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

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-22311

Schwab Strategic Trust

(Exact name of registrant as specified in charter)

211 Main Street, San Francisco, California 94105

(Address of principal executive offices) (Zip code)

Marie Chandoha

Schwab Strategic Trust

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: August 31, 2016

Item 1:

Report(s) to Shareholders.

Annual report dated August 31, 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

Annual Report

August 31, 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

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.

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Performance at a Glance

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

Total Returns for the 12 Months Ended August 31, 2016
Schwab International Equity ETF (Ticker Symbol: SCHF)
Market Price Return¹	1.46%
NAV Return¹	1.47%
FTSE Developed ex US Index (Net)*	1.45%
ETF Category: Morningstar Foreign Large Blend²	2.06%
Performance Details	pages 8-9

Schwab International Small-Cap Equity ETF (Ticker Symbol: SCHC)
Market Price Return¹	4.64%
NAV Return¹	4.12%
FTSE Developed Small Cap ex US Liquid Index (Net)*	4.03%
ETF Category: Morningstar Foreign Small/Mid Blend²	5.18%
Performance Details	pages 10-11

Schwab Emerging Markets Equity ETF (Ticker Symbol: SCHE)
Market Price Return¹	10.74%
NAV Return¹	11.02%
FTSE Emerging Index (Net)*	11.30%
ETF Category: Morningstar Diversified Emerging Markets²	9.96%
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,

Over the 12-month reporting period ended August 31, 2016, many international stocks shrugged off a slate of investor concerns early on to rebound in recent months. The Schwab International Equity ETFs (the funds) all generated positive performance over this period and generally tracked their respective indexes, with the Schwab Emerging Markets Equity ETF leading fund performance with a double-digit return of 10.7%.

Coming into the reporting period, many investors were concerned about international stocks due to weakening growth in key overseas markets and currency devaluations in China. Emerging markets, in particular, were perceived as vulnerable to China’s slowing economy, given the nation’s importance in global trade. While international stocks were challenged at times, particularly after the United Kingdom’s decision in June to exit the European Union (also known as Brexit), international stocks rallied into positive territory as accommodative monetary policies around the globe pushed investors into emerging market stocks and other assets that typically generate higher returns than bonds.

The turnaround performance of international stocks during the reporting period can serve as a reminder of the benefits of having a diversified investment portfolio. When the global economy is in expansion mode and nations are growing at different rates, emerging markets may offer the most potential due in part to their relatively underdeveloped status. But even when economic growth is challenged, as it is now, international stocks may still benefit as investors seek to diversify away from U.S. stocks and other traditional assets.

At Charles Schwab Investment Management, we believe that international exposure remains an important component of a diversified portfolio. In the short term, we believe that such positions may serve as a potential buffer against declines in other

Asset Class Performance Comparison % returns during the 12 months ended 8/31/2016

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.

Certain discussions above contain forward-looking statements based on the investment adviser’s beliefs and assumptions. Actual results could differ materially.

Schwab International Equity ETFs3

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From the President continued

Over the 12-month reporting period ended August 31, 2016, many international stocks shrugged off a slate of investor concerns early on to rebound in recent months.

asset classes, and over the long term they may generate excess returns over less risky alternatives. Of course, there are special risks involved with investing in international stocks, including increased volatility, currency fluctuations, and political instability, which may be accentuated in emerging market investments.

But it’s also true that investors can pay too much attention to the latest market developments. We feel the best way to stay on track is by maintaining a diverse portfolio, which may help mitigate risks and smooth out returns over the long term. That’s why we offer a selection of developed market and emerging market funds, in addition to a wide selection of U.S.-focused funds. No one knows for sure if international stocks will be able to maintain their current rally in the months to come, but we do know that a diversified portfolio may help an investor to weather market fluctuations and provide a more stable set of returns over time.

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 you can find further details about the funds by visiting our website at www.csimfunds.com. We are also happy to hear from you at 1-877-824-5615.

Sincerely,

4Schwab International Equity ETFs

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The Investment Environment

Over the 12-month reporting period ended August 31, 2016, market volatility and lackluster global growth continued to influence market movements. However, toward the end of the reporting period, concerns lessened surrounding the effects of China’s economic slowdown and the United Kingdom’s (U.K.) decision to leave the European Union (also known as Brexit), and an unchanged federal funds rate provided a tailwind to many emerging markets. The MSCI EAFE Index (Net), a broad measure of developed international equity performance, was almost flat and returned -0.12%, while the MSCI Emerging Markets Index (Net) returned 11.83%.

Interest rate policy in the U.S. remained a source of uncertainty over the reporting period. The Federal Reserve (Fed) raised the federal funds rate in December 2015 for the first time in almost ten years, then despite initial projections of four additional hikes in 2016, left short-term rates unchanged for the remainder of the reporting period. Challenges in both the U.S. and abroad, including inconsistent U.S. economic data and lackluster global growth, contributed to the Fed’s decision to hold off on raising rates. The Fed’s plans were further complicated by the results of the Brexit vote in late June. With the resulting heightened volatility and uncertainty, the Fed again left rates unchanged in July. However, Fed officials also noted that they believed the near-term risks to the economy had receded, increasing the chances of a short-term rate hike by the end of 2016.

While moves toward tighter monetary policy in the U.S. stalled over the reporting period, many other countries’ central banks maintained or increased accommodative policy measures to combat struggling economic growth. The Bank of Japan (BOJ) expanded its quantitative easing program and maintained negative interest rates, following other negative interest rate policies in Switzerland, Sweden, and Denmark. Meanwhile, the European Central Bank (ECB) expanded its bond purchase program and cut its deposit rate further into negative territory. The ECB also launched a plan to provide cheap funding for European banks, enabling these banks to increase lending to consumers and corporations. Following the June Brexit vote, the Bank of England increased its accommodative measures by cutting its benchmark rate and announcing an expanded stimulus package. Over the reporting period, many emerging market central banks also took steps to fuel economic growth. Central banks in Turkey and Indonesia decreased key interest rates during the year, while the People’s Bank of China cut its reserve requirement and further expanded its lending facilities.

Concerns around unsteady global growth were present throughout most of the 12 months, though lessened toward the end of the reporting period. Currency fluctuations and China’s economic slowdown weighed on both U.S. and international markets, and an oversupply of oil resulted in sharp price movements that added to market volatility. In June, the results of the Brexit vote sent global stocks downward and caused the British pound to depreciate by more than 7%, though many stocks were able to rebound in the days and weeks that followed. Additionally, an increased demand for yield and a weaker U.S. dollar helped support many emerging markets toward the end of the reporting period, as did undervaluations and an overall rebound in oil prices in August.

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

From a country perspective, many countries saw overall positive equity performance over the reporting period despite global growth concerns. Stocks in Brazil suffered early as presidential impeachment proceedings contributed to heightened market volatility, but rebounded on hopes that the new administration would help restore the economy. Overall tighter central bank policy has helped Russia regain confidence from some investors, and the BOJ’s quantitative easing program supported Japanese equity performance. Even stocks in the U.K., which dropped significantly in the aftermath of the Brexit vote, rallied in recent months and ended the reporting period almost even. By comparison, several countries had weak performances over the reporting period. Stocks from Greece suffered amid continued debt problems and uncertainty surrounding the mass migration of refugees, while credit downgrades in Poland due to an escalating constitutional crisis weighed on the performance of stocks in this country. With problems continuing in the Italian banking system, including large exposure to bad debt, many stocks from Italy also struggled over the reporting period.

6Schwab International Equity ETFs

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Fund Management

Agnes Hong, CFA, Vice President and Senior Portfolio Manager, is responsible for the day-to-day co-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 more than 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 more than 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

The Schwab International Equity ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of the FTSE Developed ex US Index (the index). The index is comprised of large and mid-capitalization companies in developed countries outside the United States, as defined by the index provider. The index defines the large and mid-capitalization universe as approximately the top 90% of the eligible universe. The fund invests in a representative sample of securities included in the index which, when taken together, are expected to perform similarly to the index as a whole. Due to the use of representative sampling, the fund may not hold all of the securities included in the index.

Market Highlights. After a weak first half of the reporting period, large-cap international stocks rallied and generated positive returns for the 12-month reporting period ended August 31, 2016. Several central banks, including the European Central Bank and the Bank of Japan (BOJ), stepped up accommodative monetary policy measures to stimulate growth and combat deflation. The Federal Reserve took the opposite approach and raised the federal funds rate in December, though left short-term interest rates unchanged at subsequent meetings. The United Kingdom’s (U.K.) unexpected vote in June to leave the European Union, also known as Brexit, increased already heightened volatility and initially triggered a sharp selloff in global equities, though many stocks rebounded in the days and weeks that followed. Additionally, the Japanese yen strengthened against the U.S. dollar over the reporting period despite the BOJ’s policy efforts, while the British pound depreciated versus the U.S. dollar in wake of Brexit.

Performance. During the 12-month reporting period ended August 31, 2016, the fund closely tracked the index. The fund’s market price return was 1.46% and its NAV return was 1.47%. The index returned 1.45%¹ during the same period.

Contributors and Detractors. Australian stocks were the largest contributors to the total return of the fund. Stocks from Australia represented an average weight of approximately 6% of the fund’s investments and returned approximately 15% in U.S. dollar terms. One example from this market is CSL, Ltd., a biotherapeutics company that develops and delivers biotherapies. The fund’s holdings of CSL, Ltd. returned approximately 27% in U.S. dollar terms. Stocks from Korea also contributed to the total return of the fund, representing an average weight of approximately 4% of the fund’s investments and returning approximately 22% in U.S. dollar terms.

Stocks from the U.K. were the biggest detractors from the total return of the fund. U.K. stocks represented an average weight of approximately 18% of the fund’s investments and returned approximately -4% in U.S. dollar terms. One example from this market is Barclays PLC, a global financial services holding company. The fund’s holdings of Barclays PLC returned approximately -42% in U.S. dollar terms. Italian stocks also performed poorly for the fund overall, representing an average weight of approximately 2% of the fund’s investments and returning approximately -20% in U.S. dollar terms.

As of 08/31/16:

Statistics
Number of Holdings	1,209
Weighted Average Market Cap (millions)	$51,670
Price/Earnings Ratio (P/E)	22.8
Price/Book Ratio (P/B)	1.5
Portfolio Turnover Rate²	5%

Sector Weightings % of Investments
Financials	24.2%
Industrials	13.7%
Consumer Discretionary	11.9%
Consumer Staples	11.7%
Health Care	10.3%
Materials	7.7%
Information Technology	6.7%
Energy	5.7%
Telecommunication Services	4.2%
Utilities	3.4%
Other	0.5%
Total	100.0%

Top Equity Holdings % of Net Assets³
Nestle S.A. – Reg'd	1.7%
Novartis AG – Reg'd	1.3%
Toyota Motor Corp.	1.2%
Roche Holding AG	1.2%
Samsung Electronics Co., Ltd. GDR	1.0%
HSBC Holdings plc	1.0%
British American Tobacco plc	0.8%
BP plc	0.7%
GlaxoSmithKline plc	0.7%
Royal Dutch Shell plc, A Shares	0.7%
Total	10.3%

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

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

Source of Sector Classification: S&P and MSCI.

¹	The total return cited for the index is calculated net of foreign withholding taxes; the underlying tax rate information is available from FTSE.
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.

8Schwab International Equity ETFs

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Schwab International Equity ETF

Performance and Fund Facts as of 08/31/16

November 3, 2009 – August 31, 2016
Performance of Hypothetical
$10,000 Investment¹

Average Annual Total Returns¹

Fund and Inception Date	1 Year	5 Years	Since Inception*
Fund: Schwab International Equity ETF (11/3/09)
Market Price Return²	1.46%	4.49%	4.36%
NAV Return²	1.47%	4.48%	4.34%
FTSE Developed ex US Index (Net)³	1.45%	4.45%	4.39%
ETF Category: Morningstar Foreign Large Blend⁴	2.06%	4.38%	4.75%

Fund Expense Ratio⁵: 0.08%

Country Weightings % of Investments

Japan	21.9%
United Kingdom	16.9%
France	7.8%
Switzerland	7.8%
Germany	7.8%
Canada	7.3%
Australia	6.4%

Republic of Korea	4.2%
Hong Kong	3.3%
Netherlands	2.7%
Spain	2.6%
Other Countries	11.3%
Total	100.0%

For index definitions, please see the Glossary.

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

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.

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Schwab International Small-Cap Equity ETF

The Schwab International Small-Cap Equity ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of the FTSE Developed Small Cap ex US Liquid Index (the index). The index is comprised of small capitalization companies in developed countries outside the United States, as defined by the index provider. The index defines the small capitalization universe as approximately the bottom 10% of the eligible universe with a minimum free float capitalization of $150 million. The fund invests in a representative sample of securities included in the index which, when taken together, are expected to perform similarly to the index as a whole. Due to the use of representative sampling, the fund may not hold all of the securities included in the index.

Market Highlights. After a weak first half of the reporting period, small-cap international stocks rallied and generated positive returns for the 12-month reporting period ended August 31, 2016. Several central banks, including the European Central Bank and the Bank of Japan (BOJ), stepped up accommodative monetary policy measures to stimulate growth and combat deflation. The Federal Reserve took the opposite approach and raised the federal funds rate in December, though left short-term interest rates unchanged at subsequent meetings. The United Kingdom’s (U.K.) unexpected vote in June to leave the European Union, also known as Brexit, increased already heightened volatility and initially triggered a sharp selloff in global equities, though many stocks rebounded in the days and weeks that followed. Additionally, the Japanese yen strengthened against the U.S. dollar over the reporting period despite the BOJ’s policy efforts, while the British pound depreciated versus the U.S. dollar in wake of Brexit.

Performance. During the 12-month reporting period ended August 31, 2016, the fund outperformed the index. The fund’s market price return was 4.64% and its NAV return was 4.12%. The index returned 4.03%¹ during the same period.

Contributors and Detractors. Canadian stocks were the largest contributors to the returns of both the index and the fund. Stocks from Canada represented an average weight of approximately 16% of the fund’s investments, and returned approximately 17% in U.S. dollar terms. One example from this market is Teck Resources, Ltd., a company engaged in the business of exploring for, acquiring, developing and producing natural resources. The fund’s Class B share holdings of Teck Resources, Ltd. returned approximately 92% in U.S. dollar terms. Stocks from Australia also positively contributed to the fund’s performance, representing an average weight of approximately 5% of the fund’s investments and returning approximately 25% in U.S. dollar terms.

Stocks from the U.K. were the biggest detractors from the returns of both the index and the fund. U.K. stocks represented an average weight of approximately 17% of the fund’s investments and returned approximately -12% in U.S. dollar terms. One example from this market is Paddy Power Betfair plc, an Ireland-based public online betting and gaming company. The fund’s holdings of Paddy Power Betfair plc returned approximately -14% in U.S. dollar terms. Korean stocks also detracted from the performance of the index and the fund. Stocks from Korea represented an average weight of approximately 5% of the fund’s investments and returned approximately -11% in U.S. dollar terms.

As of 08/31/16:

Statistics
Number of Holdings	1,800
Weighted Average Market Cap (millions)	$2,197
Price/Earnings Ratio (P/E)	37.2
Price/Book Ratio (P/B)	1.4
Portfolio Turnover Rate²	23%

Sector Weightings % of Investments
Industrials	20.3%
Financials	19.3%
Consumer Discretionary	15.2%
Materials	11.5%
Information Technology	8.6%
Health Care	6.7%
Consumer Staples	5.9%
Energy	5.9%
Utilities	2.2%
Telecommunication Services	1.4%
Other	3.0%
Total	100.0%

Top Equity Holdings % of Net Assets³
Waste Connection, Inc.	0.8%
Dollarama, Inc.	0.5%
Open Text Corp.	0.5%
Teck Resources Ltd., Class B	0.5%
Gildan Activewear, Inc.	0.4%
CCL Industries, Inc., Class B	0.4%
Seven Generations Energy Ltd., A Shares	0.4%
Keyera Corp.	0.3%
Onex Corp.	0.3%
First Quantum Minerals Ltd.	0.3%
Total	4.4%

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

Source of Sector Classification: S&P and MSCI.

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

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Schwab International Small-Cap Equity ETF

Performance and Fund Facts as of 08/31/16

January 14, 2010 – August 31, 2016
Performance of Hypothetical
$10,000 Investment¹

Average Annual Total Returns¹

Fund and Inception Date	1 Year	5 Years	Since Inception*
Fund: Schwab International Small-Cap Equity ETF (1/14/10)
Market Price Return²	4.64%	4.87%	5.44%
NAV Return²	4.12%	4.72%	5.39%
FTSE Developed Small Cap ex US Liquid Index (Net)³	4.03%	4.74%	5.53%
ETF Category: Morningstar Foreign Small/Mid Blend⁴	5.18%	6.12%	5.76%

Fund Expense Ratio⁵: 0.16%

Country Weightings % of Investments

Japan	18.2%
Canada	17.8%
United Kingdom	14.5%
Australia	5.4%
Republic of Korea	5.1%
Sweden	4.8%
Germany	4.3%

Switzerland	3.6%
France	3.2%
Italy	3.0%
United States	2.7%
Other Countries	17.4%
Total	100.0%

For index definitions, please see the Glossary.

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

Small-company stocks may be 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.

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Schwab Emerging Markets Equity ETF

The Schwab Emerging Markets Equity ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of the FTSE Emerging Index (the index). The index comprises large and mid-capitalization companies in emerging market countries, as defined by the index provider. The index defines the large and mid-capitalization universe as approximately the top 90% of the eligible universe. The fund invests in a representative sample of securities included in the index which, when taken together, are expected to perform similarly to the index as a whole. Due to the use of representative sampling, the fund may not hold all of the securities included in the index.

Market Highlights. After a weak first half of the reporting period, emerging market stocks rallied and generated positive returns for the 12-month reporting period ended August 31, 2016. Though the Federal Reserve raised the federal funds rate in December, the absence of additional rate hikes during the reporting period helped support emerging markets. The stabilization of oil and commodity prices also helped, as did a comparatively weaker U.S. dollar.

Performance. During the 12-month reporting period ended August 31, 2016, the fund underperformed the index. The fund’s market price return was 10.74% and its NAV return was 11.02%, while the index returned 11.30%¹ during the same period. Differences between the return of the fund and the return of the index may be attributable to, among other things, the operational and transactional costs incurred by the fund and not the index.

Contributors and Detractors. Stocks from Poland were the largest detractors from the total return of the fund. Polish stocks represented an average weight of approximately 2% of the fund’s investments and returned approximately -18% in U.S. dollar terms. One example from this market is Powszechny Zaklad Ubezpieczen Spolka Akcyjna, a company that provides life and non-life insurance products and services in Poland, Lithuania, Latvia, Estonia, and Ukraine. The fund’s holdings of Powszechny Zaklad Ubezpieczen Spolka Akcyjna returned approximately -33% in U.S. dollar terms. Stocks from Mexico also detracted from the performance of the fund. Mexican stocks represented an average weight of approximately 5% of the fund’s investments and returned approximately -2% in U.S. dollar terms.

Brazilian stocks were the largest contributors to the returns of both the index and the fund. Stocks from Brazil represented an average weight of approximately 8% of the fund’s investments and returned approximately 38% in U.S. dollar terms. One example from this market is Itau Unibanco Holding S.A., a holding company that provides a range of financial products and services to individual and corporate clients in Brazil and abroad. The fund’s preferred stock holdings of American depositary receipts of Itau Unibanco Holding S.A. returned approximately 58% in U.S. dollar terms. Stocks from Taiwan also contributed to the fund’s performance, representing an average weight of approximately 15% of the fund’s investments and returning approximately 18% in U.S. dollar terms.

As of 08/31/16:

Statistics
Number of Holdings	789
Weighted Average Market Cap (millions)	$48,269
Price/Earnings Ratio (P/E)	16.3
Price/Book Ratio (P/B)	1.6
Portfolio Turnover Rate²	10%

Sector Weightings % of Investments
Financials	30.6%
Information Technology	15.5%
Energy	9.2%
Consumer Discretionary	8.9%
Consumer Staples	8.1%
Materials	7.4%
Telecommunication Services	7.1%
Industrials	6.3%
Utilities	3.8%
Health Care	2.7%
Other	0.4%
Total	100.0%

Top Equity Holdings % of Net Assets³
Tencent Holdings Ltd.	4.1%
Taiwan Semiconductor Manufacturing Co., Ltd. ADR	4.0%
Naspers Ltd., N Shares	2.1%
China Construction Bank Corp., H Shares	2.0%
China Mobile Ltd.	2.0%
Industrial & Commercial Bank of China Ltd., H Shares	1.4%
Hon Hai Precision Industry Co., Ltd.	1.1%
Bank of China Ltd., H Shares	1.0%
Housing Development Finance Corp., Ltd.	1.0%
Itau Unibanco Holding S.A. ADR	1.0%
Total	19.7%

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

Source of Sector Classification: S&P and MSCI.

¹	The total return cited for the index is calculated net of foreign withholding taxes; the underlying tax rate information is available from FTSE.
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.

12Schwab International Equity ETFs

Table of Contents

Schwab Emerging Markets Equity ETF

Performance and Fund Facts as of 08/31/16

January 14, 2010 – August 31, 2016
Performance of Hypothetical
$10,000 Investment¹

Average Annual Total Returns¹

Fund and Inception Date	1 Year	5 Years	Since Inception*
Fund: Schwab Emerging Markets Equity ETF (1/14/10)
Market Price Return²	10.74%	-0.45%	0.50%
NAV Return²	11.02%	-0.39%	0.50%
FTSE Emerging Index (Net)³	11.30%	-0.17%	0.79%
ETF Category: Morningstar Diversified Emerging Markets⁴	9.96%	-1.84%	0.00%

Fund Expense Ratio⁵: 0.14%

Country Weightings % of Investments

China	26.1%
Taiwan	14.5%
India	12.5%
Brazil	9.2%
South Africa	8.7%
Mexico	4.9%

Russia	4.5%
Malaysia	4.1%
Indonesia	2.8%
Thailand	2.8%
Other Countries	9.9%
Total	100.0%

For index definitions, please see the Glossary.

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

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

Index ownership — 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.

Schwab International Equity ETFs13

Table of Contents

Fund Expenses (Unaudited)

Examples for a $1,000 Investment

As a fund shareholder, you may incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of fund shares; and, (2) ongoing costs, including management fees and other fund expenses.

The expense examples below are intended to help you understand your ongoing cost (in dollars) of investing in a fund and to compare this cost with the ongoing cost of investing in other mutual funds. These examples are based on an investment of $1,000 invested for six months beginning March 1, 2016 and held through August 31, 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, or any non-routine expenses, such as proxy fees. 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 or non-routine expenses were included, your costs would have been higher.

	Expense Ratio¹ (Annualized)	Beginning Account Value at 3/1/16	Ending Account Value (Net of Expenses) at 8/31/16	Expenses Paid During Period² 3/1/16–8/31/16
Schwab International Equity ETF
Actual Return	0.08%	$1,000.00	$1,116.30	$0.43
Hypothetical 5% Return	0.08%	$1,000.00	$ 1,024.70	$0.41
Schwab International Small-Cap Equity ETF
Actual Return	0.16%	$1,000.00	$ 1,115.00	$0.85
Hypothetical 5% Return	0.16%	$1,000.00	$1,024.30	$0.81
Schwab Emerging Markets Equity ETF
Actual Return	0.14%	$1,000.00	$1,229.40	$ 0.78
Hypothetical 5% Return	0.14%	$1,000.00	$1,024.40	$ 0.71

¹	Based on the most recent six-month expense ratio; may differ from the expense ratio provided in the Financial Highlights which covers a 12-month period. This ratio does not include certain non-routine expenses, such as proxy expenses.
²	Expenses for each fund are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by 184 days of the period, and divided by 366 days of the fiscal year.

14Schwab International Equity ETFs

Table of Contents

Schwab International Equity ETF

Financial Statements

Financial Highlights

	9/1/15– 8/31/16	9/1/14– 8/31/15	9/1/13– 8/31/14	9/1/12– 8/31/13	9/1/11– 8/31/12
Per-Share Data
Net asset value at beginning of period	$28.55	$32.37	$28.32	$24.96	$25.99
Income (loss) from investment operations:
Net investment income (loss)	0.84 ¹	0.87 ¹	0.88	0.66	0.76
Net realized and unrealized gains (losses)	(0.45)	(3.85)	3.87	3.42	(1.04)
Total from investment operations	0.39	(2.98)	4.75	4.08	(0.28)
Less distributions:
Distributions from net investment income	(0.62)	(0.84)	(0.70)	(0.72)	(0.75)
Net asset value at end of period	$28.32	$28.55	$32.37	$28.32	$24.96
Total return	1.47%	(9.27%)	16.90%	16.55%	(0.75%)
Ratios/Supplemental Data
Ratios to average net assets:
Total expenses	0.08%	0.08%	0.09% ²	0.09%	0.13%
Net investment income (loss)	3.06%	2.86%	3.44%	3.03%	3.40%
Portfolio turnover rate³	5%	4%	7%	9%	8%
Net assets, end of period (x 1,000)	$6,168,595	$4,042,603	$2,654,016	$1,464,105	$768,666

Calculated based on the average shares outstanding during the period.

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.

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 August 31, 2016

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 1-877-824-5615. This complete schedule, filed on the fund's Form N-CSR(S), 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	6,097,957,174	6,086,135,364
0.6%	Preferred Stock	39,614,103	39,434,918
0.5%	Other Investment Companies	30,692,594	30,692,594
99.8%	Total Investments	6,168,263,871	6,156,262,876
0.2%	Other Assets and Liabilities, Net		12,331,732
100.0%	Net Assets		6,168,594,608

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 98.7% of net assets
Australia 6.4%
Australia & New Zealand Banking Group Ltd.	1,293,813	0.4	26,156,632
BHP Billiton Ltd.	1,335,082	0.4	20,499,078
Commonwealth Bank of Australia	718,002	0.6	38,749,724
National Australia Bank Ltd.	1,093,758	0.4	22,473,866
Westpac Banking Corp.	1,416,784	0.5	31,368,548
Other Securities		4.1	253,651,872
		6.4	392,899,720
Austria 0.2%
Other Securities		0.2	10,300,773
Belgium 1.2%
Anheuser-Busch InBev N.V.	335,655	0.7	41,514,441
Other Securities		0.5	30,932,729
		1.2	72,447,170
Canada 7.2%
Royal Bank of Canada	617,645	0.6	38,380,090
The Bank of Nova Scotia	509,844	0.4	27,127,175
The Toronto-Dominion Bank	784,860	0.6	35,006,294
Other Securities		5.6	346,502,805
		7.2	447,016,364

Security	Number of Shares	% of Net Assets	Value ($)
Denmark 1.6%
Novo Nordisk A/S, B Shares	783,050	0.6	36,641,387
Other Securities		1.0	62,295,664
		1.6	98,937,051
Finland 0.9%
Other Securities		0.9	53,897,824
France 7.8%
BNP Paribas S.A.	416,894	0.3	21,175,107
Sanofi	475,631	0.6	36,588,711
Total S.A.	894,346	0.7	42,582,308
Other Securities		6.2	383,210,231
		7.8	483,556,357
Germany 7.3%
Allianz SE - Reg'd	196,020	0.5	29,156,258
BASF SE	392,334	0.5	31,854,514
Bayer AG - Reg'd	350,427	0.6	37,455,928
Daimler AG - Reg'd	405,689	0.4	28,049,973
Deutsche Telekom AG - Reg'd	1,327,028	0.4	22,125,312
SAP SE	377,136	0.5	33,081,958
Siemens AG - Reg'd	327,800	0.6	39,082,571
Other Securities		3.8	232,245,909
		7.3	453,052,423
Hong Kong 3.3%
AIA Group Ltd.	5,097,169	0.5	32,232,074
Other Securities		2.8	171,415,034
		3.3	203,647,108
Ireland 0.2%
Other Securities		0.2	12,118,533
Israel 0.6%
Other Securities		0.6	36,690,943
Italy 1.8%
Other Securities		1.8	108,589,087
Japan 21.8%
Honda Motor Co., Ltd.	754,210	0.4	23,114,475
KDDI Corp.	783,440	0.3	22,995,348
Mitsubishi UFJ Financial Group, Inc.	5,860,459	0.5	31,960,989
SoftBank Group Corp.	392,042	0.4	25,606,765
Toyota Motor Corp.	1,202,780	1.2	72,537,745
Other Securities		19.0	1,171,264,681
		21.8	1,347,480,003
Netherlands 2.7%
ING Groep N.V.	1,610,960	0.3	20,130,989
Unilever N.V. CVA	678,580	0.5	31,073,406
Other Securities		1.9	117,299,913
		2.7	168,504,308

16 See financial notes

Table of Contents

Schwab International Equity ETF

Condensed Portfolio Holdings continued

Security	Number of Shares	% of Net Assets	Value ($)
New Zealand 0.3%
Other Securities		0.3	15,348,563
Norway 0.5%
Other Securities		0.5	31,541,842
Portugal 0.1%
Other Securities		0.1	8,481,803
Republic of Korea 4.0%
Samsung Electronics Co., Ltd. GDR	87,626	1.0	63,353,598
Other Securities		3.0	184,128,806
		4.0	247,482,404
Singapore 1.1%
Other Securities		1.1	69,872,334
Spain 2.6%
Banco Santander S.A.	6,050,849	0.5	27,091,302
Other Securities		2.1	130,745,980
		2.6	157,837,282
Sweden 2.4%
Other Securities		2.4	145,670,829
Switzerland 7.8%
Nestle S.A. - Reg'd	1,316,841	1.7	104,939,851
Novartis AG - Reg'd	998,487	1.3	78,655,431
Roche Holding AG	295,506	1.2	72,120,848
UBS Group AG - Reg'd	1,547,406	0.3	22,394,904
Other Securities		3.3	201,498,161
		7.8	479,609,195
United Kingdom 16.9%
AstraZeneca plc	529,846	0.5	34,065,464
BP plc	7,874,110	0.7	44,128,116
British American Tobacco plc	784,162	0.8	48,526,529
Diageo plc	1,050,180	0.5	29,000,732
GlaxoSmithKline plc	2,033,428	0.7	43,649,510
HSBC Holdings plc	8,411,502	1.0	62,166,329
Imperial Brands plc	395,356	0.3	20,678,243
Lloyds Banking Group plc	26,717,815	0.3	20,767,933
National Grid plc	1,605,541	0.4	22,005,551
Reckitt Benckiser Group plc	268,881	0.4	25,897,352
Royal Dutch Shell plc, A Shares	1,773,071	0.7	43,204,344
Royal Dutch Shell plc, B Shares	1,587,141	0.7	40,367,918
SABMiller plc	396,671	0.4	22,848,479
Shire plc	375,790	0.4	23,432,306
Unilever plc	511,853	0.4	23,657,483
Vodafone Group plc	11,095,880	0.5	33,402,416
Other Securities		8.2	503,354,743
		16.9	1,041,153,448
Total Common Stock
(Cost $6,097,957,174)			6,086,135,364

Security	Number of Shares	% of Net Assets	Value ($)
Preferred Stock 0.6% of net assets
Germany 0.4%
Other Securities		0.4	26,463,639
Republic of Korea 0.2%
Other Securities		0.2	11,576,374
Spain 0.0%
Other Securities		0.0	1,394,905
Total Preferred Stock
(Cost $39,614,103)			39,434,918

Other Investment Companies 0.5% of net assets
United States 0.5%
Money Market Fund 0.3%
Other Securities		0.3	18,917,256
Securities Lending Collateral 0.2%
Other Securities		0.2	11,775,338
Total Other Investment Companies
(Cost $30,692,594)			30,692,594

End of Investments.

At 08/31/16, the tax basis cost of the fund's investments was $6,191,424,924 and the unrealized appreciation and depreciation were $479,484,752 and ($514,646,800), respectively, with a net unrealized depreciation of ($35,162,048).

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 $11,145,475.
(b)	Illiquid security. At the period end, the value of these amounted to $23,857 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 $19,318,270 or 0.3% 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)

See financial notes 17

Table of Contents

Schwab International Equity ETF

Condensed Portfolio Holdings continued

In addition to the above, the fund held the following at 08/31/16:

	Number of Contracts	Contract Value ($)	Unrealized Appreciation ($)
Futures Contracts
MSCI EAFE, e-mini, Long, expires 09/16/16	400	33,752,000	236,521

The following is a summary of the inputs used to value the fund’s investments as of August 31, 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	$5,928,298,082	$—	$—*	$5,928,298,082
Spain	157,813,425	—	23,857	157,837,282
Preferred Stock¹	39,434,918	—	—	39,434,918
Other Investment Companies¹	30,692,594	—	—	30,692,594
Total	$6,156,239,019	$—	$23,857	$6,156,262,876
Other Financial Instruments
Futures Contracts²	$236,521	$—	$—	$236,521

*	Level 3 amount shown includes securities determined to have no value at August 31, 2016.
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 August 31, 2016
Common Stock
Republic of Korea	$2,501,775	$—	$—	$—	$—	$—	($2,501,775)	$—
Spain	—	—	(5,699)	29,556	—	—	—	23,857
Total	$2,501,775	$—	($5,699)	$29,556	$—	$—	($2,501,775)	$23,857

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 August 31, 2016 was ($5,699)

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 out of Level 3 to Level 1 for the period ended August 31, 2016. 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 August 31, 2016.

18 See financial notes

Table of Contents

Schwab International Equity ETF

Statement of

Assets and Liabilities

As of August 31, 2016

Assets
Investments, at value (cost $6,156,488,533) including securities on loan of $11,145,475		$6,144,487,538
Collateral invested for securities on loan, at value (cost $11,775,338)	+	11,775,338
Total investments, at value (cost $6,168,263,871)		6,156,262,876
Cash		45,014
Deposit with broker for futures contracts		1,680,000
Foreign currency, at value (cost $2,655,354)		2,627,079
Receivables:
Dividends		14,546,611
Foreign tax reclaims		5,649,151
Income from securities on loan		50,203
Fund shares sold	+	703
Total assets		6,180,861,637
Liabilities
Collateral held for securities on loan		11,775,338
Payables:
Investment adviser fees		417,691
Variation margin on futures contracts	+	74,000
Total liabilities		12,267,029
Net Assets
Total assets		6,180,861,637
Total liabilities	–	12,267,029
Net assets		$6,168,594,608
Net Assets by Source
Capital received from investors		6,253,195,975
Net investment income not yet distributed		117,054,564
Net realized capital losses		(189,669,558)
Net unrealized capital depreciation		(11,986,373)

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$6,168,594,608		217,800,000		$28.32

See financial notes 19

Table of Contents

Schwab International Equity ETF

Statement of

Operations

For the period September 1, 2015 through August 31, 2016

Investment Income
Dividends (net of foreign withholding tax of $14,497,040)		$155,344,424
Securities on loan	+	736,351
Total investment income		156,080,775
Expenses
Investment adviser fees		3,972,170
Professional fees		92,318*
Proxy fees	+	175,240
Total expenses		4,239,728
Expense reduction by CSIM and its affiliates	–	92,318*
Net expenses	–	4,147,410
Net investment income		151,933,365
Realized and Unrealized Gains (Losses)
Net realized losses on investments		(111,923,177)
Net realized gains on futures contracts		318,604
Net realized losses on foreign currency transactions	+	(3,574)
Net realized losses		(111,608,147)
Net change in unrealized appreciation (depreciation) on investments		99,852,117
Net change in unrealized appreciation (depreciation) on futures contracts		368,411
Net change in unrealized appreciation (depreciation) on foreign currency translations	+	5,224
Net change in unrealized appreciation (depreciation)	+	100,225,752
Net realized and unrealized losses		(11,382,395)
Increase in net assets resulting from operations		$140,550,970

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

20 See financial notes

Table of Contents

Schwab International Equity ETF

Statement of

Changes in Net Assets

For the current and prior report periods

Operations
	9/1/15-8/31/16		9/1/14-8/31/15
Net investment income		$151,933,365	$95,013,058
Net realized losses		(111,608,147)	(23,913,608)
Net change in unrealized appreciation (depreciation)	+	100,225,752	(419,722,897)
Increase (decrease) in net assets resulting from operations		140,550,970	(348,623,447)
Distributions to Shareholders
Distributions from net investment income		($105,649,560)	($79,192,160)

Transactions in Fund Shares
		9/1/15-8/31/16		9/1/14-8/31/15
		SHARES	VALUE	SHARES	VALUE
Shares sold		76,200,000	$2,091,090,613	60,400,000	$1,838,831,135
Shares redeemed	+	—	—	(800,000)	(22,428,935)
Net transactions in fund shares		76,200,000	$2,091,090,613	59,600,000	$1,816,402,200
Shares Outstanding and Net Assets
		9/1/15-8/31/16		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	+	76,200,000	2,125,992,023	59,600,000	1,388,586,593
End of period		217,800,000	$6,168,594,608	141,600,000	$4,042,602,585
Net investment income not yet distributed			$117,054,564		$70,763,746

See financial notes 21

Table of Contents

Schwab International Small-Cap Equity ETF

Financial Statements

Financial Highlights

	9/1/15– 8/31/16	9/1/14– 8/31/15	9/1/13– 8/31/14	9/1/12– 8/31/13	9/1/11– 8/31/12
Per-Share Data
Net asset value at beginning of period	$29.46	$33.32	$28.61	$24.94	$27.48
Income (loss) from investment operations:
Net investment income (loss)	0.67 ¹	0.73 ¹	0.71	0.76	0.67
Net realized and unrealized gains (losses)	0.50	(3.84)	4.90	3.72	(2.39)
Total from investment operations	1.17	(3.11)	5.61	4.48	(1.72)
Less distributions:
Distributions from net investment income	(0.67)	(0.75)	(0.90)	(0.81)	(0.82)
Net asset value at end of period	$29.96	$29.46	$33.32	$28.61	$24.94
Total return	4.12%	(9.29%)	19.84%	18.23%	(5.91%)
Ratios/Supplemental Data
Ratios to average net assets:
Total expenses	0.17% ²	0.18% ³	0.19%	0.21% ⁴	0.35%
Net investment income (loss)	2.34%	2.40%	2.21%	2.86%	2.65%
Portfolio turnover rate⁵	23%	23%	16%	20%	25%
Net assets, end of period (x 1,000)	$787,951	$609,773	$403,229	$280,422	$159,610

Calculated based on the average shares outstanding during the period.

Effective March 1, 2016, the annual operating expense ratio was reduced. The ratio presented for the period ended 8/31/16 is a blended ratio (See Financial Note 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.

⁴

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.

⁵

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

22 See financial notes

Table of Contents

Schwab International Small-Cap Equity ETF

Condensed Portfolio Holdings as of August 31, 2016

Holdings by Category		Cost ($)	Value ($)
99.0%	Common Stock	749,977,714	780,322,954
0.3%	Preferred Stock	2,121,597	2,152,621
3.0%	Other Investment Companies	23,272,877	23,496,987
102.3%	Total Investments	775,372,188	805,972,562
(2.3%)	Other Assets and Liabilities, Net		(18,021,096)
100.0%	Net Assets		787,951,466

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 99.0% of net assets
Australia 5.5%
Vocus Communications Ltd.	262,739	0.2	1,518,480
Other Securities		5.3	42,102,453
		5.5	43,620,933
Austria 1.1%
Other Securities		1.1	8,677,964
Belgium 1.5%
Other Securities		1.5	11,723,370
Canada 18.2%
AltaGas Ltd.	68,916	0.2	1,782,713
Bombardier, Inc., B Shares *	908,343	0.2	1,488,463
CAE, Inc.	124,096	0.2	1,768,679
CCL Industries, Inc., Class B	15,599	0.4	2,975,229
Detour Gold Corp. *	83,130	0.3	1,875,422
Dollarama, Inc.	50,840	0.5	3,754,732
Element Financial Corp.	177,334	0.2	1,844,906
First Quantum Minerals Ltd.	324,323	0.3	2,457,049
Gildan Activewear, Inc.	110,819	0.4	3,261,097
H&R Real Estate Investment Trust	131,006	0.3	2,328,463
Industrial Alliance Insurance & Financial Services, Inc.	51,883	0.2	1,848,261
Keyera Corp.	85,017	0.3	2,623,634
Kinross Gold Corp. *	581,376	0.3	2,321,871
Onex Corp.	42,034	0.3	2,565,835

Security	Number of Shares	% of Net Assets	Value ($)
Open Text Corp.	57,932	0.5	3,641,806
Peyto Exploration & Development Corp.	65,513	0.3	1,881,929
PrairieSky Royalty Ltd.	87,730	0.2	1,718,426
Seven Generations Energy Ltd., A Shares *	124,711	0.4	2,870,525
Tahoe Resources, Inc.	134,423	0.2	1,752,965
Teck Resources Ltd., Class B	220,478	0.5	3,570,868
Vermilion Energy, Inc.	47,134	0.2	1,702,435
Waste Connections, Inc.	83,020	0.8	6,331,299
WSP Global, Inc.	49,497	0.2	1,626,699
Yamana Gold, Inc.	445,275	0.2	1,802,073
Other Securities		10.6	83,242,675
		18.2	143,038,054
Denmark 1.4%
GN Store Nord A/S	71,404	0.2	1,531,170
Other Securities		1.2	9,637,555
		1.4	11,168,725
Finland 1.7%
Amer Sports Oyj	54,074	0.2	1,626,072
Huhtamaki Oyj	49,556	0.3	2,152,526
Other Securities		1.2	9,554,118
		1.7	13,332,716
France 3.3%
UBISOFT Entertainment S.A. *	43,685	0.2	1,704,841
Other Securities		3.1	24,369,412
		3.3	26,074,253
Germany 4.2%
Freenet AG	50,983	0.2	1,461,576
STADA Arzneimittel AG	29,211	0.2	1,566,174
Other Securities		3.8	30,100,962
		4.2	33,128,712
Hong Kong 2.3%
Other Securities		2.3	18,404,839
Ireland 0.6%
Kingspan Group plc	83,379	0.3	2,282,580
Other Securities		0.3	2,533,628
		0.6	4,816,208
Israel 0.3%
Other Securities		0.3	2,602,625
Italy 3.1%
Other Securities		3.1	24,451,719
Japan 18.6%
Other Securities		18.6	146,286,609

See financial notes 23

Table of Contents

Schwab International Small-Cap Equity ETF

Condensed Portfolio Holdings continued

Security	Number of Shares	% of Net Assets	Value ($)
Netherlands 2.0%
Aalberts Industries N.V.	48,580	0.2	1,625,884
Other Securities		1.8	14,251,123
		2.0	15,877,007
New Zealand 1.0%
Other Securities		1.0	8,047,673
Norway 1.7%
Other Securities		1.7	13,018,642
Portugal 0.4%
Other Securities		0.4	2,945,388
Republic of Korea 5.2%
Other Securities		5.2	40,916,633
Singapore 1.7%
Other Securities		1.7	13,096,349
Spain 2.1%
Merlin Properties Socimi S.A.	146,632	0.2	1,701,704
Other Securities		1.9	15,108,187
		2.1	16,809,891
Sweden 4.9%
Castellum AB	132,653	0.3	2,001,574
Fingerprint Cards AB, Class B *(b)	121,424	0.2	1,546,135
ICA Gruppen AB	48,052	0.2	1,641,161
Other Securities		4.2	33,162,863
		4.9	38,351,733
Switzerland 3.5%
Georg Fischer AG - Reg'd	1,895	0.2	1,525,566
Temenos Group AG - Reg'd *	25,827	0.2	1,502,227
Other Securities		3.1	24,743,409
		3.5	27,771,202
United Kingdom 14.7%
BBA Aviation plc	484,272	0.2	1,528,544
Greene King plc	142,299	0.2	1,514,247
Hiscox Ltd.	134,280	0.2	1,836,046
IG Group Holdings plc	175,784	0.3	2,189,432
Mediclinic International plc	182,432	0.3	2,441,876
RPC Group plc	150,956	0.2	1,718,074
Shaftesbury plc	130,515	0.2	1,653,800
Spirax-Sarco Engineering plc	36,393	0.3	2,065,753
UBM plc	183,662	0.2	1,653,726
Other Securities		12.6	99,560,211
		14.7	116,161,709
Total Common Stock
(Cost $749,977,714)			780,322,954

Security	Number of Shares	% of Net Assets	Value ($)
Preferred Stock 0.3% of net assets
Germany 0.2%
Other Securities		0.2	1,801,213
Sweden 0.1%
Other Securities		0.1	351,408
Total Preferred Stock
(Cost $2,121,597)			2,152,621

Other Investment Companies 3.0% of net assets
Switzerland 0.2%
Other Securities		0.2	1,344,454
United Kingdom 0.1%
Other Securities		0.1	899,112
United States 2.7%
Equity Fund 0.2%
iShares MSCI EAFE Small-Cap ETF	36,000	0.2	1,830,600
Money Market Fund 0.1%
Other Securities		0.1	393,202
Securities Lending Collateral 2.4%
Wells Fargo Government Money Market Fund, Select Class 0.32% (c)		2.4	19,029,619
		2.7	21,253,421
Total Other Investment Companies
(Cost $23,272,877)			23,496,987

End of Investments.

At 08/31/16, the tax basis cost of the fund's investments was $784,758,836 and the unrealized appreciation and depreciation were $94,571,699 and ($73,357,973) , respectively, with a net unrealized appreciation of $21,213,726.

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 $46,630 or 0.0% of net assets.
(b)	All or a portion of this security is on loan. Securities on loan were valued at $17,804,955.
(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 $15,202,106 or 1.9% of net assets.
(e)	Fair-valued by management in accordance with procedures approved by the Board of Trustees.

24 See financial notes

Table of Contents

Schwab International Small-Cap Equity ETF

Condensed Portfolio Holdings continued

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

The following is a summary of the inputs used to value the fund’s investments as of August 31, 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	$761,918,115	$—	$—*	$761,918,115
Hong Kong	18,358,209	—	46,630*	18,404,839
Preferred Stock¹	2,152,621	—	—	2,152,621
Other Investment Companies¹	23,496,987	—	—	23,496,987
Total	$805,925,932	$—	$46,630	$805,972,562

*	Level 3 amount shown includes securities determined to have no value at August 31, 2016.
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 August 31, 2016
Common Stock
Australia	$—	$—	$234	$—	($234)	$—	$—	$—
Canada	—	96	(422,660)	35,192	($1,726)	389,098	—	—
Hong Kong	231,341	(238,836)	(95,146)	21,549	(73,327)	201,049	—	46,630
Rights
Germany	35,681	—	(17,740)	—	(17,941)	—	—	—
Total	$267,022	($238,740)	($535,312)	$56,741	($93,228)	$590,147	$—	$46,630

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 August 31, 2016 was ($672,896).

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 August 31, 2016.

See financial notes 25

Table of Contents

Schwab International Small-Cap Equity ETF

Statement of

Assets and Liabilities

As of August 31, 2016

Assets
Investments, at value (cost $756,342,569) including securities on loan of $17,804,955		$786,942,943
Collateral invested for securities on loan, at value (cost $19,029,619)	+	19,029,619
Total investments, at value (cost $775,372,188)		805,972,562
Foreign currency, at value (cost $512,935)		510,770
Receivables:
Investments sold		873,256
Dividends		774,128
Foreign tax reclaims		338,880
Income from securities on loan		104,870
Fund shares sold	+	22
Total assets		808,574,488
Liabilities
Collateral held for securities on loan		19,029,619
Payables:
Investments bought		1,485,092
Investment adviser fees	+	108,311
Total liabilities		20,623,022
Net Assets
Total assets		808,574,488
Total liabilities	–	20,623,022
Net assets		$787,951,466
Net Assets by Source
Capital received from investors		803,235,256
Net investment income not yet distributed		6,135,043
Net realized capital losses		(52,002,148)
Net unrealized capital appreciation		30,583,315

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$787,951,466		26,300,000		$29.96

26 See financial notes

Table of Contents

Schwab International Small-Cap Equity ETF

Statement of

Operations

For the period September 1, 2015 through August 31, 2016

Investment Income
Dividends (net of foreign withholding tax of $1,617,552)		$16,117,526
Securities on loan	+	911,981
Total investment income		17,029,507
Expenses
Investment adviser fees		1,149,448
Professional fees		1,869*
Proxy fees	+	25,534
Total expenses		1,176,851
Expense reduction by CSIM and its affiliates	–	1,869*
Net expenses	–	1,174,982
Net investment income		15,854,525
Realized and Unrealized Gains (Losses)
Net realized losses on investments (net of foreign capital gains tax of $535)		(12,400,790)
Net realized gains on in-kind redemptions		6,386,459
Net realized gains on foreign currency transactions	+	124,864
Net realized losses		(5,889,467)
Net change in unrealized appreciation (depreciation) on investments		19,202,934
Net change in unrealized appreciation (depreciation) on foreign currency translations	+	(3,141)
Net change in unrealized appreciation (depreciation)	+	19,199,793
Net realized and unrealized gains		13,310,326
Increase in net assets resulting from operations		$29,164,851

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

See financial notes 27

Table of Contents

Schwab International Small-Cap Equity ETF

Statement of

Changes in Net Assets

For the current and prior report periods

Operations
	9/1/15-8/31/16		9/1/14-8/31/15
Net investment income		$15,854,525	$11,329,928
Net realized losses		(5,889,467)	(10,158,381)
Net change in unrealized appreciation (depreciation)	+	19,199,793	(49,958,289)
Increase (decrease) in net assets resulting from operations		29,164,851	(48,786,742)
Distributions to Shareholders
Distributions from net investment income		($15,625,200)	($9,800,110)

Transactions in Fund Shares
		9/1/15-8/31/16		9/1/14-8/31/15
		SHARES	VALUE	SHARES	VALUE
Shares sold		6,300,000	$184,797,227	9,200,000	$284,437,217
Shares redeemed	+	(700,000)	(20,158,435)	(600,000)	(19,306,798)
Net transactions in fund shares		5,600,000	$164,638,792	8,600,000	$265,130,419
Shares Outstanding and Net Assets
		9/1/15-8/31/16		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	+	5,600,000	178,178,443	8,600,000	206,543,567
End of period		26,300,000	$787,951,466	20,700,000	$609,773,023
Net investment income not yet distributed			$6,135,043		$4,819,562

28 See financial notes

Table of Contents

Schwab Emerging Markets Equity ETF

Financial Statements

Financial Highlights

	9/1/15– 8/31/16	9/1/14– 8/31/15	9/1/13– 8/31/14	9/1/12– 8/31/13	9/1/11– 8/31/12
Per-Share Data
Net asset value at beginning of period	$20.83	$27.34	$22.94	$23.65	$26.10
Income (loss) from investment operations:
Net investment income (loss)	0.58 ¹	0.66 ¹	0.63	0.50	0.63
Net realized and unrealized gains (losses)	1.64	(6.49)	4.40	(0.65)	(2.51)
Total from investment operations	2.22	(5.83)	5.03	(0.15)	(1.88)
Less distributions:
Distributions from net investment income	(0.49)	(0.68)	(0.63)	(0.56)	(0.57)
Net asset value at end of period	$22.56	$20.83	$27.34	$22.94	$23.65
Total return	11.02%	(21.62%)	22.31%	(0.89%)	(7.04%)
Ratios/Supplemental Data
Ratios to average net assets:
Total expenses	0.14%	0.14%	0.14%	0.15%	0.25%
Net investment income (loss)	2.85%	2.66%	2.89%	2.63%	2.96%
Portfolio turnover rate²	10%	8%	9%	15%	9%
Net assets, end of period (x 1,000)	$2,009,874	$1,276,740	$1,273,840	$811,915	$515,595

Calculated based on the average shares outstanding during the period.

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

See financial notes 29

Table of Contents

Schwab Emerging Markets Equity ETF

Condensed Portfolio Holdings as of August 31, 2016

Holdings by Category		Cost ($)	Value ($)
97.4%	Common Stock	1,935,853,934	1,956,478,688
2.5%	Preferred Stock	57,459,993	51,015,088
0.0%	Rights	235,192	82,033
0.4%	Other Investment Companies	8,522,262	8,522,262
100.3%	Total Investments	2,002,071,381	2,016,098,071
(0.3%)	Other Assets and Liabilities, Net		(6,224,277)
100.0%	Net Assets		2,009,873,794

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 97.4% of net assets
Brazil 7.0%
Ambev S.A. ADR	2,731,677	0.8	16,198,845
BRF S.A. ADR	484,176	0.4	8,100,264
Itau Unibanco Holding S.A. ADR	1,763,978	1.0	19,544,876
Petroleo Brasileiro S.A. *	2,253,080	0.5	10,269,775
Other Securities		4.3	86,928,484
		7.0	141,042,244
Chile 1.4%
Other Securities		1.4	27,433,614
China 26.1%
Bank of China Ltd., H Shares	45,329,078	1.0	20,394,944
China Construction Bank Corp., H Shares	54,464,779	2.0	40,725,267
China Life Insurance Co., Ltd., H Shares	4,450,647	0.5	10,637,831
China Mobile Ltd.	3,172,390	2.0	39,180,709
China Overseas Land & Investment Ltd.	2,507,514	0.4	8,291,841
China Petroleum & Chemical Corp., H Shares	15,544,909	0.6	11,282,797
CNOOC Ltd.	9,657,737	0.6	11,865,567
Industrial & Commercial Bank of China Ltd., H Shares	43,059,385	1.4	27,367,489
PetroChina Co., Ltd., H Shares	12,889,241	0.4	8,607,505

Security	Number of Shares	% of Net Assets	Value ($)
Ping An Insurance Group Co. of China Ltd., H Shares	3,043,048	0.8	15,751,233
Tencent Holdings Ltd.	3,205,025	4.1	83,382,092
Other Securities		12.3	247,604,208
		26.1	525,091,483
Colombia 0.6%
Other Securities		0.6	11,169,232
Czech Republic 0.2%
Other Securities		0.2	4,126,228
Egypt 0.2%
Other Securities		0.2	4,887,587
Greece 0.4%
Other Securities		0.4	8,253,017
Hungary 0.3%
Other Securities		0.3	7,009,886
India 12.6%
HDFC Bank Ltd.	360,933	0.3	6,958,888
Housing Development Finance Corp., Ltd.	949,489	1.0	19,926,225
Infosys Ltd.	1,133,696	0.9	17,535,299
ITC Ltd.	1,855,730	0.4	7,205,952
Reliance Industries Ltd.	956,139	0.8	15,133,752
Sun Pharmaceutical Industries Ltd.	658,171	0.4	7,622,970
Tata Consultancy Services Ltd.	283,424	0.5	10,628,083
Other Securities		8.3	167,740,788
		12.6	252,751,957
Indonesia 2.8%
PT Astra International Tbk	12,087,580	0.3	7,426,594
PT Bank Central Asia Tbk	7,386,527	0.4	8,380,492
PT Telekomunikasi Indonesia (Persero) Tbk	30,000,414	0.5	9,521,428
Other Securities		1.6	31,963,264
		2.8	57,291,778
Malaysia 4.1%
Public Bank Berhad	1,866,854	0.5	9,114,464
Tenaga Nasional Berhad	1,961,874	0.4	7,130,569
Other Securities		3.2	65,314,019
		4.1	81,559,052
Mexico 4.9%
America Movil S.A.B. de C.V., Series L	16,638,760	0.5	9,929,245
Cemex S.A.B. de C.V., Series CPO *	8,313,282	0.3	6,859,903
Fomento Economico Mexicano S.A.B. de C.V.	1,312,514	0.6	11,980,353
Grupo Financiero Banorte S.A.B. de C.V., O Shares	1,388,450	0.4	7,447,500
Grupo Televisa S.A.B., Series CPO	1,588,263	0.4	8,638,804

30 See financial notes

Table of Contents

Schwab Emerging Markets Equity ETF

Condensed Portfolio Holdings continued

Security	Number of Shares	% of Net Assets		Value ($)
Wal-Mart de Mexico S.A.B. de C.V.	3,386,883	0.4		7,704,009
Other Securities		2.3		46,511,003
		4.9		99,070,817
Peru 0.3%
Other Securities		0.3		6,461,452
Philippines 1.9%
Other Securities		1.9		37,492,047
Poland 1.4%
Other Securities		1.4		27,522,095
Russia 4.3%
Gazprom PAO ADR	3,500,667	0.7		14,160,198
LUKOIL PJSC *	306,086	0.7		13,645,461
Sberbank of Russia PJSC *	5,931,001	0.6		13,025,190
Other Securities		2.3		45,960,218
		4.3	��	86,791,067
South Africa 8.8%
MTN Group Ltd.	1,050,854	0.4		8,584,434
Naspers Ltd., N Shares	257,451	2.1		42,097,376
Sasol Ltd.	336,166	0.4		8,456,840
Steinhoff International Holdings N.V.	1,562,303	0.5		9,366,927
Other Securities		5.4		107,470,550
		8.8		175,976,127
Taiwan 14.6%
Chunghwa Telecom Co., Ltd. ADR	232,119	0.4		8,321,466
Delta Electronics, Inc.	1,328,148	0.3		6,906,428
Formosa Chemicals & Fibre Corp.	2,735,008	0.4		7,102,462
Formosa Plastics Corp.	2,984,560	0.4		7,364,871
Hon Hai Precision Industry Co., Ltd.	8,193,969	1.1		22,724,800
MediaTek, Inc.	880,713	0.4		6,925,132
Taiwan Semiconductor Manufacturing Co., Ltd. ADR	2,794,979	4.0		80,327,697
Other Securities		7.6		152,908,896
		14.6		292,581,752
Thailand 2.8%
Other Securities		2.8		55,933,515
Turkey 1.5%
Other Securities		1.5		29,465,038
United Arab Emirates 1.2%
Other Securities		1.2		24,568,700
Total Common Stock
(Cost $1,935,853,934)				1,956,478,688

Security	Number of Shares	% of Net Assets	Value ($)
Preferred Stock 2.5% of net assets
Brazil 2.2%
Banco Bradesco S.A.	1,647,915	0.7	14,808,711
Petroleo Brasileiro S.A. *	2,602,822	0.5	10,342,712
Other Securities		1.0	19,534,067
		2.2	44,685,490
Colombia 0.1%
Other Securities		0.1	1,822,538
Russia 0.2%
Other Securities		0.2	4,507,060
Total Preferred Stock
(Cost $57,459,993)			51,015,088

Rights 0.0% of net assets
South Africa 0.0%
Other Securities		0.0	82,033
Total Rights
(Cost $235,192)			82,033

Other Investment Companies 0.4% of net assets
United States 0.4%
Money Market Fund 0.0%
Other Securities		0.0	955,527
Securities Lending Collateral 0.4%
Wells Fargo Government Money Market Fund, Select Class 0.32% (d)		0.4	7,566,735
Total Other Investment Companies
(Cost $8,522,262)			8,522,262

End of Investments.

At 08/31/16, the tax basis cost of the fund's investments was $2,034,558,067 and the unrealized appreciation and depreciation were $199,831,355 and ($218,291,351), respectively, with a net unrealized appreciation of ($18,459,996).

See financial notes 31

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Schwab Emerging Markets Equity ETF

Condensed Portfolio Holdings 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 $7,168,807.
(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 $13,185,094 or 0.7% of net assets.
(c)	Illiquid security. At the period end, the value of these amounted to $56,744 or 0.0% 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 8/31/16:

	Number of Contracts	Contract Value ($)	Unrealized Depreciation ($)
Futures Contracts
MSCI EAFE, e-mini, Long, expires 09/16/16	80	3,551,600	(82,744)

The following is a summary of the inputs used to value the fund’s investments as of August 31, 2016 (see financial note 2(a) for additional information):

Assets Valuation Input

Description	Quoted Prices in Active Markets for Identical Assets (Level 1)	Other Significant Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Common Stock¹	$1,178,635,248	$—	$—	$1,178,635,248
China	524,239,866	—	851,617	525,091,483
India	252,294,103	—	457,854	252,751,957
Preferred Stock¹	51,015,088	—	—	51,015,088
Rights ¹	82,033	—	—	82,033
Other Investment Companies¹	8,522,262	—	—	8,522,262
Total	$2,014,788,600	$—	$1,309,471	$2,016,098,071
Liabilities Valuation Input

Other Financial Instruments
Futures Contracts²	($82,744)	$—	$—	($82,744)

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 August 31, 2016
Common Stock
China	$4,014,121	$—	($135,980)	$310,533	$—	$677,064	($4,014,121)	$851,617
India	—	—	24,433	433,421	—	—	—	457,854
Pakistan	137,863	(37,191)	24,718	—	(125,390)	—	—	—
Total	$4,151,984	($37,191)	($86,829)	$743,954	($125,390)	$677,064	($4,014,121)	$1,309,471

32 See financial notes

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Schwab Emerging Markets Equity ETF

Condensed Portfolio Holdings 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 August 31, 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 August 31, 2016.

See financial notes 33

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Schwab Emerging Markets Equity ETF

Statement of

Assets and Liabilities

As of August 31, 2016

Assets
Investments, at value (cost $1,994,504,646) including securities on loan of $7,168,807		$2,008,531,336
Collateral invested for securities on loan, at value (cost $7,566,735)	+	7,566,735
Total investments, at value (cost $2,002,071,381)		2,016,098,071
Cash		56,051
Deposit with broker for futures contracts		225,000
Foreign currency, at value (cost $2,678,197)		2,674,067
Receivables:
Dividends		3,064,239
Fund shares sold		29,182
Income from securities on loan		17,968
Foreign tax reclaims	+	17,072
Total assets		2,022,181,650
Liabilities
Collateral held for securities on loan		7,566,735
Payables:
Investments bought		2,538,677
Investment adviser fees		236,152
Foreign capital gains tax		1,923,492
Variation margin on futures contracts	+	42,800
Total liabilities		12,307,856
Net Assets
Total assets		2,022,181,650
Total liabilities	–	12,307,856
Net assets		$2,009,873,794
Net Assets by Source
Capital received from investors		2,155,668,692
Net investment income not yet distributed		31,915,692
Net realized capital losses		(189,748,010)
Net unrealized capital appreciation		12,037,420

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$2,009,873,794		89,100,000		$22.56

34 See financial notes

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Schwab Emerging Markets Equity ETF

Statement of

Operations

For the period September 1, 2015 through August 31, 2016

Investment Income
Dividends (net of foreign withholding tax of $5,602,313)		$46,700,348
Securities on loan	+	251,425
Total investment income		46,951,773
Expenses
Investment adviser fees		2,193,540
Professional fees		16,248*
Proxy fees	+	55,659
Total expenses		2,265,447
Expense reduction by CSIM and its affiliates	–	16,248*
Net expenses	–	2,249,199
Net investment income		44,702,574
Realized and Unrealized Gains (Losses)
Net realized losses on investments		(61,628,792)
Net realized gains on futures contracts		636,734
Net realized losses on foreign currency transactions	+	(541,983)
Net realized losses		(61,534,041)
Net change in unrealized appreciation (depreciation) on investments (net of change in foreign capital gains tax of ($597,790))		211,126,083
Net change in unrealized appreciation (depreciation) on futures contracts		(17,285)
Net change in unrealized appreciation (depreciation) on foreign currency translations	+	105,261
Net change in unrealized appreciation (depreciation)	+	211,214,059
Net realized and unrealized gains		149,680,018
Increase in net assets resulting from operations		$194,382,592

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

See financial notes 35

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Schwab Emerging Markets Equity ETF

Statement of

Changes in Net Assets

For the current and prior report periods

Operations
	9/1/15-8/31/16		9/1/14-8/31/15
Net investment income		$44,702,574	$34,615,796
Net realized losses		(61,534,041)	(47,156,730)
Net change in unrealized appreciation (depreciation)	+	211,214,059	(323,977,692)
Increase (decrease) in net assets resulting from operations		194,382,592	(336,518,626)
Distributions to Shareholders
Distributions from net investment income		($35,546,040)	($32,001,840)

Transactions in Fund Shares
		9/1/15-8/31/16		9/1/14-8/31/15
		SHARES	VALUE	SHARES	VALUE
Shares sold		27,800,000	$574,297,285	15,600,000	$393,111,059
Shares redeemed	+	—	—	(900,000)	(21,690,338)
Net transactions in fund shares		27,800,000	$574,297,285	14,700,000	$371,420,721
Shares Outstanding and Net Assets
		9/1/15-8/31/16		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	+	27,800,000	733,133,837	14,700,000	2,900,255
End of period		89,100,000	$2,009,873,794	61,300,000	$1,276,739,957
Net investment income not yet distributed			$31,915,692		$23,218,412

36 See financial notes

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Schwab International Equity ETFs

Financial Notes

1. Business Structure of the Funds:

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

Schwab Strategic Trust (organized January 27, 2009)	Schwab U.S. 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 funds 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(S) 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:

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 (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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Schwab International Equity ETFs

Financial Notes (continued)

2. Significant Accounting Policies (continued):

changes in financial ratios or cash flows. Level 3 prices may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the funds in the absence of market information. Assumptions used by the funds due to the lack of observable inputs may significantly impact the resulting fair value and therefore the funds’ results of operations.

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

The levels associated with valuing the funds' investments as of August 31, 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 were approximately 15% of gross lending revenues through October 2, 2015. For the subsequent period through November 30, 2015, the total costs and expenses paid to the unaffiliated lending agents ranged 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 paid to the unaffiliated lending agents start at 10% of gross lending revenue, with subsequent breakpoints to a low of 7.5%.

As of August 31, 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 August 31, 2016, if any, are disclosed in each fund's Condensed Portfolio Holdings. The value of the securities on loan and the investment of cash collateral are also disclosed in each fund's Statement of Assets and Liabilities.

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 (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.

In 2015, the funds filed claims to recover taxes previously withheld in certain European Union countries on the basis that those countries had purportedly violated certain provisions in the Treaty on the Functioning of the European Union. These filings are subject to various administrative and judicial proceedings within these countries, and all professional fees associated with these filings have been paid by the investment adviser. No other amounts for additional tax reclaims are reflected in the financial statements due to the uncertainty surrounding the ultimate resolution of proceedings, the likelihood of receipt of these claims, and the potential timing of payment.

(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.

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Schwab International Equity ETFs

Financial Notes (continued)

2. Significant Accounting Policies (continued):

(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.

(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 August 31, 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 its respective 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

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Schwab International Equity ETFs

Financial Notes (continued)

3. Risk Factors (continued):

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, 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 its respective 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 its respective index as well as it would if a fund purchased all of the securities in its index.

Tracking Error Risk. As index funds, each fund seeks to track the performance of its respective 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.

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Schwab International Equity ETFs

Financial Notes (continued)

3. Risk Factors (continued):

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

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

4. Affiliates and Affiliated Transactions:

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

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

Schwab International Equity ETF		Schwab International Small-Cap Equity ETF		Schwab Emerging Markets Equity ETF
0.08%		0.16%		0.14%

Prior to March 1, 2016, the management fee of the Schwab International Small-Cap Equity ETF was 0.18%.

Subsequent to the reporting period ended August 31, 2016, and effective October 7, 2016, the management fees of the Schwab International Equity ETF and Schwab Emerging Markets Equity ETF have been reduced to 0.07% and 0.13%, respectively.

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 August 31, 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%	0.1%	0.1%
Schwab VIT Balanced with Growth Portfolio	0.4%	0.5%	0.4%
Schwab VIT Growth Portfolio	0.4%	0.8%	0.5%
Schwab Target 2010 Index Fund	0.0%*	-%	-%
Schwab Target 2015 Index Fund	0.0%*	-%	-%
Schwab Target 2020 Index Fund	0.0%*	-%	0.0%*
Schwab Target 2025 Index Fund	0.0%*	-%	0.0%*
Schwab Target 2030 Index Fund	0.0%*	-%	0.0%*
Schwab Target 2035 Index Fund	0.0%*	-%	0.0%*
Schwab Target 2040 Index Fund	0.0%*	-%	0.0%*
Schwab Target 2045 Index Fund	0.0%*	-%	0.0%*
Schwab Target 2050 Index Fund	0.0%*	-%	0.0%*
Schwab Target 2055 Index Fund	0.0%*	-%	0.0%*
Schwab Target 2060 Index Fund	0.0%*	-%	0.0%*

*	Less than 0.05%

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Schwab International Equity ETFs

Financial Notes (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 August 31, 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 International Equity ETF	$43,151,313	($8,859,514)
Schwab International Small-Cap Equity ETF	37,425,772	2,566,228
Schwab Emerging Markets Equity ETF	6,981,973	(2,047,354)

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.

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

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.

6. Board of Trustees:

The Board may include people who are officers and/or directors of CSIM or its affiliates. Federal securities law limits the percentage of such “interested persons” who may serve on a trust’s board, and the trust was in compliance with these limitations throughout the report period. The trust does not pay any interested or non-interested trustees (independent trustees). The independent trustees are paid by CSIM. 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), which matured 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 paid 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. On October 6, 2016, the Credit Facility was amended to run for a new 364 day period with an increased line of $555 million and a commitment fee of 0.15% per annum.

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.

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Schwab International Equity ETFs

Financial Notes (continued)

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 August 31, 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 August 31, 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	$13,425,150	162
Schwab Emerging Markets Equity ETF	2,721,590	66

9. Purchases and Sales/Maturities of Investment Securities:

For the period ended August 31, 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	$388,742,996	$255,783,547
Schwab International Small-Cap Equity ETF	172,872,508	153,889,662
Schwab Emerging Markets Equity ETF	506,424,249	149,928,805

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.

The in-kind transactions for the period ended August 31, 2016 were as follows:

	In-Kind Purchases of Securities	In-Kind Sales of Securities
Schwab International Equity ETF	$1,985,668,852	—
Schwab International Small-Cap Equity ETF	168,387,463	18,898,529
Schwab Emerging Markets Equity ETF	230,083,912	—

For the period ended August 31, 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 August 31, 2016 are disclosed in the funds' Statements of Operations, if any.

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Schwab International Equity ETFs

Financial Notes (continued)

11. Federal Income Taxes

As of August 31, 2016, the components of distributable earnings on a tax-basis were as follows:

	Schwab International Equity ETF	Schwab International Small-Cap Equity ETF	Schwab Emerging Markets Equity ETF
Undistributed ordinary income	$133,989,715	$14,608,342	$40,301,172
Undistributed long-term capital gains	—	—	—
Unrealized appreciation	479,484,752	94,571,699	199,831,355
Unrealized depreciation	(514,646,800)	(73,357,973)	(218,291,351)
Other unrealized appreciation (depreciation)	(221,899)	(15,298)	(1,906,527)
Net unrealized appreciation (depreciation)	(35,383,947)	21,198,428	(20,366,523)

The primary difference between book-basis and tax-basis unrealized appreciation or unrealized depreciation of investments is the tax deferral of losses on wash sales and the realization for tax purposes of unrealized gains on investments in Passive Foreign Investment Companies (PFIC).

Capital loss carryforwards may be used to offset future realized capital gains for federal income tax purposes. As of August 31, 2016, 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*	180,861,261	50,875,015	164,638,143
Total	$183,207,135	$51,090,560	$165,729,547

*	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, 2016, the funds had no capital losses deferred and no capital loss carryforwards utilized.

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

	Schwab International Equity ETF	Schwab International Small-Cap Equity ETF	Schwab Emerging Markets Equity ETF
Current period distributions
Ordinary income	$105,649,560	$15,625,200	$35,546,040
Long-term capital gains	—	—	—
Prior period distributions
Ordinary income	79,192,160	9,800,110	32,001,840
Long-term capital gains	—	—	—

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

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Schwab International Equity ETFs

Financial Notes (continued)

11. Federal Income Taxes (continued):

Permanent book and tax basis differences may result in reclassifications between components of net assets as required. The adjustments have no impact on net assets or the results of operations. As of August 31, 2016, the funds made the following reclassifications:

	Schwab International Equity ETF	Schwab International Small-Cap Equity ETF	Schwab Emerging Markets Equity ETF
Capital shares	$—	$5,911,675	$—
Undistributed net investment income	7,013	1,086,156	(459,254)
Net realized gains and losses	(7,013)	(6,997,831)	459,254

For the period ended August 31, 2016, the following funds reclassified non-taxable security gains and losses realized on the in-kind redemption of Creation Units (Note 10) as an increase or decrease to capital received from investors in the Statement of Assets and Liabilities as follows:

	Schwab International Small-Cap Equity ETF
	$6,386,459

As of August 31, 2016, 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, 2016, 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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Report of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholders of:
Schwab International Equity ETF
Schwab International Small-Cap Equity ETF
Schwab Emerging Markets Equity ETF

In our opinion, the accompanying statements of assets and liabilities, including the condensed portfolio holdings, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Schwab International Equity ETF, Schwab International Small-Cap Equity ETF and Schwab Emerging Markets Equity ETF (three of the funds constituting Schwab Strategic Trust, hereafter referred to as the “Funds”) at August 31, 2016, the results of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2016 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
San Francisco, California
October 17, 2016

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Other Federal Tax Information (unaudited)

The funds may elect to pass on the benefits of the foreign tax credit to its shareholders for the period ended August 31, 2016, and the respective foreign source income on the funds as follows:

	Foreign Tax Credit	Foreign Source Income
Schwab International Equity ETF	$14,107,274	$169,831,242
Schwab International Small-Cap Equity ETF	1,496,293	17,724,097
Schwab Emerging Markets Equity ETF	5,526,469	52,300,370

For the period ended August 31, 2016, the funds designated the following amounts of the dividend distributions as qualified dividends for the purpose of the maximum rate under section 1(h)(ii) of the Internal Revenue Code. Shareholders will be notified in January 2017 via IRS form 1099 of the amount for use in preparing their 2016 income tax return.

Schwab International Equity ETF	$109,938,353
Schwab International Small-Cap Equity ETF	12,054,140
Schwab Emerging Markets Equity ETF	25,890,536

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Other Information (unaudited)

Frequency Distribution of Discounts and Premiums
Market Price vs. NAV as of August 31, 2016

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

	Number of Days Market Price Above NAV				Number of Days Market Price Below NAV
	1-49 Basis Points	50-99 Basis Points	100-199 Basis Points	>200 Basis Points	1-49 Basis Points	50-99 Basis Points	100-199 Basis Points	>200 Basis Points
Schwab International Equity ETF
Commencement of trading
11/3/09 through 8/31/16	657	550	152	11	222	78	28	2
Schwab International Small-Cap Equity ETF
Commencement of trading
1/14/10 through 8/31/16	533	641	198	3	175	71	29	5
Schwab Emerging Markets Equity ETF
Commencement of trading
1/14/10 through 8/31/16	459	481	272	19	265	107	46	8

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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 (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 (Board or Trustees, as appropriate) calls and holds one or more meetings each year that are dedicated, in part, to considering whether to renew the investment advisory agreement (Agreement) between Schwab Strategic Trust (Trust) and Charles Schwab Investment Management, Inc. (CSIM) 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 (Funds), and to review certain other agreements pursuant to which CSIM provides investment advisory services to certain other registered investment companies. In preparation for the meeting(s), the Board requests and reviews a wide variety of materials provided by CSIM, including information about affiliates, personnel, business goals and priorities, profitability, third-party oversight, corporate structure and operations. The Board also receives extensive data provided by an independent provider of investment company data and an independent accounting firm. This information is in addition to the detailed information about the Funds that the Board reviews during the course of each year, including information that relates to the Funds’ operations and performance, legal and compliance matters, risk management, portfolio turnover, and sales and marketing activity. In addition, the Independent Trustees meet in executive session outside the presence of fund management and participate in question and answer sessions with representatives of CSIM.

The Board, including a majority of the Independent Trustees, considered information specifically relating to its consideration of the continuance of the Agreement with respect to the Funds at meetings held on May 9, 2016 and June 1, 2016, and approved the renewal of the Agreement with respect to the Funds for an additional one-year term at the meeting held on June 1, 2016. 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 these meetings and at prior meetings, including:

1.	the nature, extent and quality of the services provided to the Funds under the Agreement, including the resources of CSIM and its affiliates dedicated to the Funds;
2.	each Fund’s investment performance and how it compared to that of certain other comparable 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 experience, track record, compliance program, resources dedicated to hiring and retaining qualified personnel, and information security resources. The Trustees also considered information provided by CSIM relating to the 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 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 Funds. Specifically, the Trustees considered each Fund’s performance relative to a peer category of other exchange-traded funds and relevant indices/benchmarks, in light of total return, yield, if applicable, and market trends. As part of this review, the Trustees considered the composition of the peer category

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

Fund Expenses. With respect to the Funds’ expenses, the Trustees considered the rate of compensation called for by the Agreement and each Fund’s operating expense ratio, in 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 provider of investment company data. The Trustees noted that each Fund’s operating expense ratio was well below the average operating expense ratio charged by other funds in its peer group. 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. The Trustees considered the compensation flowing to CSIM and its affiliates, directly or indirectly and reviewed profitability on a pre-tax basis, without regard to distribution expenses. In this connection, the Trustees reviewed management’s profitability analyses together with certain commentary thereon from an independent accounting firm. The Trustees also reviewed profitability of CSIM relating to the Schwab fund complex as a whole, noting the benefit to Fund shareholders of being part of the

Schwab fund complex, including the allocations of certain fixed costs across other funds in the complex. The Trustees also considered any other benefits derived by CSIM from its relationship with the Funds, such as whether, by virtue of its management of the Funds, CSIM obtains investment information or other research resources that aid it in providing advisory services to other clients. The Trustees considered whether the varied levels of compensation and profitability with respect to the Funds under the Agreement and other service agreements were reasonable and justified in light of the quality of all services rendered to the Funds by CSIM and its affiliates. Based on this evaluation, the Board concluded, within the context of its full deliberations, that the profitability of CSIM is reasonable and supported renewal of the Agreement with respect to the Funds.

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

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

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Trustees and Officers

The tables below give information about the trustees and officers for the Schwab Strategic Trust, which includes the funds covered in this report. The “Fund Complex” includes The Charles Schwab Family of Funds, Schwab Capital Trust, Schwab Investments, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust. The Fund Complex includes 108 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 1-877-824-5615.

Independent Trustees
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Robert W. Burns 1959 Trustee (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016)	Retired/Private Investor (Jan. 2009 – present). Formerly, Managing Director, Pacific Investment Management Company, LLC (PIMCO) and President, PIMCO Funds.	108	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 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).	108	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).	108	None
David L. Mahoney 1954 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016)	Private Investor.	108	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 and Laudus 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).	108	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).	108	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 and Laudus 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).	108	None
Gerald B. Smith 1950 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2000; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Chairman, Chief Executive Officer and Founder of Smith Graham & Co. (investment advisors) (Mar. 1990 – present).	108	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 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).	108	Board Member and Chairman of the Audit Committee, Ionis 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 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).	108	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).	108	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).	108	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 and Laudus 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 and Laudus 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 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 and Multi-Asset Strategies (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President and Chief Investment Officer – Equities and Multi-Asset Strategies, 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 and Laudus 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 and Laudus 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 and Laudus 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.

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.

Bloomberg 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.

Bloomberg 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.

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.

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.

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.

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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.

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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PRIVACY NOTICE
THIS IS NOT PART OF THE SHAREHOLDER REPORT

A Commitment to Your Privacy

Your Privacy Is Not for Sale

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

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

How We Collect Information About You

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

• APPLICATION AND REGISTRATION
INFORMATION.

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

• TRANSACTION AND EXPERIENCE INFORMATION.

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

• WEBSITE USAGE.

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

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

How We Share and Use Your Information

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

• to help us process transactions for your account;

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

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

State Laws

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

Safeguarding Your Information — Security Is a Partnership

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

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

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

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

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

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

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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 1-877-824-5615 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 1-877-824-5615.

Information regarding how a fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available, without charge, by visiting the fund’s website at www.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. TIPS ETF™
Schwab Short-Term U.S. Treasury ETF™
Schwab Intermediate-Term U.S. Treasury ETF™
Schwab U.S. Aggregate Bond 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™

1-877-824-5615

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.

MFR57933-06
00179040

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Annual report dated August 31, 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

Annual Report

August 31, 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 12 Months Ended August 31, 2016
Schwab U.S. Broad Market ETF (Ticker Symbol: SCHB)
Market Price Return¹	11.31%
NAV Return¹	11.35%
Dow Jones U.S. Broad Stock Market Index	11.42%
ETF Category: Morningstar Large Blend²	10.88%
Performance Details	pages 8-9

Schwab U.S. Large-Cap ETF (Ticker Symbol: SCHX)
Market Price Return¹	11.66%
NAV Return¹	11.66%
Dow Jones U.S. Large-Cap Total Stock Market Index	11.73%
ETF Category: Morningstar Large Blend²	10.88%
Performance Details	pages 10-11

Schwab U.S. Large-Cap Growth ETF (Ticker Symbol: SCHG)
Market Price Return¹	7.52%
NAV Return¹	7.56%
Dow Jones U.S. Large-Cap Growth Total Stock Market Index	7.59%
ETF Category: Morningstar Large Growth²	8.29%
Performance Details	pages 12-13

Schwab U.S. Large-Cap Value ETF (Ticker Symbol: SCHV)
Market Price Return¹	15.59%
NAV Return¹	15.70%
Dow Jones U.S. Large-Cap Value Total Stock Market Index	15.84%
ETF Category: Morningstar Large Value²	15.17%
Performance Details	pages 14-15

Total Returns for the 12 Months Ended August 31, 2016
Schwab U.S. Mid-Cap ETF (Ticker Symbol: SCHM)
Market Price Return¹	8.84%
NAV Return¹	8.94%
Dow Jones U.S. Mid-Cap Total Stock Market Index	8.93%
ETF Category: Morningstar Mid-Cap Blend²	7.59%
Performance Details	pages 16-17

Schwab U.S. Small-Cap ETF (Ticker Symbol: SCHA)
Market Price Return¹	8.91%
NAV Return¹	8.89%
Dow Jones U.S. Small-Cap Total Stock Market Index	8.89%
ETF Category: Morningstar Small Blend²	8.24%
Performance Details	pages 18-19

Schwab U.S. Dividend Equity ETF (Ticker Symbol: SCHD)
Market Price Return¹	19.95%
NAV Return¹	19.89%
Dow Jones U.S. Dividend 100^TM Index	20.07%
ETF Category: Morningstar Large Value²	15.17%
Performance Details	pages 20-21

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,

Over the 12-month reporting period ended August 31, 2016, the Schwab U.S. Equity ETFs (the funds) generated strong returns even as concerns mounted that the seven-year bull market wouldn’t extend for another year. For the period, each of the Funds generated positive results and tracked their respective indexes, with four of the funds producing double-digit returns.

Some investors may have failed to benefit from stocks’ rally in recent months because they pulled money out of the market. Investors withdrew over $50 billion from stock funds in the first half of the year before making July the worst month for stock fund outflows in six years. Coming into the reporting period, many investors were skeptical that stocks could keep rising in light of slowing growth overseas, currency devaluations in China, and the prospect of the first interest-rate increases in the U.S. in nearly a decade. Yet, U.S. stocks continued to reach new records, even as the outlook was further clouded by the United Kingdom’s unexpected decision to exit the European Union in June (also known as Brexit).

At Charles Schwab Investment Management, we believe it’s important for investors to stay on track with their long-term investing plans and ignore the noise created by news headlines. While it can be beneficial to tweak portfolio allocations at times as the outlook changes, more dramatic moves may increase the consequences for being wrong.

Asset Class Performance Comparison % returns during the 12 months ended 8/31/2016

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

Instead, we believe investors should focus on the things they can control, like the costs related to their investments. The Schwab U.S. Equity ETFs are 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 ETFs that help their investment 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 you can find further details about the funds by visiting our website at www.csimfunds.com. We are also happy to hear from you at 1-877-824-5615.

Sincerely,

4Schwab U.S. Equity ETFs

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The Investment Environment

Over the 12-month reporting period ended August 31, 2016, most U.S. equity markets generated positive returns despite beginning 2016 with one of the worst starts to a year in more than two decades. Better-than-expected second quarter corporate earnings reports and relatively stable economic growth helped stocks to rebound toward the end of the reporting period, with several indexes reaching record highs. The S&P 500^® Index, a bellwether for the overall U.S. stock market, returned 12.55%, 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 8.93% and 8.89%, respectively. Outside the U.S., the MSCI EAFE Index (Net), a broad measure of developed international equity performance, returned -0.12%, while the MSCI Emerging Markets Index (Net) returned 11.83%.

U.S. economic data was relatively strong despite several weak measurements during the reporting period. New housing starts fell in October and January, but trended generally upwards for the second half of the 12 months. Disposable personal income improved each month and U.S. real gross domestic product grew in both of the first two quarters of 2016, while consumer spending rose in April, May, June and July. U.S. nonfarm payroll employment numbers met or exceeded expectations for most of the reporting period, though dropped sharply in May, and U.S. manufacturing reversed its downward trend to rebound in the last months of the reporting period. At the same time, however, U.S. retail sales came in unchanged and U.S. producer prices fell in July, despite expectations of growth in both areas. Additionally, the index used by the Institute for Supply Management showed U.S. manufacturing activity contracted in August from the month prior, and August nonfarm payroll numbers came in below expectations. Despite these uneven measurements, the relatively stable U.S. economy generally supported U.S. stocks, especially toward the end of the reporting period.

Interest rate policy in the U.S. remained a source of uncertainty over the reporting period. The Federal Reserve (Fed) raised the federal funds rate in December 2015 to a range of 0.25% to 0.50%, the first short-term interest rate increase in almost 10 years. At that time, expectations were for four additional rate increases in 2016, but challenges in both the U.S. and abroad caused projections to change several times over the remainder of the reporting period. China’s decelerating economy and overall lackluster global growth played a role in this uncertainty, as did fluctuating oil and commodity prices and inconsistent U.S. economic data. Further complicating the Fed’s decision was the United Kingdom’s unexpected vote in June to leave the European Union, also known as Brexit. These results shook markets globally, sending stocks downward and causing the British pound to depreciate by more than 7%. With the resulting heightened volatility and uncertainty, the Fed again left rates unchanged in July. However, Fed officials also noted that they believed the near-term risks to the economy had receded, increasing the chances of a short-term rate hike by the end of 2016.

While moves toward tighter monetary policy in the U.S. stalled over the reporting period, many other countries’ central banks maintained or increased accommodative policy measures to combat struggling economic growth. Both the Bank of Japan (BOJ) and the European Central Bank (ECB) expanded their bond buying programs and lowered key interest rates over the 12 months, with the BOJ entering negative rate territory. The ECB also launched a plan to provide cheap funding for European banks, enabling these banks to increase lending to both consumers and corporations. Following the June Brexit vote, the Bank of England increased accommodative measures by cutting its benchmark rate and announcing an expanded stimulus package. The continued divergence in policies between the Fed and central banks outside the U.S. contributed to currency fluctuations and market movements, while also highlighting the relative strength of the U.S. economy.

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

From a sector perspective, the Telecommunication Services and the Utilities sectors were two of the better performers. Dividend-paying stocks remained appealing to many investors seeking yield in the current low interest rate environment, and with heightened market volatility, demand increased for securities in these traditionally defensive sectors. By comparison, the Health Care and Energy sectors underperformed for the reporting period. The Affordable Care Act continued to cause challenges and uncertainty for many companies in the Health Care sector, while sharply fluctuating oil and commodity prices early in the reporting period weighed on Energy sector returns.

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

The Schwab U.S. Broad Market ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Broad Stock Market Index (the index). The index includes the largest 2,500 publicly traded U.S. companies for which pricing information is readily available. The index is a float-adjusted market capitalization weighted index that reflects the shares of securities actually available to investors in the marketplace. The fund invests in a representative sample of securities included in the index that, when taken together, are expected to perform similarly to the index as a whole. Due to the use of representative sampling, the fund may not hold all of the securities in the index.

Market Highlights. U.S. stocks performed well over the reporting period, with several indexes reaching record highs toward the end of the 12 months. The Federal Reserve (Fed) increased the federal funds rate in December 2015 for the first time in almost 10 years, but uncertain global growth and inconsistent economic data domestically caused the Fed to hold off on additional rate increases during the reporting period. Fluctuating oil prices and China’s decelerating economy weighed on U.S. stocks in the first half of the reporting period, and the United Kingdom’s unexpected decision in June to leave the European Union, also known as Brexit, immediately triggered a sharp selloff in global equity markets. However, solid manufacturing activity, upbeat second-quarter earnings reports, and strong housing data and job numbers helped U.S. stock markets to rebound. Within the index, stocks in the Telecommunication Services and Utilities sectors were among the better performers, while stocks in the Energy and Health Care sectors underperformed by comparison.

Performance. During the 12-month reporting period ended August 31, 2016, the fund closely tracked the index. The fund’s market price return was 11.31% and its NAV return was 11.35%. The index returned 11.42% during the same period. Differences between the return of the fund and the return of the index may be attributable to, among other things, the operational and transactional costs incurred by the fund and not the index.

Contributors and Detractors. The Health Care sector was the smallest contributor to the performance of both the index and the fund, representing an average weight of approximately 14% of the fund’s investments and returning approximately 3%. The Health Care sector includes health care providers and services, companies that manufacture and distribute health care equipment and supplies, health care technology companies, as well as companies involved in the research, development, production and marketing of pharmaceuticals and biotechnology products. One example from this sector is Gilead Sciences, Inc., a research-based biopharmaceutical company. The fund’s holdings of Gilead Sciences, Inc. returned approximately -24% for the reporting period. The Energy sector was another small contributor to overall fund performance. Energy stocks represented an average weight of approximately 6% of the fund’s investments and returned approximately 5% for the reporting period.

The Information Technology sector, which includes companies that offer software and information technology services, as well as manufacturers and distributors of technology hardware and equipment, contributed the most to the fund’s total return, and to the return of the index. Information Technology stocks represented an average weight of approximately 20% of the fund’s investments and returned approximately 18%. One example from this sector is Microsoft Corp., a technology company. The fund’s holdings of Microsoft Corp. returned approximately 36% for the 12-month reporting period. The Industrials sector also provided a meaningful contribution to the return of the fund, representing an average weight of approximately 11% of the fund’s investments and returning approximately 16%.

As of 08/31/16:

Statistics
Number of Holdings	1,996
Weighted Average Market Cap (millions)	$120,100
Price/Earnings Ratio (P/E)	28.5
Price/Book Ratio (P/B)	2.7
Portfolio Turnover Rate¹	5%

Sector Weightings % of Investments
Information Technology	20.2%
Financials	17.8%
Health Care	14.0%
Consumer Discretionary	12.8%
Industrials	10.4%
Consumer Staples	8.9%
Energy	6.4%
Materials	3.3%
Utilities	3.3%
Telecommunication Services	2.4%
Other	0.5%
Total	100.0%

Top Equity Holdings % of Net Assets²
Apple, Inc.	2.5%
Microsoft Corp.	2.0%
Exxon Mobil Corp.	1.6%
Johnson & Johnson	1.4%
Amazon.com, Inc.	1.3%
Facebook, Inc., Class A	1.3%
General Electric Co.	1.2%
Berkshire Hathaway, Inc., Class B	1.2%
AT&T, Inc.	1.1%
JPMorgan Chase & Co.	1.1%
Total	14.7%

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

Source of Sector Classification: S&P and MSCI.

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

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Schwab U.S. Broad Market ETF

Performance and Fund Facts as of 08/31/16

November 3, 2009 – August 31, 2016
Performance of Hypothetical
$10,000 Investment¹

Average Annual Total Returns¹

Fund and Inception Date	1 Year	5 Years	Since Inception*
Fund: Schwab U.S. Broad Market ETF (11/3/09)
Market Price Return²	11.31%	14.43%	13.87%
NAV Return²	11.35%	14.41%	13.88%
Dow Jones U.S. Broad Stock Market Index	11.42%	14.42%	13.90%
ETF Category: Morningstar Large Blend³	10.88%	14.12%	13.17%

Fund Expense Ratio⁴: 0.03%

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.

*	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.

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Schwab U.S. Large-Cap ETF

The Schwab U.S. Large-Cap ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Large-Cap Total Stock Market Index (the index). The index includes the large-cap portion of the Dow Jones U.S. Total Stock Market Index actually available to investors in the marketplace. The index comprises the components ranked 1–750 by full market capitalization. The index is a float-adjusted market capitalization weighted index. The fund will generally give the same weight to a given stock as does the index.

Market Highlights. U.S. stocks performed well over the reporting period, with several indexes reaching record highs toward the end of the 12 months. The Federal Reserve (Fed) increased the federal funds rate in December 2015 for the first time in almost 10 years, but uncertain global growth and inconsistent economic data domestically caused the Fed to hold off on additional rate increases during the reporting period. Fluctuating oil prices and China’s decelerating economy weighed on U.S. stocks in the first half of the reporting period, and the United Kingdom’s unexpected decision in June to leave the European Union, also known as Brexit, immediately triggered a sharp selloff in global equity markets. However, solid manufacturing activity, upbeat second-quarter earnings reports, and strong housing data and job numbers helped U.S. stock markets to rebound. Within the index, stocks in the Telecommunication Services and Utilities sectors were among the better performers, while stocks in the Health Care and Energy sectors underperformed by comparison.

Performance. During the 12-month reporting period ended August 31, 2016, the fund closely tracked the index. Both the fund’s market price return and its NAV return were 11.66%, while the index returned 11.73% during the same period. Differences between the return of the fund and the return of the index may be attributable to, among other things, the operational and transactional costs incurred by the fund and not the index.

Contributors and Detractors. The Health Care sector was the smallest contributor to the performance of both the index and the fund, representing an average weight of approximately 14% of the fund’s investments and returning approximately 4%. The Health Care sector includes health care providers and services, companies that manufacture and distribute health care equipment and supplies, health care technology companies, as well as companies involved in the research, development, production and marketing of pharmaceuticals and biotechnology products. One example from this sector is Gilead Sciences, Inc., a research-based biopharmaceutical company. The fund’s holdings of Gilead Sciences, Inc. returned approximately -24% for the reporting period. The Energy sector was another small contributor to overall fund performance. Energy stocks represented an average weight of approximately 7% of the fund’s investments and returned approximately 6% for the reporting period.

The Information Technology sector, which includes companies that offer software and information technology services, as well as manufacturers and distributors of technology hardware and equipment, contributed the most to the fund’s total return, and to the return of the index. Information Technology stocks represented an average weight of approximately 20% of the fund’s investments and returned approximately 18%. One example from this sector is Microsoft Corp., a technology company. The fund’s holdings of Microsoft Corp. returned approximately 36% for the 12-month reporting period. The Consumer Staples sector also provided a meaningful contribution to the return of the fund, representing an average weight of approximately 10% of the fund’s investments and returning approximately 18%.

As of 08/31/16:

Statistics
Number of Holdings	745
Weighted Average Market Cap (millions)	$134,386
Price/Earnings Ratio (P/E)	25.7
Price/Book Ratio (P/B)	2.7
Portfolio Turnover Rate¹	4%

Sector Weightings % of Investments
Information Technology	20.7%
Financials	16.8%
Health Care	14.3%
Consumer Discretionary	12.8%
Industrials	10.0%
Consumer Staples	9.6%
Energy	6.6%
Utilities	3.2%
Materials	3.0%
Telecommunication Services	2.6%
Other	0.4%
Total	100.0%

Top Equity Holdings % of Net Assets²
Apple, Inc.	2.8%
Microsoft Corp.	2.2%
Exxon Mobil Corp.	1.8%
Johnson & Johnson	1.6%
Amazon.com, Inc.	1.4%
Facebook, Inc., Class A	1.4%
General Electric Co.	1.4%
Berkshire Hathaway, Inc., Class B	1.4%
AT&T, Inc.	1.2%
JPMorgan Chase & Co.	1.2%
Total	16.4%

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

Source of Sector Classification: S&P and MSCI.

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

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Schwab U.S. Large-Cap ETF

Performance and Fund Facts as of 08/31/16

November 3, 2009 – August 31, 2016
Performance of Hypothetical
$10,000 Investment¹

Average Annual Total Returns¹

Fund and Inception Date	1 Year	5 Years	Since Inception*
Fund: Schwab U.S. Large-Cap ETF (11/3/09)
Market Price Return²	11.66%	14.44%	13.68%
NAV Return²	11.66%	14.44%	13.68%
Dow Jones U.S. Large-Cap Total Stock Market Index	11.73%	14.51%	13.77%
ETF Category: Morningstar Large Blend³	10.88%	14.12%	13.17%

Fund Expense Ratio⁴: 0.03%

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.

*	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.

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Schwab U.S. Large-Cap Growth ETF

The Schwab U.S. Large-Cap Growth ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Large-Cap Growth Total Stock Market Index (the index). The index includes the large-cap growth portion of the Dow Jones U.S. Total Stock Market Index actually available to investors in the marketplace. The index includes the components ranked 1-750 by full market capitalization and that are classified as “growth” based on a number of factors. The index is a float-adjusted market capitalization weighted index. The fund will generally give the same weight to a given stock as does the index.

Market Highlights. U.S. large-cap growth stocks performed well over the reporting period. The Federal Reserve (Fed) increased the federal funds rate in December 2015 for the first time in almost 10 years, but uncertain global growth and inconsistent economic data domestically caused the Fed to hold off on additional rate increases during the reporting period. Fluctuating oil prices and China’s decelerating economy weighed on U.S. stocks in the first half of the reporting period, and the United Kingdom’s unexpected decision in June to leave the European Union, also known as Brexit, immediately triggered a sharp selloff in global equity markets. However, solid manufacturing activity, upbeat second-quarter earnings reports, and strong housing data and job numbers helped U.S. stock markets to rebound. Within the index, stocks in the Information Technology and Financials sectors were among the better performers, while stocks in the Health Care and Energy sectors underperformed by comparison.

Performance. During the 12-month reporting period ended August 31, 2016, the fund closely tracked the index. The fund’s market price return was 7.52% and its NAV return was 7.56%. The index returned 7.59% during the same period. Differences between the return of the fund and the return of the index may be attributable to, among other things, the operational and transactional costs incurred by the fund and not the index.

Contributors and Detractors. The Health Care sector was the only detractor from the performance of both the index and the fund over the reporting period, representing an average weight of approximately 17% of the fund’s investments and returning approximately -3%. The Health Care sector includes health care providers and services, companies that manufacture and distribute health care equipment and supplies, health care technology companies, as well as companies involved in the research, development, production and marketing of pharmaceuticals and biotechnology products. One example from this sector is Gilead Sciences, Inc., a research-based biopharmaceutical company. The fund’s holdings of Gilead Sciences, Inc. returned approximately -24% for the reporting period. The Utilities sector did not detract from the performance of the fund, but was the smallest contributor to overall fund performance. Utilities stocks represented an average weight of less than 1% of the fund’s investments and returned approximately 9% for the reporting period.

The Information Technology sector, which includes companies that offer software and information technology services, as well as manufacturers and distributors of technology hardware and equipment, contributed the most to the fund’s total return, and to the return of the index. Information Technology stocks represented an average weight of approximately 28% of the fund’s investments and returned approximately 13% for the reporting period. One example from this sector is Facebook, Inc., a company that builds products that enable people to connect and share through mobile devices and personal computers. The fund’s Class A share holdings of Facebook, Inc. returned approximately 41% for the 12-month reporting period. The Consumer Discretionary sector also provided a meaningful contribution to the return of the fund, representing an average weight of approximately 20% of the fund’s investments and returning approximately 8%.

As of 08/31/16:

Statistics
Number of Holdings	413
Weighted Average Market Cap (millions)	$137,929
Price/Earnings Ratio (P/E)	29.3
Price/Book Ratio (P/B)	3.7
Portfolio Turnover Rate¹	7%

Sector Weightings % of Investments
Information Technology	28.4%
Consumer Discretionary	19.4%
Health Care	16.8%
Financials	12.0%
Industrials	10.6%
Energy	4.6%
Consumer Staples	4.4%
Materials	2.7%
Telecommunication Services	0.4%
Utilities	0.1%
Other	0.6%
Total	100.0%

Top Equity Holdings % of Net Assets²
Apple, Inc.	5.9%
Amazon.com, Inc.	3.0%
Facebook, Inc., Class A	3.0%
Berkshire Hathaway, Inc., Class B	2.9%
Alphabet, Inc., Class A	2.4%
Alphabet, Inc., Class C	2.3%
The Home Depot, Inc.	1.7%
Comcast Corp., Class A	1.6%
Visa, Inc., Class A	1.6%
The Walt Disney Co.	1.4%
Total	25.8%

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

Source of Sector Classification: S&P and MSCI.

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

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Schwab U.S. Large-Cap Growth ETF

Performance and Fund Facts as of 08/31/16

December 11, 2009 – August 31, 2016
Performance of Hypothetical
$10,000 Investment¹

Average Annual Total Returns¹

Fund and Inception Date	1 Year	5 Years	Since Inception*
Fund: Schwab U.S. Large-Cap Growth ETF (12/11/09)
Market Price Return²	7.52%	14.80%	13.54%
NAV Return²	7.56%	14.81%	13.54%
Dow Jones U.S. Large-Cap Growth Total Stock Market Index	7.59%	14.90%	13.65%
ETF Category: Morningstar Large Growth³	8.29%	15.13%	13.76%

Fund Expense Ratio⁴: 0.06%

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.

*	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.

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Schwab U.S. Large-Cap Value ETF

The Schwab U.S. Large-Cap Value ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Large-Cap Value Total Stock Market Index (the index). The index includes the large-cap value portion of the Dow Jones U.S. Total Stock Market Index actually available to investors in the marketplace. The index includes the components ranked 1-750 by full market capitalization and that are classified as “value” based on a number of factors. The index is a float-adjusted market capitalization weighted index. The fund will generally give the same weight to a given stock as does the index.

Market Highlights. U.S. large-cap value stocks performed well over the 12-month reporting period. The Federal Reserve (Fed) increased the federal funds rate in December 2015 for the first time in almost 10 years, but uncertain global growth and inconsistent economic data domestically caused the Fed to hold off on additional rate increases during the reporting period. Fluctuating oil prices and China’s decelerating economy weighed on U.S. stocks in the first half of the reporting period, and the United Kingdom’s unexpected decision in June to leave the European Union, also known as Brexit, immediately triggered a sharp selloff in global equity markets. However, solid manufacturing activity, upbeat second-quarter earnings reports, and strong housing data and job numbers helped U.S. stock markets to rebound. Within the index, stocks in the Information Technology and Industrials sectors were among the better performers, while stocks in the Financials and Consumer Discretionary sectors underperformed by comparison.

Performance. During the 12-month reporting period ended August 31, 2016, the fund generally tracked the index. The fund’s market price return was 15.59% and its NAV return was 15.70%, while the index returned 15.84% during the same period. Differences between the return of the fund and the return of the index may be attributable to, among other things, the operational and transactional costs incurred by the fund and not the index.

Contributors and Detractors. The Consumer Discretionary sector was the smallest contributor to the performance of the fund, representing an average weight of approximately 7% of the fund’s investments and returning approximately 7%. The Consumer Discretionary sector includes businesses in both manufacturing and service. One example from this sector is Macy’s, Inc., an omnichannel retail company. The fund’s holdings of Macy’s, Inc. returned approximately -36% for the reporting period. The Materials sector was another small contributor to overall fund performance. Materials stocks represented an average weight of approximately 3% of the fund’s investments and returned approximately 20% for the reporting period.

The Information Technology sector, which includes companies that offer software and information technology services, as well as manufacturers and distributors of technology hardware and equipment, contributed the most to the fund’s total return, and to the return of the index. Information Technology stocks represented an average weight of approximately 13% of the fund’s investments and returned approximately 28% for the reporting period. One example from this sector is Microsoft Corp., a technology company. The fund’s holdings of Microsoft Corp. returned approximately 36% for the 12-month reporting period. The Consumer Staples sector also provided a meaningful contribution to the return of the fund, representing an average weight of approximately 14% of the fund’s investments and returning approximately 21%.

As of 08/31/16:

Statistics
Number of Holdings	333
Weighted Average Market Cap (millions)	$131,230
Price/Earnings Ratio (P/E)	23.2
Price/Book Ratio (P/B)	2.2
Portfolio Turnover Rate¹	6%

Sector Weightings % of Investments
Financials	21.3%
Consumer Staples	14.5%
Information Technology	13.6%
Health Care	11.8%
Industrials	9.4%
Energy	8.4%
Consumer Discretionary	6.7%
Utilities	6.2%
Telecommunication Services	4.7%
Materials	3.3%
Other	0.1%
Total	100.0%

Top Equity Holdings % of Net Assets²
Microsoft Corp.	4.3%
Exxon Mobil Corp.	3.4%
Johnson & Johnson	3.1%
General Electric Co.	2.7%
AT&T, Inc.	2.4%
JPMorgan Chase & Co.	2.3%
Wells Fargo & Co.	2.2%
The Procter & Gamble Co.	2.2%
Verizon Communications, Inc.	2.0%
Pfizer, Inc.	2.0%
Total	26.6%

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

Source of Sector Classification: S&P and MSCI.

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

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Schwab U.S. Large-Cap Value ETF

Performance and Fund Facts as of 08/31/16

December 11, 2009 – August 31, 2016
Performance of Hypothetical
$10,000 Investment¹

Average Annual Total Returns¹

Fund and Inception Date	1 Year	5 Years	Since Inception*
Fund: Schwab U.S. Large-Cap Value ETF (12/11/09)
Market Price Return²	15.59%	13.98%	12.19%
NAV Return²	15.70%	13.96%	12.20%
Dow Jones U.S. Large-Cap Value Total Stock Market Index	15.84%	14.09%	12.36%
ETF Category: Morningstar Large Value³	15.17%	14.02%	12.80%

Fund Expense Ratio⁴: 0.06%

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.

*	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.

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Schwab U.S. Mid-Cap ETF

The Schwab U.S. Mid-Cap ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Mid-Cap Total Stock Market Index (the index). The index includes the mid-cap portion of the Dow Jones U.S. Total Stock Market Index actually available to investors in the marketplace. The index includes the components ranked 501–1,000 by full market capitalization. The index is a float-adjusted market capitalization weighted index. The fund will generally give the same weight to a given security as does the index.

Market Highlights. U.S. mid-cap stocks performed well over the reporting period. The Federal Reserve (Fed) increased the federal funds rate in December 2015 for the first time in almost 10 years, but uncertain global growth and inconsistent economic data domestically caused the Fed to hold off on additional rate increases during the reporting period. Fluctuating oil prices and China’s decelerating economy weighed on U.S. stocks in the first half of the reporting period, and the United Kingdom’s unexpected decision in June to leave the European Union, also known as Brexit, immediately triggered a sharp selloff in global equity markets. However, solid manufacturing activity, upbeat second-quarter earnings reports, and strong housing data and job numbers helped U.S. stock markets to rebound. Within the index, stocks in the Utilities and Materials sectors were among the better performers, while stocks in the Energy and Health Care sectors underperformed by comparison.

Performance. During the 12-month reporting period ended August 31, 2016, the fund closely tracked the index. The fund’s market price return was 8.84% and its NAV return was 8.94%, while the index returned 8.93% during the same period.

Contributors and Detractors. The Health Care sector was the largest detractor from the performance of the fund, representing an average weight of approximately 10% of the fund’s investments and returning approximately -3%. The Health Care sector includes health care providers and services, companies that manufacture and distribute health care equipment and supplies, health care technology companies, as well as companies involved in the research, development, production and marketing of pharmaceuticals and biotechnology products. One example from this sector is Community Health Systems, Inc., an operator of general acute care hospitals in communities. The fund’s holdings of Community Health Systems, Inc. returned approximately -76% for the reporting period. The Energy sector was another detractor from overall fund performance. Energy stocks represented an average weight of approximately 5% of the fund’s investments and returned approximately -12% for the reporting period.

The Financials sector, which includes companies involved in banking, finance, asset management, real estate companies, and real estate investment trusts (REITs), contributed the most to the fund’s total return, and to the return of the index. Financials stocks represented an average weight of approximately 26% of the fund’s investments and returned approximately 14% for the reporting period. One example from this sector is Realty Income Corp., a REIT engaged in portfolio management, asset management, in-house acquisition, credit research, real estate research, legal, finance and accounting, information technology, and capital markets capabilities. The fund’s holdings of Realty Income Corp. returned approximately 53% for the 12-month reporting period. The Utilities sector also provided a meaningful contribution to the return of the fund, representing an average weight of approximately 6% of the fund’s investments and returning approximately 26%.

As of 08/31/16:

Statistics
Number of Holdings	486
Weighted Average Market Cap (millions)	$7,046
Price/Earnings Ratio (P/E)	59.5
Price/Book Ratio (P/B)	2.4
Portfolio Turnover Rate¹	21%

Sector Weightings % of Investments
Financials	26.6%
Industrials	15.6%
Information Technology	13.9%
Consumer Discretionary	13.8%
Health Care	9.7%
Materials	5.7%
Utilities	5.7%
Energy	4.6%
Consumer Staples	2.9%
Telecommunication Services	0.4%
Other	1.1%
Total	100.0%

Top Equity Holdings % of Net Assets²
Willis Towers Watson plc	0.7%
Realty Income Corp.	0.7%
Ulta Salon, Cosmetics & Fragrance, Inc.	0.6%
DENTSPLY SIRONA, Inc.	0.6%
Medivation, Inc.	0.6%
American Water Works Co., Inc.	0.5%
Acuity Brands, Inc.	0.5%
Global Payments, Inc.	0.5%
SL Green Realty Corp.	0.5%
Masco Corp.	0.5%
Total	5.7%

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

Source of Sector Classification: S&P and MSCI.

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

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Schwab U.S. Mid-Cap ETF

Performance and Fund Facts as of 08/31/16

January 13, 2011 – August 31, 2016
Performance of Hypothetical
$10,000 Investment¹

Average Annual Total Returns¹

Fund and Inception Date	1 Year	5 Years	Since Inception*
Fund: Schwab U.S. Mid-Cap ETF (1/13/11)
Market Price Return²	8.84%	14.63%	11.84%
NAV Return²	8.94%	14.66%	11.84%
Dow Jones U.S. Mid-Cap Total Stock Market Index	8.93%	14.71%	11.89%
ETF Category: Morningstar Mid-Cap Blend³	7.59%	13.26%	10.51%

Fund Expense Ratio⁴: 0.07%

For index definitions, please see the Glossary.

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

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.

*	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.

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Schwab U.S. Small-Cap ETF

The Schwab U.S. Small-Cap ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Small-Cap Total Stock Market Index (the index). The index includes the small-cap portion of the Dow Jones U.S. Total Stock Market Index actually available to investors in the marketplace. The index includes the components ranked 751- 2,500 by full market capitalization. The index is a float-adjusted market capitalization weighted index. The fund will generally give the same weight to a given stock as does the index.

Market Highlights. U.S. small-cap stocks generated positive returns over the reporting period. The Federal Reserve (Fed) increased the federal funds rate in December 2015 for the first time in almost 10 years, but uncertain global growth and inconsistent economic data domestically caused the Fed to hold off on additional rate increases during the reporting period. Fluctuating oil prices and China’s decelerating economy weighed on U.S. stocks in the first half of the reporting period, and the United Kingdom’s unexpected decision in June to leave the European Union, also known as Brexit, immediately triggered a sharp selloff in global equity markets. However, solid manufacturing activity, upbeat second-quarter earnings reports, and strong housing data and job numbers helped U.S. stock markets to rebound. Within the index, stocks in the Utilities and Materials sectors were among the better performers, while stocks in the Health Care and Energy sectors underperformed by comparison.

Performance. During the 12-month reporting period ended August 31, 2016, the fund closely tracked the index. The fund’s market price return was 8.91% and its NAV return was 8.89%, while the index returned 8.89% during the same period.

Contributors and Detractors. The Financials sector, which includes companies involved in banking, finance, asset management, real estate companies, and real estate investment trusts (REITs), contributed the most to the fund’s total return, and to the return of the index. Financials stocks represented an average weight of approximately 27% of the fund’s investments and returned approximately 15% for the reporting period. One example from this sector is MarketAxess Holdings Inc., an electronic trading platform. The fund’s holdings of MarketAxess Holdings Inc. returned approximately 88% for the 12-month reporting period. The Information Technology sector also provided a meaningful contribution to the return of the fund, representing an average weight of approximately 16% of the fund’s investments and returning approximately 16%.

The Health Care sector was the largest detractor from the performance of the fund, representing an average weight of approximately 13% of the fund’s investments and returning approximately -8%. The Health Care sector includes health care providers and services, companies that manufacture and distribute health care equipment and supplies, health care technology companies, as well as companies involved in the research, development, production and marketing of pharmaceuticals and biotechnology products. One example from this sector is bluebird bio, Inc., a biotechnology company. The fund’s holdings of bluebird bio, Inc. returned approximately -63% for the reporting period. The Energy sector was another detractor from overall fund performance. Energy stocks represented an average weight of approximately 4% of the fund’s investments and returned approximately -6% for the reporting period.

As of 08/31/16:

Statistics
Number of Holdings	1,725
Weighted Average Market Cap (millions)	$2,920
Price/Earnings Ratio (P/E)	21.8
Price/Book Ratio (P/B)	2.1
Portfolio Turnover Rate¹	11%

Sector Weightings % of Investments
Financials	26.5%
Information Technology	15.9%
Industrials	13.6%
Consumer Discretionary	12.5%
Health Care	12.0%
Materials	5.6%
Energy	4.8%
Utilities	3.4%
Consumer Staples	3.3%
Telecommunication Services	0.5%
Other	1.9%
Total	100.0%

Top Equity Holdings % of Net Assets²
Newfield Exploration Co.	0.3%
Teleflex, Inc.	0.3%
Huntington Ingalls Industries, Inc.	0.3%
Diamondback Energy, Inc.	0.3%
Targa Resources Corp.	0.3%
Align Technology, Inc.	0.3%
Gaming & Leisure Properties, Inc.	0.3%
Spirit Realty Capital, Inc.	0.3%
MarketAxess Holdings, Inc.	0.3%
Equity LifeStyle Properties, Inc.	0.2%
Total	2.9%

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

Source of Sector Classification: S&P and MSCI.

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

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Schwab U.S. Small-Cap ETF

Performance and Fund Facts as of 08/31/16

November 3, 2009 – August 31, 2016
Performance of Hypothetical
$10,000 Investment¹

Average Annual Total Returns¹

Fund and Inception Date	1 Year	5 Years	Since Inception*
Fund: Schwab U.S. Small-Cap ETF (11/3/09)
Market Price Return²	8.91%	13.84%	15.05%
NAV Return²	8.89%	13.85%	15.04%
Dow Jones U.S. Small-Cap Total Stock Market Index	8.89%	13.83%	15.09%
ETF Category: Morningstar Small Blend³	8.24%	13.45%	14.06%

Fund Expense Ratio⁴: 0.07%

For index definitions, please see the Glossary.

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

Small-company stocks may be 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.

*	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. Effective May 2, 2016, the management fee was reduced to 0.07%. For more information, see financial note 4 or refer to the prospectus supplement dated May 2, 2016.

Schwab U.S. Equity ETFs19

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Schwab U.S. Dividend Equity ETF

The Schwab U.S. Dividend Equity ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Dividend 100^TM Index (the index). 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. The index is modified market capitalization weighted. No single stock can represent more than 4.5% of the index, and no single sector can represent more than 25% of the index. The fund will generally give the same weight to a given stock as does the index.

Market Highlights. U.S. stocks performed well over the reporting period, with several indexes reaching record highs toward the end of the 12 months. The Federal Reserve (Fed) increased the federal funds rate in December 2015 for the first time in almost 10 years, but uncertain global growth and inconsistent economic data domestically caused the Fed to hold off on additional rate increases during the reporting period. Fluctuating oil prices and China’s decelerating economy weighed on U.S. stocks in the first half of the reporting period, and the United Kingdom’s unexpected decision in June to leave the European Union, also known as Brexit, immediately triggered a sharp selloff in global equity markets. However, solid manufacturing activity, upbeat second-quarter earnings reports, and strong housing data and job numbers helped U.S. stock markets to rebound. Within the index, stocks in the Materials and Utilities sectors were among the better performers, while stocks in the Consumer Discretionary and Financials sectors underperformed by comparison.

Performance. During the 12-month reporting period ended August 31, 2016, the fund closely tracked the index. The fund’s market price return was 19.95% and its NAV return was 19.89%, while the index returned 20.07% during the same period. Differences between the return of the fund and the return of the index may be attributable to, among other things, the operational and transactional costs incurred by the fund and not the index.

Contributors and Detractors. The Utilities sector, representing an average weight of less than 1% of the fund’s investments, was the smallest contributor to the performance of the fund despite returning approximately 31%. The Utilities sector includes utility companies, independent power producers, and energy traders, as well as companies that engage in generation and distribution of electricity using renewable sources. One example from this sector is Questar Corp. an integrated natural gas holding company. The fund’s holdings of Questar Corp. were the smallest contributors in this sector and returned approximately 34% for the reporting period. The Financials sector was another small contributor to overall fund performance. Financials stocks represented an average weight of approximately 2% of the fund’s investments and returned approximately 9% for the reporting period.

The Information Technology sector, which includes companies that offer software and information technology services, as well as manufacturers and distributors of technology hardware and equipment, contributed the most to the fund’s total return, and to the return of the index. Information Technology stocks represented an average weight of approximately 20% of the fund’s investments and returned approximately 28% for the reporting period. One example from this sector is Microsoft Corp., a technology company. The fund’s holdings of Microsoft Corp. returned approximately 36% for the 12-month reporting period. The Consumer Staples sector also provided a meaningful contribution to the return of the fund, representing an average weight of approximately 24% of the fund’s investments and returning approximately 21%.

As of 08/31/16:

Statistics
Number of Holdings	102
Weighted Average Market Cap (millions)	$152,040
Price/Earnings Ratio (P/E)	21.5
Price/Book Ratio (P/B)	4.2
Portfolio Turnover Rate¹	22%

Sector Weightings % of Investments
Consumer Staples	24.2%
Information Technology	23.2%
Industrials	14.8%
Energy	10.2%
Health Care	8.8%
Consumer Discretionary	8.2%
Telecommunication Services	4.4%
Financials	2.8%
Materials	2.7%
Utilities	0.6%
Other	0.1%
Total	100.0%

Top Equity Holdings % of Net Assets²
Microsoft Corp.	4.8%
Intel Corp.	4.7%
The Procter & Gamble Co.	4.6%
Johnson & Johnson	4.5%
Verizon Communications, Inc.	4.4%
PepsiCo, Inc.	4.3%
Pfizer, Inc.	4.3%
Chevron Corp.	4.2%
Exxon Mobil Corp.	4.2%
The Coca-Cola Co.	4.1%
Total	44.1%

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

Source of Sector Classification: S&P and MSCI.

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

20Schwab U.S. Equity ETFs

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Schwab U.S. Dividend Equity ETF

Performance and Fund Facts as of 08/31/16

October 20, 2011 – August 31, 2016
Performance of Hypothetical
$10,000 Investment¹

Average Annual Total Returns¹

Fund and Inception Date	1 Year	3 Years	Since Inception*
Fund: Schwab U.S. Dividend Equity ETF (10/20/11)
Market Price Return²	19.95%	11.94%	14.69%
NAV Return²	19.89%	11.92%	14.69%
Dow Jones U.S. Dividend 100 Index	20.07%	12.06%	14.84%
ETF Category: Morningstar Large Value³	15.17%	11.40%	14.47%

Fund Expense Ratio⁴: 0.07%

For index definitions, please see the Glossary.

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

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.

*	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.

Schwab U.S. Equity ETFs21

Table of Contents

Fund Expenses (Unaudited)

Examples for a $1,000 Investment

	Expense Ratio¹ (Annualized)	Beginning Account Value at 3/1/16	Ending Account Value (Net of Expenses) at 8/31/16	Expenses Paid During Period² 3/1/16–8/31/16
Schwab U.S. Broad Market ETF
Actual Return	0.03%	$1,000.00	$ 1,144.30	$ 0.16
Hypothetical 5% Return	0.03%	$1,000.00	$ 1,024.95	$ 0.15
Schwab U.S. Large-Cap ETF
Actual Return	0.03%	$1,000.00	$ 1,138.20	$ 0.16
Hypothetical 5% Return	0.03%	$1,000.00	$ 1,024.95	$ 0.15
Schwab U.S. Large-Cap Growth ETF
Actual Return	0.06%	$1,000.00	$ 1,129.50	$ 0.32
Hypothetical 5% Return	0.06%	$1,000.00	$ 1,024.80	$ 0.31
Schwab U.S. Large-Cap Value ETF
Actual Return	0.06%	$1,000.00	$ 1,146.10	$ 0.32
Hypothetical 5% Return	0.06%	$1,000.00	$ 1,024.80	$ 0.31
Schwab U.S. Mid-Cap ETF
Actual Return	0.07%	$1,000.00	$ 1,167.60	$0.38
Hypothetical 5% Return	0.07%	$1,000.00	$ 1,024.75	$0.36
Schwab U.S. Small-Cap ETF
Actual Return	0.07%	$1,000.00	$1,198.40	$0.39
Hypothetical 5% Return	0.07%	$1,000.00	$ 1,024.75	$0.36
Schwab U.S. Dividend Equity ETF
Actual Return	0.07%	$1,000.00	$ 1,134.70	$0.38
Hypothetical 5% Return	0.07%	$1,000.00	$ 1,024.75	$0.36

¹	Based on the most recent six-month expense ratio; may differ from the expense ratio provided in the Financial Highlights which covers a 12-month period. This ratio does not include certain non-routine expenses, such as proxy expenses.
²	Expenses for each fund are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by the 184 days of the period, and divided by the 366 days of the fiscal year.

22Schwab U.S. Equity ETFs

Table of Contents

Schwab U.S. Broad Market ETF

Financial Statements

Financial Highlights

	9/1/15– 8/31/16	9/1/14– 8/31/15	9/1/13– 8/31/14	9/1/12– 8/31/13	9/1/11– 8/31/12
Per-Share Data
Net asset value at beginning of period	$48.02	$48.75	$39.79	$33.84	$29.47
Income (loss) from investment operations:
Net investment income (loss)¹	1.03	0.99	0.85	0.80	0.65
Net realized and unrealized gains (losses)	4.34	(0.79)	8.93	5.92	4.32
Total from investment operations	5.37	0.20	9.78	6.72	4.97
Less distributions:
Distributions from net investment income	(0.97)	(0.93)	(0.82)	(0.77)	(0.60)
Net asset value at end of period	$52.42	$48.02	$48.75	$39.79	$33.84
Total return	11.35%	0.33%	24.77%	20.12%	17.07%
Ratios/Supplemental Data
Ratios to average net assets:
Total expenses	0.03% ²	0.04%	0.04%	0.04%	0.06%
Net investment income (loss)	2.09%	1.98%	1.90%	2.15%	2.06%
Portfolio turnover rate³	5%	3%	4%	4%	5%
Net assets, end of period (x 1,000)	$6,858,980	$4,919,185	$3,654,037	$2,182,671	$1,072,825

Calculated based on the average shares outstanding during the period.

Effective November 17, 2015, the annual operating expense ratio was reduced. The ratio presented for the period ended 08/31/16 is a blended ratio. (See financial note 4)

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. Broad Market ETF

Condensed Portfolio Holdings as of August 31, 2016

Holdings by Category		Cost ($)	Value ($)
99.6%	Common Stock	5,748,779,107	6,832,625,477
0.0%	Rights	61,021	65,114
0.5%	Other Investment Companies	35,854,544	35,854,544
100.1%	Total Investments	5,784,694,672	6,868,545,135
(0.1%)	Other Assets and Liabilities, Net		(9,565,503)
100.0%	Net Assets		6,858,979,632

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 99.6% of net assets
Automobiles & Components 1.0%
Other Securities		1.0	71,376,488
Banks 5.8%
Bank of America Corp.	3,075,381	0.7	49,636,649
Citigroup, Inc.	878,173	0.6	41,923,979
JPMorgan Chase & Co.	1,096,213	1.1	73,994,377
Wells Fargo & Co.	1,380,874	1.0	70,148,399
Other Securities		2.4	161,471,309
		5.8	397,174,713
Capital Goods 7.4%
3M Co.	182,016	0.5	32,624,548
General Electric Co.	2,752,255	1.2	85,980,446
Honeywell International, Inc.	228,990	0.4	26,725,423
United Technologies Corp.	235,390	0.4	25,052,558
Other Securities		4.9	335,722,754
		7.4	506,105,729
Commercial & Professional Services 1.1%
Other Securities		1.1	71,943,478
Consumer Durables & Apparel 1.6%
Other Securities		1.6	108,414,993

Security	Number of Shares	% of Net Assets	Value ($)
Consumer Services 2.1%
McDonald's Corp.	262,695	0.4	30,383,304
Other Securities		1.7	116,770,897
		2.1	147,154,201
Diversified Financials 4.8%
Berkshire Hathaway, Inc., Class B *	558,790	1.2	84,092,307
The Charles Schwab Corp. (b)	366,815	0.2	11,540,000
Other Securities		3.4	236,706,984
		4.8	332,339,291
Energy 6.4%
Chevron Corp.	564,658	0.8	56,793,302
Exxon Mobil Corp.	1,240,919	1.6	108,133,682
Schlumberger Ltd.	418,475	0.5	33,059,525
Other Securities		3.5	242,343,736
		6.4	440,330,245
Food & Staples Retailing 1.9%
CVS Health Corp.	319,817	0.4	29,870,908
Wal-Mart Stores, Inc.	456,208	0.5	32,591,499
Other Securities		1.0	70,893,652
		1.9	133,356,059
Food, Beverage & Tobacco 5.1%
Altria Group, Inc.	591,516	0.6	39,093,292
PepsiCo, Inc.	431,076	0.7	46,017,363
Philip Morris International, Inc.	466,672	0.7	46,634,533
The Coca-Cola Co.	1,167,913	0.7	50,722,462
Other Securities		2.4	167,200,154
		5.1	349,667,804
Health Care Equipment & Services 5.4%
Medtronic plc	418,068	0.5	36,384,458
UnitedHealth Group, Inc.	285,016	0.6	38,776,427
Other Securities		4.3	297,769,600
		5.4	372,930,485
Household & Personal Products 1.9%
The Procter & Gamble Co.	793,816	1.0	69,308,075
Other Securities		0.9	57,659,357
		1.9	126,967,432
Insurance 2.9%
Other Securities		2.9	201,716,587
Materials 3.3%
Other Securities		3.3	227,158,224
Media 2.9%
Comcast Corp., Class A	721,160	0.7	47,062,902
The Walt Disney Co.	450,616	0.6	42,565,187
Other Securities		1.6	110,427,003
		2.9	200,055,092

24 See financial notes

Table of Contents

Schwab U.S. Broad Market ETF

Condensed Portfolio Holdings continued

Security	Number of Shares	% of Net Assets	Value ($)
Pharmaceuticals, Biotechnology & Life Sciences 8.6%
AbbVie, Inc.	480,134	0.4	30,776,589
Allergan plc *	116,963	0.4	27,432,502
Amgen, Inc.	223,415	0.6	37,993,955
Bristol-Myers Squibb Co.	500,557	0.4	28,726,966
Celgene Corp. *	235,316	0.4	25,117,630
Gilead Sciences, Inc.	406,567	0.5	31,866,721
Johnson & Johnson	825,166	1.4	98,475,310
Merck & Co., Inc.	825,599	0.8	51,839,361
Pfizer, Inc.	1,816,551	0.9	63,215,975
Other Securities		2.8	192,569,550
		8.6	588,014,559
Real Estate 4.3%
Other Securities		4.3	295,794,842
Retailing 5.1%
Amazon.com, Inc. *	115,894	1.3	89,141,029
The Home Depot, Inc.	374,891	0.7	50,280,381
Other Securities		3.1	210,910,007
		5.1	350,331,417
Semiconductors & Semiconductor Equipment 3.0%
Intel Corp.	1,409,540	0.8	50,588,391
QUALCOMM, Inc.	441,530	0.4	27,847,297
Other Securities		1.8	125,421,644
		3.0	203,857,332
Software & Services 12.1%
Alphabet, Inc., Class A *	87,378	1.0	69,015,513
Alphabet, Inc., Class C *	88,542	1.0	67,916,141
Facebook, Inc., Class A *	691,388	1.3	87,197,855
International Business Machines Corp.	265,252	0.6	42,143,238
MasterCard, Inc., Class A	292,002	0.4	28,216,153
Microsoft Corp.	2,354,830	2.0	135,308,532
Oracle Corp.	940,425	0.5	38,764,318
Visa, Inc., Class A	571,813	0.7	46,259,672
Other Securities		4.6	314,071,763
		12.1	828,893,185
Technology Hardware & Equipment 5.2%
Apple, Inc.	1,638,708	2.5	173,866,919
Cisco Systems, Inc.	1,497,648	0.7	47,086,053
Other Securities		2.0	134,625,915
		5.2	355,578,887
Telecommunication Services 2.4%
AT&T, Inc.	1,841,027	1.1	75,261,184
Verizon Communications, Inc.	1,214,884	0.9	63,574,880
Other Securities		0.4	24,539,508
		2.4	163,375,572
Transportation 2.0%
Other Securities		2.0	135,897,825

Security	Number of Shares	% of Net Assets	Value ($)
Utilities 3.3%
Other Securities		3.3	224,191,037
Total Common Stock
(Cost $5,748,779,107)			6,832,625,477

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	25,584
Total Rights
(Cost $61,021)			65,114

Other Investment Companies 0.5% of net assets
Money Market Fund 0.1%
Other Securities		0.1	10,645,211
Securities Lending Collateral 0.4%
Wells Fargo Government Money Market Fund, Select Class 0.32% (e)		0.4	25,209,333
Total Other Investment Companies
(Cost $35,854,544)			35,854,544

End of Investments.

At 08/31/16, the tax basis cost of the fund's investments was $5,785,415,200 and the unrealized appreciation and depreciation were $1,215,337,186 and ($132,207,251), respectively, with a net unrealized appreciation of $1,083,129,935.

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 $24,335,508.
(b)	Issuer is affiliated with the fund's investment adviser.
(c)	Illiquid security. At the period end, the value of these amounted to $65,114 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

See financial notes 25

Table of Contents

Schwab U.S. Broad Market ETF

Condensed Portfolio Holdings continued

In addition to the above, the fund held the following at 08/31/16:

	Number of Contracts	Contract Value ($)	Unrealized Depreciation ($)
Futures Contracts
S&P 500 Index, e-mini, Long, expires 09/16/16	175	18,983,125	(55,588)

The following is a summary of the inputs used to value the fund’s investments as of August 31, 2016 (see financial note 2(a) for additional information):

Assets Valuation Input

Description	Quoted Prices in Active Markets for Identical Assets (Level 1)	Other Significant Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Common Stock¹	$6,832,625,477	$—	$—	$6,832,625,477
Rights ¹	—	—	65,114	65,114
Other Investment Companies¹	35,854,544	—	—	35,854,544
Total	$6,868,480,021	$—	$65,114	$6,868,545,135
Liabilities Valuation Input

Other Financial Instruments
Futures Contracts²	($55,588)	$—	$—	($55,588)

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 August 31, 2016
Rights	$21,491	$—	$4,093	$39,530	$—	$—	$—	$65,114
Total	$21,491	$—	$4,093	$39,530	$—	$—	$—	$65,114

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 August 31, 2016 was $4,093.

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 August 31, 2016.

26 See financial notes

Table of Contents

Schwab U.S. Broad Market ETF

Statement of

Assets and Liabilities

As of August 31, 2016

Assets
Investments in affiliated issuers, at value (cost $9,476,206)		$11,540,000
Investments in unaffiliated issuers, at value (cost $5,750,009,133) including securities on loan of $24,335,508		6,831,795,802
Collateral invested for securities on loan, at value (cost $25,209,333)	+	25,209,333
Total investments, at value (cost $5,784,694,672)		6,868,545,135
Cash		971,388
Deposit with broker for futures contracts		735,000
Receivables:
Investments sold		264,106
Dividends		13,686,076
Fund shares sold		5,254,215
Income from securities on loan	+	121,564
Total assets		6,889,577,484
Liabilities
Collateral held for securities on loan		25,209,333
Payables:
Investments bought		5,165,479
Investment adviser fees		173,165
Variation margin on futures contracts	+	49,875
Total liabilities		30,597,852
Net Assets
Total assets		6,889,577,484
Total liabilities	–	30,597,852
Net assets		$6,858,979,632
Net Assets by Source
Capital received from investors		5,802,028,428
Net investment income not yet distributed		22,624,656
Net realized capital losses		(49,468,327)
Net unrealized capital appreciation		1,083,794,875

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$6,858,979,632		130,850,000		$52.42

See financial notes 27

Table of Contents

Schwab U.S. Broad Market ETF

Statement of

Operations

For the period September 1, 2015 through August 31, 2016

Investment Income
Dividends received from affiliated issuer		$82,691
Dividends received from unaffiliated issuers (net of foreign withholding tax of $7,117)		120,340,209
Securities on loan	+	1,096,091
Total investment income		121,518,991
Expenses
Investment adviser fees		1,819,971
Proxy fees	+	121,788
Total expenses	–	1,941,759
Net investment income		119,577,232
Realized and Unrealized Gains (Losses)
Net realized losses on investments		(49,617,076)
Net realized gains on in-kind redemptions on affiliated issuer		191,301
Net realized gains on in-kind redemptions on unaffiliated investments		108,138,838
Net realized losses on futures contracts	+	(239,488)
Net realized gains		58,473,575
Net change in unrealized appreciation (depreciation) on affiliated issuer		225,646
Net change in unrealized appreciation (depreciation) on unaffiliated investments		453,019,646
Net change in unrealized appreciation (depreciation) on futures contracts	+	(58,146)
Net change in unrealized appreciation (depreciation)	+	453,187,146
Net realized and unrealized gains		511,660,721
Increase in net assets resulting from operations		$631,237,953

28 See financial notes

Table of Contents

Schwab U.S. Broad Market ETF

Statement of

Changes in Net Assets

For the current and prior report periods

Operations
	9/1/15-8/31/16		9/1/14-8/31/15
Net investment income		$119,577,232	$91,149,398
Net realized gains		58,473,575	135,416,374
Net change in unrealized appreciation (depreciation)	+	453,187,146	(225,084,179)
Increase in net assets resulting from operations		631,237,953	1,481,593
Distributions to Shareholders
Distributions from net investment income		($111,095,810)	($84,285,250)

Transactions in Fund Shares
		9/1/15-8/31/16		9/1/14-8/31/15
		SHARES	VALUE	SHARES	VALUE
Shares sold		36,150,000	$1,780,463,725	33,800,000	$1,665,831,746
Shares redeemed	+	(7,750,000)	(360,811,273)	(6,300,000)	(317,879,850)
Net transactions in fund shares		28,400,000	$1,419,652,452	27,500,000	$1,347,951,896
Shares Outstanding and Net Assets
		9/1/15-8/31/16		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	+	28,400,000	1,939,794,595	27,500,000	1,265,148,239
End of period		130,850,000	$6,858,979,632	102,450,000	$4,919,185,037
Net investment income not yet distributed			$22,624,656		$15,537,648

See financial notes 29

Table of Contents

Schwab U.S. Large-Cap ETF

Financial Statements

Financial Highlights

	9/1/15– 8/31/16	9/1/14– 8/31/15	9/1/13– 8/31/14	9/1/12– 8/31/13	9/1/11– 8/31/12
Per-Share Data
Net asset value at beginning of period	$47.30	$47.99	$39.06	$33.49	$29.11
Income (loss) from investment operations:
Net investment income (loss)	1.03 ¹	1.01 ¹	0.83	0.77	0.64
Net realized and unrealized gains (losses)	4.41	(0.77)	8.92	5.56	4.35
Total from investment operations	5.44	0.24	9.75	6.33	4.99
Less distributions:
Distributions from net investment income	(0.99)	(0.93)	(0.82)	(0.76)	(0.61)
Net asset value at end of period	$51.75	$47.30	$47.99	$39.06	$33.49
Total return	11.66%	0.43%	25.16%	19.17%	17.36%
Ratios/Supplemental Data
Ratios to average net assets:
Total expenses	0.03% ²	0.04%	0.04%	0.04%	0.08%
Net investment income (loss)	2.13%	2.04%	1.95%	2.18%	2.10%
Portfolio turnover rate³	4%	4%	5%	5%	4%
Net assets, end of period (x 1,000)	$6,218,346	$4,329,918	$3,191,644	$1,781,282	$890,808

Calculated based on the average shares outstanding during the period.

Effective November 12, 2015, the annual operating expense ratio was reduced. The ratio presented for the period ended 8/31/16 is a blended ratio. (See financial note 4)

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 ETF

Condensed Portfolio Holdings as of August 31, 2016

Holdings by Category		Cost ($)	Value ($)
99.6%	Common Stock	5,309,657,370	6,194,416,719
0.4%	Other Investment Companies	24,174,077	24,174,077
100.0%	Total Investments	5,333,831,447	6,218,590,796
(0.0%)	Other Assets and Liabilities, Net		(244,990)
100.0%	Net Assets		6,218,345,806

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 99.6% of net assets
Automobiles & Components 1.0%
Other Securities		1.0	63,534,002
Banks 5.4%
Bank of America Corp.	3,133,255	0.8	50,570,736
Citigroup, Inc.	895,104	0.7	42,732,265
JPMorgan Chase & Co.	1,113,636	1.2	75,170,430
Wells Fargo & Co.	1,401,656	1.1	71,204,125
Other Securities		1.6	98,826,497
		5.4	338,504,053
Capital Goods 7.2%
3M Co.	183,259	0.5	32,847,343
General Electric Co.	2,792,401	1.4	87,234,607
Honeywell International, Inc.	236,426	0.5	27,593,278
United Technologies Corp.	236,302	0.4	25,149,622
Other Securities		4.4	273,135,744
		7.2	445,960,594
Commercial & Professional Services 0.8%
Other Securities		0.8	47,917,639
Consumer Durables & Apparel 1.5%
Other Securities		1.5	93,295,518

Security	Number of Shares	% of Net Assets	Value ($)
Consumer Services 1.9%
McDonald's Corp.	266,337	0.5	30,804,537
Starbucks Corp.	447,367	0.4	25,155,446
Other Securities		1.0	64,678,992
		1.9	120,638,975
Diversified Financials 5.0%
Berkshire Hathaway, Inc., Class B *	570,725	1.4	85,888,405
The Charles Schwab Corp. (b)	374,662	0.2	11,786,867
Other Securities		3.4	210,515,896
		5.0	308,191,168
Energy 6.6%
Chevron Corp.	574,470	0.9	57,780,193
Exxon Mobil Corp.	1,260,300	1.8	109,822,542
Schlumberger Ltd.	422,270	0.5	33,359,330
Other Securities		3.4	209,782,614
		6.6	410,744,679
Food & Staples Retailing 2.1%
CVS Health Corp.	325,830	0.5	30,432,522
Wal-Mart Stores, Inc.	463,422	0.5	33,106,868
Other Securities		1.1	66,045,412
		2.1	129,584,802
Food, Beverage & Tobacco 5.5%
Altria Group, Inc.	600,327	0.6	39,675,611
PepsiCo, Inc.	436,803	0.8	46,628,720
Philip Morris International, Inc.	474,207	0.8	47,387,506
The Coca-Cola Co.	1,183,765	0.8	51,410,914
Other Securities		2.5	156,563,256
		5.5	341,666,007
Health Care Equipment & Services 5.3%
Medtronic plc	426,203	0.6	37,092,447
UnitedHealth Group, Inc.	288,699	0.6	39,277,499
Other Securities		4.1	252,552,286
		5.3	328,922,232
Household & Personal Products 2.0%
The Procter & Gamble Co.	812,614	1.1	70,949,328
Other Securities		0.9	53,702,578
		2.0	124,651,906
Insurance 2.9%
Other Securities		2.9	177,802,651
Materials 3.0%
Other Securities		3.0	187,004,115
Media 3.0%
Comcast Corp., Class A	731,406	0.7	47,731,556
The Walt Disney Co.	455,634	0.7	43,039,188
Other Securities		1.6	98,434,891
		3.0	189,205,635

See financial notes 31

Table of Contents

Schwab U.S. Large-Cap ETF

Condensed Portfolio Holdings continued

Security	Number of Shares	% of Net Assets	Value ($)
Pharmaceuticals, Biotechnology & Life Sciences 9.0%
AbbVie, Inc.	493,257	0.5	31,617,774
Allergan plc *	120,809	0.5	28,334,543
Amgen, Inc.	230,607	0.6	39,217,026
Bristol-Myers Squibb Co.	507,769	0.5	29,140,863
Celgene Corp. *	236,190	0.4	25,210,921
Gilead Sciences, Inc.	406,404	0.5	31,853,946
Johnson & Johnson	839,385	1.6	100,172,206
Merck & Co., Inc.	848,567	0.9	53,281,522
Pfizer, Inc.	1,852,529	1.0	64,468,009
Other Securities		2.5	154,075,148
		9.0	557,371,958
Real Estate 3.5%
Other Securities		3.5	217,096,243
Retailing 5.3%
Amazon.com, Inc. *	117,456	1.4	90,342,457
The Home Depot, Inc.	375,467	0.8	50,357,634
Other Securities		3.1	190,179,979
		5.3	330,880,070
Semiconductors & Semiconductor Equipment 3.0%
Intel Corp.	1,434,858	0.8	51,497,054
QUALCOMM, Inc.	446,051	0.5	28,132,437
Other Securities		1.7	104,753,632
		3.0	184,383,123
Software & Services 12.6%
Alphabet, Inc., Class A *	89,491	1.1	70,684,466
Alphabet, Inc., Class C *	90,166	1.1	69,161,830
Facebook, Inc., Class A *	704,927	1.4	88,905,393
International Business Machines Corp.	268,042	0.7	42,586,513
MasterCard, Inc., Class A	291,592	0.5	28,176,535
Microsoft Corp.	2,387,436	2.2	137,182,073
Oracle Corp.	944,077	0.6	38,914,854
Visa, Inc., Class A	586,422	0.8	47,441,540
Other Securities		4.2	259,636,691
		12.6	782,689,895
Technology Hardware & Equipment 5.2%
Apple, Inc.	1,665,770	2.8	176,738,197
Cisco Systems, Inc.	1,536,609	0.8	48,310,987
Other Securities		1.6	97,212,532
		5.2	322,261,716
Telecommunication Services 2.6%
AT&T, Inc.	1,880,895	1.2	76,890,988
Verizon Communications, Inc.	1,241,168	1.1	64,950,321
Other Securities		0.3	21,094,088
		2.6	162,935,397

Security	Number of Shares	% of Net Assets	Value ($)
Transportation 2.0%
Other Securities		2.0	126,942,491
Utilities 3.2%
Other Securities		3.2	202,231,850
Total Common Stock
(Cost $5,309,657,370)			6,194,416,719

Other Investment Companies 0.4% of net assets
Money Market Fund 0.2%
Other Securities		0.2	10,043,852
Securities Lending Collateral 0.2%
Other Securities		0.2	14,130,225
Total Other Investment Companies
(Cost $24,174,077)			24,174,077

End of Investments.

At 08/31/16, the tax basis cost of the fund's investments was $5,335,094,883 and the unrealized appreciation and depreciation were $1,006,206,434 and ($122,710,521), respectively, with a net unrealized appreciation of $883,495,913.

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 $13,704,072.
(b)	Issuer is affiliated with the fund's investment adviser.
(c)	The rate shown is the 7-day yield.

In addition to the above, the fund held the following at 08/31/16:

	Number of Contracts	Contract Value ($)	Unrealized Appreciation ($)
Futures Contracts
S&P 500 Index, e-mini, Long, expires 09/16/16	170	18,440,750	104,547

32 See financial notes

Table of Contents

Schwab U.S. Large-Cap ETF

Condensed Portfolio Holdings continued

The following is a summary of the inputs used to value the fund’s investments as of August 31, 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	$6,194,416,719	$—	$—	$6,194,416,719
Other Investment Companies¹	24,174,077	—	—	24,174,077
Total	$6,218,590,796	$—	$—	$6,218,590,796
Other Financial Instruments
Futures Contracts²	$104,547	$—	$—	$104,547

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.

See financial notes 33

Table of Contents

Schwab U.S. Large-Cap ETF

Statement of

Assets and Liabilities

As of August 31, 2016

Assets
Investments in affiliated issuers, at value (cost $9,924,160)		$11,786,867
Investments in unaffiliated issuers, at value (cost $5,309,777,062) including securities on loan of $13,704,072		6,192,673,704
Collateral invested for securities on loan, at value (cost $14,130,225)	+	14,130,225
Total investments, at value (cost $5,333,831,447)		6,218,590,796
Deposit with broker for futures contracts		714,000
Receivables:
Dividends		13,227,748
Fund shares sold		5,195,132
Income from securities on loan	+	81,985
Total assets		6,237,809,661
Liabilities
Collateral held for securities on loan		14,130,225
Payables:
Investments bought		5,128,610
Investment adviser fees		156,570
Variation margin on futures contracts	+	48,450
Total liabilities		19,463,855
Net Assets
Total assets		6,237,809,661
Total liabilities	–	19,463,855
Net assets		$6,218,345,806
Net Assets by Source
Capital received from investors		5,345,882,545
Net investment income not yet distributed		22,092,100
Net realized capital losses		(34,492,735)
Net unrealized capital appreciation		884,863,896

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$6,218,345,806		120,150,000		$51.75

34 See financial notes

Table of Contents

Schwab U.S. Large-Cap ETF

Statement of

Operations

For the period September 1, 2015 through August 31, 2016

Investment Income
Dividends received from affiliated issuer		$85,999
Dividends received from unaffiliated issuers (net of foreign withholding tax of $5,305)		112,694,370
Securities on loan	+	498,876
Total investment income		113,279,245
Expenses
Investment adviser fees		1,661,355
Proxy fees	+	123,306
Total expenses	–	1,784,661
Net investment income		111,494,584
Realized and Unrealized Gains (Losses)
Net realized losses on affiliated issuer		(20,561)
Net realized losses on unaffiliated investments		(31,316,329)
Net realized gains on in-kind redemptions on affiliated issuer		208,337
Net realized gains on in-kind redemptions on unaffiliated investments		111,724,544
Net realized gains on futures contracts	+	950,722
Net realized gains		81,546,713
Net change in unrealized appreciation (depreciation) on affiliated issuer		266,305
Net change in unrealized appreciation (depreciation) on unaffiliated investments		413,680,993
Net change in unrealized appreciation (depreciation) on futures contracts	+	269,673
Net change in unrealized appreciation (depreciation)	+	414,216,971
Net realized and unrealized gains		495,763,684
Increase in net assets resulting from operations		$607,258,268

See financial notes 35

Table of Contents

Schwab U.S. Large-Cap ETF

Statement of

Changes in Net Assets

For the current and prior report periods

Operations
	9/1/15-8/31/16		9/1/14-8/31/15
Net investment income		$111,494,584	$81,817,643
Net realized gains		81,546,713	138,752,328
Net change in unrealized appreciation (depreciation)	+	414,216,971	(244,441,066)
Increase (decrease) in net assets resulting from operations		607,258,268	(23,871,095)
Distributions to Shareholders
Distributions from net investment income		($103,762,790)	($74,777,650)

Transactions in Fund Shares
		9/1/15-8/31/16		9/1/14-8/31/15
		SHARES	VALUE	SHARES	VALUE
Shares sold		35,000,000	$1,684,361,815	32,300,000	$1,580,631,648
Shares redeemed	+	(6,400,000)	(299,429,649)	(7,250,000)	(343,709,219)
Net transactions in fund shares		28,600,000	$1,384,932,166	25,050,000	$1,236,922,429
Shares Outstanding and Net Assets
		9/1/15-8/31/16		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	+	28,600,000	1,888,427,644	25,050,000	1,138,273,684
End of period		120,150,000	$6,218,345,806	91,550,000	$4,329,918,162
Net investment income not yet distributed			$22,092,100		$15,543,069

36 See financial notes

Table of Contents

Schwab U.S. Large-Cap Growth ETF

Financial Statements

Financial Highlights

	9/1/15– 8/31/16	9/1/14– 8/31/15	9/1/13– 8/31/14	9/1/12– 8/31/13	9/1/11– 8/31/12
Per-Share Data
Net asset value at beginning of period	$51.93	$50.11	$39.60	$34.05	$29.44
Income (loss) from investment operations:
Net investment income (loss)	0.59 ¹	0.66 ¹	0.56	0.55	0.36
Net realized and unrealized gains (losses)	3.30	1.79	10.50	5.52	4.59
Total from investment operations	3.89	2.45	11.06	6.07	4.95
Less distributions:
Distributions from net investment income	(0.57)	(0.63)	(0.55)	(0.52)	(0.34)
Net asset value at end of period	$55.25	$51.93	$50.11	$39.60	$34.05
Total return	7.56%	4.87%	28.11%	18.02%	16.96%
Ratios/Supplemental Data
Ratios to average net assets:
Total expenses	0.07% ²	0.07%	0.07%	0.07%	0.13%
Net investment income (loss)	1.14%	1.25%	1.29%	1.55%	1.17%
Portfolio turnover rate³	7%	10%	7%	11%	8%
Net assets, end of period (x 1,000)	$2,980,475	$2,246,101	$1,485,805	$827,613	$475,062

Calculated based on the average shares outstanding during the period.

Effective November 17, 2015, the annual operating expense ratio was reduced. The ratio presented for the period ended 08/31/16 is a blended ratio. (See financial note 4)

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 Growth ETF

Condensed Portfolio Holdings as of August 31, 2016

Holdings by Category		Cost ($)	Value ($)
99.8%	Common Stock	2,555,918,551	2,973,861,519
0.5%	Other Investment Companies	16,688,423	16,688,423
100.3%	Total Investments	2,572,606,974	2,990,549,942
(0.3%)	Other Assets and Liabilities, Net		(10,074,944)
100.0%	Net Assets		2,980,474,998

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 99.8% of net assets
Automobiles & Components 0.5%
Other Securities		0.5	14,598,650
Banks 0.3%
Other Securities		0.3	9,133,758
Capital Goods 6.0%
3M Co.	182,944	1.1	32,790,883
Caterpillar, Inc.	178,414	0.5	14,621,027
The Boeing Co.	181,740	0.8	23,526,243
Other Securities		3.6	108,456,647
		6.0	179,394,800
Commercial & Professional Services 1.0%
Other Securities		1.0	30,311,993
Consumer Durables & Apparel 2.2%
NIKE, Inc., Class B	403,134	0.8	23,236,644
Other Securities		1.4	42,685,115
		2.2	65,921,759
Consumer Services 2.3%
Starbucks Corp.	447,499	0.8	25,162,869
Other Securities		1.5	44,208,771
		2.3	69,371,640

Security	Number of Shares	% of Net Assets	Value ($)
Diversified Financials 6.9%
American Express Co.	246,425	0.5	16,160,552
Berkshire Hathaway, Inc., Class B *	568,964	2.9	85,623,392
BlackRock, Inc.	38,469	0.5	14,341,628
Morgan Stanley	460,894	0.5	14,776,262
The Charles Schwab Corp. (b)	365,001	0.4	11,482,931
Other Securities		2.1	62,194,073
		6.9	204,578,838
Energy 4.7%
EOG Resources, Inc.	168,963	0.5	14,951,536
Schlumberger Ltd.	420,857	1.1	33,247,703
Other Securities		3.1	90,600,933
		4.7	138,800,172
Food & Staples Retailing 2.6%
Costco Wholesale Corp.	132,859	0.7	21,535,116
CVS Health Corp.	325,413	1.0	30,393,574
Walgreens Boots Alliance, Inc.	262,472	0.7	21,184,115
Other Securities		0.2	5,423,846
		2.6	78,536,651
Food, Beverage & Tobacco 1.3%
Other Securities		1.3	39,446,564
Health Care Equipment & Services 8.5%
Danaher Corp.	182,749	0.5	14,877,596
Express Scripts Holding Co. *	192,219	0.5	13,974,321
Medtronic plc	426,149	1.2	37,087,748
UnitedHealth Group, Inc.	289,719	1.3	39,416,270
Other Securities		5.0	147,411,309
		8.5	252,767,244
Household & Personal Products 0.4%
Other Securities		0.4	12,399,474
Insurance 0.9%
Other Securities		0.9	25,163,944
Materials 2.7%
Monsanto Co.	133,649	0.5	14,233,618
Other Securities		2.2	65,884,319
		2.7	80,117,937
Media 4.5%
Charter Communications, Inc., Class A *	65,921	0.6	16,955,540
Comcast Corp., Class A	735,147	1.6	47,975,693
The Walt Disney Co.	453,404	1.4	42,828,542
Other Securities		0.9	26,492,439
		4.5	134,252,214
Pharmaceuticals, Biotechnology & Life Sciences 8.4%
Allergan plc *	120,001	0.9	28,145,035
Amgen, Inc.	228,022	1.3	38,777,421
Biogen, Inc. *	66,402	0.7	20,294,443
Celgene Corp. *	236,689	0.8	25,264,184

38 See financial notes

Table of Contents

Schwab U.S. Large-Cap Growth ETF

Condensed Portfolio Holdings continued

Security	Number of Shares	% of Net Assets	Value ($)
Gilead Sciences, Inc.	403,968	1.1	31,663,012
Thermo Fisher Scientific, Inc.	120,498	0.6	18,338,591
Other Securities		3.0	88,591,616
		8.4	251,074,302
Real Estate 4.0%
American Tower Corp.	128,134	0.5	14,527,833
Simon Property Group, Inc.	94,183	0.7	20,293,611
Other Securities		2.8	84,372,434
		4.0	119,193,878
Retailing 9.9%
Amazon.com, Inc. *	117,533	3.0	90,401,682
Lowe's Cos., Inc.	268,033	0.7	20,520,606
The Home Depot, Inc.	377,471	1.7	50,626,411
The Priceline Group, Inc. *	14,984	0.7	21,228,282
The TJX Cos., Inc.	198,576	0.5	15,377,725
Other Securities		3.3	97,168,012
		9.9	295,322,718
Semiconductors & Semiconductor Equipment 2.5%
Broadcom Ltd.	112,374	0.7	19,825,021
QUALCOMM, Inc.	446,774	0.9	28,178,036
Other Securities		0.9	25,634,913
		2.5	73,637,970
Software & Services 18.8%
Accenture plc, Class A	189,702	0.7	21,815,730
Adobe Systems, Inc. *	150,489	0.5	15,396,530
Alphabet, Inc., Class A *	89,069	2.4	70,351,150
Alphabet, Inc., Class C *	89,807	2.3	68,886,459
Facebook, Inc., Class A *	701,391	3.0	88,459,433
MasterCard, Inc., Class A	293,912	1.0	28,400,717
Oracle Corp.	944,793	1.3	38,944,368
salesforce.com, Inc. *	193,589	0.5	15,374,838
Visa, Inc., Class A	577,692	1.6	46,735,283
Other Securities		5.5	164,162,592
		18.8	558,527,100
Technology Hardware & Equipment 7.3%
Apple, Inc.	1,662,899	5.9	176,433,584
EMC Corp.	590,904	0.6	17,130,307
Other Securities		0.8	24,800,201
		7.3	218,364,092
Telecommunication Services 0.4%
Other Securities		0.4	12,502,093

Security	Number of Shares	% of Net Assets	Value ($)
Transportation 3.6%
Union Pacific Corp.	255,111	0.8	24,370,754
United Parcel Service, Inc., Class B	207,714	0.8	22,686,523
Other Securities		2.0	59,870,479
		3.6	106,927,756
Utilities 0.1%
Other Securities		0.1	3,515,972
Total Common Stock
(Cost $2,555,918,551)			2,973,861,519

Other Investment Companies 0.5% of net assets
Money Market Fund 0.1%
Other Securities		0.1	3,514,573
Securities Lending Collateral 0.4%
Other Securities		0.4	13,173,850
Total Other Investment Companies
(Cost $16,688,423)			16,688,423

End of Investments.

At 08/31/16, the tax basis cost of the fund's investments was $2,573,892,256 and the unrealized appreciation and depreciation were $504,602,833 and ($87,945,147), respectively, with a net unrealized appreciation of $416,657,686.

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 $12,771,371.
(b)	Issuer is affiliated with the fund's investment adviser.
(c)	The rate shown is the 7-day yield.

In addition to the above, the fund held the following at 08/31/16:

	Number of Contracts	Contract Value ($)	Unrealized Appreciation ($)
Futures Contracts
S&P 500 Index, e-mini, Long, expires 09/16/16	50	5,423,750	68,779

See financial notes 39

Table of Contents

Schwab U.S. Large-Cap Growth ETF

Condensed Portfolio Holdings continued

The following is a summary of the inputs used to value the fund’s investments as of August 31, 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	$2,973,861,519	$—	$—	$2,973,861,519
Other Investment Companies¹	16,688,423	—	—	16,688,423
Total	$2,990,549,942	$—	$—	$2,990,549,942
Other Financial Instruments
Futures Contracts²	$68,779	$—	$—	$68,779

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 Growth ETF

Statement of

Assets and Liabilities

As of August 31, 2016

Assets
Investments in affiliated issuers, at value (cost $9,772,226)		$11,482,931
Investments in unaffiliated issuers, at value (cost $2,549,660,898) including securities on loan of $12,771,371		2,965,893,161
Collateral invested for securities on loan, at value (cost $13,173,850)	+	13,173,850
Total investments, at value (cost $2,572,606,974)		2,990,549,942
Deposit with broker for futures contracts		630,000
Receivables:
Fund shares sold		5,540,226
Dividends		2,509,652
Income from securities on loan	+	71,389
Total assets		2,999,301,209
Liabilities
Collateral held for securities on loan		13,173,850
Payables:
Investments bought		5,487,357
Investment adviser fees		150,754
Variation margin on futures contracts	+	14,250
Total liabilities		18,826,211
Net Assets
Total assets		2,999,301,209
Total liabilities	–	18,826,211
Net assets		$2,980,474,998
Net Assets by Source
Capital received from investors		2,575,518,107
Net investment income not yet distributed		5,042,805
Net realized capital losses		(18,097,661)
Net unrealized capital appreciation		418,011,747

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$2,980,474,998		53,950,000		$55.25

See financial notes 41

Table of Contents

Schwab U.S. Large-Cap Growth ETF

Statement of

Operations

For the period September 1, 2015 through August 31, 2016

Investment Income
Dividends received from affiliated issuer		$87,703
Dividends received from unaffiliated issuers (net of foreign withholding tax of $6,537)		30,947,555
Securities on loan	+	377,066
Total investment income		31,412,324
Expenses
Investment adviser fees		1,618,706
Proxy fees	+	90,173
Total expenses	–	1,708,879
Net investment income		29,703,445
Realized and Unrealized Gains (Losses)
Net realized losses on investments		(17,798,086)
Net realized gains on in-kind redemptions on affiliated issuer		297,843
Net realized gains on in-kind redemptions on unaffiliated investments		77,359,349
Net realized losses on futures contracts	+	(139,554)
Net realized gains		59,719,552
Net change in unrealized appreciation (depreciation) on affiliated issuer		121,723
Net change in unrealized appreciation (depreciation) on unaffiliated investments		100,313,872
Net change in unrealized appreciation (depreciation) on futures contracts	+	94,412
Net change in unrealized appreciation (depreciation)	+	100,530,007
Net realized and unrealized gains		160,249,559
Increase in net assets resulting from operations		$189,953,004

42 See financial notes

Table of Contents

Schwab U.S. Large-Cap Growth ETF

Statement of

Changes in Net Assets

For the current and prior report periods

Operations
	9/1/15-8/31/16		9/1/14-8/31/15
Net investment income		$29,703,445	$24,011,446
Net realized gains		59,719,552	108,889,591
Net change in unrealized appreciation (depreciation)	+	100,530,007	(71,625,484)
Increase in net assets resulting from operations		189,953,004	61,275,553
Distributions to Shareholders
Distributions from net investment income		($28,157,885)	($22,727,825)

Transactions in Fund Shares
		9/1/15-8/31/16		9/1/14-8/31/15
		SHARES	VALUE	SHARES	VALUE
Shares sold		15,350,000	$807,870,244	20,150,000	$1,054,286,554
Shares redeemed	+	(4,650,000)	(235,291,453)	(6,550,000)	(332,537,817)
Net transactions in fund shares		10,700,000	$572,578,791	13,600,000	$721,748,737
Shares Outstanding and Net Assets
		9/1/15-8/31/16		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	+	10,700,000	734,373,910	13,600,000	760,296,465
End of period		53,950,000	$2,980,474,998	43,250,000	$2,246,101,088
Net investment income not yet distributed			$5,042,805		$3,997,292

See financial notes 43

Table of Contents

Schwab U.S. Large-Cap Value ETF

Financial Statements

Financial Highlights

	9/1/15– 8/31/16	9/1/14– 8/31/15	9/1/13– 8/31/14	9/1/12– 8/31/13	9/1/11– 8/31/12
Per-Share Data
Net asset value at beginning of period	$40.89	$43.54	$36.49	$31.24	$27.34
Income (loss) from investment operations:
Net investment income (loss)	1.29 ¹	1.20 ¹	1.00	0.93	0.82
Net realized and unrealized gains (losses)	5.01	(2.75)	7.03	5.24	3.89
Total from investment operations	6.30	(1.55)	8.03	6.17	4.71
Less distributions:
Distributions from net investment income	(1.18)	(1.10)	(0.98)	(0.92)	(0.81)
Net asset value at end of period	$46.01	$40.89	$43.54	$36.49	$31.24
Total return	15.70%	(3.71%)	22.25%	20.06%	17.53%
Ratios/Supplemental Data
Ratios to average net assets:
Total expenses	0.07% ²	0.07%	0.07%	0.07%	0.13%
Net investment income (loss)	3.00%	2.75%	2.54%	2.73%	2.89%
Portfolio turnover rate³	6%	15%	9%	9%	8%
Net assets, end of period (x 1,000)	$2,491,664	$1,435,194	$1,162,576	$700,693	$385,791

Calculated based on the average shares outstanding during the period.

Effective November 17, 2015, the annual operating expense ratio was reduced. The ratio presented for the period ended 08/31/16 is a blended ratio. (See financial note 4)

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. Large-Cap Value ETF

Condensed Portfolio Holdings as of August 31, 2016

Holdings by Category		Cost ($)	Value ($)
99.6%	Common Stock	2,208,719,769	2,482,278,850
0.1%	Other Investment Companies	1,872,435	1,872,435
99.7%	Total Investments	2,210,592,204	2,484,151,285
0.3%	Other Assets and Liabilities, Net		7,512,310
100.0%	Net Assets		2,491,663,595

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 99.6% of net assets
Automobiles & Components 1.5%
Ford Motor Co.	913,691	0.5	11,512,507
Other Securities		1.0	26,285,327
		1.5	37,797,834
Banks 10.2%
Bank of America Corp.	2,416,569	1.6	39,003,424
Citigroup, Inc.	690,097	1.3	32,945,231
JPMorgan Chase & Co.	861,438	2.3	58,147,065
U.S. Bancorp	379,805	0.7	16,768,391
Wells Fargo & Co.	1,088,189	2.2	55,280,001
Other Securities		2.1	52,252,351
		10.2	254,396,463
Capital Goods 8.3%
General Electric Co.	2,165,179	2.7	67,640,192
Honeywell International, Inc.	179,882	0.9	20,994,028
Lockheed Martin Corp.	61,889	0.6	15,037,170
United Technologies Corp.	182,789	0.8	19,454,233
Other Securities		3.3	82,467,327
		8.3	205,592,950
Commercial & Professional Services 0.5%
Other Securities		0.5	13,455,427

Security	Number of Shares	% of Net Assets	Value ($)
Consumer Durables & Apparel 0.8%
Other Securities		0.8	21,096,808
Consumer Services 1.6%
McDonald's Corp.	206,544	1.0	23,888,879
Other Securities		0.6	15,556,739
		1.6	39,445,618
Diversified Financials 3.2%
The Goldman Sachs Group, Inc.	90,418	0.6	15,322,234
Other Securities		2.6	64,578,809
		3.2	79,901,043
Energy 8.4%
Chevron Corp.	442,694	1.8	44,526,162
ConocoPhillips	292,474	0.5	12,006,058
Exxon Mobil Corp.	976,492	3.4	85,091,513
Occidental Petroleum Corp.	179,785	0.5	13,816,477
Other Securities		2.2	54,618,825
		8.4	210,059,035
Food & Staples Retailing 1.6%
Wal-Mart Stores, Inc.	359,423	1.0	25,677,179
Other Securities		0.6	13,564,115
		1.6	39,241,294
Food, Beverage & Tobacco 9.4%
Altria Group, Inc.	461,850	1.2	30,523,667
Mondelez International, Inc., Class A	364,039	0.7	16,389,036
PepsiCo, Inc.	339,593	1.5	36,251,553
Philip Morris International, Inc.	365,580	1.5	36,532,409
The Coca-Cola Co.	915,904	1.6	39,777,711
The Kraft Heinz Co.	141,123	0.5	12,629,097
Other Securities		2.4	61,102,759
		9.4	233,206,232
Health Care Equipment & Services 2.3%
Abbott Laboratories	345,269	0.6	14,508,203
Other Securities		1.7	43,520,294
		2.3	58,028,497
Household & Personal Products 3.5%
Colgate-Palmolive Co.	210,882	0.6	15,676,968
Kimberly-Clark Corp.	85,024	0.5	10,888,174
The Procter & Gamble Co.	626,562	2.2	54,705,128
Other Securities		0.2	5,611,966
		3.5	86,882,236
Insurance 4.7%
American International Group, Inc.	263,575	0.6	15,769,692
Chubb Ltd.	110,102	0.6	13,975,247
MetLife, Inc.	257,872	0.4	11,191,645
Other Securities		3.1	77,311,784
		4.7	118,248,368

See financial notes 45

Table of Contents

Schwab U.S. Large-Cap Value ETF

Condensed Portfolio Holdings continued

Security	Number of Shares	% of Net Assets	Value ($)
Materials 3.3%
E.I. du Pont de Nemours & Co.	205,605	0.6	14,310,108
The Dow Chemical Co.	264,017	0.5	14,161,872
Other Securities		2.2	54,597,991
		3.3	83,069,971
Media 1.7%
Time Warner, Inc.	185,385	0.6	14,536,038
Other Securities		1.1	27,783,974
		1.7	42,320,012
Pharmaceuticals, Biotechnology & Life Sciences 9.5%
AbbVie, Inc.	380,862	1.0	24,413,254
Bristol-Myers Squibb Co.	393,927	0.9	22,607,470
Eli Lilly & Co.	228,589	0.7	17,772,795
Johnson & Johnson	648,420	3.1	77,382,443
Merck & Co., Inc.	652,724	1.7	40,984,540
Pfizer, Inc.	1,429,120	2.0	49,733,376
Other Securities		0.1	3,068,262
		9.5	235,962,140
Real Estate 3.0%
Other Securities		3.0	75,936,760
Retailing 1.1%
Other Securities		1.1	26,277,243
Semiconductors & Semiconductor Equipment 3.4%
Intel Corp.	1,112,391	1.6	39,923,713
Texas Instruments, Inc.	237,268	0.6	16,499,617
Other Securities		1.2	29,181,330
		3.4	85,604,660
Software & Services 6.9%
International Business Machines Corp.	208,288	1.3	33,092,797
Microsoft Corp.	1,853,204	4.3	106,485,102
Other Securities		1.3	32,435,295
		6.9	172,013,194
Technology Hardware & Equipment 3.2%
Cisco Systems, Inc.	1,185,622	1.5	37,275,956
Other Securities		1.7	42,028,460
		3.2	79,304,416
Telecommunication Services 4.7%
AT&T, Inc.	1,451,916	2.4	59,354,326
Verizon Communications, Inc.	961,523	2.0	50,316,499
Other Securities		0.3	6,218,128
		4.7	115,888,953

Security	Number of Shares	% of Net Assets	Value ($)
Transportation 0.6%
Other Securities		0.6	15,097,124
Utilities 6.2%
Dominion Resources, Inc.	147,381	0.5	10,929,775
Duke Energy Corp.	163,081	0.5	12,991,032
NextEra Energy, Inc.	108,604	0.5	13,134,568
The Southern Co.	222,452	0.5	11,418,461
Other Securities		4.2	104,978,736
		6.2	153,452,572
Total Common Stock
(Cost $2,208,719,769)			2,482,278,850

Other Investment Companies 0.1% of net assets
Money Market Fund 0.0%
Other Securities		0.0	861,310
Securities Lending Collateral 0.1%
Other Securities		0.1	1,011,125
Total Other Investment Companies
(Cost $1,872,435)			1,872,435

End of Investments.

At 08/31/16, the tax basis cost of the fund's investments was $2,211,341,601 and the unrealized appreciation and depreciation were $313,285,635 and ($40,475,951), respectively, with a net unrealized appreciation of $272,809,684.

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 $962,525.
(b)	The rate shown is the 7-day yield.

In addition to the above, the fund held the following at 08/31/16:

	Number of Contracts	Contract Value ($)	Unrealized Depreciation ($)
Futures Contracts
S&P 500 Index, e-mini, Long, expires 09/16/16	65	7,050,875	(17,813)

46 See financial notes

Table of Contents

Schwab U.S. Large-Cap Value ETF

Condensed Portfolio Holdings continued

The following is a summary of the inputs used to value the fund’s investments as of August 31, 2016 (see financial note 2(a) for additional information):

Assets Valuation Input

Description	Quoted Prices in Active Markets for Identical Assets (Level 1)	Other Significant Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Common Stock¹	$2,482,278,850	$—	$—	$2,482,278,850
Other Investment Companies¹	1,872,435	—	—	1,872,435
Total	$2,484,151,285	$—	$—	$2,484,151,285
Liabilities Valuation Input

Other Financial Instruments
Futures Contracts²	($17,813)	$—	$—	($17,813)

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.

See financial notes 47

Table of Contents

Schwab U.S. Large-Cap Value ETF

Statement of

Assets and Liabilities

As of August 31, 2016

Assets
Investments, at value (cost $2,209,581,079) including securities on loan of $962,525		$2,483,140,160
Collateral invested for securities on loan, at value (cost $1,011,125)	+	1,011,125
Total investments, at value (cost $2,210,592,204)		2,484,151,285
Deposit with broker for futures contracts		399,000
Receivables:
Dividends		8,229,320
Fund shares sold		4,601,410
Income from securities on loan	+	5,570
Total assets		2,497,386,585
Liabilities
Collateral held for securities on loan		1,011,125
Payables:
Investments bought		4,568,802
Investment adviser fees		124,538
Variation margin on futures contracts	+	18,525
Total liabilities		5,722,990
Net Assets
Total assets		2,497,386,585
Total liabilities	–	5,722,990
Net assets		$2,491,663,595
Net Assets by Source
Capital received from investors		2,218,187,707
Net investment income not yet distributed		12,897,021
Net realized capital losses		(12,962,401)
Net unrealized capital appreciation		273,541,268

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$2,491,663,595		54,150,000		$46.01

48 See financial notes

Table of Contents

Schwab U.S. Large-Cap Value ETF

Statement of

Operations

For the period September 1, 2015 through August 31, 2016

Investment Income
Dividends received from unaffiliated issuers (net of foreign withholding tax of ($1,182))		$58,706,222
Securities on loan	+	81,759
Total investment income		58,787,981
Expenses
Investment adviser fees		1,184,491
Proxy fees	+	64,402
Total expenses	–	1,248,893
Net investment income		57,539,088
Realized and Unrealized Gains (Losses)
Net realized losses on investments		(11,060,970)
Net realized gains on in-kind redemptions		24,973,012
Net realized gains on futures contracts	+	695,509
Net realized gains		14,607,551
Net change in unrealized appreciation (depreciation) on investments		211,054,716
Net change in unrealized appreciation (depreciation) on futures contracts	+	(17,813)
Net change in unrealized appreciation (depreciation)	+	211,036,903
Net realized and unrealized gains		225,644,454
Increase in net assets resulting from operations		$283,183,542

See financial notes 49

Table of Contents

Schwab U.S. Large-Cap Value ETF

Statement of

Changes in Net Assets

For the current and prior report periods

Operations
	9/1/15-8/31/16		9/1/14-8/31/15
Net investment income		$57,539,088	$36,056,467
Net realized gains		14,607,551	61,278,807
Net change in unrealized appreciation (depreciation)	+	211,036,903	(156,701,092)
Increase (decrease) in net assets resulting from operations		283,183,542	(59,365,818)
Distributions to Shareholders
Distributions from net investment income		($51,275,935)	($32,821,400)

Transactions in Fund Shares
		9/1/15-8/31/16		9/1/14-8/31/15
		SHARES	VALUE	SHARES	VALUE
Shares sold		21,700,000	$931,456,390	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		19,050,000	$824,561,654	8,400,000	$364,805,400
Shares Outstanding and Net Assets
		9/1/15-8/31/16		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	+	19,050,000	1,056,469,261	8,400,000	272,618,182
End of period		54,150,000	$2,491,663,595	35,100,000	$1,435,194,334
Net investment income not yet distributed			$12,897,021		$7,079,782

50 See financial notes

Table of Contents

Schwab U.S. Mid-Cap ETF

Financial Statements

Financial Highlights

	9/1/15– 8/31/16	9/1/14– 8/31/15	9/1/13– 8/31/14	9/1/12– 8/31/13	9/1/11– 8/31/12
Per-Share Data
Net asset value at beginning of period	$40.70	$40.56	$32.94	$26.56	$23.75
Income (loss) from investment operations:
Net investment income (loss)	0.74 ¹	0.59 ¹	0.56	0.51	0.37
Net realized and unrealized gains (losses)	2.84	0.12	7.62	6.40	2.77
Total from investment operations	3.58	0.71	8.18	6.91	3.14
Less distributions:
Distributions from net investment income	(0.61)	(0.57)	(0.56)	(0.53)	(0.33)
Net asset value at end of period	$43.67	$40.70	$40.56	$32.94	$26.56
Total return	8.94%	1.71%	24.97%	26.27%	13.32%
Ratios/Supplemental Data
Ratios to average net assets:
Total expenses	0.07%	0.07%	0.07%	0.07%	0.13%
Net investment income (loss)	1.83%	1.42%	1.53%	1.70%	1.53%
Portfolio turnover rate²	21%	12%	9%	25%	19%
Net assets, end of period (x 1,000)	$2,532,590	$1,841,785	$1,190,517	$611,081	$205,840

Calculated based on the average shares outstanding during the period.

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. Mid-Cap ETF

Condensed Portfolio Holdings as of August 31, 2016

Holdings by Category		Cost ($)	Value ($)
99.9%	Common Stock	2,313,957,617	2,529,714,321
1.1%	Other Investment Companies	27,205,389	27,205,389
101.0%	Total Investments	2,341,163,006	2,556,919,710
(1.0%)	Other Assets and Liabilities, Net		(24,329,458)
100.0%	Net Assets		2,532,590,252

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 99.9% of net assets
Automobiles & Components 1.1%
Other Securities		1.1	26,650,844
Banks 4.1%
First Republic Bank	152,259	0.5	11,717,853
Huntington Bancshares, Inc.	1,098,575	0.4	10,996,736
Other Securities		3.2	81,077,536
		4.1	103,792,125
Capital Goods 11.4%
Acuity Brands, Inc.	44,867	0.5	12,343,809
Fortune Brands Home & Security, Inc.	158,413	0.4	10,068,730
Masco Corp.	339,996	0.5	12,063,058
Snap-on, Inc.	59,605	0.3	9,136,850
Xylem, Inc.	184,167	0.4	9,366,734
Other Securities		9.3	235,525,181
		11.4	288,504,362
Commercial & Professional Services 1.9%
Cintas Corp.	88,685	0.4	10,421,374
Other Securities		1.5	38,123,205
		1.9	48,544,579

Security	Number of Shares	% of Net Assets	Value ($)
Consumer Durables & Apparel 4.2%
Hasbro, Inc.	115,298	0.4	9,424,459
Mattel, Inc.	350,577	0.5	11,614,616
Other Securities		3.3	84,564,682
		4.2	105,603,757
Consumer Services 2.7%
Other Securities		2.7	68,542,638
Diversified Financials 4.7%
Other Securities		4.7	118,660,438
Energy 4.6%
ONEOK, Inc.	216,264	0.4	10,140,619
Other Securities		4.2	106,810,285
		4.6	116,950,904
Food & Staples Retailing 0.7%
Other Securities		0.7	16,656,164
Food, Beverage & Tobacco 1.5%
Ingredion, Inc.	73,695	0.4	10,093,267
The WhiteWave Foods Co. *	181,740	0.4	10,073,848
Other Securities		0.7	16,873,372
		1.5	37,040,487
Health Care Equipment & Services 5.7%
Centene Corp. *	176,093	0.5	12,025,391
DENTSPLY SIRONA, Inc.	240,788	0.6	14,798,830
IDEXX Laboratories, Inc. *	92,151	0.4	10,383,575
ResMed, Inc.	144,454	0.4	9,633,637
The Cooper Cos., Inc.	50,312	0.3	9,354,007
Varian Medical Systems, Inc. *	98,085	0.4	9,428,911
Other Securities		3.1	78,856,402
		5.7	144,480,753
Household & Personal Products 0.8%
Other Securities		0.8	20,970,880
Insurance 6.4%
Arch Capital Group Ltd. *	124,664	0.4	10,090,304
Cincinnati Financial Corp.	151,204	0.5	11,659,341
FNF Group	282,005	0.4	10,628,769
Willis Towers Watson plc	142,041	0.7	17,614,504
Other Securities		4.4	111,760,260
		6.4	161,753,178
Materials 5.7%
Albemarle Corp.	115,057	0.4	9,201,108
International Flavors & Fragrances, Inc.	81,694	0.4	11,321,154
Other Securities		4.9	124,891,902
		5.7	145,414,164

52 See financial notes

Table of Contents

Schwab U.S. Mid-Cap ETF

Condensed Portfolio Holdings continued

Security	Number of Shares	% of Net Assets	Value ($)
Media 2.3%
The Interpublic Group of Cos., Inc.	411,846	0.4	9,530,116
Other Securities		1.9	47,909,241
		2.3	57,439,357
Pharmaceuticals, Biotechnology & Life Sciences 4.1%
Medivation, Inc. *	169,611	0.6	13,663,862
Mettler-Toledo International, Inc. *	27,497	0.4	11,083,216
Other Securities		3.1	78,197,087
		4.1	102,944,165
Real Estate 11.7%
Duke Realty Corp.	352,967	0.4	9,925,432
Extra Space Storage, Inc.	128,010	0.4	10,311,205
Federal Realty Investment Trust	72,423	0.4	11,515,257
Iron Mountain, Inc.	245,625	0.4	9,434,456
Realty Income Corp.	264,676	0.7	17,397,153
SL Green Realty Corp.	102,761	0.5	12,097,025
UDR, Inc.	269,587	0.4	9,753,658
VEREIT, Inc.	981,086	0.4	10,252,349
Other Securities		8.1	206,854,846
		11.7	297,541,381
Retailing 3.8%
LKQ Corp. *	316,114	0.5	11,408,554
Ulta Salon, Cosmetics & Fragrance, Inc. *	64,231	0.6	15,878,545
Other Securities		2.7	68,483,089
		3.8	95,770,188
Semiconductors & Semiconductor Equipment 1.2%
KLA-Tencor Corp.	159,927	0.4	11,076,544
Other Securities		0.8	20,515,970
		1.2	31,592,514
Software & Services 9.2%
Amdocs Ltd.	154,009	0.4	9,259,021
CDK Global, Inc.	159,632	0.4	9,255,463
Global Payments, Inc.	159,403	0.5	12,106,658
Synopsys, Inc. *	155,456	0.3	9,216,986
Other Securities		7.6	192,964,956
		9.2	232,803,084
Technology Hardware & Equipment 3.6%
Harris Corp.	127,797	0.4	11,882,565
Other Securities		3.2	80,509,744
		3.6	92,392,309
Telecommunication Services 0.4%
Other Securities		0.4	9,838,668
Transportation 2.4%
Expeditors International of Washington, Inc.	185,987	0.4	9,420,241
Other Securities		2.0	51,435,408
		2.4	60,855,649

Security	Number of Shares	% of Net Assets	Value ($)
Utilities 5.7%
American Water Works Co., Inc.	183,506	0.5	13,577,609
CenterPoint Energy, Inc.	443,831	0.4	9,972,883
CMS Energy Corp.	285,928	0.5	12,000,398
SCANA Corp.	146,299	0.4	10,336,024
Other Securities		3.9	99,084,819
		5.7	144,971,733
Total Common Stock
(Cost $2,313,957,617)			2,529,714,321

Other Investment Companies 1.1% of net assets
Money Market Fund 0.0%
Other Securities		0.0	146,314
Securities Lending Collateral 1.1%
Wells Fargo Government Money Market Fund, Select Class 0.32% (b)		1.1	27,059,075
Total Other Investment Companies
(Cost $27,205,389)			27,205,389

End of Investments.

At 08/31/16, the tax basis cost of the fund's investments was $2,345,456,379 and the unrealized appreciation and depreciation were $349,651,909 and ($138,188,578), respectively, with a net unrealized appreciation of $211,463,331.

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 $26,028,977.
(b)	The rate shown is the 7-day yield.

In addition to the above, the fund held the following at 08/31/16:

	Number of Contracts	Contract Value ($)	Unrealized Appreciation ($)
Futures Contracts
S&P 500 Index, e-mini, Long, expires 09/16/16	15	1,627,125	82,659

See financial notes 53

Table of Contents

Schwab U.S. Mid-Cap ETF

Condensed Portfolio Holdings continued

The following is a summary of the inputs used to value the fund’s investments as of August 31, 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	$2,529,714,321	$—	$—	$2,529,714,321
Other Investment Companies¹	27,205,389	—	—	27,205,389
Total	$2,556,919,710	$—	$—	$2,556,919,710
Other Financial Instruments
Futures Contracts²	$82,659	$—	$—	$82,659

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.

54 See financial notes

Table of Contents

Schwab U.S. Mid-Cap ETF

Statement of

Assets and Liabilities

As of August 31, 2016

Assets
Investments, at value (cost $2,314,103,931) including securities on loan of $26,028,977		$2,529,860,635
Collateral invested for securities on loan, at value (cost $27,059,075)	+	27,059,075
Total investments, at value (cost $2,341,163,006)		2,556,919,710
Deposit with broker for futures contracts		96,600
Receivables:
Fund shares sold		8,756,166
Dividends		2,607,232
Income from securities on loan	+	107,638
Total assets		2,568,487,346
Liabilities
Collateral held for securities on loan		27,059,075
Payables:
Investments bought		8,685,449
Investment adviser fees		148,295
Variation margin on futures contracts	+	4,275
Total liabilities		35,897,094
Net Assets
Total assets		2,568,487,346
Total liabilities	–	35,897,094
Net assets		$2,532,590,252
Net Assets by Source
Capital received from investors		2,379,230,448
Net investment income not yet distributed		8,008,102
Net realized capital losses		(70,487,661)
Net unrealized capital appreciation		215,839,363

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$2,532,590,252		58,000,000		$43.67

See financial notes 55

Table of Contents

Schwab U.S. Mid-Cap ETF

Statement of

Operations

For the period September 1, 2015 through August 31, 2016

Investment Income
Dividends (net of foreign withholding tax of $25,646)		$37,939,825
Securities on loan	+	1,233,581
Total investment income		39,173,406
Expenses
Investment adviser fees		1,441,289
Proxy fees	+	76,882
Total expenses	–	1,518,171
Net investment income		37,655,235
Realized and Unrealized Gains (Losses)
Net realized losses on investments		(68,670,950)
Net realized gains on in-kind redemptions		105,357,925
Net realized losses on futures contracts	+	(443,191)
Net realized gains		36,243,784
Net change in unrealized appreciation (depreciation) on investments		112,413,014
Net change in unrealized appreciation (depreciation) on futures contracts	+	90,614
Net change in unrealized appreciation (depreciation)	+	112,503,628
Net realized and unrealized gains		148,747,412
Increase in net assets resulting from operations		$186,402,647

56 See financial notes

Table of Contents

Schwab U.S. Mid-Cap ETF

Statement of

Changes in Net Assets

For the current and prior report periods

Operations
	9/1/15-8/31/16		9/1/14-8/31/15
Net investment income		$37,655,235	$22,342,560
Net realized gains		36,243,784	78,324,391
Net change in unrealized appreciation (depreciation)	+	112,503,628	(100,425,456)
Increase in net assets resulting from operations		186,402,647	241,495
Distributions to Shareholders
Distributions from net investment income		($30,341,985)	($20,721,520)

Transactions in Fund Shares
		9/1/15-8/31/16		9/1/14-8/31/15
		SHARES	VALUE	SHARES	VALUE
Shares sold		22,550,000	$932,205,713	21,550,000	$898,836,550
Shares redeemed	+	(9,800,000)	(397,461,135)	(5,650,000)	(227,088,435)
Net transactions in fund shares		12,750,000	$534,744,578	15,900,000	$671,748,115
Shares Outstanding and Net Assets
		9/1/15-8/31/16		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	+	12,750,000	690,805,240	15,900,000	651,268,090
End of period		58,000,000	$2,532,590,252	45,250,000	$1,841,785,012
Net investment income not yet distributed			$8,008,102		$1,663,249

See financial notes 57

Table of Contents

Schwab U.S. Small-Cap ETF

Financial Statements

Financial Highlights

	9/1/15– 8/31/16	9/1/14– 8/31/15	9/1/13– 8/31/14	9/1/12– 8/31/13	9/1/11– 8/31/12
Per-Share Data
Net asset value at beginning of period	$53.54	$54.53	$45.71	$36.55	$32.34
Income (loss) from investment operations:
Net investment income (loss)	0.93 ¹	0.80 ¹	0.73	0.74	0.49
Net realized and unrealized gains (losses)	3.75	(1.07)	8.84	9.18	4.16
Total from investment operations	4.68	(0.27)	9.57	9.92	4.65
Less distributions:
Distributions from net investment income	(0.80)	(0.72)	(0.75)	(0.76)	(0.44)
Net asset value at end of period	$57.42	$53.54	$54.53	$45.71	$36.55
Total return	8.89%	(0.54%)	21.01%	27.47%	14.52%
Ratios/Supplemental Data
Ratios to average net assets:
Total expenses	0.08% ²	0.08%	0.08%	0.09% ³	0.13%
Net investment income (loss)	1.76%	1.44%	1.41%	1.74%	1.44%
Portfolio turnover rate⁴	11%	9%	13%	22%	12%
Net assets, end of period (x 1,000)	$3,772,207	$2,893,741	$2,104,717	$1,446,857	$641,516

Calculated based on the average shares outstanding during the period.

Effective May 2, 2016, the annual operating expense ratio was reduced. The ratio presented for the period ended 8/31/16 is a blended ratio. (See financial note 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.

⁴

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. Small-Cap ETF

Condensed Portfolio Holdings as of August 31, 2016

Holdings by Category		Cost ($)	Value ($)
99.7%	Common Stock	3,355,853,917	3,761,873,374
0.0%	Rights	330,693	352,677
0.0%	Warrants	—	—
1.9%	Other Investment Companies	70,547,087	70,547,087
101.6%	Total Investments	3,426,731,697	3,832,773,138
(1.6%)	Other Assets and Liabilities, Net		(60,566,075)
100.0%	Net Assets		3,772,207,063

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 99.7% of net assets
Automobiles & Components 1.2%
Gentex Corp.	425,906	0.2	7,576,868
Other Securities		1.0	38,598,435
		1.2	46,175,303
Banks 8.6%
PacWest Bancorp	171,734	0.2	7,437,800
Other Securities		8.4	315,444,603
		8.6	322,882,403
Capital Goods 9.2%
Huntington Ingalls Industries, Inc.	70,101	0.3	11,578,582
Lennox International, Inc.	57,901	0.3	9,326,114
The Toro Co.	82,074	0.2	7,973,489
Other Securities		8.4	317,725,503
		9.2	346,603,688
Commercial & Professional Services 3.3%
KAR Auction Services, Inc.	205,531	0.2	8,689,851
Other Securities		3.1	116,352,087
		3.3	125,041,938
Consumer Durables & Apparel 2.3%
Other Securities		2.3	84,913,188

Security	Number of Shares	% of Net Assets	Value ($)
Consumer Services 3.8%
ServiceMaster Global Holdings, Inc. *	201,253	0.2	7,508,749
Vail Resorts, Inc.	54,276	0.2	8,598,947
Other Securities		3.4	126,441,954
		3.8	142,549,650
Diversified Financials 3.8%
CBOE Holdings, Inc.	124,755	0.2	8,569,421
MarketAxess Holdings, Inc.	55,935	0.3	9,427,285
Starwood Property Trust, Inc.	357,996	0.2	8,198,108
Other Securities		3.1	117,324,925
		3.8	143,519,739
Energy 4.8%
Diamondback Energy, Inc. *	117,028	0.3	11,146,917
Energen Corp.	142,835	0.2	8,213,012
Newfield Exploration Co. *	295,023	0.3	12,792,197
Parsley Energy, Inc., Class A *	219,975	0.2	7,446,154
Targa Resources Corp.	241,532	0.3	10,525,965
Other Securities		3.5	132,316,685
		4.8	182,440,930
Food & Staples Retailing 0.8%
Casey's General Stores, Inc.	58,122	0.2	7,632,000
Other Securities		0.6	20,511,471
		0.8	28,143,471
Food, Beverage & Tobacco 1.9%
Pinnacle Foods, Inc.	163,584	0.2	8,285,530
Post Holdings, Inc. *	96,635	0.2	8,192,715
TreeHouse Foods, Inc. *	84,863	0.2	8,039,072
Other Securities		1.3	47,617,503
		1.9	72,134,820
Health Care Equipment & Services 6.7%
Align Technology, Inc. *	108,352	0.3	10,065,901
STERIS plc	130,262	0.3	9,206,918
Teleflex, Inc.	64,656	0.3	11,837,867
VCA, Inc. *	119,210	0.2	8,441,260
WellCare Health Plans, Inc. *	66,764	0.2	7,524,303
West Pharmaceutical Services, Inc.	107,511	0.2	8,797,625
Other Securities		5.2	195,419,131
		6.7	251,293,005
Household & Personal Products 0.6%
Other Securities		0.6	23,965,617
Insurance 3.5%
Assurant, Inc.	91,039	0.2	8,152,542
Other Securities		3.3	123,698,070
		3.5	131,850,612
Materials 5.7%
AptarGroup, Inc.	95,432	0.2	7,441,787
Bemis Co., Inc.	141,944	0.2	7,466,254
Berry Plastics Group, Inc. *	183,356	0.2	8,322,529

See financial notes 59

Table of Contents

Schwab U.S. Small-Cap ETF

Condensed Portfolio Holdings continued

Security	Number of Shares	% of Net Assets	Value ($)
Sonoco Products Co.	151,237	0.2	7,794,755
Steel Dynamics, Inc.	366,443	0.2	9,021,827
Other Securities		4.7	175,054,779
		5.7	215,101,931
Media 1.9%
Other Securities		1.9	72,566,271
Pharmaceuticals, Biotechnology & Life Sciences 5.5%
Other Securities		5.5	207,571,421
Real Estate 11.1%
CubeSmart	264,701	0.2	7,287,219
Douglas Emmett, Inc.	208,422	0.2	7,828,330
EPR Properties	98,565	0.2	7,719,611
Equity LifeStyle Properties, Inc.	120,353	0.2	9,330,968
Forest City Realty Trust, Inc., Class A	331,820	0.2	7,850,861
Gaming & Leisure Properties, Inc.	288,954	0.3	9,885,116
Highwoods Properties, Inc.	144,953	0.2	7,688,307
Hospitality Properties Trust	242,930	0.2	7,406,936
Spirit Realty Capital, Inc.	725,357	0.3	9,610,980
Other Securities		9.1	344,594,673
		11.1	419,203,001
Retailing 3.5%
Burlington Stores, Inc. *	106,085	0.2	8,616,224
Other Securities		3.3	124,704,980
		3.5	133,321,204
Semiconductors & Semiconductor Equipment 3.0%
Other Securities		3.0	112,402,362
Software & Services 8.2%
Leidos Holdings, Inc.	209,237	0.2	8,476,191
PTC, Inc. *	171,679	0.2	7,325,543
The Ultimate Software Group, Inc. *	43,830	0.2	9,157,840
Tyler Technologies, Inc. *	48,498	0.2	7,951,247
Other Securities		7.4	277,476,186
		8.2	310,387,007
Technology Hardware & Equipment 5.0%
ARRIS International plc *	266,378	0.2	7,477,230
Ingram Micro, Inc., Class A	224,762	0.2	7,857,680
Other Securities		4.6	172,744,034
		5.0	188,078,944
Telecommunication Services 0.5%
Other Securities		0.5	20,370,121
Transportation 1.3%
Other Securities		1.3	50,722,090

Security	Number of Shares	% of Net Assets	Value ($)
Utilities 3.5%
Piedmont Natural Gas Co., Inc.	123,395	0.2	7,416,040
Other Securities		3.3	123,218,618
		3.5	130,634,658
Total Common Stock
(Cost $3,355,853,917)			3,761,873,374

Rights 0.0% of net assets
Pharmaceuticals, Biotechnology & Life Sciences 0.0%
Other Securities		0.0	215,274
Telecommunication Services 0.0%
Other Securities		0.0	137,403
Total Rights
(Cost $330,693)			352,677

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

Other Investment Companies 1.9% of net assets
Money Market Fund 0.2%
Other Securities		0.2	6,146,690
Securities Lending Collateral 1.7%
Wells Fargo Government Money Market Fund, Select Class 0.32% (c)		1.7	64,400,397
Total Other Investment Companies
(Cost $70,547,087)			70,547,087

End of Investments.

At 08/31/16, the tax basis cost of the fund's investments was $3,432,134,201 and the unrealized appreciation and depreciation were $645,584,526 and ($244,945,589), respectively, with a net unrealized appreciation of $400,638,937.

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 $61,764,346.
(b)	Illiquid security. At the period end, the value of these amounted to $352,677 or 0.0% of net assets.
(c)	The rate shown is the 7-day yield.
(d)	Fair-valued by management in accordance with procedures approved by the Board of Trustees.

60 See financial notes

Table of Contents

Schwab U.S. Small-Cap ETF

Condensed Portfolio Holdings continued

CVR —	Contingent Value Rights
REIT —	Real Estate Investment Trust

In addition to the above, the fund held the following at 8/31/16:

	Number of Contracts	Contract Value ($)	Unrealized Depreciation ($)
Futures Contracts
Russell 2000 Index, e-mini, Long, expires 09/16/16	23	2,849,240	(1,197)

The following is a summary of the inputs used to value the fund’s investments as of August 31, 2016 (see financial note 2(a) for additional information):

Assets Valuation Input

Description	Quoted Prices in Active Markets for Identical Assets (Level 1)	Other Significant Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Common Stock¹	$3,761,873,374	$—	$—	$3,761,873,374
Rights ¹	—	—	352,677*	352,677
Warrants ¹	—	—	—*	—
Other Investment Companies¹	70,547,087	—	—	70,547,087
Total	$3,832,420,461	$—	$352,677	$3,832,773,138
Liabilities Valuation Input

Other Financial Instruments
Futures Contracts²	($1,197)	$—	$—	($1,197)

*	Level 3 amount shown includes securities determined to have no value at August 31, 2016.
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 August 31, 2016
Rights	$115,419	$—	$21,984	$215,274	$—	$—	$—	$352,677
Total	$115,419	$—	$21,984	$215,274	$—	$—	$—	$352,677

See financial notes 61

Table of Contents

Schwab U.S. Small-Cap ETF

Statement of

Assets and Liabilities

As of August 31, 2016

Assets
Investments, at value (cost $3,362,331,300) including securities on loan of $61,764,346		$3,768,372,741
Collateral invested for securities on loan, at value (cost $64,400,397)	+	64,400,397
Total investments, at value (cost $3,426,731,697)		3,832,773,138
Cash		3,575,586
Deposit with broker for futures contracts		605,000
Receivables:
Investments sold		1,953,545
Dividends		3,306,035
Fund shares sold		2,882,633
Income from securities on loan	+	289,968
Total assets		3,845,385,905
Liabilities
Collateral held for securities on loan		64,400,397
Payables:
Investments bought		8,541,118
Investment adviser fees		220,997
Variation margin on futures contracts	+	16,330
Total liabilities		73,178,842
Net Assets
Total assets		3,845,385,905
Total liabilities	–	73,178,842
Net assets		$3,772,207,063
Net Assets by Source
Capital received from investors		3,449,537,268
Net investment income not yet distributed		11,992,552
Net realized capital losses		(95,363,001)
Net unrealized capital appreciation		406,040,244

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$3,772,207,063		65,700,000		$57.42

62 See financial notes

Table of Contents

Schwab U.S. Small-Cap ETF

Statement of

Operations

For the period September 1, 2015 through August 31, 2016

Investment Income
Dividends (net of foreign withholding tax of $14,415)		$53,748,819
Securities on loan	+	3,699,567
Total investment income		57,448,386
Expenses
Investment adviser fees		2,381,510
Proxy fees	+	118,750
Total expenses	–	2,500,260
Net investment income		54,948,126
Realized and Unrealized Gains (Losses)
Net realized losses on investments		(76,460,034)
Net realized gains on in-kind redemptions		156,854,595
Net realized losses on futures contracts	+	(1,388,089)
Net realized gains		79,006,472
Net change in unrealized appreciation (depreciation) on investments		157,346,913
Net change in unrealized appreciation (depreciation) on futures contracts	+	(84,892)
Net change in unrealized appreciation (depreciation)	+	157,262,021
Net realized and unrealized gains		236,268,493
Increase in net assets resulting from operations		$291,216,619

See financial notes 63

Table of Contents

Schwab U.S. Small-Cap ETF

Statement of

Changes in Net Assets

For the current and prior report periods

Operations
	9/1/15-8/31/16		9/1/14-8/31/15
Net investment income		$54,948,126	$36,905,675
Net realized gains		79,006,472	70,342,722
Net change in unrealized appreciation (depreciation)	+	157,262,021	(155,287,037)
Increase (decrease) in net assets resulting from operations		291,216,619	(48,038,640)
Distributions to Shareholders
Distributions from net investment income		($46,392,950)	($32,271,525)

Transactions in Fund Shares
		9/1/15-8/31/16		9/1/14-8/31/15
		SHARES	VALUE	SHARES	VALUE
Shares sold		20,950,000	$1,122,818,001	19,700,000	$1,097,023,969
Shares redeemed	+	(9,300,000)	(489,175,354)	(4,250,000)	(227,689,724)
Net transactions in fund shares		11,650,000	$633,642,647	15,450,000	$869,334,245
Shares Outstanding and Net Assets
		9/1/15-8/31/16		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	+	11,650,000	878,466,316	15,450,000	789,024,080
End of period		65,700,000	$3,772,207,063	54,050,000	$2,893,740,747
Net investment income not yet distributed			$11,992,552		$4,406,447

64 See financial notes

Table of Contents

Schwab U.S. Dividend Equity ETF

Financial Statements

Financial Highlights

	9/1/15– 8/31/16	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)	1.29 ²	1.19 ²	1.04	0.91	0.62
Net realized and unrealized gains (losses)	5.85	(2.46)	5.86	4.40	3.43
Total from investment operations	7.14	(1.27)	6.90	5.31	4.05
Less distributions:
Distributions from net investment income	(1.19)	(1.11)	(1.00)	(0.89)	(0.47)
Net asset value at end of period	$42.47	$36.52	$38.90	$33.00	$28.58
Total return	19.89%	(3.47%)	21.15%	18.93%	16.31% ³
Ratios/Supplemental Data
Ratios to average net assets:
Total expenses	0.07%	0.07%	0.07%	0.07%	0.17% ⁴
Net investment income (loss)	3.27%	3.03%	3.01%	3.09%	3.19% ⁴
Portfolio turnover rate⁵	22%	19%	26%	13%	17% ³
Net assets, end of period (x 1,000)	$4,300,443	$2,497,808	$2,075,331	$1,141,690	$504,464

Commencement of operations.

Calculated based on the average shares outstanding during the period.

Not annualized.

⁴

Annualized.

⁵

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

See financial notes 65

Table of Contents

Schwab U.S. Dividend Equity ETF

Condensed Portfolio Holdings as of August 31, 2016

Holdings by Category		Cost ($)	Value ($)
99.4%	Common Stock	3,974,779,921	4,276,826,062
0.1%	Other Investment Companies	3,346,358	3,446,203
99.5%	Total Investments	3,978,126,279	4,280,272,265
0.5%	Other Assets and Liabilities, Net		20,170,350
100.0%	Net Assets		4,300,442,615

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 99.4% of net assets
Automobiles & Components 0.3%
Other Securities		0.3	11,601,167
Banks 0.3%
Other Securities		0.3	14,217,285
Capital Goods 12.1%
3M Co.	725,639	3.0	130,063,534
Caterpillar, Inc.	697,085	1.3	57,126,116
Cummins, Inc.	198,003	0.6	24,871,157
Eaton Corp. plc	550,237	0.9	36,612,770
Emerson Electric Co.	768,715	0.9	40,495,906
Fastenal Co.	342,730	0.3	14,775,090
Lockheed Martin Corp.	316,644	1.8	76,934,993
PACCAR, Inc.	421,892	0.6	25,246,017
Rockwell Automation, Inc.	158,045	0.4	18,322,157
The Boeing Co.	746,724	2.3	96,663,422
		12.1	521,111,162
Commercial & Professional Services 0.2%
Other Securities		0.2	8,535,683
Consumer Durables & Apparel 1.2%
Other Securities		1.2	50,477,550

Security	Number of Shares	% of Net Assets	Value ($)
Consumer Services 3.2%
McDonald's Corp.	1,080,398	2.9	124,958,833
Other Securities		0.3	13,189,021
		3.2	138,147,854
Diversified Financials 1.9%
CME Group, Inc.	404,758	1.0	43,855,529
T. Rowe Price Group, Inc.	303,358	0.5	21,095,515
Other Securities		0.4	18,553,081
		1.9	83,504,125
Energy 10.1%
Chevron Corp.	1,812,447	4.2	182,295,919
Exxon Mobil Corp.	2,058,881	4.2	179,410,890
The Williams Cos., Inc.	814,387	0.5	22,753,973
Valero Energy Corp.	562,450	0.7	31,131,608
Other Securities		0.5	20,000,125
		10.1	435,592,515
Food & Staples Retailing 3.1%
Wal-Mart Stores, Inc.	1,880,836	3.1	134,366,924
Food, Beverage & Tobacco 14.6%
Altria Group, Inc.	2,355,140	3.6	155,651,203
General Mills, Inc.	712,875	1.2	50,485,807
PepsiCo, Inc.	1,734,159	4.3	185,121,473
Reynolds American, Inc.	991,720	1.2	49,159,560
The Coca-Cola Co.	4,101,732	4.1	178,138,221
Other Securities		0.2	6,821,829
		14.6	625,378,093
Health Care Equipment & Services 0.0%
Other Securities		0.0	1,417,594
Household & Personal Products 6.5%
Kimberly-Clark Corp.	432,009	1.3	55,323,073
The Clorox Co.	158,130	0.5	20,721,355
The Procter & Gamble Co.	2,259,248	4.6	197,254,943
Other Securities		0.1	4,256,958
		6.5	277,556,329
Insurance 0.5%
Principal Financial Group, Inc.	326,318	0.4	16,012,424
Other Securities		0.1	5,914,367
		0.5	21,926,791
Materials 2.7%
International Paper Co.	494,691	0.5	23,987,567
The Dow Chemical Co.	1,335,704	1.7	71,647,162
Other Securities		0.5	19,822,384
		2.7	115,457,113
Media 0.6%
Omnicom Group, Inc.	288,308	0.5	24,831,968
Other Securities		0.1	2,569,099
		0.6	27,401,067

66 See financial notes

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Schwab U.S. Dividend Equity ETF

Condensed Portfolio Holdings continued

Security	Number of Shares	% of Net Assets	Value ($)
Pharmaceuticals, Biotechnology & Life Sciences 8.8%
Johnson & Johnson	1,612,489	4.5	192,434,437
Pfizer, Inc.	5,299,551	4.3	184,424,375
		8.8	376,858,812
Retailing 2.8%
Genuine Parts Co.	184,628	0.4	18,983,451
Target Corp.	724,705	1.2	50,867,044
Other Securities		1.2	51,818,126
		2.8	121,668,621
Semiconductors & Semiconductor Equipment 11.3%
Analog Devices, Inc.	372,668	0.5	23,314,110
Intel Corp.	5,677,847	4.7	203,777,929
Linear Technology Corp.	291,918	0.4	17,001,304
Maxim Integrated Products, Inc.	342,690	0.3	13,954,337
Microchip Technology, Inc.	255,440	0.4	15,814,290
QUALCOMM, Inc.	1,792,365	2.6	113,044,461
Texas Instruments, Inc.	1,206,535	2.0	83,902,444
Xilinx, Inc.	303,994	0.4	16,479,515
		11.3	487,288,390
Software & Services 11.0%
Automatic Data Processing, Inc.	550,416	1.1	49,432,861
International Business Machines Corp.	1,061,215	3.9	168,605,839
Microsoft Corp.	3,590,774	4.8	206,325,874
Paychex, Inc.	392,373	0.6	23,805,270
Other Securities		0.6	25,333,557
		11.0	473,503,401
Technology Hardware & Equipment 0.7%
HP, Inc.	2,093,623	0.7	30,085,362
Other Securities		0.0	768,135
		0.7	30,853,497
Telecommunication Services 4.4%
Verizon Communications, Inc.	3,624,491	4.4	189,669,614
Transportation 2.4%
United Parcel Service, Inc., Class B	825,452	2.1	90,155,867
Other Securities		0.3	11,978,213
		2.4	102,134,080

Security	Number of Shares	% of Net Assets	Value ($)
Utilities 0.7%
WEC Energy Group, Inc.	376,810	0.5	22,563,383
Other Securities		0.2	5,595,012
		0.7	28,158,395
Total Common Stock
(Cost $3,974,779,921)			4,276,826,062

Other Investment Companies 0.1% of net assets
Equity Fund 0.1%
Other Securities		0.1	2,554,800
Money Market Fund 0.0%
Other Securities		0.0	891,403
Total Other Investment Companies
(Cost $3,346,358)			3,446,203

End of Investments.

At 08/31/16, the tax basis cost of the fund's investments was $3,979,009,003 and the unrealized appreciation and depreciation were $346,890,657 and ($45,627,395), respectively, with a net unrealized appreciation of $301,263,262.

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

In addition to the above, the fund held the following at 08/31/16:

	Number of Contracts	Contract Value ($)	Unrealized Appreciation ($)
Futures Contracts
S&P 500 Index, e-mini, Long, expires 09/16/16	150	16,271,250	10,248

See financial notes 67

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Schwab U.S. Dividend Equity ETF

Condensed Portfolio Holdings continued

The following is a summary of the inputs used to value the fund’s investments as of August 31, 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	$4,276,826,062	$—	$—	$4,276,826,062
Other Investment Companies¹	3,446,203	—	—	3,446,203
Total	$4,280,272,265	$—	$—	$4,280,272,265
Other Financial Instruments
Futures Contracts²	$10,248	$—	$—	$10,248

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.

68 See financial notes

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Schwab U.S. Dividend Equity ETF

Statement of

Assets and Liabilities

As of August 31, 2016

Assets
Investments, at value (cost $3,978,126,279)		$4,280,272,265
Deposit with broker for futures contracts		420,000
Receivables:
Fund shares sold		23,437,123
Dividends	+	19,884,197
Total assets		4,324,013,585
Liabilities
Payables:
Investments bought		23,291,028
Investment adviser fees		251,970
Variation margin on futures contracts	+	27,972
Total liabilities		23,570,970
Net Assets
Total assets		4,324,013,585
Total liabilities	–	23,570,970
Net assets		$4,300,442,615
Net Assets by Source
Capital received from investors		4,009,845,899
Net investment income not yet distributed		25,943,439
Net realized capital losses		(37,502,957)
Net unrealized capital appreciation		302,156,234

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$4,300,442,615		101,250,001		$42.47

See financial notes 69

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Schwab U.S. Dividend Equity ETF

Statement of

Operations

For the period September 1, 2015 through August 31, 2016

Investment Income
Dividends		$108,645,680
Expenses
Investment adviser fees		2,272,356
Proxy fees	+	108,100
Total expenses	–	2,380,456
Net investment income		106,265,224
Realized and Unrealized Gains (Losses)
Net realized losses on investments		(14,531,431)
Net realized gains on in-kind redemptions		76,399,566
Net realized gains on futures contracts	+	239,866
Net realized gains		62,108,001
Net change in unrealized appreciation (depreciation) on investments		408,374,668
Net change in unrealized appreciation (depreciation) on futures contracts	+	10,248
Net change in unrealized appreciation (depreciation)	+	408,384,916
Net realized and unrealized gains		470,492,917
Increase in net assets resulting from operations		$576,758,141

70 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

Operations
	9/1/15-8/31/16		9/1/14-8/31/15
Net investment income		$106,265,224	$79,948,930
Net realized gains		62,108,001	218,576,988
Net change in unrealized appreciation (depreciation)	+	408,384,916	(396,180,173)
Increase (decrease) in net assets resulting from operations		576,758,141	(97,654,255)
Distributions to Shareholders
Distributions from net investment income		($95,093,961)	($74,347,401)

Transactions in Fund Shares
		9/1/15-8/31/16		9/1/14-8/31/15
		SHARES	VALUE	SHARES	VALUE
Shares sold		44,000,000	$1,750,920,347	44,400,000	$1,752,473,550
Shares redeemed	+	(11,150,000)	(429,949,595)	(29,350,000)	(1,157,995,283)
Net transactions in fund shares		32,850,000	$1,320,970,752	15,050,000	$594,478,267
Shares Outstanding and Net Assets
		9/1/15-8/31/16		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	+	32,850,000	1,802,634,932	15,050,000	422,476,611
End of period		101,250,001	$4,300,442,615	68,400,001	$2,497,807,683
Net investment income not yet distributed			$25,943,439		$15,960,054

See financial notes 71

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Schwab U.S. Equity ETFs

Financial Notes

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 funds are not redeemable securities.

2. Significant Accounting Policies:

(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 (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 (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 August 31, 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 (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 (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 susceptible 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 (continued)

3. Risk Factors (continued):

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

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

4. Affiliates and Affiliated Transactions:

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

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

Schwab 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%		0.07%		0.07%

*	Prior to November 17, 2015 the management fees 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 were 0.04%, 0.07% and 0.07%, respectively.
**	Prior to November 12, 2015, the management fee was 0.04%.
***	Prior to May 2, 2016, the management fee was 0.08%.

Subsequent to the reporting period ended August 31, 2016, and effective October 7, 2016, the management fees of the Schwab U.S. Mid-Cap ETF and Schwab U.S. Small-Cap ETF have been reduced to 0.06% and 0.06%, respectively.

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 8/31/15	Gross Purchases	Gross Sales	Balance of Shares Held at 8/31/16	Market Value at 8/31/16	Realized Gains (Losses) 9/1/15 to 8/31/16	Dividends Received 9/1/15 to 8/31/16
Schwab U.S. Broad Market ETF	263,047	118,936	(15,168)	366,815	$11,540,000	$191,301	$82,691
Schwab U.S. Large-Cap ETF	266,524	133,306	(25,168)	374,662	11,786,867	187,776	85,999
Schwab U.S. Large-Cap Growth ETF	273,886	113,399	(22,284)	365,001	11,482,931	297,843	87,703

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Schwab U.S. Equity ETFs

Financial Notes (continued)

4. Affiliates and Affiliated Transactions (continued):

	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	0.6%	0.2%
Schwab Target 2010 Index Fund	0.0%*	0.0%*
Schwab Target 2015 Index Fund	0.0%*	0.0%*
Schwab Target 2020 Index Fund	0.0%*	0.0%*
Schwab Target 2025 Index Fund	0.0%*	0.0%*
Schwab Target 2030 Index Fund	0.0%*	0.0%*
Schwab Target 2035 Index Fund	0.0%*	0.0%*
Schwab Target 2040 Index Fund	0.0%*	0.0%*
Schwab Target 2045 Index Fund	0.0%*	0.0%*
Schwab Target 2050 Index Fund	0.0%*	0.0%*
Schwab Target 2055 Index Fund	0.0%*	0.0%*
Schwab Target 2060 Index Fund	0.0%*	0.0%*

*	Less than 0.05%

	Total Aggregate Transactions	Realized Gains (Losses)
Schwab U.S. Broad Market ETF	$67,487,331	($20,365,715)
Schwab U.S. Large-Cap ETF	87,640,398	(16,912,555)
Schwab U.S. Large-Cap Growth ETF	54,459,321	(9,662,832)
Schwab U.S. Large-Cap Value ETF	49,695,181	(8,267,484)
Schwab U.S. Mid-Cap ETF	80,186,054	(24,803,870)
Schwab U.S. Small-Cap ETF	107,354,733	(11,982,266)
Schwab U.S. Dividend Equity ETF	131,645,022	(7,972,438)

5. Other Service Providers:

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

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Schwab U.S. Equity ETFs

Financial Notes (continued)

5. Other Service Providers (continued):

6. Board of Trustees:

7. Borrowing from Banks:

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 August 31, 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 August 31, 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	$12,815,567	124
Schwab U.S. Large-Cap ETF	9,916,669	97
Schwab U.S. Large-Cap Growth ETF	3,532,558	35
Schwab U.S. Large-Cap Value ETF	4,675,371	45
Schwab U.S. Mid-Cap ETF	695,363	7
Schwab U.S. Small-Cap ETF	6,167,172	54
Schwab U.S. Dividend Equity ETF	1,355,938	13

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Schwab U.S. Equity ETFs

Financial Notes (continued)

9. Purchases and Sales/Maturities of Investment Securities:

For the period ended August 31, 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	$384,733,213	$278,902,723
Schwab U.S. Large-Cap ETF	301,158,685	230,685,279
Schwab U.S. Large-Cap Growth ETF	222,087,865	179,512,746
Schwab U.S. Large-Cap Value ETF	142,540,873	123,234,880
Schwab U.S. Mid-Cap ETF	523,367,768	428,087,892
Schwab U.S. Small-Cap ETF	485,121,048	347,530,340
Schwab U.S. Dividend Equity ETF	730,812,601	703,100,068

10. In-Kind Transactions:

The in-kind transactions for the period ended August 31, 2016 were as follows:

	In-Kind Purchases of Securities	In-Kind Sales of Securities
Schwab U.S. Broad Market ETF	$1,665,567,424	$268,843,740
Schwab U.S. Large-Cap ETF	1,644,210,331	276,103,110
Schwab U.S. Large-Cap Growth ETF	796,041,483	231,203,205
Schwab U.S. Large-Cap Value ETF	914,166,978	93,228,183
Schwab U.S. Mid-Cap ETF	877,012,812	378,050,480
Schwab U.S. Small-Cap ETF	1,048,010,868	452,236,306
Schwab U.S. Dividend Equity ETF	1,696,682,317	403,706,284

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Schwab U.S. Equity ETFs

Financial Notes (continued)

11. Federal Income Taxes

As of August 31, 2016, the components of distributable earnings on a tax-basis were 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
Undistributed ordinary income	$22,712,775	$22,092,100	$5,042,805	$12,897,021	$8,008,102	$12,332,317	$25,943,439
Undistributed long-term capital gains	—	—	—	—	—	—	—
Unrealized appreciation	1,215,337,186	1,006,206,434	504,602,833	313,285,635	349,651,909	645,584,526	346,890,657
Unrealized depreciation	(132,207,251)	(122,710,521)	(87,945,147)	(40,475,951)	(138,188,578)	(244,945,589)	(45,627,395)
Net unrealized appreciation (depreciation)	1,083,129,935	883,495,913	416,657,686	272,809,684	211,463,331	400,638,937	301,263,262

The primary difference between book-basis and tax-basis unrealized appreciation or unrealized depreciation of investments is the tax deferral of losses on wash sales and non-taxable dividends.

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*	48,891,506	32,403,690	16,111,999	11,935,433	65,892,934	89,373,828	36,609,985
Total	$48,891,506	$33,124,752	$16,743,600	$12,230,817	$66,111,629	$90,301,459	$36,609,985

*	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.

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

	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
Current period distributions
Ordinary income	$111,095,810	$103,762,790	$28,157,885	$51,275,935	$30,341,985	$46,392,950	$95,093,961
Long-term capital gains	—	—	—	—	—	—	—
Prior period distributions
Ordinary income	84,285,250	74,777,650	22,727,825	32,821,400	20,721,520	32,271,525	74,347,401
Long-term capital gains	—	—	—	—	—	—	—

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Schwab U.S. Equity ETFs

Financial Notes (continued)

11. Federal Income Taxes (continued):

	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 shares	$108,745,740	$112,079,210	$77,674,211	$24,982,963	$105,961,584	$156,690,117	$76,002,282
Undistributed net investment income	(1,394,414)	(1,182,763)	(500,047)	(445,914)	(968,397)	(969,071)	(1,187,878)
Net realized gains and losses	(107,351,326)	(110,896,447)	(77,174,164)	(24,537,049)	(104,993,187)	(155,721,046)	(74,814,404)

	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
	$108,330,139		$111,932,881		$77,657,192		$24,973,012		$105,357,925		$156,854,595		$76,399,566

12. Subsequent Events:

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Report of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholders of:
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

In our opinion, the accompanying statements of assets and liabilities, including the condensed portfolio holdings, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Schwab 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 (seven of the funds constituting Schwab Strategic Trust, hereafter referred to as the “Funds”) at August 31, 2016, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2016 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
San Francisco, California
October 17, 2016

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Other Federal Tax Information (unaudited)

For corporate shareholders, the following percentage of the funds’ dividend distributions paid during the period ended August 31, 2016 qualify for the corporate dividends received deduction:

Schwab U.S. Broad Market ETF	90.30%
Schwab U.S. Large-Cap ETF	92.89%
Schwab U.S. Large-Cap Growth ETF	88.82%
Schwab U.S. Large-Cap Value ETF	96.52%
Schwab U.S. Mid-Cap ETF	72.10%
Schwab U.S. Small-Cap ETF	65.72%
Schwab U.S. Dividend Equity ETF	100.00%

Schwab U.S. Broad Market ETF	$104,682,164
Schwab U.S. Large-Cap ETF	100,669,932
Schwab U.S. Large-Cap Growth ETF	27,219,840
Schwab U.S. Large-Cap Value ETF	50,766,122
Schwab U.S. Mid-Cap ETF	23,030,145
Schwab U.S. Small-Cap ETF	31,321,706
Schwab U.S. Dividend Equity ETF	95,093,961

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Other Information (unaudited)

Frequency Distribution of Discounts and Premiums
Market Price vs. NAV as of August 31, 2016

	Number of Days Market Price Above NAV				Number of Days Market Price Below NAV
	1-49 Basis Points	50-99 Basis Points	100-199 Basis Points	>200 Basis Points	1-49 Basis Points	50-99 Basis Points	100-199 Basis Points	>200 Basis Points
Schwab U.S. Broad Market ETF
Commencement of trading
11/3/09 through 8/31/16	1,159	1	—	—	297	—	—	—
Schwab U.S. Large-Cap ETF
Commencement of trading
11/3/09 through 8/31/16	1,131	—	—	—	328	—	—	—
Schwab U.S. Large-Cap Growth ETF
Commencement of trading
12/11/09 through 8/31/16	1,049	—	1	—	333	—	—	—
Schwab U.S. Large-Cap Value ETF
Commencement of trading
12/11/09 through 8/31/16	1,081	—	—	—	280	—	—	—
Schwab U.S. Mid-Cap ETF
Commencement of trading
1/13/11 through 8/31/16	1,014	—	—	—	211	—	—	—
Schwab U.S. Small-Cap ETF
Commencement of trading
11/3/09 through 8/31/16	1,066	1	—	—	476	—	—	—
Schwab U.S. Dividend Equity ETF
Commencement of trading
10/20/11 through 8/31/16	693	—	—	—	246	—	—	—

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Investment Advisory Agreement Approval

The Board of Trustees (Board or Trustees, as appropriate) calls and holds one or more meetings each year that are dedicated, in part, to considering whether to renew the investment advisory agreement (Agreement) between Schwab Strategic Trust (Trust) and Charles Schwab Investment Management, Inc. (CSIM) 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 (Funds), and to review certain other agreements pursuant to which CSIM provides investment advisory services to certain other registered investment companies. In preparation for the meeting(s), the Board requests and reviews a wide variety of materials provided by CSIM, including information about affiliates, personnel, business goals and priorities, profitability, third-party oversight, corporate structure and operations. The Board also receives extensive data provided by an independent provider of investment company data and an independent accounting firm. This information is in addition to the detailed information about the Funds that the Board reviews during the course of each year, including information that relates to the Funds’ operations and performance, legal and compliance matters, risk management, portfolio turnover, and sales and marketing activity. In addition, the Independent Trustees meet in executive session outside the presence of fund management and participate in question and answer sessions with representatives of CSIM.

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

1. the nature, extent and quality of the services provided to the 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;

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.

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

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Fund and the appropriateness of the benchmark used to compare the performance of the Fund. The Trustees further considered the level of Fund performance in the context of their review of Fund expenses and adviser profitability discussed below and also noted that performance is reviewed throughout the year by a designated committee of the Board and by the Board. Following such evaluation the Board concluded, within the context of its full deliberations, that the performance of the Funds supported renewal of the Agreement with respect to the Funds.

fixed costs across other funds in the complex. The Trustees also considered any other benefits derived by CSIM from its relationship with the Funds, such as whether, by virtue of its management of the Funds, CSIM obtains investment information or other research resources that aid it in providing advisory services to other clients. The Trustees considered whether the 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.

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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.	108	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 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).	108	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).	108	None
David L. Mahoney 1954 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016)	Private Investor.	108	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 and Laudus 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).	108	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).	108	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 and Laudus 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).	108	None
Gerald B. Smith 1950 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2000; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Chairman, Chief Executive Officer and Founder of Smith Graham & Co. (investment advisors) (Mar. 1990 – present).	108	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 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).	108	Board Member and Chairman of the Audit Committee, Ionis 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 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).	108	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).	108	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).	108	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 and Laudus 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 and Laudus 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 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 and Multi-Asset Strategies (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President and Chief Investment Officer – Equities and Multi-Asset Strategies, 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 and Laudus 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 and Laudus 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 and Laudus 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. 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.

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

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

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.

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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.