		$579,142,759
Net Assets by Source
Capital received from investors		588,393,213
Total distributable loss		(9,250,454)

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$579,142,759		34,716,667		$16.68

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Table of Contents

Schwab Small-Cap Equity Fund

Statement of Operations

For the period November 1, 2018 through October 31, 2019

Investment Income
Dividends (net of foreign withholding tax of $21,064)		$6,546,820
Interest		58,887
Securities on loan, net	+	277,530
Total investment income		6,883,237
Expenses
Investment adviser and administrator fees		4,720,018
Shareholder service fees		1,418,126
Portfolio accounting fees		58,451
Custodian fees		47,318
Professional fees		35,713
Registration fees		32,952
Shareholder reports		24,861
Transfer agent fees		15,579
Independent trustees’ fees		10,938
Other expenses	+	13,003
Total expenses		6,376,959
Expense reduction by CSIM and its affiliates	–	15,579
Net expenses	–	6,361,380
Net investment income		521,857
Realized and Unrealized Gains (Losses)
Net realized losses on investments		(42,448,740)
Net realized gains on futures contracts	+	1,536,744
Net realized losses		(40,911,996)
Net change in unrealized appreciation (depreciation) on investments	+	43,145,274
Net realized and unrealized gains		2,233,278
Increase in net assets resulting from operations		$2,755,135

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Table of Contents

Schwab Small-Cap Equity Fund

Statement of Changes in Net Assets

For the current and prior report periods

Operations
	11/1/18-10/31/19		11/1/17-10/31/18
Net investment income		$521,857	$389,215
Net realized gains (losses)		(40,911,996)	104,146,024
Net change in unrealized appreciation (depreciation)	+	43,145,274	(92,914,743)
Increase in net assets from operations		2,755,135	11,620,496
Distributions to Shareholders
Total distributions		($105,061,725)	($82,566,358)

Transactions in Fund Shares
		11/1/18-10/31/19		11/1/17-10/31/18
		SHARES	VALUE	SHARES	VALUE
Shares sold		8,709,089	$139,266,609	2,529,047	$55,468,967
Shares reinvested		5,236,122	80,112,670	2,938,036	61,434,349
Shares redeemed	+	(6,703,704)	(111,336,125)	(5,346,501)	(117,486,079)
Net transactions in fund shares		7,241,507	$108,043,154	120,582	($582,763)
Shares Outstanding and Net Assets
		11/1/18-10/31/19		11/1/17-10/31/18
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		27,475,160	$573,406,195	27,354,578	$644,934,820
Total increase or decrease	+	7,241,507	5,736,564	120,582	(71,528,625)
End of period		34,716,667	$579,142,759	27,475,160	$573,406,195

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Table of Contents

Schwab Hedged Equity Fund

Financial Statements

Financial Highlights

	11/1/18– 10/31/19	11/1/17– 10/31/18	11/1/16– 10/31/17	11/1/15– 10/31/16	11/1/14– 10/31/15
Per-Share Data
Net asset value at beginning of period	$16.89	$17.65	$16.25	$17.46	$19.02
Income (loss) from investment operations:
Net investment income (loss)¹	0.07	0.08	0.03	0.03	(0.01)
Net realized and unrealized gains (losses)	(0.34)	0.24	1.85	0.49	0.89
Total from investment operations	(0.27)	0.32	1.88	0.52	0.88
Less distributions:
Distributions from net investment income	(0.08)	(0.01)	—	(0.12)	—
Distributions from net realized gains	(1.05)	(1.07)	(0.48)	(1.61)	(2.44)
Total distributions	(1.13)	(1.08)	(0.48)	(1.73)	(2.44)
Net asset value at end of period	$15.49	$16.89	$17.65	$16.25	$17.46
Total return	(1.31%)	1.75%	11.71%	3.55%	4.84%
Ratios/Supplemental Data
Ratios to average net assets:
Net operating expenses (including dividend expense on short sales)	1.93%	1.66%	1.64%	1.85%	1.82%
Net operating expenses (excluding dividend expense on short sales)	1.34%²	1.33%	1.33%	1.57%³	1.54%³
Gross operating expenses	1.95%	1.67%	1.65%	1.87%	1.84%
Net investment income (loss)	0.46%	0.43%	0.16%	0.22%	(0.06%)
Portfolio turnover rate	176%	180%	163%	142%	146%
Net assets, end of period (x 1,000,000)	$182	$300	$252	$204	$212

Calculated based on the average shares outstanding during the period.

The ratio of net operating expenses would have been 1.33%, if interest expense had not been incurred.

The ratios of net operating expenses would have been 1.33%, if stock loan fees on short sales had not been incurred.

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Schwab Active Equity Funds | Annual Report

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Table of Contents

Schwab Hedged Equity Fund

Portfolio Holdings as of October 31, 2019

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 U.S. Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. Effective March 31, 2019, Form N-PORT Part F has replaced Form N-Q. The fund’s Form N-Q and Form N-PORT Part F are available on the SEC’s website atwww.sec.gov. The fund also makes available its complete schedule of portfolio holdings 15 to 20 days after calendar quarters on the fund’s website atwww.schwabfunds.com/schwabfunds_prospectus.

Security	Number of Shares	Value ($)
Common Stock99.5% of net assets

Automobiles & Components 0.9%
Dana, Inc.	82,787	1,343,633
Tenneco, Inc., Class A	18,585	233,985
		1,577,618

Banks 6.3%
Bank of America Corp.(a)	20,285	634,312
CIT Group, Inc.	9,236	396,132
Citigroup, Inc.(a)	55,689	4,001,812
First BanCorp(a)	197,147	2,073,986
Flagstar Bancorp, Inc.	9,065	329,422
MGIC Investment Corp.	45,154	619,061
Popular, Inc.	26,005	1,416,232
Radian Group, Inc.	62,952	1,580,095
TCF Financial Corp.	12,096	478,881
		11,529,933

Capital Goods 9.1%
Advanced Drainage Systems, Inc.(a)	8,132	301,047
Allison Transmission Holdings, Inc.(a)	72,161	3,146,941
BMC Stock Holdings, Inc. *	9,756	263,314
Builders FirstSource, Inc. *	36,837	832,885
Cummins, Inc.	6,077	1,048,161
Dover Corp.(a)	23,130	2,402,976
Eaton Corp. plc	14,573	1,269,454
Gibraltar Industries, Inc. *	14,570	775,561
HD Supply Holdings, Inc. *	2,959	116,999
HEICO Corp.	9,829	1,212,309
ITT, Inc.	20,037	1,191,200
Lockheed Martin Corp.	3,886	1,463,778
Masco Corp.	6,714	310,522
Masonite International Corp. *	5,889	361,643
Moog, Inc., Class A	4,118	344,718
Oshkosh Corp.	1,802	153,855
Parker-Hannifin Corp.	2,113	387,714
Patrick Industries, Inc. *	6,091	300,956
Spirit AeroSystems Holdings, Inc., Class A	7,886	645,233
		16,529,266

Commercial & Professional Services 1.9%
ASGN, Inc. *	12,815	814,906
Clean Harbors, Inc. *	2,724	224,621
Korn Ferry	20,811	763,556
McGrath RentCorp	2,904	221,604
RELX plc ADR	18,199	440,234
Robert Half International, Inc.	13,508	773,603
TriNet Group, Inc. *	6,096	323,027
		3,561,551

Security	Number of Shares	Value ($)
Consumer Durables & Apparel 0.8%
Sony Corp. ADR	2,115	128,655
Tempur Sealy International, Inc. *	15,149	1,377,802
		1,506,457

Consumer Services 2.5%
Boyd Gaming Corp.	38,010	1,035,773
Career Education Corp. *	29,615	419,348
Darden Restaurants, Inc.	5,746	645,104
K12, Inc. *(a)	69,675	1,378,868
Starbucks Corp.	12,611	1,066,386
		4,545,479

Diversified Financials 5.7%
Affiliated Managers Group, Inc.(a)	5,921	472,970
Ameriprise Financial, Inc.	8,488	1,280,754
Capital One Financial Corp.(a)	27,321	2,547,683
E*TRADE Financial Corp.	12,510	522,793
Evercore, Inc., Class A	17,285	1,272,867
LPL Financial Holdings, Inc.	5,566	449,955
Macquarie Group Ltd	3,412	315,235
Morgan Stanley	5,559	255,992
MSCI, Inc.	1,398	327,915
Navient Corp.	63,989	881,129
OneMain Holdings, Inc.	6,877	275,080
Synchrony Financial(a)	43,370	1,533,997
T. Rowe Price Group, Inc.	1,673	193,733
		10,330,103

Energy 6.1%
Cabot Oil & Gas Corp.	18,248	340,143
Chevron Corp.	11,877	1,379,395
ConocoPhillips(a)	56,045	3,093,684
Continental Resources, Inc. *(a)	34,028	1,002,805
CVR Energy, Inc.	27,477	1,302,959
Exxon Mobil Corp.	14,025	947,669
Helmerich & Payne, Inc.	12,595	472,313
HollyFrontier Corp.	10,133	556,707
NexTier Oilfield Solutions, Inc. *	47,974	207,248
Patterson-UTI Energy, Inc.	34,335	285,667
Phillips 66(a)	13,411	1,566,673
		11,155,263

Food & Staples Retailing 1.3%
Casey's General Stores, Inc.	2,864	489,200
Koninklijke Ahold Delhaize N.V. ADR	28,638	712,800
Performance Food Group Co. *	6,344	270,318
Walmart, Inc.(a)	7,499	879,332
		2,351,650

Food, Beverage & Tobacco 2.3%
Cia Cervecerias Unidas S.A. ADR(a)	57,445	1,140,283
Coca-Cola Consolidated, Inc.	2,073	568,748

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Table of Contents

Schwab Hedged Equity Fund

Portfolio Holdings as of October 31, 2019 (continued)

Security	Number of Shares	Value ($)
Darling Ingredients, Inc. *	75,613	1,459,331
Flowers Foods, Inc.	38,539	837,067
Philip Morris International, Inc.	2,640	215,002
		4,220,431

Health Care Equipment & Services 5.1%
Anthem, Inc.	3,009	809,662
CVS Health Corp.(a)	25,460	1,690,289
HCA Healthcare, Inc.	8,776	1,171,947
Hill-Rom Holdings, Inc.	12,247	1,282,138
HMS Holdings Corp. *	8,204	268,189
Hologic, Inc. *(a)	28,335	1,368,864
Medtronic plc	8,088	880,783
Natus Medical, Inc. *	10,496	353,505
Steris plc	4,418	625,456
Varian Medical Systems, Inc. *	3,724	449,897
Veeva Systems, Inc., Class A *	2,709	384,218
		9,284,948

Household & Personal Products 1.3%
Kimberly-Clark de Mexico SAB de CV	5,816	57,985
Medifast, Inc.(a)	13,884	1,540,291
The Procter & Gamble Co.	2,903	361,453
Unilever N.V.	8,190	485,176
		2,444,905

Insurance 1.9%
American National Insurance Co.(a)	3,873	464,683
Loews Corp.(a)	35,773	1,752,877
MetLife, Inc.	15,775	738,112
The Allstate Corp.(a)	4,021	427,915
		3,383,587

Materials 2.3%
Alcoa Corp. *(a)	22,004	457,463
Axalta Coating Systems Ltd. *	12,936	381,483
Domtar Corp.	9,902	360,334
H.B. Fuller Co.	11,279	550,415
Innospec, Inc.	8,057	736,087
Kraton Corp. *	4,593	102,975
NewMarket Corp.	1,463	710,272
Reliance Steel & Aluminum Co.	6,547	759,714
Tronox Holdings plc, Class A *	19,561	166,073
		4,224,816

Media & Entertainment 8.4%
Alphabet, Inc., Class A *(a)	5,645	7,105,926
Altice USA, Inc., Class A *	4,502	139,337
AMC Networks, Inc., Class A *(a)	13,634	593,761
Comcast Corp., Class A	24,937	1,117,676
Discovery, Inc., Class A *(a)	43,769	1,179,793
Facebook, Inc., Class A *(a)	12,674	2,428,972
Live Nation Entertainment, Inc. *	13,247	933,914
Sinclair Broadcast Group, Inc., Class A	14,240	567,322
The Interpublic Group of Cos., Inc.	18,439	401,048
Viacom, Inc., Class B	38,243	824,519
		15,292,268

Pharmaceuticals, Biotechnology & Life Sciences 5.5%
AbbVie, Inc.(a)	5,626	447,548
Alkermes plc *	19,292	376,773
Astellas Pharma, Inc.	10,507	181,351

Security	Number of Shares	Value ($)
Biogen, Inc. *(a)	5,244	1,566,435
Dicerna Pharmaceuticals, Inc. *	12,749	210,231
Emergent BioSolutions, Inc. *	22,166	1,267,009
Esperion Therapeutics, Inc. *	5,125	203,821
FibroGen, Inc. *	1,401	54,849
Incyte Corp. *	14,917	1,251,835
Invitae Corp. *	5,621	90,554
Jazz Pharmaceuticals plc *	1,167	146,610
Johnson & Johnson(a)	12,127	1,601,249
Novartis AG ADR	16,935	1,480,796
Novo Nordisk A/S ADR	9,692	535,192
Regeneron Pharmaceuticals, Inc. *	466	142,727
Vertex Pharmaceuticals, Inc. *	2,893	565,524
		10,122,504

Real Estate 5.8%
Alexander & Baldwin, Inc.(a)	62,766	1,475,629
American Tower Corp.(a)	9,584	2,090,079
Boston Properties, Inc.(a)	26,722	3,666,258
Brandywine Realty Trust	27,413	418,871
Colony Capital, Inc.(a)	60,047	336,263
Columbia Property Trust, Inc.	12,792	262,492
CoreCivic, Inc.	34,648	528,728
Paramount Group, Inc.	75,572	1,017,955
PS Business Parks, Inc.	4,704	849,307
		10,645,582

Retailing 7.4%
Amazon.com, Inc. *(a)	3,690	6,555,876
AutoZone, Inc. *	493	564,179
Best Buy Co., Inc.(a)	13,302	955,483
Expedia Group, Inc.	8,909	1,217,504
LKQ Corp. *	5,376	182,730
Lowe's Cos., Inc.	6,066	677,026
O'Reilly Automotive, Inc. *	2,370	1,032,159
Tailored Brands, Inc.	56,761	263,371
Target Corp.	1,242	132,782
The Home Depot, Inc.	2,180	511,384
The TJX Cos., Inc.(a)	23,649	1,363,365
		13,455,859

Semiconductors & Semiconductor Equipment 2.8%
Inphi Corp. *	4,095	294,349
Intel Corp.(a)	21,248	1,201,149
Lam Research Corp.	2,937	796,044
NXP Semiconductors N.V.	4,444	505,194
Qorvo, Inc. *	13,810	1,116,676
Xilinx, Inc.	7,066	641,169
Xperi Corp.	28,448	577,637
		5,132,218

Software & Services 11.4%
Accenture plc, Class A(a)	5,197	963,628
Akamai Technologies, Inc. *(a)	16,216	1,402,684
Atlassian Corp. plc, Class A *	885	106,899
Booz Allen Hamilton Holding Corp.	5,011	352,624
Bottomline Technologies (de), Inc. *	799	32,719
CACI International, Inc., Class A *	6,324	1,414,995
Cadence Design Systems, Inc. *(a)	18,866	1,232,893
Cerence, Inc. *	8,152	126,356
CommVault Systems, Inc. *	7,693	382,111
Cornerstone OnDemand, Inc. *	11,079	648,897
Fortinet, Inc. *	4,787	390,428
Intuit, Inc.(a)	1,987	511,653

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Schwab Active Equity Funds | Annual Report

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Table of Contents

Schwab Hedged Equity Fund

Portfolio Holdings as of October 31, 2019 (continued)

Security	Number of Shares	Value ($)
Mastercard, Inc., Class A	3,074	850,914
Microsoft Corp.(a)	51,489	7,381,978
Nuance Communications, Inc. *(a)	65,220	1,064,391
Oracle Corp.(a)	12,419	676,711
PayPal Holdings, Inc. *	9,971	1,037,981
Progress Software Corp.(a)	13,299	530,364
Synopsys, Inc. *	992	134,664
VeriSign, Inc. *	1,745	331,585
Visa, Inc., Class A	6,934	1,240,215
		20,814,690

Technology Hardware & Equipment 5.7%
Apple, Inc.(a)	19,252	4,789,127
CDW Corp.	4,622	591,200
Ciena Corp. *	14,568	540,764
Cisco Systems, Inc.(a)	57,839	2,747,931
Jabil, Inc.	4,569	168,231
Keysight Technologies, Inc. *	5,343	539,162
Plantronics, Inc.	26,054	1,027,049
		10,403,464

Telecommunication Services 1.4%
CenturyLink, Inc.	37,507	485,341
Telefonica S.A. ADR	60,383	463,138
Telekomunikasi Indonesia Persero Tbk PT	20,942	604,805
Verizon Communications, Inc.	15,686	948,532
		2,501,816

Transportation 0.5%
United Airlines Holdings, Inc. *(a)	10,597	962,631

Utilities 3.1%
Ameren Corp.	3,288	255,477
California Water Service Group	5,867	328,376
CenterPoint Energy, Inc.	5,458	158,664
DTE Energy Co.	7,346	935,293
Exelon Corp.	30,425	1,384,033
NextEra Energy, Inc.	564	134,424
NRG Energy, Inc.	38,109	1,528,933
Vistra Energy Corp.(a)	31,594	853,986
		5,579,186
Total Common Stock
(Cost $166,065,663)		181,556,225

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Schwab Active Equity Funds | Annual Report

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Table of Contents

Schwab Hedged Equity Fund

Portfolio Holdings as of October 31, 2019 (continued)

In addition to the above, the fund had the following short sale positions at October 31, 2019:

Security	Number of Shares	Value ($)
Short Sales (39.6%) of net assets

Automobiles & Components (2.1%)
Dorman Products, Inc.	17,325	(1,246,534)
Tesla, Inc.	4,746	(1,494,610)
Visteon Corp.	11,226	(1,044,243)
		(3,785,387)

Banks (2.6%)
BancorpSouth Bank	21,739	(666,735)
Home BancShares, Inc.	26,888	(496,890)
PennyMac Financial Services, Inc.	12,330	(383,833)
Prosperity Bancshares, Inc.	6,330	(436,897)
TFS Financial Corp.	52,152	(1,004,447)
United Bankshares, Inc.	44,528	(1,760,637)
		(4,749,439)

Capital Goods (5.5%)
AAON, Inc.	7,662	(372,833)
Air Lease Corp.	14,263	(627,287)
Aircastle Ltd.	46,701	(1,271,201)
Axon Enterprise, Inc.	5,751	(294,049)
BWX Technologies, Inc.	5,099	(296,252)
Cubic Corp.	13,536	(998,145)
Generac Holdings, Inc.	983	(94,938)
SiteOne Landscape Supply, Inc.	7,595	(668,816)
Sunrun, Inc.	15,568	(241,927)
Trex Co., Inc.	8,056	(708,042)
Trinity Industries, Inc.	62,962	(1,245,388)
Univar Solutions, Inc.	39,809	(854,301)
Watsco, Inc.	1,665	(293,539)
Welbilt, Inc.	105,416	(1,998,687)
		(9,965,405)

Commercial & Professional Services (1.7%)
Equifax, Inc.	11,974	(1,636,965)
Stericycle, Inc.	26,838	(1,545,869)
		(3,182,834)

Consumer Durables & Apparel (0.9%)
Callaway Golf Co.	37,398	(756,187)
Capri Holdings Ltd.	20,467	(635,910)
LGI Homes, Inc.	2,937	(230,496)
		(1,622,593)

Consumer Services (0.5%)
Domino's Pizza, Inc.	361	(98,055)
Papa John's International, Inc.	2,871	(168,097)
Shake Shack, Inc., Class A	7,623	(627,220)
		(893,372)

Diversified Financials (3.1%)
Eaton Vance Corp.	27,262	(1,243,147)
Federated Investors, Inc., Class B	32,662	(1,043,224)
FirstCash, Inc.	3,282	(276,968)
Invesco Ltd.	65,509	(1,101,862)
Moelis & Co., Class A	9,374	(334,464)

Security	Number of Shares	Value ($)
Virtu Financial, Inc.	76,922	(1,304,597)
WisdomTree Investments, Inc.	59,332	(303,187)
		(5,607,449)

Energy (2.7%)
Antero Midstream Corp.	13,081	(84,242)
Callon Petroleum Co.	48,028	(182,506)
Cimarex Energy Co.	5,655	(238,754)
CNX Resources Corp.	43,748	(368,796)
Concho Resources, Inc.	2,836	(191,487)
Dril-Quip, Inc.	12,778	(524,154)
Matador Resources Co.	65,456	(910,493)
Murphy Oil Corp.	8,169	(168,526)
Targa Resources Corp.	57,799	(2,247,225)
		(4,916,183)

Food, Beverage & Tobacco (0.4%)
Cal-Maine Foods, Inc.	15,894	(634,012)
National Beverage Corp.	1,976	(86,865)
		(720,877)

Health Care Equipment & Services (1.2%)
Acadia Healthcare Co., Inc.	26,667	(799,743)
Addus HomeCare Corp.	2,148	(180,883)
Avanos Medical, Inc.	10,582	(466,031)
Cantel Medical Corp.	8,009	(583,776)
Nevro Corp.	1,597	(137,662)
		(2,168,095)

Insurance (0.3%)
Everest Re Group Ltd.	1,199	(308,251)
WR Berkley Corp.	3,574	(249,822)
		(558,073)

Materials (2.2%)
Linde plc	5,548	(1,100,446)
Louisiana-Pacific Corp.	52,719	(1,540,976)
Owens-Illinois, Inc.	49,063	(417,036)
Royal Gold, Inc.	2,424	(279,827)
The Chemours Co.	41,813	(686,151)
		(4,024,436)

Media & Entertainment (2.0%)
Charter Communications, Inc.	1,347	(630,208)
Netflix, Inc.	3,418	(982,367)
The Walt Disney Co.	9,867	(1,281,921)
Zillow Group, Inc., Class A	20,911	(677,307)
		(3,571,803)

Pharmaceuticals, Biotechnology & Life Sciences (0.3%)
Bluebird Bio, Inc.	3,249	(263,169)
Sage Therapeutics, Inc.	2,723	(369,375)
		(632,544)

Real Estate (2.6%)
Agree Realty Corp.	12,316	(970,131)
Pebblebrook Hotel Trust	67,945	(1,746,866)
Redfin Corp.	24,283	(422,281)

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Schwab Active Equity Funds | Annual Report

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Table of Contents

Schwab Hedged Equity Fund

Portfolio Holdings as of October 31, 2019 (continued)

Security	Number of Shares	Value ($)
Washington Real Estate Investment Trust	22,579	(700,401)
WP Carey, Inc.	9,448	(869,783)
		(4,709,462)

Retailing (2.4%)
Five Below, Inc.	4,348	(543,978)
GrubHub, Inc.	9,149	(311,615)
Ollie's Bargain Outlet Holdings, Inc.	4,409	(281,647)
The Gap, Inc.	59,552	(968,316)
Tiffany & Co.	4,414	(549,587)
Urban Outfitters, Inc.	13,335	(382,714)
Wayfair, Inc., Class A	16,105	(1,324,314)
		(4,362,171)

Semiconductors & Semiconductor Equipment (2.1%)
Advanced Energy Industries, Inc.	13,480	(796,668)
Brooks Automation, Inc.	7,030	(298,564)
First Solar, Inc.	19,335	(1,001,360)
Marvell Technology Group Ltd.	17,036	(415,508)
NVIDIA Corp.	2,257	(453,702)
Skyworks Solutions, Inc.	10,115	(921,072)
		(3,886,874)

Software & Services (3.4%)
8x8, Inc.	22,013	(425,291)
Alliance Data Systems Corp.	1,774	(177,400)
Appian Corp.	7,852	(350,513)
Envestnet, Inc.	11,946	(746,506)
Guidewire Software, Inc.	11,452	(1,291,099)
LivePerson, Inc.	15,559	(638,697)
LiveRamp Holdings, Inc.	31,818	(1,243,766)
Nutanix, Inc.	3,088	(90,231)
Rapid7, Inc.	1,199	(60,058)
Twilio, Inc., Class A	7,074	(683,065)
Varonis Systems, Inc.	8,193	(586,209)
		(6,292,835)

Security	Number of Shares	Value ($)
Technology Hardware & Equipment (2.0%)
CommScope Holding Co., Inc.	40,191	(450,139)
IPG Photonics Corp.	13,258	(1,780,284)
Knowles Corp.	4,458	(96,204)
Littelfuse, Inc.	526	(92,350)
ViaSat, Inc.	6,119	(421,232)
Western Digital Corp.	15,579	(804,655)
		(3,644,864)

Telecommunication Services (0.5%)
Bandwidth, Inc.	4,287	(240,715)
Iridium Communications, Inc.	7,000	(171,290)
Vonage Holdings Corp.	53,696	(524,610)
		(936,615)

Transportation (0.6%)
Copa Holdings S.A., Class A	4,728	(481,027)
Knight-Swift Transportation Holdings, Inc.	15,133	(551,749)
		(1,032,776)

Utilities (0.5%)
Aqua America, Inc.	4,125	(186,986)
Avangrid, Inc.	5,046	(252,552)
Pattern Energy Group, Inc.	17,529	(491,338)
		(930,876)
Total Short Sales
(Proceeds $73,852,784)		(72,194,963)

*	Non-income producing security.
(a)	All or a portion of this security is held as collateral for short sales.

ADR —

American Depositary Receipt

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2019 (see financial note 2(a) for additional information):

Description	Quoted Prices in Active Markets for Identical Assets (Level 1)	Other Significant Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Assets
Common Stock¹	$181,556,225	$—	$—	$181,556,225
Liabilities
Short Sales¹	(72,194,963)	—	—	(72,194,963)
Total	$109,361,262	$—	$—	$109,361,262

¹	As categorized in Portfolio Holdings.

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Schwab Active Equity Funds | Annual Report

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Table of Contents

Schwab Hedged Equity Fund

Statement of Assets and Liabilities

As of October 31, 2019

Assets
Investments in unaffiliated issuers, at value (cost $166,065,663)		$181,556,225
Deposit with broker for short sales		73,032,381
Receivables:
Investments sold		2,654,165
Fund shares sold		122,688
Dividends		101,195
Foreign tax reclaims		1,169
Prepaid expenses	+	15,907
Total assets		257,483,730
Liabilities
Securities sold short, at value (proceeds $73,852,784)		72,194,963
Payables:
Investments bought		2,161,716
Investment adviser and administrator fees		160,316
Shareholder service fees		33,151
Independent trustees’ fees		7
Fund shares redeemed		286,568
Due to custodian		181,263
Dividends on short sales		66,843
Accrued expenses	+	10,125
Total liabilities		75,094,952
Net Assets
Total assets		257,483,730
Total liabilities	–	75,094,952
Net assets		$182,388,778
Net Assets by Source
Capital received from investors		180,360,193
Total distributable earnings		2,028,585

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$182,388,778		11,774,285		$15.49

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Schwab Active Equity Funds | Annual Report

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Table of Contents

Schwab Hedged Equity Fund

Statement of Operations

For the period November 1, 2018 through October 31, 2019

Investment Income
Dividends (net of foreign withholding tax of $23,488)		$3,816,922
Rebates on short sales, net of fees	+	1,878,415
Total investment income		5,695,337
Expenses
Investment adviser and administrator fees		2,503,857
Shareholder service fees		498,186
Dividends on short sales		1,409,752
Portfolio accounting fees		58,112
Custodian fees		42,028
Professional fees		38,350
Registration fees		35,752
Transfer agent fees		15,061
Interest expense		13,097
Shareholder reports		11,775
Independent trustees’ fees		9,211
Other expenses	+	7,143
Total expenses		4,642,324
Expense reduction by CSIM and its affiliates	–	47,922
Net expenses	–	4,594,402
Net investment income		1,100,935
Realized and Unrealized Gains (Losses)
Net realized losses on investments		(9,942,343)
Net realized gains on futures contracts		83,499
Net realized losses on short sales	+	(5,953,841)
Net realized losses		(15,812,685)
Net change in unrealized appreciation (depreciation) on investments		16,749,612
Net change in unrealized appreciation (depreciation) on futures contracts		27,930
Net change in unrealized appreciation (depreciation) on short sales	+	(8,857,963)
Net change in unrealized appreciation (depreciation)	+	7,919,579
Net realized and unrealized losses		(7,893,106)
Decrease in net assets resulting from operations		($6,792,171)

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Table of Contents

Schwab Hedged Equity Fund

Statement of Changes in Net Assets

For the current and prior report periods

Operations
	11/1/18-10/31/19		11/1/17-10/31/18
Net investment income		$1,100,935	$1,176,893
Net realized gains (losses)		(15,812,685)	18,114,481
Net change in unrealized appreciation (depreciation)	+	7,919,579	(16,574,229)
Increase (decrease) in net assets from operations		(6,792,171)	2,717,145
Distributions to Shareholders
Total distributions		($19,341,478)	($15,243,329)

Transactions in Fund Shares
		11/1/18-10/31/19		11/1/17-10/31/18
		SHARES	VALUE	SHARES	VALUE
Shares sold		3,932,131	$60,687,628	6,194,796	$107,567,531
Shares reinvested		1,047,501	15,597,289	728,755	12,461,727
Shares redeemed	+	(10,987,256)	(168,052,659)	(3,400,784)	(58,925,303)
Net transactions in fund shares		(6,007,624)	($91,767,742)	3,522,767	$61,103,955
Shares Outstanding and Net Assets
		11/1/18-10/31/19		11/1/17-10/31/18
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		17,781,909	$300,290,169	14,259,142	$251,712,398
Total increase or decrease	+	(6,007,624)	(117,901,391)	3,522,767	48,577,771
End of period		11,774,285	$182,388,778	17,781,909	$300,290,169

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Table of Contents

Schwab Health Care Fund

Financial Statements

Financial Highlights

	11/1/18– 10/31/19	11/1/17– 10/31/18	11/1/16– 10/31/17	11/1/15– 10/31/16	11/1/14– 10/31/15
Per-Share Data
Net asset value at beginning of period	$25.85	$25.44	$21.56	$26.68	$28.19
Income (loss) from investment operations:
Net investment income (loss)¹	0.26	0.23	0.21	0.19	0.14
Net realized and unrealized gains (losses)	1.27	1.96	4.24	(1.52)	1.78
Total from investment operations	1.53	2.19	4.45	(1.33)	1.92
Less distributions:
Distributions from net investment income	(0.24)	(0.24)	(0.20)	(0.16)	(0.21)
Distributions from net realized gains	(2.06)	(1.54)	(0.37)	(3.63)	(3.22)
Total distributions	(2.30)	(1.78)	(0.57)	(3.79)	(3.43)
Net asset value at end of period	$25.08	$25.85	$25.44	$21.56	$26.68
Total return	6.51%	9.13%	21.10%	(5.78%)	7.26%
Ratios/Supplemental Data
Ratios to average net assets:
Net operating expenses	0.80%	0.80%	0.81%	0.80%	0.79%
Gross operating expenses	0.80%	0.80%	0.81%	0.80%	0.80%
Net investment income (loss)	1.05%	0.91%	0.89%	0.82%	0.52%
Portfolio turnover rate	45%	45%	42%	54%	75%
Net assets, end of period (x 1,000,000)	$779	$826	$853	$853	$1,118

Calculated based on the average shares outstanding during the period.

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Schwab Active Equity Funds | Annual Report

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Table of Contents

Schwab Health Care Fund

Portfolio Holdings as of October 31, 2019

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 U.S. Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. Effective March 31, 2019, Form N-PORT Part F has replaced Form N-Q. The fund’s Form N-Q and Form N-PORT Part F are available on the SEC’s website atwww.sec.gov. The fund also makes available its complete schedule of portfolio holdings 15 to 20 days after calendar quarters on the fund’s website atwww.schwabfunds.com/schwabfunds_prospectus.

Security	Number of Shares	Value ($)
Common Stock99.6% of net assets

Australia 0.7%
Cochlear Ltd.	35,715	5,210,461

Denmark 3.0%
Coloplast A/S, Class B	29,012	3,492,926
Novo Nordisk A/S, Class B	354,426	19,489,423
		22,982,349

France 0.2%
Sanofi	17,110	1,577,321

Germany 0.3%
Eckert & Ziegler AG	6,977	1,222,887
Fresenius SE & Co. KGaA	15,284	804,783
		2,027,670

Hong Kong 0.6%
China Medical System Holdings Ltd.	2,476,000	3,357,762
Consun Pharmaceutical Group Ltd.	774,000	463,301
Livzon Pharmaceutical Group, Inc., Class H	254,000	741,765
		4,562,828

Ireland 5.3%
Horizon Therapeutics plc *	216,927	6,271,359
ICON plc *	7,390	1,085,591
Medtronic plc	252,433	27,489,954
Steris plc	48,135	6,814,472
		41,661,376

Italy 0.0%
DiaSorin S.p.A.	3,424	386,059

Japan 4.2%
Hoya Corp.	191,600	16,933,074
Mani, Inc.	53,100	1,401,868
Mochida Pharmaceutical Co., Ltd.	13,700	546,738
NichiiGakkan Co., Ltd.	199,800	3,387,502
PeptiDream, Inc. *	14,400	722,789
Shionogi & Co., Ltd.	114,800	6,890,626
Ship Healthcare Holdings, Inc.	8,000	340,974
Takara Bio, Inc.	98,000	1,998,539
Torii Pharmaceutical Co., Ltd.	15,000	400,277
		32,622,387

Sweden 0.3%
Vitrolife AB	167,777	2,617,748

Security	Number of Shares	Value ($)
Switzerland 9.0%
Lonza Group AG *	26,108	9,410,170
Novartis AG	275,104	24,037,266
Roche Holding AG	107,777	32,436,113
Sonova Holding AG	19,634	4,505,577
		70,389,126

United Kingdom 1.5%
GlaxoSmithKline plc	360,307	8,252,809
Smith & Nephew plc	167,055	3,586,071
		11,838,880

United States 74.5%
Abbott Laboratories	287,700	24,054,597
AbbVie, Inc.	309,631	24,631,146
Agilent Technologies, Inc.	232,231	17,591,498
Alexion Pharmaceuticals, Inc. *	112,440	11,851,176
Amedisys, Inc. *	20,282	2,606,643
Amgen, Inc.	159,852	34,088,439
AMN Healthcare Services, Inc. *	13,344	784,093
Anthem, Inc.	54,591	14,689,346
Baxter International, Inc.	104,929	8,048,054
Bio-Techne Corp.	34,013	7,080,486
Biogen, Inc. *	73,662	22,003,576
Bristol-Myers Squibb Co.	290,238	16,650,954
Celgene Corp. *	72,423	7,823,857
Chemed Corp.	3,243	1,277,450
Cigna Corp. *	4,439	792,184
CVS Health Corp.	41,046	2,725,044
Danaher Corp.	89,857	12,384,092
DENTSPLY SIRONA, Inc.	86,525	4,739,840
Edwards Lifesciences Corp. *	20,836	4,966,886
Eli Lilly & Co.	164,358	18,728,594
Exelixis, Inc. *	117,105	1,809,272
Gilead Sciences, Inc.	349,829	22,287,606
HCA Healthcare, Inc.	78,904	10,536,840
Hill-Rom Holdings, Inc.	80,506	8,428,173
Hologic, Inc. *	274,754	13,273,366
IDEXX Laboratories, Inc. *	10,008	2,852,380
Incyte Corp. *	139,152	11,677,636
Integer Holdings Corp. *	4,744	367,375
Jazz Pharmaceuticals plc *	40,400	5,075,452
Johnson & Johnson	480,164	63,400,855
Lantheus Holdings, Inc. *	14,212	296,320
McKesson Corp.	61,878	8,229,774
Merck & Co., Inc.	584,714	50,671,315
Meridian Bioscience, Inc.	11,131	108,973
Molina Healthcare, Inc. *	66,320	7,801,885
Perrigo Co., plc	6,993	370,769
Pfizer, Inc.	1,045,481	40,115,106
Regeneron Pharmaceuticals, Inc. *	2,576	788,977
Repligen Corp. *	7,000	556,430
Stryker Corp.	60,075	12,992,420
Teleflex, Inc.	3,446	1,197,175
Tenet Healthcare Corp. *	71,527	1,812,494
The Cooper Cos., Inc.	5,293	1,540,263

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Schwab Active Equity Funds | Annual Report

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Table of Contents

Schwab Health Care Fund

Portfolio Holdings as of October 31, 2019 (continued)

Security	Number of Shares	Value ($)
Thermo Fisher Scientific, Inc.	87,504	26,424,458
UnitedHealth Group, Inc.	107,731	27,223,624
Varex Imaging Corp. *	13,307	399,343
Veeva Systems, Inc., Class A *	8,564	1,214,632
Veracyte, Inc. *	41,655	955,149
Vertex Pharmaceuticals, Inc. *	35,715	6,981,568
Zoetis, Inc.	101,824	13,025,326
		579,932,911
Total Common Stock
(Cost $534,266,449)		775,809,116
Security Rate, Maturity Date	Face Amount Local Currency	Value ($)
Short-Term Investments0.1% of net assets

Time Deposits 0.1%
Brown Brothers Harriman
New Zealand Dollar
0.50%, 11/01/19(a)	3	2
Hong Kong Dollar
2.30%, 11/01/19(a)	9	1

Security Rate, Maturity Date	Face Amount Local Currency	Value ($)
Sumitomo Mitsui Banking Corp.
U.S. Dollar
1.18%, 11/01/19(a)	864,791	864,791
Total Short-Term Investments
(Cost $864,794)		864,794

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

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2019 (see financial note 2(a) for additional information):

Description	Quoted Prices in Active Markets for Identical Assets (Level 1)	Other Significant Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Assets
Common Stock¹	$621,594,287	$—	$—	$621,594,287
Australia	—	5,210,461	—	5,210,461
Denmark	—	22,982,349	—	22,982,349
France	—	1,577,321	—	1,577,321
Germany	—	2,027,670	—	2,027,670
Hong Kong	—	4,562,828	—	4,562,828
Italy	—	386,059	—	386,059
Japan	—	32,622,387	—	32,622,387
Sweden	—	2,617,748	—	2,617,748
Switzerland	—	70,389,126	—	70,389,126
United Kingdom	—	11,838,880	—	11,838,880
Short-Term Investments¹	—	864,794	—	864,794
Total	$621,594,287	$155,079,623	$—	$776,673,910

¹	As categorized in Portfolio Holdings.

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Schwab Active Equity Funds | Annual Report

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Table of Contents

Schwab Health Care Fund

Statement of Assets and Liabilities

As of October 31, 2019

Assets
Investments in unaffiliated issuers, at value (cost $535,131,243)		$776,673,910
Deposit with broker for futures contracts		462,000
Receivables:
Investments sold		7,303,360
Foreign tax reclaims		1,276,303
Dividends		706,999
Fund shares sold		394,498
Interest		29
Prepaid expenses	+	13,749
Total assets		786,830,848
Liabilities
Payables:
Investments bought		7,175,078
Investment adviser and administrator fees		340,821
Shareholder service fees		151,170
Independent trustees’ fees		9
Fund shares redeemed		310,773
Accrued expenses	+	99,719
Total liabilities		8,077,570
Net Assets
Total assets		786,830,848
Total liabilities	–	8,077,570
Net assets		$778,753,278
Net Assets by Source
Capital received from investors		504,062,828
Total distributable earnings		274,690,450

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$778,753,278		31,047,209		$25.08

₆₉

Schwab Active Equity Funds | Annual Report

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Table of Contents

Schwab Health Care Fund

Statement of Operations

For the period November 1, 2018 through October 31, 2019

Investment Income
Dividends (net of foreign withholding tax of $407,173)		$14,702,600
Interest		62,521
Securities on loan, net	+	48,503
Total investment income		14,813,624
Expenses
Investment adviser and administrator fees		4,246,107
Shareholder service fees		1,877,813
Portfolio accounting fees		88,423
Custodian fees		45,671
Shareholder reports		37,016
Professional fees		32,737
Registration fees		32,416
Transfer agent fees		32,292
Independent trustees’ fees		12,038
Other expenses	+	21,898
Total expenses		6,426,411
Expense reduction by CSIM and its affiliates	–	32,292
Net expenses	–	6,394,119
Net investment income		8,419,505
Realized and Unrealized Gains (Losses)
Net realized gains on investments		25,743,292
Net realized gains on futures contracts		299,969
Net realized losses on foreign currency transactions	+	(37,789)
Net realized gains		26,005,472
Net change in unrealized appreciation (depreciation) on investments		14,453,288
Net change in unrealized appreciation (depreciation) on foreign currency translations	+	18,438
Net change in unrealized appreciation (depreciation)	+	14,471,726
Net realized and unrealized gains		40,477,198
Increase in net assets resulting from operations		$48,896,703

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Table of Contents

Schwab Health Care Fund

Statement of Changes in Net Assets

For the current and prior report periods

Operations
	11/1/18-10/31/19		11/1/17-10/31/18
Net investment income		$8,419,505	$7,705,996
Net realized gains		26,005,472	66,847,299
Net change in unrealized appreciation (depreciation)	+	14,471,726	(1,223,836)
Increase in net assets from operations		48,896,703	73,329,459
Distributions to Shareholders
Total distributions		($73,744,967)	($58,703,388)

Transactions in Fund Shares
		11/1/18-10/31/19		11/1/17-10/31/18
		SHARES	VALUE	SHARES	VALUE
Shares sold		2,837,228	$69,277,171	2,353,386	$60,438,285
Shares reinvested		2,764,704	64,998,182	2,159,882	51,772,373
Shares redeemed	+	(6,495,890)	(156,442,620)	(6,109,931)	(154,310,987)
Net transactions in fund shares		(893,958)	($22,167,267)	(1,596,663)	($42,100,329)
Shares Outstanding and Net Assets
		11/1/18-10/31/19		11/1/17-10/31/18
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		31,941,167	$825,768,809	33,537,830	$853,243,067
Total decrease	+	(893,958)	(47,015,531)	(1,596,663)	(27,474,258)
End of period		31,047,209	$778,753,278	31,941,167	$825,768,809

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Schwab International Core Equity Fund

Financial Statements

Financial Highlights

	11/1/18– 10/31/19	11/1/17– 10/31/18	11/1/16– 10/31/17	11/1/15– 10/31/16	11/1/14– 10/31/15
Per-Share Data
Net asset value at beginning of period	$9.64	$11.27	$9.20	$9.62	$9.77
Income (loss) from investment operations:
Net investment income (loss)¹	0.24	0.24	0.22	0.22	0.19
Net realized and unrealized gains (losses)	0.41	(1.58)	2.08	(0.45)	(0.01)
Total from investment operations	0.65	(1.34)	2.30	(0.23)	0.18
Less distributions:
Distributions from net investment income	(0.25)	(0.26)	(0.23)	(0.19)	(0.15)
Distributions from net realized gains	—	(0.03)	—	—	(0.18)
Total distributions	(0.25)	(0.29)	(0.23)	(0.19)	(0.33)
Net asset value at end of period	$10.04	$9.64	$11.27	$9.20	$9.62
Total return	7.08%	(12.18%)	25.58%	(2.41%)	2.05%
Ratios/Supplemental Data
Ratios to average net assets:
Net operating expenses	0.86%	0.86%	0.86%	0.86%	0.86%
Gross operating expenses	0.87%	0.89%	0.90%	0.91%	0.92%
Net investment income (loss)	2.44%	2.22%	2.15%	2.40%	2.02%
Portfolio turnover rate	91%	98%	85%	90%	87%
Net assets, end of period (x 1,000,000)	$976	$1,166	$1,227	$772	$679

Calculated based on the average shares outstanding during the period.

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Schwab International Core Equity Fund

Portfolio Holdings as of October 31, 2019

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 U.S. Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. Effective March 31, 2019, Form N-PORT Part F has replaced Form N-Q. The fund’s Form N-Q and Form N-PORT Part F are available on the SEC’s website atwww.sec.gov. The fund also makes available its complete schedule of portfolio holdings 15 to 20 days after calendar quarters on the fund’s website atwww.schwabfunds.com/schwabfunds_prospectus.

Security	Number of Shares	Value ($)
Common Stock99.5% of net assets

Australia 7.8%
Altium Ltd.	47,725	1,056,497
ASX Ltd.	48,345	2,744,150
Australia & New Zealand Banking Group Ltd.	1,025,282	18,841,717
Beach Energy Ltd.	3,918,861	6,164,285
Bravura Solutions Ltd.	603,655	1,698,243
Coca-Cola Amatil Ltd.	1,735,581	12,179,695
Cochlear Ltd.	11,401	1,663,292
Jumbo Interactive Ltd	63,641	972,937
Macquarie Group Ltd.	105,073	9,702,169
Magellan Financial Group Ltd.	95,984	3,183,591
QBE Insurance Group Ltd.	741,103	6,447,880
Sandfire Resources NL	438,881	1,752,852
Santos Ltd.	532,667	2,979,480
Service Stream Ltd.	1,012,938	1,800,305
Telstra Corp., Ltd.	2,105,203	5,070,264
		76,257,357

Austria 0.7%
Erste Group Bank AG *	89,644	3,170,516
Wienerberger AG	146,810	3,976,434
		7,146,950

Brazil 0.2%
YDUQS Part *	169,800	1,661,800

Canada 0.7%
Air Canada *	100,193	3,567,726
Kirkland Lake Gold Ltd.	73,530	3,452,912
		7,020,638

Denmark 3.0%
Novo Nordisk A/S, Class B	296,665	16,313,221
Pandora A/S	43,775	2,153,994
SimCorp A/S	103,999	9,305,597
Topdanmark A/S	28,518	1,277,154
		29,049,966

Finland 0.4%
Fortum Oyj	154,066	3,765,006

France 9.8%
Air Liquide S.A.	32,266	4,290,121
Arkema S.A.	16,419	1,680,286
Christian Dior SE	21,114	10,429,424
Credit Agricole S.A.	114,232	1,490,539
Faurecia SE	46,246	2,158,215
Gaztransport Et Technigaz S.A.	70,219	6,406,671
Kering S.A.	7,783	4,428,498
L'Oreal S.A.	71,696	20,939,653
LVMH Moet Hennessy Louis Vuitton SE	10,048	4,291,055

Security	Number of Shares	Value ($)
Peugeot S.A.	526,234	13,327,461
Sanofi	24,446	2,253,605
Schneider Electric SE	30,022	2,790,255
Societe Generale S.A.	229,039	6,513,618
TOTAL S.A.	217,287	11,487,571
Veolia Environnement S.A.	104,591	2,753,228
		95,240,200

Germany 7.0%
adidas AG	45,076	13,918,149
Allianz SE	108,446	26,484,958
CompuGroup Medical SE	18,705	1,197,461
Deutsche Boerse AG	16,960	2,626,419
Deutsche Pfandbriefbank AG	227,186	3,104,795
Deutsche Telekom AG	373,641	6,574,422
HOCHTIEF AG	25,424	3,176,548
Hugo Boss AG	59,726	2,518,197
KION Group AG	21,818	1,451,720
MTU Aero Engines AG	25,401	6,793,015
		67,845,684

Greece 0.4%
Hellenic Telecommunications Organization S.A.	277,984	4,216,014

Hong Kong 3.6%
Anhui Conch Cement Co., Ltd., H Shares(a)	205,000	1,225,229
CITIC Ltd.	5,780,259	7,603,836
Lenovo Group Ltd.	8,631,000	6,017,039
Longfor Group Holdings Ltd.	2,039,500	8,464,228
Sunac China Holdings Ltd.	645,000	2,925,583
Tencent Holdings Ltd.	135,506	5,496,518
Weichai Power Co., Ltd., H Shares(a)	822,000	1,293,844
Yuexiu Property Co., Ltd.	9,504,000	2,093,374
		35,119,651

Italy 2.2%
Assicurazioni Generali S.p.A.	148,167	3,004,454
Fiat Chrysler Automobiles N.V.	62,882	975,851
Italgas S.p.A.	1,699,030	10,937,844
Moncler S.p.A.	33,219	1,281,880
Unipol Gruppo S.p.A.	883,049	4,928,352
		21,128,381

Japan 24.6%
Advantest Corp.	57,300	2,607,635
Akatsuki, Inc.(b)	44,000	2,452,072
Astellas Pharma, Inc.	281,200	4,826,147
Bandai Namco Holdings, Inc.	66,300	4,076,731
Daiwabo Holdings Co., Ltd.	162,900	7,118,094
DMG Mori Co., Ltd.	136,000	2,201,863
Heiwa Real Estate REIT, Inc.	392	518,359
Hitachi Ltd.	214,500	8,005,663
Hosiden Corp.	707,200	7,429,227

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Schwab International Core Equity Fund

Portfolio Holdings as of October 31, 2019 (continued)

Security	Number of Shares	Value ($)
Hoya Corp.	211,263	18,670,835
Invincible Investment Corp.	20,693	13,066,665
Japan Airlines Co., Ltd.	142,700	4,446,830
Japan Aviation Electronics Industry Ltd.	113,000	2,105,055
Kanamoto Co., Ltd.	148,800	3,978,033
Kenedix Office Investment Corp.	412	3,227,632
Kenedix, Inc.	234,500	1,276,418
Makino Milling Machine Co., Ltd.	72,000	3,579,779
MCUBS MidCity Investment Corp.	1,699	1,970,436
Meitec Corp.	49,000	2,554,384
Mitsubishi Electric Corp.	67,000	957,259
Mitsubishi Heavy Industries Ltd.	216,000	8,741,377
Mitsubishi UFJ Financial Group, Inc.	3,144,400	16,301,476
Mitsubishi UFJ Lease & Finance Co., Ltd.	960,800	5,898,336
Modec, Inc.	32,000	877,769
Morinaga & Co., Ltd.	92,900	4,589,213
Nihon Unisys Ltd.	74,452	2,457,620
Nishi-Nippon Financial Holdings, Inc.	85,800	635,797
Riso Kyoiku Co. Ltd	107,400	412,328
Round One Corp.	78,000	1,005,778
Sankyu, Inc.	180,380	9,170,733
Seino Holdings Co., Ltd.	420,000	5,400,355
Shin-Etsu Chemical Co., Ltd.	61,400	6,846,174
Shionogi & Co., Ltd.	166,419	9,988,947
Showa Corp.	198,600	4,149,672
Showa Denko K.K.	65,000	1,823,701
Softbank Corp.	100,000	1,371,731
Sony Corp.	264,298	16,087,593
Sumco Corp.	98,200	1,631,187
Sumitomo Mitsui Financial Group, Inc.	206,500	7,331,404
Sumitomo Mitsui Trust Holdings, Inc.	87,000	3,170,750
Takuma Co., Ltd.	462,000	5,497,759
TOKAI Holdings Corp.	70,500	691,425
Tokuyama Corp.	257,700	6,884,193
Tokyo Electron Ltd.	46,500	9,420,834
Tokyo Gas Co., Ltd.	37,000	903,208
Tokyo Steel Manufacturing Co., Ltd.	624,153	5,024,877
Tomy Co., Ltd.	307,000	3,329,193
Toyota Motor Corp.	74,600	5,175,814
		239,888,361

Mexico 0.2%
Grupo Aeroportuario del Centro Norte S.A.B. de C.V.	252,500	1,750,626

Netherlands 6.0%
Airbus SE	39,374	5,648,525
ASM International N.V.	47,464	4,785,404
Heineken Holding N.V.	148,783	14,196,199
Koninklijke Ahold Delhaize N.V.	854,299	21,289,177
Koninklijke Philips N.V.	39,680	1,740,923
Signify N.V.	89,962	2,635,892
Unilever N.V.	50,311	2,973,716
Wolters Kluwer N.V.	75,209	5,539,368
		58,809,204

New Zealand 0.6%
Spark New Zealand Ltd.	2,117,559	6,074,566

Norway 0.5%
DNO A.S.A.	2,189,781	2,661,072
TGS NOPEC Geophysical Co., A.S.A.	93,161	2,419,513
		5,080,585

Security	Number of Shares	Value ($)
Portugal 0.2%
Sonae SGPS, S.A.	1,400,000	1,412,513

Republic of Korea 0.3%
Samsung Electronics Co., Ltd.	71,239	3,078,939

Singapore 0.7%
Singapore Exchange Ltd.	716,500	4,704,209
United Overseas Bank Ltd.	100,000	1,968,743
		6,672,952

Spain 2.6%
ACS Actividades de Construccion y Servicios S.A.	343,780	13,949,948
Banco Bilbao Vizcaya Argentaria S.A.	532,634	2,805,291
Industria de Diseno Textil S.A.	185,576	5,782,699
Telefonica S.A.	415,915	3,193,927
		25,731,865

Sweden 2.2%
Bravida Holding AB	156,273	1,439,992
Evolution Gaming Group AB	131,277	3,139,843
Hemfosa Fastigheter AB	534,865	5,508,904
Investor AB, B Shares	67,251	3,450,274
Mycronic AB	115,678	1,925,481
Sandvik AB	182,339	3,221,442
Volvo AB, B Shares	201,550	3,020,381
		21,706,317

Switzerland 11.0%
ABB Ltd.	115,042	2,415,880
BKW AG	30,377	2,242,094
Cembra Money Bank AG	53,185	5,640,026
Forbo Holding AG	2,723	4,339,074
Kardex AG	4,922	715,261
Nestle S.A.	258,834	27,690,401
Novartis AG	270,840	23,664,698
Pargesa Holding S.A.	36,775	2,907,014
Roche Holding AG	120,388	36,231,467
UBS Group AG *	131,740	1,559,164
		107,405,079

Taiwan 0.7%
Catcher Technology Co., Ltd.	296,000	2,508,929
Chicony Electronics Co., Ltd.	795,000	2,469,856
Radiant Opto-Electronics Corp.	554,000	2,199,533
		7,178,318

United Kingdom 14.1%
Ashmore Group plc	511,713	3,086,483
Ashtead Group plc	210,574	6,411,097
Auto Trader Group plc	904,916	6,593,480
Avast plc	543,069	2,915,957
Aviva plc	3,525,961	19,005,090
BHP Group plc	767,528	16,279,685
Compass Group plc	54,320	1,446,221
Diageo plc	132,478	5,422,454
Direct Line Insurance Group plc	664,181	2,341,736
Drax Group plc	638,991	2,456,536
Dunelm Group plc	345,643	3,534,818

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Schwab International Core Equity Fund

Portfolio Holdings as of October 31, 2019 (continued)

Security	Number of Shares	Value ($)
GlaxoSmithKline plc	543,117	12,440,060
Halma plc	67,102	1,628,259
HSBC Holdings plc	725,391	5,480,407
Legal & General Group plc	1,159,043	3,962,001
Man Group plc	2,289,490	4,261,141
Paragon Banking Group plc	215,165	1,402,590
Prudential plc	138,461	2,418,476
RELX plc	182,649	4,397,340
Rightmove plc	323,997	2,514,925
Royal Dutch Shell plc, A Shares	98,077	2,843,064
Segro plc	197,136	2,156,531
Smith & Nephew plc	158,503	3,402,490
Unilever plc	282,089	16,891,191
Vodafone Group plc	1,852,888	3,781,224
		137,073,256
Total Common Stock
(Cost $881,287,172)		970,314,228

Security	Number of Shares	Value ($)
Other Investment Company0.2% of net assets

Securities Lending Collateral 0.2%
Wells Fargo Government Money Market Fund, Select Class 1.75%(c)	2,434,850	2,434,850
Total Other Investment Company
(Cost $2,434,850)		2,434,850

*	Non-income producing security.
(a)	Represents a China based company which is listed on the Hong Kong exchange and traded in Hong Kong dollars.
(b)	All or a portion of this security is on loan. Securities on loan were valued at $2,329,469.
(c)	The rate shown is the 7-day yield.

REIT —

Real Estate Investment Trust

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2019 (see financial note 2(a) for additional information):

Description	Quoted Prices in Active Markets for Identical Assets (Level 1)	Other Significant Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Assets
Common Stock¹	$—	$464,317,580	$—	$464,317,580
Brazil	1,661,800	—	—	1,661,800
Canada	7,020,638	—	—	7,020,638
Denmark	1,277,154	27,772,812	—	29,049,966
Germany	15,115,610	52,730,074	—	67,845,684
Japan	3,745,991	236,142,370	—	239,888,361
Mexico	1,750,626	—	—	1,750,626
Sweden	5,508,904	16,197,413	—	21,706,317
United Kingdom	3,534,818	133,538,438	—	137,073,256
Other Investment Company¹	2,434,850	—	—	2,434,850
Total	$42,050,391	$930,698,687	$—	$972,749,078

¹	As categorized in Portfolio Holdings.

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Table of Contents

Schwab International Core Equity Fund

Statement of Assets and Liabilities

As of October 31, 2019

Assets
Investments in unaffiliated issuers, at value (cost $881,287,172) including securities on loan of $2,329,469		$970,314,228
Collateral invested for securities on loan, at value (cost $2,434,850)		2,434,850
Foreign currency, at value (cost $15,715)		15,719
Deposit with broker for futures contracts		315,000
Receivables:
Investments sold		22,857,550
Dividends		2,705,508
Foreign tax reclaims		1,718,180
Fund shares sold		430,649
Income from securities on loan		14,282
Prepaid expenses	+	16,885
Total assets		1,000,822,851
Liabilities
Collateral held for securities on loan		2,434,850
Payables:
Investments bought		18,745,647
Investment adviser and administrator fees		487,374
Shareholder service fees		189,776
Independent trustees’ fees		10
Due to custodian		2,325,635
Fund shares redeemed		880,542
Accrued expenses	+	247,965
Total liabilities		25,311,799
Net Assets
Total assets		1,000,822,851
Total liabilities	–	25,311,799
Net assets		$975,511,052
Net Assets by Source
Capital received from investors		989,666,726
Total distributable loss		(14,155,674)

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$975,511,052		97,158,889		$10.04

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Schwab International Core Equity Fund

Statement of Operations

For the period November 1, 2018 through October 31, 2019

Investment Income
Dividends (net of foreign withholding tax of $3,664,267)		$34,729,651
Securities on loan, net	+	64,311
Total investment income		34,793,962
Expenses
Investment adviser and administrator fees		6,108,800
Shareholder service fees		2,555,247
Custodian fees		166,541
Portfolio accounting fees		92,456
Professional fees		67,813*
Registration fees		56,644
Transfer agent fees		42,838
Shareholder reports		33,981
Independent trustees’ fees		13,402
Other expenses	+	48,437
Total expenses		9,186,159
Expense reduction by CSIM and its affiliates	–	108,836*
Net expenses	–	9,077,323
Net investment income		25,716,639
Realized and Unrealized Gains (Losses)
Net realized losses on investments		(113,139,631)
Net realized losses on futures contracts		(75,869)
Net realized losses on foreign currency transactions	+	(7,998)
Net realized losses		(113,223,498)
Net change in unrealized appreciation (depreciation) on investments		154,363,573
Net change in unrealized appreciation (depreciation) on foreign currency translations	+	84,926
Net change in unrealized appreciation (depreciation)	+	154,448,499
Net realized and unrealized gains		41,225,001
Increase in net assets resulting from operations		$66,941,640

*	Includes professional fees of $19,171 associated with the filing of tax claims in the European Union deemed to be non-routine expenses of the fund. See financial notes 2(d) and 4 for additional information.

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Table of Contents

Schwab International Core Equity Fund

Statement of Changes in Net Assets

For the current and prior report periods

Operations
	11/1/18-10/31/19		11/1/17-10/31/18
Net investment income		$25,716,639	$30,286,755
Net realized losses		(113,223,498)	(5,255,760)
Net change in unrealized appreciation (depreciation)	+	154,448,499	(202,582,332)
Increase (decrease) in net assets from operations		66,941,640	(177,551,337)
Distributions to Shareholders
Total distributions		($29,979,566)	($32,281,172)

Transactions in Fund Shares
		11/1/18-10/31/19		11/1/17-10/31/18
		SHARES	VALUE	SHARES	VALUE
Shares sold		16,140,498	$153,928,560	43,839,389	$487,710,481
Shares reinvested		2,751,748	24,710,692	2,423,051	26,411,257
Shares redeemed	+	(42,745,841)	(406,370,048)	(34,071,759)	(364,936,798)
Net transactions in fund shares		(23,853,595)	($227,730,796)	12,190,681	$149,184,940
Shares Outstanding and Net Assets
		11/1/18-10/31/19		11/1/17-10/31/18
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		121,012,484	$1,166,279,774	108,821,803	$1,226,927,343
Total increase or decrease	+	(23,853,595)	(190,768,722)	12,190,681	(60,647,569)
End of period		97,158,889	$975,511,052	121,012,484	$1,166,279,774

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Schwab Active Equity Funds

Financial Notes

1. Business Structure of the Funds:

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

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

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

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

2. Significant Accounting Policies:

The following is a summary of the significant accounting policies the funds use in their preparation of financial statements. The funds follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standard CodificationTopic 946 Financial Services — Investment Companies. The accounting policies are in conformity with accounting principles generally accepted in the United States of America (GAAP).

The funds invest in certain other investment companies (underlying funds). For more information about the underlying funds’ operations and policies, please refer to those funds’ semiannual and annual reports, which are filed with the U.S. Securities and Exchange Commission (SEC) and are available on the SEC’s website at www.sec.gov.

(a) Security Valuation:

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

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2. Significant Accounting Policies (continued):

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

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

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

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

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

• Cash management sweep time deposits: Balances held in cash management sweep time deposits are accounted for on a cost basis, which approximates market value.

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

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

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

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2. Significant Accounting Policies (continued):

securities, investment-grade corporate bonds, certain mortgage products, less liquid listed equities, and state, municipal and provincial obligations. In addition, international securities whose markets close hours before the funds value their holdings may require fair valuations due to significant movement in the U.S. markets occurring after the daily close of the foreign markets. The Board has approved a vendor that calculates fair valuations of international equity securities based on a number of factors that appear to correlate to the movements in the U.S. markets.

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

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

The levels associated with valuing the funds’ investments as of October 31, 2019 are disclosed in the Portfolio Holdings.

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

Futures Contracts: Futures contracts are instruments that represent an agreement between two parties that obligates one party to buy, and the other party to sell, specific instruments at an agreed upon price on a stipulated future date. A fund must give the broker a deposit of cash and/or securities (initial margin) whenever it enters into a futures contract. The amount of the deposit may vary from one contract to another. Subsequent payments (variation margin) are made or received by a fund depending on the daily fluctuations in the value of the futures contract and are accounted for as unrealized appreciation or depreciation until the contract is closed, at which time the gains or losses are realized. Futures contracts are traded publicly on exchanges, and their market value may change daily.

Securities Lending: Under the trust’s Securities Lending Program, a fund (lender) may make short-term loans of its securities to another party (borrower) to generate additional revenue for the fund. The borrower pledges collateral in the form of cash, securities issued or fully guaranteed by the U.S. government or foreign governments, or letters of credit issued by a bank. Collateral at the individual loan level is required to be maintained on a daily marked-to-market basis in an amount at least equal to the current value of the securities loaned. The lending agent provides a fund with indemnification against borrower default (the borrower fails to return the security on loan) reducing the risk of loss as a result of default. The cash collateral of securities loaned is currently invested in money market portfolios operating under Rule 2a-7 of the 1940 Act. Each fund bears the risk of loss with respect to the investment of cash collateral. The terms of the securities lending agreement allow the funds or the lending agent to terminate any loan at any given time and the securities must be returned within the earlier of the standard trade settlement period or the specified time period under the relevant securities lending agreement. Securities lending income, as disclosed in each fund’s Statement of Operations, if applicable, represents the income earned from the investment of the cash collateral plus any fees paid by borrowers, less the fees paid to the lending agent and broker rebates which are subject to adjustments pursuant to the securities lending agreement. On loans not collateralized by cash, a fee is received from the borrower, and is allocated between a fund and the lending agent. The aggregate market value of securities loaned will not at any time exceed one-third of the total assets of a fund, including collateral received from the loan. Securities lending fees paid to the unaffiliated lending agents start at 10% of gross lending revenue, with subsequent breakpoints to a low of 7.5%. In this context, the gross lending revenue equals the income received from the investment of cash collateral and fees paid by borrowers less any rebates paid to the borrowers. Any expenses charged by the cash collateral fund are in addition to these fees. All remaining revenue is retained by the fund, as applicable. No portion of lending revenue is paid to or retained by Charles Schwab Investment Management, Inc. (CSIM or the investment adviser) or any affiliate of CSIM.

As of October 31, 2019, the funds had securities on loan, all of which were classified as common stocks. The value of the securities on loan and the related collateral as of October 31, 2019, if any, are disclosed in each fund’s Portfolio Holdings. The value of the securities on loan and the investment of cash collateral are also disclosed in each fund’s Statement of Assets and Liabilities.

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2. Significant Accounting Policies (continued):

fully automated program allows the funds to earn interest on cash balances. Excess cash invested with deposit institutions domiciled outside of the U.S., as with any offshore deposit, may be subject to sovereign actions in the jurisdiction of the deposit institution including, but not limited to, freeze, seizure or diminution. The funds bear the risk associated with the repayment of principal and payment of interest on such instruments by the institution with which the deposit is ultimately placed.

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

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

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

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

(d) Investment Income:

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

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Financial Notes(continued)

2. Significant Accounting Policies (continued):

The Schwab International Core Equity Fund filed claims to recover taxes previously withheld in certain European Union countries on the basis that those countries had purportedly violated certain provisions in the Treaty on the Functioning of the European Union. These filings are subject to various administrative and judicial proceedings within these countries, and all professional fees associated with these filings have been paid by the investment adviser.

(e) Expenses:

(f) Distributions to Shareholders:

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

(g) Accounting Estimates:

(h) Federal Income Taxes:

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

(i) Foreign Taxes:

The funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, corporate events, foreign currency exchanges and capital gains on investments. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in foreign markets in which the funds invest. These foreign taxes, if any, are paid by the funds and are disclosed in the Statement of Operations. Foreign taxes payable as of October 31, 2019, if any, are reflected in each fund’s Statement of Assets and Liabilities.

(j) Indemnification:

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

(k) Recent Accounting Standards:

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

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3. Risk Factors:

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

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

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

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

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

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

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

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

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Financial Notes(continued)

3. Risk Factors (continued):

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

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

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

Foreign Investment Risk. A fund’s investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of a fund’s investments, and could impair the fund’s ability to meet its investment objective or invest in accordance with its investment strategy. There is a risk that investments in securities denominated in, and/or receiving revenues in, foreign currencies will decline in value relative to the U.S. dollar. To the extent a fund’s investments in a single country or a limited number of countries represent a large percentage of the fund’s assets, the fund’s performance may be adversely affected by the economic, political, regulatory and social conditions in those countries, and the fund’s price may be more volatile than the price of a fund that is geographically diversified.

Emerging Markets Risk. Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting and reporting requirements and greater risk associated with the custody of securities. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there may be an increased risk of illiquidity and price volatility associated with a fund’s investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

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

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

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

4. Affiliates and Affiliated Transactions:

Investment Adviser

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

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4. Affiliates and Affiliated Transactions (continued):

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

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

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

For the period ended October 31, 2019, the aggregate advisory fee paid to CSIM by the Schwab Health Care Fund was 0.53%, as a percentage of the fund’s average daily net assets.

Shareholder Servicing

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

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

Expense Limitation

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

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

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

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4. Affiliates and Affiliated Transactions (continued):

Investments from Affiliates

Certain funds in the Fund Complex (for definition refer to Trustees and Officers section) may own shares of other funds in the Fund Complex. The table below reflects the percentages of shares of each fund in this report that are owned by other funds in the Fund Complex as of October 31, 2019, as applicable:

	Underlying Funds
	Schwab Core Equity Fund	Schwab Dividend Equity Fund	Schwab Small-Cap Equity Fund	Schwab International Core Equity Fund
Schwab Balanced Fund	8.5%	—%	9.2%	—%
Schwab Monthly Income Fund - Enhanced Payout	—%	1.9%	—%	—%
Schwab Monthly Income Fund - Maximum Payout	—%	0.7%	—%	—%
Schwab Monthly Income Fund - Moderate Payout	—%	1.5%	—%	—%
Schwab Target 2010 Fund	0.1%	0.0%*	0.1%	0.2%
Schwab Target 2015 Fund	0.2%	0.0%*	0.2%	0.4%
Schwab Target 2020 Fund	1.6%	0.2%	1.7%	2.8%
Schwab Target 2025 Fund	2.5%	0.2%	2.7%	3.8%
Schwab Target 2030 Fund	4.8%	1.3%	5.9%	7.8%
Schwab Target 2035 Fund	2.5%	1.0%	3.4%	4.2%
Schwab Target 2040 Fund	5.7%	2.7%	8.1%	9.5%
Schwab Target 2045 Fund	1.0%	0.5%	1.4%	1.6%
Schwab Target 2050 Fund	1.0%	0.6%	1.5%	1.7%
Schwab Target 2055 Fund	0.6%	0.4%	0.9%	1.0%
Schwab Target 2060 Fund	0.1%	0.1%	0.2%	0.2%

*	Less than 0.05%

Other Affiliated Transactions

The professional fees related to foreign withholding tax claims discussed in financial note 2 were non-routine expenses. The investment adviser agreed to pay these professional fees for this reporting period, subject to reimbursement by the Schwab International Core Equity Fund to the extent the fund is able to successfully recover taxes withheld in the future.

As of October 31, 2019, the balance of professional fees related to foreign withholding tax subject to future reimbursement by the fund to the investment adviser was $19,171 for Schwab International Core Equity Fund.

Interfund Borrowing and Lending

Pursuant to an exemptive order issued by the SEC, the funds may enter into interfund borrowing and lending transactions with other funds in the Fund Complex. All loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the overnight repurchase agreement rate and the short-term bank loan rate. All loans are subject to numerous conditions designed to ensure fair and equitable treatment of all participating funds. The interfund lending facility is subject to the oversight and periodic review by the Board. The funds had no interfund borrowing or lending activity during the period.

5. Board of Trustees:

The Board may include people who are officers and/or directors of CSIM or its affiliates. Federal securities law limits the percentage of such “interested persons” who may serve on a trust’s board, and the trust was in compliance with these limitations throughout the report period. The trust did not pay any of these interested persons for their services as trustees, but it did pay non-interested persons (independent trustees), as noted on each fund’s Statement of Operations. For information regarding the trustees, please refer to the Trustees and Officers table at the end of this report.

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6. Borrowing from Banks:

During the period, the funds were participants with other U.S. registered investment companies managed by CSIM in a joint, syndicated, committed $750 million line of credit (the Syndicated Credit Facility), which matured on October 3, 2019. On October 3, 2019, the Syndicated Credit Facility was amended to run for a new 364 day period with the line of credit amount remaining unchanged, maturing on October 1, 2020. Under the terms of the Syndicated Credit Facility, in addition to the interest charged on any borrowings by a fund, each fund paid a commitment fee of 0.15% per annum on the funds’ proportionate share of the unused portion of the Syndicated Credit Facility.

During the period, the funds were participants with other U.S. registered investment companies managed by CSIM in a joint, unsecured, uncommitted $500 million line of credit (the Uncommitted Credit Facility), with State Street Bank and Trust Company, which matured on November 30, 2018. On November 30, 2018, the Uncommitted Credit Facility was amended to run for a new 364 day period with the line of credit amount remaining unchanged, maturing November 29, 2019. Under the terms of the Uncommitted Credit Facility, each fund pays interest on the amount a fund borrows. There were no borrowings from either line of credit during the period.

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

7. Purchases and Sales of Investment Securities:

For the period ended October 31, 2019, purchases and sales of securities (excluding short-term obligations) were as follows:

	Purchases of Securities	Sales of Securities
Schwab Core Equity Fund	$2,086,706,309	$2,258,430,744
Schwab Dividend Equity Fund	659,881,610	1,102,179,188
Schwab Large-Cap Growth Fund	127,790,847	205,859,671
Schwab Small-Cap Equity Fund	684,919,014	679,799,167
Schwab Hedged Equity Fund*	417,325,733	470,531,713
Schwab Health Care Fund	357,456,758	436,777,342
Schwab International Core Equity Fund	953,919,162	1,184,561,141

*	Including securities sold short.

8. Derivatives:

Certain funds entered into equity index futures contracts during the report period. The funds invested in futures contracts to equitize available cash. The current value and variation margin for futures contracts held at October 31, 2019 are presented on the Portfolio Holdings and Statement of Assets and Liabilities, respectively. The net realized and change in unrealized gains (losses) on futures contracts are presented on the Statement of Operations. Refer to financial note 2(b) for the funds’ accounting policies with respect to futures contracts and financial note 3 for disclosures concerning the risks of investing in futures contracts. During the period ended October 31, 2019, the month-end average notional amounts of futures contracts held by the funds and the month-end average number of contracts held were as follows:

	Notional Amounts	Number of Contracts
Schwab Core Equity Fund	$2,226,510	17
Schwab Dividend Equity Fund	19,621,615*	150*
Schwab Large-Cap Growth Fund	543,710	4
Schwab Small-Cap Equity Fund	4,188,787	56
Schwab Hedged Equity Fund	281,537	2
Schwab Health Care Fund	1,273,298	9
Schwab International Core Equity Fund	287,785	3

*	During the period, the fund did not hold futures contracts at any month-end. The average notional amounts and number of contracts were calculated by aggregating the highest daily values held each month during the period.

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Financial Notes(continued)

9. Federal Income Taxes:

As of October 31, 2019, the tax basis cost of the funds’ investments and gross unrealized appreciation and depreciation were as follows:

	Schwab Core Equity Fund	Schwab Dividend Equity Fund	Schwab Large-Cap Growth Fund	Schwab Small-Cap Equity Fund	Schwab Hedged Equity Fund	Schwab Health Care Fund	Schwab International Core Equity Fund
Tax cost	$1,705,660,637	$724,755,785	$124,372,271	$551,864,275	$92,299,477	$536,066,543	$892,300,824
Gross unrealized appreciation	$498,772,486	$144,452,799	$59,887,181	$75,870,698	$32,339,419	$247,150,721	$99,913,468
Gross unrealized depreciation	(26,896,222)	(21,461,363)	(3,121,046)	(44,392,082)	(15,277,634)	(6,543,354)	(19,465,214)
Net unrealized appreciation (depreciation)	$471,876,264	$122,991,436	$56,766,135	$31,478,616	$17,061,785	$240,607,367	$80,448,254

As of October 31, 2019, the components of distributable earnings on a tax basis were as follows:

	Schwab Core Equity Fund	Schwab Dividend Equity Fund	Schwab Large-Cap Growth Fund	Schwab Small-Cap Equity Fund	Schwab Hedged Equity Fund
Undistributed ordinary income	$15,452,132	$—	$128,168	$520,604	$841,356
Undistributed long-term capital gains	44,087,057	44,139,966	9,419,148	—	—
Net unrealized appreciation (depreciation) on investments	471,876,264	122,991,436	56,766,135	31,478,616	17,061,785
Total	$531,415,453	$167,131,402	$66,313,451	$31,999,220	$17,903,141

	Schwab Health Care Fund	Schwab International Core Equity Fund
Undistributed ordinary income	$7,104,923	$32,545,509
Undistributed long-term capital gains	26,992,356	—
Net unrealized appreciation (depreciation) on investments	240,607,367	80,448,254
Net other unrealized appreciation (depreciation)	(14,196)	(4,384)
Total	$274,690,450	$112,989,379

Capital loss carryforwards may be used to offset future realized capital gains for federal income tax purposes. As of October 31, 2019, the funds had capital loss carryforwards available to offset future net capital gains as follows:

Expiration Date	Schwab Core Equity Fund	Schwab Dividend Equity Fund	Schwab Large-Cap Growth Fund	Schwab Small-Cap Equity Fund	Schwab Hedged Equity Fund
No expiration	$—	$—	$—	$41,249,674	$15,795,438
Total	$—	$—	$—	$41,249,674	$15,795,438

Expiration Date	Schwab Health Care Fund	Schwab International Core Equity Fund
No expiration	$—	$127,145,053
Total	$—	$127,145,053

For the fiscal year ended October 31, 2019, the Schwab Hedged Equity Fund had other accumulated losses of $79,118.

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Financial Notes(continued)

9. Federal Income Taxes (continued):

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

	Schwab Core Equity Fund	Schwab Dividend Equity Fund	Schwab Large-Cap Growth Fund	Schwab Small-Cap Equity Fund	Schwab Hedged Equity Fund
Current period distributions
Ordinary income	$50,106,445	$17,703,109	$6,863,262	$47,742,964	$2,154,010
Long-term capital gains	208,707,447	98,971,136	17,392,917	57,318,761	17,187,468
Prior period distributions
Ordinary income	$106,313,933	$66,835,738	$8,808,544	$20,943,065	$125,442
Long-term capital gains	145,688,756	79,534,655	10,650,342	61,623,293	15,117,887

	Schwab Health Care Fund	Schwab International Core Equity Fund
Current period distributions
Ordinary income	$13,608,829	$29,979,566
Long-term capital gains	60,136,138	—
Prior period distributions
Ordinary income	$14,878,678	$28,754,784
Long-term capital gains	43,824,710	3,526,388

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

As of October 31, 2019, management has reviewed the tax positions for open periods (for federal purposes, three years from the date of filing and for state purposes, four years from the date of filing) as applicable to the funds, and has determined that no provision for income tax is required in the funds’ financial statements. The funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the fiscal year ended October 31, 2019, the funds did not incur any interest or penalties.

10. Subsequent Events:

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Report of Independent Registered Public Accounting Firm

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

Opinions on the Financial Statements

We have audited the accompanying statements of assets and liabilities, including the portfolio holdings, of Schwab Core Equity Fund, Schwab Dividend Equity Fund, Schwab Large-Cap Growth Fund, Schwab Small-Cap Equity Fund, Schwab Hedged Equity Fund, Schwab Health Care Fund and Schwab International Core Equity Fund (seven of the funds constituting Schwab Capital Trust, hereafter collectively referred to as the “Funds”) as of October 31, 2019, the related statements of operations for the year ended October 31, 2019, the statements of changes in net assets for each of the two years in the period ended October 31, 2019, including the related notes, and the financial highlights for each of the five years in the period ended October 31, 2019 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds as of October 31, 2019, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period ended October 31, 2019 and each of the financial highlights for each of the five years in the period ended October 31, 2019 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinions

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

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of October 31, 2019 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinions.

/s/ PricewaterhouseCoopers LLP
San Francisco, California
December 16, 2019

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

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Other Federal Tax Information (unaudited)

Schwab International Core Equity Fund elects to pass through under section 853 of the Internal Revenue Code foreign tax credit of $3,557,334 to its shareholders for the fiscal year ended October 31, 2019. The respective foreign source income on the fund is $38,315,279.

For corporate shareholders, the following percentage of the funds’ dividend distributions paid during the fiscal year ended October 31, 2019, qualify for the corporate dividends received deduction:

	Percentage
Schwab Core Equity Fund	79.13
Schwab Dividend Equity Fund	100.00
Schwab Large-Cap Growth Fund	49.12
Schwab Small-Cap Equity Fund	8.91
Schwab Hedged Equity Fund	100.00
Schwab Health Care Fund	76.57
Schwab International Core Equity Fund	—

For the fiscal year ended October 31, 2019, the funds designate the following amounts of the dividend distributions as qualified dividends for the purpose of the maximum rate under section 1(h)(11) of the Internal Revenue Code. Shareholders will be notified in January 2020 via IRS Form 1099 of the amounts for use in preparing their 2019 income tax return.


Schwab Core Equity Fund	$40,630,992
Schwab Dividend Equity Fund	17,703,109
Schwab Large-Cap Growth Fund	3,459,591
Schwab Small-Cap Equity Fund	4,502,335
Schwab Hedged Equity Fund	2,154,010
Schwab Health Care Fund	13,608,829
Schwab International Core Equity Fund	32,975,452

Under section 852(b)(3)(C) of the Internal Revenue Code, the funds hereby designate the following amounts as long-term capital gain dividends for the fiscal year ended October 31, 2019:


Schwab Core Equity Fund	$208,707,447
Schwab Dividend Equity Fund	98,971,136
Schwab Large-Cap Growth Fund	17,392,917
Schwab Small-Cap Equity Fund	57,318,761
Schwab Hedged Equity Fund	17,187,468
Schwab Health Care Fund	60,136,138
Schwab International Core Equity Fund	—

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Investment Advisory Agreement Approval

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

The Board, including a majority of the Independent Trustees, considered information specifically relating to the continuance

of the Agreement with respect to the Funds at meetings held on May 13, 2019 and June 4, 2019, and approved the renewal of the Agreement with respect to the Funds for an additional one-year term at the June 4, 2019 in person meeting called for the purpose of voting on such approval.

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

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

Nature, Extent and Quality of Services. The Board considered the nature, extent and quality of the services provided by CSIM to the Funds and the resources of CSIM and its affiliates dedicated to the Funds. In this regard, the Trustees evaluated, among other things, CSIM’s experience, track record, compliance program, resources dedicated to hiring and retaining skilled personnel and specialized talent, and information security resources. The Trustees also considered information provided by CSIM relating to services and support provided with respect to each Fund’s portfolio management team, portfolio strategy, and internal investment guidelines, as well as trading infrastructure, liquidity management, product design and analysis, shareholder communications, securities valuation, fund accounting and custody, and vendor and risk oversight. The Trustees also considered investments CSIM has made in its infrastructure, including modernizing CSIM’s technology and use of data, increasing expertise in key areas (including portfolio management and trade operations), and improving business continuity, cybersecurity, due diligence, risk management processes, and information security programs, which are designed to provide enhanced services to the Funds and their shareholders. The Trustees also considered that many of the Funds’ shareholders are also brokerage clients of Schwab and considered Schwab’s wide range of products,

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services, and channel alternatives such as investment research tools and an array of account features that benefit the Funds and shareholders who are brokerage clients of Schwab. Finally, the Trustees also considered Schwab’s reputation as a full service brokerage firm and its overall financial condition. Following such evaluation, the Board concluded, within the context of its full deliberations, that the nature, extent and quality of services provided by CSIM to the Funds and the resources of CSIM and its affiliates dedicated to the Funds supported renewal of the Agreement with respect to the Funds.

Fund Performance. The Board considered the Funds’ performance in determining whether to renew the Agreement with respect to the Funds. Specifically, the Trustees considered each Fund’s performance relative to a peer category of other mutual funds and applicable indices/benchmarks, in light of total return, yield, if applicable, and market trends, as well as in consideration of each Fund’s investment style and strategy attributes and disclosures. As part of this review, the Trustees considered the composition of the peer category, selection criteria and the reputation of the independent provider of investment company data who prepared the peer category analysis. The Trustees further considered the level of Fund performance in the context of their review of Fund expenses and adviser profitability discussed below and also noted that performance is reviewed throughout the year by a designated committee of the Board and by the Board. Following such evaluation, the Board concluded, within the context of its full deliberations, that the performance of the Funds supported renewal of the Agreement with respect to the Funds.

Fund Expenses. With respect to the Funds’ expenses, the Trustees considered the rate of compensation called for by the Agreement, and each Fund’s net operating expense ratio, in each case, in comparison to those of other similar mutual funds, such peer groups and comparisons having been selected and calculated by an independent provider of investment company data. CSIM reported to the Board, and the Board took into account, the risk assumed by CSIM in the development of products and provision of services as well as the competitive marketplace for financial products. When applicable, the Trustees considered the effects of CSIM’s and Schwab’s practice of waiving certain fees to prevent total annual operating expenses of certain Funds from exceeding a specified cap. The Trustees also considered CSIM’s contractual commitment to keep the expense cap for so long as CSIM serves as the adviser to such Fund. The Trustees also considered fees charged by CSIM to other mutual funds and to other types of accounts, but, with respect to such other types of accounts, accorded less weight to such comparisons due to the different legal, regulatory, compliance and operating features of mutual funds as compared to these other types of accounts, and any differences in the nature and scope of the services CSIM provides to these other accounts, as well as differences in the market for these types of accounts. Following such evaluation, the Board concluded, within the

context of its full deliberations, that the expenses of the Funds are reasonable and supported renewal of the Agreement with respect to the Funds.

Profitability. The Trustees considered the compensation flowing to CSIM and its affiliates, directly or indirectly and reviewed profitability on a pre-tax basis, without regard to distribution expenses. In this connection, the Trustees reviewed management’s profitability analyses. The Trustees also reviewed profitability of CSIM relating to the Schwab fund complex as a whole, noting the benefit to Fund shareholders of being part of the Schwab fund complex, including the allocations of certain fixed costs across other funds in the complex. The Trustees also considered any other benefits derived by CSIM from its relationship with the Funds, such as whether, by virtue of its management of the Funds, CSIM obtains investment information or other research resources that aid it in providing advisory services to other clients. The Trustees considered whether the compensation and profitability with respect to the Funds under the Agreement and other service agreements were reasonable and justified in light of the quality of all services rendered to each Fund by CSIM and its affiliates. The Trustees noted that CSIM continues to invest substantial sums in its business in order to provide enhanced research capabilities, services, and systems to benefit the Funds. Based on this evaluation, the Board concluded, within the context of its full deliberations, that the profitability of CSIM is reasonable and supported renewal of the Agreement with respect to the Funds.

Economies of Scale. Although the Trustees recognized the difficulty of determining economies of scale with precision, the Trustees considered the potential existence of any economies of scale and whether those are passed along to a Fund’s shareholders through (i) the enhancement of services provided to the Funds in return for fees paid, including through investments by CSIM in CSIM’s infrastructure, including modernizing CSIM’s technology and use of data, increasing expertise and capabilities in key areas (including portfolio and trade operations), and improving business continuity, cybersecurity, due diligence, and information security programs, which are designed to provide enhanced services to the Funds and their shareholders; (ii) graduated investment advisory fee schedules, fee waivers, or expense caps by CSIM and its affiliates for those funds in the Schwab Funds complex with such features; and (iii) pricing a fund to scale and keeping overall expenses down as the fund grows. The Trustees acknowledged that CSIM has shared any economies of scale with the Funds by investing in CSIM’s infrastructure, as discussed above, over time and that CSIM’s internal costs of providing investment management, technology, administrative, legal and compliance services to the Funds continues to increase as a result of regulatory or other developments. The Trustees considered that CSIM and its affiliates may employ contractual expense caps to protect shareholders from high fees when fund assets are relatively small, for example, in the case of newer funds or funds with investment strategies that

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are from time to time out of favor, because, among other reasons, 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 Funds obtain reasonable benefits from economies of scale.

In the course of their deliberations, the Trustees may have accorded different weights to various factors and did not identify any particular information or factor that was all

important or controlling. Based on the Trustees’ deliberation and their evaluation of the information described above, the Board, including all of the Independent Trustees, approved the continuation of the Agreement with respect to the Funds and concluded that the compensation under the Agreement with respect to the Funds is fair and reasonable in light of such services and expenses and such other matters as the Trustees have considered to be relevant in the exercise of their reasonable judgment.

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Trustees and Officers

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

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

Independent Trustees
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Robert W. Burns 1959 Trustee (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016)	Retired/Private Investor (Jan. 2009 – present). Formerly, Managing Director, Pacific Investment Management Company, LLC (PIMCO) (investment management firm) and President, PIMCO Funds.	101	None
John F. Cogan 1947 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Senior Fellow (Oct. 1979 – present), The Hoover Institution at Stanford University (public policy think tank); Senior Fellow (2000 – present), Stanford Institute for Economic Policy Research; Professor of Public Policy (1994 – 2015), Stanford University.	101	Director (2005 – present), Gilead Sciences, Inc.
Nancy F. Heller 1956 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2018)	President and Chairman (2014 – 2016), TIAA Charitable (financial services); Senior Managing Director (2003 – 2016), TIAA (financial services).	101	None
Stephen Timothy Kochis 1946 Trustee (Trustee of Schwab Strategic Trust since 2012; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016)	CEO and Owner (May 2012 – present), Kochis Global (wealth management consulting).	101	None

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Independent Trustees (continued)
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
David L. Mahoney 1954 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016)	Private Investor.	101	Director (2003 – present), Symantec Corporation Director (2004 – present), Corcept Therapeutics Incorporated Director (2009 – present), Adamas Pharmaceuticals, Inc.
Jane P. Moncreiff 1961 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2019)	Chief Investment Officer (2009-2017), CareGroup Healthcare System, Inc. (healthcare).	101	None
Kiran M. Patel 1948 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016)	Retired. Executive Vice President and General Manager of Small Business Group (Dec. 2008 – Sept. 2013), Intuit, Inc. (financial software and services firm for consumers and small businesses).	101	Director (2008 – present), KLA-Tencor Corporation
Kimberly S. Patmore 1956 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016)	Consultant (2008 – present), Patmore Management Consulting (management consulting).	101	None
Gerald B. Smith 1950 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2000; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Chairman, Chief Executive Officer and Founder (Mar. 1990 – present), Smith Graham & Co. (investment advisors).	101	Director (2012 – present), Eaton Corporation plc

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Interested Trustees
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Walter W. Bettinger II² 1960 Chairman and Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Schwab Strategic Trust since 2009; Laudus Trust since 2010)	Director, President and Chief Executive Officer (Oct. 2008 – present), The Charles Schwab Corporation; President and Chief Executive Officer (Oct. 2008 – present) and Director (May 2008 – present), Charles Schwab & Co., Inc.; Director (Apr. 2006 – present), Charles Schwab Bank; Director (Nov. 2017 – present), Charles Schwab Premier Bank; Director (May 2008 – present) and President and Chief Executive Officer (Aug. 2017 – present), Schwab Holdings, Inc.; Director (July 2016 – present), Charles Schwab Investment Management, Inc.	101	Director (2008 – present), The Charles Schwab Corporation
Jonathan de St. Paer² 1973 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2019)	Director (Apr. 2019 – present), President (Oct. 2018 – present), and Chief Executive Officer (Apr. 2019 – Nov. 2019), Charles Schwab Investment Management, Inc.; Trustee and Chief Executive Officer (Apr. 2019 – present) and President (Nov. 2018 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Director (Apr. 2019 – present), Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited; Senior Vice President (Apr. 2019 – present), Senior Vice President – Strategy and Product Development (CSIM) (Jan. 2014 – Mar. 2019), and Vice President (Jan. 2009 – Dec. 2013), Charles Schwab & Co., Inc.	101	None
Joseph R. Martinetto² 1962 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016)	Chief Operating Officer (Feb. 2018 – present) and Senior Executive Vice President (July 2015 – Feb. 2018), The Charles Schwab Corporation; Senior Executive Vice President (July 2015 – present), Charles Schwab & Co., Inc.; Chief Financial Officer (July 2015 – Aug. 2017) and Executive Vice President and Chief Financial Officer (May 2007 – July 2015), The Charles Schwab Corporation and Charles Schwab & Co., Inc.; Director (May 2007 – present), Charles Schwab & Co., Inc.; Director (Apr. 2010 – present) and Chief Executive Officer (July 2013 – Apr. 2015), Charles Schwab Bank; Director (Nov. 2017 – present), Charles Schwab Premier Bank; Director (May 2007 – present), Chief Financial Officer (May 2007 – Aug. 2017), Senior Executive Vice President (Feb. 2016 – present), and Executive Vice President (May 2007 – Feb. 2016), Schwab Holdings, Inc.	101	None

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
Jonathan de St. Paer 1973 President and Chief Executive Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2018)	Director (Apr. 2019 – present), President (Oct. 2018 – present), and Chief Executive Officer (Apr. 2019 – Nov. 2019), Charles Schwab Investment Management, Inc.; Trustee and Chief Executive Officer (Apr. 2019 – present) and President (Nov. 2018 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Director (Apr. 2019 – present), Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited; Senior Vice President (Apr. 2019 – present), Senior Vice President – Strategy and Product Development (CSIM) (Jan. 2014 – Mar. 2019), and Vice President (Jan. 2009 – Dec. 2013), Charles Schwab & Co., Inc.

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Officers of the Trust (continued)
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served³)	Principal Occupations During the Past Five Years
Mark Fischer 1970 Treasurer and Chief Financial Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2013)	Treasurer and Chief Financial Officer (Jan. 2016 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Assistant Treasurer (Dec. 2013 – Dec. 2015), Schwab Funds and Laudus Funds; Assistant Treasurer (Nov. 2013 – Dec. 2015), Schwab ETFs; Vice President (Oct. 2013 – present), Charles Schwab Investment Management, Inc.; Executive Director (Apr. 2011 – Sept. 2013), J.P. Morgan Investor Services; Assistant Treasurer (May 2005 – Mar. 2011), Massachusetts Financial Service Investment Management.
George Pereira 1964 Senior Vice President and Chief Operating Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2004; Laudus Trust since 2006; Schwab Strategic Trust since 2009)	Senior Vice President and Chief Financial Officer (Nov. 2004 – present) and Chief Operating Officer (Jan. 2011 – present), Charles Schwab Investment Management, Inc.; Senior Vice President and Chief Operating Officer (Jan. 2016 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Treasurer and Chief Financial Officer (June 2006 – Dec. 2015), Laudus Funds; Treasurer and Principal Financial Officer (Nov. 2004 – Dec. 2015), Schwab Funds; Treasurer and Principal Financial Officer (Oct. 2009 – Dec. 2015), Schwab ETFs; Director (Apr. 2005 – present), Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited.
Omar Aguilar 1970 Senior Vice President and Chief Investment Officer – Equities and Multi-Asset Strategies (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President and Chief Investment Officer (Apr. 2011 – present), Charles Schwab Investment Management, Inc.; Senior Vice President and Chief Investment Officer – Equities and Multi-Asset Strategies (June 2011 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Head of the Portfolio Management Group and Vice President of Portfolio Management (May 2009 – Apr. 2011), Financial Engines, Inc. (investment management firm); Head of Quantitative Equity (July 2004 – Jan. 2009), ING Investment Management.
Brett Wander 1961 Senior Vice President and Chief Investment Officer – Fixed Income (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President and Chief Investment Officer (Apr. 2011 – present), Charles Schwab Investment Management, Inc.; Senior Vice President and Chief Investment Officer – Fixed Income (June 2011 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Senior Managing Director and Global Head of Active Fixed-Income Strategies (Jan. 2008 – Oct. 2010), State Street Global Advisors; Director of Alpha Strategies (Apr. 2006 – Jan. 2008), Loomis, Sayles & Company (investment management firm).
David Lekich 1964 Chief Legal Officer and Secretary, Schwab Funds and Schwab ETFs Vice President and Assistant Clerk, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President (Sept. 2011 – present) and Vice President (Mar. 2004 – Sept. 2011), Charles Schwab & Co., Inc.; Senior Vice President and Chief Counsel (Sept. 2011 – present) and Vice President (Jan. 2011 – Sept. 2011), Charles Schwab Investment Management, Inc.; Secretary (Apr. 2011 – present) and Chief Legal Officer (Dec. 2011 – present), Schwab Funds; Vice President and Assistant Clerk (Apr. 2011 – present), Laudus Funds; Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs.
Catherine MacGregor 1964 Vice President and Assistant Secretary, Schwab Funds and Schwab ETFs Chief Legal Officer, Vice President and Clerk, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2005; Schwab Strategic Trust since 2009)	Vice President (July 2005 – present), Charles Schwab & Co., Inc.; Vice President (Sept. 2005 – present), Charles Schwab Investment Management, Inc.; Vice President (Dec. 2005 – present) and Chief Legal Officer and Clerk (Mar. 2007 – present), Laudus Funds; Vice President (Nov. 2005 – present) and Assistant Secretary (June 2007 – present), Schwab Funds; Vice President and Assistant Secretary (Oct. 2009 – present), Schwab ETFs.

¹	Each Trustee shall hold office until the election and qualification of his or her successor, or until he or she dies, resigns or is removed. The retirement policy requires that each independent trustee retire by December 31 of the year in which the Trustee turns 74 or the Trustee’s twentieth year of service as an independent trustee on any trust in the Fund Complex, whichever occurs first.
²	Mr. Bettinger, Mr. de St. Paer and Mr. Martinetto are Interested Trustees. Mr. Bettinger is an Interested Trustee because he owns stock of The Charles Schwab Corporation (CSC), the parent company of Charles Schwab Investment Management, Inc. (CSIM), the investment adviser for the trusts in the Fund Complex, is an employee and director of Charles Schwab & Co., Inc. (CS&Co), the principal underwriter for The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust, and is a director of CSIM. Mr. de St. Paer is an Interested Trustee because he owns stock of CSC and is an employee and director of CSIM. Mr. Martinetto is an Interested Trustee because he owns stock of CSC and is an employee and director of CS&Co.
³	The President, Treasurer and Secretary/Clerk hold office until their respective successors are chosen and qualified or until he or she sooner dies, resigns, is removed or becomes disqualified. Each of the other officers serves at the pleasure of the Board.

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Glossary

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

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

cap, capitalization See “market cap.”

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

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

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

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

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

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

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

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

Russell 1000 Index An index that measures the performance of the 1,000 largest companies in the Russell 3000 Index, and represents approximately 92% of the total market capitalization of the Russell 3000 Index. The Russell 3000 Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market.

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

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

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

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

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

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

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PRIVACY NOTICE
THIS IS NOT PART OF THE SHAREHOLDER REPORT

A Commitment to Your Privacy

Your Privacy Is Not for Sale

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

How We Collect Information About You

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

• APPLICATION AND REGISTRATION
INFORMATION.

• TRANSACTION AND EXPERIENCE
INFORMATION.

• WEBSITE USAGE.

provide a more personalized experience. To learn more, please go to www.schwab.com/privacy.

How We Share and Use Your Information

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

• to help us process transactions for your account;

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

State Laws

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

Safeguarding Your Information — Security Is a Partnership

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

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

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

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

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

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Notes

Table of Contents

Notes

Table of Contents

Schwab Active Equity Funds

Charles Schwab Investment Management

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

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

Proxy Voting Policies, Procedures and Results

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

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

Schwab Funds

Equity Funds

Schwab Core Equity Fund

Schwab Dividend Equity Fund

Schwab Large-Cap Growth Fund

Schwab Small-Cap Equity Fund

Schwab Hedged Equity Fund

Schwab Health Care Fund

Schwab International Core Equity Fund

Schwab Fundamental US Large Company Index Fund

Schwab Fundamental US Small Company Index Fund

Schwab Fundamental International Large Company Index Fund

Schwab Fundamental International Small Company Index Fund

Schwab Fundamental Emerging Markets Large Company Index Fund

Schwab Fundamental Global Real Estate Index Fund

Schwab Global Real Estate Fund

Schwab S&P 500 Index Fund

Schwab 1000 Index^® Fund

Schwab Small-Cap Index Fund^®

Schwab Total Stock Market Index Fund^®

Schwab U.S. Large-Cap Growth Index Fund

Schwab U.S. Large-Cap Value Index Fund

Schwab U.S. Mid-Cap Index Fund

Schwab International Index Fund^®

Asset Allocation Funds

Schwab Balanced Fund

Schwab MarketTrack Portfolios^®

Schwab Target Funds

Schwab Target Index Funds

Schwab Monthly Income Funds

Bond Funds

Schwab Treasury Inflation Protected Securities Index Fund

Schwab U.S. Aggregate Bond Index Fund

Schwab Short-Term Bond Index Fund

Schwab Tax-Free Bond Fund¹

Schwab California Tax-Free Bond Fund¹

Schwab Money Funds²

Schwab provides a broad choice of taxable and tax-exempt money market funds for both retail and institutional client types.

Investment Adviser

Charles Schwab Investment Management, Inc.

211 Main Street, San Francisco, CA 94105

Funds

Schwab Funds

1-877-824-5615

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

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

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MFR26298-16
00237233

Annual Report | October 31, 2019

Schwab Balanced Fund

New Notice Regarding Shareholder Report Delivery Options

Beginning on January 1, 2021, paper copies of a fund’s shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from a fund or from your financial intermediary (such as a bank or broker-dealer). Instead, the reports will be made available on a fund’s websitewww.schwabfunds.com/schwabfunds_prospectus, and you will be notified by mail each time a report is posted and the mailing will provide a website link to access the report. You will continue to receive other fund regulatory documents (such as prospectuses or supplements) in paper unless you have elected to receive all fund documents electronically.

If you would like to receive a fund’s future shareholder reports in paper free of charge after January 1, 2021, you can make that request:

• If you invest through Charles Schwab & Co, Inc. (broker-dealer), by calling 1-866-345-5954 and using the unique identifier attached to this mailing;

• If you invest through another financial intermediary (such as a bank or broker-dealer) by contacting them directly; or

• If owned directly through a fund by calling 1-800-407-0256.

If you already receive shareholder reports and other fund documents electronically, you will not be affected by this change and you need not take any action.

Schwab Balanced Fund

In This Report

Performance at a Glance	2
From the President	3
The Investment Environment	4
Fund Management	6
Performance and Fund Facts	7
Fund Expenses	10
Financial Statements and Portfolio Holdings	11
Financial Notes	16
Report of Independent Registered Public Accounting Firm	24
Other Federal Tax Information	25
Investment Advisory Agreement Approval	26
Trustees and Officers	29
Glossary	33

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

Distributor: Charles Schwab & Co., Inc. (Schwab)

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Performance at a Glance

Total Return for the 12 Months Ended October 31, 2019
Schwab Balanced Fund (Ticker Symbol: SWOBX)	11.19%
Balanced Blended Index	12.35%
Fund Category: Morningstar Allocation—50% to 70% Equity¹	10.26%
Performance Details	pages 7-9

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

¹	Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date.

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Schwab Balanced Fund

From the President

Jonathan de St. Paer
President of Charles Schwab
Investment Management, Inc.
and the fund covered
in this report.

Dear Shareholder,

At the crux of every investment decision, one consideration that may be top of mind is your risk tolerance. It may seem like a straightforward consideration, but it’s often not. Most of us are risk-averse by nature and as investors, the fear of a significant market decline is ever-present in our minds. This can sometimes lead us to make decisions that may get in the way of the performance of our investments. Our feelings about risk are also fluid, impacted by changes in market conditions and our progress toward our financial goals. For example, some investors may have been prompted to rethink their risk appetite as a result of the latest bout of market volatility.

At Charles Schwab Investment Management, we provide a range of foundational products that are designed to suit a variety of risk appetites and help investors remain focused on their long-term investment plans despite market volatility. One way we do that is by providing asset allocation solutions, which take on the job of adjusting the allocation to varying asset classes in response to changing market conditions.

The Schwab Balanced Fund can play an important role in fulfilling this objective. The fund offers an all-in-one portfolio solution that holds a combination of equity funds, bond funds, and cash in one place. The portfolio management team balances the exposures between each asset class. The fund typically invests most of its assets in equity funds while maintaining an allocation to bond funds.

The fund seeks to provide investors access to both growth and income opportunities. When either stocks or bonds are under pressure, this diversification can offer downside protection. And at times like the present, when stocks and bonds are experiencing a simultaneous climb, diversification helps investors stay invested and benefit from both.

When it comes to investing, it’s important to have a long-term investing plan and portfolio based on your individual goals and risk tolerance. It can at times be tough to maintain that discipline in the face of day-to-day uncertainty. We aim to offer products with clear objectives, straightforward pricing, and a consistent approach to investing to help simplify investing decisions, so investors can focus on their long-term goals without unnecessary complexity.

Thank you for investing with Charles Schwab Investment Management, and for trusting us to help you achieve your financial goals. For more information about the Schwab Balanced Fund, please continue reading this report. In addition, you can find further details about this fund by visiting our website at www.schwabfunds.com. We are also happy to hear from you at 1-877-824-5615.

Sincerely,

“The fund offers an all-in-one portfolio solution that holds a combination of equity funds, bond funds, and cash in one place.”

Diversification and asset allocation strategies do not ensure a profit and cannot protect against losses in a declining market.

Management views may have changed since the report date.

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The Investment Environment

For the 12-month reporting period ended October 31, 2019, global equity and fixed income markets generated positive returns. The final two months of 2018 were marked by significant market volatility and steep declines across global equity markets, driven by concerns about slowing international growth, a trade war between the U.S. and China, falling oil prices, the waning strength of the U.S. economy, and the pace of future interest rate hikes despite low inflation. By late December, major market indices had fallen to near-bear market territory. However, as the Federal Reserve (Fed) put interest rate hikes on hold, stocks, particularly in the U.S., staged a strong recovery in the first four months of 2019, which generally continued through the end of the reporting period despite several setbacks. Over the period, the U.S. dollar strengthened slightly against a basket of foreign currencies, generally reducing the returns on overseas investments in U.S. dollar terms. For the reporting period, the S&P 500^® Index, a bellwether for the overall U.S. stock market, returned 14.33%. Despite headwinds, markets outside the U.S. also rose, particularly toward the end of the reporting period with the MSCI EAFE^® Index (Net)*, a broad measure of developed international equity performance, returning 11.04%. Fixed-income markets were particularly strong over the period. The Bloomberg Barclays US Aggregate Bond Index returned 11.51% and the FTSE non-US Dollar World Government Bond Index returned 9.25%.

Economic growth around the globe was uneven over the reporting period, largely as a result of manufacturing weakness in developed international markets. Despite escalating trade tensions with China, the U.S. maintained its steady growth in its tenth year of expansion, although at a declining pace. In the last two months of 2018, economies around the globe showed increasing signs of weakness, but many regained economic momentum in the first six months of 2019, demonstrating resilient growth despite lingering uncertainties on various fronts. As the year progressed, signs of slowing growth increased amid a weakening global economy, waning manufacturing activity, and the ongoing U.S.-China trade war. However, toward the end of the period, prospects of a partial trade resolution relieved some of the pressure. U.S. gross domestic product (GDP) grew at an annual rate of 2.1% in the third quarter of 2019, up slightly from 2.0% in the second quarter, but down from 3.1% in the first quarter of 2019. Unemployment declined in September 2019 to a 50-year low. While consumer confidence edged lower in October to hit a four-month low, it remained a stable source of GDP growth in the U.S. Inflation remained benign.

Asset Class Performance Comparison % returns during the 12 months ended October 31, 2019

For index definitions, please see the Glossary.

Data source: Index provider websites and CSIM.

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

Management views may have changed since the report date.

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

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Schwab Balanced Fund

The Investment Environment(continued)

Outside the U.S., conditions continued to soften, dampened by trade issues, slowing economic output, and geopolitical concerns. Oil prices, which had fallen steeply in the fourth quarter of 2018, rebounded through the first four months of 2019, as major exporters sought to curb supply and central banks took steps to ease growth-related fears, before dipping in May when trade concerns escalated. Oil prices remained volatile through period end. In the eurozone, growth slowed in the second and third quarters of 2019, down slightly from the first quarter. Growth was subdued by tepid wage growth and constrained consumer spending. The United Kingdom’s economy contracted in the second quarter of 2019 amid growing Brexit-related economic and political uncertainty that dampened industrial output, construction, and services sectors. Japan’s economy, however, experienced growth in recent quarters after contracting sharply in the third quarter of 2018. Several Asian economies, including China and India, exhibited signs of slowing, but still outpaced many developed economies.

In response to the economic environment and flat or inverted yield curves around the world, to bolster growth, and to ensure stability given ongoing trade tensions, a number of central banks reduced their policy rates, including the U.S., while others maintained their generally low—and for some international central banks, negative—interest rates. In the U.S., after raising interest rates four times in 2018, the Fed held rates unchanged through the first half of 2019. But amid growing signs of global economic weakness that threatened to dampen U.S. economic growth, along with continued low inflation and weakness in manufacturing, the Fed enacted three interest rate cuts by the end of the period—in July, September, and October. Following the October interest rate cut, the Fed signaled that subsequent interest rate cuts would be put on hold provided the economy continues to expand moderately and the labor market remains strong. The federal funds rate ended the reporting period in a range of 1.50% to 1.75%. Outside the U.S., the European Central Bank held interest rates steady and launched an asset-purchase program to help stimulate the economy. The Bank of Japan maintained its short-term interest rate target of –0.1% throughout the period. Despite growing Brexit-related division, the Bank of England maintained its key official bank rate at 0.75% throughout the period, where it has remained since August 2018. Central banks in key emerging market economies—including India, Thailand, and China—lowered their policy rates in response to inflation and trade-related pressures.

Bond prices generally rose over the reporting period as yields fell. (Bond yields and bond prices move in opposite directions.) Short-term yields, which typically respond to changes in the federal funds rate, remained flat for the first half of the period before declining as the Fed implemented interest rate cuts, with the three-month Treasury yield falling from 2.34% at the outset of the period to 1.54% at the end of the period. Longer-term yields, which are influenced more by economic growth and inflation expectations, trended downward over most of the period before moderating in the final two months. During the reporting period, the yield curve flattened with portions of the yield curve inverting, which is often an indicator of a potential recession. Over the reporting period, the 10-year Treasury yield fell from 3.15% to 1.69%. Outside the U.S., bond yields generally remained low.

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Schwab Balanced Fund

Fund Management

Zifan Tang, Ph.D., CFA, Senior Portfolio Manager, is responsible for the co-management of the fund. She has served as portfolio manager of the fund since February 2012. Prior to joining CSIM in 2012, Ms. Tang was a product manager at Thomson Reuters and, from 1997 to 2009, worked as a portfolio manager at Barclays Global Investors, which was subsequently acquired by BlackRock.

Patrick Kwok, CFA, Portfolio Manager, is responsible for the co-management of the fund. He has served as portfolio manager of the fund since February 2019. Prior to joining CSIM in 2008, Mr. Kwok spent two years as an asset operations specialist at Charles Schwab Trust Company. He also previously worked for one year at State Street Bank & Trust as a portfolio accountant and pricing specialist.

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Schwab Balanced Fund

The Schwab Balanced Fund (the fund) seeks capital growth and income. To pursue its goal, the fund generally invests in a diversified group of other affiliated Schwab and/or Laudus Funds, in accordance with its target portfolio allocation. Normally, the fund invests 55% to 65% of its assets in equity securities (including stocks and equity funds) and 35% to 45% in fixed-income securities (including bonds and fixed income funds), and cash and cash equivalents (including money market funds). The fund’s allocation is designed to provide a mix of the growth opportunities of stock investing with the income opportunities of bonds and other fixed-income securities. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.

Market Highlights. Over the 12-month reporting period, the U.S. economy maintained its steady growth in its tenth year of expansion, although at a declining pace. Unemployment declined while consumer confidence lagged. Inflation remained benign. In response to the economic environment, to bolster growth, and to ensure stability given ongoing trade tensions, the Federal Reserve reduced its policy rates. Bond prices generally rose over the reporting period as yields fell.

Performance. For the 12-month reporting period ended October 31, 2019, the fund returned 11.19%. The fund’s internally calculated comparative index, the Balanced Blended Index (the index), returned 12.35%.

Positioning and Strategies. Over the reporting period, the fund’s asset allocations were broadly in line with those of the index.

The fund’s U.S. large-cap equity exposure contributed positively to total return but dragged on relative performance. The Schwab Core Equity Fund returned approximately 12.0% for the reporting period while its comparative index, the S&P 500^® Index returned approximately 14.3%. The Laudus U.S. Large Cap Growth Fund also contributed positively to the fund’s total return, returning approximately 15.8%.

The fund’s fixed income allocation contributed to the fund’s total return. The Schwab U.S. Aggregate Bond Index Fund returned approximately 11.3%, while its comparative benchmark, the Bloomberg Barclays US Aggregate Bond Index, returned approximately 11.5%. The fund’s allocation to the Schwab U.S. Aggregate Bond Index Fund was increased in January 2019 when the allocation to the Schwab Intermediate-Term Bond Fund was replaced with the Schwab U.S. Aggregate Bond Index Fund. While held by the fund, the Schwab Intermediate-Term Bond Fund returned approximately 2.1% while the comparative index, the Bloomberg Barclays US Aggregate Intermediate Index, returned approximately 2.5%.

The U.S. small-cap equity allocation neither contributed nor detracted to the return of the fund and the return for this allocation was nearly flat. The U.S. small-cap equity allocation dragged on relative performance, underperforming the comparative benchmark, the Russell 2000^® Index which returned approximately 4.9%. In January 2019, the fund transitioned its U.S. small-cap equity allocation from the Laudus Small-Cap MarketMasters Fund to the Schwab Small-Cap Equity Fund. While held by the fund, the Laudus Small-Cap MarketMasters Fund and the Schwab Small-Cap Equity Fund returned approximately -2.7% and 4.3%, respectively.

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

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Schwab Balanced Fund

Performance and Fund Factsas of October 31, 2019

Performance of Hypothetical $10,000 Investment (October 31, 2009 – October 31, 2019)¹

Average Annual Total Returns¹

Fund and Inception Date	1 Year	5 Years	10 Years
Fund: Schwab Balanced Fund (11/18/96)	11.19%	6.73%	8.86%
Balanced Blended Index	12.35%	7.52%	9.54%
S&P 500^® Index	14.33%	10.78%	13.70%
Bloomberg Barclays US Aggregate Bond Index	11.51%	3.24%	3.73%
Fund Category: Morningstar Allocation—50% to 70% Equity²	10.26%	5.57%	8.08%
Fund Expense Ratios³: Net 0.50%; Gross 0.54%

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

For index definitions, please see the Glossary.

¹	Fund expenses may have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
²	Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date.
³	As stated in the prospectus. Includes 0.50% of acquired fund fees and expenses (AFFE), which are based on estimated amounts for the current fiscal year and are indirect expenses incurred by the fund through its investments in the underlying funds. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as the investment adviser to the fund. Gross Expense: Does not reflect the effect of contractual fee waivers. For actual expense ratios during the period, not including AFFE, refer to the financial highlights section of the financial statements.

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Schwab Balanced Fund

Performance and Fund Factsas of October 31, 2019 (continued)

Statistics

Number of Holdings	6
Portfolio Turnover Rate	32%

Asset Class Weightings % of Investments¹

Top Holdings % of Net Assets^2,3

Portfolio holdings may have changed since the report date.

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

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

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Schwab Balanced Fund

Fund Expenses(Unaudited)

Examples for a $1,000 Investment

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

The expense examples below are intended to help you understand your ongoing cost (in dollars) of investing in the fund and to compare this cost with the ongoing cost of investing in other mutual funds. These examples are based on an investment of $1,000 invested for six months beginning May 1, 2019 and held through October 31, 2019.

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

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

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

	Expense Ratio (Annualized)^1,2	Effective Expense Ratio (Annualized)^3,4	Beginning Account Value at 5/1/19	Ending Account Value (Net of Expenses) at 10/31/19	Expenses Paid During Period 5/1/19-10/31/19^2,5	Effective Expenses Paid During Period 5/1/19-10/31/19^4,5
Schwab Balanced Fund
Actual Return	0.00%	0.50%	$1,000.00	$1,029.60	$0.00	$2.56
Hypothetical 5% Return	0.00%	0.50%	$1,000.00	$1,025.20	$0.00	$2.55

¹	Based on the most recent six-month expense ratio.
²	Excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds.
³	Based on the most recent six-month acquired fund fees and expense ratio; may differ from the acquired fund fees and expense ratio in the prospectus, which are based on estimated amounts for the current fiscal year.
⁴	Includes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds.
⁵	Expenses for each fund are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by the 184 days of the period, and divided by the 365 days of the fiscal year.

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Schwab Balanced Fund

Financial Statements

Financial Highlights

	11/1/18– 10/31/19	11/1/17– 10/31/18	11/1/16– 10/31/17	11/1/15– 10/31/16	11/1/14– 10/31/15
Per-Share Data
Net asset value at beginning of period	$15.41	$15.60	$14.51	$15.40	$15.56
Income (loss) from investment operations:
Net investment income (loss)¹	0.24	0.23	0.21	0.19	0.18
Net realized and unrealized gains (losses)	1.32	0.08²	1.96	0.00³	0.42
Total from investment operations	1.56	0.31	2.17	0.19	0.60
Less distributions:
Distributions from net investment income	(0.37)	(0.48)	(0.22)	(0.32)	(0.34)
Distributions from net realized gains	(0.61)	(0.02)	(0.86)	(0.76)	(0.42)
Total distributions	(0.98)	(0.50)	(1.08)	(1.08)	(0.76)
Net asset value at end of period	$15.99	$15.41	$15.60	$14.51	$15.40
Total return	11.19%	1.94%	15.90%	1.41%	3.95%
Ratios/Supplemental Data
Ratios to average net assets:
Net operating expenses⁴	0.00%	0.00%	0.00%	0.00%⁵	0.00%⁵
Gross operating expenses⁴	0.04%	0.04%	0.06%	0.06%	0.07%
Net investment income (loss)	1.55%	1.44%	1.39%	1.34%	1.18%
Portfolio turnover rate	32%	6%	28%⁶	19%	5%
Net assets, end of period (x 1,000,000)	$526	$447	$386	$282	$305

Calculated based on the average shares outstanding during the period.

Less than $0.005.

⁴

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

⁵

Less than 0.005%; the ratio of net operating expenses would have been 0.00%, if certain non-routine expenses and/or interest expense had not been incurred.

⁶

The portfolio turnover rate increased due to the in-kind transactions relating to Schwab Total Bond Market Fund and Schwab U.S. Aggregate Bond Index Fund. For comparison purposes, the portfolio turnover rate would have been 7% without including these transactions. There were no transaction costs associated with these transactions.

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Schwab Balanced Fund

Portfolio Holdings as of October 31, 2019

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 U.S. Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. Effective March 31, 2019, Form N-PORT Part F has replaced Form N-Q. The fund’s Form N-Q and Form N-PORT Part F are available on the SEC’s website atwww.sec.gov. The fund also makes available its complete schedule of portfolio holdings 15 to 20 days after the end of the month on the fund’s website atwww.schwabfunds.com/schwabfunds_prospectus.

Security	Number of Shares	Value ($)
Affiliated Underlying Funds99.3% of net assets

Equity Funds 60.2%
Large-Cap 50.0%
Laudus U.S. Large Cap Growth Fund *	3,461,758	77,612,608
Schwab Core Equity Fund	8,488,742	185,648,795
		263,261,403
Small-Cap 10.2%
Schwab Small-Cap Equity Fund	3,196,837	53,323,240
		316,584,643

Fixed-Income Fund 36.8%
Intermediate-Term Bond 36.8%
Schwab U.S. Aggregate Bond Index Fund	18,675,589	193,852,620

Money Market Fund 2.3%
Schwab Variable Share Price Money Fund, Ultra Shares 1.85%(a)	12,112,940	12,118,997
Total Affiliated Underlying Funds
(Cost $475,454,387)		522,556,260

Security	Number of Shares	Value ($)
Unaffiliated Underlying Fund0.7% of net assets

Money Market Fund 0.7%
State Street Institutional U.S. Government Money Market Fund, Premier Class 1.75%(a)	3,821,366	3,821,366
Total Unaffiliated Underlying Fund
(Cost $3,821,366)		3,821,366

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

Below is a summary of the fund’s transactions with its affiliated underlying funds during the period ended October 31, 2019:

Affiliated Underlying Funds	Market Value at 10/31/18	Gross Purchases	Gross Sales	Realized Gains (Losses)	Net Change in Unrealized Appreciation (depreciation)	Market Value at 10/31/19	Balance of Shares Held at 10/31/19	Distributions Received*
Laudus Small-Cap MarketMasters Fund, Select Shares	$44,913,075	$2,370,000	($41,276,972)	($362,506)	($5,643,597)	$—	—	$4,489,301
Laudus U.S. Large Cap Growth Fund	66,622,785	15,268,559	(10,075,000)	(340,756)	6,137,020	77,612,608	3,461,758	5,008,159
Schwab Core Equity Fund	157,179,451	46,498,943	(17,575,000)	(3,276,849)	2,822,250	185,648,795	8,488,742	20,048,943
Schwab Intermediate-Term Bond Fund	50,815,631	2,675,201	(54,131,542)	(1,847,142)	2,487,852	—	—	289,075
Schwab Small-Cap Equity Fund	—	52,798,000	(833,000)	(16,237)	1,374,477	53,323,240	3,196,837	—
Schwab U.S. Aggregate Bond Index Fund	115,403,823	94,523,143	(28,913,000)	(509,608)	13,348,262	193,852,620	18,675,589	4,861,893
Schwab Variable Share Price Money Fund, Ultra Shares	10,364,980	1,750,559	—	—	3,458	12,118,997	12,112,940	250,654
Total	$445,299,745	$215,884,405	($152,804,514)	($6,353,098)	$20,529,722	$522,556,260		$34,948,025

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

At October 31, 2019, all of the fund’s investment securities were classified as Level 1. Fund investments in underlying mutual funds are classified as Level 1, without consideration to the classification level of the investments held by the underlying mutual funds, which could be Level 1, Level 2 or Level 3 (see financial note 2(a) for additional information).

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Schwab Balanced Fund

Statement of Assets and Liabilities

As of October 31, 2019

Assets
Investments in affiliated underlying funds, at value (cost $475,454,387)		$522,556,260
Investments in unaffiliated underlying funds, at value (cost $3,821,366)		3,821,366
Receivables:
Fund shares sold		1,255,808
Dividends		469,874
Due from investment adviser		19,915
Prepaid expenses	+	21,442
Total assets		528,144,665
Liabilities
Payables:
Investments bought		1,554,102
Fund shares redeemed		361,423
Accrued expenses	+	55,309
Total liabilities		1,970,834
Net Assets
Total assets		528,144,665
Total liabilities	–	1,970,834
Net assets		$526,173,831
Net Assets by Source
Capital received from investors		460,308,724
Total distributable earnings		65,865,107

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$526,173,831		32,907,989		$15.99

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Schwab Balanced Fund

Statement of Operations

For the period November 1, 2018 through October 31, 2019

Investment Income
Dividends received from affiliated underlying funds		$7,390,752
Dividends received from unaffiliated underlying funds	+	70,340
Total investment income		7,461,092
Expenses
Registration fees		51,420
Shareholder reports		44,293
Professional fees		31,136
Portfolio accounting fees		28,555
Transfer agent fees		21,861
Independent trustees’ fees		10,337
Custodian fees		1,790
Other expenses	+	9,253
Total expenses		198,645
Expense reduction by CSIM and its affiliates	–	198,645
Net expenses	–	—
Net investment income		7,461,092
Realized and Unrealized Gains (Losses)
Realized capital gain distributions received from affiliated underlying funds		27,557,273
Net realized losses on sales of affiliated underlying funds	+	(6,353,098)
Net realized gains		21,204,175
Net change in unrealized appreciation (depreciation) on affiliated underlying funds	+	20,529,722
Net realized and unrealized gains		41,733,897
Increase in net assets resulting from operations		$49,194,989

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Schwab Balanced Fund

Statement of Changes in Net Assets

For the current and prior report periods

Operations
	11/1/18-10/31/19		11/1/17-10/31/18
Net investment income		$7,461,092	$6,070,669
Net realized gains		21,204,175	24,111,718
Net change in unrealized appreciation (depreciation)	+	20,529,722	(24,870,807)
Increase in net assets from operations		49,194,989	5,311,580
Distributions to Shareholders
Total distributions		($28,049,773)	($12,185,118)

Transactions in Fund Shares
		11/1/18-10/31/19		11/1/17-10/31/18
		SHARES	VALUE	SHARES	VALUE
Shares sold		11,096,629	$169,470,196	10,224,123	$162,133,182
Shares reinvested		1,812,747	24,889,012	690,392	10,707,988
Shares redeemed	+	(8,978,575)	(135,957,018)	(6,642,949)	(104,866,438)
Net transactions in fund shares		3,930,801	$58,402,190	4,271,566	$67,974,732
Shares Outstanding and Net Assets
		11/1/18-10/31/19		11/1/17-10/31/18
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		28,977,188	$446,626,425	24,705,622	$385,525,231
Total increase	+	3,930,801	79,547,406	4,271,566	61,101,194
End of period		32,907,989	$526,173,831	28,977,188	$446,626,425

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Schwab Balanced Fund

Financial Notes

1. Business Structure of the Fund:

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

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

The Schwab Balanced Fund is a single class “fund of funds” which seeks to achieve its investment objective by investing in a diversified group of other affiliated Schwab and/or Laudus Funds (the underlying funds), but also may invest in other unaffiliated, third party mutual funds, including exchange-traded funds (ETFs). In addition, the fund may invest a portion of its assets directly in equity and fixed-income securities to maintain its allocations.

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

2. Significant Accounting Policies:

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.

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Schwab Balanced Fund

Financial Notes(continued)

2. Significant Accounting Policies (continued):

(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.

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.

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

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Schwab Balanced Fund

Financial Notes(continued)

2. Significant Accounting Policies (continued):

(b) Security Transactions:

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

(d) Expenses:

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

(e) Distributions to Shareholders:

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

(f) Accounting Estimates:

(g) Federal Income Taxes:

(h) Indemnification:

(i) Recent Accounting Standards:

3. Risk Factors:

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Schwab Balanced Fund

Financial Notes(continued)

3. Risk Factors (continued):

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

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

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

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

Underlying Fund Investment Risk.Before investing in the fund, investors should assess the risks associated with the underlying funds in which the fund may invest, which include any combination of the risks described below.

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

• Management Risk.Generally, the underlying funds are actively managed mutual funds. Any actively managed mutual fund is subject to the risk that its investment adviser (or subadviser(s)) will select or allocate assets that could cause the fund to underperform or otherwise not meet its objective. An underlying fund’s adviser applies its own investment techniques and risk analyses in making investment decisions for the underlying fund, but there can be no guarantee that they will produce the desired results.

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

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

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

• Fixed Income Risk.Interest rates rise and fall over time, which will affect an underlying fund’s yield and share price. A change in a central bank’s monetary policy or improving economic conditions, among other things, may result in an increase in interest rates. A rise in interest rates could cause an underlying fund’s share price to fall. The credit quality of a portfolio investment could also cause an underlying fund’s share price to fall. An underlying fund could lose money if the issuer or guarantor of a portfolio investment or the counterparty to a derivatives contract fails to make timely principal or interest payments or otherwise honor its obligations. Fixed income securities may be paid off earlier or later than expected. Either situation could cause an underlying fund to hold securities paying lower-than-market rates of interest, which could hurt the fund’s yield or share price. Below investment-grade bonds (junk bonds) involve greater credit risk, are more volatile, involve greater risk of price declines and may be more susceptible to economic downturns than investment-grade securities.

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

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Schwab Balanced Fund

Financial Notes(continued)

3. Risk Factors (continued):

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

• Foreign Investment Risk. An underlying fund’s investments in securities of foreign issuers involve certain risks that may be greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of an underlying fund’s investments, and could impair the underlying fund’s ability to meet its investment objective or invest in accordance with its investment strategy. There is a risk that investments in securities denominated in, and/or receiving revenues in, foreign currencies will decline in value relative to the U.S. dollar.

• Emerging Markets Risk.Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting and reporting requirements and greater risk associated with the custody of securities. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there may be an increased risk of illiquidity and price volatility associated with an underlying fund’s investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

• Derivatives Risk. An underlying fund may use derivatives to enhance returns or hedge against market declines. Examples of derivatives are options, futures, options on futures and swaps. An option is the right to buy or sell an instrument at a specific price before a specific date. A future is an agreement to buy or sell a financial instrument at a specific price on a specific day. A swap is an agreement whereby two parties agree to exchange payment streams calculated in relation to a rate, index, instrument or certain securities and a predetermined amount. A credit default swap is an agreement in which the seller agrees to make a payment to the buyer in the event of a specified credit event in exchange for a fixed payment or series of fixed payments.

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

• Leverage Risk.Certain underlying fund transactions, such as derivatives transactions, short sales, reverse repurchase agreements, and mortgage dollar rolls, may give rise to a form of leverage and may expose an underlying fund to greater risk. Leverage tends to magnify the effect of any decrease or increase in the value of an underlying fund’s portfolio securities, which means even a small amount of leverage can have a disproportionately large impact on the underlying fund.

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

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Schwab Balanced Fund

Financial Notes(continued)

3. Risk Factors (continued):

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

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

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

• Mortgage Dollar Rolls Risk. Mortgage dollar rolls are transactions in which an underlying fund sells mortgage-backed securities to a dealer and simultaneously agrees to repurchase similar securities in the future at a predetermined price. An underlying fund’s mortgage dollar rolls could lose money if the price of the mortgage-backed securities sold falls below the agreed upon repurchase price, or if the counterparty is unable to honor the agreement.

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

4. Affiliates and Affiliated Transactions:

Investment Adviser

Shareholder Servicing

The Board has adopted a Shareholder Servicing Plan (the Plan) on behalf of the fund. The Plan enables the fund to bear expenses relating to the provision by financial intermediaries, including Charles Schwab & Co., Inc., a broker-dealer affiliate of CSIM (together, service providers), of certain shareholder services to the current shareholders of the fund. The fund is not subject to any fee under the Plan.

Expense Limitation

CSIM and its affiliates have agreed with the fund, for so long as CSIM serves as the investment adviser to the fund, which may only be amended or terminated with the approval of the Board, to limit the total annual fund operating expenses charged, excluding interest, taxes and certain non-routine expenses to 0.00%.

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

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Financial Notes(continued)

4. Affiliates and Affiliated Transactions (continued):

Investments in Affiliates

The fund may engage in certain transactions involving related parties. Pursuant to an exemptive order issued by the SEC, the fund may invest in other related funds. As of October 31, 2019, the fund’s ownership percentages of other related funds’ shares are:

Laudus U.S. Large Cap Growth Fund	3.5%
Schwab Core Equity Fund	8.5%
Schwab Small-Cap Equity Fund	9.2%
Schwab U.S. Aggregate Bond Index Fund	6.2%
Schwab Variable Share Price Money Fund, Ultra Shares	0.2%

Interfund Borrowing and Lending

Pursuant to an exemptive order issued by the SEC, the fund may enter into interfund borrowing and lending transactions with other funds in the Fund Complex (for definition refer to Trustees and Officers section). All loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the overnight repurchase agreement rate and the short-term bank loan rate. All loans are subject to numerous conditions designed to ensure fair and equitable treatment of all participating funds. The interfund lending facility is subject to the oversight and periodic review by the Board. The fund had no interfund borrowing or lending activity during the period.

5. Board of Trustees:

6. Borrowing from Banks:

7. Purchases and Sales of Investment Securities:

For the period ended October 31, 2019, purchases and sales of securities (excluding short-term obligations) were as follows:

Purchases of Securities	Sales of Securities
$215,884,405	$152,804,514

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Financial Notes(continued)

8. Federal Income Taxes:

As of October 31, 2019, the tax basis cost of the fund’s investments and gross unrealized appreciation and depreciation were as follows:

Tax cost	$484,908,783
Gross unrealized appreciation	$43,932,821
Gross unrealized depreciation	(2,463,978)
Net unrealized appreciation (depreciation)	$41,468,843

As of October 31, 2019, the components of distributable earnings on a tax basis were as follows:

Undistributed ordinary income	$4,542,108
Undistributed long-term capital gains	19,854,156
Net unrealized appreciation (depreciation) on investments	41,468,843
Total	$65,865,107

The primary difference between book basis and tax basis unrealized appreciation or unrealized depreciation of investments is the tax deferral of losses on wash sales. The tax cost of the fund’s investments, disclosed above, has been adjusted from the book amounts to reflect these unrealized appreciation or depreciation differences, as applicable.

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

Current period distributions
Ordinary income	$10,526,518
Long-term capital gains	17,523,255
Prior period distributions
Ordinary income	$11,740,011
Long-term capital gains	445,107

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

9. Subsequent Events:

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Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Schwab Capital Trust and Shareholders of Schwab Balanced Fund

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities, including the portfolio holdings, of Schwab Balanced Fund (one of the funds constituting Schwab Capital Trust, referred to hereafter as the “Fund”) as of October 31, 2019, the related statement of operations for the year ended October 31, 2019, the statement of changes in net assets for each of the two years in the period ended October 31, 2019, including the related notes, and the financial highlights for each of the five years in the period ended October 31, 2019 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of October 31, 2019, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended October 31, 2019 and the financial highlights for each of the five years in the period ended October 31, 2019 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of October 31, 2019 by correspondence with the custodian, transfer agent and broker; when replies were not received from the broker, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP
San Francisco, California
December 16, 2019

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

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Other Federal Tax Information (unaudited)

For corporate shareholders, 26.05% of the fund’s dividend distributions paid during the fiscal year ended October 31, 2019, qualify for the corporate dividends received deduction.

For the fiscal year ended October 31, 2019, the fund designates $3,086,580 of the dividend distributions as qualified dividends for the purposes of the maximum rate under section 1(h)(11) of the Internal Revenue Code. Shareholders will be notified in January 2020 via IRS Form 1099 of the amounts for use in preparing their 2019 income tax return.

Under section 852(b)(3)(C) of the Internal Revenue Code, the fund hereby designates $17,523,255 as long-term capital gain dividends for the fiscal year ended October 31, 2019.

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Investment Advisory Agreement Approval

The Board of Trustees (the Board or the Trustees, as appropriate) calls and holds one or more meetings each year that are dedicated, in whole or in part, to considering whether to renew the investment advisory and administration agreement (the Agreement) between Schwab Capital Trust (the Trust) and Charles Schwab Investment Management, Inc. (CSIM) with respect to the existing funds in the Trust, including Schwab Balanced Fund (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, business goals and priorities, profitability, third-party oversight, corporate structure and operations. As part of the renewal process, the Independent Trustees’ legal counsel sends an information request letter to CSIM seeking certain relevant information. The responses by CSIM are provided to the Trustees for their review prior to their meeting, and the Trustees are provided with the opportunity to request any additional materials. The Board also receives data provided by an independent provider of investment company data. 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 the Fund’s operations and performance, legal and compliance matters, risk management, portfolio turnover, and sales and marketing activity. The Independent Trustees receive advice from Independent Trustees’ legal counsel, including a memorandum regarding the responsibilities of trustees for the approval of investment advisory agreements. In addition, the Independent Trustees meet in executive session outside the presence of Fund management and participate in question and answer sessions with representatives of CSIM.

The Board, including a majority of the Independent Trustees, considered information specifically relating to the continuance of the Agreement with respect to the Fund at meetings held on May 13, 2019 and June 4, 2019, and approved the renewal of the Agreement with respect to the Fund for an additional

one-year term at the June 4, 2019 in person meeting called for the purpose of voting on such approval.

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

1.	the nature, extent and quality of the services provided to the Fund under the Agreement, including the resources of CSIM and its affiliates dedicated to the Fund;
2.	the Fund’s investment performance and how it compared to that of certain other comparable mutual funds and benchmark data;
3.	the Fund’s expenses and how those expenses compared to those of certain other similar 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 experience, track record, compliance program, resources dedicated to hiring and retaining skilled personnel and specialized talent, and information security resources. The Trustees also considered information provided by CSIM relating to services and support provided with respect to the Fund’s portfolio management team, portfolio strategy, and internal investment guidelines, as well as trading infrastructure, liquidity management, product design and analysis, shareholder communications, securities valuation, fund accounting and custody, and vendor and risk oversight. The Trustees also considered investments CSIM has made in its infrastructure, including modernizing CSIM’s technology and use of data, increasing expertise in key areas (including portfolio management and trade operations), and improving business continuity, cybersecurity, due diligence, risk management processes, and information security programs, which are designed to provide enhanced services to the Fund and its shareholders. The Trustees also considered that many of the Fund’s shareholders are also brokerage clients of Schwab and considered Schwab’s wide range of products, services, and channel alternatives such as investment research tools and an array of account features that benefit the Fund and shareholders who are brokerage clients of Schwab. Finally,

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the Trustees also considered Schwab’s reputation as a full service brokerage firm and the firm’s overall financial condition. 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 applicable indices/benchmarks, in light of total return, yield, if applicable, and market trends, as well as in consideration of the Fund’s investment style and strategy attributes and disclosures. As part of this review, the Trustees considered the composition of the peer category, selection criteria and the reputation of the independent provider of investment company data who prepared the peer category analysis. The Trustees further considered the level of Fund performance in the context of their review of Fund expenses and adviser profitability discussed below and also noted that performance is reviewed throughout the year by a designated committee of the Board and by the Board. Following such evaluation, the Board concluded, within the context of its full deliberations, that the performance of the Fund supported renewal of the Agreement with respect to the Fund.

Fund Expenses. With respect to the Fund’s expenses, the Trustees considered the rate of compensation called for by the Agreement, and the Fund’s net operating expense ratio, in each case, in comparison to those of other similar mutual funds, such peer groups and comparisons having been selected and calculated by an independent provider of investment company data. CSIM reported to the Board, and the Board took into account, the risk assumed by CSIM in the development of products and provision of services as well as the competitive marketplace for financial products. When applicable, the Trustees considered the effects of CSIM’s and Schwab’s practice of waiving certain fees to prevent total annual Fund operating expenses from exceeding a specified cap. The Trustees also considered CSIM’s contractual commitment to keep the Fund’s expense cap for so long as CSIM serves as the adviser to the Fund. The Trustees also considered fees charged by CSIM to other mutual funds and to other types of accounts, but, with respect to such other types of accounts, accorded less weight to such comparisons due to the different legal, regulatory, compliance and operating features of mutual funds as compared to these other types of accounts, and any differences in the nature and scope of the services CSIM provides to these other accounts, as well as differences in the market for these types of accounts. The Trustees noted that shareholders of the Fund indirectly pay their pro rata share of the fees and expenses of the underlying funds in which the Fund invests. Following such evaluation, the Board concluded, within the context of its full deliberations,

that the expenses of the Fund are reasonable and supported renewal of the Agreement with respect to the Fund.

Profitability. The Trustees considered the compensation flowing to CSIM and its affiliates, directly or indirectly and reviewed profitability on a pre-tax basis, without regard to distribution expenses. In this connection, the Trustees reviewed management’s profitability analyses. The Trustees also reviewed profitability of CSIM relating to the Schwab fund complex as a whole, noting the benefit to Fund shareholders of being part of the Schwab fund complex, including the allocations of certain fixed costs across other funds in the complex. The Trustees considered that CSIM is not charging any management fees at the Fund level; it being understood that there is a management fee at the underlying fund level. The Trustees also considered any other benefits derived by CSIM from its relationship with the Fund, such as whether, by virtue of its management of the Fund, CSIM obtains investment information or other research resources that aid it in providing advisory services to other clients. Also, because the Fund invests a portion of its assets in other funds within the Schwab fund complex, the Trustees considered whether CSIM indirectly benefits from the Fund’s investments in other underlying funds managed by CSIM. The Trustees considered whether the varied levels of 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. The Trustees noted that CSIM continues to invest substantial sums in its business in order to provide enhanced research capabilities, services, and systems to benefit the Fund. 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.

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technology, administrative, legal and compliance services to the Fund continues to increase as a result of regulatory or other developments. The Trustees considered that CSIM and its affiliates may employ contractual expense caps to protect shareholders from high fees when fund assets are relatively small, for example, in the case of newer funds or funds with investment strategies that are from time to time out of favor, because, among other reasons, 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 benefits from economies of scale.

In the course of their deliberations, the Trustees may have accorded different weights to various factors and 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.

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Trustees and Officers

Independent Trustees
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Robert W. Burns 1959 Trustee (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016)	Retired/Private Investor (Jan. 2009 – present). Formerly, Managing Director, Pacific Investment Management Company, LLC (PIMCO) (investment management firm) and President, PIMCO Funds.	101	None
John F. Cogan 1947 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Senior Fellow (Oct. 1979 – present), The Hoover Institution at Stanford University (public policy think tank); Senior Fellow (2000 – present), Stanford Institute for Economic Policy Research; Professor of Public Policy (1994 – 2015), Stanford University.	101	Director (2005 – present), Gilead Sciences, Inc.
Nancy F. Heller 1956 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2018)	President and Chairman (2014 – 2016), TIAA Charitable (financial services); Senior Managing Director (2003 – 2016), TIAA (financial services).	101	None
Stephen Timothy Kochis 1946 Trustee (Trustee of Schwab Strategic Trust since 2012; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016)	CEO and Owner (May 2012 – present), Kochis Global (wealth management consulting).	101	None

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Independent Trustees (continued)
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
David L. Mahoney 1954 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016)	Private Investor.	101	Director (2003 – present), Symantec Corporation Director (2004 – present), Corcept Therapeutics Incorporated Director (2009 – present), Adamas Pharmaceuticals, Inc.
Jane P. Moncreiff 1961 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2019)	Chief Investment Officer (2009-2017), CareGroup Healthcare System, Inc. (healthcare).	101	None
Kiran M. Patel 1948 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016)	Retired. Executive Vice President and General Manager of Small Business Group (Dec. 2008 – Sept. 2013), Intuit, Inc. (financial software and services firm for consumers and small businesses).	101	Director (2008 – present), KLA-Tencor Corporation
Kimberly S. Patmore 1956 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016)	Consultant (2008 – present), Patmore Management Consulting (management consulting).	101	None
Gerald B. Smith 1950 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2000; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Chairman, Chief Executive Officer and Founder (Mar. 1990 �� present), Smith Graham & Co. (investment advisors).	101	Director (2012 – present), Eaton Corporation plc

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Interested Trustees
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Walter W. Bettinger II² 1960 Chairman and Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Schwab Strategic Trust since 2009; Laudus Trust since 2010)	Director, President and Chief Executive Officer (Oct. 2008 – present), The Charles Schwab Corporation; President and Chief Executive Officer (Oct. 2008 – present) and Director (May 2008 – present), Charles Schwab & Co., Inc.; Director (Apr. 2006 – present), Charles Schwab Bank; Director (Nov. 2017 – present), Charles Schwab Premier Bank; Director (May 2008 – present) and President and Chief Executive Officer (Aug. 2017 – present), Schwab Holdings, Inc.; Director (July 2016 – present), Charles Schwab Investment Management, Inc.	101	Director (2008 – present), The Charles Schwab Corporation
Jonathan de St. Paer² 1973 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2019)	Director (Apr. 2019 – present), President (Oct. 2018 – present), and Chief Executive Officer (Apr. 2019 – Nov. 2019), Charles Schwab Investment Management, Inc.; Trustee and Chief Executive Officer (Apr. 2019 – present) and President (Nov. 2018 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Director (Apr. 2019 – present), Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited; Senior Vice President (Apr. 2019 – present), Senior Vice President – Strategy and Product Development (CSIM) (Jan. 2014 – Mar. 2019), and Vice President (Jan. 2009 – Dec. 2013), Charles Schwab & Co., Inc.	101	None
Joseph R. Martinetto² 1962 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016)	Chief Operating Officer (Feb. 2018 – present) and Senior Executive Vice President (July 2015 – Feb. 2018), The Charles Schwab Corporation; Senior Executive Vice President (July 2015 – present), Charles Schwab & Co., Inc.; Chief Financial Officer (July 2015 – Aug. 2017) and Executive Vice President and Chief Financial Officer (May 2007 – July 2015), The Charles Schwab Corporation and Charles Schwab & Co., Inc.; Director (May 2007 – present), Charles Schwab & Co., Inc.; Director (Apr. 2010 – present) and Chief Executive Officer (July 2013 – Apr. 2015), Charles Schwab Bank; Director (Nov. 2017 – present), Charles Schwab Premier Bank; Director (May 2007 – present), Chief Financial Officer (May 2007 – Aug. 2017), Senior Executive Vice President (Feb. 2016 – present), and Executive Vice President (May 2007 – Feb. 2016), Schwab Holdings, Inc.	101	None

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
Jonathan de St. Paer 1973 President and Chief Executive Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2018)	Director (Apr. 2019 – present), President (Oct. 2018 – present), and Chief Executive Officer (Apr. 2019 – Nov. 2019), Charles Schwab Investment Management, Inc.; Trustee and Chief Executive Officer (Apr. 2019 – present) and President (Nov. 2018 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Director (Apr. 2019 – present), Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited; Senior Vice President (Apr. 2019 – present), Senior Vice President – Strategy and Product Development (CSIM) (Jan. 2014 – Mar. 2019), and Vice President (Jan. 2009 – Dec. 2013), Charles Schwab & Co., Inc.

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Officers of the Trust (continued)
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served³)	Principal Occupations During the Past Five Years
Mark Fischer 1970 Treasurer and Chief Financial Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2013)	Treasurer and Chief Financial Officer (Jan. 2016 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Assistant Treasurer (Dec. 2013 – Dec. 2015), Schwab Funds and Laudus Funds; Assistant Treasurer (Nov. 2013 – Dec. 2015), Schwab ETFs; Vice President (Oct. 2013 – present), Charles Schwab Investment Management, Inc.; Executive Director (Apr. 2011 – Sept. 2013), J.P. Morgan Investor Services; Assistant Treasurer (May 2005 – Mar. 2011), Massachusetts Financial Service Investment Management.
George Pereira 1964 Senior Vice President and Chief Operating Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2004; Laudus Trust since 2006; Schwab Strategic Trust since 2009)	Senior Vice President and Chief Financial Officer (Nov. 2004 – present) and Chief Operating Officer (Jan. 2011 – present), Charles Schwab Investment Management, Inc.; Senior Vice President and Chief Operating Officer (Jan. 2016 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Treasurer and Chief Financial Officer (June 2006 – Dec. 2015), Laudus Funds; Treasurer and Principal Financial Officer (Nov. 2004 – Dec. 2015), Schwab Funds; Treasurer and Principal Financial Officer (Oct. 2009 – Dec. 2015), Schwab ETFs; Director (Apr. 2005 – present), Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited.
Omar Aguilar 1970 Senior Vice President and Chief Investment Officer – Equities and Multi-Asset Strategies (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President and Chief Investment Officer (Apr. 2011 – present), Charles Schwab Investment Management, Inc.; Senior Vice President and Chief Investment Officer – Equities and Multi-Asset Strategies (June 2011 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Head of the Portfolio Management Group and Vice President of Portfolio Management (May 2009 – Apr. 2011), Financial Engines, Inc. (investment management firm); Head of Quantitative Equity (July 2004 – Jan. 2009), ING Investment Management.
Brett Wander 1961 Senior Vice President and Chief Investment Officer – Fixed Income (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President and Chief Investment Officer (Apr. 2011 – present), Charles Schwab Investment Management, Inc.; Senior Vice President and Chief Investment Officer – Fixed Income (June 2011 – present), Schwab Funds, Laudus Funds and Schwab ETFs; Senior Managing Director and Global Head of Active Fixed-Income Strategies (Jan. 2008 – Oct. 2010), State Street Global Advisors; Director of Alpha Strategies (Apr. 2006 – Jan. 2008), Loomis, Sayles & Company (investment management firm).
David Lekich 1964 Chief Legal Officer and Secretary, Schwab Funds and Schwab ETFs Vice President and Assistant Clerk, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President (Sept. 2011 – present) and Vice President (Mar. 2004 – Sept. 2011), Charles Schwab & Co., Inc.; Senior Vice President and Chief Counsel (Sept. 2011 – present) and Vice President (Jan. 2011 – Sept. 2011), Charles Schwab Investment Management, Inc.; Secretary (Apr. 2011 – present) and Chief Legal Officer (Dec. 2011 – present), Schwab Funds; Vice President and Assistant Clerk (Apr. 2011 – present), Laudus Funds; Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs.
Catherine MacGregor 1964 Vice President and Assistant Secretary, Schwab Funds and Schwab ETFs Chief Legal Officer, Vice President and Clerk, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2005; Schwab Strategic Trust since 2009)	Vice President (July 2005 – present), Charles Schwab & Co., Inc.; Vice President (Sept. 2005 – present), Charles Schwab Investment Management, Inc.; Vice President (Dec. 2005 – present) and Chief Legal Officer and Clerk (Mar. 2007 – present), Laudus Funds; Vice President (Nov. 2005 – present) and Assistant Secretary (June 2007 – present), Schwab Funds; Vice President and Assistant Secretary (Oct. 2009 – present), Schwab ETFs.

¹	Each Trustee shall hold office until the election and qualification of his or her successor, or until he or she dies, resigns or is removed. The retirement policy requires that each independent trustee retire by December 31 of the year in which the Trustee turns 74 or the Trustee’s twentieth year of service as an independent trustee on any trust in the Fund Complex, whichever occurs first.
²	Mr. Bettinger, Mr. de St. Paer and Mr. Martinetto are Interested Trustees. Mr. Bettinger is an Interested Trustee because he owns stock of The Charles Schwab Corporation (CSC), the parent company of Charles Schwab Investment Management, Inc. (CSIM), the investment adviser for the trusts in the Fund Complex, is an employee and director of Charles Schwab & Co., Inc. (CS&Co), the principal underwriter for The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust, and is a director of CSIM. Mr. de St. Paer is an Interested Trustee because he owns stock of CSC and is an employee and director of CSIM. Mr. Martinetto is an Interested Trustee because he owns stock of CSC and is an employee and director of CS&Co.
³	The President, Treasurer and Secretary/Clerk hold office until their respective successors are chosen and qualified or until he or she sooner dies, resigns, is removed or becomes disqualified. Each of the other officers serves at the pleasure of the Board.

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Glossary

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

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

Balanced Blended Index A custom blended index developed by CSIM that, effective January 29, 2019, is composed of 50% S&P 500 Index, 10% Russell 2000 Index, 37% Bloomberg Barclays US Aggregate Bond Index, and 3% Bloomberg Barclays US Treasury Bills 1-3 Month Index. From August 1, 2013 to January 29, 2019, the composite was composed of 50% S&P 500 Index, 10% Russell 2000 Index, 25% Bloomberg Barclays US Aggregate Bond Index, 12% Bloomberg Barclays US Intermediate Aggregate Bond Index and 3% Bloomberg Barclays US Treasury Bills 1-3 Month Index. Prior to August 1, 2013 the Balanced Blended Index was composed of 60% S&P 500 Index and 40% Bloomberg Barclays US Aggregate Bond Index. Percentages listed may not total to 100% due to rounding.

Bloomberg Barclays US Intermediate Aggregate Bond Index An index that represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

cap, capitalization See “market cap.”

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