Schwab U.S. Small-Cap ETF NCSR Certified annual shareholder report (management investment company)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-22311

Schwab Strategic Trust

(Exact name of registrant as specified in charter)

211 Main Street, San Francisco, California 94105

(Address of principal executive offices) (Zip code)

Marie Chandoha

Schwab Strategic Trust – Schwab U.S. REIT ETF and Schwab Fundamental Index ETFs

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: February 28

Date of reporting period: February 28, 2015

Item 1:

Report(s) to Shareholders.

Annual report dated February 28, 2015, enclosed.

Schwab U.S. REIT ETF^™

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Schwab U.S. REIT ETF^™

Annual Report

February 28, 2015

This page is intentionally left blank.

In This Report

Performance at a Glance	2
From the President	3
Fund Management	5
Performance and Fund Facts	6
Fund Expenses	8
Financial Statements and Portfolio Holdings	9
Financial Notes	15
Report of Independent Registered Public Accounting Firm	23
Other Federal Tax Information	24
Other Information	25
Investment Advisory Agreement Approval	26
Trustees and Officers	28
Glossary	30

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

Distributor: SEI Investments Distribution Co. (SIDCO)

The Sector/Industry classifications in this report use the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International 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 Charles Schwab & Co., Inc. The Industry classifications used in the schedule of Portfolio Holdings are sub-categories of Sector classifications.

Table of Contents

Performance at a Glance

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

Total Returns for the 12 Months Ended February 28, 2015
Schwab U.S. REIT ETF^TM (Ticker Symbol: SCHH)
Market Price Return¹	24.48%
NAV Return¹	24.04%
Dow Jones U.S. Select REIT Index	24.13%
ETF Category: Morningstar Real Estate²	20.24%
Performance Details	pages 6-7

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.

Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption of fund shares.

Shares are bought and sold at market price, which may be higher or lower than the net asset value (NAV). Brokerage commissions will reduce returns.

Index ownership — Dow Jones^® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). The Dow Jones U.S. Select REIT Index is a product of S&P Dow Jones Indices LLC and/or its affiliates, and has been licensed for use by Charles Schwab Investment Management, Inc. The Schwab U.S. REIT ETF is not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, or any of their respective affiliates and neither S&P Dow Jones Indices LLC, Dow Jones, nor any of their respective affiliates make any representation regarding the advisability of investing in such product.

ETF performance must be shown based on both a market price and NAV basis. The fund’s per share net asset value (“NAV”) is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which the shares of the fund are listed for trading, as of the time that the fund’s NAV is calculated. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively.

Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date.

2Schwab U.S. REIT ETF

Table of Contents

From the President

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

Dear Shareholder,

At Charles Schwab Investment Management, we provide funds that are designed to be part of the foundation of a diversified portfolio. The Schwab U.S. REIT ETF represents an important part of our product line-up, and is discussed in this annual report. The fund tracks the Dow Jones U.S. Select REIT Index, and provides the benefits of ETF investing, including transparency, intraday trading, and potential tax efficiency.

For the 12-month reporting period ended February 28, 2015, the fund’s returns were in line with the 24.1% total return of the index. U.S. REITs performed well, generating nearly double the returns of the broader U.S. stock market. Part of the reason behind this outperformance was the low yield environment, which enhanced the appeal of income-oriented investments such as REITs. Relatively stable economic conditions in the U.S. supported the performance of U.S. REITs, as did declining vacancy rates, increased rental growth, and generally improving property fundamentals.

Within this environment, the performance of U.S. REITs varied considerably from one sub-industry to another. Residential REITs were among the better performers, as were Retail REITs, with each sub-industry generating returns of more than 25%. Diversified REITs, which represent REITs that tend to invest in real estate in a variety of industries and property types, and Industrial REITs, generally underperformed by comparison.

Asset Class Performance Comparison % returns during the 12 months ended 2/28/2015

For index definitions, please see the Glossary.

Data source: Index provider websites and CSIM.

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

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

Schwab U.S. REIT ETF3

Table of Contents

From the President continued

For the 12-month reporting period ended February 28, 2015, the fund’s returns were in line with the 24.1% total return of the index.

For more information about the Schwab U.S. REIT ETF, please continue reading this report. In addition, you can find further details about this ETF by visiting our new website at www.csimfunds.com, which provides improved functionality, enhanced design, and access to industry insights. We are also happy to hear from you at 1-800-435-4000.

Sincerely,

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. Past performance is not an indication of future results.

4Schwab U.S. REIT ETF

Table of Contents

Fund Management

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

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

Chuck Craig, CFA, Managing Director and Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. Prior to joining CSIM in 2012, Mr. Craig worked at Guggenheim Funds (formerly Claymore Group), where he spent over five years as a managing director of portfolio management and supervision, and three years as vice president of product research and development. Prior to that, he worked as an equity research analyst at First Trust Portfolios (formerly Niké Securities), and a trader and analyst at PMA Securities, Inc.

Schwab U.S. REIT ETF5

Table of Contents

Schwab U.S. REIT ETF^™

The Schwab U.S. REIT ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Select REIT Index (the index). The index is a float-adjusted market capitalization-weighted index comprised of real estate investment trusts (REITs). The index generally includes REITs that own and operate income-producing commercial and/or residential real estate, derive at least 75% of the REIT’s total revenue from the ownership and operation of real estate assets, and have a minimum total market capitalization of $200 million at the time of its inclusion. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.

Market Highlights. U.S. REITs generated strong returns for the 12-month reporting period and outperformed the broader U.S. stock market, supported by a rebounding U.S. economy and the Federal Reserve’s decision to maintain historically low short-term interest rates. Within the index, Residential REITs outperformed other sub-industries for the period, while Diversified REITs underperformed by comparison.

Performance. For the 12-month reporting period ended February 28, 2015, the fund closely tracked the index. The fund’s market price return was 24.48% and its NAV return was 24.04% (for an explanation of the market price and NAV returns, please refer to footnote 2 on the following page). The index returned 24.13% for the same period. Differences between the return of the fund and the return of the index may be attributable to, among other things, the trading and management costs incurred by the fund and not the index.

Contributors and Detractors. Though all sub-industries positively contributed to the return of the fund, several of these were relatively weak contributors to the fund’s total return as compared to other sub-industries. Diversified REITs, which represented an average weight of approximately 3% of the fund and returned approximately 12%, were among the smallest contributors to the return of the fund. Diversified REITs include companies or trusts with significantly diversified operations across two or more property types. One detractor within this sub-industry was Cousins Properties, Inc., a REIT that owns, develops, and manages real estate portfolios, as well as performs certain real estate-related services in the U.S. The fund’s holdings of Cousins Properties, Inc. returned approximately -5%. Industrial REITs were also relatively weak contributors to the return of the fund, representing an approximate weight of 5% and returning approximately 9% for the 12-month reporting period.

Retail REITs were the biggest contributors to the fund’s total return and represented an average weight of approximately 26% of the fund. Retail REITs include companies or trusts engaged in the acquisition, development, ownership, leasing, management and operation of shopping malls, outlet malls, and neighborhood and community shopping centers. One significant contributor in this sub-industry was Simon Property Group, Inc., a self-administered and self-managed real estate investment trust. The fund’s Simon Property Group, Inc. holdings returned approximately 29% for the 12-month reporting period. Residential REITs also provided a meaningful total return contribution for the fund. This sub-industry represented an average weight of approximately 19% of the fund and returned approximately 30%.

As of 02/28/15:

Statistics
Number of Holdings	93
Weighted Average Market Cap (millions)	$18,674
Price/Earnings Ratio (P/E)	49.4
Price/Book Ratio (P/B)	2.6
Portfolio Turnover Rate¹	15%

Sector Weightings % of Investments
Specialized REITs	27.5%
Retail REITs	26.5%
Residential REITs	19.3%
Office REITs	18.4%
Industrial REITs	5.0%
Diversified REITs	3.2%
Other	0.1%
Total	100.0%

Top Equity Holdings % of Net Assets²
Simon Property Group, Inc.	9.9%
Public Storage	4.8%
Equity Residential	4.7%
Health Care REIT, Inc.	4.2%
Ventas, Inc.	4.0%
AvalonBay Communities, Inc.	3.7%
Prologis, Inc.	3.6%
Boston Properties, Inc.	3.5%
HCP, Inc.	3.3%
Vornado Realty Trust	3.2%
Total	44.9%

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

An index is a statistical composite of a specified financial market or sector. Unlike the fund, an index does not actually hold a portfolio of securities and its return is not inclusive of trading and management costs incurred by the fund.

Source of Sector Classification: S& P and MSCI.

¹	Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
²	This list is not a recommendation of any security by the investment adviser.

6Schwab U.S. REIT ETF

Table of Contents

Schwab U.S. REIT ETF

Performance and Fund Facts as of 02/28/15

January 13, 2011 – February 28, 2015
Performance of Hypothetical
$10,000 Investment¹

Average Annual Total Returns¹

Fund and Inception Date	1 Year	3 Years	Since Inception*
Fund: Schwab U.S. REIT ETF^TM (1/13/11)
Market Price Return²	24.48%	15.16%	14.68%
NAV Return²	24.04%	15.08%	14.59%
Dow Jones U.S. Select REIT Index	24.13%	15.22%	14.74%
ETF Category: Morningstar Real Estate³	20.24%	14.48%	13.40%

Fund Expense Ratio⁴: 0.07%

For index definitions, please see the Glossary.

Shares are bought and sold at market price, which may be higher or lower than the net asset value (NAV). Brokerage commissions will reduce returns.

Investing in REITs may pose additional risks such as real estate industry risk, interest rate risk and liquidity risk.

*	Inception (1/13/11) represents the date that the shares began trading in the secondary market.
¹	Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption of fund shares.
²	ETF performance must be shown based on both a market price and NAV basis. The fund’s per share net asset value (“NAV”) is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which the shares of the fund are listed for trading, as of the time that the fund’s NAV is calculated. NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively.
³	Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date.
⁴	As stated in the prospectus.

Schwab U.S. REIT ETF7

Table of Contents

Fund Expenses (Unaudited)

Examples for a $1,000 Investment

As a fund shareholder, you may incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of fund shares; and, (2) ongoing costs, including management 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 September 1, 2014 and held through February 28, 2015.

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.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only, and do not reflect any transactional costs, including any brokerage commissions you may pay when purchasing or selling shares of a fund. 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 Ratio¹ (Annualized)	Beginning Account Value at 9/1/14	Ending Account Value (Net of Expenses) at 2/28/15	Expenses Paid During Period² 9/1/14-2/28/15
Schwab U.S. REIT ETF^TM
Actual Return	0.07%	$1,000.00	$1,114.20	$0.37
Hypothetical 5% Return	0.07%	$1,000.00	$1,024.45	$0.35

¹	Based on the most recent six-month expense ratio; may differ from the expense ratio provided in the Financial Highlights which covers a 12-month period.
²	Expenses for the fund are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by 181 days of the period, and divided by 365 days of the fiscal year.

8Schwab U.S. REIT ETF

Table of Contents

Schwab U.S. REIT ETF^™

Financial Statements

Financial Highlights

	3/1/14– 2/28/15	3/1/13– 2/28/14	3/1/12– 2/28/13	3/1/11– 2/29/12	1/12/11 ¹– 2/28/11
Per-Share Data ($)
Net asset value at beginning of period	33.06	31.96	28.30	27.28	25.00
Income (loss) from investment operations:
Net investment income (loss)	0.92	0.80	0.72	0.65	0.06
Net realized and unrealized gains (losses)	6.91	1.08	3.71	0.98	2.22
Total from investment operations	7.83	1.88	4.43	1.63	2.28
Less distributions:
Distributions from net investment income	(0.85)	(0.78)	(0.77)	(0.61)	–
Net asset value at end of period	40.04	33.06	31.96	28.30	27.28
Total return (%)	24.04	6.08	15.83	6.15	9.12 ²
Ratios/Supplemental Data (%)
Ratios to average net assets:
Total expenses	0.07	0.07	0.10 ³	0.13	0.13 ⁴
Net investment income (loss)	2.56	2.52	2.43	2.50	3.82 ⁴
Portfolio turnover rate⁵	15	11	7	5	– ²
Net assets, end of period ($ x 1,000)	1,269,306	790,052	466,567	277,370	69,566

Commencement of operations.

Not annualized.

Effective September 20, 2012, the annual operating expense ratio was reduced. The ratio presented for the period ended 2/28/13 is a blended ratio.

⁴

Annualized.

⁵

Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.

See financial notes 9

Table of Contents

Schwab U.S. REIT ETF

Portfolio Holdings as of February 28, 2015

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

The fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's website at http://www.sec.gov and may be viewed and copied at the SEC's Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the Public Reference Room. The fund also makes available its complete schedule of portfolio holdings on a daily basis on the fund's website at www.csimfunds.com/schwabetfs_prospectus.

Holdings by Category		Cost ($)	Value ($)
99.9%	Common Stock	1,082,643,335	1,268,044,614
0.1%	Other Investment Companies	618,496	686,483
100.0%	Total Investments	1,083,261,831	1,268,731,097
0.0%	Other Assets and Liabilities, Net		574,453
100.0%	Net Assets		1,269,305,550

Security	Number of Shares	Value ($)
Common Stock 99.9% of net assets
Diversified REITs 3.3%
Cousins Properties, Inc.	417,464	4,479,389
Duke Realty Corp.	732,734	15,651,198
First Potomac Realty Trust	135,211	1,615,771
Liberty Property Trust	318,926	11,870,426
PS Business Parks, Inc.	42,709	3,552,535
Washington Real Estate Investment Trust	146,153	4,141,976
		41,311,295
Industrial REITs 5.0%
DCT Industrial Trust, Inc.	188,955	6,817,496
EastGroup Properties, Inc.	67,855	4,274,865
First Industrial Realty Trust, Inc.	237,311	5,049,978
Prologis, Inc.	1,062,186	45,365,964
Rexford Industrial Realty, Inc.	101,816	1,633,129
		63,141,432
Office REITs 18.4%
Alexandria Real Estate Equities, Inc.	153,420	14,714,512
BioMed Realty Trust, Inc.	424,780	9,447,107
Boston Properties, Inc.	326,252	44,830,287
Brandywine Realty Trust	379,839	6,020,448
Columbia Property Trust, Inc.	257,167	6,658,054
Corporate Office Properties Trust	197,027	5,792,594
Digital Realty Trust, Inc.	289,616	19,224,710
Douglas Emmett, Inc.	285,311	8,236,929
DuPont Fabros Technology, Inc.	139,810	4,377,451
Equity Commonwealth *	278,851	7,375,609
Franklin Street Properties Corp.	199,687	2,522,047
Highwoods Properties, Inc.	194,012	8,848,887
Kilroy Realty Corp.	178,627	13,213,039
Mack-Cali Realty Corp.	167,335	3,147,572

Security	Number of Shares	Value ($)
New York REIT, Inc.	333,173	3,461,668
Parkway Properties, Inc.	170,220	2,997,574
Piedmont Office Realty Trust, Inc., Class A	334,506	6,131,495
SL Green Realty Corp.	205,457	26,078,657
Vornado Realty Trust	370,900	40,813,836
		233,892,476
Residential REITs 19.2%
American Campus Communities, Inc.	218,466	9,016,092
American Homes 4 Rent, Class A	288,581	4,816,417
Apartment Investment & Management Co., Class A	331,215	12,480,181
Associated Estates Realty Corp.	122,751	2,939,886
AvalonBay Communities, Inc.	280,399	47,202,368
Camden Property Trust	183,751	13,375,235
Education Realty Trust, Inc.	101,451	3,556,872
Equity LifeStyle Properties, Inc.	170,325	9,175,408
Equity Residential	771,753	59,448,133
Essex Property Trust, Inc.	136,349	30,328,108
Home Properties, Inc.	122,656	8,189,741
Mid-America Apartment Communities, Inc.	160,406	11,624,623
Post Properties, Inc.	116,395	6,619,384
Silver Bay Realty Trust Corp.	65,179	1,053,293
Sun Communities, Inc.	107,083	7,237,740
UDR, Inc.	542,101	17,314,706
		244,378,187
Retail REITs 26.5%
Acadia Realty Trust	143,526	4,902,848
Brixmor Property Group, Inc.	290,289	7,373,341
CBL & Associates Properties, Inc.	352,385	7,054,748
Cedar Realty Trust, Inc.	172,380	1,289,402
DDR Corp.	642,143	12,162,188
Equity One, Inc.	167,951	4,497,728
Federal Realty Investment Trust	145,640	20,685,249
General Growth Properties, Inc.	1,334,262	38,706,941
Inland Real Estate Corp.	189,000	2,022,300
Kimco Realty Corp.	874,066	22,970,454
Kite Realty Group Trust	177,785	5,034,871
Pennsylvania Real Estate Investment Trust	145,952	3,324,787
Ramco-Gershenson Properties Trust	165,971	3,106,977
Regency Centers Corp.	198,654	13,037,662
Rouse Properties, Inc.	74,336	1,284,526
Saul Centers, Inc.	24,299	1,308,987
Simon Property Group, Inc.	660,621	125,755,814
Tanger Factory Outlet Centers, Inc.	204,866	7,262,500
Taubman Centers, Inc.	136,036	9,840,844
The Macerich Co.	298,614	24,979,061
Urban Edge Properties *	185,461	4,439,936
Weingarten Realty Investors	242,474	8,782,408
WP GLIMCHER, Inc.	398,950	6,913,804
		336,737,376
Specialized REITs 27.5%
Ashford Hospitality Prime, Inc.	57,671	938,307
Ashford Hospitality Trust, Inc.	177,744	1,892,974
CubeSmart	346,610	8,041,352

10 See financial notes

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Schwab U.S. REIT ETF

Portfolio Holdings continued

Security	Number of Shares	Value ($)
DiamondRock Hospitality Co.	424,057	6,140,345
Extra Space Storage, Inc.	235,682	15,503,162
FelCor Lodging Trust, Inc.	237,601	2,558,963
HCP, Inc.	976,142	41,349,375
Health Care REIT, Inc.	695,601	53,637,793
Healthcare Realty Trust, Inc.	209,269	5,972,537
Hersha Hospitality Trust	445,502	2,989,318
Hospitality Properties Trust	321,739	9,912,779
Host Hotels & Resorts, Inc.	1,608,879	33,786,459
LaSalle Hotel Properties	237,315	9,236,300
LTC Properties, Inc.	76,842	3,429,459
Pebblebrook Hotel Trust	152,214	7,394,556
Public Storage	308,779	60,897,394
Senior Housing Properties Trust	489,741	10,945,711
Sovran Self Storage, Inc.	71,849	6,611,545
Strategic Hotels & Resorts, Inc. *	567,262	7,442,478
Sunstone Hotel Investors, Inc.	444,939	7,764,186
Universal Health Realty Income Trust	27,733	1,409,668
Ventas, Inc.	681,203	50,729,187
		348,583,848
Total Common Stock
(Cost $1,082,643,335)		1,268,044,614

Other Investment Companies 0.1% of net assets
Equity Fund 0.1%
SPDR Dow Jones REIT ETF	5,001	466,550

Security	Number of Shares	Value ($)
Money Market Fund 0.0%
State Street Institutional U.S. Government Money Market Fund, Premier Class 0.00% (a)	219,933	219,933
Total Other Investment Companies
(Cost $618,496)		686,483

End of Investments

At 02/28/15, the tax basis cost of the fund's investments was $1,084,421,801 and the unrealized appreciation and depreciation were $185,824,418 and ($1,515,122), respectively, with a net unrealized appreciation of $184,309,296.

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

ETF –	Exchange Traded Fund
REIT –	Real Estate Investment Trust

The following is a summary of the inputs used to value the fund’s investments as of February 28, 2015 (see financial note 2(a) for additional information):

Description	Quoted Prices in Active Markets for Identical Assets (Level 1)	Other Significant Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Common Stock¹	$1,268,044,614	$—	$—	$1,268,044,614
Other Investment Companies¹	686,483	—	—	686,483
Total	$1,268,731,097	$—	$—	$1,268,731,097

¹	As categorized in Portfolio Holdings.

The fund's policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were no transfers between Level 1, Level 2 and Level 3 for the period ended February 28, 2015.

See financial notes 11

Table of Contents

Schwab U.S. REIT ETF

Statement of

Assets and Liabilities

As of February 28, 2015

Assets
Investments, at value (cost $1,083,261,831)		$1,268,731,097
Cash		970,394
Receivables:
Fund shares sold		11,949,604
Dividends	+	566,108
Total assets		1,282,217,203
Liabilities
Payables:
Investments bought		12,897,112
Investment adviser fees	+	14,541
Total liabilities		12,911,653
Net Assets
Total assets		1,282,217,203
Total liabilities	–	12,911,653
Net assets		$1,269,305,550
Net Assets by Source
Capital received from investors		1,080,652,828
Net investment income not yet distributed		4,343,426
Net realized capital losses		(1,159,970)
Net unrealized capital appreciation		185,469,266

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$1,269,305,550		31,700,000		$40.04

12 See financial notes

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Schwab U.S. REIT ETF

Statement of

Operations

For the period March 1, 2014 through February 28, 2015

Investment Income
Dividends		$27,711,865
Expenses
Investment adviser fees		737,959
Total expenses	–	737,959
Net investment income		26,973,906
Realized and Unrealized Gains (Losses)
Net realized gains on investments		3,779,215
Net realized gains on in-kind redemptions		46,796,841
Net realized losses on futures contracts	+	(18,930)
Net realized gains		50,557,126
Net change in unrealized appreciation (depreciation) on investments	+	145,570,492
Net realized and unrealized gains		196,127,618
Increase in net assets resulting from operations		$223,101,524

See financial notes 13

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Schwab U.S. REIT ETF

Statement of

Changes in Net Assets

For the current and prior report periods

Operations
	3/1/14-2/28/15		3/1/13-2/28/14
Net investment income		$26,973,906	$14,363,480
Net realized gains		50,557,126	7,444,305
Net change in unrealized appreciation (depreciation)	+	145,570,492	7,893,159
Increase in net assets resulting from operations		223,101,524	29,700,944
Distributions to Shareholders
Distributions from net investment income		($24,242,790)	($13,544,625)

Transactions in Fund Shares
		3/1/14-2/28/15		3/1/13-2/28/14
		SHARES	VALUE	SHARES	VALUE
Shares sold		12,800,000	$470,767,488	11,200,000	$367,726,254
Shares redeemed	+	(5,000,000)	(190,372,676)	(1,900,001)	(60,397,404)
Net transactions in fund shares		7,800,000	$280,394,812	9,299,999	$307,328,850
Shares Outstanding and Net Assets
		3/1/14-2/28/15		3/1/13-2/28/14
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		23,900,000	$790,052,004	14,600,001	$466,566,835
Total increase	+	7,800,000	479,253,546	9,299,999	323,485,169
End of period		31,700,000	$1,269,305,550	23,900,000	$790,052,004
Net investment income not yet distributed			$4,343,426		$1,612,310

14 See financial notes

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Schwab U.S. REIT ETF

Financial Notes

1. Business Structure of the Fund:

Schwab U.S. REIT ETF is a series of Schwab Strategic Trust (the “trust”), a no-load, open-end management investment company. The trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The list below shows all the operational funds in the trust as of the end of the period, including the fund discussed in this report, which is highlighted:

Schwab Strategic Trust (organized January 27, 2009)	Schwab Emerging Markets Equity ETF
Schwab U.S. REIT ETF	Schwab U.S. TIPS ETF
Schwab U.S. Broad Market ETF	Schwab Short-Term U.S. Treasury ETF
Schwab U.S. Large-Cap ETF	Schwab Intermediate-Term U.S. Treasury ETF
Schwab U.S. Large-Cap Growth ETF	Schwab U.S. Aggregate Bond ETF
Schwab U.S. Large-Cap Value ETF	Schwab Fundamental U.S. Broad Market Index ETF
Schwab U.S. Mid-Cap ETF	Schwab Fundamental U.S. Large Company Index ETF
Schwab U.S. Small-Cap ETF	Schwab Fundamental U.S. Small Company Index ETF
Schwab U.S. Dividend Equity ETF	Schwab Fundamental International Large Company Index ETF
Schwab International Equity ETF	Schwab Fundamental International Small Company Index ETF
Schwab International Small-Cap Equity ETF	Schwab Fundamental Emerging Markets Large Company Index ETF

The fund issues and redeems shares at its net assets value per share (“NAV”) only in large blocks of shares, typically 50,000 shares or more (“Creation Units”). These transactions are usually in exchange for a basket of securities and an amount of cash. As a practical matter, only institutions or large investors purchase or redeem Creation Units. Except when aggregated in Creation Units, shares of the fund are not redeemable securities.

Individual shares of the fund trade on national securities exchanges and elsewhere during the trading day and can only be bought and sold at market prices throughout the trading day through a broker-dealer. Because fund shares trade at market prices rather than NAV, shares may trade at a price greater than NAV (premium) or less than NAV (discount).

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 Codification Topic 946 Financial Services - Investment Companies. The accounting policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

The 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”).

(a) Security Valuation:

Under procedures approved by the fund's Board of Trustees (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 halfway between the most recent bid and ask quotes. Securities that are primarily traded on foreign exchanges are valued at the official closing price or the last sales price on the exchange where the securities are principally traded with these values then translated into U.S. dollars at the current exchange rate, unless these securities are fair valued as discussed below.

• Securities for which no quoted value is available: The Board has adopted procedures to fair value the fund’s securities when market prices are not “readily available” or are unreliable. For example, a fund may fair value a security when it is

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Schwab U.S. REIT ETF

Financial Notes (continued)

2. Significant Accounting Policies (continued):

de-listed or its trading is halted or suspended; when a security’s primary pricing source is unable or unwilling to provide a price; or when a security’s primary trading market is closed during regular market hours. 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.

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

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

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

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 NAV, 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. As investments whose values are classified as Level 2 prices include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.

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

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Schwab U.S. REIT ETF

Financial Notes (continued)

2. Significant Accounting Policies (continued):

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

The levels associated with valuing the fund's investments as of February 28, 2015 are disclosed in the Portfolio Holdings.

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

Futures Contracts: Futures contracts are instruments that represent an agreement between two parties that obligates one party to buy, and the other party to sell, specific instruments at an agreed upon price on a stipulated future date. 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 are traded publicly on exchanges, and their market value may change daily.

As of February 28, 2015, the fund did not hold any open futures contracts.

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.

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

(d) Real Estate Investment Trusts:

The fund invests in real estate investment trusts (“REITs”) which report information on the source of their distributions annually. Certain distributions received from REITs during the year, which are known to be a return of capital or realized gains, are recorded as a reduction to the cost of the individual REITs or as realized gains on investments, respectively.

(e) Investment Income:

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

(f) Expenses:

Pursuant to the Investment Advisory Agreement (“Advisory Agreement”) between Charles Schwab Investment Management, Inc. (“CSIM” or the “investment adviser”) and the trust, the investment adviser will pay the operating expenses of the fund, excluding interest expense, taxes, any brokerage expenses, and extraordinary or non-routine expenses. Interest expense, taxes, any brokerage expenses and extraordinary or non-routine expenses that are specific to the fund are charged directly to the fund.

(g) Distributions to Shareholders:

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

(h) Accounting Estimates:

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

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Schwab U.S. REIT ETF

Financial Notes (continued)

2. Significant Accounting Policies (continued):

(i) Federal Income Taxes:

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

(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.

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. Stock and bond markets and the values of securities held by the fund rise and fall daily. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that the investors could lose money.

Investment Style Risk. The fund is not actively managed. Therefore, the fund follows the securities included in the index during upturns as well as downturns. Because of its indexing strategy, the fund does not take steps to reduce market exposure or to lessen the effects of a declining market. In addition, because of the fund's expenses, the fund’s performance may be below that of its respective index.

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

Large-Cap Risk. The fund will invest in large-cap segments of the U.S. stock market. Large-cap stocks tend to go in and out of favor based on market and economic conditions. During a period when large-cap U.S. stocks fall behind other types of investments—mid- or small-cap stocks, for instance—the fund’s large-cap holdings could reduce performance.

Small- and Mid-Cap Risk. REITs and other real estate companies may be small- to medium- sized companies in relation to the equity markets as a whole. Historically, mid- and small-cap stocks have been riskier than large-cap stocks. Mid- and small-cap companies themselves may be more vulnerable to adverse business or economic events than larger, more established companies. Stock prices of smaller companies may be based in substantial part on future expectations rather than current achievements and may move sharply, especially during market upturns and downturns. During a period when mid- and small-cap stocks fall behind other types of investments—bonds or large-cap stocks, for instance—the fund’s small- and mid-cap holdings could reduce performance.

REITs Risk. In addition to the risks associated with investing in securities of real estate companies and real estate related companies, REITs are subject to certain additional risks. Equity REITs may be affected by changes in the value of the underlying properties owned by the trusts. Further, REITs are dependent upon specialized management skills and may have their investments in relatively few properties, or in 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 to the fund. In addition, REITs have their own expenses, and the fund will bear a proportionate share of those expenses.

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

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Schwab U.S. REIT ETF

Financial Notes (continued)

3. Risk Factors (continued):

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

Derivatives Risk. The fund may invest in derivative instruments. The principal types of derivatives the fund may use are futures contracts. A futures contract is an agreement to buy or sell a financial instrument at a specific price on a specific day. 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 market risk and liquidity risk, are discussed elsewhere in this section. The fund’s use of derivatives is also subject to leverage risk, credit risk, lack of availability risk, valuation risk, correlation risk and tax risk. Leverage risk is the risk that use of derivatives may magnify the effect of any decrease or increase in the value of the fund’s portfolio securities. Credit risk is the risk that the counterparty to a derivative transaction may not fulfill its contractual obligations. 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 the fund to realize higher amounts of short-term capital gain. These risks could cause the fund to lose more than the principal amount invested.

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

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

Market Trading Risk. Although fund shares are listed on national securities exchanges, there can be no assurance that an active trading market for fund shares will develop or be maintained. If an active market is not maintained, investors may find it difficult to buy or sell fund shares.

Shares of the Fund May Trade at Prices Other Than NAV. Fund shares may be bought and sold in the secondary market at market prices. Although it is expected that the market price of the shares of the fund will approximate the fund’s NAV, there may be times when the market price and the NAV vary significantly. Investors may pay more than NAV when they buy shares of the fund in the secondary market, and may receive less than NAV when they sell those shares in the secondary market (See Frequency Distribution of Discounts and Premiums in Other Information for an overview showing the frequency at which the daily closing price was at a discount or a premium to the fund's daily NAV).

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:

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

For its advisory services to the fund, CSIM is entitled to receive an annual fee, payable monthly, equal to 0.07% of the fund's average daily net assets.

Certain Schwab funds may own shares of other Schwab Funds. The table below reflects the percentage of outstanding shares of the fund that are owned by other Schwab funds as of February 28, 2015.


Schwab VIT Balanced Portfolio	0.2%
Schwab VIT Balanced with Growth Portfolio	0.5%
Schwab VIT Growth Portfolio	0.5%

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Schwab U.S. REIT ETF

Financial Notes (continued)

4. Affiliates and Affiliated Transactions (continued):

Pursuant to an exemptive order issued by the SEC, the fund may enter into interfund borrowing and lending transactions with other Schwab Funds, including Schwab ETFs. All loans are for temporary or emergency purposes only. The interest rate to be charged on a loan is the average of the overnight repurchase agreement rate and the short-term bank loan rate. The interfund lending facility is subject to the oversight and periodic review of the Board. The fund had no interfund borrowing or lending activity during the period.

5. Other Service Providers:

SEI Investments Distribution Co. is the principal underwriter and distributor of shares of the fund.

State Street Bank and Trust Company (“State Street”) serves as the fund’s transfer agent. As part of these services, the transfer agent maintains records pertaining to the sale, redemption and transfer of the fund’s shares.

State Street also serves as custodian and accountant for the fund. The custodian is responsible for the daily safekeeping of securities and cash held by the fund. The fund’s accountant maintains all books and records related to the fund’s transactions.

6. 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. For information regarding the trustees please refer to the Trustees and Officers table at the end of this report.

7. Borrowing from Banks:

The fund has access to custodian overdraft facilities and to an uncommitted line of credit of $100 million with State Street. The fund pays interest on the amounts it borrows at rates that are negotiated periodically.

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

8. Derivatives:

The fund entered into equity index futures contracts during the report period. The fund invested in futures to equitize available cash. The fair value and variation margin for futures contracts held at February 28, 2015, if any, are presented on the Portfolio Holdings and Statement of Assets and Liabilities, respectively. The net realized and change in unrealized gains (losses) on futures contracts are presented on the Statement of Operations. Refer to financial note 2(b) for the fund’s accounting policies with respect to futures contracts and financial note 3 for disclosures concerning the risks of investing in futures contracts. During the period, the month-end average contract values of futures contracts held by the fund was $64,160 and the month-end average number of contracts held was 1.

9. Purchases and Sales/Maturities of Investment Securities:

For the period ended February 28, 2015, purchases and sales/maturities of securities (excluding in-kind transactions and short-term obligations) were as follows:

	Purchases of Securities		Sales/Maturities of Securities
Schwab U.S. REIT ETF	$174,837,311		$158,806,552

10. In-Kind Transactions:

The consideration for the purchase of Creation Units of the fund generally consists of the in-kind deposit of a designated portfolio of equity securities, which constitutes an optimized representation of the securities involved in a relevant fund’s underlying index, and an amount of cash. Investors purchasing and redeeming Creation Units are subject to a standard creation transaction fee and a standard redemption transaction fee paid to the custodian to offset transfer and other transaction costs associated with the issuance and redemption of Creation Units. Purchasers and redeemers of Creation Units

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Schwab U.S. REIT ETF

Financial Notes (continued)

10. In-Kind Transactions (continued):

for cash are subject to an additional variable charge paid to the fund that will offset the transaction costs to the fund of buying or selling portfolio securities. In addition, purchasers and redeemers of shares in Creation Units are responsible for payment of the costs of transferring securities to or out of the fund. From time to time, CSIM may cover the cost of any transaction fees when believed to be in the best interests of the fund.

The in-kind transactions for the period ended February 28, 2015 were as follows:

	In-Kind Purchases of Securities		In-Kind Sales of Securities
Schwab U.S. REIT ETF	$457,023,180		$177,786,220

For the period ended February 28, 2015, the fund realized net capital gains or losses resulting from in-kind redemptions of Creation Units. Because such gains or losses are not taxable to the fund and are not distributed to existing fund shareholders, the gains or losses are reclassified from accumulated net realized gains or losses to capital received from investors at the end of the fund's tax year. These reclassifications have no effect on net assets or net asset values per share. The net realized in-kind gains or losses for the period ended February 28, 2015 are disclosed in the fund's Statement of Operations.

11. Federal Income Taxes

As of February 28, 2015, the components of distributable earnings on a tax-basis were as follows:

Undistributed ordinary income	$4,343,426
Undistributed long-term capital gains	—
Unrealized appreciation	185,824,418
Unrealized depreciation	(1,515,122)
Net unrealized appreciation (depreciation)	184,309,296

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.

As of February 28, 2015, the fund had no capital loss carryforwards.

For tax purposes, realized net capital losses and late-year ordinary losses incurred after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the year ended February 28, 2015, the fund had capital losses carryforwards utilized in the amount of $876,325.

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

Current period distributions
Ordinary income	$24,242,790
Long-term capital gains	—
Return of capital	—
Prior period distributions
Ordinary income	13,544,625
Long-term capital gains	—
Return of capital	—

Distributions paid to shareholders are based on net investment income and net realized gains determined on a tax basis, which may differ from net investment income and net realized gains for financial reporting purposes. These differences are due primarily to differing treatment for items such as short-term capital gains and losses, in-kind transactions, capital losses related to wash sales, and income on certain investments. The fiscal year in which amounts are distributed may differ from the year in which the net investment income and net realized gains are recorded by the fund for financial reporting purposes. The fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes.

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Schwab U.S. REIT ETF

Financial Notes (continued)

11. Federal Income Taxes (continued):

The permanent book and tax basis differences may result in reclassifications between components of net assets as required. The adjustments have no impact on net assets or the results of operations. As of February 28, 2015, the fund made the following reclassifications:

Capital shares	$49,389,641
Undistributed net investment income	—
Net realized gains and losses	(49,389,641)

For the period ended February 28, 2015, the fund reclassified $46,796,841 of non-taxable security gains and losses realized on the in-kind redemption of Creation Units (Note 10) as an increase or decrease to capital received from investors in the Statement of Assets and Liabilities.

As of February 28, 2015, management has reviewed the tax positions for open periods (for federal purposes, three years from the date of filing and for state purposes, four years from the date of filing) as applicable to the fund, and has determined that no provision for income tax is required in the fund's financial statements. The fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the period ended February 28, 2015, the fund did not incur any interest or penalties.

12. Subsequent Events:

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

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Report of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholders of:
Schwab U.S. REIT ETF

In our opinion, the accompanying statement of assets and liabilities, including the portfolio holdings, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Schwab U.S. REIT ETF (one of the funds constituting Schwab Strategic Trust, hereafter referred to as the “Fund”) at February 28, 2015, and 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 then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2015 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
San Francisco, California
April 16, 2015

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Other Federal Tax Information (unaudited)

Under Section 852 (b)(3)(C) of the Internal Revenue Code, the fund hereby designates $2,724,703 long term capital gain dividends for the fiscal year ended February 28, 2015.

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Other Information (unaudited)

Frequency Distribution of Discounts and Premiums
Market Price vs. NAV as of February 28, 2015

The following charts are provided to show the frequency at which the daily closing market price on the NYSE Arca, Inc. (“Exchange”), the secondary market for shares of the fund, was at a discount or premium to such fund's daily NAV. The “Market Price” of the fund generally is determined using the midpoint between the highest bid and lowest offer on the Exchange, as of the time that the fund's NAV is calculated. The discount or premium is the percentage difference between the NAV and the Market Price of a fund. A discount is the amount that a fund is trading below the reported NAV, expressed as a percentage of NAV. A premium is the amount that a fund is trading above the reported NAV, expressed as a percentage of NAV. The NAV of the fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of the fund will fluctuate in accordance with changes in its NAV, as well as supply and demand. The data presented below represents past performance and cannot be used to predict future results. The chart does not include days in which the NAV equals the Market Price.

	Number of Days Market Price Above NAV				Number of Days Market Price Below NAV
	1-49 Basis Points	50-99 Basis Points	100-199 Basis Points	>200 Basis Points	1-49 Basis Points	50-99 Basis Points	100-199 Basis Points	>200 Basis Points

Commencement of trading
1/13/11 through 2/28/15	672	—	—	—	205	—	—	—

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Investment Advisory Agreement Approval

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

The Board of Trustees (the “Board” or the “Trustees”, as appropriate) calls and holds a meeting each year that is dedicated, in part, to considering whether to renew the investment advisory agreement between Schwab Strategic Trust (the “Trust”) and Charles Schwab Investment Management, Inc. (“CSIM”) (the “Agreement”) with respect to the existing funds in the Trust, including Schwab U.S. REIT ETF (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, the Board requests and reviews a wide variety of materials provided by CSIM, including information about CSIM’s affiliates, personnel and operations. The Board also receives extensive data provided by third parties. This information is in addition to the detailed information about the Fund that the Board reviews during the course of each year, including information that relates to Fund operations and Fund performance. In addition, the Independent Trustees meet in executive session outside the presence of Fund management and participate in question and answer sessions with representatives of CSIM.

The Board, including a majority of the Independent Trustees, considered information specifically relating to its consideration of the continuance of the Agreement with respect to the Fund at a meeting held on September 3, 2014, and approved the renewal of the Agreement with respect to the Fund for an additional one year term. The Board’s approval of the Agreement with respect to the Fund was based on consideration and evaluation of a variety of specific factors discussed at this meeting 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 exchange-traded funds;

3.	the Fund’s expenses and how those expenses compared to those of certain other comparable exchange-traded funds;
4.	the profitability of CSIM and its affiliates, including Charles Schwab & Co., Inc. (“Schwab”), with respect to the Fund, including both direct and indirect benefits accruing to CSIM and its affiliates; and
5.	the extent to which economies of scale would be realized as the Fund grows and whether fee levels in the Agreement reflect those economies of scale for the benefit of Fund investors.

Nature, Extent and Quality of Services. The Board considered the nature, extent and quality of the services provided by CSIM to the Fund and the resources of CSIM and its affiliates dedicated to the Fund. In this regard, the Trustees evaluated, among other things, CSIM’s personnel, experience, track record and compliance program. The Trustees also considered Schwab’s wide range of products, services, and channel alternatives such as free advice, investment research tools and Internet access and an array of account features that benefit the Fund and its shareholders. The Trustees also considered Schwab’s excellent reputation as a full service brokerage firm and its overall financial condition. Finally, the Trustees considered that the vast majority of the Fund’s shareholders are also brokerage clients of Schwab. Following such evaluation, the Board concluded, within the context of its full deliberations, that the nature, extent and quality of services provided by CSIM to the Fund and the resources of CSIM and its affiliates dedicated to the Fund supported renewal of the Agreement with respect to the Fund.

Fund Performance. The Board considered 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 exchange-traded funds and appropriate indices/benchmarks, in light of total return, yield, if applicable, and market trends. As part of this review, the Trustees considered the composition of the peer category, selection criteria and the reputation of the third party who prepared the peer category analysis. In evaluating the performance of the Fund, the Trustees considered both risk and shareholder risk expectations for the Fund. The Trustees further considered the level of Fund performance in the context of its review of Fund expenses and adviser profitability discussed below. Following such evaluation the Board concluded, within the context of its full deliberations, that the performance of the Fund supported renewal of the Agreement with respect to the Fund.

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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 operating expense ratio, in each case, in comparison to those of other comparable exchange-traded funds, such peer groups and comparisons having been selected and calculated by an independent third party. The Trustees also considered fees charged by CSIM to mutual funds that it manages. Following such evaluation, the Board concluded, within the context of its full deliberations, that the expenses of the Fund are reasonable and supported renewal of the Agreement with respect to the Fund.

Profitability. With regard to profitability, the Trustees considered the compensation flowing to CSIM and its affiliates, directly or indirectly. In this connection, the Trustees reviewed management’s profitability analyses. The Trustees also considered any other benefits derived by CSIM from its relationship with the Fund, such as whether, by virtue of its management of the Fund, CSIM obtains investment information or other research resources that aid it in providing advisory services to other clients. The Trustees considered whether the 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. Based on this evaluation, the Board concluded, within the context of its full deliberations, that the profitability of CSIM is reasonable and supported renewal of the Agreement with respect to the Fund.

Economies of Scale. The Trustees considered the existence of any economies of scale and whether those are passed along to the Fund’s shareholders by way of the relatively low advisory fee and unitary fee structure of the Fund. Based on this evaluation, the Board concluded, within the context of its full deliberations, that the Fund obtains reasonable benefit from economies of scale.

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

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Trustees and Officers

The tables below give information about the trustees and officers for the Schwab Strategic 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, Laudus Trust and Laudus Institutional Trust. The Fund Complex includes 95 funds.

The address for all trustees and officers is 211 Main Street, San Francisco, CA 94105. You can find more information about the trustees and officers in the Statement of Additional Information, which is available free by calling 1-800-435-4000.

Independent Trustees
Name, Year of Birth, and Position(s) with the trust; (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Robert W. Burns 1959 Trustee (Trustee since 2009)	Retired/Private Investor (January 2009 – present); Formerly, Managing Director, Pacific Investment Management Company, LLC (PIMCO) and President, PIMCO Funds.	21	Director, PS Business Parks, Inc. (2005 – 2012).
Stephen Timothy Kochis 1946 Trustee (Trustee since 2012)	CEO and Owner, Kochis Global (wealth management consulting) (May 2012 – present); Chairman and CEO, Aspiriant, LLC (wealth management) (January 2008 – April 2012).	21	None
Charles A. Ruffel 1956 Trustee (Trustee since 2009)	Managing Partner and Co-Founder, Kudu Advisors, LLC (financial services) (May 2009 – present); Director, Asset International, Inc. (publisher of financial services information) (Jan. 2009 – Nov. 2014).	95	None

Interested Trustees
Name, Year of Birth, and Position(s) with the trust; (Terms of office, and length of Time Served)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Walter W. Bettinger II² 1960 Chairman and Trustee (Chairman and Trustee since 2009)	Director, President and Chief Executive Officer, The Charles Schwab Corporation and Charles Schwab & Co., Inc. (2008 – present); Director, Charles Schwab Bank (2006 – present); and Director Schwab Holdings, Inc. (2008 – present).	95	Director, The Charles Schwab Corporation (2008 – present)

Officers of the Trust
Name, Year of Birth, and Position(s) with the trust; (Terms of office, and length of Time Served³)	Principal Occupations During the Past Five Years
Marie Chandoha 1961 President and Chief Executive Officer (Officer since 2010)	Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; President, Chief Executive Officer (Dec. 2010 – present), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (January 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (March 2007 – August 2010)..

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

¹	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 Schwab ETF’s retirement policy requires that independent trustees retire by December 31 of the year in which the Trustee turns 72 or the Trustee’s twentieth year of service as an independent trustee, whichever comes first.
²	Mr. Bettinger is an Interested Trustee because he owns stock of The Charles Schwab Corporation, the parent company of the investment adviser.
³	The President, Treasurer and Secretary hold office until their respective successors are chosen and qualified or until he or she sooner dies, resigns, is removed or becomes disqualified. Each of the other officers serves at the pleasure of the Board.

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Glossary

ask See “offer.”

asset allocation The practice of dividing a portfolio among different asset classes, with each asset class assigned a particular percentage to help offset risks and rewards, based on your goals, time horizon and risk tolerance.

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

authorized participant (AP) A large institutional investor that places orders for creation units with the funds’ distributor.

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

beta A historical measure of an investment’s volatility relative to a market index (usually the S&P 500^®). The index is defined as having a beta of 1.00. Investments with a beta higher than 1.00 have been more volatile than the index; those with a beta of less than 1.00 have been less volatile.

bid The highest price at which someone is willing to buy a security.

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 gain or loss is still “on paper” and is considered unrealized.

commencement of operations The date that the first NAV was calculated.

creation unit (C.U.) A basket of securities that is delivered by an authorized participant (AP) to the fund equal to the current holdings of the ETF, plus a designated cash component. In return, the APs receive a large block of ETF shares (typically 50,000 shares), which investors can then buy and sell in the secondary market.

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

exchange A marketplace, or any organization or group that provides or maintains a marketplace for trading securities, options, futures, or commodities.

expense ratio The amount that is taken from the fund’s assets each year to cover the 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.

inception date The date that the shares began trading in the secondary market.

indicative optimized portfolio value (IOPV) A calculation disseminated by the stock exchange that approximates the fund’s NAV every 15 seconds throughout the trading day.

liquidity The ability to convert a security or asset quickly into cash.

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

market price return The return based on the change in market price per share of the fund over a given time period. Market price returns assume that dividends and capital gain distributions have been reinvested in the fund at market price.

median market cap The midpoint of the range of market caps of the stocks held by a fund. There are different ways of calculating median market cap. With a simple median, half of the stocks in the fund’s portfolio would be larger than the median, and half would be smaller. With a weighted median (the type that is calculated for these funds), half of the fund’s assets are invested in stocks that are larger than the median market cap, and half in stocks that are smaller.

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

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

NAV return The return based on the change in NAV of the fund over a given time period. NAV returns assume that dividends and capital gain distributions have been reinvested in the fund.

offer (ask) The lowest price at which an individual is willing to sell a security.

open The price at which a security opened for trading on a given day.

outstanding shares, shares outstanding When speaking of the 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.

primary market The market that deals with the issuance of new securities.

real estate investment trust (REIT) Real estate companies that own and commonly operate income producing commercial and/or residential real estate.

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

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sampling If a fund uses a sampling method, the fund will not fully replicate the benchmark index and may hold securities not included in the index. A fund that utilizes a sampling approach may not track the return of the index.

secondary market The market in which investors purchase securities from other investors rather than directly from the issuing companies. Organized exchanges facilitate the trading of securities in the secondary market.

spread The gap between bid and ask prices of a security.

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.

tracking error The difference between the performance of the fund and its benchmark index, positive or negative.

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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.

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

How We Collect Information About You

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

• APPLICATION AND REGISTRATION
INFORMATION.

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

• TRANSACTION AND EXPERIENCE INFORMATION.

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

• WEBSITE USAGE.

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

tools help us to recognize you, maintain your web session, and provide a more personalized experience. To learn more, please go to www.schwab.com/privacy.

How We Share and Use Your Information

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

• to help us process transactions for your account;

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

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

State Laws

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

Safeguarding Your Information — Security Is a Partnership

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

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

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

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

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

Schwab ETF™ direct investors: 1-800-435-4000

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Schwab ETFs™ are designed to be low-cost, diversified investments. Each fund follows broad market indices and provides exposure to specific segments of the market, making each an investment option for the core portions of an investor portfolio. The list to the right shows all currently available Schwab ETFs.

Investors should carefully consider information contained in the prospectus, including investment objectives, risks, charges and expenses before investing. Please call 1-800-435-4000 for a prospectus and brochure for any Schwab ETF. 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 ETFs’ website at www.csimfunds.com/schwabetfs_prospectus, the SEC’s website at http://www.sec.gov, or by contacting Schwab ETFs at 1-800-435-4000.

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

Schwab ETFs™

U.S. ETFs

Schwab U.S. Broad Market ETF™
Schwab U.S. Large-Cap ETF™
Schwab U.S. Large-Cap Growth ETF™
Schwab U.S. Large-Cap Value ETF™
Schwab U.S. Mid-Cap ETF™
Schwab U.S. Small-Cap ETF™
Schwab U.S. Dividend Equity ETF™
Schwab U.S. REIT ETF™

International ETFs

Schwab International Equity ETF™
Schwab International Small-Cap Equity ETF™
Schwab Emerging Markets Equity ETF™

Fixed Income ETFs

Schwab U.S. Aggregate Bond ETF™
Schwab Short-Term U.S. Treasury ETF™
Schwab Intermediate-Term U.S. Treasury ETF™
Schwab U.S. TIPS ETF™

Fundamental Index* ETFs

Schwab Fundamental U.S. Broad Market Index ETF
Schwab Fundamental U.S. Large Company Index ETF
Schwab Fundamental U.S. Small Company Index ETF
Schwab Fundamental International Large Company Index ETF
Schwab Fundamental International Small Company Index ETF
Schwab Fundamental Emerging Markets Large Company Index ETF

*	FUNDAMENTAL INDEX is a registered trademark of Research Affiliates LLC.

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Investment Adviser

Charles Schwab Investment Management, Inc.
211 Main Street, San Francisco, CA 94105

Schwab ETFs™

1-800-435-4000

This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus.
© 2015 Charles Schwab Investment Management, Inc. All rights reserved.
Printed on recycled paper.

MFR60994-04
00137725

Table of Contents

Annual report dated February 28, 2015, enclosed.

Schwab Fundamental Index* ETFs

Schwab Fundamental
U.S. Broad Market Index ETF

Schwab Fundamental
U.S. Large Company Index ETF

Schwab Fundamental
U.S. Small Company Index ETF

Schwab Fundamental
International Large Company
Index ETF

Schwab Fundamental
International Small Company
Index ETF

Schwab Fundamental
Emerging Markets Large
Company Index ETF

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*	SCHWAB is a registered trademark of Charles Schwab & Co., Inc. FUNDAMENTAL INDEX is a registered trademark of Research Affiliates LLC.

This wrapper is not part of the shareholder report.

Schwab Fundamental Index* ETFs

Annual Report

February 28, 2015

Schwab Fundamental
U.S. Broad Market Index ETF

Schwab Fundamental
U.S. Large Company Index ETF

Schwab Fundamental
U.S. Small Company Index ETF

Schwab Fundamental
International Large Company
Index ETF

Schwab Fundamental
International Small Company
Index ETF

Schwab Fundamental
Emerging Markets Large
Company Index ETF

*	SCHWAB is a registered trademark of Charles Schwab & Co., Inc. FUNDAMENTAL INDEX is a registered trademark of Research Affiliates LLC.

This page is intentionally left blank.

In This Report

Performance at a Glance	2
From the President	3
Fund Management	5
Performance and Fund Facts	6
Schwab Fundamental U.S. Broad Market Index ETF	6
Schwab Fundamental U.S. Large Company Index ETF	8
Schwab Fundamental U.S. Small Company Index ETF	10
Schwab Fundamental International Large Company Index ETF	12
Schwab Fundamental International Small Company Index ETF	14
Schwab Fundamental Emerging Markets Large Company Index ETF	16
Fund Expenses	18
Financial Statements and Portfolio Holdings	19
Schwab Fundamental U.S. Broad Market Index ETF	19
Schwab Fundamental U.S. Large Company Index ETF	26
Schwab Fundamental U.S. Small Company Index ETF	33
Schwab Fundamental International Large Company Index ETF	40
Schwab Fundamental International Small Company Index ETF	47
Schwab Fundamental Emerging Markets Large Company Index ETF	54
Financial Notes	61
Report of Independent Registered Public Accounting Firm	72
Other Federal Tax Information	73
Other Information	74
Investment Advisory Agreement Approval	75
Trustees and Officers	77
Glossary	79

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

Distributor: SEI Investments Distribution Co. (SIDCO)

The Sector/Industry classifications in this report use the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International 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 Charles Schwab & Co., Inc. The Industry classifications used in the schedules of Portfolio Holdings are sub-categories of Sector classifications.

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Performance at a Glance

Total Returns for the 12 Months Ended February 28, 2015
Schwab Fundamental U.S. Broad Market Index ETF (Ticker Symbol: FNDB)
Market Price Return¹	13.78%
NAV Return¹	13.54%
Russell Fundamental U.S. Index	13.89%
ETF Category: Morningstar Large Value²	14.42%
Performance Details	pages 6-7

Schwab Fundamental U.S. Large Company Index ETF (Ticker Symbol: FNDX)
Market Price Return¹	14.11%
NAV Return¹	13.92%
Russell Fundamental U.S. Large Company Index	14.34%
ETF Category: Morningstar Large Value²	14.42%
Performance Details	pages 8-9

Schwab Fundamental U.S. Small Company Index ETF (Ticker Symbol: FNDA)
Market Price Return¹	9.02%
NAV Return¹	9.06%
Russell Fundamental U.S. Small Company Index	9.34%
ETF Category: Morningstar Small Blend²	6.95%
Performance Details	pages 10-11

Total Returns for the 12 Months Ended February 28, 2015
Schwab Fundamental International Large Company Index ETF (Ticker Symbol: FNDF)
Market Price Return¹	-2.28%
NAV Return¹	-2.11%
Russell Fundamental Developed ex-U.S. Large Company Index (Net)*	-1.79%
ETF Category: Morningstar Foreign Large Value²	-1.87%
Performance Details	pages 12-13

Schwab Fundamental International Small Company Index ETF (Ticker Symbol: FNDC)
Market Price Return¹	-0.61%
NAV Return¹	-0.32%
Russell Fundamental Developed ex-U.S. Small Company Index (Net)*	0.25%
ETF Category: Morningstar Foreign Small/Mid Blend²	-2.20%
Performance Details	pages 14-15

Schwab Fundamental Emerging Markets Large Company Index ETF (Ticker Symbol: FNDE)
Market Price Return¹	-1.33%
NAV Return¹	-1.98%
Russell Fundamental Emerging Markets Large Company Index (Net)*	-1.34%
ETF Category: Morningstar Diversified Emerging Markets²	2.73%
Performance Details	pages 16-17

For index definitions, please see the Glossary.

Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption of fund shares.

Shares are bought and sold at market price, which may be higher or lower than the net asset value (NAV). Brokerage commissions will reduce returns.

Index ownership — each of the names identifying a Russell Fundamental Index is a joint trademark of Russell Investments (“Russell”) and Research Affiliates LLC (“RA”) and is used by the funds under license. “Research Affiliates” and “Fundamental Index” are trademarks of RA. Subject to RA’s intellectual property rights in certain content, Russell is the owner of all copyrights related to the Russell Fundamental Index Series. Russell is the owner of the trademarks and copyrights related to the Russell Indexes. Schwab Fundamental Index ETFs are not sponsored, endorsed, sold or promoted by Russell or RA, and Russell and RA do not make any representation regarding the advisability of investing in shares of the funds.

*	The total return cited for the index is calculated net of foreign withholding taxes.
¹	ETF performance must be shown based on both a market price and NAV basis. The fund’s per share net asset value (“NAV”) is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which the shares of the fund are listed for trading, as of the time that the fund’s NAV is calculated. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively.
²	Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date.

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From the President

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

Dear Shareholder,

At Charles Schwab Investment Management, we provide funds that are designed to be part of the foundation of a diversified portfolio. The Schwab Fundamental Index ETFs represent an important part of our product line-up, and are discussed in this annual report.

In recent years, fundamentally weighted strategies have experienced considerable asset growth. Unlike traditional equity indices that are often weighted by market capitalization, fundamentally weighted indices select and weight stocks by objective non-price measures, such as dividends, cash flow, and sales. By using this weighting methodology, the Schwab Fundamental Index ETFs can serve as effective complements to capitalization-weighted index funds and actively managed investment vehicles. These funds also provide the benefits of ETF investing, including transparency, intraday trading, and potential tax efficiency.

For the 12-month reporting period ended February 28, 2015, the funds produced returns that generally tracked their respective indices, with the U.S. funds outperforming the international funds, which generated negative returns. U.S. stocks benefitted from relatively stable economic conditions within the U.S., while international stocks were hurt by the depreciation of many international currencies versus the U.S. dollar. The dollar’s strength reflected signs of decoupling between central bank policies in the U.S. and other countries. In addition, falling commodity prices and political tensions in Russia reduced returns for emerging market stocks.¹ Reflecting these

Asset Class Performance Comparison % returns during the 12 months ended 2/28/2015

For index definitions, please see the Glossary.

Data source: Index provider websites and CSIM.

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

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

Schwab Fundamental Index ETFs3

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From the President continued

conditions, the Russell Fundamental U.S. Large Company Index returned 14.3% and the Russell Fundamental Developed ex-U.S. Large Company Index returned -1.8%.²

For more information about the Schwab Fundamental Index ETFs, please continue reading this report. In addition, you can find further details about these ETFs by visiting our new website at www.csimfunds.com, which provides improved functionality, enhanced design, and access to industry insights. We are also happy to hear from you at 1-800-435-4000.

Sincerely,

1 To find out more information, please read “Investments in Russian Securities” in the “Insights” tab on CSIMFunds.com.

2 The total return cited for the index is calculated net of foreign withholding taxes.

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Fund Management

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

Chuck Craig, CFA, Managing Director and Senior Portfolio Manager, is responsible for the day-to-day co-management of the funds. Prior to joining CSIM in 2012, Mr. Craig worked at Guggenheim Funds (formerly Claymore Group), where he spent over five years as a managing director of portfolio management and supervision, and three years as vice president of product research and development. Prior to that, he worked as an equity research analyst at First Trust Portfolios (formerly Niké Securities), and a trader and analyst at PMA Securities, Inc.

Jane Qin, Portfolio Manager, is responsible for the day-to-day co-management of the funds. Prior to joining CSIM in 2013, Ms. Qin worked at The Bank of New York Mellon Corporation, where she spent more than two years as an associate equity portfolio manager, and nearly two years as a performance analyst. Prior to that, Ms. Qin worked at Wells Fargo Fund Management as a mutual fund analyst and at CIGNA Reinsurance in the Variable Annuity Death Benefits (VADBe) Risk Management group as a risk analyst.

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Schwab Fundamental U.S. Broad Market Index ETF

The Schwab Fundamental U.S. Broad Market Index ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of the Russell Fundamental U.S. Index (the index). This index measures the performance of the companies by fundamental overall company scores that are created using the universe the companies in the Russell 3000^® Index. To pursue its investment objective, the fund invests in a statistical sample of the securities included in the index that collectively has a similar investment profile to the index. Due to the use of statistical sampling, the fund may not hold all of the securities in the index. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.

Market Highlights. U.S. stocks performed well during the reporting period, in part due to a rebounding U.S. economy, strengthening consumer sentiment, and favorable earnings reports by select companies. Several U.S. indices were able to overcome increased market volatility and reach record highs in the second half of the reporting period, even as many economies outside the U.S. struggled with fragile recoveries. Within the index, stocks in the Health Care and Consumer Staples sectors were some of the better performers, while stocks in the Energy and Materials sectors underperformed by comparison.

Performance. For the 12-month reporting period ended February 28, 2015, the fund closely tracked the index. The fund’s market price return was 13.78% and its NAV return was 13.54% (for an explanation of the market price and NAV returns, please refer to footnote 2 on the following page). The index returned 13.89% during the same period. Differences between the return of the fund and the return of the index may be attributable to, among other things, the trading and management costs incurred by the fund and not the index.

Contributors and Detractors. The Energy sector was the only detractor from the performance of both the index and the fund. Energy stocks represented the largest average weight of any sector, comprising of approximately 14% of the fund. Stocks in the Energy sector returned approximately -5%, reflecting the overall performance of companies engaged in exploration and production, refining and marketing, and storage and transportation of oil, gas, coal, and consumable fuels, as well as companies that offer oil and gas equipment and services. One example from this sector is Exxon Mobil Corp., a company that operates petroleum and petrochemicals businesses on a worldwide basis. The fund’s holdings of Exxon Mobil Corp. returned approximately -5% for the reporting period. The Materials sector produced positive returns for the fund, but was one of the weakest contributors to overall fund performance. Materials stocks represented an average weight of approximately 4% of the fund and returned approximately 7%.

The Health Care sector contributed the most to the fund’s total return, and to the return of the index. Health Care stocks represented an average weight of approximately 11% of the fund and returned approximately 26% for the 12-month reporting period, reflecting the overall performance of health care providers and services, companies that manufacture and distribute health care equipment and supplies, health care technology companies, and companies involved in the research, development, production and marketing of pharmaceuticals and biotechnology products. One example from this sector is Anthem, Inc., a health benefits company. The fund’s holdings of Anthem, Inc. returned approximately 64% for the reporting period. The Information Technology sector also provided a meaningful contribution to the return of the fund, representing an average weight of approximately 14% and returning approximately 20%.

As of 02/28/15:

Statistics
Number of Holdings	1,507
Weighted Average Market Cap (millions)	$106,043
Price/Earnings Ratio (P/E)	20.5
Price/Book Ratio (P/B)	2.4
Portfolio Turnover Rate¹	10%

Sector Weightings % of Investments
Information Technology	13.9%
Consumer Discretionary	13.7%
Financials	13.7%
Energy	12.5%
Health Care	11.8%
Consumer Staples	11.3%
Industrials	11.0%
Utilities	4.2%
Materials	4.0%
Telecommunication Services	3.5%
Other	0.4%
Total	100.0%

Top Equity Holdings % of Net Assets²
Exxon Mobil Corp.	3.9%
Chevron Corp.	2.1%
AT&T, Inc.	1.9%
Microsoft Corp.	1.6%
Wal-Mart Stores, Inc.	1.4%
The Procter & Gamble Co.	1.3%
Pfizer, Inc.	1.2%
Apple, Inc.	1.2%
General Electric Co.	1.2%
JPMorgan Chase & Co.	1.2%
Total	17.0%

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

Source of Sector Classification: S& P and MSCI.

¹	Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
²	This list is not a recommendation of any security by the investment adviser.

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Schwab Fundamental U.S. Broad Market Index ETF

Performance and Fund Facts as of 02/28/15

August 15, 2013 – February 28, 2015
Performance of Hypothetical
$10,000 Investment¹

Average Annual Total Returns¹

Fund and Inception Date	1 Year	Since Inception*
Fund: Schwab Fundamental U.S. Broad Market Index ETF (8/15/13)
Market Price Return²	13.78%	15.90%
NAV Return²	13.54%	15.83%
Russell Fundamental U.S. Index	13.89%	16.22%
ETF Category: Morningstar Large Value³	14.42%	14.75%

Fund Expense Ratio⁴: 0.32%

For index definitions, please see the Glossary.

Shares are bought and sold at market price, which may be higher or lower than the net asset value (NAV). Brokerage commissions will reduce returns.

Index ownership — “Russell Fundamental U.S. Index” is a joint trademark of Russell Investments (“Russell”) and Research Affiliates LLC (“RA”) and is used by the fund under license. “Research Affiliates” and “Fundamental Index” are trademarks of RA. Subject to RA’s intellectual property rights in certain content, Russell is the owner of all copyrights related to the Russell Fundamental Index Series. Russell is the owner of the trademarks and copyrights related to the Russell Indexes. Schwab Fundamental U.S. Broad Market Index ETF is not sponsored, endorsed, sold or promoted by Russell or RA, and Russell and RA do not make any representation regarding the advisability of investing in shares of the fund.

*	Inception (8/15/13) represents the date that the shares began trading in the secondary market.
¹	Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption of fund shares.
²	ETF performance must be shown based on both a market price and NAV basis. The fund’s per share net asset value (“NAV”) is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which the shares of the fund are listed for trading, as of the time that the fund’s NAV is calculated. NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively.
³	Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date.
⁴	As stated in the prospectus.

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Schwab Fundamental U.S. Large Company Index ETF

The Schwab Fundamental U.S. Large Company Index ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of the Russell Fundamental U.S. Large Company Index (the index). This index measures the performance of the large company size segment by fundamental overall company scores that are created using as the universe the companies in the Russell 3000^® Index. To pursue its investment objective, the fund uses a replication investment approach and generally gives the same weight to a given stock as does the index. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.

Market Highlights. Large-cap U.S. stocks performed well during the reporting period, slightly outperforming U.S. small-cap stocks. A rebounding U.S. economy and strengthening consumer sentiment contributed to this positive performance, as did favorable earnings reports by select companies. Several U.S. indices were able to overcome increased market volatility and reach record highs in the second half of the reporting period, even as many economies outside the U.S. struggled with fragile recoveries. Within the index, stocks in the Health Care and Consumer Staples sectors were some of the better performers, while stocks in the Energy and Materials sectors underperformed by comparison.

Performance. For the 12-month reporting period ended February 28, 2015, the fund closely tracked the index. The fund’s market price return was 14.11% and its NAV return was 13.92% (for an explanation of the market price and NAV returns, please refer to footnote 2 on the following page). The index returned 14.34% during the same period. Differences between the return of the fund and the return of the index may be attributable to, among other things, the trading and management costs incurred by the fund and not the index.

Contributors and Detractors. The Energy sector was the only detractor from the performance of both the index and the fund. Energy stocks represented an average weight of approximately 15% of the fund and returned approximately -4%, reflecting the overall performance of companies engaged in exploration and production, refining and marketing, and storage and transportation of oil, gas, coal, and consumable fuels, as well as companies that offer oil and gas equipment and services. One example from this sector is Exxon Mobil Corp., a company that operates petroleum and petrochemicals businesses on a worldwide basis. The fund’s holdings of Exxon Mobil Corp. returned approximately -5% for the reporting period. The Materials sector generated positive returns, but was among the weakest contributors to the performance of the fund. Materials stocks represented an average weight of 4% of the fund and returned approximately 8%.

The Health Care sector contributed the most to the fund’s total return, and to the return of the index. Health Care stocks represented an average weight of approximately 12% of the fund and returned approximately 26%, reflecting the overall performance of health care providers and services, companies that manufacture and distribute health care equipment and supplies, health care technology companies, and companies involved in the research, development, production and marketing of pharmaceuticals and biotechnology products. Anthem, Inc., a health benefits company, is one example from this sector. The fund’s holdings of Anthem, Inc. returned approximately 64%. Another meaningful contributor to the return of the fund was the Information Technology sector. Information Technology stocks represented an average weight of approximately 14% of the fund and returned approximately 20% for the 12-month reporting period.

As of 02/28/15:

Statistics
Number of Holdings	627
Weighted Average Market Cap (millions)	$115,971
Price/Earnings Ratio (P/E)	19.3
Price/Book Ratio (P/B)	2.4
Portfolio Turnover Rate¹	10%

Sector Weightings % of Investments
Information Technology	13.9%
Consumer Discretionary	13.4%
Energy	13.3%
Financials	12.9%
Health Care	12.2%
Consumer Staples	12.1%
Industrials	10.1%
Utilities	4.3%
Materials	3.8%
Telecommunication Services	3.7%
Other	0.3%
Total	100.0%

Top Equity Holdings % of Net Assets²
Exxon Mobil Corp.	4.3%
Chevron Corp.	2.3%
AT&T, Inc.	2.1%
Microsoft Corp.	1.8%
Wal-Mart Stores, Inc.	1.5%
The Procter & Gamble Co.	1.5%
Pfizer, Inc.	1.4%
Apple, Inc.	1.3%
General Electric Co.	1.3%
JPMorgan Chase & Co.	1.3%
Total	18.8%

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

Source of Sector Classification: S& P and MSCI.

¹	Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
²	This list is not a recommendation of any security by the investment adviser.

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Schwab Fundamental U.S. Large Company Index ETF

Performance and Fund Facts as of 02/28/15

August 15, 2013 – February 28, 2015
Performance of Hypothetical
$10,000 Investment¹

Average Annual Total Returns¹

Fund and Inception Date	1 Year	Since Inception*
Fund: Schwab Fundamental U.S. Large Company Index ETF (8/15/13)
Market Price Return²	14.11%	15.90%
NAV Return²	13.92%	15.81%
Russell Fundamental U.S. Large Company Index	14.34%	16.22%
ETF Category: Morningstar Large Value³	14.42%	14.75%

Fund Expense Ratio⁴: 0.32%

For index definitions, please see the Glossary.

Shares are bought and sold at market price, which may be higher or lower than the net asset value (NAV). Brokerage commissions will reduce returns.

Index ownership — “Russell Fundamental U.S. Large Company Index” is a joint trademark of Russell Investments (“Russell”) and Research Affiliates LLC (“RA”) and is used by the fund under license. “Research Affiliates” and “Fundamental Index” are trademarks of RA. Subject to RA’s intellectual property rights in certain content, Russell is the owner of all copyrights related to the Russell Fundamental Index Series. Russell is the owner of the trademarks and copyrights related to the Russell Indexes. Schwab Fundamental U.S. Large Company Index ETF is not sponsored, endorsed, sold or promoted by Russell or RA, and Russell and RA do not make any representation regarding the advisability of investing in shares of the fund.

*	Inception (8/15/13) represents the date that the shares began trading in the secondary market.
¹	Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption of fund shares.
²	ETF performance must be shown based on both a market price and NAV basis. The fund’s per share net asset value (“NAV”) is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which the shares of the fund are listed for trading, as of the time that the fund’s NAV is calculated. NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively.
³	Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date.
⁴	As stated in the prospectus.

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Schwab Fundamental U.S. Small Company Index ETF

The Schwab Fundamental U.S. Small Company Index ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of the Russell Fundamental U.S. Small Company Index (the index). This index measures the performance of the small company size segment by fundamental overall company scores that are created using as the universe the companies in the Russell 3000^® Index. To pursue its investment objective, the fund uses a replication investment approach and generally gives the same weight to a given stock as does the index. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.

Market Highlights. Small-cap U.S. stocks performed well during the reporting period, slightly underperforming U.S. large-cap stocks. A rebounding U.S. economy and strengthening consumer sentiment contributed to this positive performance, as did favorable earnings reports by select companies. Several U.S. indices were able to overcome increased market volatility and reach record highs in the second half of the reporting period, even as many economies outside the U.S. struggled with fragile recoveries. Within the index, stocks in the Health Care and Telecommunication Services sectors were some of the better performers, while stocks in the Energy and Materials sectors underperformed by comparison.

Performance. For the 12-month reporting period ended February 28, 2015, the fund closely tracked the index. The fund’s market price return was 9.02% and its NAV return was 9.06% (for an explanation of the market price and NAV returns, please refer to footnote 2 on the following page). The index returned 9.34% during the same period. Differences between the return of the fund and the return of the index may be attributable to, among other things, the trading and management costs incurred by the fund and not the index.

Contributors and Detractors. The Energy sector was one of the only detractors from the performance of the index and the fund. Energy stocks represented an average weight of approximately 6% of the fund and returned approximately -39%, reflecting the overall performance of companies engaged in exploration and production, refining and marketing, and storage and transportation of oil, gas, coal and consumable fuels, as well as companies that offer oil and gas equipment and services. One example from this sector is McDermott International, Inc., a worldwide energy services company. The fund’s holdings of McDermott International, Inc. returned approximately -69%. Another detractor from both index and fund performance was the Materials sector. Materials stocks represented an average weight of approximately 6% of the fund and returned approximately -2%.

The Financials sector was the biggest contributor to the fund’s total return. The large average weight of this sector represents part of the reason for this contribution, with Financials stocks comprising approximately 22% of the fund. The Financials sector returned approximately 14% for the fund, reflecting the overall performance of companies involved in banking, diversified financial services, insurance, and real estate. One example from this sector is Protective Life Corp., a provider of financial services through the production, distribution, and administration of insurance and investment products. The fund’s holdings of Protective Life Corp. returned approximately 36%. The Information Technology sector was another significant contributor to the fund’s overall performance, representing an average weight of approximately 15% of the fund and returning approximately 18% for the 12-month reporting period.

As of 02/28/15:

Statistics
Number of Holdings	882
Weighted Average Market Cap (millions)	$4,440
Price/Earnings Ratio (P/E)	53.8
Price/Book Ratio (P/B)	2.0
Portfolio Turnover Rate¹	22%

Sector Weightings % of Investments
Financials	21.7%
Industrials	20.2%
Consumer Discretionary	16.3%
Information Technology	14.4%
Health Care	7.5%
Materials	5.6%
Energy	4.1%
Utilities	3.8%
Consumer Staples	3.6%
Telecommunication Services	1.8%
Other	1.0%
Total	100.0%

Top Equity Holdings % of Net Assets²
Office Depot, Inc.	0.4%
Level 3 Communications, Inc.	0.3%
Centene Corp.	0.3%
Restaurant Brands International, Inc.	0.3%
The Pantry, Inc.	0.3%
Endurance Specialty Holdings Ltd.	0.3%
Spirit AeroSystems Holdings, Inc., Class A	0.3%
SkyWest, Inc.	0.3%
Platinum Underwriters Holdings Ltd.	0.3%
Lennox International, Inc.	0.3%
Total	3.1%

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

Source of Sector Classification: S& P and MSCI.

¹	Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
²	This list is not a recommendation of any security by the investment adviser.

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Schwab Fundamental U.S. Small Company Index ETF

Performance and Fund Facts as of 02/28/15

August 15, 2013 – February 28, 2015
Performance of Hypothetical
$10,000 Investment¹

Average Annual Total Returns¹

Fund and Inception Date	1 Year	Since Inception*
Fund: Schwab Fundamental U.S. Small Company Index ETF (8/15/13)
Market Price Return²	9.02%	15.63%
NAV Return²	9.06%	15.59%
Russell Fundamental U.S. Small Company Index	9.34%	16.00%
ETF Category: Morningstar Small Blend³	6.95%	13.29%

Fund Expense Ratio⁴: 0.32%

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.

Shares are bought and sold at market price, which may be higher or lower than the net asset value (NAV). Brokerage commissions will reduce returns.

Investments in smaller companies typically exhibit higher volatility.

Index ownership — “Russell Fundamental U.S. Small Company Index” is a joint trademark of Russell Investments (“Russell”) and Research Affiliates LLC (“RA”) and is used by the fund under license. “Research Affiliates” and “Fundamental Index” are trademarks of RA. Subject to RA’s intellectual property rights in certain content, Russell is the owner of all copyrights related to the Russell Fundamental Index Series. Russell is the owner of the trademarks and copyrights related to the Russell Indexes. Schwab Fundamental U.S. Small Company Index ETF is not sponsored, endorsed, sold or promoted by Russell or RA, and Russell and RA do not make any representation regarding the advisability of investing in shares of the fund.

*	Inception (8/15/13) represents the date that the shares began trading in the secondary market.
¹	Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption of fund shares.
²	ETF performance must be shown based on both a market price and NAV basis. The fund’s per share net asset value (“NAV”) is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which the shares of the fund are listed for trading, as of the time that the fund’s NAV is calculated. NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively.
³	Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date.
⁴	As stated in the prospectus.

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Schwab Fundamental International Large Company Index ETF

The Schwab Fundamental International Large Company Index ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of the Russell Fundamental Developed ex-U.S. Large Company Index (the index). This index measures the performance of the large company size segment by fundamental overall company scores that are created using as the universe the companies in the Russell Developed ex-U.S. Index. To pursue its investment objective, the fund invests in a statistical sample of the securities included in the index that collectively has a similar investment profile to the index. Due to the use of statistical sampling, the fund may not hold all of the securities in the index. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.

Market Highlights. Stocks of large companies in developed international markets produced negative overall returns for the 12-month reporting period, in part due to uncertain global economic growth and continued geopolitical tensions in Ukraine and the Middle East. Additionally, many international currencies depreciated versus the U.S. dollar, generally reducing returns on overseas investments.

Performance. For the 12-month reporting period ended February 28, 2015, the fund closely tracked the index. The fund’s market price return was -2.28% and its NAV return was -2.11% (for an explanation of the market price and NAV returns, please refer to footnote 2 on the following page). The index returned -1.79%¹ during the same period. Differences between the return of the fund and the return of the index may be attributable to, among other things, the trading and management costs incurred by the fund and not the index.

Contributors and Detractors. Stocks from the United Kingdom were among the biggest detractors from the total return of the fund. United Kingdom stocks represented an average weight of approximately 17% of the fund and returned approximately -5% in U.S. dollar terms. One example from this market is BP plc, an oil and gas company that provides fuel for transportation, energy for heat and light, lubricants for engines, and petrochemicals products. The fund’s holdings of BP plc returned approximately -14% in U.S. dollar terms. Stocks from France also performed poorly for the fund overall, representing an average weight of approximately 11% of the fund and returning approximately -5% in U.S. dollar terms.

Japanese stocks were among the biggest contributors to the returns of both the index and the fund. Stocks from Japan represented an average weight of approximately 20% of the fund and returned approximately 8% in U.S. dollar terms. One example from this market is Toyota Motor Corp., a company that designs, manufactures, assembles, and sells passenger cars, minivans, commercial vehicles, and related parts and accessories in Japan, North America, Europe, Asia, and internationally. The fund’s holdings of Toyota Motor Corp. returned approximately 21% in U.S. dollar terms. Stocks from Hong Kong also contributed to the fund’s performance, representing an average weight of approximately 1% of the fund and returning approximately 15% in U.S. dollar terms.

As of 02/28/15:

Statistics
Number of Holdings	819
Weighted Average Market Cap (millions)	$59,000
Price/Earnings Ratio (P/E)	24.5
Price/Book Ratio (P/B)	1.5
Portfolio Turnover Rate²	11%

Sector Weightings % of Investments
Financials	18.2%
Industrials	12.9%
Energy	12.1%
Consumer Discretionary	11.8%
Materials	9.8%
Consumer Staples	9.8%
Telecommunication Services	7.8%
Health Care	7.0%
Utilities	5.7%
Information Technology	4.5%
Other	0.4%
Total	100.0%

Top Equity Holdings % of Net Assets³
BP plc	2.2%
Royal Dutch Shell plc, A Shares	1.9%
Total S.A	1.6%
Royal Dutch Shell plc, B Shares	1.2%
HSBC Holdings plc	1.2%
Nestle S.A. – Reg'd	1.1%
Telefonica S.A	1.1%
Vodafone Group plc	1.1%
Toyota Motor Corp.	1.0%
Banco Santander S.A	1.0%
Total	13.4%

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

Source of Sector Classification: S& P and MSCI.

¹	The total return cited for the index is calculated net of foreign withholding taxes.
²	Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
³	This list is not a recommendation of any security by the investment adviser.

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Schwab Fundamental International Large Company Index ETF

Performance and Fund Facts as of 02/28/15

August 15, 2013 – February 28, 2015
Performance of Hypothetical
$10,000 Investment¹

Average Annual Total Returns¹

Fund and Inception Date	1 Year	Since Inception*
Fund: Schwab Fundamental International Large Company Index ETF (8/15/13)
Market Price Return²	-2.28%	6.93%
NAV Return²	-2.11%	6.69%
Russell Fundamental Developed ex-U.S. Large Company Index (Net)	-1.79%	7.09%
ETF Category: Morningstar Foreign Large Value³	-1.87%	5.06%

Fund Expense Ratio⁴: 0.32%

Country Weightings % of Investments

Japan	22.3%
United Kingdom	17.0%
France	10.4%
Germany	9.1%
Canada	6.3%
Switzerland	5.6%

Netherlands	5.5%
Australia	5.3%
Spain	4.0%
Italy	3.7%
Other Countries	10.8%
Total	100.0%

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. 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.

Shares are bought and sold at market price, which may be higher or lower than the net asset value (NAV). Brokerage commissions will reduce returns.

International investing may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations.

Index ownership — “Russell Fundamental Developed ex-U.S. Large Company Index” is a joint trademark of Russell Investments (“Russell”) and Research Affiliates LLC (“RA”) and is used by the fund under license. “Research Affiliates” and “Fundamental Index” are trademarks of RA. Subject to RA’s intellectual property rights in certain content, Russell is the owner of all copyrights related to the Russell Fundamental Series. Russell is the owner of the trademarks and copyrights related to the Russell Indexes. Schwab Fundamental International Large Company Index ETF is not sponsored, endorsed, sold or promoted by Russell or RA, and Russell and RA do not make any representation regarding the advisability of investing in shares of the fund.

*	Inception (8/15/13) represents the date that the shares began trading in the secondary market.
¹	Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption of fund shares.
²	ETF performance must be shown based on both a market price and NAV basis. The fund’s per share net asset value (“NAV”) is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which the shares of the fund are listed for trading, as of the time that the fund’s NAV is calculated. NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively.
³	Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date.
⁴	As stated in the prospectus.

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Schwab Fundamental International Small Company Index ETF

The Schwab Fundamental International Small Company Index ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of the Russell Fundamental Developed ex-U.S. Small Company Index (the index). This index measures the performance of the small company size segment by fundamental overall company scores that are created using as the universe the companies in the Russell Developed ex-U.S. Index. To pursue its investment objective, the fund invests in a statistical sample of the securities included in the index that collectively has a similar investment profile to the index. Due to the use of statistical sampling, the fund may not hold all of the securities in the index. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.

Market Highlights. Stocks of small companies in developed international markets produced negative overall returns for the 12-month reporting period, in part due to uncertain global economic growth and continued geopolitical tensions in Ukraine and the Middle East. Additionally, many international currencies depreciated versus the U.S. dollar, generally reducing returns on overseas investments.

Performance. For the 12-month reporting period ended February 28, 2015, the fund closely tracked the index. The fund’s market price return was -0.61% and its NAV return was -0.32% (for an explanation of the market price and NAV returns, please refer to footnote 2 on the following page). The index returned 0.25%¹ during the same period. Differences between the return of the fund and the return of the index may be attributable to, among other things, the trading and management costs incurred by the fund and not the index.

Contributors and Detractors. Canadian stocks were among the biggest detractors from the returns of both the index and the fund. Stocks from Canada represented an average weight of approximately 9% of the fund and returned approximately -9% in U.S. dollar terms. One example from this market is Lightstream Resources Ltd., a light oil-focused exploration and production company in Canada. The fund’s holdings of Lightstream Resources Ltd. returned approximately -81% in U.S. dollar terms. Stocks from Germany also detracted from the performance of the index and the fund. German stocks represented an average weight of approximately 4% of the fund and returned approximately -13% in U.S. dollar terms.

Stocks from Japan were among the biggest contributors to the fund’s total return from a country perspective, and represented an average weight of approximately 38% of the fund. Japanese stocks returned approximately 12% in U.S. dollar terms. One example from this market is Minebea Co., Ltd., a company that manufactures and markets miniature and instrument ball bearings with production facilities in Thailand and Singapore. The fund’s holdings of Minebea Co., Ltd. returned approximately 74% in U.S. dollar terms. Stocks from Hong Kong also provided meaningful contributions to the fund’s performance, representing an average weight of approximately 3% of the fund and returning approximately 5% in U.S. dollar terms.

As of 02/28/15:

Statistics
Number of Holdings	1,301
Weighted Average Market Cap (millions)	$3,592
Price/Earnings Ratio (P/E)	25.3
Price/Book Ratio (P/B)	1.4
Portfolio Turnover Rate²	21%

Sector Weightings % of Investments
Industrials	23.3%
Consumer Discretionary	19.3%
Financials	17.1%
Materials	10.9%
Information Technology	9.1%
Consumer Staples	8.0%
Health Care	4.6%
Energy	3.0%
Utilities	1.5%
Telecommunication Services	1.1%
Other	2.1%
Total	100.0%

Top Equity Holdings % of Net Assets³
Dixons Carphone plc	0.4%
Evraz plc	0.3%
Kikkoman Corp.	0.2%
Alps Electric Co., Ltd.	0.2%
NOK Corp.	0.2%
Check Point Software Technologies Ltd.	0.2%
Persimmon plc	0.2%
Celesio AG	0.2%
Catlin Group Ltd.	0.2%
DCC plc	0.2%
Total	2.3%

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

Source of Sector Classification: S& P and MSCI.

¹	The total return cited for the index is calculated net of foreign withholding taxes.
²	Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
³	This list is not a recommendation of any security by the investment adviser.

14Schwab Fundamental Index ETFs

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Schwab Fundamental International Small Company Index ETF

Performance and Fund Facts as of 02/28/15

August 15, 2013 – February 28, 2015
Performance of Hypothetical
$10,000 Investment¹

Average Annual Total Returns¹

Fund and Inception Date	1 Year	Since Inception*
Fund: Schwab Fundamental International Small Company Index ETF (8/15/13)
Market Price Return²	-0.61%	7.18%
NAV Return²	-0.32%	6.74%
Russell Fundamental Developed ex-U.S. Small Company Index (Net)	0.25%	7.51%
ETF Category: Morningstar Foreign Small/Mid Blend³	-2.20%	6.85%

Fund Expense Ratio⁴: 0.48%

Country Weightings % of Investments

Japan	38.9%
United Kingdom	13.2%
Canada	7.3%
Australia	5.5%
France	4.4%

Germany	3.7%
Switzerland	2.8%
Hong Kong	2.7%
Other Countries	21.5%
Total	100.0%

For index definitions, please see the Glossary.

Shares are bought and sold at market price, which may be higher or lower than the net asset value (NAV). Brokerage commissions will reduce returns.

Investments in smaller companies typically exhibit higher volatility.

Index ownership — “Russell Fundamental Developed ex-U.S. Small Company Index” is a joint trademark of Russell Investments (“Russell”) and Research Affiliates LLC (“RA”) and is used by the fund under license. “Research Affiliates” and “Fundamental Index” are trademarks of RA. Subject to RA’s intellectual property rights in certain content, Russell is the owner of all copyrights related to the Russell Fundamental Index Series. Russell is the owner of the trademarks and copyrights related to the Russell Indexes. Schwab Fundamental International Small Company Index ETF is not sponsored, endorsed, sold or promoted by Russell or RA, and Russell and RA do not make any representation regarding the advisability of investing in shares of the fund.

*	Inception (8/15/13) represents the date that the shares began trading in the secondary market.
¹	Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption of fund shares.
²	ETF performance must be shown based on both a market price and NAV basis. The fund’s per share net asset value (“NAV”) is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which the shares of the fund are listed for trading, as of the time that the fund’s NAV is calculated. NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively.
³	Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date.
⁴	As stated in the prospectus. Includes expenses of the underlying funds in which the fund invests. The annualized weighted average expense ratio of the underlying funds was 0.02%.

Schwab Fundamental Index ETFs15

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Schwab Fundamental Emerging Markets Large Company Index ETF

The Schwab Fundamental Emerging Markets Large Company Index ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of the Russell Fundamental Emerging Markets Large Company Index (the index). This index measures the performance of the large company size segment by fundamental overall company scores that are created using as the universe the companies in the Russell Emerging Markets Index. To pursue its investment objective, the fund invests in a statistical sample of the securities included in the index that collectively has a similar investment profile to the index. Due to the use of statistical sampling, the fund may not hold all of the securities in the index. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.

Market Highlights. Emerging markets produced negative overall returns for the 12-month reporting period, even as the Federal Reserve decided to maintain historically low short-term interest rates. Many emerging market central banks, including Indonesia and China, have cut interest rates to help spur growth, while others, such as Brazil, have raised interest rates to combat inflation. Continued geopolitical tensions and increased market volatility played a role in the negative performance of emerging markets, and the appreciation of the U.S. dollar versus many emerging market currencies, including Russia and Indonesia, generally reduced returns on overseas investments.

Performance. For the 12-month reporting period ended February 28, 2015, the fund closely tracked the index. The fund’s market price return was -1.33% and its NAV return was -1.98% (for an explanation of the market price and NAV returns, please refer to footnote 2 on the following page). The index returned -1.34%¹ during the same period. Differences between the return of the fund and the return of the index may be attributable to, among other things, the trading and management costs incurred by the fund and not the index.

Contributors and Detractors. Brazilian stocks were among the biggest detractors from the total return of the fund. Stocks from Brazil represented an average weight of approximately 14% of the fund and returned approximately -22% in U.S. dollar terms. One example from this market is preferred stock of Petroleo Brasileiro SA, a company that explores for and produces oil and natural gas. The fund’s preferred stock holdings of Petroleo Brasileiro SA returned approximately -39% in U.S. dollar terms. Stocks from Russia also detracted from the performance of the fund. Russian stocks represented an average weight of approximately 12% of the fund and returned approximately -23% in U.S. dollar terms.

Stocks from China were among the biggest contributors to the returns of both the index and the fund. Chinese stocks represented an average weight of approximately 15% of the fund and returned approximately 27% in U.S. dollar terms. One example from this market is China Mobile Ltd., a company that provides, through its subsidiaries, cellular telecommunications and related services in the People’s Republic of China and Hong Kong. The fund’s holdings of China Mobile Ltd. returned approximately 48% in U.S. dollar terms. Stocks from Taiwan also meaningfully contributed to the fund’s performance, representing an average weight of approximately 13% of the fund and returning approximately 17% in U.S. dollar terms.

As of 02/28/15:

Statistics
Number of Holdings	291
Weighted Average Market Cap (millions)	$56,920
Price/Earnings Ratio (P/E)	13.4
Price/Book Ratio (P/B)	1.1
Portfolio Turnover Rate²	13%

Sector Weightings % of Investments
Energy	22.2%
Financials	19.8%
Information Technology	16.6%
Materials	10.9%
Telecommunication Services	10.7%
Industrials	5.7%
Consumer Discretionary	5.6%
Consumer Staples	3.5%
Utilities	3.3%
Other	1.7%
Total	100.0%

Top Equity Holdings % of Net Assets³
Samsung Electronics Co., Ltd.	4.2%
Gazprom OAO	3.4%
LUKOIL OAO	3.2%
China Mobile Ltd.	2.6%
China Construction Bank Corp., H Shares	2.4%
Taiwan Semiconductor Manufacturing Co., Ltd.	2.0%
Industrial & Commercial Bank of China Ltd., H Shares	1.9%
Bank of China Ltd., H Shares	1.7%
China Petroleum & Chemical Corp., H Shares	1.7%
Hon Hai Precision Industry Co., Ltd.	1.4%
Total	24.5%

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

Source of Sector Classification: S& P and MSCI.

¹	The total return cited for the index is calculated net of foreign withholding taxes.
²	Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
³	This list is not a recommendation of any security by the investment adviser.

16Schwab Fundamental Index ETFs

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Schwab Fundamental Emerging Markets Large Company Index ETF

Performance and Fund Facts as of 02/28/15

August 15, 2013 – February 28, 2015
Performance of Hypothetical
$10,000 Investment¹

Average Annual Total Returns¹

Fund and Inception Date	1 Year	Since Inception*
Fund: Schwab Fundamental Emerging Markets Large Company Index ETF (8/15/13)
Market Price Return²	-1.33%	-0.76%
NAV Return²	-1.98%	-1.26%
Russell Fundamental Emerging Markets Large Company Index (Net)	-1.34%	-0.75%
ETF Category: Morningstar Diversified Emerging Markets³	2.73%	1.18%

Fund Expense Ratio⁴: 0.47%

Country Weightings % of Investments

China	18.8%
Republic of Korea	18.4%
Taiwan	13.2%
Brazil	11.8%
Russia	11.7%

South Africa	7.0%
Mexico	3.5%
Other Countries	15.6%
Total	100.0%

For index definitions, please see the Glossary.

Shares are bought and sold at market price, which may be higher or lower than the net asset value (NAV). Brokerage commissions will reduce returns.

Emerging markets involve heightened risks related to the same factors as international investing, as well as increased volatility and lower trading volume.

Index ownership — “Russell Fundamental Emerging Markets Large Company Index” is a joint trademark of Russell Investments (“Russell”) and Research Affiliates LLC (“RA”) and is used by the fund under license. “Research Affiliates” and “Fundamental Index” are trademarks of RA. Subject to RA’s intellectual property rights in certain content, Russell is the owner of all copyrights related to the Russell Fundamental Index Series. Russell is the owner of the trademarks and copyrights related to the Russell Indexes. Schwab Fundamental Emerging Markets Large Company Index ETF is not sponsored, endorsed, sold or promoted by Russell or RA, and Russell and RA do not make any representation regarding the advisability of investing in shares of the fund.

*	Inception (8/15/13) represents the date that the shares began trading in the secondary market.
¹	Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption of fund shares.
²	ETF performance must be shown based on both a market price and NAV basis. The fund’s per share net asset value (“NAV”) is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which the shares of the fund are listed for trading, as of the time that the fund’s NAV is calculated. NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively.
³	Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date.
⁴	As stated in the prospectus. Includes expenses of the underlying funds in which the fund invests. The annualized weighted average expense ratio of the underlying funds was 0.01%.

Schwab Fundamental Index ETFs17

Table of Contents

Fund Expenses (Unaudited)

Examples for a $1,000 Investment

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

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

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

	Expense Ratio¹ (Annualized)	Beginning Account Value at 9/1/14	Ending Account Value (Net of Expenses) at 2/28/15	Expenses Paid During Period² 9/1/14–2/28/15
Schwab Fundamental U.S. Broad Market Index ETF
Actual Return	0.32%	$1,000.00	$ 1,041.90	$1.62
Hypothetical 5% Return	0.32%	$1,000.00	$ 1,023.21	$1.61
Schwab Fundamental U.S. Large Company Index ETF
Actual Return	0.32%	$1,000.00	$1,040.90	$1.62
Hypothetical 5% Return	0.32%	$1,000.00	$ 1,023.21	$1.61
Schwab Fundamental U.S. Small Company Index ETF
Actual Return	0.32%	$1,000.00	$ 1,049.20	$1.63
Hypothetical 5% Return	0.32%	$1,000.00	$ 1,023.21	$1.61
Schwab Fundamental International Large Company Index ETF
Actual Return	0.32%	$1,000.00	$ 963.20	$1.56
Hypothetical 5% Return	0.32%	$1,000.00	$ 1,023.21	$1.61
Schwab Fundamental International Small Company Index ETF
Actual Return	0.46%	$1,000.00	$ 976.10	$2.25
Hypothetical 5% Return	0.46%	$1,000.00	$ 1,022.52	$2.31
Schwab Fundamental Emerging Markets Large Company Index ETF
Actual Return	0.46%	$1,000.00	$ 852.00	$2.11
Hypothetical 5% Return	0.46%	$1,000.00	$ 1,022.52	$2.31

¹	Based on the most recent six-month expense ratio; may differ from the expense ratio provided in the Financial Highlights which covers a 12-month period. The expenses incurred by the underlying funds in which the funds invest are not included in this ratio.
²	Expenses for each fund are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 181 days of the period, and divided by 365 days of the fiscal year.

18Schwab Fundamental Index ETFs

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Schwab Fundamental U.S. Broad Market Index ETF

Financial Statements

Financial Highlights

	3/1/14– 2/28/15	8/14/13 ¹– 2/28/14
Per-Share Data ($)
Net asset value at beginning of period	27.36	25.00
Income (loss) from investment operations:
Net investment income (loss)	0.54	0.21
Net realized and unrealized gains (losses)	3.14	2.28
Total from investment operations	3.68	2.49
Less distributions:
Distributions from net investment income	(0.50)	(0.13)
Net asset value at end of period	30.54	27.36
Total return (%)	13.54	9.99 ²
Ratios/Supplemental Data (%)
Ratios to average net assets:
Total expenses	0.32	0.32 ³
Net investment income (loss)	2.14	2.11 ³
Portfolio turnover rate⁴	10	5 ²
Net assets, end of period ($ x 1,000)	212,247	58,823

Commencement of operations.

Not annualized.

Annualized.

⁴

Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.

See financial notes 19

Table of Contents

Schwab Fundamental U.S. Broad Market Index ETF

Condensed Portfolio Holdings as of February 28, 2015

This section shows the fund's 50 largest portfolio holdings in unaffiliated issuers, any holdings exceeding 1% of the fund's net assets as of the report date, and any affiliated issuers. The remaining securities held by the fund are grouped as "Other Securities" in each category. You can request a complete schedule of portfolio holdings as of the report date, free of charge, by calling Schwab ETFs™ at 1-800-435-4000. This complete schedule, filed on the fund's Form N-CSR, is also available on the SEC's website at http://www.sec.gov.

In addition, the fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's website and may be viewed and copied at the SEC's Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the Public Reference Room. The fund also makes available its complete schedule of portfolio holdings on a daily basis on the fund's website at www.csimfunds.com/schwabetfs_prospectus.

Holdings by Category		Cost ($)	Value ($)
99.7%	Common Stock	195,907,920	211,538,252
0.0%	Rights	1,852	1,852
0.4%	Other Investment Companies	915,699	915,699
0.0%	Short-Term Investment	10,000	10,000
100.1%	Total Investments	196,835,471	212,465,803
(0.1)%	Other Assets and Liabilities, Net		(218,808)
100.0%	Net Assets		212,246,995

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 99.7% of net assets
Automobiles & Components 1.2%
Other Securities		1.2	2,478,157
Banks 5.3%
Bank of America Corp.	131,355	1.0	2,076,722
Citigroup, Inc.	26,353	0.7	1,381,424
JPMorgan Chase & Co.	40,602	1.2	2,488,091
Wells Fargo & Co.	35,987	0.9	1,971,728
Other Securities		1.5	3,318,023
		5.3	11,235,988
Capital Goods 7.8%
3M Co.	5,228	0.4	881,702
General Electric Co.	96,241	1.2	2,501,304
United Technologies Corp.	9,256	0.5	1,128,399
Other Securities		5.7	12,113,685
		7.8	16,625,090
Commercial & Professional Services 1.3%
Other Securities		1.3	2,634,633
Consumer Durables & Apparel 1.3%
Other Securities		1.3	2,732,066

Security	Number of Shares	% of Net Assets	Value ($)
Consumer Services 2.0%
McDonald's Corp.	12,131	0.6	1,199,756
Other Securities		1.4	3,003,143
		2.0	4,202,899
Diversified Financials 3.1%
Berkshire Hathaway, Inc., Class B *	10,286	0.7	1,516,259
The Charles Schwab Corp. (a)	3,997	0.1	117,272
Other Securities		2.3	5,019,743
		3.1	6,653,274
Energy 12.5%
Chevron Corp.	41,452	2.1	4,422,099
ConocoPhillips	36,435	1.1	2,375,562
Exxon Mobil Corp.	92,784	3.9	8,215,095
Phillips 66	17,326	0.6	1,359,398
Schlumberger Ltd.	9,095	0.4	765,435
Valero Energy Corp.	16,791	0.5	1,035,837
Other Securities		3.9	8,376,900
		12.5	26,550,326
Food & Staples Retailing 4.2%
Costco Wholesale Corp.	6,612	0.5	971,700
CVS Health Corp.	20,132	1.0	2,091,111
Wal-Mart Stores, Inc.	35,631	1.4	2,990,510
Walgreens Boots Alliance, Inc.	13,484	0.5	1,120,251
Other Securities		0.8	1,789,752
		4.2	8,963,324
Food, Beverage & Tobacco 5.1%
Altria Group, Inc.	18,978	0.5	1,068,272
PepsiCo, Inc.	14,759	0.7	1,460,846
Philip Morris International, Inc.	18,401	0.7	1,526,547
The Coca-Cola Co.	30,254	0.6	1,309,998
Other Securities		2.6	5,413,988
		5.1	10,779,651
Health Care Equipment & Services 6.2%
Anthem, Inc.	9,804	0.7	1,435,796
McKesson Corp.	3,364	0.4	769,347
Medtronic plc	12,339	0.5	957,383
UnitedHealth Group, Inc.	15,664	0.8	1,779,900
Other Securities		3.8	8,295,345
		6.2	13,237,771
Household & Personal Products 2.0%
The Procter & Gamble Co.	33,265	1.3	2,831,849
Other Securities		0.7	1,465,538
		2.0	4,297,387
Insurance 3.3%
The Travelers Cos., Inc.	9,768	0.5	1,049,474
Other Securities		2.8	5,973,116
		3.3	7,022,590

20 See financial notes

Table of Contents

Schwab Fundamental U.S. Broad Market Index ETF

Condensed Portfolio Holdings continued

Security	Number of Shares	% of Net Assets	Value ($)
Materials 4.0%
Other Securities		4.0	8,477,505
Media 3.6%
Comcast Corp., Class A	18,801	0.5	1,116,403
DIRECTV *	8,588	0.4	760,897
The Walt Disney Co.	12,736	0.6	1,325,563
Time Warner, Inc.	12,026	0.5	984,448
Other Securities		1.6	3,377,282
		3.6	7,564,593
Pharmaceuticals, Biotechnology & Life Sciences 5.5%
Amgen, Inc.	6,860	0.5	1,081,959
Bristol-Myers Squibb Co.	13,400	0.4	816,328
Johnson & Johnson	22,129	1.1	2,268,444
Merck & Co., Inc.	23,157	0.6	1,355,611
Pfizer, Inc.	76,668	1.2	2,631,246
Other Securities		1.7	3,555,623
		5.5	11,709,211
Real Estate 2.0%
Other Securities		2.0	4,245,604
Retailing 5.7%
Lowe's Cos., Inc.	17,100	0.6	1,266,939
Target Corp.	15,765	0.6	1,211,225
The Home Depot, Inc.	14,177	0.8	1,626,811
Other Securities		3.7	7,925,781
		5.7	12,030,756
Semiconductors & Semiconductor Equipment 2.6%
Intel Corp.	74,327	1.2	2,471,373
Other Securities		1.4	3,048,669
		2.6	5,520,042
Software & Services 6.4%
International Business Machines Corp.	14,722	1.1	2,384,081
Microsoft Corp.	78,235	1.6	3,430,605
Oracle Corp.	25,354	0.5	1,111,012
Other Securities		3.2	6,722,171
		6.4	13,647,869
Technology Hardware & Equipment 4.9%
Apple, Inc.	20,089	1.2	2,580,633
Cisco Systems, Inc.	58,458	0.8	1,725,096
Hewlett-Packard Co.	60,015	1.0	2,090,923
Other Securities		1.9	3,986,533
		4.9	10,383,185
Telecommunication Services 3.5%
AT&T, Inc.	117,859	1.9	4,073,207
Verizon Communications, Inc.	47,235	1.1	2,335,771
Other Securities		0.5	1,054,011
		3.5	7,462,989

Security	Number of Shares	% of Net Assets	Value ($)
Transportation 2.0%
Other Securities		2.0	4,116,609
Utilities 4.2%
Other Securities		4.2	8,966,733
Total Common Stock
(Cost $195,907,920)			211,538,252

Rights 0.0% of net assets
Telecommunication Services 0.0%
Other Securities		0.0	1,852
Total Rights
(Cost $1,852)			1,852

Other Investment Companies 0.4% of net assets
Money Market Fund 0.1%
Other Securities		0.1	158,442
Securities Lending Collateral 0.3%
Other Securities		0.3	757,257
Total Other Investment Companies
(Cost $915,699)			915,699
Security Rate, Maturity Date	Face Amount ($)	% of Net Assets	Value ($)
Short-Term Investment 0.0% of net assets
U.S. Treasury Obligation 0.0%
Other Securities		0.0	10,000
Total Short-Term Investment
(Cost $10,000)			10,000

End of Investments.

At 02/28/15, the tax basis cost of the fund's investments was $196,824,545 and the unrealized appreciation and depreciation were $20,582,594 and ($4,941,336), respectively, with a net unrealized appreciation of $15,641,258.

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

*	Non-income producing security.
(a)	Issuer is affiliated with the fund's adviser.
(b)	Illiquid security. At the period end, the value of these amounted to $1,852 or 0.0% of net assets.
(c)	Fair-valued by management in accordance with procedures approved by the Board of Trustees.
(d)	The rate shown is the 7-day yield.
(e)	The rate shown is the purchase yield.
(f)	All or a portion of this security is on loan. Securities on loan were valued at $769,282. Non-Cash Collateral pledged to the fund for securities on loan amounted to $51,369.
(g)	All or a portion of this security is held as collateral for open futures contracts.

See financial notes 21

Table of Contents

Schwab Fundamental U.S. Broad Market Index ETF

Condensed Portfolio Holdings continued

CVR –	Contingent Value Rights
REIT –	Real Estate Investment Trust

In addition to the above, the fund held the following at 02/28/15:

	Number of Contracts	Contract Value ($)	Unrealized Appreciation ($)
Futures Contracts
S&P 500 Index, e-mini, Long, expires 03/20/15	2	210,280	376

The following is a summary of the inputs used to value the fund’s investments as of February 28, 2015 (see financial note 2(a) for additional information):

Description	Quoted Prices in Active Markets for Identical Assets (Level 1)	Other Significant Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Common Stock¹	$211,538,252	$—	$—	$211,538,252
Rights ¹	—	—	1,852	1,852
Other Investment Companies¹	915,699	—	—	915,699
Short-Term Investment¹	—	10,000	—	10,000
Total	$212,453,951	$10,000	$1,852	$212,465,803
Other Financial Instruments
Futures Contracts²	$376	$—	$—	$376

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

The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:

Investments in Securities	Balance as of February 28, 2014	Realized Gains (Losses)	Change in Unrealized Appreciation (Depreciation)	Gross Purchases	Gross Sales	Gross Transfers in	Gross Transfers out	Balance as of February 28, 2015
Rights	$—	$—	$—	$1,852	$—	$—	$—	$1,852
Total	$—	$—	$—	$1,852	$—	$—	$—	$1,852

22 See financial notes

Table of Contents

Schwab Fundamental U.S. Broad Market Index ETF

Statement of

Assets and Liabilities

As of February 28, 2015

Assets
Investments in affiliated issuers, at value (cost $102,885)		$117,272
Investments in unaffiliated issuers, at value (cost $195,975,329) including securities on loan of $769,282		211,591,274
Collateral invested for securities on loan, at value (cost $757,257)	+	757,257
Total investments, at value (cost $196,835,471)		212,465,803
Foreign currency, at value (cost $7,961)		7,961
Receivables:
Investments sold		200
Dividends		539,485
Income from securities on loan	+	2,722
Total assets		213,016,171
Liabilities
Collateral held for securities on loan		757,257
Payables:
Investment adviser fees		11,209
Variation margin on futures contracts	+	710
Total liabilities		769,176
Net Assets
Total assets		213,016,171
Total liabilities	–	769,176
Net assets		$212,246,995
Net Assets by Source
Capital received from investors		195,880,708
Net investment income not yet distributed		819,107
Net realized capital losses		(83,528)
Net unrealized capital appreciation		15,630,708

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$212,246,995		6,950,001		$30.54

See financial notes 23

Table of Contents

Schwab Fundamental U.S. Broad Market Index ETF

Statement of

Operations

For the period March 1, 2014 through February 28, 2015

Investment Income
Dividends received from affiliated issuer		$784
Dividends received from unaffiliated issuers (net of foreign withholding tax of $836)		3,114,317
Securities on loan	+	12,521
Total investment income		3,127,622
Expenses
Investment adviser fees		407,051
Total expenses	–	407,051
Net investment income		2,720,571
Realized and Unrealized Gains (Losses)
Net realized gains on affiliated issuer		1,519
Net realized losses on unaffiliated investments		(61,521)
Net realized gains on futures contracts		4,530
Net realized losses on foreign currency transactions	+	(3)
Net realized losses		(55,475)
Net change in unrealized appreciation (depreciation) on affiliated issuer		9,071
Net change in unrealized appreciation (depreciation) on unaffiliated investments		12,906,010
Net change in unrealized appreciation (depreciation) on futures contracts	+	376
Net change in unrealized appreciation (depreciation)	+	12,915,457
Net realized and unrealized gains		12,859,982
Increase in net assets resulting from operations		$15,580,553

24 See financial notes

Table of Contents

Schwab Fundamental U.S. Broad Market Index ETF

Statement of

Changes in Net Assets

For the current and prior report periods

Operations
	3/1/14-2/28/15		8/14/13*-2/28/14
Net investment income		$2,720,571	$315,003
Net realized losses		(55,475)	(61,690)
Net change in unrealized appreciation (depreciation)	+	12,915,457	2,715,251
Increase in net assets resulting from operations		15,580,553	2,968,564
Distributions to Shareholders
Distributions from net investment income		($2,041,330)	($141,500)

Transactions in Fund Shares
		3/1/14-2/28/15		8/14/13*-2/28/14
		SHARES	VALUE	SHARES	VALUE
Shares sold		4,800,000	$139,884,389	2,150,001	$55,996,319
Shares redeemed	+	—	—	—	—
Net transactions in fund shares		4,800,000	$139,884,389	2,150,001	$55,996,319
Shares Outstanding and Net Assets
		3/1/14-2/28/15		8/14/13*-2/28/14
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		2,150,001	$58,823,383	—	$—
Total increase	+	4,800,000	153,423,612	2,150,001	58,823,383
End of period		6,950,001	$212,246,995	2,150,001	$58,823,383
Net investment income not yet distributed			$819,107		$172,206

*	Commencement of operations.

See financial notes 25

Table of Contents

Schwab Fundamental U.S. Large Company Index ETF

Financial Statements

Financial Highlights

	3/1/14– 2/28/15	8/14/13 ¹– 2/28/14
Per-Share Data ($)
Net asset value at beginning of period	27.27	25.00
Income (loss) from investment operations:
Net investment income (loss)	0.52	0.21
Net realized and unrealized gains (losses)	3.25	2.18
Total from investment operations	3.77	2.39
Less distributions:
Distributions from net investment income	(0.49)	(0.12)
Net asset value at end of period	30.55	27.27
Total return (%)	13.92	9.59 ²
Ratios/Supplemental Data (%)
Ratios to average net assets:
Total expenses	0.32	0.32 ³
Net investment income (loss)	2.24	2.20 ³
Portfolio turnover rate⁴	10	6 ²
Net assets, end of period ($ x 1,000)	336,043	72,259

Commencement of operations.

Not annualized.

Annualized.

⁴

Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.

26 See financial notes

Table of Contents

Schwab Fundamental U.S. Large Company Index ETF

Condensed Portfolio Holdings as of February 28, 2015

Holdings by Category		Cost ($)	Value ($)
99.7%	Common Stock	314,025,661	334,954,585
0.3%	Other Investment Companies	908,722	908,722
0.0%	Short-Term Investment	40,000	40,000
100.0%	Total Investments	314,974,383	335,903,307
0.0%	Other Assets and Liabilities, Net		140,113
100.0%	Net Assets		336,043,420

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 99.7% of net assets
Automobiles & Components 1.2%
Other Securities		1.2	4,013,453
Banks 5.4%
Bank of America Corp.	229,787	1.1	3,632,933
Citigroup, Inc.	46,036	0.7	2,413,207
JPMorgan Chase & Co.	70,693	1.3	4,332,067
Wells Fargo & Co.	62,054	1.0	3,399,939
Other Securities		1.3	4,254,253
		5.4	18,032,399
Capital Goods 7.5%
3M Co.	9,079	0.5	1,531,173
General Electric Co.	168,192	1.3	4,371,310
United Technologies Corp.	16,060	0.6	1,957,875
Other Securities		5.1	17,389,321
		7.5	25,249,679
Commercial & Professional Services 0.8%
Other Securities		0.8	2,857,687
Consumer Durables & Apparel 1.1%
Other Securities		1.1	3,777,895

Security	Number of Shares	% of Net Assets	Value ($)
Consumer Services 1.7%
McDonald's Corp.	20,962	0.6	2,073,142
Other Securities		1.1	3,684,369
		1.7	5,757,511
Diversified Financials 3.1%
Berkshire Hathaway, Inc., Class B *	17,535	0.8	2,584,834
The Charles Schwab Corp. (a)	7,089	0.1	207,991
Other Securities		2.2	7,714,571
		3.1	10,507,396
Energy 13.3%
Chevron Corp.	72,320	2.3	7,715,098
ConocoPhillips	63,435	1.2	4,135,962
Exxon Mobil Corp.	161,526	4.3	14,301,512
Phillips 66	30,405	0.7	2,385,576
Schlumberger Ltd.	15,940	0.4	1,341,510
Valero Energy Corp.	29,285	0.5	1,806,592
Other Securities		3.9	13,108,463
		13.3	44,794,713
Food & Staples Retailing 4.5%
Costco Wholesale Corp.	11,537	0.5	1,695,478
CVS Health Corp.	34,884	1.1	3,623,401
The Kroger Co.	18,350	0.4	1,305,602
Wal-Mart Stores, Inc.	61,870	1.5	5,192,749
Walgreens Boots Alliance, Inc.	23,434	0.6	1,946,897
Other Securities		0.4	1,510,302
		4.5	15,274,429
Food, Beverage & Tobacco 5.3%
Altria Group, Inc.	32,681	0.5	1,839,614
PepsiCo, Inc.	25,402	0.7	2,514,290
Philip Morris International, Inc.	32,013	0.8	2,655,798
The Coca-Cola Co.	52,650	0.7	2,279,745
Other Securities		2.6	8,667,918
		5.3	17,957,365
Health Care Equipment & Services 6.3%
Anthem, Inc.	17,286	0.8	2,531,535
McKesson Corp.	5,837	0.4	1,334,922
Medtronic plc	21,503	0.5	1,668,418
UnitedHealth Group, Inc.	27,222	0.9	3,093,236
Other Securities		3.7	12,563,331
		6.3	21,191,442
Household & Personal Products 2.2%
The Procter & Gamble Co.	57,864	1.5	4,925,962
Other Securities		0.7	2,406,898
		2.2	7,332,860
Insurance 3.2%
The Travelers Cos., Inc.	16,979	0.5	1,824,224
Other Securities		2.7	8,799,071
		3.2	10,623,295

See financial notes 27

Table of Contents

Schwab Fundamental U.S. Large Company Index ETF

Condensed Portfolio Holdings continued

Security	Number of Shares	% of Net Assets	Value ($)
Materials 3.8%
Other Securities		3.8	12,865,223
Media 3.7%
Comcast Corp., Class A	32,394	0.6	1,923,556
The Walt Disney Co.	22,128	0.7	2,303,082
Time Warner, Inc.	20,559	0.5	1,682,960
Other Securities		1.9	6,534,707
		3.7	12,444,305
Pharmaceuticals, Biotechnology & Life Sciences 5.9%
Amgen, Inc.	11,948	0.6	1,884,439
Bristol-Myers Squibb Co.	23,197	0.4	1,413,161
Johnson & Johnson	38,544	1.2	3,951,145
Merck & Co., Inc.	40,356	0.7	2,362,440
Pfizer, Inc.	133,243	1.4	4,572,900
Other Securities		1.6	5,495,118
		5.9	19,679,203
Real Estate 1.3%
Other Securities		1.3	4,260,995
Retailing 5.7%
Lowe's Cos., Inc.	29,949	0.7	2,218,921
Target Corp.	27,508	0.6	2,113,440
The Home Depot, Inc.	24,374	0.8	2,796,916
Other Securities		3.6	11,864,553
		5.7	18,993,830
Semiconductors & Semiconductor Equipment 2.5%
Intel Corp.	129,149	1.3	4,294,204
Other Securities		1.2	3,989,939
		2.5	8,284,143
Software & Services 6.5%
International Business Machines Corp.	25,583	1.2	4,142,911
Microsoft Corp.	136,254	1.8	5,974,738
Oracle Corp.	43,868	0.6	1,922,296
Other Securities		2.9	9,814,079
		6.5	21,854,024
Technology Hardware & Equipment 4.9%
Apple, Inc.	34,835	1.3	4,474,904
Cisco Systems, Inc.	101,266	0.9	2,988,360
Hewlett-Packard Co.	104,988	1.1	3,657,782
Other Securities		1.6	5,316,115
		4.9	16,437,161
Telecommunication Services 3.8%
AT&T, Inc.	204,836	2.1	7,079,132
Verizon Communications, Inc.	82,291	1.2	4,069,290
Other Securities		0.5	1,485,892
		3.8	12,634,314
Transportation 1.7%
Other Securities		1.7	5,806,091

Security	Number of Shares	% of Net Assets	Value ($)
Utilities 4.3%
Other Securities		4.3	14,325,172
Total Common Stock
(Cost $314,025,661)			334,954,585

Other Investment Companies 0.3% of net assets
Money Market Fund 0.1%
Other Securities		0.1	207,814
Securities Lending Collateral 0.2%
Other Securities		0.2	700,908
Total Other Investment Companies
(Cost $908,722)			908,722
Security Rate, Maturity Date	Face Amount ($)	% of Net Assets	Value ($)
Short-Term Investment 0.0% of net assets
U.S. Treasury Obligation 0.0%
Other Securities		0.0	40,000
Total Short-Term Investment
(Cost $40,000)			40,000

End of Investments.

At 02/28/15, the tax basis cost of the fund's investments was $314,950,046 and the unrealized appreciation and depreciation were $26,937,939 and ($5,984,678), respectively, with a net unrealized appreciation of $20,953,261.

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

*	Non-income producing security.
(a)	Issuer is affiliated with the fund's adviser.
(b)	All or a portion of this security is on loan. Securities on loan were valued at $754,549. Non-Cash Collateral pledged to the fund for securities on loan amounted to $87,052.
(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.

REIT –

Real Estate Investment Trust

In addition to the above, the fund held the following at 02/28/15:

	Number of Contracts	Contract Value ($)	Unrealized Depreciation ($)
Futures Contracts
S&P 500 Index, e-mini, Long, expires 03/20/15	4	420,560	(148)

28 See financial notes

Table of Contents

Schwab Fundamental U.S. Large Company Index ETF

Condensed Portfolio Holdings continued

The following is a summary of the inputs used to value the fund’s investments as of February 28, 2015 (see financial note 2(a) for additional information):

Assets Valuation Input

Description	Quoted Prices in Active Markets for Identical Assets (Level 1)	Other Significant Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Common Stock¹	$334,954,585	$—	$—	$334,954,585
Other Investment Companies¹	908,722	—	—	908,722
Short-Term Investment¹	—	40,000	—	40,000
Total	$335,863,307	$40,000	$—	$335,903,307
Liabilities Valuation Input

Other Financial Instruments
Futures Contracts²	($148)	$—	$—	($148)

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

See financial notes 29

Table of Contents

Schwab Fundamental U.S. Large Company Index ETF

Statement of

Assets and Liabilities

As of February 28, 2015

Assets
Investments in affiliated issuers, at value (cost $184,132)		$207,991
Investments in unaffiliated issuers, at value (cost $314,089,343) including securities on loan of $754,549		334,994,408
Collateral invested for securities on loan, at value (cost $700,908)	+	700,908
Total investments, at value (cost $314,974,383)		335,903,307
Receivables:
Dividends		858,483
Income from securities on loan	+	1,593
Total assets		336,763,383
Liabilities
Collateral held for securities on loan		700,908
Payables:
Investment adviser fees		17,628
Variation margin on futures contracts		1,420
Due to custodian	+	7
Total liabilities		719,963
Net Assets
Total assets		336,763,383
Total liabilities	–	719,963
Net assets		$336,043,420
Net Assets by Source
Capital received from investors		314,012,873
Net investment income not yet distributed		1,265,040
Net realized capital losses		(163,269)
Net unrealized capital appreciation		20,928,776

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$336,043,420		11,000,001		$30.55

30 See financial notes

Table of Contents

Schwab Fundamental U.S. Large Company Index ETF

Statement of

Operations

For the period March 1, 2014 through February 28, 2015

Investment Income
Dividends received from affiliated issuer		$1,194
Dividends received from unaffiliated issuers (net of foreign withholding tax of $1,068)		4,418,671
Securities on loan	+	10,210
Total investment income		4,430,075
Expenses
Investment adviser fees		554,434
Total expenses	–	554,434
Net investment income		3,875,641
Realized and Unrealized Gains (Losses)
Net realized gains on affiliated issuer		2,220
Net realized losses on unaffiliated investments		(185,210)
Net realized gains on in-kind redemptions		1,816,689
Net realized gains on futures contracts	+	20,174
Net realized gains		1,653,873
Net change in unrealized appreciation (depreciation) on affiliated issuer		15,948
Net change in unrealized appreciation (depreciation) on unaffiliated investments		17,954,276
Net change in unrealized appreciation (depreciation) on futures contracts	+	(148)
Net change in unrealized appreciation (depreciation)	+	17,970,076
Net realized and unrealized gains		19,623,949
Increase in net assets resulting from operations		$23,499,590

See financial notes 31

Table of Contents

Schwab Fundamental U.S. Large Company Index ETF

Statement of

Changes in Net Assets

For the current and prior report periods

Operations
	3/1/14-2/28/15		8/14/13*-2/28/14
Net investment income		$3,875,641	$400,764
Net realized gains (losses)		1,653,873	(40,036)
Net change in unrealized appreciation (depreciation)	+	17,970,076	2,958,700
Increase in net assets resulting from operations		23,499,590	3,319,428
Distributions to Shareholders
Distributions from net investment income		($2,790,460)	($180,240)

Transactions in Fund Shares
		3/1/14-2/28/15		8/14/13*-2/28/14
		SHARES	VALUE	SHARES	VALUE
Shares sold		8,700,000	$253,334,704	2,650,001	$69,119,382
Shares redeemed	+	(350,000)	(10,258,984)	—	—
Net transactions in fund shares		8,350,000	$243,075,720	2,650,001	$69,119,382
Shares Outstanding and Net Assets
		3/1/14-2/28/15		8/14/13*-2/28/14
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		2,650,001	$72,258,570	—	$—
Total increase	+	8,350,000	263,784,850	2,650,001	72,258,570
End of period		11,000,001	$336,043,420	2,650,001	$72,258,570
Net investment income not yet distributed			$1,265,040		$218,984

*	Commencement of operations.

32 See financial notes

Table of Contents

Schwab Fundamental U.S. Small Company Index ETF

Financial Statements

Financial Highlights

	3/1/14– 2/28/15	8/14/13 ¹– 2/28/14
Per-Share Data ($)
Net asset value at beginning of period	28.44	25.00
Income (loss) from investment operations:
Net investment income (loss)	0.34	0.12
Net realized and unrealized gains (losses)	2.22	3.41
Total from investment operations	2.56	3.53
Less distributions:
Distributions from net investment income	(0.32)	(0.09)
Net asset value at end of period	30.68	28.44
Total return (%)	9.06	14.14 ²
Ratios/Supplemental Data (%)
Ratios to average net assets:
Total expenses	0.32	0.32 ³
Net investment income (loss)	1.32	1.16 ³
Portfolio turnover rate⁴	22	9 ²
Net assets, end of period ($ x 1,000)	187,141	55,465

Commencement of operations.

Not annualized.

Annualized.

⁴

Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.

See financial notes 33

Table of Contents

Schwab Fundamental U.S. Small Company Index ETF

Condensed Portfolio Holdings as of February 28, 2015

Holdings by Category		Cost ($)	Value ($)
99.8%	Common Stock	173,876,216	186,743,603
0.0%	Rights	14,969	14,969
1.8%	Other Investment Companies	3,408,567	3,408,567
0.0%	Short-Term Investments	31,500	31,500
101.6%	Total Investments	177,331,252	190,198,639
(1.6)%	Other Assets and Liabilities, Net		(3,057,201)
100.0%	Net Assets		187,141,438

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 99.8% of net assets
Automobiles & Components 1.0%
Other Securities		1.0	1,798,313
Banks 4.6%
Popular, Inc. *	14,890	0.3	513,854
Other Securities		4.3	8,041,398
		4.6	8,555,252
Capital Goods 11.1%
Carlisle Cos., Inc.	5,124	0.3	476,891
Huntington Ingalls Industries, Inc.	3,297	0.2	465,965
Lennox International, Inc.	5,017	0.3	523,072
Spirit AeroSystems Holdings, Inc., Class A *	10,785	0.3	530,730
Other Securities		10.0	18,827,135
		11.1	20,823,793
Commercial & Professional Services 5.3%
Copart, Inc. *	11,651	0.2	435,980
Other Securities		5.1	9,427,026
		5.3	9,863,006

Security	Number of Shares	% of Net Assets	Value ($)
Consumer Durables & Apparel 2.9%
Hanesbrands, Inc.	3,711	0.3	473,301
Other Securities		2.6	4,963,721
		2.9	5,437,022
Consumer Services 4.6%
Jack in the Box, Inc.	4,665	0.2	451,059
Restaurant Brands International, Inc.	13,786	0.3	609,755
Other Securities		4.1	7,658,965
		4.6	8,719,779
Diversified Financials 3.3%
Eaton Vance Corp.	10,739	0.2	452,112
Federated Investors, Inc., Class B	14,363	0.3	472,974
SEI Investments Co.	10,533	0.2	453,340
Other Securities		2.6	4,759,620
		3.3	6,138,046
Energy 4.2%
Other Securities		4.2	7,806,602
Food & Staples Retailing 1.0%
The Pantry, Inc. *	16,510	0.3	605,917
Other Securities		0.7	1,199,200
		1.0	1,805,117
Food, Beverage & Tobacco 2.3%
Other Securities		2.3	4,362,186
Health Care Equipment & Services 5.6%
Centene Corp. *	9,928	0.3	610,175
Cerner Corp. *	7,119	0.3	512,995
Edwards Lifesciences Corp. *	3,298	0.2	438,700
ResMed, Inc.	7,167	0.2	461,268
Other Securities		4.6	8,422,261
		5.6	10,445,399
Household & Personal Products 0.3%
Other Securities		0.3	663,905
Insurance 4.8%
Allied World Assurance Co. Holdings AG	11,138	0.2	450,532
Endurance Specialty Holdings Ltd.	8,458	0.3	537,675
First American Financial Corp.	14,696	0.3	514,801
Platinum Underwriters Holdings Ltd.	6,877	0.3	525,059
Primerica, Inc.	8,691	0.2	458,363
Other Securities		3.5	6,493,233
		4.8	8,979,663
Materials 5.7%
Graphic Packaging Holding Co. *	30,453	0.2	459,536
Martin Marietta Materials, Inc.	3,245	0.2	461,861
Resolute Forest Products, Inc. *	24,235	0.2	442,046
Other Securities		5.1	9,356,036
		5.7	10,719,479

34 See financial notes

Table of Contents

Schwab Fundamental U.S. Small Company Index ETF

Condensed Portfolio Holdings continued

Security	Number of Shares	% of Net Assets	Value ($)
Media 2.1%
Cinemark Holdings, Inc.	11,514	0.3	468,850
Other Securities		1.8	3,551,257
		2.1	4,020,107
Pharmaceuticals, Biotechnology & Life Sciences 2.0%
Charles River Laboratories International, Inc. *	6,165	0.3	472,671
Other Securities		1.7	3,293,174
		2.0	3,765,845
Real Estate 9.4%
Corrections Corp. of America	12,368	0.3	493,360
Digital Realty Trust, Inc.	6,748	0.2	447,932
Duke Realty Corp.	22,192	0.3	474,021
Jones Lang LaSalle, Inc.	3,088	0.3	497,940
Other Securities		8.3	15,611,238
		9.4	17,524,491
Retailing 5.9%
Chico's FAS, Inc.	26,485	0.3	482,822
Office Depot, Inc. *	74,863	0.4	701,466
Other Securities		5.2	9,793,591
		5.9	10,977,879
Semiconductors & Semiconductor Equipment 4.0%
ON Semiconductor Corp. *	36,481	0.2	465,133
Qorvo, Inc. *	7,404	0.3	513,838
Skyworks Solutions, Inc.	5,285	0.2	463,759
Other Securities		3.3	6,062,852
		4.0	7,505,582
Software & Services 5.7%
Akamai Technologies, Inc. *	6,874	0.3	477,812
Convergys Corp.	21,148	0.3	472,658
DST Systems, Inc.	4,487	0.3	476,923
Global Payments, Inc.	4,890	0.2	449,195
VeriSign, Inc. *	7,584	0.3	485,528
Other Securities		4.3	8,276,027
		5.7	10,638,143
Technology Hardware & Equipment 4.9%
Brocade Communications Systems, Inc.	35,948	0.2	445,396
QLogic Corp. *	30,546	0.2	458,495
Other Securities		4.5	8,313,723
		4.9	9,217,614
Telecommunication Services 1.0%
Level 3 Communications, Inc. *	11,770	0.3	633,932
Other Securities		0.7	1,238,798
		1.0	1,872,730
Transportation 4.2%
Alaska Air Group, Inc.	7,731	0.3	492,078
JetBlue Airways Corp. *	28,487	0.3	489,692
SkyWest, Inc.	35,922	0.3	525,180

Security	Number of Shares	% of Net Assets	Value ($)
Southwest Airlines Co.	11,634	0.3	503,054
Other Securities		3.0	5,783,761
		4.2	7,793,765
Utilities 3.9%
Hawaiian Electric Industries, Inc.	14,575	0.3	481,704
WGL Holdings, Inc.	8,419	0.2	449,154
Other Securities		3.4	6,379,027
		3.9	7,309,885
Total Common Stock
(Cost $173,876,216)			186,743,603

Rights 0.0% of net assets
Telecommunication Services 0.0%
Other Securities		0.0	14,969
Total Rights
(Cost $14,969)			14,969

Other Investment Companies 1.8% of net assets
Money Market Fund 0.2%
Other Securities		0.2	345,284
Securities Lending Collateral 1.6%
Other Securities		1.6	3,063,283
Total Other Investment Companies
(Cost $3,408,567)			3,408,567
Security Rate, Maturity Date	Face Amount ($)	% of Net Assets	Value ($)
Short-Term Investments 0.0% of net assets
U.S. Treasury Obligations 0.0%
Other Securities		0.0	31,500
Total Short-Term Investment
(Cost $31,500)			31,500

End of Investments.

At 02/28/15, the tax basis cost of the fund's investments was $177,333,719 and the unrealized appreciation and depreciation were $18,758,378 and ($5,893,458), respectively, with a net unrealized appreciation of $12,864,920.

See financial notes 35

Table of Contents

Schwab Fundamental U.S. Small Company Index ETF

Condensed Portfolio Holdings continued

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

*	Non-income producing security.
(a)	Fair-valued by management in accordance with procedures approved by the Board of Trustees.
(b)	Illiquid security. At the period end, the value of these amounted to $14,969 or 0.0% of net assets.
(c)	The rate shown is the 7-day yield.
(d)	All or a portion of this security is on loan. Securities on loan were valued at $2,885,416. Non-Cash Collateral pledged to the fund for securities on loan amounted to $11,556.
(e)	The rate shown is the purchase yield.
(f)	All or a portion of this security is held as collateral for open futures contracts.

CVR –	Contingent Value Rights
REIT –	Real Estate Investment Trust

In addition to the above, the fund held the following at 02/28/15:

	Number of Contracts	Contract Value ($)	Unrealized Depreciation ($)
Futures Contracts
Russell 2000 Index, e-mini, Long, expires 03/20/15	1	123,160	(67)

The following is a summary of the inputs used to value the fund’s investments as of February 28, 2015 (see financial note 2(a) for additional information):

Assets Valuation Input

Description	Quoted Prices in Active Markets for Identical Assets (Level 1)	Other Significant Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Common Stock¹	$186,743,603	$—	$—	$186,743,603
Rights ¹	—	—	14,969	14,969
Other Investment Companies¹	3,408,567	—	—	3,408,567
Short-Term Investments¹	—	31,500	—	31,500
Total	$190,152,170	$31,500	$14,969	$190,198,639
Liabilities Valuation Input

Other Financial Instruments
Futures Contracts²	($67)	$—	$—	($67)

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

The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:

Investments in Securities	Balance as of February 28, 2014	Realized Gains (Losses)	Change in Unrealized Appreciation (Depreciation)	Gross Purchases	Gross Sales	Gross Transfers in	Gross Transfers out	Balance as of February 28, 2015
Rights	$—	$—	$—	$14,969	$—	$—	$—	$14,969
Total	$—	$—	$—	$14,969	$—	$—	$—	$14,969

36 See financial notes

Table of Contents

Schwab Fundamental U.S. Small Company Index ETF

Statement of

Assets and Liabilities

As of February 28, 2015

Assets
Investments, at value (cost $174,267,969) including securities on loan of $2,885,416		$187,135,356
Collateral invested for securities on loan, at value (cost $3,063,283)	+	3,063,283
Total investments, at value (cost $177,331,252)		190,198,639
Cash		22,310
Receivables:
Investments sold		2,652
Fund shares sold		4,612,640
Dividends		198,263
Income from securities on loan	+	7,697
Total assets		195,042,201
Liabilities
Collateral held for securities on loan		3,063,283
Payables:
Investments bought		4,827,204
Investment adviser fees		9,666
Variation margin on futures contracts	+	610
Total liabilities		7,900,763
Net Assets
Total assets		195,042,201
Total liabilities	–	7,900,763
Net assets		$187,141,438
Net Assets by Source
Capital received from investors		174,211,619
Net investment income not yet distributed		247,303
Net realized capital losses		(184,800)
Net unrealized capital appreciation		12,867,316

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$187,141,438		6,100,001		$30.68

See financial notes 37

Table of Contents

Schwab Fundamental U.S. Small Company Index ETF

Statement of

Operations

For the period March 1, 2014 through February 28, 2015

Investment Income
Dividends (net of foreign withholding tax of $1,474)		$1,586,224
Securities on loan	+	42,476
Total investment income		1,628,700
Expenses
Investment adviser fees		318,756
Total expenses	–	318,756
Net investment income		1,309,944
Realized and Unrealized Gains (Losses)
Net realized losses on investments		(207,078)
Net realized gains on in-kind redemptions		1,197,593
Net realized gains on futures contracts		25,180
Net realized losses on foreign currency transactions	+	(28)
Net realized gains		1,015,667
Net change in unrealized appreciation (depreciation) on investments		9,507,234
Net change in unrealized appreciation (depreciation) on futures contracts		(1,085)
Net change in unrealized appreciation (depreciation) on foreign currency translations	+	(4)
Net change in unrealized appreciation (depreciation)	+	9,506,145
Net realized and unrealized gains		10,521,812
Increase in net assets resulting from operations		$11,831,756

38 See financial notes

Table of Contents

Schwab Fundamental U.S. Small Company Index ETF

Statement of

Changes in Net Assets

For the current and prior report periods

Operations
	3/1/14-2/28/15		8/14/13*-2/28/14
Net investment income		$1,309,944	$155,554
Net realized gains (losses)		1,015,667	(49,772)
Net change in unrealized appreciation (depreciation)	+	9,506,145	3,361,171
Increase in net assets resulting from operations		11,831,756	3,466,953
Distributions to Shareholders
Distributions from net investment income		($1,067,580)	($95,650)

Transactions in Fund Shares
		3/1/14-2/28/15		8/14/13*-2/28/14
		SHARES	VALUE	SHARES	VALUE
Shares sold		4,550,000	$132,596,467	1,950,001	$52,093,700
Shares redeemed	+	(400,000)	(11,684,208)	—	—
Net transactions in fund shares		4,150,000	$120,912,259	1,950,001	$52,093,700
Shares Outstanding and Net Assets
		3/1/14-2/28/15		8/14/13*-2/28/14
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		1,950,001	$55,465,003	—	$—
Total increase	+	4,150,000	131,676,435	1,950,001	55,465,003
End of period		6,100,001	$187,141,438	1,950,001	$55,465,003
Net investment income not yet distributed			$247,303		$57,781

*	Commencement of operations.

See financial notes 39

Table of Contents

Schwab Fundamental International Large Company Index ETF

Financial Statements

Financial Highlights

	3/1/14– 2/28/15	8/14/13 ¹– 2/28/14
Per-Share Data ($)
Net asset value at beginning of period	28.26	25.00
Income (loss) from investment operations:
Net investment income (loss)	0.30	0.36
Net realized and unrealized gains (losses)	(0.92) ²	3.04
Total from investment operations	(0.62)	3.40
Less distributions:
Distributions from net investment income	(0.47)	(0.14)
Net asset value at end of period	27.17	28.26
Total return (%)	(2.11)	13.60 ³
Ratios/Supplemental Data (%)
Ratios to average net assets:
Total expenses	0.32	0.32 ⁴
Net investment income (loss)	2.50	4.00 ⁴
Portfolio turnover rate⁵	11	8 ³
Net assets, end of period ($ x 1,000)	290,670	62,164

Commencement of operations.

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.

Not annualized.

⁴

Annualized.

⁵

Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.

40 See financial notes

Table of Contents

Schwab Fundamental International Large Company Index ETF

Condensed Portfolio Holdings as of February 28, 2015

Holdings by Category		Cost ($)	Value ($)
99.3%	Common Stock	283,630,072	288,583,885
0.4%	Preferred Stock	1,202,978	1,285,381
0.4%	Other Investment Companies	1,122,071	1,122,071
0.0%	Short-Term Investments	55,000	55,000
100.1%	Total Investments	286,010,121	291,046,337
(0.1)%	Other Assets and Liabilities, Net		(376,094)
100.0%	Net Assets		290,670,243

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 99.3% of net assets
Australia 5.3%
BHP Billiton Ltd.	74,323	0.7	1,957,634
Commonwealth Bank of Australia	18,627	0.5	1,340,220
National Australia Bank Ltd.	36,813	0.4	1,092,103
Westpac Banking Corp.	37,138	0.4	1,104,651
Other Securities		3.3	10,029,346
		5.3	15,523,954
Austria 0.4%
Other Securities		0.4	1,064,301
Belgium 1.0%
Other Securities		1.0	2,847,412
Canada 6.3%
Royal Bank of Canada	18,083	0.4	1,134,089
Other Securities		5.9	17,229,122
		6.3	18,363,211
Denmark 0.8%
Other Securities		0.8	2,427,728

Security	Number of Shares	% of Net Assets	Value ($)
Finland 1.1%
Nokia Oyj	136,582	0.4	1,100,722
Other Securities		0.7	2,191,583
		1.1	3,292,305
France 10.5%
AXA S.A.	46,010	0.4	1,170,965
BNP Paribas S.A.	23,647	0.5	1,381,617
GDF Suez	67,766	0.5	1,510,693
Orange S.A.	149,386	0.9	2,731,208
Sanofi	22,694	0.8	2,232,379
Total S.A.	85,213	1.6	4,610,259
Vivendi S.A. *	52,266	0.4	1,278,886
Other Securities		5.4	15,449,019
		10.5	30,365,026
Germany 8.7%
Allianz SE - Reg'd	9,097	0.5	1,526,465
BASF SE	23,540	0.8	2,261,471
Bayer AG - Reg'd	10,733	0.5	1,589,706
Daimler AG - Reg'd	24,250	0.8	2,353,072
Deutsche Telekom AG - Reg'd	130,075	0.8	2,432,129
E.ON SE	123,094	0.7	1,994,397
Siemens AG - Reg'd	16,696	0.6	1,869,335
Other Securities		4.0	11,271,352
		8.7	25,297,927
Hong Kong 1.1%
Other Securities		1.1	3,219,730
Ireland 0.7%
Other Securities		0.7	1,883,593
Israel 0.4%
Other Securities		0.4	1,124,360
Italy 3.7%
Enel S.p.A.	321,714	0.5	1,485,982
Eni S.p.A.	139,055	0.9	2,601,596
Intesa Sanpaolo S.p.A.	342,118	0.4	1,145,070
UniCredit S.p.A.	170,711	0.4	1,138,336
Other Securities		1.5	4,433,016
		3.7	10,804,000
Japan 22.3%
Canon, Inc.	38,800	0.4	1,262,229
Hitachi Ltd.	158,000	0.4	1,081,133
Honda Motor Co., Ltd.	46,200	0.5	1,526,345
KDDI Corp.	15,800	0.4	1,095,671
Mitsubishi UFJ Financial Group, Inc.	219,400	0.5	1,427,307
Nippon Telegraph & Telephone Corp.	23,000	0.5	1,427,580
Sony Corp.	36,900	0.4	1,053,955
Toyota Motor Corp.	44,500	1.0	3,001,410
Other Securities		18.2	52,906,472
		22.3	64,782,102
Luxembourg 0.5%
Other Securities		0.5	1,401,922

See financial notes 41

Table of Contents

Schwab Fundamental International Large Company Index ETF

Condensed Portfolio Holdings continued

Security	Number of Shares	% of Net Assets	Value ($)
Netherlands 5.5%
Royal Dutch Shell plc, A Shares	166,338	1.9	5,459,125
Royal Dutch Shell plc, B Shares	106,494	1.2	3,629,718
Other Securities		2.4	6,813,105
		5.5	15,901,948
New Zealand 0.1%
Other Securities		0.1	407,968
Norway 0.9%
Other Securities		0.9	2,491,500
Portugal 0.2%
Other Securities		0.2	520,339
Singapore 0.8%
Other Securities		0.8	2,348,968
Spain 4.0%
Banco Bilbao Vizcaya Argentaria S.A.	136,643	0.5	1,376,325
Banco Santander S.A.	400,121	1.0	2,931,981
Telefonica S.A.	209,783	1.1	3,269,536
Other Securities		1.4	4,150,850
		4.0	11,728,692
Sweden 2.4%
Other Securities		2.4	7,006,840
Switzerland 5.6%
Nestle S.A. - Reg'd	42,328	1.1	3,321,944
Novartis AG - Reg'd	27,639	1.0	2,841,161
Roche Holding AG	6,527	0.6	1,781,843
Other Securities		2.9	8,423,660
		5.6	16,368,608
United Kingdom 17.0%
AstraZeneca plc	31,260	0.7	2,159,179
Barclays plc	391,951	0.5	1,556,097
BHP Billiton plc	47,352	0.4	1,182,918
BP plc	918,339	2.2	6,358,727
British American Tobacco plc	27,624	0.6	1,614,540
GlaxoSmithKline plc	104,869	0.9	2,498,224
HSBC Holdings plc	389,630	1.2	3,476,119
Rio Tinto plc	28,302	0.5	1,396,113
Tesco plc	423,337	0.6	1,605,467
Vodafone Group plc	883,641	1.1	3,064,357
Other Securities		8.3	24,499,710
		17.0	49,411,451
Total Common Stock
(Cost $283,630,072)			288,583,885

Security	Number of Shares	% of Net Assets	Value ($)
Preferred Stock 0.4% of net assets
Germany 0.4%
Other Securities		0.4	1,285,381
Total Preferred Stock
(Cost $1,202,978)			1,285,381

Other Investment Companies 0.4% of net assets
United States 0.4%
Money Market Fund 0.0%
Other Securities		0.0	73,642
Securities Lending Collateral 0.4%
Other Securities		0.4	1,048,429
Total Other Investment Companies
(Cost $1,122,071)			1,122,071
Security Rate, Maturity Date	Face Amount ($)	% of Net Assets	Value ($)
Short-Term Investments 0.0% of net assets
U.S. Treasury Obligations 0.0%
Other Securities		0.0	55,000
Total Short-Term Investment
(Cost $55,000)			55,000

End of Investments.

At 02/28/15, the tax basis cost of the fund's investments was $286,250,068 and the unrealized appreciation and depreciation were $15,256,196 and ($10,459,927), respectively, with a net unrealized appreciation of $4,796,269.

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

*	Non-income producing security.
(a)	Fair-valued by management in accordance with procedures approved by the Board of Trustees.
(b)	Illiquid security. At the period end, the value of these amounted to $29,564 or 0.0% of net assets.
(c)	The rate shown is the 7-day yield.
(d)	All or a portion of this security is on loan. Securities on loan were valued at $1,845,067. Non-Cash Collateral pledged to the fund for securities on loan amounted to $891,398.
(e)	The rate shown is the purchase yield.
(f)	All or a portion of this security is held as collateral for open futures contracts.

CDI –	CHESS Depositary Interest
CVA –	Dutch Certificate
Reg'd –	Registered
REIT –	Real Estate Investment Trust
RSP –	Risparmio (Convertible Savings Shares)

42 See financial notes

Table of Contents

Schwab Fundamental International Large Company Index ETF

Condensed Portfolio Holdings continued

In addition to the above, the fund held the following at 02/28/15:

	Number of Contracts	Contract Value ($)	Unrealized Appreciation ($)
Futures Contracts
MSCI EAFE, e-mini, Long, expires 03/20/15	2	187,530	2,771

The following is a summary of the inputs used to value the fund’s investments as of February 28, 2015 (see financial note 2(a) for additional information):

Description	Quoted Prices in Active Markets for Identical Assets (Level 1)	Other Significant Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Common Stock¹	$272,681,937	$—	$—	$272,681,937
Netherlands ¹	15,274,232	—	—	15,274,232
Telecommunication Services	598,152	—	29,564	627,716
Preferred Stock¹	1,285,381	—	—	1,285,381
Other Investment Companies¹	1,122,071	—	—	1,122,071
Short-Term Investments¹	—	55,000	—	55,000
Total	$290,961,773	$55,000	$29,564	$291,046,337
Other Financial Instruments
Futures Contracts²	$2,771	$—	$—	$2,771

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

The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:

Investments in Securities	Balance as of February 28, 2014	Realized Gains (Losses)	Change in Unrealized Appreciation (Depreciation)	Gross Purchases	Gross Sales	Gross Transfers in	Gross Transfers out	Balance as of February 28, 2015
Common Stock
Netherlands	$—	$—	$4,053	$25,511	$—	$—	$—	$29,564
Total	$—	$—	$4,053	$25,511	$—	$—	$—	$29,564

All net realized and change in unrealized gains (losses) in the table above are reflected on the accompanying Statement of Operations. The change in net unrealized appreciation (depreciation) for Level 3 Investments held by the fund at February 28, 2015 was $4,053.

See financial notes 43

Table of Contents

Schwab Fundamental International Large Company Index ETF

Statement of

Assets and Liabilities

As of February 28, 2015

Assets
Investments, at value (cost $284,961,692) including securities on loan of $1,845,067		$289,997,908
Collateral invested for securities on loan, at value (cost $1,048,429)	+	1,048,429
Total investments, at value (cost $286,010,121)		291,046,337
Foreign currency, at value (cost $72,817)		72,747
Receivables:
Dividends		573,299
Foreign tax reclaims		37,015
Income from securities on loan	+	4,777
Total assets		291,734,175
Liabilities
Collateral held for securities on loan		1,048,429
Payables:
Investments bought		125
Investment adviser fees		15,228
Variation margin on futures contracts	+	150
Total liabilities		1,063,932
Net Assets
Total assets		291,734,175
Total liabilities	–	1,063,932
Net assets		$290,670,243
Net Assets by Source
Capital received from investors		286,609,097
Net investment income not yet distributed		542,427
Net realized capital losses		(1,514,858)
Net unrealized capital appreciation		5,033,577

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$290,670,243		10,700,001		$27.17

44 See financial notes

Table of Contents

Schwab Fundamental International Large Company Index ETF

Statement of

Operations

For the period March 1, 2014 through February 28, 2015

Investment Income
Dividends (net of foreign withholding tax of $344,301)		$4,042,057
Securities on loan	+	24,413
Total investment income		4,066,470
Expenses
Investment adviser fees		461,036
Total expenses	–	461,036
Net investment income		3,605,434
Realized and Unrealized Gains (Losses)
Net realized losses on investments		(1,410,767)
Net realized losses on futures contracts		(27,757)
Net realized losses on foreign currency transactions	+	(49,984)
Net realized losses		(1,488,508)
Net change in unrealized appreciation (depreciation) on investments		2,255,975
Net change in unrealized appreciation (depreciation) on futures contracts		2,771
Net change in unrealized appreciation (depreciation) on foreign currency translations	+	(6,609)
Net change in unrealized appreciation (depreciation)	+	2,252,137
Net realized and unrealized gains		763,629
Increase in net assets resulting from operations		$4,369,063

See financial notes 45

Table of Contents

Schwab Fundamental International Large Company Index ETF

Statement of

Changes in Net Assets

For the current and prior report periods

Operations
	3/1/14-2/28/15		8/14/13*-2/28/14
Net investment income		$3,605,434	$677,200
Net realized losses		(1,488,508)	(43,417)
Net change in unrealized appreciation (depreciation)	+	2,252,137	2,781,440
Increase in net assets resulting from operations		4,369,063	3,415,223
Distributions to Shareholders
Distributions from net investment income		($3,534,000)	($189,140)

Transactions in Fund Shares
		3/1/14-2/28/15		8/14/13*-2/28/14
		SHARES	VALUE	SHARES	VALUE
Shares sold		8,500,000	$227,670,907	2,200,001	$58,938,190
Shares redeemed	+	—	—	—	—
Net transactions in fund shares		8,500,000	$227,670,907	2,200,001	$58,938,190
Shares Outstanding and Net Assets
		3/1/14-2/28/15		8/14/13*-2/28/14
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		2,200,001	$62,164,273	—	$—
Total increase	+	8,500,000	228,505,970	2,200,001	62,164,273
End of period		10,700,001	$290,670,243	2,200,001	$62,164,273
Net investment income not yet distributed			$542,427		$486,413

*	Commencement of operations.

46 See financial notes

Table of Contents

Schwab Fundamental International Small Company Index ETF

Financial Statements

Financial Highlights

	3/1/14– 2/28/15	8/14/13 ¹– 2/28/14
Per-Share Data ($)
Net asset value at beginning of period	27.75	25.00
Income (loss) from investment operations:
Net investment income (loss)	0.41	0.15
Net realized and unrealized gains (losses)	(0.53) ²	2.78
Total from investment operations	(0.12)	2.93
Less distributions:
Distributions from net investment income	(0.41)	(0.18)
Net asset value at end of period	27.22	27.75
Total return (%)	(0.32)	11.73 ³
Ratios/Supplemental Data (%)
Ratios to average net assets:
Total expenses	0.46	0.46 ⁴
Net investment income (loss)	1.73	1.09 ⁴
Portfolio turnover rate⁵	21	18 ³
Net assets, end of period ($ x 1,000)	68,046	24,977

Commencement of operations.

Not annualized.

⁴

Annualized.

⁵

Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.

See financial notes 47

Table of Contents

Schwab Fundamental International Small Company Index ETF

Condensed Portfolio Holdings as of February 28, 2015

Holdings by Category		Cost ($)	Value ($)
99.3%	Common Stock	65,610,741	67,561,966
0.5%	Preferred Stock	311,591	313,181
0.0%	Rights	—	1,854
2.2%	Other Investment Companies	1,529,501	1,533,481
102.0%	Total Investments	67,451,833	69,410,482
(2.0)%	Other Assets and Liabilities, Net		(1,364,833)
100.0%	Net Assets		68,045,649

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 99.3% of net assets
Australia 5.6%
APA Group	16,360	0.2	117,685
CSR Ltd.	35,253	0.2	118,931
Dexus Property Group	21,362	0.2	132,097
Sigma Pharmaceuticals Ltd.	162,352	0.2	116,279
Other Securities		4.8	3,324,645
		5.6	3,809,637
Austria 0.7%
Other Securities		0.7	468,258
Belgium 1.4%
Mobistar S.A. *	5,565	0.2	131,487
Other Securities		1.2	796,656
		1.4	928,143
Canada 7.5%
Other Securities		7.5	5,100,545
Denmark 1.3%
Other Securities		1.3	904,627
Finland 1.4%
Other Securities		1.4	972,729

Security	Number of Shares	% of Net Assets	Value ($)
France 4.5%
Klepierre	2,396	0.2	117,416
Other Securities		4.3	2,950,111
		4.5	3,067,527
Germany 3.4%
Celesio AG	4,536	0.2	140,398
Symrise AG	2,090	0.2	133,247
Other Securities		3.0	2,043,364
		3.4	2,317,009
Hong Kong 2.8%
Cathay Pacific Airways Ltd.	52,500	0.2	117,788
Hongkong Land Holdings Ltd.	16,250	0.2	122,687
Orient Overseas International Ltd.	19,375	0.2	122,414
Wheelock & Co., Ltd.	25,000	0.2	134,099
Other Securities		2.0	1,397,218
		2.8	1,894,206
Ireland 1.0%
DCC plc	2,309	0.2	138,094
Other Securities		0.8	566,272
		1.0	704,366
Israel 1.0%
Check Point Software Technologies Ltd. *	1,776	0.2	148,278
Other Securities		0.8	548,392
		1.0	696,670
Italy 2.3%
Banca Popolare di Milano Scarl *	139,176	0.2	130,973
Other Securities		2.1	1,417,172
		2.3	1,548,145
Japan 39.7%
Alps Electric Co., Ltd.	7,000	0.2	157,514
Aoyama Trading Co., Ltd.	4,125	0.2	137,506
Casio Computer Co., Ltd. (b)	7,000	0.2	122,615
Don Quijote Holdings Co., Ltd.	1,625	0.2	126,281
FamilyMart Co., Ltd.	2,625	0.2	118,575
Fukuoka Financial Group, Inc.	25,000	0.2	134,050
Hitachi High-Technologies Corp.	4,375	0.2	135,409
Hokuhoku Financial Group, Inc.	51,250	0.2	121,325
Keio Corp.	16,250	0.2	135,116
Kikkoman Corp.	5,625	0.2	163,040
Koito Manufacturing Co., Ltd.	4,125	0.2	132,157
Morinaga Milk Industry Co., Ltd.	30,000	0.2	117,696
NGK Spark Plug Co., Ltd.	4,250	0.2	120,519
Nichirei Corp.	25,000	0.2	128,822
NOK Corp.	5,125	0.2	150,048
Nomura Research Institute Ltd.	3,625	0.2	126,903
NTN Corp.	26,250	0.2	131,310
Sumco Corp.	6,375	0.2	128,199
Sysmex Corp.	2,375	0.2	127,546
Toyoda Gosei Co., Ltd.	5,250	0.2	116,115
Tsuruha Holdings, Inc.	1,750	0.2	118,282

48 See financial notes

Table of Contents

Schwab Fundamental International Small Company Index ETF

Condensed Portfolio Holdings continued

Security	Number of Shares	% of Net Assets	Value ($)
Yamaha Corp.	8,125	0.2	137,699
Other Securities		35.3	24,099,616
		39.7	26,986,343
Luxembourg 0.4%
Other Securities		0.4	267,697
Netherlands 1.9%
Other Securities		1.9	1,322,297
New Zealand 0.8%
Other Securities		0.8	521,863
Norway 0.9%
Other Securities		0.9	613,816
Portugal 0.4%
Other Securities		0.4	268,976
Singapore 1.8%
CapitaLand Ltd.	50,000	0.2	131,976
Other Securities		1.6	1,081,244
		1.8	1,213,220
Spain 1.9%
Other Securities		1.9	1,320,760
Sweden 2.2%
Other Securities		2.2	1,492,153
Switzerland 2.9%
Georg Fischer AG - Reg'd	175	0.2	126,358
Other Securities		2.7	1,849,996
		2.9	1,976,354
United Kingdom 13.5%
Catlin Group Ltd.	13,105	0.2	138,628
Dixons Carphone plc	37,707	0.4	256,748
DS Smith plc	22,600	0.2	128,248
Evraz plc	67,205	0.3	204,394
Hammerson plc	11,929	0.2	124,529
London Stock Exchange Group plc	3,135	0.2	120,152
National Express Group plc	28,000	0.2	122,933
Persimmon plc *	5,413	0.2	147,563
Provident Financial plc	2,880	0.2	122,173
Segro plc	17,558	0.2	116,812
The British Land Co. plc	10,763	0.2	137,806
Other Securities		11.0	7,546,639
		13.5	9,166,625
Total Common Stock
(Cost $65,610,741)			67,561,966

Preferred Stock 0.5% of net assets
Germany 0.4%
Other Securities		0.4	237,047

Security	Number of Shares	% of Net Assets	Value ($)
Italy 0.1%
Other Securities		0.1	49,263
Sweden 0.0%
Other Securities		0.0	26,871
Total Preferred Stock
(Cost $311,591)			313,181

Rights 0.0% of net assets
Finland 0.0%
Other Securities		0.0	1,854
Total Rights
(Cost $—)			1,854

Other Investment Companies 2.2% of net assets
United States 2.2%
Equity Fund 0.1%
Other Securities		0.1	65,130
Securities Lending Collateral 2.1%
Other Securities		2.1	1,468,351
Total Other Investment Companies
(Cost $1,529,501)			1,533,481

End of Investments.

At 02/28/15, the tax basis cost of the fund's investments was $67,776,439 and the unrealized appreciation and depreciation were $4,780,267 and ($3,146,224), respectively, with a net unrealized appreciation of $1,634,043.

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

*	Non-income producing security.
(a)	The rate shown is the 7-day yield.
(b)	All or a portion of this security is on loan. Securities on loan were valued at $1,607,522. Non-Cash Collateral pledged to the fund for securities on loan amounted to $224,115.
(c)	Securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registrations, normally to qualified institutional buyers. At the period end, the value of these amounted to $10,158 or 0.0% of net assets.
(d)	Fair-valued by management in accordance with procedures approved by the Board of Trustees.
(e)	Illiquid security. At the period end, the value of these amounted to $69,840 or 0.1% of net assets.

See financial notes 49

Table of Contents

Schwab Fundamental International Small Company Index ETF

Condensed Portfolio Holdings continued

ADR –	American Depositary Receipt
CDI –	CHESS Depositary Interest
CVA –	Dutch Certificate
ETF –	Exchange Traded Fund
GDR –	Global Depositary Receipt
Reg'd –	Registered
REIT –	Real Estate Investment Trust
SDR –	Swedish Depositary Receipt

The following is a summary of the inputs used to value the fund’s investments as of February 28, 2015 (see financial note 2(a) for additional information):

Description	Quoted Prices in Active Markets for Identical Assets (Level 1)	Other Significant Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Common Stock¹	$67,561,966	$—	$—	$67,561,966
Preferred Stock¹	313,181	—	—	313,181
Rights ¹
Finland ¹	—	—	1,854	1,854
Other Investment Companies¹	1,533,481	—	—	1,533,481
Total	$69,408,628	$—	$1,854	$69,410,482

¹	As categorized in the complete schedule of portfolio holdings.

The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:

Investments in Securities	Balance as of February 28, 2014	Realized Gains (Losses)	Change in Unrealized Appreciation (Depreciation)	Gross Purchases	Gross Sales	Gross Transfers in	Gross Transfers out	Balance as of February 28, 2015
Common Stock
Luxembourg	$—	$—	($48,927)	15,053	$—	$33,874	$—	$—
Portugal	—	—	(44,633)	44,633	—	—	—	—
Rights	—	—	1,854	—	—	—	—	1,854
Total	$—	$—	($91,706)	$59,686	$—	$33,874	$—	$1,854

The fund's policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were transfers out of Level 1 to Level 3 due to the result of fair valued securities for which no quoted value was available. There were no transfers between any other Levels for the period ended February 28, 2015.

50 See financial notes

Table of Contents

Schwab Fundamental International Small Company Index ETF

Statement of

Assets and Liabilities

As of February 28, 2015

Assets
Investments, at value (cost $65,983,482) including securities on loan of $1,607,522		$67,942,131
Collateral invested for securities on loan, at value (cost $1,468,351)	+	1,468,351
Total investments, at value (cost $67,451,833)		69,410,482
Cash		2,745
Foreign currency, at value (cost $23,933)		23,865
Receivables:
Investments sold		4,680
Dividends		73,072
Foreign tax reclaims		2,153
Income from securities on loan	+	2,125
Total assets		69,519,122
Liabilities
Collateral held for securities on loan		1,468,351
Payables:
Investment adviser fees	+	5,122
Total liabilities		1,473,473
Net Assets
Total assets		69,519,122
Total liabilities	–	1,473,473
Net assets		$68,045,649
Net Assets by Source
Capital received from investors		66,525,656
Distributions in excess of net investment income		(67,425)
Net realized capital losses		(370,912)
Net unrealized capital appreciation		1,958,330

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$68,045,649		2,500,001		$27.22

See financial notes 51

Table of Contents

Schwab Fundamental International Small Company Index ETF

Statement of

Operations

For the period March 1, 2014 through February 28, 2015

Investment Income
Dividends (net of foreign withholding tax of $86,018)		$820,474
Securities on loan	+	11,687
Total investment income		832,161
Expenses
Investment adviser fees		175,161
Total expenses	–	175,161
Net investment income		657,000
Realized and Unrealized Gains (Losses)
Net realized losses on investments		(338,083)
Net realized gains on in-kind redemptions		392,467
Net realized gains on futures contracts		968
Net realized losses on foreign currency transactions	+	(13,819)
Net realized gains		41,533
Net change in unrealized appreciation (depreciation) on investments		595,043
Net change in unrealized appreciation (depreciation) on foreign currency translations	+	(587)
Net change in unrealized appreciation (depreciation)	+	594,456
Net realized and unrealized gains		635,989
Increase in net assets resulting from operations		$1,292,989

52 See financial notes

Table of Contents

Schwab Fundamental International Small Company Index ETF

Statement of

Changes in Net Assets

For the current and prior report periods

Operations
	3/1/14-2/28/15		8/14/13*-2/28/14
Net investment income		$657,000	$85,503
Net realized gains (losses)		41,533	(23,675)
Net change in unrealized appreciation (depreciation)	+	594,456	1,363,874
Increase in net assets resulting from operations		1,292,989	1,425,702
Distributions to Shareholders
Distributions from net investment income		($704,650)	($105,600)

Transactions in Fund Shares
		3/1/14-2/28/15		8/14/13*-2/28/14
		SHARES	VALUE	SHARES	VALUE
Shares sold		1,700,000	$45,347,254	900,001	$23,656,700
Shares redeemed	+	(100,000)	(2,866,746)	—	—
Net transactions in fund shares		1,600,000	$42,480,508	900,001	$23,656,700
Shares Outstanding and Net Assets
		3/1/14-2/28/15		8/14/13*-2/28/14
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		900,001	$24,976,802	—	$—
Total increase	+	1,600,000	43,068,847	900,001	24,976,802
End of period		2,500,001	$68,045,649	900,001	$24,976,802
Distributions in excess of net investment income			($67,425)		($23,022)

*	Commencement of operations.

See financial notes 53

Table of Contents

Schwab Fundamental Emerging Markets Large Company Index ETF

Financial Statements

Financial Highlights

	3/1/14– 2/28/15	8/14/13 ¹– 2/28/14
Per-Share Data ($)
Net asset value at beginning of period	24.98	25.00
Income (loss) from investment operations:
Net investment income (loss)	0.37	0.12
Net realized and unrealized gains (losses)	(0.87)	(0.00) ²
Total from investment operations	(0.50)	0.12
Less distributions:
Distributions from net investment income	(0.32)	(0.14)
Net asset value at end of period	24.16	24.98
Total return (%)	(1.98)	0.45 ³
Ratios/Supplemental Data (%)
Ratios to average net assets:
Total expenses	0.46	0.46 ⁴
Net investment income (loss)	2.20	1.01 ⁴
Portfolio turnover rate⁵	13	6 ³
Net assets, end of period ($ x 1,000)	96,642	22,482

Commencement of operations.

Per-share amount was less than $0.01.

Not annualized.

⁴

Annualized.

⁵

Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.

54 See financial notes

Table of Contents

Schwab Fundamental Emerging Markets Large Company Index ETF

Condensed Portfolio Holdings as of February 28, 2015

Holdings by Category		Cost ($)	Value ($)
89.7%	Common Stock	87,604,388	86,652,395
8.4%	Preferred Stock	10,017,328	8,095,599
1.7%	Other Investment Companies	1,403,622	1,665,176
0.0%	Short-Term Investment	20,000	20,000
99.8%	Total Investments	99,045,338	96,433,170
0.2%	Other Assets and Liabilities, Net		208,535
100.0%	Net Assets		96,641,705

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 89.7% of net assets
Brazil 5.3%
Ambev S.A.	70,963	0.5	455,160
Banco do Brasil S.A.	61,545	0.5	510,552
Petroleo Brasileiro S.A.	254,142	0.9	842,592
Vale S.A.	110,960	0.9	824,628
Other Securities		2.5	2,510,864
		5.3	5,143,796
Chile 1.0%
Other Securities		1.0	934,356
China 18.8%
Bank of China Ltd., H Shares	2,920,000	1.7	1,679,232
China Construction Bank Corp., H Shares	2,800,000	2.4	2,328,685
China Mobile Ltd.	187,646	2.6	2,550,192
China Petroleum & Chemical Corp., H Shares	1,928,112	1.7	1,615,990
China Telecom Corp., Ltd., H Shares	720,000	0.5	466,046
CNOOC Ltd.	628,230	0.9	902,395
Industrial & Commercial Bank of China Ltd., H Shares	2,480,000	1.9	1,809,927
PetroChina Co., Ltd., H Shares	1,096,860	1.3	1,272,878
Other Securities		5.8	5,501,270
		18.8	18,126,615

Security	Number of Shares	% of Net Assets	Value ($)
Colombia 0.3%
Other Securities		0.3	270,118
Czech Republic 0.4%
Other Securities		0.4	381,918
Greece 0.4%
Other Securities		0.4	411,798
Hungary 0.6%
Other Securities		0.6	574,807
India 2.4%
Infosys Ltd. ADR	16,000	0.6	587,360
Reliance Industries Ltd. GDR (a)	29,296	0.8	817,358
Other Securities		1.0	916,469
		2.4	2,321,187
Indonesia 1.1%
Other Securities		1.1	1,045,697
Malaysia 2.1%
Other Securities		2.1	2,015,470
Mexico 3.5%
America Movil S.A.B. de C.V., Series L	1,020,000	1.1	1,091,493
Cemex S.A.B. de C.V., Series CPO *	452,000	0.5	457,986
Other Securities		1.9	1,797,217
		3.5	3,346,696
Peru 0.1%
Other Securities		0.1	133,602
Philippines 0.2%
Other Securities		0.2	229,494
Poland 2.1%
Polski Koncern Naftowy Orlen S.A.	38,982	0.6	575,330
Other Securities		1.5	1,457,282
		2.1	2,032,612
Republic of Korea 17.5%
Hyundai Motor Co.	5,280	0.8	772,120
LG Corp.	10,131	0.6	587,064
LG Display Co., Ltd.	16,141	0.5	500,017
LG Electronics, Inc.	11,140	0.6	627,263
POSCO	4,560	1.2	1,111,384
Samsung Electronics Co., Ltd.	3,264	4.2	4,035,578
Shinhan Financial Group Co., Ltd.	13,080	0.5	520,792
SK Holdings Co., Ltd.	3,760	0.7	637,201
SK Innovation Co., Ltd. *	7,840	0.8	739,319
Other Securities		7.6	7,387,751
		17.5	16,918,489

See financial notes 55

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Schwab Fundamental Emerging Markets Large Company Index ETF

Condensed Portfolio Holdings continued

Security	Number of Shares	% of Net Assets	Value ($)
Russia 10.7%
Gazprom OAO	1,331,066	3.4	3,293,522
LUKOIL OAO *	63,459	3.2	3,060,524
MMC Norilsk Nickel OJSC *	3,143	0.6	568,558
Surgutneftegas OAO *	1,872,000	1.1	1,035,721
Tatneft OAO *	114,010	0.6	582,829
Other Securities		1.8	1,754,232
		10.7	10,295,386
South Africa 6.9%
MTN Group Ltd.	56,800	1.0	1,007,222
Sasol Ltd.	25,520	1.0	927,944
Standard Bank Group Ltd.	39,640	0.5	518,793
Other Securities		4.4	4,263,328
		6.9	6,717,287
Taiwan 13.2%
Asustek Computer, Inc.	43,176	0.5	448,876
AU Optronics Corp.	911,764	0.5	480,487
Chunghwa Telecom Co., Ltd.	164,764	0.5	515,199
Compal Electronics, Inc.	600,000	0.5	466,168
Hon Hai Precision Industry Co., Ltd.	495,738	1.4	1,374,902
HTC Corp. *	105,822	0.5	515,547
Taiwan Semiconductor Manufacturing Co., Ltd.	406,352	2.0	1,947,332
Other Securities		7.3	7,028,234
		13.2	12,776,745
Thailand 1.4%
PTT PCL NVDR	60,000	0.7	636,561
Other Securities		0.7	725,951
		1.4	1,362,512
Turkey 1.7%
Other Securities		1.7	1,613,810
Total Common Stock
(Cost $87,604,388)			86,652,395

Preferred Stock 8.4% of net assets
Brazil 6.4%
Banco Bradesco S.A.	60,965	0.8	801,680
Itau Unibanco Holding S.A.	100,446	1.3	1,282,207
Petroleo Brasileiro S.A.	366,142	1.3	1,225,446
Vale S.A.	154,304	1.0	998,887
Other Securities		2.0	1,894,778
		6.4	6,202,998
Colombia 0.1%
Other Securities		0.1	89,787
Republic of Korea 0.9%
Samsung Electronics Co., Ltd.	531	0.5	507,028
Other Securities		0.4	308,970
		0.9	815,998

Security	Number of Shares	% of Net Assets	Value ($)
Russia 1.0%
AK Transneft OAO *	327	0.8	730,026
Other Securities		0.2	256,790
		1.0	986,816
Total Preferred Stock
(Cost $10,017,328)			8,095,599

Other Investment Companies 1.7% of net assets
United States 1.7%
Equity Funds 1.7%
iShares India 50 ETF	21,572	0.8	715,543
WisdomTree India Earnings Fund	36,366	0.9	879,694
		1.7	1,595,237
Money Market Fund 0.0%
Other Securities		0.0	35,307
Securities Lending Collateral 0.0%
Other Securities		0.0	34,632
Total Other Investment Companies
(Cost $1,403,622)			1,665,176
Security Rate, Maturity Date	Face Amount ($)	% of Net Assets	Value ($)
Short-Term Investment 0.0% of net assets
U.S. Treasury Obligation 0.0%
Other Securities		0.0	20,000
Total Short-Term Investment
(Cost $20,000)			20,000

End of Investments.

At 02/28/15, the tax basis cost of the fund's investments was $99,464,487 and the unrealized appreciation and depreciation were $4,513,806 and ($7,545,123), respectively, with a net unrealized depreciation of ($3,031,317).

56 See financial notes

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Condensed Portfolio Holdings continued

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

*	Non-income producing security.
(a)	Securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registrations, normally to qualified institutional buyers. At the period end, the value of these amounted to $817,358 or 0.8% of net assets.
(b)	All or a portion of this security is on loan. Securities on loan were valued at $56,497. Non-Cash Collateral pledged to the fund for securities on loan amounted to $28,262.
(c)	The rate shown is the 7-day yield.
(d)	Illiquid security. At the period end, the value of these amounted to $0 or 0.0% of net assets.
(e)	Fair-valued by management in accordance with procedures approved by the Board of Trustees.
(f)	The rate shown is the purchase yield.
(g)	All or a portion of this security is held as collateral for open futures contracts.

ADR –	American Depositary Receipt
ETF –	Exchange Traded Fund
GDR –	Global Depositary Receipt
NVDR –	Non-Voting Depositary Receipt
Reg'd –	Registered

In addition to the above, the fund held the following at 02/28/15:

	Number of Contracts	Contract Value ($)	Unrealized Appreciation ($)
Futures Contracts
MSCI EAFE, e-mini, Long, expires 03/20/15	2	99,190	1,976

The following is a summary of the inputs used to value the fund’s investments as of February 28, 2015 (see financial note 2(a) for additional information):

Description	Quoted Prices in Active Markets for Identical Assets (Level 1)	Other Significant Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Common Stock¹	$86,652,395	$—	$—	$86,652,395
Preferred Stock¹	8,095,599	—	—	8,095,599
Other Investment Companies¹	1,665,176	—	—	1,665,176
Short-Term Investment¹	—	20,000	—	20,000
Total	$96,413,170	$20,000	$—	$96,433,170
Other Financial Instruments
Futures Contracts²	$1,976	$—	$—	$1,976

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

The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:

Investments in Securities	Balance as of February 28, 2014	Realized Gains (Losses)	Change in Unrealized Appreciation (Depreciation)	Gross Purchases	Gross Sales	Gross Transfers in	Gross Transfers out	Balance as of February 28, 2015
Common Stock
South Africa	$—	$—	($19,715)	$19,715	$—	$—	$—	$—
Total	$—	$—	($19,715)	$19,715	$—	$—	$—	$—

See financial notes 57

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Schwab Fundamental Emerging Markets Large Company Index ETF

Statement of

Assets and Liabilities

As of February 28, 2015

Assets
Investments, at value (cost $99,010,706) including securities on loan of $56,497		$96,398,538
Collateral invested for securities on loan, at value (cost $34,632)	+	34,632
Total investments, at value (cost $99,045,338)		96,433,170
Foreign currency, at value (cost $52,834)		52,798
Receivables:
Investments sold		92
Dividends		170,245
Fund shares sold		26,832
Income from securities on loan		124
Foreign tax reclaims	+	106
Total assets		96,683,367
Liabilities
Collateral held for securities on loan		34,632
Payables:
Investment adviser fees		6,940
Variation margin on futures contracts	+	90
Total liabilities		41,662
Net Assets
Total assets		96,683,367
Total liabilities	–	41,662
Net assets		$96,641,705
Net Assets by Source
Capital received from investors		99,572,788
Net investment income not yet distributed		77,079
Net realized capital losses		(396,917)
Net unrealized capital depreciation		(2,611,245)

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$96,641,705		4,000,001		$24.16

58 See financial notes

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Schwab Fundamental Emerging Markets Large Company Index ETF

Statement of

Operations

For the period March 1, 2014 through February 28, 2015

Investment Income
Dividends (net of foreign withholding tax of $168,201)		$1,207,706
Securities on loan	+	767
Total investment income		1,208,473
Expenses
Investment adviser fees		209,298
Total expenses	–	209,298
Net investment income		999,175
Realized and Unrealized Gains (Losses)
Net realized losses on investments		(368,761)
Net realized gains on futures contracts		18,619
Net realized losses on foreign currency transactions	+	(89,367)
Net realized losses		(439,509)
Net change in unrealized appreciation (depreciation) on investments		(2,091,394)
Net change in unrealized appreciation (depreciation) on futures contracts		1,976
Net change in unrealized appreciation (depreciation) on foreign currency translations	+	(743)
Net change in unrealized appreciation (depreciation)	+	(2,090,161)
Net realized and unrealized losses		(2,529,670)
Decrease in net assets resulting from operations		($1,530,495)

See financial notes 59

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Schwab Fundamental Emerging Markets Large Company Index ETF

Statement of

Changes in Net Assets

For the current and prior report periods

Operations
	3/1/14-2/28/15		8/14/13*-2/28/14
Net investment income		$999,175	$80,648
Net realized losses		(439,509)	(38,538)
Net change in unrealized appreciation (depreciation)	+	(2,090,161)	(521,084)
Decrease in net assets resulting from operations		(1,530,495)	(478,974)
Distributions to Shareholders
Distributions from net investment income		($826,020)	($96,670)

Transactions in Fund Shares
		3/1/14-2/28/15		8/14/13*-2/28/14
		SHARES	VALUE	SHARES	VALUE
Shares sold		3,100,000	$76,516,387	900,001	$23,057,477
Shares redeemed	+	—	—	—	—
Net transactions in fund shares		3,100,000	$76,516,387	900,001	$23,057,477
Shares Outstanding and Net Assets
		3/1/14-2/28/15		8/14/13*-2/28/14
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		900,001	$22,481,833	—	$—
Total increase	+	3,100,000	74,159,872	900,001	22,481,833
End of period		4,000,001	$96,641,705	900,001	$22,481,833
Net investment income not yet distributed/Distributions in excess of net investment income			$77,079		($8,854)

*	Commencement of operations.

60 See financial notes

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Financial Notes

1. Business Structure of the Funds:

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

Schwab Strategic Trust (organized January 27, 2009)	Schwab U.S. Mid-Cap ETF
Schwab Fundamental U.S. Broad Market Index ETF	Schwab U.S. Small-Cap ETF
Schwab Fundamental U.S. Large Company Index ETF	Schwab U.S. Dividend Equity ETF
Schwab Fundamental U.S. Small Company Index ETF	Schwab U.S. REIT ETF
Schwab Fundamental International Large Company Index ETF	Schwab International Equity ETF
Schwab Fundamental International Small Company Index ETF	Schwab International Small-Cap Equity ETF
Schwab Fundamental Emerging Markets Large Company Index ETF	Schwab Emerging Markets Equity ETF
Schwab U.S. Broad Market ETF	Schwab U.S. TIPS ETF
Schwab U.S. Large-Cap ETF	Schwab Short-Term U.S. Treasury ETF
Schwab U.S. Large-Cap Growth ETF	Schwab Intermediate-Term U.S. Treasury ETF
Schwab U.S. Large-Cap Value ETF	Schwab U.S. Aggregate Bond ETF

The funds issue and redeem shares at their net assets value per share (“NAV”) only in large blocks of shares, typically 50,000 shares or more (“Creation Units”). These transactions are usually in exchange for a basket of securities and an amount of cash. As a practical matter, only institutions or large investors purchase or redeem Creation Units. Except when aggregated in Creation Units, shares of the fund are not redeemable securities.

Individual shares of the funds trade on national securities exchanges and elsewhere during the trading day and can only be bought and sold at market prices throughout the trading day through a broker-dealer. Because fund shares trade at market prices rather than NAV, shares may trade at a price greater than NAV (premium) or less than NAV (discount).

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

2. Significant Accounting Policies:

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

The funds invest in certain other investment companies (“underlying funds”). For specific investments in underlying funds, please refer to the complete schedule of portfolio holdings on Form N-CSR, which is filed with the U.S. Securities and Exchange Commission (“SEC”). For more information about the underlying funds’ operations and policies, please refer to those funds’ semiannual and annual reports, which are filed with the SEC.

(a) Security Valuation:

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

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

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Financial Notes (continued)

2. Significant Accounting Policies (continued):

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

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

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

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

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Financial Notes (continued)

2. Significant Accounting Policies (continued):

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 February 28, 2015 are disclosed in the Portfolio Holdings.

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

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

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

The value of the securities on loan and the related collateral as of February 28, 2015, if any, are disclosed in each fund's Portfolio Holdings. The value of the securities on loan and the investments of cash collateral are also disclosed in each fund's Statement of Assets and Liabilities.

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

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Financial Notes (continued)

2. Significant Accounting Policies (continued):

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

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

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

(d) Investment Income:

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

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

(e) Expenses:

Pursuant to the Investment Advisory Agreement (“Advisory Agreement”) between Charles Schwab Investment Management, Inc. (“CSIM” or the “investment adviser”) and the trust, the investment adviser will pay the operating expenses of each fund, excluding interest expense, taxes, any brokerage expenses, and extraordinary or non-routine expenses. Interest expense, taxes, any brokerage expenses and extraordinary or non-routine expenses that are specific to a fund are charged directly to the fund.

(f) Distributions to Shareholders:

Schwab Fundamental U.S. Broad Market Index ETF, Schwab Fundamental U.S. Large Company Index ETF, and Schwab Fundamental U.S. Small Company Index ETF generally make distributions from net investment income, if any, quarterly. Schwab Fundamental International Large Company Index ETF, Schwab Fundamental International Small Company Index ETF, and Schwab Fundamental Emerging Markets Large Company Index ETF generally make distributions from net investment income, if any, annually. All funds generally 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. Accordingly, the funds distribute substantially all of their net investment income and realized net capital gains, if any, to their respective shareholders each year. As long as a fund meets the tax requirements, it is not required to pay federal income tax.

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Financial Notes (continued)

2. Significant Accounting Policies (continued):

(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 February 28, 2015, 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) New Accounting Pronouncements:

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

3. Risk Factors:

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

Market Risk. Equity markets rise and fall daily. As with any investment whose performance is tied to these markets, the value of the investment in a fund will fluctuate, which means that the investors could lose money.

Investment Style Risk. The funds are not actively managed. Therefore, the funds follow the securities included in the index during upturns as well as downturns. Because of their indexing strategies, the funds do not take steps to reduce market exposure or to lessen the effects of a declining market. In addition, because of the funds' expenses, the funds' performance may be below that of their respective index.

Large-Cap Risk. Certain funds invest in large-cap stocks. Large-cap stocks tend to go in and out of favor based on market and economic conditions. During a period when large-cap U.S. stocks fall behind other types of investments—mid- or small-cap stocks, for instance—a fund’s large-cap holdings could reduce performance.

Mid-Cap Risk. Certain funds invest in mid-cap stocks. Mid-cap stocks tend to go in and out of favor based on market and economic conditions. Stocks of mid-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies. During a period when mid-cap stocks fall behind other types of investments—bonds or large-cap stocks, for instance—a fund’s mid-cap holdings could reduce performance.

Small-Cap Risk. Certain funds invest in small-cap stocks. Historically, small-cap stocks have been riskier than large- and mid-cap stocks, and their prices may move sharply, especially during market upturns and downturns. Small-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies. During a period when small-cap stocks fall behind other types of investments—large-cap and mid-cap stocks, for instance—a fund’s small-cap holdings could reduce performance.

Foreign Investment Risk. A fund’s investments in securities of foreign issuers may involve certain risks that are greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including

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Financial Notes (continued)

3. Risk Factors (continued):

limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of a fund's investments, and could impair the fund's ability to meet its investment objective or invest in accordance with its investment strategy. These risks may be heightened in connection with investments in emerging markets. Foreign securities also include ADRs, GDRs, and EDRs, which are receipts issued by U.S. and foreign banks that represent shares of foreign-based corporations. Investment in ADRs, GDRs and EDRs may be less liquid than the underlying shares in their primary trading market and GDRs, many of which are issued by companies in emerging markets, may be more volatile. To the extent a fund's investments in a single country or a limited number of countries represent a larger percentage of the fund's assets, the fund's performance may be adversely affected by the economic, political and social conditions in those countries and the fund may be subject to increased price volatility.

Emerging Markets Risk. Certain funds invest in emerging markets. Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Such countries often have less uniformity in accounting and reporting requirements and greater risk associated with the custody of securities. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in other countries. As a result, there will tend to be an increased risk of price volatility associated with a fund’s investments in emerging market countries.

Sampling Index Tracking Risk. Certain funds may not fully replicate the index and may hold securities not included in the index. As a result, a fund will be subject to the risk that the Adviser’s investment management strategy, the implementation of which is subject to a number of constraints, may not produce the intended results. Because certain funds utilize a sampling approach they may not track the return of their respective index as well as they would if the funds purchased all of the securities in their respective benchmark index.

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

Derivatives Risk. Each fund may invest in derivative instruments. The principal types of derivatives a fund may use are futures contracts. A futures contract is an agreement to buy or sell a financial instrument at a specific price on a specific day. 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 market risk and liquidity risk, are discussed elsewhere in this section. A fund’s use of derivatives is also subject to leverage risk, credit risk, lack of availability risk, valuation risk, correlation risk and tax risk. Leverage risk is the risk that use of derivatives may magnify the effect of any decrease or increase in the value of the fund’s portfolio securities. Credit risk is the risk that the counterparty to a derivative transaction may not fulfill its contractual obligations. 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 a fund to realize higher amounts of short-term capital gain. These risks could cause a fund to lose more than the principal amount invested.

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

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

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

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Schwab Fundamental Index ETFs

Financial Notes (continued)

3. Risk Factors (continued):

Shares of the Fund May Trade at Prices Other Than NAV. Fund shares may be bought and sold in the secondary market at market prices. Although it is expected that the market price of the shares of a fund will approximate the fund’s NAV, there may be times when the market price and the NAV vary significantly. Investors may pay more than NAV when they buy shares of a fund in the secondary market, and may receive less than NAV when they sell those shares in the secondary market (See Frequency Distribution of Discounts and Premiums in Other Information for an overview showing the frequency at which the daily closing price was at a discount or a premium to a fund's daily NAV).

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:

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

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

Schwab Fundamental U.S. Broad Market Index ETF		Schwab Fundamental U.S. Large Company Index ETF		Schwab Fundamental U.S. Small Company Index ETF		Schwab Fundamental International Large Company Index ETF		Schwab Fundamental International Small Company Index ETF		Schwab Fundamental Emerging Markets Large Company Index ETF
0.32%		0.32%		0.32%		0.32%		0.46%		0.46%

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

Fund	Balance of Shares Held at 2/28/14	Gross Purchases	Gross Sales	Balance of Shares Held at 2/28/15	Market Value at 2/28/15	Realized Gains (Losses) 3/1/14 to 2/28/15	Dividends Received 3/1/14 to 2/28/15
Schwab Fundamental U.S. Broad Market Index ETF	2,064	3,768	(1,835)	3,997	$117,272	$1,519	$784
Schwab Fundamental U.S. Large Company Index ETF	2,787	6,722	(2,420)	7,089	207,991	2,220	1,194

Pursuant to an exemptive order issued by the SEC, the funds may enter into interfund borrowing and lending transactions with other Schwab Funds, including Schwab ETFs. All loans are for temporary or emergency purposes only. The interest rate to be charged on a loan is the average of the overnight repurchase agreement rate and the short-term bank loan rate. The interfund lending facility is subject to the oversight and periodic review of the Board. The funds had no interfund borrowing or lending activity during the period.

5. Other Service Providers:

SEI Investments Distribution Co. is the principal underwriter and distributor of shares of the funds.

State Street Bank and Trust Company (“State Street”) serves as the funds’ transfer agent. As part of these services, the transfer agent maintains records pertaining to the sale, redemption and transfer of the funds’ shares.

State Street also serves as custodian and accountant for the funds. The custodian is responsible for the daily safekeeping of securities and cash held by the funds. The funds’ accountant maintains all books and records related to the funds’ transactions.

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Schwab Fundamental Index ETFs

Financial Notes (continued)

6. Board of Trustees:

7. Borrowing from Banks:

The funds have access to custodian overdraft facilities and to an uncommitted line of credit of $100 million with State Street. The funds pay interest on the amounts they borrow at rates that are negotiated periodically.

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

8. Derivatives:

Certain funds entered into equity index futures contracts during the report period. The funds invested in futures to equitize available cash. The fair value and variation margin for futures contracts held at February 28, 2015 are presented on the Portfolio Holdings and Statement of Assets and Liabilities, respectively. The net realized and change in unrealized gains (losses) on futures contracts are presented on the Statement of Operations. Refer to financial note 2(b) for the funds’ accounting policies with respect to futures contracts and financial note 3 for disclosures concerning the risks of investing in futures contracts. During the period, the month-end average contract values of futures contracts held by the funds and the month-end average number of contracts held were as follows:

	Contract Values	Number of Contracts
Schwab Fundamental U.S. Broad Market Index ETF	$60,073	1
Schwab Fundamental U.S. Large Company Index ETF	85,615	1
Schwab Fundamental U.S. Small Company Index ETF	49,628	1
Schwab Fundamental International Large Company Index ETF	110,956	1
Schwab Fundamental International Small Company Index ETF	81,651*	1*
Schwab Fundamental Emerging Markets Large Company Index ETF	28,512	1

*	During the period, the fund did not hold futures contracts at any month-end. The average value and number of contracts were calculated by aggregating the highest daily values held each month during the period.

9. Purchases and Sales/Maturities of Investment Securities:

For the period ended February 28, 2015, purchases and sales/maturities of securities (excluding in-kind transactions and short-term obligations) were as follows:

	Purchases of Securities	Sales/Maturities of Securities
Schwab Fundamental U.S. Broad Market Index ETF	$15,544,914	$13,110,530
Schwab Fundamental U.S. Large Company Index ETF	21,123,130	17,223,010
Schwab Fundamental U.S. Small Company Index ETF	25,922,308	22,552,334
Schwab Fundamental International Large Company Index ETF	38,435,054	15,843,063
Schwab Fundamental International Small Company Index ETF	13,924,424	8,080,334
Schwab Fundamental Emerging Markets Large Company Index ETF	53,606,997	5,966,826

10. In-Kind Transactions:

The consideration for the purchase of Creation Units of a fund generally consists of the in-kind deposit of a designated portfolio of equity securities, which constitutes an optimized representation of the securities involved in a relevant fund’s underlying index, and an amount of cash. Investors purchasing and redeeming Creation Units are subject to a standard creation transaction fee and a standard redemption transaction fee paid to the custodian to offset transfer and other transaction costs associated with the issuance and redemption of Creation Units. Purchasers and redeemers of Creation Units

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Schwab Fundamental Index ETFs

Financial Notes (continued)

10. In-Kind Transactions (continued):

The in-kind transactions for the period ended February 28, 2015 were as follows:

	In-Kind Purchases of Securities	In-Kind Sales of Securities
Schwab Fundamental U.S. Broad Market Index ETF	$137,970,638	$—
Schwab Fundamental U.S. Large Company Index ETF	249,801,923	10,113,146
Schwab Fundamental U.S. Small Company Index ETF	127,507,692	8,509,517
Schwab Fundamental International Large Company Index ETF	204,455,460	—
Schwab Fundamental International Small Company Index ETF	39,358,873	2,798,384
Schwab Fundamental Emerging Markets Large Company Index ETF	28,721,060	—

For the period ended February 28, 2015, the funds realized net capital gains or losses resulting from in-kind redemptions of Creation Units. Because such gains or losses are not taxable to the funds and are not distributed to existing fund shareholders, the gains or losses are reclassified from accumulated net realized gains or losses to capital received from investors at the end of the funds' tax year. These reclassifications have no effect on net assets or net asset values per share. The net realized in-kind gains or losses for the period ended February 28, 2015 are disclosed in the funds' Statements of Operations.

11. Federal Income Taxes

As of February 28, 2015, the components of distributable earnings on a tax-basis were as follows:

	Schwab Fundamental U.S. Broad Market Index ETF	Schwab Fundamental U.S. Large Company Index ETF	Schwab Fundamental U.S. Small Company Index ETF	Schwab Fundamental International Large Company Index ETF	Schwab Fundamental International Small Company Index ETF	Schwab Fundamental Emerging Markets Large Company Index ETF
Undistributed ordinary income	$825,155	$1,265,040	$288,189	$741,441	$250,835	$185,929
Undistributed long-term capital gains	—	—	—	—	—	—
Unrealized appreciation	20,582,594	26,937,939	18,758,378	15,256,196	4,780,267	4,513,806
Unrealized depreciation	(4,941,336)	(5,984,678)	(5,893,458)	(10,459,927)	(3,146,224)	(7,545,123)
Other unrealized appreciation (depreciation)	(1)	—	(4)	(5,409)	(319)	(1,053)
Net unrealized appreciation (depreciation)	15,641,257	20,953,261	12,864,916	4,790,860	1,633,724	(3,032,370)

The primary difference between book-basis and tax-basis unrealized appreciation or unrealized depreciation of investments is the tax deferral of losses on wash sales and Real Estate Investment Trusts (REITs).

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Schwab Fundamental Index ETFs

Financial Notes (continued)

11. Federal Income Taxes (continued):

Capital loss carryforwards may be used to offset future realized capital gains for federal income tax purposes. As of February 28, 2015, the funds had capital loss carryforwards available to offset future net capital gains before the expiration dates as follows:

Expiration Date	Schwab Fundamental U.S. Broad Market Index ETF	Schwab Fundamental U.S. Large Company Index ETF	Schwab Fundamental U.S. Small Company Index ETF	Schwab Fundamental International Large Company Index ETF	Schwab Fundamental International Small Company Index ETF	Schwab Fundamental Emerging Markets Large Company Index ETF
No expiration*	$100,125	$187,754	$223,286	$1,471,155	$364,566	$84,642
Total	$100,125	$187,754	$223,286	$1,471,155	$364,566	$84,642

*	As a result of the passage of the Regulated Investment Company Modernization Act of 2010, capital losses incurred after December 31, 2010 may now be carried forward indefinitely, but must retain the character of the original loss.

For tax purposes, realized net capital losses and late-year ordinary losses incurred after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the year ended February 28, 2015, the funds had no capital losses deferred and no capital loss carryforwards utilized.

The tax-basis components of distributions paid during the current period were:

	Schwab Fundamental U.S. Broad Market Index ETF	Schwab Fundamental U.S. Large Company Index ETF	Schwab Fundamental U.S. Small Company Index ETF	Schwab Fundamental International Large Company Index ETF	Schwab Fundamental International Small Company Index ETF	Schwab Fundamental Emerging Markets Large Company Index ETF
Current period distributions
Ordinary income	$2,041,330	$2,790,460	$1,067,580	$3,534,000	$704,650	$826,020
Long-term capital gains	—	—	—	—	—	—
Return of capital	—	—	—	—	—	—
Prior period distributions
Ordinary income	141,500	180,240	95,650	189,140	105,600	96,670
Return of capital	—	—	—	—	—	—

Distributions paid to shareholders are based on net investment income and net realized gains determined on a tax basis, which may differ from net investment income and net realized gains for financial reporting purposes. These differences are due primarily to differing treatment for items such as short-term capital gains and losses, in-kind transactions, capital losses related to wash sales, and income on certain investments. The fiscal year in which amounts are distributed may differ from the year in which the net investment income and net realized gains are recorded by a fund for financial reporting purposes. A fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes.

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Schwab Fundamental Index ETFs

Financial Notes (continued)

11. Federal Income Taxes (continued):

	Schwab Fundamental U.S. Broad Market Index ETF	Schwab Fundamental U.S. Large Company Index ETF	Schwab Fundamental U.S. Small Company Index ETF	Schwab Fundamental International Large Company Index ETF	Schwab Fundamental International Small Company Index ETF	Schwab Fundamental Emerging Markets Large Company Index ETF
Capital shares	$—	$1,817,771	$1,205,660	$—	$388,448	$—
Undistributed net investment income	(32,340)	(39,125)	(52,842)	(15,420)	3,247	(87,222)
Net realized gains and losses	32,340	(1,778,646)	(1,152,818)	15,420	(391,695)	87,222

For the period ended February 28, 2015, the following funds reclassified non-taxable security gains and losses realized on the in-kind redemption of Creation Units (Note 10) as an increase or decrease to capital received from investors in the Statement of Assets and Liabilities as follows:

	Schwab Fundamental U.S. Broad Market Index ETF		Schwab Fundamental U.S. Large Company Index ETF		Schwab Fundamental U.S. Small Company Index ETF		Schwab Fundamental International Large Company Index ETF		Schwab Fundamental International Small Company Index ETF		Schwab Fundamental Emerging Markets Large Company Index ETF
	$—		$1,816,689		$1,197,593		$—		$392,467		$—

As of February 28, 2015, management has reviewed the tax positions for open periods (for federal purposes, three years from the date of filing and for state purposes, four years from the date of filing) as applicable to the funds, and has determined that no provision for income tax is required in the funds' financial statements. The funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the period ended February 28, 2015, the funds did not incur any interest or penalties.

12. Other:

As a result of recent political and military actions undertaken by the Russian Federation, the U.S. and the European Union have instituted various economic sanctions against Russian individuals and entities. The U.S. and/or the European Union may impose additional economic sanctions, or take other actions, against individuals and/or companies in specific sectors of the Russian economy, including, but not limited to, the financial services, energy, metals and mining, engineering, and defense and defense related materials sectors. These sanctions, and the threat of additional sanctions, could have adverse consequences for the Russian economy, including continued weakening of the Russian currency, downgrades in Russia’s credit rating, and a significant decline in the value and liquidity of securities issued by Russian companies or the Russian government. Any of these events could negatively impact a fund's investment in Russian securities. These sanctions have the possibility of impairing a fund’s ability to invest in accordance with its investment strategy and/or to meet its investment objective.

In addition, as index based products, the funds will generally maintain exposure to Russian securities to the extent the indexes which they track include such securities. For this reason, the sanction instituted against Russia, and any continued disruption of the Russian economy, could negatively impact a fund’s performance to the extent its index and its portfolio contain securities of Russian issuers, and, depending on the fund’s exposure to Russian issuers, the impact could be significant.

13. Subsequent Events:

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Report of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholders of:
Schwab Fundamental U.S. Broad Market Index ETF
Schwab Fundamental U.S. Large Company Index ETF
Schwab Fundamental U.S. Small Company Index ETF
Schwab Fundamental International Large Company Index ETF
Schwab Fundamental International Small Company Index ETF
Schwab Fundamental Emerging Markets Large Company Index ETF

In our opinion, the accompanying statements of assets and liabilities, including the condensed portfolio holdings, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Schwab Fundamental U.S. Broad Market Index ETF, Schwab Fundamental U.S. Large Company Index ETF, Schwab Fundamental U.S. Small Company Index ETF, Schwab Fundamental International Large Company Index ETF, Schwab Fundamental International Small Company Index ETF and Schwab Fundamental Emerging Markets Large Company Index ETF (six of the funds constituting Schwab Strategic Trust, hereafter referred to as the “Funds”) at February 28, 2015, the results of each of their operations for the year then ended, the changes in each of their net assets and the financial highlights for the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2015 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
San Francisco, California
April 16, 2015

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Other Federal Tax Information (unaudited)

The funds may elect to pass on the benefits of the foreign tax credit to its shareholders for the period ended February 28, 2015, and the respective foreign source income on the funds as follows:

	Foreign Tax Credit	Foreign Source Income
Schwab Fundamental U.S. Broad Market Index ETF	$—	$—
Schwab Fundamental U.S. Large Company Index ETF	—	—
Schwab Fundamental U.S. Small Company Index ETF	—	—
Schwab Fundamental International Large Company Index ETF	314,588	4,403,443
Schwab Fundamental International Small Company Index ETF	80,753	904,631
Schwab Fundamental Emerging Markets Large Company Index ETF	168,165	1,370,578

For corporate shareholders, the following percentage of the funds’’ dividend distributions paid during the period ended February 28, 2015 qualify for the corporate dividends received deduction:

Schwab Fundamental U.S. Broad Market Index ETF	100.00%
Schwab Fundamental U.S. Large Company Index ETF	100.00%
Schwab Fundamental U.S. Small Company Index ETF	88.47%
Schwab Fundamental International Large Company Index ETF	—%
Schwab Fundamental International Small Company Index ETF	—%
Schwab Fundamental Emerging Markets Large Company Index ETF	—%

For the period ended February 28, 2015, the funds designated the following amounts of the dividend distributions as qualified dividends for the purpose of the maximum rate under section 1(h)(ii) of the Internal Revenue Code. Shareholders will be notified in January 2016 via IRS form 1099 of the amount for use in preparing their 2015 income tax return.

Schwab Fundamental U.S. Broad Market Index ETF	$2,041,330
Schwab Fundamental U.S. Large Company Index ETF	2,790,460
Schwab Fundamental U.S. Small Company Index ETF	992,117
Schwab Fundamental International Large Company Index ETF	3,614,385
Schwab Fundamental International Small Company Index ETF	555,566
Schwab Fundamental Emerging Markets Large Company Index ETF	715,127

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Other Information (unaudited)

Frequency Distribution of Discounts and Premiums
Market Price vs. NAV as of February 28, 2015

The following charts are provided to show the frequency at which the daily closing market price on the NYSE Arca, Inc. (“Exchange”), the secondary market for shares of each fund, was at a discount or premium to such fund's daily NAV. The “Market Price” of each fund generally is determined using the midpoint between the highest bid and lowest offer on the Exchange, as of the time that the fund's NAV is calculated. The discount or premium is the percentage difference between the NAV and the Market Price of a fund. A discount is the amount that a fund is trading below the reported NAV, expressed as a percentage of NAV. A premium is the amount that a fund is trading above the reported NAV, expressed as a percentage of NAV. The NAV of each Fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of each fund will fluctuate in accordance with changes in its NAV, as well as supply and demand. The data presented below represents past performance and can not be used to predict future results. The chart does not include days in which the NAV equals the Market Price.

	Number of Days Market Price Above NAV				Number of Days Market Price Below NAV
	1-49 Basis Points	50-99 Basis Points	100-199 Basis Points	>200 Basis Points	1-49 Basis Points	50-99 Basis Points	100-199 Basis Points	>200 Basis Points
Schwab Fundamental U.S. Broad Market Index ETF
Commencement of trading
8/15/13 through 2/28/15	318	—	—	—	32	—	—	—
Schwab Fundamental U.S. Large Company Index ETF
Commencement of trading
8/15/13 through 2/28/15	313	—	—	—	37	—	—	—
Schwab Fundamental U.S. Small Company Index ETF
Commencement of trading
8/15/13 through 2/28/15	302	—	—	—	44	—	—	—
Schwab Fundamental International Large Company Index ETF
Commencement of trading
8/15/13 through 2/28/15	80	207	75	2	15	5	—	—
Schwab Fundamental International Small Company Index ETF
Commencement of trading
8/15/13 through 2/28/15	76	178	110	4	13	5	1	—
Schwab Fundamental Emerging Markets Large Company Index ETF
Commencement of trading
8/15/13 through 2/28/15	134	138	53	3	40	11	2	—

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Investment Advisory Agreement Approval

The Board of Trustees (the “Board” or the “Trustees”, as appropriate) calls and holds a meeting each year that is dedicated, in part, to considering whether to renew the investment advisory agreement between Schwab Strategic Trust (the “Trust”) and Charles Schwab Investment Management, Inc. (“CSIM”) (the “Agreement”) with respect to the existing funds in the Trust, including Schwab Fundamental U.S. Broad Market Index ETF, Schwab Fundamental U.S. Large Company Index ETF, Schwab Fundamental U.S. Small Company Index ETF, Schwab Fundamental International Large Company Index ETF, Schwab Fundamental International Small Company Index ETF, and Schwab Fundamental Emerging Markets Large Company Index ETF (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, the Board requests and reviews a wide variety of materials provided by CSIM, including information about CSIM’s affiliates, personnel and operations. The Board also receives extensive data provided by third parties. This information is in addition to the detailed information about the Funds that the Board reviews during the course of each year, including information that relates to Fund operations and Fund performance. In addition, the Independent Trustees meet in executive session outside the presence of fund management and participate in question and answer sessions with representatives of CSIM.

The Board, including a majority of the Independent Trustees, considered information specifically relating to its consideration of the continuance of the Agreement with respect to the Funds at a meeting held on September 3, 2014, and approved the renewal of the Agreement with respect to the Funds for an additional one year term. The Board’s approval of the Agreement with respect to the

Funds was based on consideration and evaluation of a variety of specific factors discussed at this meeting 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 exchange-traded funds;
3.	each Fund’s expenses and how those expenses compared to those of certain other comparable exchange-traded funds;
4.	the profitability of CSIM and its affiliates, including Charles Schwab & Co., Inc. (“Schwab”), with respect to the Funds, including both direct and indirect benefits accruing to CSIM and its affiliates; and
5.	the extent to which economies of scale would be realized as the Funds grow and whether fee levels in the Agreement reflect those economies of scale for the benefit of Fund investors.

Nature, Extent and Quality of Services. The Board considered the nature, extent and quality of the services provided by CSIM to the Funds and the resources of CSIM and its affiliates dedicated to the Funds. In this regard, the Trustees evaluated, among other things, CSIM’s personnel, experience, track record and compliance program. The Trustees also considered Schwab’s wide range of products, services, and channel alternatives such as free advice, investment research tools and Internet access and an array of account features that benefit the Funds and their shareholders. The Trustees also considered Schwab’s excellent reputation as a full service brokerage firm and its overall financial condition. Finally, the Trustees considered that the vast majority of the Funds’ shareholders are also brokerage clients of Schwab. Following such evaluation, the Board concluded, within the context of its full deliberations, that the nature, extent and quality of services provided by CSIM to the Funds and the resources of CSIM and its affiliates dedicated to the Funds supported renewal of the Agreement with respect to the Funds.

Fund Performance. The Board considered each Fund’s performance in determining whether to renew the Agreement with respect to the Fund. Specifically, the Trustees considered each Fund’s performance relative to a peer category of other exchange-traded funds and appropriate indices/benchmarks, in light of total return, yield, if applicable, and market trends. As part of this review, the Trustees considered the composition of the peer category, selection criteria and the reputation of the third

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party who prepared the peer category analysis. In evaluating the performance of each Fund, the Trustees considered both risk and shareholder risk expectations for such Fund. The Trustees further considered the level of Fund performance in the context of its review of Fund expenses and adviser profitability discussed below. Following such evaluation the Board concluded, within the context of its full deliberations, that the performance of the Funds supported renewal of the 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 operating expense ratio, in comparison to those of other comparable exchange-traded funds, such peer groups and comparisons having been selected and calculated by an independent third party. The Trustees also considered fees charged by CSIM to mutual funds that it manages. 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.

Trustees considered whether the varied levels of 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 the Funds by CSIM and its affiliates. Based on this evaluation, the Board concluded, within the context of its full deliberations, that the profitability of CSIM is reasonable and supported renewal of the Agreement with respect to the Funds.

Economies of Scale. The Trustees considered the existence of any economies of scale and whether those are passed along to the Funds’ shareholders by way of the relatively low advisory fee and unitary fee structure of the Funds. Based on this evaluation, the Board concluded, within the context of its full deliberations, that the Funds obtain reasonable benefit from economies of scale.

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

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Trustees and Officers

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

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 since 2009)	Retired/Private Investor (January 2009 – present); Formerly, Managing Director, Pacific Investment Management Company, LLC (PIMCO) and President, PIMCO Funds.	21	Director, PS Business Parks, Inc. (2005 – 2012).
Stephen Timothy Kochis 1946 Trustee (Trustee since 2012)	CEO and Owner, Kochis Global (wealth management consulting) (May 2012 – present); Chairman and CEO, Aspiriant, LLC (wealth management) (January 2008 – April 2012).	21	None
Charles A. Ruffel 1956 Trustee (Trustee since 2009)	Managing Partner and Co-Founder, Kudu Advisors, LLC (financial services) (May 2009 – present); Director, Asset International, Inc. (publisher of financial services information) (Jan. 2009 – Nov. 2014).	95	None

Interested Trustees
Name, Year of Birth, and Position(s) with the trust; (Terms of office, and length of Time Served)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Walter W. Bettinger II² 1960 Chairman and Trustee (Chairman and Trustee since 2009)	Director, President and Chief Executive Officer, The Charles Schwab Corporation and Charles Schwab & Co., Inc. (2008 – present); Director, Charles Schwab Bank (2006 – present); and Director Schwab Holdings, Inc. (2008 – present).	95	Director, The Charles Schwab Corporation (2008 – present)

Officers of the Trust
Name, Year of Birth, and Position(s) with the trust; (Terms of office, and length of Time Served³)	Principal Occupations During the Past Five Years
Marie Chandoha 1961 President and Chief Executive Officer (Officer since 2010)	Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; President, Chief Executive Officer (Dec. 2010 – present), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (January 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (March 2007 – August 2010)..

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

¹	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 Schwab ETF’s retirement policy requires that independent trustees retire by December 31 of the year in which the Trustee turns 72 or the Trustee’s twentieth year of service as an independent trustee, whichever comes first.
²	Mr. Bettinger is an Interested Trustee because he owns stock of The Charles Schwab Corporation, the parent company of the investment adviser.
³	The President, Treasurer and Secretary hold office until their respective successors are chosen and qualified or until he or she sooner dies, resigns, is removed or becomes disqualified. Each of the other officers serves at the pleasure of the Board.

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Glossary

144A securities These securities may be sold only to qualified institutional buyers under Securities Act Rule 144A.

American Depositary Receipt (ADR) U.S. dollar-denominated receipts issued by U.S. banks or trust companies that represent shares of foreign-based corporations.

ask See “offer.”

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

authorized participant (AP) A large institutional investor that places orders for creation units with the funds’ distributor.

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

bid The highest price at which someone is willing to buy a security.

cap, capitalization See “market cap.”

commencement of operations The date that the first NAV was calculated.

European Depositary Receipt (EDR) A negotiable security (receipt) that is issued by a European bank, and that represents shares of foreign-based corporations.

exchange A marketplace, or any organization or group that provides or maintains a marketplace for trading securities, options, futures, or commodities.

Global Depositary Receipt (GDR) A negotiable security (receipt) that is issued by a foreign bank, and that represents shares of foreign-based corporations.

gross domestic product (GDP) The output of goods and services produced by labor and property located in the United States.