Schwab U.S. Small-Cap ETF NCSRS Certified semi-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

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: August 31

Date of reporting period: February 29, 2016

Item 1: Report(s) to Shareholders.

Semiannual report dated February 29, 2016, enclosed.

Schwab International Equity ETFs

Schwab International
Equity ETF™

Schwab International Small-Cap
Equity ETF™

Schwab Emerging Markets
Equity ETF™

This wrapper is not part of the shareholder report.

Schwab International Equity ETFs

Semiannual Report

February 29, 2016

Schwab International
Equity ETF

Schwab International Small-Cap
Equity ETF

Schwab Emerging Markets
Equity ETF

This page is intentionally left blank.

In This Report

Performance at a Glance	2
From the President	3
The Investment Environment	5
Fund Management	7
Performance and Fund Facts
Schwab International Equity ETF	8
Schwab International Small-Cap Equity ETF	10
Schwab Emerging Markets Equity ETF	12
Fund Expenses	14
Financial Statements and Condensed Portfolio Holdings
Schwab International Equity ETF	15
Schwab International Small-Cap Equity ETF	23
Schwab Emerging Markets Equity ETF	30
Financial Notes	38
Investment Advisory Agreement Approval	47
Shareholder Vote Results	49
Trustees and Officers	50
Glossary	54

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.

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 6 Months Ended February 29, 2016
Schwab International Equity ETF (Ticker Symbol: SCHF)
Market Price Return¹	-9.55%
NAV Return¹	-9.10%
FTSE Developed ex US Index (Net)*	-9.04%
ETF Category: Morningstar Foreign Large Blend²	-7.91%
Performance Details	pages 8-9

Schwab International Small-Cap Equity ETF (Ticker Symbol: SCHC)
Market Price Return¹	-6.99%
NAV Return¹	-6.62%
FTSE Developed Small Cap ex US Liquid Index (Net)*	-6.67%
ETF Category: Morningstar Foreign Small/Mid Blend²	-5.57%
Performance Details	pages 10-11

Schwab Emerging Markets Equity ETF (Ticker Symbol: SCHE)
Market Price Return¹	-9.77%
NAV Return¹	-9.70%
FTSE Emerging Index (Net)*	-9.71%
ETF Category: Morningstar Diversified Emerging Markets²	-8.60%
Performance Details	pages 12-13

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 — FTSE is a trademark of the London Stock Exchange Group companies (LSEG) and is used by the Schwab International Equity ETFs under license. The Schwab International Equity ETFs are not sponsored, endorsed, sold or promoted by FTSE nor LSEG, and neither FTSE nor LSEG makes any representation regarding the advisability of investing in shares of the funds. Fees payable under the license are paid by the investment adviser.

*	The total return cited for the index is calculated net of foreign withholding taxes; the underlying tax rate information is available from FTSE.
¹	ETF performance must be shown based on both a market price and NAV basis. The fund’s per share 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.

2Schwab International Equity ETFs

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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,

The past six months have been a challenging period for equities across all asset classes and geographies. Volatility was a consistent theme for much of the period, both in the U.S. and abroad. What’s notable about the increase in volatility over the reporting period is the variety of factors behind it. China’s slowing economy and its impact on global trade, the Federal Reserve’s long-awaited decision to begin raising short-term interest rates, and the sharp decline in oil prices are but a few of the factors that have caused bouts of selling.

Dramatic moves in the market can prompt investors to question their strategy and second-guess their commitment to staying invested in stocks. But research shows that over virtually all periods of time, investors who take the long view – and stay invested in the market—have seen positive long-term results. Timing the market, trying to move in or out of investments based on predictions of where the market will move, is nearly impossible, particularly when equity prices are being fueled by so many factors. Moving in and out of the stock market means that you could miss out on some of the best days, which can exact a toll on returns.

One of the most important steps you can take to help manage the risk of volatile markets is to ensure your portfolio is diversified. At Charles Schwab Investment Management, we offer a variety of equity ETFs that are designed to track their respective indices. For the six-month reporting period, the Schwab International Equity ETFs were generally aligned with their indices.

Asset Class Performance Comparison % returns during the six months ended 2/29/2016

Index figures assume dividends and distributions were reinvested, and 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.

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 International Equity ETFs3

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From the President continued

One of the most important steps you can take to help manage the risk of volatile markets is to ensure your portfolio is diversified.

While many markets have felt the effects of increased volatility, we believe international exposure remains an important component of a diversified portfolio. Globalization has only strengthened this argument: international trade now accounts for nearly two-thirds of world gross domestic product, up from less than half just 10 years ago and one-third about 30 years ago. Open borders mean more opportunities for businesses and their investors, so long as they understand the risks of investing in foreign markets.

In constructing our ETF line-up, our goal is to provide foundational products that enable investors to build diversified portfolios. We believe that the Schwab International Equity ETFs help fulfill this role by giving investors exposure to a varied selection of international stocks. Our ETFs are also available at some of the lowest operating expense ratios in the industry. We recognize that investor dollars that go toward paying fees are dollars that aren’t being invested and enjoying the benefits of compounding over time. That’s why we are committed to providing our clients with low-cost funds that help their dollars to go further.

Thank you for investing with Charles Schwab Investment Management, and for trusting us to help you achieve your financial goals. For more information about the Schwab International Equity ETFs, please continue reading this report or visit our website at www.csimfunds.com. We are also happy to hear from you at 1-800-435-4000.

Sincerely,

4Schwab International Equity ETFs

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The Investment Environment

Over the six-month reporting period ended February 29, 2016, most equity markets generated negative returns as heightened volatility continued around the globe. Low and sub-zero interest rates, stalling global economic growth, and sharp selloffs in oil and commodities were large drivers of markets fluctuations, where volatility has become the new normal.

The S&P 500^® Index, a bellwether for the overall U.S. stock market, returned -0.92%, while the Dow Jones U.S. Mid-Cap Total Stock Market Index and the Dow Jones U.S. Small-Cap Total Stock Market Index returned -6.71% and -9.14%, respectively. Outside the U.S., the MSCI EAFE Index (Net), a broad measure of developed international equity performance, returned -9.48%, while the MSCI Emerging Markets (Net) Index returned -9.71%. For the six-month reporting period the Schwab International Equity ETFs generally tracked their respective indices, though all generated negative returns. The Schwab International Equity ETF returned -9.55% and the Schwab International Small-Cap Equity ETF returned -6.99%, while the Schwab Emerging Markets Equity ETF returned -9.77% for the reporting period.

Speculation surrounding a potential rise in short-term interest rates in the U.S. was a significant contributor to market volatility during much of the reporting period. After leaving rates in the target range of 0.00% to 0.25% at both its September and October meetings, the Federal Reserve (the Fed) raised the federal funds rate to a range of 0.25% to 0.50% at its meeting in December. This was the first short-term rate increase by the central bank in almost 10 years, with the last increase occurring in mid-2006. Though inflation remained below the target of 2%, the Fed cited strengthening economic indicators and expanding economic activity as support for this rate increase. The Fed also noted that they believed the risks related to a weak global economy had receded, and that any subsequent increases to the federal funds rate would be measured and gradual.

While the U.S. took additional steps toward a tighter monetary policy, many other central banks took the opposite approach and increased their accommodative policy measures. The People’s Bank of China lowered its interest rate twice during the reporting period, while the Bank of Japan (the BOJ) cut short-term interest rates to below 0.00%. Both the BOJ and the European Central Bank (the ECB) expanded their quantitative easing programs, and many central banks, including the ECB, maintained interest rates at or near 0.00%. These differences between the Fed and central banks outside the U.S. highlighted the ongoing divergence in global monetary policies, and also supported a strong U.S. dollar and contributed to increased volatility in both currencies and stocks.

As the reporting period progressed, the chance of a second U.S. rate hike in the near future became less and less likely. Global growth remained weak and unsteady, and stock markets in the U.S. did not rebound as expected in response to the first interest rate increase as other factors counteracted this change in monetary policy. During her congressional testimony in February, Fed Chair Janet Yellen was questioned about the possibility of a negative federal funds rate. Though the Fed had just raised short-term rates in December, Yellen acknowledged that while it was unlikely, a negative federal funds rate was an option if U.S. economic conditions worsened significantly. While no additional moves in either direction had been made as of the end of the reporting period, the mention of negative rates was enough to send stocks and oil downward, widen the spread on corporate bonds, and increase currency volatility.

During the reporting period, currency devaluations and China’s economic slowdown contributed to weak global economic growth. As China is the second largest consumer of oil after the U.S., concerns surrounding the lessening demand in China drove oil prices drastically lower over the reporting period. As overall demand for oil failed to keep pace with supply, excess reserves resulted across the globe. In December, the Organization of the Petroleum Exporting Countries (OPEC) decided to maintain current production levels despite excess supply, causing oil prices to drop even further. Oil prices rallied in February as discussions surrounding a production cap progressed between OPEC and non-members, though no decision was made by the end of the reporting period.

For index definitions, please see the Glossary.

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 International Equity ETFs5

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The Investment Environment continued

In developed international markets, New Zealand was one of the only countries to generate positive returns as economic growth increased in the last quarter of 2015. Stocks in Greece, however, were down over 40% as negative effects of its debt crisis continued to linger. (Please note FTSE reclassified Greece from Developed to Advanced Emerging status in March 2016.) In emerging markets, stocks in Brazil, Russia, China, India, and South Africa all fell as global growth concerns continued, though stimulative policies in Indonesia contributed to this country’s positive performance. The U.S. dollar remained strong, in part due to the continued divergence of central bank policies, creating additional headwinds for developed international and emerging market stocks. When the dollar appreciates against foreign currencies, returns on overseas investments are generally reduced in U.S. dollar terms.

6Schwab International Equity ETFs

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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 passive equity funds and ETFs, which comprise the Schwab Equity Index Funds, the Schwab Fundamental Index Funds, and the Schwab 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.

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

Schwab International Equity ETFs7

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Schwab International Equity ETF

Performance and Fund Facts as of 02/29/16

Average Annual Total Returns¹

Fund and Inception Date	6 Months	1 Year	5 Years	Since Inception*
Fund: Schwab International Equity ETF (11/3/09)
Market Price Return²	-9.55%	-15.52%	-0.24%	2.83%
NAV Return²	-9.10%	-15.30%	-0.03%	2.88%
FTSE Developed ex US Index (Net)³	-9.04%	-15.31%	-0.04%	2.95%
ETF Category: Morningstar Foreign Large Blend⁴	-7.91%	-14.82%	-0.56%	3.46%

Fund Expense Ratio⁵: 0.08%

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 — FTSE is a trademark of the London Stock Exchange Group companies (LSEG) and is used by the fund under license. The Schwab International Equity ETF is not sponsored, endorsed, sold or promoted by FTSE nor LSEG, and neither FTSE nor LSEG makes any representation regarding the advisability of investing in shares of the fund. Fees payable under the license are paid by the investment adviser.

*	Inception (11/3/09) 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 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	The total return cited for the index is calculated net of foreign withholding taxes; the underlying tax rate information is available from FTSE.
⁴	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.
⁵	As stated in the prospectus.

8Schwab International Equity ETFs

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Schwab International Equity ETF

Performance and Fund Facts as of 02/29/16 continued

Statistics
Number of Holdings	1,215
Weighted Average Market Cap (millions)	$46,882
Price/Earnings Ratio (P/E)	18.4
Price/Book Ratio (P/B)	1.4
Portfolio Turnover Rate^1,2	3%

Sector Weightings % of Investments
Financials	24.3%
Industrials	13.2%
Consumer Discretionary	12.9%
Consumer Staples	11.9%
Health Care	10.8%
Materials	6.9%
Information Technology	5.9%
Energy	5.5%
Telecommunication Services	4.6%
Utilities	3.6%
Other	0.4%
Total	100.0%

Top Equity Holdings % of Net Assets³
Nestle S.A. – Reg'd	1.7%
Roche Holding AG	1.4%
Novartis AG – Reg'd	1.2%
Toyota Motor Corp.	1.1%
HSBC Holdings plc	0.9%
Samsung Electronics Co., Ltd. GDR	0.8%
British American Tobacco plc	0.8%
Novo Nordisk A/S, B Shares	0.7%
Royal Dutch Shell plc, A Shares	0.7%
GlaxoSmithKline plc	0.7%
Total	10.0%

Country Weightings % of Investments

Japan	21.6%
United Kingdom	17.4%
France	8.1%
Switzerland	8.0%
Germany	7.6%
Canada	6.9%
Australia	6.0%

Republic of Korea	3.8%
Hong Kong	3.2%
Netherlands	2.7%
Spain	2.6%
Sweden	2.6%
Other Countries	9.5%
Total	100.0%

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	Not annualized.
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.

Schwab International Equity ETFs9

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Schwab International Small-Cap Equity ETF

Performance and Fund Facts as of 02/29/16

Average Annual Total Returns¹

Fund and Inception Date	6 Months	1 Year	5 Years	Since Inception*
Fund: Schwab International Small-Cap Equity ETF (1/14/10)
Market Price Return²	-6.99%	-10.22%	0.60%	3.88%
NAV Return²	-6.62%	-9.74%	0.87%	3.98%
FTSE Developed Small Cap ex US Liquid Index (Net)³	-6.67%	-9.70%	0.84%	4.13%
ETF Category: Morningstar Foreign Small/Mid Blend⁴	-5.57%	-8.12%	2.10%	4.37%

Fund Expense Ratio⁵: 0.18%

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.

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

Index ownership — FTSE is a trademark of the London Stock Exchange Group companies (LSEG) and is used by the fund under license. The Schwab International Small-Cap Equity ETF is not sponsored, endorsed, sold or promoted by FTSE nor LSEG, and neither FTSE nor LSEG makes any representation regarding the advisability of investing in shares of the fund. Fees payable under the license are paid by the investment adviser.

*	Inception (1/14/10) 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 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	The total return cited for the index is calculated net of foreign withholding taxes; the underlying tax rate information is available from FTSE.
⁴	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.
⁵	As stated in the prospectus dated December 30, 2015. Effective March 1, 2016, the management fee was reduced to 0.16%. For more information, see financial note 4 or refer to the prospectus supplement dated March 1, 2016.

10Schwab International Equity ETFs

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Schwab International Small-Cap Equity ETF

Performance and Fund Facts as of 02/29/16 continued

Statistics
Number of Holdings	1,684
Weighted Average Market Cap (millions)	$2,006
Price/Earnings Ratio (P/E)	27.7
Price/Book Ratio (P/B)	1.4
Portfolio Turnover Rate^1,2	11%

Sector Weightings % of Investments
Industrials	20.1%
Financials	19.9%
Consumer Discretionary	16.2%
Information Technology	9.3%
Materials	9.2%
Health Care	7.3%
Consumer Staples	5.9%
Energy	4.3%
Utilities	2.2%
Telecommunication Services	1.6%
Other	4.0%
Total	100.0%

Top Equity Holdings % of Net Assets³
Paddy Power Betfair plc	0.8%
Constellation Software, Inc.	0.4%
Dollarama, Inc.	0.4%
Open Text Corp.	0.4%
Gildan Activewear, Inc.	0.4%
Onex Corp.	0.3%
CCL Industries, Inc., Class B	0.3%
LEG Immobilien AG	0.3%
Halma plc	0.3%
Teleperformance	0.3%
Total	3.9%

Country Weightings % of Investments

Japan	17.7%
United Kingdom	17.6%
Canada	14.2%
Republic of Korea	5.0%
Germany	4.9%
Australia	4.7%
Sweden	4.4%

United States	3.9%
France	3.7%
Switzerland	3.6%
Italy	3.6%
Other Countries	16.7%
Total	100.0%

Portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.

¹	Not annualized.
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.

Schwab International Equity ETFs11

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Schwab Emerging Markets Equity ETF

Performance and Fund Facts as of 02/29/16

Average Annual Total Returns¹

Fund and Inception Date	6 Months	1 Year	5 Years	Since Inception*
Fund: Schwab Emerging Markets Equity ETF (1/14/10)
Market Price Return²	-9.77%	-24.33%	-5.67%	-2.77%
NAV Return²	-9.70%	-24.00%	-5.51%	-2.79%
FTSE Emerging Index (Net)³	-9.71%	-23.97%	-5.38%	-2.53%
ETF Category: Morningstar Diversified Emerging Markets⁴	-8.60%	-22.96%	-6.86%	-2.95%

Fund Expense Ratio⁵: 0.14%

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 — FTSE is a trademark of the London Stock Exchange Group companies (LSEG) and is used by the fund under license. The Schwab Emerging Markets Equity ETF is not sponsored, endorsed, sold or promoted by FTSE nor LSEG, and neither FTSE nor LSEG makes any representation regarding the advisability of investing in shares of the fund. Fees payable under the license are paid by the investment adviser.

*	Inception (1/14/10) 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 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	The total return cited for the index is calculated net of foreign withholding taxes; the underlying tax rate information is available from FTSE.
⁴	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.
⁵	As stated in the prospectus.

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Schwab Emerging Markets Equity ETF

Performance and Fund Facts as of 02/29/16 continued

Statistics
Number of Holdings	751
Weighted Average Market Cap (millions)	$37,170
Price/Earnings Ratio (P/E)	13.3
Price/Book Ratio (P/B)	0.7
Portfolio Turnover Rate^1,2	6%

Sector Weightings % of Investments
Financials	29.7%
Information Technology	15.4%
Energy	9.0%
Consumer Discretionary	8.4%
Consumer Staples	8.4%
Telecommunication Services	7.6%
Materials	7.1%
Industrials	7.0%
Utilities	3.9%
Health Care	2.9%
Other	0.6%
Total	100.0%

Top Equity Holdings % of Net Assets³
Taiwan Semiconductor Manufacturing Co., Ltd. ADR	3.9%
Tencent Holdings Ltd.	3.5%
China Mobile Ltd.	2.1%
China Construction Bank Corp., H Shares	2.0%
Naspers Ltd., N Shares	1.9%
Industrial & Commercial Bank of China Ltd., H Shares	1.3%
Hon Hai Precision Industry Co., Ltd.	1.2%
Infosys Ltd.	1.1%
Bank of China Ltd., H Shares	1.0%
Housing Development Finance Corp., Ltd.	0.9%
Total	18.9%

Country Weightings % of Investments

China	25.9%
Taiwan	15.4%
India	12.1%
South Africa	8.7%
Brazil	7.0%
Mexico	5.7%

Malaysia	4.6%
Russia	4.5%
Indonesia	3.0%
Thailand	2.9%
Other Countries	10.2%
Total	100.0%

Portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.

¹	Not annualized.
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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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, 2015 and held through February 29, 2016.

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.

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 9/1/15	Ending Account Value (Net of Expenses) at 2/29/16	Expenses Paid During Period² 9/1/15–2/29/16
Schwab International Equity ETF
Actual Return	0.08%	$1,000.00	$ 909.00	$0.38
Hypothetical 5% Return	0.08%	$1,000.00	$1,024.50	$0.40
Schwab International Small-Cap Equity ETF
Actual Return	0.18%	$1,000.00	$ 933.80	$ 0.87
Hypothetical 5% Return	0.18%	$1,000.00	$1,024.00	$ 0.91
Schwab Emerging Markets Equity ETF
Actual Return	0.14%	$1,000.00	$ 903.00	$0.66
Hypothetical 5% Return	0.14%	$1,000.00	$1,024.20	$ 0.70

¹	Based on the most recent six-month expense ratio; may differ from the expense ratio provided in the Financial Highlights.
²	Expenses for each fund are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by 182 days of the period, and divided by 366 days of the fiscal year.

14Schwab International Equity ETFs

Table of Contents

Schwab International Equity ETF

Financial Statements

Financial Highlights

	9/1/15– 2/29/16*	9/1/14– 8/31/15	9/1/13– 8/31/14	9/1/12– 8/31/13	9/1/11– 8/31/12	9/1/10– 8/31/11
Per-Share Data
Net asset value at beginning of period	$28.55	$32.37	$28.32	$24.96	$25.99	$23.82
Income (loss) from investment operations:
Net investment income (loss)	0.27 ¹	0.87 ¹	0.88	0.66	0.76	0.68
Net realized and unrealized gains (losses)	(2.83)	(3.85)	3.87	3.42	(1.04)	1.96 ²
Total from investment operations	(2.56)	(2.98)	4.75	4.08	(0.28)	2.64
Less distributions:
Distributions from net investment income	(0.62)	(0.84)	(0.70)	(0.72)	(0.75)	(0.47)
Net asset value at end of period	$25.37	$28.55	$32.37	$28.32	$24.96	$25.99
Total return	(9.10%) ³	(9.27%)	16.90%	16.55%	(0.75%)	11.04%
Ratios/Supplemental Data
Ratios to average net assets:
Total expenses	0.08% ⁴	0.08%	0.09% ⁵	0.09%	0.13%	0.13%
Net investment income (loss)	1.98% ⁴	2.86%	3.44%	3.03%	3.40%	3.10%
Portfolio turnover rate⁶	3% ³	4%	7%	9%	8%	6%
Net assets, end of period (x 1,000)	$4,584,018	$4,042,603	$2,654,016	$1,464,105	$768,666	$634,208

*	Unaudited.

Calculated based on the average shares outstanding during the period.

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

Not annualized.

⁴

Annualized (except for proxy costs).

⁵

Effective April 18, 2014, the annual operating expense ratio was reduced to 0.08%. The ratio presented for the period ended 8/31/14 is a blended ratio.

⁶

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

See financial notes 15

Table of Contents

Schwab International Equity ETF

Condensed Portfolio Holdings as of February 29, 2016 (Unaudited)

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 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 ($)	Value ($)
98.7%	Common Stock	5,054,199,633	4,526,256,713
0.6%	Preferred Stock	32,456,334	25,611,428
0.0%	Rights	12,699	13,140
0.6%	Other Investment Companies	27,266,617	27,266,617
99.9%	Total Investments	5,113,935,283	4,579,147,898
0.1%	Other Assets and Liabilities, Net		4,870,401
100.0%	Net Assets		4,584,018,299

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 98.7% of net assets
Australia 6.0%
Australia & New Zealand Banking Group Ltd.	1,031,456	0.4	16,502,471
Commonwealth Bank of Australia	600,562	0.7	30,086,652
National Australia Bank Ltd.	907,516	0.3	15,679,796
Westpac Banking Corp.	1,188,412	0.5	24,403,669
Other Securities		4.1	186,444,898
		6.0	273,117,486
Austria 0.2%
Other Securities		0.2	7,636,017
Belgium 1.2%
Anheuser-Busch InBev N.V.	278,521	0.7	31,352,164
Other Securities		0.5	25,913,503
		1.2	57,265,667
Canada 6.9%
Royal Bank of Canada	512,652	0.6	26,139,726
The Bank of Nova Scotia	423,030	0.4	17,101,080
The Toronto-Dominion Bank	651,300	0.5	25,208,666
Other Securities		5.4	245,799,657
		6.9	314,249,129

Security	Number of Shares	% of Net Assets	Value ($)
Denmark 1.7%
Novo Nordisk A/S, B Shares	649,861	0.7	33,700,493
Other Securities		1.0	45,548,859
		1.7	79,249,352
Finland 0.9%
Other Securities		0.9	42,543,866
France 8.1%
BNP Paribas S.A.	340,550	0.3	15,911,061
Sanofi	390,845	0.7	31,081,797
Total S.A.	724,336	0.7	32,563,261
Other Securities		6.4	292,905,465
		8.1	372,461,584
Germany 7.2%
Allianz SE - Reg'd	162,630	0.5	24,252,853
BASF SE	325,554	0.5	21,287,518
Bayer AG - Reg'd	288,622	0.7	30,240,670
Daimler AG - Reg'd	336,683	0.5	23,083,431
Deutsche Telekom AG - Reg'd	1,101,089	0.4	18,508,130
SAP SE	312,953	0.5	23,782,339
Siemens AG - Reg'd	278,970	0.6	25,904,201
Other Securities		3.5	164,837,658
		7.2	331,896,800
Greece 0.0%
Other Securities		0.0	1,931,096
Hong Kong 3.2%
AIA Group Ltd.	4,184,279	0.5	21,362,226
Other Securities		2.7	123,379,719
		3.2	144,741,945
Ireland 0.3%
Other Securities		0.3	13,100,979
Israel 0.7%
Teva Pharmaceutical Industries Ltd.	355,661	0.4	20,088,589
Other Securities		0.3	11,922,585
		0.7	32,011,174
Italy 1.9%
Other Securities		1.9	85,269,841
Japan 21.5%
Honda Motor Co., Ltd.	625,844	0.3	16,007,191
KDDI Corp.	642,435	0.4	16,380,314
Mitsubishi UFJ Financial Group, Inc.	4,809,153	0.5	20,732,083
SoftBank Group Corp.	325,262	0.4	16,062,108
Toyota Motor Corp.	972,263	1.1	50,794,551
Other Securities		18.8	866,916,197
		21.5	986,892,444

16 See financial notes

Table of Contents

Schwab International Equity ETF

Condensed Portfolio Holdings (Unaudited) continued

Security	Number of Shares	% of Net Assets	Value ($)
Netherlands 2.7%
Unilever N.V. CVA	545,277	0.5	23,488,507
Other Securities		2.2	100,077,840
		2.7	123,566,347
New Zealand 0.2%
Other Securities		0.2	8,881,277
Norway 0.5%
Other Securities		0.5	23,997,141
Portugal 0.1%
Other Securities		0.1	6,197,599
Republic of Korea 3.7%
Samsung Electronics Co., Ltd. GDR	76,496	0.8	36,679,832
Other Securities		2.9	131,936,628
		3.7	168,616,460
Singapore 1.1%
Other Securities		1.1	52,550,672
Spain 2.6%
Banco Santander S.A.	5,020,211	0.4	20,471,532
Other Securities		2.2	98,332,126
		2.6	118,803,658
Sweden 2.6%
Other Securities		2.6	116,929,601
Switzerland 8.0%
Nestle S.A. - Reg'd	1,087,015	1.7	76,505,775
Novartis AG - Reg'd	737,081	1.2	53,023,949
Roche Holding AG	248,020	1.4	63,997,128
UBS Group AG - Reg'd	1,265,345	0.4	19,488,346
Other Securities		3.3	153,121,363
		8.0	366,136,561
United Kingdom 17.4%
AstraZeneca plc	439,693	0.5	25,165,896
BP plc	6,307,817	0.7	30,894,472
British American Tobacco plc	650,602	0.8	35,591,683
BT Group plc	2,897,705	0.4	19,646,046
Diageo plc	871,358	0.5	22,574,293
GlaxoSmithKline plc	1,680,144	0.7	32,768,575
HSBC Holdings plc	6,707,725	0.9	42,967,557
Imperial Brands plc	328,205	0.4	17,026,212
Lloyds Banking Group plc	21,346,370	0.5	21,537,770
National Grid plc	1,267,690	0.4	17,021,700
Reckitt Benckiser Group plc	229,542	0.5	20,984,767
Royal Dutch Shell plc, A Shares	1,462,007	0.7	33,567,038
Royal Dutch Shell plc, B Shares	1,317,053	0.7	30,193,072
SABMiller plc	329,149	0.4	19,164,572
Unilever plc	424,668	0.4	18,298,992

Security	Number of Shares	% of Net Assets	Value ($)
Vodafone Group plc	9,206,006	0.6	28,186,390
Other Securities		8.3	382,620,982
		17.4	798,210,017
Total Common Stock
(Cost $5,054,199,633)			4,526,256,713

Preferred Stock 0.6% of net assets
Germany 0.4%
Other Securities		0.4	17,503,419
Republic of Korea 0.2%
Other Securities		0.2	6,959,796
Spain 0.0%
Other Securities		0.0	1,148,213
Total Preferred Stock
(Cost $32,456,334)			25,611,428

Rights 0.0% of net assets
Italy 0.0%
Other Securities		0.0	8
Spain 0.0%
Other Securities		0.0	13,132
Total Rights
(Cost $12,699)			13,140

Other Investment Companies 0.6% of net assets
United States 0.6%
Money Market Fund 0.2%
Other Securities		0.2	7,719,519
Securities Lending Collateral 0.4%
Wells Fargo Advantage Government Money Market Fund, Institutional Class 0.16% (c)		0.4	19,547,098
Total Other Investment Companies
(Cost $27,266,617)			27,266,617

End of Investments.

At 02/29/16, the tax basis cost of the fund's investments was $5,116,672,346 and the unrealized appreciation and depreciation were $207,562,160 and ($745,086,608), respectively, with a net unrealized depreciation of ($537,524,448).

See financial notes 17

Table of Contents

Schwab International Equity ETF

Condensed Portfolio Holdings (Unaudited) continued

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

*	Non-income producing security.
(a)	All or a portion of this security is on loan. Securities on loan were valued at $18,848,331.
(b)	Illiquid security. At the period end, the value of these amounted to $8 or 0.0% of net assets.
(c)	The rate shown is the 7-day yield.
(d)	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 $7,830,580 or 0.2% of net assets.
(e)	Fair-valued by management in accordance with procedures approved by the Board of Trustees.

ADR —	American Depositary Receipt
CDI —	CHESS Depositary Interest
CVA —	Dutch Certificate
GDR —	Global Depositary Receipt
Reg'd —	Registered
REIT —	Real Estate Investment Trust
RSP —	Risparmio (Convertible Savings Shares)

In addition to the above, the fund held the following at 02/29/16:

	Number of Contracts	Contract Value ($)	Unrealized Appreciation ($)
Futures Contracts
MSCI EAFE, e-mini, Long, expires 03/18/16	200	15,450,000	226,274

The following is a summary of the inputs used to value the fund’s investments as of February 29, 2016 (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	$4,526,256,713	$—	$—	$4,526,256,713
Preferred Stock¹	25,611,428	—	—	25,611,428
Rights ¹	13,132	—	—	13,132
Italy ¹	—	—	8	8
Other Investment Companies¹	27,266,617	—	—	27,266,617
Total	$4,579,147,890	$—	$8	$4,579,147,898
Other Financial Instruments
Futures Contracts²	$226,274	$—	$—	$226,274

¹	As categorized in the complete schedule of portfolio holdings.
²	Futures contracts are not included in Investments in the schedule of condensed 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 August 31, 2015	Realized Gains (Losses)	Change in Unrealized Appreciation (Depreciation)	Gross Purchases	Gross Sales	Gross Transfers in	Gross Transfers out	Balance as of February 29, 2016
Common Stock
Republic of Korea	$2,501,775	$—	$300,561	$—	($2,802,336)	$—	$—	$—
Rights
Italy	—	—	8	—	—	—	—	8
Total	$2,501,775	$—	$300,569	$—	($2,802,336)	$—	$—	$8

All net realized and change in unrealized gains (losses) in the tables above are reflected on the accompanying Statement of Operations. The net change in unrealized appreciation (depreciation) for Level 3 investments held by the fund at February 29, 2016 was $8.

18 See financial notes

Table of Contents

Schwab International Equity ETF

Condensed Portfolio Holdings (Unaudited) continued

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 29, 2016.

See financial notes 19

Table of Contents

Schwab International Equity ETF

Statement of

Assets and Liabilities

As of February 29, 2016; unaudited

Assets
Investments, at value (cost $5,094,388,185) including securities on loan of $18,848,331		$4,559,600,800
Collateral invested for securities on loan, at value (cost $19,547,098)	+	19,547,098
Total investments, at value (cost $5,113,935,283)		4,579,147,898
Deposit with broker for futures contracts		852,000
Foreign currency, at value (cost $9,956,521)		9,956,872
Receivables:
Investments sold		710
Dividends		10,481,353
Foreign tax reclaims		3,363,882
Income from securities on loan		111,403
Interest	+	1,398
Total assets		4,603,915,516
Liabilities
Collateral held for securities on loan		19,547,098
Payables:
Investment adviser fees		69,942
Variation margin on futures contracts		106,000
Accrued expenses	+	174,177
Total liabilities		19,897,217
Net Assets
Total assets		4,603,915,516
Total liabilities	–	19,897,217
Net assets		$4,584,018,299
Net Assets by Source
Capital received from investors		5,250,660,604
Net investment income not yet distributed		8,767,639
Net realized capital losses		(140,615,818)
Net unrealized capital depreciation		(534,794,126)

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$4,584,018,299		180,700,000		$25.37

20 See financial notes

Table of Contents

Schwab International Equity ETF

Statement of

Operations

For the period September 1, 2015 through February 29, 2016; unaudited

Investment Income
Dividends (net of foreign withholding tax of $3,566,260)		$45,326,469
Interest		3,459
Securities on loan	+	269,639
Total investment income		45,599,567
Expenses
Investment adviser fees		1,770,874
Proxy fees	+	175,240
Total expenses	–	1,946,114
Net investment income		43,653,453
Realized and Unrealized Gains (Losses)
Net realized losses on investments		(60,800,197)
Net realized losses on futures contracts		(1,100,679)
Net realized losses on foreign currency transactions	+	(660,544)
Net realized losses		(62,561,420)
Net change in unrealized appreciation (depreciation) on investments		(422,934,273)
Net change in unrealized appreciation (depreciation) on futures contracts		358,164
Net change in unrealized appreciation (depreciation) on foreign currency translations	+	(5,892)
Net change in unrealized appreciation (depreciation)	+	(422,582,001)
Net realized and unrealized losses		(485,143,421)
Decrease in net assets resulting from operations		($441,489,968)

See financial notes 21

Table of Contents

Schwab International Equity ETF

Statement of

Changes in Net Assets

For the current and prior report periods

Figures for the current period are unaudited

Operations
	9/1/15-2/29/16		9/1/14-8/31/15
Net investment income		$43,653,453	$95,013,058
Net realized losses		(62,561,420)	(23,913,608)
Net change in unrealized appreciation (depreciation)	+	(422,582,001)	(419,722,897)
Decrease in net assets resulting from operations		(441,489,968)	(348,623,447)
Distributions to Shareholders
Distributions from net investment income		($105,649,560)	($79,192,160)

Transactions in Fund Shares
		9/1/15-2/29/16		9/1/14-8/31/15
		SHARES	VALUE	SHARES	VALUE
Shares sold		39,100,000	$1,088,555,242	60,400,000	$1,838,831,135
Shares redeemed	+	—	—	(800,000)	(22,428,935)
Net transactions in fund shares		39,100,000	$1,088,555,242	59,600,000	$1,816,402,200
Shares Outstanding and Net Assets
		9/1/15-2/29/16		9/1/14-8/31/15
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		141,600,000	$4,042,602,585	82,000,000	$2,654,015,992
Total increase	+	39,100,000	541,415,714	59,600,000	1,388,586,593
End of period		180,700,000	$4,584,018,299	141,600,000	$4,042,602,585
Net investment income not yet distributed			$8,767,639		$70,763,746

22 See financial notes

Table of Contents

Schwab International Small-Cap Equity ETF

Financial Statements

Financial Highlights

	9/1/15– 2/29/16*	9/1/14– 8/31/15	9/1/13– 8/31/14	9/1/12– 8/31/13	9/1/11– 8/31/12	9/1/10– 8/31/11
Per-Share Data
Net asset value at beginning of period	$29.46	$33.32	$28.61	$24.94	$27.48	$23.54
Income (loss) from investment operations:
Net investment income (loss)	0.23 ¹	0.73 ¹	0.71	0.76	0.67	0.72
Net realized and unrealized gains (losses)	(2.15)	(3.84)	4.90	3.72	(2.39)	3.88
Total from investment operations	(1.92)	(3.11)	5.61	4.48	(1.72)	4.60
Less distributions:
Distributions from net investment income	(0.67)	(0.75)	(0.90)	(0.81)	(0.82)	(0.66)
Net asset value at end of period	$26.87	$29.46	$33.32	$28.61	$24.94	$27.48
Total return	(6.62%) ²	(9.29%)	19.84%	18.23%	(5.91%)	19.52%
Ratios/Supplemental Data
Ratios to average net assets:
Total expenses	0.18% ³	0.18% ⁴	0.19%	0.21% ⁵	0.35%	0.35%
Net investment income (loss)	1.62% ³	2.40%	2.21%	2.86%	2.65%	2.46%
Portfolio turnover rate⁶	11% ²	23%	16%	20%	25%	18%
Net assets, end of period (x 1,000)	$631,499	$609,773	$403,229	$280,422	$159,610	$162,139

*	Unaudited.

Calculated based on the average shares outstanding during the period.

Not annualized.

Annualized (except for proxy costs).

⁴

Effective March 4, 2015, the annual operating expense ratio was reduced. The ratio presented for the period ended 8/31/15 is a blended ratio.

⁵

Effective September 20, 2012, the annual operating expense ratio was reduced. The ratio presented for the period ended 8/31/13 is a blended ratio.

⁶

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

See financial notes 23

Table of Contents

Schwab International Small-Cap Equity ETF

Condensed Portfolio Holdings as of February 29, 2016 (Unaudited)

Holdings by Category		Cost ($)	Value ($)
98.9%	Common Stock	656,636,655	624,810,081
0.3%	Preferred Stock	1,972,980	2,170,247
0.0%	Rights	—	13,612
4.4%	Other Investment Companies	27,268,534	27,462,046
103.6%	Total Investments	685,878,169	654,455,986
(3.6%)	Other Assets and Liabilities, Net		(22,956,555)
100.0%	Net Assets		631,499,431

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 98.9% of net assets
Australia 4.9%
DUET Group	979,060	0.3	1,587,396
Vocus Communications Ltd. (b)	211,054	0.2	1,236,112
Other Securities		4.4	27,922,318
		4.9	30,745,826
Austria 1.0%
Other Securities		1.0	6,242,774
Belgium 1.6%
Ackermans & van Haaren N.V.	11,123	0.2	1,468,412
Other Securities		1.4	8,579,754
		1.6	10,048,166
Canada 14.7%
AltaGas Ltd. (b)	58,541	0.2	1,390,273
CCL Industries, Inc., Class B	13,947	0.3	2,130,660
Constellation Software, Inc.	6,700	0.4	2,792,178
Dollarama, Inc.	45,436	0.4	2,641,769
Element Financial Corp.	153,499	0.3	1,623,830
Empire Co., Ltd., A Shares	67,017	0.2	1,295,220
Gildan Activewear, Inc.	95,892	0.4	2,476,231
H&R Real Estate Investment Trust	110,984	0.2	1,538,668
Keyera Corp.	68,590	0.3	1,899,314
Kinross Gold Corp. *	491,919	0.2	1,438,062
Onex Corp.	37,582	0.3	2,208,421

Security	Number of Shares	% of Net Assets	Value ($)
Open Text Corp.	51,772	0.4	2,571,019
Progressive Waste Solutions Ltd.	43,543	0.2	1,299,604
Other Securities		10.9	67,566,193
		14.7	92,871,442
Denmark 1.3%
GN Store Nord A/S	63,816	0.2	1,278,198
Other Securities		1.1	7,195,372
		1.3	8,473,570
Finland 1.6%
Amer Sports Oyj	48,334	0.2	1,349,695
Huhtamaki Oyj	43,404	0.2	1,439,814
Other Securities		1.2	6,947,318
		1.6	9,736,827
France 3.8%
Eurofins Scientific SE	3,666	0.2	1,306,918
Orpea	18,767	0.2	1,551,777
Teleperformance	25,217	0.3	1,950,299
Other Securities		3.1	19,268,492
		3.8	24,077,486
Germany 4.8%
Freenet AG	47,734	0.2	1,427,076
KION Group AG *	25,458	0.2	1,272,839
LEG Immobilien AG *	24,372	0.3	2,003,848
Other Securities		4.1	25,753,679
		4.8	30,457,442
Greece 0.3%
Other Securities		0.3	2,097,226
Hong Kong 2.1%
Other Securities		2.1	13,177,898
Ireland 0.5%
Kingspan Group plc	74,503	0.3	1,878,879
Other Securities		0.2	1,025,848
		0.5	2,904,727
Israel 0.4%
Other Securities		0.4	2,540,005
Italy 3.7%
Banca Popolare di Milano Scarl	1,890,076	0.2	1,308,183
Other Securities		3.5	22,123,468
		3.7	23,431,651
Japan 18.3%
Other Securities		18.3	115,786,202
Netherlands 2.1%
Other Securities		2.1	13,042,059

24 See financial notes

Table of Contents

Schwab International Small-Cap Equity ETF

Condensed Portfolio Holdings (Unaudited) continued

Security	Number of Shares	% of Net Assets	Value ($)
New Zealand 0.8%
Other Securities		0.8	5,159,783
Norway 1.2%
Other Securities		1.2	7,816,665
Portugal 0.4%
Other Securities		0.4	2,496,306
Republic of Korea 5.2%
Other Securities		5.2	32,628,383
Singapore 1.7%
Other Securities		1.7	10,927,582
Spain 2.3%
Gamesa Corp. Tecnologica S.A.	90,025	0.3	1,706,901
Merlin Properties Socimi S.A.	131,036	0.2	1,374,082
Other Securities		1.8	11,486,734
		2.3	14,567,717
Sweden 4.5%
Elekta AB, B Shares	144,604	0.2	1,278,706
NCC AB, B Shares	38,076	0.2	1,282,958
Other Securities		4.1	26,088,125
		4.5	28,649,789
Switzerland 3.6%
Other Securities		3.6	22,418,148
United Kingdom 18.1%
Bellway plc	47,843	0.3	1,712,188
Booker Group plc	651,865	0.2	1,510,734
BTG plc *	160,478	0.2	1,396,645
Essentra plc	113,571	0.2	1,320,784
Great Portland Estates plc	134,930	0.2	1,312,508
Greene King plc	127,151	0.3	1,605,411
Halma plc	161,225	0.3	1,994,063
Henderson Group plc	423,610	0.2	1,388,486
Hiscox Ltd.	120,000	0.3	1,627,167
IG Group Holdings plc	143,676	0.2	1,523,727
Man Group plc	662,035	0.2	1,424,513
Mediclinic International plc	155,000	0.3	1,919,231
Micro Focus International plc	76,290	0.2	1,568,187
Paddy Power Betfair plc	33,793	0.8	5,086,144
RPC Group plc	124,172	0.2	1,278,811
Shaftesbury plc	116,627	0.2	1,395,332
Spirax-Sarco Engineering plc	32,529	0.2	1,425,705
UBM plc	184,638	0.2	1,519,424
Other Securities		13.4	83,503,347
		18.1	114,512,407
Total Common Stock
(Cost $656,636,655)			624,810,081

Security	Number of Shares	% of Net Assets	Value ($)
Preferred Stock 0.3% of net assets
Germany 0.3%
Other Securities		0.3	1,885,703
Sweden 0.0%
Other Securities		0.0	284,544
Total Preferred Stock
(Cost $1,972,980)			2,170,247

Rights 0.0% of net assets
Spain 0.0%
Other Securities		0.0	13,612
Total Rights
(Cost $—)			13,612

Other Investment Companies 4.4% of net assets
Switzerland 0.2%
Other Securities		0.2	1,128,236
United Kingdom 0.1%
Other Securities		0.1	699,857
United States 4.1%
Equity Fund 0.1%
Other Securities		0.1	690,450
Money Market Fund 0.1%
Other Securities		0.1	300,785
Securities Lending Collateral 3.9%
Wells Fargo Advantage Government Money Market Fund, Institutional Class 0.16% (c)		3.9	24,642,718
		4.1	25,633,953
Total Other Investment Companies
(Cost $27,268,534)			27,462,046

End of Investments.

At 02/29/16, the tax basis cost of the fund's investments was $686,346,742 and the unrealized appreciation and depreciation were $65,367,135 and ($97,257,891), respectively, with a net unrealized depreciation of ($31,890,756).

See financial notes 25

Table of Contents

Schwab International Small-Cap Equity ETF

Condensed Portfolio Holdings (Unaudited) continued

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

*	Non-income producing security.
(a)	Illiquid security. At the period end, the value of these amounted to $94,212 or 0.0% of net assets.
(b)	All or a portion of this security is on loan. Securities on loan were valued at $23,581,911.
(c)	The rate shown is the 7-day yield.
(d)	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 $9,719,812 or 1.5% of net assets.
(e)	Fair-valued by management in accordance with procedures approved by the Board of Trustees.

CVA —	Dutch Certificate
ETF —	Exchange-traded fund
Reg'd —	Registered
REIC —	Real Estate Investment Company
REIT —	Real Estate Investment Trust

The following is a summary of the inputs used to value the fund’s investments as of February 29, 2016 (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	$611,632,183	$—	$—	$611,632,183
Hong Kong	13,083,686	—	94,212	13,177,898
Preferred Stock¹	2,170,247	—	—	2,170,247
Rights ¹	—	—	13,612	13,612
Other Investment Companies¹	27,462,046	—	—	27,462,046
Total	$654,348,162	$—	$107,824	$654,455,986

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 August 31, 2015	Realized Gains (Losses)	Change in Unrealized Appreciation (Depreciation)	Gross Purchases	Gross Sales	Gross Transfers in	Gross Transfers out	Balance as of February 29, 2016
Common Stock
Australia	$—	$—	$234	$—	($234)	$—	$—	$—
Hong Kong	231,341	—	(137,129)	—	—	—	—	94,212
Rights
Germany	35,681	—	(17,740)	—	(17,941)	—	—	—
Spain	—	1	13,612	—	(1)	—	—	13,612
Total	$267,022	$1	($141,023)	$—	($18,176)	$—	$—	$107,824

All net realized and change in unrealized gains (losses) in the table above are reflected on the accompanying Statement of Operations. The net change in unrealized appreciation (depreciation) for Level 3 Investments held by the fund at February 29, 2016 was $13,295.

26 See financial notes

Table of Contents

Schwab International Small-Cap Equity ETF

Statement of

Assets and Liabilities

As of February 29, 2016; unaudited

Assets
Investments, at value (cost $661,235,451) including securities on loan of $23,581,911		$629,813,268
Collateral invested for securities on loan, at value (cost $24,642,718)	+	24,642,718
Total investments, at value (cost $685,878,169)		654,455,986
Foreign currency, at value (cost $1,376,840)		1,368,099
Receivables:
Investments sold		486,450
Dividends		865,026
Foreign tax reclaims		172,904
Income from securities on loan		78,003
Interest	+	37
Total assets		657,426,505
Liabilities
Collateral held for securities on loan		24,642,718
Payables:
Investments bought		1,236,256
Investment adviser fees		22,725
Accrued expenses	+	25,375
Total liabilities		25,927,074
Net Assets
Total assets		657,426,505
Total liabilities	–	25,927,074
Net assets		$631,499,431
Net Assets by Source
Capital received from investors		714,433,741
Distributions in excess of net investment income		(5,712,778)
Net realized capital losses		(45,773,538)
Net unrealized capital depreciation		(31,447,994)

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$631,499,431		23,500,000		$26.87

See financial notes 27

Table of Contents

Schwab International Small-Cap Equity ETF

Statement of

Operations

For the period September 1, 2015 through February 29, 2016; unaudited

Investment Income
Dividends (net of foreign withholding tax of $482,980)		$5,374,676
Securities on loan	+	312,218
Total investment income		5,686,894
Expenses
Investment adviser fees		568,500
Proxy fees	+	25,534
Total expenses	–	594,034
Net investment income		5,092,860
Realized and Unrealized Gains (Losses)
Net realized losses on investments (net of foreign capital gains tax of $163)		(10,580,914)
Net realized gains on in-kind redemptions		3,951,564
Net realized losses on foreign currency transactions	+	(29,338)
Net realized losses		(6,658,688)
Net change in unrealized appreciation (depreciation) on investments		(42,819,623)
Net change in unrealized appreciation (depreciation) on foreign currency translations	+	(11,893)
Net change in unrealized appreciation (depreciation)	+	(42,831,516)
Net realized and unrealized losses		(49,490,204)
Decrease in net assets resulting from operations		($44,397,344)

28 See financial notes

Table of Contents

Schwab International Small-Cap Equity ETF

Statement of

Changes in Net Assets

For the current and prior report periods

Figures for the current period are unaudited

Operations
	9/1/15-2/29/16		9/1/14-8/31/15
Net investment income		$5,092,860	$11,329,928
Net realized losses		(6,658,688)	(10,158,381)
Net change in unrealized appreciation (depreciation)	+	(42,831,516)	(49,958,289)
Decrease in net assets resulting from operations		(44,397,344)	(48,786,742)
Distributions to Shareholders
Distributions from net investment income		($15,625,200)	($9,800,110)

Transactions in Fund Shares
		9/1/15-2/29/16		9/1/14-8/31/15
		SHARES	VALUE	SHARES	VALUE
Shares sold		3,200,000	$93,516,670	9,200,000	$284,437,217
Shares redeemed	+	(400,000)	(11,767,718)	(600,000)	(19,306,798)
Net transactions in fund shares		2,800,000	$81,748,952	8,600,000	$265,130,419
Shares Outstanding and Net Assets
		9/1/15-2/29/16		9/1/14-8/31/15
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		20,700,000	$609,773,023	12,100,000	$403,229,456
Total increase	+	2,800,000	21,726,408	8,600,000	206,543,567
End of period		23,500,000	$631,499,431	20,700,000	$609,773,023
Distributions in excess of net investment income/ Net investment income not yet distributed			($5,712,778)		$4,819,562

See financial notes 29

Table of Contents

Schwab Emerging Markets Equity ETF

Financial Statements

Financial Highlights

	9/1/15– 2/29/16*	9/1/14– 8/31/15	9/1/13– 8/31/14	9/1/12– 8/31/13	9/1/11– 8/31/12	9/1/10– 8/31/11
Per-Share Data
Net asset value at beginning of period	$20.83	$27.34	$22.94	$23.65	$26.10	$24.30
Income (loss) from investment operations:
Net investment income (loss)	0.14 ¹	0.66 ¹	0.63	0.50	0.63	0.62
Net realized and unrealized gains (losses)	(2.13)	(6.49)	4.40	(0.65)	(2.51)	1.41 ²
Total from investment operations	(1.99)	(5.83)	5.03	(0.15)	(1.88)	2.03
Less distributions:
Distributions from net investment income	(0.49)	(0.68)	(0.63)	(0.56)	(0.57)	(0.23)
Net asset value at end of period	$18.35	$20.83	$27.34	$22.94	$23.65	$26.10
Total return	(9.70%) ³	(21.62%)	22.31%	(0.89%)	(7.04%)	8.31%
Ratios/Supplemental Data
Ratios to average net assets:
Total expenses	0.14% ⁴	0.14%	0.14%	0.15%	0.25%	0.25%
Net investment income (loss)	1.47% ⁴	2.66%	2.89%	2.63%	2.96%	2.78%
Portfolio turnover rate⁵	6% ³	8%	9%	15%	9%	9%
Net assets, end of period (x 1,000)	$1,427,295	$1,276,740	$1,273,840	$811,915	$515,595	$396,661

*	Unaudited.

Calculated based on the average shares outstanding during the period.

Not annualized.

⁴

Annualized (except for proxy costs).

⁵

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

30 See financial notes

Table of Contents

Schwab Emerging Markets Equity ETF

Condensed Portfolio Holdings as of February 29, 2016 (Unaudited)

Holdings by Category		Cost ($)	Value ($)
97.8%	Common Stock	1,689,219,473	1,396,071,984
1.9%	Preferred Stock	53,667,422	26,519,021
0.0%	Rights	—	5,769
0.6%	Other Investment Companies	8,504,021	8,504,021
100.3%	Total Investments	1,751,390,916	1,431,100,795
(0.3%)	Other Assets and Liabilities, Net		(3,805,847)
100.0%	Net Assets		1,427,294,948

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 97.8% of net assets
Brazil 5.5%
Ambev S.A. ADR	2,367,310	0.7	10,274,124
BRF S.A. ADR	441,185	0.4	5,633,933
Itau Unibanco Holding S.A. ADR	1,549,505	0.7	9,761,882
Other Securities		3.7	52,998,089
		5.5	78,668,028
Chile 1.5%
Other Securities		1.5	21,026,185
China 26.0%
Bank of China Ltd., H Shares	39,239,753	1.0	14,684,347
China Construction Bank Corp., H Shares	47,574,180	2.0	27,836,721
China Life Insurance Co., Ltd., H Shares	3,886,212	0.6	8,455,946
China Mobile Ltd.	2,789,232	2.1	29,484,368
China Overseas Land & Investment Ltd.	2,049,320	0.4	6,087,754
China Petroleum & Chemical Corp., H Shares	13,573,511	0.5	7,558,149
CNOOC Ltd.	8,532,612	0.6	8,734,347
Industrial & Commercial Bank of China Ltd., H Shares	37,610,896	1.3	18,572,924
PetroChina Co., Ltd., H Shares	11,330,944	0.5	7,271,132

Security	Number of Shares	% of Net Assets	Value ($)
Ping An Insurance Group Co. of China Ltd., H Shares	2,657,153	0.8	11,242,110
Tencent Holdings Ltd.	2,773,754	3.5	50,615,754
Other Securities		12.7	180,565,390
		26.0	371,108,942
Colombia 0.6%
Other Securities		0.6	8,590,591
Czech Republic 0.2%
Other Securities		0.2	2,915,946
Egypt 0.2%
Other Securities		0.2	3,460,873
Hungary 0.4%
Other Securities		0.4	4,916,811
India 12.1%
HDFC Bank Ltd.	382,447	0.4	5,431,949
Housing Development Finance Corp., Ltd.	831,703	0.9	12,887,902
Infosys Ltd.	989,960	1.1	15,683,831
Reliance Industries Ltd.	834,890	0.8	11,794,613
Sun Pharmaceutical Industries Ltd.	598,429	0.5	7,468,009
Tata Consultancy Services Ltd.	247,490	0.6	7,873,383
Other Securities		7.8	111,509,575
		12.1	172,649,262
Indonesia 3.0%
PT Astra International Tbk	10,850,812	0.4	5,517,912
PT Bank Central Asia Tbk	6,270,687	0.4	6,318,988
PT Telekomunikasi Indonesia (Persero) Tbk	26,195,704	0.4	6,366,739
Other Securities		1.8	24,791,665
		3.0	42,995,304
Malaysia 4.7%
Malayan Banking Berhad	2,654,500	0.4	5,372,127
Public Bank Berhad	1,570,854	0.5	6,903,539
Tenaga Nasional Berhad	1,713,274	0.4	5,345,578
Other Securities		3.4	48,819,890
		4.7	66,441,134
Mexico 5.7%
America Movil S.A.B. de C.V., Series L	14,528,598	0.7	9,912,252
Fomento Economico Mexicano S.A.B. de C.V.	1,146,065	0.8	10,766,180
Grupo Financiero Banorte S.A.B. de C.V., O Shares	1,212,396	0.4	6,141,412
Grupo Televisa S.A.B., Series CPO	1,402,075	0.5	7,240,217
Wal-Mart de Mexico S.A.B. de C.V.	3,080,290	0.5	7,271,984
Other Securities		2.8	40,212,904
		5.7	81,544,949

See financial notes 31

Table of Contents

Schwab Emerging Markets Equity ETF

Condensed Portfolio Holdings (Unaudited) continued

Security	Number of Shares	% of Net Assets	Value ($)
Peru 0.3%
Other Securities		0.3	4,178,222
Philippines 1.9%
Other Securities		1.9	27,354,315
Poland 1.6%
Other Securities		1.6	23,059,493
Russia 4.2%
Gazprom PAO ADR	2,937,625	0.8	10,820,742
LUKOIL PJSC *	267,327	0.7	9,568,366
Magnit PJSC GDR - Reg'd	159,041	0.4	5,327,873
Sberbank of Russia PJSC *	5,186,001	0.5	7,394,439
Other Securities		1.8	26,804,120
		4.2	59,915,540
South Africa 8.7%
MTN Group Ltd.	908,738	0.5	7,702,877
Naspers Ltd., N Shares	223,785	1.9	26,721,105
Sasol Ltd.	286,339	0.5	7,748,344
Steinhoff International Holdings N.V.	1,284,109	0.5	6,890,385
Other Securities		5.3	75,536,452
		8.7	124,599,163
Taiwan 15.4%
Chunghwa Telecom Co., Ltd. ADR	200,135	0.4	6,282,238
CTBC Financial Holding Co., Ltd.	9,653,623	0.3	4,705,967
Delta Electronics, Inc.	1,165,148	0.3	4,715,708
Formosa Chemicals & Fibre Corp.	2,396,008	0.4	5,393,037
Formosa Plastics Corp.	2,545,560	0.4	6,051,373
Hon Hai Precision Industry Co., Ltd.	7,226,969	1.2	16,962,674
MediaTek, Inc.	782,713	0.4	5,558,506
Nan Ya Plastics Corp.	3,000,816	0.4	5,761,075
Taiwan Semiconductor Manufacturing Co., Ltd. ADR	2,377,466	3.9	55,989,324
Other Securities		7.7	108,204,850
		15.4	219,624,752
Thailand 2.9%
Other Securities		2.9	41,643,064
Turkey 1.8%
Other Securities		1.8	25,802,800
United Arab Emirates 1.1%
Other Securities		1.1	15,576,610
Total Common Stock
(Cost $1,689,219,473)			1,396,071,984

Security	Number of Shares	% of Net Assets	Value ($)
Preferred Stock 1.9% of net assets
Brazil 1.5%
Banco Bradesco S.A.	1,377,270	0.5	7,385,958
Other Securities		1.0	13,633,573
		1.5	21,019,531
Colombia 0.1%
Other Securities		0.1	1,149,832
Russia 0.3%
Other Securities		0.3	4,349,658
Total Preferred Stock
(Cost $53,667,422)			26,519,021

Rights 0.0% of net assets
Brazil 0.0%
Other Securities		0.0	5,769
Total Rights
(Cost $—)			5,769

Other Investment Companies 0.6% of net assets
United States 0.6%
Money Market Fund 0.2%
Other Securities		0.2	2,318,573
Securities Lending Collateral 0.4%
Wells Fargo Advantage Government Money Market Fund, Institutional Class 0.16% (d)		0.4	6,185,448
Total Other Investment Companies
(Cost $8,504,021)			8,504,021

End of Investments.

At 02/29/16, the tax basis cost of the fund's investments was $1,769,739,292 and the unrealized appreciation and depreciation were $52,663,535 and ($391,302,032), respectively, with a net unrealized depreciation of ($338,638,497).

32 See financial notes

Table of Contents

Schwab Emerging Markets Equity ETF

Condensed Portfolio Holdings (Unaudited) continued

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

*	Non-income producing security.
(a)	All or a portion of this security is on loan. Securities on loan were valued at $5,779,464.
(b)	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 $6,383,431 or 0.4% of net assets.
(c)	Illiquid security. At the period end, the value of these amounted to $1,559,647 or 0.1% of net assets.
(d)	The rate shown is the 7-day yield.
(e)	Fair-valued by management in accordance with procedures approved by the Board of Trustees.

ADR —	American Depositary Receipt
GDR —	Global Depositary Receipt
NVDR —	Non-Voting Depositary Receipt
Reg'd —	Registered
REIT —	Real Estate Investment Trust

In addition to the above, the fund held the following at 2/29/16:

	Number of Contracts	Contract Value ($)	Unrealized Appreciation ($)
Futures Contracts
MSCI EAFE, e-mini, Long, expires 03/18/16	50	1,855,250	37,879

The following is a summary of the inputs used to value the fund’s investments as of February 29, 2016 (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	$1,016,372,451	$—	$—	$1,016,372,451
China	369,362,662	—	1,746,280	371,108,942
Colombia	7,674,532	—	916,059	8,590,591
Preferred Stock¹	26,519,021	—	—	26,519,021
Rights ¹	5,769	—	—	5,769
Other Investment Companies¹	8,504,021	—	—	8,504,021
Total	$1,428,438,456	$—	$2,662,339	$1,431,100,795
Other Financial Instruments
Futures Contracts²	$37,879	$—	$—	$37,879

¹	As categorized in the complete schedule of portfolio holdings.
²	Futures contracts are not included in Investments in the schedule of condensed 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 August 31, 2015	Realized Gains (Losses)	Change in Unrealized Appreciation (Depreciation)	Gross Purchases	Gross Sales	Gross Transfers in	Gross Transfers out	Balance as of February 29, 2016
Common Stock
China	$4,014,121	$60,293	$424,761	$416,806	($812,906)	$1,343,335	($3,700,130)	$1,746,280
Colombia	—	—	187,705	159,171	—	569,183	—	916,059
Pakistan	137,863	(37,191)	24,718	—	(125,390)	—	—	—
Total	$4,151,984	$23,102	$637,184	$575,977	($938,296)	$1,912,518	($3,700,130)	$2,662,339

See financial notes 33

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Schwab Emerging Markets Equity ETF

Condensed Portfolio Holdings (Unaudited) continued

The funds policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were transfers between Level 1 and Level 3 for the period ended February 29, 2016. Transfers from Level 1 to Level 3 are a result of fair valued securities for which no quoted value was available. Transfers from Level 3 to Level 1 are a result of the availability of current and reliable market-based data provided by third-party pricing services or other valuation techniques which utilize significant observable inputs. There were no transfers between Level 1 and Level 2 for the period ended February 29, 2016.

34 See financial notes

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Schwab Emerging Markets Equity ETF

Statement of

Assets and Liabilities

As of February 29, 2016; unaudited

Assets
Investments, at value (cost $1,745,205,468) including securities on loan of $5,779,464		$1,424,915,347
Collateral invested for securities on loan, at value (cost $6,185,448)	+	6,185,448
Total investments, at value (cost $1,751,390,916)		1,431,100,795
Cash		280,369
Deposit with broker for futures contracts		135,000
Foreign currency, at value (cost $579,045)		578,898
Receivables:
Investments sold		2,021,125
Dividends		1,493,017
Income from securities on loan		31,443
Foreign tax reclaims		17,411
Variation margin on futures contracts		16,250
Interest	+	529
Total assets		1,435,674,837
Liabilities
Collateral held for securities on loan		6,185,448
Payables:
Investments bought		2,099,447
Investment adviser fees		39,671
Accrued expenses	+	55,323
Total liabilities		8,379,889
Net Assets
Total assets		1,435,674,837
Total liabilities	–	8,379,889
Net assets		$1,427,294,948
Net Assets by Source
Capital received from investors		1,915,767,774
Distributions in excess of net investment income		(2,230,286)
Net realized capital losses		(165,976,007)
Net unrealized capital depreciation		(320,266,533)

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$1,427,294,948		77,800,000		$18.35

See financial notes 35

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Schwab Emerging Markets Equity ETF

Statement of

Operations

For the period September 1, 2015 through February 29, 2016; unaudited

Investment Income
Dividends (net of foreign withholding tax of $1,057,380)		$10,985,999
Securities on loan	+	134,546
Total investment income		11,120,545
Expenses
Investment adviser fees		967,544
Proxy fees	+	55,659
Total expenses	–	1,023,203
Net investment income		10,097,342
Realized and Unrealized Gains (Losses)
Net realized losses on investments		(36,627,587)
Net realized losses on futures contracts		(278,108)
Net realized losses on foreign currency transactions	+	(397,089)
Net realized losses		(37,302,784)
Net change in unrealized appreciation (depreciation) on investments (net of change in foreign capital gain tax of $1,325,702)		(121,267,236)
Net change in unrealized appreciation (depreciation) on futures contracts		103,338
Net change in unrealized appreciation (depreciation) on foreign currency translations	+	74,004
Net change in unrealized appreciation (depreciation)	+	(121,089,894)
Net realized and unrealized losses		(158,392,678)
Decrease in net assets resulting from operations		($148,295,336)

36 See financial notes

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Schwab Emerging Markets Equity ETF

Statement of

Changes in Net Assets

For the current and prior report periods

Figures for the current period are unaudited

Operations
	9/1/15-2/29/16		9/1/14-8/31/15
Net investment income		$10,097,342	$34,615,796
Net realized losses		(37,302,784)	(47,156,730)
Net change in unrealized appreciation (depreciation)	+	(121,089,894)	(323,977,692)
Decrease in net assets resulting from operations		(148,295,336)	(336,518,626)
Distributions to Shareholders
Distributions from net investment income		($35,546,040)	($32,001,840)

Transactions in Fund Shares
		9/1/15-2/29/16		9/1/14-8/31/15
		SHARES	VALUE	SHARES	VALUE
Shares sold		16,500,000	$334,396,367	15,600,000	$393,111,059
Shares redeemed	+	—	—	(900,000)	(21,690,338)
Net transactions in fund shares		16,500,000	$334,396,367	14,700,000	$371,420,721
Shares Outstanding and Net Assets
		9/1/15-2/29/16		9/1/14-8/31/15
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		61,300,000	$1,276,739,957	46,600,000	$1,273,839,702
Total increase	+	16,500,000	150,554,991	14,700,000	2,900,255
End of period		77,800,000	$1,427,294,948	61,300,000	$1,276,739,957
Distributions in excess of net investment income/ Net investment income not yet distributed			($2,230,286)		$23,218,412

See financial notes 37

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Schwab International Equity ETFs

Financial Notes, unaudited

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. REIT ETF™
Schwab International Equity ETF	Schwab U.S. TIPS ETF™
Schwab International Small-Cap Equity ETF	Schwab Short-Term U.S. Treasury ETF™
Schwab Emerging Markets Equity ETF	Schwab Intermediate-Term U.S. Treasury ETF™
Schwab U.S. Broad Market ETF™	Schwab U.S. Aggregate Bond ETF™
Schwab U.S. Large-Cap ETF™	Schwab Fundamental U.S. Broad Market Index ETF
Schwab U.S. Large-Cap Growth ETF™	Schwab Fundamental U.S. Large Company Index ETF
Schwab U.S. Large-Cap Value ETF™	Schwab Fundamental U.S. Small Company Index ETF
Schwab U.S. Mid-Cap ETF™	Schwab Fundamental International Large Company Index ETF
Schwab U.S. Small-Cap ETF™	Schwab Fundamental International Small Company Index ETF
Schwab U.S. Dividend Equity ETF™	Schwab Fundamental Emerging Markets Large Company Index ETF

The funds issue and redeem shares at their net asset value per share (NAV) only in large blocks of shares, typically 100,000 shares or more (Creation Units). These transactions are usually in exchange for a basket of securities and/or 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 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 may 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 for this reporting period, which is filed with the U.S. Securities and Exchange Commission (SEC). For more information about United States 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:

• 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.

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Financial Notes, unaudited (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.

• Bonds and notes: Bonds and notes are valued at halfway between the most recent bid and ask quotes or, if such quotes are unavailable, at prices for securities of comparable maturity, credit quality and type. Valuations for bonds and notes are provided by independent bond-pricing services.

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

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

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

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

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

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

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

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Financial Notes, unaudited (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 29, 2016 are disclosed in the Condensed Portfolio Holdings.

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

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

Securities Lending: Under the trust's Securities Lending Program, a fund (lender) may make short-term loans of its securities to another party (borrower) to generate additional revenue for the fund. The borrower pledges collateral in the form of cash, securities issued or fully guaranteed by the U.S. government or foreign governments, or letters of credit issued by a bank. Collateral at the individual loan level is required to be maintained on a daily marked-to-market basis in an amount at least equal to the current value of the securities loaned. The lending agent provides a fund with indemnification against borrower default (the borrower fails to return the security on loan) reducing the risk of loss as a result of default. The cash collateral of securities loaned is currently invested in money market portfolios operating under Rule 2a-7 of the 1940 Act. Each fund bears the risk of loss with respect to the investment of cash collateral. The terms of the securities lending agreements allow the funds or the lending agent to terminate any loan at any given time and the securities must be returned within the earlier of the standard trade settlement period or the specified time period under the relevant securities lending agreement. Securities lending income, as disclosed in each fund’s Statement of Operations, if applicable, represents the income earned from the investment of the cash collateral plus any fees paid by borrowers, less the fees paid to the lending agent and broker rebates which are subject to adjustments pursuant to the securities lending agreement. On loans not collateralized by cash, a fee is received from the borrower, and is allocated between a fund and the lending agent. The aggregate market value of securities loaned will not at any time exceed one-third of the total assets of a fund, including collateral received from the loan (at market value computed at the time of the loan). Total costs and expenses, including lending 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 through October 2, 2015. For the subsequent period through November 30, 2015, the total costs and expenses to be paid to the unaffiliated lending agents range from 10% to 15%, with subsequent breakpoints to a low of 7.5%, of gross lending revenue. After December 1, 2015, the total costs and expenses to be paid to the unaffiliated lending agents start at 10% of gross lending revenue, with subsequent breakpoints to a low of 7.5%.

As of February 29, 2016, the funds had securities on loan, all of which were classified as common stocks. The value of the securities on loan and the related collateral as of February 29, 2016, if any, are disclosed in each fund's Condensed 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.

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

Assets and liabilities denominated in foreign currencies are reported in U.S. dollars. For assets and liabilities held on a given date, the dollar value is based on market exchange rates in effect on that date. Transactions involving foreign currencies, including purchases, sales, income receipts and expense payments, are calculated using exchange rates in effect on the

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Schwab International Equity ETFs

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):

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 appreciation or depreciation arises from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period. These realized and unrealized foreign exchange gains or losses are 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 contract position, it calculates the difference between the value of the position at the beginning and at the end of the contract, and records a realized gain or loss accordingly.

(d) Investment Income:

Interest income is recorded as it accrues. Dividends 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:

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

(g) Accounting Estimates:

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

(h) Federal Income Taxes:

The 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 net realized capital gains, if any, to their respective shareholders each year. As long as a fund meets the tax requirements, it is not required to pay federal income tax.

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Schwab International Equity ETFs

Financial Notes, unaudited (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 29, 2016, 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.

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 an investment in a fund will fluctuate, which means that the investors could lose money.

Investment Style Risk. The funds are not actively managed. Therefore, each fund follows 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.

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- and Mid-Cap Risk. Certain funds invest in large- and mid-cap stocks. Both large- and mid-cap stocks tend to go in and out of favor based on market and economic conditions. However, stocks of mid-cap companies tend to be more susceptible to adverse business or economic events than larger, more established companies. During a period when large- and mid-cap stocks fall behind other types of investments—small-cap stocks, for instance—a fund’s large- and 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- or 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 involve certain risks that are greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of 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 American Depositary receipts (ADRs), Global Depositary receipts (GDRs), and European Depositary receipts (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,

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Financial Notes, unaudited (continued)

3. Risk Factors (continued):

may be more volatile. To the extent a fund's investments in a single country or a limited number of countries represent a large percentage of the fund's assets, the fund's performance may be adversely affected by the economic, political 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. Emerging market countries often have less uniformity in accounting and reporting requirements and greater risk associated with the custody of securities. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in 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, which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

Sampling Index Tracking Risk. Each fund uses statistical sampling techniques, and as a result, a fund may not fully replicate the index and may hold securities not included in the index. As a result, a fund is subject to the risk that the investment adviser’s investment management strategy, the implementation of which is subject to a number of constraints, may not produce the intended results. Because each fund utilizes a sampling approach, it may not track the return of the index as well as it would if a fund purchased all of the securities in its index.

Tracking Error Risk. As an index fund, each fund seeks to track the performance of the index, although it may not be successful in doing so. The divergence between the performance of a fund and the 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. The fund's use of derivatives could reduce the fund's performance, increase the fund's volatility, and cause the fund to lose more than the initial amount invested. Furthermore, the use of derivatives subject to regulation by the Commodity Futures Trading Commission (CFTC) could cause the fund to become a commodity pool, which would require the fund to comply with certain CFTC rules.

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

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.

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 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. The market

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Financial Notes, unaudited (continued)

3. Risk Factors (continued):

price of fund shares may deviate, sometimes significantly, from NAV during periods of market volatility or as a result of other factors impacting foreign securities, including liquidity, irregular trading activity and timing differences between foreign markets where securities trade and the secondary market where fund shares are sold.

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 International Equity ETF		Schwab International Small-Cap Equity ETF		Schwab Emerging Markets Equity ETF
0.08%		0.18%		0.14%

Subsequent to the reporting period ended February 29, 2016, and effective March 1, 2016, the management fee of the Schwab International Small-Cap Equity ETF has been reduced to 0.16%.

Certain Schwab funds may own shares of other Schwab funds. The table below reflects the percentages of shares of each fund in this report that are owned by other Schwab funds as of February 29, 2016, as applicable:

	Underlying Funds
	Schwab International Equity ETF	Schwab International Small-Cap Equity ETF	Schwab Emerging Markets Equity ETF
Schwab VIT Balanced Portfolio	0.1%	0.2%	0.2%
Schwab VIT Balanced with Growth Portfolio	0.4%	0.5%	0.4%
Schwab VIT Growth Portfolio	0.5%	0.9%	0.6%

Pursuant to an exemptive order issued by the SEC, the funds may enter into interfund borrowing and lending transactions with other funds in the Fund Complex (for definition refer to Trustees and Officers section). All loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the overnight repurchase agreement rate and the short-term bank loan rate. All loans are subject to numerous conditions designed to ensure fair and equitable treatment of all participating funds/portfolios. 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 International Equity ETFs

Financial Notes, unaudited (continued)

6. Board of Trustees:

At a Special Meeting of Shareholders on December 11, 2015, twelve individuals were elected to serve as trustees of all trusts constituting the Schwab Funds, Laudus Funds and Schwab ETFs effective January 1, 2016. The twelve individuals elected to the Board of Trustees consist of the former Schwab Funds and Laudus Funds trustees, the former Schwab ETFs trustees and three new nominees. The trustees believe that combining the composition of the Board of Trustees and adding the new nominees will further align oversight of the Schwab Funds, Laudus Funds and Schwab ETFs, among other benefits.

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:

Prior to October 8, 2015, the funds had access to an uncommitted line of credit of $100 million with State Street. Effective October 8, 2015, the previous line of credit was terminated and the funds became participants with other U.S. registered investment companies managed by CSIM in a joint, syndicated, committed $530 million line of credit (the Credit Facility), with State Street as agent, which matures on October 6, 2016. Under the terms of the Credit Facility, in addition to the interest charged on any borrowings by a fund, each fund pays a commitment fee of 0.125% per annum on its proportionate share of the unused portion of the Credit Facility. There were no borrowings from any of the lines of credit during the period.

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

8. Derivatives:

Certain funds entered into equity index futures contracts during the report period. The funds invested in futures contracts to equitize available cash. The fair value and variation margin for futures contracts held at February 29, 2016 are presented on the Condensed Portfolio Holdings and Statement of Assets and Liabilities, respectively. The net realized and change in unrealized gains (losses) on futures contracts are presented on the Statement of Operations. Refer to financial note 2(b) for the funds’ accounting policies with respect to futures contracts and financial note 3 for disclosures concerning the risks of investing in futures contracts. During the period ended February 29, 2016, 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 International Equity ETF	$8,994,163	109
Schwab Emerging Markets Equity ETF	2,102,254	53

9. Purchases and Sales/Maturities of Investment Securities:

For the period ended February 29, 2016, 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 International Equity ETF	$128,882,717	$157,527,432
Schwab International Small-Cap Equity ETF	70,956,206	71,217,540
Schwab Emerging Markets Equity ETF	252,393,576	84,234,258

10. In-Kind Transactions:

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Schwab International Equity ETFs

Financial Notes, unaudited (continued)

10. In-Kind Transactions (continued):

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 a fund.

The in-kind transactions for the period ended February 29, 2016 were as follows:

	In-Kind Purchases of Securities	In-Kind Sales of Securities
Schwab International Equity ETF	$1,045,362,297	$—
Schwab International Small-Cap Equity ETF	83,962,272	11,063,801
Schwab Emerging Markets Equity ETF	143,055,053	—

For the period ended February 29, 2016, 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 29, 2016 are disclosed in the funds' Statements of Operations.

11. Federal Income Taxes

Capital loss carryforwards may be used to offset future realized capital gains for federal income tax purposes. As of August 31, 2015, the funds had capital loss carryforwards available to offset future net capital gains before the expiration dates as follows:

Expiration Date	Schwab International Equity ETF	Schwab International Small-Cap Equity ETF	Schwab Emerging Markets Equity ETF
August 31, 2019	$2,345,874	$215,545	$1,091,404
No expiration*	73,824,638	38,302,411	118,710,606
Total	$76,170,512	$38,517,956	$119,802,010

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

As of August 31, 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 August 31, 2015, the funds 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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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 International Equity ETF, Schwab International Small-Cap Equity ETF and Schwab Emerging Markets Equity ETF (the “Funds’’). 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 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 2, 2015, 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 information provided by CSIM relating to the Funds’ portfolio management team, portfolio strategy and risk oversight structure, and internal investment guidelines. The Trustees also considered investments in CSIM’s infrastructure. The Trustees also considered Schwab’s excellent reputation in connection with the OneSource exchange-traded fund offering and its overall financial condition. Following such evaluation, the Board concluded, within the context of its full deliberations, that the nature, extent and quality of services provided by CSIM to the Funds and the resources of CSIM and its affiliates dedicated to the Funds supported renewal of the Agreement with respect to the Funds.

Fund Performance. The Board considered 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 select peers and relevant indices/benchmarks, in light of total return, yield (if applicable), and market trends. As part of this review, the Trustees considered the criteria for selecting the peers. 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 their 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.

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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.

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 Funds, such as whether, by virtue of its management of the Funds, CSIM obtains investment information or other research resources that aid it in providing advisory services to other clients. The Trustees considered whether the 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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Shareholder Vote Results (Unaudited)

A Special Meeting of Shareholders of Schwab Strategic Trust (the “Trust”) was held on December 11, 2015, for the purpose of seeking shareholder approval to elect the following individuals as trustees of the Trust: Walter W. Bettinger II, Marie A. Chandoha, Joseph R. Martinetto, Robert W. Burns, John F. Cogan, Stephen T. Kochis, David L. Mahoney, Kiran M. Patel, Kimberly S. Patmore, Charles A. Ruffel, Gerald B. Smith, and Joseph H. Wender. The number of votes necessary to conduct the Special Meeting and approve the proposal was obtained. The results of the shareholder vote are listed below:

Proposal – To elect each of the following individuals as trustees of the Trust:	For	Withheld
Walter W. Bettinger II	692,669,185.464	115,543,246.417
Marie A. Chandoha	792,077,989.887	16,134,441.994
Joseph R. Martinetto	791,795,082.163	16,417,349.718
Robert W. Burns	792,580,288.687	15,632,143.194
John F. Cogan	760,202,566.290	48,009,865.591
Stephen T. Kochis	791,955,734.563	16,256,697.318
David L. Mahoney	790,582,269.572	17,630,162.309
Kiran M. Patel	791,333,584.438	16,878,847.443
Kimberly S. Patmore	792,462,618.902	15,749,812.979
Charles A. Ruffel	792,425,735.968	15,786,695.913
Gerald B. Smith	791,728,903.579	16,483,528.302
Joseph H. Wender	790,699,630.035	17,512,801.846

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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 96 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 of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016)	Retired/Private Investor (Jan. 2009 – present). Formerly, Managing Director, Pacific Investment Management Company, LLC (PIMCO) and President, PIMCO Funds.	96	Director, PS Business Parks, Inc. (2005 – 2012).
John F. Cogan 1947 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust and Laudus Institutional Trust since 2010; Schwab Strategic Trust since 2016)	Senior Fellow, The Hoover Institution at Stanford University (Oct. 1979 – present); Senior Fellow, Stanford Institute for Economic Policy Research (2000 – present); Professor of Public Policy, Stanford University (1994 – 2015).	96	Director, Gilead Sciences, Inc. (2005 – present)
Stephen Timothy Kochis 1946 Trustee (Trustee of Schwab Strategic Trust since 2012; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016)	CEO and Owner, Kochis Global (wealth management consulting) (May 2012 – present); Chairman and CEO, Aspiriant, LLC (wealth management) (Jan. 2008 – Apr. 2012).	96	None
David L. Mahoney 1954 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011; Schwab Strategic Trust since 2016)	Private Investor.	96	Director, Symantec Corporation (2003 – present) Director, Corcept Therapeutics Incorporated (2004 – present) Director, Adamas Pharmaceuticals, Inc. (2009 – present)
Kiran M. Patel 1948 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011; Schwab Strategic Trust since 2016)	Retired. Executive Vice President and General Manager of Small Business Group, Intuit, Inc. (financial software and services firm for consumers and small businesses) (Dec. 2008 – Sept. 2013).	96	Director, KLA-Tencor Corporation (2008 – present)

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Independent Trustees (continued)
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Kimberly S. Patmore 1956 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust, and Laudus Trust since 2016)	Consultant, Patmore Management Consulting (management consulting) (2008 – present).	96	None
Charles A. Ruffel 1956 Trustee (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2015)	Co-Chief Executive Officer, Kudu Investment Management, LLC (financial services) (Jan. 2015 – present); Partner, Kudu Advisors, LLC (financial services) (June 2008 – Jan. 2015); Advisor, Asset International, Inc. (publisher of financial services information) (Aug. 2008 – Jan. 2015).	96	None
Gerald B. Smith 1950 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2000; Laudus Trust and Laudus Institutional Trust since 2010; Schwab Strategic Trust since 2016)	Chairman, Chief Executive Officer and Founder of Smith Graham & Co. (investment advisors) (Mar. 1990 – present).	96	Director, Eaton (2012 – present) Director and Chairman of the Audit Committee, Oneok Partners LP (2003 – 2013) Director, Oneok, Inc. (2009 – 2013) Lead Independent Director, Board of Cooper Industries (2002 – 2012)
Joseph H. Wender 1944 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust and Laudus Institutional Trust since 2010; Schwab Strategic Trust since 2016)	Senior Consultant, Goldman Sachs & Co., Inc. (investment banking and securities firm) (Jan. 2008 – present); Partner, Colgin Partners, LLC (vineyards) (Feb. 1998 – present).	96	Board Member and Chairman of the Audit Committee, Isis Pharmaceuticals (1994 – present) Lead Independent Director and Chair of Audit Committee, OUTFRONT Media Inc. (2014 – present)

Interested Trustees
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Walter W. Bettinger II² 1960 Chairman and Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Schwab Strategic Trust since 2009; Laudus Trust and Laudus Institutional Trust since 2010)	Director, President and Chief Executive Officer, The Charles Schwab Corporation (Oct. 2008 – present); President and Chief Executive Officer (Oct. 2008 – present), Director (May 2008 – present), Charles Schwab & Co., Inc.; Director, Charles Schwab Bank (Apr. 2006 – present); and Director, Schwab Holdings, Inc. (May 2008 – present).	96	Director, The Charles Schwab Corporation (2008 – present)

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Interested Trustees (continued)
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Marie A. Chandoha² 1961 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust, and Laudus Trust since 2016)	Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; Trustee (Jan. 2016 – present), President, Chief Executive Officer (Dec. 2010 – present), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (Jan. 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (Mar. 2007 – Aug. 2010).	96	None
Joseph R. Martinetto² 1962 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust, and Laudus Trust since 2016)	Senior Executive Vice President and Chief Financial Officer, The Charles Schwab Corporation and Charles Schwab & Co., Inc. (July 2015 – present); Executive Vice President and Chief Financial Officer of The Charles Schwab Corporation and Charles Schwab & Co., Inc. (May 2007 – July 2015); Director, Charles Schwab & Co., Inc. (May 2007 – present); Director (Apr. 2010 – present) and Chief Executive Officer (July 2013 – Apr. 2015), Charles Schwab Bank; Director, Executive Vice President and Chief Financial Officer, Schwab Holdings, Inc. (May 2007 – present).	96	None

Officers of the Trust
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served³)	Principal Occupations During the Past Five Years
Marie A. Chandoha 1961 President and Chief Executive Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust, Laudus Trust and Laudus Institutional Trust since 2010)	Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; Trustee (Jan. 2016 – present), President, Chief Executive Officer (Dec. 2010 – present), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (Jan. 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (Mar. 2007 – Aug. 2010).
Mark Fischer 1970 Treasurer and Chief Financial Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust, Laudus Trust and Laudus Institutional Trust since 2013)	Treasurer and Chief Financial Officer, Schwab Funds, Laudus Funds and Schwab ETFs (Jan. 2016 – present); Assistant Treasurer, Schwab Funds and Laudus Funds (Dec. 2013 – Dec. 2015), Schwab ETFs (Nov. 2013 – Dec. 2015); Vice President, Charles Schwab Investment Management, Inc. (Oct. 2013 – present); Executive Director, J.P. Morgan Investor Services (Apr. 2011 – Sept. 2013); Assistant Treasurer, Massachusetts Financial Service Investment Management (May 2005 – Mar. 2011).

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

¹	Each Trustee shall hold office until the election and qualification of his or her successor, or until he or she dies, resigns or is removed. The retirement policy requires that each independent trustee retire by December 31 of the year in which the Trustee turns 74 or the Trustee’s twentieth year of service as an independent trustee on any trust in the Fund Complex, whichever occurs first.
²	Mr. Bettinger, Ms. Chandoha, and Mr. Martinetto are Interested Trustees because they own stock of The Charles Schwab Corporation, the parent company of the investment adviser.
³	The President, Treasurer and Secretary/Clerk hold office until their respective successors are chosen and qualified or until he or she sooner dies, resigns, is removed or becomes disqualified. Each of the other officers serves at the pleasure of the 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 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. 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.

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. Mid-Cap Total Stock Market Index is a subset of the Dow Jones U.S. Total Stock Market Index, which measures all U.S. equity securities with readily available prices. The index includes the components ranked 501-1000 by full market capitalization and is float-adjusted market cap weighted.

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

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.

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.

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

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

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

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.

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. Free-float market capitalization is a variation of market capitalization that only includes shares generally available to the public, and excludes shares of a company held by entities such as the government. Modified market capitalization weighting represents a mix between conventional market capitalization weighting and equal weighting.

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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.

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

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.

Russell 2000 Index An index that measures the performance of the small-cap segment of the U.S. equity universe. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.

rights and warrants Rights and warrants are types of securities that entitle the holder to purchase a proportionate amount of common stock at a specified price for a specific period of time. Rights allow a shareholder to buy more shares directly from the company, usually at a price somewhat lower than the current market price of the outstanding shares. Warrants are usually issued with bonds and preferred stock. Rights and warrants can trade on the market separately from the company’s stock. The prices of rights and warrants do not necessarily move parallel to the prices of the underlying common stock. Rights usually expire within a few weeks of issuance, while warrants may not expire for several years. If a right or warrant is not exercised within the specified time period, it will become worthless and a fund will lose the purchase price it paid for the right or warrant and the right to purchase the underlying security.

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.

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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Notes

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Schwab ETFs™ are designed to be low-cost, diversified investments which follow broad market indices and provide exposure to specific segments of the market. These ETFs can serve as part of the foundation of a diversified 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 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 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.
© 2016 Charles Schwab Investment Management, Inc. All rights reserved.
Printed on recycled paper.

MFR54790-06
00162646

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Semiannual report dated February 29, 2016, enclosed.

Schwab U.S. Equity 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™

This wrapper is not part of the shareholder report.

Schwab U.S. Equity ETFs

Semiannual Report

February 29, 2016

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

This page is intentionally left blank.

In This Report

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

Distributor: SEI Investments Distribution Co. (SIDCO)

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Performance at a Glance

Total Returns for the 6 Months Ended February 29, 2016
Schwab U.S. Broad Market ETF (Ticker Symbol: SCHB)
Market Price Return¹	-2.75%
NAV Return¹	-2.69%
Dow Jones U.S. Broad Stock Market Index	-2.67%
ETF Category: Morningstar Large Blend²	-1.43%
Performance Details	page 8

Schwab U.S. Large-Cap ETF (Ticker Symbol: SCHX)
Market Price Return¹	-1.98%
NAV Return¹	-1.90%
Dow Jones U.S. Large-Cap Total Stock Market Index	-1.86%
ETF Category: Morningstar Large Blend²	-1.43%
Performance Details	page 9

Schwab U.S. Large-Cap Growth ETF (Ticker Symbol: SCHG)
Market Price Return¹	-4.80%
NAV Return¹	-4.76%
Dow Jones U.S. Large-Cap Growth Total Stock Market Index	-4.77%
ETF Category: Morningstar Large Growth²	-4.27%
Performance Details	page 10

Schwab U.S. Large-Cap Value ETF (Ticker Symbol: SCHV)
Market Price Return¹	0.83%
NAV Return¹	0.95%
Dow Jones U.S. Large-Cap Value Total Stock Market Index	1.03%
ETF Category: Morningstar Large Value²	0.71%
Performance Details	page 11

Total Returns for the 6 Months Ended February 29, 2016
Schwab U.S. Mid-Cap ETF (Ticker Symbol: SCHM)
Market Price Return¹	-6.74%
NAV Return¹	-6.69%
Dow Jones U.S. Mid-Cap Total Stock Market Index	-6.71%
ETF Category: Morningstar Mid-Cap Blend²	-7.04%
Performance Details	page 12

Schwab U.S. Small-Cap ETF (Ticker Symbol: SCHA)
Market Price Return¹	-9.19%
NAV Return¹	-9.14%
Dow Jones U.S. Small-Cap Total Stock Market Index	-9.14%
ETF Category: Morningstar Small Blend²	-8.19%
Performance Details	page 13

Schwab U.S. Dividend Equity ETF (Ticker Symbol: SCHD)
Market Price Return¹	5.58%
NAV Return¹	5.66%
Dow Jones U.S. Dividend 100^TM Index	5.73%
ETF Category: Morningstar Large Value²	0.71%
Performance Details	page 14

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 Indices are products of S& P Dow Jones Indices LLC and/or its affiliates, and have been licensed for use by CSIM. The Schwab U.S. Equity ETFs, based on their respective Dow Jones Indices are 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 products.

ETF performance must be shown based on both a market price and NAV basis. The fund’s per share 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. Equity ETFs

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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,

The past six months have been a challenging period for equities across all asset classes and geographies. Volatility was a consistent theme for much of the period, both in the U.S. and abroad. For instance, the difference between the high and low points over the six-month reporting period for the S&P 500^® Index was more than 10%, and the swings have been more pronounced for select markets outside the U.S.

What’s notable about the increase in volatility over the reporting period is the variety of factors behind it. China’s slowing economy and its impact on global trade, the Federal Reserve’s long-awaited decision to begin raising short-term interest rates, and the sharp decline in oil prices are but a few of the factors that have triggered this volatility.

Dramatic moves in the market can prompt investors to question their strategy and second-guess their commitment to staying invested in stocks. But research shows that over virtually all periods of time, investors who take the long view—and stay invested in the market—have seen positive long-term results. Timing the market, trying to move in or out of investments based on predictions of where the market will move, is difficult for even the most seasoned professionals. And, moving in and out of the stock market means that you could miss out on some of the best days, which can exact a toll on returns.

Asset Class Performance Comparison % returns during the six months ended 2/29/2016

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. Equity ETFs3

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From the President continued

One of the most important steps you can take to help manage the risk of volatile markets is to ensure your portfolio is diversified.

One of the most important steps you can take to help manage the risk of volatile markets is to ensure your portfolio is diversified. At Charles Schwab Investment Management, our goal is to provide foundational products with consistent performance that enable investors to build diversified portfolios. We believe that the Schwab U.S. Equity ETFs help fulfill this role by giving investors exposure to a varied selection of domestic stocks.

At Charles Schwab Investment Management, we offer a variety of equity ETFs that are designed to track their respective indices and for the six-month reporting period, the performances of the Schwab U.S. Equity ETFs were generally aligned with their indices. While most stock markets felt the negative impacts of increased volatility during this time, certain equity classes—including U.S. dividend-paying stocks and U.S. large-cap value stocks—bucked this trend and delivered positive performances.

Our ETFs are also available at some of the lowest operating expense ratios in the industry. We recognize that investor dollars that go toward paying fees are dollars that aren’t being invested and enjoying the benefits of compounding over time. That’s why we are committed to providing our clients with low-cost funds that help their dollars to go further.

Thank you for investing with Charles Schwab Investment Management, and for trusting us to help you achieve your financial goals. For more information about the Schwab U.S. Equity ETFs, please continue reading this report or visit our website at www.csimfunds.com. We are also happy to hear from you at 1-800-435-4000.

Sincerely,

4Schwab U.S. Equity ETFs

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The Investment Environment

The S&P 500^® Index, a bellwether for the overall U.S. stock market, returned -0.92%, while the Dow Jones U.S. Mid-Cap Total Stock Market Index and the Dow Jones U.S. Small-Cap Total Stock Market Index returned -6.71% and -9.14%, respectively. Outside the U.S., the MSCI EAFE Index (Net), a broad measure of developed international equity performance, returned -9.48%, while the MSCI Emerging Markets (Net) Index returned -9.71%. For the six-month reporting period, the Schwab U.S. Equity ETFs tracked their respective indices, though most generated negative returns. The Schwab U.S. Dividend Equity ETF and the Schwab U.S. Large-Cap Value ETF were the exceptions, with returns of 5.58% and 0.83%, respectively.

While the U.S. took additional steps toward a tighter monetary policy, many other central banks took the opposite approach and increased their accommodative policy measures. The People’s Bank of China lowered its interest rate twice during the reporting period, while the Bank of Japan (the BOJ) cut short-term interest rates to below 0.00%. Both the BOJ and the European Central Bank (the ECB) expanded their quantitative easing programs, and many central banks, including the ECB, maintained interest rates at or near 0.00%. These differences between the Fed and central banks outside the U.S. highlighted the ongoing divergence in monetary policies, and also supported a strong U.S. dollar and contributed to increased volatility in both currencies and stocks.

For index definitions, please see the Glossary.

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. Equity ETFs5

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The Investment Environment continued

Low and volatile oil and commodity prices weighed most heavily on the Energy and Financial sectors. Fears that falling prices would disrupt the high-yield corporate credit market were reflected in the downward movement of stocks in these sectors. Many financial institutions were also negatively affected by oil and commodity price fluctuations, as credit spreads widened and losses from loans to energy firms weighed on returns. On the opposite side of the spectrum, the Utilities and the Telecommunication Services sectors outperformed, as these sectors are generally less susceptible to market volatility.

6Schwab U.S. Equity ETFs

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Fund Management

Schwab U.S. Equity ETFs7

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Schwab U.S. Broad Market ETF

Performance and Fund Facts as of 02/29/16

Average Annual Total Returns¹

Fund and Inception Date	6 Months	1 Year	5 Years	Since Inception*
Fund: Schwab U.S. Broad Market ETF (11/3/09)
Market Price Return²	-2.75%	-7.93%	9.61%	12.62%
NAV Return²	-2.69%	-7.91%	9.64%	12.63%
Dow Jones U.S. Broad Stock Market Index	-2.67%	-7.86%	9.60%	12.66%
ETF Category: Morningstar Large Blend³	-1.43%	-7.13%	9.65%	12.18%

Fund Expense Ratio⁴: 0.03%

Statistics
Number of Holdings	2,079
Weighted Average Market Cap (millions)	$108,717
Price/Earnings Ratio (P/E)	23.8
Price/Book Ratio (P/B)	2.4
Portfolio Turnover Rate^5,6	4%

Sector Weightings % of Investments
Information Technology	19.6%
Financials	17.3%
Health Care	14.1%
Consumer Discretionary	13.6%
Industrials	10.7%
Consumer Staples	9.4%
Energy	5.9%
Utilities	3.5%
Materials	3.1%
Telecommunication Services	2.5%
Other	0.3%
Total	100.0%

Top Equity Holdings % of Net Assets⁷
Apple, Inc.	2.6%
Microsoft Corp.	2.0%
Exxon Mobil Corp.	1.6%
Johnson & Johnson	1.4%
General Electric Co.	1.3%
Berkshire Hathaway, Inc., Class B	1.2%
Facebook, Inc., Class A	1.2%
AT&T, Inc.	1.1%
Wells Fargo & Co.	1.1%
The Procter & Gamble Co.	1.1%
Total	14.6%

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 — Dow Jones^® is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones). The Dow Jones U.S. Broad Stock Market Index is a product of S&P Dow Jones Indices LLC and/or its affiliates, and has been licensed for use by CSIM. The Schwab U.S. Broad Market 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.

Portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.

*	Inception (11/3/09) 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 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.
⁵	Not annualized.
⁶	Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
⁷	This list is not a recommendation of any security by the investment adviser.

8Schwab U.S. Equity ETFs

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Schwab U.S. Large-Cap ETF

Performance and Fund Facts as of 02/29/16

Average Annual Total Returns¹

Fund and Inception Date	6 Months	1 Year	5 Years	Since Inception*
Fund: Schwab U.S. Large-Cap ETF (11/3/09)
Market Price Return²	-1.98%	-7.08%	9.80%	12.50%
NAV Return²	-1.90%	-7.11%	9.83%	12.51%
Dow Jones U.S. Large-Cap Total Stock Market Index	-1.86%	-7.06%	9.91%	12.60%
ETF Category: Morningstar Large Blend³	-1.43%	-7.13%	9.65%	12.18%

Fund Expense Ratio⁴: 0.03%

Statistics
Number of Holdings	758
Weighted Average Market Cap (millions)	$121,063
Price/Earnings Ratio (P/E)	22.3
Price/Book Ratio (P/B)	2.5
Portfolio Turnover Rate^5,6	3%

Sector Weightings % of Investments
Information Technology	20.1%
Financials	16.1%
Health Care	14.4%
Consumer Discretionary	13.5%
Industrials	10.3%
Consumer Staples	10.1%
Energy	6.2%
Utilities	3.4%
Materials	2.9%
Telecommunication Services	2.7%
Other	0.3%
Total	100.0%

Top Equity Holdings % of Net Assets⁷
Apple, Inc.	2.9%
Microsoft Corp.	2.2%
Exxon Mobil Corp.	1.8%
Johnson & Johnson	1.6%
General Electric Co.	1.5%
Berkshire Hathaway, Inc., Class B	1.4%
Facebook, Inc., Class A	1.3%
AT&T, Inc.	1.2%
Wells Fargo & Co.	1.2%
The Procter & Gamble Co.	1.2%
Total	16.3%

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 — Dow Jones^® is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones). The Dow Jones U.S. Large-Cap Total Stock Market Index is a product of S&P Dow Jones Indices LLC and/or its affiliates, and has been licensed for use by CSIM. The Schwab U.S. Large-Cap 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.

Portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.

*	Inception (11/3/09) 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 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.
⁵	Not annualized.
⁶	Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
⁷	This list is not a recommendation of any security by the investment adviser.

Schwab U.S. Equity ETFs9

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Schwab U.S. Large-Cap Growth ETF

Performance and Fund Facts as of 02/29/16

Average Annual Total Returns¹

Fund and Inception Date	6 Months	1 Year	5 Years	Since Inception*
Fund: Schwab U.S. Large-Cap Growth ETF (12/11/09)
Market Price Return²	-4.80%	-8.63%	10.44%	12.48%
NAV Return²	-4.76%	-8.57%	10.43%	12.49%
Dow Jones U.S. Large-Cap Growth Total Stock Market Index	-4.77%	-8.56%	10.52%	12.60%
ETF Category: Morningstar Large Growth³	-4.27%	-8.12%	11.40%	12.88%

Fund Expense Ratio⁴: 0.06%

Statistics
Number of Holdings	419
Weighted Average Market Cap (millions)	$123,275
Price/Earnings Ratio (P/E)	25.2
Price/Book Ratio (P/B)	3.5
Portfolio Turnover Rate^5,6	6%

Sector Weightings % of Investments
Information Technology	27.7%
Consumer Discretionary	20.1%
Health Care	16.9%
Industrials	11.5%
Financials	11.2%
Consumer Staples	4.7%
Energy	4.0%
Materials	2.6%
Telecommunication Services	0.4%
Utilities	0.1%
Other	0.8%
Total	100.0%

Top Equity Holdings % of Net Assets⁷
Apple, Inc.	6.1%
Berkshire Hathaway, Inc., Class B	2.8%
Facebook, Inc., Class A	2.7%
Amazon.com, Inc.	2.4%
Alphabet, Inc., Class A	2.4%
Alphabet, Inc., Class C	2.3%
The Home Depot, Inc.	1.8%
The Walt Disney Co.	1.6%
Visa, Inc., Class A	1.6%
Comcast Corp., Class A	1.6%
Total	25.3%

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 — Dow Jones^® is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones). The Dow Jones U.S. Large-Cap Growth Total Stock Market Index is a product of S&P Dow Jones Indices LLC and/or its affiliates, and has been licensed for use by CSIM. The Schwab U.S. Large-Cap Growth 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.

Portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.

*	Inception (12/11/09) 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 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.
⁵	Not annualized.
⁶	Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
⁷	This list is not a recommendation of any security by the investment adviser.

10Schwab U.S. Equity ETFs

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Schwab U.S. Large-Cap Value ETF

Performance and Fund Facts as of 02/29/16

Average Annual Total Returns¹

Fund and Inception Date	6 Months	1 Year	5 Years	Since Inception*
Fund: Schwab U.S. Large-Cap Value ETF (12/11/09)
Market Price Return²	0.83%	-5.81%	9.12%	10.78%
NAV Return²	0.95%	-5.70%	9.14%	10.79%
Dow Jones U.S. Large-Cap Value Total Stock Market Index	1.03%	-5.63%	9.27%	10.95%
ETF Category: Morningstar Large Value³	0.71%	-6.20%	9.66%	11.51%

Fund Expense Ratio⁴: 0.06%

Statistics
Number of Holdings	341
Weighted Average Market Cap (millions)	$118,979
Price/Earnings Ratio (P/E)	20.3
Price/Book Ratio (P/B)	2.0
Portfolio Turnover Rate^5,6	5%

Sector Weightings % of Investments
Financials	20.3%
Consumer Staples	15.2%
Information Technology	12.8%
Health Care	11.8%
Industrials	9.5%
Energy	8.2%
Consumer Discretionary	7.3%
Utilities	6.5%
Telecommunication Services	4.8%
Materials	3.2%
Other	0.4%
Total	100.0%

Top Equity Holdings % of Net Assets⁷
Microsoft Corp.	4.3%
Exxon Mobil Corp.	3.5%
Johnson & Johnson	3.1%
General Electric Co.	2.9%
AT&T, Inc.	2.4%
Wells Fargo & Co.	2.3%
The Procter & Gamble Co.	2.3%
JPMorgan Chase & Co.	2.2%
Verizon Communications, Inc.	2.2%
Pfizer, Inc.	1.9%
Total	27.1%

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 — Dow Jones^® is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones). The Dow Jones U.S. Large-Cap Value Total Stock Market Index is a product of S&P Dow Jones Indices LLC and/or its affiliates, and has been licensed for use by CSIM. The Schwab U.S. Large-Cap Value 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.

Portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.

*	Inception (12/11/09) 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 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.
⁵	Not annualized.
⁶	Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
⁷	This list is not a recommendation of any security by the investment adviser.

Schwab U.S. Equity ETFs11

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Schwab U.S. Mid-Cap ETF

Performance and Fund Facts as of 02/29/16

Average Annual Total Returns¹

Fund and Inception Date	6 Months	1 Year	5 Years	Since Inception*
Fund: Schwab U.S. Mid-Cap ETF (1/13/11)
Market Price Return²	-6.74%	-10.65%	9.00%	9.72%
NAV Return²	-6.69%	-10.66%	8.99%	9.71%
Dow Jones U.S. Mid-Cap Total Stock Market Index	-6.71%	-10.67%	9.04%	9.77%
ETF Category: Morningstar Mid-Cap Blend³	-7.04%	-12.99%	7.70%	8.52%

Fund Expense Ratio⁴: 0.07%

Statistics
Number of Holdings	504
Weighted Average Market Cap (millions)	$5,906
Price/Earnings Ratio (P/E)	34.1
Price/Book Ratio (P/B)	2.1
Portfolio Turnover Rate^5,6	18%

Sector Weightings % of Investments
Financials	25.4%
Industrials	15.5%
Consumer Discretionary	14.7%
Information Technology	13.6%
Health Care	9.3%
Utilities	6.6%
Materials	5.4%
Energy	3.9%
Consumer Staples	2.8%
Telecommunication Services	0.5%
Other	2.3%
Total	100.0%

Top Equity Holdings % of Net Assets⁷
Willis Towers Watson plc	0.7%
Realty Income Corp.	0.7%
American Water Works Co., Inc.	0.5%
Mattel, Inc.	0.5%
CMS Energy Corp.	0.5%
KLA-Tencor Corp.	0.5%
Ulta Salon, Cosmetics & Fragrance, Inc.	0.5%
Federal Realty Investment Trust	0.5%
Extra Space Storage, Inc.	0.5%
Harris Corp.	0.4%
Total	5.3%

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 — Dow Jones^® is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones). The Dow Jones U.S. Mid-Cap Total Stock Market Index is a product of S&P Dow Jones Indices LLC and/or its affiliates, and has been licensed for use by CSIM. The Schwab U.S. Mid-Cap 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.

Portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.

*	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 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.
⁵	Not annualized.
⁶	Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
⁷	This list is not a recommendation of any security by the investment adviser.

12Schwab U.S. Equity ETFs

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Schwab U.S. Small-Cap ETF

Performance and Fund Facts as of 02/29/16

Average Annual Total Returns¹

Fund and Inception Date	6 Months	1 Year	5 Years	Since Inception*
Fund: Schwab U.S. Small-Cap ETF (11/3/09)
Market Price Return²	-9.19%	-14.19%	7.31%	13.04%
NAV Return²	-9.14%	-14.12%	7.34%	13.05%
Dow Jones U.S. Small-Cap Total Stock Market Index	-9.14%	-14.14%	7.32%	13.10%
ETF Category: Morningstar Small Blend³	-8.19%	-13.54%	6.88%	12.28%

Fund Expense Ratio⁴: 0.08%

Statistics
Number of Holdings	1,745
Weighted Average Market Cap (millions)	$2,414
Price/Earnings Ratio (P/E)	77.2
Price/Book Ratio (P/B)	1.8
Portfolio Turnover Rate^5,6	8%

Sector Weightings % of Investments
Financials	26.0%
Information Technology	16.1%
Consumer Discretionary	13.5%
Industrials	13.1%
Health Care	11.8%
Materials	4.8%
Utilities	3.7%
Energy	3.5%
Consumer Staples	3.2%
Telecommunication Services	0.7%
Other	3.6%
Total	100.0%

Top Equity Holdings % of Net Assets⁷
Huntington Ingalls Industries, Inc.	0.3%
Teleflex, Inc.	0.3%
Equity LifeStyle Properties, Inc.	0.3%
Ingram Micro, Inc., Class A	0.3%
STERIS plc	0.3%
Diamondback Energy, Inc.	0.2%
Lennox International, Inc.	0.2%
CBOE Holdings, Inc.	0.2%
ServiceMaster Global Holdings, Inc.	0.2%
CubeSmart	0.2%
Total	2.5%

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.

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

Index ownership — Dow Jones^® is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones). The Dow Jones U.S. Small-Cap Total Stock Market Index is a product of S&P Dow Jones Indices LLC and/or its affiliates, and has been licensed for use by CSIM. The Schwab U.S. Small-Cap 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.

Portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.

*	Inception (11/3/09) 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 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.
⁵	Not annualized.
⁶	Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
⁷	This list is not a recommendation of any security by the investment adviser.

Schwab U.S. Equity ETFs13

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Schwab U.S. Dividend Equity ETF

Performance and Fund Facts as of 02/29/16

Average Annual Total Returns¹

Fund and Inception Date	6 Months	1 Year	3 Years	Since Inception*
Fund: Schwab U.S. Dividend Equity ETF (10/20/11)
Market Price Return²	5.58%	-3.75%	10.56%	13.16%
NAV Return²	5.66%	-3.60%	10.56%	13.18%
Dow Jones U.S. Dividend 100 Index	5.73%	-3.51%	10.67%	13.33%
ETF Category: Morningstar Large Value³	0.71%	-6.20%	9.48%	12.79%

Fund Expense Ratio⁴: 0.07%

Statistics
Number of Holdings	101
Weighted Average Market Cap (millions)	$140,505
Price/Earnings Ratio (P/E)	19.9
Price/Book Ratio (P/B)	3.7
Portfolio Turnover Rate^5,6	4%

Sector Weightings % of Investments
Consumer Staples	24.0%
Information Technology	18.3%
Industrials	13.9%
Health Care	11.4%
Energy	11.1%
Consumer Discretionary	10.2%
Telecommunication Services	5.0%
Materials	3.2%
Financials	1.8%
Utilities	0.7%
Other	0.4%
Total	100.0%

Top Equity Holdings % of Net Assets⁷
Verizon Communications, Inc.	5.0%
Exxon Mobil Corp.	4.8%
The Procter & Gamble Co.	4.7%
Johnson & Johnson	4.7%
Microsoft Corp.	4.2%
Pfizer, Inc.	4.2%
The Coca-Cola Co.	4.1%
The Home Depot, Inc.	3.8%
Chevron Corp.	3.8%
PepsiCo, Inc.	3.5%
Total	42.8%

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 — Dow Jones^® is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones). The Dow Jones U.S. Dividend 100 Index is a product of S&P Dow Jones Indices LLC and/or its affiliates, and has been licensed for use by CSIM. The Schwab U.S. Dividend Equity 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.

Portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.

*	Inception (10/20/11) 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 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.
⁵	Not annualized.
⁶	Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
⁷	This list is not a recommendation of any security by the investment adviser.

14Schwab U.S. Equity ETFs

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Fund Expenses (Unaudited)

Examples for a $1,000 Investment

	Expense Ratio¹ (Annualized)	Beginning Account Value at 9/1/15	Ending Account Value (Net of Expenses) at 2/29/16	Expenses Paid During Period² 9/1/15–2/29/16
Schwab U.S. Broad Market ETF
Actual Return	0.03%	$1,000.00	$ 973.10	$ 0.15
Hypothetical 5% Return	0.03%	$1,000.00	$ 1,024.75	$ 0.15
Schwab U.S. Large-Cap ETF
Actual Return	0.03%	$1,000.00	$ 981.00	$ 0.15
Hypothetical 5% Return	0.03%	$1,000.00	$ 1,024.75	$ 0.15
Schwab U.S. Large-Cap Growth ETF
Actual Return	0.06%	$1,000.00	$ 952.40	$ 0.29
Hypothetical 5% Return	0.06%	$1,000.00	$1,024.60	$0.30
Schwab U.S. Large-Cap Value ETF
Actual Return	0.06%	$1,000.00	$1,009.50	$0.30
Hypothetical 5% Return	0.06%	$1,000.00	$1,024.60	$0.30
Schwab U.S. Mid-Cap ETF
Actual Return	0.07%	$1,000.00	$ 933.10	$ 0.34
Hypothetical 5% Return	0.07%	$1,000.00	$ 1,024.55	$ 0.35
Schwab U.S. Small-Cap ETF
Actual Return	0.08%	$1,000.00	$ 908.60	$0.38
Hypothetical 5% Return	0.08%	$1,000.00	$ 1,024.50	$0.40
Schwab U.S. Dividend Equity ETF
Actual Return	0.07%	$1,000.00	$1,056.60	$0.36
Hypothetical 5% Return	0.07%	$1,000.00	$ 1,024.55	$ 0.35

¹	Based on the most recent six-month expense ratio; may differ from the expense ratio provided in the Financial Highlights.
²	Expenses for each fund are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by the 182 days of the period, and divided by the 366 days of the fiscal year.

Schwab U.S. Equity ETFs15

Table of Contents

Schwab U.S. Broad Market ETF

Financial Statements

Financial Highlights

	9/1/15– 2/29/16*	9/1/14– 8/31/15	9/1/13– 8/31/14	9/1/12– 8/31/13	9/1/11– 8/31/12	9/1/10– 8/31/11
Per-Share Data
Net asset value at beginning of period	$48.02	$48.75	$39.79	$33.84	$29.47	$25.11
Income (loss) from investment operations:
Net investment income (loss)¹	0.52	0.99	0.85	0.80	0.65	0.56
Net realized and unrealized gains (losses)	(1.79)	(0.79)	8.93	5.92	4.32	4.32
Total from investment operations	(1.27)	0.20	9.78	6.72	4.97	4.88
Less distributions:
Distributions from net investment income	(0.49)	(0.93)	(0.82)	(0.77)	(0.60)	(0.52)
Net asset value at end of period	$46.26	$48.02	$48.75	$39.79	$33.84	$29.47
Total return	(2.69%) ²	0.33%	24.77%	20.12%	17.07%	19.41%
Ratios/Supplemental Data
Ratios to average net assets:
Total expenses	0.04% ³^,⁴	0.04%	0.04%	0.04%	0.06%	0.06%
Net investment income (loss)	2.20% ⁴	1.98%	1.90%	2.15%	2.06%	1.83%
Portfolio turnover rate⁵	4%	3%	4%	4%	5%	3%
Net assets, end of period (x 1,000)	$5,371,314	$4,919,185	$3,654,037	$2,182,671	$1,072,825	$742,651

*	Unaudited.

Calculated based on the average shares outstanding during the period.

Not annualized.

Effective November 17, 2015, the annual operating expense ratio was reduced. The ratio presented for the period ended 2/29/16 is a blended ratio. (See financial note 4)

⁴

Annualized (except for proxy costs).

⁵

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

16 See financial notes

Table of Contents

Schwab U.S. Broad Market ETF

Condensed Portfolio Holdings as of February 29, 2016 (Unaudited)

Holdings by Category		Cost ($)	Value ($)
99.7%	Common Stock	5,022,714,192	5,357,420,570
0.0%	Rights	61,021	57,797
0.9%	Other Investment Companies	46,452,239	46,452,239
100.6%	Total Investments	5,069,227,452	5,403,930,606
(0.6%)	Other Assets and Liabilities, Net		(32,616,712)
100.0%	Net Assets		5,371,313,894

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 99.7% of net assets
Automobiles & Components 1.1%
Other Securities		1.1	56,924,363
Banks 5.5%
Bank of America Corp.	2,702,052	0.6	33,829,691
Citigroup, Inc.	774,183	0.6	30,077,010
JPMorgan Chase & Co.	961,905	1.0	54,155,251
Wells Fargo & Co.	1,225,409	1.1	57,496,190
Other Securities		2.2	117,281,958
		5.5	292,840,100
Capital Goods 7.5%
3M Co.	161,661	0.5	25,359,761
General Electric Co.	2,470,326	1.3	71,985,300
Honeywell International, Inc.	200,774	0.4	20,348,445
Other Securities		5.3	284,523,793
		7.5	402,217,299
Commercial & Professional Services 1.1%
Other Securities		1.1	57,454,612
Consumer Durables & Apparel 1.7%
NIKE, Inc., Class B	350,320	0.4	21,576,209
Other Securities		1.3	71,031,480
		1.7	92,607,689

Security	Number of Shares	% of Net Assets	Value ($)
Consumer Services 2.4%
McDonald's Corp.	239,724	0.5	28,093,256
Starbucks Corp.	386,884	0.4	22,520,518
Other Securities		1.5	78,677,097
		2.4	129,290,871
Diversified Financials 4.5%
Berkshire Hathaway, Inc., Class B *	491,912	1.2	65,999,833
The Charles Schwab Corp. (b)	306,879	0.1	7,687,319
Other Securities		3.2	165,806,850
		4.5	239,494,002
Energy 5.9%
Chevron Corp.	491,999	0.8	41,052,397
Exxon Mobil Corp.	1,088,585	1.6	87,250,088
Schlumberger Ltd.	326,780	0.4	23,436,662
Other Securities		3.1	165,381,466
		5.9	317,120,613
Food & Staples Retailing 2.2%
CVS Health Corp.	288,205	0.5	28,004,880
Wal-Mart Stores, Inc.	411,058	0.5	27,269,588
Other Securities		1.2	60,994,763
		2.2	116,269,231
Food, Beverage & Tobacco 5.3%
Altria Group, Inc.	513,456	0.6	31,613,486
PepsiCo, Inc.	379,745	0.7	37,146,656
Philip Morris International, Inc.	405,843	0.7	36,943,888
The Coca-Cola Co.	1,023,440	0.8	44,140,967
Other Securities		2.5	135,881,727
		5.3	285,726,724
Health Care Equipment & Services 5.2%
Medtronic plc	367,512	0.5	28,441,754
UnitedHealth Group, Inc.	250,347	0.6	29,816,328
Other Securities		4.1	219,738,511
		5.2	277,996,593
Household & Personal Products 1.9%
The Procter & Gamble Co.	710,993	1.1	57,085,628
Other Securities		0.8	47,270,930
		1.9	104,356,558
Insurance 3.0%
Other Securities		3.0	160,917,623
Materials 3.1%
Other Securities		3.1	167,154,191
Media 3.2%
Comcast Corp., Class A	640,035	0.7	36,949,221
The Walt Disney Co.	399,876	0.7	38,196,156
Other Securities		1.8	98,140,973
		3.2	173,286,350

See financial notes 17

Table of Contents

Schwab U.S. Broad Market ETF

Condensed Portfolio Holdings (Unaudited) continued

Security	Number of Shares	% of Net Assets	Value ($)
Pharmaceuticals, Biotechnology & Life Sciences 8.9%
AbbVie, Inc.	426,149	0.4	23,271,997
Allergan plc *	103,983	0.6	30,166,508
Amgen, Inc.	196,442	0.5	27,949,768
Bristol-Myers Squibb Co.	437,436	0.5	27,090,411
Celgene Corp. *	204,810	0.4	20,650,992
Gilead Sciences, Inc.	376,591	0.6	32,857,565
Johnson & Johnson	723,796	1.4	76,150,577
Merck & Co., Inc.	727,472	0.7	36,526,369
Pfizer, Inc.	1,618,747	0.9	48,028,223
Other Securities		2.9	156,953,947
		8.9	479,646,357
Real Estate 4.3%
Other Securities		4.3	232,997,622
Retailing 5.2%
Amazon.com, Inc. *	100,463	1.0	55,507,817
The Home Depot, Inc.	329,977	0.8	40,956,745
Other Securities		3.4	180,919,535
		5.2	277,384,097
Semiconductors & Semiconductor Equipment 2.6%
Intel Corp.	1,233,586	0.7	36,501,810
Other Securities		1.9	105,687,942
		2.6	142,189,752
Software & Services 11.8%
Alphabet, Inc., Class A *	76,425	1.0	54,813,538
Alphabet, Inc., Class C *	77,707	1.0	54,221,613
Facebook, Inc., Class A *	593,059	1.2	63,409,868
International Business Machines Corp.	233,148	0.6	30,549,382
MasterCard, Inc., Class A	256,206	0.4	22,269,426
Microsoft Corp.	2,086,003	2.0	106,135,833
Oracle Corp.	834,520	0.6	30,693,646
Visa, Inc., Class A	510,883	0.7	36,982,820
Other Securities		4.3	237,018,965
		11.8	636,095,091
Technology Hardware & Equipment 5.2%
Apple, Inc.	1,457,918	2.6	140,966,091
Cisco Systems, Inc.	1,314,802	0.6	34,421,516
Other Securities		2.0	105,417,253
		5.2	280,804,860
Telecommunication Services 2.5%
AT&T, Inc.	1,608,983	1.1	59,451,922
Verizon Communications, Inc.	1,067,516	1.0	54,155,087
Other Securities		0.4	20,459,306
		2.5	134,066,315
Transportation 2.1%
Other Securities		2.1	113,727,860

Security	Number of Shares	% of Net Assets	Value ($)
Utilities 3.5%
Other Securities		3.5	186,851,797
Total Common Stock
(Cost $5,022,714,192)			5,357,420,570

Rights 0.0% of net assets
Pharmaceuticals, Biotechnology & Life Sciences 0.0%
Other Securities		0.0	39,530
Telecommunication Services 0.0%
Other Securities		0.0	18,267
Total Rights
(Cost $61,021)			57,797

Other Investment Companies 0.9% of net assets
Money Market Fund 0.0%
Other Securities		0.0	1,520,608
Securities Lending Collateral 0.9%
Wells Fargo Advantage Government Money Market Fund, Institutional Class 0.16% (e)		0.9	44,931,631
Total Other Investment Companies
(Cost $46,452,239)			46,452,239

End of Investments.

At 02/29/16, the tax basis cost of the fund's investments was $5,071,222,412 and the unrealized appreciation and depreciation were $664,931,003 and ($332,222,809), respectively, with a net unrealized appreciation of $332,708,194.

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

*	Non-income producing security.
(a)	All or a portion of this security is on loan. Securities on loan were valued at $43,220,108.
(b)	Issuer is affiliated with the fund's investment adviser.
(c)	Illiquid security. At the period end, the value of these amounted to $57,797 or 0.0% of net assets.
(d)	Fair-valued by management in accordance with procedures approved by the Board of Trustees.
(e)	The rate shown is the 7-day yield.

CVR —	Contingent Value Rights
REIT —	Real Estate Investment Trust

18 See financial notes

Table of Contents

Schwab U.S. Broad Market ETF

Condensed Portfolio Holdings (Unaudited) continued

In addition to the above, the fund held the following at 02/29/16:

	Number of Contracts	Contract Value ($)	Unrealized Appreciation ($)
Futures Contracts
S&P 500 Index, e-mini, Long, expires 03/18/16	100	9,647,500	233,182

The following is a summary of the inputs used to value the fund’s investments as of February 29, 2016 (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	$4,793,697,253	$—	$—	$4,793,697,253
Food, Beverage & Tobacco	285,374,717	—	352,007	285,726,724
Health Care Equipment & Services	276,445,517	—	1,551,076	277,996,593
Rights ¹	—	—	57,797	57,797
Other Investment Companies¹	46,452,239	—	—	46,452,239
Total	$5,401,969,726	$—	$1,960,880	$5,403,930,606
Other Financial Instruments
Futures Contracts²	$233,182	$—	$—	$233,182

¹	As categorized in the complete schedule of portfolio holdings.
²	Futures contracts are not included in Investments in the schedule of condensed 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 August 31, 2015	Realized Gains (Losses)	Change in Unrealized Appreciation (Depreciation)	Gross Purchases	Gross Sales	Gross Transfers in	Gross Transfers out	Balance as of February 29, 2016
Common Stock	$—	$36,790	$216,442	$296,671	($74,542)	$1,427,722	$—	$1,903,083
Rights	21,491	—	(3,224)	39,530	—	—	—	57,797
Total	$21,491	$36,790	$213,218	$336,201	($74,542)	$1,427,722	$—	$1,960,880

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 29, 2016 was $244,784.

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 security 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 Level 1 and Level 2 for the period ended February 29, 2016.

See financial notes 19

Table of Contents

Schwab U.S. Broad Market ETF

Statement of

Assets and Liabilities

As of February 29, 2016; unaudited

Assets
Investments in affiliated issuers, at value (cost $7,740,028)		$7,687,319
Investments in unaffiliated issuers, at value (cost $5,016,555,793) including securities on loan of $43,220,108		5,351,311,656
Collateral invested for securities on loan, at value (cost $44,931,631)	+	44,931,631
Total investments, at value (cost $5,069,227,452)		5,403,930,606
Deposit with broker for futures contracts		475,000
Receivables:
Investments sold		36,057
Dividends		11,909,138
Income from securities on loan		107,236
Interest	+	1,213
Total assets		5,416,459,250
Liabilities
Collateral held for securities on loan		44,931,631
Payables:
Investment adviser fees		30,983
Variation margin on futures contracts		66,000
Accrued expenses	+	116,742
Total liabilities		45,145,356
Net Assets
Total assets		5,416,459,250
Total liabilities	–	45,145,356
Net assets		$5,371,313,894
Net Assets by Source
Capital received from investors		4,952,306,393
Net investment income not yet distributed		20,331,957
Net realized capital gains		63,739,208
Net unrealized capital appreciation		334,936,336

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$5,371,313,894		116,100,000		$46.26

20 See financial notes

Table of Contents

Schwab U.S. Broad Market ETF

Statement of

Operations

For the period September 1, 2015 through February 29, 2016; unaudited

Investment Income
Dividends received from affiliated issuer		$34,770
Dividends received from unaffiliated issuers (net of foreign withholding tax of $2,925)		57,589,432
Interest		4,260
Securities on loan	+	485,672
Total investment income		58,114,134
Expenses
Investment adviser fees		884,737
Proxy fees	+	118,023
Total expenses	–	1,002,760
Net investment income		57,111,374
Realized and Unrealized Gains (Losses)
Net realized losses on investments		(25,945,667)
Net realized gains on in-kind redemptions on affiliated issuer		168,954
Net realized gains on in-kind redemptions on unaffiliated investments		92,358,217
Net realized losses on futures contracts	+	(2,251,720)
Net realized gains		64,329,784
Net change in unrealized appreciation (depreciation) on affiliated issuer		(1,890,857)
Net change in unrealized appreciation (depreciation) on unaffiliated investments		(294,011,160)
Net change in unrealized appreciation (depreciation) on futures contracts	+	230,624
Net change in unrealized appreciation (depreciation)	+	(295,671,393)
Net realized and unrealized losses		(231,341,609)
Decrease in net assets resulting from operations		($174,230,235)

See financial notes 21

Table of Contents

Schwab U.S. Broad Market ETF

Statement of

Changes in Net Assets

For the current and prior report periods

Figures for the current period are unaudited

Operations
	9/1/15-2/29/16		9/1/14-8/31/15
Net investment income		$57,111,374	$91,149,398
Net realized gains		64,329,784	135,416,374
Net change in unrealized appreciation (depreciation)	+	(295,671,393)	(225,084,179)
Increase (decrease) in net assets resulting from operations		(174,230,235)	1,481,593
Distributions to Shareholders
Distributions from net investment income		($52,317,065)	($84,285,250)

Transactions in Fund Shares
		9/1/15-2/29/16		9/1/14-8/31/15
		SHARES	VALUE	SHARES	VALUE
Shares sold		19,950,000	$968,314,594	33,800,000	$1,665,831,746
Shares redeemed	+	(6,300,000)	(289,638,437)	(6,300,000)	(317,879,850)
Net transactions in fund shares		13,650,000	$678,676,157	27,500,000	$1,347,951,896
Shares Outstanding and Net Assets
		9/1/15-2/29/16		9/1/14-8/31/15
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		102,450,000	$4,919,185,037	74,950,000	$3,654,036,798
Total increase	+	13,650,000	452,128,857	27,500,000	1,265,148,239
End of period		116,100,000	$5,371,313,894	102,450,000	$4,919,185,037
Net investment income not yet distributed			$20,331,957		$15,537,648

22 See financial notes

Table of Contents

Schwab U.S. Large-Cap ETF

Financial Statements

Financial Highlights

	9/1/15– 2/29/16*	9/1/14– 8/31/15	9/1/13– 8/31/14	9/1/12– 8/31/13	9/1/11– 8/31/12	9/1/10– 8/31/11
Per-Share Data
Net asset value at beginning of period	$47.30	$47.99	$39.06	$33.49	$29.11	$24.98
Income (loss) from investment operations:
Net investment income (loss)	0.52 ¹	1.01 ¹	0.83	0.77	0.64	0.53
Net realized and unrealized gains (losses)	(1.40)	(0.77)	8.92	5.56	4.35	4.13
Total from investment operations	(0.88)	0.24	9.75	6.33	4.99	4.66
Less distributions:
Distributions from net investment income	(0.50)	(0.93)	(0.82)	(0.76)	(0.61)	(0.53)
Net asset value at end of period	$45.92	$47.30	$47.99	$39.06	$33.49	$29.11
Total return	(1.90%) ²	0.43%	25.16%	19.17%	17.36%	18.66%
Ratios/Supplemental Data
Ratios to average net assets:
Total expenses	0.04% ³^,⁴	0.04%	0.04%	0.04%	0.08%	0.08%
Net investment income (loss)	2.21% ⁴	2.04%	1.95%	2.18%	2.10%	1.88%
Portfolio turnover rate⁵	3% ²	4%	5%	5%	4%	5%
Net assets, end of period (x 1,000)	$5,106,767	$4,329,918	$3,191,644	$1,781,282	$890,808	$615,781

*	Unaudited.

Calculated based on the average shares outstanding during the period.

Not annualized.

Effective November 12, 2015, the annual operating expense ratio was reduced. The ratio presented for the period ended 2/29/16 is a blended ratio. (See financial note 4)

⁴

Annualized (except for proxy costs).

⁵

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

See financial notes 23

Table of Contents

Schwab U.S. Large-Cap ETF

Condensed Portfolio Holdings as of February 29, 2016 (Unaudited)

Holdings by Category		Cost ($)	Value ($)
99.7%	Common Stock	4,817,090,332	5,090,346,624
0.6%	Other Investment Companies	30,529,687	30,529,687
100.3%	Total Investments	4,847,620,019	5,120,876,311
(0.3%)	Other Assets and Liabilities, Net		(14,109,194)
100.0%	Net Assets		5,106,767,117

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 99.7% of net assets
Automobiles & Components 1.0%
Other Securities		1.0	53,157,344
Banks 5.1%
Bank of America Corp.	2,886,550	0.7	36,139,606
Citigroup, Inc.	829,863	0.6	32,240,178
JPMorgan Chase & Co.	1,022,487	1.1	57,566,018
Wells Fargo & Co.	1,292,513	1.2	60,644,710
Other Securities		1.5	73,545,806
		5.1	260,136,318
Capital Goods 7.3%
3M Co.	170,721	0.5	26,781,003
General Electric Co.	2,618,434	1.5	76,301,167
Honeywell International, Inc.	213,801	0.4	21,668,731
Other Securities		4.9	249,701,171
		7.3	374,452,072
Commercial & Professional Services 0.8%
Other Securities		0.8	41,679,818
Consumer Durables & Apparel 1.6%
NIKE, Inc., Class B	376,713	0.5	23,201,754
Other Securities		1.1	60,011,264
		1.6	83,213,018

Security	Number of Shares	% of Net Assets	Value ($)
Consumer Services 2.2%
McDonald's Corp.	255,120	0.6	29,897,513
Starbucks Corp.	414,073	0.5	24,103,189
Other Securities		1.1	57,293,669
		2.2	111,294,371
Diversified Financials 4.7%
Berkshire Hathaway, Inc., Class B *	522,390	1.4	70,089,066
The Charles Schwab Corp. (b)	332,199	0.2	8,321,585
Other Securities		3.1	160,950,517
		4.7	239,361,168
Energy 6.2%
Chevron Corp.	521,072	0.9	43,478,248
Exxon Mobil Corp.	1,153,864	1.8	92,482,200
Schlumberger Ltd.	350,226	0.5	25,118,209
Other Securities		3.0	153,766,249
		6.2	314,844,906
Food & Staples Retailing 2.3%
CVS Health Corp.	304,715	0.6	29,609,157
Wal-Mart Stores, Inc.	431,856	0.6	28,649,327
Other Securities		1.1	60,202,022
		2.3	118,460,506
Food, Beverage & Tobacco 5.7%
Altria Group, Inc.	544,259	0.7	33,510,027
PepsiCo, Inc.	404,404	0.8	39,558,799
Philip Morris International, Inc.	430,643	0.8	39,201,432
The Coca-Cola Co.	1,086,222	0.9	46,848,755
Other Securities		2.5	133,265,789
		5.7	292,384,802
Health Care Equipment & Services 5.0%
Medtronic plc	389,926	0.6	30,176,373
UnitedHealth Group, Inc.	263,775	0.6	31,415,602
Other Securities		3.8	192,445,349
		5.0	254,037,324
Household & Personal Products 2.1%
The Procter & Gamble Co.	753,717	1.2	60,515,938
Other Securities		0.9	46,653,625
		2.1	107,169,563
Insurance 2.9%
Other Securities		2.9	147,604,813
Materials 2.9%
Other Securities		2.9	148,003,787
Media 3.4%
Comcast Corp., Class A	674,369	0.8	38,931,322
The Walt Disney Co.	421,803	0.8	40,290,623
Other Securities		1.8	93,072,483
		3.4	172,294,428

24 See financial notes

Table of Contents

Schwab U.S. Large-Cap ETF

Condensed Portfolio Holdings (Unaudited) continued

Security	Number of Shares	% of Net Assets	Value ($)
Pharmaceuticals, Biotechnology & Life Sciences 9.4%
AbbVie, Inc.	452,504	0.5	24,711,243
Allergan plc *	109,528	0.6	31,775,168
Amgen, Inc.	208,895	0.6	29,721,581
Bristol-Myers Squibb Co.	462,133	0.6	28,619,897
Celgene Corp. *	216,105	0.4	21,789,867
Gilead Sciences, Inc.	401,108	0.7	34,996,673
Johnson & Johnson	766,689	1.6	80,663,350
Merck & Co., Inc.	775,505	0.8	38,938,106
Pfizer, Inc.	1,714,436	1.0	50,867,316
Other Securities		2.6	135,235,967
		9.4	477,319,168
Real Estate 3.4%
Other Securities		3.4	174,889,213
Retailing 5.3%
Amazon.com, Inc. *	106,764	1.2	58,989,245
The Home Depot, Inc.	353,445	0.9	43,869,593
Other Securities		3.2	167,468,868
		5.3	270,327,706
Semiconductors & Semiconductor Equipment 2.6%
Intel Corp.	1,307,081	0.8	38,676,527
Other Securities		1.8	94,715,386
		2.6	133,391,913
Software & Services 12.3%
Alphabet, Inc., Class A *	80,715	1.1	57,890,412
Alphabet, Inc., Class C *	82,657	1.1	57,675,575
Facebook, Inc., Class A *	630,528	1.3	67,416,054
International Business Machines Corp.	249,660	0.6	32,712,950
MasterCard, Inc., Class A	276,258	0.5	24,012,345
Microsoft Corp.	2,216,028	2.2	112,751,505
Oracle Corp.	884,462	0.6	32,530,512
Visa, Inc., Class A	539,908	0.8	39,083,940
Other Securities		4.1	201,285,051
		12.3	625,358,344
Technology Hardware & Equipment 5.2%
Apple, Inc.	1,545,068	2.9	149,392,625
Cisco Systems, Inc.	1,407,157	0.7	36,839,370
Other Securities		1.6	79,956,304
		5.2	266,188,299
Telecommunication Services 2.7%
AT&T, Inc.	1,703,346	1.2	62,938,635
Verizon Communications, Inc.	1,127,340	1.1	57,189,958
Other Securities		0.4	17,544,922
		2.7	137,673,515

Security	Number of Shares	% of Net Assets	Value ($)
Transportation 2.2%
Other Securities		2.2	111,905,139
Utilities 3.4%
Other Securities		3.4	175,199,089
Total Common Stock
(Cost $4,817,090,332)			5,090,346,624

Other Investment Companies 0.6% of net assets
Money Market Fund 0.1%
Other Securities		0.1	4,224,273
Securities Lending Collateral 0.5%
Wells Fargo Advantage Government Money Market Fund, Institutional Class 0.16% (c)		0.5	26,305,414
Total Other Investment Companies
(Cost $30,529,687)			30,529,687

End of Investments.

At 02/29/16, the tax basis cost of the fund's investments was $4,848,778,893 and the unrealized appreciation and depreciation were $554,090,925 and ($281,993,507), respectively, with a net unrealized appreciation of $272,097,418.

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

*	Non-income producing security.
(a)	All or a portion of this security is on loan. Securities on loan were valued at $25,440,741.
(b)	Issuer is affiliated with the fund's investment adviser.
(c)	The rate shown is the 7-day yield.
(d)	Fair-valued by management in accordance with procedures approved by the Board of Trustees.

In addition to the above, the fund held the following at 02/29/16:

	Number of Contracts	Contract Value ($)	Unrealized Appreciation ($)
Futures Contracts
S&P 500 Index, e-mini, Long, expires 03/18/16	160	15,436,000	468,941

See financial notes 25

Table of Contents

Schwab U.S. Large-Cap ETF

Condensed Portfolio Holdings (Unaudited) continued

The following is a summary of the inputs used to value the fund’s investments as of February 29, 2016 (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	$4,836,309,300	$—	$—	$4,836,309,300
Health Care Equipment & Services	252,281,650	—	1,755,674	254,037,324
Other Investment Companies¹	30,529,687	—	—	30,529,687
Total	$5,119,120,637	$—	$1,755,674	$5,120,876,311
Other Financial Instruments
Futures Contracts²	$468,941	$—	$—	$468,941

¹	As categorized in the complete schedule of portfolio holdings.
²	Futures contracts are not included in Investments in the schedule of condensed 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 August 31, 2015	Realized Gains (Losses)	Change in Unrealized Appreciation (Depreciation)	Gross Purchases	Gross Sales	Gross Transfers in	Gross Transfers out	Balance as of February 29, 2016
Common Stock	$—	$16,164	$199,216	$337,604	($47,741)	$1,250,431	$—	$1,755,674
Total	$—	$16,164	$199,216	$337,604	($47,741)	$1,250,431	$—	$1,755,674

26 See financial notes

Table of Contents

Schwab U.S. Large-Cap ETF

Statement of

Assets and Liabilities

As of February 29, 2016; unaudited

Assets
Investments in affiliated issuers, at value (cost $8,603,027)		$8,321,585
Investments in unaffiliated issuers, at value (cost $4,812,711,578) including securities on loan of $25,440,741		5,086,249,312
Collateral invested for securities on loan, at value (cost $26,305,414)	+	26,305,414
Total investments, at value (cost $4,847,620,019)		5,120,876,311
Deposit with broker for futures contracts		665,000
Receivables:
Investments sold		4,533,934
Dividends		11,806,140
Income from securities on loan		51,890
Interest	+	945
Total assets		5,137,934,220
Liabilities
Collateral held for securities on loan		26,305,414
Payables:
Investment adviser fees		29,410
Fund shares redeemed		4,592,417
Variation margin on futures contracts		117,689
Accrued expenses	+	122,173
Total liabilities		31,167,103
Net Assets
Total assets		5,137,934,220
Total liabilities	–	31,167,103
Net assets		$5,106,767,117
Net Assets by Source
Capital received from investors		4,785,200,069
Net investment income not yet distributed		19,242,409
Net realized capital gains		28,599,406
Net unrealized capital appreciation		273,725,233

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$5,106,767,117		111,200,000		$45.92

See financial notes 27

Table of Contents

Schwab U.S. Large-Cap ETF

Statement of

Operations

For the period September 1, 2015 through February 29, 2016; unaudited

Investment Income
Dividends received from affiliated issuer		$36,618
Dividends received from unaffiliated issuers (net of foreign withholding tax of $1,797)		53,390,764
Interest		2,844
Securities on loan	+	189,784
Total investment income		53,620,010
Expenses
Investment adviser fees		803,934
Proxy fees	+	123,306
Total expenses	–	927,240
Net investment income		52,692,770
Realized and Unrealized Gains (Losses)
Net realized losses on affiliated issuer		(20,561)
Net realized losses on unaffiliated investments		(26,200,117)
Net realized gains on in-kind redemptions on affiliated issuer		115,788
Net realized gains on in-kind redemptions on unaffiliated investments		61,167,098
Net realized losses on futures contracts	+	(1,319,801)
Net realized gains		33,742,407
Net change in unrealized appreciation (depreciation) on affiliated issuer		(1,877,844)
Net change in unrealized appreciation (depreciation) on unaffiliated investments		(195,677,915)
Net change in unrealized appreciation (depreciation) on futures contracts	+	634,067
Net change in unrealized appreciation (depreciation)	+	(196,921,692)
Net realized and unrealized losses		(163,179,285)
Decrease in net assets resulting from operations		($110,486,515)

28 See financial notes

Table of Contents

Schwab U.S. Large-Cap ETF

Statement of

Changes in Net Assets

For the current and prior report periods

Figures for the current period are unaudited

Operations
	9/1/15-2/29/16		9/1/14-8/31/15
Net investment income		$52,692,770	$81,817,643
Net realized gains		33,742,407	138,752,328
Net change in unrealized appreciation (depreciation)	+	(196,921,692)	(244,441,066)
Decrease in net assets resulting from operations		(110,486,515)	(23,871,095)
Distributions to Shareholders
Distributions from net investment income		($48,993,430)	($74,777,650)

Transactions in Fund Shares
		9/1/15-2/29/16		9/1/14-8/31/15
		SHARES	VALUE	SHARES	VALUE
Shares sold		23,300,000	$1,103,929,949	32,300,000	$1,580,631,648
Shares redeemed	+	(3,650,000)	(167,601,049)	(7,250,000)	(343,709,219)
Net transactions in fund shares		19,650,000	$936,328,900	25,050,000	$1,236,922,429
Shares Outstanding and Net Assets
		9/1/15-2/29/16		9/1/14-8/31/15
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		91,550,000	$4,329,918,162	66,500,000	$3,191,644,478
Total increase	+	19,650,000	776,848,955	25,050,000	1,138,273,684
End of period		111,200,000	$5,106,767,117	91,550,000	$4,329,918,162
Net investment income not yet distributed			$19,242,409		$15,543,069

See financial notes 29

Table of Contents

Schwab U.S. Large-Cap Growth ETF

Financial Statements

Financial Highlights

	9/1/15– 2/29/16*	9/1/14– 8/31/15	9/1/13– 8/31/14	9/1/12– 8/31/13	9/1/11– 8/31/12	9/1/10– 8/31/11
Per-Share Data
Net asset value at beginning of period	$51.93	$50.11	$39.60	$34.05	$29.44	$24.21
Income (loss) from investment operations:
Net investment income (loss)	0.30 ¹	0.66 ¹	0.56	0.55	0.36	0.27
Net realized and unrealized gains (losses)	(2.76)	1.79	10.50	5.52	4.59	5.20
Total from investment operations	(2.46)	2.45	11.06	6.07	4.95	5.47
Less distributions:
Distributions from net investment income	(0.29)	(0.63)	(0.55)	(0.52)	(0.34)	(0.24)
Net asset value at end of period	$49.18	$51.93	$50.11	$39.60	$34.05	$29.44
Total return	(4.76%) ²	4.87%	28.11%	18.02%	16.96%	22.57%
Ratios/Supplemental Data
Ratios to average net assets:
Total expenses	0.07% ³^,⁴	0.07%	0.07%	0.07%	0.13%	0.13%
Net investment income (loss)	1.18% ³	1.25%	1.29%	1.55%	1.17%	0.93%
Portfolio turnover rate⁵	6% ²	10%	7%	11%	8%	10%
Net assets, end of period (x 1,000)	$2,399,884	$2,246,101	$1,485,805	$827,613	$475,062	$309,155

*	Unaudited.

Calculated based on the average shares outstanding during the period.

Not annualized.

Annualized (except for proxy costs).

⁴

Effective November 17, 2015, the annual operating expense ratio was reduced. The ratio presented for the period ended 2/29/16 is a blended ratio. (See financial note 4)

⁵

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

30 See financial notes

Table of Contents

Schwab U.S. Large-Cap Growth ETF

Condensed Portfolio Holdings as of February 29, 2016 (Unaudited)

Holdings by Category		Cost ($)	Value ($)
99.8%	Common Stock	2,259,214,126	2,395,350,525
0.8%	Other Investment Companies	18,803,361	18,803,361
100.6%	Total Investments	2,278,017,487	2,414,153,886
(0.6%)	Other Assets and Liabilities, Net		(14,270,281)
100.0%	Net Assets		2,399,883,605

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 99.8% of net assets
Automobiles & Components 0.5%
Other Securities		0.5	11,377,519
Banks 0.3%
Other Securities		0.3	6,619,053
Capital Goods 6.2%
3M Co.	165,778	1.1	26,005,595
Caterpillar, Inc.	157,987	0.4	10,695,720
Danaher Corp.	159,788	0.6	14,264,275
The Boeing Co.	169,832	0.8	20,070,746
Other Securities		3.3	78,810,666
		6.2	149,847,002
Commercial & Professional Services 1.1%
Other Securities		1.1	25,506,630
Consumer Durables & Apparel 2.6%
NIKE, Inc., Class B	362,970	0.9	22,355,322
Other Securities		1.7	40,071,718
		2.6	62,427,040
Consumer Services 2.6%
Starbucks Corp.	400,387	1.0	23,306,527
Other Securities		1.6	37,770,621
		2.6	61,077,148

Security	Number of Shares	% of Net Assets	Value ($)
Diversified Financials 6.5%
American Express Co.	225,842	0.5	12,552,298
Berkshire Hathaway, Inc., Class B *	505,310	2.8	67,797,443
BlackRock, Inc.	33,876	0.4	10,567,957
The Charles Schwab Corp. (b)	323,754	0.3	8,110,038
Other Securities		2.5	57,727,331
		6.5	156,755,067
Energy 4.0%
Schlumberger Ltd.	340,459	1.0	24,417,719
Other Securities		3.0	71,815,540
		4.0	96,233,259
Food & Staples Retailing 2.9%
Costco Wholesale Corp.	117,567	0.7	17,638,577
CVS Health Corp.	298,608	1.2	29,015,739
Walgreens Boots Alliance, Inc.	235,415	0.8	18,583,660
Other Securities		0.2	5,102,189
		2.9	70,340,165
Food, Beverage & Tobacco 1.4%
Other Securities		1.4	33,679,098
Health Care Equipment & Services 7.9%
Express Scripts Holding Co. *	182,365	0.5	12,834,849
Medtronic plc	379,459	1.2	29,366,332
UnitedHealth Group, Inc.	256,479	1.3	30,546,649
Other Securities		4.9	116,931,813
		7.9	189,679,643
Household & Personal Products 0.4%
Other Securities		0.4	10,275,925
Insurance 0.9%
Other Securities		0.9	21,787,214
Materials 2.6%
Monsanto Co.	118,253	0.4	10,641,588
Other Securities		2.2	52,181,046
		2.6	62,822,634
Media 5.0%
Comcast Corp., Class A	657,804	1.6	37,975,025
The Walt Disney Co.	410,403	1.6	39,201,695
Time Warner Cable, Inc.	76,717	0.6	14,642,207
Other Securities		1.2	27,452,967
		5.0	119,271,894
Pharmaceuticals, Biotechnology & Life Sciences 9.1%
Allergan plc *	106,496	1.3	30,895,555
Amgen, Inc.	204,111	1.2	29,040,913
Biogen, Inc. *	59,968	0.6	15,556,899
Celgene Corp. *	211,650	0.9	21,340,669
Gilead Sciences, Inc.	389,376	1.4	33,973,056
Thermo Fisher Scientific, Inc.	107,926	0.6	13,942,960
Other Securities		3.1	73,863,386
		9.1	218,613,438

See financial notes 31

Table of Contents

Schwab U.S. Large-Cap Growth ETF

Condensed Portfolio Holdings (Unaudited) continued

Security	Number of Shares	% of Net Assets	Value ($)
Real Estate 3.9%
Simon Property Group, Inc.	83,664	0.7	15,873,571
Other Securities		3.2	77,452,559
		3.9	93,326,130
Retailing 9.6%
Amazon.com, Inc. *	103,682	2.4	57,286,379
Lowe's Cos., Inc.	246,650	0.7	16,656,274
Netflix, Inc. *	115,783	0.5	10,815,290
The Home Depot, Inc.	342,431	1.8	42,502,536
The Priceline Group, Inc. *	13,445	0.7	17,010,748
The TJX Cos., Inc.	180,202	0.6	13,352,968
Other Securities		2.9	72,930,223
		9.6	230,554,418
Semiconductors & Semiconductor Equipment 2.1%
Broadcom Ltd.	104,575	0.6	14,009,913
QUALCOMM, Inc.	404,182	0.9	20,528,404
Other Securities		0.6	15,749,078
		2.1	50,287,395
Software & Services 18.2%
Accenture plc, Class A	168,023	0.7	16,845,986
Adobe Systems, Inc. *	134,833	0.5	11,481,030
Alphabet, Inc., Class A *	78,702	2.4	56,446,649
Alphabet, Inc., Class C *	80,023	2.3	55,837,649
Facebook, Inc., Class A *	612,651	2.7	65,504,645
MasterCard, Inc., Class A	266,758	1.0	23,186,605
Oracle Corp.	862,037	1.3	31,705,721
PayPal Holdings, Inc. *	300,248	0.5	11,451,459
salesforce.com, Inc. *	167,552	0.5	11,351,648
Visa, Inc., Class A	525,223	1.6	38,020,893
Other Securities		4.7	113,778,857
		18.2	435,611,142
Technology Hardware & Equipment 7.6%
Apple, Inc.	1,504,046	6.1	145,426,208
EMC Corp.	524,993	0.6	13,718,067
Other Securities		0.9	23,537,933
		7.6	182,682,208
Telecommunication Services 0.4%
Other Securities		0.4	9,760,664
Transportation 3.9%
Union Pacific Corp.	230,803	0.8	18,201,125
United Parcel Service, Inc., Class B	188,595	0.8	18,208,847
Other Securities		2.3	57,654,841
		3.9	94,064,813

Security	Number of Shares	% of Net Assets	Value ($)
Utilities 0.1%
Other Securities		0.1	2,751,026
Total Common Stock
(Cost $2,259,214,126)			2,395,350,525

Other Investment Companies 0.8% of net assets
Money Market Fund 0.1%
Other Securities		0.1	1,803,391
Securities Lending Collateral 0.7%
Wells Fargo Advantage Government Money Market Fund, Institutional Class 0.16% (c)		0.7	16,999,970
Total Other Investment Companies
(Cost $18,803,361)			18,803,361

End of Investments.

At 02/29/16, the tax basis cost of the fund's investments was $2,278,912,841 and the unrealized appreciation and depreciation were $285,413,948 and ($150,172,903), respectively, with a net unrealized appreciation of $135,241,045.

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

*	Non-income producing security.
(a)	All or a portion of this security is on loan. Securities on loan were valued at $16,423,687.
(b)	Issuer is affiliated with the fund's investment adviser.
(c)	The rate shown is the 7-day yield.
(d)	Fair-valued by management in accordance with procedures approved by the Board of Trustees.

ETF —

Exchange-traded fund

In addition to the above, the fund held the following at 02/29/16:

	Number of Contracts	Contract Value ($)	Unrealized Appreciation ($)
Futures Contracts
S&P 500 Index, e-mini, Long, expires 03/18/16	40	3,859,000	89,970

32 See financial notes

Table of Contents

Schwab U.S. Large-Cap Growth ETF

Condensed Portfolio Holdings (Unaudited) continued

The following is a summary of the inputs used to value the fund’s investments as of February 29, 2016 (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	$2,205,670,882	$—	$—	$2,205,670,882
Health Care Equipment & Services	188,008,463	—	1,671,180	189,679,643
Other Investment Companies¹	18,803,361	—	—	18,803,361
Total	$2,412,482,706	$—	$1,671,180	$2,414,153,886
Other Financial Instruments
Futures Contracts²	$89,970	$—	$—	$89,970

¹	As categorized in the complete schedule of portfolio holdings.
²	Futures contracts are not included in Investments in the schedule of condensed 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 August 31, 2015	Realized Gains (Losses)	Change in Unrealized Appreciation (Depreciation)	Gross Purchases	Gross Sales	Gross Transfers in	Gross Transfers out	Balance as of February 29, 2016
Common Stock	$—	$23,709	$191,959	$278,004	($69,204)	$1,246,712	$—	$1,671,180
Total	$—	$23,709	$191,959	$278,004	($69,204)	$1,246,712	$—	$1,671,180

See financial notes 33

Table of Contents

Schwab U.S. Large-Cap Growth ETF

Statement of

Assets and Liabilities

As of February 29, 2016; unaudited

Assets
Investments in affiliated issuers, at value (cost $8,516,691)		$8,110,038
Investments in unaffiliated issuers, at value (cost $2,252,500,826) including securities on loan of $16,423,687		2,389,043,878
Collateral invested for securities on loan, at value (cost $16,999,970)	+	16,999,970
Total investments, at value (cost $2,278,017,487)		2,414,153,886
Cash		220,250
Deposit with broker for futures contracts		522,500
Receivables:
Investments sold		453,729
Dividends		2,315,575
Income from securities on loan		34,635
Interest	+	524
Total assets		2,417,701,099
Liabilities
Collateral held for securities on loan		16,999,970
Payables:
Investments bought		673,979
Investment adviser fees		27,577
Variation margin on futures contracts		26,400
Accrued expenses	+	89,568
Total liabilities		17,817,494
Net Assets
Total assets		2,417,701,099
Total liabilities	–	17,817,494
Net assets		$2,399,883,605
Net Assets by Source
Capital received from investors		2,225,792,336
Net investment income not yet distributed		4,517,962
Net realized capital gains		33,346,938
Net unrealized capital appreciation		136,226,369

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$2,399,883,605		48,800,000		$49.18

34 See financial notes

Table of Contents

Schwab U.S. Large-Cap Growth ETF

Statement of

Operations

For the period September 1, 2015 through February 29, 2016; unaudited

Investment Income
Dividends received from affiliated issuer		$37,833
Dividends received from unaffiliated issuers (net of foreign withholding tax of $3,568)		15,142,092
Interest		1,184
Securities on loan	+	120,949
Total investment income		15,302,058
Expenses
Investment adviser fees		785,795
Proxy fees	+	90,173
Total expenses	–	875,968
Net investment income		14,426,090
Realized and Unrealized Gains (Losses)
Net realized losses on investments		(16,386,947)
Net realized gains on in-kind redemptions on affiliated issuer		190,867
Net realized gains on in-kind redemptions on unaffiliated investments		50,871,055
Net realized losses on futures contracts	+	(684,988)
Net realized gains		33,989,987
Net change in unrealized appreciation (depreciation) on affiliated issuer		(1,995,635)
Net change in unrealized appreciation (depreciation) on unaffiliated investments		(179,375,339)
Net change in unrealized appreciation (depreciation) on futures contracts	+	115,603
Net change in unrealized appreciation (depreciation)	+	(181,255,371)
Net realized and unrealized losses		(147,265,384)
Decrease in net assets resulting from operations		($132,839,294)

See financial notes 35

Table of Contents

Schwab U.S. Large-Cap Growth ETF

Statement of

Changes in Net Assets

For the current and prior report periods

Figures for the current period are unaudited

Operations
	9/1/15-2/29/16		9/1/14-8/31/15
Net investment income		$14,426,090	$24,011,446
Net realized gains		33,989,987	108,889,591
Net change in unrealized appreciation (depreciation)	+	(181,255,371)	(71,625,484)
Increase (decrease) in net assets resulting from operations		(132,839,294)	61,275,553
Distributions to Shareholders
Distributions from net investment income		($13,905,420)	($22,727,825)

Transactions in Fund Shares
		9/1/15-2/29/16		9/1/14-8/31/15
		SHARES	VALUE	SHARES	VALUE
Shares sold		9,050,000	$475,634,051	20,150,000	$1,054,286,554
Shares redeemed	+	(3,500,000)	(175,106,820)	(6,550,000)	(332,537,817)
Net transactions in fund shares		5,550,000	$300,527,231	13,600,000	$721,748,737
Shares Outstanding and Net Assets
		9/1/15-2/29/16		9/1/14-8/31/15
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		43,250,000	$2,246,101,088	29,650,000	$1,485,804,623
Total increase	+	5,550,000	153,782,517	13,600,000	760,296,465
End of period		48,800,000	$2,399,883,605	43,250,000	$2,246,101,088
Net investment income not yet distributed			$4,517,962		$3,997,292

36 See financial notes

Table of Contents

Schwab U.S. Large-Cap Value ETF

Financial Statements

Financial Highlights

	9/1/15– 2/29/16*	9/1/14– 8/31/15	9/1/13– 8/31/14	9/1/12– 8/31/13	9/1/11– 8/31/12	9/1/10– 8/31/11
Per-Share Data
Net asset value at beginning of period	$40.89	$43.54	$36.49	$31.24	$27.34	$24.36
Income (loss) from investment operations:
Net investment income (loss)	0.64 ¹	1.20 ¹	1.00	0.93	0.82	0.70
Net realized and unrealized gains (losses)	(0.25)	(2.75)	7.03	5.24	3.89	2.99
Total from investment operations	0.39	(1.55)	8.03	6.17	4.71	3.69
Less distributions:
Distributions from net investment income	(0.58)	(1.10)	(0.98)	(0.92)	(0.81)	(0.71)
Net asset value at end of period	$40.70	$40.89	$43.54	$36.49	$31.24	$27.34
Total return	0.95% ²	(3.71%)	22.25%	20.06%	17.53%	15.12%
Ratios/Supplemental Data
Ratios to average net assets:
Total expenses	0.07% ³^,⁴	0.07%	0.07%	0.07%	0.13%	0.13%
Net investment income (loss)	3.14% ³	2.75%	2.54%	2.73%	2.89%	2.68%
Portfolio turnover rate⁵	5% ²	15%	9%	9%	8%	7%
Net assets, end of period (x 1,000)	$1,770,667	$1,435,194	$1,162,576	$700,693	$385,791	$241,994

*	Unaudited.

Calculated based on the average shares outstanding during the period.

Not annualized.

Annualized (except for proxy costs).

⁴

Effective November 17, 2015, the annual operating expense ratio was reduced. The ratio presented for the period ended 2/29/16 is a blended ratio. (See financial note 4)

⁵

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

See financial notes 37

Table of Contents

Schwab U.S. Large-Cap Value ETF

Condensed Portfolio Holdings as of February 29, 2016 (Unaudited)

Holdings by Category		Cost ($)	Value ($)
99.5%	Common Stock	1,732,651,952	1,762,289,788
0.4%	Other Investment Companies	7,243,358	7,243,358
99.9%	Total Investments	1,739,895,310	1,769,533,146
0.1%	Other Assets and Liabilities, Net		1,134,043
100.0%	Net Assets		1,770,667,189

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 99.5% of net assets
Automobiles & Components 1.6%
Ford Motor Co.	728,316	0.5	9,111,233
Other Securities		1.1	18,870,073
		1.6	27,981,306
Banks 9.6%
Bank of America Corp.	1,935,040	1.4	24,226,701
Citigroup, Inc.	553,969	1.2	21,521,696
JPMorgan Chase & Co.	684,702	2.2	38,548,723
U.S. Bancorp	306,203	0.7	11,794,940
Wells Fargo & Co.	867,851	2.3	40,719,569
Other Securities		1.8	32,958,556
		9.6	169,770,185
Capital Goods 8.3%
General Electric Co.	1,755,106	2.9	51,143,789
Honeywell International, Inc.	143,270	0.8	14,520,415
Lockheed Martin Corp.	49,404	0.6	10,660,889
United Technologies Corp.	144,873	0.8	13,997,629
Other Securities		3.2	57,258,888
		8.3	147,581,610
Commercial & Professional Services 0.6%
Other Securities		0.6	10,270,190

Security	Number of Shares	% of Net Assets	Value ($)
Consumer Durables & Apparel 0.7%
Other Securities		0.7	12,788,437
Consumer Services 1.8%
McDonald's Corp.	171,145	1.1	20,056,483
Other Securities		0.7	12,379,589
		1.8	32,436,072
Diversified Financials 3.0%
The Goldman Sachs Group, Inc.	74,768	0.6	11,180,059
Other Securities		2.4	41,412,395
		3.0	52,592,454
Energy 8.2%
Chevron Corp.	350,582	1.7	29,252,562
ConocoPhillips	230,465	0.4	7,796,631
Exxon Mobil Corp.	774,973	3.5	62,114,086
Occidental Petroleum Corp.	142,412	0.6	9,800,794
Other Securities		2.0	36,297,220
		8.2	145,261,293
Food & Staples Retailing 1.7%
Wal-Mart Stores, Inc.	292,328	1.1	19,393,040
Other Securities		0.6	11,523,867
		1.7	30,916,907
Food, Beverage & Tobacco 9.8%
Altria Group, Inc.	364,597	1.3	22,448,237
Mondelez International, Inc., Class A	296,357	0.7	12,011,349
PepsiCo, Inc.	271,671	1.5	26,574,857
Philip Morris International, Inc.	287,892	1.5	26,206,809
The Coca-Cola Co.	727,845	1.8	31,391,955
The Kraft Heinz Co.	110,499	0.5	8,510,633
Other Securities		2.5	45,804,218
		9.8	172,948,058
Health Care Equipment & Services 2.2%
Abbott Laboratories	276,999	0.6	10,730,941
Other Securities		1.6	28,927,524
		2.2	39,658,465
Household & Personal Products 3.6%
Colgate-Palmolive Co.	167,672	0.6	11,005,990
Kimberly-Clark Corp.	67,354	0.5	8,776,226
The Procter & Gamble Co.	506,692	2.3	40,682,301
Other Securities		0.2	4,293,873
		3.6	64,758,390
Insurance 4.7%
American International Group, Inc.	231,454	0.7	11,618,991
Chubb Ltd.	85,713	0.6	9,902,423
MetLife, Inc.	205,978	0.5	8,148,490
Other Securities		2.9	54,413,917
		4.7	84,083,821

38 See financial notes

Table of Contents

Schwab U.S. Large-Cap Value ETF

Condensed Portfolio Holdings (Unaudited) continued

Security	Number of Shares	% of Net Assets	Value ($)
Materials 3.2%
E.I. du Pont de Nemours & Co.	162,280	0.6	9,877,984
The Dow Chemical Co.	208,492	0.6	10,134,796
Other Securities		2.0	35,907,564
		3.2	55,920,344
Media 1.9%
Time Warner, Inc.	148,267	0.6	9,815,275
Other Securities		1.3	23,386,454
		1.9	33,201,729
Pharmaceuticals, Biotechnology & Life Sciences 9.6%
AbbVie, Inc.	303,313	0.9	16,563,923
Bristol-Myers Squibb Co.	310,244	1.1	19,213,411
Eli Lilly & Co.	181,075	0.7	13,037,400
Johnson & Johnson	515,058	3.1	54,189,252
Merck & Co., Inc.	520,962	1.5	26,157,502
Pfizer, Inc.	1,147,831	1.9	34,056,146
Other Securities		0.4	6,276,323
		9.6	169,493,957
Real Estate 3.0%
Other Securities		3.0	52,980,773
Retailing 1.3%
Target Corp.	113,515	0.5	8,905,252
Other Securities		0.8	13,486,261
		1.3	22,391,513
Semiconductors & Semiconductor Equipment 3.1%
Intel Corp.	879,662	1.5	26,029,199
Texas Instruments, Inc.	188,104	0.6	9,973,274
Other Securities		1.0	18,626,982
		3.1	54,629,455
Software & Services 6.7%
International Business Machines Corp.	166,093	1.2	21,763,166
Microsoft Corp.	1,486,899	4.3	75,653,421
Other Securities		1.2	21,369,597
		6.7	118,786,184
Technology Hardware & Equipment 3.0%
Cisco Systems, Inc.	943,538	1.4	24,701,825
Other Securities		1.6	27,874,323
		3.0	52,576,148
Telecommunication Services 4.8%
AT&T, Inc.	1,143,503	2.4	42,252,436
Verizon Communications, Inc.	756,220	2.2	38,363,040
Other Securities		0.2	5,011,071
		4.8	85,626,547

Security	Number of Shares	% of Net Assets	Value ($)
Transportation 0.6%
Other Securities		0.6	9,977,634
Utilities 6.5%
Duke Energy Corp.	126,418	0.5	9,390,329
NextEra Energy, Inc.	85,672	0.5	9,665,515
The Southern Co.	168,725	0.5	8,129,170
Other Securities		5.0	88,473,302
		6.5	115,658,316
Total Common Stock
(Cost $1,732,651,952)			1,762,289,788

Other Investment Companies 0.4% of net assets
Money Market Fund 0.1%
Other Securities		0.1	1,788,945
Securities Lending Collateral 0.3%
Other Securities		0.3	5,454,413
Total Other Investment Companies
(Cost $7,243,358)			7,243,358

End of Investments.

At 02/29/16, the tax basis cost of the fund's investments was $1,740,460,252 and the unrealized appreciation and depreciation were $133,102,416 and ($104,029,522), respectively, with a net unrealized appreciation of $29,072,894.

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

*	Non-income producing security.
(a)	All or a portion of this security is on loan. Securities on loan were valued at $5,270,078.
(b)	The rate shown is the 7-day yield.

ETF —

Exchange-traded fund

In addition to the above, the fund held the following at 02/29/16:

	Number of Contracts	Contract Value ($)	Unrealized Appreciation ($)
Futures Contracts
S&P 500 Index, e-mini, Long, expires 03/18/16	85	8,200,375	156,436

See financial notes 39

Table of Contents

Schwab U.S. Large-Cap Value ETF

Condensed Portfolio Holdings (Unaudited) continued

The following is a summary of the inputs used to value the fund’s investments as of February 29, 2016 (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	$1,762,289,788	$—	$—	$1,762,289,788
Other Investment Companies¹	7,243,358	—	—	7,243,358
Total	$1,769,533,146	$—	$—	$1,769,533,146
Other Financial Instruments
Futures Contracts²	$156,436	$—	$—	$156,436

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

40 See financial notes

Table of Contents

Schwab U.S. Large-Cap Value ETF

Statement of

Assets and Liabilities

As of February 29, 2016; unaudited

Assets
Investments, at value (cost $1,734,440,897) including securities on loan of $5,270,078		$1,764,078,733
Collateral invested for securities on loan, at value (cost $5,454,413)	+	5,454,413
Total investments, at value (cost $1,739,895,310)		1,769,533,146
Deposit with broker for futures contracts		356,250
Receivables:
Dividends		6,368,058
Income from securities on loan		10,343
Interest	+	399
Total assets		1,776,268,196
Liabilities
Collateral held for securities on loan		5,454,413
Payables:
Investment adviser fees		20,430
Variation margin on futures contracts		62,144
Accrued expenses	+	64,020
Total liabilities		5,601,007
Net Assets
Total assets		1,776,268,196
Total liabilities	–	5,601,007
Net assets		$1,770,667,189
Net Assets by Source
Capital received from investors		1,722,984,783
Net investment income not yet distributed		9,825,092
Net realized capital gains		8,063,042
Net unrealized capital appreciation		29,794,272

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$1,770,667,189		43,500,000		$40.70

See financial notes 41

Table of Contents

Schwab U.S. Large-Cap Value ETF

Statement of

Operations

For the period September 1, 2015 through February 29, 2016; unaudited

Investment Income
Dividends		$26,400,060
Interest		918
Securities on loan	+	52,730
Total investment income		26,453,708
Expenses
Investment adviser fees		527,756
Proxy fees	+	64,402
Total expenses	–	592,158
Net investment income		25,861,550
Realized and Unrealized Gains (Losses)
Net realized losses on investments		(13,406,028)
Net realized gains on in-kind redemptions		24,973,012
Net realized losses on futures contracts	+	(471,039)
Net realized gains		11,095,945
Net change in unrealized appreciation (depreciation) on investments		(32,866,529)
Net change in unrealized appreciation (depreciation) on futures contracts	+	156,436
Net change in unrealized appreciation (depreciation)	+	(32,710,093)
Net realized and unrealized losses		(21,614,148)
Increase in net assets resulting from operations		$4,247,402

42 See financial notes

Table of Contents

Schwab U.S. Large-Cap Value ETF

Statement of

Changes in Net Assets

For the current and prior report periods

Figures for the current period are unaudited

Operations
	9/1/15-2/29/16		9/1/14-8/31/15
Net investment income		$25,861,550	$36,056,467
Net realized gains		11,095,945	61,278,807
Net change in unrealized appreciation (depreciation)	+	(32,710,093)	(156,701,092)
Increase (decrease) in net assets resulting from operations		4,247,402	(59,365,818)
Distributions to Shareholders
Distributions from net investment income		($23,116,240)	($32,821,400)

Transactions in Fund Shares
		9/1/15-2/29/16		9/1/14-8/31/15
		SHARES	VALUE	SHARES	VALUE
Shares sold		11,050,000	$461,236,429	12,900,000	$560,369,492
Shares redeemed	+	(2,650,000)	(106,894,736)	(4,500,000)	(195,564,092)
Net transactions in fund shares		8,400,000	$354,341,693	8,400,000	$364,805,400
Shares Outstanding and Net Assets
		9/1/15-2/29/16		9/1/14-8/31/15
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		35,100,000	$1,435,194,334	26,700,000	$1,162,576,152
Total increase	+	8,400,000	335,472,855	8,400,000	272,618,182
End of period		43,500,000	$1,770,667,189	35,100,000	$1,435,194,334
Net investment income not yet distributed			$9,825,092		$7,079,782

See financial notes 43

Table of Contents

Schwab U.S. Mid-Cap ETF

Financial Statements

Financial Highlights

	9/1/15– 2/29/16*	9/1/14– 8/31/15	9/1/13– 8/31/14	9/1/12– 8/31/13	9/1/11– 8/31/12	1/12/11 ¹– 8/31/11
Per-Share Data
Net asset value at beginning of period	$40.70	$40.56	$32.94	$26.56	$23.75	$25.00
Income (loss) from investment operations:
Net investment income (loss)	0.43 ²	0.59 ²	0.56	0.51	0.37	0.18
Net realized and unrealized gains (losses)	(3.14)	0.12	7.62	6.40	2.77	(1.29)
Total from investment operations	(2.71)	0.71	8.18	6.91	3.14	(1.11)
Less distributions:
Distributions from net investment income	(0.32)	(0.57)	(0.56)	(0.53)	(0.33)	(0.14)
Net asset value at end of period	$37.67	$40.70	$40.56	$32.94	$26.56	$23.75
Total return	(6.69%) ³	1.71%	24.97%	26.27%	13.32%	(4.49%) ³
Ratios/Supplemental Data
Ratios to average net assets:
Total expenses	0.07% ⁴	0.07%	0.07%	0.07%	0.13%	0.13% ⁵
Net investment income (loss)	2.20% ⁴	1.42%	1.53%	1.70%	1.53%	1.18% ⁵
Portfolio turnover rate⁶	18% ³	12%	9%	25%	19%	9% ³
Net assets, end of period (x 1,000)	$1,875,752	$1,841,785	$1,190,517	$611,081	$205,840	$79,550

*	Unaudited.

Commencement of operations.

Calculated based on the average shares outstanding during the period.

Not annualized.

⁴

Annualized (except for proxy costs).

⁵

Annualized.

⁶

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

44 See financial notes

Table of Contents

Schwab U.S. Mid-Cap ETF

Condensed Portfolio Holdings as of February 29, 2016 (Unaudited)

Holdings by Category		Cost ($)	Value ($)
99.9%	Common Stock	1,948,119,261	1,873,490,426
2.3%	Other Investment Companies	43,029,761	43,049,935
102.2%	Total Investments	1,991,149,022	1,916,540,361
(2.2%)	Other Assets and Liabilities, Net		(40,788,723)
100.0%	Net Assets		1,875,751,638

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 99.9% of net assets
Automobiles & Components 1.1%
Lear Corp.	64,172	0.3	6,503,832
The Goodyear Tire & Rubber Co.	226,907	0.4	6,834,439
Other Securities		0.4	7,560,102
		1.1	20,898,373
Banks 3.8%
First Republic Bank	121,815	0.4	7,496,495
Other Securities		3.4	64,027,629
		3.8	71,524,124
Capital Goods 10.8%
Acuity Brands, Inc.	37,500	0.4	7,853,625
Fortune Brands Home & Security, Inc.	137,159	0.4	6,888,125
Masco Corp.	285,148	0.4	8,041,174
Snap-on, Inc.	49,149	0.4	7,110,386
Other Securities		9.2	171,958,771
		10.8	201,852,081
Commercial & Professional Services 2.4%
Waste Connections, Inc.	105,991	0.3	6,536,465
Other Securities		2.1	39,286,429
		2.4	45,822,894

Security	Number of Shares	% of Net Assets	Value ($)
Consumer Durables & Apparel 4.4%
Hasbro, Inc.	94,787	0.4	7,191,490
Lennar Corp., Class A	154,104	0.3	6,463,122
Mattel, Inc.	288,631	0.5	9,386,280
Other Securities		3.2	59,302,985
		4.4	82,343,877
Consumer Services 3.0%
H&R Block, Inc.	200,373	0.4	6,588,264
Other Securities		2.6	50,536,020
		3.0	57,124,284
Diversified Financials 3.8%
Other Securities		3.8	70,593,087
Energy 4.0%
Other Securities		4.0	74,464,728
Food & Staples Retailing 0.8%
Rite Aid Corp. *	896,055	0.4	7,123,637
Other Securities		0.4	6,879,999
		0.8	14,003,636
Food, Beverage & Tobacco 1.3%
Other Securities		1.3	24,480,024
Health Care Equipment & Services 5.6%
DENTSPLY International, Inc.	118,549	0.4	7,226,747
ResMed, Inc.	118,601	0.4	6,749,583
Varian Medical Systems, Inc. *	83,976	0.4	6,568,603
Other Securities		4.4	85,124,794
		5.6	105,669,727
Household & Personal Products 0.8%
Other Securities		0.8	14,707,611
Insurance 6.9%
Arch Capital Group Ltd. *	104,142	0.4	7,075,407
Cincinnati Financial Corp.	126,393	0.4	7,980,454
Everest Re Group Ltd.	36,512	0.4	6,795,979
FNF Group	235,346	0.4	7,761,711
Willis Towers Watson plc	117,324	0.7	13,295,156
Other Securities		4.6	86,228,872
		6.9	129,137,579
Materials 5.5%
Airgas, Inc.	54,821	0.4	7,758,268
International Flavors & Fragrances, Inc.	67,909	0.4	7,014,321
Other Securities		4.7	88,890,272
		5.5	103,662,861
Media 2.6%
The Interpublic Group of Cos., Inc.	344,055	0.4	7,359,336
Other Securities		2.2	42,057,273
		2.6	49,416,609

See financial notes 45

Table of Contents

Schwab U.S. Mid-Cap ETF

Condensed Portfolio Holdings (Unaudited) continued

Security	Number of Shares	% of Net Assets	Value ($)
Pharmaceuticals, Biotechnology & Life Sciences 3.9%
Jazz Pharmaceuticals plc *	52,490	0.3	6,381,734
Mettler-Toledo International, Inc. *	23,415	0.4	7,373,618
Other Securities		3.2	59,095,724
		3.9	72,851,076
Real Estate 11.5%
Extra Space Storage, Inc.	104,839	0.5	8,612,524
Federal Realty Investment Trust	58,861	0.5	8,714,960
Realty Income Corp.	212,215	0.7	12,423,066
SL Green Realty Corp.	84,823	0.4	7,479,692
UDR, Inc.	221,390	0.4	7,600,319
Other Securities		9.0	171,444,548
		11.5	216,275,109
Retailing 3.9%
Foot Locker, Inc.	117,617	0.4	7,351,063
LKQ Corp. *	261,528	0.4	7,218,173
Ulta Salon, Cosmetics & Fragrance, Inc. *	54,187	0.5	8,951,151
Other Securities		2.6	49,311,669
		3.9	72,832,056
Semiconductors & Semiconductor Equipment 1.6%
KLA-Tencor Corp.	132,665	0.5	8,986,727
Other Securities		1.1	20,940,097
		1.6	29,926,824
Software & Services 8.7%
Amdocs Ltd.	130,143	0.4	7,386,917
Global Payments, Inc.	111,746	0.4	6,810,919
Vantiv, Inc., Class A *	132,874	0.4	6,914,763
VeriSign, Inc. *	83,379	0.4	7,044,692
Other Securities		7.1	134,534,679
		8.7	162,691,970
Technology Hardware & Equipment 3.6%
Harris Corp.	105,351	0.4	8,219,485
Other Securities		3.2	60,014,478
		3.6	68,233,963
Telecommunication Services 0.5%
Other Securities		0.5	8,865,635
Transportation 2.6%
Alaska Air Group, Inc.	106,522	0.4	7,871,976
Expeditors International of Washington, Inc.	157,612	0.4	7,215,477
Other Securities		1.8	33,714,002
		2.6	48,801,455

Security	Number of Shares	% of Net Assets	Value ($)
Utilities 6.8%
AGL Resources, Inc.	103,320	0.4	6,679,638
Alliant Energy Corp.	95,946	0.3	6,519,531
American Water Works Co., Inc.	153,430	0.5	9,945,333
CenterPoint Energy, Inc.	365,268	0.4	6,804,943
CMS Energy Corp.	235,922	0.5	9,333,074
Pinnacle West Capital Corp.	93,751	0.3	6,452,881
SCANA Corp.	122,054	0.4	7,935,951
Other Securities		4.0	73,639,492
		6.8	127,310,843
Total Common Stock
(Cost $1,948,119,261)			1,873,490,426

Other Investment Companies 2.3% of net assets
Equity Fund 0.1%
Other Securities		0.1	704,961
Money Market Fund 0.0%
Other Securities		0.0	438,435
Securities Lending Collateral 2.2%
Wells Fargo Advantage Government Money Market Fund, Institutional Class 0.16% (b)		2.2	41,906,539
Total Other Investment Companies
(Cost $43,029,761)			43,049,935

End of Investments.

At 02/29/16, the tax basis cost of the fund's investments was $1,994,127,246 and the unrealized appreciation and depreciation were $156,903,977 and ($234,490,862), respectively, with a net unrealized depreciation of ($77,586,885).

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

*	Non-income producing security.
(a)	All or a portion of this security is on loan. Securities on loan were valued at $40,167,302.
(b)	The rate shown is the 7-day yield.
(c)	Fair-valued by management in accordance with procedures approved by the Board of Trustees.

ETF —

Exchange-traded fund

46 See financial notes

Table of Contents

Schwab U.S. Mid-Cap ETF

Condensed Portfolio Holdings (Unaudited) continued

The following is a summary of the inputs used to value the fund’s investments as of February 29, 2016 (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	$1,767,820,699	$—	$—	$1,767,820,699
Health Care Equipment & Services	100,417,414	—	5,252,313	105,669,727
Other Investment Companies¹	43,049,935	—	—	43,049,935
Total	$1,911,288,048	$—	$5,252,313	$1,916,540,361

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 August 31, 2015	Realized Gains (Losses)	Change in Unrealized Appreciation (Depreciation)	Gross Purchases	Gross Sales	Gross Transfers in	Gross Transfers out	Balance as of February 29, 2016
Common Stock	$—	$50,420	$623,207	$1,232,559	($576,090)	$3,922,216	$—	$5,252,313
Total	$—	$50,420	$623,207	$1,232,559	($576,090)	$3,922,216	$—	$5,252,313

See financial notes 47

Table of Contents

Schwab U.S. Mid-Cap ETF

Statement of

Assets and Liabilities

As of February 29, 2016; unaudited

Assets
Investments, at value (cost $1,949,242,483) including securities on loan of $40,167,302		$1,874,633,822
Collateral invested for securities on loan, at value (cost $41,906,539)	+	41,906,539
Total investments, at value (cost $1,991,149,022)		1,916,540,361
Receivables:
Investments sold		145,845
Dividends		2,154,920
Income from securities on loan		136,273
Interest	+	140
Total assets		1,918,977,539
Liabilities
Collateral held for securities on loan		41,906,539
Payables:
Investments bought		1,217,971
Investment adviser fees		25,002
Accrued expenses	+	76,389
Total liabilities		43,225,901
Net Assets
Total assets		1,918,977,539
Total liabilities	–	43,225,901
Net assets		$1,875,751,638
Net Assets by Source
Capital received from investors		1,927,891,409
Net investment income not yet distributed		6,925,786
Net realized capital gains		15,543,104
Net unrealized capital depreciation		(74,608,661)

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$1,875,751,638		49,800,000		$37.67

48 See financial notes

Table of Contents

Schwab U.S. Mid-Cap ETF

Statement of

Operations

For the period September 1, 2015 through February 29, 2016; unaudited

Investment Income
Dividends (net of foreign withholding tax of $11,954)		$20,861,857
Interest		391
Securities on loan	+	634,079
Total investment income		21,496,327
Expenses
Investment adviser fees		660,438
Proxy fees	+	76,882
Total expenses	–	737,320
Net investment income		20,759,007
Realized and Unrealized Gains (Losses)
Net realized losses on investments		(66,910,550)
Net realized gains on in-kind redemptions		84,945,460
Net realized losses on futures contracts	+	(753,548)
Net realized gains		17,281,362
Net change in unrealized appreciation (depreciation) on investments		(177,952,351)
Net change in unrealized appreciation (depreciation) on futures contracts	+	7,955
Net change in unrealized appreciation (depreciation)	+	(177,944,396)
Net realized and unrealized losses		(160,663,034)
Decrease in net assets resulting from operations		($139,904,027)

See financial notes 49

Table of Contents

Schwab U.S. Mid-Cap ETF

Statement of

Changes in Net Assets

For the current and prior report periods

Figures for the current period are unaudited

Operations
	9/1/15-2/29/16		9/1/14-8/31/15
Net investment income		$20,759,007	$22,342,560
Net realized gains		17,281,362	78,324,391
Net change in unrealized appreciation (depreciation)	+	(177,944,396)	(100,425,456)
Increase (decrease) in net assets resulting from operations		(139,904,027)	241,495
Distributions to Shareholders
Distributions from net investment income		($15,496,470)	($20,721,520)

Transactions in Fund Shares
		9/1/15-2/29/16		9/1/14-8/31/15
		SHARES	VALUE	SHARES	VALUE
Shares sold		12,750,000	$520,432,982	21,550,000	$898,836,550
Shares redeemed	+	(8,200,000)	(331,065,859)	(5,650,000)	(227,088,435)
Net transactions in fund shares		4,550,000	$189,367,123	15,900,000	$671,748,115
Shares Outstanding and Net Assets
		9/1/15-2/29/16		9/1/14-8/31/15
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		45,250,000	$1,841,785,012	29,350,000	$1,190,516,922
Total increase	+	4,550,000	33,966,626	15,900,000	651,268,090
End of period		49,800,000	$1,875,751,638	45,250,000	$1,841,785,012
Net investment income not yet distributed			$6,925,786		$1,663,249

50 See financial notes

Table of Contents

Schwab U.S. Small-Cap ETF

Financial Statements

Financial Highlights

	9/1/15– 2/29/16*	9/1/14– 8/31/15	9/1/13– 8/31/14	9/1/12– 8/31/13	9/1/11– 8/31/12	9/1/10– 8/31/11
Per-Share Data
Net asset value at beginning of period	$53.54	$54.53	$45.71	$36.55	$32.34	$26.48
Income (loss) from investment operations:
Net investment income (loss)	0.52 ¹	0.80 ¹	0.73	0.74	0.49	0.39
Net realized and unrealized gains (losses)	(5.38)	(1.07)	8.84	9.18	4.16	5.86
Total from investment operations	(4.86)	(0.27)	9.57	9.92	4.65	6.25
Less distributions:
Distributions from net investment income	(0.42)	(0.72)	(0.75)	(0.76)	(0.44)	(0.39)
Net asset value at end of period	$48.26	$53.54	$54.53	$45.71	$36.55	$32.34
Total return	(9.14%) ²	(0.54%)	21.01%	27.47%	14.52%	23.55%
Ratios/Supplemental Data
Ratios to average net assets:
Total expenses	0.08% ³	0.08%	0.08%	0.09% ⁴	0.13%	0.13%
Net investment income (loss)	2.06% ³	1.44%	1.41%	1.74%	1.44%	1.17%
Portfolio turnover rate⁵	8% ²	9%	13%	22%	12%	11%
Net assets, end of period (x 1,000)	$2,796,506	$2,893,741	$2,104,717	$1,446,857	$641,516	$462,523

*	Unaudited.

Calculated based on the average shares outstanding during the period.

Not annualized.

Annualized (except for proxy costs).

⁴

Effective September 20, 2012, the annual operating expense ratio was reduced to 0.10%. On March 11, 2013, the rate was further reduced to 0.08%. The ratio presented for the period ended 8/31/13 is a blended ratio.

⁵

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

See financial notes 51

Table of Contents

Schwab U.S. Small-Cap ETF

Condensed Portfolio Holdings as of February 29, 2016 (Unaudited)

Holdings by Category		Cost ($)	Value ($)
99.8%	Common Stock	2,965,307,451	2,792,144,646
0.0%	Rights	330,693	313,380
0.0%	Warrants	—	—
3.7%	Other Investment Companies	102,872,256	102,872,256
103.5%	Total Investments	3,068,510,400	2,895,330,282
(3.5%)	Other Assets and Liabilities, Net		(98,824,778)
100.0%	Net Assets		2,796,505,504

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 99.8% of net assets
Automobiles & Components 1.2%
Gentex Corp.	384,914	0.2	5,604,348
Other Securities		1.0	28,359,156
		1.2	33,963,504
Banks 8.5%
Other Securities		8.5	238,851,379
Capital Goods 8.8%
AECOM *	206,102	0.2	5,659,561
Graco, Inc.	76,408	0.2	5,984,275
Huntington Ingalls Industries, Inc.	61,355	0.3	8,041,186
Lennox International, Inc.	53,050	0.2	6,854,590
Orbital ATK, Inc.	77,422	0.2	6,484,867
The Toro Co.	72,446	0.2	5,773,946
Other Securities		7.5	208,234,450
		8.8	247,032,875
Commercial & Professional Services 3.3%
KAR Auction Services, Inc.	181,351	0.2	6,421,639
Other Securities		3.1	84,416,122
		3.3	90,837,761

Security	Number of Shares	% of Net Assets	Value ($)
Consumer Durables & Apparel 2.6%
Other Securities		2.6	71,192,977
Consumer Services 4.3%
Panera Bread Co., Class A *	31,482	0.2	6,523,070
ServiceMaster Global Holdings, Inc. *	177,538	0.2	6,734,016
Six Flags Entertainment Corp.	112,701	0.2	5,731,973
Vail Resorts, Inc.	47,921	0.2	6,105,615
Other Securities		3.5	95,216,351
		4.3	120,311,025
Diversified Financials 2.4%
CBOE Holdings, Inc.	109,037	0.2	6,814,813
MarketAxess Holdings, Inc.	49,425	0.2	5,854,886
Other Securities		2.0	54,235,680
		2.4	66,905,379
Energy 3.6%
Diamondback Energy, Inc. *	96,589	0.2	6,881,966
Newfield Exploration Co. *	209,421	0.2	5,702,534
Targa Resources Corp.	218,315	0.2	5,868,307
Other Securities		3.0	83,016,240
		3.6	101,469,047
Food & Staples Retailing 0.8%
Other Securities		0.8	23,386,303
Food, Beverage & Tobacco 1.9%
Pinnacle Foods, Inc.	144,364	0.2	6,235,081
Post Holdings, Inc. *	80,336	0.2	5,580,139
TreeHouse Foods, Inc. *	72,330	0.2	6,106,099
Other Securities		1.3	35,001,063
		1.9	52,922,382
Health Care Equipment & Services 6.9%
Alere, Inc. *	115,106	0.2	6,135,150
Align Technology, Inc. *	95,642	0.2	6,315,241
athenahealth, Inc. *	51,167	0.2	6,604,125
Health Net, Inc. *	101,162	0.2	6,294,300
STERIS plc	111,794	0.3	7,190,590
Teleflex, Inc.	54,303	0.3	7,755,554
West Pharmaceutical Services, Inc.	94,956	0.2	5,889,171
Other Securities		5.3	146,820,470
		6.9	193,004,601
Household & Personal Products 0.6%
Other Securities		0.6	15,356,887
Insurance 3.9%
Assurant, Inc.	85,936	0.2	6,110,050
Old Republic International Corp.	318,551	0.2	5,670,208
StanCorp Financial Group, Inc.	57,499	0.2	6,606,635
White Mountains Insurance Group Ltd.	7,407	0.2	5,680,132
Other Securities		3.1	85,531,938
		3.9	109,598,963

52 See financial notes

Table of Contents

Schwab U.S. Small-Cap ETF

Condensed Portfolio Holdings (Unaudited) continued

Security	Number of Shares	% of Net Assets	Value ($)
Materials 5.0%
AptarGroup, Inc.	82,790	0.2	6,102,451
Bemis Co., Inc.	125,204	0.2	6,143,760
Sonoco Products Co.	133,412	0.2	5,830,104
Steel Dynamics, Inc.	316,748	0.2	5,761,646
Other Securities		4.2	116,486,158
		5.0	140,324,119
Media 1.9%
Other Securities		1.9	52,374,924
Pharmaceuticals, Biotechnology & Life Sciences 5.3%
Other Securities		5.3	149,162,040
Real Estate 12.1%
CubeSmart	225,183	0.2	6,732,972
Equity LifeStyle Properties, Inc.	106,248	0.3	7,454,360
Highwoods Properties, Inc.	127,903	0.2	5,570,176
Spirit Realty Capital, Inc.	583,129	0.2	6,233,649
Starwood Property Trust, Inc.	315,836	0.2	5,539,763
Other Securities		11.0	305,874,308
		12.1	337,405,228
Retailing 4.0%
Burlington Stores, Inc. *	100,331	0.2	5,624,556
Other Securities		3.8	107,023,619
		4.0	112,648,175
Semiconductors & Semiconductor Equipment 3.0%
Other Securities		3.0	84,726,183
Software & Services 8.2%
Genpact Ltd. *	206,185	0.2	5,449,470
The Ultimate Software Group, Inc. *	37,574	0.2	6,453,710
Other Securities		7.8	218,211,471
		8.2	230,114,651
Technology Hardware & Equipment 5.4%
ARRIS International plc *	235,068	0.2	5,615,775
Brocade Communications Systems, Inc.	549,110	0.2	5,452,662
Ingram Micro, Inc., Class A	208,144	0.3	7,451,555
Other Securities		4.7	131,243,318
		5.4	149,763,310
Telecommunication Services 0.7%
Other Securities		0.7	19,998,930
Transportation 1.5%
Other Securities		1.5	42,314,920
Utilities 3.9%
Great Plains Energy, Inc.	204,419	0.2	5,997,653
Piedmont Natural Gas Co., Inc.	104,050	0.2	6,181,610

Security	Number of Shares	% of Net Assets	Value ($)
Questar Corp.	230,963	0.2	5,720,953
Other Securities		3.3	90,578,867
		3.9	108,479,083
Total Common Stock
(Cost $2,965,307,451)			2,792,144,646

Rights 0.0% of net assets
Pharmaceuticals, Biotechnology & Life Sciences 0.0%
Other Securities		0.0	215,275
Telecommunication Services 0.0%
Other Securities		0.0	98,105
Total Rights
(Cost $330,693)			313,380

Warrants 0.0% of net assets
Energy 0.0%
Other Securities		0.0	—
Total Warrants
(Cost $—)			—

Other Investment Companies 3.7% of net assets
Money Market Fund 0.0%
Other Securities		0.0	946,285
Securities Lending Collateral 3.7%
Wells Fargo Advantage Government Money Market Fund, Institutional Class 0.16% (d)		3.7	101,925,971
Total Other Investment Companies
(Cost $102,872,256)			102,872,256

End of Investments.

At 02/29/16, the tax basis cost of the fund's investments was $3,072,596,271 and the unrealized appreciation and depreciation were $284,014,307 and ($461,280,296), respectively, with a net unrealized depreciation of ($177,265,989).

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

*	Non-income producing security.
(a)	All or a portion of this security is on loan. Securities on loan were valued at $98,949,102.
(b)	Fair-valued by management in accordance with procedures approved by the Board of Trustees.
(c)	Illiquid security. At the period end, the value of these amounted to $313,380 or 0.0% of net assets.
(d)	The rate shown is the 7-day yield.

See financial notes 53

Table of Contents

Schwab U.S. Small-Cap ETF

Condensed Portfolio Holdings (Unaudited) continued

CVR —	Contingent Value Rights
REIT —	Real Estate Investment Trust

In addition to the above, the fund held the following at 2/29/16:

	Number of Contracts	Contract Value ($)	Unrealized Appreciation ($)
Futures Contracts
Russell 2000 Index, e-mini, Long, expires 03/18/16	35	3,610,950	195,810

The following is a summary of the inputs used to value the fund’s investments as of February 29, 2016 (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	$2,739,222,264	$—	$—	$2,739,222,264
Food, Beverage & Tobacco	51,574,156	—	1,348,226	52,922,382
Rights ¹	—	—	313,380	313,380
Warrants ¹	—	—	—	—
Other Investment Companies¹	102,872,256	—	—	102,872,256
Total	$2,893,668,676	$—	$1,661,606	$2,895,330,282
Other Financial Instruments
Futures Contracts²	$195,810	$—	$—	$195,810

¹	As categorized in the complete schedule of portfolio holdings.
²	Futures contracts are not included in Investments in the schedule of condensed 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 August 31, 2015	Realized Gains (Losses)	Change in Unrealized Appreciation (Depreciation)	Gross Purchases	Gross Sales	Gross Transfers in	Gross Transfers out	Balance as of February 29, 2016
Common Stock	$—	$21,499	$223,875	$239,847	($39,319)	$902,324	$—	$1,348,226
Rights	115,419	—	(17,313)	215,274	—	—	—	313,380
Total	$115,419	$21,499	$206,562	$455,121	($39,319)	$902,324	$—	$1,661,606

54 See financial notes

Table of Contents

Schwab U.S. Small-Cap ETF

Statement of

Assets and Liabilities

As of February 29, 2016; unaudited

Assets
Investments, at value (cost $2,966,584,429) including securities on loan of $98,949,102		$2,793,404,311
Collateral invested for securities on loan, at value (cost $101,925,971)	+	101,925,971
Total investments, at value (cost $3,068,510,400)		2,895,330,282
Deposit with broker for futures contracts		648,004
Receivables:
Investments sold		156,454
Dividends		3,176,580
Income from securities on loan		343,178
Interest	+	859
Total assets		2,899,655,357
Liabilities
Collateral held for securities on loan		101,925,971
Payables:
Investments bought		1,050,200
Investment adviser fees		42,402
Variation margin on futures contracts		13,300
Accrued expenses	+	117,980
Total liabilities		103,149,853
Net Assets
Total assets		2,899,655,357
Total liabilities	–	103,149,853
Net assets		$2,796,505,504
Net Assets by Source
Capital received from investors		2,877,016,183
Net investment income not yet distributed		10,187,797
Net realized capital gains		82,285,832
Net unrealized capital depreciation		(172,984,308)

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$2,796,505,504		57,950,000		$48.26

See financial notes 55

Table of Contents

Schwab U.S. Small-Cap ETF

Statement of

Operations

For the period September 1, 2015 through February 29, 2016; unaudited

Investment Income
Dividends (net of foreign withholding tax of $5,459)		$29,084,374
Interest		3,079
Securities on loan	+	1,804,810
Total investment income		30,892,263
Expenses
Investment adviser fees		1,154,073
Proxy fees	+	118,750
Total expenses	–	1,272,823
Net investment income		29,619,440
Realized and Unrealized Gains (Losses)
Net realized losses on investments		(41,441,597)
Net realized gains on in-kind redemptions		145,111,568
Net realized losses on futures contracts	+	(2,735,712)
Net realized gains		100,934,259
Net change in unrealized appreciation (depreciation) on investments		(421,874,646)
Net change in unrealized appreciation (depreciation) on futures contracts	+	112,115
Net change in unrealized appreciation (depreciation)	+	(421,762,531)
Net realized and unrealized losses		(320,828,272)
Decrease in net assets resulting from operations		($291,208,832)

56 See financial notes

Table of Contents

Schwab U.S. Small-Cap ETF

Statement of

Changes in Net Assets

For the current and prior report periods

Figures for the current period are unaudited

Operations
	9/1/15-2/29/16		9/1/14-8/31/15
Net investment income		$29,619,440	$36,905,675
Net realized gains		100,934,259	70,342,722
Net change in unrealized appreciation (depreciation)	+	(421,762,531)	(155,287,037)
Decrease in net assets resulting from operations		(291,208,832)	(48,038,640)
Distributions to Shareholders
Distributions from net investment income		($23,838,090)	($32,271,525)

Transactions in Fund Shares
		9/1/15-2/29/16		9/1/14-8/31/15
		SHARES	VALUE	SHARES	VALUE
Shares sold		12,500,000	$671,635,046	19,700,000	$1,097,023,969
Shares redeemed	+	(8,600,000)	(453,823,367)	(4,250,000)	(227,689,724)
Net transactions in fund shares		3,900,000	$217,811,679	15,450,000	$869,334,245
Shares Outstanding and Net Assets
		9/1/15-2/29/16		9/1/14-8/31/15
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		54,050,000	$2,893,740,747	38,600,000	$2,104,716,667
Total increase or decrease	+	3,900,000	(97,235,243)	15,450,000	789,024,080
End of period		57,950,000	$2,796,505,504	54,050,000	$2,893,740,747
Net investment income not yet distributed			$10,187,797		$4,406,447

See financial notes 57

Table of Contents

Schwab U.S. Dividend Equity ETF

Financial Statements

Financial Highlights

	9/1/15– 2/29/16*	9/1/14– 8/31/15	9/1/13– 8/31/14	9/1/12– 8/31/13	10/19/11 ¹– 8/31/12
Per-Share Data
Net asset value at beginning of period	$36.52	$38.90	$33.00	$28.58	$25.00
Income (loss) from investment operations:
Net investment income (loss)	0.60 ²	1.19 ²	1.04	0.91	0.62
Net realized and unrealized gains (losses)	1.45	(2.46)	5.86	4.40	3.43
Total from investment operations	2.05	(1.27)	6.90	5.31	4.05
Less distributions:
Distributions from net investment income	(0.57)	(1.11)	(1.00)	(0.89)	(0.47)
Net asset value at end of period	$38.00	$36.52	$38.90	$33.00	$28.58
Total return	5.66% ³	(3.47%)	21.15%	18.93%	16.31% ³
Ratios/Supplemental Data
Ratios to average net assets:
Total expenses	0.07% ⁴	0.07%	0.07%	0.07%	0.17% ⁵
Net investment income (loss)	3.21% ⁴	3.03%	3.01%	3.09%	3.19% ⁵
Portfolio turnover rate⁶	4% ³	19%	26%	13%	17% ³
Net assets, end of period (x 1,000)	$3,020,676	$2,497,808	$2,075,331	$1,141,690	$504,464

*	Unaudited.

Commencement of operations.

Calculated based on the average shares outstanding during the period.

Not annualized.

⁴

Annualized (except for proxy costs).

⁵

Annualized.

⁶

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

58 See financial notes

Table of Contents

Schwab U.S. Dividend Equity ETF

Condensed Portfolio Holdings as of February 29, 2016 (Unaudited)

Holdings by Category		Cost ($)	Value ($)
99.6%	Common Stock	3,064,422,662	3,009,047,535
0.1%	Other Investment Companies	1,922,299	1,951,672
99.7%	Total Investments	3,066,344,961	3,010,999,207
0.3%	Other Assets and Liabilities, Net		9,676,498
100.0%	Net Assets		3,020,675,705

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 99.6% of net assets
Banks 0.2%
Other Securities		0.2	5,135,184
Capital Goods 11.9%
3M Co.	455,675	2.4	71,481,737
Caterpillar, Inc.	436,938	1.0	29,580,703
Eaton Corp. plc	339,046	0.6	19,227,299
Emerson Electric Co.	478,256	0.8	23,353,240
Lockheed Martin Corp.	194,506	1.4	41,972,450
PACCAR, Inc.	256,637	0.4	13,216,805
Raytheon Co.	221,140	0.9	27,388,189
The Boeing Co.	465,644	1.8	55,029,808
United Technologies Corp.	602,337	1.9	58,197,801
Other Securities		0.7	19,678,410
		11.9	359,126,442
Commercial & Professional Services 0.1%
Other Securities		0.1	2,434,386
Consumer Durables & Apparel 0.8%
Other Securities		0.8	24,167,636
Consumer Services 3.1%
McDonald's Corp.	685,850	2.7	80,374,761
Other Securities		0.4	13,506,916
		3.1	93,881,677

Security	Number of Shares	% of Net Assets	Value ($)
Diversified Financials 0.5%
T. Rowe Price Group, Inc.	185,646	0.4	12,829,995
Other Securities		0.1	3,808,602
		0.5	16,638,597
Energy 11.1%
Chevron Corp.	1,369,996	3.8	114,312,466
ConocoPhillips	893,952	1.0	30,242,396
Exxon Mobil Corp.	1,825,331	4.8	146,300,280
Valero Energy Corp.	362,797	0.7	21,796,844
Other Securities		0.8	21,332,356
		11.1	333,984,342
Food & Staples Retailing 3.1%
Sysco Corp.	380,562	0.6	16,794,201
Wal-Mart Stores, Inc.	1,150,266	2.5	76,308,647
		3.1	93,102,848
Food, Beverage & Tobacco 13.2%
Altria Group, Inc.	1,428,909	2.9	87,977,927
General Mills, Inc.	433,753	0.8	25,526,364
Kellogg Co.	184,301	0.5	13,641,960
PepsiCo, Inc.	1,070,539	3.5	104,720,125
Reynolds American, Inc.	604,627	1.0	30,491,340
The Coca-Cola Co.	2,853,146	4.1	123,056,187
Other Securities		0.4	11,944,664
		13.2	397,358,567
Health Care Equipment & Services 0.8%
Baxter International, Inc.	395,136	0.5	15,611,823
Other Securities		0.3	8,010,263
		0.8	23,622,086
Household & Personal Products 7.7%
Colgate-Palmolive Co.	654,528	1.4	42,963,218
Kimberly-Clark Corp.	265,389	1.2	34,580,187
The Clorox Co.	93,301	0.4	11,795,112
The Procter & Gamble Co.	1,777,889	4.7	142,746,708
		7.7	232,085,225
Insurance 1.1%
Aflac, Inc.	312,485	0.6	18,599,107
Other Securities		0.5	14,479,755
		1.1	33,078,862
Materials 3.2%
E.I. du Pont de Nemours & Co.	658,132	1.3	40,060,495
International Paper Co.	301,608	0.4	10,767,405
The Dow Chemical Co.	842,361	1.4	40,947,168
Other Securities		0.1	5,762,581
		3.2	97,537,649
Media 0.6%
Omnicom Group, Inc.	177,288	0.5	13,794,779
Other Securities		0.1	5,241,466
		0.6	19,036,245

See financial notes 59

Table of Contents

Schwab U.S. Dividend Equity ETF

Condensed Portfolio Holdings (Unaudited) continued

Security	Number of Shares	% of Net Assets	Value ($)
Pharmaceuticals, Biotechnology & Life Sciences 10.6%
Eli Lilly & Co.	710,619	1.7	51,164,568
Johnson & Johnson	1,352,021	4.7	142,246,130
Pfizer, Inc.	4,276,951	4.2	126,897,136
		10.6	320,307,834
Retailing 5.7%
Target Corp.	456,649	1.2	35,824,114
The Home Depot, Inc.	935,343	3.8	116,094,773
Other Securities		0.7	21,200,050
		5.7	173,118,937
Semiconductors & Semiconductor Equipment 8.0%
Analog Devices, Inc.	229,232	0.4	12,147,004
Intel Corp.	3,463,604	3.4	102,488,042
QUALCOMM, Inc.	1,144,724	1.9	58,140,532
Texas Instruments, Inc.	747,073	1.3	39,609,810
Other Securities		1.0	30,255,498
		8.0	242,640,886
Software & Services 10.1%
Accenture plc, Class A	453,775	1.5	45,495,482
Automatic Data Processing, Inc.	338,195	0.9	28,641,735
International Business Machines Corp.	656,646	2.8	86,040,325
Microsoft Corp.	2,511,983	4.2	127,809,695
Paychex, Inc.	232,883	0.4	11,967,857
Other Securities		0.3	6,652,257
		10.1	306,607,351
Technology Hardware & Equipment 0.2%
Other Securities		0.2	7,011,267
Telecommunication Services 5.0%
Verizon Communications, Inc.	2,962,006	5.0	150,262,564
Transportation 1.9%
United Parcel Service, Inc., Class B	509,460	1.6	49,188,363
Other Securities		0.3	7,176,289
		1.9	56,364,652

Security	Number of Shares	% of Net Assets	Value ($)
Utilities 0.7%
WEC Energy Group, Inc.	229,828	0.4	12,950,808
Other Securities		0.3	8,593,490
		0.7	21,544,298
Total Common Stock
(Cost $3,064,422,662)			3,009,047,535

Other Investment Companies 0.1% of net assets
Equity Fund 0.0%
Other Securities		0.0	768,400
Money Market Fund 0.1%
Other Securities		0.1	1,183,272
Total Other Investment Companies
(Cost $1,922,299)			1,951,672

End of Investments.

At 02/29/16, the tax basis cost of the fund's investments was $3,068,075,402 and the unrealized appreciation and depreciation were $165,095,240 and ($222,171,435), respectively, with a net unrealized depreciation of ($57,076,195).

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

(a)	The rate shown is the 7-day yield.

ETF —

Exchange-traded fund

The following is a summary of the inputs used to value the fund’s investments as of February 29, 2016 (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	$3,009,047,535	$—	$—	$3,009,047,535
Other Investment Companies¹	1,951,672	—	—	1,951,672
Total	$3,010,999,207	$—	$—	$3,010,999,207

¹	As categorized in the complete schedule of portfolio holdings.

60 See financial notes

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Schwab U.S. Dividend Equity ETF

Statement of

Assets and Liabilities

As of February 29, 2016; unaudited

Assets
Investments, at value (cost $3,066,344,961)		$3,010,999,207
Receivables:
Dividends		13,498,948
Fund shares sold		7,639,307
Interest	+	154
Total assets		3,032,137,616
Liabilities
Payables:
Investments bought		11,313,895
Investment adviser fees		40,567
Accrued expenses	+	107,449
Total liabilities		11,461,911
Net Assets
Total assets		3,032,137,616
Total liabilities	–	11,461,911
Net assets		$3,020,675,705
Net Assets by Source
Capital received from investors		3,045,306,795
Net investment income not yet distributed		18,404,075
Net realized capital gains		12,310,589
Net unrealized capital depreciation		(55,345,754)

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$3,020,675,705		79,500,001		$38.00

See financial notes 61

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Schwab U.S. Dividend Equity ETF

Statement of

Operations

For the period September 1, 2015 through February 29, 2016; unaudited

Investment Income
Dividends		$45,835,969
Interest	+	662
Total investment income		45,836,631
Expenses
Investment adviser fees		975,779
Proxy fees	+	108,100
Total expenses	–	1,083,879
Net investment income		44,752,752
Realized and Unrealized Gains (Losses)
Net realized losses on investments		(8,736,177)
Net realized gains on in-kind redemptions	+	45,843,320
Net realized gains		37,107,143
Net change in unrealized appreciation (depreciation) on investments	+	50,882,928
Net realized and unrealized gains		87,990,071
Increase in net assets resulting from operations		$132,742,823

62 See financial notes

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Schwab U.S. Dividend Equity ETF

Statement of

Changes in Net Assets

For the current and prior report periods

Figures for the current period are unaudited

Operations
	9/1/15-2/29/16		9/1/14-8/31/15
Net investment income		$44,752,752	$79,948,930
Net realized gains		37,107,143	218,576,988
Net change in unrealized appreciation (depreciation)	+	50,882,928	(396,180,173)
Increase (decrease) in net assets resulting from operations		132,742,823	(97,654,255)
Distributions to Shareholders
Distributions from net investment income		($42,308,731)	($74,347,401)

Transactions in Fund Shares
		9/1/15-2/29/16		9/1/14-8/31/15
		SHARES	VALUE	SHARES	VALUE
Shares sold		18,450,000	$709,279,497	44,400,000	$1,752,473,550
Shares redeemed	+	(7,350,000)	(276,845,567)	(29,350,000)	(1,157,995,283)
Net transactions in fund shares		11,100,000	$432,433,930	15,050,000	$594,478,267
Shares Outstanding and Net Assets
		9/1/15-2/29/16		9/1/14-8/31/15
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		68,400,001	$2,497,807,683	53,350,001	$2,075,331,072
Total increase	+	11,100,000	522,868,022	15,050,000	422,476,611
End of period		79,500,001	$3,020,675,705	68,400,001	$2,497,807,683
Net investment income not yet distributed			$18,404,075		$15,960,054

See financial notes 63

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Schwab U.S. Equity ETFs

Financial Notes, unaudited

1. Business Structure of the Funds:

Schwab Strategic Trust (organized January 27, 2009)	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™
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

The funds issue and redeem shares at their net asset 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/or 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.

2. Significant Accounting Policies:

The funds may 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 for this reporting period, 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:

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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Schwab U.S. Equity ETFs

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):

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

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

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

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

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Schwab U.S. Equity ETFs

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):

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

The levels associated with valuing the funds' investments as of February 29, 2016 are disclosed in the Condensed Portfolio Holdings.

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

(d) Investment Income:

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Schwab U.S. Equity ETFs

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):

(e) Expenses:

(f) Distributions to Shareholders:

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

(g) Accounting Estimates:

(h) Federal Income Taxes:

(i) Indemnification:

3. Risk Factors:

Certain funds primarily invest in dividend paying stocks. As a result, fund performance will correlate directly with the performance of the dividend paying stock segment of the stock market, and a fund may underperform funds that do not limit their investments to dividend paying stocks. If stocks held by a fund reduce or stop paying dividends, the fund’s ability to generate income may be affected.

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 stocks fall behind other types of investments—mid- or small-cap stocks, for instance—a fund’s large-cap holdings could reduce performance.

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Schwab U.S. Equity ETFs

Financial Notes, unaudited (continued)

3. Risk Factors (continued):

Mid-Cap Risk. Certain funds invest in mid-cap stocks. Historically, mid-cap stocks have been riskier than large-cap stocks. Mid-cap companies themselves may be more vulnerable to adverse business or economic events than larger, more established companies. Stock prices of mid-sized 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-cap stocks fall behind other types of investments—large-cap stocks, for instance—a fund’s mid-cap holdings could reduce performance.

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

Value Investing Risk. Certain funds emphasize a “value” style of investing, which targets undervalued companies with characteristics for improved valuations. This style of investing is subject to the risk that the valuations never improve or that the returns on “value” securities may not move in tandem with the returns on other styles of investing or the stock market in general.

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 is subject to the risk that the investment adviser’s investment management strategy, the implementation of which is subject to a number of constraints, may not produce the intended results. 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 index.

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

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Schwab U.S. Equity ETFs

Financial Notes, unaudited (continued)

3. Risk Factors (continued):

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 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
0.03%		0.03%		0.06%		0.06%		0.07%		0.08%		0.07%

*	Prior to November 17, 2015 the rate of the Schwab U.S. Broad Market ETF, the Schwab U.S. Large-Cap Growth ETF and the Schwab U.S. Large-Cap Value ETF was 0.04%, 0.07% and 0.07%, respectively.
**	Prior to November 12, 2015, the rate was 0.04%.

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 08/31/15	Gross Purchases	Gross Sales	Balance of Shares Held at 2/29/16	Market Value at 2/29/16	Realized Gains (Losses) 9/1/15 to 2/29/16	Dividends Received 9/1/15 to 2/29/16
Schwab U.S. Broad Market ETF	263,047	56,940	(13,108)	306,879	$7,687,319	$168,954	$34,770
Schwab U.S. Large-Cap ETF	266,524	83,065	(17,390)	332,199	8,321,585	95,227	36,618
Schwab U.S. Large-Cap Growth ETF	273,886	64,378	(14,510)	323,754	8,110,038	190,867	37,833

	Underlying Funds
	Schwab U.S. Large-Cap ETF	Schwab U.S. Small-Cap ETF
Schwab VIT Balanced Portfolio	0.1%	0.1%
Schwab VIT Balanced with Growth Portfolio	0.5%	0.2%
Schwab VIT Growth Portfolio	0.7%	0.3%

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Schwab U.S. Equity ETFs

Financial Notes, unaudited (continued)

4. Affiliates and Affiliated Transactions (continued):

The funds may engage in direct transactions with certain other Schwab funds when practical. When one fund is seeking to sell a security that another is seeking to buy, an interfund transaction can allow both funds to benefit by reducing transaction costs. This practice is limited to funds that share the same investment adviser, trustees and/or officers. For the period ended February 29, 2016, each fund's total aggregate security transactions with other Schwab funds as well as any realized gains (losses) were as follows:

	Total Aggregate Transactions	Realized Gains (Losses)
Schwab U.S. Broad Market ETF	$53,555,410	($15,232,627)
Schwab U.S. Large-Cap ETF	68,920,596	(13,544,429)
Schwab U.S. Large-Cap Growth ETF	44,781,645	(7,561,809)
Schwab U.S. Large-Cap Value ETF	41,953,425	(7,376,900)
Schwab U.S. Mid-Cap ETF	72,732,764	22,709,596
Schwab U.S. Small-Cap ETF	95,267,765	(5,559,999)
Schwab U.S. Dividend Equity ETF	44,378,635	(1,725,925)

5. Other Service Providers:

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

6. Board of Trustees:

7. Borrowing from Banks:

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Schwab U.S. Equity ETFs

Financial Notes, unaudited (continued)

7. Borrowing from Banks (continued):

8. Derivatives:

Certain funds entered into equity index futures contracts during the report period. The fund invested in futures contracts to equitize available cash. The fair value and variation margin for futures contracts held at February 29, 2016 are presented on the Condensed Portfolio Holdings and Statement of Assets and Liabilities, respectively. The net realized and change in unrealized gains (losses) on futures contracts are presented on the Statement of Operations. Refer to financial note 2(b) for the fund’s accounting policies with respect to futures contracts and financial note 3 for disclosures concerning the risks of investing in futures contracts. During the period ended February 29, 2016, 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 U.S. Broad Market ETF	$11,227,117	112
Schwab U.S. Large-Cap ETF	9,976,358	100
Schwab U.S. Large-Cap Growth ETF	3,684,550	38
Schwab U.S. Large-Cap Value ETF	3,299,558	33
Schwab U.S. Mid-Cap ETF	5,964,000*	60*
Schwab U.S. Small-Cap ETF	7,044,087	62

*	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 29, 2016, 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. Broad Market ETF	$242,736,461	$189,810,675
Schwab U.S. Large-Cap ETF	184,001,069	147,236,909
Schwab U.S. Large-Cap Growth ETF	166,301,408	143,553,887
Schwab U.S. Large-Cap Value ETF	92,627,726	88,393,045
Schwab U.S. Mid-Cap ETF	389,045,129	338,623,984
Schwab U.S. Small-Cap ETF	326,556,883	239,656,899
Schwab U.S. Dividend Equity ETF	111,935,553	108,039,961

10. In-Kind Transactions:

The consideration for the purchase of Creation Units of a fund often 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 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 a fund.

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Schwab U.S. Equity ETFs

Financial Notes, unaudited (continued)

10. In-Kind Transactions (continued):

The in-kind transactions for the period ended February 29, 2016 were as follows:

	In-Kind Purchases of Securities	In-Kind Sales of Securities
Schwab U.S. Broad Market ETF	$900,470,779	$232,439,410
Schwab U.S. Large-Cap ETF	1,078,023,621	153,165,968
Schwab U.S. Large-Cap Growth ETF	466,790,687	171,530,424
Schwab U.S. Large-Cap Value ETF	447,083,631	93,228,183
Schwab U.S. Mid-Cap ETF	468,930,717	312,250,328
Schwab U.S. Small-Cap ETF	602,774,113	417,332,864
Schwab U.S. Dividend Equity ETF	701,356,368	271,875,588

11. Federal Income Taxes

Expiration Date	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
August 31, 2019	$—	$721,062	$631,601	$295,384	$218,695	$927,631	$—
No expiration*	1,198,145	4,766,408	—	2,559,875	500,581	16,683,955	24,663,497
Total	$1,198,145	$5,487,470	$631,601	$2,855,259	$719,276	$17,611,586	$24,663,497

*	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.

	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
Capital loss carryforwards utilized	$3,662,223		$—		$7,653,867		$—		$6,694,975		$—		$—

12. Subsequent Events:

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Investment Advisory Agreement Approval

Approval of Renewal of 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. 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 and Schwab U.S. Dividend Equity ETF (the “Funds”) 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 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.

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.

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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 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 Funds are reasonable and supported renewal of the Agreement with respect to the Funds.

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 a majority 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.

Approval of Amendment to Investment Advisory Agreement

At a meeting held on November 16, 2015, the Board, including a majority of the Independent Trustees, considered information specifically relating to its consideration of the approval of an amendment to the Agreement to reflect a reduction to the rate paid by the Trust to CSIM as compensation for CSIM’s services rendered to Schwab U.S. Broad Market ETF, Schwab U.S. Large-Cap Growth ETF and Schwab U.S. Large-Cap Value ETF. The Board reviewed materials provided by CSIM and also took into account the detailed information that the Board reviewed at the September 2, 2015 meeting during the course of its consideration and approval of the renewal of the Agreement.

Based on the Trustees’ deliberation and their evaluation of the information described above, the Board, including a majority of the Independent Trustees, approved the amendment to the Agreement with respect to Schwab U.S. Broad Market ETF, Schwab U.S. Large-Cap Growth ETF and Schwab U.S. Large-Cap Value ETF and concluded the change to the rate paid by the Trust to CSIM as compensation for CSIM’s services rendered to Schwab U.S. Broad Market ETF, Schwab U.S. Large-Cap Growth ETF and Schwab U.S. Large-Cap Value ETF will not result in any reduction in the nature or quality of services provided by CSIM under the Agreement.

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Shareholder Vote Results (Unaudited)

Proposal – To elect each of the following individuals as trustees of the Trust:	For	Withheld
Walter W. Bettinger II	692,669,185.464	115,543,246.417
Marie A. Chandoha	792,077,989.887	16,134,441.994
Joseph R. Martinetto	791,795,082.163	16,417,349.718
Robert W. Burns	792,580,288.687	15,632,143.194
John F. Cogan	760,202,566.290	48,009,865.591
Stephen T. Kochis	791,955,734.563	16,256,697.318
David L. Mahoney	790,582,269.572	17,630,162.309
Kiran M. Patel	791,333,584.438	16,878,847.443
Kimberly S. Patmore	792,462,618.902	15,749,812.979
Charles A. Ruffel	792,425,735.968	15,786,695.913
Gerald B. Smith	791,728,903.579	16,483,528.302
Joseph H. Wender	790,699,630.035	17,512,801.846

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Trustees and Officers

Independent Trustees
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Robert W. Burns 1959 Trustee (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016)	Retired/Private Investor (Jan. 2009 – present). Formerly, Managing Director, Pacific Investment Management Company, LLC (PIMCO) and President, PIMCO Funds.	96	Director, PS Business Parks, Inc. (2005 – 2012).
John F. Cogan 1947 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust and Laudus Institutional Trust since 2010; Schwab Strategic Trust since 2016)	Senior Fellow, The Hoover Institution at Stanford University (Oct. 1979 – present); Senior Fellow, Stanford Institute for Economic Policy Research (2000 – present); Professor of Public Policy, Stanford University (1994 – 2015).	96	Director, Gilead Sciences, Inc. (2005 – present)
Stephen Timothy Kochis 1946 Trustee (Trustee of Schwab Strategic Trust since 2012; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016)	CEO and Owner, Kochis Global (wealth management consulting) (May 2012 – present); Chairman and CEO, Aspiriant, LLC (wealth management) (Jan. 2008 – Apr. 2012).	96	None
David L. Mahoney 1954 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011; Schwab Strategic Trust since 2016)	Private Investor.	96	Director, Symantec Corporation (2003 – present) Director, Corcept Therapeutics Incorporated (2004 – present) Director, Adamas Pharmaceuticals, Inc. (2009 – present)
Kiran M. Patel 1948 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2011; Schwab Strategic Trust since 2016)	Retired. Executive Vice President and General Manager of Small Business Group, Intuit, Inc. (financial software and services firm for consumers and small businesses) (Dec. 2008 – Sept. 2013).	96	Director, KLA-Tencor Corporation (2008 – present)

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Independent Trustees (continued)
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Kimberly S. Patmore 1956 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust, and Laudus Trust since 2016)	Consultant, Patmore Management Consulting (management consulting) (2008 – present).	96	None
Charles A. Ruffel 1956 Trustee (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust since 2015)	Co-Chief Executive Officer, Kudu Investment Management, LLC (financial services) (Jan. 2015 – present); Partner, Kudu Advisors, LLC (financial services) (June 2008 – Jan. 2015); Advisor, Asset International, Inc. (publisher of financial services information) (Aug. 2008 – Jan. 2015).	96	None
Gerald B. Smith 1950 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2000; Laudus Trust and Laudus Institutional Trust since 2010; Schwab Strategic Trust since 2016)	Chairman, Chief Executive Officer and Founder of Smith Graham & Co. (investment advisors) (Mar. 1990 – present).	96	Director, Eaton (2012 – present) Director and Chairman of the Audit Committee, Oneok Partners LP (2003 – 2013) Director, Oneok, Inc. (2009 – 2013) Lead Independent Director, Board of Cooper Industries (2002 – 2012)
Joseph H. Wender 1944 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust and Laudus Institutional Trust since 2010; Schwab Strategic Trust since 2016)	Senior Consultant, Goldman Sachs & Co., Inc. (investment banking and securities firm) (Jan. 2008 – present); Partner, Colgin Partners, LLC (vineyards) (Feb. 1998 – present).	96	Board Member and Chairman of the Audit Committee, Isis Pharmaceuticals (1994 – present) Lead Independent Director and Chair of Audit Committee, OUTFRONT Media Inc. (2014 – present)

Interested Trustees
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Walter W. Bettinger II² 1960 Chairman and Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Schwab Strategic Trust since 2009; Laudus Trust and Laudus Institutional Trust since 2010)	Director, President and Chief Executive Officer, The Charles Schwab Corporation (Oct. 2008 – present); President and Chief Executive Officer (Oct. 2008 – present), Director (May 2008 – present), Charles Schwab & Co., Inc.; Director, Charles Schwab Bank (Apr. 2006 – present); and Director, Schwab Holdings, Inc. (May 2008 – present).	96	Director, The Charles Schwab Corporation (2008 – present)

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Interested Trustees (continued)
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Marie A. Chandoha² 1961 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust, and Laudus Trust since 2016)	Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; Trustee (Jan. 2016 – present), President, Chief Executive Officer (Dec. 2010 – present), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (Jan. 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (Mar. 2007 – Aug. 2010).	96	None
Joseph R. Martinetto² 1962 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust, and Laudus Trust since 2016)	Senior Executive Vice President and Chief Financial Officer, The Charles Schwab Corporation and Charles Schwab & Co., Inc. (July 2015 – present); Executive Vice President and Chief Financial Officer of The Charles Schwab Corporation and Charles Schwab & Co., Inc. (May 2007 – July 2015); Director, Charles Schwab & Co., Inc. (May 2007 – present); Director (Apr. 2010 – present) and Chief Executive Officer (July 2013 – Apr. 2015), Charles Schwab Bank; Director, Executive Vice President and Chief Financial Officer, Schwab Holdings, Inc. (May 2007 – present).	96	None

Officers of the Trust
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served³)	Principal Occupations During the Past Five Years
Marie A. Chandoha 1961 President and Chief Executive Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust, Laudus Trust and Laudus Institutional Trust since 2010)	Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; Trustee (Jan. 2016 – present), President, Chief Executive Officer (Dec. 2010 – present), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (Jan. 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (Mar. 2007 – Aug. 2010).
Mark Fischer 1970 Treasurer and Chief Financial Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust, Laudus Trust and Laudus Institutional Trust since 2013)	Treasurer and Chief Financial Officer, Schwab Funds, Laudus Funds and Schwab ETFs (Jan. 2016 – present); Assistant Treasurer, Schwab Funds and Laudus Funds (Dec. 2013 – Dec. 2015), Schwab ETFs (Nov. 2013 – Dec. 2015); Vice President, Charles Schwab Investment Management, Inc. (Oct. 2013 – present); Executive Director, J.P. Morgan Investor Services (Apr. 2011 – Sept. 2013); Assistant Treasurer, Massachusetts Financial Service Investment Management (May 2005 – Mar. 2011).

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

¹	Each Trustee shall hold office until the election and qualification of his or her successor, or until he or she dies, resigns or is removed. The retirement policy requires that each independent trustee retire by December 31 of the year in which the Trustee turns 74 or the Trustee’s twentieth year of service as an independent trustee on any trust in the Fund Complex, whichever occurs first.
²	Mr. Bettinger, Ms. Chandoha, and Mr. Martinetto are Interested Trustees because they own stock of The Charles Schwab Corporation, the parent company of the investment adviser.
³	The President, Treasurer and Secretary/Clerk hold office until their respective successors are chosen and qualified or until he or she sooner dies, resigns, is removed or becomes disqualified. Each of the other officers serves at the pleasure of the Board.

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Glossary

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.

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.

dividend yield A stock’s indicated annual dividend divided by current price. At the portfolio level, it is the value-weighted average of the dividend yield of the securities in the portfolio.

Dow Jones U.S. Broad Stock Market Index An index that is a subset of the Dow Jones U.S. Total Stock Market Index, which measures all U.S. equity securities with readily available prices. The index includes approximately 2,500 stocks and is float-adjusted market cap weighted.

Dow Jones U.S. Dividend 100 Index An index that is designed to measure the performance of high dividend yielding stocks issued by U.S. companies that have a record of consistently paying dividends, selected for fundamental strength relative to their peers, based on financial ratios. The 100-component index is a subset of the Dow Jones U.S. Broad Market Index, excluding REITs, master limited partnerships, preferred stocks and convertibles. All index eligible stocks must have sustained at least 10 consecutive years of dividend payments, have a minimum float-adjusted market capitalization of $500 million and meet minimum liquidity criteria. The index is modified market capitalization weighted.

Dow Jones U.S. Large-Cap Growth Total Stock Market Index An index that includes the large-cap growth portion of the Dow Jones U.S. Total Stock Market Index. The index is float-adjusted market capitalization weighted and includes components ranked 1-750 by full market capitalization and that are classified as “growth” based on a number of factors.

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

Dow Jones U.S. Large-Cap Value Total Stock Market Index An index that includes the large-cap value portion of the Dow Jones U.S. Total Stock Market Index. The index is float-adjusted market capitalization weighted and includes the components ranked 1-750 by full market capitalization and that are classified as “value” based on a number of factors.

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