Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-22311
Schwab Strategic Trust
(Exact name of registrant as specified in charter)
211 Main Street, San Francisco, California 94105
(Address of principal executive offices) (Zip code)
Marie Chandoha
Schwab Strategic Trust – Schwab U.S. REIT ETF and Schwab Fundamental Index ETFs
211 Main Street, San Francisco, California 94105
(Name and address of agent for service)
Registrant’s telephone number, including area code: (415) 636-7000
Date of fiscal year end: February 28
Date of reporting period: February 28, 2017
Item 1: Report(s) to Shareholders.
Table of Contents
Annual Report | February 28, 2017
Schwab U.S. REIT 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. The Industry classifications used in the schedule of Portfolio Holdings are sub-categories of Sector classifications.
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Schwab U.S. REIT ETF | Annual Report
Schwab U.S. REIT ETF
Performance at a Glance
The performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the performance quoted. To obtain performance information current to the most recent month end, please visit www.csimfunds.com.
| Total Returns for the 12 Months Ended February 28, 2017 | |
| Schwab U.S. REIT ETF (Ticker Symbol: SCHH) | |
| Market Price Return1 | 14.75% |
| NAV Return1 | 14.74% |
| Dow Jones U.S. Select REIT Index | 14.99% |
| ETF Category: Morningstar Real Estate2 | 15.62% |
| Performance Details | pages 8-10 |
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.
Small-company stocks are subject to greater volatility than many other asset classes.
The fund is subject to risks associated with the direct ownership of real estate securities and an investment in the fund will be closely linked to the performance of the real estate markets.
Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption of fund shares.
Shares are bought and sold at market price, which may be higher or lower than the net asset value (NAV). Brokerage commissions will reduce returns.
Index ownership — Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones). The Dow Jones U.S. Select REIT Index is a product of S&P Dow Jones Indices LLC and/or its affiliates, and has been licensed for use by CSIM. The Schwab U.S. REIT ETF is not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, or any of their respective affiliates and neither S&P Dow Jones Indices LLC, Dow Jones, nor any of their respective affiliates make any representation regarding the advisability of investing in such product.
| 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. |
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Schwab U.S. REIT ETF
From the President
Marie Chandoha
President and CEO of
Charles Schwab Investment
Management, Inc. and the
fund covered in this report.
President and CEO of
Charles Schwab Investment
Management, Inc. and the
fund covered in this report.
Dear Shareholder,
We hope you are off to a healthy and productive start to 2017. At Charles Schwab Investment Management, we have been quite busy over the past six months since our last communication, continuing to pursue more ways to help investors achieve their financial goals. Below I’ll share some exciting news regarding some of the changes we’ve made to bring down the costs of our index products. But first, let’s discuss the market environment that set the tone for the performance of the Schwab U.S. REIT ETF (the fund) during the 12–month reporting period ended February 28, 2017.
U.S. REITs started the period on solid footing, but fell later in the year as investors focused on interest rate policy. The Federal Reserve (Fed) increased U.S. short-term interest rates in December for just the second time in a decade, and set the stage for several additional increases in 2017. Despite the Fed tightening, the fund generated a 14.8%1 return for the 12-month period, in line with its benchmark index.
While it’s true that higher rates can lead to increased costs for borrowers and generally repress demand for real estate assets, we believe that market fundamentals are in place to help absorb the impacts of higher rates. Current expectations are that the U.S. economy will enjoy at least moderate growth this year, with or without the impact of any government-related stimulus. If
Asset Class Performance Comparison % returns during the 12 months ended 2/28/2017
Index figures assume dividends and distributions were reinvested. Index figures do not include trading and management costs, which would lower performance. Indices are unmanaged and cannot be invested in directly. Past performance is not an indication of future results.
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.
| 1 | Return shown is the fund’s market price return, which is based on the market price per share of the fund. For the definition of market price return, please refer to the glossary. |
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Schwab U.S. REIT ETF
From the President (continued)
“ Rather than trying to time the market’s every move, we believe investors are better off focusing on what they can control: how much they pay to invest.”
the Fed does increase rates several times this year, borrowing costs will still remain inexpensive compared to long-term averages.
With this in mind, we believe that investors should stay invested in a mix of stocks and bonds over the long haul, and not drop out of either when they fall temporarily out of favor. Rather than trying to time the market’s every move, we believe investors are better off focusing on what they can control: how much they pay to invest. We know that costs matter to investors, particularly when it comes to passive investments, such as index mutual funds and ETFs, that they plan to hold for the long-term. As part of our commitment to putting our investors first, we have reduced the costs on many of our passive fund offerings. On March 1, 2017, we lowered the expense ratios on our market cap index products and Fundamental Index® ETFs. Those reductions gave us among the lowest-cost market cap index mutual funds and ETFs available in the industry, further leveling the playing field for you, our investors.
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 fund, please continue reading this report. In addition, you can find further details about the fund by visiting our website at www.csimfunds.com. We are also happy to hear from you at 1-877-824-5615.
Sincerely,
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Schwab U.S. REIT ETF
The Investment Environment
Over the 12-month reporting period ended February 28, 2017, U.S. real estate securities generated positive returns as short-term interest rates remained low and the U.S. economic picture generally improved. Overseas investment in U.S. real estate grew, while overall market fundamentals remained solid. In this environment, the Dow Jones U.S. Select REIT Index returned 14.99% for the reporting period, and the FTSE EPRA/NAREIT Global Index (Net), representing general trends in eligible real estate securities worldwide, returned 13.27%. The overall U.S. stock market, as measured by the S&P 500® Index, returned 24.98% for the reporting period. Outside the U.S., the MSCI EAFE Index (Net), a broad measure of developed international equity performance, and the MSCI Emerging Markets Index (Net), returned 15.75% and 29.46%, respectively.
U.S. economic growth measurements were largely positive over the 12-month reporting period, supporting many U.S. REITs and the overall U.S. real estate market. Outside of an unexpected and steep drop in May, nonfarm payrolls were generally in line with expectations and ended the reporting period on a high note, with February’s number coming in above forecasts. Consumer confidence, as measured by the University of Michigan’s survey of consumers, grew from a two-year low in October to a 13-year high in January, spurred by post-election optimism for the U.S. economic outlook. Meanwhile, the unemployment rate remained low, in November dropping to the lowest level since before the 2008 financial crisis, and U.S. manufacturing grew in 11 out the last 12 months. Continued low interest rates supported a strong U.S. housing market, and the consumer-price index, a broad measure of inflation, moved above 2% in early 2017 for the first time in over two years. Expectations for new policies or changes to existing policies from the Trump administration, including tax reform, increased fiscal spending, and reduced regulation, supported a positive growth outlook, and contributed to the positive performance of many U.S. REITs.
U.S. monetary policy remained fairly accommodative over the 12-month reporting period, even with moves toward a more normalized short-term interest rate environment. Early in the reporting period, speculation around potential changes in U.S. monetary policy added to heightened market volatility, while concerns that investors would leave dividend-paying investments (including REITs) for bonds or other fixed-income instruments weighed on the returns of some U.S. REITs. The Federal Reserve (Fed) left short-term interest rates unchanged through its November meeting, as inflation remained below the Fed’s goal of 2% and concerns about the strength of the U.S. economy and sluggish global growth remained. The United Kingdom’s decision to leave the European Union (Brexit) and uncertainty surrounding the U.S. election further complicated the Fed’s decision. However, as the U.S. economy continued to show signs of stability and strength, the Fed decided to raise the federal funds rate at its December meeting, with forecasts for several additional hikes in 2017. The Fed met once more during the reporting period in late January, and left short-term rates unchanged. The minutes from this meeting, as well as statements from Fed Chair Janet Yellen’s congressional testimony in mid-February, indicated that the Fed was still on track to follow-through on the anticipated rate increases later this year. Despite the increasing likelihood of additional rate hikes in 2017, U.S. REITs performed well as positive signs of U.S. economic growth outweighed concerns over rising rates. (After the end of the reporting period, the Fed raised short-term interest rates for the first time in 2017 at its March meeting.)
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.
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.
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Schwab U.S. REIT ETF
The Investment Environment (continued)
Within the U.S. REIT market, Industrial REITs had the best returns in the Dow Jones U.S. Select REIT Index. This was largely due to strong demand, driven by e-commerce and the need for industrial warehouses. With the online retailer market expanding, vacancy rates were low and rents high. Additionally, online retailers typically need much more space to store goods than their traditional brick-and-mortar counterparts, contributing to the strength in this sub-industry. On the other side of this scenario are Retail REITs, which, in this environment, turned in the weakest performance of the REIT sub-industries for the reporting period. Declining retail sales and other negative factors led to many store closings, with this trend especially noticeable in shopping centers. Some mall landlords decided to walk away from struggling properties rather than attempt to restructure their debt, leaving landlords to sell properties at deep discounts.
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Schwab U.S. REIT ETF
Fund Management
 | Agnes Hong, CFA, Vice President and Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. Prior to joining CSIM in 2009, Ms. Hong spent five years as a portfolio manager at Barclays Global Investors (subsequently acquired by BlackRock), where she managed institutional index funds and quantitative active funds. Prior to that, Ms. Hong worked in management consulting and product management, servicing global financial services clients. |
 | Ferian Juwono, CFA, Managing Director and Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. Prior to joining CSIM in 2010, Mr. Juwono worked at BlackRock (formerly Barclays Global Investors), where he spent 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 fund. 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. |
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Schwab U.S. REIT ETF
The Schwab U.S. REIT ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Select REIT Index (the index). The index is a float-adjusted market capitalization-weighted index comprised of real estate investment trusts (REITs). The index generally includes REITs that own and operate income-producing commercial and/or residential real estate, derive at least 75% of the REIT’s total revenue from the ownership and operation of real estate assets, and have a minimum total market capitalization of $200 million at the time of its inclusion. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.
Market Highlights. U.S. REITs generated positive returns for the 12-month reporting period, as rising rents and steady demand helped boost the performance of many U.S. real estate securities. Though the Federal Reserve raised short-term interest rates in December for the first time in a year, strong fundamentals and tempered market volatility helped these securities to perform well over the reporting period. Within the index, Industrial REITs outperformed other sub-industries, while Retail REITs underperformed by comparison.
Performance. For the 12-month reporting period ended February 28, 2017, the fund generally tracked the index. The fund’s market price return was 14.75% and its NAV return was 14.74%. (For an explanation of the market price and NAV returns, please refer to footnote 2 on the following page.) The index returned 14.99% for the same period. Differences between the return of the fund and the return of the index may be attributable to, among other things, the trading and management costs incurred by the fund and not the index.
Contributors and Detractors. Over the reporting period, no sub-industries detracted from the total return of the fund. However, Retail REITs, which include companies engaged in the acquisition, development, ownership, leasing, management, and operation of shopping malls, outlet malls, neighborhood and community shopping centers, were the smallest contributors to the fund’s total return. Over the reporting period, Retail REITs represented an average weight of approximately 26% of the fund’s investments, and returned approximately -1%. (Due to fluctuations in average weight and in total return over the reporting period, Retail REITs had an overall negative return but a positive contribution to the total return of the fund.) One detractor within this sub-industry was Macerich Company, a fully integrated self-managed and self-administered REIT that focuses on the acquisition, leasing, management, development and redevelopment of regional malls throughout the U.S. The fund’s holdings of Macerich Company returned approximately -12% for the reporting period. Specialized REITs were also small contributors to the return of the fund, representing an average weight of approximately 11% of the fund and returning approximately 5%.
Office REITs were the biggest contributors to the fund’s total return over the reporting period, representing an average weight of approximately 15% of the fund’s investments and returning approximately 33%. Office REITs include companies engaged in the acquisition, development, ownership, leasing, management, and operation of office properties. One significant contributor in this sub-industry was Vornado Realty Trust, a fully-integrated REIT that owns, manages, and leases office properties in New York City and Washington DC. The fund’s holdings of Vornado Realty Trust returned approximately 31% for the 12-month reporting period. Residential REITs also provided a meaningful contribution to the fund’s total return. This sub-industry represented an average weight of approximately 20% of the fund and returned approximately 15%.
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Schwab U.S. REIT ETF | Annual Report
Schwab U.S. REIT ETF
Performance and Fund Facts as of 2/28/17
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.
Performance of Hypothetical $10,000 Investment (January 13, 2011 – February 28, 2017)1
Average Annual Total Returns1
| Fund and Inception Date | 1 Year | 5 Years | Since Inception* |
| Fund: Schwab U.S. REIT ETF (1/13/11) | |||
| Market Price Return2 | 14.75% | 11.02% | 11.46% |
| NAV Return2 | 14.74% | 11.06% | 11.47% |
| Dow Jones U.S. Select REIT Index | 14.99% | 11.20% | 11.62% |
| ETF Category: Morningstar Real Estate3 | 15.62% | 10.31% | 10.55% |
| Fund Expense Ratio4: 0.07% | |||
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.
Small-company stocks may be subject to greater volatility than many other asset classes.
The fund is subject to risks associated with the direct ownership of real estate securities, and an investment in the fund will be closely linked to the performance of the real estate markets.
Shares are bought and sold at market price, which may be higher or lower than the net asset value (NAV). Brokerage commissions will reduce returns.
Index ownership — Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones). The Dow Jones U.S. Select REIT Index is a product of S&P Dow Jones Indices LLC and/or its affiliates, and has been licensed for use by CSIM. The Schwab U.S. REIT ETF is not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, or any of their respective affiliates and neither S&P Dow Jones Indices LLC, Dow Jones, nor any of their respective affiliates make any representation regarding the advisability of investing in such product.
| * | 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. REIT ETF
Performance and Fund Facts as of 2/28/17 (continued)
Statistics
| Number of Holdings | 103 |
| Weighted Average Market Cap (millions) | $18,127 |
| Price/Earnings Ratio (P/E) | 33.6 |
| Price/Book Ratio (P/B) | 2.5 |
| Portfolio Turnover Rate1 | 14% |
Sector Weightings % of Investments
Top Equity Holdings % of Net Assets2
Management views and portfolio holdings may have changed since the report date.
An index is a statistical composite of a specified financial market or sector. Unlike the fund, an index does not actually hold a portfolio of securities and its return is not inclusive of trading and management costs incurred by the fund.
Source of Sector Classification: S& P and MSCI.
| 1 | Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions. |
| 2 | This list is not a recommendation of any security by the investment adviser. |
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Schwab U.S. REIT ETF | Annual Report
Schwab U.S. REIT ETF
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.
The expense examples below are intended to help you understand your ongoing cost (in dollars) of investing in the fund and to compare this cost with the ongoing cost of investing in other mutual funds. These examples are based on an investment of $1,000 invested for six months beginning September 1, 2016 and held through February 28, 2017.
Actual Return line in the table below provides information about actual account values and actual expenses. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value ÷ $1,000 = 8.6), then multiply the result by the number given for the fund under the heading entitled “Expenses Paid During Period.”
Hypothetical Return line in the table below provides information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed return of 5% per year before expenses. Because the return used is not an actual return, it may not be used to estimate the actual ending account value or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only, and do not reflect any transactional costs, including any brokerage commissions you may pay when purchasing or selling shares of a fund. Therefore, the hypothetical return lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Expense Ratio (Annualized)1 | Beginning Account Value at 9/1/16 | Ending Account Value (Net of Expenses) at 2/28/17 | Expenses Paid During Period 9/1/16-2/28/172 | |
| Schwab U.S. REIT ETF | ||||
| Actual Return | 0.07% | $1,000.00 | $ 978.20 | $0.34 |
| Hypothetical 5% Return | 0.07% | $1,000.00 | $1,024.45 | $0.35 |
| 1 | Based on the most recent six-month expense ratio; may differ from the expense ratio provided in the Financial Highlights which covers a 12-month period. |
| 2 | Expenses for the fund are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by the 181 days of the period, and divided by 365 days of the fiscal year. |
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Schwab U.S. REIT ETF
Financial Statements
Financial Highlights
| 3/1/16– 2/28/17 | 3/1/15– 2/29/16 | 3/1/14– 2/28/15 | 3/1/13– 2/28/14 | 3/1/12– 2/28/13 | ||
| Per-Share Data | ||||||
| Net asset value at beginning of period | $37.71 | $40.04 | $33.06 | $31.96 | $28.30 | |
| Income (loss) from investment operations: | ||||||
| Net investment income (loss) | 1.04 1 | 1.03 1 | 0.92 | 0.80 | 0.72 | |
| Net realized and unrealized gains (losses) | 4.48 | (2.38) | 6.91 | 1.08 | 3.71 | |
| Total from investment operations | 5.52 | (1.35) | 7.83 | 1.88 | 4.43 | |
| Less distributions: | ||||||
| Distributions from net investment income | (1.15) | (0.98) | (0.85) | (0.78) | (0.77) | |
| Net asset value at end of period | $42.08 | $37.71 | $40.04 | $33.06 | $31.96 | |
| Total return | 14.74% | (3.41%) | 24.04% | 6.08% | 15.83% | |
| Ratios/Supplemental Data | ||||||
| Ratios to average net assets: | ||||||
| Total expenses | 0.07% | 0.07% | 0.07% | 0.07% | 0.10% 2 | |
| Net investment income (loss) | 2.50% | 2.70% | 2.56% | 2.52% | 2.43% | |
| Portfolio turnover rate3 | 14% | 12% | 15% | 11% | 7% | |
| Net assets, end of period (x 1,000) | $3,037,968 | $1,823,208 | $1,269,306 | $790,052 | $466,567 | |
1
Calculated based on the average shares outstanding during the period.
2
Effective September 20, 2012, the annual operating expense ratio was reduced. The ratio presented for the period ended 2/28/13 is a blended ratio.
3
Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
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See financial notes
Schwab U.S. REIT ETF
Portfolio Holdings as of February 28, 2017
This section shows all the securities in the fund's portfolio and their values as of the report date.
The fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's website at www.sec.gov and may be viewed and copied at the SEC's Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the Public Reference Room. The fund also makes available its complete schedule of portfolio holdings on a daily basis on the fund's website at www.csimfunds.com/schwabetfs_prospectus.
| Holdings by Category | Cost ($) | Value ($) | |
| 99.7% | Common Stock | 2,788,712,437 | 3,029,277,363 |
| 0.4% | Other Investment Companies | 10,264,908 | 10,264,908 |
| 100.1% | Total Investments | 2,798,977,345 | 3,039,542,271 |
| (0.1%) | Other Assets and Liabilities, Net | (1,574,192) | |
| 100.0% | Net Assets | 3,037,968,079 | |
| Security | Number of Shares | Value ($) |
| Common Stock 99.7% of net assets | ||
| Diversified REITs 2.4% | ||
| First Potomac Realty Trust | 268,623 | 2,683,544 |
| Forest City Realty Trust, Inc., Class A | 1,001,484 | 22,883,909 |
| Liberty Property Trust | 679,739 | 26,808,906 |
| PS Business Parks, Inc. | 89,877 | 10,444,606 |
| Washington Real Estate Investment Trust | 351,169 | 11,486,738 |
| 74,307,703 | ||
| Health Care REITs 12.1% | ||
| Care Capital Properties, Inc. | 386,764 | 10,168,025 |
| HCP, Inc. | 2,170,659 | 71,175,909 |
| Healthcare Realty Trust, Inc. | 535,205 | 17,105,152 |
| LTC Properties, Inc. | 176,634 | 8,520,824 |
| Quality Care Properties, Inc. * | 450,942 | 8,558,879 |
| Senior Housing Properties Trust | 1,094,610 | 22,439,505 |
| Universal Health Realty Income Trust | 55,310 | 3,549,796 |
| Ventas, Inc. | 1,641,278 | 106,765,134 |
| Welltower, Inc. | 1,680,124 | 118,247,127 |
| 366,530,351 | ||
| Hotel & Resort REITs 6.3% | ||
| Apple Hospitality REIT, Inc. | 730,871 | 14,354,306 |
| Ashford Hospitality Prime, Inc. | 119,616 | 1,560,989 |
| Ashford Hospitality Trust, Inc. | 358,826 | 2,357,487 |
| Chesapeake Lodging Trust | 284,306 | 6,868,833 |
| DiamondRock Hospitality Co. | 932,862 | 10,140,210 |
| FelCor Lodging Trust, Inc. | 626,437 | 4,541,668 |
| Hersha Hospitality Trust | 206,273 | 4,024,386 |
| Hospitality Properties Trust | 763,515 | 24,264,507 |
| Host Hotels & Resorts, Inc. | 3,409,123 | 61,330,123 |
| LaSalle Hotel Properties | 528,758 | 15,281,106 |
| Pebblebrook Hotel Trust | 321,708 | 9,249,105 |
| RLJ Lodging Trust | 577,621 | 13,146,654 |
| Sunstone Hotel Investors, Inc. | 999,663 | 14,745,029 |
| Xenia Hotels & Resorts, Inc. | 476,133 | 8,365,657 |
| 190,230,060 | ||
| Industrial REITs 7.3% | ||
| DCT Industrial Trust, Inc. | 421,366 | 20,158,150 |
| Duke Realty Corp. | 1,638,535 | 42,012,037 |
| EastGroup Properties, Inc. | 151,357 | 11,251,879 |
| First Industrial Realty Trust, Inc. | 541,774 | 14,573,721 |
| Security | Number of Shares | Value ($) |
| Prologis, Inc. | 2,450,925 | 125,119,721 |
| Rexford Industrial Realty, Inc. | 312,223 | 7,174,885 |
| 220,290,393 | ||
| Office REITs 17.1% | ||
| Alexandria Real Estate Equities, Inc. | 411,821 | 49,134,364 |
| Boston Properties, Inc. | 713,161 | 99,150,774 |
| Brandywine Realty Trust | 811,112 | 13,513,126 |
| Columbia Property Trust, Inc. | 572,122 | 13,210,297 |
| Corporate Office Properties Trust | 442,025 | 15,068,632 |
| Cousins Properties, Inc. | 1,597,429 | 13,658,018 |
| Douglas Emmett, Inc. | 665,438 | 26,843,769 |
| Easterly Government Properties, Inc. | 125,837 | 2,601,051 |
| Equity Commonwealth * | 578,338 | 18,078,846 |
| Franklin Street Properties Corp. | 494,181 | 6,122,903 |
| Highwoods Properties, Inc. | 462,353 | 24,268,909 |
| Hudson Pacific Properties, Inc. | 673,930 | 24,652,359 |
| Kilroy Realty Corp. | 453,103 | 34,956,896 |
| Mack-Cali Realty Corp. | 411,664 | 12,000,006 |
| NorthStar Realty Europe Corp. | 253,165 | 3,073,423 |
| Parkway, Inc. * | 194,739 | 4,085,624 |
| Piedmont Office Realty Trust, Inc., Class A | 673,153 | 15,442,130 |
| SL Green Realty Corp. | 468,434 | 52,783,143 |
| Tier REIT, Inc. | 220,029 | 3,978,124 |
| Vornado Realty Trust | 798,147 | 87,692,411 |
| 520,314,805 | ||
| Residential REITs 20.1% | ||
| American Campus Communities, Inc. | 610,661 | 31,204,777 |
| American Homes 4 Rent, Class A | 996,684 | 23,691,179 |
| Apartment Investment & Management Co., Class A | 722,693 | 33,626,905 |
| AvalonBay Communities, Inc. | 636,180 | 116,917,160 |
| Camden Property Trust | 404,334 | 34,226,873 |
| Colony Starwood Homes | 229,019 | 7,534,725 |
| Education Realty Trust, Inc. | 339,708 | 14,318,692 |
| Equity LifeStyle Properties, Inc. | 374,645 | 29,829,235 |
| Equity Residential | 1,695,521 | 106,936,509 |
| Essex Property Trust, Inc. | 303,994 | 71,347,392 |
| Independence Realty Trust, Inc. | 262,035 | 2,408,102 |
| Mid-America Apartment Communities, Inc. | 528,024 | 54,243,906 |
| Monogram Residential Trust, Inc. | 778,726 | 8,013,091 |
| NexPoint Residential Trust, Inc. | 82,954 | 1,978,453 |
| Silver Bay Realty Trust Corp. | 172,097 | 3,705,248 |
| Sun Communities, Inc. | 306,020 | 25,347,637 |
| UDR, Inc. | 1,235,002 | 45,077,573 |
| 610,407,457 | ||
| Retail REITs 23.0% | ||
| Acadia Realty Trust | 373,442 | 11,961,347 |
| Brixmor Property Group, Inc. | 1,208,647 | 28,209,821 |
| CBL & Associates Properties, Inc. | 782,998 | 7,853,470 |
| Cedar Realty Trust, Inc. | 352,006 | 2,066,275 |
| DDR Corp. | 1,421,403 | 20,553,487 |
| Equity One, Inc. | 431,065 | 13,647,518 |
| Federal Realty Investment Trust | 333,894 | 46,988,903 |
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Schwab U.S. REIT ETF | Annual Report
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Schwab U.S. REIT ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| GGP, Inc. | 2,697,835 | 67,068,178 |
| Kimco Realty Corp. | 1,964,681 | 47,643,514 |
| Kite Realty Group Trust | 395,540 | 8,958,981 |
| Pennsylvania Real Estate Investment Trust | 335,138 | 5,529,777 |
| Ramco-Gershenson Properties Trust | 382,288 | 5,986,630 |
| Regency Centers Corp. | 482,785 | 33,963,925 |
| Retail Opportunity Investments Corp. | 499,217 | 10,982,774 |
| Saul Centers, Inc. | 55,312 | 3,542,181 |
| Seritage Growth Properties, Class A (a) | 113,648 | 5,282,359 |
| Simon Property Group, Inc. | 1,457,155 | 268,699,382 |
| Tanger Factory Outlet Centers, Inc. | 441,184 | 14,942,902 |
| Taubman Centers, Inc. | 278,033 | 19,395,582 |
| The Macerich Co. | 557,819 | 37,585,844 |
| Urban Edge Properties | 421,031 | 11,675,190 |
| Washington Prime Group, Inc. | 879,579 | 8,153,697 |
| Weingarten Realty Investors | 540,674 | 19,177,707 |
| 699,869,444 | ||
| Specialized REITs 11.4% | ||
| CubeSmart | 837,023 | 22,808,877 |
| Digital Realty Trust, Inc. | 734,874 | 79,366,392 |
| DuPont Fabros Technology, Inc. | 348,247 | 17,931,238 |
| Extra Space Storage, Inc. | 581,992 | 46,087,946 |
| Life Storage, Inc. | 212,769 | 18,857,716 |
| National Storage Affiliates Trust | 205,494 | 4,977,065 |
| Public Storage | 691,541 | 157,297,916 |
| 347,327,150 | ||
| Total Common Stock | ||
| (Cost $2,788,712,437) | 3,029,277,363 | |
| Other Investment Companies 0.4% of net assets | ||
| Money Market Fund 0.2% | ||
| State Street Institutional U.S. Government Money Market Fund, Premier Class 0.46% (b) | 6,304,156 | 6,304,156 |
| Security | Number of Shares | Value ($) |
| Securities Lending Collateral 0.2% | ||
| Wells Fargo Government Money Market Fund, Select Class 0.48% (b) | 3,960,752 | 3,960,752 |
| Total Other Investment Companies | ||
| (Cost $10,264,908) | 10,264,908 | |
End of Investments
At 02/28/17, the tax basis cost of the fund's investments was $2,805,504,088 and the unrealized appreciation and depreciation were $267,050,773 and ($33,012,590), respectively, with a net unrealized appreciation of $234,038,183.
| * | Non-income producing security. |
| (a) | All or a portion of this security is on loan. Securities on loan were valued at $3,795,789. |
| (b) | The rate shown is the 7-day yield. |
| REIT — | Real Estate Investment Trust |
In addition to the above, the fund held the following at 02/28/17:
| Number of Contracts | Contract Value ($) | Unrealized Appreciation ($) | ||||
| Futures Contracts | ||||||
| S&P 500 Index, e-mini, Long, expires 03/17/17 | 72 | 8,506,080 | 191,479 | |||
The following is a summary of the inputs used to value the fund’s investments as of February 28, 2017 (see financial note 2(a) for additional information):
| Description | Quoted Prices in Active Markets for Identical Assets (Level 1) | Other Significant Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | |
| Common Stock1 | $3,029,277,363 | $— | $— | $3,029,277,363 | |
| Other Investment Companies1 | 10,264,908 | — | — | 10,264,908 | |
| Total | $3,039,542,271 | $— | $— | $3,039,542,271 | |
| Other Financial Instruments | |||||
| Futures Contracts2 | $191,479 | $— | $— | $191,479 |
| 1 | As categorized in Portfolio Holdings. |
| 2 | Futures contracts are not included in Investments in the schedule of Portfolio Holdings and are valued at unrealized appreciation or depreciation. |
The fund's policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were no transfers between Level 1, Level 2 and Level 3 for the period ended February 28, 2017.
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Schwab U.S. REIT ETF | Annual Report
See financial notes
Schwab U.S. REIT ETF
Statement of Assets and Liabilities
As of February 28, 2017
| Assets | ||
| Investments, at value (cost $2,795,016,593) including securities on loan of $3,795,789 | $3,035,581,519 | |
| Collateral invested for securities on loan, at value (cost $3,960,752) | + | 3,960,752 |
| Total investments, at value (cost $2,798,977,345) | 3,039,542,271 | |
| Deposit with broker for futures contracts | 546,250 | |
| Receivables: | ||
| Fund shares sold | 8,455,176 | |
| Dividends | 1,981,120 | |
| Income from securities on loan | + | 4,387 |
| Total assets | 3,050,529,204 | |
| Liabilities | ||
| Collateral held for securities on loan | 3,960,752 | |
| Payables: | ||
| Investments bought | 8,421,807 | |
| Investment adviser fees | 158,766 | |
| Variation margin on futures contracts | + | 19,800 |
| Total liabilities | 12,561,125 | |
| Net Assets | ||
| Total assets | 3,050,529,204 | |
| Total liabilities | – | 12,561,125 |
| Net assets | $3,037,968,079 | |
| Net Assets by Source | ||
| Capital received from investors | 2,808,955,850 | |
| Net investment income not yet distributed | 1,033,152 | |
| Net realized capital losses | (12,777,328) | |
| Net unrealized capital appreciation | 240,756,405 | |
| Net Asset Value (NAV) | ||||
| Net Assets | ÷ | Shares Outstanding | = | NAV |
| $3,037,968,079 | 72,200,000 | $42.08 | ||
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Schwab U.S. REIT ETF | Annual Report
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Schwab U.S. REIT ETF
Statement of Operations
For the period March 1, 2016 through February 28, 2017
| Investment Income | ||
| Dividends | $65,923,600 | |
| Securities on loan, net | + | 60,925 |
| Total investment income | 65,984,525 | |
| Expenses | ||
| Investment adviser fees | 1,796,250 | |
| Total expenses | – | 1,796,250 |
| Net investment income | 64,188,275 | |
| Realized and Unrealized Gains (Losses) | ||
| Net realized losses on investments | (4,445,180) | |
| Net realized gains on in-kind redemptions | 32,397,353 | |
| Net realized gains on futures contracts | + | 82,531 |
| Net realized gains | 28,034,704 | |
| Net change in unrealized appreciation (depreciation) on investments | 194,689,370 | |
| Net change in unrealized appreciation (depreciation) on futures contracts | + | 191,479 |
| Net change in unrealized appreciation (depreciation) | + | 194,880,849 |
| Net realized and unrealized gains | 222,915,553 | |
| Increase in net assets resulting from operations | $287,103,828 | |
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Schwab U.S. REIT ETF | Annual Report
See financial notes
Schwab U.S. REIT ETF
Statement of Changes in Net Assets
For the current and prior report periods
| Operations | ||||
| 3/1/16-2/28/17 | 3/1/15-2/29/16 | |||
| Net investment income | $64,188,275 | $42,924,967 | ||
| Net realized gains | 28,034,704 | 44,259,722 | ||
| Net change in unrealized appreciation (depreciation) | + | 194,880,849 | (139,593,710) | |
| Increase (decrease) in net assets resulting from operations | 287,103,828 | (52,409,021) | ||
| Distributions to Shareholders | ||||
| Distributions from net investment income | ($71,668,635) | ($40,950,395) | ||
| Transactions in Fund Shares | ||||||||
| 3/1/16-2/28/17 | 3/1/15-2/29/16 | |||||||
| SHARES | VALUE | SHARES | VALUE | |||||
| Shares sold | 27,750,000 | $1,158,636,462 | 22,700,000 | $876,203,124 | ||||
| Shares redeemed | + | (3,900,000) | (159,311,136) | (6,050,000) | (228,941,698) | |||
| Net transactions in fund shares | 23,850,000 | $999,325,326 | 16,650,000 | $647,261,426 | ||||
| Shares Outstanding and Net Assets | ||||||||
| 3/1/16-2/28/17 | 3/1/15-2/29/16 | |||||||
| SHARES | NET ASSETS | SHARES | NET ASSETS | |||||
| Beginning of period | 48,350,000 | $1,823,207,560 | 31,700,000 | $1,269,305,550 | ||||
| Total increase | + | 23,850,000 | 1,214,760,519 | 16,650,000 | 553,902,010 | |||
| End of period | 72,200,000 | $3,037,968,079 | 48,350,000 | $1,823,207,560 | ||||
| Net investment income not yet distributed | $1,033,152 | $6,317,998 | ||||||
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Schwab U.S. REIT ETF | Annual Report
See financial notes
Schwab U.S. REIT ETF
Financial Notes
1. Business Structure of the Fund:
Schwab U.S. REIT ETF is a series of Schwab Strategic Trust (the trust), a no-load, open-end management investment company. The trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the 1940 Act). The list below shows all the operational funds in the trust as of the end of the period, including the fund discussed in this report, which is highlighted:
| SCHWAB STRATEGIC TRUST (ORGANIZED JANUARY 27, 2009) | |
| Schwab U.S. REIT ETF | Schwab U.S. TIPS ETF™ |
| Schwab U.S. Broad Market ETF™ | Schwab Short-Term U.S. Treasury ETF™ |
| Schwab U.S. Large-Cap ETF™ | Schwab Intermediate-Term U.S. Treasury ETF™ |
| Schwab U.S. Large-Cap Growth ETF™ | Schwab U.S. Aggregate Bond ETF™ |
| Schwab U.S. Large-Cap Value ETF™ | Schwab Fundamental U.S. Broad Market Index ETF |
| Schwab U.S. Mid-Cap ETF™ | Schwab Fundamental U.S. Large Company Index ETF |
| Schwab U.S. Small-Cap ETF™ | Schwab Fundamental U.S. Small Company Index ETF |
| Schwab U.S. Dividend Equity ETF™ | Schwab Fundamental International Large Company Index ETF |
| Schwab International Equity ETF™ | Schwab Fundamental International Small Company Index ETF |
| Schwab International Small-Cap Equity ETF™ | Schwab Fundamental Emerging Markets Large Company Index ETF |
| Schwab Emerging Markets Equity ETF™ | |
The fund issues and redeems shares at its net asset value per share (NAV) only in large blocks of shares, typically 50,000 shares or more (Creation Units). These transactions are usually in exchange for a basket of securities and/or an amount of cash. As a practical matter, only institutions or large investors purchase or redeem Creation Units. Except when aggregated in Creation Units, shares of the fund are not redeemable securities.
Individual shares of the fund trade on national securities exchanges and elsewhere during the trading day and can only be bought and sold at market prices throughout the trading day through a broker-dealer. Because fund shares trade at market prices rather than NAV, shares may trade at a price greater than NAV (premium) or less than NAV (discount).
The fund maintains its own account for purposes of holding assets and accounting, and is considered a separate entity for tax purposes. Within its account, the fund may also keep certain assets in segregated accounts, as required by securities law.
2. Significant Accounting Policies:
The following is a summary of the significant accounting policies the fund uses in its preparation of financial statements. The fund follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standard Codification Topic 946 Financial Services — Investment Companies. The accounting policies are in conformity with accounting principles generally accepted in the United States of America (GAAP).
The fund may invest in certain other investment companies (underlying funds). For more information about the underlying funds' operations and policies, please refer to those funds' semiannual and annual reports, which are filed with the U.S. Securities and Exchange Commission (SEC).
(a) Security Valuation:
Under procedures approved by the fund's Board of Trustees (the Board), the investment adviser has formed a Pricing Committee to administer the pricing and valuation of portfolio securities and other assets and to ensure that prices used for internal purposes or provided by third parties reasonably reflect fair market value. Among other things, these procedures allow the fund to utilize independent pricing services, quotations from securities and financial instrument dealers and other market sources to determine fair value.
The fund values the securities in its portfolio every business day. The fund uses the following policies to value various types of securities:
• Securities traded on an exchange or over-the-counter: Traded securities are valued at the closing value for the day, or, on days when no closing value has been reported, at the mean of the most recent bid and ask quotes. Securities that are primarily traded on foreign exchanges are valued at the official closing price or the last sales price on the exchange where the securities are principally traded with these values then translated into U.S. dollars at the current exchange rate, unless these securities are fair valued as discussed below.
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Schwab U.S. REIT ETF | Annual Report
Schwab U.S. REIT ETF
Financial Notes (continued)
2. Significant Accounting Policies (continued):
• Securities for which no quoted value is available: The Board has adopted procedures to fair value the fund’s securities when market prices are not “readily available” or are unreliable. For example, a fund may fair value a security when it is de-listed or its trading is halted or suspended; when a security’s primary pricing source is unable or unwilling to provide a price; or when a security’s primary trading market is closed during regular market hours. The fund makes fair value determinations in good faith in accordance with the fund’s valuation procedures. The Pricing Committee considers a number of factors, including unobservable market inputs when arriving at fair value. The Pricing Committee may employ techniques such as the review of related or comparable assets or liabilities, related market activities, recent transactions, market multiples, book values, transactional back-testing, disposition analysis and other relevant information. The Pricing Committee regularly reviews these inputs and assumptions to calibrate the valuations. Due to the subjective and variable nature of fair value pricing, there can be no assurance that the fund could obtain the fair value assigned to the security upon the sale of such security. The Board convenes on a regular basis to review fair value determinations made by the fund pursuant to the valuation procedures.
• Short-term securities (60 days or less to maturity): A short-term security may be valued at its amortized cost when it approximates the security's market value.
• Underlying funds: Mutual funds are valued at their respective NAVs. Exchange-traded funds (ETFs) traded on a recognized securities exchange are valued at the last reported sale price that day or the official closing price, if applicable.
In accordance with the authoritative guidance on fair value measurements and disclosures under GAAP, the fund discloses the fair value of its investments in a hierarchy that prioritizes the significant inputs to valuation techniques used to measure the fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). If inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the valuation. If the fund determines that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value.
The three levels of the fair value hierarchy are as follows:
• Level 1—quoted prices in active markets for identical securities—Investments whose values are based on quoted market prices in active markets, and whose values are therefore classified as Level 1 prices, include active listed equities, ETFs and futures contracts. Investments in mutual funds are valued daily at their NAV, and investments in ETFs are valued daily at the last reported sale price or the official closing price, which are classified as Level 1 prices, without consideration to the classification level of the specific investments held by an underlying fund.
• Level 2—other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)—Investments that trade in markets that are not considered to be active, but whose values are based on quoted market prices, dealer quotations or valuations provided by alternative pricing sources supported by observable inputs are classified as Level 2 prices. These generally include U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, certain mortgage products, less liquid listed equities, and state, municipal and provincial obligations.
• Level 3—significant unobservable inputs (including the fund's own assumptions in determining the fair value of investments)—Investments whose values are classified as Level 3 prices have significant unobservable inputs, as they may trade infrequently or not at all. When observable prices are not available for these securities, the fund uses one or more valuation techniques for which sufficient and reliable data is available. The inputs used by the fund in estimating the value of Level 3 prices may include the original transaction price, quoted prices for similar securities or assets in active markets, completed or pending third-party transactions in the underlying investment or comparable issuers, and changes in financial ratios or cash flows. Level 3 prices may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the fund in the absence of market information. Assumptions used by the fund due to the lack of observable inputs may significantly impact the resulting fair value and therefore the fund’s results of operations.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The levels associated with valuing the fund's investments as of February 28, 2017 are disclosed in the Portfolio Holdings.
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Schwab U.S. REIT ETF | Annual Report
Schwab U.S. REIT ETF
Financial Notes (continued)
2. Significant Accounting Policies (continued):
(b) Accounting Policies for certain Portfolio Investments (if held):
Futures Contracts: Futures contracts are instruments that represent an agreement between two parties that obligates one party to buy, and the other party to sell, specific instruments at an agreed upon price on a stipulated future date. The fund must give the broker a deposit of cash and/or securities (initial margin) whenever it enters into a futures contract. The amount of the deposit may vary from one contract to another. Subsequent payments (variation margin) are made or received by the fund depending on the daily fluctuations in the value of the futures contract and are accounted for as unrealized appreciation or depreciation until the contract is closed, at which time the gains or losses are realized. Futures contracts are traded publicly on exchanges, and their market value may change daily.
Securities Lending: Under the trust's Securities Lending Program, the fund (lender) may make short-term loans of its securities to another party (borrower) to generate additional revenue for the fund. The borrower pledges collateral in the form of cash, securities issued or fully guaranteed by the U.S. government or foreign governments, or letters of credit issued by a bank. Collateral at the individual loan level is required to be maintained on a daily marked-to-market basis in an amount at least equal to the current value of the securities loaned. The lending agent provides the fund with indemnification against borrower default (the borrower fails to return the security on loan) reducing the risk of loss as a result of default. The cash collateral of securities loaned is currently invested in money market portfolios operating under Rule 2a-7 of the 1940 Act. The fund bears the risk of loss with respect to the investment of cash collateral. The terms of the securities lending agreement allow the fund 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 agreements. Securities lending income, as disclosed in the fund’s Statement of Operations, if applicable, represents the income earned from the investment of the cash collateral plus any fees paid by borrowers, less the fees paid to the lending agent and broker rebates which are subject to adjustments pursuant to the securities lending agreement. On loans not collateralized by cash, a fee is received from the borrower, and is allocated between the fund and the lending agent. The aggregate market value of securities loaned will not at any time exceed one-third of the total assets of the fund, including collateral received from the loan (at market value computed at the time of the loan). Total costs and expenses, including lending agent fees and broker rebates, associated with securities lending activities under the trust’s Securities Lending Program paid to the unaffiliated lending agents start at 10% of gross lending revenue, with subsequent breakpoints to a low of 7.5%.
As of February 28, 2017, the fund had securities on loan, all of which were classified as common stocks. The value of the securities on loan and the related collateral as of February 28, 2017 are disclosed in the fund's Portfolio Holdings. The value of the securities on loan and investment of cash collateral are also disclosed in the fund's Statement of Assets and Liabilities.
(c) Security Transactions:
Security transactions are recorded as of the date the order to buy or sell the security is executed. Realized gains and losses from security transactions are based on the identified costs of the securities involved.
When the fund closes out a futures contract position, it calculates the difference between the value of the position at the beginning and at the end of the contract, and records a realized gain or loss accordingly.
(d) Real Estate Investment Trusts:
The fund invests in real estate investment trusts (REITs) which report information on the source of their distributions annually. Certain distributions received from REITs during the year, which are known to be a return of capital or realized gains, are recorded as a reduction to the cost of the individual REITs or realized gains on investments, respectively.
(e) Investment Income:
Interest income is recorded as it accrues. Dividends and distributions from portfolio securities and underlying funds are recorded on the date they are effective (the ex-dividend date), although the fund records certain foreign security dividends on the day it learns of the ex-dividend date. Any distributions from underlying funds are recorded in accordance with the character of the distributions as designated by the underlying funds.
(f) Expenses:
Pursuant to the Investment Advisory Agreement (Advisory Agreement) between Charles Schwab Investment Management, Inc. (CSIM or the investment adviser) and the trust, the investment adviser will pay the operating expenses of the fund, excluding interest expense, taxes, any brokerage expenses, and extraordinary or non-routine expenses. Interest expense, taxes, any brokerage expenses and extraordinary or non-routine expenses that are specific to the fund are charged directly to the fund. Effective March 1, 2017, the advisory fees will include interest expenses, which were previously excluded.
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Schwab U.S. REIT ETF | Annual Report
Schwab U.S. REIT ETF
Financial Notes (continued)
2. Significant Accounting Policies (continued):
(g) Distributions to Shareholders:
The fund makes distributions from net investment income, if any, quarterly and from net realized capital gains, if any, once a year.
(h) Accounting Estimates:
The accounting policies described in this report conform to GAAP. Notwithstanding this, shareholders should understand that in order to follow these principles, fund management has to make estimates and assumptions that affect the information reported in the financial statements. It’s possible that once the results are known, they may turn out to be different from these estimates and these differences may be material.
(i) Federal Income Taxes:
The fund intends to meet federal income and excise tax requirements for regulated investment companies under subchapter M of the Internal Revenue Code, as amended. Accordingly, the fund distributes substantially all of its net investment income and net realized capital gains, if any, to its shareholders each year. As long as the fund meets the tax requirements, it is not required to pay federal income tax.
(j) Indemnification:
Under the fund's organizational documents, the officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business the fund enters into contracts with its vendors and others that provide general indemnifications. The fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the fund. However, based on experience, the fund expects the risk of loss attributable to these arrangements to be remote.
3. Risk Factors:
Investing in the fund may involve certain risks, as discussed in the fund’s prospectus, including, but not limited to, those described below. Any of these risks could cause an investor to lose money.
Market Risk. Stock and bond markets and the values of securities held by the fund rise and fall daily. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that the investors could lose money.
Investment Style Risk. The fund is not actively managed. Therefore, the fund follows the securities included in the index during upturns as well as downturns. Because of its indexing strategy, the fund does not take steps to reduce market exposure or to lessen the effects of a declining market. In addition, because of the fund's expenses, the fund’s performance may be below that of the index.
Equity Risk. The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles which may cause stock prices to fall over short or extended periods of time.
Large-Cap Risk. The fund will invest in large-cap segments of the U.S. stock market. Large-cap stocks tend to go in and out of favor based on market and economic conditions. During a period when large-cap U.S. stocks fall behind other types of investments—mid- or small-cap stocks, for instance—the fund’s large-cap holdings could reduce performance.
Small- and Mid-Cap Risk. Even larger REITs and other real estate companies may be small- to medium- sized companies in relation to the equity markets as a whole. Historically, small- and mid-cap stocks have been riskier than large-cap stocks. Small- and mid-cap companies themselves may be more vulnerable to adverse business or economic events than larger, more established companies. Stock prices of smaller companies may be based in substantial part on future expectations rather than current achievements and may move sharply, especially during market upturns and downturns. During a period when small- and mid-cap stocks fall behind other types of investments—large-cap stocks, for instance—the fund’s small- and mid-cap holdings could reduce performance.
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Financial Notes (continued)
3. Risk Factors (continued):
REITs Risk. In addition to the risks associated with investing in securities of real estate companies and real estate related companies, REITs are subject to certain additional risks. Equity REITs may be affected by changes in the value of the underlying properties owned by the trusts. Further, REITs are dependent upon specialized management skills and cash flows, and may have their investments in relatively few properties, or in a small geographic area or a single property type. Failure of a company to qualify as a REIT under federal tax law may have adverse consequences to the fund. In addition, REITs have their own expenses, and the fund will bear a proportionate share of those expenses.
Real Estate Investment Risk. Due to the composition of the index, the fund concentrates its investments in real estate companies and companies related to the real estate industry. As such, the fund is subject to risks associated with the direct ownership of real estate securities and an investment in the fund will be closely linked to the performance of the real estate markets. These risks include, among others: declines in the value of real estate; risks related to general and local economic conditions; possible lack of availability of mortgage funds or other limits to accessing the credit or capital markets; defaults by borrowers or tenants, particularly during an economic downturn; and changes in interest rates.
Tracking Error Risk. As an index fund, the fund seeks to track the performance of its benchmark index, although it may not be successful in doing so. The divergence between the performance of the fund and its benchmark index, positive or negative, is called “tracking error.” Tracking error can be caused by many factors and it may be significant.
Derivatives Risk. The principal types of derivatives used by the fund are futures contracts. A futures contract is an agreement to buy or sell a financial instrument at a specific price on a specific day. The fund’s use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as leverage risk, market risk and liquidity risk, are discussed elsewhere.
The fund’s use of derivatives is also subject to credit risk, lack-of-availability risk, valuation risk, correlation risk and tax risk. Credit risk is the risk that the counterparty to a derivative transaction may not fulfill its contractual obligations. Lack-of-availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gain. 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. The fund's use of derivatives that are subject to regulation by the Commodity Futures Trading Commission (CFTC) could cause the fund to become a commodity pool, which would require the fund to comply with certain CFTC rules.
Concentration Risk. To the extent that the fund's or the index's portfolio is concentrated in the securities of issuers in a particular market, industry, group of industries, sector or asset class (including the real estate industry, as described above), the fund may be adversely affected by the performance of those securities, may be subject to increased price volatility and may be more susceptible to adverse economic, market, political or regulatory occurrences affecting that market, industry, group of industries, sector or asset class.
Liquidity Risk. The fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the fund may have to sell them at a loss.
Market Trading Risk. Although fund shares are listed on national securities exchanges, there can be no assurance that an active trading market for fund shares will develop or be maintained. If an active market is not maintained, investors may find it difficult to buy or sell fund shares.
Shares of the Fund May Trade at Prices Other Than NAV. Fund shares may be bought and sold in the secondary market at market prices. Although it is expected that the market price of the shares of the fund will approximate the fund’s NAV, there may be times when the market price and the NAV vary significantly. Investors may pay more than NAV when they buy shares of the fund in the secondary market, and may receive less than NAV when they sell those shares in the secondary market. The market price of the fund shares may deviate, sometimes significantly, from NAV during periods of market volatility. 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 the fund's daily NAV.)
Please refer to the fund’s prospectus for a more complete description of the principal risks of investing in the fund.
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Financial Notes (continued)
4. Affiliates and Affiliated Transactions:
CSIM, a wholly owned subsidiary of The Charles Schwab Corporation (CSC), serves as the fund’s investment adviser pursuant to an Advisory Agreement between CSIM and the trust.
For its advisory services to the fund, CSIM is entitled to receive an annual fee, payable monthly, equal to 0.07% of the fund's average daily net assets.
Certain Schwab funds may own shares of other Schwab funds. The table below reflects the percentage of shares of the fund that are owned by other Schwab funds as of February 28, 2017.
| Schwab VIT Balanced Portfolio | 0.1% |
| Schwab VIT Balanced with Growth Portfolio | 0.3% |
| Schwab VIT Growth Portfolio | 0.3% |
| Schwab Target 2010 Index Fund | 0.0%* |
| Schwab Target 2015 Index Fund | 0.0%* |
| Schwab Target 2020 Index Fund | 0.0%* |
| Schwab Target 2025 Index Fund | 0.0%* |
| Schwab Target 2030 Index Fund | 0.0%* |
| Schwab Target 2035 Index Fund | 0.0%* |
| Schwab Target 2040 Index Fund | 0.0%* |
| Schwab Target 2045 Index Fund | 0.0%* |
| Schwab Target 2050 Index Fund | 0.0%* |
| Schwab Target 2055 Index Fund | 0.0%* |
| Schwab Target 2060 Index Fund | 0.0%* |
| * | Less than 0.05% |
The fund may engage in direct transactions with certain other Schwab funds when practical. When one fund is seeking to sell a security that another is seeking to buy, an interfund transaction can allow both funds to benefit by reducing transaction costs. This practice is limited to funds that share the same investment adviser, trustees and/or officers. For the period ended February 28, 2017, the fund's total aggregate security transactions with other Schwab funds was $22,796,478 and includes realized gains (losses) of ($2,407,438).
Pursuant to an exemptive order issued by the SEC, the fund may enter into interfund borrowing and lending transactions with other funds in the Fund Complex (for definition refer to Trustees and Officers section). All loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the overnight repurchase agreement rate and the short-term bank loan rate. All loans are subject to numerous conditions designed to ensure fair and equitable treatment of all participating funds/portfolios. The interfund lending facility is subject to the oversight and periodic review of the Board. The fund had no interfund borrowing or lending activity during the period.
5. Other Service Providers:
SEI Investments Distribution Co. is the principal underwriter and distributor of shares of the fund.
State Street Bank and Trust Company (State Street) serves as the fund’s transfer agent. As part of these services, the transfer agent maintains records pertaining to the sale, redemption and transfer of the fund’s shares.
State Street also serves as custodian and accountant for the fund. The custodian is responsible for the daily safekeeping of securities and cash held by the fund. The fund’s accountant maintains all books and records related to the fund’s transactions.
6. Board of Trustees:
The Board may include people who are officers and/or directors of CSIM or its affiliates. Federal securities law limits the percentage of such “interested persons” who may serve on a trust’s board, and the trust was in compliance with these limitations throughout the report period. The trust 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.
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Financial Notes (continued)
7. Borrowing from Banks:
During the period, the fund was a participant with other U.S. registered investment companies managed by CSIM in a joint, syndicated, committed $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, the fund paid a commitment fee of 0.125% per annum on its proportionate share of the unused portion of the Credit Facility. 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. There were no borrowings from the line of credit during the period.
The fund also has access to custodian overdraft facilities. The fund may have utilized the overdraft facility and incurred an interest expense, which is disclosed on the fund’s Statement of Operations, if any. The interest expense is determined based on a negotiated rate above the current Federal Funds Rate.
8. Purchases and Sales/Maturities of Investment Securities:
For the period ended February 28, 2017, purchases and sales/maturities of securities (excluding in-kind transactions and short-term obligations) were as follows:
| Purchases of Securities | Sales/Maturities of Securities | |
| Schwab U.S. REIT ETF | $381,508,368 | $348,355,929 |
9. Derivatives:
The fund entered into equity index futures contracts during the report period. The fund invested in futures contracts to equitize available cash. The fair value and variation margin for futures contracts held at February 28, 2017 are presented on the Portfolio Holdings and Statement of Assets and Liabilities, respectively. The net realized and change in unrealized gains (losses) on futures contracts are presented on the Statement of Operations. Refer to financial note 2(b) for the fund’s accounting policies with respect to futures contracts and financial note 3 for disclosures concerning the risks of investing in futures contracts. During the period ended February 28, 2017, the month-end average contract values of futures contracts held by the fund was $2,140,482 and the month-end average number of contracts held was 19.
10. In-Kind Transactions:
The consideration for the purchase of Creation Units of the 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 the fund.
The in-kind transactions for the period ended February 28, 2017 were as follows:
| In-Kind Purchases of Securities | In-Kind Sales of Securities | |
| Schwab U.S. REIT ETF | $1,129,720,633 | $135,616,305 |
For the period ended February 28, 2017, the fund realized net capital gains or losses resulting from in-kind redemptions of Creation Units. Because such gains or losses are not taxable to the fund and are not distributed to existing fund shareholders, the gains or losses are reclassified from accumulated net realized gains or losses to capital received from investors at the end of the fund's tax year. These reclassifications have no effect on net assets or net asset values per share. The net realized in-kind gains or losses for the period ended February 28, 2017 are disclosed in the fund's Statement of Operations.
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Financial Notes (continued)
11. Federal Income Taxes
As of February 28, 2017, the components of distributable earnings on a tax-basis were as follows:
| Undistributed ordinary income | $1,033,152 |
| Undistributed long-term capital gains | — |
| Unrealized appreciation | 267,050,773 |
| Unrealized depreciation | (33,012,590) |
| Net unrealized appreciation (depreciation) | $234,038,183 |
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.
Capital loss carryforwards may be used to offset future realized capital gains for federal income tax purposes. As of February 28, 2017, the fund had no capital loss carryforwards.
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 February 28, 2017, the fund had capital losses deferred of $6,059,106 and no late-year ordinary losses deferred.
The tax-basis components of distributions paid during the current and prior fiscal years were:
| Current period distributions | |
| Ordinary income | $71,668,635 |
| Long-term capital gains | — |
| Prior period distributions | |
| Ordinary income | $40,950,395 |
| 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. The fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes.
Permanent book and tax basis differences may result in reclassifications between components of net assets as required. The adjustments have no impact on net assets or the results of operations. As of February 28, 2017, the fund made the following reclassifications:
| Capital shares | $35,800,056 |
| Undistributed net investment income | 2,195,514 |
| Net realized gains and losses | (37,995,570) |
For the period ended February 28, 2017, the fund reclassified $32,397,353 of non-taxable security gains and losses realized on the in-kind redemption of Creation Units (Note 10) as an increase or decrease to capital received from investors in the Statement of Assets and Liabilities.
As of February 28, 2017, management has reviewed the tax positions for open periods (for federal purposes, three years from the date of filing and for state purposes, four years from the date of filing) as applicable to the fund, and has determined that no provision for income tax is required in the fund's financial statements. The fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the period ended February 28, 2017, the fund did not incur any interest or penalties.
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Financial Notes (continued)
12. Recent Regulatory Development:
In October 2016, the SEC adopted new rules and amended existing rules (together, final rules) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosure about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management is currently evaluating the impact that the adoption of the amendments to Regulation S-X will have on the fund's financial statements and related disclosures.
13. 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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Schwab U.S. REIT ETF
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Schwab Strategic Trust and Shareholders of:
Schwab U.S. REIT ETF
Schwab U.S. REIT ETF
In our opinion, the accompanying statement of assets and liabilities, including the portfolio holdings, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Schwab U.S. REIT ETF (one of the funds constituting Schwab Strategic Trust, hereafter referred to as the “Fund”) as of February 28, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the 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 Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of February 28, 2017 by correspondence with the custodian, brokers and authorized participants, or by other appropriate auditing procedures where replies were not received, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
April 17, 2017
San Francisco, California
April 17, 2017
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Other Federal Tax Information (unaudited)
Under section 852(b)(3)(C) of the Internal Revenue Code, the fund hereby designates $4,208,608 as long term capital gain dividends for the fiscal year ended February 28, 2017.
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Other Information (unaudited)
Frequency Distribution of Discounts and Premiums
Market Price vs. NAV as of February 28, 2017
Market Price vs. NAV as of February 28, 2017
The following charts are provided to show the frequency at which the daily closing market price on the NYSE Arca, Inc. (Exchange), the secondary market for shares of the fund, was at a discount or premium to such fund's daily NAV. The “Market Price” of the fund generally is determined using the midpoint between the highest bid and lowest offer on the Exchange, as of the time that the fund's NAV is calculated. The discount or premium is the percentage difference between the NAV and the Market Price of a fund. A discount is the amount that a fund is trading below the reported NAV, expressed as a percentage of NAV. A premium is the amount that a fund is trading above the reported NAV, expressed as a percentage of NAV. The NAV of the fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of the fund will fluctuate in accordance with changes in its NAV, as well as supply and demand. The data presented below represents past performance and cannot be used to predict future results. The chart does not include days in which the NAV equals the Market Price.
| Number of Days Market Price Above NAV | Number of Days Market Price Below NAV | |||||||
| 1-49 Basis Points | 50-99 Basis Points | 100-199 Basis Points | >200 Basis Points | 1-49 Basis Points | 50-99 Basis Points | 100-199 Basis Points | >200 Basis Points | |
| Commencement of trading | ||||||||
| 1/13/11 through 2/28/17 | 857 | — | — | — | 321 | — | — | — |
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Investment Advisory Agreement Approval
The Investment Company Act of 1940 requires that initial approval of, as well as the continuation of, a fund’s investment advisory agreement must be specifically approved (1) by the vote of the trustees or by a vote of the shareholders of the fund, and (2) by the vote of a majority of the trustees who are not parties to the investment advisory agreement or “interested persons” of any party (the Independent Trustees), cast in person at a meeting called for the purpose of voting on such approval. In connection with such approvals, the fund’s trustees must request and evaluate, and the investment adviser is required to furnish, such information as may be reasonably necessary to evaluate the terms of the investment advisory agreement.
At a meeting held on January 18, 2017, the Board, including a majority of the Independent Trustees, considered information specifically relating to its consideration of the approval of an amended and restated investment advisory agreement (the Amended Agreement) between Schwab Strategic Trust (the Trust) and Charles Schwab Investment Management, Inc. (CSIM) with respect to the existing funds in the Trust, including Schwab U.S. REIT ETF (the Fund) to reflect a change that would make CSIM responsible for the interest expenses resulting from the Fund’s operations. The Board reviewed
materials provided by CSIM relating to this change (including a representation by CSIM that the change will not result in any reduction in the nature and level of services provided to the Fund by CSIM) and also took into account the extensive information that the Board reviewed and the conclusions it reached at its May and June 2016 meetings, in connection with its annual consideration and approval of the continuation of the Fund’s investment advisory agreement. Because the Board had conducted a full review of the Fund’s investment advisory agreement in the spring of 2016, and intends to conduct another such review in the spring of 2017, it limited its discussions in January 2017 primarily to the proposed change to the agreement.
Based on the Trustees’ deliberation and their evaluation of the information described above, the Board, including a majority of the Independent Trustees, approved the Amended Agreement with respect to the Fund effective March 1, 2017 through June 30, 2017 and concluded that the compensation payable by the Fund to CSIM under the Agreement is fair and reasonable in light of the services CSIM renders to (and the expenses it bears relating to) the Fund and such other matters as the Trustees considered to be relevant in the exercise of their reasonable judgment.
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Trustees and Officers
The tables below give information about the trustees and officers for the Schwab Strategic Trust, which includes the fund covered in this report. The “Fund Complex” includes The Charles Schwab Family of Funds, Schwab Capital Trust, Schwab Investments, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust. The Fund Complex includes 110 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. | 110 | 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). | 110 | 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). | 110 | 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. | 110 | Director, Symantec Corporation (2003 – present) Director, Corcept Therapeutics Incorporated (2004 – present) Director, Adamas Pharmaceuticals, Inc. (2009 – 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 |
| 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). | 110 | Director, KLA-Tencor Corporation (2008 – present) |
| 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). | 110 | 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). | 110 | 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). | 110 | 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). | 110 | 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) |
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| Interested Trustees | |||
| Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served1) | Principal Occupations During the Past Five Years | Number of Portfolios in Fund Complex Overseen by the Trustee | Other Directorships |
| Walter W. Bettinger II2 1960 Chairman and Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Schwab Strategic Trust since 2009; Laudus Trust since 2010) | Director, President and Chief Executive Officer, 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); Director, Schwab Holdings, Inc. (May 2008 – present); and Director, Charles Schwab Investment Management, Inc. (July 2016 – present). | 110 | Director, The Charles Schwab Corporation (2008 – present) |
| 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). | 110 | 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 (May 2007 – present), Senior Executive Vice President (Feb. 2016 – present), and Executive Vice President (May 2007 – Feb. 2016), Schwab Holdings, Inc. | 110 | 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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Schwab U.S. REIT ETF
Glossary
ask See “offer.”
asset allocation The practice of dividing a portfolio among different asset classes, with each asset class assigned a particular percentage to help offset risks and rewards, based on your goals, time horizon and risk tolerance.
asset class A group of securities with similar structure and basic characteristics. Stocks, bonds and cash are the three main examples of asset classes.
authorized participant (AP) A large institutional investor that places orders for creation units with the funds’ distributor.
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.
beta A historical measure of an investment’s volatility relative to a market index (usually the S&P 500®). The index is defined as having a beta of 1.00. Investments with a beta higher than 1.00 have been more volatile than the index; those with a beta of less than 1.00 have been less volatile.
bid The highest price at which someone is willing to buy a security.
cap, capitalization See “market cap.”
capital gain, capital loss The difference between the amount paid for an investment and its value at a later time. If the investment has been sold, the capital gain or loss is considered a realized gain or loss. If the investment is still held, the gain or loss is still “on paper” and is considered unrealized.
commencement of operations The date that the first NAV was calculated.
creation unit (C.U.) A basket of securities that is delivered by an authorized participant (AP) to the fund equal to the current holdings of the ETF, plus a designated cash component. In return, the APs receive a large block of ETF shares (typically 50,000 shares), which investors can then buy and sell in the secondary market.
Dow Jones U.S. Select REIT Index A float-adjusted market capitalization weighted index comprised of real estate investment trusts (REITs).
exchange A marketplace, or any organization or group that provides or maintains a marketplace for trading securities, options, futures, or commodities.
expense ratio The amount that is taken from the fund’s assets each year to cover the operating expenses. An expense ratio of 0.50% means that a fund’s expenses amount to half of one percent of its average net assets a year.
FTSE EPRA/NAREIT Global Index An index that is designed to provide a diverse representation of publicly traded equity REITs and listed property companies worldwide. The index constituents are free-float adjusted, and screened on liquidity, size and revenue. The index constituents are from developed and emerging markets. The Net of Tax Index is calculated based on the maximum withholding tax rates applicable to dividends received by institutional investors who are not
residents in the same country as the remitting company and who do not benefit from double taxation treaties. The Net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.
inception date The date that the shares began trading in the secondary market.
indicative optimized portfolio value (IOPV) A calculation disseminated by the stock exchange that approximates the fund’s NAV every 15 seconds throughout the trading day.
liquidity The ability to convert a security or asset quickly into cash.
market cap, market capitalization The value of a company as determined by the total value of all shares of its stock outstanding.
market price return The return based on the change in market price per share of the fund over a given time period. Market price returns assume that dividends and capital gain distributions have been reinvested in the fund at market price.
median market cap The midpoint of the range of market caps of the stocks held by a fund. There are different ways of calculating median market cap. With a simple median, half of the stocks in the fund’s portfolio would be larger than the median, and half would be smaller. With a weighted median (the type that is calculated for these funds), half of the fund’s assets are invested in stocks that are larger than the median market cap, and half in stocks that are smaller.
MSCI EAFE (Europe, Australasia, Far East) Index A free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada. The Net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes; returns are calculated applying dividend withholding rates applicable to non-resident persons who do not benefit from double taxation treaties.
MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. This series approximates the minimum possible dividend reinvestment. 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.
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Schwab U.S. REIT ETF
price-to-earnings ratio (P/E) The market price of a company’s stock compared with earnings over the past year. A mutual fund’s P/E is the weighted average of the P/E of all stocks in the fund’s portfolio.
primary market The market that deals with the issuance of new securities.
real estate investment trust (REIT) Real estate companies that own and commonly operate income producing commercial and/or residential real estate.
rights and warrants Rights and warrants are types of securities that entitle the holder to purchase a proportionate amount of common stock at a specified price for a specific period of time. Rights allow a shareholder to buy more shares directly from the company, usually at a price somewhat lower than the current market price of the outstanding shares. Warrants are usually issued with bonds and preferred stock. Rights and warrants can trade on the market separately from the company’s stock. The prices of rights and warrants do not necessarily move parallel to the prices of the underlying common stock. Rights usually expire within a few weeks of issuance, while warrants may not expire for several years. If a right or warrant is not exercised within the specified time period, it will become worthless and a fund will lose the purchase price it paid for the right or warrant and the right to purchase the underlying security.
S&P 500 Index A market capitalization index that is designed to measure the performance of 500 leading publicly held companies in leading industries of the U.S. economy.
sampling If a fund uses a sampling method, the fund will not fully replicate the benchmark index and may hold securities not included in the index. A fund that utilizes a sampling approach may not track the return of the index.
secondary market The market in which investors purchase securities from other investors rather than directly from the issuing companies. Organized exchanges facilitate the trading of securities in the secondary market.
spread The gap between bid and ask prices of a security.
stock A share of ownership, or equity, in the issuing company.
total return The percentage that an investor would have earned or lost on an investment in the fund assuming dividends and distributions were reinvested.
tracking error The difference between the performance of the fund and its benchmark index, positive or negative.
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Schwab U.S. REIT ETF | Annual Report
Schwab U.S. REIT ETF
PRIVACY NOTICE
THIS IS NOT PART OF THE SHAREHOLDER REPORT
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.
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.
Contact Us
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
© 2016 Schwab ETFs. All rights reserved.
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Schwab U.S. REIT ETF | Annual Report
Notes
Notes
Schwab U.S. REIT ETF
Schwab ETFs™
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 below shows all currently available Schwab ETFs.
Investors should carefully consider information contained in the prospectus, or if available, the summary prospectus, including investment objectives, risks, charges and expenses before investing. Please call 1-877-824-5615 for a prospectus 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
Index ETF
Investment Adviser
Charles Schwab Investment Management, Inc.
211 Main Street, San Francisco, CA 94105
Schwab ETFs™
1-877-824-5615
© 2017 Charles Schwab Investment Management, Inc. All rights reserved.
Printed on recycled paper.
Printed on recycled paper.
| * | FUNDAMENTAL INDEX is a registered trademark of Research Affiliates LLC. |
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MFR60994-06
00191465
00191465
Table of Contents
Annual Report | February 28, 2017
Schwab Fundamental Index* ETFs
Schwab Fundamental
U.S. Broad Market Index ETF
U.S. Broad Market Index ETF
Schwab Fundamental
U.S. Large Company Index ETF
U.S. Large Company Index ETF
Schwab Fundamental
U.S. Small Company Index ETF
U.S. Small Company Index ETF
Schwab Fundamental
International Large Company
Index ETF
International Large Company
Index ETF
Schwab Fundamental
International Small Company
Index ETF
International Small Company
Index ETF
Schwab Fundamental
Emerging Markets Large
Company Index ETF
Emerging Markets Large
Company Index ETF
| * | SCHWAB is a registered trademark of Charles Schwab & Co., Inc. FUNDAMENTAL INDEX is a registered trademark of Research Affiliates LLC. |
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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. The Industry classifications used in the schedules of Portfolio Holdings are sub-categories of Sector classifications.
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Schwab Fundamental Index ETFs | Annual Report
Schwab Fundamental Index ETFs
Performance at a Glance
The performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the performance quoted. To obtain performance information current to the most recent month end, please visit www.csimfunds.com.
| Total Returns for the 12 Months Ended February 28, 2017 | |
| Schwab Fundamental U.S. Broad Market Index ETF (Ticker Symbol: FNDB) | |
| Market Price Return1 | 26.00% |
| NAV Return1 | 26.32% |
| Russell RAFI US Index | 26.64% |
| ETF Category: Morningstar Large Value2 | 26.31% |
| Performance Details | pages 8-10 |
| Schwab Fundamental U.S. Large Company Index ETF (Ticker Symbol: FNDX) | |
| Market Price Return1 | 25.67% |
| NAV Return1 | 25.66% |
| Russell RAFI US Large Company Index | 25.99% |
| ETF Category: Morningstar Large Value2 | 26.31% |
| Performance Details | pages 11-13 |
| Schwab Fundamental U.S. Small Company Index ETF (Ticker Symbol: FNDA) | |
| Market Price Return1 | 33.56% |
| NAV Return1 | 33.56% |
| Russell RAFI US Small Company Index | 33.94% |
| ETF Category: Morningstar Small Blend2 | 31.53% |
| Performance Details | pages 14-16 |
| Total Returns for the 12 Months Ended February 28, 2017 | |
| Schwab Fundamental International Large Company Index ETF (Ticker Symbol: FNDF) | |
| Market Price Return1 | 21.21% |
| NAV Return1 | 20.62% |
| Russell RAFI Developed ex US Large Company Index (Net)* | 20.81% |
| ETF Category: Morningstar Foreign Large Value2 | 17.10% |
| Performance Details | pages 17-19 |
| Schwab Fundamental International Small Company Index ETF (Ticker Symbol: FNDC) | |
| Market Price Return1 | 23.88% |
| NAV Return1 | 23.26% |
| Russell RAFI Developed ex US Small Company Index (Net)* | 23.67% |
| ETF Category: Morningstar Foreign Small/Mid Blend2 | 17.26% |
| Performance Details | pages 20-22 |
| Schwab Fundamental Emerging Markets Large Company Index ETF (Ticker Symbol: FNDE) | |
| Market Price Return1 | 48.04% |
| NAV Return1 | 49.03% |
| Russell RAFI Emerging Markets Large Company Index (Net)* | 50.00% |
| ETF Category: Morningstar Diversified Emerging Markets2 | 25.50% |
| Performance Details | pages 23-25 |
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 — each of the names identifying the Russell RAFI Index Series is a joint trademark of Frank Russell Company (Russell) and Research Affiliates LLC (RA) and is used by the funds under license. “Research Affiliates,” “Fundamental Index” and “RAFI” are trademarks of RA. Subject to RA’s intellectual property rights in certain content, Russell is the owner of all copyrights related to the Russell RAFI Index Series. Russell is the owner of the trademarks and copyrights related to the Russell Indexes. The Schwab Fundamental Index ETFs are not sponsored, endorsed, sold or promoted by Russell or RA, and Russell and RA do not make any representation regarding the advisability of investing in shares of the funds. Effective December 1, 2016, the name of the Russell Fundamental Index Series and all associated indexes were changed from "Russell Fundamental" to "Russell RAFI" by the index provider. No other changes to the index series or the associated indexes have occurred.
| * | The total return cited for the index is calculated net of foreign withholding taxes. |
| 1 | ETF performance must be shown based on both a market price and NAV basis. The fund’s per share NAV is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which the shares of the fund are listed for trading, as of the time that the fund’s NAV is calculated. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively. |
| 2 | Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date. |
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Schwab Fundamental Index ETFs | Annual Report
Schwab Fundamental Index ETFs
From the President
Marie Chandoha
President and CEO of
Charles Schwab Investment
Management, Inc. and the
funds covered in this report.
President and CEO of
Charles Schwab Investment
Management, Inc. and the
funds covered in this report.
Dear Shareholder,
We hope you are off to a healthy and productive start to the year. At Charles Schwab Investment Management, we have been quite busy over the past six months since our last communication, continuing to pursue more ways to help investors achieve their financial goals. Below I’ll share some exciting news regarding some of the changes we’ve made to bring down the costs of our index products. But first, let’s discuss the market environment that set the tone for the performance of the Schwab Fundamental Index ETFs (the funds) during the 12-month reporting period ended February 28, 2017.
The past 12 months were marked by substantial gains across most equity classes. Stock prices rose first in reaction to improving economic fundamentals around the world, and then in anticipation of reflationary policies expected to be enacted by the Trump administration. Each of the six funds posted strong returns that were in line with their underlying indexes, led by the Schwab Fundamental Emerging Markets Large Company Index ETF, which returned 48.0%1.
The current bull market is now the second-longest in history, and many market watchers are warning that returns may not be as strong in the months and years ahead. It is quite possible, given our current starting point, that
Asset Class Performance Comparison % returns during the 12 months ended 2/28/2017
Index figures assume dividends and distributions were reinvested. Index figures do not include trading and management costs, which would lower performance. Indices are unmanaged and cannot be invested in directly. Past performance is not an indication of future results.
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.
| 1 | Return shown is the fund’s market price return, which is based on the market price per share of the fund. For the definition of market price return, please refer to the glossary. |
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Schwab Fundamental Index ETFs
From the President (continued)
“ Rather than trying to predict the market’s every move, we believe investors are better off focusing on what they can control: how much they pay to invest.”
equity markets may be hard-pressed to provide returns similar to those over the preceding 12-month period. While the exact path of the markets is uncertain, we do know that investors who simply stay in the market, instead of attempting to time the market, are generally more likely to take advantage of some of the best periods of higher returns.
Rather than trying to predict the market’s every move, we believe investors are better off focusing on what they can control: how much they pay to invest. Costs matter to investors, particularly when it comes to passive investments, such as index ETFs, that they plan to hold for the long haul. As part of our commitment to putting our investors first, we have taken steps to dramatically reduce costs and complexity. We initiated our latest expense reductions this past February, when we announced plans to lower the expense ratios on our Fundamental Index ETFs and several market cap index products. Those expense reductions went into effect on March 1, further leveling the playing field for you, our investors. To learn more about these changes, please visit www.csimfunds.com/lowercosts.
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 funds, please continue reading this report. In addition, 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,
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Schwab Fundamental Index ETFs | Annual Report
Schwab Fundamental Index ETFs
The Investment Environment
Over the 12-month reporting period ended February 28, 2017, most stock markets performed well as volatility quieted down and global economic growth improved. The Federal Reserve (Fed) raised short-term interest rates in December for only the second time in 10 years, while the election of Donald Trump in the U.S. presidential election supported many stocks both in the U.S. and abroad. Outside the U.S., the results of the surprise vote by the United Kingdom (U.K.) to leave the European Union (Brexit) sent many markets downward, only to recover in the weeks and months that followed. Accommodative monetary policies from central banks in Europe and Asia appeared to be working as the reporting period progressed, with some signs of stability emerging in these regions toward the end of 2016 and in early 2017. Meanwhile, the U.S. dollar continued its upward trajectory, appreciating against many major currencies over the reporting period. In this environment, the S&P 500® Index, a bellwether for the overall U.S. stock market, returned 24.98%, while the Russell RAFI US Large Company Index returned 25.99% over the same timeframe. In U.S. small-cap markets, the Russell 2000® Index and the Russell RAFI US Small Company Index returned 36.11% and 33.94%, respectively. Internationally, the MSCI EAFE Index (Net), a broad measure of developed international equity performance, returned 15.75%, while the Russell RAFI Developed ex US Large Company Index (Net) returned 20.81%. In emerging markets, the MSCI Emerging Markets Index (Net) and the Russell RAFI Emerging Markets Large Company Index (Net) returned 29.46% and 50.00%, respectively.
U.S. monetary policy remained fairly accommodative over the 12-month reporting period, even with moves toward a more normalized short-term interest rate environment. Early in the reporting period, speculation around potential changes in U.S. monetary policy added to heightened market volatility and uncertainty. The Fed left short-term interest rates unchanged through its November meeting, as inflation remained below the Fed’s goal of 2% and concerns about the strength of the U.S. economy and sluggish global growth persisted. The Brexit vote and uncertainty surrounding the U.S. election further complicated the Fed’s decision. However, as the U.S. economy continued to show signs of stability and strength, the Fed decided to raise the federal funds rate at its December meeting, with forecasts for several additional hikes in 2017. U.S. stock markets initially fell after the Fed’s announcement, but then rallied to near record levels in the following days and weeks. The Fed met once more during the reporting period in late January, and left short-term rates unchanged. The minutes from this meeting, as well as statements from Fed Chair Janet Yellen’s congressional testimony in mid-February, indicated that the Fed was still on track to follow-through on the anticipated rate increases later this year. (After the end of the reporting period, the Fed raised short-term interest rates for the first time in 2017 at its March meeting.)
To combat weak economic growth and low inflation, many central banks outside the U.S. maintained or increased accommodative policy measures over the reporting period. The European Central Bank (ECB) cut its deposit rate further into negative territory, launched a program to provide cheap funding for European banks, and extended its bond purchase program until at least December 2017. Hoping to minimize the fallout from Brexit, the Bank of England in August cut its main interest rate to an all-time low. In Asia, the Bank of Japan (BOJ) expanded its quantitative easing program and left key interest rates below zero. The BOJ also introduced yield curve management as a policy tool in September, targeting interest rates on government bonds to achieve its inflation goal. Stock markets in Europe and Japan rallied toward the end of the reporting period, suggesting that these central bank policies were working. Meanwhile, the People’s Bank of China (PBOC) cut its reserve requirement ratio and increased its lending facilities, which supported positive trends in several economic measurements. However, this also led to credit expanding at twice the rate of economic growth, prompting the PBOC to take steps to address this imbalance and reduce long-term financial risk. As a result, the PBOC tightened its monetary policy stance and raised several key interest rates in early 2017.
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.
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.
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Schwab Fundamental Index ETFs | Annual Report
Schwab Fundamental Index ETFs
The Investment Environment (continued)
Global economic growth generally steadied over the 12-month reporting period, due in part to accommodative central bank policies and rising oil and commodity prices. Economic activity in the eurozone slowed in the second quarter of 2016 and was flat in the third quarter, but surprisingly robust fourth quarter estimates indicated a turnaround for that region, driven by strong numbers from Germany, Italy, and France. The entire eurozone bloc had exited deflation by the end of January 2017, and the U.K. economy specifically performed better-than-expected in the months following Brexit as a feasible exit plan materialized. In Japan, economic growth accelerated and consumer prices fell at a slower pace, with inflation on track to hit the target of 2% in the next two years. Generally increasing oil and commodity prices supported a rebound in many oil-exporting emerging markets, including Russia and Brazil. The price of Brent crude oil (a global crude oil benchmark) rose from less than $38 per barrel in March 2016 to over $55 per barrel in February 2017, providing a substantial tailwind for these countries. In China, despite slower economic growth in 2016 than in prior years, concerns lessened around this subdued pace as many economic indicators showed signs of strength toward the end of the reporting period.
Meanwhile, U.S. economic growth measurements were largely positive over the 12-month reporting period. Outside of an unexpected and steep drop in May, nonfarm payrolls were generally in line with expectations and ended the reporting period on a high note, with February’s number coming in above forecasts. Consumer confidence, as measured by the University of Michigan’s survey of consumers, grew from a two-year low in October to a 13-year high in January, spurred by post-election optimism for the U.S. economic outlook. U.S. manufacturing grew in 11 out the last 12 months, and the unemployment rate remained low, dropping to the lowest level since before the 2008 financial crisis in November. Continued low interest rates supported a strong U.S. housing market, and the consumer-price index, a broad measure of inflation, moved above 2% in early 2017 for the first time in over two years. Expectations for new policies or changes to existing policies from the Trump administration, including tax reform, increased fiscal spending, and reduced regulation, supported a positive growth outlook, and contributed to the positive performance of many U.S. stocks.
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Schwab Fundamental Index ETFs | Annual Report
Schwab Fundamental Index ETFs
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. |
 | 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. |
 | Jane Qin, Portfolio Manager, is responsible for the day-to-day co-management of the funds. Prior to joining CSIM in 2012, Ms. Qin spent more than four years at The Bank of New York Mellon Corporation. During that time, Ms. Qin spent more than two years as an associate equity portfolio manager and nearly two years as a performance analyst. She also worked at Wells Fargo Funds Management as a mutual fund analyst and at CIGNA Reinsurance in Risk Management group as a risk analyst. |
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Schwab Fundamental Index ETFs | Annual Report
Schwab Fundamental U.S. Broad Market Index ETF
The Schwab Fundamental U.S. Broad Market Index ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of the Russell RAFI US Index (the index). This index measures the performance of the companies by fundamental overall company scores that are created using the universe of companies in the Russell 3000® Index. To pursue its investment objective, the fund invests in a statistical sample of the securities included in the index that collectively are expected to perform similarly to the index as a whole. Due to the use of statistical sampling, the fund may not hold all of the securities in the index. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.
Market Highlights. U.S. stocks generated positive returns over the reporting period, with several indexes reaching record highs during the 12 months. Market volatility remained heightened early in the reporting period as weak global economic growth, inconsistent U.S. economic data, and the United Kingdom’s decision to leave the European Union (Brexit) contributed to investor uncertainty. As the reporting period continued, however, the U.S. economy showed renewed signs of stability and equity markets calmed. Volatility picked up again in the weeks prior to the U.S. presidential election and through the night of Election Day, when U.S. equity futures dropped sharply during after-hours trading. Stock markets rebounded the following day, and maintained an upward trajectory throughout the remainder of the reporting period. This rally was supported by investor belief that the new administration would increase infrastructure spending and implement tax reform, among other changes in economic policies, which would in turn help to spur U.S. economic growth. Meanwhile, the Federal Reserve raised short-term interest rates in December for the second time in 10 years, and indicated forecasts for several additional rate hikes in 2017. Stocks initially fell in response, but regained momentum in the weeks that followed and ended the reporting period on a high note.
Performance. For the 12-month reporting period ended February 28, 2017, the fund generally tracked the index. The fund’s market price return was 26.00% and its NAV return was 26.32% (for an explanation of the market price and NAV returns, please refer to footnote 2 on the following page). The index returned 26.64% during the same period. Differences between the return of the fund and the return of the index may be attributable to, among other things, the trading and management costs incurred by the fund and not the index.
Contributors and Detractors. Over the reporting period, no sector detracted from fund performance. However, the Real Estate sector was the smallest contributor to the performance of both the index and the fund, due in large part to the small average weight of this sector. Stocks in the Real Estate sector represented an average weight of approximately 2% of the fund’s investments and returned approximately 20%, representing the overall performance of companies engaged in real estate development and operation, as well as companies offering real estate-related services and equity REITs. One example from this sector is Realogy Holdings Corp., an integrated provider of residential real estate services. The fund’s holdings of Realogy Holdings Corp. returned approximately -15% for the reporting period. The Telecommunication Services sector was also a small contributor to overall fund performance. Telecommunication Services stocks represented an average weight of approximately 4% of the fund’s investments and returned approximately 10% for the reporting period.
The Financials sector, which includes companies involved in banking, finance, asset management, brokerage and insurance, as well as financial exchanges and data and mortgage REITs, contributed the most the total return of both the fund and the index. Financials stocks represented an average weight of approximately 13% of the fund’s investments and returned approximately 46%. One example from this sector is financial holding company JPMorgan Chase & Co. The fund’s holdings of JPMorgan Chase & Co. returned approximately 66% 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 15% of the fund’s investments and returning approximately 37%.
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Schwab Fundamental Index ETFs | Annual Report
Schwab Fundamental U.S. Broad Market Index ETF
Performance and Fund Facts as of 2/28/17
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.
Performance of Hypothetical $10,000 Investment (August 15, 2013 – February 28, 2017)1
Average Annual Total Returns1
| Fund and Inception Date | 1 Year | 3 Years | Since Inception* |
| Fund: Schwab Fundamental U.S. Broad Market Index ETF (8/15/13) | |||
| Market Price Return2 | 26.00% | 9.59% | 11.11% |
| NAV Return2 | 26.32% | 9.55% | 11.11% |
| Russell RAFI US Index | 26.64% | 9.87% | 11.46% |
| ETF Category: Morningstar Large Value3 | 26.31% | 8.22% | 9.37% |
| Fund Expense Ratio4: 0.32% | |||
All total returns on this page assume dividends and distributions were reinvested. Index figures do not include trading and management costs, which would lower performance. Indices are unmanaged and cannot be invested in directly. Performance results less than one year are not annualized.
For index definitions, please see the Glossary.
Shares are bought and sold at market price, which may be higher or lower than the net asset value (NAV). Brokerage commissions will reduce returns.
Index ownership — “Russell RAFI US Index” is a joint trademark of Frank Russell Company (Russell) and Research Affiliates LLC (RA) and is used by the fund under license. “Research Affiliates,” “Fundamental Index” and "RAFI" are trademarks of RA. Subject to RA’s intellectual property rights in certain content, Russell is the owner of all copyrights related to the Russell RAFI Index Series. Russell is the owner of the trademarks and copyrights related to the Russell Indexes. Schwab Fundamental U.S. Broad Market Index ETF is not sponsored, endorsed, sold or promoted by Russell or RA, and Russell and RA do not make any representation regarding the advisability of investing in shares of the fund. Effective December 1, 2016, the name of the index was changed by the index provider. No other changes to the index have occurred.
| * | Inception (8/15/13) represents the date that the shares began trading in the secondary market. |
| 1 | Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption of fund shares. |
| 2 | ETF performance must be shown based on both a market price and NAV basis. The fund’s per share 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 March 1, 2017, the management fee was reduced to 0.25%. For more information, see financial note 4 or refer to the prospectus supplement dated March 1, 2017. |
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Schwab Fundamental Index ETFs | Annual Report
Schwab Fundamental U.S. Broad Market Index ETF
Performance and Fund Facts as of 2/28/17 (continued)
Statistics
| Number of Holdings | 1,406 |
| Weighted Average Market Cap (millions) | $121,009 |
| Price/Earnings Ratio (P/E) | 19.5 |
| Price/Book Ratio (P/B) | 2.4 |
| Portfolio Turnover Rate1 | 10% |
Sector Weightings % of Investments
Top Equity Holdings % of Net Assets2
Management views and portfolio holdings may have changed since the report date.
An index is a statistical composite of a specified financial market or sector. Unlike the fund, an index does not actually hold a portfolio of securities and its return is not inclusive of trading and management costs incurred by the fund.
Source of Sector Classification: S& P and MSCI.
| 1 | Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions. |
| 2 | This list is not a recommendation of any security by the investment adviser. |
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Schwab Fundamental Index ETFs | Annual Report
Schwab Fundamental U.S. Large Company Index ETF
The Schwab Fundamental U.S. Large Company Index ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of the Russell RAFI US Large Company Index (the index). This index measures the performance of the large company size segment by fundamental overall company scores that are created using as the universe the companies in the Russell 3000® Index. To pursue its investment objective, the fund uses a replication investment approach and generally gives the same weight to a given stock as does the index. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.
Market Highlights. Large-cap U.S. stocks underperformed small-cap stocks over the reporting period, though both posted strong returns as several indexes reached record highs during the 12 months. Market volatility remained heightened early in the reporting period as weak global economic growth, inconsistent U.S. economic data, and the United Kingdom’s decision to leave the European Union (Brexit) contributed to investor uncertainty. As the reporting period continued, however, the U.S. economy showed renewed signs of stability and equity markets calmed. Volatility picked up again in the weeks prior to the U.S. presidential election and through the night of Election Day, when U.S. equity futures dropped sharply during after-hours trading. Stock markets rebounded the following day, and generally maintained an upward trajectory throughout the remainder of the reporting period. This rally was supported by investor belief that the new administration would increase infrastructure spending and implement tax reform, among other changes in economic policies, which would in turn help to spur U.S. economic growth. Meanwhile, the Federal Reserve raised short-term interest rates in December for the second time in 10 years, and indicated forecasts for several additional rate hikes in 2017. Stocks initially fell in response, but regained momentum in the weeks that followed and ended the reporting period on a high note.
Performance. For the 12-month reporting period ended February 28, 2017, the fund generally tracked the index. The fund’s market price return was 25.67% and its NAV return was 25.66% (for an explanation of the market price and NAV returns, please refer to footnote 2 on the following page). The index returned 25.99% during the same period. Differences between the return of the fund and the return of the index may be attributable to, among other things, the trading and management costs incurred by the fund and not the index.
Contributors and Detractors. Over the reporting period, no sector detracted from fund performance. However, the Real Estate sector was the smallest contributor to the performance of both the index and the fund, due in large part to the small average weight of this sector. Stocks in the Real Estate sector represented an average weight of approximately 1% of the fund’s investments and returned approximately 19%, representing the overall performance of companies engaged in real estate development and operation, as well as companies offering real estate-related services and equity REITs. One example from this sector is Macerich Company, a fully integrated self-managed and self-administered REIT, which focuses on the acquisition, leasing, management, development and redevelopment of regional malls. The fund’s holdings of Macerich Company returned approximately -12% for the reporting period. The Telecommunication Services sector was also a small contributor to overall fund performance. Telecommunication Services stocks represented an average weight of approximately 4% of the fund’s investments and returned approximately 10% for the reporting period.
The Financials sector contributed the most to the total return of both the fund and the index, representing the overall performance of companies involved in banking, finance, asset management, brokerage and insurance, as well as financial exchanges and data and mortgage REITs. Stocks from the Financials sector represented an average weight of approximately 13% of the fund’s investments and returned approximately 46%. One example from this sector is financial holding company JPMorgan Chase & Co. The fund’s holdings of JPMorgan Chase & Co. returned approximately 66% for the 12-month reporting period. Another meaningful contributor to the return of the fund was the Information Technology sector. Information Technology stocks represented an average weight of approximately 15% of the fund’s investments and returned approximately 37%.
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Schwab Fundamental Index ETFs | Annual Report
Schwab Fundamental U.S. Large Company Index ETF
Performance and Fund Facts as of 2/28/17
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.
Performance of Hypothetical $10,000 Investment (August 15, 2013 – February 28, 2017)1
Average Annual Total Returns1
| Fund and Inception Date | 1 Year | 3 Years | Since Inception* |
| Fund: Schwab Fundamental U.S. Large Company Index ETF (8/15/13) | |||
| Market Price Return2 | 25.67% | 9.65% | 11.07% |
| NAV Return2 | 25.66% | 9.64% | 11.08% |
| Russell RAFI US Large Company Index | 25.99% | 10.00% | 11.44% |
| ETF Category: Morningstar Large Value3 | 26.31% | 8.22% | 9.37% |
| Fund Expense Ratio4: 0.32% | |||
All total returns on this page assume dividends and distributions were reinvested. Index figures do not include trading and management costs, which would lower performance. Indices are unmanaged and cannot be invested in directly. Performance results less than one year are not annualized.
For index definitions, please see the Glossary.
Shares are bought and sold at market price, which may be higher or lower than the net asset value (NAV). Brokerage commissions will reduce returns.
Index ownership — “Russell RAFI US Large Company Index” is a joint trademark of Frank Russell Company (Russell) and Research Affiliates LLC (RA) and is used by the fund under license. “Research Affiliates,” “Fundamental Index” and "RAFI" are trademarks of RA. Subject to RA’s intellectual property rights in certain content, Russell is the owner of all copyrights related to the Russell RAFI Index Series. Russell is the owner of the trademarks and copyrights related to the Russell Indexes. Schwab Fundamental U.S. Large Company Index ETF is not sponsored, endorsed, sold or promoted by Russell or RA, and Russell and RA do not make any representation regarding the advisability of investing in shares of the fund. Effective December 1, 2016, the name of the index was changed by the index provider. No other changes to the index have occurred.
| * | Inception (8/15/13) represents the date that the shares began trading in the secondary market. |
| 1 | Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption of fund shares. |
| 2 | ETF performance must be shown based on both a market price and NAV basis. The fund’s per share 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 March 1, 2017, the management fee was reduced to 0.25%. For more information, see financial note 4 or refer to the prospectus supplement dated March 1, 2017. |
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Schwab Fundamental Index ETFs | Annual Report
Schwab Fundamental U.S. Large Company Index ETF
Performance and Fund Facts as of 2/28/17 (continued)
Statistics
| Number of Holdings | 656 |
| Weighted Average Market Cap (millions) | $132,231 |
| Price/Earnings Ratio (P/E) | 19.3 |
| Price/Book Ratio (P/B) | 2.4 |
| Portfolio Turnover Rate1 | 10% |
Sector Weightings % of Investments
Top Equity Holdings % of Net Assets2
Management views and portfolio holdings may have changed since the report date.
An index is a statistical composite of a specified financial market or sector. Unlike the fund, an index does not actually hold a portfolio of securities and its return is not inclusive of trading and management costs incurred by the fund.
Source of Sector Classification: S& P and MSCI.
| 1 | Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions. |
| 2 | This list is not a recommendation of any security by the investment adviser. |
13
Schwab Fundamental Index ETFs | Annual Report
Schwab Fundamental U.S. Small Company Index ETF
The Schwab Fundamental U.S. Small Company Index ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of the Russell RAFI US Small Company Index (the index). This index measures the performance of the small company size segment by fundamental overall company scores that are created using as the universe the companies in the Russell 3000® Index. To pursue its investment objective, the fund uses a replication investment approach and generally gives the same weight to a given stock as does the index. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.
Market Highlights. Small-cap U.S. stocks outperformed large-cap stocks over the reporting period, though both posted strong returns as several indexes reached record highs during the 12 months. Market volatility remained heightened early in the reporting period as weak global economic growth, inconsistent U.S. economic data, and the United Kingdom’s decision to leave the European Union (Brexit) contributed to investor uncertainty. As the reporting period continued, however, the U.S. economy showed renewed signs of stability and equity markets calmed. Volatility picked up again in the weeks prior to the U.S. presidential election and through the night of Election Day, when U.S. equity futures dropped sharply during after-trading hours. Stock markets rebounded the following day, and generally maintained an upward trajectory throughout the remainder of the reporting period. This rally was supported by investor belief that the new administration would increase infrastructure spending and implement tax reform, among other changes in economic policies, which would in turn help to spur U.S. economic growth. Meanwhile, the Federal Reserve raised short-term interest rates in December for the second time in 10 years, and indicated forecasts for several additional rate hikes in 2017. Stocks initially fell in response, but regained momentum in the weeks that followed and ended the reporting period on a high note.
Performance. For the 12-month reporting period ended February 28, 2017, the fund generally tracked the index. The fund’s market price return and NAV return were both 33.56% (for an explanation of the market price and NAV returns, please refer to footnote 2 on the following page). The index returned 33.94% during the same period. Differences between the return of the fund and the return of the index may be attributable to, among other things, the trading and management costs incurred by the fund and not the index.
Contributors and Detractors. Over the reporting period, no sector detracted from fund performance. However, the Telecommunication Services sector was the smallest contributor the performance of the index and the fund. Telecommunication Services stocks represented an average weight of approximately 1% of the fund’s investments and returned approximately 10%, reflecting the overall performance of companies that provide communications services primarily through a fixed-line, cellular or wireless, high bandwidth and/or fiber optic cable network. One example from this sector is Windstream Holdings, Inc., a holding company that provides advanced network communications and technology solutions for consumers, businesses, enterprise organizations, and carrier partners across the U.S. The fund’s holdings of Windstream Holdings, Inc. returned approximately -11% for the reporting period. Another small contributor to both index and fund performance was the Consumer Staples sector. Consumer Staples stocks represented an average weight of approximately 4% of the fund’s investments and returned approximately 19%.
The Industrials sector was the largest contributor to the fund’s total return, and to the return of the index. Industrials stocks represented an average weight of approximately 21% of the fund’s investments and returned approximately 43%, reflecting the overall performance of manufacturers and distributors of capital goods, providers of commercial and professional services, and companies that provide transportation services. One example from this sector is Harsco Corporation, a provider of industrial services and engineered products serving global industries. The fund’s holdings of Harsco Corporation generated a triple-digit return of approximately 272%. The Financials sector was another large contributor to the return of the both the index and the fund. Financials stocks represented an average weight of 14% of the fund’s investments and returned approximately 46% for the 12-month reporting period.
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Schwab Fundamental Index ETFs | Annual Report
Schwab Fundamental U.S. Small Company Index ETF
Performance and Fund Facts as of 2/28/17
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.
Performance of Hypothetical $10,000 Investment (August 15, 2013 – February 28, 2017)1
Average Annual Total Returns1
| Fund and Inception Date | 1 Year | 3 Years | Since Inception* |
| Fund: Schwab Fundamental U.S. Small Company Index ETF (8/15/13) | |||
| Market Price Return2 | 33.56% | 8.35% | 11.27% |
| NAV Return2 | 33.56% | 8.38% | 11.27% |
| Russell RAFI US Small Company Index | 33.94% | 8.68% | 11.61% |
| ETF Category: Morningstar Small Blend3 | 31.53% | 6.18% | 8.71% |
| Fund Expense Ratio4: 0.32% | |||
All total returns on this page assume dividends and distributions were reinvested. Index figures do not include trading and management costs, which would lower performance. Indices are unmanaged and cannot be invested in directly. Performance results less than one year are not annualized.
For index definitions, please see the Glossary.
Shares are bought and sold at market price, which may be higher or lower than the net asset value (NAV). Brokerage commissions will reduce returns.
Small-company stocks may be subject to greater volatility than many other asset classes.
Index ownership — “Russell RAFI US Small Company Index” is a joint trademark of Frank Russell Company (Russell) and Research Affiliates LLC (RA) and is used by the fund under license. “Research Affiliates,” “Fundamental Index” and "RAFI" are trademarks of RA. Subject to RA’s intellectual property rights in certain content, Russell is the owner of all copyrights related to the Russell RAFI Index Series. Russell is the owner of the trademarks and copyrights related to the Russell Indexes. Schwab Fundamental U.S. Small Company Index ETF is not sponsored, endorsed, sold or promoted by Russell or RA, and Russell and RA do not make any representation regarding the advisability of investing in shares of the fund. Effective December 1, 2016, the name of the index was changed by the index provider. No other changes to the index have occurred.
| * | Inception (8/15/13) represents the date that the shares began trading in the secondary market. |
| 1 | Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption of fund shares. |
| 2 | ETF performance must be shown based on both a market price and NAV basis. The fund’s per share 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 March 1, 2017, the management fee was reduced to 0.25%. For more information, see financial note 4 or refer to the prospectus supplement dated March 1, 2017. |
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Schwab Fundamental Index ETFs | Annual Report
Schwab Fundamental U.S. Small Company Index ETF
Performance and Fund Facts as of 2/28/17 (continued)
Statistics
| Number of Holdings | 848 |
| Weighted Average Market Cap (millions) | $4,469 |
| Price/Earnings Ratio (P/E) | 22.0 |
| Price/Book Ratio (P/B) | 2.0 |
| Portfolio Turnover Rate1 | 23% |
Sector Weightings % of Investments
Top Equity Holdings % of Net Assets2
Management views and portfolio holdings may have changed since the report date.
An index is a statistical composite of a specified financial market or sector. Unlike the fund, an index does not actually hold a portfolio of securities and its return is not inclusive of trading and management costs incurred by the fund.
Source of Sector Classification: S& P and MSCI.
| 1 | Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions. |
| 2 | This list is not a recommendation of any security by the investment adviser. |
16
Schwab Fundamental Index ETFs | Annual Report
Schwab Fundamental International Large Company Index ETF
The Schwab Fundamental International Large Company Index ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of the Russell RAFI Developed ex US Large Company Index (the index). This index measures the performance of the large company size segment by fundamental overall company scores that are created using as the universe the companies in the Russell Developed ex-U.S. Index. To pursue its investment objective, the fund invests in a statistical sample of the securities included in the index that collectively are expected to perform similarly to the index as a whole. Due to the use of statistical sampling, the fund may not hold all of the securities in the index. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.
Market Highlights. Stocks of large companies in developed international markets generated positive returns for the 12-month reporting period. Though concerns surrounding weak global economic growth weighed on many international stocks early in the reporting period, especially after the United Kingdom’s (U.K.) decision in June to leave the European Union (Brexit), markets rebounded toward the end of 2016 amid accommodative central bank monetary policies and expectations of faster U.S. economic growth. The increasing likelihood of an uncomplicated Brexit plan and rising inflation in both the eurozone and Japan also supported many developed international stocks. Meanwhile, the U.S. dollar generally strengthened after the U.S. presidential election through the end of the reporting period, most notably against the British pound, generally reducing returns on overseas investments in U.S. dollar terms. However, as international stocks performed particularly well this reporting period, returns on many of these investments were strong even when translated into U.S. dollars.
Performance. For the 12-month reporting period ended February 28, 2017, the fund’s market price return was 21.21% and its NAV return was 20.62% (for an explanation of the market price and NAV returns, please refer to footnote 2 on the following page). The index returned 20.81%1 during the same period.
Contributors and Detractors. Stocks from Japan were among the strongest contributors to the total return of the fund. Japanese stocks represented an average weight of approximately 22% of the fund’s investments and returned approximately 26% in U.S. dollar terms. One example from this market is bank holding company Mitsubishi Ufj Financial Group. The fund’s common stock holdings of Mitsubishi Ufj Financial Group returned approximately 58% in U.S. dollar terms. Stocks from the U.K. also contributed to the return of the fund, representing an average weight of approximately 16% of the fund’s investments and returning approximately 14% in U.S. dollar terms.
Stocks from Israel were among the few detractors from the total return of the fund. Israeli stocks represented an average weight of less than 1% of the fund’s investments and returned approximately -18% in U.S. dollar terms. One example from this market is Teva Pharmaceutical Industries Ltd., a pharmaceutical company. The fund’s common stock holdings of Teva Pharmaceutical Industries Ltd. returned approximately -36% in U.S. dollar terms. Despite positive returns, Portuguese stocks were among the smallest contributors to the return of the fund, due in large part to this country’s small average weight. Stocks from Portugal represented an average weight of less than 1% of the fund’s investments and returned approximately 8% in U.S. dollar terms.
| 1 | The total return cited for the index is calculated net of foreign withholding taxes. |
17
Schwab Fundamental Index ETFs | Annual Report
Schwab Fundamental International Large Company Index ETF
Performance and Fund Facts as of 2/28/17
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.
Performance of Hypothetical $10,000 Investment (August 15, 2013 – February 28, 2017)1
Average Annual Total Returns1
| Fund and Inception Date | 1 Year | 3 Years | Since Inception* |
| Fund: Schwab Fundamental International Large Company Index ETF (8/15/13) | |||
| Market Price Return2 | 21.21% | -0.84% | 2.89% |
| NAV Return2 | 20.62% | -0.68% | 2.89% |
| Russell RAFI Developed ex US Large Company Index (Net)3 | 20.81% | -0.49% | 3.12% |
| ETF Category: Morningstar Foreign Large Value4 | 17.10% | -1.63% | 1.74% |
| Fund Expense Ratio5: 0.32% | |||
All total returns on this page assume dividends and distributions were reinvested. Index figures do not include trading and management costs, which would lower performance. Indices are unmanaged and cannot be invested in directly. Performance results less than one year are not annualized.
For index definitions, please see the Glossary.
Shares are bought and sold at market price, which may be higher or lower than the net asset value (NAV). Brokerage commissions will reduce returns.
International investing may involve risk of capital loss from unfavorable fluctuations in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations.
Index ownership — “Russell RAFI Developed ex US Large Company Index” is a joint trademark of Frank Russell Company (Russell) and Research Affiliates LLC (RA) and is used by the fund under license. “Research Affiliates,” "Fundamental Index” and "RAFI" are trademarks of RA. Subject to RA’s intellectual property rights in certain content, Russell is the owner of all copyrights related to the Russell RAFI Index Series. Russell is the owner of the trademarks and copyrights related to the Russell Indexes. Schwab Fundamental International Large Company Index ETF is not sponsored, endorsed, sold or promoted by Russell or RA, and Russell and RA do not make any representation regarding the advisability of investing in shares of the fund. Effective December 1, 2016, the name of the index was changed by the index provider. No other changes to the index have occurred.
| * | Inception (8/15/13) represents the date that the shares began trading in the secondary market. |
| 1 | Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption of fund shares. |
| 2 | ETF performance must be shown based on both a market price and NAV basis. The fund’s per share 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. |
| 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. Effective March 1, 2017, the management fee was reduced to 0.25%. For more information, see financial note 4 or refer to the prospectus supplement dated March 1, 2017. |
18
Schwab Fundamental Index ETFs | Annual Report
Schwab Fundamental International Large Company Index ETF
Performance and Fund Facts as of 2/28/17 (continued)
Statistics
| Number of Holdings | 824 |
| Weighted Average Market Cap (millions) | $54,032 |
| Price/Earnings Ratio (P/E) | 17.4 |
| Price/Book Ratio (P/B) | 1.4 |
| Portfolio Turnover Rate1 | 11% |
Sector Weightings % of Investments
Top Equity Holdings % of Net Assets2
Country Weightings % of Investments
Management views and portfolio holdings may have changed since the report date.
An index is a statistical composite of a specified financial market or sector. Unlike the fund, an index does not actually hold a portfolio of securities and its return is not inclusive of trading and management costs incurred by the fund.
Source of Sector Classification: S&P and MSCI.
| 1 | Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions. |
| 2 | This list is not a recommendation of any security by the investment adviser. |
19
Schwab Fundamental Index ETFs | Annual Report
Schwab Fundamental International Small Company Index ETF
The Schwab Fundamental International Small Company Index ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of the Russell RAFI Developed ex US Small Company Index (the index). This index measures the performance of the small company size segment by fundamental overall company scores that are created using as the universe the companies in the Russell Developed ex-U.S. Index. To pursue its investment objective, the fund invests in a statistical sample of the securities included in the index that collectively are expected to perform similarly to the index as a whole. Due to the use of statistical sampling, the fund may not hold all of the securities in the index. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.
Market Highlights. Stocks of small companies in developed international markets generated positive returns for the 12-month reporting period. Though concerns surrounding weak global economic growth weighed on many international stocks early in the reporting period, especially after the United Kingdom’s (U.K.) decision in June to leave the European Union (Brexit), markets rebounded toward the end of 2016 amid accommodative central bank monetary policies and expectations of faster U.S. economic growth. The increasing likelihood of an uncomplicated Brexit plan and rising inflation in both the eurozone and Japan also supported many developed international stocks. Meanwhile, the U.S. dollar generally strengthened after the U.S. presidential election through the end of the reporting period, most notably against the British pound, generally reducing returns on overseas investments in U.S. dollar terms. However, as international stocks performed particularly well this reporting period, returns on many of these investments were strong even when translated into U.S. dollars.
Performance. For the 12-month reporting period ended February 28, 2017, the fund’s market price return was 23.88% and its NAV return was 23.26% (for an explanation of the market price and NAV returns, please refer to footnote 2 on the following page). The index returned 23.67%1 during the same period.
Contributors and Detractors. Japanese stocks were the largest contributors to the returns of both the index and the fund. Stocks from Japan represented an average weight of approximately 42% of the fund’s investments and returned approximately 26% in U.S. dollar terms. One example from this market is Nippon Sheet Glass Co., Ltd. The fund’s holdings of Nippon Sheet Glass Co., Ltd. returned approximately 18% in U.S. dollar terms for the reporting period. Stocks from Canada also contributed to the performance of the index and the fund. Canadian stocks represented an average weight of approximately 8% of the fund’s investments and returned approximately 33% in U.S. dollar terms.
Over the reporting period, no country segment detracted from fund performance. However, stocks from Ireland were among the smallest contributors to the returns of both the index and the fund, representing an average weight of less than 1% of the fund’s investments and returning approximately 9% 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 -27% in U.S. dollar terms. Stocks from Luxembourg also minimally contributed to the fund’s performance, representing an average weight less than 1% of the fund’s investments and returning approximately 37% in U.S. dollar terms.
| 1 | The total return cited for the index is calculated net of foreign withholding taxes. |
20
Schwab Fundamental Index ETFs | Annual Report
Schwab Fundamental International Small Company Index ETF
Performance and Fund Facts as of 2/28/17
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.
Performance of Hypothetical $10,000 Investment (August 15, 2013 – February 28, 2017)1
Average Annual Total Returns1
| Fund and Inception Date | 1 Year | 3 Years | Since Inception* |
| Fund: Schwab Fundamental International Small Company Index ETF (8/15/13) | |||
| Market Price Return2 | 23.88% | 3.95% | 6.69% |
| NAV Return2 | 23.26% | 4.30% | 6.72% |
| Russell RAFI Developed ex US Small Company Index (Net)3 | 23.67% | 4.78% | 7.29% |
| ETF Category: Morningstar Foreign Small/Mid Blend4 | 17.26% | 0.89% | 4.55% |
| Fund Expense Ratio5: 0.46% | |||
All total returns on this page assume dividends and distributions were reinvested. Index figures do not include trading and management costs, which would lower performance. Indices are unmanaged and cannot be invested in directly. Performance results less than one year are not annualized.
For index definitions, please see the Glossary.
Shares are bought and sold at market price, which may be higher or lower than the net asset value (NAV). Brokerage commissions will reduce returns.
International investing may involve risk of capital loss from unfavorable fluctuations in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations.
Small-company stocks may be subject to greater volatility than many other asset classes.
Index ownership — “Russell RAFI Developed ex US Small Company Index” is a joint trademark of Frank Russell Company (Russell) and Research Affiliates LLC (RA) and is used by the fund under license. “Research Affiliates,” "Fundamental Index” and "RAFI" are trademarks of RA. Subject to RA’s intellectual property rights in certain content, Russell is the owner of all copyrights related to the Russell RAFI Index Series. Russell is the owner of the trademarks and copyrights related to the Russell Indexes. Schwab Fundamental International Small Company Index ETF is not sponsored, endorsed, sold or promoted by Russell or RA, and Russell and RA do not make any representation regarding the advisability of investing in shares of the fund. Effective December 1, 2016, the name of the index was changed by the index provider. No other changes to the index have occurred.
| * | Inception (8/15/13) represents the date that the shares began trading in the secondary market. |
| 1 | Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption of fund shares. |
| 2 | ETF performance must be shown based on both a market price and NAV basis. The fund’s per share 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. |
| 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. Effective March 1, 2017, the management fee was reduced to 0.39%. For more information, see financial note 4 or refer to the prospectus supplement dated March 1, 2017. |
21
Schwab Fundamental Index ETFs | Annual Report
Schwab Fundamental International Small Company Index ETF
Performance and Fund Facts as of 2/28/17 (continued)
Statistics
| Number of Holdings | 1,425 |
| Weighted Average Market Cap (millions) | $3,314 |
| Price/Earnings Ratio (P/E) | 16.7 |
| Price/Book Ratio (P/B) | 1.4 |
| Portfolio Turnover Rate1 | 25% |
Sector Weightings % of Investments
Top Equity Holdings % of Net Assets2
Country Weightings % of Investments
Management views and portfolio holdings may have changed since the report date.
An index is a statistical composite of a specified financial market or sector. Unlike the fund, an index does not actually hold a portfolio of securities and its return is not inclusive of trading and management costs incurred by the fund.
Source of Sector Classification: S&P and MSCI.
| 1 | Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions. |
| 2 | This list is not a recommendation of any security by the investment adviser. |
22
Schwab Fundamental Index ETFs | Annual Report
Schwab Fundamental Emerging Markets Large Company Index ETF
The Schwab Fundamental Emerging Markets Large Company Index ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of the Russell RAFI Emerging Markets Large Company Index (the index). This index measures the performance of the large company size segment by fundamental overall company scores that are created using as the universe the companies in the Russell Emerging Markets Index. To pursue its investment objective, the fund invests in a statistical sample of the securities included in the index that collectively are expected to perform similarly to the index as a whole. Due to the use of statistical sampling, the fund may not hold all of the securities in the index. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.
Market Highlights. Stocks in emerging markets produced strong overall returns for the 12-month reporting period. Though the Federal Reserve (Fed) raised short-term interest rates again in December, the cautious tone of the Fed meeting minutes reassured many investors that subsequent rate hikes would be gradual. Oil and commodity prices stabilized, while global economic growth showed signs of improvement over the reporting period. Additionally, the U.S. dollar strengthened against some emerging market currencies during the 12-month period, including the Chinese renminbi and the Turkish lira, generally reducing returns on investments from these countries in U.S. dollar terms. However, several other emerging market currencies strengthened against the U.S. dollar, most notably the Brazilian real, the Russian ruble, and the South African rand, generally enhancing returns on investments from these countries in U.S. dollar terms.
Performance. For the 12-month reporting period ended February 28, 2017, the fund’s market price return was 48.04% and its NAV return was 49.03% (for an explanation of the market price and NAV returns, please refer to footnote 2 on the following page). The index returned 50.00%1 during the same period. Differences between the return of the fund and the return of the index may be attributable to, among other things, the trading and management costs incurred by the fund and not the index.
Contributors and Detractors. The fund’s position in the Philippines was one of the few detractors from the total return of the fund. Stocks from the Philippines represented an average weight of less than 1% of the fund’s investments and returned approximately -20% in U.S. dollar terms. The fund’s only holding in this country was PLDT, Inc., a telecommunication services provider. The fund’s investment in PLDT, Inc. returned approximately -20% in U.S. dollar terms. The fund’s position in the United Arab Emirates also detracted from the performance of the fund, representing an average weight of less than 1% of the fund’s investments and returning approximately -5% in U.S. dollar terms.
Stocks from Brazil were among the biggest contributors to the returns of both the index and the fund. Brazilian stocks represented an average weight of approximately 18% of the fund’s investments and generated a triple-digit return of approximately 183% in U.S. dollar terms. One example from this market is energy company Petroleo Brasileiro SA. The fund’s preferred stock holdings of Petroleo Brasileiro SA returned approximately 278% in U.S. dollar terms. Stocks from South Korea also contributed meaningfully to the fund’s performance, representing an average weight of approximately 18% of the fund’s investments and returning approximately 41% in U.S. dollar terms.
| 1 | The total return cited for the index is calculated net of foreign withholding taxes. |
23
Schwab Fundamental Index ETFs | Annual Report
Schwab Fundamental Emerging Markets Large Company Index ETF
Performance and Fund Facts as of 2/28/17
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.
Performance of Hypothetical $10,000 Investment (August 15, 2013 – February 28, 2017)1
Average Annual Total Returns1
| Fund and Inception Date | 1 Year | 3 Years | Since Inception* |
| Fund: Schwab Fundamental Emerging Markets Large Company Index ETF (8/15/13) | |||
| Market Price Return2 | 48.04% | 2.91% | 2.51% |
| NAV Return2 | 49.03% | 3.13% | 2.66% |
| Russell RAFI Emerging Markets Large Company Index (Net)3 | 50.00% | 3.83% | 3.29% |
| ETF Category: Morningstar Diversified Emerging Markets4 | 25.50% | 0.41% | 0.58% |
| Fund Expense Ratio5: 0.47% | |||
All total returns on this page assume dividends and distributions were reinvested. Index figures do not include trading and management costs, which would lower performance. Indices are unmanaged and cannot be invested in directly. Performance results less than one year are not annualized.
For index definitions, please see the Glossary.
Shares are bought and sold at market price, which may be higher or lower than the net asset value (NAV). Brokerage commissions will reduce returns.
International investing may involve risk of capital loss from unfavorable fluctuations in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations.
Emerging markets involve heightened risks related to the same factors as international investing, as well as increased volatility and lower trading volume.
Index ownership — “Russell RAFI Emerging Markets Large Company Index” is a joint trademark of Frank Russell Company (Russell) and Research Affiliates LLC (RA) and is used by the fund under license. “Research Affiliates,” "Fundamental Index” and "RAFI" are trademarks of RA. Subject to RA’s intellectual property rights in certain content, Russell is the owner of all copyrights related to the Russell RAFI Index Series. Russell is the owner of the trademarks and copyrights related to the Russell Indexes. Schwab Fundamental Emerging Markets Large Company Index ETF is not sponsored, endorsed, sold or promoted by Russell or RA, and Russell and RA do not make any representation regarding the advisability of investing in shares of the fund. Effective December 1, 2016, the name of the index was changed by the index provider. No other changes to the index have occurred.
| * | Inception (8/15/13) represents the date that the shares began trading in the secondary market. |
| 1 | Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption of fund shares. |
| 2 | ETF performance must be shown based on both a market price and NAV basis. The fund’s per share 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. |
| 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. The annualized weighted average expense ratio of the underlying funds was 0.01%. Effective March 1, 2017, the management fee was reduced to 0.39%. For more information, see financial note 4 or refer to the prospectus supplement dated March 1, 2017. |
24
Schwab Fundamental Index ETFs | Annual Report
Schwab Fundamental Emerging Markets Large Company Index ETF
Performance and Fund Facts as of 2/28/17 (continued)
Statistics
| Number of Holdings | 292 |
| Weighted Average Market Cap (millions) | $62,004 |
| Price/Earnings Ratio (P/E) | 11.9 |
| Price/Book Ratio (P/B) | 1.1 |
| Portfolio Turnover Rate1 | 14% |
Sector Weightings % of Investments
Top Equity Holdings % of Net Assets2
Country Weightings % of Investments
Management views and portfolio holdings may have changed since the report date.
An index is a statistical composite of a specified financial market or sector. Unlike the fund, an index does not actually hold a portfolio of securities and its return is not inclusive of trading and management costs incurred by the fund.
Source of Sector Classification: S&P and MSCI.
| 1 | Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions. |
| 2 | This list is not a recommendation of any security by the investment adviser. |
25
Schwab Fundamental Index ETFs | Annual Report
Schwab Fundamental Index ETFs
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.
The expense examples below are intended to help you understand your ongoing cost (in dollars) of investing in a fund and to compare this cost with the ongoing cost of investing in other mutual funds. These examples are based on an investment of $1,000 invested for six months beginning September 1, 2016 and held through February 28, 2017.
Actual Return lines in the table below provide information about actual account values and actual expenses. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value ÷ $1,000 = 8.6), then multiply the result by the number given for your fund under the heading entitled “Expenses Paid During Period.”
Hypothetical Return lines in the table below provide information about hypothetical account values and hypothetical expenses based on a fund’s actual expense ratio and an assumed return of 5% per year before expenses. Because the return used is not an actual return, it may not be used to estimate the actual ending account value or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in a fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only, and do not reflect any transactional costs, including any brokerage commissions you may pay when purchasing or selling shares of a fund. Therefore, the hypothetical return lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Expense Ratio (Annualized)1 | Beginning Account Value at 9/1/16 | Ending Account Value (Net of Expenses) at 2/28/17 | Expenses Paid During Period 9/1/16-2/28/172 | |
| Schwab Fundamental U.S. Broad Market Index ETF | ||||
| Actual Return | 0.32% | $1,000.00 | $1,103.80 | $1.67 |
| Hypothetical 5% Return | 0.32% | $1,000.00 | $1,023.21 | $1.61 |
| Schwab Fundamental U.S. Large Company Index ETF | ||||
| Actual Return | 0.32% | $1,000.00 | $1,101.00 | $1.67 |
| Hypothetical 5% Return | 0.32% | $1,000.00 | $1,023.21 | $1.61 |
| Schwab Fundamental U.S. Small Company Index ETF | ||||
| Actual Return | 0.32% | $1,000.00 | $1,130.60 | $1.69 |
| Hypothetical 5% Return | 0.32% | $1,000.00 | $1,023.21 | $1.61 |
| Schwab Fundamental International Large Company Index ETF | ||||
| Actual Return | 0.32% | $1,000.00 | $1,078.20 | $1.65 |
| Hypothetical 5% Return | 0.32% | $1,000.00 | $1,023.21 | $1.61 |
| Schwab Fundamental International Small Company Index ETF | ||||
| Actual Return | 0.46% | $1,000.00 | $1,080.60 | $2.37 |
| Hypothetical 5% Return | 0.46% | $1,000.00 | $1,022.52 | $2.31 |
| Schwab Fundamental Emerging Markets Large Company Index ETF | ||||
| Actual Return | 0.46% | $1,000.00 | $1,146.10 | $2.45 |
| Hypothetical 5% Return | 0.46% | $1,000.00 | $1,022.52 | $2.31 |
| 1 | Based on the most recent six-month expense ratio; may differ from the expense ratio provided in the Financial Highlights which covers a 12-month period. The expenses incurred by the underlying funds in which the funds invest are not included in this ratio. Effective March 1, 2017, the advisory fee of the Schwab Fundamental U.S. Broad Market Index ETF, Schwab Fundamental U.S. Large Company Index ETF, Schwab Fundamental U.S. Small Company Index ETF, Schwab Fundamental International Large Company Index ETF, Schwab Fundamental International Small Company Index ETF and Schwab Fundamental Emerging Markets Large Company Index ETF were reduced to 0.25%, 0.25%, 0.25%, 0.25%, 0.39% and 0.39%, respectively. If the fund expense changes had been in place throughout the entire most recent fiscal half-year the expenses paid during period under the actual return and hypothetical 5% return example would have been the following; Schwab Fundamental U.S. Broad Market Index ETF, $1.30 and $1.25, respectively, Schwab Fundamental U.S. Large Company Index ETF, $1.30 and $1.25, respectively, Schwab Fundamental U.S. Small Company Index ETF, $1.32 and $1.25, respectively, Schwab Fundamental International Large Company Index ETF, $1.29 and $1.25, respectively, Schwab Fundamental International Small Company Index ETF, $2.01 and $1.96, respectively, and Schwab Fundamental Emerging Markets Large Company Index ETF, $2.08 and $1.96, respectively. (See financial note 4) |
| 2 | Expenses for each fund are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by the 181 days of the period, and divided by 365 days of the fiscal year. |
26
Schwab Fundamental Index ETFs | Annual Report
Schwab Fundamental U.S. Broad Market Index ETF
Financial Statements
Financial Highlights
| 3/1/16– 2/28/17 | 3/1/15– 2/29/16 | 3/1/14– 2/28/15 | 8/14/13 1– 2/28/14 | |||
| Per-Share Data | ||||||
| Net asset value at beginning of period | $27.37 | $30.54 | $27.36 | $25.00 | ||
| Income (loss) from investment operations: | ||||||
| Net investment income (loss) | 0.67 2 | 0.65 2 | 0.54 | 0.21 | ||
| Net realized and unrealized gains (losses) | 6.45 | (3.18) | 3.14 | 2.28 | ||
| Total from investment operations | 7.12 | (2.53) | 3.68 | 2.49 | ||
| Less distributions: | ||||||
| Distributions from net investment income | (0.67) | (0.64) | (0.50) | (0.13) | ||
| Net asset value at end of period | $33.82 | $27.37 | $30.54 | $27.36 | ||
| Total return | 26.32% | (8.34%) | 13.54% | 9.99% 3 | ||
| Ratios/Supplemental Data | ||||||
| Ratios to average net assets: | ||||||
| Total expenses | 0.32% | 0.32% | 0.32% | 0.32% 4 | ||
| Net investment income (loss) | 2.17% | 2.23% | 2.14% | 2.11% 4 | ||
| Portfolio turnover rate5 | 10% | 12% | 10% | 5% 3 | ||
| Net assets, end of period (x 1,000) | $263,785 | $166,985 | $212,247 | $58,823 | ||
1
Commencement of operations.
2
Calculated based on the average shares outstanding during the period.
3
Not annualized.
4
Annualized.
5
Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
27
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Broad Market Index ETF
Condensed Portfolio Holdings as of February 28, 2017
This section shows the fund's 50 largest portfolio holdings in unaffiliated issuers, any holdings exceeding 1% of the fund's net assets as of the report date, and any affiliated issuers. The remaining securities held by the fund are grouped as "Other Securities" in each category. You can request a complete schedule of portfolio holdings as of the report date, free of charge, by calling Schwab ETFs™ at 1-877-824-5615. This complete schedule, filed on the fund's Form N-CSR(S), is also available on the SEC's website at www.sec.gov.
In addition, the fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's website and may be viewed and copied at the SEC's Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the Public Reference Room. The fund also makes available its complete schedule of portfolio holdings on a daily basis on the fund's website at www.csimfunds.com/schwabetfs_prospectus.
| Holdings by Category | Cost ($) | Value ($) | |
| 99.8% | Common Stock | 230,881,625 | 263,077,794 |
| 0.3% | Other Investment Companies | 854,320 | 854,320 |
| 100.1% | Total Investments | 231,735,945 | 263,932,114 |
| (0.1%) | Other Assets and Liabilities, Net | (147,520) | |
| 100.0% | Net Assets | 263,784,594 | |
| Security | Number of Shares | % of Net Assets | Value ($) | |
| Common Stock 99.8% of net assets | ||||
| Automobiles & Components 1.3% | ||||
| General Motors Co. | 31,437 | 0.4 | 1,158,139 | |
| Other Securities | 0.9 | 2,323,836 | ||
| 1.3 | 3,481,975 | |||
| Banks 5.8% | ||||
| Bank of America Corp. | 82,974 | 0.8 | 2,047,798 | |
| Citigroup, Inc. | 34,570 | 0.8 | 2,067,632 | |
| JPMorgan Chase & Co. | 38,743 | 1.3 | 3,510,891 | |
| Wells Fargo & Co. | 43,773 | 1.0 | 2,533,581 | |
| Other Securities | 1.9 | 5,032,325 | ||
| 5.8 | 15,192,227 | |||
| Capital Goods 8.7% | ||||
| 3M Co. | 6,038 | 0.4 | 1,125,181 | |
| Caterpillar, Inc. | 11,196 | 0.4 | 1,082,205 | |
| General Electric Co. | 88,925 | 1.0 | 2,650,854 | |
| The Boeing Co. | 6,200 | 0.4 | 1,117,426 | |
| United Technologies Corp. | 11,965 | 0.5 | 1,346,661 | |
| Other Securities | 6.0 | 15,722,490 | ||
| 8.7 | 23,044,817 | |||
| Commercial & Professional Services 1.0% | ||||
| Other Securities | 1.0 | 2,512,131 | ||
| Consumer Durables & Apparel 1.2% | ||||
| Other Securities | 1.2 | 3,173,460 | ||
| Consumer Services 1.9% | ||||
| McDonald's Corp. | 11,150 | 0.5 | 1,423,297 | |
| Other Securities | 1.4 | 3,493,861 | ||
| 1.9 | 4,917,158 | |||
| Security | Number of Shares | % of Net Assets | Value ($) | |
| Diversified Financials 4.8% | ||||
| Berkshire Hathaway, Inc., Class B * | 14,541 | 0.9 | 2,492,618 | |
| The Charles Schwab Corp. (a) | 3,460 | 0.1 | 139,819 | |
| The Goldman Sachs Group, Inc. | 6,956 | 0.7 | 1,725,505 | |
| Other Securities | 3.1 | 8,176,369 | ||
| 4.8 | 12,534,311 | |||
| Energy 12.9% | ||||
| Chevron Corp. | 54,936 | 2.3 | 6,180,300 | |
| ConocoPhillips | 51,455 | 0.9 | 2,447,714 | |
| Exxon Mobil Corp. | 107,521 | 3.3 | 8,743,608 | |
| Marathon Petroleum Corp. | 22,177 | 0.4 | 1,099,979 | |
| Phillips 66 | 17,267 | 0.5 | 1,350,107 | |
| Schlumberger Ltd. | 16,268 | 0.5 | 1,307,296 | |
| Valero Energy Corp. | 20,806 | 0.5 | 1,413,768 | |
| Other Securities | 4.5 | 11,593,449 | ||
| 12.9 | 34,136,221 | |||
| Food & Staples Retailing 3.4% | ||||
| Costco Wholesale Corp. | 6,728 | 0.5 | 1,192,067 | |
| CVS Health Corp. | 22,542 | 0.7 | 1,816,434 | |
| Wal-Mart Stores, Inc. | 44,938 | 1.2 | 3,187,452 | |
| Other Securities | 1.0 | 2,683,139 | ||
| 3.4 | 8,879,092 | |||
| Food, Beverage & Tobacco 4.6% | ||||
| PepsiCo, Inc. | 15,213 | 0.6 | 1,679,211 | |
| Philip Morris International, Inc. | 18,363 | 0.8 | 2,007,994 | |
| The Coca-Cola Co. | 35,915 | 0.6 | 1,506,993 | |
| Other Securities | 2.6 | 6,826,656 | ||
| 4.6 | 12,020,854 | |||
| Health Care Equipment & Services 5.2% | ||||
| Anthem, Inc. | 8,201 | 0.5 | 1,351,689 | |
| UnitedHealth Group, Inc. | 11,890 | 0.7 | 1,966,368 | |
| Other Securities | 4.0 | 10,406,408 | ||
| 5.2 | 13,724,465 | |||
| Household & Personal Products 1.8% | ||||
| The Procter & Gamble Co. | 33,619 | 1.2 | 3,061,682 | |
| Other Securities | 0.6 | 1,727,655 | ||
| 1.8 | 4,789,337 | |||
28
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Broad Market Index ETF
Condensed Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | % of Net Assets | Value ($) | |
| Insurance 3.7% | ||||
| American International Group, Inc. | 23,304 | 0.6 | 1,489,592 | |
| The Travelers Cos., Inc. | 8,736 | 0.4 | 1,067,889 | |
| Other Securities | 2.7 | 7,206,234 | ||
| 3.7 | 9,763,715 | |||
| Materials 4.3% | ||||
| Other Securities | 4.3 | 11,395,204 | ||
| Media 3.2% | ||||
| Comcast Corp., Class A | 42,232 | 0.6 | 1,580,321 | |
| The Walt Disney Co. | 14,481 | 0.6 | 1,594,213 | |
| Time Warner, Inc. | 16,289 | 0.6 | 1,599,743 | |
| Other Securities | 1.4 | 3,533,188 | ||
| 3.2 | 8,307,465 | |||
| Pharmaceuticals, Biotechnology & Life Sciences 5.1% | ||||
| Amgen, Inc. | 6,132 | 0.4 | 1,082,482 | |
| Johnson & Johnson | 22,555 | 1.0 | 2,756,447 | |
| Merck & Co., Inc. | 32,849 | 0.8 | 2,163,764 | |
| Pfizer, Inc. | 90,949 | 1.2 | 3,103,180 | |
| Other Securities | 1.7 | 4,454,373 | ||
| 5.1 | 13,560,246 | |||
| Real Estate 1.9% | ||||
| Other Securities | 1.9 | 4,995,891 | ||
| Retailing 4.4% | ||||
| Lowe's Cos., Inc. | 14,152 | 0.4 | 1,052,484 | |
| The Home Depot, Inc. | 12,979 | 0.7 | 1,880,787 | |
| Other Securities | 3.3 | 8,728,495 | ||
| 4.4 | 11,661,766 | |||
| Semiconductors & Semiconductor Equipment 2.8% | ||||
| Intel Corp. | 80,497 | 1.1 | 2,913,991 | |
| Other Securities | 1.7 | 4,562,247 | ||
| 2.8 | 7,476,238 | |||
| Software & Services 7.0% | ||||
| International Business Machines Corp. | 20,197 | 1.4 | 3,631,825 | |
| Microsoft Corp. | 66,129 | 1.6 | 4,230,933 | |
| Oracle Corp. | 35,962 | 0.6 | 1,531,622 | |
| Other Securities | 3.4 | 9,187,417 | ||
| 7.0 | 18,581,797 | |||
| Technology Hardware & Equipment 5.7% | ||||
| Apple, Inc. | 45,650 | 2.4 | 6,253,593 | |
| Cisco Systems, Inc. | 58,854 | 0.8 | 2,011,630 | |
| HP, Inc. | 77,280 | 0.5 | 1,342,354 | |
| Other Securities | 2.0 | 5,302,001 | ||
| 5.7 | 14,909,578 | |||
| Security | Number of Shares | % of Net Assets | Value ($) | |
| Telecommunication Services 3.1% | ||||
| AT&T, Inc. | 112,601 | 1.8 | 4,705,596 | |
| Verizon Communications, Inc. | 52,604 | 1.0 | 2,610,737 | |
| Other Securities | 0.3 | 981,766 | ||
| 3.1 | 8,298,099 | |||
| Transportation 2.2% | ||||
| Union Pacific Corp. | 9,989 | 0.4 | 1,078,213 | |
| Other Securities | 1.8 | 4,660,911 | ||
| 2.2 | 5,739,124 | |||
| Utilities 3.8% | ||||
| Other Securities | 3.8 | 9,982,623 | ||
| Total Common Stock | ||||
| (Cost $230,881,625) | 263,077,794 | |||
| Other Investment Companies 0.3% of net assets | ||||
| Money Market Fund 0.2% | ||||
| Other Securities | 0.2 | 579,920 | ||
| Securities Lending Collateral 0.1% | ||||
| Other Securities | 0.1 | 274,400 | ||
| Total Other Investment Companies | ||||
| (Cost $854,320) | 854,320 | |||
End of Investments.
At 02/28/17, the tax basis cost of the fund's investments was $231,618,227 and the unrealized appreciation and depreciation were $40,069,551 and ($7,755,664), respectively, with a net unrealized appreciation of $32,313,887.
For the following notes, please refer to the complete schedule of portfolio holdings.
| * | Non-income producing security. |
| (a) | Issuer is affiliated with the fund's investment adviser. |
| (b) | All or a portion of this security is on loan. Securities on loan were valued at $240,735. |
| (c) | The rate shown is the 7-day yield. |
| REIT — | Real Estate Investment Trust |
In addition to the above, the fund held the following at 02/28/17:
| Number of Contracts | Contract Value ($) | Unrealized Appreciation ($) | ||||
| Futures Contracts | ||||||
| S&P 500 Index, e-mini, Long, expires 03/17/17 | 6 | 708,840 | 5,954 | |||
29
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Broad Market Index ETF
Condensed Portfolio Holdings as of February 28, 2017 (continued)
The following is a summary of the inputs used to value the fund’s investments as of February 28, 2017 (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 | $263,077,794 | $— | $— | $263,077,794 | |
| Other Investment Companies1 | 854,320 | — | — | 854,320 | |
| Total | $263,932,114 | $— | $— | $263,932,114 | |
| Other Financial Instruments | |||||
| Futures Contracts2 | $5,954 | $— | $— | $5,954 |
| 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 fund's policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were no transfers between Level 1, Level 2 and Level 3 for the period ended February 28, 2017.
30
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Broad Market Index ETF
Statement of Assets and Liabilities
As of February 28, 2017
| Assets | ||
| Investments in affiliated issuers, at value (cost $97,389) | $139,819 | |
| Investments in unaffiliated issuers, at value (cost $231,364,156) including securities on loan of $240,735 | 263,517,895 | |
| Collateral invested for securities on loan, at value (cost $274,400) | + | 274,400 |
| Total investments, at value (cost $231,735,945) | 263,932,114 | |
| Cash | 91,696 | |
| Deposit with broker for futures contracts | 42,750 | |
| Receivables: | ||
| Investments sold | 307,999 | |
| Dividends | 669,815 | |
| Income from securities on loan | + | 2,260 |
| Total assets | 265,046,634 | |
| Liabilities | ||
| Collateral held for securities on loan | 274,400 | |
| Payables: | ||
| Investments bought | 922,623 | |
| Investment adviser fees | 63,643 | |
| Variation margin on futures contracts | + | 1,374 |
| Total liabilities | 1,262,040 | |
| Net Assets | ||
| Total assets | 265,046,634 | |
| Total liabilities | – | 1,262,040 |
| Net assets | $263,784,594 | |
| Net Assets by Source | ||
| Capital received from investors | 233,585,865 | |
| Net investment income not yet distributed | 767,672 | |
| Net realized capital losses | (2,771,066) | |
| Net unrealized capital appreciation | 32,202,123 | |
| Net Asset Value (NAV) | ||||
| Net Assets | ÷ | Shares Outstanding | = | NAV |
| $263,784,594 | 7,800,001 | $33.82 | ||
31
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Broad Market Index ETF
Statement of Operations
For the period March 1, 2016 through February 28, 2017
| Investment Income | ||
| Dividends received from affiliated issuer | $888 | |
| Dividends received from unaffiliated issuers (net of foreign withholding tax of $1,065) | 5,132,617 | |
| Securities on loan, net | + | 23,921 |
| Total investment income | 5,157,426 | |
| Expenses | ||
| Investment adviser fees | 663,405 | |
| Total expenses | – | 663,405 |
| Net investment income | 4,494,021 | |
| Realized and Unrealized Gains (Losses) | ||
| Net realized losses on investments | (1,972,828) | |
| Net realized gains on futures contracts | + | 127,186 |
| Net realized losses | (1,845,642) | |
| Net change in unrealized appreciation (depreciation) on affiliated issuer | 45,492 | |
| Net change in unrealized appreciation (depreciation) on unaffiliated investments | 45,075,757 | |
| Net change in unrealized appreciation (depreciation) on futures contracts | + | (6,689) |
| Net change in unrealized appreciation (depreciation) | + | 45,114,560 |
| Net realized and unrealized gains | 43,268,918 | |
| Increase in net assets resulting from operations | $47,762,939 | |
32
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Broad Market Index ETF
Statement of Changes in Net Assets
For the current and prior report periods
| Operations | ||||
| 3/1/16-2/28/17 | 3/1/15-2/29/16 | |||
| Net investment income | $4,494,021 | $4,615,610 | ||
| Net realized gains (losses) | (1,845,642) | 5,430,716 | ||
| Net change in unrealized appreciation (depreciation) | + | 45,114,560 | (28,543,145) | |
| Increase (decrease) in net assets resulting from operations | 47,762,939 | (18,496,819) | ||
| Distributions to Shareholders | ||||
| Distributions from net investment income | ($4,414,601) | ($4,591,356) | ||
| Transactions in Fund Shares | ||||||||
| 3/1/16-2/28/17 | 3/1/15-2/29/16 | |||||||
| SHARES | VALUE | SHARES | VALUE | |||||
| Shares sold | 1,700,000 | $53,451,725 | 950,000 | $28,644,349 | ||||
| Shares redeemed | + | — | — | (1,800,000) | (50,818,638) | |||
| Net transactions in fund shares | 1,700,000 | $53,451,725 | (850,000) | ($22,174,289) | ||||
| Shares Outstanding and Net Assets | ||||||||
| 3/1/16-2/28/17 | 3/1/15-2/29/16 | |||||||
| SHARES | NET ASSETS | SHARES | NET ASSETS | |||||
| Beginning of period | 6,100,001 | $166,984,531 | 6,950,001 | $212,246,995 | ||||
| Total increase or decrease | + | 1,700,000 | 96,800,063 | (850,000) | (45,262,464) | |||
| End of period | 7,800,001 | $263,784,594 | 6,100,001 | $166,984,531 | ||||
| Net investment income not yet distributed | $767,672 | $786,526 | ||||||
33
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Large Company Index ETF
Financial Statements
Financial Highlights
| 3/1/16– 2/28/17 | 3/1/15– 2/29/16 | 3/1/14– 2/28/15 | 8/14/13 1– 2/28/14 | |||
| Per-Share Data | ||||||
| Net asset value at beginning of period | $27.57 | $30.55 | $27.27 | $25.00 | ||
| Income (loss) from investment operations: | ||||||
| Net investment income (loss) | 0.70 2 | 0.69 2 | 0.52 | 0.21 | ||
| Net realized and unrealized gains (losses) | 6.29 | (3.10) | 3.25 | 2.18 | ||
| Total from investment operations | 6.99 | (2.41) | 3.77 | 2.39 | ||
| Less distributions: | ||||||
| Distributions from net investment income | (0.65) | (0.57) | (0.49) | (0.12) | ||
| Net asset value at end of period | $33.91 | $27.57 | $30.55 | $27.27 | ||
| Total return | 25.66% | (7.92%) | 13.92% | 9.59% 3 | ||
| Ratios/Supplemental Data | ||||||
| Ratios to average net assets: | ||||||
| Total expenses | 0.32% | 0.32% | 0.32% | 0.32% 4 | ||
| Net investment income (loss) | 2.26% | 2.39% | 2.24% | 2.20% 4 | ||
| Portfolio turnover rate5 | 10% | 11% | 10% | 6% 3 | ||
| Net assets, end of period (x 1,000) | $2,197,623 | $893,389 | $336,043 | $72,259 | ||
1
Commencement of operations.
2
Calculated based on the average shares outstanding during the period.
3
Not annualized.
4
Annualized.
5
Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
34
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Large Company Index ETF
Condensed Portfolio Holdings as of February 28, 2017
This section shows the fund's 50 largest portfolio holdings in unaffiliated issuers, any holdings exceeding 1% of the fund's net assets as of the report date, and any affiliated issuers. The remaining securities held by the fund are grouped as "Other Securities" in each category. You can request a complete schedule of portfolio holdings as of the report date, free of charge, by calling Schwab ETFs™ at 1-877-824-5615. This complete schedule, filed on the fund's Form N-CSR(S), is also available on the SEC's website at www.sec.gov.
In addition, the fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's website and may be viewed and copied at the SEC's Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the Public Reference Room. The fund also makes available its complete schedule of portfolio holdings on a daily basis on the fund's website at www.csimfunds.com/schwabetfs_prospectus.
| Holdings by Category | Cost ($) | Value ($) | |
| 99.7% | Common Stock | 1,980,449,996 | 2,192,103,750 |
| 0.4% | Other Investment Companies | 7,716,403 | 7,716,403 |
| 100.1% | Total Investments | 1,988,166,399 | 2,199,820,153 |
| (0.1%) | Other Assets and Liabilities, Net | (2,197,201) | |
| 100.0% | Net Assets | 2,197,622,952 | |
| Security | Number of Shares | % of Net Assets | Value ($) | |
| Common Stock 99.7% of net assets | ||||
| Automobiles & Components 1.3% | ||||
| General Motors Co. | 282,590 | 0.5 | 10,410,616 | |
| Other Securities | 0.8 | 18,996,276 | ||
| 1.3 | 29,406,892 | |||
| Banks 5.7% | ||||
| Bank of America Corp. | 761,099 | 0.9 | 18,783,923 | |
| Citigroup, Inc. | 314,393 | 0.9 | 18,803,845 | |
| JPMorgan Chase & Co. | 356,009 | 1.5 | 32,261,536 | |
| Wells Fargo & Co. | 406,754 | 1.1 | 23,542,921 | |
| Other Securities | 1.3 | 32,958,826 | ||
| 5.7 | 126,351,051 | |||
| Capital Goods 8.3% | ||||
| 3M Co. | 54,465 | 0.5 | 10,149,553 | |
| General Electric Co. | 820,131 | 1.1 | 24,448,105 | |
| The Boeing Co. | 55,101 | 0.5 | 9,930,853 | |
| United Technologies Corp. | 106,903 | 0.5 | 12,031,933 | |
| Other Securities | 5.7 | 126,621,652 | ||
| 8.3 | 183,182,096 | |||
| Commercial & Professional Services 0.6% | ||||
| Other Securities | 0.6 | 12,713,719 | ||
| Consumer Durables & Apparel 1.1% | ||||
| Other Securities | 1.1 | 23,859,087 | ||
| Consumer Services 1.6% | ||||
| McDonald's Corp. | 100,948 | 0.6 | 12,886,012 | |
| Other Securities | 1.0 | 22,346,373 | ||
| 1.6 | 35,232,385 | |||
| Security | Number of Shares | % of Net Assets | Value ($) | |
| Diversified Financials 4.7% | ||||
| Berkshire Hathaway, Inc., Class B * | 132,595 | 1.0 | 22,729,435 | |
| The Charles Schwab Corp. (a) | 31,379 | 0.1 | 1,268,025 | |
| The Goldman Sachs Group, Inc. | 62,518 | 0.7 | 15,508,215 | |
| Other Securities | 2.9 | 64,166,940 | ||
| 4.7 | 103,672,615 | |||
| Energy 13.7% | ||||
| Chevron Corp. | 506,391 | 2.6 | 56,968,987 | |
| ConocoPhillips | 468,228 | 1.0 | 22,273,606 | |
| Exxon Mobil Corp. | 980,832 | 3.6 | 79,761,258 | |
| Marathon Petroleum Corp. | 203,053 | 0.5 | 10,071,429 | |
| Phillips 66 | 154,279 | 0.5 | 12,063,075 | |
| Schlumberger Ltd. | 148,672 | 0.5 | 11,947,282 | |
| Valero Energy Corp. | 186,228 | 0.6 | 12,654,193 | |
| Other Securities | 4.4 | 95,758,988 | ||
| 13.7 | 301,498,818 | |||
| Food & Staples Retailing 3.6% | ||||
| Costco Wholesale Corp. | 59,503 | 0.5 | 10,542,742 | |
| CVS Health Corp. | 203,094 | 0.7 | 16,365,315 | |
| Wal-Mart Stores, Inc. | 411,864 | 1.3 | 29,213,513 | |
| Other Securities | 1.1 | 22,798,413 | ||
| 3.6 | 78,919,983 | |||
| Food, Beverage & Tobacco 4.8% | ||||
| Altria Group, Inc. | 127,295 | 0.4 | 9,536,941 | |
| PepsiCo, Inc. | 140,677 | 0.7 | 15,527,927 | |
| Philip Morris International, Inc. | 171,407 | 0.9 | 18,743,355 | |
| The Coca-Cola Co. | 336,184 | 0.6 | 14,106,281 | |
| Other Securities | 2.2 | 47,102,263 | ||
| 4.8 | 105,016,767 | |||
| Health Care Equipment & Services 5.4% | ||||
| Anthem, Inc. | 77,111 | 0.6 | 12,709,435 | |
| UnitedHealth Group, Inc. | 110,382 | 0.8 | 18,254,975 | |
| Other Securities | 4.0 | 86,897,546 | ||
| 5.4 | 117,861,956 | |||
| Household & Personal Products 1.9% | ||||
| The Procter & Gamble Co. | 307,824 | 1.3 | 28,033,532 | |
| Other Securities | 0.6 | 14,412,624 | ||
| 1.9 | 42,446,156 | |||
35
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Large Company Index ETF
Condensed Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | % of Net Assets | Value ($) | |
| Insurance 3.7% | ||||
| American International Group, Inc. | 213,381 | 0.6 | 13,639,313 | |
| The Travelers Cos., Inc. | 77,964 | 0.4 | 9,530,319 | |
| Other Securities | 2.7 | 57,327,942 | ||
| 3.7 | 80,497,574 | |||
| Materials 4.0% | ||||
| Other Securities | 4.0 | 88,161,148 | ||
| Media 3.2% | ||||
| Comcast Corp., Class A | 391,956 | 0.7 | 14,666,994 | |
| The Walt Disney Co. | 133,027 | 0.7 | 14,644,942 | |
| Time Warner, Inc. | 143,138 | 0.6 | 14,057,583 | |
| Other Securities | 1.2 | 27,992,311 | ||
| 3.2 | 71,361,830 | |||
| Pharmaceuticals, Biotechnology & Life Sciences 5.4% | ||||
| Amgen, Inc. | 57,116 | 0.5 | 10,082,687 | |
| Johnson & Johnson | 203,907 | 1.1 | 24,919,474 | |
| Merck & Co., Inc. | 298,608 | 0.9 | 19,669,309 | |
| Pfizer, Inc. | 830,252 | 1.3 | 28,328,198 | |
| Other Securities | 1.6 | 36,061,362 | ||
| 5.4 | 119,061,030 | |||
| Real Estate 1.2% | ||||
| Other Securities | 1.2 | 25,703,729 | ||
| Retailing 4.4% | ||||
| Lowe's Cos., Inc. | 133,897 | 0.5 | 9,957,920 | |
| The Home Depot, Inc. | 117,720 | 0.8 | 17,058,805 | |
| Other Securities | 3.1 | 69,380,000 | ||
| 4.4 | 96,396,725 | |||
| Semiconductors & Semiconductor Equipment 2.8% | ||||
| Intel Corp. | 748,058 | 1.2 | 27,079,700 | |
| Other Securities | 1.6 | 34,950,867 | ||
| 2.8 | 62,030,567 | |||
| Software & Services 7.1% | ||||
| International Business Machines Corp. | 186,821 | 1.5 | 33,594,152 | |
| Microsoft Corp. | 601,406 | 1.8 | 38,477,956 | |
| Oracle Corp. | 331,025 | 0.6 | 14,098,355 | |
| Other Securities | 3.2 | 70,819,403 | ||
| 7.1 | 156,989,866 | |||
| Technology Hardware & Equipment 5.8% | ||||
| Apple, Inc. | 419,144 | 2.6 | 57,418,536 | |
| Cisco Systems, Inc. | 534,612 | 0.8 | 18,273,038 | |
| HP, Inc. | 700,330 | 0.6 | 12,164,732 | |
| Other Securities | 1.8 | 38,882,648 | ||
| 5.8 | 126,738,954 | |||
| Security | Number of Shares | % of Net Assets | Value ($) | |
| Telecommunication Services 3.4% | ||||
| AT&T, Inc. | 1,026,069 | 2.0 | 42,879,424 | |
| Verizon Communications, Inc. | 477,358 | 1.1 | 23,691,278 | |
| Other Securities | 0.3 | 7,848,173 | ||
| 3.4 | 74,418,875 | |||
| Transportation 2.1% | ||||
| Union Pacific Corp. | 92,032 | 0.5 | 9,933,934 | |
| Other Securities | 1.6 | 35,971,600 | ||
| 2.1 | 45,905,534 | |||
| Utilities 3.9% | ||||
| Other Securities | 3.9 | 84,676,393 | ||
| Total Common Stock | ||||
| (Cost $1,980,449,996) | 2,192,103,750 | |||
| Other Investment Companies 0.4% of net assets | ||||
| Money Market Fund 0.2% | ||||
| Other Securities | 0.2 | 3,369,128 | ||
| Securities Lending Collateral 0.2% | ||||
| Other Securities | 0.2 | 4,347,275 | ||
| Total Other Investment Companies | ||||
| (Cost $7,716,403) | 7,716,403 | |||
End of Investments.
At 02/28/17, the tax basis cost of the fund's investments was $1,987,814,162 and the unrealized appreciation and depreciation were $249,977,534 and ($37,971,543), respectively, with a net unrealized appreciation of $212,005,991.
For the following notes, please refer to the complete schedule of portfolio holdings.
| * | Non-income producing security. |
| (a) | Issuer is affiliated with the fund's adviser. |
| (b) | All or a portion of this security is on loan. Securities on loan were valued at $3,763,030. |
| (c) | The rate shown is the 7-day yield. |
In addition to the above, the fund held the following at 02/28/17:
| Number of Contracts | Contract Value ($) | Unrealized Appreciation ($) | ||||
| Futures Contracts | ||||||
| S&P 500 Index, e-mini, Long, expires 03/17/17 | 45 | 5,316,300 | 61,101 | |||
36
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Large Company Index ETF
Condensed Portfolio Holdings as of February 28, 2017 (continued)
The following is a summary of the inputs used to value the fund’s investments as of February 28, 2017 (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 | $2,192,103,750 | $— | $— | $2,192,103,750 | |
| Other Investment Companies1 | 7,716,403 | — | — | 7,716,403 | |
| Total | $2,199,820,153 | $— | $— | $2,199,820,153 | |
| Other Financial Instruments | |||||
| Futures Contracts2 | $61,101 | $— | $— | $61,101 |
| 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 fund's policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were no transfers between Level 1, Level 2 and Level 3 for the period ended February 28, 2017.
37
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Large Company Index ETF
Statement of Assets and Liabilities
As of February 28, 2017
| Assets | ||
| Investments in affiliated issuers, at value (cost $981,251) | $1,268,025 | |
| Investments in unaffiliated issuers, at value (cost $1,982,837,873) including securities on loan of $3,763,030 | 2,194,204,853 | |
| Collateral invested for securities on loan, at value (cost $4,347,275) | + | 4,347,275 |
| Total investments, at value (cost $1,988,166,399) | 2,199,820,153 | |
| Deposit with broker for futures contracts | 318,250 | |
| Receivables: | ||
| Investments sold | 2,444,342 | |
| Fund shares sold | 13,614,011 | |
| Dividends | 5,735,813 | |
| Income from securities on loan | + | 25,027 |
| Total assets | 2,221,957,596 | |
| Liabilities | ||
| Collateral held for securities on loan | 4,347,275 | |
| Payables: | ||
| Investments bought | 19,460,018 | |
| Investment adviser fees | 514,976 | |
| Variation margin on futures contracts | + | 12,375 |
| Total liabilities | 24,334,644 | |
| Net Assets | ||
| Total assets | 2,221,957,596 | |
| Total liabilities | – | 24,334,644 |
| Net assets | $2,197,622,952 | |
| Net Assets by Source | ||
| Capital received from investors | 1,988,683,458 | |
| Net investment income not yet distributed | 6,668,851 | |
| Net realized capital losses | (9,444,212) | |
| Net unrealized capital appreciation | 211,714,855 | |
| Net Asset Value (NAV) | ||||
| Net Assets | ÷ | Shares Outstanding | = | NAV |
| $2,197,622,952 | 64,800,001 | $33.91 | ||
38
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Large Company Index ETF
Statement of Operations
For the period March 1, 2016 through February 28, 2017
| Investment Income | ||
| Dividends received from affiliated issuer | $7,347 | |
| Dividends received from unaffiliated issuers (net of foreign withholding tax of $6,336) | 37,342,064 | |
| Securities on loan, net | + | 256,420 |
| Total investment income | 37,605,831 | |
| Expenses | ||
| Investment adviser fees | 4,670,959 | |
| Total expenses | – | 4,670,959 |
| Net investment income | 32,934,872 | |
| Realized and Unrealized Gains (Losses) | ||
| Net realized gains on affiliated issuer | 2,094 | |
| Net realized losses on unaffiliated investments | (5,724,323) | |
| Net realized gains on in-kind redemptions on affiliated issuer | 1,575 | |
| Net realized gains on in-kind redemptions on unaffiliated investments | 4,937,064 | |
| Net realized gains on futures contracts | + | 806,217 |
| Net realized gains | 22,627 | |
| Net change in unrealized appreciation (depreciation) on affiliated issuer | 369,874 | |
| Net change in unrealized appreciation (depreciation) on unaffiliated investments | 284,014,031 | |
| Net change in unrealized appreciation (depreciation) on futures contracts | + | (34,093) |
| Net change in unrealized appreciation (depreciation) | + | 284,349,812 |
| Net realized and unrealized gains | 284,372,439 | |
| Increase in net assets resulting from operations | $317,307,311 | |
39
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Large Company Index ETF
Statement of Changes in Net Assets
For the current and prior report periods
| Operations | ||||
| 3/1/16-2/28/17 | 3/1/15-2/29/16 | |||
| Net investment income | $32,934,872 | $17,018,181 | ||
| Net realized gains | 22,627 | 12,819,015 | ||
| Net change in unrealized appreciation (depreciation) | + | 284,349,812 | (93,563,733) | |
| Increase (decrease) in net assets resulting from operations | 317,307,311 | (63,726,537) | ||
| Distributions to Shareholders | ||||
| Distributions from net investment income | ($29,673,625) | ($14,147,221) | ||
| Transactions in Fund Shares | ||||||||
| 3/1/16-2/28/17 | 3/1/15-2/29/16 | |||||||
| SHARES | VALUE | SHARES | VALUE | |||||
| Shares sold | 33,300,000 | $1,044,664,871 | 28,450,000 | $834,612,024 | ||||
| Shares redeemed | + | (900,000) | (28,064,322) | (7,050,000) | (199,392,969) | |||
| Net transactions in fund shares | 32,400,000 | $1,016,600,549 | 21,400,000 | $635,219,055 | ||||
| Shares Outstanding and Net Assets | ||||||||
| 3/1/16-2/28/17 | 3/1/15-2/29/16 | |||||||
| SHARES | NET ASSETS | SHARES | NET ASSETS | |||||
| Beginning of period | 32,400,001 | $893,388,717 | 11,000,001 | $336,043,420 | ||||
| Total increase | + | 32,400,000 | 1,304,234,235 | 21,400,000 | 557,345,297 | |||
| End of period | 64,800,001 | $2,197,622,952 | 32,400,001 | $893,388,717 | ||||
| Net investment income not yet distributed | $6,668,851 | $3,968,416 | ||||||
40
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Small Company Index ETF
Financial Statements
Financial Highlights
| 3/1/16– 2/28/17 | 3/1/15– 2/29/16 | 3/1/14– 2/28/15 | 8/14/13 1– 2/28/14 | |||
| Per-Share Data | ||||||
| Net asset value at beginning of period | $26.47 | $30.68 | $28.44 | $25.00 | ||
| Income (loss) from investment operations: | ||||||
| Net investment income (loss) | 0.45 2 | 0.41 2 | 0.34 | 0.12 | ||
| Net realized and unrealized gains (losses) | 8.37 | (4.25) | 2.22 | 3.41 | ||
| Total from investment operations | 8.82 | (3.84) | 2.56 | 3.53 | ||
| Less distributions: | ||||||
| Distributions from net investment income | (0.40) | (0.37) | (0.32) | (0.09) | ||
| Net asset value at end of period | $34.89 | $26.47 | $30.68 | $28.44 | ||
| Total return | 33.56% | (12.60%) | 9.06% | 14.14% 3 | ||
| Ratios/Supplemental Data | ||||||
| Ratios to average net assets: | ||||||
| Total expenses | 0.32% | 0.32% | 0.32% | 0.32% 4 | ||
| Net investment income (loss) | 1.43% | 1.43% | 1.32% | 1.16% 4 | ||
| Portfolio turnover rate5 | 23% | 23% | 22% | 9% 3 | ||
| Net assets, end of period (x 1,000) | $1,568,402 | $608,865 | $187,141 | $55,465 | ||
1
Commencement of operations.
2
Calculated based on the average shares outstanding during the period.
3
Not annualized.
4
Annualized.
5
Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
41
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Small Company Index ETF
Condensed Portfolio Holdings as of February 28, 2017
This section shows the fund's 50 largest portfolio holdings in unaffiliated issuers, any holdings exceeding 1% of the fund's net assets as of the report date, and any affiliated issuers. The remaining securities held by the fund are grouped as "Other Securities" in each category. You can request a complete schedule of portfolio holdings as of the report date, free of charge, by calling Schwab ETFs™ at 1-877-824-5615. This complete schedule, filed on the fund's Form N-CSR(S), is also available on the SEC's website at www.sec.gov.
In addition, the fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's website and may be viewed and copied at the SEC's Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the Public Reference Room. The fund also makes available its complete schedule of portfolio holdings on a daily basis on the fund's website at www.csimfunds.com/schwabetfs_prospectus.
| Holdings by Category | Cost ($) | Value ($) | |
| 99.6% | Common Stock | 1,366,836,996 | 1,561,453,498 |
| 1.8% | Other Investment Companies | 28,188,426 | 28,188,426 |
| 101.4% | Total Investments | 1,395,025,422 | 1,589,641,924 |
| (1.4%) | Other Assets and Liabilities, Net | (21,239,635) | |
| 100.0% | Net Assets | 1,568,402,289 | |
| Security | Number of Shares | % of Net Assets | Value ($) | |
| Common Stock 99.6% of net assets | ||||
| Automobiles & Components 1.2% | ||||
| Other Securities | 1.2 | 18,805,682 | ||
| Banks 6.0% | ||||
| East West Bancorp, Inc. | 69,693 | 0.2 | 3,771,785 | |
| Popular, Inc. | 94,101 | 0.3 | 4,146,090 | |
| Zions Bancorp | 91,267 | 0.3 | 4,097,888 | |
| Other Securities | 5.2 | 81,265,919 | ||
| 6.0 | 93,281,682 | |||
| Capital Goods 12.9% | ||||
| Allison Transmission Holdings, Inc. | 102,512 | 0.2 | 3,688,382 | |
| Applied Industrial Technologies, Inc. | 58,074 | 0.2 | 3,661,566 | |
| Donaldson Co., Inc. | 91,502 | 0.3 | 3,930,011 | |
| Harsco Corp. * | 310,534 | 0.3 | 4,378,529 | |
| Kennametal, Inc. | 134,077 | 0.3 | 4,972,916 | |
| MRC Global, Inc. * | 214,208 | 0.3 | 4,329,144 | |
| MSC Industrial Direct Co., Inc., Class A | 41,726 | 0.3 | 4,197,218 | |
| Mueller Industries, Inc. | 92,341 | 0.2 | 3,861,701 | |
| Regal Beloit Corp. | 55,315 | 0.3 | 4,118,202 | |
| Spirit AeroSystems Holdings, Inc., Class A | 66,123 | 0.3 | 4,073,838 | |
| Other Securities | 10.2 | 161,804,698 | ||
| 12.9 | 203,016,205 | |||
| Commercial & Professional Services 4.7% | ||||
| Copart, Inc. * | 64,030 | 0.2 | 3,786,734 | |
| Other Securities | 4.5 | 70,299,124 | ||
| 4.7 | 74,085,858 | |||
| Consumer Durables & Apparel 2.5% | ||||
| Other Securities | 2.5 | 39,766,681 | ||
| Security | Number of Shares | % of Net Assets | Value ($) | |
| Consumer Services 4.5% | ||||
| Graham Holdings Co., Class B | 7,222 | 0.2 | 3,887,241 | |
| Panera Bread Co., Class A * | 16,327 | 0.2 | 3,768,272 | |
| The Wendy's Co. | 269,438 | 0.2 | 3,755,966 | |
| Other Securities | 3.9 | 59,571,667 | ||
| 4.5 | 70,983,146 | |||
| Diversified Financials 5.2% | ||||
| LPL Financial Holdings, Inc. | 106,452 | 0.3 | 4,209,112 | |
| Raymond James Financial, Inc. | 52,811 | 0.3 | 4,148,832 | |
| Other Securities | 4.6 | 73,015,008 | ||
| 5.2 | 81,372,952 | |||
| Energy 4.7% | ||||
| McDermott International, Inc. * | 497,988 | 0.2 | 3,665,192 | |
| Unit Corp. * | 162,946 | 0.3 | 4,422,354 | |
| WPX Energy, Inc. * | 312,077 | 0.3 | 4,025,793 | |
| Other Securities | 3.9 | 61,766,707 | ||
| 4.7 | 73,880,046 | |||
| Food & Staples Retailing 0.9% | ||||
| Other Securities | 0.9 | 13,639,123 | ||
| Food, Beverage & Tobacco 2.3% | ||||
| Other Securities | 2.3 | 36,330,146 | ||
| Health Care Equipment & Services 3.5% | ||||
| Envision Healthcare Corp. * | 60,592 | 0.3 | 4,241,440 | |
| Other Securities | 3.2 | 50,981,050 | ||
| 3.5 | 55,222,490 | |||
| Household & Personal Products 0.7% | ||||
| Other Securities | 0.7 | 10,268,566 | ||
| Insurance 4.2% | ||||
| Allied World Assurance Co. Holdings AG | 82,204 | 0.3 | 4,342,015 | |
| Aspen Insurance Holdings Ltd. | 70,296 | 0.3 | 3,940,091 | |
| Endurance Specialty Holdings Ltd. | 41,033 | 0.2 | 3,813,197 | |
| Old Republic International Corp. | 188,631 | 0.2 | 3,906,548 | |
| Primerica, Inc. | 55,832 | 0.3 | 4,508,434 | |
| Validus Holdings Ltd. | 74,215 | 0.3 | 4,279,237 | |
| Other Securities | 2.6 | 40,401,865 | ||
| 4.2 | 65,191,387 | |||
42
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Small Company Index ETF
Condensed Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | % of Net Assets | Value ($) | |
| Materials 7.4% | ||||
| Chemtura Corp. * | 111,200 | 0.2 | 3,686,280 | |
| Cliffs Natural Resources, Inc. * | 1,099,124 | 0.7 | 11,716,662 | |
| Greif, Inc., Class A | 65,450 | 0.2 | 3,732,613 | |
| Martin Marietta Materials, Inc. | 18,336 | 0.3 | 3,959,659 | |
| Olin Corp. | 130,835 | 0.3 | 4,066,352 | |
| Southern Copper Corp. | 122,524 | 0.3 | 4,491,730 | |
| Tronox Ltd., Class A | 227,770 | 0.3 | 3,947,254 | |
| Other Securities | 5.1 | 79,991,485 | ||
| 7.4 | 115,592,035 | |||
| Media 2.0% | ||||
| Other Securities | 2.0 | 31,148,736 | ||
| Pharmaceuticals, Biotechnology & Life Sciences 2.3% | ||||
| Quintiles IMS Holdings, Inc. * | 56,172 | 0.3 | 4,347,151 | |
| Other Securities | 2.0 | 31,958,079 | ||
| 2.3 | 36,305,230 | |||
| Real Estate 9.7% | ||||
| Mid-America Apartment Communities, Inc. | 36,952 | 0.2 | 3,796,079 | |
| Other Securities | 9.5 | 148,149,072 | ||
| 9.7 | 151,945,151 | |||
| Retailing 4.8% | ||||
| Group 1 Automotive, Inc. | 51,285 | 0.3 | 3,984,332 | |
| Other Securities | 4.5 | 71,777,131 | ||
| 4.8 | 75,761,463 | |||
| Semiconductors & Semiconductor Equipment 2.9% | ||||
| Advanced Micro Devices, Inc. * | 431,849 | 0.4 | 6,244,536 | |
| ON Semiconductor Corp. * | 305,363 | 0.3 | 4,620,142 | |
| Teradyne, Inc. | 129,067 | 0.2 | 3,670,665 | |
| Other Securities | 2.0 | 31,052,567 | ||
| 2.9 | 45,587,910 | |||
| Software & Services 5.7% | ||||
| Science Applications International Corp. | 45,911 | 0.3 | 3,992,880 | |
| Other Securities | 5.4 | 85,480,002 | ||
| 5.7 | 89,472,882 | |||
| Technology Hardware & Equipment 4.5% | ||||
| Insight Enterprises, Inc. * | 108,336 | 0.3 | 4,589,113 | |
| Other Securities | 4.2 | 65,903,657 | ||
| 4.5 | 70,492,770 | |||
| Telecommunication Services 0.7% | ||||
| Windstream Holdings, Inc. (a) | 571,851 | 0.3 | 4,271,731 | |
| Other Securities | 0.4 | 6,846,750 | ||
| 0.7 | 11,118,481 | |||
| Security | Number of Shares | % of Net Assets | Value ($) | |
| Transportation 3.2% | ||||
| Copa Holdings S.A., Class A | 39,720 | 0.3 | 4,229,783 | |
| Landstar System, Inc. | 43,648 | 0.2 | 3,788,646 | |
| SkyWest, Inc. | 110,106 | 0.2 | 3,870,226 | |
| United Continental Holdings, Inc. * | 54,898 | 0.3 | 4,067,393 | |
| Other Securities | 2.2 | 34,174,659 | ||
| 3.2 | 50,130,707 | |||
| Utilities 3.1% | ||||
| Other Securities | 3.1 | 48,054,169 | ||
| Total Common Stock | ||||
| (Cost $1,366,836,996) | 1,561,453,498 | |||
| Other Investment Companies 1.8% of net assets | ||||
| Money Market Fund 0.1% | ||||
| Other Securities | 0.1 | 891,901 | ||
| Securities Lending Collateral 1.7% | ||||
| Wells Fargo Government Money Market Fund, Select Class 0.48% (b) | 1.7 | 27,296,525 | ||
| Total Other Investment Companies | ||||
| (Cost $28,188,426) | 28,188,426 | |||
End of Investments.
At 02/28/17, the tax basis cost of the fund's investments was $1,395,293,091 and the unrealized appreciation and depreciation were $236,648,364 and ($42,299,531), respectively, with a net unrealized appreciation of $194,348,833.
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 $26,089,127. |
| (b) | The rate shown is the 7-day yield. |
| REIT — | Real Estate Investment Trust |
In addition to the above, the fund held the following at 02/28/17:
| Number of Contracts | Contract Value ($) | Unrealized Depreciation ($) | ||||
| Futures Contracts | ||||||
| Russell 2000 Index, e-mini, Long, expires 03/17/17 | 100 | 6,925,000 | (35,636) | |||
43
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Small Company Index ETF
Condensed Portfolio Holdings as of February 28, 2017 (continued)
The following is a summary of the inputs used to value the fund’s investments as of February 28, 2017 (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 | $1,561,453,498 | $— | $— | $1,561,453,498 | |
| Other Investment Companies1 | 28,188,426 | — | — | 28,188,426 | |
| Total | $1,589,641,924 | $— | $— | $1,589,641,924 | |
| Liabilities Valuation Input | |||||
| Other Financial Instruments | |||||
| Futures Contracts2 | ($35,636) | $— | $— | ($35,636) |
| 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 fund's policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were no transfers between Level 1, Level 2 and Level 3 for the period ended February 28, 2017.
44
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Small Company Index ETF
Statement of Assets and Liabilities
As of February 28, 2017
| Assets | ||
| Investments, at value (cost $1,367,728,897) including securities on loan of $26,089,127 | $1,562,345,399 | |
| Collateral invested for securities on loan, at value (cost $27,296,525) | + | 27,296,525 |
| Total investments, at value (cost $1,395,025,422) | 1,589,641,924 | |
| Cash | 4,588,125 | |
| Deposit with broker for futures contracts | 181,500 | |
| Receivables: | ||
| Fund shares sold | 12,326,353 | |
| Dividends | 1,451,788 | |
| Income from securities on loan | + | 79,998 |
| Total assets | 1,608,269,688 | |
| Liabilities | ||
| Collateral held for securities on loan | 27,296,525 | |
| Payables: | ||
| Investments bought | 12,142,140 | |
| Investment adviser fees | 370,406 | |
| Variation margin on futures contracts | + | 58,328 |
| Total liabilities | 39,867,399 | |
| Net Assets | ||
| Total assets | 1,608,269,688 | |
| Total liabilities | – | 39,867,399 |
| Net assets | $1,568,402,289 | |
| Net Assets by Source | ||
| Capital received from investors | 1,390,293,574 | |
| Net investment income not yet distributed | 1,848,900 | |
| Net realized capital losses | (18,321,051) | |
| Net unrealized capital appreciation | 194,580,866 | |
| Net Asset Value (NAV) | ||||
| Net Assets | ÷ | Shares Outstanding | = | NAV |
| $1,568,402,289 | 44,950,001 | $34.89 | ||
45
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Small Company Index ETF
Statement of Operations
For the period March 1, 2016 through February 28, 2017
| Investment Income | ||
| Dividends (net of foreign withholding tax of $4,880) | $16,708,514 | |
| Securities on loan, net | + | 858,313 |
| Total investment income | 17,566,827 | |
| Expenses | ||
| Investment adviser fees | 3,203,597 | |
| Total expenses | – | 3,203,597 |
| Net investment income | 14,363,230 | |
| Realized and Unrealized Gains (Losses) | ||
| Net realized losses on investments | (10,472,893) | |
| Net realized gains on in-kind redemptions | 12,464,691 | |
| Net realized gains on futures contracts | + | 601,854 |
| Net realized gains | 2,593,652 | |
| Net change in unrealized appreciation (depreciation) on investments | 256,896,479 | |
| Net change in unrealized appreciation (depreciation) on futures contracts | + | (55,141) |
| Net change in unrealized appreciation (depreciation) | + | 256,841,338 |
| Net realized and unrealized gains | 259,434,990 | |
| Increase in net assets resulting from operations | $273,798,220 | |
46
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Small Company Index ETF
Statement of Changes in Net Assets
For the current and prior report periods
| Operations | ||||
| 3/1/16-2/28/17 | 3/1/15-2/29/16 | |||
| Net investment income | $14,363,230 | $6,106,158 | ||
| Net realized gains | 2,593,652 | 1,371,574 | ||
| Net change in unrealized appreciation (depreciation) | + | 256,841,338 | (75,127,788) | |
| Increase (decrease) in net assets resulting from operations | 273,798,220 | (67,650,056) | ||
| Distributions to Shareholders | ||||
| Distributions from net investment income | ($12,680,080) | ($5,384,415) | ||
| Transactions in Fund Shares | ||||||||
| 3/1/16-2/28/17 | 3/1/15-2/29/16 | |||||||
| SHARES | VALUE | SHARES | VALUE | |||||
| Shares sold | 23,300,000 | $741,815,537 | 19,750,000 | $576,824,584 | ||||
| Shares redeemed | + | (1,350,000) | (43,396,411) | (2,850,000) | (82,066,528) | |||
| Net transactions in fund shares | 21,950,000 | $698,419,126 | 16,900,000 | $494,758,056 | ||||
| Shares Outstanding and Net Assets | ||||||||
| 3/1/16-2/28/17 | 3/1/15-2/29/16 | |||||||
| SHARES | NET ASSETS | SHARES | NET ASSETS | |||||
| Beginning of period | 23,000,001 | $608,865,023 | 6,100,001 | $187,141,438 | ||||
| Total increase | + | 21,950,000 | 959,537,266 | 16,900,000 | 421,723,585 | |||
| End of period | 44,950,001 | $1,568,402,289 | 23,000,001 | $608,865,023 | ||||
| Net investment income not yet distributed | $1,848,900 | $823,995 | ||||||
47
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Large Company Index ETF
Financial Statements
Financial Highlights
| 3/1/16– 2/28/17 | 3/1/15– 2/29/16 | 3/1/14– 2/28/15 | 8/14/13 1– 2/28/14 | |||
| Per-Share Data | ||||||
| Net asset value at beginning of period | $22.08 | $27.17 | $28.26 | $25.00 | ||
| Income (loss) from investment operations: | ||||||
| Net investment income (loss) | 0.74 2 | 0.70 2 | 0.30 | 0.36 | ||
| Net realized and unrealized gains (losses) | 3.79 | (5.30) | (0.92) 3 | 3.04 | ||
| Total from investment operations | 4.53 | (4.60) | (0.62) | 3.40 | ||
| Less distributions: | ||||||
| Distributions from net investment income | (0.61) | (0.49) | (0.47) | (0.14) | ||
| Net asset value at end of period | $26.00 | $22.08 | $27.17 | $28.26 | ||
| Total return | 20.62% | (17.02%) | (2.11%) | 13.60% 4 | ||
| Ratios/Supplemental Data | ||||||
| Ratios to average net assets: | ||||||
| Total expenses | 0.32% | 0.32% | 0.32% | 0.32% 5 | ||
| Net investment income (loss) | 2.98% | 2.80% | 2.50% | 4.00% 5 | ||
| Portfolio turnover rate6 | 11% | 12% | 11% | 8% 4 | ||
| Net assets, end of period (x 1,000) | $1,928,861 | $885,348 | $290,670 | $62,164 | ||
1
Commencement of operations.
2
Calculated based on the average shares outstanding during the period.
3
The per share amount does not accord with the change in aggregate gains and losses in securities during the period because of the timing of sales and repurchases of fund shares in relation to fluctuating market values.
4
Not annualized.
5
Annualized.
6
Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
48
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Large Company Index ETF
Condensed Portfolio Holdings as of February 28, 2017
This section shows the fund's 50 largest portfolio holdings in unaffiliated issuers, any holdings exceeding 1% of the fund's net assets as of the report date, and any affiliated issuers. The remaining securities held by the fund are grouped as "Other Securities" in each category. You can request a complete schedule of portfolio holdings as of the report date, free of charge, by calling Schwab ETFs™ at 1-877-824-5615. This complete schedule, filed on the fund's Form N-CSR(S), is also available on the SEC's website at www.sec.gov.
In addition, the fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's website and may be viewed and copied at the SEC's Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the Public Reference Room. The fund also makes available its complete schedule of portfolio holdings on a daily basis on the fund's website at www.csimfunds.com/schwabetfs_prospectus.
| Holdings by Category | Cost ($) | Value ($) | |
| 99.0% | Common Stock | 1,829,829,330 | 1,908,884,142 |
| 0.7% | Preferred Stock | 13,105,712 | 12,860,832 |
| 0.7% | Other Investment Companies | 13,948,811 | 13,948,811 |
| 100.4% | Total Investments | 1,856,883,853 | 1,935,693,785 |
| (0.4%) | Other Assets and Liabilities, Net | (6,832,668) | |
| 100.0% | Net Assets | 1,928,861,117 | |
| Security | Number of Shares | % of Net Assets | Value ($) | |
| Common Stock 99.0% of net assets | ||||
| Australia 6.6% | ||||
| Australia & New Zealand Banking Group Ltd. | 409,661 | 0.5 | 9,732,506 | |
| BHP Billiton Ltd. | 862,316 | 0.9 | 16,574,789 | |
| Commonwealth Bank of Australia | 177,429 | 0.6 | 11,229,787 | |
| National Australia Bank Ltd. | 369,821 | 0.5 | 9,095,935 | |
| Wesfarmers Ltd. | 272,566 | 0.5 | 8,952,503 | |
| Westpac Banking Corp. | 411,877 | 0.6 | 10,671,832 | |
| Other Securities | 3.0 | 61,472,782 | ||
| 6.6 | 127,730,134 | |||
| Austria 0.4% | ||||
| Other Securities | 0.4 | 7,362,797 | ||
| Belgium 0.7% | ||||
| Other Securities | 0.7 | 13,790,173 | ||
| Canada 7.2% | ||||
| Royal Bank of Canada | 132,129 | 0.5 | 9,624,981 | |
| Suncor Energy, Inc. | 323,549 | 0.5 | 10,101,364 | |
| Other Securities | 6.2 | 119,148,199 | ||
| 7.2 | 138,874,544 | |||
| Denmark 0.8% | ||||
| Other Securities | 0.8 | 14,952,867 | ||
| Finland 0.9% | ||||
| Other Securities | 0.9 | 17,367,705 | ||
| France 9.5% | ||||
| BNP Paribas S.A. | 165,047 | 0.5 | 9,668,640 | |
| Engie S.A. | 736,509 | 0.5 | 9,031,370 | |
| Orange S.A. | 578,778 | 0.5 | 8,773,110 | |
| Security | Number of Shares | % of Net Assets | Value ($) | |
| Sanofi | 157,970 | 0.7 | 13,651,965 | |
| Total S.A. | 674,674 | 1.7 | 33,730,546 | |
| Other Securities | 5.6 | 109,044,000 | ||
| 9.5 | 183,899,631 | |||
| Germany 8.8% | ||||
| Allianz SE - Reg'd | 61,997 | 0.6 | 10,817,168 | |
| BASF SE | 185,027 | 0.9 | 17,281,990 | |
| Bayer AG - Reg'd | 87,184 | 0.5 | 9,616,209 | |
| Daimler AG - Reg'd | 191,642 | 0.7 | 13,977,765 | |
| Deutsche Telekom AG - Reg'd | 638,522 | 0.6 | 11,066,227 | |
| E.ON SE | 1,470,024 | 0.6 | 11,443,559 | |
| Siemens AG - Reg'd | 105,945 | 0.7 | 13,824,473 | |
| Other Securities | 4.2 | 81,034,210 | ||
| 8.8 | 169,061,601 | |||
| Hong Kong 1.4% | ||||
| Other Securities | 1.4 | 26,963,783 | ||
| Ireland 0.7% | ||||
| Other Securities | 0.7 | 13,406,949 | ||
| Israel 0.4% | ||||
| Other Securities | 0.4 | 7,396,149 | ||
| Italy 3.3% | ||||
| Enel S.p.A. | 2,472,481 | 0.6 | 10,645,649 | |
| Eni S.p.A. | 1,160,537 | 0.9 | 17,905,868 | |
| Other Securities | 1.8 | 34,149,201 | ||
| 3.3 | 62,700,718 | |||
| Japan 22.3% | ||||
| Hitachi Ltd. | 1,630,698 | 0.5 | 9,018,867 | |
| Honda Motor Co., Ltd. | 364,765 | 0.6 | 11,374,761 | |
| Mitsubishi UFJ Financial Group, Inc. | 1,597,834 | 0.5 | 10,545,119 | |
| Nippon Telegraph & Telephone Corp. | 313,484 | 0.7 | 13,311,547 | |
| Toyota Motor Corp. | 352,500 | 1.0 | 20,053,291 | |
| Other Securities | 19.0 | 366,312,885 | ||
| 22.3 | 430,616,470 | |||
| Luxembourg 0.6% | ||||
| ArcelorMittal * | 939,912 | 0.4 | 8,299,616 | |
| Other Securities | 0.2 | 3,475,448 | ||
| 0.6 | 11,775,064 | |||
49
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Large Company Index ETF
Condensed Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | % of Net Assets | Value ($) | |
| Netherlands 5.1% | ||||
| Royal Dutch Shell plc, A Shares | 925,841 | 1.2 | 23,985,008 | |
| Royal Dutch Shell plc, B Shares | 1,147,294 | 1.6 | 31,030,905 | |
| Other Securities | 2.3 | 43,657,069 | ||
| 5.1 | 98,672,982 | |||
| New Zealand 0.1% | ||||
| Other Securities | 0.1 | 1,902,819 | ||
| Norway 0.9% | ||||
| Statoil A.S.A. (a) | 470,474 | 0.4 | 8,354,124 | |
| Other Securities | 0.5 | 9,465,509 | ||
| 0.9 | 17,819,633 | |||
| Portugal 0.2% | ||||
| Other Securities | 0.2 | 4,003,680 | ||
| Singapore 0.8% | ||||
| Other Securities | 0.8 | 16,032,981 | ||
| Spain 4.2% | ||||
| Banco Santander S.A. | 4,854,696 | 1.4 | 26,587,421 | |
| Repsol S.A. | 572,415 | 0.4 | 8,515,474 | |
| Telefonica S.A. | 1,650,247 | 0.9 | 16,920,026 | |
| Other Securities | 1.5 | 29,020,969 | ||
| 4.2 | 81,043,890 | |||
| Sweden 2.4% | ||||
| Other Securities | 2.4 | 45,434,829 | ||
| Switzerland 6.4% | ||||
| Glencore plc * | 4,267,488 | 0.9 | 17,102,346 | |
| Nestle S.A. - Reg'd | 273,666 | 1.1 | 20,290,279 | |
| Novartis AG - Reg'd | 205,034 | 0.8 | 16,051,391 | |
| Roche Holding AG | 51,527 | 0.7 | 12,590,401 | |
| Other Securities | 2.9 | 56,750,224 | ||
| 6.4 | 122,784,641 | |||
| United Kingdom 15.3% | ||||
| Anglo American plc * | 514,026 | 0.4 | 8,126,805 | |
| AstraZeneca plc | 194,673 | 0.6 | 11,250,142 | |
| Barclays plc | 3,277,698 | 0.5 | 9,238,410 | |
| BHP Billiton plc | 573,800 | 0.5 | 9,264,628 | |
| BP plc | 7,367,875 | 2.2 | 41,584,118 | |
| British American Tobacco plc | 164,548 | 0.5 | 10,401,989 | |
| GlaxoSmithKline plc | 578,141 | 0.6 | 11,856,351 | |
| HSBC Holdings plc | 2,957,194 | 1.2 | 23,790,765 | |
| Rio Tinto plc | 276,965 | 0.6 | 11,363,285 | |
| Vodafone Group plc | 5,815,636 | 0.8 | 14,611,460 | |
| Other Securities | 7.4 | 143,802,149 | ||
| 15.3 | 295,290,102 | |||
| Total Common Stock | ||||
| (Cost $1,829,829,330) | 1,908,884,142 | |||
| Security | Number of Shares | % of Net Assets | Value ($) | |
| Preferred Stock 0.7% of net assets | ||||
| Germany 0.7% | ||||
| Volkswagen AG | 59,741 | 0.5 | 8,868,265 | |
| Other Securities | 0.2 | 3,342,175 | ||
| 0.7 | 12,210,440 | |||
| Italy 0.0% | ||||
| Other Securities | 0.0 | 395,723 | ||
| Spain 0.0% | ||||
| Other Securities | 0.0 | 254,669 | ||
| Total Preferred Stock | ||||
| (Cost $13,105,712) | 12,860,832 | |||
| Other Investment Companies 0.7% of net assets | ||||
| United States 0.7% | ||||
| Money Market Fund 0.1% | ||||
| Other Securities | 0.1 | 1,461,725 | ||
| Securities Lending Collateral 0.6% | ||||
| Wells Fargo Government Money Market Fund, Select Class 0.48% (c) | 0.6 | 12,487,086 | ||
| Total Other Investment Companies | ||||
| (Cost $13,948,811) | 13,948,811 | |||
End of Investments.
At 02/28/17, the tax basis cost of the fund's investments was $1,859,937,009 and the unrealized appreciation and depreciation were $140,748,096 and ($64,991,320), respectively, with a net unrealized appreciation of $75,756,776.
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 $11,911,524. |
| (b) | Fair-valued by management in accordance with procedures approved by the Board of Trustees. |
| (c) | The rate shown is the 7-day yield. |
| ADR — | American Depositary Receipt |
| CDI — | CHESS Depositary Interest |
| CVA — | Dutch Certificate |
| Reg'd — | Registered |
| REIT — | Real Estate Investment Trust |
| RSP — | Risparmio (Convertible Savings Shares) |
50
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Large Company Index ETF
Condensed Portfolio Holdings as of February 28, 2017 (continued)
In addition to the above, the fund held the following at 02/28/17:
| Number of Contracts | Contract Value ($) | Unrealized Depreciation ($) | ||||
| Futures Contracts | ||||||
| MSCI EAFE Index, e-mini, Long, expires 03/17/17 | 66 | 5,760,150 | (4,012) | |||
The following is a summary of the inputs used to value the fund’s investments as of February 28, 2017 (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 | $1,718,453,290 | $— | $— | $1,718,453,290 | |
| Australia 1 | 97,620,411 | — | — | 97,620,411 | |
| Materials | 30,070,379 | — | 39,344 | 30,109,723 | |
| Italy 1 | 47,418,376 | — | — | 47,418,376 | |
| Banks | 14,769,710 | — | 512,632 | 15,282,342 | |
| Preferred Stock1 | 12,860,832 | — | — | 12,860,832 | |
| Other Investment Companies1 | 13,948,811 | — | — | 13,948,811 | |
| Total | $1,935,141,809 | $— | $551,976 | $1,935,693,785 | |
| Liabilities Valuation Input | |||||
| Other Financial Instruments | |||||
| Futures Contracts2 | ($4,012) | $— | $— | ($4,012) |
| 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 fund's policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were no transfers between Level 1, Level 2 and Level 3 for the period ended February 28, 2017.
51
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Large Company Index ETF
Statement of Assets and Liabilities
As of February 28, 2017
| Assets | ||
| Investments, at value (cost $1,844,396,767) including securities on loan of $11,911,524 | $1,923,206,699 | |
| Collateral invested for securities on loan, at value (cost $12,487,086) | + | 12,487,086 |
| Total investments, at value (cost $1,856,883,853) | 1,935,693,785 | |
| Deposit with broker for futures contracts | 344,400 | |
| Foreign currency, at value (cost $620,887) | 625,100 | |
| Receivables: | ||
| Investments sold | 535,744 | |
| Fund shares sold | 46,791,652 | |
| Dividends | 5,204,875 | |
| Foreign tax reclaims | 768,249 | |
| Income from securities on loan | + | 58,952 |
| Total assets | 1,990,022,757 | |
| Liabilities | ||
| Collateral held for securities on loan | 12,487,086 | |
| Payables: | ||
| Investments bought | 48,214,874 | |
| Investment adviser fees | 451,100 | |
| Variation margin on futures contracts | + | 8,580 |
| Total liabilities | 61,161,640 | |
| Net Assets | ||
| Total assets | 1,990,022,757 | |
| Total liabilities | – | 61,161,640 |
| Net assets | $1,928,861,117 | |
| Net Assets by Source | ||
| Capital received from investors | 1,881,059,985 | |
| Net investment income not yet distributed | 3,568,504 | |
| Net realized capital losses | (34,561,482) | |
| Net unrealized capital appreciation | 78,794,110 | |
| Net Asset Value (NAV) | ||||
| Net Assets | ÷ | Shares Outstanding | = | NAV |
| $1,928,861,117 | 74,200,001 | $26.00 | ||
52
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Large Company Index ETF
Statement of Operations
For the period March 1, 2016 through February 28, 2017
| Investment Income | ||
| Dividends (net of foreign withholding tax of $3,773,800) | $42,920,031 | |
| Securities on loan, net | + | 503,752 |
| Total investment income | 43,423,783 | |
| Expenses | ||
| Investment adviser fees | 4,206,891 | |
| Total expenses | – | 4,206,891 |
| Net investment income | 39,216,892 | |
| Realized and Unrealized Gains (Losses) | ||
| Net realized losses on investments | (25,262,580) | |
| Net realized gains on futures contracts | 560,466 | |
| Net realized losses on foreign currency transactions | + | (316,339) |
| Net realized losses | (25,018,453) | |
| Net change in unrealized appreciation (depreciation) on investments | 219,417,888 | |
| Net change in unrealized appreciation (depreciation) on futures contracts | 6,347 | |
| Net change in unrealized appreciation (depreciation) on foreign currency translations | + | (2,339) |
| Net change in unrealized appreciation (depreciation) | + | 219,421,896 |
| Net realized and unrealized gains | 194,403,443 | |
| Increase in net assets resulting from operations | $233,620,335 | |
53
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Large Company Index ETF
Statement of Changes in Net Assets
For the current and prior report periods
| Operations | ||||
| 3/1/16-2/28/17 | 3/1/15-2/29/16 | |||
| Net investment income | $39,216,892 | $18,366,877 | ||
| Net realized losses | (25,018,453) | (8,438,472) | ||
| Net change in unrealized appreciation (depreciation) | + | 219,421,896 | (145,661,363) | |
| Increase (decrease) in net assets resulting from operations | 233,620,335 | (135,732,958) | ||
| Distributions to Shareholders | ||||
| Distributions from net investment income | ($37,964,160) | ($16,183,231) | ||
| Transactions in Fund Shares | ||||||||
| 3/1/16-2/28/17 | 3/1/15-2/29/16 | |||||||
| SHARES | VALUE | SHARES | VALUE | |||||
| Shares sold | 34,100,000 | $847,856,850 | 29,400,000 | $746,594,038 | ||||
| Shares redeemed | + | — | — | — | — | |||
| Net transactions in fund shares | 34,100,000 | $847,856,850 | 29,400,000 | $746,594,038 | ||||
| Shares Outstanding and Net Assets | ||||||||
| 3/1/16-2/28/17 | 3/1/15-2/29/16 | |||||||
| SHARES | NET ASSETS | SHARES | NET ASSETS | |||||
| Beginning of period | 40,100,001 | $885,348,092 | 10,700,001 | $290,670,243 | ||||
| Total increase | + | 34,100,000 | 1,043,513,025 | 29,400,000 | 594,677,849 | |||
| End of period | 74,200,001 | $1,928,861,117 | 40,100,001 | $885,348,092 | ||||
| Net investment income not yet distributed | $3,568,504 | $2,624,284 | ||||||
54
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Small Company Index ETF
Financial Statements
Financial Highlights
| 3/1/16– 2/28/17 | 3/1/15– 2/29/16 | 3/1/14– 2/28/15 | 8/14/13 1– 2/28/14 | |||
| Per-Share Data | ||||||
| Net asset value at beginning of period | $24.81 | $27.22 | $27.75 | $25.00 | ||
| Income (loss) from investment operations: | ||||||
| Net investment income (loss) | 0.55 2 | 0.43 2 | 0.41 | 0.15 | ||
| Net realized and unrealized gains (losses) | 5.18 | (2.49) | (0.53) 3 | 2.78 | ||
| Total from investment operations | 5.73 | (2.06) | (0.12) | 2.93 | ||
| Less distributions: | ||||||
| Distributions from net investment income | (0.55) | (0.35) | (0.41) | (0.18) | ||
| Net asset value at end of period | $29.99 | $24.81 | $27.22 | $27.75 | ||
| Total return | 23.26% | (7.64%) | (0.32%) | 11.73% 4 | ||
| Ratios/Supplemental Data | ||||||
| Ratios to average net assets: | ||||||
| Total expenses | 0.46% | 0.46% | 0.46% | 0.46% 5 | ||
| Net investment income (loss) | 1.94% | 1.65% | 1.73% | 1.09% 5 | ||
| Portfolio turnover rate6 | 25% | 22% | 21% | 18% 4 | ||
| Net assets, end of period (x 1,000) | $866,749 | $379,667 | $68,046 | $24,977 | ||
1
Commencement of operations.
2
Calculated based on the average shares outstanding during the period.
3
The per share amount does not accord with the change in aggregate gains and losses in securities during the period because of the timing of sales and repurchases of fund shares in relation to fluctuating market values.
4
Not annualized.
5
Annualized.
6
Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
55
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Small Company Index ETF
Condensed Portfolio Holdings as of February 28, 2017
This section shows the fund's 50 largest portfolio holdings in unaffiliated issuers, any holdings exceeding 1% of the fund's net assets as of the report date, and any affiliated issuers. The remaining securities held by the fund are grouped as "Other Securities" in each category. You can request a complete schedule of portfolio holdings as of the report date, free of charge, by calling Schwab ETFs™ at 1-877-824-5615. This complete schedule, filed on the fund's Form N-CSR(S), is also available on the SEC's website at www.sec.gov.
In addition, the fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's website and may be viewed and copied at the SEC's Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the Public Reference Room. The fund also makes available its complete schedule of portfolio holdings on a daily basis on the fund's website at www.csimfunds.com/schwabetfs_prospectus.
| Holdings by Category | Cost ($) | Value ($) | |
| 99.4% | Common Stock | 787,743,443 | 862,091,454 |
| 0.3% | Preferred Stock | 2,208,062 | 2,365,681 |
| 1.2% | Other Investment Companies | 10,242,621 | 10,242,621 |
| 100.9% | Total Investments | 800,194,126 | 874,699,756 |
| (0.9%) | Other Assets and Liabilities, Net | (7,950,853) | |
| 100.0% | Net Assets | 866,748,903 | |
| Security | Number of Shares | % of Net Assets | Value ($) | |
| Common Stock 99.4% of net assets | ||||
| Australia 5.9% | ||||
| Computershare Ltd. | 143,093 | 0.2 | 1,486,330 | |
| Dexus Property Group | 182,828 | 0.2 | 1,326,955 | |
| Fairfax Media Ltd. | 1,883,465 | 0.2 | 1,368,456 | |
| Goodman Group | 235,179 | 0.2 | 1,365,171 | |
| Myer Holdings Ltd. | 1,415,469 | 0.2 | 1,371,237 | |
| OZ Minerals Ltd. | 252,126 | 0.2 | 1,802,778 | |
| Qantas Airways Ltd. | 564,154 | 0.2 | 1,626,561 | |
| Other Securities | 4.5 | 40,406,023 | ||
| 5.9 | 50,753,511 | |||
| Austria 0.9% | ||||
| Other Securities | 0.9 | 8,237,551 | ||
| Belgium 1.2% | ||||
| Other Securities | 1.2 | 10,170,316 | ||
| Canada 8.0% | ||||
| Waste Connections, Inc. | 30,517 | 0.3 | 2,667,026 | |
| Other Securities | 7.7 | 66,932,249 | ||
| 8.0 | 69,599,275 | |||
| Denmark 1.3% | ||||
| FLSmidth & Co. A/S | 31,074 | 0.2 | 1,528,157 | |
| Other Securities | 1.1 | 10,102,285 | ||
| 1.3 | 11,630,442 | |||
| Finland 1.5% | ||||
| Other Securities | 1.5 | 13,432,223 | ||
| Security | Number of Shares | % of Net Assets | Value ($) | |
| France 3.6% | ||||
| Edenred | 59,477 | 0.2 | 1,349,957 | |
| Neopost S.A. | 48,106 | 0.2 | 1,453,268 | |
| Other Securities | 3.2 | 28,397,035 | ||
| 3.6 | 31,200,260 | |||
| Germany 3.2% | ||||
| Covestro AG | 17,795 | 0.2 | 1,343,860 | |
| Other Securities | 3.0 | 26,250,654 | ||
| 3.2 | 27,594,514 | |||
| Hong Kong 4.4% | ||||
| Hang Lung Properties Ltd. | 545,559 | 0.2 | 1,377,523 | |
| Orient Overseas International Ltd. | 251,316 | 0.2 | 1,474,721 | |
| Other Securities | 4.0 | 35,002,254 | ||
| 4.4 | 37,854,498 | |||
| Ireland 0.9% | ||||
| Other Securities | 0.9 | 7,516,486 | ||
| Israel 1.1% | ||||
| Other Securities | 1.1 | 9,506,973 | ||
| Italy 2.7% | ||||
| A2A S.p.A. | 995,985 | 0.2 | 1,387,475 | |
| Mediobanca S.p.A. | 165,759 | 0.2 | 1,332,465 | |
| Other Securities | 2.3 | 20,467,579 | ||
| 2.7 | 23,187,519 | |||
| Japan 39.2% | ||||
| EDION Corp. (a) | 149,221 | 0.2 | 1,365,709 | |
| FamilyMart UNY Holdings Co., Ltd. | 46,154 | 0.3 | 2,829,838 | |
| Fujikura Ltd. | 223,796 | 0.2 | 1,668,194 | |
| Fukuoka Financial Group, Inc. | 295,784 | 0.2 | 1,385,269 | |
| Hitachi Chemical Co., Ltd. | 60,476 | 0.2 | 1,710,744 | |
| Hitachi High-Technologies Corp. | 34,276 | 0.2 | 1,433,719 | |
| Hitachi Metals Ltd. | 102,738 | 0.2 | 1,469,194 | |
| Kinden Corp. | 107,981 | 0.2 | 1,460,207 | |
| Konami Holdings Corp. | 37,752 | 0.2 | 1,599,361 | |
| Minebea Mitsumi, Inc. | 200,193 | 0.3 | 2,476,356 | |
| Mitsubishi Gas Chemical Co., Inc. | 97,683 | 0.2 | 2,065,674 | |
| Morinaga Milk Industry Co., Ltd. | 174,374 | 0.2 | 1,352,787 | |
| Nichirei Corp. | 61,286 | 0.2 | 1,433,485 | |
| Nissin Foods Holdings Co., Ltd. | 23,791 | 0.2 | 1,337,493 | |
| NOK Corp. | 62,883 | 0.2 | 1,441,051 | |
| North Pacific Bank Ltd. | 415,127 | 0.2 | 1,729,000 | |
56
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Small Company Index ETF
Condensed Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | % of Net Assets | Value ($) | |
| NTN Corp. | 312,174 | 0.2 | 1,559,684 | |
| The Chiba Bank Ltd. | 215,497 | 0.2 | 1,511,956 | |
| Tokuyama Corp. * | 367,727 | 0.2 | 1,768,219 | |
| Toyoda Gosei Co., Ltd. | 60,721 | 0.2 | 1,554,319 | |
| Yaskawa Electric Corp. | 70,366 | 0.2 | 1,324,492 | |
| Yokogawa Electric Corp. | 92,316 | 0.2 | 1,443,095 | |
| Other Securities | 34.6 | 303,855,533 | ||
| 39.2 | 339,775,379 | |||
| Luxembourg 0.5% | ||||
| APERAM S.A. | 27,795 | 0.2 | 1,417,973 | |
| Ternium S.A. ADR | 50,961 | 0.2 | 1,351,486 | |
| Other Securities | 0.1 | 1,789,159 | ||
| 0.5 | 4,558,618 | |||
| Netherlands 2.1% | ||||
| X5 Retail Group N.V. GDR - Reg’d * | 47,708 | 0.2 | 1,445,552 | |
| Other Securities | 1.9 | 16,900,121 | ||
| 2.1 | 18,345,673 | |||
| New Zealand 1.0% | ||||
| Other Securities | 1.0 | 8,909,818 | ||
| Norway 1.5% | ||||
| Other Securities | 1.5 | 12,911,954 | ||
| Portugal 0.4% | ||||
| Other Securities | 0.4 | 3,475,960 | ||
| Singapore 2.0% | ||||
| City Developments Ltd. | 204,696 | 0.2 | 1,386,058 | |
| Other Securities | 1.8 | 16,081,415 | ||
| 2.0 | 17,467,473 | |||
| Spain 1.7% | ||||
| Acerinox S.A. | 94,889 | 0.2 | 1,352,622 | |
| Other Securities | 1.5 | 13,423,388 | ||
| 1.7 | 14,776,010 | |||
| Sweden 2.1% | ||||
| Husqvarna AB, B Shares | 170,838 | 0.2 | 1,467,239 | |
| Other Securities | 1.9 | 16,706,293 | ||
| 2.1 | 18,173,532 | |||
| Switzerland 3.1% | ||||
| Other Securities | 3.1 | 26,706,775 | ||
| United Kingdom 11.1% | ||||
| Evraz plc * | 543,788 | 0.2 | 1,559,094 | |
| IHS Markit Ltd. * | 37,203 | 0.2 | 1,480,679 | |
| KAZ Minerals plc * | 364,345 | 0.3 | 2,389,370 | |
| Melrose Industries plc | 811,714 | 0.2 | 2,154,032 | |
| Security | Number of Shares | % of Net Assets | Value ($) | |
| Vedanta Resources plc | 201,383 | 0.2 | 2,157,675 | |
| Other Securities | 10.0 | 86,565,844 | ||
| 11.1 | 96,306,694 | |||
| Total Common Stock | ||||
| (Cost $787,743,443) | 862,091,454 | |||
| Preferred Stock 0.3% of net assets | ||||
| Germany 0.3% | ||||
| Other Securities | 0.3 | 2,056,637 | ||
| Sweden 0.0% | ||||
| Other Securities | 0.0 | 309,044 | ||
| Total Preferred Stock | ||||
| (Cost $2,208,062) | 2,365,681 | |||
| Other Investment Companies 1.2% of net assets | ||||
| United States 1.2% | ||||
| Money Market Fund 0.1% | ||||
| Other Securities | 0.1 | 762,104 | ||
| Securities Lending Collateral 1.1% | ||||
| Wells Fargo Government Money Market Fund, Select Class 0.48% (c) | 1.1 | 9,480,517 | ||
| Total Other Investment Companies | ||||
| (Cost $10,242,621) | 10,242,621 | |||
End of Investments.
At 02/28/17, the tax basis cost of the fund's investments was $805,578,924 and the unrealized appreciation and depreciation were $94,261,623 and ($25,140,791), respectively, with a net unrealized appreciation of $69,120,832.
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 $8,888,910. |
| (b) | Fair-valued by management in accordance with procedures approved by the Board of Trustees. |
| (c) | The rate shown is the 7-day yield. |
| ADR — | American Depositary Receipt |
| CDI — | CHESS Depositary Interest |
| GDR — | Global Depositary Receipt |
| Reg'd — | Registered |
| REIT — | Real Estate Investment Trust |
| RSP — | Risparmio (Convertible Savings Shares) |
57
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Small Company Index ETF
Condensed Portfolio Holdings as of February 28, 2017 (continued)
In addition to the above, the fund held the following at 02/28/17:
| Number of Contracts | Contract Value ($) | Unrealized Depreciation ($) | ||||
| Futures Contracts | ||||||
| MSCI EAFE Index, e-mini, Long, expires 03/17/17 | 28 | 2,443,700 | (4,672) | |||
The following is a summary of the inputs used to value the fund’s investments as of February 28, 2017 (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 | $824,236,956 | $— | $— * | $824,236,956 | |
| Hong Kong1 | 35,496,824 | — | — | 35,496,824 | |
| Materials | 1,735,791 | — | 621,883 | 2,357,674 | |
| Preferred Stock1 | 2,365,681 | — | — | 2,365,681 | |
| Other Investment Companies1 | 10,242,621 | — | — | 10,242,621 | |
| Total | $874,077,873 | $— | $621,883 | $874,699,756 | |
| Liabilities Valuation Input | |||||
| Other Financial Instruments | |||||
| Futures Contracts2 | ($4,672) | $— | $— | ($4,672) |
| * | Level 3 amount shown includes securities determined to have no value at February 28, 2017. |
| 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 fund's policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were no transfers between Level 1, Level 2 and Level 3 for the period ended February 28, 2017.
58
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Small Company Index ETF
Statement of Assets and Liabilities
As of February 28, 2017
| Assets | ||
| Investments, at value (cost $790,713,609) including securities on loan of $8,888,910 | $865,219,239 | |
| Collateral invested for securities on loan, at value (cost $9,480,517) | + | 9,480,517 |
| Total investments, at value (cost $800,194,126) | 874,699,756 | |
| Deposit with broker for futures contracts | 193,199 | |
| Foreign currency, at value (cost $190,081) | 190,256 | |
| Receivables: | ||
| Fund shares sold | 17,956,689 | |
| Dividends | 980,249 | |
| Foreign tax reclaims | 156,030 | |
| Income from securities on loan | + | 24,131 |
| Total assets | 894,200,310 | |
| Liabilities | ||
| Collateral held for securities on loan | 9,480,517 | |
| Payables: | ||
| Investments bought | 17,679,828 | |
| Investment adviser fees | 287,422 | |
| Variation margin on futures contracts | + | 3,640 |
| Total liabilities | 27,451,407 | |
| Net Assets | ||
| Total assets | 894,200,310 | |
| Total liabilities | – | 27,451,407 |
| Net assets | $866,748,903 | |
| Net Assets by Source | ||
| Capital received from investors | 811,822,126 | |
| Distributions in excess of net investment income | (2,221,772) | |
| Net realized capital losses | (17,360,139) | |
| Net unrealized capital appreciation | 74,508,688 | |
| Net Asset Value (NAV) | ||||
| Net Assets | ÷ | Shares Outstanding | = | NAV |
| $866,748,903 | 28,900,001 | $29.99 | ||
59
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Small Company Index ETF
Statement of Operations
For the period March 1, 2016 through February 28, 2017
| Investment Income | ||
| Dividends (net of foreign withholding tax of $1,316,303) | $13,392,495 | |
| Interest | 2,652 | |
| Securities on loan, net | + | 328,079 |
| Total investment income | 13,723,226 | |
| Expenses | ||
| Investment adviser fees | 2,625,077 | |
| Total expenses | – | 2,625,077 |
| Net investment income | 11,098,149 | |
| Realized and Unrealized Gains (Losses) | ||
| Net realized losses on investments | (13,211,357) | |
| Net realized gains on in-kind redemptions | 3,124,985 | |
| Net realized gains on futures contracts | 46,564 | |
| Net realized gains on foreign currency transactions | + | 1,494 |
| Net realized losses | (10,038,314) | |
| Net change in unrealized appreciation (depreciation) on investments | 109,298,358 | |
| Net change in unrealized appreciation (depreciation) on futures contracts | (4,672) | |
| Net change in unrealized appreciation (depreciation) on foreign currency translations | + | 5,175 |
| Net change in unrealized appreciation (depreciation) | + | 109,298,861 |
| Net realized and unrealized gains | 99,260,547 | |
| Increase in net assets resulting from operations | $110,358,696 | |
60
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Small Company Index ETF
Statement of Changes in Net Assets
For the current and prior report periods
| Operations | ||||
| 3/1/16-2/28/17 | 3/1/15-2/29/16 | |||
| Net investment income | $11,098,149 | $4,646,894 | ||
| Net realized losses | (10,038,314) | (2,673,320) | ||
| Net change in unrealized appreciation (depreciation) | + | 109,298,861 | (36,748,503) | |
| Increase (decrease) in net assets resulting from operations | 110,358,696 | (34,774,929) | ||
| Distributions to Shareholders | ||||
| Distributions from net investment income | ($13,315,200) | ($4,911,780) | ||
| Transactions in Fund Shares | ||||||||
| 3/1/16-2/28/17 | 3/1/15-2/29/16 | |||||||
| SHARES | VALUE | SHARES | VALUE | |||||
| Shares sold | 14,100,000 | $403,432,348 | 13,100,000 | $359,784,798 | ||||
| Shares redeemed | + | (500,000) | (13,394,058) | (300,000) | (8,476,621) | |||
| Net transactions in fund shares | 13,600,000 | $390,038,290 | 12,800,000 | $351,308,177 | ||||
| Shares Outstanding and Net Assets | ||||||||
| 3/1/16-2/28/17 | 3/1/15-2/29/16 | |||||||
| SHARES | NET ASSETS | SHARES | NET ASSETS | |||||
| Beginning of period | 15,300,001 | $379,667,117 | 2,500,001 | $68,045,649 | ||||
| Total increase | + | 13,600,000 | 487,081,786 | 12,800,000 | 311,621,468 | |||
| End of period | 28,900,001 | $866,748,903 | 15,300,001 | $379,667,117 | ||||
| Distributions in excess of net investment income | ($2,221,772) | ($333,473) | ||||||
61
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental Emerging Markets Large Company Index ETF
Financial Statements
Financial Highlights
| 3/1/16– 2/28/17 | 3/1/15– 2/29/16 | 3/1/14– 2/28/15 | 8/14/13 1– 2/28/14 | |||
| Per-Share Data | ||||||
| Net asset value at beginning of period | $17.78 | $24.16 | $24.98 | $25.00 | ||
| Income (loss) from investment operations: | ||||||
| Net investment income (loss) | 0.49 2 | 0.57 2 | 0.37 | 0.12 | ||
| Net realized and unrealized gains (losses) | 8.18 | (6.58) | (0.87) | (0.00) 3 | ||
| Total from investment operations | 8.67 | (6.01) | (0.50) | 0.12 | ||
| Less distributions: | ||||||
| Distributions from net investment income | (0.39) | (0.37) | (0.32) | (0.14) | ||
| Net asset value at end of period | $26.06 | $17.78 | $24.16 | $24.98 | ||
| Total return | 49.03% | (24.92%) | (1.98%) | 0.45% 4 | ||
| Ratios/Supplemental Data | ||||||
| Ratios to average net assets: | ||||||
| Total expenses | 0.46% | 0.46% | 0.46% | 0.46% 5 | ||
| Net investment income (loss) | 2.14% | 2.80% | 2.20% | 1.01% 5 | ||
| Portfolio turnover rate6 | 14% | 20% | 13% | 6% 4 | ||
| Net assets, end of period (x 1,000) | $1,011,273 | $359,092 | $96,642 | $22,482 | ||
1
Commencement of operations.
2
Calculated based on the average shares outstanding during the period.
3
Per-share amount was less than $0.005.
4
Not annualized.
5
Annualized.
6
Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
62
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental Emerging Markets Large Company Index ETF
Condensed Portfolio Holdings as of February 28, 2017
This section shows the fund's 50 largest portfolio holdings in unaffiliated issuers, any holdings exceeding 1% of the fund's net assets as of the report date, and any affiliated issuers. The remaining securities held by the fund are grouped as "Other Securities" in each category. You can request a complete schedule of portfolio holdings as of the report date, free of charge, by calling Schwab ETFs™ at 1-877-824-5615. This complete schedule, filed on the fund's Form N-CSR(S), is also available on the SEC's website at www.sec.gov.
In addition, the fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's website and may be viewed and copied at the SEC's Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the Public Reference Room. The fund also makes available its complete schedule of portfolio holdings on a daily basis on the fund's website at www.csimfunds.com/schwabetfs_prospectus.
| Holdings by Category | Cost ($) | Value ($) | |
| 86.2% | Common Stock | 775,409,528 | 871,196,104 |
| 13.5% | Preferred Stock | 87,593,754 | 136,810,047 |
| 0.0% | Rights | — | 13,961 |
| 0.1% | Other Investment Company | 1,388,488 | 1,388,488 |
| 99.8% | Total Investments | 864,391,770 | 1,009,408,600 |
| 0.2% | Other Assets and Liabilities, Net | 1,864,791 | |
| 100.0% | Net Assets | 1,011,273,391 | |
| Security | Number of Shares | % of Net Assets | Value ($) | |
| Common Stock 86.2% of net assets | ||||
| Brazil 7.9% | ||||
| Ambev S.A. | 879,216 | 0.5 | 5,041,856 | |
| Banco do Brasil S.A. | 1,006,576 | 1.1 | 10,709,632 | |
| Petroleo Brasileiro S.A. * | 3,377,007 | 1.7 | 17,324,665 | |
| Vale S.A. | 2,083,289 | 2.2 | 21,911,031 | |
| Other Securities | 2.4 | 24,894,555 | ||
| 7.9 | 79,881,739 | |||
| Chile 0.6% | ||||
| Other Securities | 0.6 | 5,895,548 | ||
| China 15.6% | ||||
| Bank of China Ltd., H Shares | 24,842,539 | 1.2 | 12,577,367 | |
| China Construction Bank Corp., H Shares | 30,651,836 | 2.5 | 25,232,399 | |
| China Mobile Ltd. | 1,514,301 | 1.7 | 16,698,873 | |
| China Petroleum & Chemical Corp., H Shares | 20,588,295 | 1.6 | 15,966,806 | |
| CNOOC Ltd. | 7,485,040 | 0.9 | 8,851,930 | |
| Industrial & Commercial Bank of China Ltd., H Shares | 23,966,519 | 1.6 | 15,715,345 | |
| PetroChina Co., Ltd., H Shares | 10,877,830 | 0.8 | 8,281,918 | |
| Other Securities | 5.3 | 54,267,031 | ||
| 15.6 | 157,591,669 | |||
| Colombia 0.4% | ||||
| Other Securities | 0.4 | 4,232,065 | ||
| Czech Republic 0.2% | ||||
| Other Securities | 0.2 | 2,102,156 | ||
| Security | Number of Shares | % of Net Assets | Value ($) | |
| Greece 0.7% | ||||
| Other Securities | 0.7 | 7,420,076 | ||
| Hungary 0.4% | ||||
| Other Securities | 0.4 | 4,339,119 | ||
| India 4.1% | ||||
| Reliance Industries Ltd. GDR | 244,614 | 0.9 | 9,026,257 | |
| Other Securities | 3.2 | 32,044,966 | ||
| 4.1 | 41,071,223 | |||
| Indonesia 1.3% | ||||
| Other Securities | 1.3 | 12,814,486 | ||
| Malaysia 1.7% | ||||
| Other Securities | 1.7 | 16,783,709 | ||
| Mexico 2.6% | ||||
| America Movil S.A.B. de C.V., Series L | 9,016,525 | 0.6 | 5,750,119 | |
| Other Securities | 2.0 | 20,452,426 | ||
| 2.6 | 26,202,545 | |||
| Peru 0.1% | ||||
| Other Securities | 0.1 | 1,161,065 | ||
| Philippines 0.1% | ||||
| Other Securities | 0.1 | 1,225,597 | ||
| Poland 2.3% | ||||
| KGHM Polska Miedz S.A. | 176,333 | 0.6 | 5,602,216 | |
| Polski Koncern Naftowy Orlen S.A. | 253,244 | 0.6 | 5,875,254 | |
| Other Securities | 1.1 | 11,336,533 | ||
| 2.3 | 22,814,003 | |||
| Republic of Korea 16.6% | ||||
| Hyundai Heavy Industries Co., Ltd. * | 34,573 | 0.5 | 5,029,634 | |
| Hyundai Mobis Co., Ltd. | 21,528 | 0.5 | 4,854,866 | |
| Hyundai Motor Co. | 70,320 | 0.9 | 9,297,228 | |
| Kia Motors Corp. | 160,658 | 0.5 | 5,434,595 | |
| LG Chem Ltd. | 17,663 | 0.4 | 4,420,632 | |
| LG Display Co., Ltd. | 178,244 | 0.4 | 4,319,156 | |
| LG Electronics, Inc. | 95,849 | 0.5 | 5,068,999 | |
| POSCO | 54,819 | 1.4 | 13,744,140 | |
63
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental Emerging Markets Large Company Index ETF
Condensed Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | % of Net Assets | Value ($) | |
| Samsung Electronics Co., Ltd. | 32,190 | 5.4 | 54,715,171 | |
| Shinhan Financial Group Co., Ltd. | 126,613 | 0.5 | 5,229,120 | |
| SK Hynix, Inc. | 146,341 | 0.6 | 6,043,886 | |
| SK Innovation Co., Ltd. | 46,665 | 0.6 | 6,376,071 | |
| Other Securities | 4.4 | 43,077,556 | ||
| 16.6 | 167,611,054 | |||
| Russia 11.4% | ||||
| Gazprom PAO * | 17,068,183 | 3.9 | 39,138,999 | |
| LUKOIL PJSC * | 547,300 | 2.9 | 28,902,741 | |
| MMC Norilsk Nickel PJSC * | 26,261 | 0.4 | 4,184,323 | |
| Mobile TeleSystems PJSC * | 879,250 | 0.4 | 4,145,258 | |
| Sberbank of Russia PJSC * | 1,874,790 | 0.5 | 5,004,895 | |
| Surgutneftegas * | 20,623,667 | 1.0 | 10,374,261 | |
| Tatneft PAO * | 852,471 | 0.5 | 4,973,796 | |
| Other Securities | 1.8 | 18,988,109 | ||
| 11.4 | 115,712,382 | |||
| South Africa 5.9% | ||||
| MTN Group Ltd. | 1,144,295 | 1.0 | 10,479,747 | |
| Sasol Ltd. | 330,315 | 0.9 | 9,419,533 | |
| Standard Bank Group Ltd. | 460,318 | 0.5 | 5,039,919 | |
| Other Securities | 3.5 | 35,213,720 | ||
| 5.9 | 60,152,919 | |||
| Taiwan 11.4% | ||||
| Hon Hai Precision Industry Co., Ltd. | 6,334,911 | 1.8 | 18,454,100 | |
| Innolux Corp. | 10,236,000 | 0.4 | 4,164,565 | |
| Taiwan Semiconductor Manufacturing Co., Ltd. | 2,823,352 | 1.7 | 17,368,253 | |
| Other Securities | 7.5 | 75,633,625 | ||
| 11.4 | 115,620,543 | |||
| Thailand 1.6% | ||||
| PTT PCL NVDR | 542,900 | 0.6 | 6,174,709 | |
| Other Securities | 1.0 | 9,608,526 | ||
| 1.6 | 15,783,235 | |||
| Turkey 1.2% | ||||
| Other Securities | 1.2 | 11,897,166 | ||
| United Arab Emirates 0.1% | ||||
| Other Securities | 0.1 | 883,805 | ||
| Total Common Stock | ||||
| (Cost $775,409,528) | 871,196,104 | |||
| Preferred Stock 13.5% of net assets | ||||
| Brazil 10.9% | ||||
| Banco Bradesco S.A. | 1,035,385 | 1.1 | 11,122,651 | |
| Companhia Energetica de Minas Gerais | 1,559,929 | 0.5 | 5,360,219 | |
| Gerdau S.A. | 1,658,356 | 0.7 | 6,903,153 | |
| Itau Unibanco Holding S.A. | 1,436,673 | 1.8 | 18,486,024 | |
| Metalurgica Gerdau S.A. * | 2,738,901 | 0.5 | 5,159,100 | |
| Petroleo Brasileiro S.A. * | 5,048,549 | 2.4 | 24,634,193 | |
| Security | Number of Shares | % of Net Assets | Value ($) | |
| Vale S.A. | 2,838,923 | 2.8 | 28,754,248 | |
| Other Securities | 1.1 | 10,389,994 | ||
| 10.9 | 110,809,582 | |||
| Colombia 0.1% | ||||
| Other Securities | 0.1 | 1,106,629 | ||
| Republic of Korea 1.1% | ||||
| Samsung Electronics Co., Ltd. | 5,886 | 0.8 | 7,787,270 | |
| Other Securities | 0.3 | 3,006,826 | ||
| 1.1 | 10,794,096 | |||
| Russia 1.4% | ||||
| AK Transneft OAO * | 3,551 | 1.1 | 11,238,871 | |
| Other Securities | 0.3 | 2,860,869 | ||
| 1.4 | 14,099,740 | |||
| Total Preferred Stock | ||||
| (Cost $87,593,754) | 136,810,047 | |||
| Rights 0.0% of net assets | ||||
| Brazil 0.0% | ||||
| Other Securities | 0.0 | 13,961 | ||
| Total Rights | ||||
| (Cost $—) | 13,961 | |||
| Other Investment Company 0.1% of net assets | ||||
| United States 0.1% | ||||
| Money Market Fund 0.1% | ||||
| Other Securities | 0.1 | 1,388,488 | ||
| Total Other Investment Company | ||||
| (Cost $1,388,488) | 1,388,488 | |||
End of Investments.
At 02/28/17, the tax basis cost of the fund's investments was $878,316,139 and the unrealized appreciation and depreciation were $149,397,717 and ($18,305,256), respectively, with a net unrealized appreciation of $131,092,461.
For the following notes, please refer to the complete schedule of portfolio holdings.
| * | Non-income producing security. |
| (a) | Fair-valued by management in accordance with procedures approved by the Board of Trustees. |
| (b) | The rate shown is the 7-day yield. |
| ADR — | American Depositary Receipt |
| GDR — | Global Depositary Receipt |
| NVDR — | Non-Voting Depositary Receipt |
| Reg'd — | Registered |
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See financial notes
Schwab Fundamental Emerging Markets Large Company Index ETF
Condensed Portfolio Holdings as of February 28, 2017 (continued)
In addition to the above, the fund held the following at 02/28/17:
| Number of Contracts | Contract Value ($) | Unrealized Depreciation ($) | ||||
| Futures Contracts | ||||||
| MSCI Emerging Markets Index, e-mini, Long, expires 03/17/17 | 83 | 3,862,820 | (6,246) | |||
The following is a summary of the inputs used to value the fund’s investments as of February 28, 2017 (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 | $871,196,104 | $— | $— | $871,196,104 | |
| Preferred Stock1 | 136,810,047 | — | — | 136,810,047 | |
| Rights 1 | — | — | 13,961 | 13,961 | |
| Other Investment Company1 | 1,388,488 | — | — | 1,388,488 | |
| Total | $1,009,394,639 | $— | $13,961 | $1,009,408,600 | |
| Liabilities Valuation Input | |||||
| Other Financial Instruments | |||||
| Futures Contracts2 | ($6,246) | $— | $— | ($6,246) |
| 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 fund's policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were no transfers between Level 1, Level 2 and Level 3 for the period ended February 28, 2017.
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Schwab Fundamental Emerging Markets Large Company Index ETF
Statement of Assets and Liabilities
As of February 28, 2017
| Assets | ||
| Investments, at value (cost $864,391,770) | $1,009,408,600 | |
| Deposit with broker for futures contracts | 254,000 | |
| Foreign currency, at value (cost $438,335) | 440,152 | |
| Receivables: | ||
| Dividends | + | 3,059,821 |
| Total assets | 1,013,162,573 | |
| Liabilities | ||
| Payables: | ||
| Investments bought | 1,010,131 | |
| Investment adviser fees | 349,257 | |
| Foreign capital gains tax | 496,594 | |
| Variation margin on futures contracts | + | 33,200 |
| Total liabilities | 1,889,182 | |
| Net Assets | ||
| Total assets | 1,013,162,573 | |
| Total liabilities | – | 1,889,182 |
| Net assets | $1,011,273,391 | |
| Net Assets by Source | ||
| Capital received from investors | 885,784,783 | |
| Net investment income not yet distributed | 1,230,119 | |
| Net realized capital losses | (20,413,962) | |
| Net unrealized capital appreciation | 144,672,451 | |
| Net Asset Value (NAV) | ||||
| Net Assets | ÷ | Shares Outstanding | = | NAV |
| $1,011,273,391 | 38,800,001 | $26.06 | ||
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Schwab Fundamental Emerging Markets Large Company Index ETF
Statement of Operations
For the period March 1, 2016 through February 28, 2017
| Investment Income | ||
| Dividends (net of foreign withholding tax of $2,557,477) | $16,681,567 | |
| Securities on loan, net | + | 563 |
| Total investment income | 16,682,130 | |
| Expenses | ||
| Investment adviser fees | 2,955,225 | |
| Total expenses | – | 2,955,225 |
| Net investment income | 13,726,905 | |
| Realized and Unrealized Gains (Losses) | ||
| Net realized losses on investments (net of foreign capital gains tax of $39,232) | (9,777,551) | |
| Net realized gains on futures contracts | 329,104 | |
| Net realized losses on foreign currency transactions | + | (136,393) |
| Net realized losses | (9,584,840) | |
| Net change in unrealized appreciation (depreciation) on investments (net of change in foreign capital gains tax of $496,594) | 225,919,919 | |
| Net change in unrealized appreciation (depreciation) on futures contracts | (9,516) | |
| Net change in unrealized appreciation (depreciation) on foreign currency translations | + | 213,703 |
| Net change in unrealized appreciation (depreciation) | + | 226,124,106 |
| Net realized and unrealized gains | 216,539,266 | |
| Increase in net assets resulting from operations | $230,266,171 | |
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Schwab Fundamental Emerging Markets Large Company Index ETF
Statement of Changes in Net Assets
For the current and prior report periods
| Operations | ||||
| 3/1/16-2/28/17 | 3/1/15-2/29/16 | |||
| Net investment income | $13,726,905 | $7,336,753 | ||
| Net realized losses | (9,584,840) | (10,486,500) | ||
| Net change in unrealized appreciation (depreciation) | + | 226,124,106 | (78,840,410) | |
| Increase (decrease) in net assets resulting from operations | 230,266,171 | (81,990,157) | ||
| Distributions to Shareholders | ||||
| Distributions from net investment income | ($12,995,400) | ($6,556,080) | ||
| Transactions in Fund Shares | ||||||||
| 3/1/16-2/28/17 | 3/1/15-2/29/16 | |||||||
| SHARES | VALUE | SHARES | VALUE | |||||
| Shares sold | 18,600,000 | $434,910,865 | 16,500,000 | $357,682,826 | ||||
| Shares redeemed | + | — | — | (300,000) | (6,686,539) | |||
| Net transactions in fund shares | 18,600,000 | $434,910,865 | 16,200,000 | $350,996,287 | ||||
| Shares Outstanding and Net Assets | ||||||||
| 3/1/16-2/28/17 | 3/1/15-2/29/16 | |||||||
| SHARES | NET ASSETS | SHARES | NET ASSETS | |||||
| Beginning of period | 20,200,001 | $359,091,755 | 4,000,001 | $96,641,705 | ||||
| Total increase | + | 18,600,000 | 652,181,636 | 16,200,000 | 262,450,050 | |||
| End of period | 38,800,001 | $1,011,273,391 | 20,200,001 | $359,091,755 | ||||
| Net investment income not yet distributed | $1,230,119 | $671,682 | ||||||
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Schwab Fundamental Index 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 Fundamental U.S. Broad Market Index ETF | Schwab U.S. Small-Cap ETF™ |
| Schwab Fundamental U.S. Large Company Index ETF | Schwab U.S. Dividend Equity ETF™ |
| Schwab Fundamental U.S. Small Company Index ETF | Schwab U.S. REIT ETF™ |
| Schwab Fundamental International Large Company Index ETF | Schwab International Equity ETF™ |
| Schwab Fundamental International Small Company Index ETF | Schwab International Small-Cap Equity ETF™ |
| Schwab Fundamental Emerging Markets Large Company Index ETF | Schwab Emerging Markets Equity ETF™ |
| Schwab U.S. Broad Market ETF™ | Schwab U.S. TIPS ETF™ |
| Schwab U.S. Large-Cap ETF™ | Schwab Short-Term U.S. Treasury ETF™ |
| Schwab U.S. Large-Cap Growth ETF™ | Schwab Intermediate-Term U.S. Treasury ETF™ |
| Schwab U.S. Large-Cap Value ETF™ | Schwab U.S. Aggregate Bond ETF™ |
| Schwab U.S. Mid-Cap 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.
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 the mean of the most recent bid and ask quotes. Securities that are primarily traded on foreign exchanges are valued at the official closing price or the last sales price on the exchange where the securities are principally traded with these values then translated into U.S. dollars at the current exchange rate, unless these securities are fair valued as discussed below.
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Financial Notes (continued)
2. Significant Accounting Policies (continued):
• Securities for which no quoted value is available: The Board has adopted procedures to fair value each fund’s securities when market prices are not “readily available” or are unreliable. For example, a fund may fair value a security when it is de-listed or its trading is halted or suspended; when a security’s primary pricing source is unable or unwilling to provide a price; or when a security’s primary trading market is closed during regular market hours. Each fund makes fair value determinations in good faith in accordance with the fund’s valuation procedures. The Pricing Committee considers a number of factors, including unobservable market inputs when arriving at fair value. The Pricing Committee may employ techniques such as the review of related or comparable assets or liabilities, related market activities, recent transactions, market multiples, book values, transactional back-testing, disposition analysis and other relevant information. The Pricing Committee regularly reviews these inputs and assumptions to calibrate the valuations. Due to the subjective and variable nature of fair value pricing, there can be no assurance that a fund could obtain the fair value assigned to the security upon the sale of such security. The Board convenes on a regular basis to review fair value determinations made by the funds pursuant to the valuation procedures.
• Futures contracts: Futures 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.
In accordance with the authoritative guidance on fair value measurements and disclosures under GAAP, the funds disclose the fair value of their investments in a hierarchy that prioritizes the significant inputs to valuation techniques used to measure the fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). If inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the valuation. If the funds determine that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value.
The three levels of the fair value hierarchy are as follows:
• Level 1—quoted prices in active markets for identical securities—Investments whose values are based on quoted market prices in active markets, and whose values are therefore classified as Level 1 prices, include active listed equities and futures contracts. Investments in mutual funds are valued daily at their NAVs, which are classified as Level 1 prices, without consideration to the classification level of the specific investments held by an underlying fund.
• 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.
• Level 3—significant unobservable inputs (including the funds’ own assumptions in determining the fair value of investments)—Investments whose values are classified as Level 3 prices have significant unobservable inputs, as they may trade infrequently or not at all. When observable prices are not available for these securities, the funds use one or more valuation techniques for which sufficient and reliable data is available. The inputs used by the funds in estimating the value of Level 3 prices may include the original transaction price, quoted prices for similar securities or assets in active markets, completed or pending third-party transactions in the underlying investment or comparable issuers, and changes in financial ratios or cash flows. Level 3 prices may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the funds in the absence of market information. Assumptions used by the funds due to the lack of observable inputs may significantly impact the resulting fair value and therefore the funds’ results of operations.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The levels associated with valuing the funds' investments as of February 28, 2017 are disclosed in the Condensed Portfolio Holdings.
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Financial Notes (continued)
2. Significant Accounting Policies (continued):
(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 and broker rebates, associated with securities lending activities under the trust’s Securities Lending Program paid to the unaffiliated lending agents start at 10% of gross lending revenue, with subsequent breakpoints to a low of 7.5%.
As of February 28, 2017, the funds had securities on loan, all of which were classified as common stocks. The value of the securities on loan and the related collateral as of February 28, 2017, 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.
(c) Security Transactions:
Security transactions are recorded as of the date the order to buy or sell the security is executed. Realized gains and losses from security transactions are based on the identified costs of the securities involved.
Assets and liabilities denominated in foreign currencies are reported in U.S. dollars. For assets and liabilities held on a given date, the dollar value is based on market exchange rates in effect on that date. Transactions involving foreign currencies, including purchases, sales, income receipts and expense payments, are calculated using exchange rates in effect on the transaction date. Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange 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.
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Financial Notes (continued)
2. Significant Accounting Policies (continued):
(d) Investment Income:
Interest income is recorded as it accrues. Dividends and distributions from portfolio securities and underlying funds are recorded on the date they are effective (the ex-dividend date), although the funds record certain foreign security dividends on the day they learn of the ex-dividend date. Any distributions from underlying funds are recorded in accordance with the character of the distributions as designated by the underlying funds.
Income received from foreign sources may result in withholding tax. Withholding taxes are accrued at the same time as the related income if the tax rate is fixed and known, unless a tax withheld is reclaimable from the local tax authorities in which case it is recorded as receivable. If the tax rate is not known or estimable, such expense or reclaim receivable is recorded when the net proceeds are received.
(e) Expenses:
Pursuant to the Investment Advisory Agreement (Advisory Agreement) between Charles Schwab Investment Management, Inc. (CSIM or the investment adviser) and the trust, the investment adviser will pay the operating expenses of each fund, excluding interest expense, taxes, any brokerage expenses, and extraordinary or non-routine expenses. Interest expense, taxes, any brokerage expenses and extraordinary or non-routine expenses that are specific to a fund are charged directly to the fund. Effective March 1, 2017, the advisory fees will include interest expenses, which were previously excluded.
(f) Distributions to Shareholders:
Schwab Fundamental U.S. Broad Market Index ETF, Schwab Fundamental U.S. Large Company Index ETF, and Schwab Fundamental U.S. Small Company Index ETF generally make distributions from net investment income, if any, quarterly. Schwab Fundamental International Large Company Index ETF, Schwab Fundamental International Small Company Index ETF, and Schwab Fundamental Emerging Markets Large Company Index ETF generally make distributions from net investment income, if any, annually. All funds generally make distributions from net realized capital gains, if any, once a year.
(g) Accounting Estimates:
The accounting policies described in this report conform to GAAP. Notwithstanding this, shareholders should understand that in order to follow these principles, fund management has to make estimates and assumptions that affect the information reported in the financial statements. It’s possible that once the results are known, they may turn out to be different from these estimates and these differences may be material.
(h) Federal Income Taxes:
The funds intend to meet federal income and excise tax requirements for regulated investment companies under subchapter M of the Internal Revenue Code, as amended. Accordingly, the funds distribute substantially all of their net investment income and net realized capital gains, if any, to their respective shareholders each year. As long as a fund meets the tax requirements, it is not required to pay federal income tax.
(i) Foreign Taxes:
The funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, corporate events, foreign currency exchanges and capital gains on investments. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in foreign markets in which the funds invest. These foreign taxes, if any, are paid by the funds and are disclosed in the Statement of Operations. Foreign taxes payable as of February 28, 2017, 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.
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Financial Notes (continued)
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-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.
Mid-Cap Risk. Certain funds invest in mid-cap stocks. Mid-cap stocks tend to go in and out of favor based on market and economic conditions. Stocks of mid-cap companies tend to be more vulnerable to adverse business or economic events than larger, more established companies. During a period when mid-cap stocks fall behind other types of investments—bonds or large-cap stocks, for instance—a fund’s mid-cap holdings could reduce performance.
Small-Cap Risk. Certain funds invest in small-cap stocks. Historically, small-cap stocks have been riskier than large- and mid-cap stocks, and their prices may move sharply, especially during market upturns and downturns. Small-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies. During a period when small-cap stocks fall behind other types of investments—large- 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 may involve certain risks that are greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of a fund's investments, and could impair the fund's ability to meet its investment objective or invest in accordance with its investment strategy. These risks may be heightened in connection with investments in emerging markets. Foreign securities also include American Depositary receipts (ADRs), Global Depositary receipts (GDRs), and European Depositary receipts (EDRs), which are receipts issued by U.S. and foreign banks that represent shares of foreign-based corporations. Investment in ADRs, GDRs and EDRs may be less liquid than the underlying shares in their primary trading market and GDRs, many of which are issued by companies in emerging markets, may be more volatile. To the extent a fund's investments in a single country or a limited number of countries represent a larger percentage of the fund's assets, the fund's performance may be adversely affected by the economic, political and social conditions in those countries and the fund may be subject to increased price volatility.
Emerging Markets Risk. Certain funds invest in emerging markets. Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting and reporting requirements and greater risk associated with the custody of securities. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there 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. 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.
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Financial Notes (continued)
3. Risk Factors (continued):
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 use derivatives to enhance returns or hedge against market declines. Examples of derivatives are options, futures, options on futures and swaps. An option is the right to buy or sell an instrument at a specific price before a specific date. A future is an agreement to buy or sell a financial instrument at a specific price on a specific day. A swap is an agreement whereby two parties agree to exchange payment streams calculated in relation to a rate, index, instrument or certain securities and a predetermined amount. A fund's use of derivatives that are subject to regulation by the Commodity Futures Trading Commission (CFTC) could cause the fund to become a commodity pool, which would require the fund to comply with certain CFTC rules.
A fund’s use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as liquidity risk and market risk, are discussed elsewhere in this section. The fund’s use of derivatives is also subject to credit risk, leverage risk, lack of availability risk, valuation risk, correlation risk and tax risk. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Credit risk is the risk that the counterparty to a derivatives transaction may not fulfill its obligations. Leverage risk is the risk that a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gain. A fund's use of derivatives could reduce the fund's performance, increase the fund's volatility, and could cause the fund to lose more than the initial amount invested.
Liquidity Risk. A fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or a fund may have to sell them at a loss.
Securities Lending Risk. Securities lending involves the risk of loss of rights in the collateral or delay in recovery of the collateral if the borrower fails to return the security loaned or becomes insolvent.
Concentration Risk. To the extent that a fund's or an index's portfolio is concentrated in the securities of issuers in a particular market, industry, group of industries, sector or asset class, the fund may be adversely affected by the performance of those securities, may be subject to increased price volatility and may be more susceptible to adverse economic, market, political or regulatory occurrences affecting that market, industry, group of industries, sector or asset class.
Market Trading Risk. Although fund shares are listed on national securities exchanges, there can be no assurance that an active trading market for fund shares will develop or be maintained. If an active market is not maintained, investors may find it difficult to buy or sell fund shares.
Shares of the Fund May Trade at Prices Other Than NAV. Fund shares may be bought and sold in the secondary market at market prices. Although it is expected that the market price of the shares of a fund will approximate the fund’s NAV, there may be times when the market price and the NAV vary significantly. An investor may pay more than NAV when buying shares of a fund in the secondary market, and an investor may receive less than NAV when selling 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 (CSC), serves as each fund’s investment adviser pursuant to an Advisory Agreement between CSIM and the trust.
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Financial Notes (continued)
4. Affiliates and Affiliated Transactions (continued):
For its advisory services to the funds, CSIM is entitled to receive an annual fee, payable monthly, based on a percentage of each fund’s average daily net assets as follows:
| Schwab Fundamental U.S. Broad Market Index ETF | Schwab Fundamental U.S. Large Company Index ETF | Schwab Fundamental U.S. Small Company Index ETF | Schwab Fundamental International Large Company Index ETF | Schwab Fundamental International Small Company Index ETF | Schwab Fundamental Emerging Markets Large Company Index ETF |
| 0.32% | 0.32% | 0.32% | 0.32% | 0.46% | 0.46% |
Subsequent to the reporting period ended February 28, 2017, and effective March 1, 2017, the advisory fees of the funds were reduced as follows:
| Schwab Fundamental U.S. Broad Market Index ETF | Schwab Fundamental U.S. Large Company Index ETF | Schwab Fundamental U.S. Small Company Index ETF | Schwab Fundamental International Large Company Index ETF | Schwab Fundamental International Small Company Index ETF | Schwab Fundamental Emerging Markets Large Company Index ETF |
| 0.25% | 0.25% | 0.25% | 0.25% | 0.39% | 0.39% |
The funds may engage in certain transactions involving affiliates. For instance, a fund may own shares of CSC if that company is included in its index. Below is the summary of investment activities involving CSC shares owned by the funds during the report period:
| Fund | Balance of Shares Held at 2/29/16 | Gross Purchases | Gross Sales | Balance of Shares Held at 2/28/17 | Market Value at 2/28/17 | Realized Gains(Losses) 3/1/16 to 2/28/17 | Dividends Received 3/1/16 to 2/28/17 |
| Schwab Fundamental U.S. Broad Market Index ETF | 2,712 | 748 | — | 3,460 | $139,819 | $— | $888 |
| Schwab Fundamental U.S. Large Company Index ETF | 17,086 | 16,812 | (2,519) | 31,379 | 1,268,025 | 3,669 | 7,347 |
The funds may engage in direct transactions with certain other Schwab funds when practical. When one fund is seeking to sell a security that another is seeking to buy, an interfund transaction can allow both funds to benefit by reducing transaction costs. This practice is limited to funds that share the same investment adviser, trustees and/or officers. For the period ended February 28, 2017, 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 Fundamental U.S. Broad Market Index ETF | $6,415,632 | ($1,799,942) |
| Schwab Fundamental U.S. Large Company Index ETF | 46,582,872 | (1,561,321) |
| Schwab Fundamental U.S. Small Company Index ETF | 19,824,916 | (2,322,004) |
| Schwab Fundamental International Large Company Index ETF | 30,713,884 | (1,219,900) |
| Schwab Fundamental International Small Company Index ETF | 5,519,191 | (1,198,059) |
| Schwab Fundamental Emerging Markets Large Company Index ETF | 8,852,748 | (652,584) |
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.
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Financial Notes (continued)
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:
During the period, the funds were 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. 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. There were no borrowings from the line of credit during the period.
The funds also have access to custodian overdraft facilities. A fund may have utilized the overdraft facility and incurred an interest expense, which is disclosed on the fund’s Statement of Operations, if any. The interest expense is determined based on a negotiated rate above the current Federal Funds Rate.
8. Derivatives:
Certain funds entered into equity index futures contracts during the report period. The funds invested in futures contracts to equitize available cash. The fair value and variation margin for futures contracts held at February 28, 2017 are presented on the Condensed Portfolio Holdings and Statement of Assets and Liabilities, respectively. The net realized and change in unrealized gains (losses) on futures contracts are presented on the Statement of Operations. Refer to financial note 2(b) for the funds’ accounting policies with respect to futures contracts and financial note 3 for disclosures concerning the risks of investing in futures contracts. During the period ended February 28, 2017, the month-end average contract values of futures contracts held by the funds and the month-end average number of contracts held were as follows:
| Contract Values | Number of Contracts | |
| Schwab Fundamental U.S. Broad Market Index ETF | $569,352 | 5 |
| Schwab Fundamental U.S. Large Company Index ETF | 3,653,972 | 34 |
| Schwab Fundamental U.S. Small Company Index ETF | 2,409,577 | 27 |
| Schwab Fundamental International Large Company Index ETF | 5,578,535 | 67 |
| Schwab Fundamental International Small Company Index ETF | 1,326,080 | 16 |
| Schwab Fundamental Emerging Markets Large Company Index ETF | 1,623,095 | 36 |
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Financial Notes (continued)
9. Purchases and Sales/Maturities of Investment Securities:
For the period ended February 28, 2017, purchases and sales/maturities of securities (excluding in-kind transactions and short-term obligations) were as follows:
| Purchases of Securities | Sales/Maturities of Securities | |
| Schwab Fundamental U.S. Broad Market Index ETF | $23,987,028 | $20,010,548 |
| Schwab Fundamental U.S. Large Company Index ETF | 185,076,170 | 150,651,163 |
| Schwab Fundamental U.S. Small Company Index ETF | 275,557,616 | 231,296,913 |
| Schwab Fundamental International Large Company Index ETF | 165,082,402 | 149,837,443 |
| Schwab Fundamental International Small Company Index ETF | 151,060,573 | 145,297,708 |
| Schwab Fundamental Emerging Markets Large Company Index ETF | 440,937,665 | 90,654,412 |
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 February 28, 2017 were as follows:
| In-Kind Purchases of Securities | In-Kind Sales of Securities | |
| Schwab Fundamental U.S. Broad Market Index ETF | $52,232,037 | $— |
| Schwab Fundamental U.S. Large Company Index ETF | 1,019,334,268 | 19,424,181 |
| Schwab Fundamental U.S. Small Company Index ETF | 714,845,567 | 27,332,230 |
| Schwab Fundamental International Large Company Index ETF | 834,467,017 | — |
| Schwab Fundamental International Small Company Index ETF | 395,085,443 | 13,132,336 |
| Schwab Fundamental Emerging Markets Large Company Index ETF | 84,144,146 | — |
For the period ended February 28, 2017, the funds realized net capital gains or losses resulting from in-kind redemptions of Creation Units. Because such gains or losses are not taxable to the funds and are not distributed to existing fund shareholders, the gains or losses are reclassified from accumulated net realized gains or losses to capital received from investors at the end of the funds' tax year. These reclassifications have no effect on net assets or net asset values per share. The net realized in-kind gains or losses for the period ended February 28, 2017 are disclosed in the funds' Statements of Operations, if any.
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Financial Notes (continued)
11. Federal Income Taxes
As of February 28, 2017, the components of distributable earnings on a tax-basis were as follows:
| Schwab Fundamental U.S. Broad Market Index ETF | Schwab Fundamental U.S. Large Company Index ETF | Schwab Fundamental U.S. Small Company Index ETF | Schwab Fundamental International Large Company Index ETF | Schwab Fundamental International Small Company Index ETF | Schwab Fundamental Emerging Markets Large Company Index ETF | ||||||
| Undistributed ordinary income | $771,165 | $6,668,851 | $2,008,589 | $5,004,371 | $1,884,696 | $2,496,125 | |||||
| Undistributed long-term capital gains | — | — | — | — | — | — | |||||
| Unrealized appreciation | 40,069,551 | 249,977,534 | 236,648,364 | 140,748,096 | 94,261,623 | 149,397,717 | |||||
| Unrealized depreciation | (7,755,664) | (37,971,543) | (42,299,531) | (64,991,320) | (25,140,791) | (18,305,256) | |||||
| Other unrealized appreciation (depreciation) | — | — | — | 7,440 | 7,730 | (338,133) | |||||
| Net unrealized appreciation (depreciation) | $32,313,887 | $212,005,991 | $194,348,833 | $75,764,216 | $69,128,562 | $130,754,328 |
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 February 28, 2017, the funds had capital loss carryforwards available to offset future net capital gains as follows:
| Expiration Date | Schwab Fundamental U.S. Broad Market Index ETF | Schwab Fundamental U.S. Large Company Index ETF | Schwab Fundamental U.S. Small Company Index ETF | Schwab Fundamental International Large Company Index ETF | Schwab Fundamental International Small Company Index ETF | Schwab Fundamental Emerging Markets Large Company Index ETF | |||||
| No expiration | $2,886,323 | $9,735,348 | $18,248,707 | $32,967,455 | $16,086,481 | $7,761,845 | |||||
| Total | $2,886,323 | $9,735,348 | $18,248,707 | $32,967,455 | $16,086,481 | $7,761,845 |
For the year ended February 28, 2017, the funds had no capital loss carryforwards utilized.
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 February 28, 2017, the funds had no capital or late-year ordinary losses deferred.
The tax-basis components of distributions paid during the current period were as follows:
| Schwab Fundamental U.S. Broad Market Index ETF | Schwab Fundamental U.S. Large Company Index ETF | Schwab Fundamental U.S. Small Company Index ETF | Schwab Fundamental International Large Company Index ETF | Schwab Fundamental International Small Company Index ETF | Schwab Fundamental Emerging Markets Large Company Index ETF | |
| Current period distributions | ||||||
| Ordinary income | $4,414,601 | $29,673,625 | $12,680,080 | $37,964,160 | $13,315,200 | $12,995,400 |
| Long-term capital gains | — | — | — | — | — | — |
| Prior period distributions | ||||||
| Ordinary income | $4,591,356 | $14,147,221 | $5,384,415 | $16,183,231 | $4,911,780 | $6,556,080 |
| 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. The funds may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes.
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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 February 28, 2017, the funds made the following reclassifications:
| Schwab Fundamental U.S. Broad Market Index ETF | Schwab Fundamental U.S. Large Company Index ETF | Schwab Fundamental U.S. Small Company Index ETF | Schwab Fundamental International Large Company Index ETF | Schwab Fundamental International Small Company Index ETF | Schwab Fundamental Emerging Markets Large Company Index ETF | |
| Capital shares | $1,506 | $4,936,912 | $12,457,558 | $— | $3,039,110 | $— |
| Undistributed net investment income | (98,274) | (560,812) | (658,245) | (308,512) | 328,752 | (173,068) |
| Net realized gains and losses | 96,768 | (4,376,100) | (11,799,313) | 308,512 | (3,367,862) | 173,068 |
For the period ended February 28, 2017, the following funds reclassified non-taxable security gains and losses realized on the in-kind redemption of Creation Units (Note 10) as an increase or decrease to capital received from investors in the Statement of Assets and Liabilities as follows:
| Schwab Fundamental U.S. Broad Market Index ETF | Schwab Fundamental U.S. Large Company Index ETF | Schwab Fundamental U.S. Small Company Index ETF | Schwab Fundamental International Large Company Index ETF | Schwab Fundamental International Small Company Index ETF | Schwab Fundamental Emerging Markets Large Company Index ETF | |
| Net realized gains and losses reclassified to capital received from investors | $— | $4,938,639 | $12,464,691 | $— | $3,124,985 | $— |
As of February 28, 2017, management has reviewed the tax positions for open periods (for federal purposes, three years from the date of filing and for state purposes, four years from the date of filing) as applicable to the funds, and has determined that no provision for income tax is required in the funds' financial statements. The funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the period ended February 28, 2017, the funds did not incur any interest or penalties.
12. Recent Regulatory Development:
In October 2016, the SEC adopted new rules and amended existing rules (together, final rules) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosure about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management is currently evaluating the impact that the adoption of the amendments to Regulation S-X will have on the funds' financial statements and related disclosures.
13. 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 of Schwab Strategic Trust and Shareholders of:
Schwab Fundamental U.S. Broad Market Index ETF
Schwab Fundamental U.S. Large Company Index ETF
Schwab Fundamental U.S. Small Company Index ETF
Schwab Fundamental International Large Company Index ETF
Schwab Fundamental International Small Company Index ETF
Schwab Fundamental Emerging Markets Large Company Index ETF
Schwab Fundamental U.S. Broad Market Index ETF
Schwab Fundamental U.S. Large Company Index ETF
Schwab Fundamental U.S. Small Company Index ETF
Schwab Fundamental International Large Company Index ETF
Schwab Fundamental International Small Company Index ETF
Schwab Fundamental Emerging Markets Large Company Index ETF
In our opinion, the accompanying statements of assets and liabilities, including the condensed portfolio holdings, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Schwab Fundamental U.S. Broad Market Index ETF, Schwab Fundamental U.S. Large Company Index ETF, Schwab Fundamental U.S. Small Company Index ETF, Schwab Fundamental International Large Company Index ETF, Schwab Fundamental International Small Company Index ETF and Schwab Fundamental Emerging Markets Large Company Index ETF (six of the funds constituting Schwab Strategic Trust, hereafter referred to as the “Funds”) as of February 28, 2017, 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 indicated, 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 as of February 28, 2017 by correspondence with the custodian, brokers and authorized participants, or by other appropriate auditing procedures where replies were not received, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
April 17, 2017
San Francisco, California
April 17, 2017
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Other Federal Tax Information (unaudited)
The funds may elect to pass on the benefits of the foreign tax credit to its shareholders for the period ended February 28, 2017, and the respective foreign source income on the funds as follows:
| Foreign Tax Credit | Foreign Source Income | |
| Schwab Fundamental U.S. Broad Market Index ETF | $— | $— |
| Schwab Fundamental U.S. Large Company Index ETF | — | — |
| Schwab Fundamental U.S. Small Company Index ETF | — | — |
| Schwab Fundamental International Large Company Index ETF | 3,516,572 | 46,668,937 |
| Schwab Fundamental International Small Company Index ETF | 1,280,964 | 14,695,607 |
| Schwab Fundamental Emerging Markets Large Company Index ETF | 2,498,168 | 19,232,780 |
For corporate shareholders, the following percentage of the funds’ dividend distributions paid during the period ended February 28, 2017 qualify for the corporate dividends received deduction:
| Schwab Fundamental U.S. Broad Market Index ETF | 100.00% |
| Schwab Fundamental U.S. Large Company Index ETF | 100.00% |
| Schwab Fundamental U.S. Small Company Index ETF | 77.43% |
| Schwab Fundamental International Large Company Index ETF | 0.04% |
| Schwab Fundamental International Small Company Index ETF | —% |
| Schwab Fundamental Emerging Markets Large Company Index ETF | —% |
For the period ended February 28, 2017, 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 2018 via IRS form 1099 of the amount for use in preparing their 2017 income tax return.
| Schwab Fundamental U.S. Broad Market Index ETF | $4,414,601 |
| Schwab Fundamental U.S. Large Company Index ETF | 29,673,625 |
| Schwab Fundamental U.S. Small Company Index ETF | 10,314,122 |
| Schwab Fundamental International Large Company Index ETF | 41,472,855 |
| Schwab Fundamental International Small Company Index ETF | 11,393,706 |
| Schwab Fundamental Emerging Markets Large Company Index ETF | 11,585,404 |
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Other Information (unaudited)
Frequency Distribution of Discounts and Premiums
Market Price vs. NAV as of February 28, 2017
Market Price vs. NAV as of February 28, 2017
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 cannot be used to predict future results. The chart does not include days in which the NAV equals the Market Price.
| Number of Days Market Price Above NAV | Number of Days Market Price Below NAV | |||||||
| 1-49 Basis Points | 50-99 Basis Points | 100-199 Basis Points | >200 Basis Points | 1-49 Basis Points | 50-99 Basis Points | 100-199 Basis Points | >200 Basis Points | |
| Schwab Fundamental U.S. Broad Market Index ETF | ||||||||
| Commencement of trading | ||||||||
| 8/15/13 through 2/28/17 | 601 | — | — | — | 141 | — | — | — |
| Schwab Fundamental U.S. Large Company Index ETF | ||||||||
| Commencement of trading | ||||||||
| 8/15/13 through 2/28/17 | 526 | — | — | — | 110 | — | — | — |
| Schwab Fundamental U.S. Small Company Index ETF | ||||||||
| Commencement of trading | ||||||||
| 8/15/13 through 2/28/17 | 569 | — | — | — | 111 | — | — | — |
| Schwab Fundamental International Large Company Index ETF | ||||||||
| Commencement of trading | ||||||||
| 8/15/13 through 2/28/17 | 284 | 370 | 111 | 2 | 85 | 19 | 7 | — |
| Schwab Fundamental International Small Company Index ETF | ||||||||
| Commencement of trading | ||||||||
| 8/15/13 through 2/28/17 | 246 | 342 | 169 | 5 | 84 | 25 | 11 | 1 |
| Schwab Fundamental Emerging Markets Large Company Index ETF | ||||||||
| Commencement of trading | ||||||||
| 8/15/13 through 2/28/17 | 277 | 277 | 121 | 8 | 119 | 43 | 19 | 1 |
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Investment Advisory Agreement Approval
The Investment Company Act of 1940 requires that initial approval of, as well as the continuation of, a fund’s investment advisory agreement must be specifically approved (1) by the vote of the trustees or by a vote of the shareholders of the fund, and (2) by the vote of a majority of the trustees who are not parties to the investment advisory agreement or “interested persons” of any party (the Independent Trustees), cast in person at a meeting called for the purpose of voting on such approval. In connection with such approvals, the fund’s trustees must request and evaluate, and the investment adviser is required to furnish, such information as may be reasonably necessary to evaluate the terms of the investment advisory agreement.
At a meeting held on January 18, 2017, the Board, including a majority of the Independent Trustees, considered information specifically relating to its consideration of the approval of an amended and restated investment advisory agreement (the Amended Agreement) between Schwab Strategic Trust (the Trust) and Charles Schwab Investment Management, Inc. (CSIM) with respect to the existing funds in the Trust, including Schwab Fundamental U.S. Broad Market Index ETF, Schwab Fundamental U.S. Large Company Index ETF, Schwab Fundamental U.S. Small Company Index ETF, Schwab Fundamental International Large Company Index ETF, Schwab Fundamental International Small Company Index ETF, and Schwab Fundamental Emerging Markets Large Company Index ETF (the Funds) to reflect (i) a reduction to the rate paid by the
Trust to CSIM as compensation for CSIM’s services rendered to the Funds; and (ii) a change that would make CSIM responsible for the interest expenses resulting from the Funds’ operations. The Board reviewed materials provided by CSIM relating to these changes (including a representation by CSIM that the changes will not result in any reduction in the nature and level of services provided to the Funds by CSIM) and also took into account the extensive information that the Board reviewed and the conclusions it reached at its May and June 2016 meetings, in connection with its annual consideration and approval of the continuation of the Funds’ investment advisory agreement. Because the Board had conducted a full review of the Funds’ investment advisory agreement in the spring of 2016, and intends to conduct another such review in the spring of 2017, it limited its discussions in January 2017 primarily to the proposed changes to the agreement.
Based on the Trustees’ deliberation and their evaluation of the information described above, the Board, including a majority of the Independent Trustees, approved the Amended Agreement with respect to the Funds effective March 1, 2017 through June 30, 2017 and concluded that the compensation payable by the Funds to CSIM under the Amended Agreement is fair and reasonable in light of the services CSIM renders to (and the expenses it bears relating to) the Funds and such other matters as the Trustees 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 110 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. | 110 | 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). | 110 | 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). | 110 | 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. | 110 | Director, Symantec Corporation (2003 – present) Director, Corcept Therapeutics Incorporated (2004 – present) Director, Adamas Pharmaceuticals, Inc. (2009 – 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 |
| 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). | 110 | Director, KLA-Tencor Corporation (2008 – present) |
| 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). | 110 | 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). | 110 | 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). | 110 | 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). | 110 | 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) |
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| Interested Trustees | |||
| Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served1) | Principal Occupations During the Past Five Years | Number of Portfolios in Fund Complex Overseen by the Trustee | Other Directorships |
| Walter W. Bettinger II2 1960 Chairman and Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Schwab Strategic Trust since 2009; Laudus Trust since 2010) | Director, President and Chief Executive Officer, 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); Director, Schwab Holdings, Inc. (May 2008 – present); and Director, Charles Schwab Investment Management, Inc. (July 2016 – present). | 110 | Director, The Charles Schwab Corporation (2008 – present) |
| 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). | 110 | 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 (May 2007 – present), Senior Executive Vice President (Feb. 2016 – present), and Executive Vice President (May 2007 – Feb. 2016), Schwab Holdings, Inc. | 110 | 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.
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 Month Index An index that includes all publicly issued zero-coupon U.S. Treasury Bills that have a remaining maturity of less than 3 months and more than 1 month, are rated investment grade, and have $250 million or more of outstanding face value.
beta A historical measure of an investment’s volatility relative to a market index (usually the S&P 500®). The index is defined as having a beta of 1.00. Investments with a beta higher than 1.00 have been more volatile than the index; those with a beta of less than 1.00 have been less volatile.
bid The highest price at which someone is willing to buy a security.
cap, capitalization See “market cap.”
capital gain, capital loss The difference between the amount paid for an investment and its value at a later time. If the investment has been sold, the capital gain or loss is considered a realized gain or loss. If the investment is still held, the gain or loss is still “on paper” and is considered unrealized.
commencement of operations The date that the first NAV was calculated.
creation unit (C.U.) A basket of securities that is delivered by an authorized participant (AP) to the fund equal to the current holdings of the ETF, plus a designated cash component. In return, the APs receive a large block of ETF shares (typically 50,000 shares), which investors can then buy and sell in the secondary market.
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.
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.
market price return The return based on the change in market price per share of the fund over a given time period. Market price returns assume that dividends and capital gain distributions have been reinvested in the fund at market price.
median market cap The midpoint of the range of market caps of the stocks held by a fund. There are different ways of calculating median market cap. With a simple median, half of the stocks in the fund’s portfolio would be larger than the median, and half would be smaller. With a weighted median (the type that is calculated for these funds), half of the fund’s assets are invested in stocks that are larger than the median market cap, and half in stocks that are smaller.
MSCI EAFE (Europe, Australasia, Far East) Index A free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada. The Net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes; returns are calculated applying dividend withholding rates applicable to non-resident persons who do not benefit from double taxation treaties.
MSCI Emerging Markets Index A free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. The Net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes; returns are calculated applying dividend withholding rates applicable to non-resident persons who do not benefit from double taxation treaties.
net asset value (NAV) The value of one share of a fund. NAV is calculated by taking the fund’s total assets, subtracting liabilities, and dividing by the number of shares outstanding.
NAV return The return based on the change in NAV of the fund over a given time period. NAV returns assume that dividends and capital gain distributions have been reinvested in the fund.
offer (ask) The lowest price at which an individual is willing to sell a security.
open The price at which a security opened for trading on a given day.
outstanding shares, shares outstanding When speaking of the fund, indicates all shares currently held by investors.
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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.
rights and warrants Rights and warrants are types of securities that entitle the holder to purchase a proportionate amount of common stock at a specified price for a specific period of time. Rights allow a shareholder to buy more shares directly from the company, usually at a price somewhat lower than the current market price of the outstanding shares. Warrants are usually issued with bonds and preferred stock. Rights and warrants can trade on the market separately from the company’s stock. The prices of rights and warrants do not necessarily move parallel to the prices of the underlying common stock. Rights usually expire within a few weeks of issuance, while warrants may not expire for several years. If a right or warrant is not exercised within the specified time period, it will become worthless and a fund will lose the purchase price it paid for the right or warrant and the right to purchase the underlying security.
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.
Russell 3000® Index An index that measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market. The Russell 3000 Index is constructed to provide a comprehensive, unbiased and stable barometer of the broad market and is completely reconstituted annually to ensure new and growing equities are reflected.
Russell Developed ex-U.S. Index An index that measures the performance of the largest investable securities in developed countries globally, excluding companies assigned to the United States. The Russell Developed ex-US index is constructed to provide a comprehensive and unbiased barometer for this market segment and is completely reconstituted annually to accurately reflect the changes in the market over time.
Russell RAFI Developed ex US Large Company Index An index that ranks companies in the Russell Developed ex-U.S. Index by fundamental measures of size and tracks the performance of those companies whose fundamental scores are in the top 87.5% of the Russell Developed ex-U.S. Index. The index uses a partial quarterly reconstitution methodology in which the index is split into four equal segments at the annual reconstitution and each segment is then rebalanced on a rolling quarterly basis. The Net series reduces index performance by adjusting for local taxes. The Russell Developed ex-U.S. Index measures the performance of the largest investable securities in developed countries globally, excluding companies assigned to the United States.
Russell RAFI Developed ex US Small Company Index An index that ranks companies in the Russell Developed ex-U.S. Index by fundamental measures of size and tracks the performance of those companies whose fundamental scores are in the bottom 12.5% of the Russell Developed ex-U.S. Index. The index uses a partial quarterly reconstitution methodology in which the index is split into four equal segments at the annual reconstitution and each segment is then
rebalanced on a rolling quarterly basis. The Net series reduces index performance by adjusting for local taxes. The Russell Developed ex-U.S. Index measures the performance of the largest investable securities in developed countries globally, excluding companies assigned to the United States.
Russell RAFI Emerging Markets Large Company Index An index that ranks companies in the Russell Emerging Markets Index by measures of fundamental size and tracks the performance of those companies whose fundamental scores are in the top 87.5% of the Russell Emerging Markets Index. The index uses a partial quarterly reconstitution methodology in which the index is split into four equal segments at the annual reconstitution and each segment is then rebalanced on a rolling quarterly basis. The Net series reduces index performance by adjusting for local taxes. The Russell Emerging Markets Index measures the performance of the investable securities in emerging countries globally.
Russell RAFI US Index An index that selects, ranks, and weights securities by fundamental measures of company size as opposed to market capitalization. The fundamental overall company scores are created using as the universe the members of the Russell 3000 Index. Securities are grouped in order of decreasing company score for each index and each company receives a weight as a percentage of the sum of the weights of the individual securities within each index.
Russell RAFI US Large Company Index An index that ranks companies in the Russell 3000 Index by fundamental measures of size, and tracks the performance of those companies whose fundamental scores are in the top 87.5% of the Russell 3000 Index. The index uses a partial quarterly reconstitution methodology in which the index is split into four equal segments at the annual reconstitution and each segment is then rebalanced on a rolling quarterly basis. The Russell 3000 Index measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity market.
Russell RAFI US Small Company Index An index that ranks companies in the Russell 3000 Index by fundamental measures of size and tracks the performance of those companies whose fundamental scores are in the bottom 12.5% of the Russell 3000 Index. The index uses a partial quarterly reconstitution methodology in which the index is split into four equal segments at the annual reconstitution and each segment is then rebalanced on a rolling quarterly basis. The Russell 3000 Index measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity market.
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
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.
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.
Contact Us
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
© 2016 Schwab ETFs. All rights reserved.
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Notes
Schwab Fundamental Index ETFs
Schwab ETFs™
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 below shows all currently available Schwab ETFs.
Investors should carefully consider information contained in the prospectus, or if available, the summary prospectus, including investment objectives, risks, charges and expenses before investing. Please call 1-877-824-5615 for a prospectus 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
Index ETF
Investment Adviser
Charles Schwab Investment Management, Inc.
211 Main Street, San Francisco, CA 94105
Schwab ETFs™
1-877-824-5615
© 2017 Charles Schwab Investment Management, Inc. All rights reserved.
Printed on recycled paper.
Printed on recycled paper.
| * | FUNDAMENTAL INDEX is a registered trademark of Research Affiliates LLC. |
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MFR79815-03
00191457
00191457
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Item 2: Code of Ethics.
| (a) | Registrant has adopted a code of ethics that applies to its principal executive officer, principal financial officer, and any other persons who perform a similar function, regardless of whether these individuals are employed by Registrant or a third party. |
| (c) | During the period covered by the report, no amendments were made to the provisions of this code of ethics. |
| (d) | During the period covered by the report, Registrant did not grant any waivers, including implicit waivers, from the provisions of this code of ethics. |
| (f)(1) | Registrant has filed this code of ethics as an exhibit pursuant to Item 12(a)(1) of Form N-CSR. |
Item 3: Audit Committee Financial Expert.
Registrant’s Board of Trustees has determined that Kiran M. Patel, Robert W. Burns and Kimberly S. Patmore, each currently serving on its audit, compliance and valuation committee, are each an “audit committee financial expert,” as such term is defined in Item 3 of Form N-CSR. Each member of Registrant’s audit, compliance and valuation committee is “independent” under the standards set forth in Item 3 of Form N-CSR.
The designation of each of Mr. Patel, Mr. Burns and Ms. Patmore as an “audit committee financial expert” pursuant to Item 3 of Form N-CSR does not (i) impose upon such individual any duties, obligations, or liability that are greater than the duties, obligations and liability imposed upon such individual as a member of Registrant’s audit, compliance and valuation committee or Board of Trustees in the absence of such designation; and (ii) affect the duties, obligations or liability of any other member of Registrant’s audit, compliance and valuation committee or Board of Trustees.
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Item 4: Principal Accountant Fees and Services.
Registrant is composed of twenty-one operational series. Ten series have a fiscal year-end of August 31, four series have a fiscal year-end of December 31, and seven series have a fiscal year-end of February 28 (whose annual financial statements are reported in Item 1). Principal accountant fees disclosed in Items 4(a)-(d) and 4(g) include fees billed for services rendered to each of the fifteen operational series, based on their respective 2016/2017 and 2015/2016 fiscal years, as applicable.
The following table presents fees billed by the principal accountant in each of the last two fiscal years for the services rendered to the Funds:
(a) Audit Fees | (b) Audit-Related Fees1 | (c) Tax Fees2 | (d) All Other Fees3 | |||||||||||||||||||||||||
Fiscal Year | Fiscal Year 2015/2016 | Fiscal Year 2016/2017 | Fiscal Year 2015/2016 | Fiscal Year 2016/2017 | Fiscal Year 2015/2016 | Fiscal Year 2016/2017 | Fiscal Year 2015/2016 | |||||||||||||||||||||
$ 488,203 | $ | 454,657 | $ | 0 | $ | 0 | $ | 80,863 | $ | 100,482 | None | None | ||||||||||||||||
| 1 | The nature of the services includes assurance and related services reasonably related to the performance of the audit of financial statements not included in Audit Fees. |
| 2 | The nature of the services includes tax compliance, tax advice and tax planning. |
| 3 | The nature of the services include agreed upon procedures relating to Charles Schwab Investment Management., Inc.’s, (“CSIM”) expenses for purposes of Section 15(c) of the Investment Company Act of 1940. |
(e) (1) Registrant’s audit committee does not have pre-approval policies and procedures as described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
(2) There were no services described in each of paragraphs (b) through (d) above (including services required to be approved by Registrant’s audit committee
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pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X) that were approved by Registrant’s audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
| (f) | Not applicable. |
(g) Below are the aggregate non-audit fees billed in each of the last two fiscal years by Registrant’s principal accountant for services rendered to Registrant, to Registrant’s investment adviser, and to any entity controlling, controlled by, or under common control with Registrant’s investment adviser that provides ongoing services to Registrant.
| 2016/2017: $80,863 | 2015/2016: $100,482 |
(h) During the past fiscal year, all non-audit services provided by Registrant’s principal accountant to either Registrant’s investment adviser or to any entity controlling, controlled by, or under common control with Registrant’s investment adviser that provides ongoing services to Registrant were pre-approved. Included in the audit committee’s pre-approval was the review and consideration as to whether the provision of these non-audit services is compatible with maintaining the principal accountant’s independence.
Item 5: Audit Committee of Listed Registrants.
The Registrant is a listed issuer as defined in Rule 10A-3 under the Exchange Act and has separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Registrant’s audit committee members are Kiran M. Patel, Robert W. Burns, John F. Cogan and Kimberly S. Patmore.
Item 6: Schedule of Investments.
Except as noted below, the schedules of investments are included as part of the report to shareholders filed under Item 1 of this Form. The schedules of investments
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for the Schwab Fundamental U.S. Broad Market Index ETF, Schwab Fundamental U.S. Large Company Index ETF, Schwab Fundamental U.S. Small Company Index ETF, Schwab Fundamental International Large Company Index ETF, Schwab Fundamental International Small Company Index ETF, and Schwab Fundamental Emerging Markets Large Company Index ETF are filed under this Item.
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Schwab Fundamental U.S. Broad Market Index ETF
Portfolio Holdings as of February 28, 2017
This section shows all the securities in the fund's portfolio and their values as of the report date.
The fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's website at www.sec.gov and may be viewed and copied at the SEC's Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the Public Reference Room. The fund also makes available its complete schedule of portfolio holdings on a daily basis on the fund's website at www.csimfunds.com/schwabetfs_prospectus.
| Holdings by Category | Cost ($) | Value ($) | |
| 99.8% | Common Stock | 230,881,625 | 263,077,794 |
| 0.3% | Other Investment Companies | 854,320 | 854,320 |
| 100.1% | Total Investments | 231,735,945 | 263,932,114 |
| (0.1%) | Other Assets and Liabilities, Net | (147,520) | |
| 100.0% | Net Assets | 263,784,594 | |
| Security | Number of Shares | Value ($) |
| Common Stock 99.8% of net assets | ||
| Automobiles & Components 1.3% | ||
| Adient plc * | 1,260 | 84,584 |
| American Axle & Manufacturing Holdings, Inc. * | 686 | 13,597 |
| BorgWarner, Inc. | 3,600 | 151,884 |
| Cooper Tire & Rubber Co. | 954 | 38,589 |
| Cooper-Standard Holding, Inc. * | 216 | 24,192 |
| Dana, Inc. | 3,500 | 66,115 |
| Delphi Automotive plc | 2,091 | 159,188 |
| Dorman Products, Inc. * | 248 | 19,384 |
| Ford Motor Co. | 79,672 | 998,290 |
| General Motors Co. | 31,437 | 1,158,139 |
| Gentex Corp. | 2,496 | 52,491 |
| Harley-Davidson, Inc. | 2,303 | 129,843 |
| LCI Industries | 312 | 33,602 |
| Lear Corp. | 1,404 | 199,354 |
| Standard Motor Products, Inc. | 468 | 22,450 |
| Tenneco, Inc. * | 868 | 55,821 |
| The Goodyear Tire & Rubber Co. | 2,850 | 99,892 |
| Thor Industries, Inc. | 651 | 72,144 |
| Tower International, Inc. | 1,063 | 29,392 |
| Visteon Corp. * | 788 | 73,024 |
| 3,481,975 | ||
| Banks 5.8% | ||
| Associated Banc-Corp. | 1,500 | 38,625 |
| Astoria Financial Corp. | 893 | 16,512 |
| BancorpSouth, Inc. | 424 | 13,144 |
| Bank of America Corp. | 82,974 | 2,047,798 |
| Bank of Hawaii Corp. | 624 | 52,703 |
| BankUnited, Inc. | 470 | 18,626 |
| BB&T Corp. | 7,802 | 376,212 |
| BOK Financial Corp. | 156 | 12,864 |
| Capitol Federal Financial, Inc. | 2,886 | 43,550 |
| Cathay General Bancorp | 171 | 6,717 |
| CIT Group, Inc. | 3,365 | 144,358 |
| Citigroup, Inc. | 34,570 | 2,067,632 |
| Citizens Financial Group, Inc. | 3,937 | 147,126 |
| Comerica, Inc. | 1,872 | 133,436 |
| Commerce Bancshares, Inc. | 708 | 41,786 |
| Community Bank System, Inc. | 156 | 9,268 |
| Cullen/Frost Bankers, Inc. | 548 | 50,674 |
| CVB Financial Corp. | 780 | 18,525 |
| East West Bancorp, Inc. | 624 | 33,771 |
| EverBank Financial Corp. | 429 | 8,340 |
| Security | Number of Shares | Value ($) |
| F.N.B. Corp. | 1,092 | 17,002 |
| Fifth Third Bancorp | 10,166 | 278,955 |
| First Citizens BancShares, Inc., Class A | 35 | 12,470 |
| First Financial Bancorp | 791 | 21,950 |
| First Financial Bankshares, Inc. | 405 | 17,820 |
| First Horizon National Corp. | 2,964 | 59,102 |
| First Republic Bank | 627 | 58,831 |
| Fulton Financial Corp. | 1,872 | 35,802 |
| Glacier Bancorp, Inc. | 470 | 17,352 |
| Great Western Bancorp, Inc. | 413 | 17,652 |
| Hancock Holding Co. | 412 | 19,549 |
| Huntington Bancshares, Inc. | 6,183 | 87,428 |
| IBERIABANK Corp. | 156 | 13,221 |
| International Bancshares Corp. | 624 | 23,743 |
| JPMorgan Chase & Co. | 38,743 | 3,510,891 |
| KeyCorp | 10,858 | 203,805 |
| M&T Bank Corp. | 1,276 | 213,054 |
| MB Financial, Inc. | 468 | 21,069 |
| NBT Bancorp, Inc. | 312 | 12,599 |
| New York Community Bancorp, Inc. | 6,084 | 92,964 |
| Northwest Bancshares, Inc. | 1,822 | 33,051 |
| Ocwen Financial Corp. * | 7,528 | 33,198 |
| Old National Bancorp | 624 | 11,450 |
| PacWest Bancorp | 195 | 10,745 |
| People's United Financial, Inc. | 3,120 | 59,904 |
| PHH Corp. * | 4,652 | 58,708 |
| Popular, Inc. | 2,028 | 89,354 |
| PrivateBancorp, Inc. | 280 | 15,848 |
| Prosperity Bancshares, Inc. | 226 | 16,846 |
| Regions Financial Corp. | 15,358 | 234,517 |
| Signature Bank * | 93 | 14,648 |
| SunTrust Banks, Inc. | 4,954 | 294,713 |
| SVB Financial Group * | 156 | 29,779 |
| Synovus Financial Corp. | 626 | 26,430 |
| TCF Financial Corp. | 2,184 | 38,002 |
| The PNC Financial Services Group, Inc. | 4,680 | 595,436 |
| Trustmark Corp. | 624 | 20,617 |
| U.S. Bancorp | 14,082 | 774,510 |
| UMB Financial Corp. | 221 | 17,419 |
| Umpqua Holdings Corp. | 1,000 | 18,810 |
| United Bankshares, Inc. | 468 | 20,943 |
| Valley National Bancorp | 2,184 | 27,016 |
| Walter Investment Management Corp. * | 3,682 | 12,519 |
| Washington Federal, Inc. | 936 | 31,684 |
| Webster Financial Corp. | 624 | 34,276 |
| Wells Fargo & Co. | 43,773 | 2,533,581 |
| Westamerica Bancorp | 265 | 15,330 |
| Wintrust Financial Corp. | 156 | 11,497 |
| Zions Bancorp | 2,104 | 94,470 |
| 15,192,227 | ||
| Capital Goods 8.7% | ||
| 3M Co. | 6,038 | 1,125,181 |
| A.O. Smith Corp. | 936 | 47,137 |
| AAR Corp. | 936 | 32,217 |
| Actuant Corp., Class A | 624 | 16,567 |
| Acuity Brands, Inc. | 159 | 33,597 |
| AECOM * | 2,840 | 103,234 |
1
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Broad Market Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Aegion Corp. * | 468 | 10,652 |
| AGCO Corp. | 2,028 | 123,546 |
| Air Lease Corp. | 651 | 25,343 |
| Aircastle Ltd. | 810 | 19,464 |
| Albany International Corp., Class A | 468 | 21,224 |
| Allegion plc | 539 | 39,126 |
| Allison Transmission Holdings, Inc. | 837 | 30,115 |
| AMETEK, Inc. | 1,254 | 67,678 |
| Apogee Enterprises, Inc. | 185 | 10,578 |
| Applied Industrial Technologies, Inc. | 938 | 59,141 |
| Arconic, Inc. | 8,050 | 231,759 |
| Armstrong World Industries, Inc. * | 1,806 | 83,076 |
| Astec Industries, Inc. | 312 | 19,709 |
| AZZ, Inc. | 173 | 10,146 |
| B/E Aerospace, Inc. | 468 | 29,765 |
| Babcock & Wilcox Enterprises, Inc. * | 742 | 12,243 |
| Barnes Group, Inc. | 624 | 31,269 |
| Beacon Roofing Supply, Inc. * | 468 | 21,266 |
| Briggs & Stratton Corp. | 1,092 | 23,369 |
| BWX Technologies, Inc. | 1,302 | 60,465 |
| Carlisle Cos., Inc. | 624 | 64,459 |
| Caterpillar, Inc. | 11,196 | 1,082,205 |
| Chart Industries, Inc. * | 366 | 13,026 |
| Chicago Bridge & Iron Co. N.V. | 1,663 | 55,827 |
| CIRCOR International, Inc. | 156 | 9,689 |
| Colfax Corp. * | 780 | 29,679 |
| Comfort Systems USA, Inc. | 723 | 27,582 |
| Crane Co. | 468 | 33,832 |
| Cubic Corp. | 389 | 20,442 |
| Cummins, Inc. | 2,917 | 433,145 |
| Curtiss-Wright Corp. | 624 | 61,046 |
| Deere & Co. | 7,385 | 808,584 |
| DigitalGlobe, Inc. * | 468 | 14,812 |
| Donaldson Co., Inc. | 1,488 | 63,910 |
| Dover Corp. | 2,676 | 214,348 |
| Dycom Industries, Inc. * | 344 | 28,270 |
| Eaton Corp. plc | 5,305 | 381,854 |
| EMCOR Group, Inc. | 1,248 | 76,727 |
| Emerson Electric Co. | 11,634 | 699,203 |
| Encore Wire Corp. | 468 | 22,230 |
| EnerSys | 468 | 35,910 |
| EnPro Industries, Inc. | 156 | 10,184 |
| ESCO Technologies, Inc. | 474 | 25,691 |
| Esterline Technologies Corp. * | 312 | 27,737 |
| Fastenal Co. | 2,579 | 129,027 |
| Flowserve Corp. | 2,529 | 117,472 |
| Fluor Corp. | 5,787 | 320,542 |
| Fortive Corp. | 1,610 | 92,816 |
| Fortune Brands Home & Security, Inc. | 982 | 56,789 |
| Franklin Electric Co., Inc. | 312 | 13,073 |
| GATX Corp. | 780 | 45,302 |
| Generac Holdings, Inc. * | 846 | 33,028 |
| General Cable Corp. | 3,155 | 52,689 |
| General Dynamics Corp. | 3,182 | 603,975 |
| General Electric Co. | 88,925 | 2,650,854 |
| Graco, Inc. | 468 | 42,476 |
| Granite Construction, Inc. | 936 | 49,617 |
| Griffon Corp. | 1,035 | 26,030 |
| H&E Equipment Services, Inc. | 630 | 16,531 |
| Harsco Corp. * | 4,762 | 67,144 |
| HD Supply Holdings, Inc. * | 334 | 14,362 |
| HEICO Corp. | 158 | 12,980 |
| Herc Holdings, Inc. * | 733 | 37,889 |
| Hexcel Corp. | 468 | 25,731 |
| Hillenbrand, Inc. | 624 | 22,682 |
| Honeywell International, Inc. | 5,697 | 709,276 |
| Hubbell, Inc. | 662 | 78,526 |
| Huntington Ingalls Industries, Inc. | 377 | 82,375 |
| Security | Number of Shares | Value ($) |
| Hyster-Yale Materials Handling, Inc. | 164 | 9,986 |
| IDEX Corp. | 468 | 43,145 |
| Illinois Tool Works, Inc. | 3,900 | 514,839 |
| Ingersoll-Rand plc | 3,435 | 272,602 |
| Jacobs Engineering Group, Inc. | 3,448 | 194,502 |
| Johnson Controls International plc | 12,602 | 528,528 |
| Joy Global, Inc. | 5,545 | 156,314 |
| Kaman Corp. | 312 | 16,152 |
| KBR, Inc. | 6,465 | 97,298 |
| Kennametal, Inc. | 1,811 | 67,170 |
| KLX, Inc. * | 840 | 42,286 |
| L3 Technologies, Inc. | 2,130 | 358,522 |
| Lennox International, Inc. | 361 | 59,428 |
| Lincoln Electric Holdings, Inc. | 780 | 65,684 |
| Lindsay Corp. | 77 | 6,165 |
| Lockheed Martin Corp. | 2,765 | 737,094 |
| Masco Corp. | 978 | 33,037 |
| Masonite International Corp. * | 156 | 12,184 |
| MasTec, Inc. * | 1,335 | 52,399 |
| Moog, Inc., Class A * | 468 | 31,627 |
| MRC Global, Inc. * | 3,058 | 61,802 |
| MSC Industrial Direct Co., Inc., Class A | 487 | 48,987 |
| Mueller Industries, Inc. | 1,481 | 61,935 |
| MYR Group, Inc. * | 676 | 25,357 |
| Nordson Corp. | 312 | 37,452 |
| Northrop Grumman Corp. | 3,003 | 742,011 |
| NOW, Inc. * | 3,518 | 67,335 |
| Orbital ATK, Inc. | 348 | 32,162 |
| Oshkosh Corp. | 1,955 | 132,725 |
| Owens Corning | 1,892 | 110,663 |
| PACCAR, Inc. | 4,138 | 276,460 |
| Parker-Hannifin Corp. | 1,820 | 281,809 |
| Pentair plc | 1,566 | 90,922 |
| Primoris Services Corp. | 660 | 16,408 |
| Quanex Building Products Corp. | 624 | 12,199 |
| Quanta Services, Inc. * | 3,901 | 145,585 |
| Raven Industries, Inc. | 885 | 26,152 |
| Raytheon Co. | 4,012 | 618,450 |
| RBC Bearings, Inc. * | 109 | 10,170 |
| Regal Beloit Corp. | 879 | 65,442 |
| Rexnord Corp. * | 559 | 12,393 |
| Rockwell Automation, Inc. | 1,162 | 175,578 |
| Rockwell Collins, Inc. | 1,560 | 149,120 |
| Roper Technologies, Inc. | 468 | 97,906 |
| Rush Enterprises, Inc., Class A * | 624 | 21,516 |
| Simpson Manufacturing Co., Inc. | 468 | 20,199 |
| Snap-on, Inc. | 468 | 79,406 |
| Spirit AeroSystems Holdings, Inc., Class A | 1,181 | 72,761 |
| SPX Corp. * | 3,196 | 84,310 |
| SPX FLOW, Inc. * | 811 | 27,574 |
| Standex International Corp. | 92 | 8,786 |
| Stanley Black & Decker, Inc. | 1,420 | 180,553 |
| Teledyne Technologies, Inc. * | 312 | 41,000 |
| Tennant Co. | 156 | 10,959 |
| Terex Corp. | 2,068 | 64,604 |
| Textainer Group Holdings Ltd. | 3,165 | 49,849 |
| Textron, Inc. | 3,233 | 152,921 |
| The Boeing Co. | 6,200 | 1,117,426 |
| The Greenbrier Cos., Inc. | 278 | 11,690 |
| The Middleby Corp. * | 165 | 22,887 |
| The Timken Co. | 2,148 | 94,942 |
| The Toro Co. | 1,248 | 75,142 |
| Titan International, Inc. | 3,028 | 40,091 |
| TransDigm Group, Inc. | 320 | 81,344 |
| TriMas Corp. * | 388 | 8,555 |
| Trinity Industries, Inc. | 3,476 | 93,296 |
| Triumph Group, Inc. | 1,493 | 41,505 |
| Tutor Perini Corp. * | 1,272 | 38,732 |
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Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Broad Market Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| United Rentals, Inc. * | 1,315 | 168,359 |
| United Technologies Corp. | 11,965 | 1,346,661 |
| Universal Forest Products, Inc. | 407 | 38,995 |
| Valmont Industries, Inc. | 388 | 61,013 |
| W.W. Grainger, Inc. | 893 | 221,428 |
| WABCO Holdings, Inc. * | 468 | 52,547 |
| Wabtec Corp. | 468 | 37,496 |
| Watsco, Inc. | 312 | 46,260 |
| Watts Water Technologies, Inc., Class A | 312 | 19,952 |
| WESCO International, Inc. * | 994 | 69,083 |
| Woodward, Inc. | 468 | 32,971 |
| Xylem, Inc. | 1,716 | 82,574 |
| 23,044,817 | ||
| Commercial & Professional Services 1.0% | ||
| ABM Industries, Inc. | 1,404 | 57,269 |
| ACCO Brands Corp. * | 1,181 | 15,825 |
| Brady Corp., Class A | 811 | 31,021 |
| CBIZ, Inc. * | 1,098 | 14,603 |
| CEB, Inc. | 70 | 5,428 |
| Cintas Corp. | 731 | 86,265 |
| Clean Harbors, Inc. * | 521 | 30,197 |
| Copart, Inc. * | 889 | 52,575 |
| Covanta Holding Corp. | 2,346 | 38,005 |
| Deluxe Corp. | 624 | 45,920 |
| Equifax, Inc. | 626 | 82,075 |
| Essendant, Inc. | 1,755 | 27,957 |
| FTI Consulting, Inc. * | 784 | 31,548 |
| G&K Services, Inc., Class A | 312 | 29,484 |
| Healthcare Services Group, Inc. | 468 | 19,366 |
| Herman Miller, Inc. | 936 | 27,893 |
| HNI Corp. | 580 | 26,576 |
| Huron Consulting Group, Inc. * | 156 | 6,778 |
| ICF International, Inc. * | 312 | 13,400 |
| Insperity, Inc. | 180 | 14,985 |
| Interface, Inc. | 468 | 8,845 |
| KAR Auction Services, Inc. | 626 | 28,057 |
| Kelly Services, Inc., Class A | 1,716 | 36,688 |
| Kforce, Inc. | 624 | 16,068 |
| Knoll, Inc. | 624 | 13,946 |
| Korn/Ferry International | 624 | 19,288 |
| LSC Communications, Inc. | 1,000 | 28,420 |
| ManpowerGroup, Inc. | 2,533 | 245,802 |
| Matthews International Corp., Class A | 468 | 30,818 |
| McGrath RentCorp | 312 | 11,741 |
| Mobile Mini, Inc. | 800 | 26,040 |
| MSA Safety, Inc. | 312 | 22,542 |
| Navigant Consulting, Inc. * | 1,092 | 25,444 |
| Nielsen Holdings plc | 2,435 | 108,017 |
| On Assignment, Inc. * | 156 | 7,362 |
| Pitney Bowes, Inc. | 2,893 | 39,461 |
| Quad/Graphics, Inc. | 1,909 | 51,829 |
| R.R. Donnelley & Sons Co. | 1,872 | 31,393 |
| Republic Services, Inc. | 3,165 | 196,072 |
| Resources Connection, Inc. | 1,092 | 18,455 |
| Robert Half International, Inc. | 1,785 | 86,108 |
| Rollins, Inc. | 468 | 17,110 |
| Steelcase, Inc., Class A | 2,062 | 32,992 |
| Stericycle, Inc. * | 180 | 14,918 |
| Team, Inc. * | 156 | 5,359 |
| Tetra Tech, Inc. | 1,444 | 58,121 |
| The Brink's Co. | 675 | 36,079 |
| The Dun & Bradstreet Corp. | 624 | 65,857 |
| TrueBlue, Inc. * | 936 | 24,289 |
| UniFirst Corp. | 156 | 20,764 |
| Verisk Analytics, Inc. * | 842 | 69,819 |
| Viad Corp. | 468 | 22,090 |
| Security | Number of Shares | Value ($) |
| Waste Management, Inc. | 5,702 | 418,071 |
| West Corp. | 715 | 17,096 |
| 2,512,131 | ||
| Consumer Durables & Apparel 1.2% | ||
| American Outdoor Brands Corp. * | 701 | 13,627 |
| Arctic Cat, Inc. * | 538 | 9,953 |
| Brunswick Corp. | 814 | 48,750 |
| Carter's, Inc. | 472 | 41,541 |
| Coach, Inc. | 6,791 | 258,669 |
| Columbia Sportswear Co. | 312 | 17,141 |
| Crocs, Inc. * | 1,765 | 11,737 |
| D.R. Horton, Inc. | 1,445 | 46,240 |
| Deckers Outdoor Corp. * | 472 | 24,936 |
| Fossil Group, Inc. * | 2,571 | 48,618 |
| G-III Apparel Group Ltd. * | 752 | 19,349 |
| Garmin Ltd. | 1,813 | 93,569 |
| Hanesbrands, Inc. | 1,904 | 38,099 |
| Harman International Industries, Inc. | 831 | 92,756 |
| Hasbro, Inc. | 1,346 | 130,387 |
| Helen of Troy Ltd. * | 312 | 30,482 |
| Iconix Brand Group, Inc. * | 2,760 | 21,280 |
| La-Z-Boy, Inc. | 936 | 25,272 |
| Leggett & Platt, Inc. | 1,872 | 92,065 |
| Lennar Corp., Class A | 636 | 31,030 |
| Lululemon Athletica, Inc. * | 395 | 25,778 |
| M.D.C Holdings, Inc. | 326 | 9,516 |
| Mattel, Inc. | 6,624 | 170,436 |
| Meritage Homes Corp. * | 312 | 11,092 |
| Michael Kors Holdings Ltd. * | 1,887 | 68,876 |
| Mohawk Industries, Inc. * | 471 | 106,616 |
| Newell Brands, Inc. | 2,657 | 130,273 |
| NIKE, Inc., Class B | 9,405 | 537,590 |
| NVR, Inc. * | 50 | 96,748 |
| Oxford Industries, Inc. | 104 | 5,846 |
| Polaris Industries, Inc. | 875 | 74,559 |
| PulteGroup, Inc. | 4,377 | 96,513 |
| PVH Corp. | 799 | 73,188 |
| Ralph Lauren Corp. | 1,506 | 119,471 |
| Skechers U.S.A., Inc., Class A * | 780 | 20,023 |
| Steven Madden Ltd. * | 468 | 17,480 |
| Sturm Ruger & Co., Inc. | 202 | 10,070 |
| Tempur Sealy International, Inc. * | 544 | 25,127 |
| Toll Brothers, Inc. * | 481 | 16,421 |
| Tupperware Brands Corp. | 857 | 51,754 |
| Under Armour, Inc., Class A * | 312 | 6,433 |
| Under Armour, Inc., Class C * | 313 | 5,809 |
| VF Corp. | 3,086 | 161,861 |
| Whirlpool Corp. | 1,209 | 215,915 |
| Wolverine World Wide, Inc. | 817 | 20,564 |
| 3,173,460 | ||
| Consumer Services 1.9% | ||
| Aramark | 1,621 | 57,935 |
| Bloomin' Brands, Inc. | 1,817 | 31,053 |
| Bob Evans Farms, Inc. | 718 | 40,732 |
| Boyd Gaming Corp. * | 527 | 10,366 |
| Brinker International, Inc. | 1,313 | 55,461 |
| Buffalo Wild Wings, Inc. * | 80 | 12,400 |
| Caesars Entertainment Corp. * | 1,318 | 12,455 |
| Capella Education Co. | 371 | 28,233 |
| Career Education Corp. * | 5,983 | 49,838 |
| Carnival Corp. | 4,898 | 274,043 |
| Chipotle Mexican Grill, Inc. * | 94 | 39,362 |
| Choice Hotels International, Inc. | 469 | 28,421 |
| Churchill Downs, Inc. | 49 | 7,365 |
3
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Broad Market Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Cracker Barrel Old Country Store, Inc. | 160 | 25,758 |
| Darden Restaurants, Inc. | 1,739 | 129,869 |
| DeVry Education Group, Inc. | 2,365 | 76,035 |
| DineEquity, Inc. | 156 | 9,332 |
| Domino's Pizza, Inc. | 334 | 63,397 |
| Dunkin' Brands Group, Inc. | 363 | 19,969 |
| Graham Holdings Co., Class B | 76 | 40,907 |
| Grand Canyon Education, Inc. * | 215 | 13,197 |
| H&R Block, Inc. | 3,812 | 78,375 |
| Hilton Grand Vacations, Inc. * | 283 | 8,473 |
| Hilton Worldwide Holdings, Inc. | 975 | 55,770 |
| Hyatt Hotels Corp., Class A * | 312 | 16,018 |
| International Game Technology plc | 1,061 | 28,647 |
| International Speedway Corp., Class A | 468 | 17,363 |
| Jack in the Box, Inc. | 551 | 51,634 |
| K12, Inc. * | 1,312 | 23,432 |
| La Quinta Holdings, Inc. * | 951 | 13,181 |
| Las Vegas Sands Corp. | 3,438 | 182,042 |
| Marriott International, Inc., Class A | 3,338 | 290,373 |
| Marriott Vacations Worldwide Corp. | 214 | 20,101 |
| McDonald's Corp. | 11,150 | 1,423,297 |
| MGM Resorts International * | 2,808 | 73,822 |
| Norwegian Cruise Line Holdings Ltd. * | 852 | 43,196 |
| Panera Bread Co., Class A * | 220 | 50,776 |
| Papa John's International, Inc. | 92 | 7,261 |
| Penn National Gaming, Inc. * | 997 | 14,427 |
| Regis Corp. * | 1,560 | 19,204 |
| Royal Caribbean Cruises Ltd. | 1,520 | 146,072 |
| Ruby Tuesday, Inc. * | 4,625 | 8,787 |
| SeaWorld Entertainment, Inc. | 2,275 | 43,839 |
| Service Corp. International | 1,668 | 51,258 |
| Six Flags Entertainment Corp. | 312 | 18,910 |
| Sotheby's * | 333 | 15,028 |
| Starbucks Corp. | 5,486 | 311,989 |
| Strayer Education, Inc. * | 624 | 48,385 |
| Texas Roadhouse, Inc. | 624 | 26,395 |
| The Cheesecake Factory, Inc. | 780 | 47,619 |
| The Wendy's Co. | 4,368 | 60,890 |
| Vail Resorts, Inc. | 187 | 33,881 |
| Weight Watchers International, Inc. *(b) | 2,084 | 29,989 |
| Wyndham Worldwide Corp. | 2,506 | 208,599 |
| Wynn Resorts Ltd. | 1,168 | 112,303 |
| Yum China Holdings, Inc. * | 2,204 | 58,604 |
| Yum! Brands, Inc. | 3,844 | 251,090 |
| 4,917,158 | ||
| Diversified Financials 4.8% | ||
| Affiliated Managers Group, Inc. | 402 | 67,508 |
| AGNC Investment Corp. | 4,176 | 81,975 |
| Ally Financial, Inc. | 16,739 | 376,460 |
| American Express Co. | 11,392 | 912,044 |
| Ameriprise Financial, Inc. | 1,961 | 257,872 |
| Annaly Capital Management, Inc. | 19,231 | 213,464 |
| Anworth Mortgage Asset Corp. | 1,560 | 8,486 |
| Berkshire Hathaway, Inc., Class B * | 14,541 | 2,492,618 |
| BGC Partners, Inc., Class A | 1,769 | 19,954 |
| BlackRock, Inc. | 657 | 254,561 |
| Capital One Financial Corp. | 8,078 | 758,201 |
| Capstead Mortgage Corp. | 936 | 9,903 |
| CBOE Holdings, Inc. | 472 | 36,840 |
| Chimera Investment Corp. | 2,508 | 48,254 |
| CME Group, Inc. | 2,055 | 249,600 |
| Credit Acceptance Corp. * | 53 | 10,624 |
| Discover Financial Services | 5,425 | 385,935 |
| E*TRADE Financial Corp. * | 2,028 | 69,986 |
| Eaton Vance Corp. | 1,116 | 52,039 |
| Evercore Partners, Inc., Class A | 231 | 18,376 |
| Security | Number of Shares | Value ($) |
| EZCORP, Inc., Class A * | 2,665 | 23,452 |
| FactSet Research Systems, Inc. | 88 | 15,655 |
| Federated Investors, Inc., Class B | 1,716 | 46,624 |
| FirstCash, Inc. | 550 | 24,393 |
| FNFV Group * | 3,032 | 37,748 |
| Franklin Resources, Inc. | 6,650 | 286,216 |
| Greenhill & Co., Inc. | 1,248 | 36,878 |
| Intercontinental Exchange, Inc. | 880 | 50,274 |
| Invesco Ltd. | 4,797 | 154,415 |
| Invesco Mortgage Capital, Inc. | 1,285 | 19,982 |
| Janus Capital Group, Inc. | 732 | 9,267 |
| Lazard Ltd., Class A | 1,166 | 50,208 |
| Legg Mason, Inc. | 3,130 | 118,064 |
| Leucadia National Corp. | 2,761 | 73,498 |
| LPL Financial Holdings, Inc. | 1,889 | 74,691 |
| MarketAxess Holdings, Inc. | 86 | 16,790 |
| MFA Financial, Inc. | 5,151 | 41,311 |
| Moody's Corp. | 798 | 88,873 |
| Morgan Stanley | 8,051 | 367,689 |
| Morningstar, Inc. | 94 | 7,542 |
| MSCI, Inc. | 391 | 36,985 |
| Nasdaq, Inc. | 1,253 | 89,101 |
| Navient Corp. | 7,179 | 110,628 |
| Nelnet, Inc., Class A | 417 | 18,677 |
| New Residential Investment Corp. | 1,326 | 22,370 |
| Northern Trust Corp. | 1,622 | 141,682 |
| OneMain Holdings, Inc. * | 1,444 | 40,461 |
| PennyMac Mortgage Investment Trust | 1,284 | 21,648 |
| PRA Group, Inc. * | 670 | 27,336 |
| Raymond James Financial, Inc. | 624 | 49,021 |
| Redwood Trust, Inc. | 936 | 15,322 |
| S&P Global, Inc. | 2,185 | 282,892 |
| Santander Consumer USA Holdings, Inc. * | 3,900 | 57,642 |
| SEI Investments Co. | 1,248 | 62,837 |
| SLM Corp. * | 19,049 | 228,398 |
| Starwood Property Trust, Inc. | 1,308 | 29,901 |
| State Street Corp. | 4,088 | 325,854 |
| Stifel Financial Corp. * | 391 | 21,098 |
| Synchrony Financial | 6,430 | 233,023 |
| T. Rowe Price Group, Inc. | 2,215 | 157,730 |
| TD Ameritrade Holding Corp. | 1,255 | 49,071 |
| The Bank of New York Mellon Corp. | 8,434 | 397,579 |
| The Charles Schwab Corp. (a) | 3,460 | 139,819 |
| The Goldman Sachs Group, Inc. | 6,956 | 1,725,505 |
| Thomson Reuters Corp. | 4,683 | 198,091 |
| Two Harbors Investment Corp. | 1,298 | 12,071 |
| Voya Financial, Inc. | 1,872 | 77,183 |
| Waddell & Reed Financial, Inc., Class A | 2,854 | 54,911 |
| Western Asset Mortgage Capital Corp. | 830 | 8,632 |
| World Acceptance Corp. * | 583 | 30,573 |
| 12,534,311 | ||
| Energy 12.9% | ||
| Alon USA Energy, Inc. | 3,226 | 39,228 |
| Anadarko Petroleum Corp. | 6,959 | 449,899 |
| Antero Resources Corp. * | 756 | 18,129 |
| Apache Corp. | 9,215 | 484,617 |
| Archrock, Inc. | 3,913 | 53,412 |
| Atwood Oceanics, Inc. * | 3,032 | 31,866 |
| Baker Hughes, Inc. | 8,676 | 522,989 |
| Bill Barrett Corp. * | 4,708 | 25,941 |
| Bristow Group, Inc. | 3,002 | 47,161 |
| Cabot Oil & Gas Corp. | 2,063 | 45,180 |
| California Resources Corp. *(b) | 6,173 | 110,312 |
| CARBO Ceramics, Inc. * | 1,799 | 23,081 |
| Chesapeake Energy Corp. * | 40,470 | 220,561 |
| Chevron Corp. | 54,936 | 6,180,300 |
4
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Broad Market Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Cimarex Energy Co. | 479 | 60,220 |
| Concho Resources, Inc. * | 418 | 55,364 |
| ConocoPhillips | 51,455 | 2,447,714 |
| CONSOL Energy, Inc. * | 8,292 | 129,106 |
| Continental Resources, Inc. * | 495 | 22,374 |
| CVR Energy, Inc. | 896 | 20,536 |
| Delek US Holdings, Inc. | 3,826 | 92,092 |
| Denbury Resources, Inc. * | 26,770 | 72,547 |
| Devon Energy Corp. | 11,237 | 487,236 |
| Diamond Offshore Drilling, Inc. * | 3,244 | 54,629 |
| Dril-Quip, Inc. * | 512 | 31,411 |
| Energen Corp. * | 1,271 | 66,728 |
| Ensco plc, Class A | 14,272 | 139,009 |
| EOG Resources, Inc. | 4,144 | 401,927 |
| EP Energy Corp., Class A *(b) | 2,738 | 12,923 |
| EQT Corp. | 1,099 | 65,819 |
| Exxon Mobil Corp. | 107,521 | 8,743,608 |
| Forum Energy Technologies, Inc. * | 521 | 11,306 |
| Golar LNG Ltd. | 1,028 | 28,075 |
| Green Plains, Inc. | 1,620 | 40,581 |
| Halliburton Co. | 13,327 | 712,461 |
| Helix Energy Solutions Group, Inc. * | 3,453 | 28,522 |
| Helmerich & Payne, Inc. | 1,432 | 97,906 |
| Hess Corp. | 11,163 | 574,225 |
| HollyFrontier Corp. | 10,331 | 302,492 |
| Hornbeck Offshore Services, Inc. * | 1,584 | 7,112 |
| Kinder Morgan, Inc. | 18,307 | 390,122 |
| Marathon Oil Corp. | 35,919 | 574,704 |
| Marathon Petroleum Corp. | 22,177 | 1,099,979 |
| Matrix Service Co. * | 468 | 7,582 |
| McDermott International, Inc. * | 11,651 | 85,751 |
| Murphy Oil Corp. | 10,326 | 292,123 |
| Nabors Industries Ltd. | 11,640 | 170,410 |
| National Oilwell Varco, Inc. | 11,413 | 461,313 |
| Newfield Exploration Co. * | 2,048 | 74,670 |
| Newpark Resources, Inc. * | 3,515 | 27,066 |
| Noble Corp. plc | 15,556 | 103,914 |
| Noble Energy, Inc. | 3,856 | 140,397 |
| Oasis Petroleum, Inc. * | 1,411 | 19,980 |
| Occidental Petroleum Corp. | 13,694 | 897,642 |
| Oceaneering International, Inc. | 3,104 | 87,905 |
| Oil States International, Inc. * | 1,006 | 37,021 |
| ONEOK, Inc. | 2,248 | 121,504 |
| Patterson-UTI Energy, Inc. | 3,977 | 109,845 |
| PBF Energy, Inc., Class A | 1,731 | 42,392 |
| PDC Energy, Inc. * | 156 | 10,544 |
| Phillips 66 | 17,267 | 1,350,107 |
| Pioneer Energy Services Corp. * | 3,294 | 17,294 |
| Pioneer Natural Resources Co. | 478 | 88,894 |
| QEP Resources, Inc. * | 5,717 | 78,666 |
| Range Resources Corp. | 1,179 | 32,564 |
| Renewable Energy Group, Inc. * | 1,275 | 11,348 |
| Rowan Cos. plc, Class A * | 2,200 | 39,864 |
| RPC, Inc. | 816 | 16,320 |
| Schlumberger Ltd. | 16,268 | 1,307,296 |
| SEACOR Holdings, Inc. * | 845 | 58,178 |
| Seadrill Ltd. *(b) | 70,916 | 124,103 |
| SemGroup Corp., Class A | 689 | 24,218 |
| Ship Finance International Ltd. | 624 | 9,204 |
| SM Energy Co. | 1,968 | 48,511 |
| Southwestern Energy Co. * | 7,870 | 59,104 |
| Superior Energy Services, Inc. * | 4,904 | 80,916 |
| Targa Resources Corp. | 955 | 53,958 |
| Teekay Corp. | 3,933 | 38,622 |
| Tesco Corp. * | 1,779 | 14,855 |
| Tesoro Corp. | 2,859 | 243,558 |
| The Williams Cos., Inc. | 8,656 | 245,311 |
| Tidewater, Inc. *(b) | 8,957 | 12,182 |
| Security | Number of Shares | Value ($) |
| Transocean Ltd. * | 21,920 | 302,934 |
| Unit Corp. * | 2,809 | 76,236 |
| US Silica Holdings, Inc. | 517 | 26,145 |
| Valero Energy Corp. | 20,806 | 1,413,768 |
| W&T Offshore, Inc. * | 9,736 | 24,437 |
| Weatherford International plc * | 31,909 | 180,605 |
| Western Refining, Inc. | 2,234 | 81,586 |
| Whiting Petroleum Corp. * | 7,970 | 86,474 |
| World Fuel Services Corp. | 5,259 | 190,218 |
| WPX Energy, Inc. * | 6,611 | 85,282 |
| 34,136,221 | ||
| Food & Staples Retailing 3.4% | ||
| Casey's General Stores, Inc. | 594 | 68,061 |
| Costco Wholesale Corp. | 6,728 | 1,192,067 |
| CVS Health Corp. | 22,542 | 1,816,434 |
| Ingles Markets, Inc., Class A | 547 | 25,627 |
| PriceSmart, Inc. | 156 | 13,790 |
| Rite Aid Corp. * | 5,410 | 32,460 |
| SpartanNash Co. | 800 | 27,920 |
| Sprouts Farmers Market, Inc. * | 550 | 10,153 |
| SUPERVALU, Inc. * | 7,850 | 29,673 |
| Sysco Corp. | 10,331 | 544,650 |
| The Andersons, Inc. | 735 | 29,069 |
| The Kroger Co. | 18,792 | 597,586 |
| United Natural Foods, Inc. * | 1,795 | 77,275 |
| Wal-Mart Stores, Inc. | 44,938 | 3,187,452 |
| Walgreens Boots Alliance, Inc. | 11,917 | 1,029,391 |
| Whole Foods Market, Inc. | 6,439 | 197,484 |
| 8,879,092 | ||
| Food, Beverage & Tobacco 4.6% | ||
| Altria Group, Inc. | 13,840 | 1,036,893 |
| Archer-Daniels-Midland Co. | 21,387 | 1,004,547 |
| B&G Foods, Inc. | 319 | 13,557 |
| Brown-Forman Corp., Class B | 1,910 | 93,132 |
| Bunge Ltd. | 7,076 | 579,171 |
| Cal-Maine Foods, Inc. | 312 | 11,840 |
| Campbell Soup Co. | 1,643 | 97,512 |
| ConAgra Brands, Inc. | 4,876 | 200,940 |
| Constellation Brands, Inc., Class A | 468 | 74,323 |
| Darling Ingredients, Inc. * | 2,042 | 26,566 |
| Dean Foods Co. | 1,570 | 28,637 |
| Dr. Pepper Snapple Group, Inc. | 1,989 | 185,852 |
| Flowers Foods, Inc. | 1,166 | 22,457 |
| Fresh Del Monte Produce, Inc. | 1,092 | 63,194 |
| General Mills, Inc. | 6,919 | 417,700 |
| Hormel Foods Corp. | 2,406 | 84,811 |
| Ingredion, Inc. | 946 | 114,362 |
| J&J Snack Foods Corp. | 156 | 20,873 |
| Kellogg Co. | 2,693 | 199,470 |
| Lamb Weston Holdings, Inc. | 1,619 | 63,449 |
| Lancaster Colony Corp. | 312 | 41,122 |
| McCormick & Co., Inc. Non-Voting Shares | 1,092 | 107,475 |
| Mead Johnson Nutrition Co. | 809 | 71,022 |
| Molson Coors Brewing Co., Class B | 1,176 | 118,059 |
| Mondelez International, Inc., Class A | 15,639 | 686,865 |
| Monster Beverage Corp. * | 1,180 | 48,899 |
| PepsiCo, Inc. | 15,213 | 1,679,211 |
| Philip Morris International, Inc. | 18,363 | 2,007,994 |
| Pinnacle Foods, Inc. | 577 | 32,964 |
| Reynolds American, Inc. | 5,408 | 332,971 |
| Sanderson Farms, Inc. | 471 | 44,764 |
| Snyder's-Lance, Inc. | 468 | 18,523 |
| The Coca-Cola Co. | 35,915 | 1,506,993 |
| The Hain Celestial Group, Inc. * | 542 | 19,176 |
5
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Broad Market Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| The Hershey Co. | 1,094 | 118,535 |
| The J.M. Smucker Co. | 1,311 | 185,808 |
| The Kraft Heinz Co. | 2,598 | 237,743 |
| The WhiteWave Foods Co. * | 570 | 31,396 |
| TreeHouse Foods, Inc. * | 400 | 34,032 |
| Tyson Foods, Inc., Class A | 4,539 | 283,960 |
| Universal Corp. | 857 | 58,019 |
| Vector Group Ltd. | 704 | 16,037 |
| 12,020,854 | ||
| Health Care Equipment & Services 5.2% | ||
| Abbott Laboratories | 17,278 | 778,892 |
| Aetna, Inc. | 4,847 | 624,100 |
| Air Methods Corp. * | 217 | 8,213 |
| Alere, Inc. * | 496 | 18,997 |
| Align Technology, Inc. * | 98 | 10,070 |
| Allscripts Healthcare Solutions, Inc. * | 2,695 | 32,825 |
| Amedisys, Inc. * | 364 | 17,552 |
| AmerisourceBergen Corp. | 2,655 | 242,959 |
| Analogic Corp. | 156 | 12,847 |
| Anthem, Inc. | 8,201 | 1,351,689 |
| Baxter International, Inc. | 7,746 | 394,426 |
| Becton Dickinson & Co. | 1,926 | 352,554 |
| Boston Scientific Corp. * | 6,942 | 170,426 |
| C.R. Bard, Inc. | 632 | 154,992 |
| Cardinal Health, Inc. | 8,036 | 653,889 |
| Centene Corp. * | 1,681 | 118,510 |
| Cerner Corp. * | 1,040 | 57,242 |
| Chemed Corp. | 312 | 55,708 |
| Cigna Corp. | 1,451 | 216,054 |
| Community Health Systems, Inc. * | 12,172 | 118,677 |
| CONMED Corp. | 312 | 12,985 |
| Danaher Corp. | 3,220 | 275,471 |
| DaVita, Inc. * | 1,416 | 98,285 |
| DENTSPLY SIRONA, Inc. | 1,347 | 85,561 |
| Edwards Lifesciences Corp. * | 690 | 64,888 |
| Envision Healthcare Corp. * | 792 | 55,440 |
| Express Scripts Holding Co. * | 13,434 | 949,112 |
| Haemonetics Corp. * | 255 | 9,519 |
| Halyard Health, Inc. * | 1,454 | 56,793 |
| HCA Holdings, Inc. * | 5,646 | 492,557 |
| HealthSouth Corp. | 468 | 19,806 |
| Henry Schein, Inc. * | 863 | 148,056 |
| Hill-Rom Holdings, Inc. | 936 | 62,197 |
| Humana, Inc. | 2,501 | 528,336 |
| IDEXX Laboratories, Inc. * | 624 | 90,443 |
| Integer Holdings Corp. * | 825 | 29,824 |
| Intuitive Surgical, Inc. * | 158 | 116,446 |
| Invacare Corp. | 832 | 10,067 |
| Kindred Healthcare, Inc. | 4,101 | 36,909 |
| Laboratory Corp. of America Holdings * | 789 | 112,243 |
| LifePoint Health, Inc. * | 936 | 59,951 |
| Magellan Health, Inc. * | 973 | 67,283 |
| Masimo Corp. * | 312 | 28,192 |
| McKesson Corp. | 3,774 | 566,591 |
| MEDNAX, Inc. * | 624 | 44,423 |
| Medtronic plc | 8,641 | 699,143 |
| Molina Healthcare, Inc. * | 624 | 30,270 |
| Owens & Minor, Inc. | 2,659 | 95,937 |
| Patterson Cos., Inc. | 1,404 | 63,812 |
| PharMerica Corp. * | 488 | 12,005 |
| Quality Systems, Inc. * | 634 | 9,675 |
| Quest Diagnostics, Inc. | 2,825 | 275,268 |
| ResMed, Inc. | 936 | 67,420 |
| Select Medical Holdings Corp. * | 3,462 | 49,853 |
| Stryker Corp. | 2,384 | 306,487 |
| Teleflex, Inc. | 326 | 62,325 |
| Security | Number of Shares | Value ($) |
| Tenet Healthcare Corp. * | 2,039 | 39,353 |
| The Cooper Cos., Inc. | 156 | 31,066 |
| Triple-S Management Corp., Class B * | 624 | 11,650 |
| UnitedHealth Group, Inc. | 11,890 | 1,966,368 |
| Universal Health Services, Inc., Class B | 703 | 88,297 |
| Varex Imaging Corp. * | 373 | 12,988 |
| Varian Medical Systems, Inc. * | 936 | 78,521 |
| VCA, Inc. * | 664 | 60,358 |
| WellCare Health Plans, Inc. * | 787 | 111,124 |
| West Pharmaceutical Services, Inc. | 624 | 51,461 |
| Zimmer Biomet Holdings, Inc. | 1,615 | 189,084 |
| 13,724,465 | ||
| Household & Personal Products 1.8% | ||
| Avon Products, Inc. * | 23,212 | 102,133 |
| Central Garden & Pet Co., Class A * | 1,000 | 31,950 |
| Church & Dwight Co., Inc. | 1,966 | 97,986 |
| Colgate-Palmolive Co. | 8,283 | 604,493 |
| Edgewell Personal Care Co. * | 624 | 46,076 |
| Energizer Holdings, Inc. | 215 | 11,795 |
| Herbalife Ltd. *(b) | 1,607 | 90,780 |
| Kimberly-Clark Corp. | 3,129 | 414,749 |
| Nu Skin Enterprises, Inc., Class A | 1,343 | 66,532 |
| Spectrum Brands Holdings, Inc. | 156 | 21,172 |
| The Clorox Co. | 841 | 115,057 |
| The Estee Lauder Cos., Inc., Class A | 1,301 | 107,788 |
| The Procter & Gamble Co. | 33,619 | 3,061,682 |
| WD-40 Co. | 156 | 17,144 |
| 4,789,337 | ||
| Insurance 3.7% | ||
| Aflac, Inc. | 5,234 | 378,680 |
| Alleghany Corp. * | 57 | 36,811 |
| Allied World Assurance Co. Holdings AG | 1,422 | 75,110 |
| Ambac Financial Group, Inc. * | 1,328 | 29,349 |
| American Equity Investment Life Holding Co. | 2,040 | 54,896 |
| American Financial Group, Inc. | 1,248 | 117,387 |
| American International Group, Inc. | 23,304 | 1,489,592 |
| American National Insurance Co. | 200 | 24,020 |
| AmTrust Financial Services, Inc. | 368 | 8,464 |
| Aon plc | 2,031 | 234,885 |
| Arch Capital Group Ltd. * | 1,313 | 124,170 |
| Argo Group International Holdings Ltd. | 374 | 25,039 |
| Arthur J. Gallagher & Co. | 936 | 53,305 |
| Aspen Insurance Holdings Ltd. | 1,248 | 69,950 |
| Assurant, Inc. | 1,500 | 148,500 |
| Assured Guaranty Ltd. | 1,284 | 52,785 |
| Axis Capital Holdings Ltd. | 2,052 | 142,204 |
| Brown & Brown, Inc. | 780 | 33,618 |
| Chubb Ltd. | 3,721 | 514,131 |
| Cincinnati Financial Corp. | 1,578 | 115,131 |
| CNA Financial Corp. | 354 | 15,180 |
| CNO Financial Group, Inc. | 2,692 | 56,290 |
| Employers Holdings, Inc. | 672 | 25,267 |
| Endurance Specialty Holdings Ltd. | 714 | 66,352 |
| Erie Indemnity Co., Class A | 99 | 11,742 |
| Everest Re Group Ltd. | 628 | 147,668 |
| First American Financial Corp. | 1,404 | 54,854 |
| FNF Group | 3,008 | 115,297 |
| Genworth Financial, Inc., Class A * | 23,333 | 95,432 |
| Horace Mann Educators Corp. | 468 | 19,609 |
| Infinity Property & Casualty Corp. | 312 | 29,406 |
| Kemper Corp. | 1,108 | 47,035 |
| Lincoln National Corp. | 2,677 | 187,818 |
| Loews Corp. | 5,929 | 278,544 |
| Maiden Holdings Ltd. | 870 | 13,441 |
6
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Broad Market Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Markel Corp. * | 35 | 34,291 |
| Marsh & McLennan Cos., Inc. | 4,112 | 302,150 |
| MBIA, Inc. * | 3,043 | 31,404 |
| Mercury General Corp. | 468 | 27,439 |
| MetLife, Inc. | 9,530 | 499,753 |
| Old Republic International Corp. | 2,848 | 58,982 |
| Primerica, Inc. | 950 | 76,712 |
| Principal Financial Group, Inc. | 2,056 | 128,582 |
| ProAssurance Corp. | 948 | 56,027 |
| Prudential Financial, Inc. | 3,744 | 413,862 |
| Reinsurance Group of America, Inc. | 964 | 125,378 |
| RenaissanceRe Holdings Ltd. | 781 | 115,307 |
| RLI Corp. | 624 | 36,473 |
| Safety Insurance Group, Inc. | 156 | 11,076 |
| Selective Insurance Group, Inc. | 665 | 29,459 |
| Stewart Information Services Corp. | 314 | 13,945 |
| The Allstate Corp. | 5,875 | 482,690 |
| The Hanover Insurance Group, Inc. | 634 | 57,073 |
| The Hartford Financial Services Group, Inc. | 5,507 | 269,237 |
| The Progressive Corp. | 8,633 | 338,241 |
| The Travelers Cos., Inc. | 8,736 | 1,067,889 |
| Torchmark Corp. | 1,612 | 124,978 |
| Unum Group | 4,524 | 220,907 |
| Validus Holdings Ltd. | 1,104 | 63,657 |
| W.R. Berkley Corp. | 1,326 | 94,172 |
| White Mountains Insurance Group Ltd. | 70 | 65,538 |
| XL Group Ltd. | 3,125 | 126,531 |
| 9,763,715 | ||
| Materials 4.3% | ||
| A. Schulman, Inc. | 624 | 21,060 |
| AdvanSix, Inc. * | 217 | 5,920 |
| Air Products & Chemicals, Inc. | 1,734 | 243,575 |
| Albemarle Corp. | 1,498 | 152,062 |
| Alcoa Corp. | 324 | 11,207 |
| Allegheny Technologies, Inc. | 4,335 | 83,275 |
| AptarGroup, Inc. | 942 | 70,188 |
| Ashland Global Holdings, Inc. | 1,056 | 127,417 |
| Avery Dennison Corp. | 1,125 | 90,799 |
| Axalta Coating Systems Ltd. * | 530 | 15,428 |
| Ball Corp. | 2,580 | 189,707 |
| Bemis Co., Inc. | 1,560 | 77,329 |
| Berry Plastics Group, Inc. * | 405 | 20,384 |
| Boise Cascade Co. * | 1,023 | 27,723 |
| Cabot Corp. | 1,255 | 72,765 |
| Calgon Carbon Corp. | 393 | 5,541 |
| Carpenter Technology Corp. | 1,006 | 40,803 |
| Celanese Corp., Series A | 1,404 | 125,195 |
| Century Aluminum Co. * | 1,566 | 22,057 |
| CF Industries Holdings, Inc. | 6,334 | 199,014 |
| Chemtura Corp. * | 1,248 | 41,371 |
| Clearwater Paper Corp. * | 528 | 29,357 |
| Cliffs Natural Resources, Inc. * | 23,139 | 246,662 |
| Commercial Metals Co. | 4,368 | 92,296 |
| Compass Minerals International, Inc. | 312 | 23,650 |
| Crown Holdings, Inc. * | 936 | 50,160 |
| Domtar Corp. | 2,965 | 112,937 |
| E.I. du Pont de Nemours & Co. | 9,419 | 739,768 |
| Eagle Materials, Inc. | 110 | 11,408 |
| Eastman Chemical Co. | 1,876 | 150,549 |
| Ecolab, Inc. | 1,176 | 145,789 |
| Ferro Corp. * | 398 | 5,572 |
| FMC Corp. | 1,297 | 74,733 |
| Freeport-McMoRan, Inc. * | 57,929 | 776,249 |
| Graphic Packaging Holding Co. | 3,588 | 47,900 |
| Greif, Inc., Class A | 813 | 46,365 |
| H.B. Fuller Co. | 624 | 30,832 |
| Security | Number of Shares | Value ($) |
| Hecla Mining Co. | 5,197 | 28,999 |
| Huntsman Corp. | 5,474 | 123,712 |
| Innophos Holdings, Inc. | 312 | 16,533 |
| Innospec, Inc. | 343 | 22,398 |
| International Flavors & Fragrances, Inc. | 624 | 78,437 |
| International Paper Co. | 7,905 | 416,594 |
| Kaiser Aluminum Corp. | 312 | 24,595 |
| KapStone Paper & Packaging Corp. | 1,430 | 32,318 |
| Koppers Holdings, Inc. * | 971 | 42,578 |
| Kraton Corp. * | 468 | 12,744 |
| Louisiana-Pacific Corp. * | 936 | 22,071 |
| LyondellBasell Industries N.V., Class A | 8,796 | 802,547 |
| Martin Marietta Materials, Inc. | 314 | 67,808 |
| Materion Corp. | 312 | 10,873 |
| Minerals Technologies, Inc. | 468 | 36,153 |
| Monsanto Co. | 5,180 | 589,639 |
| Neenah Paper, Inc. | 100 | 7,325 |
| NewMarket Corp. | 73 | 31,805 |
| Newmont Mining Corp. | 7,375 | 252,520 |
| Nucor Corp. | 6,602 | 413,087 |
| Olin Corp. | 1,562 | 48,547 |
| Owens-Illinois, Inc. * | 2,882 | 57,064 |
| P.H. Glatfelter Co. | 780 | 17,238 |
| Packaging Corp. of America | 784 | 72,465 |
| Platform Specialty Products Corp. * | 1,577 | 20,801 |
| PolyOne Corp. | 780 | 26,270 |
| PPG Industries, Inc. | 2,437 | 249,622 |
| Praxair, Inc. | 3,122 | 370,613 |
| Quaker Chemical Corp. | 71 | 9,349 |
| Reliance Steel & Aluminum Co. | 2,028 | 171,670 |
| Royal Gold, Inc. | 202 | 13,342 |
| RPM International, Inc. | 1,404 | 74,819 |
| Schnitzer Steel Industries, Inc., Class A | 2,654 | 63,165 |
| Schweitzer-Mauduit International, Inc. | 312 | 12,801 |
| Sealed Air Corp. | 1,099 | 51,082 |
| Sensient Technologies Corp. | 624 | 49,883 |
| Silgan Holdings, Inc. | 624 | 37,203 |
| Sonoco Products Co. | 1,716 | 91,497 |
| Southern Copper Corp. | 2,534 | 92,896 |
| Steel Dynamics, Inc. | 3,952 | 144,643 |
| Stepan Co. | 533 | 40,300 |
| Stillwater Mining Co. * | 938 | 16,002 |
| SunCoke Energy, Inc. * | 3,041 | 29,650 |
| The Chemours Co. | 7,020 | 236,293 |
| The Dow Chemical Co. | 14,527 | 904,451 |
| The Mosaic Co. | 12,020 | 374,904 |
| The Scotts Miracle-Gro Co., Class A | 624 | 56,553 |
| The Sherwin-Williams Co. | 363 | 112,000 |
| The Valspar Corp. | 780 | 86,752 |
| TimkenSteel Corp. * | 1,792 | 37,489 |
| Trinseo S.A. | 300 | 20,745 |
| Tronox Ltd., Class A | 3,356 | 58,160 |
| United States Steel Corp. | 5,821 | 225,389 |
| Vulcan Materials Co. | 473 | 57,049 |
| W.R. Grace & Co. | 156 | 11,051 |
| Westlake Chemical Corp. | 478 | 30,320 |
| WestRock Co. | 2,186 | 117,432 |
| Worthington Industries, Inc. | 936 | 45,911 |
| 11,395,204 | ||
| Media 3.2% | ||
| AMC Networks, Inc., Class A * | 156 | 9,330 |
| Cable One, Inc. | 25 | 15,636 |
| CBS Corp., Class B Non-Voting Shares | 7,132 | 470,141 |
| Charter Communications, Inc., Class A * | 1,116 | 360,535 |
| Cinemark Holdings, Inc. | 1,407 | 58,911 |
| Comcast Corp., Class A | 42,232 | 1,580,321 |
7
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Broad Market Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Discovery Communications, Inc., Class A * | 2,904 | 83,519 |
| Discovery Communications, Inc., Class C * | 4,682 | 131,424 |
| DISH Network Corp., Class A * | 1,470 | 91,140 |
| Gannett Co., Inc. | 2,610 | 22,759 |
| John Wiley & Sons, Inc., Class A | 468 | 24,430 |
| Lions Gate Entertainment Corp., Class A | 156 | 4,176 |
| Lions Gate Entertainment Corp., Class B * | 418 | 10,442 |
| Live Nation Entertainment, Inc. * | 1,032 | 29,319 |
| Loral Space & Communications, Inc. * | 328 | 13,415 |
| Meredith Corp. | 496 | 31,099 |
| National CineMedia, Inc. | 947 | 12,150 |
| News Corp., Class A | 7,247 | 92,907 |
| News Corp., Class B | 2,196 | 28,987 |
| Omnicom Group, Inc. | 3,276 | 278,788 |
| Regal Entertainment Group, Class A | 1,560 | 33,665 |
| Scholastic Corp. | 936 | 42,176 |
| Scripps Networks Interactive, Inc., Class A | 1,277 | 103,143 |
| Sinclair Broadcast Group, Inc., Class A | 335 | 13,367 |
| Sirius XM Holdings, Inc. | 10,325 | 52,554 |
| TEGNA, Inc. | 3,434 | 88,013 |
| The Interpublic Group of Cos., Inc. | 4,435 | 106,884 |
| The New York Times Co., Class A | 1,775 | 25,560 |
| The Walt Disney Co. | 14,481 | 1,594,213 |
| Time Warner, Inc. | 16,289 | 1,599,743 |
| Time, Inc. | 4,745 | 83,275 |
| Tribune Media Co., Class A | 519 | 17,916 |
| Twenty-First Century Fox, Inc., Class A | 13,375 | 400,180 |
| Twenty-First Century Fox, Inc., Class B | 7,735 | 227,022 |
| Viacom, Inc., Class B | 13,126 | 570,325 |
| 8,307,465 | ||
| Pharmaceuticals, Biotechnology & Life Sciences 5.1% | ||
| AbbVie, Inc. | 7,259 | 448,897 |
| Agilent Technologies, Inc. | 2,677 | 137,330 |
| Alexion Pharmaceuticals, Inc. * | 104 | 13,650 |
| Allergan plc | 569 | 139,303 |
| Amgen, Inc. | 6,132 | 1,082,482 |
| Bio-Rad Laboratories, Inc., Class A * | 277 | 53,915 |
| Bio-Techne Corp. | 156 | 16,586 |
| Biogen, Inc. * | 894 | 258,008 |
| Bioverativ, Inc. * | 445 | 23,176 |
| Bristol-Myers Squibb Co. | 10,789 | 611,844 |
| Bruker Corp. | 501 | 12,099 |
| Celgene Corp. * | 2,618 | 323,349 |
| Charles River Laboratories International, Inc. * | 563 | 48,964 |
| Eli Lilly & Co. | 8,837 | 731,792 |
| Endo International plc * | 740 | 10,101 |
| Gilead Sciences, Inc. | 7,877 | 555,171 |
| Impax Laboratories, Inc. * | 1,036 | 14,763 |
| Johnson & Johnson | 22,555 | 2,756,447 |
| Mallinckrodt plc * | 289 | 15,149 |
| Merck & Co., Inc. | 32,849 | 2,163,764 |
| Mettler-Toledo International, Inc. * | 205 | 97,625 |
| Mylan N.V. * | 2,878 | 120,444 |
| Myriad Genetics, Inc. * | 969 | 18,828 |
| PAREXEL International Corp. * | 312 | 20,183 |
| PDL BioPharma, Inc. | 8,371 | 17,914 |
| PerkinElmer, Inc. | 1,092 | 59,252 |
| Perrigo Co., plc | 663 | 49,572 |
| Pfizer, Inc. | 90,949 | 3,103,180 |
| QIAGEN N.V. * | 898 | 25,557 |
| Quintiles IMS Holdings, Inc. * | 594 | 45,970 |
| Regeneron Pharmaceuticals, Inc. * | 119 | 44,446 |
| Thermo Fisher Scientific, Inc. | 1,764 | 278,148 |
| United Therapeutics Corp. * | 420 | 62,042 |
| Security | Number of Shares | Value ($) |
| Waters Corp. * | 624 | 96,714 |
| Zoetis, Inc. | 1,943 | 103,581 |
| 13,560,246 | ||
| Real Estate 1.9% | ||
| Alexandria Real Estate Equities, Inc. | 509 | 60,729 |
| Altisource Portfolio Solutions S.A. * | 387 | 9,300 |
| American Campus Communities, Inc. | 470 | 24,017 |
| American Tower Corp. | 1,163 | 133,501 |
| Apartment Investment & Management Co., Class A | 731 | 34,013 |
| Apple Hospitality REIT, Inc. | 756 | 14,848 |
| Ashford Hospitality Trust, Inc. | 3,056 | 20,078 |
| AvalonBay Communities, Inc. | 468 | 86,009 |
| Boston Properties, Inc. | 792 | 110,112 |
| Brandywine Realty Trust | 1,716 | 28,589 |
| Brixmor Property Group, Inc. | 659 | 15,381 |
| Camden Property Trust | 468 | 39,616 |
| CBL & Associates Properties, Inc. | 2,994 | 30,030 |
| CBRE Group, Inc., Class A * | 3,000 | 106,860 |
| Columbia Property Trust, Inc. | 1,659 | 38,306 |
| CoreCivic, Inc. | 3,531 | 118,995 |
| Corporate Office Properties Trust | 1,254 | 42,749 |
| Crown Castle International Corp. | 801 | 74,918 |
| CubeSmart | 387 | 10,546 |
| DCT Industrial Trust, Inc. | 393 | 18,801 |
| DDR Corp. | 1,560 | 22,558 |
| DiamondRock Hospitality Co. | 1,560 | 16,957 |
| Digital Realty Trust, Inc. | 780 | 84,240 |
| Douglas Emmett, Inc. | 624 | 25,172 |
| Duke Realty Corp. | 2,496 | 63,997 |
| DuPont Fabros Technology, Inc. | 314 | 16,168 |
| EastGroup Properties, Inc. | 156 | 11,597 |
| EPR Properties | 312 | 24,012 |
| Equinix, Inc. | 161 | 60,547 |
| Equity Commonwealth * | 1,560 | 48,766 |
| Equity LifeStyle Properties, Inc. | 247 | 19,666 |
| Equity One, Inc. | 315 | 9,973 |
| Equity Residential | 2,117 | 133,519 |
| Essex Property Trust, Inc. | 193 | 45,297 |
| Extra Space Storage, Inc. | 312 | 24,707 |
| Federal Realty Investment Trust | 312 | 43,908 |
| Franklin Street Properties Corp. | 1,009 | 12,502 |
| Gaming & Leisure Properties, Inc. | 1,000 | 32,000 |
| GGP, Inc. | 2,364 | 58,769 |
| Government Properties Income Trust | 473 | 9,749 |
| Gramercy Property Trust | 481 | 13,449 |
| HCP, Inc. | 3,795 | 124,438 |
| Healthcare Realty Trust, Inc. | 468 | 14,957 |
| Healthcare Trust of America, Inc., Class A | 485 | 15,602 |
| Hersha Hospitality Trust | 1,197 | 23,353 |
| Highwoods Properties, Inc. | 780 | 40,942 |
| Hospitality Properties Trust | 1,872 | 59,492 |
| Host Hotels & Resorts, Inc. | 7,980 | 143,560 |
| Investors Real Estate Trust | 1,325 | 8,613 |
| Iron Mountain, Inc. | 3,461 | 125,807 |
| Jones Lang LaSalle, Inc. | 524 | 60,103 |
| Kilroy Realty Corp. | 312 | 24,071 |
| Kimco Realty Corp. | 2,964 | 71,877 |
| Lamar Advertising Co., Class A | 371 | 28,003 |
| LaSalle Hotel Properties | 1,288 | 37,223 |
| Lexington Realty Trust | 2,430 | 27,119 |
| Liberty Property Trust | 1,092 | 43,068 |
| Life Storage, Inc. | 156 | 13,826 |
| Mack-Cali Realty Corp. | 1,716 | 50,021 |
| Medical Properties Trust, Inc. | 670 | 8,991 |
| Mid-America Apartment Communities, Inc. | 672 | 69,035 |
8
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Broad Market Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| National Retail Properties, Inc. | 472 | 21,353 |
| Omega Healthcare Investors, Inc. | 468 | 15,276 |
| Outfront Media, Inc. | 1,502 | 38,977 |
| Park Hotels & Resorts, Inc. | 578 | 14,762 |
| Pennsylvania Real Estate Investment Trust | 624 | 10,296 |
| Piedmont Office Realty Trust, Inc., Class A | 2,362 | 54,184 |
| Potlatch Corp. | 624 | 27,612 |
| Prologis, Inc. | 2,115 | 107,971 |
| PS Business Parks, Inc. | 156 | 18,129 |
| Public Storage | 510 | 116,005 |
| Rayonier, Inc. | 2,048 | 58,655 |
| Realogy Holdings Corp. | 742 | 20,553 |
| Realty Income Corp. | 835 | 51,169 |
| Regency Centers Corp. | 419 | 29,477 |
| Retail Properties of America, Inc., Class A | 2,257 | 34,780 |
| RLJ Lodging Trust | 834 | 18,982 |
| Ryman Hospitality Properties, Inc. | 312 | 20,115 |
| Sabra Health Care REIT, Inc. | 780 | 21,216 |
| SBA Communications Corp. * | 312 | 36,120 |
| Senior Housing Properties Trust | 2,457 | 50,368 |
| Simon Property Group, Inc. | 1,523 | 280,841 |
| SL Green Realty Corp. | 312 | 35,156 |
| Spirit Realty Capital, Inc. | 1,369 | 15,045 |
| Sun Communities, Inc. | 156 | 12,921 |
| Sunstone Hotel Investors, Inc. | 1,127 | 16,623 |
| Tanger Factory Outlet Centers, Inc. | 312 | 10,567 |
| Taubman Centers, Inc. | 312 | 21,765 |
| The GEO Group, Inc. | 1,436 | 68,368 |
| The Macerich Co. | 624 | 42,045 |
| UDR, Inc. | 1,267 | 46,246 |
| Ventas, Inc. | 2,707 | 176,090 |
| Vornado Realty Trust | 1,249 | 137,228 |
| Washington Prime Group, Inc. | 2,675 | 24,797 |
| Washington Real Estate Investment Trust | 468 | 15,308 |
| Weingarten Realty Investors | 936 | 33,200 |
| Welltower, Inc. | 1,944 | 136,819 |
| Weyerhaeuser Co. | 9,925 | 334,671 |
| WP Carey, Inc. | 312 | 19,684 |
| Xenia Hotels & Resorts, Inc. | 994 | 17,465 |
| 4,995,891 | ||
| Retailing 4.4% | ||
| Aaron's, Inc. | 2,028 | 55,324 |
| Abercrombie & Fitch Co., Class A | 4,808 | 57,504 |
| Advance Auto Parts, Inc. | 520 | 81,437 |
| Amazon.com, Inc. * | 506 | 427,590 |
| American Eagle Outfitters, Inc. | 6,240 | 98,904 |
| Asbury Automotive Group, Inc. * | 708 | 46,126 |
| Ascena Retail Group, Inc. * | 6,179 | 28,423 |
| AutoNation, Inc. * | 1,771 | 81,289 |
| AutoZone, Inc. * | 101 | 74,392 |
| Barnes & Noble Education, Inc. * | 1,631 | 15,658 |
| Barnes & Noble, Inc. | 2,586 | 25,343 |
| Bed Bath & Beyond, Inc. | 6,089 | 245,996 |
| Best Buy Co., Inc. | 10,953 | 483,356 |
| Big Lots, Inc. | 2,203 | 113,102 |
| Burlington Stores, Inc. * | 804 | 71,564 |
| Cabela's, Inc. * | 386 | 18,080 |
| Caleres, Inc. | 1,092 | 32,618 |
| CarMax, Inc. * | 2,067 | 133,404 |
| Chico's FAS, Inc. | 5,672 | 82,131 |
| Core-Mark Holding Co., Inc. | 1,802 | 58,601 |
| CST Brands, Inc. | 3,192 | 153,631 |
| Dick's Sporting Goods, Inc. | 1,430 | 69,998 |
| Dillard's, Inc., Class A | 551 | 30,041 |
| Dollar General Corp. | 3,396 | 247,976 |
| Dollar Tree, Inc. * | 2,377 | 182,268 |
| Security | Number of Shares | Value ($) |
| DSW, Inc., Class A | 1,092 | 22,965 |
| Expedia, Inc. | 538 | 64,044 |
| Express, Inc. * | 1,716 | 19,288 |
| Five Below, Inc. * | 209 | 8,057 |
| Foot Locker, Inc. | 1,779 | 134,617 |
| Fred's, Inc., Class A | 1,355 | 24,024 |
| GameStop Corp., Class A | 5,016 | 122,591 |
| Genesco, Inc. * | 799 | 46,582 |
| Genuine Parts Co. | 2,341 | 224,057 |
| GNC Holdings, Inc., Class A | 3,266 | 27,108 |
| Group 1 Automotive, Inc. | 624 | 48,479 |
| Guess?, Inc. | 2,356 | 29,921 |
| Hibbett Sports, Inc. * | 429 | 12,655 |
| J.C. Penney Co., Inc. * | 10,467 | 66,361 |
| Kohl's Corp. | 9,949 | 424,026 |
| L Brands, Inc. | 2,466 | 129,761 |
| Lands' End, Inc. * | 830 | 15,396 |
| Liberty Interactive Corp. QVC Group, Class A * | 7,510 | 141,789 |
| Lithia Motors, Inc., Class A | 184 | 17,603 |
| LKQ Corp. * | 1,479 | 46,707 |
| Lowe's Cos., Inc. | 14,152 | 1,052,484 |
| Lumber Liquidators Holdings, Inc. * | 939 | 16,648 |
| Macy's, Inc. | 9,552 | 317,317 |
| Monro Muffler Brake, Inc. | 156 | 8,970 |
| Murphy USA, Inc. * | 2,157 | 137,401 |
| Netflix, Inc. * | 354 | 50,314 |
| Nordstrom, Inc. | 3,135 | 146,279 |
| Nutrisystem, Inc. | 417 | 19,390 |
| O'Reilly Automotive, Inc. * | 640 | 173,894 |
| Office Depot, Inc. | 20,774 | 86,628 |
| Penske Automotive Group, Inc. | 780 | 39,234 |
| Pier 1 Imports, Inc. | 7,657 | 51,532 |
| Pool Corp. | 312 | 35,790 |
| Rent-A-Center, Inc. | 4,900 | 42,483 |
| RH * | 384 | 11,689 |
| Ross Stores, Inc. | 3,193 | 218,976 |
| Sally Beauty Holdings, Inc. * | 1,430 | 31,274 |
| Select Comfort Corp. * | 312 | 7,329 |
| Signet Jewelers Ltd. | 689 | 43,813 |
| Sonic Automotive, Inc., Class A | 1,092 | 23,696 |
| Stage Stores, Inc. | 4,860 | 11,324 |
| Staples, Inc. | 39,071 | 351,248 |
| Target Corp. | 14,676 | 862,508 |
| The Buckle, Inc. | 2,196 | 43,591 |
| The Cato Corp., Class A | 468 | 11,705 |
| The Children's Place, Inc. | 630 | 63,819 |
| The Finish Line, Inc., Class A | 936 | 15,257 |
| The Gap, Inc. | 9,559 | 237,254 |
| The Home Depot, Inc. | 12,979 | 1,880,787 |
| The Michaels Cos., Inc. * | 374 | 7,514 |
| The Priceline Group, Inc. * | 97 | 167,241 |
| The TJX Cos., Inc. | 7,258 | 569,390 |
| Tiffany & Co. | 1,221 | 112,173 |
| Tractor Supply Co. | 1,092 | 77,434 |
| Ulta Salon, Cosmetics & Fragrance, Inc. * | 191 | 52,225 |
| Urban Outfitters, Inc. * | 2,212 | 57,578 |
| Williams-Sonoma, Inc. | 1,745 | 84,790 |
| 11,661,766 | ||
| Semiconductors & Semiconductor Equipment 2.8% | ||
| Advanced Micro Devices, Inc. * | 12,980 | 187,691 |
| Amkor Technology, Inc. * | 1,668 | 16,380 |
| Analog Devices, Inc. | 1,955 | 160,173 |
| Applied Materials, Inc. | 10,381 | 376,000 |
| Broadcom Ltd. | 490 | 103,356 |
| Brooks Automation, Inc. | 1,248 | 26,033 |
| Cabot Microelectronics Corp. | 409 | 28,311 |
9
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Broad Market Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Cirrus Logic, Inc. * | 498 | 26,932 |
| Cree, Inc. * | 806 | 21,875 |
| Cypress Semiconductor Corp. | 2,230 | 29,592 |
| Entegris, Inc. * | 1,560 | 33,072 |
| First Solar, Inc. * | 756 | 27,360 |
| Integrated Device Technology, Inc. * | 425 | 10,162 |
| Intel Corp. | 80,497 | 2,913,991 |
| KLA-Tencor Corp. | 1,752 | 157,890 |
| Lam Research Corp. | 1,128 | 133,713 |
| Linear Technology Corp. | 1,560 | 100,745 |
| Marvell Technology Group Ltd. | 12,991 | 202,660 |
| Maxim Integrated Products, Inc. | 3,120 | 138,216 |
| Microchip Technology, Inc. | 1,813 | 131,479 |
| Micron Technology, Inc. * | 13,160 | 308,470 |
| Microsemi Corp. * | 398 | 20,624 |
| MKS Instruments, Inc. | 624 | 40,934 |
| NVIDIA Corp. | 2,716 | 275,620 |
| ON Semiconductor Corp. * | 4,056 | 61,367 |
| Photronics, Inc. * | 1,248 | 13,354 |
| Qorvo, Inc. * | 226 | 14,939 |
| QUALCOMM, Inc. | 14,127 | 797,893 |
| Silicon Laboratories, Inc. * | 468 | 31,590 |
| Skyworks Solutions, Inc. | 540 | 51,197 |
| Synaptics, Inc. * | 215 | 11,427 |
| Teradyne, Inc. | 1,560 | 44,366 |
| Texas Instruments, Inc. | 10,852 | 831,480 |
| Veeco Instruments, Inc. * | 328 | 8,971 |
| Versum Materials, Inc. * | 851 | 25,794 |
| Xilinx, Inc. | 1,914 | 112,581 |
| 7,476,238 | ||
| Software & Services 7.0% | ||
| Accenture plc, Class A | 5,472 | 670,320 |
| ACI Worldwide, Inc. * | 474 | 9,276 |
| Activision Blizzard, Inc. | 6,016 | 271,502 |
| Acxiom Corp. * | 1,248 | 35,593 |
| Adobe Systems, Inc. * | 1,517 | 179,522 |
| Akamai Technologies, Inc. * | 788 | 49,329 |
| Alliance Data Systems Corp. | 328 | 79,697 |
| Alphabet, Inc., Class A * | 810 | 684,393 |
| Alphabet, Inc., Class C * | 827 | 680,795 |
| Amdocs Ltd. | 2,184 | 132,460 |
| ANSYS, Inc. * | 343 | 36,619 |
| Autodesk, Inc. * | 868 | 74,908 |
| Automatic Data Processing, Inc. | 3,065 | 314,530 |
| Booz Allen Hamilton Holding Corp. | 1,782 | 63,742 |
| Broadridge Financial Solutions, Inc. | 1,092 | 75,708 |
| CA, Inc. | 4,735 | 152,798 |
| CACI International, Inc., Class A * | 630 | 79,002 |
| Cadence Design Systems, Inc. * | 780 | 24,102 |
| Cardtronics plc, Class A * | 376 | 16,574 |
| CDK Global, Inc. | 234 | 15,545 |
| Cimpress N.V. * | 312 | 25,026 |
| Citrix Systems, Inc. * | 1,116 | 88,108 |
| Cognizant Technology Solutions Corp., Class A * | 2,584 | 153,154 |
| Computer Sciences Corp. | 3,381 | 231,801 |
| Conduent, Inc. * | 7,108 | 114,368 |
| Convergys Corp. | 2,340 | 51,199 |
| CoreLogic, Inc. * | 1,594 | 62,469 |
| CSG Systems International, Inc. | 211 | 8,316 |
| CSRA, Inc. | 893 | 26,629 |
| Dell Technologies, Inc., Class V * | 673 | 42,729 |
| DST Systems, Inc. | 389 | 46,524 |
| eBay, Inc. * | 9,716 | 329,372 |
| Electronic Arts, Inc. * | 724 | 62,626 |
| Euronet Worldwide, Inc. * | 314 | 25,993 |
| Security | Number of Shares | Value ($) |
| Facebook, Inc., Class A * | 1,532 | 207,647 |
| Fair Isaac Corp. | 250 | 32,517 |
| Fidelity National Information Services, Inc. | 3,120 | 256,682 |
| First Data Corp., Class A * | 2,118 | 34,100 |
| Fiserv, Inc. * | 1,639 | 189,141 |
| FleetCor Technologies, Inc. * | 67 | 11,390 |
| Gartner, Inc. * | 312 | 32,202 |
| Genpact Ltd. * | 1,096 | 26,567 |
| Global Payments, Inc. | 1,133 | 90,289 |
| IAC/InterActiveCorp * | 1,496 | 110,614 |
| International Business Machines Corp. | 20,197 | 3,631,825 |
| Intuit, Inc. | 1,894 | 237,583 |
| j2 Global, Inc. | 312 | 25,403 |
| Jack Henry & Associates, Inc. | 468 | 43,884 |
| Leidos Holdings, Inc. | 2,139 | 114,009 |
| Manhattan Associates, Inc. * | 156 | 7,823 |
| ManTech International Corp., Class A | 1,256 | 45,995 |
| MasterCard, Inc., Class A | 4,242 | 468,571 |
| MAXIMUS, Inc. | 468 | 27,926 |
| Mentor Graphics Corp. | 429 | 15,916 |
| Microsoft Corp. | 66,129 | 4,230,933 |
| NeuStar, Inc., Class A * | 1,717 | 56,919 |
| Nuance Communications, Inc. * | 1,098 | 18,699 |
| Oracle Corp. | 35,962 | 1,531,622 |
| Paychex, Inc. | 1,977 | 121,427 |
| PayPal Holdings, Inc. * | 1,473 | 61,866 |
| Progress Software Corp. | 468 | 13,422 |
| PTC, Inc. * | 277 | 14,928 |
| Red Hat, Inc. * | 340 | 28,155 |
| salesforce.com, Inc. * | 312 | 25,381 |
| Science Applications International Corp. | 944 | 82,100 |
| SS&C Technologies Holdings, Inc. | 410 | 14,358 |
| Sykes Enterprises, Inc. * | 780 | 21,232 |
| Symantec Corp. | 11,101 | 317,156 |
| Synopsys, Inc. * | 941 | 67,225 |
| Take-Two Interactive Software, Inc. * | 780 | 44,444 |
| Teradata Corp. * | 2,749 | 85,494 |
| The Western Union Co. | 9,070 | 178,135 |
| TiVo Corp. | 1,311 | 24,253 |
| Total System Services, Inc. | 1,057 | 57,585 |
| Travelport Worldwide Ltd. | 1,208 | 15,342 |
| Unisys Corp. * | 2,574 | 35,779 |
| Vantiv, Inc., Class A * | 315 | 20,595 |
| Verint Systems, Inc. * | 254 | 9,588 |
| VeriSign, Inc. * | 542 | 44,699 |
| Visa, Inc., Class A | 7,939 | 698,156 |
| VMware, Inc., Class A * | 230 | 20,675 |
| WebMD Health Corp. * | 348 | 18,061 |
| WEX, Inc. * | 79 | 8,787 |
| Yahoo! Inc. * | 3,937 | 179,763 |
| Zynga, Inc., Class A * | 3,851 | 10,205 |
| 18,581,797 | ||
| Technology Hardware & Equipment 5.7% | ||
| ADTRAN, Inc. | 936 | 19,796 |
| Amphenol Corp., Class A | 1,874 | 129,700 |
| Anixter International, Inc. * | 1,097 | 91,380 |
| Apple, Inc. | 45,650 | 6,253,593 |
| Arrow Electronics, Inc. * | 3,120 | 225,264 |
| Avnet, Inc. | 5,519 | 254,316 |
| AVX Corp. | 1,051 | 16,312 |
| Belden, Inc. | 468 | 33,064 |
| Benchmark Electronics, Inc. * | 1,872 | 58,219 |
| Brocade Communications Systems, Inc. | 5,154 | 63,446 |
| CDW Corp. | 964 | 56,780 |
| Cisco Systems, Inc. | 58,854 | 2,011,630 |
| Cognex Corp. | 312 | 23,965 |
10
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Broad Market Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Coherent, Inc. * | 312 | 56,965 |
| CommScope Holding Co., Inc. * | 1,124 | 42,768 |
| Comtech Telecommunications Corp. | 1,738 | 19,831 |
| Corning, Inc. | 17,981 | 496,455 |
| Diebold Nixdorf, Inc. | 902 | 27,240 |
| Dolby Laboratories, Inc., Class A | 815 | 39,845 |
| EchoStar Corp., Class A * | 468 | 24,930 |
| Electronics For Imaging, Inc. * | 225 | 10,366 |
| F5 Networks, Inc. * | 538 | 77,079 |
| Fabrinet * | 477 | 19,819 |
| Finisar Corp. * | 624 | 20,892 |
| FLIR Systems, Inc. | 1,592 | 58,442 |
| Harmonic, Inc. * | 2,658 | 14,353 |
| Harris Corp. | 1,831 | 201,227 |
| Hewlett Packard Enterprise Co. | 23,909 | 545,603 |
| HP, Inc. | 77,280 | 1,342,354 |
| II-VI, Inc. * | 742 | 26,415 |
| Insight Enterprises, Inc. * | 1,404 | 59,473 |
| InterDigital, Inc. | 312 | 26,224 |
| IPG Photonics Corp. * | 160 | 18,928 |
| Itron, Inc. * | 648 | 41,926 |
| Jabil Circuit, Inc. | 5,461 | 139,310 |
| Juniper Networks, Inc. | 5,933 | 166,124 |
| Keysight Technologies, Inc. * | 1,736 | 65,274 |
| Knowles Corp. * | 1,806 | 34,188 |
| Littelfuse, Inc. | 156 | 25,186 |
| Methode Electronics, Inc. | 330 | 13,695 |
| Motorola Solutions, Inc. | 3,522 | 278,132 |
| MTS Systems Corp. | 156 | 8,572 |
| National Instruments Corp. | 624 | 20,118 |
| NCR Corp. * | 1,749 | 84,074 |
| NetApp, Inc. | 5,306 | 221,950 |
| NETGEAR, Inc. * | 782 | 42,854 |
| OSI Systems, Inc. * | 400 | 30,168 |
| Plantronics, Inc. | 312 | 16,711 |
| Plexus Corp. * | 780 | 43,735 |
| Sanmina Corp. * | 2,048 | 79,872 |
| ScanSource, Inc. * | 624 | 25,116 |
| SYNNEX Corp. | 792 | 92,601 |
| Tech Data Corp. * | 2,352 | 204,624 |
| Trimble, Inc. * | 1,181 | 36,646 |
| TTM Technologies, Inc. * | 1,278 | 20,652 |
| VeriFone Systems, Inc. * | 1,096 | 22,654 |
| ViaSat, Inc. * | 156 | 10,739 |
| Viavi Solutions, Inc. * | 2,496 | 25,010 |
| Vishay Intertechnology, Inc. | 4,916 | 77,919 |
| Western Digital Corp. | 5,305 | 407,848 |
| Xerox Corp. | 35,573 | 264,663 |
| Zebra Technologies Corp., Class A * | 469 | 42,543 |
| 14,909,578 | ||
| Telecommunication Services 3.1% | ||
| AT&T, Inc. | 112,601 | 4,705,596 |
| CenturyLink, Inc. | 19,519 | 473,531 |
| Cincinnati Bell, Inc. * | 1,721 | 33,215 |
| Consolidated Communications Holdings, Inc. | 624 | 14,071 |
| Frontier Communications Corp. (b) | 38,734 | 113,491 |
| Level 3 Communications, Inc. * | 1,098 | 62,860 |
| T-Mobile US, Inc. * | 1,126 | 70,409 |
| Telephone & Data Systems, Inc. | 3,759 | 101,606 |
| Verizon Communications, Inc. | 52,604 | 2,610,737 |
| Vonage Holdings Corp. * | 3,667 | 22,075 |
| Windstream Holdings, Inc. (b) | 9,947 | 74,307 |
| Zayo Group Holdings, Inc. * | 514 | 16,201 |
| 8,298,099 | ||
| Security | Number of Shares | Value ($) |
| Transportation 2.2% | ||
| Alaska Air Group, Inc. | 939 | 91,853 |
| Allegiant Travel Co. | 66 | 11,491 |
| AMERCO | 26 | 10,044 |
| American Airlines Group, Inc. | 2,852 | 132,219 |
| ArcBest Corp. | 1,233 | 36,188 |
| Atlas Air Worldwide Holdings, Inc. * | 477 | 27,117 |
| Avis Budget Group, Inc. * | 3,291 | 113,803 |
| C.H. Robinson Worldwide, Inc. | 2,109 | 169,500 |
| Copa Holdings S.A., Class A | 902 | 96,054 |
| CSX Corp. | 17,014 | 826,200 |
| Delta Air Lines, Inc. | 1,722 | 85,979 |
| Expeditors International of Washington, Inc. | 2,737 | 154,312 |
| FedEx Corp. | 4,722 | 911,251 |
| Forward Air Corp. | 312 | 15,460 |
| Genesee & Wyoming, Inc., Class A * | 156 | 11,566 |
| Hawaiian Holdings, Inc. * | 493 | 23,984 |
| Heartland Express, Inc. | 780 | 16,177 |
| Hertz Global Holdings, Inc. * | 2,283 | 51,870 |
| Hub Group, Inc., Class A * | 624 | 31,512 |
| J.B. Hunt Transport Services, Inc. | 780 | 76,573 |
| JetBlue Airways Corp. * | 3,300 | 65,868 |
| Kansas City Southern | 795 | 70,461 |
| Kirby Corp. * | 529 | 36,607 |
| Knight Transportation, Inc. | 780 | 25,506 |
| Landstar System, Inc. | 624 | 54,163 |
| Macquarie Infrastructure Corp. | 484 | 37,239 |
| Marten Transport Ltd. | 486 | 11,931 |
| Matson, Inc. | 341 | 11,570 |
| Norfolk Southern Corp. | 3,959 | 479,158 |
| Old Dominion Freight Line, Inc. * | 225 | 20,646 |
| Roadrunner Transportation Systems, Inc. * | 2,890 | 21,791 |
| Ryder System, Inc. | 1,388 | 105,696 |
| Saia, Inc. * | 211 | 10,202 |
| SkyWest, Inc. | 1,647 | 57,892 |
| Southwest Airlines Co. | 1,010 | 58,378 |
| Spirit Airlines, Inc. * | 690 | 36,025 |
| Swift Transportation Co. * | 936 | 20,330 |
| Union Pacific Corp. | 9,989 | 1,078,213 |
| United Continental Holdings, Inc. * | 815 | 60,383 |
| United Parcel Service, Inc., Class B | 5,232 | 553,336 |
| Werner Enterprises, Inc. | 1,092 | 30,576 |
| 5,739,124 | ||
| Utilities 3.8% | ||
| AES Corp. | 20,595 | 237,254 |
| ALLETE, Inc. | 468 | 31,454 |
| Alliant Energy Corp. | 3,176 | 125,388 |
| Ameren Corp. | 3,985 | 217,940 |
| American Electric Power Co., Inc. | 6,976 | 467,183 |
| American States Water Co. | 312 | 13,953 |
| American Water Works Co., Inc. | 552 | 43,056 |
| Aqua America, Inc. | 937 | 29,740 |
| Atmos Energy Corp. | 794 | 62,162 |
| Avista Corp. | 936 | 37,318 |
| Black Hills Corp. | 468 | 30,364 |
| California Water Service Group | 468 | 17,199 |
| Calpine Corp. * | 10,302 | 120,636 |
| CenterPoint Energy, Inc. | 7,199 | 196,677 |
| CMS Energy Corp. | 2,977 | 132,536 |
| Consolidated Edison, Inc. | 4,768 | 367,327 |
| Dominion Resources, Inc. | 6,471 | 502,408 |
| DTE Energy Co. | 2,305 | 233,681 |
| Duke Energy Corp. | 8,350 | 689,293 |
| Dynegy, Inc. * | 2,517 | 20,237 |
| Edison International | 4,375 | 348,863 |
11
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Broad Market Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| El Paso Electric Co. | 468 | 22,862 |
| Entergy Corp. | 3,554 | 272,450 |
| Eversource Energy | 2,731 | 160,200 |
| Exelon Corp. | 19,165 | 703,547 |
| FirstEnergy Corp. | 9,533 | 309,155 |
| Great Plains Energy, Inc. | 2,351 | 68,320 |
| Hawaiian Electric Industries, Inc. | 1,605 | 53,414 |
| IDACORP, Inc. | 468 | 38,811 |
| MDU Resources Group, Inc. | 3,932 | 106,597 |
| MGE Energy, Inc. | 314 | 20,080 |
| National Fuel Gas Co. | 656 | 39,557 |
| New Jersey Resources Corp. | 1,248 | 49,171 |
| NextEra Energy, Inc. | 3,966 | 519,546 |
| NiSource, Inc. | 5,528 | 132,175 |
| Northwest Natural Gas Co. | 468 | 28,127 |
| NorthWestern Corp. | 468 | 27,378 |
| NRG Energy, Inc. | 11,144 | 184,545 |
| OGE Energy Corp. | 3,040 | 111,963 |
| ONE Gas, Inc. | 276 | 18,092 |
| Otter Tail Corp. | 330 | 12,408 |
| PG&E Corp. | 6,318 | 421,727 |
| Pinnacle West Capital Corp. | 1,716 | 141,038 |
| PNM Resources, Inc. | 1,248 | 45,302 |
| Portland General Electric Co. | 1,262 | 57,206 |
| PPL Corp. | 9,066 | 334,354 |
| Public Service Enterprise Group, Inc. | 8,198 | 376,944 |
| SCANA Corp. | 746 | 51,735 |
| Sempra Energy | 2,389 | 263,483 |
| South Jersey Industries, Inc. | 354 | 12,397 |
| Southwest Gas Holdings, Inc. | 624 | 53,371 |
| Spire, Inc. | 468 | 30,841 |
| The Southern Co. | 12,729 | 646,888 |
| UGI Corp. | 1,819 | 87,730 |
| Vectren Corp. | 1,248 | 70,325 |
| WEC Energy Group, Inc. | 2,753 | 165,923 |
| Westar Energy, Inc. | 1,417 | 76,490 |
| WGL Holdings, Inc. | 884 | 73,805 |
| Xcel Energy, Inc. | 6,177 | 269,997 |
| 9,982,623 | ||
| Total Common Stock | ||
| (Cost $230,881,625) | 263,077,794 | |
| Other Investment Companies 0.3% of net assets | ||
| Money Market Fund 0.2% | ||
| State Street Institutional U.S. Government Money Market Fund, Premier Class 0.46% (c) | 579,920 | 579,920 |
| Securities Lending Collateral 0.1% | ||
| Wells Fargo Government Money Market Fund, Select Class 0.48% (c) | 274,400 | 274,400 |
| Total Other Investment Companies | ||
| (Cost $854,320) | 854,320 | |
End of Investments.
At 02/28/17, the tax basis cost of the fund's investments was $231,618,227 and the unrealized appreciation and depreciation were $40,069,551 and ($7,755,664), respectively, with a net unrealized appreciation of $32,313,887.
| * | Non-income producing security. |
| (a) | Issuer is affiliated with the fund's investment adviser. |
| (b) | All or a portion of this security is on loan. Securities on loan were valued at $240,735. |
| (c) | The rate shown is the 7-day yield. |
| REIT — | Real Estate Investment Trust |
In addition to the above, the fund held the following at 02/28/17:
| Number of Contracts | Contract Value ($) | Unrealized Appreciation ($) | ||||
| Futures Contracts | ||||||
| S&P 500 Index, e-mini, Long, expires 03/17/17 | 6 | 708,840 | 5,954 | |||
12
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Large Company Index ETF
Portfolio Holdings as of February 28, 2017
This section shows all the securities in the fund's portfolio and their values as of the report date.
The fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's website at www.sec.gov and may be viewed and copied at the SEC's Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the Public Reference Room. The fund also makes available its complete schedule of portfolio holdings on a daily basis on the fund's website at www.csimfunds.com/schwabetfs_prospectus.
| Holdings by Category | Cost ($) | Value ($) | |
| 99.7% | Common Stock | 1,980,449,996 | 2,192,103,750 |
| 0.4% | Other Investment Companies | 7,716,403 | 7,716,403 |
| 100.1% | Total Investments | 1,988,166,399 | 2,199,820,153 |
| (0.1%) | Other Assets and Liabilities, Net | (2,197,201) | |
| 100.0% | Net Assets | 2,197,622,952 | |
| Security | Number of Shares | Value ($) |
| Common Stock 99.7% of net assets | ||
| Automobiles & Components 1.3% | ||
| Adient plc * | 2,873 | 192,864 |
| BorgWarner, Inc. | 34,101 | 1,438,721 |
| Dana, Inc. | 39,296 | 742,301 |
| Delphi Automotive plc | 26,363 | 2,007,015 |
| Ford Motor Co. | 684,881 | 8,581,559 |
| General Motors Co. | 282,590 | 10,410,616 |
| Harley-Davidson, Inc. | 25,354 | 1,429,459 |
| Lear Corp. | 11,772 | 1,671,506 |
| The Goodyear Tire & Rubber Co. | 35,598 | 1,247,710 |
| Thor Industries, Inc. | 6,874 | 761,777 |
| Visteon Corp. * | 9,964 | 923,364 |
| 29,406,892 | ||
| Banks 5.7% | ||
| Bank of America Corp. | 761,099 | 18,783,923 |
| BB&T Corp. | 65,532 | 3,159,953 |
| CIT Group, Inc. | 28,708 | 1,231,573 |
| Citigroup, Inc. | 314,393 | 18,803,845 |
| Citizens Financial Group, Inc. | 38,427 | 1,436,017 |
| Comerica, Inc. | 11,863 | 845,595 |
| Fifth Third Bancorp | 90,054 | 2,471,082 |
| Huntington Bancshares, Inc. | 80,880 | 1,143,643 |
| JPMorgan Chase & Co. | 356,009 | 32,261,536 |
| KeyCorp | 91,262 | 1,712,988 |
| M&T Bank Corp. | 9,816 | 1,638,978 |
| New York Community Bancorp, Inc. | 54,642 | 834,930 |
| People's United Financial, Inc. | 33,999 | 652,781 |
| PHH Corp. * | 41,618 | 525,219 |
| Regions Financial Corp. | 124,686 | 1,903,955 |
| SunTrust Banks, Inc. | 44,371 | 2,639,631 |
| The PNC Financial Services Group, Inc. | 42,200 | 5,369,106 |
| U.S. Bancorp | 134,425 | 7,393,375 |
| Wells Fargo & Co. | 406,754 | 23,542,921 |
| 126,351,051 | ||
| Capital Goods 8.3% | ||
| 3M Co. | 54,465 | 10,149,553 |
| AECOM * | 25,104 | 912,530 |
| AGCO Corp. | 18,553 | 1,130,249 |
| AMETEK, Inc. | 14,727 | 794,816 |
| Arconic, Inc. | 74,461 | 2,143,732 |
| Armstrong World Industries, Inc. * | 14,603 | 671,738 |
| Carlisle Cos., Inc. | 5,234 | 540,672 |
| Security | Number of Shares | Value ($) |
| Caterpillar, Inc. | 97,555 | 9,429,666 |
| Chicago Bridge & Iron Co. N.V. | 18,299 | 614,297 |
| Cummins, Inc. | 26,153 | 3,883,459 |
| Deere & Co. | 66,953 | 7,330,684 |
| Dover Corp. | 22,867 | 1,831,647 |
| Eaton Corp. plc | 49,000 | 3,527,020 |
| EMCOR Group, Inc. | 9,731 | 598,262 |
| Emerson Electric Co. | 106,681 | 6,411,528 |
| Fastenal Co. | 24,737 | 1,237,592 |
| Flowserve Corp. | 22,605 | 1,050,002 |
| Fluor Corp. | 54,568 | 3,022,521 |
| Fortive Corp. | 7,434 | 428,570 |
| Fortune Brands Home & Security, Inc. | 9,664 | 558,869 |
| General Dynamics Corp. | 30,345 | 5,759,784 |
| General Electric Co. | 820,131 | 24,448,105 |
| Herc Holdings, Inc. * | 9,361 | 483,870 |
| Honeywell International, Inc. | 53,356 | 6,642,822 |
| Hubbell, Inc. | 5,708 | 677,083 |
| Huntington Ingalls Industries, Inc. | 3,344 | 730,664 |
| IDEX Corp. | 4,251 | 391,900 |
| Illinois Tool Works, Inc. | 37,285 | 4,921,993 |
| Ingersoll-Rand plc | 28,700 | 2,277,632 |
| Jacobs Engineering Group, Inc. | 26,129 | 1,473,937 |
| Johnson Controls International plc | 119,591 | 5,015,647 |
| Joy Global, Inc. | 42,911 | 1,209,661 |
| KBR, Inc. | 55,180 | 830,459 |
| L3 Technologies, Inc. | 18,762 | 3,158,020 |
| Lincoln Electric Holdings, Inc. | 9,333 | 785,932 |
| Lockheed Martin Corp. | 23,515 | 6,268,629 |
| Northrop Grumman Corp. | 24,630 | 6,085,827 |
| NOW, Inc. * | 28,813 | 551,481 |
| Oshkosh Corp. | 19,499 | 1,323,787 |
| Owens Corning | 17,468 | 1,021,703 |
| PACCAR, Inc. | 43,633 | 2,915,121 |
| Parker-Hannifin Corp. | 18,521 | 2,867,792 |
| Pentair plc | 17,367 | 1,008,328 |
| Quanta Services, Inc. * | 35,680 | 1,331,578 |
| Raytheon Co. | 35,759 | 5,512,250 |
| Rockwell Automation, Inc. | 11,307 | 1,708,488 |
| Rockwell Collins, Inc. | 13,333 | 1,274,501 |
| Roper Technologies, Inc. | 3,906 | 817,135 |
| Snap-on, Inc. | 3,906 | 662,731 |
| Stanley Black & Decker, Inc. | 14,337 | 1,822,950 |
| Terex Corp. | 22,924 | 716,146 |
| Textron, Inc. | 31,411 | 1,485,740 |
| The Boeing Co. | 55,101 | 9,930,853 |
| The Timken Co. | 18,285 | 808,197 |
| TransDigm Group, Inc. | 3,230 | 821,066 |
| Trinity Industries, Inc. | 27,544 | 739,281 |
| Triumph Group, Inc. | 15,907 | 442,215 |
| United Rentals, Inc. * | 11,763 | 1,506,017 |
| United Technologies Corp. | 106,903 | 12,031,933 |
| Valmont Industries, Inc. | 4,258 | 669,570 |
| W.W. Grainger, Inc. | 8,037 | 1,992,855 |
| WABCO Holdings, Inc. * | 4,540 | 509,751 |
| WESCO International, Inc. * | 9,431 | 655,454 |
| Xylem, Inc. | 13,005 | 625,801 |
| 183,182,096 | ||
13
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Large Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Commercial & Professional Services 0.6% | ||
| Cintas Corp. | 7,216 | 851,560 |
| Equifax, Inc. | 5,411 | 709,436 |
| LSC Communications, Inc. | 2,716 | 77,189 |
| ManpowerGroup, Inc. | 21,419 | 2,078,500 |
| Nielsen Holdings plc | 20,432 | 906,363 |
| Pitney Bowes, Inc. | 44,244 | 603,488 |
| R.R. Donnelley & Sons Co. | 16,031 | 268,840 |
| Republic Services, Inc. | 28,917 | 1,791,408 |
| Robert Half International, Inc. | 18,807 | 907,250 |
| The Dun & Bradstreet Corp. | 5,211 | 549,969 |
| Verisk Analytics, Inc. * | 6,525 | 541,053 |
| Waste Management, Inc. | 46,763 | 3,428,663 |
| 12,713,719 | ||
| Consumer Durables & Apparel 1.1% | ||
| Coach, Inc. | 55,226 | 2,103,558 |
| D.R. Horton, Inc. | 18,606 | 595,392 |
| Fossil Group, Inc. * | 22,488 | 425,248 |
| Garmin Ltd. | 13,984 | 721,714 |
| Hanesbrands, Inc. | 18,747 | 375,128 |
| Harman International Industries, Inc. | 5,755 | 642,373 |
| Hasbro, Inc. | 11,067 | 1,072,060 |
| Leggett & Platt, Inc. | 15,877 | 780,831 |
| Mattel, Inc. | 52,947 | 1,362,326 |
| Michael Kors Holdings Ltd. * | 12,465 | 454,973 |
| Mohawk Industries, Inc. * | 4,070 | 921,285 |
| Newell Brands, Inc. | 18,265 | 895,533 |
| NIKE, Inc., Class B | 94,744 | 5,415,567 |
| NVR, Inc. * | 494 | 955,875 |
| Polaris Industries, Inc. (b) | 7,261 | 618,710 |
| PulteGroup, Inc. | 32,798 | 723,196 |
| PVH Corp. | 8,382 | 767,791 |
| Ralph Lauren Corp. | 13,145 | 1,042,793 |
| Tupperware Brands Corp. | 9,589 | 579,080 |
| VF Corp. | 29,462 | 1,545,282 |
| Whirlpool Corp. | 10,417 | 1,860,372 |
| 23,859,087 | ||
| Consumer Services 1.6% | ||
| Aramark | 19,913 | 711,691 |
| Brinker International, Inc. | 10,459 | 441,788 |
| Carnival Corp. | 45,414 | 2,540,913 |
| Chipotle Mexican Grill, Inc. * | 1,396 | 584,561 |
| Darden Restaurants, Inc. | 13,151 | 982,117 |
| DeVry Education Group, Inc. | 22,315 | 717,427 |
| H&R Block, Inc. | 33,325 | 685,162 |
| Hilton Grand Vacations, Inc. * | 2,275 | 68,114 |
| Hilton Worldwide Holdings, Inc. | 7,981 | 456,513 |
| International Game Technology plc | 16,601 | 448,227 |
| Las Vegas Sands Corp. | 31,469 | 1,666,284 |
| Marriott International, Inc., Class A | 28,995 | 2,522,275 |
| McDonald's Corp. | 100,948 | 12,886,012 |
| MGM Resorts International * | 34,122 | 897,067 |
| Royal Caribbean Cruises Ltd. | 14,080 | 1,353,088 |
| Service Corp. International | 17,244 | 529,908 |
| Starbucks Corp. | 47,760 | 2,716,111 |
| Wyndham Worldwide Corp. | 18,334 | 1,526,122 |
| Wynn Resorts Ltd. | 12,492 | 1,201,106 |
| Yum China Holdings, Inc. * | 7,790 | 207,136 |
| Yum! Brands, Inc. | 32,008 | 2,090,763 |
| 35,232,385 | ||
| Security | Number of Shares | Value ($) |
| Diversified Financials 4.7% | ||
| AGNC Investment Corp. | 37,745 | 740,934 |
| Ally Financial, Inc. | 131,009 | 2,946,392 |
| American Express Co. | 113,341 | 9,074,080 |
| Ameriprise Financial, Inc. | 23,656 | 3,110,764 |
| Annaly Capital Management, Inc. | 148,067 | 1,643,544 |
| Berkshire Hathaway, Inc., Class B * | 132,595 | 22,729,435 |
| BlackRock, Inc. | 6,938 | 2,688,198 |
| Capital One Financial Corp. | 69,056 | 6,481,596 |
| CME Group, Inc. | 17,350 | 2,107,331 |
| Discover Financial Services | 52,370 | 3,725,602 |
| Donnelley Financial Solutions, Inc. * | 2,721 | 62,882 |
| FNFV Group * | 37,313 | 464,547 |
| Franklin Resources, Inc. | 55,908 | 2,406,280 |
| Intercontinental Exchange, Inc. | 8,524 | 486,976 |
| Invesco Ltd. | 40,462 | 1,302,472 |
| Legg Mason, Inc. | 28,738 | 1,083,997 |
| Leucadia National Corp. | 28,792 | 766,443 |
| Moody's Corp. | 9,488 | 1,056,679 |
| Morgan Stanley | 81,272 | 3,711,692 |
| Nasdaq, Inc. | 9,222 | 655,776 |
| Navient Corp. | 75,338 | 1,160,959 |
| Northern Trust Corp. | 12,666 | 1,106,375 |
| S&P Global, Inc. | 14,961 | 1,937,001 |
| SLM Corp. * | 144,218 | 1,729,174 |
| State Street Corp. | 37,258 | 2,969,835 |
| Synchrony Financial | 68,969 | 2,499,437 |
| T. Rowe Price Group, Inc. | 22,772 | 1,621,594 |
| TD Ameritrade Holding Corp. | 14,634 | 572,189 |
| The Bank of New York Mellon Corp. | 72,034 | 3,395,683 |
| The Charles Schwab Corp. (a) | 31,379 | 1,268,025 |
| The Goldman Sachs Group, Inc. | 62,518 | 15,508,215 |
| Thomson Reuters Corp. | 39,686 | 1,678,718 |
| Voya Financial, Inc. | 23,764 | 979,790 |
| 103,672,615 | ||
| Energy 13.7% | ||
| Anadarko Petroleum Corp. | 67,732 | 4,378,874 |
| Apache Corp. | 83,882 | 4,411,354 |
| Baker Hughes, Inc. | 78,292 | 4,719,442 |
| Cabot Oil & Gas Corp. | 18,908 | 414,085 |
| California Resources Corp. *(b) | 56,533 | 1,010,245 |
| Chesapeake Energy Corp. * | 368,074 | 2,006,003 |
| Chevron Corp. | 506,391 | 56,968,987 |
| Cimarex Energy Co. | 5,289 | 664,933 |
| Concho Resources, Inc. * | 3,976 | 526,621 |
| ConocoPhillips | 468,228 | 22,273,606 |
| CONSOL Energy, Inc. * | 57,519 | 895,571 |
| Delek US Holdings, Inc. | 32,938 | 792,818 |
| Denbury Resources, Inc. * | 249,824 | 677,023 |
| Devon Energy Corp. | 104,183 | 4,517,375 |
| Diamond Offshore Drilling, Inc. * | 38,033 | 640,476 |
| Energen Corp. * | 11,017 | 578,392 |
| Ensco plc, Class A | 128,052 | 1,247,226 |
| EOG Resources, Inc. | 38,036 | 3,689,112 |
| EQT Corp. | 7,976 | 477,683 |
| Exxon Mobil Corp. | 980,832 | 79,761,258 |
| Halliburton Co. | 127,162 | 6,798,081 |
| Helmerich & Payne, Inc. | 13,328 | 911,235 |
| Hess Corp. | 105,455 | 5,424,605 |
| HollyFrontier Corp. | 91,310 | 2,673,557 |
| Kinder Morgan, Inc. | 170,646 | 3,636,466 |
| Marathon Oil Corp. | 327,290 | 5,236,640 |
| Marathon Petroleum Corp. | 203,053 | 10,071,429 |
| Murphy Oil Corp. | 90,262 | 2,553,512 |
| Nabors Industries Ltd. | 105,410 | 1,543,202 |
14
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Large Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| National Oilwell Varco, Inc. | 104,356 | 4,218,070 |
| Newfield Exploration Co. * | 15,003 | 547,009 |
| Noble Corp. plc | 137,438 | 918,086 |
| Noble Energy, Inc. | 37,055 | 1,349,173 |
| Occidental Petroleum Corp. | 131,255 | 8,603,765 |
| Oceaneering International, Inc. | 24,138 | 683,588 |
| ONEOK, Inc. | 25,349 | 1,370,113 |
| Patterson-UTI Energy, Inc. | 32,964 | 910,466 |
| PBF Energy, Inc., Class A | 23,415 | 573,433 |
| Phillips 66 | 154,279 | 12,063,075 |
| Pioneer Natural Resources Co. | 5,401 | 1,004,424 |
| QEP Resources, Inc. * | 44,643 | 614,288 |
| Schlumberger Ltd. | 148,672 | 11,947,282 |
| Seadrill Ltd. *(b) | 652,153 | 1,141,268 |
| SM Energy Co. | 16,903 | 416,659 |
| Southwestern Energy Co. * | 68,189 | 512,099 |
| Superior Energy Services, Inc. | 44,689 | 737,368 |
| Tesoro Corp. | 26,942 | 2,295,189 |
| The Williams Cos., Inc. | 78,440 | 2,222,990 |
| Transocean Ltd. * | 176,005 | 2,432,389 |
| Valero Energy Corp. | 186,228 | 12,654,193 |
| Weatherford International plc * | 290,789 | 1,645,866 |
| Western Refining, Inc. | 19,534 | 713,382 |
| Whiting Petroleum Corp. * | 65,679 | 712,617 |
| World Fuel Services Corp. | 47,338 | 1,712,215 |
| 301,498,818 | ||
| Food & Staples Retailing 3.6% | ||
| Casey's General Stores, Inc. | 5,565 | 637,638 |
| Costco Wholesale Corp. | 59,503 | 10,542,742 |
| CVS Health Corp. | 203,094 | 16,365,315 |
| Sysco Corp. | 88,909 | 4,687,282 |
| The Kroger Co. | 171,870 | 5,465,466 |
| United Natural Foods, Inc. * | 15,932 | 685,873 |
| Wal-Mart Stores, Inc. | 411,864 | 29,213,513 |
| Walgreens Boots Alliance, Inc. | 108,159 | 9,342,774 |
| Whole Foods Market, Inc. | 64,538 | 1,979,380 |
| 78,919,983 | ||
| Food, Beverage & Tobacco 4.8% | ||
| Altria Group, Inc. | 127,295 | 9,536,941 |
| Archer-Daniels-Midland Co. | 187,418 | 8,803,023 |
| Brown-Forman Corp., Class B | 17,425 | 849,643 |
| Bunge Ltd. | 71,089 | 5,818,635 |
| Campbell Soup Co. | 13,677 | 811,730 |
| ConAgra Brands, Inc. | 42,333 | 1,744,543 |
| Constellation Brands, Inc., Class A | 4,737 | 752,283 |
| Dr. Pepper Snapple Group, Inc. | 19,782 | 1,848,430 |
| General Mills, Inc. | 65,173 | 3,934,494 |
| Hormel Foods Corp. | 22,282 | 785,440 |
| Ingredion, Inc. | 7,192 | 869,441 |
| Kellogg Co. | 25,265 | 1,871,379 |
| Lamb Weston Holdings, Inc. | 2,848 | 111,613 |
| McCormick & Co., Inc. Non-Voting Shares | 7,287 | 717,187 |
| Mead Johnson Nutrition Co. | 9,778 | 858,411 |
| Molson Coors Brewing Co., Class B | 9,433 | 946,979 |
| Mondelez International, Inc., Class A | 146,054 | 6,414,692 |
| Monster Beverage Corp. * | 12,600 | 522,144 |
| PepsiCo, Inc. | 140,677 | 15,527,927 |
| Philip Morris International, Inc. | 171,407 | 18,743,355 |
| Reynolds American, Inc. | 40,836 | 2,514,272 |
| The Coca-Cola Co. | 336,184 | 14,106,281 |
| The Hershey Co. | 10,007 | 1,084,258 |
| The J.M. Smucker Co. | 12,037 | 1,706,004 |
| Security | Number of Shares | Value ($) |
| The Kraft Heinz Co. | 15,812 | 1,446,956 |
| Tyson Foods, Inc., Class A | 43,010 | 2,690,706 |
| 105,016,767 | ||
| Health Care Equipment & Services 5.4% | ||
| Abbott Laboratories | 156,686 | 7,063,405 |
| Aetna, Inc. | 45,573 | 5,867,979 |
| AmerisourceBergen Corp. | 27,444 | 2,511,400 |
| Anthem, Inc. | 77,111 | 12,709,435 |
| Baxter International, Inc. | 59,178 | 3,013,344 |
| Becton Dickinson & Co. | 17,098 | 3,129,789 |
| Boston Scientific Corp. * | 48,632 | 1,193,916 |
| C.R. Bard, Inc. | 6,049 | 1,483,457 |
| Cardinal Health, Inc. | 70,065 | 5,701,189 |
| Centene Corp. * | 12,381 | 872,860 |
| Cerner Corp. * | 10,605 | 583,699 |
| Cigna Corp. | 15,441 | 2,299,165 |
| Community Health Systems, Inc. * | 97,767 | 953,228 |
| Danaher Corp. | 29,984 | 2,565,131 |
| DaVita, Inc. * | 14,008 | 972,295 |
| DENTSPLY SIRONA, Inc. | 10,457 | 664,229 |
| Edwards Lifesciences Corp. * | 4,136 | 388,949 |
| Express Scripts Holding Co. * | 119,887 | 8,470,017 |
| HCA Holdings, Inc. * | 49,697 | 4,335,566 |
| Henry Schein, Inc. * | 7,270 | 1,247,241 |
| Humana, Inc. | 23,942 | 5,057,747 |
| IDEXX Laboratories, Inc. * | 4,458 | 646,143 |
| Intuitive Surgical, Inc. * | 1,438 | 1,059,806 |
| Laboratory Corp. of America Holdings * | 7,013 | 997,669 |
| LifePoint Health, Inc. * | 8,053 | 515,795 |
| Magellan Health, Inc. * | 9,182 | 634,935 |
| McKesson Corp. | 37,675 | 5,656,148 |
| MEDNAX, Inc. * | 6,843 | 487,153 |
| Medtronic plc | 80,733 | 6,532,107 |
| Owens & Minor, Inc. | 22,311 | 804,981 |
| Patterson Cos., Inc. | 13,020 | 591,759 |
| Quest Diagnostics, Inc. | 23,843 | 2,323,262 |
| ResMed, Inc. | 8,285 | 596,769 |
| Stryker Corp. | 18,812 | 2,418,471 |
| Tenet Healthcare Corp. * | 30,005 | 579,097 |
| UnitedHealth Group, Inc. | 110,382 | 18,254,975 |
| Universal Health Services, Inc., Class B | 7,588 | 953,053 |
| Varex Imaging Corp. * | 4,052 | 141,091 |
| Varian Medical Systems, Inc. * | 10,223 | 857,607 |
| WellCare Health Plans, Inc. * | 5,915 | 835,198 |
| Zimmer Biomet Holdings, Inc. | 16,159 | 1,891,896 |
| 117,861,956 | ||
| Household & Personal Products 1.9% | ||
| Avon Products, Inc. * | 206,924 | 910,466 |
| Church & Dwight Co., Inc. | 16,648 | 829,736 |
| Colgate-Palmolive Co. | 71,666 | 5,230,185 |
| Herbalife Ltd. *(b) | 13,516 | 763,519 |
| Kimberly-Clark Corp. | 29,081 | 3,854,687 |
| Nu Skin Enterprises, Inc., Class A | 12,038 | 596,362 |
| The Clorox Co. | 8,351 | 1,142,500 |
| The Estee Lauder Cos., Inc., Class A | 13,098 | 1,085,169 |
| The Procter & Gamble Co. | 307,824 | 28,033,532 |
| 42,446,156 | ||
| Insurance 3.7% | ||
| Aflac, Inc. | 49,577 | 3,586,896 |
| Alleghany Corp. * | 1,113 | 718,775 |
| American Financial Group, Inc. | 9,144 | 860,085 |
| American International Group, Inc. | 213,381 | 13,639,313 |
15
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Large Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Aon plc | 19,711 | 2,279,577 |
| Arch Capital Group Ltd. * | 10,062 | 951,563 |
| Arthur J. Gallagher & Co. | 10,449 | 595,071 |
| Assurant, Inc. | 14,517 | 1,437,183 |
| Assured Guaranty Ltd. | 20,298 | 834,451 |
| Axis Capital Holdings Ltd. | 17,315 | 1,199,929 |
| Chubb Ltd. | 32,023 | 4,424,618 |
| Cincinnati Financial Corp. | 10,722 | 782,277 |
| CNO Financial Group, Inc. | 31,739 | 663,662 |
| Everest Re Group Ltd. | 6,184 | 1,454,106 |
| First American Financial Corp. | 13,483 | 526,781 |
| FNF Group | 28,640 | 1,097,771 |
| Genworth Financial, Inc., Class A * | 211,909 | 866,708 |
| Lincoln National Corp. | 28,086 | 1,970,514 |
| Loews Corp. | 51,921 | 2,439,249 |
| Marsh & McLennan Cos., Inc. | 35,629 | 2,618,019 |
| MetLife, Inc. | 87,181 | 4,571,772 |
| Principal Financial Group, Inc. | 23,679 | 1,480,885 |
| Prudential Financial, Inc. | 37,239 | 4,116,399 |
| Reinsurance Group of America, Inc. | 8,015 | 1,042,431 |
| RenaissanceRe Holdings Ltd. | 7,280 | 1,074,819 |
| The Allstate Corp. | 53,644 | 4,407,391 |
| The Hartford Financial Services Group, Inc. | 55,944 | 2,735,102 |
| The Progressive Corp. | 81,716 | 3,201,633 |
| The Travelers Cos., Inc. | 77,964 | 9,530,319 |
| Torchmark Corp. | 13,822 | 1,071,620 |
| Unum Group | 30,429 | 1,485,848 |
| W.R. Berkley Corp. | 13,199 | 937,393 |
| White Mountains Insurance Group Ltd. | 616 | 576,736 |
| XL Group Ltd. | 32,568 | 1,318,678 |
| 80,497,574 | ||
| Materials 4.0% | ||
| AdvanSix, Inc. * | 528 | 14,404 |
| Air Products & Chemicals, Inc. | 14,646 | 2,057,324 |
| Albemarle Corp. | 8,758 | 889,025 |
| Alcoa Corp. | 7,172 | 248,080 |
| Allegheny Technologies, Inc. | 37,685 | 723,929 |
| AptarGroup, Inc. | 8,024 | 597,868 |
| Ashland Global Holdings, Inc. | 8,606 | 1,038,400 |
| Avery Dennison Corp. | 10,982 | 886,357 |
| Ball Corp. | 25,541 | 1,878,030 |
| Bemis Co., Inc. | 15,651 | 775,820 |
| Cabot Corp. | 9,609 | 557,130 |
| Celanese Corp., Series A | 12,488 | 1,113,555 |
| CF Industries Holdings, Inc. | 57,288 | 1,799,989 |
| Commercial Metals Co. | 35,433 | 748,699 |
| Domtar Corp. | 26,480 | 1,008,623 |
| E.I. du Pont de Nemours & Co. | 78,738 | 6,184,083 |
| Eastman Chemical Co. | 18,921 | 1,518,410 |
| Ecolab, Inc. | 12,737 | 1,579,006 |
| FMC Corp. | 15,676 | 903,251 |
| Freeport-McMoRan, Inc. * | 554,022 | 7,423,895 |
| Graphic Packaging Holding Co. | 32,793 | 437,787 |
| Huntsman Corp. | 49,517 | 1,119,084 |
| International Flavors & Fragrances, Inc. | 5,240 | 658,668 |
| International Paper Co. | 67,076 | 3,534,905 |
| LyondellBasell Industries N.V., Class A | 78,281 | 7,142,358 |
| Monsanto Co. | 48,433 | 5,513,128 |
| Newmont Mining Corp. | 71,049 | 2,432,718 |
| Nucor Corp. | 56,735 | 3,549,909 |
| Owens-Illinois, Inc. * | 43,968 | 870,566 |
| Packaging Corp. of America | 7,965 | 736,205 |
| PPG Industries, Inc. | 25,138 | 2,574,885 |
| Praxair, Inc. | 30,141 | 3,578,038 |
| Reliance Steel & Aluminum Co. | 14,856 | 1,257,560 |
| RPM International, Inc. | 10,984 | 585,337 |
| Security | Number of Shares | Value ($) |
| Sealed Air Corp. | 10,678 | 496,313 |
| Sonoco Products Co. | 13,084 | 697,639 |
| Steel Dynamics, Inc. | 34,133 | 1,249,268 |
| The Chemours Co. | 69,738 | 2,347,381 |
| The Dow Chemical Co. | 134,107 | 8,349,502 |
| The Mosaic Co. | 112,155 | 3,498,115 |
| The Sherwin-Williams Co. | 3,340 | 1,030,524 |
| The Valspar Corp. | 6,927 | 770,421 |
| United States Steel Corp. | 55,267 | 2,139,938 |
| Vulcan Materials Co. | 4,361 | 525,980 |
| WestRock Co. | 20,831 | 1,119,041 |
| 88,161,148 | ||
| Media 3.2% | ||
| CBS Corp., Class B Non-Voting Shares | 64,346 | 4,241,688 |
| Charter Communications, Inc., Class A * | 9,747 | 3,148,866 |
| Comcast Corp., Class A | 391,956 | 14,666,994 |
| Discovery Communications, Inc., Class A * | 30,514 | 877,583 |
| Discovery Communications, Inc., Class C * | 45,697 | 1,282,715 |
| DISH Network Corp., Class A * | 16,157 | 1,001,734 |
| News Corp., Class A | 60,342 | 773,584 |
| News Corp., Class B | 20,188 | 266,482 |
| Omnicom Group, Inc. | 27,707 | 2,357,866 |
| Scripps Networks Interactive, Inc., Class A | 10,981 | 886,935 |
| TEGNA, Inc. | 32,753 | 839,459 |
| The Interpublic Group of Cos., Inc. | 32,116 | 773,996 |
| The Walt Disney Co. | 133,027 | 14,644,942 |
| Time Warner, Inc. | 143,138 | 14,057,583 |
| Time, Inc. | 40,717 | 714,583 |
| Twenty-First Century Fox, Inc., Class A | 126,102 | 3,772,972 |
| Twenty-First Century Fox, Inc., Class B | 58,793 | 1,725,575 |
| Viacom, Inc., Class B | 122,630 | 5,328,273 |
| 71,361,830 | ||
| Pharmaceuticals, Biotechnology & Life Sciences 5.4% | ||
| AbbVie, Inc. | 69,099 | 4,273,082 |
| Agilent Technologies, Inc. | 21,422 | 1,098,949 |
| Allergan plc | 4,163 | 1,019,186 |
| Amgen, Inc. | 57,116 | 10,082,687 |
| Biogen, Inc. * | 7,286 | 2,102,740 |
| Bioverativ, Inc. * | 3,586 | 186,759 |
| Bristol-Myers Squibb Co. | 98,583 | 5,590,642 |
| Celgene Corp. * | 26,779 | 3,307,474 |
| Eli Lilly & Co. | 84,531 | 7,000,012 |
| Gilead Sciences, Inc. | 68,745 | 4,845,148 |
| Johnson & Johnson | 203,907 | 24,919,474 |
| Merck & Co., Inc. | 298,608 | 19,669,309 |
| Mettler-Toledo International, Inc. * | 1,584 | 754,332 |
| Mylan N.V. * | 33,917 | 1,419,426 |
| Perrigo Co., plc | 6,731 | 503,277 |
| Pfizer, Inc. | 830,252 | 28,328,198 |
| Thermo Fisher Scientific, Inc. | 15,835 | 2,496,863 |
| Waters Corp. * | 4,650 | 720,704 |
| Zoetis, Inc. | 13,933 | 742,768 |
| 119,061,030 | ||
| Real Estate 1.2% | ||
| American Tower Corp. | 10,615 | 1,218,496 |
| AvalonBay Communities, Inc. | 4,002 | 735,488 |
| Boston Properties, Inc. | 7,919 | 1,100,979 |
| CBRE Group, Inc., Class A * | 18,673 | 665,132 |
| CoreCivic, Inc. | 27,875 | 939,388 |
| Crown Castle International Corp. | 8,765 | 819,790 |
| Digital Realty Trust, Inc. | 8,026 | 866,808 |
| Duke Realty Corp. | 17,024 | 436,495 |
16
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Large Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Equity Residential | 18,303 | 1,154,370 |
| GGP, Inc. | 28,077 | 697,994 |
| HCP, Inc. | 37,461 | 1,228,346 |
| Hospitality Properties Trust | 21,497 | 683,175 |
| Host Hotels & Resorts, Inc. | 71,003 | 1,277,344 |
| Iron Mountain, Inc. | 34,796 | 1,264,835 |
| Jones Lang LaSalle, Inc. | 4,687 | 537,599 |
| Kimco Realty Corp. | 22,154 | 537,235 |
| Park Hotels & Resorts, Inc. | 4,699 | 120,012 |
| Prologis, Inc. | 18,943 | 967,040 |
| Public Storage | 4,453 | 1,012,879 |
| Quality Care Properties, Inc. * | 2,179 | 41,357 |
| Simon Property Group, Inc. | 11,730 | 2,163,012 |
| SL Green Realty Corp. | 4,371 | 492,524 |
| The Macerich Co. | 6,517 | 439,116 |
| Ventas, Inc. | 19,124 | 1,244,016 |
| Vornado Realty Trust | 11,718 | 1,287,457 |
| Welltower, Inc. | 16,153 | 1,136,848 |
| Weyerhaeuser Co. | 78,173 | 2,635,994 |
| 25,703,729 | ||
| Retailing 4.4% | ||
| Abercrombie & Fitch Co., Class A | 43,040 | 514,758 |
| Advance Auto Parts, Inc. | 4,052 | 634,584 |
| Amazon.com, Inc. * | 4,128 | 3,488,325 |
| American Eagle Outfitters, Inc. | 44,912 | 711,855 |
| AutoNation, Inc. * | 15,651 | 718,381 |
| AutoZone, Inc. * | 1,090 | 802,840 |
| Bed Bath & Beyond, Inc. | 61,531 | 2,485,852 |
| Best Buy Co., Inc. | 89,956 | 3,969,758 |
| Big Lots, Inc. | 18,240 | 936,442 |
| CarMax, Inc. * | 18,717 | 1,207,995 |
| Chico's FAS, Inc. | 40,745 | 589,988 |
| Core-Mark Holding Co., Inc. | 18,800 | 611,376 |
| CST Brands, Inc. | 18,885 | 908,935 |
| Dick's Sporting Goods, Inc. | 14,056 | 688,041 |
| Dillard's, Inc., Class A | 10,803 | 588,980 |
| Dollar General Corp. | 32,700 | 2,387,754 |
| Dollar Tree, Inc. * | 18,244 | 1,398,950 |
| Expedia, Inc. | 5,248 | 624,722 |
| Foot Locker, Inc. | 20,096 | 1,520,664 |
| GameStop Corp., Class A | 55,750 | 1,362,530 |
| Genuine Parts Co. | 18,804 | 1,799,731 |
| GNC Holdings, Inc., Class A | 21,384 | 177,487 |
| Guess?, Inc. | 29,578 | 375,641 |
| J.C. Penney Co., Inc. *(b) | 79,432 | 503,599 |
| Kohl's Corp. | 88,820 | 3,785,508 |
| L Brands, Inc. | 23,769 | 1,250,725 |
| Liberty Interactive Corp. QVC Group, Class A * | 69,795 | 1,317,730 |
| LKQ Corp. * | 19,280 | 608,862 |
| Lowe's Cos., Inc. | 133,897 | 9,957,920 |
| Macy's, Inc. | 80,927 | 2,688,395 |
| Murphy USA, Inc. * | 18,843 | 1,200,299 |
| Nordstrom, Inc. | 27,929 | 1,303,167 |
| O'Reilly Automotive, Inc. * | 6,243 | 1,696,286 |
| Office Depot, Inc. | 131,389 | 547,892 |
| Ross Stores, Inc. | 25,274 | 1,733,291 |
| Signet Jewelers Ltd. | 7,981 | 507,512 |
| Staples, Inc. | 383,984 | 3,452,016 |
| Target Corp. | 131,803 | 7,746,062 |
| The Gap, Inc. | 91,189 | 2,263,311 |
| The Home Depot, Inc. | 117,720 | 17,058,805 |
| The Priceline Group, Inc. * | 1,299 | 2,239,645 |
| The TJX Cos., Inc. | 63,794 | 5,004,639 |
| Tiffany & Co. | 11,020 | 1,012,407 |
| Tractor Supply Co. | 11,145 | 790,292 |
| Security | Number of Shares | Value ($) |
| Urban Outfitters, Inc. * | 18,753 | 488,141 |
| Williams-Sonoma, Inc. | 15,119 | 734,632 |
| 96,396,725 | ||
| Semiconductors & Semiconductor Equipment 2.8% | ||
| Analog Devices, Inc. | 19,785 | 1,620,985 |
| Applied Materials, Inc. | 95,162 | 3,446,768 |
| Broadcom Ltd. | 5,601 | 1,181,419 |
| Intel Corp. | 748,058 | 27,079,700 |
| KLA-Tencor Corp. | 14,532 | 1,309,624 |
| Lam Research Corp. | 10,683 | 1,266,363 |
| Linear Technology Corp. | 12,725 | 821,780 |
| Marvell Technology Group Ltd. | 97,230 | 1,516,788 |
| Maxim Integrated Products, Inc. | 29,972 | 1,327,760 |
| Microchip Technology, Inc. | 12,547 | 909,908 |
| Micron Technology, Inc. * | 136,966 | 3,210,483 |
| NVIDIA Corp. | 18,449 | 1,872,204 |
| QUALCOMM, Inc. | 136,702 | 7,720,929 |
| Skyworks Solutions, Inc. | 6,971 | 660,920 |
| Texas Instruments, Inc. | 89,738 | 6,875,726 |
| Versum Materials, Inc. * | 1,686 | 51,103 |
| Xilinx, Inc. | 19,689 | 1,158,107 |
| 62,030,567 | ||
| Software & Services 7.1% | ||
| Accenture plc, Class A | 49,606 | 6,076,735 |
| Activision Blizzard, Inc. | 53,574 | 2,417,795 |
| Adobe Systems, Inc. * | 11,886 | 1,406,589 |
| Akamai Technologies, Inc. * | 9,530 | 596,578 |
| Alliance Data Systems Corp. | 3,173 | 770,976 |
| Alphabet, Inc., Class A * | 7,318 | 6,183,198 |
| Alphabet, Inc., Class C * | 7,552 | 6,216,882 |
| Amdocs Ltd. | 17,623 | 1,068,835 |
| Autodesk, Inc. * | 7,849 | 677,369 |
| Automatic Data Processing, Inc. | 25,073 | 2,572,991 |
| Booz Allen Hamilton Holding Corp. | 16,318 | 583,695 |
| Broadridge Financial Solutions, Inc. | 9,417 | 652,881 |
| CA, Inc. | 42,163 | 1,360,600 |
| CACI International, Inc., Class A * | 4,571 | 573,203 |
| Citrix Systems, Inc. * | 10,692 | 844,133 |
| Cognizant Technology Solutions Corp., Class A * | 28,226 | 1,672,955 |
| Computer Sciences Corp. | 21,185 | 1,452,444 |
| Conduent, Inc. * | 57,184 | 920,091 |
| CSRA, Inc. | 16,920 | 504,554 |
| Dell Technologies, Inc., Class V * | 10,558 | 670,327 |
| eBay, Inc. * | 77,507 | 2,627,487 |
| Electronic Arts, Inc. * | 8,216 | 710,684 |
| Facebook, Inc., Class A * | 12,675 | 1,717,969 |
| Fidelity National Information Services, Inc. | 28,312 | 2,329,228 |
| Fiserv, Inc. * | 15,665 | 1,807,741 |
| Global Payments, Inc. | 7,204 | 574,087 |
| IAC/InterActiveCorp * | 12,084 | 893,491 |
| International Business Machines Corp. | 186,821 | 33,594,152 |
| Intuit, Inc. | 15,809 | 1,983,081 |
| Leidos Holdings, Inc. | 16,191 | 862,980 |
| MasterCard, Inc., Class A | 37,269 | 4,116,734 |
| Microsoft Corp. | 601,406 | 38,477,956 |
| Oracle Corp. | 331,025 | 14,098,355 |
| Paychex, Inc. | 19,643 | 1,206,473 |
| PayPal Holdings, Inc. * | 19,557 | 821,394 |
| Symantec Corp. | 106,516 | 3,043,162 |
| Teradata Corp. * | 30,464 | 947,430 |
| The Western Union Co. | 82,473 | 1,619,770 |
| Total System Services, Inc. | 9,508 | 517,996 |
17
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Large Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Visa, Inc., Class A | 69,149 | 6,080,963 |
| Yahoo! Inc. * | 38,018 | 1,735,902 |
| 156,989,866 | ||
| Technology Hardware & Equipment 5.8% | ||
| Amphenol Corp., Class A | 18,234 | 1,261,975 |
| Anixter International, Inc. * | 10,096 | 840,997 |
| Apple, Inc. | 419,144 | 57,418,536 |
| Arrow Electronics, Inc. * | 28,785 | 2,078,277 |
| Avnet, Inc. | 50,589 | 2,331,141 |
| Brocade Communications Systems, Inc. | 49,498 | 609,320 |
| CDW Corp. | 10,167 | 598,836 |
| Cisco Systems, Inc. | 534,612 | 18,273,038 |
| Corning, Inc. | 160,090 | 4,420,085 |
| F5 Networks, Inc. * | 4,270 | 611,763 |
| FLIR Systems, Inc. | 17,538 | 643,820 |
| Harris Corp. | 14,301 | 1,571,680 |
| Hewlett Packard Enterprise Co. | 212,918 | 4,858,789 |
| HP, Inc. | 700,330 | 12,164,732 |
| Jabil Circuit, Inc. | 57,131 | 1,457,412 |
| Juniper Networks, Inc. | 59,878 | 1,676,584 |
| Keysight Technologies, Inc. * | 17,497 | 657,887 |
| Motorola Solutions, Inc. | 35,475 | 2,801,461 |
| NCR Corp. * | 15,624 | 751,046 |
| NetApp, Inc. | 43,873 | 1,835,208 |
| Sanmina Corp. * | 19,726 | 769,314 |
| SYNNEX Corp. | 5,847 | 683,631 |
| Tech Data Corp. * | 21,306 | 1,853,622 |
| Vishay Intertechnology, Inc. | 37,729 | 598,005 |
| Western Digital Corp. | 49,622 | 3,814,939 |
| Xerox Corp. | 289,900 | 2,156,856 |
| 126,738,954 | ||
| Telecommunication Services 3.4% | ||
| AT&T, Inc. | 1,026,069 | 42,879,424 |
| CenturyLink, Inc. | 189,719 | 4,602,583 |
| Frontier Communications Corp. (b) | 358,520 | 1,050,464 |
| Level 3 Communications, Inc. * | 10,826 | 619,788 |
| T-Mobile US, Inc. * | 12,625 | 789,441 |
| Telephone & Data Systems, Inc. | 29,075 | 785,897 |
| Verizon Communications, Inc. | 477,358 | 23,691,278 |
| 74,418,875 | ||
| Transportation 2.1% | ||
| Alaska Air Group, Inc. | 8,770 | 857,881 |
| American Airlines Group, Inc. | 26,268 | 1,217,784 |
| Avis Budget Group, Inc. * | 29,162 | 1,008,422 |
| C.H. Robinson Worldwide, Inc. | 22,179 | 1,782,526 |
| CSX Corp. | 143,437 | 6,965,301 |
| Delta Air Lines, Inc. | 15,946 | 796,184 |
| Expeditors International of Washington, Inc. | 27,357 | 1,542,388 |
| FedEx Corp. | 42,998 | 8,297,754 |
| Hertz Global Holdings, Inc. * | 17,597 | 399,804 |
| J.B. Hunt Transport Services, Inc. | 7,420 | 728,421 |
| JetBlue Airways Corp. * | 27,403 | 546,964 |
| Kansas City Southern | 6,825 | 604,900 |
| Norfolk Southern Corp. | 36,405 | 4,406,097 |
| Ryder System, Inc. | 12,700 | 967,105 |
| Southwest Airlines Co. | 11,878 | 686,548 |
| Union Pacific Corp. | 92,032 | 9,933,934 |
| United Parcel Service, Inc., Class B | 48,823 | 5,163,521 |
| 45,905,534 | ||
| Security | Number of Shares | Value ($) |
| Utilities 3.9% | ||
| AES Corp. | 205,426 | 2,366,508 |
| Alliant Energy Corp. | 21,252 | 839,029 |
| Ameren Corp. | 31,609 | 1,728,696 |
| American Electric Power Co., Inc. | 61,595 | 4,125,017 |
| American Water Works Co., Inc. | 12,083 | 942,474 |
| Atmos Energy Corp. | 9,772 | 765,050 |
| Calpine Corp. * | 108,438 | 1,269,809 |
| CenterPoint Energy, Inc. | 69,606 | 1,901,636 |
| CMS Energy Corp. | 28,164 | 1,253,861 |
| Consolidated Edison, Inc. | 38,183 | 2,941,618 |
| Dominion Resources, Inc. | 56,415 | 4,380,061 |
| DTE Energy Co. | 22,792 | 2,310,653 |
| Duke Energy Corp. | 74,688 | 6,165,494 |
| Edison International | 34,190 | 2,726,311 |
| Entergy Corp. | 37,966 | 2,910,474 |
| Eversource Energy | 27,989 | 1,641,835 |
| Exelon Corp. | 168,202 | 6,174,695 |
| FirstEnergy Corp. | 93,957 | 3,047,026 |
| Great Plains Energy, Inc. | 23,840 | 692,790 |
| MDU Resources Group, Inc. | 31,329 | 849,329 |
| National Fuel Gas Co. | 9,788 | 590,216 |
| NextEra Energy, Inc. | 36,422 | 4,771,282 |
| NiSource, Inc. | 29,240 | 699,128 |
| NRG Energy, Inc. | 124,592 | 2,063,244 |
| OGE Energy Corp. | 27,840 | 1,025,347 |
| PG&E Corp. | 58,816 | 3,925,968 |
| Pinnacle West Capital Corp. | 13,566 | 1,114,990 |
| PPL Corp. | 83,374 | 3,074,833 |
| Public Service Enterprise Group, Inc. | 74,051 | 3,404,865 |
| SCANA Corp. | 13,357 | 926,308 |
| Sempra Energy | 23,494 | 2,591,153 |
| The Southern Co. | 108,487 | 5,513,309 |
| UGI Corp. | 17,614 | 849,523 |
| Vectren Corp. | 11,758 | 662,563 |
| WEC Energy Group, Inc. | 19,918 | 1,200,458 |
| Westar Energy, Inc. | 12,476 | 673,455 |
| Xcel Energy, Inc. | 58,508 | 2,557,385 |
| 84,676,393 | ||
| Total Common Stock | ||
| (Cost $1,980,449,996) | 2,192,103,750 | |
| Other Investment Companies 0.4% of net assets | ||
| Money Market Fund 0.2% | ||
| State Street Institutional U.S. Government Money Market Fund, Premier Class 0.46% (c) | 3,369,128 | 3,369,128 |
| Securities Lending Collateral 0.2% | ||
| Wells Fargo Government Money Market Fund, Select Class 0.48% (c) | 4,347,275 | 4,347,275 |
| Total Other Investment Companies | ||
| (Cost $7,716,403) | 7,716,403 | |
End of Investments.
18
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Large Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
At 02/28/17, the tax basis cost of the fund's investments was $1,987,814,162 and the unrealized appreciation and depreciation were $249,977,534 and ($37,971,543), respectively, with a net unrealized appreciation of $212,005,991.
| * | Non-income producing security. |
| (a) | Issuer is affiliated with the fund's adviser. |
| (b) | All or a portion of this security is on loan. Securities on loan were valued at $3,763,030. |
| (c) | The rate shown is the 7-day yield. |
In addition to the above, the fund held the following at 02/28/17:
| Number of Contracts | Contract Value ($) | Unrealized Appreciation ($) | ||||
| Futures Contracts | ||||||
| S&P 500 Index, e-mini, Long, expires 03/17/17 | 45 | 5,316,300 | 61,101 | |||
19
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Small Company Index ETF
Portfolio Holdings as of February 28, 2017
This section shows all the securities in the fund's portfolio and their values as of the report date.
The fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's website at www.sec.gov and may be viewed and copied at the SEC's Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the Public Reference Room. The fund also makes available its complete schedule of portfolio holdings on a daily basis on the fund's website at www.csimfunds.com/schwabetfs_prospectus.
| Holdings by Category | Cost ($) | Value ($) | |
| 99.6% | Common Stock | 1,366,836,996 | 1,561,453,498 |
| 1.8% | Other Investment Companies | 28,188,426 | 28,188,426 |
| 101.4% | Total Investments | 1,395,025,422 | 1,589,641,924 |
| (1.4%) | Other Assets and Liabilities, Net | (21,239,635) | |
| 100.0% | Net Assets | 1,568,402,289 | |
| Security | Number of Shares | Value ($) |
| Common Stock 99.6% of net assets | ||
| Automobiles & Components 1.2% | ||
| American Axle & Manufacturing Holdings, Inc. * | 74,258 | 1,471,794 |
| Cooper Tire & Rubber Co. | 87,623 | 3,544,350 |
| Cooper-Standard Holding, Inc. * | 17,261 | 1,933,232 |
| Dorman Products, Inc. * | 13,708 | 1,071,417 |
| Gentex Corp. | 155,583 | 3,271,911 |
| LCI Industries | 15,332 | 1,651,257 |
| Standard Motor Products, Inc. | 22,124 | 1,061,288 |
| Superior Industries International, Inc. | 30,778 | 689,427 |
| Tenneco, Inc. * | 52,827 | 3,397,304 |
| Tower International, Inc. | 25,812 | 713,702 |
| 18,805,682 | ||
| Banks 6.0% | ||
| Associated Banc-Corp. | 77,167 | 1,987,050 |
| Astoria Financial Corp. | 51,830 | 958,337 |
| BancorpSouth, Inc. | 37,556 | 1,164,236 |
| Bank of Hawaii Corp. | 27,361 | 2,310,910 |
| Bank of the Ozarks, Inc. | 16,688 | 913,334 |
| BankUnited, Inc. | 54,886 | 2,175,132 |
| BOK Financial Corp. | 16,567 | 1,366,115 |
| Capitol Federal Financial, Inc. | 94,945 | 1,432,720 |
| Cathay General Bancorp | 25,856 | 1,015,624 |
| Columbia Banking System, Inc. | 14,808 | 590,691 |
| Commerce Bancshares, Inc. | 46,402 | 2,738,646 |
| Community Bank System, Inc. | 17,270 | 1,026,011 |
| Cullen/Frost Bankers, Inc. | 28,477 | 2,633,268 |
| CVB Financial Corp. | 46,929 | 1,114,564 |
| East West Bancorp, Inc. | 69,693 | 3,771,785 |
| EverBank Financial Corp. | 67,979 | 1,321,512 |
| F.N.B. Corp. | 107,048 | 1,666,737 |
| First Citizens BancShares, Inc., Class A | 4,135 | 1,473,259 |
| First Financial Bancorp | 46,925 | 1,302,169 |
| First Financial Bankshares, Inc. (a) | 18,403 | 809,732 |
| First Horizon National Corp. | 171,754 | 3,424,775 |
| First Republic Bank | 33,811 | 3,172,486 |
| Fulton Financial Corp. | 107,216 | 2,050,506 |
| Glacier Bancorp, Inc. | 31,840 | 1,175,533 |
| Great Western Bancorp, Inc. | 22,994 | 982,764 |
| Hancock Holding Co. | 49,161 | 2,332,689 |
| IBERIABANK Corp. | 12,136 | 1,028,526 |
| International Bancshares Corp. | 37,460 | 1,425,353 |
| Investors Bancorp, Inc. | 53,983 | 789,771 |
| MB Financial, Inc. | 23,473 | 1,056,754 |
| Security | Number of Shares | Value ($) |
| National Bank Holdings Corp., Class A | 21,025 | 693,615 |
| NBT Bancorp, Inc. | 24,125 | 974,168 |
| Northwest Bancshares, Inc. | 89,655 | 1,626,342 |
| Ocwen Financial Corp. * | 379,964 | 1,675,641 |
| Old National Bancorp | 60,330 | 1,107,056 |
| PacWest Bancorp | 20,134 | 1,109,383 |
| Park National Corp. | 6,509 | 699,392 |
| Popular, Inc. | 94,101 | 4,146,090 |
| PrivateBancorp, Inc. | 18,615 | 1,053,609 |
| Prosperity Bancshares, Inc. | 25,933 | 1,933,046 |
| Provident Financial Services, Inc. | 21,693 | 575,949 |
| Signature Bank * | 8,597 | 1,354,113 |
| SVB Financial Group * | 14,801 | 2,825,363 |
| Synovus Financial Corp. | 51,075 | 2,156,387 |
| TCF Financial Corp. | 112,895 | 1,964,373 |
| Texas Capital Bancshares, Inc. * | 8,444 | 752,783 |
| Trustmark Corp. | 50,581 | 1,671,196 |
| UMB Financial Corp. | 16,237 | 1,279,800 |
| Umpqua Holdings Corp. | 72,321 | 1,360,358 |
| United Bankshares, Inc. (a) | 25,908 | 1,159,383 |
| Valley National Bancorp | 186,139 | 2,302,539 |
| Walter Investment Management Corp. *(a) | 186,672 | 634,685 |
| Washington Federal, Inc. | 69,238 | 2,343,706 |
| Webster Financial Corp. | 36,959 | 2,030,158 |
| Westamerica Bancorp | 19,000 | 1,099,150 |
| Wintrust Financial Corp. | 19,600 | 1,444,520 |
| Zions Bancorp | 91,267 | 4,097,888 |
| 93,281,682 | ||
| Capital Goods 12.9% | ||
| A.O. Smith Corp. | 50,501 | 2,543,230 |
| AAR Corp. | 69,851 | 2,404,271 |
| Actuant Corp., Class A | 80,618 | 2,140,408 |
| Acuity Brands, Inc. | 9,217 | 1,947,552 |
| Aegion Corp. * | 58,100 | 1,322,356 |
| Air Lease Corp. | 34,903 | 1,358,774 |
| Aircastle Ltd. | 51,324 | 1,233,316 |
| Albany International Corp., Class A | 20,513 | 930,265 |
| Allegion plc | 21,981 | 1,595,601 |
| Allison Transmission Holdings, Inc. | 102,512 | 3,688,382 |
| Altra Industrial Motion Corp. | 17,529 | 681,002 |
| Apogee Enterprises, Inc. | 18,319 | 1,047,480 |
| Applied Industrial Technologies, Inc. | 58,074 | 3,661,566 |
| Astec Industries, Inc. | 17,599 | 1,111,729 |
| AZZ, Inc. | 13,130 | 770,074 |
| B/E Aerospace, Inc. | 39,986 | 2,543,110 |
| Babcock & Wilcox Enterprises, Inc. * | 50,548 | 834,042 |
| Barnes Group, Inc. | 39,803 | 1,994,528 |
| Beacon Roofing Supply, Inc. * | 44,125 | 2,005,040 |
| Briggs & Stratton Corp. | 80,709 | 1,727,173 |
| BWX Technologies, Inc. | 68,455 | 3,179,050 |
| Chart Industries, Inc. * | 39,047 | 1,389,683 |
| CIRCOR International, Inc. | 16,425 | 1,020,157 |
| Colfax Corp. * | 61,688 | 2,347,228 |
| Comfort Systems USA, Inc. | 30,718 | 1,171,892 |
| Crane Co. | 37,766 | 2,730,104 |
| Cubic Corp. | 33,353 | 1,752,700 |
| Curtiss-Wright Corp. | 26,648 | 2,606,974 |
20
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Small Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| DigitalGlobe, Inc. * | 38,440 | 1,216,626 |
| Donaldson Co., Inc. | 91,502 | 3,930,011 |
| DXP Enterprises, Inc. * | 22,640 | 792,400 |
| Dycom Industries, Inc. * | 15,604 | 1,282,337 |
| Encore Wire Corp. | 39,235 | 1,863,662 |
| EnerSys | 44,439 | 3,409,804 |
| EnPro Industries, Inc. | 17,159 | 1,120,140 |
| ESCO Technologies, Inc. | 18,255 | 989,421 |
| Esterline Technologies Corp. * | 32,960 | 2,930,144 |
| Federal Signal Corp. | 39,979 | 594,888 |
| Franklin Electric Co., Inc. | 28,269 | 1,184,471 |
| GATX Corp. | 58,165 | 3,378,223 |
| Generac Holdings, Inc. * | 65,657 | 2,563,249 |
| General Cable Corp. | 205,442 | 3,430,881 |
| Graco, Inc. | 25,856 | 2,346,691 |
| Granite Construction, Inc. | 37,139 | 1,968,738 |
| Griffon Corp. | 50,374 | 1,266,906 |
| H&E Equipment Services, Inc. | 58,516 | 1,535,460 |
| Harsco Corp. * | 310,534 | 4,378,529 |
| HD Supply Holdings, Inc. * | 52,673 | 2,264,939 |
| HEICO Corp. | 7,931 | 651,532 |
| HEICO Corp., Class A | 3,679 | 261,025 |
| Hexcel Corp. | 51,864 | 2,851,483 |
| Hillenbrand, Inc. | 44,781 | 1,627,789 |
| Hyster-Yale Materials Handling, Inc. | 18,070 | 1,100,282 |
| Kaman Corp. | 31,934 | 1,653,223 |
| Kennametal, Inc. | 134,077 | 4,972,916 |
| KLX, Inc. * | 59,571 | 2,998,804 |
| Lennox International, Inc. | 21,791 | 3,587,234 |
| Lindsay Corp. | 11,327 | 906,953 |
| Masco Corp. | 103,591 | 3,499,304 |
| Masonite International Corp. * | 19,780 | 1,544,818 |
| MasTec, Inc. * | 82,619 | 3,242,796 |
| Meritor, Inc. * | 45,174 | 738,595 |
| Moog, Inc., Class A * | 45,477 | 3,073,336 |
| MRC Global, Inc. * | 214,208 | 4,329,144 |
| MSC Industrial Direct Co., Inc., Class A | 41,726 | 4,197,218 |
| Mueller Industries, Inc. | 92,341 | 3,861,701 |
| Mueller Water Products, Inc., Class A | 53,474 | 662,543 |
| MYR Group, Inc. * | 28,429 | 1,066,372 |
| National Presto Industries, Inc. | 6,502 | 647,599 |
| Nordson Corp. | 29,081 | 3,490,883 |
| Orbital ATK, Inc. | 26,200 | 2,421,404 |
| Primoris Services Corp. | 44,781 | 1,113,256 |
| Quanex Building Products Corp. | 48,660 | 951,303 |
| Raven Industries, Inc. | 39,303 | 1,161,404 |
| RBC Bearings, Inc. * | 10,254 | 956,698 |
| Regal Beloit Corp. | 55,315 | 4,118,202 |
| Rexnord Corp. * | 65,038 | 1,441,892 |
| Rush Enterprises, Inc., Class A * | 62,515 | 2,155,517 |
| Simpson Manufacturing Co., Inc. | 26,456 | 1,141,841 |
| Spirit AeroSystems Holdings, Inc., Class A | 66,123 | 4,073,838 |
| SPX Corp. * | 134,609 | 3,550,985 |
| SPX FLOW, Inc. * | 56,717 | 1,928,378 |
| Standex International Corp. | 8,507 | 812,418 |
| Teledyne Technologies, Inc. * | 22,974 | 3,019,013 |
| Tennant Co. | 16,254 | 1,141,843 |
| Textainer Group Holdings Ltd. | 47,960 | 755,370 |
| The Greenbrier Cos., Inc. | 32,082 | 1,349,048 |
| The Middleby Corp. * | 12,276 | 1,702,804 |
| The Toro Co. | 58,028 | 3,493,866 |
| Titan International, Inc. | 127,160 | 1,683,598 |
| Titan Machinery, Inc. * | 57,876 | 818,945 |
| TriMas Corp. * | 53,535 | 1,180,447 |
| Tutor Perini Corp. * | 94,573 | 2,879,748 |
| Universal Forest Products, Inc. | 23,784 | 2,278,745 |
| USG Corp. * | 16,797 | 566,563 |
| Wabash National Corp. | 50,655 | 1,071,353 |
| Security | Number of Shares | Value ($) |
| Wabtec Corp. | 37,613 | 3,013,554 |
| Watsco, Inc. | 19,225 | 2,850,491 |
| Watts Water Technologies, Inc., Class A | 24,429 | 1,562,235 |
| Woodward, Inc. | 37,909 | 2,670,689 |
| 203,016,205 | ||
| Commercial & Professional Services 4.7% | ||
| ABM Industries, Inc. | 86,067 | 3,510,673 |
| ACCO Brands Corp. * | 119,036 | 1,595,082 |
| Brady Corp., Class A | 48,068 | 1,838,601 |
| CBIZ, Inc. * | 49,801 | 662,353 |
| CEB, Inc. | 13,948 | 1,081,667 |
| Clean Harbors, Inc. * | 43,452 | 2,518,478 |
| Copart, Inc. * | 64,030 | 3,786,734 |
| Covanta Holding Corp. | 151,676 | 2,457,151 |
| Deluxe Corp. | 38,512 | 2,834,098 |
| Ennis, Inc. | 31,719 | 518,606 |
| Essendant, Inc. | 142,846 | 2,275,537 |
| FTI Consulting, Inc. * | 55,055 | 2,215,413 |
| G&K Services, Inc., Class A | 15,892 | 1,501,794 |
| Healthcare Services Group, Inc. | 37,001 | 1,531,101 |
| Herman Miller, Inc. | 47,075 | 1,402,835 |
| HNI Corp. | 39,643 | 1,816,442 |
| Huron Consulting Group, Inc. * | 13,856 | 602,043 |
| ICF International, Inc. * | 20,394 | 875,922 |
| Insperity, Inc. | 14,665 | 1,220,861 |
| Interface, Inc. | 55,403 | 1,047,117 |
| KAR Auction Services, Inc. | 66,296 | 2,971,387 |
| Kelly Services, Inc., Class A | 133,440 | 2,852,947 |
| Kforce, Inc. | 52,740 | 1,358,055 |
| Knoll, Inc. | 32,607 | 728,767 |
| Korn/Ferry International | 38,757 | 1,197,979 |
| Matthews International Corp., Class A | 18,148 | 1,195,046 |
| McGrath RentCorp | 28,322 | 1,065,757 |
| Mobile Mini, Inc. | 21,035 | 684,689 |
| MSA Safety, Inc. | 22,248 | 1,607,418 |
| Navigant Consulting, Inc. * | 52,273 | 1,217,961 |
| On Assignment, Inc. * | 28,217 | 1,331,560 |
| Quad/Graphics, Inc. | 109,878 | 2,983,188 |
| Resources Connection, Inc. | 69,028 | 1,166,573 |
| Rollins, Inc. | 34,082 | 1,246,038 |
| Steelcase, Inc., Class A | 119,582 | 1,913,312 |
| Stericycle, Inc. * | 35,492 | 2,941,577 |
| Team, Inc. * | 27,219 | 934,973 |
| Tetra Tech, Inc. | 57,297 | 2,306,204 |
| The Brink's Co. | 63,830 | 3,411,714 |
| TrueBlue, Inc. * | 56,989 | 1,478,865 |
| UniFirst Corp. | 11,700 | 1,557,270 |
| Viad Corp. | 27,974 | 1,320,373 |
| West Corp. | 55,278 | 1,321,697 |
| 74,085,858 | ||
| Consumer Durables & Apparel 2.5% | ||
| American Outdoor Brands Corp. *(a) | 33,814 | 657,344 |
| Arctic Cat, Inc. * | 49,299 | 912,031 |
| Brunswick Corp. | 52,671 | 3,154,466 |
| CalAtlantic Group, Inc. | 16,897 | 596,971 |
| Carter's, Inc. | 31,999 | 2,816,232 |
| Columbia Sportswear Co. | 17,730 | 974,086 |
| Crocs, Inc. * | 141,561 | 941,381 |
| Deckers Outdoor Corp. * | 45,535 | 2,405,614 |
| Ethan Allen Interiors, Inc. | 15,090 | 433,837 |
| G-III Apparel Group Ltd. * | 43,423 | 1,117,274 |
| Helen of Troy Ltd. * | 18,999 | 1,856,202 |
| Iconix Brand Group, Inc. * | 184,068 | 1,419,164 |
| KB Home | 39,871 | 707,710 |
21
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Small Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| La-Z-Boy, Inc. | 55,857 | 1,508,139 |
| Lennar Corp., Class A | 71,620 | 3,494,340 |
| Lululemon Athletica, Inc. * | 29,950 | 1,954,537 |
| M.D.C Holdings, Inc. | 50,877 | 1,485,100 |
| Meritage Homes Corp. * | 28,428 | 1,010,615 |
| Oxford Industries, Inc. | 11,171 | 627,922 |
| Skechers U.S.A., Inc., Class A * | 55,009 | 1,412,081 |
| Steven Madden Ltd. * | 50,523 | 1,887,034 |
| Sturm Ruger & Co., Inc. (a) | 18,369 | 915,695 |
| Tempur Sealy International, Inc. *(a) | 33,087 | 1,528,289 |
| Toll Brothers, Inc. * | 50,592 | 1,727,211 |
| Under Armour, Inc., Class A *(a) | 28,911 | 596,145 |
| Under Armour, Inc., Class C * | 31,135 | 577,866 |
| Unifi, Inc. * | 17,987 | 490,865 |
| Vista Outdoor, Inc. * | 30,729 | 621,648 |
| Wolverine World Wide, Inc. | 76,952 | 1,936,882 |
| 39,766,681 | ||
| Consumer Services 4.5% | ||
| BJ's Restaurants, Inc. * | 15,848 | 576,075 |
| Bloomin' Brands, Inc. | 98,183 | 1,677,947 |
| Bob Evans Farms, Inc. | 47,925 | 2,718,785 |
| Boyd Gaming Corp. * | 42,715 | 840,204 |
| Bright Horizons Family Solutions, Inc. * | 11,215 | 775,069 |
| Buffalo Wild Wings, Inc. * | 8,366 | 1,296,730 |
| Caesars Entertainment Corp. *(a) | 119,948 | 1,133,509 |
| Capella Education Co. | 18,064 | 1,374,670 |
| Career Education Corp. * | 209,812 | 1,747,734 |
| Choice Hotels International, Inc. | 27,690 | 1,678,014 |
| Churchill Downs, Inc. | 5,728 | 860,918 |
| Cracker Barrel Old Country Store, Inc. (a) | 11,893 | 1,914,654 |
| DineEquity, Inc. | 14,742 | 881,866 |
| Domino's Pizza, Inc. | 13,625 | 2,586,161 |
| Dunkin' Brands Group, Inc. | 41,821 | 2,300,573 |
| Extended Stay America, Inc. | 32,135 | 555,936 |
| Graham Holdings Co., Class B | 7,222 | 3,887,241 |
| Grand Canyon Education, Inc. * | 17,189 | 1,055,061 |
| Houghton Mifflin Harcourt Co. * | 68,525 | 757,201 |
| Hyatt Hotels Corp., Class A * | 17,401 | 893,367 |
| ILG, Inc. | 32,984 | 622,738 |
| International Speedway Corp., Class A | 21,385 | 793,384 |
| Jack in the Box, Inc. | 27,073 | 2,537,011 |
| K12, Inc. * | 60,015 | 1,071,868 |
| La Quinta Holdings, Inc. * | 66,655 | 923,838 |
| Marriott Vacations Worldwide Corp. | 18,884 | 1,773,774 |
| Norwegian Cruise Line Holdings Ltd. * | 47,790 | 2,422,953 |
| Panera Bread Co., Class A * | 16,327 | 3,768,272 |
| Papa John's International, Inc. | 9,531 | 752,187 |
| Penn National Gaming, Inc. * | 116,350 | 1,683,585 |
| Red Robin Gourmet Burgers, Inc. * | 19,324 | 882,141 |
| Regis Corp. * | 122,264 | 1,505,070 |
| Ruby Tuesday, Inc. * | 293,528 | 557,703 |
| SeaWorld Entertainment, Inc. | 123,831 | 2,386,223 |
| ServiceMaster Global Holdings, Inc. * | 19,145 | 762,545 |
| Six Flags Entertainment Corp. | 34,746 | 2,105,955 |
| Sotheby's * | 46,518 | 2,099,357 |
| Strayer Education, Inc. * | 29,667 | 2,300,379 |
| Texas Roadhouse, Inc. | 39,556 | 1,673,219 |
| The Cheesecake Factory, Inc. | 47,753 | 2,915,321 |
| The Wendy's Co. | 269,438 | 3,755,966 |
| Vail Resorts, Inc. | 9,957 | 1,804,009 |
| Weight Watchers International, Inc. *(a) | 164,971 | 2,373,933 |
| 70,983,146 | ||
| Security | Number of Shares | Value ($) |
| Diversified Financials 5.2% | ||
| Affiliated Managers Group, Inc. | 19,562 | 3,285,047 |
| Altisource Residential Corp. | 69,607 | 934,126 |
| Anworth Mortgage Asset Corp. | 169,274 | 920,851 |
| BGC Partners, Inc., Class A | 100,833 | 1,137,396 |
| Capstead Mortgage Corp. | 103,400 | 1,093,972 |
| CBOE Holdings, Inc. | 33,768 | 2,635,592 |
| Chimera Investment Corp. | 148,959 | 2,865,971 |
| Credit Acceptance Corp. *(a) | 5,156 | 1,033,572 |
| CYS Investments, Inc. | 83,805 | 672,116 |
| E*TRADE Financial Corp. * | 102,813 | 3,548,077 |
| Eaton Vance Corp. | 78,481 | 3,659,569 |
| Evercore Partners, Inc., Class A | 19,350 | 1,539,292 |
| EZCORP, Inc., Class A * | 194,549 | 1,712,031 |
| FactSet Research Systems, Inc. | 12,760 | 2,270,004 |
| Federated Investors, Inc., Class B | 88,290 | 2,398,839 |
| FirstCash, Inc. | 45,947 | 2,037,749 |
| Greenhill & Co., Inc. | 50,920 | 1,504,686 |
| Invesco Mortgage Capital, Inc. | 108,982 | 1,694,670 |
| Janus Capital Group, Inc. | 108,092 | 1,368,445 |
| KCG Holdings, Inc., Class A * | 39,105 | 541,604 |
| Lazard Ltd., Class A | 61,277 | 2,638,588 |
| LPL Financial Holdings, Inc. | 106,452 | 4,209,112 |
| MarketAxess Holdings, Inc. | 4,985 | 973,222 |
| MFA Financial, Inc. | 292,803 | 2,348,280 |
| Morningstar, Inc. | 11,003 | 882,771 |
| MSCI, Inc. | 28,571 | 2,702,531 |
| Nelnet, Inc., Class A | 24,715 | 1,106,985 |
| New Residential Investment Corp. | 146,845 | 2,477,275 |
| OneMain Holdings, Inc. * | 43,728 | 1,225,259 |
| PennyMac Mortgage Investment Trust | 86,478 | 1,458,019 |
| PRA Group, Inc. * | 34,458 | 1,405,886 |
| Raymond James Financial, Inc. | 52,811 | 4,148,832 |
| Redwood Trust, Inc. | 89,474 | 1,464,689 |
| Santander Consumer USA Holdings, Inc. * | 229,884 | 3,397,686 |
| SEI Investments Co. | 64,230 | 3,233,980 |
| Starwood Property Trust, Inc. | 89,015 | 2,034,883 |
| Stifel Financial Corp. * | 28,405 | 1,532,734 |
| Two Harbors Investment Corp. | 177,274 | 1,648,648 |
| Waddell & Reed Financial, Inc., Class A | 152,236 | 2,929,021 |
| Western Asset Mortgage Capital Corp. | 75,934 | 789,714 |
| World Acceptance Corp. * | 36,446 | 1,911,228 |
| 81,372,952 | ||
| Energy 4.7% | ||
| Alon USA Energy, Inc. | 152,392 | 1,853,087 |
| Antero Resources Corp. * | 33,626 | 806,351 |
| Archrock, Inc. | 219,480 | 2,995,902 |
| Atwood Oceanics, Inc. * | 230,368 | 2,421,168 |
| Bill Barrett Corp. * | 211,396 | 1,164,792 |
| Bristow Group, Inc. | 151,680 | 2,382,893 |
| CARBO Ceramics, Inc. * | 103,218 | 1,324,287 |
| Carrizo Oil & Gas, Inc. * | 15,956 | 519,368 |
| Continental Resources, Inc. * | 27,903 | 1,261,216 |
| CVR Energy, Inc. (a) | 73,251 | 1,678,913 |
| Dril-Quip, Inc. * | 29,008 | 1,779,641 |
| EP Energy Corp., Class A *(a) | 105,850 | 499,612 |
| Forum Energy Technologies, Inc. * | 65,767 | 1,427,144 |
| Golar LNG Ltd. | 56,151 | 1,533,484 |
| Green Plains, Inc. | 97,572 | 2,444,179 |
| Gulfport Energy Corp. * | 20,386 | 353,493 |
| Helix Energy Solutions Group, Inc. * | 204,431 | 1,688,600 |
| Hornbeck Offshore Services, Inc. * | 128,924 | 578,869 |
| Laredo Petroleum, Inc. * | 45,292 | 626,388 |
| Matrix Service Co. * | 37,480 | 607,176 |
| McDermott International, Inc. * | 497,988 | 3,665,192 |
22
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Small Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Newpark Resources, Inc. * | 236,994 | 1,824,854 |
| Nordic American Tankers Ltd. (a) | 67,726 | 537,744 |
| Oasis Petroleum, Inc. * | 132,584 | 1,877,389 |
| Oil States International, Inc. * | 84,645 | 3,114,936 |
| PDC Energy, Inc. * | 11,947 | 807,498 |
| Pioneer Energy Services Corp. * | 296,254 | 1,555,333 |
| Range Resources Corp. | 85,547 | 2,362,808 |
| Renewable Energy Group, Inc. * | 117,872 | 1,049,061 |
| REX American Resources Corp. * | 5,996 | 498,987 |
| Rowan Cos. plc, Class A * | 159,530 | 2,890,684 |
| RPC, Inc. (a) | 66,884 | 1,337,680 |
| SEACOR Holdings, Inc. * | 45,603 | 3,139,766 |
| SemGroup Corp., Class A | 43,014 | 1,511,942 |
| Ship Finance International Ltd. (a) | 69,434 | 1,024,151 |
| Targa Resources Corp. | 62,511 | 3,531,871 |
| Teekay Corp. | 193,329 | 1,898,491 |
| Tesco Corp. * | 117,376 | 980,090 |
| TETRA Technologies, Inc. * | 123,475 | 554,403 |
| Tidewater, Inc. *(a) | 647,369 | 880,422 |
| Unit Corp. * | 162,946 | 4,422,354 |
| US Silica Holdings, Inc. | 24,035 | 1,215,450 |
| W&T Offshore, Inc. * | 488,679 | 1,226,584 |
| WPX Energy, Inc. * | 312,077 | 4,025,793 |
| 73,880,046 | ||
| Food & Staples Retailing 0.9% | ||
| Ingles Markets, Inc., Class A | 37,040 | 1,735,324 |
| Performance Food Group Co. * | 40,255 | 950,018 |
| PriceSmart, Inc. | 14,905 | 1,317,602 |
| Rite Aid Corp. * | 358,214 | 2,149,284 |
| SpartanNash Co. | 71,320 | 2,489,068 |
| Sprouts Farmers Market, Inc. * | 53,777 | 992,723 |
| SUPERVALU, Inc. * | 365,114 | 1,380,131 |
| The Andersons, Inc. | 66,371 | 2,624,973 |
| 13,639,123 | ||
| Food, Beverage & Tobacco 2.3% | ||
| B&G Foods, Inc. | 27,362 | 1,162,885 |
| Cal-Maine Foods, Inc. (a) | 27,393 | 1,039,564 |
| Darling Ingredients, Inc. * | 157,915 | 2,054,474 |
| Dean Foods Co. | 113,858 | 2,076,770 |
| Flowers Foods, Inc. | 179,477 | 3,456,727 |
| Fresh Del Monte Produce, Inc. | 50,968 | 2,949,518 |
| J&J Snack Foods Corp. | 9,623 | 1,287,557 |
| Lancaster Colony Corp. | 13,033 | 1,717,749 |
| Pilgrim's Pride Corp. | 76,534 | 1,559,763 |
| Pinnacle Foods, Inc. | 51,718 | 2,954,649 |
| Sanderson Farms, Inc. | 29,892 | 2,840,936 |
| Snyder's-Lance, Inc. | 48,568 | 1,922,321 |
| The Boston Beer Co., Inc., Class A * | 4,660 | 739,309 |
| The Hain Celestial Group, Inc. * | 37,104 | 1,312,740 |
| The WhiteWave Foods Co. * | 39,835 | 2,194,112 |
| TreeHouse Foods, Inc. * | 25,726 | 2,188,768 |
| Universal Corp. | 53,315 | 3,609,426 |
| Vector Group Ltd. | 55,438 | 1,262,878 |
| 36,330,146 | ||
| Health Care Equipment & Services 3.5% | ||
| Air Methods Corp. * | 30,185 | 1,142,502 |
| Alere, Inc. * | 33,727 | 1,291,744 |
| Align Technology, Inc. * | 11,476 | 1,179,274 |
| Allscripts Healthcare Solutions, Inc. * | 156,253 | 1,903,161 |
| Amedisys, Inc. * | 19,359 | 933,491 |
| Analogic Corp. | 9,333 | 768,573 |
| Brookdale Senior Living, Inc. * | 136,156 | 1,960,646 |
| Security | Number of Shares | Value ($) |
| Chemed Corp. | 16,594 | 2,962,859 |
| CONMED Corp. | 23,454 | 976,155 |
| Envision Healthcare Corp. * | 60,592 | 4,241,440 |
| Haemonetics Corp. * | 33,327 | 1,244,097 |
| Halyard Health, Inc. * | 75,041 | 2,931,101 |
| HealthSouth Corp. | 55,096 | 2,331,663 |
| Hill-Rom Holdings, Inc. | 46,413 | 3,084,144 |
| HMS Holdings Corp. * | 27,046 | 503,867 |
| Hologic, Inc. * | 34,346 | 1,393,761 |
| Integer Holdings Corp. * | 25,651 | 927,284 |
| Invacare Corp. | 108,938 | 1,318,150 |
| Kindred Healthcare, Inc. | 262,820 | 2,365,380 |
| LHC Group, Inc. * | 11,942 | 573,455 |
| Masimo Corp. * | 21,921 | 1,980,782 |
| Molina Healthcare, Inc. * | 35,781 | 1,735,736 |
| PharMerica Corp. * | 56,424 | 1,388,030 |
| Quality Systems, Inc. * | 65,006 | 991,992 |
| Select Medical Holdings Corp. * | 199,342 | 2,870,525 |
| Teleflex, Inc. | 14,457 | 2,763,889 |
| The Cooper Cos., Inc. | 15,109 | 3,008,806 |
| Triple-S Management Corp., Class B * | 61,191 | 1,142,436 |
| VCA, Inc. * | 37,452 | 3,404,387 |
| West Pharmaceutical Services, Inc. | 23,077 | 1,903,160 |
| 55,222,490 | ||
| Household & Personal Products 0.7% | ||
| Central Garden & Pet Co., Class A * | 42,543 | 1,359,249 |
| Edgewell Personal Care Co. * | 47,343 | 3,495,807 |
| Energizer Holdings, Inc. | 43,316 | 2,376,316 |
| HRG Group, Inc. * | 60,980 | 1,120,812 |
| Spectrum Brands Holdings, Inc. | 8,732 | 1,185,107 |
| WD-40 Co. | 6,654 | 731,275 |
| �� | 10,268,566 | |
| Insurance 4.2% | ||
| Allied World Assurance Co. Holdings AG | 82,204 | 4,342,015 |
| Ambac Financial Group, Inc. * | 80,982 | 1,789,702 |
| American Equity Investment Life Holding Co. | 109,181 | 2,938,061 |
| American National Insurance Co. | 5,560 | 667,756 |
| AmTrust Financial Services, Inc. | 30,654 | 705,042 |
| Argo Group International Holdings Ltd. | 27,369 | 1,832,355 |
| Aspen Insurance Holdings Ltd. | 70,296 | 3,940,091 |
| Brown & Brown, Inc. | 56,647 | 2,441,486 |
| CNA Financial Corp. | 25,262 | 1,083,235 |
| Employers Holdings, Inc. | 27,626 | 1,038,738 |
| Endurance Specialty Holdings Ltd. | 41,033 | 3,813,197 |
| Erie Indemnity Co., Class A | 20,318 | 2,409,918 |
| Horace Mann Educators Corp. | 24,798 | 1,039,036 |
| Infinity Property & Casualty Corp. | 13,918 | 1,311,771 |
| James River Group Holdings Ltd. | 16,264 | 699,677 |
| Kemper Corp. | 71,309 | 3,027,067 |
| Maiden Holdings Ltd. | 54,386 | 840,264 |
| Markel Corp. * | 3,433 | 3,363,413 |
| MBIA, Inc. * | 193,547 | 1,997,405 |
| Mercury General Corp. | 31,173 | 1,827,673 |
| Old Republic International Corp. | 188,631 | 3,906,548 |
| Primerica, Inc. | 55,832 | 4,508,434 |
| ProAssurance Corp. | 48,243 | 2,851,161 |
| RLI Corp. | 27,964 | 1,634,496 |
| Safety Insurance Group, Inc. | 15,046 | 1,068,266 |
| Selective Insurance Group, Inc. | 30,291 | 1,341,891 |
| Stewart Information Services Corp. | 34,259 | 1,521,442 |
23
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Small Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| The Hanover Insurance Group, Inc. | 33,015 | 2,972,010 |
| Validus Holdings Ltd. | 74,215 | 4,279,237 |
| 65,191,387 | ||
| Materials 7.4% | ||
| A. Schulman, Inc. | 55,754 | 1,881,698 |
| AK Steel Holding Corp. * | 96,571 | 804,436 |
| Axalta Coating Systems Ltd. * | 57,283 | 1,667,508 |
| Berry Plastics Group, Inc. * | 46,312 | 2,330,883 |
| Boise Cascade Co. * | 89,663 | 2,429,867 |
| Calgon Carbon Corp. | 54,472 | 768,055 |
| Carpenter Technology Corp. | 62,424 | 2,531,917 |
| Century Aluminum Co. * | 107,059 | 1,507,926 |
| Chemtura Corp. * | 111,200 | 3,686,280 |
| Clearwater Paper Corp. * | 29,418 | 1,635,641 |
| Cliffs Natural Resources, Inc. * | 1,099,124 | 11,716,662 |
| Compass Minerals International, Inc. | 27,973 | 2,120,353 |
| Crown Holdings, Inc. * | 66,308 | 3,553,446 |
| Eagle Materials, Inc. | 14,627 | 1,516,966 |
| Ferro Corp. * | 60,635 | 848,890 |
| Greif, Inc., Class A | 65,450 | 3,732,613 |
| H.B. Fuller Co. | 41,398 | 2,045,475 |
| Hecla Mining Co. | 173,844 | 970,050 |
| Innophos Holdings, Inc. | 36,097 | 1,912,780 |
| Innospec, Inc. | 18,249 | 1,191,660 |
| Kaiser Aluminum Corp. | 21,587 | 1,701,703 |
| KapStone Paper & Packaging Corp. | 76,901 | 1,737,963 |
| Koppers Holdings, Inc. * | 34,637 | 1,518,832 |
| Kraton Corp. * | 41,823 | 1,138,840 |
| Louisiana-Pacific Corp. * | 71,495 | 1,685,852 |
| Martin Marietta Materials, Inc. | 18,336 | 3,959,659 |
| Materion Corp. | 43,219 | 1,506,182 |
| Minerals Technologies, Inc. | 22,864 | 1,766,244 |
| Neenah Paper, Inc. | 10,395 | 761,434 |
| NewMarket Corp. | 6,337 | 2,760,968 |
| Olin Corp. | 130,835 | 4,066,352 |
| P.H. Glatfelter Co. | 74,976 | 1,656,970 |
| Platform Specialty Products Corp. * | 58,858 | 776,337 |
| PolyOne Corp. | 83,697 | 2,818,915 |
| Quaker Chemical Corp. | 8,278 | 1,090,047 |
| Royal Gold, Inc. | 13,942 | 920,869 |
| Schnitzer Steel Industries, Inc., Class A | 129,465 | 3,081,267 |
| Schweitzer-Mauduit International, Inc. | 34,169 | 1,401,954 |
| Sensient Technologies Corp. | 33,849 | 2,705,889 |
| Silgan Holdings, Inc. | 52,234 | 3,114,191 |
| Southern Copper Corp. | 122,524 | 4,491,730 |
| Stepan Co. | 22,611 | 1,709,618 |
| Stillwater Mining Co. * | 71,132 | 1,213,512 |
| SunCoke Energy, Inc. * | 168,691 | 1,644,737 |
| The Scotts Miracle-Gro Co., Class A | 33,428 | 3,029,580 |
| TimkenSteel Corp. * | 139,699 | 2,922,503 |
| Trinseo S.A. | 14,581 | 1,008,276 |
| Tronox Ltd., Class A | 227,770 | 3,947,254 |
| W.R. Grace & Co. | 25,478 | 1,804,862 |
| Westlake Chemical Corp. | 36,135 | 2,292,043 |
| Worthington Industries, Inc. | 51,057 | 2,504,346 |
| 115,592,035 | ||
| Media 2.0% | ||
| AMC Networks, Inc., Class A * | 22,962 | 1,373,357 |
| Cable One, Inc. | 1,799 | 1,125,131 |
| Cinemark Holdings, Inc. | 84,958 | 3,557,191 |
| Gannett Co., Inc. | 209,845 | 1,829,848 |
| John Wiley & Sons, Inc., Class A | 40,663 | 2,122,609 |
| Lions Gate Entertainment Corp., Class A | 17,820 | 477,041 |
| Lions Gate Entertainment Corp., Class B * | 64,474 | 1,610,561 |
| Security | Number of Shares | Value ($) |
| Live Nation Entertainment, Inc. * | 78,778 | 2,238,083 |
| Loral Space & Communications, Inc. * | 24,989 | 1,022,050 |
| Meredith Corp. | 34,517 | 2,164,216 |
| National CineMedia, Inc. | 72,347 | 928,212 |
| Regal Entertainment Group, Class A | 85,739 | 1,850,248 |
| Scholastic Corp. | 46,878 | 2,112,323 |
| Sinclair Broadcast Group, Inc., Class A | 42,559 | 1,698,104 |
| Sirius XM Holdings, Inc. (a) | 717,468 | 3,651,912 |
| The New York Times Co., Class A | 99,050 | 1,426,320 |
| Tribune Media Co., Class A | 56,823 | 1,961,530 |
| 31,148,736 | ||
| Pharmaceuticals, Biotechnology & Life Sciences 2.3% | ||
| Alexion Pharmaceuticals, Inc. * | 18,362 | 2,410,012 |
| Bio-Rad Laboratories, Inc., Class A * | 12,995 | 2,529,347 |
| Bio-Techne Corp. | 13,225 | 1,406,082 |
| Bruker Corp. | 41,419 | 1,000,269 |
| Catalent, Inc. * | 20,378 | 584,849 |
| Charles River Laboratories International, Inc. * | 30,079 | 2,615,971 |
| Endo International plc * | 45,978 | 627,600 |
| Illumina, Inc. * | 14,804 | 2,478,189 |
| Impax Laboratories, Inc. * | 54,469 | 776,183 |
| Mallinckrodt plc * | 33,692 | 1,766,135 |
| Myriad Genetics, Inc. * | 79,690 | 1,548,377 |
| PAREXEL International Corp. * | 20,258 | 1,310,490 |
| PDL BioPharma, Inc. | 580,136 | 1,241,491 |
| PerkinElmer, Inc. | 53,535 | 2,904,809 |
| Prestige Brands Holdings, Inc. * | 14,560 | 824,387 |
| QIAGEN N.V. * | 82,710 | 2,353,927 |
| Quintiles IMS Holdings, Inc. * | 56,172 | 4,347,151 |
| Regeneron Pharmaceuticals, Inc. * | 4,205 | 1,570,567 |
| United Therapeutics Corp. * | 17,260 | 2,549,647 |
| Vertex Pharmaceuticals, Inc. * | 5,488 | 497,322 |
| VWR Corp. * | 34,250 | 962,425 |
| 36,305,230 | ||
| Real Estate 9.7% | ||
| Acadia Realty Trust | 13,676 | 438,042 |
| Alexandria Real Estate Equities, Inc. | 24,436 | 2,915,459 |
| Altisource Portfolio Solutions S.A. * | 30,901 | 742,551 |
| American Campus Communities, Inc. | 42,858 | 2,190,044 |
| Apartment Investment & Management Co., Class A | 56,873 | 2,646,301 |
| Apple Hospitality REIT, Inc. | 88,409 | 1,736,353 |
| Ashford Hospitality Trust, Inc. | 114,305 | 750,984 |
| Brandywine Realty Trust | 131,562 | 2,191,823 |
| Brixmor Property Group, Inc. | 82,491 | 1,925,340 |
| Camden Property Trust | 37,050 | 3,136,283 |
| Care Capital Properties, Inc. | 22,999 | 604,644 |
| CBL & Associates Properties, Inc. | 215,866 | 2,165,136 |
| Chesapeake Lodging Trust | 22,267 | 537,971 |
| Columbia Property Trust, Inc. | 124,083 | 2,865,076 |
| Corporate Office Properties Trust | 65,843 | 2,244,588 |
| Cousins Properties, Inc. | 44,767 | 382,758 |
| CubeSmart | 33,545 | 914,101 |
| DCT Industrial Trust, Inc. | 26,677 | 1,276,228 |
| DDR Corp. | 127,258 | 1,840,151 |
| DiamondRock Hospitality Co. | 152,206 | 1,654,479 |
| Douglas Emmett, Inc. | 51,841 | 2,091,266 |
| DuPont Fabros Technology, Inc. | 21,114 | 1,087,160 |
| EastGroup Properties, Inc. | 12,991 | 965,751 |
| EPR Properties | 21,803 | 1,677,959 |
| Equinix, Inc. | 9,587 | 3,605,383 |
| Equity Commonwealth * | 84,906 | 2,654,162 |
| Equity LifeStyle Properties, Inc. | 22,931 | 1,825,766 |
24
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Small Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Equity One, Inc. | 35,673 | 1,129,407 |
| Essex Property Trust, Inc. | 11,989 | 2,813,818 |
| Extra Space Storage, Inc. | 20,771 | 1,644,855 |
| Federal Realty Investment Trust | 18,581 | 2,614,904 |
| First Industrial Realty Trust, Inc. | 23,095 | 621,256 |
| Franklin Street Properties Corp. | 68,703 | 851,230 |
| Gaming & Leisure Properties, Inc. | 39,620 | 1,267,840 |
| Government Properties Income Trust | 48,694 | 1,003,583 |
| Gramercy Property Trust | 34,422 | 962,439 |
| Healthcare Realty Trust, Inc. | 45,393 | 1,450,760 |
| Healthcare Trust of America, Inc., Class A | 43,484 | 1,398,880 |
| Hersha Hospitality Trust | 40,265 | 785,570 |
| Highwoods Properties, Inc. | 44,353 | 2,328,089 |
| Investors Real Estate Trust | 131,286 | 853,359 |
| Kilroy Realty Corp. | 24,847 | 1,916,946 |
| Lamar Advertising Co., Class A | 31,965 | 2,412,718 |
| LaSalle Hotel Properties | 69,818 | 2,017,740 |
| Lexington Realty Trust | 155,783 | 1,738,538 |
| Liberty Property Trust | 84,677 | 3,339,661 |
| Life Storage, Inc. | 10,568 | 936,642 |
| Mack-Cali Realty Corp. | 96,910 | 2,824,927 |
| Medical Properties Trust, Inc. | 70,815 | 950,337 |
| Mid-America Apartment Communities, Inc. | 36,952 | 3,796,079 |
| Monogram Residential Trust, Inc. | 63,978 | 658,334 |
| National Retail Properties, Inc. | 41,071 | 1,858,052 |
| Omega Healthcare Investors, Inc. | 49,794 | 1,625,276 |
| Outfront Media, Inc. | 139,600 | 3,622,620 |
| Paramount Group, Inc. | 51,539 | 898,325 |
| Parkway, Inc. * | 3,168 | 66,465 |
| Pebblebrook Hotel Trust | 20,726 | 595,873 |
| Pennsylvania Real Estate Investment Trust | 50,359 | 830,924 |
| Piedmont Office Realty Trust, Inc., Class A | 131,759 | 3,022,551 |
| Potlatch Corp. | 32,515 | 1,438,789 |
| PS Business Parks, Inc. | 8,255 | 959,314 |
| RAIT Financial Trust | 158,568 | 532,788 |
| Rayonier, Inc. | 121,524 | 3,480,447 |
| Realogy Holdings Corp. | 122,799 | 3,401,532 |
| Realty Income Corp. | 47,060 | 2,883,837 |
| Regency Centers Corp. | 30,995 | 2,180,498 |
| Retail Properties of America, Inc., Class A | 147,892 | 2,279,016 |
| RLJ Lodging Trust | 89,484 | 2,036,656 |
| Ryman Hospitality Properties, Inc. | 28,208 | 1,818,570 |
| Sabra Health Care REIT, Inc. | 47,749 | 1,298,773 |
| SBA Communications Corp. * | 24,765 | 2,867,044 |
| Senior Housing Properties Trust | 153,837 | 3,153,659 |
| Spirit Realty Capital, Inc. | 118,968 | 1,307,458 |
| Sun Communities, Inc. | 16,001 | 1,325,363 |
| Sunstone Hotel Investors, Inc. | 98,391 | 1,451,267 |
| Tanger Factory Outlet Centers, Inc. | 38,381 | 1,299,964 |
| Taubman Centers, Inc. | 31,829 | 2,220,391 |
| The GEO Group, Inc. | 71,345 | 3,396,735 |
| Tier REIT, Inc. | 31,901 | 576,770 |
| UDR, Inc. | 88,205 | 3,219,483 |
| VEREIT, Inc. | 124,562 | 1,129,777 |
| Washington Prime Group, Inc. | 134,130 | 1,243,385 |
| Washington Real Estate Investment Trust | 42,576 | 1,392,661 |
| Weingarten Realty Investors | 56,038 | 1,987,668 |
| WP Carey, Inc. | 32,170 | 2,029,605 |
| Xenia Hotels & Resorts, Inc. | 64,311 | 1,129,944 |
| 151,945,151 | ||
| Retailing 4.8% | ||
| Aaron's, Inc. | 111,784 | 3,049,468 |
| Asbury Automotive Group, Inc. * | 38,672 | 2,519,481 |
| Ascena Retail Group, Inc. * | 407,600 | 1,874,960 |
| Barnes & Noble Education, Inc. * | 114,607 | 1,100,227 |
| Security | Number of Shares | Value ($) |
| Barnes & Noble, Inc. | 148,172 | 1,452,086 |
| Burlington Stores, Inc. * | 27,283 | 2,428,460 |
| Cabela's, Inc. * | 29,995 | 1,404,966 |
| Caleres, Inc. | 67,672 | 2,021,363 |
| DSW, Inc., Class A | 113,027 | 2,376,958 |
| Express, Inc. * | 159,531 | 1,793,128 |
| Five Below, Inc. * | 21,130 | 814,562 |
| Fred's, Inc., Class A (a) | 154,428 | 2,738,008 |
| Genesco, Inc. * | 40,798 | 2,378,523 |
| Group 1 Automotive, Inc. | 51,285 | 3,984,332 |
| Hibbett Sports, Inc. * | 35,119 | 1,036,010 |
| HSN, Inc. | 49,566 | 1,868,638 |
| Lands' End, Inc. *(a) | 39,286 | 728,755 |
| Liberty TripAdvisor Holdings, Inc., Class A * | 38,882 | 522,963 |
| Lithia Motors, Inc., Class A | 17,531 | 1,677,191 |
| Lumber Liquidators Holdings, Inc. *(a) | 75,847 | 1,344,767 |
| Monro Muffler Brake, Inc. | 15,447 | 888,202 |
| Netflix, Inc. * | 20,816 | 2,958,578 |
| Nutrisystem, Inc. | 26,816 | 1,246,944 |
| Penske Automotive Group, Inc. | 58,259 | 2,930,428 |
| Pier 1 Imports, Inc. | 444,748 | 2,993,154 |
| Pool Corp. | 21,173 | 2,428,755 |
| Rent-A-Center, Inc. (a) | 293,424 | 2,543,986 |
| RH *(a) | 27,420 | 834,665 |
| Sally Beauty Holdings, Inc. * | 111,565 | 2,439,927 |
| Select Comfort Corp. * | 48,584 | 1,141,238 |
| Shoe Carnival, Inc. | 20,826 | 527,731 |
| Shutterfly, Inc. * | 14,857 | 674,211 |
| Sonic Automotive, Inc., Class A | 105,982 | 2,299,809 |
| Stage Stores, Inc. (a) | 282,422 | 658,043 |
| The Buckle, Inc. (a) | 71,606 | 1,421,379 |
| The Cato Corp., Class A | 40,600 | 1,015,406 |
| The Children's Place, Inc. | 26,989 | 2,733,986 |
| The Finish Line, Inc., Class A | 107,080 | 1,745,404 |
| The Michaels Cos., Inc. * | 35,358 | 710,342 |
| TripAdvisor, Inc. * | 20,886 | 866,142 |
| Tuesday Morning Corp. * | 112,840 | 411,866 |
| Ulta Salon, Cosmetics & Fragrance, Inc. * | 12,689 | 3,469,553 |
| Vitamin Shoppe, Inc. * | 46,353 | 987,319 |
| Zumiez, Inc. * | 35,272 | 719,549 |
| 75,761,463 | ||
| Semiconductors & Semiconductor Equipment 2.9% | ||
| Advanced Energy Industries, Inc. * | 11,943 | 741,660 |
| Advanced Micro Devices, Inc. * | 431,849 | 6,244,536 |
| Amkor Technology, Inc. * | 192,202 | 1,887,424 |
| Brooks Automation, Inc. | 63,299 | 1,320,417 |
| Cabot Microelectronics Corp. | 27,142 | 1,878,769 |
| Cirrus Logic, Inc. * | 30,788 | 1,665,015 |
| Cree, Inc. * | 82,511 | 2,239,348 |
| Cypress Semiconductor Corp. | 164,869 | 2,187,812 |
| Diodes, Inc. * | 37,601 | 897,536 |
| Entegris, Inc. * | 67,226 | 1,425,191 |
| First Solar, Inc. * | 76,677 | 2,774,941 |
| Integrated Device Technology, Inc. * | 51,390 | 1,228,735 |
| Microsemi Corp. * | 29,162 | 1,511,175 |
| MKS Instruments, Inc. | 32,405 | 2,125,768 |
| ON Semiconductor Corp. * | 305,363 | 4,620,142 |
| Photronics, Inc. * | 85,000 | 909,500 |
| Power Integrations, Inc. | 8,544 | 539,981 |
| Qorvo, Inc. * | 44,648 | 2,951,233 |
| Silicon Laboratories, Inc. * | 28,206 | 1,903,905 |
| Synaptics, Inc. * | 15,124 | 803,841 |
| Teradyne, Inc. | 129,067 | 3,670,665 |
25
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Small Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Veeco Instruments, Inc. * | 55,553 | 1,519,375 |
| Xperi Corp. | 15,089 | 540,941 |
| 45,587,910 | ||
| Software & Services 5.7% | ||
| ACI Worldwide, Inc. * | 46,406 | 908,165 |
| Acxiom Corp. * | 60,651 | 1,729,767 |
| ANSYS, Inc. * | 22,824 | 2,436,690 |
| Cadence Design Systems, Inc. * | 57,627 | 1,780,674 |
| Cardtronics plc, Class A * | 18,559 | 818,081 |
| CDK Global, Inc. | 39,173 | 2,602,262 |
| Cimpress N.V. * | 12,319 | 988,107 |
| CommVault Systems, Inc. * | 9,943 | 487,704 |
| Convergys Corp. | 103,734 | 2,269,700 |
| CoreLogic, Inc. * | 77,669 | 3,043,848 |
| CSG Systems International, Inc. | 24,349 | 959,594 |
| DST Systems, Inc. | 27,708 | 3,313,877 |
| EPAM Systems, Inc. * | 7,295 | 537,131 |
| Euronet Worldwide, Inc. * | 16,011 | 1,325,391 |
| Fair Isaac Corp. | 17,314 | 2,252,032 |
| First Data Corp., Class A * | 175,016 | 2,817,758 |
| FleetCor Technologies, Inc. * | 9,416 | 1,600,720 |
| Gartner, Inc. * | 24,812 | 2,560,847 |
| Genpact Ltd. * | 91,018 | 2,206,276 |
| j2 Global, Inc. | 15,063 | 1,226,429 |
| Jack Henry & Associates, Inc. | 30,191 | 2,831,010 |
| Manhattan Associates, Inc. * | 18,256 | 915,538 |
| ManTech International Corp., Class A | 52,465 | 1,921,268 |
| MAXIMUS, Inc. | 33,578 | 2,003,599 |
| Mentor Graphics Corp. | 62,137 | 2,305,283 |
| NeuStar, Inc., Class A * | 96,334 | 3,193,472 |
| Nuance Communications, Inc. * | 78,847 | 1,342,764 |
| Progress Software Corp. | 58,986 | 1,691,719 |
| PTC, Inc. * | 47,117 | 2,539,135 |
| Red Hat, Inc. * | 37,332 | 3,091,463 |
| Sabre Corp. | 22,185 | 486,073 |
| salesforce.com, Inc. * | 30,571 | 2,486,951 |
| Science Applications International Corp. | 45,911 | 3,992,880 |
| SS&C Technologies Holdings, Inc. | 28,044 | 982,101 |
| Sykes Enterprises, Inc. * | 44,826 | 1,220,164 |
| Synopsys, Inc. * | 47,886 | 3,420,976 |
| Take-Two Interactive Software, Inc. * | 46,019 | 2,622,163 |
| TiVo Corp. | 101,642 | 1,880,377 |
| Travelport Worldwide Ltd. | 105,184 | 1,335,837 |
| Unisys Corp. * | 152,664 | 2,122,030 |
| Vantiv, Inc., Class A * | 26,688 | 1,744,861 |
| Verint Systems, Inc. * | 24,284 | 916,721 |
| VeriSign, Inc. * | 37,928 | 3,127,922 |
| VMware, Inc., Class A *(a) | 24,374 | 2,190,979 |
| WebMD Health Corp. * | 21,270 | 1,103,913 |
| WEX, Inc. * | 12,787 | 1,422,298 |
| Zynga, Inc., Class A * | 270,314 | 716,332 |
| 89,472,882 | ||
| Technology Hardware & Equipment 4.5% | ||
| ADTRAN, Inc. | 77,804 | 1,645,555 |
| AVX Corp. | 55,156 | 856,021 |
| Belden, Inc. | 27,676 | 1,955,309 |
| Benchmark Electronics, Inc. * | 117,308 | 3,648,279 |
| Cognex Corp. | 17,753 | 1,363,608 |
| Coherent, Inc. * | 11,531 | 2,105,330 |
| CommScope Holding Co., Inc. * | 78,415 | 2,983,691 |
| Comtech Telecommunications Corp. | 95,869 | 1,093,865 |
| Diebold Nixdorf, Inc. | 85,432 | 2,580,046 |
| Dolby Laboratories, Inc., Class A | 37,797 | 1,847,895 |
| Eastman Kodak Co. * | 46,224 | 663,314 |
| Security | Number of Shares | Value ($) |
| EchoStar Corp., Class A * | 40,513 | 2,158,128 |
| Electronics For Imaging, Inc. * | 19,246 | 886,663 |
| ePlus, Inc. * | 6,039 | 766,651 |
| Fabrinet * | 20,917 | 869,101 |
| Finisar Corp. * | 63,442 | 2,124,038 |
| Harmonic, Inc. * | 237,410 | 1,282,014 |
| II-VI, Inc. * | 33,072 | 1,177,363 |
| Insight Enterprises, Inc. * | 108,336 | 4,589,113 |
| InterDigital, Inc. | 23,462 | 1,971,981 |
| IPG Photonics Corp. * | 10,300 | 1,218,490 |
| Itron, Inc. * | 29,005 | 1,876,624 |
| Knowles Corp. * | 121,029 | 2,291,079 |
| Littelfuse, Inc. | 9,217 | 1,488,085 |
| Lumentum Holdings, Inc. * | 17,137 | 786,588 |
| Methode Electronics, Inc. | 25,594 | 1,062,151 |
| MTS Systems Corp. | 18,037 | 991,133 |
| National Instruments Corp. | 59,714 | 1,925,179 |
| NETGEAR, Inc. * | 31,048 | 1,701,430 |
| NetScout Systems, Inc. * | 20,285 | 749,531 |
| OSI Systems, Inc. * | 11,249 | 848,400 |
| Plantronics, Inc. | 33,530 | 1,795,867 |
| Plexus Corp. * | 48,920 | 2,742,945 |
| Rogers Corp. * | 7,695 | 634,915 |
| ScanSource, Inc. * | 60,779 | 2,446,355 |
| Super Micro Computer, Inc. * | 29,845 | 775,970 |
| Trimble, Inc. * | 99,444 | 3,085,747 |
| TTM Technologies, Inc. * | 83,373 | 1,347,308 |
| VeriFone Systems, Inc. * | 66,541 | 1,375,403 |
| ViaSat, Inc. * | 14,717 | 1,013,118 |
| Viavi Solutions, Inc. * | 147,004 | 1,472,980 |
| Zebra Technologies Corp., Class A * | 25,306 | 2,295,507 |
| 70,492,770 | ||
| Telecommunication Services 0.7% | ||
| ATN International, Inc. | 6,537 | 447,065 |
| Cincinnati Bell, Inc. * | 71,130 | 1,372,809 |
| Consolidated Communications Holdings, Inc. (a) | 44,771 | 1,009,586 |
| General Communication, Inc., Class A * | 43,403 | 874,570 |
| Iridium Communications, Inc. * | 82,825 | 720,578 |
| Spok Holdings, Inc. | 26,731 | 486,504 |
| Vonage Holdings Corp. * | 180,260 | 1,085,165 |
| Windstream Holdings, Inc. (a) | 571,851 | 4,271,731 |
| Zayo Group Holdings, Inc. * | 26,982 | 850,473 |
| 11,118,481 | ||
| Transportation 3.2% | ||
| Allegiant Travel Co. | 8,267 | 1,439,285 |
| AMERCO | 3,349 | 1,293,719 |
| ArcBest Corp. | 71,041 | 2,085,053 |
| Atlas Air Worldwide Holdings, Inc. * | 39,754 | 2,260,015 |
| Copa Holdings S.A., Class A | 39,720 | 4,229,783 |
| Echo Global Logistics, Inc. * | 20,077 | 438,682 |
| Forward Air Corp. | 22,479 | 1,113,834 |
| Genesee & Wyoming, Inc., Class A * | 24,726 | 1,833,186 |
| Hawaiian Holdings, Inc. * | 21,301 | 1,036,294 |
| Heartland Express, Inc. | 41,401 | 858,657 |
| Hub Group, Inc., Class A * | 54,408 | 2,747,604 |
| Kirby Corp. * | 44,618 | 3,087,566 |
| Knight Transportation, Inc. | 49,969 | 1,633,986 |
| Landstar System, Inc. | 43,648 | 3,788,646 |
| Macquarie Infrastructure Corp. | 22,606 | 1,739,306 |
| Marten Transport Ltd. | 31,465 | 772,466 |
| Matson, Inc. | 31,214 | 1,059,091 |
| Old Dominion Freight Line, Inc. * | 33,465 | 3,070,748 |
| Roadrunner Transportation Systems, Inc. * | 66,034 | 497,896 |
26
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental U.S. Small Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Saia, Inc. * | 32,088 | 1,551,455 |
| SkyWest, Inc. | 110,106 | 3,870,226 |
| Spirit Airlines, Inc. * | 38,378 | 2,003,715 |
| Swift Transportation Co. * | 70,552 | 1,532,389 |
| United Continental Holdings, Inc. * | 54,898 | 4,067,393 |
| Werner Enterprises, Inc. | 75,704 | 2,119,712 |
| 50,130,707 | ||
| Utilities 3.1% | ||
| ALLETE, Inc. | 32,084 | 2,156,366 |
| American States Water Co. | 21,146 | 945,649 |
| Aqua America, Inc. | 73,745 | 2,340,666 |
| Avangrid, Inc. | 18,471 | 807,552 |
| Avista Corp. | 57,028 | 2,273,706 |
| Black Hills Corp. | 38,232 | 2,480,492 |
| California Water Service Group | 27,879 | 1,024,553 |
| Dynegy, Inc. * | 116,113 | 933,549 |
| El Paso Electric Co. | 39,382 | 1,923,811 |
| Hawaiian Electric Industries, Inc. | 100,815 | 3,355,123 |
| IDACORP, Inc. | 29,754 | 2,467,499 |
| MGE Energy, Inc. | 20,110 | 1,286,035 |
| New Jersey Resources Corp. | 67,525 | 2,660,485 |
| Northwest Natural Gas Co. | 24,543 | 1,475,034 |
| NorthWestern Corp. | 31,011 | 1,814,144 |
| ONE Gas, Inc. | 33,265 | 2,180,521 |
| Otter Tail Corp. | 36,211 | 1,361,534 |
| PNM Resources, Inc. | 90,334 | 3,279,124 |
| Portland General Electric Co. | 75,085 | 3,403,603 |
| South Jersey Industries, Inc. | 45,318 | 1,587,036 |
| Southwest Gas Holdings, Inc. | 39,770 | 3,401,528 |
| Spire, Inc. | 23,245 | 1,531,846 |
| WGL Holdings, Inc. | 40,296 | 3,364,313 |
| 48,054,169 | ||
| Total Common Stock | ||
| (Cost $1,366,836,996) | 1,561,453,498 | |
| Other Investment Companies 1.8% of net assets | ||
| Money Market Fund 0.1% | ||
| State Street Institutional U.S. Government Money Market Fund, Premier Class 0.46% (b) | 891,901 | 891,901 |
| Securities Lending Collateral 1.7% | ||
| Wells Fargo Government Money Market Fund, Select Class 0.48% (b) | 27,296,525 | 27,296,525 |
| Total Other Investment Companies | ||
| (Cost $28,188,426) | 28,188,426 | |
End of Investments.
At 02/28/17, the tax basis cost of the fund's investments was $1,395,293,091 and the unrealized appreciation and depreciation were $236,648,364 and ($42,299,531), respectively, with a net unrealized appreciation of $194,348,833.
| * | Non-income producing security. |
| (a) | All or a portion of this security is on loan. Securities on loan were valued at $26,089,127. |
| (b) | The rate shown is the 7-day yield. |
| REIT — | Real Estate Investment Trust |
In addition to the above, the fund held the following at 02/28/17:
| Number of Contracts | Contract Value ($) | Unrealized Depreciation ($) | ||||
| Futures Contracts | ||||||
| Russell 2000 Index, e-mini, Long, expires 03/17/17 | 100 | 6,925,000 | (35,636) | |||
27
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Large Company Index ETF
Portfolio Holdings as of February 28, 2017
This section shows all the securities in the fund's portfolio and their values as of the report date.
The fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's website at www.sec.gov and may be viewed and copied at the SEC's Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the Public Reference Room. The fund also makes available its complete schedule of portfolio holdings on a daily basis on the fund's website at www.csimfunds.com/schwabetfs_prospectus.
| Holdings by Category | Cost ($) | Value ($) | |
| 99.0% | Common Stock | 1,829,829,330 | 1,908,884,142 |
| 0.7% | Preferred Stock | 13,105,712 | 12,860,832 |
| 0.7% | Other Investment Companies | 13,948,811 | 13,948,811 |
| 100.4% | Total Investments | 1,856,883,853 | 1,935,693,785 |
| (0.4%) | Other Assets and Liabilities, Net | (6,832,668) | |
| 100.0% | Net Assets | 1,928,861,117 | |
| Security | Number of Shares | Value ($) |
| Common Stock 99.0% of net assets | ||
| Australia 6.6% | ||
| Banks 2.1% | ||
| Australia & New Zealand Banking Group Ltd. | 409,661 | 9,732,506 |
| Bendigo & Adelaide Bank Ltd. | 64,594 | 606,883 |
| Commonwealth Bank of Australia | 177,429 | 11,229,787 |
| National Australia Bank Ltd. | 369,821 | 9,095,935 |
| Westpac Banking Corp. | 411,877 | 10,671,832 |
| 41,336,943 | ||
| Capital Goods 0.0% | ||
| CIMIC Group Ltd. | 18,238 | 529,201 |
| Commercial & Professional Services 0.1% | ||
| Brambles Ltd. | 114,877 | 822,289 |
| Downer EDI Ltd. | 203,174 | 1,098,158 |
| 1,920,447 | ||
| Consumer Services 0.1% | ||
| Tabcorp Holdings Ltd. | 147,026 | 481,554 |
| Tatts Group Ltd. | 233,061 | 727,507 |
| 1,209,061 | ||
| Diversified Financials 0.2% | ||
| AMP Ltd. | 504,038 | 1,891,144 |
| Macquarie Group Ltd. | 26,005 | 1,732,475 |
| 3,623,619 | ||
| Energy 0.5% | ||
| Caltex Australia Ltd. | 64,728 | 1,400,418 |
| Origin Energy Ltd. | 453,061 | 2,285,084 |
| Santos Ltd. | 303,734 | 887,398 |
| Woodside Petroleum Ltd. | 124,101 | 2,990,307 |
| WorleyParsons Ltd. * | 141,176 | 1,155,985 |
| 8,719,192 | ||
| Food & Staples Retailing 0.9% | ||
| Metcash Ltd. * | 673,563 | 1,118,597 |
| Wesfarmers Ltd. | 272,566 | 8,952,503 |
| Woolworths Ltd. | 378,535 | 7,497,103 |
| 17,568,203 | ||
| Food, Beverage & Tobacco 0.0% | ||
| Coca-Cola Amatil Ltd. | 98,701 | 777,834 |
| Health Care Equipment & Services 0.0% | ||
| Sonic Healthcare Ltd. | 45,523 | 753,208 |
| Security | Number of Shares | Value ($) |
| Insurance 0.4% | ||
| Insurance Australia Group Ltd. | 296,637 | 1,368,416 |
| Medibank Pvt Ltd. | 241,540 | 523,697 |
| QBE Insurance Group Ltd. | 230,867 | 2,185,050 |
| Suncorp Group Ltd. | 274,413 | 2,799,737 |
| 6,876,900 | ||
| Materials 1.6% | ||
| Amcor Ltd. | 111,383 | 1,203,197 |
| Arrium Ltd. *(b) | 11,076,407 | 39,344 |
| BHP Billiton Ltd. | 862,316 | 16,574,789 |
| BlueScope Steel Ltd. | 137,679 | 1,293,542 |
| Boral Ltd. | 136,726 | 616,014 |
| CSR Ltd. | 168,904 | 542,822 |
| Fortescue Metals Group Ltd. | 309,764 | 1,579,014 |
| Iluka Resources Ltd. | 87,059 | 453,821 |
| Incitec Pivot Ltd. | 304,751 | 859,910 |
| Newcrest Mining Ltd. | 55,794 | 949,744 |
| Orica Ltd. | 105,736 | 1,486,888 |
| Rio Tinto Ltd. | 94,640 | 4,510,638 |
| 30,109,723 | ||
| Pharmaceuticals, Biotechnology & Life Sciences 0.1% | ||
| CSL Ltd. | 29,276 | 2,652,893 |
| Real Estate 0.2% | ||
| LendLease Group | 80,951 | 947,902 |
| Mirvac Group | 385,098 | 636,577 |
| Scentre Group | 291,655 | 977,682 |
| Stockland | 309,414 | 1,122,855 |
| Westfield Corp. | 107,418 | 726,777 |
| 4,411,793 | ||
| Telecommunication Services 0.2% | ||
| Telstra Corp., Ltd. | 772,139 | 2,861,436 |
| Transportation 0.1% | ||
| Aurizon Holdings Ltd. | 277,106 | 1,090,831 |
| Transurban Group | 72,302 | 613,151 |
| 1,703,982 | ||
| Utilities 0.1% | ||
| AGL Energy Ltd. | 88,010 | 1,632,115 |
| APA Group | 76,791 | 499,485 |
| DUET Group | 257,338 | 544,099 |
| 2,675,699 | ||
| 127,730,134 | ||
| Austria 0.4% | ||
| Banks 0.1% | ||
| Erste Group Bank AG * | 61,149 | 1,784,266 |
| Raiffeisen Bank International AG * | 49,377 | 1,099,729 |
| 2,883,995 | ||
| Energy 0.2% | ||
| OMV AG | 78,885 | 3,022,664 |
| Materials 0.1% | ||
| voestalpine AG | 34,496 | 1,456,138 |
| 7,362,797 | ||
28
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Large Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Belgium 0.7% | ||
| Banks 0.1% | ||
| KBC Groep N.V. | 24,783 | 1,520,549 |
| Diversified Financials 0.0% | ||
| Groupe Bruxelles Lambert S.A. | 10,781 | 916,586 |
| Food & Staples Retailing 0.0% | ||
| Colruyt S.A. | 11,789 | 554,570 |
| Food, Beverage & Tobacco 0.3% | ||
| Anheuser-Busch InBev S.A. | 48,327 | 5,302,121 |
| Insurance 0.1% | ||
| Ageas | 38,847 | 1,479,433 |
| Materials 0.1% | ||
| Solvay S.A. | 11,313 | 1,321,730 |
| Umicore S.A. | 20,942 | 1,106,306 |
| 2,428,036 | ||
| Pharmaceuticals, Biotechnology & Life Sciences 0.0% | ||
| UCB S.A. | 8,208 | 586,193 |
| Telecommunication Services 0.1% | ||
| Proximus | 33,998 | 1,002,685 |
| 13,790,173 | ||
| Canada 7.2% | ||
| Automobiles & Components 0.2% | ||
| Magna International, Inc. | 96,172 | 4,123,680 |
| Banks 1.8% | ||
| Bank of Montreal | 67,090 | 5,105,516 |
| Canadian Imperial Bank of Commerce | 51,346 | 4,520,712 |
| National Bank of Canada | 37,150 | 1,589,839 |
| Royal Bank of Canada | 132,129 | 9,624,981 |
| The Bank of Nova Scotia | 120,754 | 7,023,963 |
| The Toronto-Dominion Bank | 148,899 | 7,696,497 |
| 35,561,508 | ||
| Capital Goods 0.1% | ||
| Bombardier, Inc., B Shares * | 516,279 | 896,554 |
| Finning International, Inc. | 38,880 | 723,909 |
| SNC-Lavalin Group, Inc. | 18,673 | 762,598 |
| 2,383,061 | ||
| Diversified Financials 0.2% | ||
| Brookfield Asset Management, Inc., Class A | 73,928 | 2,670,328 |
| CI Financial Corp. | 32,079 | 655,895 |
| IGM Financial, Inc. | 15,705 | 482,729 |
| Onex Corp. | 12,192 | 860,422 |
| 4,669,374 | ||
| Energy 2.1% | ||
| ARC Resources Ltd. | 49,216 | 735,760 |
| Baytex Energy Corp. *(a) | 131,661 | 480,141 |
| Cameco Corp. | 54,665 | 606,724 |
| Canadian Natural Resources Ltd. | 146,314 | 4,207,860 |
| Cenovus Energy, Inc. | 202,306 | 2,566,153 |
| Crescent Point Energy Corp. | 92,289 | 1,018,039 |
| Enbridge, Inc. | 109,405 | 4,617,569 |
| Encana Corp. | 270,534 | 3,006,728 |
| Enerplus Corp. | 112,377 | 994,419 |
| Gibson Energy, Inc. | 37,270 | 523,122 |
| Husky Energy, Inc. * | 122,884 | 1,465,942 |
| Imperial Oil Ltd. | 42,534 | 1,332,429 |
| Inter Pipeline Ltd. | 25,565 | 537,570 |
| Keyera Corp. | 14,330 | 423,154 |
| Pembina Pipeline Corp. | 27,744 | 899,069 |
| Pengrowth Energy Corp. * | 384,756 | 453,184 |
| Penn West Petroleum Ltd. * | 1,012,273 | 1,689,096 |
| Security | Number of Shares | Value ($) |
| Suncor Energy, Inc. | 323,549 | 10,101,364 |
| TransCanada Corp. | 74,284 | 3,424,653 |
| Vermilion Energy, Inc. | 12,770 | 487,004 |
| 39,569,980 | ||
| Food & Staples Retailing 0.3% | ||
| Alimentation Couche-Tard, Inc., B Shares | 32,070 | 1,430,068 |
| Empire Co., Ltd., A Shares | 64,141 | 810,207 |
| George Weston Ltd. | 10,531 | 884,971 |
| Loblaw Cos. Ltd. | 28,237 | 1,476,609 |
| Metro, Inc. | 42,061 | 1,229,962 |
| 5,831,817 | ||
| Food, Beverage & Tobacco 0.1% | ||
| Saputo, Inc. | 24,545 | 845,255 |
| Insurance 0.5% | ||
| Fairfax Financial Holdings Ltd. | 1,190 | 537,295 |
| Great-West Lifeco, Inc. | 27,734 | 758,866 |
| Intact Financial Corp. | 10,388 | 738,521 |
| Manulife Financial Corp. | 159,929 | 2,865,427 |
| Power Corp. of Canada | 71,436 | 1,666,633 |
| Power Financial Corp. | 34,741 | 903,641 |
| Sun Life Financial, Inc. | 52,348 | 1,905,073 |
| 9,375,456 | ||
| Materials 0.8% | ||
| Agnico Eagle Mines Ltd. | 9,748 | 411,058 |
| Agrium, Inc. | 23,063 | 2,229,769 |
| Barrick Gold Corp. | 111,872 | 2,070,280 |
| First Quantum Minerals Ltd. | 106,687 | 1,113,228 |
| Goldcorp, Inc. | 75,772 | 1,204,274 |
| Kinross Gold Corp. * | 124,707 | 440,657 |
| Methanex Corp. | 10,780 | 550,944 |
| Potash Corp. of Saskatchewan, Inc. | 182,902 | 3,181,745 |
| Teck Resources Ltd., Class B | 188,908 | 3,786,861 |
| West Fraser Timber Co., Ltd. | 11,350 | 472,442 |
| Yamana Gold, Inc. | 161,292 | 446,934 |
| 15,908,192 | ||
| Media 0.1% | ||
| Quebecor, Inc., Class B | 16,324 | 463,178 |
| Shaw Communications, Inc., B Shares | 60,510 | 1,262,786 |
| 1,725,964 | ||
| Pharmaceuticals, Biotechnology & Life Sciences 0.0% | ||
| Valeant Pharmaceuticals International, Inc. * | 27,001 | 385,102 |
| Retailing 0.1% | ||
| Canadian Tire Corp., Ltd., Class A | 10,099 | 1,161,295 |
| Dollarama, Inc. | 4,920 | 379,945 |
| 1,541,240 | ||
| Software & Services 0.0% | ||
| CGI Group, Inc., Class A * | 12,953 | 597,161 |
| Technology Hardware & Equipment 0.1% | ||
| BlackBerry Ltd. * | 161,923 | 1,128,430 |
| Celestica, Inc. * | 48,348 | 640,649 |
| 1,769,079 | ||
| Telecommunication Services 0.3% | ||
| BCE, Inc. | 53,669 | 2,347,829 |
| Rogers Communications, Inc., B Shares | 42,357 | 1,783,250 |
| TELUS Corp. | 46,670 | 1,522,955 |
| 5,654,034 | ||
| Transportation 0.3% | ||
| Canadian National Railway Co. | 58,369 | 4,070,339 |
| Canadian Pacific Railway Ltd. | 9,273 | 1,368,283 |
| 5,438,622 | ||
29
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Large Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Utilities 0.2% | ||
| Atco Ltd., Class I | 15,159 | 519,397 |
| Canadian Utilities Ltd., Class A | 23,891 | 644,694 |
| Emera, Inc. | 13,356 | 459,335 |
| Fortis, Inc. | 34,568 | 1,099,588 |
| TransAlta Corp. | 143,809 | 772,005 |
| 3,495,019 | ||
| 138,874,544 | ||
| Denmark 0.8% | ||
| Banks 0.1% | ||
| Danske Bank A/S | 46,233 | 1,547,930 |
| Capital Goods 0.0% | ||
| Vestas Wind Systems A/S | 9,987 | 743,136 |
| Commercial & Professional Services 0.0% | ||
| ISS A/S | 17,224 | 673,201 |
| Consumer Durables & Apparel 0.0% | ||
| Pandora A/S | 3,852 | 440,543 |
| Food, Beverage & Tobacco 0.1% | ||
| Carlsberg A/S, B Shares | 13,763 | 1,212,994 |
| Health Care Equipment & Services 0.0% | ||
| Coloplast A/S, B Shares | 5,397 | 381,686 |
| Pharmaceuticals, Biotechnology & Life Sciences 0.2% | ||
| Novo Nordisk A/S, B Shares | 78,363 | 2,791,717 |
| Telecommunication Services 0.1% | ||
| TDC A/S * | 280,788 | 1,515,733 |
| Transportation 0.3% | ||
| AP Moller - Maersk A/S, A Shares | 1,531 | 2,381,312 |
| AP Moller - Maersk A/S, B Shares | 1,608 | 2,629,810 |
| DSV A/S | 12,856 | 634,805 |
| 5,645,927 | ||
| 14,952,867 | ||
| Finland 0.9% | ||
| Automobiles & Components 0.0% | ||
| Nokian Renkaat Oyj | 15,590 | 615,093 |
| Capital Goods 0.1% | ||
| Kone Oyj, B Shares (a) | 20,908 | 938,884 |
| Metso Oyj | 21,983 | 651,486 |
| Wartsila Oyj Abp (a) | 16,415 | 846,488 |
| 2,436,858 | ||
| Energy 0.1% | ||
| Neste Oyj | 24,608 | 859,761 |
| Food & Staples Retailing 0.1% | ||
| Kesko Oyj, B Shares | 27,099 | 1,247,129 |
| Insurance 0.1% | ||
| Sampo Oyj, A Shares | 37,214 | 1,700,770 |
| Materials 0.2% | ||
| Stora Enso Oyj, R Shares | 145,713 | 1,570,023 |
| UPM-Kymmene Oyj | 103,530 | 2,467,546 |
| 4,037,569 | ||
| Pharmaceuticals, Biotechnology & Life Sciences 0.0% | ||
| Orion Oyj, Class B | 12,663 | 626,228 |
| Technology Hardware & Equipment 0.2% | ||
| Nokia Oyj | 724,466 | 3,724,377 |
| Telecommunication Services 0.0% | ||
| Elisa Oyj | 14,358 | 480,132 |
| Utilities 0.1% | ||
| Fortum Oyj | 106,500 | 1,639,788 |
| 17,367,705 | ||
| Security | Number of Shares | Value ($) |
| France 9.5% | ||
| Automobiles & Components 0.4% | ||
| Faurecia | 16,512 | 727,969 |
| Peugeot S.A. * | 91,682 | 1,749,686 |
| Renault S.A. | 33,663 | 2,994,332 |
| Valeo S.A. | 25,069 | 1,545,289 |
| 7,017,276 | ||
| Banks 1.1% | ||
| BNP Paribas S.A. | 165,047 | 9,668,640 |
| Credit Agricole S.A. | 179,249 | 2,170,405 |
| Natixis S.A. | 98,441 | 538,812 |
| Societe Generale S.A. | 179,759 | 8,005,309 |
| 20,383,166 | ||
| Capital Goods 1.5% | ||
| Airbus SE | 40,420 | 2,977,314 |
| Alstom S.A. * | 38,348 | 1,044,182 |
| Bouygues S.A. | 65,765 | 2,541,604 |
| Compagnie de Saint-Gobain | 119,991 | 5,766,935 |
| Eiffage S.A. | 11,023 | 789,693 |
| Legrand S.A. | 21,768 | 1,231,015 |
| Rexel S.A. | 108,075 | 1,753,040 |
| Safran S.A. | 22,466 | 1,603,268 |
| Schneider Electric SE | 77,028 | 5,229,393 |
| Thales S.A. | 7,052 | 696,891 |
| Vinci S.A. | 71,634 | 5,176,804 |
| Zodiac Aerospace | 22,003 | 648,221 |
| 29,458,360 | ||
| Commercial & Professional Services 0.0% | ||
| Bureau Veritas S.A. | 20,046 | 383,629 |
| Teleperformance | 5,217 | 579,304 |
| 962,933 | ||
| Consumer Durables & Apparel 0.4% | ||
| Christian Dior SE | 6,528 | 1,386,637 |
| Kering | 7,639 | 1,864,927 |
| LVMH Moet Hennessy Louis Vuitton SE | 21,070 | 4,241,592 |
| 7,493,156 | ||
| Consumer Services 0.1% | ||
| Accor S.A. | 24,664 | 976,247 |
| Sodexo S.A. | 9,666 | 1,063,571 |
| 2,039,818 | ||
| Diversified Financials 0.0% | ||
| Eurazeo S.A. | 7,068 | 437,860 |
| Wendel S.A. | 4,639 | 514,876 |
| 952,736 | ||
| Energy 1.9% | ||
| TechnipFMC plc * | 66,884 | 2,163,754 |
| Total S.A. | 674,674 | 33,730,546 |
| Vallourec S.A. *(a) | 193,343 | 1,064,006 |
| 36,958,306 | ||
| Food & Staples Retailing 0.3% | ||
| Carrefour S.A. | 169,649 | 4,063,263 |
| Casino Guichard Perrachon S.A. | 30,463 | 1,615,748 |
| Rallye S.A. | 46,258 | 1,054,348 |
| 6,733,359 | ||
| Food, Beverage & Tobacco 0.3% | ||
| Danone S.A. | 59,391 | 3,948,091 |
| Pernod-Ricard S.A. | 16,785 | 1,924,476 |
| 5,872,567 | ||
| Health Care Equipment & Services 0.1% | ||
| Essilor International S.A. | 9,832 | 1,129,895 |
30
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Large Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Household & Personal Products 0.2% | ||
| L'Oreal S.A. | 16,600 | 3,096,554 |
| Insurance 0.4% | ||
| AXA S.A. | 262,033 | 6,200,775 |
| CNP Assurances | 28,196 | 523,869 |
| SCOR SE | 22,609 | 818,989 |
| 7,543,633 | ||
| Materials 0.3% | ||
| Air Liquide S.A. | 39,454 | 4,272,037 |
| Arkema S.A. | 14,465 | 1,406,401 |
| 5,678,438 | ||
| Media 0.3% | ||
| Eutelsat Communications S.A. | 22,408 | 441,808 |
| Publicis Groupe S.A. | 16,106 | 1,088,979 |
| Vivendi S.A. | 282,748 | 5,003,961 |
| 6,534,748 | ||
| Pharmaceuticals, Biotechnology & Life Sciences 0.7% | ||
| Sanofi | 157,970 | 13,651,965 |
| Real Estate 0.1% | ||
| Klepierre | 11,982 | 446,450 |
| Unibail-Rodamco SE | 5,723 | 1,309,599 |
| 1,756,049 | ||
| Software & Services 0.1% | ||
| Atos SE | 9,118 | 1,080,300 |
| Cap Gemini S.A. | 16,722 | 1,433,764 |
| 2,514,064 | ||
| Telecommunication Services 0.5% | ||
| Orange S.A. | 578,778 | 8,773,110 |
| Transportation 0.1% | ||
| Air France-KLM *(a) | 136,778 | 965,932 |
| Bollore S.A. | 107,345 | 417,363 |
| 1,383,295 | ||
| Utilities 0.7% | ||
| Electricite de France S.A. (a) | 162,572 | 1,597,928 |
| Engie S.A. | 736,509 | 9,031,370 |
| Suez | 79,910 | 1,201,934 |
| Veolia Environnement S.A. | 130,045 | 2,134,971 |
| 13,966,203 | ||
| 183,899,631 | ||
| Germany 8.8% | ||
| Automobiles & Components 1.3% | ||
| Bayerische Motoren Werke AG | 77,525 | 6,950,237 |
| Continental AG | 12,811 | 2,606,883 |
| Daimler AG - Reg'd | 191,642 | 13,977,765 |
| Leoni AG | 13,011 | 523,848 |
| Volkswagen AG | 9,196 | 1,395,394 |
| 25,454,127 | ||
| Banks 0.1% | ||
| Commerzbank AG | 299,034 | 2,288,143 |
| Capital Goods 1.0% | ||
| Brenntag AG | 22,709 | 1,305,947 |
| GEA Group AG | 16,576 | 647,126 |
| HOCHTIEF AG | 3,369 | 515,506 |
| Kloeckner & Co. SE * | 41,288 | 542,704 |
| MAN SE | 4,802 | 494,391 |
| MTU Aero Engines AG | 4,877 | 620,840 |
| OSRAM Licht AG | 12,895 | 768,695 |
| Rheinmetall AG | 6,202 | 475,288 |
| Siemens AG - Reg'd | 105,945 | 13,824,473 |
| 19,194,970 | ||
| Security | Number of Shares | Value ($) |
| Commercial & Professional Services 0.0% | ||
| Bilfinger SE *(a) | 17,233 | 681,473 |
| Consumer Durables & Apparel 0.2% | ||
| adidas AG | 16,917 | 2,847,399 |
| HUGO BOSS AG | 12,366 | 853,844 |
| 3,701,243 | ||
| Diversified Financials 0.4% | ||
| Deutsche Bank AG - Reg'd * | 342,343 | 6,766,190 |
| Deutsche Boerse AG * | 13,401 | 1,152,008 |
| 7,918,198 | ||
| Food & Staples Retailing 0.1% | ||
| METRO AG | 75,989 | 2,363,029 |
| Food, Beverage & Tobacco 0.0% | ||
| Suedzucker AG | 27,726 | 710,026 |
| Health Care Equipment & Services 0.2% | ||
| Fresenius Medical Care AG & Co. KGaA | 15,808 | 1,319,450 |
| Fresenius SE & Co. KGaA | 27,734 | 2,210,850 |
| 3,530,300 | ||
| Household & Personal Products 0.1% | ||
| Beiersdorf AG | 6,791 | 621,452 |
| Henkel AG & Co. KGaA | 8,548 | 924,206 |
| 1,545,658 | ||
| Insurance 0.8% | ||
| Allianz SE - Reg'd | 61,997 | 10,817,168 |
| Hannover Rueck SE | 6,976 | 790,194 |
| Muenchener Rueckversicherungs-Gesellschaft AG - Reg'd | 23,267 | 4,410,674 |
| 16,018,036 | ||
| Materials 1.6% | ||
| Aurubis AG | 19,790 | 1,145,021 |
| BASF SE | 185,027 | 17,281,990 |
| Evonik Industries AG | 23,348 | 751,978 |
| Fuchs Petrolub SE | 2,233 | 95,054 |
| HeidelbergCement AG | 21,079 | 1,975,776 |
| K+S AG - Reg'd | 50,139 | 1,175,839 |
| LANXESS AG | 19,423 | 1,322,952 |
| Linde AG | 23,447 | 3,820,681 |
| Salzgitter AG | 20,823 | 763,586 |
| ThyssenKrupp AG | 61,161 | 1,533,431 |
| 29,866,308 | ||
| Media 0.1% | ||
| ProSiebenSat.1 Media SE | 24,764 | 996,125 |
| Pharmaceuticals, Biotechnology & Life Sciences 0.5% | ||
| Bayer AG - Reg'd | 87,184 | 9,616,209 |
| Merck KGaA | 7,833 | 858,553 |
| 10,474,762 | ||
| Real Estate 0.0% | ||
| Vonovia SE | 17,334 | 605,804 |
| Semiconductors & Semiconductor Equipment 0.1% | ||
| Infineon Technologies AG | 72,465 | 1,293,622 |
| Software & Services 0.3% | ||
| SAP SE | 52,430 | 4,899,880 |
| Telecommunication Services 0.6% | ||
| Deutsche Telekom AG - Reg'd | 638,522 | 11,066,227 |
| Freenet AG | 25,646 | 767,537 |
| 11,833,764 | ||
| Transportation 0.4% | ||
| Deutsche Lufthansa AG - Reg'd | 96,253 | 1,414,511 |
| Deutsche Post AG - Reg'd | 164,587 | 5,662,068 |
| 7,076,579 | ||
31
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Large Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Utilities 1.0% | ||
| E.ON SE | 1,470,024 | 11,443,559 |
| RWE AG * | 424,924 | 6,075,258 |
| Uniper SE * | 76,603 | 1,090,737 |
| 18,609,554 | ||
| 169,061,601 | ||
| Hong Kong 1.4% | ||
| Banks 0.1% | ||
| BOC Hong Kong Holdings Ltd. | 305,884 | 1,209,752 |
| Hang Seng Bank Ltd. | 55,825 | 1,144,914 |
| 2,354,666 | ||
| Capital Goods 0.3% | ||
| CK Hutchison Holdings Ltd. | 44,299 | 547,285 |
| Jardine Matheson Holdings Ltd. | 27,905 | 1,735,133 |
| Jardine Strategic Holdings Ltd. | 25,097 | 936,118 |
| Noble Group Ltd. * | 18,668,987 | 3,070,228 |
| 6,288,764 | ||
| Consumer Durables & Apparel 0.1% | ||
| Li & Fung Ltd. | 2,000,644 | 891,758 |
| Yue Yuen Industrial Holdings Ltd. | 122,148 | 454,763 |
| 1,346,521 | ||
| Consumer Services 0.1% | ||
| Galaxy Entertainment Group Ltd. | 164,287 | 787,313 |
| Sands China Ltd. | 185,025 | 772,283 |
| SJM Holdings Ltd. | 794,917 | 652,323 |
| 2,211,919 | ||
| Diversified Financials 0.0% | ||
| Hong Kong Exchanges & Clearing Ltd. | 18,714 | 464,568 |
| Food, Beverage & Tobacco 0.1% | ||
| China Mengniu Dairy Co., Ltd. | 260,770 | 513,985 |
| Want Want China Holdings Ltd. | 650,196 | 418,808 |
| 932,793 | ||
| Insurance 0.1% | ||
| AIA Group Ltd. | 409,594 | 2,588,176 |
| Real Estate 0.4% | ||
| Cheung Kong Property Holdings Ltd. | 53,441 | 363,504 |
| Hongkong Land Holdings Ltd. | 60,286 | 411,753 |
| Link REIT | 77,438 | 534,213 |
| New World Development Co., Ltd. | 646,402 | 846,053 |
| Sun Hung Kai Properties Ltd. | 118,494 | 1,732,581 |
| Swire Pacific Ltd., Class A | 112,255 | 1,154,011 |
| Swire Pacific Ltd., Class B | 115,031 | 210,725 |
| The Wharf Holdings Ltd. | 109,375 | 867,256 |
| Wheelock & Co., Ltd. | 92,394 | 600,491 |
| 6,720,587 | ||
| Retailing 0.0% | ||
| Esprit Holdings Ltd. * | 832,332 | 788,107 |
| Transportation 0.0% | ||
| MTR Corp. Ltd. | 102,087 | 539,865 |
| Utilities 0.2% | ||
| CLP Holdings Ltd. | 165,143 | 1,679,629 |
| Hong Kong & China Gas Co., Ltd. | 341,331 | 656,943 |
| Power Assets Holdings Ltd. | 43,604 | 391,245 |
| 2,727,817 | ||
| 26,963,783 | ||
| Ireland 0.7% | ||
| Banks 0.0% | ||
| Bank of Ireland * | 2,276,687 | 541,902 |
| Security | Number of Shares | Value ($) |
| Commercial & Professional Services 0.1% | ||
| Experian plc | 70,792 | 1,406,855 |
| Food, Beverage & Tobacco 0.0% | ||
| Kerry Group plc, A Shares | 8,538 | 657,755 |
| Materials 0.2% | ||
| CRH plc | 100,324 | 3,396,945 |
| Smurfit Kappa Group plc | 37,604 | 1,003,146 |
| 4,400,091 | ||
| Pharmaceuticals, Biotechnology & Life Sciences 0.1% | ||
| Shire plc | 26,562 | 1,604,429 |
| Technology Hardware & Equipment 0.3% | ||
| Seagate Technology plc | 99,521 | 4,795,917 |
| 13,406,949 | ||
| Israel 0.4% | ||
| Banks 0.1% | ||
| Bank Hapoalim B.M. | 89,074 | 549,326 |
| Bank Leumi Le-Israel * | 213,445 | 935,797 |
| 1,485,123 | ||
| Materials 0.1% | ||
| Israel Chemicals Ltd. | 185,592 | 790,231 |
| Pharmaceuticals, Biotechnology & Life Sciences 0.2% | ||
| Teva Pharmaceutical Industries Ltd. | 106,599 | 3,754,084 |
| Software & Services 0.0% | ||
| Check Point Software Technologies Ltd. * | 6,275 | 620,660 |
| Telecommunication Services 0.0% | ||
| Bezeq The Israeli Telecommunication Corp., Ltd. | 417,823 | 746,051 |
| 7,396,149 | ||
| Italy 3.3% | ||
| Banks 0.8% | ||
| Banca Monte dei Paschi di Siena S.p.A. *(b) | 36,136 | 512,632 |
| Banco BPM S.p.A. | 317,894 | 795,843 |
| BPER Banca | 119,590 | 547,699 |
| Intesa Sanpaolo S.p.A. | 2,233,195 | 5,220,584 |
| UniCredit S.p.A. (a) | 521,494 | 7,009,864 |
| Unione di Banche Italiane S.p.A. (a) | 381,450 | 1,195,720 |
| 15,282,342 | ||
| Capital Goods 0.1% | ||
| Leonardo S.p.A. * | 45,394 | 625,617 |
| Prysmian S.p.A. | 24,703 | 630,248 |
| 1,255,865 | ||
| Consumer Durables & Apparel 0.0% | ||
| Luxottica Group S.p.A. | 11,252 | 594,949 |
| Diversified Financials 0.2% | ||
| EXOR N.V. | 65,873 | 3,130,950 |
| Energy 1.0% | ||
| Eni S.p.A. | 1,160,537 | 17,905,868 |
| Saipem S.p.A. * | 2,555,712 | 1,170,738 |
| Snam S.p.A. | 291,894 | 1,166,226 |
| 20,242,832 | ||
| Insurance 0.2% | ||
| Assicurazioni Generali S.p.A. | 203,154 | 2,918,581 |
| Poste Italiane S.p.A. | 64,772 | 417,090 |
| 3,335,671 | ||
| Media 0.0% | ||
| Mediaset S.p.A. | 221,479 | 914,545 |
32
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Large Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Telecommunication Services 0.3% | ||
| Telecom Italia S.p.A. * | 4,605,463 | 3,746,177 |
| Telecom Italia S.p.A. - RSP * | 2,558,238 | 1,709,863 |
| 5,456,040 | ||
| Transportation 0.1% | ||
| Atlantia S.p.A. | 45,589 | 1,070,587 |
| Utilities 0.6% | ||
| Enel S.p.A. | 2,472,481 | 10,645,649 |
| Italgas S.p.A. * | 18,392 | 73,366 |
| Terna Rete Elettrica Nazionale S.p.A. | 150,230 | 697,922 |
| 11,416,937 | ||
| 62,700,718 | ||
| Japan 22.3% | ||
| Automobiles & Components 3.4% | ||
| Aisin Seiki Co., Ltd. | 43,334 | 2,161,181 |
| Bridgestone Corp. | 120,017 | 4,806,687 |
| Calsonic Kansei Corp. | 44,952 | 515,872 |
| Denso Corp. | 80,450 | 3,589,457 |
| Fuji Heavy Industries Ltd. | 48,360 | 1,818,390 |
| Honda Motor Co., Ltd. | 364,765 | 11,374,761 |
| Isuzu Motors Ltd. | 110,770 | 1,488,517 |
| Koito Manufacturing Co., Ltd. | 7,838 | 405,613 |
| Mazda Motor Corp. | 102,050 | 1,437,465 |
| Mitsubishi Motors Corp. | 239,673 | 1,557,334 |
| NGK Spark Plug Co., Ltd. | 23,949 | 544,329 |
| NHK Spring Co., Ltd. | 63,255 | 725,919 |
| Nissan Motor Co., Ltd. | 538,424 | 5,322,402 |
| Stanley Electric Co., Ltd. | 17,360 | 491,079 |
| Sumitomo Electric Industries Ltd. | 181,981 | 2,975,683 |
| Sumitomo Rubber Industries Ltd. | 43,224 | 716,247 |
| Suzuki Motor Corp. | 69,181 | 2,716,909 |
| The Yokohama Rubber Co., Ltd. | 28,726 | 573,570 |
| Toyota Industries Corp. | 25,388 | 1,243,475 |
| Toyota Motor Corp. | 352,500 | 20,053,291 |
| Yamaha Motor Co., Ltd. | 43,059 | 1,000,226 |
| 65,518,407 | ||
| Banks 1.5% | ||
| Aozora Bank Ltd. | 140,750 | 529,613 |
| Japan Post Bank Co., Ltd. | 45,755 | 575,797 |
| Mitsubishi UFJ Financial Group, Inc. | 1,597,834 | 10,545,119 |
| Mizuho Financial Group, Inc. | 3,180,586 | 5,961,200 |
| Resona Holdings, Inc. | 320,070 | 1,793,662 |
| Sumitomo Mitsui Financial Group, Inc. | 196,360 | 7,681,707 |
| Sumitomo Mitsui Trust Holdings, Inc. | 38,594 | 1,389,777 |
| 28,476,875 | ||
| Capital Goods 3.4% | ||
| Asahi Glass Co., Ltd. | 328,741 | 2,697,272 |
| Daikin Industries Ltd. | 17,997 | 1,715,494 |
| Ebara Corp. | 18,063 | 534,375 |
| FANUC Corp. | 12,463 | 2,464,529 |
| Fuji Electric Co., Ltd. | 106,880 | 593,221 |
| Furukawa Electric Co., Ltd. | 23,158 | 849,654 |
| Hanwa Co., Ltd. | 96,657 | 696,300 |
| Hino Motors Ltd. | 63,515 | 740,824 |
| Hitachi Construction Machinery Co., Ltd. | 27,701 | 647,186 |
| IHI Corp. * | 337,335 | 1,055,255 |
| ITOCHU Corp. | 266,831 | 3,878,988 |
| JGC Corp. | 46,961 | 846,587 |
| JTEKT Corp. | 43,380 | 739,769 |
| Kajima Corp. | 104,665 | 684,764 |
| Kawasaki Heavy Industries Ltd. | 287,491 | 907,041 |
| Komatsu Ltd. | 154,810 | 3,750,391 |
| Kubota Corp. | 96,550 | 1,542,505 |
| LIXIL Group Corp. | 56,528 | 1,390,907 |
| Security | Number of Shares | Value ($) |
| Makita Corp. | 9,767 | 679,155 |
| Marubeni Corp. | 501,069 | 3,254,922 |
| Mitsubishi Corp. | 268,072 | 6,072,561 |
| Mitsubishi Electric Corp. | 310,275 | 4,568,781 |
| Mitsubishi Heavy Industries Ltd. | 675,432 | 2,680,358 |
| Mitsui & Co., Ltd. | 406,396 | 6,243,864 |
| Nagase & Co., Ltd. | 42,295 | 617,310 |
| NGK Insulators Ltd. | 20,290 | 438,678 |
| Nidec Corp. | 10,564 | 990,449 |
| NSK Ltd. | 64,753 | 927,151 |
| Obayashi Corp. | 66,960 | 624,804 |
| Shimizu Corp. | 82,725 | 762,296 |
| SMC Corp. | 3,240 | 922,322 |
| Sojitz Corp. | 504,274 | 1,311,559 |
| Sumitomo Corp. | 254,540 | 3,434,134 |
| Sumitomo Heavy Industries Ltd. | 125,958 | 894,996 |
| Taisei Corp. | 113,911 | 802,269 |
| Toshiba Corp. * | 1,275,280 | 2,373,091 |
| TOTO Ltd. | 13,867 | 536,039 |
| Toyota Tsusho Corp. | 83,716 | 2,506,579 |
| 66,376,380 | ||
| Commercial & Professional Services 0.3% | ||
| Dai Nippon Printing Co., Ltd. | 171,538 | 1,873,526 |
| Recruit Holdings Co., Ltd. | 32,355 | 1,593,386 |
| Secom Co., Ltd. | 19,084 | 1,396,099 |
| Toppan Printing Co., Ltd. | 131,816 | 1,333,653 |
| 6,196,664 | ||
| Consumer Durables & Apparel 1.0% | ||
| Bandai Namco Holdings, Inc. | 30,941 | 894,616 |
| Iida Group Holdings Co., Ltd. | 27,629 | 469,188 |
| Nikon Corp. | 78,049 | 1,197,749 |
| Panasonic Corp. | 560,576 | 6,177,684 |
| Sega Sammy Holdings, Inc. | 39,045 | 576,855 |
| Sekisui Chemical Co., Ltd. | 76,485 | 1,268,085 |
| Sekisui House Ltd. | 103,395 | 1,659,255 |
| Sharp Corp. *(a) | 648,304 | 1,929,528 |
| Shimano, Inc. | 3,791 | 562,458 |
| Sony Corp. | 141,344 | 4,393,747 |
| Sumitomo Forestry Co., Ltd. | 34,525 | 504,521 |
| 19,633,686 | ||
| Consumer Services 0.1% | ||
| Benesse Holdings, Inc. | 18,650 | 575,910 |
| Oriental Land Co., Ltd. | 10,458 | 589,989 |
| 1,165,899 | ||
| Diversified Financials 0.3% | ||
| Daiwa Securities Group, Inc. | 129,889 | 826,920 |
| Nomura Holdings, Inc. | 372,602 | 2,428,732 |
| ORIX Corp. | 104,633 | 1,634,233 |
| 4,889,885 | ||
| Energy 0.8% | ||
| Idemitsu Kosan Co., Ltd. | 74,683 | 2,416,342 |
| Inpex Corp. | 301,848 | 3,010,791 |
| JX Holdings, Inc. | 1,427,617 | 6,827,706 |
| San-Ai Oil Co., Ltd. | 54,735 | 467,683 |
| Showa Shell Sekiyu K.K. | 75,035 | 759,169 |
| TonenGeneral Sekiyu K.K. | 134,738 | 1,619,722 |
| 15,101,413 | ||
| Food & Staples Retailing 0.4% | ||
| Aeon Co., Ltd. | 166,806 | 2,497,207 |
| Lawson, Inc. | 6,065 | 420,108 |
| Seven & i Holdings Co., Ltd. | 124,041 | 4,878,048 |
| 7,795,363 | ||
33
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Large Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Food, Beverage & Tobacco 0.7% | ||
| Ajinomoto Co., Inc. | 56,033 | 1,138,839 |
| Asahi Group Holdings Ltd. | 48,315 | 1,713,923 |
| Coca-Cola West Co., Ltd. | 16,853 | 501,591 |
| Japan Tobacco, Inc. | 89,894 | 3,018,562 |
| Kewpie Corp. | 18,110 | 483,807 |
| Kirin Holdings Co., Ltd. | 164,009 | 2,834,995 |
| MEIJI Holdings Co., Ltd. | 10,023 | 804,456 |
| NH Foods Ltd. | 39,908 | 1,067,923 |
| Nisshin Seifun Group, Inc. | 28,253 | 426,503 |
| Suntory Beverage & Food Ltd. | 12,821 | 539,723 |
| Toyo Suisan Kaisha Ltd. | 12,164 | 447,921 |
| Yamazaki Baking Co., Ltd. | 29,980 | 603,700 |
| 13,581,943 | ||
| Health Care Equipment & Services 0.3% | ||
| Alfresa Holdings Corp. | 50,638 | 915,137 |
| Hoya Corp. | 42,543 | 1,933,133 |
| Medipal Holdings Corp. | 56,670 | 938,549 |
| Olympus Corp. | 15,635 | 555,473 |
| Suzuken Co., Ltd. | 27,568 | 936,304 |
| Terumo Corp. | 19,490 | 678,496 |
| 5,957,092 | ||
| Household & Personal Products 0.2% | ||
| Kao Corp. | 42,400 | 2,198,350 |
| Shiseido Co., Ltd. | 36,616 | 967,067 |
| Unicharm Corp. | 21,581 | 487,036 |
| 3,652,453 | ||
| Insurance 0.5% | ||
| Dai-ichi Life Holdings, Inc. | 103,658 | 1,957,166 |
| Japan Post Holdings Co., Ltd. | 43,799 | 564,100 |
| MS&AD Insurance Group Holdings, Inc. | 48,480 | 1,646,115 |
| Sompo Holdings, Inc. | 41,188 | 1,545,401 |
| T&D Holdings, Inc. | 76,461 | 1,177,821 |
| Tokio Marine Holdings, Inc. | 60,907 | 2,677,763 |
| 9,568,366 | ||
| Materials 2.1% | ||
| Air Water, Inc. | 28,965 | 552,195 |
| Asahi Kasei Corp. | 279,269 | 2,731,912 |
| Daicel Corp. | 36,411 | 443,564 |
| Denka Co., Ltd. | 110,835 | 579,510 |
| DIC Corp. | 21,196 | 776,723 |
| Dowa Holdings Co., Ltd. | 58,060 | 472,741 |
| JFE Holdings, Inc. | 197,647 | 3,753,853 |
| JSR Corp. | 37,365 | 640,867 |
| Kaneka Corp. | 59,400 | 465,601 |
| Kobe Steel Ltd. * | 161,014 | 1,570,061 |
| Kuraray Co., Ltd. | 56,839 | 866,162 |
| Mitsubishi Chemical Holdings Corp. | 382,956 | 2,952,819 |
| Mitsubishi Materials Corp. | 31,336 | 1,044,673 |
| Mitsui Chemicals, Inc. | 225,771 | 1,152,212 |
| Mitsui Mining & Smelting Co., Ltd. | 236,194 | 783,197 |
| Nippon Paper Industries Co., Ltd. | 39,431 | 720,003 |
| Nippon Steel & Sumitomo Metal Corp. | 194,424 | 4,802,169 |
| Nitto Denko Corp. | 19,361 | 1,636,994 |
| Oji Holdings Corp. | 230,180 | 1,106,823 |
| Shin-Etsu Chemical Co., Ltd. | 39,352 | 3,342,379 |
| Showa Denko K.K. | 57,289 | 1,013,317 |
| Sumitomo Chemical Co., Ltd. | 332,570 | 1,860,739 |
| Sumitomo Metal Mining Co., Ltd. | 106,346 | 1,483,721 |
| Taiheiyo Cement Corp. | 250,155 | 883,150 |
| Teijin Ltd. | 43,144 | 828,676 |
| Toray Industries, Inc. | 194,638 | 1,748,324 |
| Tosoh Corp. | 107,116 | 935,356 |
| Security | Number of Shares | Value ($) |
| Toyo Seikan Group Holdings Ltd. | 42,715 | 776,914 |
| Ube Industries Ltd. | 341,380 | 857,378 |
| 40,782,033 | ||
| Media 0.1% | ||
| Dentsu, Inc. | 22,332 | 1,241,498 |
| Hakuhodo DY Holdings, Inc. | 58,685 | 724,351 |
| 1,965,849 | ||
| Pharmaceuticals, Biotechnology & Life Sciences 0.7% | ||
| Astellas Pharma, Inc. | 175,962 | 2,377,929 |
| Chugai Pharmaceutical Co., Ltd. | 13,534 | 453,008 |
| Daiichi Sankyo Co., Ltd. | 74,986 | 1,716,063 |
| Eisai Co., Ltd. | 20,622 | 1,161,364 |
| Kyowa Hakko Kirin Co., Ltd. | 26,735 | 401,676 |
| Mitsubishi Tanabe Pharma Corp. | 24,063 | 496,810 |
| Otsuka Holdings Co., Ltd. | 45,417 | 2,074,686 |
| Shionogi & Co., Ltd. | 13,802 | 678,227 |
| Takeda Pharmaceutical Co., Ltd. | 93,099 | 4,345,202 |
| 13,704,965 | ||
| Real Estate 0.3% | ||
| Daito Trust Construction Co., Ltd. | 7,759 | 1,090,150 |
| Daiwa House Industry Co., Ltd. | 64,933 | 1,789,814 |
| Mitsubishi Estate Co., Ltd. | 67,585 | 1,325,907 |
| Mitsui Fudosan Co., Ltd. | 67,715 | 1,539,074 |
| Sumitomo Realty & Development Co., Ltd. | 37,598 | 1,042,065 |
| 6,787,010 | ||
| Retailing 0.4% | ||
| Don Quijote Holdings Co., Ltd. | 12,320 | 438,250 |
| Fast Retailing Co., Ltd. | 3,225 | 1,022,972 |
| Isetan Mitsukoshi Holdings Ltd. | 87,769 | 1,128,834 |
| J Front Retailing Co., Ltd. | 55,802 | 860,833 |
| K's Holdings Corp. | 29,272 | 522,728 |
| Nitori Holdings Co., Ltd. | 5,273 | 616,444 |
| Shimamura Co., Ltd. | 6,175 | 802,471 |
| Takashimaya Co., Ltd. | 75,770 | 684,663 |
| Yamada Denki Co., Ltd. | 250,579 | 1,283,298 |
| 7,360,493 | ||
| Semiconductors & Semiconductor Equipment 0.1% | ||
| Rohm Co., Ltd. | 14,459 | 938,216 |
| Tokyo Electron Ltd. | 14,433 | 1,446,074 |
| 2,384,290 | ||
| Software & Services 0.3% | ||
| Fujitsu Ltd. | 630,510 | 3,678,186 |
| Nintendo Co., Ltd. | 7,906 | 1,660,553 |
| NTT Data Corp. | 18,957 | 897,995 |
| 6,236,734 | ||
| Technology Hardware & Equipment 1.9% | ||
| Alps Electric Co., Ltd. | 21,800 | 651,750 |
| Brother Industries Ltd. | 50,624 | 957,868 |
| Canon, Inc. | 222,894 | 6,536,311 |
| FUJIFILM Holdings Corp. | 75,159 | 2,916,748 |
| Hitachi Ltd. | 1,630,698 | 9,018,867 |
| Ibiden Co., Ltd. | 40,590 | 659,903 |
| Japan Display, Inc. *(a) | 223,676 | 555,766 |
| Keyence Corp. | 1,870 | 726,373 |
| Konica Minolta, Inc. | 120,430 | 1,165,712 |
| Kyocera Corp. | 49,110 | 2,711,727 |
| Murata Manufacturing Co., Ltd. | 11,237 | 1,622,001 |
| NEC Corp. | 888,649 | 2,223,906 |
| Nippon Electric Glass Co., Ltd. | 158,259 | 987,306 |
| Omron Corp. | 30,073 | 1,298,231 |
| Ricoh Co., Ltd. | 217,981 | 1,907,346 |
| Seiko Epson Corp. | 44,616 | 1,002,100 |
| TDK Corp. | 19,485 | 1,330,522 |
| 36,272,437 | ||
34
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Large Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Telecommunication Services 1.6% | ||
| KDDI Corp. | 218,689 | 5,744,532 |
| Nippon Telegraph & Telephone Corp. | 313,484 | 13,311,547 |
| NTT DOCOMO, Inc. | 197,175 | 4,700,056 |
| SoftBank Group Corp. | 90,887 | 6,792,663 |
| 30,548,798 | ||
| Transportation 1.1% | ||
| ANA Holdings, Inc. | 219,720 | 659,445 |
| Central Japan Railway Co. | 18,695 | 3,071,136 |
| East Japan Railway Co. | 42,759 | 3,880,928 |
| Hankyu Hanshin Holdings, Inc. | 25,362 | 852,314 |
| Kawasaki Kisen Kaisha Ltd. (a) | 352,541 | 954,729 |
| Kintetsu Group Holdings Co., Ltd. | 163,617 | 609,807 |
| Mitsui OSK Lines Ltd. | 476,449 | 1,579,859 |
| Nagoya Railroad Co., Ltd. | 99,786 | 459,309 |
| Nippon Express Co., Ltd. | 242,102 | 1,255,031 |
| Nippon Yusen K.K. | 804,755 | 1,783,789 |
| Odakyu Electric Railway Co., Ltd. | 19,787 | 392,610 |
| Seino Holdings Co., Ltd. | 54,990 | 635,984 |
| Tobu Railway Co., Ltd. | 114,678 | 589,354 |
| Tokyu Corp. | 100,711 | 748,908 |
| West Japan Railway Co. | 27,740 | 1,843,879 |
| Yamato Holdings Co., Ltd. | 60,151 | 1,319,575 |
| 20,636,657 | ||
| Utilities 0.8% | ||
| Chubu Electric Power Co., Inc. | 160,595 | 2,124,330 |
| Electric Power Development Co., Ltd. | 29,745 | 701,587 |
| Hokuriku Electric Power Co. | 44,013 | 436,649 |
| Kyushu Electric Power Co., Inc. | 74,068 | 827,501 |
| Osaka Gas Co., Ltd. | 411,623 | 1,593,735 |
| Shikoku Electric Power Co., Inc. | 38,620 | 389,358 |
| The Chugoku Electric Power Co., Inc. | 74,388 | 823,098 |
| The Kansai Electric Power Co., Inc. * | 174,467 | 1,942,161 |
| Toho Gas Co., Ltd. | 59,386 | 428,868 |
| Tohoku Electric Power Co., Inc. | 108,448 | 1,397,703 |
| Tokyo Electric Power Co. Holdings, Inc. * | 761,061 | 2,938,538 |
| Tokyo Gas Co., Ltd. | 530,949 | 2,419,250 |
| 16,022,778 | ||
| 430,616,470 | ||
| Luxembourg 0.6% | ||
| Energy 0.1% | ||
| Tenaris S.A. | 74,648 | 1,231,854 |
| Materials 0.4% | ||
| ArcelorMittal * | 939,912 | 8,299,616 |
| Media 0.1% | ||
| RTL Group S.A. * | 7,485 | 577,588 |
| SES S.A. | 35,042 | 717,344 |
| 1,294,932 | ||
| Telecommunication Services 0.0% | ||
| Millicom International Cellular S.A. | 17,348 | 948,662 |
| 11,775,064 | ||
| Netherlands 5.1% | ||
| Banks 0.3% | ||
| ING Groep N.V. | 354,906 | 4,908,257 |
| Capital Goods 0.3% | ||
| Boskalis Westminster | 14,932 | 545,816 |
| Koninklijke Philips N.V. | 142,496 | 4,320,662 |
| 4,866,478 | ||
| Security | Number of Shares | Value ($) |
| Commercial & Professional Services 0.2% | ||
| Randstad Holding N.V. | 23,205 | 1,353,951 |
| RELX N.V. | 56,246 | 999,902 |
| Wolters Kluwer N.V. | 22,760 | 935,104 |
| 3,288,957 | ||
| Energy 2.9% | ||
| Fugro N.V. CVA * | 26,011 | 415,557 |
| Royal Dutch Shell plc, A Shares | 925,841 | 23,985,008 |
| Royal Dutch Shell plc, B Shares | 1,147,294 | 31,030,905 |
| 55,431,470 | ||
| Food & Staples Retailing 0.4% | ||
| Koninklijke Ahold Delhaize N.V. | 360,409 | 7,682,389 |
| Food, Beverage & Tobacco 0.1% | ||
| Heineken Holding N.V. | 14,934 | 1,137,639 |
| Heineken N.V. | 17,552 | 1,452,894 |
| 2,590,533 | ||
| Household & Personal Products 0.3% | ||
| Unilever N.V. CVA | 138,109 | 6,547,457 |
| Insurance 0.2% | ||
| Aegon N.V. | 444,585 | 2,370,583 |
| Delta Lloyd N.V. | 129,209 | 735,915 |
| NN Group N.V. | 20,556 | 640,540 |
| 3,747,038 | ||
| Materials 0.2% | ||
| Akzo Nobel N.V. | 35,037 | 2,357,051 |
| Koninklijke DSM N.V. | 29,693 | 1,956,210 |
| 4,313,261 | ||
| Semiconductors & Semiconductor Equipment 0.1% | ||
| ASML Holding N.V. | 12,689 | 1,543,167 |
| NXP Semiconductor N.V. * | 6,346 | 652,432 |
| 2,195,599 | ||
| Software & Services 0.0% | ||
| Gemalto N.V. | 6,917 | 417,554 |
| Telecommunication Services 0.1% | ||
| Koninklijke KPN N.V. | 743,782 | 2,106,263 |
| VimpelCom Ltd. ADR | 140,566 | 577,726 |
| 2,683,989 | ||
| 98,672,982 | ||
| New Zealand 0.1% | ||
| Materials 0.0% | ||
| Fletcher Building Ltd. | 131,509 | 918,800 |
| Telecommunication Services 0.1% | ||
| Spark New Zealand Ltd. | 378,984 | 984,019 |
| 1,902,819 | ||
| Norway 0.9% | ||
| Banks 0.1% | ||
| DNB A.S.A. | 126,692 | 2,084,411 |
| Energy 0.4% | ||
| Statoil A.S.A. (a) | 470,474 | 8,354,124 |
| Food, Beverage & Tobacco 0.1% | ||
| Marine Harvest A.S.A. * | 43,163 | 757,142 |
| Orkla A.S.A. | 106,365 | 938,625 |
| 1,695,767 | ||
| Materials 0.2% | ||
| Norsk Hydro A.S.A. | 291,849 | 1,657,711 |
| Yara International A.S.A. | 44,835 | 1,707,596 |
| 3,365,307 | ||
35
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Large Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Telecommunication Services 0.1% | ||
| Telenor A.S.A. | 141,838 | 2,320,024 |
| 17,819,633 | ||
| Portugal 0.2% | ||
| Energy 0.1% | ||
| Galp Energia, SGPS, S.A. | 93,513 | 1,380,206 |
| Food & Staples Retailing 0.0% | ||
| Jeronimo Martins, SGPS, S.A. | 30,038 | 484,521 |
| Utilities 0.1% | ||
| EDP - Energias de Portugal S.A. | 689,600 | 2,138,953 |
| 4,003,680 | ||
| Singapore 0.8% | ||
| Banks 0.3% | ||
| DBS Group Holdings Ltd. | 158,824 | 2,127,041 |
| Oversea-Chinese Banking Corp., Ltd. | 269,494 | 1,822,898 |
| United Overseas Bank Ltd. | 114,622 | 1,762,091 |
| 5,712,030 | ||
| Capital Goods 0.1% | ||
| Keppel Corp., Ltd. | 349,488 | 1,701,772 |
| Sembcorp Industries Ltd. | 227,893 | 521,439 |
| 2,223,211 | ||
| Food, Beverage & Tobacco 0.1% | ||
| Wilmar International Ltd. | 364,334 | 948,251 |
| Media 0.0% | ||
| Singapore Press Holdings Ltd. | 199,615 | 499,555 |
| Real Estate 0.0% | ||
| CapitaLand Ltd. | 196,690 | 511,924 |
| Retailing 0.0% | ||
| Jardine Cycle & Carriage Ltd. | 21,893 | 668,585 |
| Technology Hardware & Equipment 0.1% | ||
| Flex Ltd. * | 93,868 | 1,547,883 |
| Telecommunication Services 0.1% | ||
| Singapore Telecommunications Ltd. | 906,019 | 2,552,440 |
| Transportation 0.1% | ||
| ComfortDelGro Corp., Ltd. | 263,425 | 465,239 |
| Singapore Airlines Ltd. | 127,045 | 903,863 |
| 1,369,102 | ||
| 16,032,981 | ||
| Spain 4.2% | ||
| Banks 1.9% | ||
| Banco Bilbao Vizcaya Argentaria S.A. | 948,753 | 6,228,319 |
| Banco de Sabadell S.A. | 584,201 | 861,632 |
| Banco Popular Espanol S.A. *(a) | 600,971 | 534,501 |
| Banco Santander S.A. | 4,854,696 | 26,587,421 |
| CaixaBank S.A. | 395,747 | 1,386,877 |
| 35,598,750 | ||
| Capital Goods 0.1% | ||
| ACS, Actividades de Construccion y Servicios S.A. | 46,176 | 1,453,598 |
| Ferrovial S.A. | 60,493 | 1,150,931 |
| 2,604,529 | ||
| Energy 0.5% | ||
| Enagas S.A. | 20,306 | 500,482 |
| Repsol S.A. | 572,415 | 8,515,474 |
| 9,015,956 | ||
| Security | Number of Shares | Value ($) |
| Food & Staples Retailing 0.0% | ||
| Distribuidora Internacional de Alimentacion S.A. | 124,941 | 695,807 |
| Insurance 0.0% | ||
| Mapfre S.A. | 253,959 | 788,252 |
| Pharmaceuticals, Biotechnology & Life Sciences 0.0% | ||
| Grifols S.A. | 11,874 | 260,484 |
| Retailing 0.1% | ||
| Industria de Diseno Textil S.A. | 57,447 | 1,850,829 |
| Software & Services 0.0% | ||
| Amadeus IT Group S.A. | 16,198 | 755,693 |
| Telecommunication Services 0.9% | ||
| Telefonica S.A. | 1,650,247 | 16,920,026 |
| Transportation 0.1% | ||
| Abertis Infraestructuras S.A. | 71,561 | 1,052,404 |
| Utilities 0.6% | ||
| Acciona S.A. | 6,988 | 524,756 |
| Endesa S.A. | 131,484 | 2,807,571 |
| Gas Natural SDG S.A. | 75,940 | 1,482,749 |
| Iberdrola S.A. | 897,837 | 5,985,656 |
| Red Electrica Corp. S.A. | 38,672 | 700,428 |
| 11,501,160 | ||
| 81,043,890 | ||
| Sweden 2.4% | ||
| Automobiles & Components 0.1% | ||
| Autoliv, Inc. | 10,640 | 1,114,008 |
| Banks 0.5% | ||
| Nordea Bank AB | 364,086 | 4,277,063 |
| Skandinaviska Enskilda Banken AB, A Shares | 132,300 | 1,517,456 |
| Svenska Handelsbanken AB, A Shares | 133,346 | 1,859,626 |
| Swedbank AB, A Shares | 99,196 | 2,455,050 |
| 10,109,195 | ||
| Capital Goods 0.8% | ||
| Alfa Laval AB | 36,367 | 659,805 |
| Assa Abloy AB, B Shares | 49,222 | 959,709 |
| Atlas Copco AB, A Shares | 68,729 | 2,255,799 |
| Atlas Copco AB, B Shares | 36,444 | 1,080,422 |
| NCC AB, B Shares | 12,799 | 305,115 |
| Sandvik AB | 173,215 | 2,361,782 |
| Skanska AB, B Shares | 59,085 | 1,411,808 |
| SKF AB, B Shares | 62,912 | 1,200,785 |
| Trelleborg AB, B Shares | 27,459 | 565,568 |
| Volvo AB, A Shares | 35,128 | 460,638 |
| Volvo AB, B Shares | 262,045 | 3,430,407 |
| 14,691,838 | ||
| Commercial & Professional Services 0.0% | ||
| Securitas AB, B Shares | 50,725 | 776,117 |
| Consumer Durables & Apparel 0.1% | ||
| Bonava AB, B Shares * | 10,390 | 160,241 |
| Electrolux AB, Series B | 38,815 | 1,031,763 |
| 1,192,004 | ||
| Food, Beverage & Tobacco 0.0% | ||
| Swedish Match AB | 19,467 | 607,813 |
| Health Care Equipment & Services 0.0% | ||
| Getinge AB, B Shares | 27,752 | 472,073 |
| Household & Personal Products 0.1% | ||
| Svenska Cellulosa AB SCA, B Shares | 62,060 | 1,911,500 |
36
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Large Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Materials 0.1% | ||
| Boliden AB | 47,019 | 1,438,827 |
| SSAB AB, A Shares *(a) | 82,630 | 327,813 |
| SSAB AB, B Shares * | 91,308 | 303,034 |
| 2,069,674 | ||
| Retailing 0.2% | ||
| Hennes & Mauritz AB, B Shares | 108,399 | 2,871,784 |
| Technology Hardware & Equipment 0.3% | ||
| Hexagon AB, B Shares | 13,490 | 546,116 |
| Telefonaktiebolaget LM Ericsson, B Shares | 729,233 | 4,756,967 |
| 5,303,083 | ||
| Telecommunication Services 0.2% | ||
| Tele2 AB, B Shares | 163,448 | 1,465,474 |
| Telia Co. AB | 707,558 | 2,850,266 |
| 4,315,740 | ||
| 45,434,829 | ||
| Switzerland 6.4% | ||
| Capital Goods 0.5% | ||
| ABB Ltd. - Reg'd * | 258,348 | 5,861,168 |
| Geberit AG - Reg'd | 1,679 | 728,637 |
| Schindler Holding AG | 2,978 | 577,490 |
| Schindler Holding AG - Reg'd | 742 | 142,332 |
| Wolseley plc | 38,985 | 2,384,411 |
| 9,694,038 | ||
| Commercial & Professional Services 0.2% | ||
| Adecco Group AG - Reg’d | 35,723 | 2,575,466 |
| SGS S.A. - Reg'd | 398 | 848,500 |
| 3,423,966 | ||
| Consumer Durables & Apparel 0.3% | ||
| Cie Financiere Richemont S.A. - Reg'd | 47,792 | 3,531,488 |
| The Swatch Group AG | 3,791 | 1,263,982 |
| The Swatch Group AG - Reg'd | 6,991 | 454,804 |
| 5,250,274 | ||
| Diversified Financials 0.4% | ||
| Credit Suisse Group AG - Reg'd * | 258,342 | 3,908,214 |
| Julius Baer Group Ltd. * | 9,282 | 455,550 |
| UBS Group AG - Reg'd | 159,545 | 2,464,588 |
| 6,828,352 | ||
| Food, Beverage & Tobacco 1.1% | ||
| Aryzta AG * | 12,781 | 414,526 |
| Chocoladefabriken Lindt & Sprungli AG | 27 | 153,542 |
| Chocoladefabriken Lindt & Sprungli AG - Reg'd | 4 | 260,003 |
| Coca-Cola HBC AG CDI * | 29,696 | 718,750 |
| Nestle S.A. - Reg'd | 273,666 | 20,290,279 |
| 21,837,100 | ||
| Insurance 0.7% | ||
| Baloise Holding AG - Reg'd | 4,543 | 592,910 |
| Swiss Life Holding AG - Reg'd * | 2,968 | 936,530 |
| Swiss Re AG | 53,691 | 4,814,471 |
| Zurich Insurance Group AG * | 24,824 | 6,873,728 |
| 13,217,639 | ||
| Materials 1.3% | ||
| Clariant AG - Reg'd * | 31,174 | 584,289 |
| Givaudan S.A. - Reg'd | 515 | 938,000 |
| Glencore plc * | 4,267,488 | 17,102,346 |
| LafargeHolcim Ltd. - Reg'd * | 53,180 | 3,034,836 |
| Sika AG | 134 | 756,673 |
| Syngenta AG - Reg'd | 6,804 | 2,938,469 |
| 25,354,613 | ||
| Security | Number of Shares | Value ($) |
| Pharmaceuticals, Biotechnology & Life Sciences 1.6% | ||
| Actelion Ltd. - Reg'd * | 2,568 | 693,125 |
| Lonza Group AG - Reg'd * | 3,170 | 585,601 |
| Novartis AG - Reg'd | 205,034 | 16,051,391 |
| Roche Holding AG | 51,527 | 12,590,401 |
| Roche Holding AG, Bearer Shares | 1,758 | 432,720 |
| 30,353,238 | ||
| Semiconductors & Semiconductor Equipment 0.1% | ||
| STMicroelectronics N.V. | 136,870 | 2,092,853 |
| Technology Hardware & Equipment 0.1% | ||
| TE Connectivity Ltd. | 32,835 | 2,445,222 |
| Telecommunication Services 0.1% | ||
| Swisscom AG - Reg'd | 3,235 | 1,428,446 |
| Transportation 0.0% | ||
| Kuehne & Nagel International AG - Reg'd | 6,015 | 858,900 |
| 122,784,641 | ||
| United Kingdom 15.3% | ||
| Automobiles & Components 0.3% | ||
| Fiat Chrysler Automobiles N.V. * | 348,504 | 3,825,409 |
| GKN plc | 250,241 | 1,120,728 |
| 4,946,137 | ||
| Banks 2.4% | ||
| Barclays plc | 3,277,698 | 9,238,410 |
| HSBC Holdings plc | 2,957,194 | 23,790,765 |
| Lloyds Banking Group plc | 7,342,684 | 6,274,541 |
| Royal Bank of Scotland Group plc * | 544,639 | 1,611,687 |
| Standard Chartered plc * | 565,887 | 5,087,068 |
| 46,002,471 | ||
| Capital Goods 0.8% | ||
| Ashtead Group plc | 30,041 | 619,063 |
| BAE Systems plc | 430,427 | 3,374,428 |
| Balfour Beatty plc | 176,156 | 606,331 |
| Bunzl plc | 27,769 | 779,232 |
| Carillion plc | 136,358 | 371,608 |
| CNH Industrial N.V. | 150,050 | 1,396,722 |
| Cobham plc | 266,662 | 397,537 |
| DCC plc | 9,773 | 834,889 |
| IMI plc | 40,379 | 623,573 |
| Meggitt plc | 98,012 | 573,851 |
| Rolls-Royce Holdings plc * | 301,074 | 2,948,547 |
| Smiths Group plc | 51,312 | 954,597 |
| The Weir Group plc | 33,242 | 778,928 |
| Travis Perkins plc | 42,599 | 806,815 |
| 15,066,121 | ||
| Commercial & Professional Services 0.2% | ||
| Aggreko plc | 44,665 | 585,825 |
| Babcock International Group plc | 42,609 | 502,655 |
| Capita plc | 64,112 | 449,566 |
| G4S plc | 283,540 | 924,786 |
| Intertek Group plc | 11,465 | 503,199 |
| RELX plc | 61,144 | 1,145,118 |
| 4,111,149 | ||
| Consumer Durables & Apparel 0.1% | ||
| Barratt Developments plc | 75,920 | 483,239 |
| Berkeley Group Holdings plc | 11,518 | 421,964 |
| Burberry Group plc | 48,478 | 1,041,227 |
| Persimmon plc | 20,357 | 522,098 |
| Taylor Wimpey plc | 198,364 | 444,319 |
| 2,912,847 | ||
| Consumer Services 0.3% | ||
| Carnival plc | 16,583 | 907,773 |
| Compass Group plc | 135,562 | 2,527,027 |
37
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Large Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| InterContinental Hotels Group plc | 18,082 | 854,147 |
| Whitbread plc | 14,569 | 693,460 |
| William Hill plc | 102,669 | 337,162 |
| 5,319,569 | ||
| Diversified Financials 0.1% | ||
| 3i Group plc | 66,045 | 565,854 |
| Investec plc | 69,761 | 502,199 |
| Man Group plc | 400,913 | 730,384 |
| 1,798,437 | ||
| Energy 2.3% | ||
| Amec Foster Wheeler plc | 102,799 | 562,222 |
| BP plc | 7,367,875 | 41,584,118 |
| John Wood Group plc | 75,734 | 712,009 |
| Petrofac Ltd. | 51,466 | 570,955 |
| Subsea 7 S.A. * | 83,347 | 1,181,788 |
| Tullow Oil plc * | 157,173 | 524,953 |
| 45,136,045 | ||
| Food & Staples Retailing 0.7% | ||
| Booker Group plc | 257,883 | 638,931 |
| J Sainsbury plc | 968,356 | 3,224,640 |
| Tesco plc * | 2,969,714 | 6,962,346 |
| Wm Morrison Supermarkets plc | 1,021,431 | 3,083,613 |
| 13,909,530 | ||
| Food, Beverage & Tobacco 1.2% | ||
| Associated British Foods plc | 33,776 | 1,100,788 |
| British American Tobacco plc | 164,548 | 10,401,989 |
| Coca-Cola European Partners plc | 34,265 | 1,188,653 |
| Diageo plc | 170,688 | 4,817,327 |
| Imperial Brands plc | 95,348 | 4,500,435 |
| Tate & Lyle plc | 85,330 | 790,014 |
| 22,799,206 | ||
| Health Care Equipment & Services 0.1% | ||
| Smith & Nephew plc | 66,321 | 999,437 |
| Household & Personal Products 0.4% | ||
| Reckitt Benckiser Group plc | 38,289 | 3,483,460 |
| Unilever plc | 99,561 | 4,731,502 |
| 8,214,962 | ||
| Insurance 0.7% | ||
| Admiral Group plc | 16,144 | 367,238 |
| Aviva plc | 396,368 | 2,456,337 |
| Direct Line Insurance Group plc | 209,606 | 895,964 |
| Legal & General Group plc | 517,043 | 1,597,583 |
| Old Mutual plc | 629,693 | 1,709,010 |
| Phoenix Group Holdings | 54,243 | 518,400 |
| Prudential plc | 154,407 | 3,088,717 |
| RSA Insurance Group plc | 128,102 | 954,867 |
| Standard Life plc | 273,097 | 1,252,997 |
| Willis Towers Watson plc | 4,993 | 641,251 |
| 13,482,364 | ||
| Materials 1.7% | ||
| Anglo American plc * | 514,026 | 8,126,805 |
| Antofagasta plc | 113,756 | 1,149,451 |
| BHP Billiton plc | 573,800 | 9,264,628 |
| DS Smith plc | 90,530 | 502,106 |
| Johnson Matthey plc | 40,419 | 1,541,112 |
| Mondi plc | 43,790 | 1,023,910 |
| Rio Tinto plc | 276,965 | 11,363,285 |
| 32,971,297 | ||
| Media 0.5% | ||
| Informa plc | 60,254 | 503,866 |
| ITV plc | 303,818 | 765,594 |
| Liberty Global plc, Class A * | 26,390 | 942,123 |
| Liberty Global plc, Series C * | 54,605 | 1,916,090 |
| Security | Number of Shares | Value ($) |
| Pearson plc | 159,555 | 1,338,229 |
| Sky plc | 125,033 | 1,552,021 |
| WPP plc | 105,368 | 2,487,346 |
| 9,505,269 | ||
| Pharmaceuticals, Biotechnology & Life Sciences 1.2% | ||
| AstraZeneca plc | 194,673 | 11,250,142 |
| GlaxoSmithKline plc | 578,141 | 11,856,351 |
| 23,106,493 | ||
| Real Estate 0.0% | ||
| Land Securities Group plc | 49,377 | 655,001 |
| Retailing 0.3% | ||
| Debenhams plc | 481,064 | 321,168 |
| Inchcape plc | 80,985 | 756,337 |
| Kingfisher plc | 517,319 | 2,119,231 |
| Marks & Spencer Group plc | 429,224 | 1,788,255 |
| Next plc | 18,900 | 900,079 |
| 5,885,070 | ||
| Software & Services 0.0% | ||
| The Sage Group plc | 93,030 | 747,852 |
| Telecommunication Services 0.9% | ||
| BT Group plc | 758,568 | 3,087,700 |
| Inmarsat plc | 50,038 | 443,032 |
| Vodafone Group plc | 5,815,636 | 14,611,460 |
| 18,142,192 | ||
| Transportation 0.2% | ||
| easyJet plc | 38,068 | 450,506 |
| Firstgroup plc * | 601,148 | 899,179 |
| International Consolidated Airlines Group S.A. | 85,365 | 570,445 |
| Royal Mail plc | 203,755 | 1,051,230 |
| 2,971,360 | ||
| Utilities 0.9% | ||
| Centrica plc | 1,540,591 | 4,349,926 |
| Drax Group plc | 145,634 | 637,013 |
| National Grid plc | 465,309 | 5,660,024 |
| Pennon Group plc | 40,138 | 432,797 |
| Severn Trent plc | 27,518 | 800,611 |
| SSE plc | 199,831 | 3,832,001 |
| United Utilities Group plc | 73,496 | 894,921 |
| 16,607,293 | ||
| 295,290,102 | ||
| Total Common Stock | ||
| (Cost $1,829,829,330) | 1,908,884,142 | |
| Preferred Stock 0.7% of net assets | ||
| Germany 0.7% | ||
| Automobiles & Components 0.5% | ||
| Bayerische Motoren Werke AG | 12,097 | 904,812 |
| Volkswagen AG | 59,741 | 8,868,265 |
| 9,773,077 | ||
| Household & Personal Products 0.1% | ||
| Henkel AG & Co. KGaA | 13,117 | 1,643,304 |
| Materials 0.0% | ||
| Fuchs Petrolub SE | 8,226 | 382,067 |
| Utilities 0.1% | ||
| RWE AG | 37,956 | 411,992 |
| 12,210,440 | ||
38
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Large Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Italy 0.0% | ||
| Banks 0.0% | ||
| Intesa Sanpaolo S.p.A. - RSP | 177,338 | 395,723 |
| Spain 0.0% | ||
| Pharmaceuticals, Biotechnology & Life Sciences 0.0% | ||
| Grifols S.A., B Shares | 14,596 | 254,669 |
| Total Preferred Stock | ||
| (Cost $13,105,712) | 12,860,832 | |
| Other Investment Companies 0.7% of net assets | ||
| United States 0.7% | ||
| Money Market Fund 0.1% | ||
| State Street Institutional U.S. Government Money Market Fund, Premier Class 0.46% (c) | 1,461,725 | 1,461,725 |
| Securities Lending Collateral 0.6% | ||
| Wells Fargo Government Money Market Fund, Select Class 0.48% (c) | 12,487,086 | 12,487,086 |
| Total Other Investment Companies | ||
| (Cost $13,948,811) | 13,948,811 | |
End of Investments.
At 02/28/17, the tax basis cost of the fund's investments was $1,859,937,009 and the unrealized appreciation and depreciation were $140,748,096 and ($64,991,320) , respectively, with a net unrealized appreciation of $75,756,776.
| * | Non-income producing security. |
| (a) | All or a portion of this security is on loan. Securities on loan were valued at $11,911,524. |
| (b) | Fair-valued by management in accordance with procedures approved by the Board of Trustees. |
| (c) | The rate shown is the 7-day yield. |
| ADR — | American Depositary Receipt |
| CDI — | CHESS Depositary Interest |
| CVA — | Dutch Certificate |
| Reg'd — | Registered |
| REIT — | Real Estate Investment Trust |
| RSP — | Risparmio (Convertible Savings Shares) |
In addition to the above, the fund held the following at 02/28/17:
| Number of Contracts | Contract Value ($) | Unrealized Depreciation ($) | ||||
| Futures Contracts | ||||||
| MSCI EAFE Index, e-mini, Long, expires 03/17/17 | 66 | 5,760,150 | (4,012) | |||
39
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Small Company Index ETF
Portfolio Holdings as of February 28, 2017
This section shows all the securities in the fund's portfolio and their values as of the report date.
The fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's website at www.sec.gov and may be viewed and copied at the SEC's Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the Public Reference Room. The fund also makes available its complete schedule of portfolio holdings on a daily basis on the fund's website at www.csimfunds.com/schwabetfs_prospectus.
| Holdings by Category | Cost ($) | Value ($) | |
| 99.4% | Common Stock | 787,743,443 | 862,091,454 |
| 0.3% | Preferred Stock | 2,208,062 | 2,365,681 |
| 1.2% | Other Investment Companies | 10,242,621 | 10,242,621 |
| 100.9% | Total Investments | 800,194,126 | 874,699,756 |
| (0.9%) | Other Assets and Liabilities, Net | (7,950,853) | |
| 100.0% | Net Assets | 866,748,903 | |
| Security | Number of Shares | Value ($) |
| Common Stock 99.4% of net assets | ||
| Australia 5.9% | ||
| Banks 0.1% | ||
| Bank of Queensland Ltd. | 108,832 | 991,555 |
| Genworth Mortgage Insurance Australia Ltd. | 144,928 | 313,112 |
| 1,304,667 | ||
| Capital Goods 0.3% | ||
| GWA Group Ltd. | 184,266 | 376,850 |
| Monadelphous Group Ltd. (a) | 133,387 | 1,309,622 |
| Seven Group Holdings Ltd. | 70,380 | 537,870 |
| 2,224,342 | ||
| Commercial & Professional Services 0.4% | ||
| ALS Ltd. | 270,939 | 1,258,201 |
| Cleanaway Waste Management Ltd. | 956,419 | 904,471 |
| McMillan Shakespeare Ltd. | 20,333 | 193,693 |
| Programmed Maintenance Services Ltd. | 254,393 | 350,106 |
| SEEK Ltd. | 39,799 | 480,106 |
| Spotless Group Holdings Ltd. | 645,646 | 407,052 |
| 3,593,629 | ||
| Consumer Durables & Apparel 0.1% | ||
| G.U.D. Holdings Ltd. | 55,431 | 444,933 |
| Consumer Services 0.5% | ||
| Ardent Leisure Group | 222,468 | 279,658 |
| Aristocrat Leisure Ltd. | 48,649 | 620,903 |
| Crown Resorts Ltd. | 128,666 | 1,252,388 |
| Flight Centre Travel Group Ltd. | 20,062 | 444,847 |
| InvoCare Ltd. | 25,911 | 281,892 |
| Navitas Ltd. | 100,777 | 381,988 |
| The Star Entertainment Grp Ltd. | 239,450 | 898,413 |
| 4,160,089 | ||
| Diversified Financials 0.4% | ||
| ASX Ltd. | 31,817 | 1,253,214 |
| Challenger Ltd. | 106,954 | 940,729 |
| IOOF Holdings Ltd. | 74,468 | 495,253 |
| Perpetual Ltd. | 10,250 | 407,906 |
| 3,097,102 | ||
| Energy 0.2% | ||
| AWE Ltd. * | 509,630 | 188,078 |
| Beach Energy Ltd. | 844,952 | 457,997 |
| Washington H Soul Pattinson & Co., Ltd. | 21,895 | 270,185 |
| Whitehaven Coal Ltd. * | 555,250 | 1,233,752 |
| 2,150,012 | ||
| Security | Number of Shares | Value ($) |
| Food, Beverage & Tobacco 0.3% | ||
| Bega Cheese Ltd. (a) | 66,704 | 298,994 |
| GrainCorp Ltd., Class A | 175,914 | 1,207,795 |
| Treasury Wine Estates Ltd. | 121,452 | 1,112,136 |
| 2,618,925 | ||
| Health Care Equipment & Services 0.6% | ||
| Ansell Ltd. | 40,317 | 659,942 |
| Australian Pharmaceutical Industries Ltd. | 370,672 | 541,483 |
| Cochlear Ltd. | 8,990 | 902,357 |
| Healthscope Ltd. | 155,355 | 268,751 |
| Primary Health Care Ltd. | 329,614 | 836,298 |
| Ramsay Health Care Ltd. | 19,224 | 1,031,374 |
| Sigma Pharmaceuticals Ltd. | 1,091,036 | 985,640 |
| 5,225,845 | ||
| Insurance 0.1% | ||
| nib Holdings Ltd. | 158,425 | 649,221 |
| Materials 0.7% | ||
| Adelaide Brighton Ltd. | 156,702 | 646,979 |
| DuluxGroup Ltd. | 94,650 | 446,818 |
| Mineral Resources Ltd. | 74,609 | 641,320 |
| Nufarm Ltd. | 90,595 | 616,437 |
| OceanaGold Corp. | 125,235 | 356,477 |
| Orora Ltd. | 370,325 | 845,631 |
| OZ Minerals Ltd. | 252,126 | 1,802,778 |
| Resolute Mining Ltd. | 187,057 | 231,548 |
| Western Areas Ltd. * | 118,326 | 215,611 |
| 5,803,599 | ||
| Media 0.4% | ||
| APN News & Media Ltd. * | 105,356 | 215,468 |
| Event Hospitality & Entertainment Ltd. | 28,515 | 275,143 |
| Fairfax Media Ltd. | 1,883,465 | 1,368,456 |
| Nine Entertainment Co. Holdings Ltd. | 413,712 | 333,986 |
| NZME Ltd. | 2,040 | 1,114 |
| Seven West Media Ltd. | 1,195,199 | 629,466 |
| Southern Cross Media Group Ltd. | 455,230 | 453,255 |
| Village Roadshow Ltd. | 79,626 | 214,272 |
| 3,491,160 | ||
| Real Estate 0.6% | ||
| Charter Hall Retail REIT | 82,185 | 271,076 |
| Cromwell Property Group | 260,205 | 197,058 |
| Dexus Property Group | 182,828 | 1,326,955 |
| Goodman Group | 235,179 | 1,365,171 |
| Investa Office Fund | 101,071 | 362,898 |
| The GPT Group | 308,829 | 1,170,595 |
| Vicinity Centres | 284,395 | 631,919 |
| 5,325,672 | ||
| Retailing 0.6% | ||
| AP Eagers Ltd. | 38,858 | 265,896 |
| Automotive Holdings Group Ltd. | 208,749 | 640,382 |
| Harvey Norman Holdings Ltd. | 184,206 | 729,378 |
| JB Hi-Fi Ltd. | 51,050 | 1,052,679 |
| Myer Holdings Ltd. | 1,415,469 | 1,371,237 |
| Premier Investments Ltd. | 37,291 | 385,627 |
| Super Retail Group Ltd. | 62,350 | 505,744 |
| 4,950,943 | ||
40
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Small Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Software & Services 0.2% | ||
| carsales.com Ltd. | 31,238 | 267,313 |
| Computershare Ltd. | 143,093 | 1,486,330 |
| IRESS Ltd. | 28,777 | 262,184 |
| 2,015,827 | ||
| Telecommunication Services 0.0% | ||
| TPG Telecom Ltd. | 26,082 | 125,131 |
| Transportation 0.3% | ||
| Qantas Airways Ltd. | 564,154 | 1,626,561 |
| Qube Holdings Ltd. (a) | 163,462 | 290,316 |
| Sydney Airport | 166,924 | 777,737 |
| 2,694,614 | ||
| Utilities 0.1% | ||
| AusNet Services | 704,756 | 877,800 |
| 50,753,511 | ||
| Austria 0.9% | ||
| Capital Goods 0.1% | ||
| ANDRITZ AG | 19,312 | 1,011,887 |
| Zumtobel Group AG | 16,827 | 279,560 |
| 1,291,447 | ||
| Energy 0.0% | ||
| Schoeller-Bleckmann Oilfield Equipment AG | 4,481 | 331,401 |
| Insurance 0.1% | ||
| UNIQA Insurance Group AG | 45,701 | 347,169 |
| Vienna Insurance Group AG Wiener Versicherung Gruppe | 30,475 | 734,926 |
| 1,082,095 | ||
| Materials 0.2% | ||
| Lenzing AG | 3,335 | 526,250 |
| RHI AG | 19,403 | 463,381 |
| Wienerberger AG | 57,519 | 1,136,826 |
| 2,126,457 | ||
| Real Estate 0.1% | ||
| BUWOG AG * | 10,533 | 263,804 |
| CA Immobilien Anlagen AG * | 9,878 | 194,183 |
| Conwert Immobilien Invest SE * | 11,028 | 192,181 |
| IMMOFINANZ AG * | 233,401 | 426,084 |
| 1,076,252 | ||
| Semiconductors & Semiconductor Equipment 0.1% | ||
| ams AG | 9,728 | 450,726 |
| Technology Hardware & Equipment 0.0% | ||
| Austria Technologie & Systemtechnik AG (a) | 16,331 | 173,880 |
| Telecommunication Services 0.1% | ||
| Telekom Austria AG * | 71,811 | 463,180 |
| Transportation 0.1% | ||
| Oesterreichische Post AG * | 21,236 | 774,556 |
| Utilities 0.1% | ||
| Verbund AG (a) | 28,062 | 467,557 |
| 8,237,551 | ||
| Belgium 1.2% | ||
| Capital Goods 0.0% | ||
| Cie d'Entreprises CFE | 1,780 | 196,708 |
| Diversified Financials 0.1% | ||
| Ackermans & van Haaren N.V. | 3,076 | 426,547 |
| Gimv N.V. | 9,256 | 500,623 |
| 927,170 | ||
| Energy 0.0% | ||
| Euronav N.V. | 20,825 | 171,010 |
| Security | Number of Shares | Value ($) |
| Health Care Equipment & Services 0.1% | ||
| AGFA-Gevaert N.V. * | 110,823 | 453,967 |
| Household & Personal Products 0.1% | ||
| Ontex Group N.V. | 14,892 | 458,270 |
| Materials 0.2% | ||
| Bekaert N.V. | 23,353 | 1,036,642 |
| Nyrstar N.V. *(a) | 87,645 | 540,163 |
| Tessenderlo Chemie N.V. * | 13,778 | 505,830 |
| 2,082,635 | ||
| Media 0.1% | ||
| Telenet Group Holding N.V. * | 19,092 | 1,082,117 |
| Real Estate 0.1% | ||
| Befimmo S.A. | 5,008 | 277,356 |
| Cofinimmo S.A. | 4,752 | 529,185 |
| 806,541 | ||
| Retailing 0.1% | ||
| D'Ieteren S.A. N.V. | 16,971 | 759,296 |
| Technology Hardware & Equipment 0.1% | ||
| Barco N.V. | 6,435 | 578,891 |
| EVS Broadcast Equipment S.A. | 7,055 | 266,318 |
| 845,209 | ||
| Telecommunication Services 0.1% | ||
| Orange Belgium S.A. * | 30,756 | 699,870 |
| Transportation 0.1% | ||
| bpost S.A. | 39,512 | 984,559 |
| Utilities 0.1% | ||
| Elia System Operator S.A. N.V. | 13,667 | 702,964 |
| 10,170,316 | ||
| Canada 8.0% | ||
| Automobiles & Components 0.2% | ||
| Linamar Corp. | 21,582 | 961,083 |
| Martinrea International, Inc. | 70,272 | 437,724 |
| 1,398,807 | ||
| Banks 0.2% | ||
| Canadian Western Bank | 25,056 | 556,379 |
| Genworth MI Canada, Inc. | 24,121 | 690,967 |
| Home Capital Group, Inc. (a) | 18,374 | 367,078 |
| Laurentian Bank of Canada | 11,739 | 508,753 |
| 2,123,177 | ||
| Capital Goods 0.7% | ||
| Aecon Group, Inc. | 49,601 | 596,583 |
| Ag Growth International, Inc. | 7,747 | 312,231 |
| ATS Automation Tooling Systems, Inc. * | 30,672 | 312,637 |
| Bird Construction, Inc. | 34,817 | 233,174 |
| CAE, Inc. | 70,380 | 1,060,124 |
| MacDonald, Dettwiler & Associates Ltd. | 9,441 | 468,254 |
| New Flyer Industries, Inc. | 10,539 | 350,040 |
| Richelieu Hardware Ltd. | 12,630 | 257,187 |
| Russel Metals, Inc. | 63,655 | 1,275,070 |
| Toromont Industries Ltd. | 23,726 | 829,949 |
| WSP Global, Inc. | 18,921 | 641,581 |
| 6,336,830 | ||
| Commercial & Professional Services 0.6% | ||
| Morneau Shepell, Inc. | 21,330 | 302,609 |
| Ritchie Bros. Auctioneers, Inc. | 14,478 | 488,631 |
| Stantec, Inc. | 26,464 | 684,354 |
| Transcontinental, Inc., Class A | 51,364 | 784,547 |
| Waste Connections, Inc. | 30,517 | 2,667,026 |
| 4,927,167 | ||
41
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Small Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Consumer Durables & Apparel 0.2% | ||
| Dorel Industries, Inc., Class B | 29,551 | 780,694 |
| Gildan Activewear, Inc. | 41,070 | 1,043,456 |
| 1,824,150 | ||
| Consumer Services 0.1% | ||
| Enercare, Inc. | 22,357 | 318,361 |
| Great Canadian Gaming Corp. * | 17,051 | 300,608 |
| Restaurant Brands International, Inc. | 7,617 | 416,722 |
| 1,035,691 | ||
| Diversified Financials 0.1% | ||
| AGF Management Ltd., Class B | 158,192 | 722,611 |
| TMX Group Ltd. | 8,577 | 454,478 |
| 1,177,089 | ||
| Energy 1.7% | ||
| AltaGas Ltd. | 40,172 | 940,263 |
| Bonavista Energy Corp. | 449,602 | 1,272,987 |
| Bonterra Energy Corp. | 13,149 | 237,277 |
| Canadian Energy Services & Technology Corp. | 84,742 | 479,231 |
| Canyon Services Group, Inc. * | 68,783 | 299,136 |
| Crew Energy, Inc. * | 56,279 | 232,008 |
| Enerflex Ltd. | 64,590 | 845,139 |
| Ensign Energy Services, Inc. | 181,652 | 1,088,993 |
| Gran Tierra Energy, Inc. * | 176,164 | 470,852 |
| MEG Energy Corp. * | 101,356 | 543,341 |
| Mullen Group Ltd. | 70,005 | 882,694 |
| Parex Resources, Inc. * | 18,943 | 226,266 |
| Parkland Fuel Corp. | 58,189 | 1,164,263 |
| Pason Systems, Inc. | 29,023 | 396,411 |
| Peyto Exploration & Development Corp. | 28,544 | 585,772 |
| Precision Drilling Corp. * | 251,173 | 1,287,678 |
| Secure Energy Services, Inc. | 50,356 | 389,328 |
| ShawCor Ltd. | 40,058 | 1,070,673 |
| Tourmaline Oil Corp. * | 16,878 | 374,656 |
| Trinidad Drilling Ltd. * | 283,719 | 574,100 |
| Veresen, Inc. | 68,311 | 697,319 |
| Whitecap Resources, Inc. | 36,479 | 299,390 |
| 14,357,777 | ||
| Food & Staples Retailing 0.2% | ||
| The Jean Coutu Group PJC, Inc., A Shares | 43,542 | 656,196 |
| The North West Co., Inc. | 29,669 | 656,797 |
| 1,312,993 | ||
| Food, Beverage & Tobacco 0.2% | ||
| Cott Corp. | 43,300 | 462,603 |
| Maple Leaf Foods, Inc. | 43,097 | 1,005,147 |
| 1,467,750 | ||
| Health Care Equipment & Services 0.1% | ||
| Chartwell Retirement Residences | 16,794 | 198,695 |
| Extendicare, Inc. | 40,892 | 317,701 |
| Medical Facilities Corp. | 8,576 | 117,653 |
| 634,049 | ||
| Insurance 0.1% | ||
| Industrial Alliance Insurance & Financial Services, Inc. | 30,098 | 1,252,824 |
| Materials 1.5% | ||
| Alamos Gold, Inc., Class A | 46,920 | 340,444 |
| Canam Group, Inc. | 22,351 | 110,367 |
| Canfor Corp. * | 52,453 | 679,202 |
| Cascades, Inc. | 70,921 | 709,504 |
| CCL Industries, Inc., Class B | 2,937 | 626,029 |
| Centerra Gold, Inc. | 103,370 | 500,284 |
| Chemtrade Logistics Income Fund | 29,967 | 413,829 |
| Dominion Diamond Corp. | 35,887 | 304,286 |
| Eldorado Gold Corp. * | 247,694 | 759,287 |
| Franco-Nevada Corp. | 10,029 | 648,256 |
| Security | Number of Shares | Value ($) |
| Hudbay Minerals, Inc. | 96,565 | 750,239 |
| IAMGOLD Corp. * | 300,958 | 1,190,698 |
| Interfor Corp. * | 30,838 | 414,216 |
| Intertape Polymer Group, Inc. | 11,655 | 191,397 |
| Labrador Iron Ore Royalty Corp. | 25,735 | 369,766 |
| Lundin Mining Corp. * | 163,389 | 985,676 |
| Nevsun Resources Ltd. | 110,183 | 277,860 |
| New Gold, Inc. * | 102,467 | 296,311 |
| Norbord, Inc. | 7,808 | 227,911 |
| Pan American Silver Corp. | 38,862 | 696,579 |
| Resolute Forest Products, Inc. * | 195,252 | 888,397 |
| SEMAFO, Inc. * | 82,824 | 254,516 |
| Silver Wheaton Corp. | 45,167 | 882,231 |
| Stella-Jones, Inc. | 5,354 | 165,942 |
| Western Forest Products, Inc. | 188,806 | 297,938 |
| 12,981,165 | ||
| Media 0.3% | ||
| Aimia, Inc. | 105,971 | 724,103 |
| Cineplex, Inc. | 17,808 | 672,951 |
| Cogeco Communications, Inc. | 10,277 | 557,128 |
| Corus Entertainment, Inc., B Shares | 54,091 | 519,081 |
| Entertainment One Ltd. | 150,072 | 441,476 |
| 2,914,739 | ||
| Real Estate 0.6% | ||
| Artis Real Estate Investment Trust | 32,111 | 314,940 |
| Boardwalk Real Estate Investment Trust (a) | 8,185 | 274,821 |
| Canadian Apartment Properties REIT | 13,681 | 332,199 |
| Canadian Real Estate Investment Trust | 8,842 | 332,464 |
| Colliers International Group, Inc. | 5,650 | 285,219 |
| Cominar Real Estate Investment Trust | 36,878 | 412,927 |
| Dream Global Real Estate Investment Trust | 27,947 | 208,265 |
| Dream Office Real Estate Investment Trust | 28,611 | 404,609 |
| First Capital Realty, Inc. | 26,434 | 417,531 |
| Granite Real Estate Investment Trust | 11,479 | 398,682 |
| H&R Real Estate Investment Trust | 37,782 | 673,227 |
| RioCan Real Estate Investment Trust | 42,799 | 862,152 |
| Smart Real Estate Investment Trust | 14,792 | 373,360 |
| 5,290,396 | ||
| Retailing 0.1% | ||
| AutoCanada, Inc. | 10,480 | 181,755 |
| Hudson's Bay Co. (a) | 56,423 | 525,698 |
| Uni-Select, Inc. | 18,290 | 465,104 |
| 1,172,557 | ||
| Semiconductors & Semiconductor Equipment 0.0% | ||
| Canadian Solar, Inc. *(a) | 15,965 | 235,005 |
| Software & Services 0.2% | ||
| Constellation Software, Inc. | 993 | 467,466 |
| DH Corp. | 28,208 | 485,805 |
| Open Text Corp. | 22,680 | 749,693 |
| 1,702,964 | ||
| Telecommunication Services 0.0% | ||
| Manitoba Telecom Services, Inc. | 10,432 | 309,309 |
| Transportation 0.4% | ||
| Air Canada * | 36,557 | 369,310 |
| Exchange Income Corp. | 10,807 | 309,576 |
| Student Transportation, Inc. | 32,726 | 181,859 |
| TFI International, Inc. | 49,469 | 1,237,052 |
| WestJet Airlines Ltd. | 33,022 | 543,531 |
| Westshore Terminals Investment Corp. | 25,338 | 516,536 |
| 3,157,864 | ||
| Utilities 0.5% | ||
| Algonquin Power & Utilities Corp. | 25,187 | 229,535 |
| Capital Power Corp. | 57,984 | 1,104,123 |
| Hydro One Ltd. | 12,361 | 220,257 |
42
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Small Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Innergex Renewable Energy, Inc. | 16,414 | 179,204 |
| Just Energy Group, Inc. | 70,390 | 402,851 |
| Northland Power, Inc. | 28,247 | 521,667 |
| Superior Plus Corp. | 112,499 | 1,046,463 |
| Valener, Inc. | 18,012 | 282,872 |
| 3,986,972 | ||
| 69,599,275 | ||
| Denmark 1.3% | ||
| Banks 0.2% | ||
| Jyske Bank A/S - Reg’d | 13,136 | 678,490 |
| Sydbank A/S | 18,798 | 652,488 |
| 1,330,978 | ||
| Capital Goods 0.4% | ||
| FLSmidth & Co. A/S | 31,074 | 1,528,157 |
| NKT Holding A/S | 13,722 | 971,231 |
| Per Aarsleff Holding A/S, Class B | 10,338 | 241,639 |
| Rockwool International A/S, B Shares | 4,457 | 738,479 |
| 3,479,506 | ||
| Food, Beverage & Tobacco 0.1% | ||
| Royal Unibrew A/S | 7,144 | 279,224 |
| Schouw & Co. | 5,974 | 470,575 |
| 749,799 | ||
| Health Care Equipment & Services 0.1% | ||
| GN Store Nord A/S | 35,910 | 820,873 |
| William Demant Holding A/S * | 17,531 | 360,144 |
| 1,181,017 | ||
| Insurance 0.1% | ||
| Topdanmark A/S * | 15,165 | 385,466 |
| Tryg A/S | 29,083 | 542,578 |
| 928,044 | ||
| Materials 0.2% | ||
| Chr Hansen Holding A/S | 7,869 | 471,128 |
| Novozymes A/S, B Shares | 30,748 | 1,186,402 |
| 1,657,530 | ||
| Pharmaceuticals, Biotechnology & Life Sciences 0.1% | ||
| H. Lundbeck A/S * | 12,558 | 514,169 |
| Retailing 0.0% | ||
| Matas A/S | 13,489 | 195,730 |
| Software & Services 0.0% | ||
| SimCorp A/S | 5,491 | 306,539 |
| Transportation 0.1% | ||
| D/S Norden A/S * | 35,919 | 686,030 |
| Dfds A/S | 10,893 | 601,100 |
| 1,287,130 | ||
| 11,630,442 | ||
| Finland 1.5% | ||
| Capital Goods 0.6% | ||
| Cargotec Oyj, B Shares | 18,588 | 906,204 |
| Cramo Oyj | 18,565 | 402,829 |
| Konecranes Oyj | 23,469 | 846,650 |
| PKC Group Oyj | 14,298 | 355,518 |
| Ramirent Oyj | 47,739 | 406,327 |
| Uponor Oyj | 20,131 | 346,751 |
| Valmet Oyj | 54,732 | 845,039 |
| YIT Oyj | 130,257 | 902,440 |
| 5,011,758 | ||
| Security | Number of Shares | Value ($) |
| Commercial & Professional Services 0.1% | ||
| Caverion Corp. (a) | 69,227 | 506,833 |
| Lassila & Tikanoja Oyj | 17,549 | 352,812 |
| 859,645 | ||
| Consumer Durables & Apparel 0.1% | ||
| Amer Sports Oyj | 29,613 | 705,170 |
| Materials 0.5% | ||
| Huhtamaki Oyj | 24,573 | 889,089 |
| Kemira Oyj | 58,378 | 745,630 |
| Metsa Board Oyj | 74,886 | 503,304 |
| Outokumpu Oyj * | 127,921 | 1,270,255 |
| Outotec Oyj * | 131,518 | 742,078 |
| Tikkurila Oyj | 20,422 | 410,789 |
| 4,561,145 | ||
| Media 0.1% | ||
| Sanoma Oyj | 106,683 | 938,632 |
| Real Estate 0.0% | ||
| Sponda Oyj | 78,208 | 328,592 |
| Software & Services 0.1% | ||
| Tieto Oyj | 36,759 | 1,027,281 |
| 13,432,223 | ||
| France 3.6% | ||
| Automobiles & Components 0.1% | ||
| Plastic Omnium S.A. | 19,584 | 663,422 |
| Capital Goods 0.2% | ||
| Dassault Aviation S.A. | 216 | 245,347 |
| Nexans S.A. * | 23,420 | 1,211,331 |
| SPIE S.A. | 9,620 | 233,015 |
| Tarkett S.A. | 7,410 | 310,860 |
| 2,000,553 | ||
| Commercial & Professional Services 0.3% | ||
| Edenred | 59,477 | 1,349,957 |
| Elis S.A. | 16,718 | 314,432 |
| Societe BIC S.A. | 7,986 | 990,732 |
| 2,655,121 | ||
| Consumer Durables & Apparel 0.1% | ||
| SEB S.A. | 8,206 | 1,084,294 |
| Consumer Services 0.1% | ||
| Elior Group | 25,468 | 573,315 |
| Diversified Financials 0.0% | ||
| Amundi S.A. | 4,751 | 276,249 |
| Energy 0.1% | ||
| Bourbon Corp. (a) | 29,038 | 390,326 |
| Etablissements Maurel et Prom *(a) | 116,210 | 442,075 |
| 832,401 | ||
| Food, Beverage & Tobacco 0.1% | ||
| Remy Cointreau S.A. | 5,381 | 479,442 |
| Health Care Equipment & Services 0.1% | ||
| BioMerieux | 3,192 | 492,153 |
| Korian S.A. | 8,962 | 254,264 |
| Orpea | 6,535 | 568,999 |
| 1,315,416 | ||
| Insurance 0.1% | ||
| Coface S.A. * | 51,852 | 379,625 |
| Euler Hermes Group | 6,793 | 600,918 |
| 980,543 | ||
43
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Small Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Materials 0.3% | ||
| Eramet * | 9,375 | 509,052 |
| Imerys S.A. | 15,252 | 1,235,280 |
| Vicat S.A. | 10,023 | 635,618 |
| 2,379,950 | ||
| Media 0.5% | ||
| Havas S.A. | 47,446 | 411,496 |
| IPSOS | 17,768 | 573,583 |
| JCDecaux S.A. | 20,311 | 650,711 |
| Metropole Television S.A. | 44,507 | 945,390 |
| Technicolor S.A. - Reg'd | 121,384 | 508,062 |
| Television Francaise 1 S.A. | 80,960 | 920,931 |
| 4,010,173 | ||
| Pharmaceuticals, Biotechnology & Life Sciences 0.1% | ||
| Ipsen S.A. | 7,047 | 627,881 |
| Real Estate 0.5% | ||
| Fonciere Des Regions | 9,696 | 800,644 |
| Gecina S.A. | 6,860 | 875,461 |
| ICADE | 14,082 | 1,007,045 |
| Mercialys S.A. | 20,327 | 368,271 |
| Nexity S.A. * | 18,703 | 905,252 |
| 3,956,673 | ||
| Retailing 0.1% | ||
| Groupe Fnac S.A. * | 10,554 | 633,405 |
| Software & Services 0.4% | ||
| Alten S.A. | 9,039 | 627,196 |
| Altran Technologies S.A. * | 31,533 | 498,751 |
| Dassault Systemes S.A. | 12,269 | 993,813 |
| Sopra Steria Group | 3,843 | 486,966 |
| UBISOFT Entertainment S.A. * | 24,679 | 908,003 |
| 3,514,729 | ||
| Technology Hardware & Equipment 0.2% | ||
| Ingenico Group S.A. | 7,111 | 639,855 |
| Neopost S.A. | 48,106 | 1,453,268 |
| 2,093,123 | ||
| Telecommunication Services 0.1% | ||
| Iliad S.A. | 4,673 | 970,513 |
| SFR Group S.A. * | 6,744 | 197,070 |
| 1,167,583 | ||
| Transportation 0.2% | ||
| Aeroports de Paris | 8,286 | 942,103 |
| Europcar Groupe S.A. * | 18,115 | 187,659 |
| Groupe Eurotunnel SE - Reg'd | 88,358 | 826,225 |
| 1,955,987 | ||
| 31,200,260 | ||
| Germany 3.2% | ||
| Automobiles & Components 0.2% | ||
| ElringKlinger AG | 17,693 | 320,738 |
| Grammer AG | 5,814 | 348,375 |
| Hella KGaA Hueck & Co. | 14,105 | 559,201 |
| SAF-Holland S.A. | 27,905 | 404,006 |
| 1,632,320 | ||
| Banks 0.1% | ||
| Aareal Bank AG | 15,048 | 557,411 |
| Capital Goods 0.7% | ||
| BayWa AG | 19,450 | 636,665 |
| Deutz AG | 91,653 | 554,639 |
| Duerr AG | 6,128 | 509,990 |
| Heidelberger Druckmaschinen AG * | 136,358 | 340,501 |
| Indus Holding AG | 9,127 | 564,444 |
| KION Group AG | 18,139 | 1,061,254 |
| Security | Number of Shares | Value ($) |
| Krones AG | 5,044 | 524,720 |
| Norma Group SE | 7,371 | 318,231 |
| Pfeiffer Vacuum Technology AG | 3,073 | 329,802 |
| SGL Carbon SE *(a) | 28,728 | 245,676 |
| Vossloh AG *(a) | 4,437 | 285,714 |
| Wacker Neuson SE | 17,357 | 331,707 |
| 5,703,343 | ||
| Commercial & Professional Services 0.0% | ||
| Bertrandt AG | 1,581 | 157,346 |
| Consumer Durables & Apparel 0.0% | ||
| Gerry Weber International AG (a) | 25,363 | 287,025 |
| Health Care Equipment & Services 0.1% | ||
| Carl Zeiss Meditec AG | 7,302 | 316,882 |
| Rhoen-Klinikum AG | 28,334 | 715,660 |
| 1,032,542 | ||
| Insurance 0.1% | ||
| Talanx AG * | 19,085 | 684,035 |
| Materials 0.4% | ||
| Covestro AG | 17,795 | 1,343,860 |
| Symrise AG | 18,805 | 1,173,155 |
| Wacker Chemie AG | 9,408 | 1,057,676 |
| 3,574,691 | ||
| Media 0.1% | ||
| Axel Springer SE | 19,662 | 1,031,271 |
| Pharmaceuticals, Biotechnology & Life Sciences 0.2% | ||
| Gerresheimer AG | 8,442 | 663,904 |
| STADA Arzneimittel AG | 20,297 | 1,232,588 |
| 1,896,492 | ||
| Real Estate 0.2% | ||
| Deutsche Wohnen AG | 22,373 | 770,857 |
| LEG Immobilien AG * | 7,855 | 649,292 |
| TAG Immobilien AG | 19,125 | 262,055 |
| 1,682,204 | ||
| Retailing 0.0% | ||
| Fielmann AG | 5,344 | 397,100 |
| Semiconductors & Semiconductor Equipment 0.2% | ||
| AIXTRON SE * | 77,090 | 264,916 |
| Siltronic AG * | 15,898 | 982,847 |
| SMA Solar Technology AG (a) | 14,050 | 355,173 |
| 1,602,936 | ||
| Software & Services 0.3% | ||
| Bechtle AG | 5,833 | 609,650 |
| CANCOM SE | 3,525 | 173,293 |
| Software AG | 17,993 | 669,464 |
| United Internet AG - Reg'd | 17,787 | 734,850 |
| Wirecard AG (a) | 6,521 | 302,010 |
| 2,489,267 | ||
| Technology Hardware & Equipment 0.2% | ||
| Diebold Nixdorf AG | 13,790 | 1,006,972 |
| Jenoptik AG | 19,224 | 429,895 |
| 1,436,867 | ||
| Telecommunication Services 0.2% | ||
| Drillisch AG (a) | 7,952 | 361,651 |
| Telefonica Deutschland Holding AG | 256,676 | 1,130,251 |
| 1,491,902 | ||
| Transportation 0.2% | ||
| Fraport AG Frankfurt Airport Services Worldwide | 14,563 | 914,706 |
| Hamburger Hafen und Logistik AG | 14,266 | 283,398 |
44
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Small Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Hapag-Lloyd AG * | 13,025 | 390,990 |
| Sixt SE | 6,790 | 348,668 |
| 1,937,762 | ||
| 27,594,514 | ||
| Hong Kong 4.4% | ||
| Automobiles & Components 0.1% | ||
| Minth Group Ltd. | 121,775 | 387,486 |
| Xinyi Glass Holdings Ltd. * | 630,798 | 572,090 |
| 959,576 | ||
| Banks 0.1% | ||
| The Bank of East Asia Ltd. | 243,773 | 1,008,073 |
| Capital Goods 0.1% | ||
| Hopewell Holdings Ltd. | 74,179 | 270,916 |
| NWS Holdings Ltd. | 400,101 | 728,820 |
| 999,736 | ||
| Consumer Durables & Apparel 0.3% | ||
| Global Brands Group Holding Ltd. * | 4,981,362 | 583,970 |
| Pacific Textiles Holdings Ltd. | 358,123 | 399,532 |
| Stella International Holdings Ltd. | 313,132 | 444,540 |
| Techtronic Industries Co., Ltd. | 253,066 | 906,316 |
| Texwinca Holdings Ltd. | 477,569 | 313,767 |
| 2,648,125 | ||
| Consumer Services 0.4% | ||
| Cafe de Coral Holdings Ltd. | 114,329 | 379,995 |
| Melco Crown Entertainment Ltd. ADR | 26,759 | 438,045 |
| MGM China Holdings Ltd. | 346,304 | 630,824 |
| Shangri-La Asia Ltd. | 494,267 | 629,100 |
| Wynn Macau Ltd. | 721,212 | 1,285,879 |
| 3,363,843 | ||
| Diversified Financials 0.2% | ||
| First Pacific Co., Ltd. | 1,492,567 | 1,095,999 |
| Sun Hung Kai & Co., Ltd. | 409,599 | 267,527 |
| 1,363,526 | ||
| Energy 0.1% | ||
| Brightoil Petroleum Holdings Ltd. * | 1,095,369 | 361,245 |
| Food & Staples Retailing 0.2% | ||
| Dairy Farm International Holdings Ltd. | 94,880 | 809,327 |
| Sun Art Retail Group Ltd. | 1,111,832 | 1,071,376 |
| 1,880,703 | ||
| Food, Beverage & Tobacco 0.3% | ||
| C.P. Pokphand Co., Ltd. | 2,301,189 | 231,232 |
| Tingyi Cayman Islands Holding Corp. | 1,002,926 | 1,124,059 |
| Uni-President China Holdings Ltd. | 320,428 | 218,780 |
| Vitasoy International Holdings Ltd. | 110,048 | 216,908 |
| WH Group Ltd. | 933,507 | 729,974 |
| 2,520,953 | ||
| Materials 0.3% | ||
| Huabao International Holdings Ltd. * | 1,185,618 | 636,916 |
| MMG Ltd. * | 1,415,912 | 558,160 |
| Shougang Fushan Resources Group Ltd. | 2,426,170 | 540,715 |
| Yingde Gases Group Co., Ltd. (b) | 905,692 | 621,883 |
| 2,357,674 | ||
| Media 0.1% | ||
| Television Broadcasts Ltd. | 138,586 | 606,122 |
| Real Estate 0.8% | ||
| Great Eagle Holdings Ltd. | 71,700 | 339,913 |
| Hang Lung Group Ltd. | 287,738 | 1,195,441 |
| Hang Lung Properties Ltd. | 545,559 | 1,377,523 |
| Henderson Land Development Co., Ltd. | 122,442 | 711,391 |
| Hysan Development Co., Ltd. | 80,106 | 373,572 |
| Security | Number of Shares | Value ($) |
| Kerry Properties Ltd. | 287,008 | 879,979 |
| Shui On Land Ltd. | 1,410,252 | 316,117 |
| Sino Land Co., Ltd. | 589,384 | 1,026,541 |
| Swire Properties Ltd. | 209,997 | 631,686 |
| 6,852,163 | ||
| Retailing 0.2% | ||
| Chow Tai Fook Jewellery Group Ltd. | 576,172 | 525,517 |
| Giordano International Ltd. | 864,216 | 470,938 |
| Luk Fook Holdings International Ltd. | 257,234 | 747,267 |
| Sa Sa International Holdings Ltd. | 754,870 | 308,271 |
| 2,051,993 | ||
| Semiconductors & Semiconductor Equipment 0.2% | ||
| ASM Pacific Technology Ltd. | 79,218 | 985,320 |
| Semiconductor Manufacturing International Corp. * | 774,821 | 1,008,147 |
| 1,993,467 | ||
| Technology Hardware & Equipment 0.4% | ||
| AAC Technologies Holdings, Inc. | 71,873 | 756,928 |
| FIH Mobile Ltd. | 2,100,038 | 814,320 |
| Ju Teng International Holdings Ltd. | 907,969 | 343,890 |
| Truly International Holdings Ltd. | 1,039,978 | 447,478 |
| VTech Holdings Ltd. | 78,659 | 887,674 |
| 3,250,290 | ||
| Telecommunication Services 0.2% | ||
| Hutchison Telecommunications Hong Kong Holdings Ltd. | 876,713 | 274,451 |
| PCCW Ltd. | 1,751,135 | 1,067,043 |
| SmarTone Telecommunications Holdings Ltd. | 166,906 | 226,628 |
| 1,568,122 | ||
| Transportation 0.4% | ||
| Cathay Pacific Airways Ltd. | 704,958 | 1,035,307 |
| Kerry Logistics Network Ltd. | 177,743 | 234,473 |
| Orient Overseas International Ltd. | 251,316 | 1,474,721 |
| Pacific Basin Shipping Ltd. * | 3,477,396 | 761,560 |
| SITC International Holdings Co., Ltd. | 487,891 | 313,007 |
| 3,819,068 | ||
| Utilities 0.0% | ||
| HK Electric Investments & HK Electric Investments Ltd. | 286,019 | 249,819 |
| 37,854,498 | ||
| Ireland 0.9% | ||
| Banks 0.0% | ||
| Permanent TSB Group Holdings plc * | 77,280 | 217,612 |
| Capital Goods 0.2% | ||
| AerCap Holdings N.V. * | 23,519 | 1,065,411 |
| Fly Leasing Ltd. ADR * | 18,396 | 247,794 |
| Kingspan Group plc | 25,267 | 778,612 |
| 2,091,817 | ||
| Consumer Services 0.1% | ||
| Paddy Power Betfair plc | 5,976 | 656,600 |
| Food & Staples Retailing 0.1% | ||
| Total Produce plc | 251,631 | 491,985 |
| Food, Beverage & Tobacco 0.2% | ||
| C&C Group plc | 117,055 | 481,361 |
| Glanbia plc | 31,509 | 618,737 |
| Origin Enterprises plc | 44,946 | 303,894 |
| 1,403,992 | ||
| Health Care Equipment & Services 0.1% | ||
| UDG Healthcare plc | 74,678 | 640,748 |
45
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Small Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Materials 0.1% | ||
| James Hardie Industries plc CDI | 51,595 | 773,542 |
| Pharmaceuticals, Biotechnology & Life Sciences 0.1% | ||
| ICON plc * | 6,964 | 583,374 |
| Jazz Pharmaceuticals plc * | 2,932 | 388,842 |
| 972,216 | ||
| Transportation 0.0% | ||
| Irish Continental Group plc | 49,938 | 267,974 |
| 7,516,486 | ||
| Israel 1.1% | ||
| Banks 0.2% | ||
| First International Bank of Israel Ltd. | 21,505 | 337,021 |
| Israel Discount Bank Ltd., A Shares * | 440,833 | 976,050 |
| Mizrahi Tefahot Bank Ltd. | 34,424 | 574,947 |
| 1,888,018 | ||
| Capital Goods 0.1% | ||
| Elbit Systems Ltd. | 6,095 | 720,792 |
| Shikun & Binui Ltd. | 155,308 | 353,211 |
| 1,074,003 | ||
| Energy 0.2% | ||
| Delek Group Ltd. | 3,065 | 731,414 |
| Oil Refineries Ltd. | 1,013,554 | 407,059 |
| Paz Oil Co., Ltd. | 4,176 | 675,446 |
| 1,813,919 | ||
| Insurance 0.1% | ||
| Harel Insurance Investments & Financial Services Ltd. | 77,637 | 423,343 |
| Materials 0.1% | ||
| The Israel Corp., Ltd. * | 4,960 | 896,405 |
| Real Estate 0.1% | ||
| Azrieli Group | 2,801 | 139,346 |
| Gazit-Globe Ltd. | 29,113 | 303,102 |
| 442,448 | ||
| Retailing 0.0% | ||
| Delek Automotive Systems Ltd. | 23,186 | 225,281 |
| Software & Services 0.1% | ||
| NICE Ltd. | 9,287 | 645,189 |
| Telecommunication Services 0.2% | ||
| B Communications Ltd. | 18,322 | 362,383 |
| Cellcom Israel Ltd. * | 92,912 | 1,024,756 |
| Partner Communications Co., Ltd. * | 112,765 | 711,228 |
| 2,098,367 | ||
| 9,506,973 | ||
| Italy 2.7% | ||
| Automobiles & Components 0.2% | ||
| Brembo S.p.A. | 5,955 | 401,181 |
| Ferrari N.V. | 18,040 | 1,178,912 |
| Piaggio & C S.p.A. | 142,094 | 236,298 |
| 1,816,391 | ||
| Banks 0.4% | ||
| Banca Carige S.p.A. *(a) | 1,742,600 | 512,917 |
| Banca Popolare di Sondrio Scarl | 299,543 | 955,520 |
| Credito Valtellinese SC | 101,419 | 367,273 |
| Mediobanca S.p.A. | 165,759 | 1,332,465 |
| 3,168,175 | ||
| Capital Goods 0.3% | ||
| Astaldi S.p.A. (a) | 61,048 | 421,652 |
| C.I.R. - Compagnie Industriali Riunite S.p.A | 363,111 | 474,200 |
| Security | Number of Shares | Value ($) |
| Danieli & C Officine Meccaniche S.p.A. | 5,868 | 130,007 |
| Danieli & C Officine Meccaniche S.p.A. - RSP | 19,981 | 331,853 |
| Interpump Group S.p.A. | 15,528 | 317,131 |
| Italmobiliare S.p.A. | 11,313 | 558,745 |
| Salini Impregilo S.p.A | 102,711 | 345,976 |
| Trevi Finanziaria Industriale S.p.A. * | 218,273 | 238,895 |
| 2,818,459 | ||
| Consumer Durables & Apparel 0.2% | ||
| De'Longhi S.p.A. | 15,372 | 400,190 |
| Prada S.p.A. | 199,816 | 761,944 |
| Safilo Group S.p.A. * | 29,033 | 200,065 |
| Tod's S.p.A. (a) | 7,258 | 513,643 |
| 1,875,842 | ||
| Consumer Services 0.1% | ||
| Autogrill S.p.A. | 55,783 | 494,946 |
| Diversified Financials 0.1% | ||
| Anima Holding S.p.A. | 24,996 | 134,265 |
| Azimut Holding S.p.A. | 19,787 | 333,257 |
| Banca Generali S.p.A. | 14,676 | 355,559 |
| Cerved Information Solutions S.p.A. | 25,569 | 229,040 |
| 1,052,121 | ||
| Energy 0.1% | ||
| Saras S.p.A. | 306,807 | 560,742 |
| Food & Staples Retailing 0.0% | ||
| MARR S.p.A. | 13,091 | 266,386 |
| Food, Beverage & Tobacco 0.1% | ||
| Davide Campari-Milano S.p.A. | 53,518 | 543,091 |
| Parmalat S.p.A. | 168,936 | 529,200 |
| 1,072,291 | ||
| Health Care Equipment & Services 0.0% | ||
| DiaSorin S.p.A. | 3,900 | 247,612 |
| Insurance 0.2% | ||
| Societa Cattolica di Assicurazioni Scarl | 80,192 | 504,455 |
| Unipol Gruppo Finanziario S.p.A. | 251,856 | 959,693 |
| UnipolSai S.p.A. | 298,590 | 634,564 |
| 2,098,712 | ||
| Materials 0.1% | ||
| Buzzi Unicem S.p.A. | 32,896 | 817,255 |
| Media 0.1% | ||
| RCS MediaGroup S.p.A. * | 441,169 | 375,029 |
| Pharmaceuticals, Biotechnology & Life Sciences 0.1% | ||
| Recordati S.p.A. | 15,344 | 488,647 |
| Real Estate 0.0% | ||
| Beni Stabili S.p.A. * | 395,431 | 247,909 |
| Technology Hardware & Equipment 0.0% | ||
| Esprinet S.p.A. | 44,033 | 340,861 |
| Transportation 0.2% | ||
| Ansaldo STS S.p.A. | 28,767 | 356,115 |
| ASTM S.p.A. | 40,832 | 529,335 |
| Societa Iniziative Autostradali e Servizi S.p.A. | 53,080 | 466,451 |
| 1,351,901 | ||
| Utilities 0.5% | ||
| A2A S.p.A. | 995,985 | 1,387,475 |
| ACEA S.p.A. | 26,454 | 337,320 |
| ERG S.p.A. | 56,434 | 658,435 |
| Hera S.p.A. | 413,856 | 1,029,046 |
| Iren S.p.A. | 395,433 | 681,964 |
| 4,094,240 | ||
| 23,187,519 | ||
46
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Small Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Japan 39.2% | ||
| Automobiles & Components 2.6% | ||
| Aisan Industry Co., Ltd. | 36,561 | 315,989 |
| Akebono Brake Industry Co., Ltd. * | 143,989 | 395,090 |
| Eagle Industry Co., Ltd. | 13,429 | 194,320 |
| Exedy Corp. | 28,510 | 817,957 |
| FCC Co., Ltd. | 29,051 | 585,252 |
| Futaba Industrial Co., Ltd. | 106,224 | 746,231 |
| G-Tekt Corp. | 22,549 | 421,213 |
| Kasai Kogyo Co., Ltd. | 21,977 | 287,370 |
| Keihin Corp. | 48,333 | 812,138 |
| KYB Corp. | 216,848 | 1,172,570 |
| Mitsuba Corp. | 24,157 | 459,887 |
| Musashi Seimitsu Industry Co., Ltd. | 19,538 | 521,258 |
| Nifco, Inc. | 12,029 | 618,195 |
| Nippon Seiki Co., Ltd. | 30,513 | 638,432 |
| Nissan Shatai Co., Ltd. | 96,551 | 924,218 |
| Nissin Kogyo Co., Ltd. | 38,066 | 679,428 |
| NOK Corp. | 62,883 | 1,441,051 |
| Pacific Industrial Co., Ltd. | 26,728 | 333,727 |
| Piolax, Inc. | 3,905 | 268,745 |
| Press Kogyo Co., Ltd. | 114,445 | 583,042 |
| Sanden Holdings Corp. | 140,537 | 488,617 |
| Showa Corp. | 86,156 | 716,908 |
| Sumitomo Riko Co., Ltd. | 48,631 | 508,108 |
| Tachi-S Co., Ltd. | 36,530 | 674,214 |
| Takata Corp. *(a) | 117,231 | 578,375 |
| Tokai Rika Co., Ltd. | 46,343 | 938,582 |
| Topre Corp. | 13,173 | 347,206 |
| Toyo Tire & Rubber Co., Ltd. | 61,995 | 1,009,008 |
| Toyoda Gosei Co., Ltd. | 60,721 | 1,554,319 |
| Toyota Boshoku Corp. | 54,187 | 1,210,290 |
| TPR Co., Ltd. | 7,829 | 267,649 |
| TS Tech Co., Ltd. | 37,199 | 976,480 |
| Unipres Corp. | 45,717 | 983,109 |
| Yorozu Corp. | 22,287 | 355,564 |
| 22,824,542 | ||
| Banks 2.2% | ||
| Fukuoka Financial Group, Inc. | 295,784 | 1,385,269 |
| Hokuhoku Financial Group, Inc. | 51,786 | 911,815 |
| Mebuki Financial Group, Inc. | 245,257 | 1,085,062 |
| Nishi-Nippon Financial Holdings, Inc. * | 69,228 | 753,010 |
| North Pacific Bank Ltd. | 415,127 | 1,729,000 |
| Senshu Ikeda Holdings, Inc. | 59,560 | 270,425 |
| Seven Bank Ltd. | 132,485 | 413,257 |
| Shinsei Bank Ltd. | 412,182 | 755,216 |
| Suruga Bank Ltd. | 23,144 | 515,070 |
| The 77 Bank Ltd. | 72,062 | 340,714 |
| The Awa Bank Ltd. | 47,781 | 336,946 |
| The Bank of Kyoto Ltd. | 61,114 | 499,793 |
| The Chiba Bank Ltd. | 215,497 | 1,511,956 |
| The Chugoku Bank Ltd. | 42,209 | 676,038 |
| The Daishi Bank Ltd. | 76,340 | 346,612 |
| The Gunma Bank Ltd. | 114,517 | 667,338 |
| The Hachijuni Bank Ltd. | 110,989 | 704,314 |
| The Hiroshima Bank Ltd. | 109,988 | 521,997 |
| The Hokkoku Bank Ltd. | 64,312 | 264,985 |
| The Hyakugo Bank Ltd. | 61,075 | 257,652 |
| The Iyo Bank Ltd. | 67,640 | 500,567 |
| The Juroku Bank Ltd. | 106,860 | 380,125 |
| The Keiyo Bank Ltd. | 71,394 | 330,537 |
| The Kiyo Bank Ltd. | 39,423 | 657,843 |
| The Musashino Bank Ltd. | 10,613 | 343,380 |
| The Nanto Bank Ltd. | 7,275 | 295,200 |
| The Ogaki Kyoritsu Bank Ltd. | 88,191 | 290,068 |
| The San-In Godo Bank Ltd. | 47,194 | 424,339 |
| Security | Number of Shares | Value ($) |
| The Shiga Bank Ltd. | 56,117 | 310,465 |
| The Shizuoka Bank Ltd. | 126,480 | 1,114,620 |
| Yamaguchi Financial Group, Inc. | 61,075 | 707,451 |
| 19,301,064 | ||
| Capital Goods 7.2% | ||
| Aica Kogyo Co., Ltd. | 20,288 | 520,777 |
| Amada Holdings Co., Ltd. | 98,321 | 1,116,036 |
| Asahi Diamond Industrial Co., Ltd. | 31,998 | 262,825 |
| Bunka Shutter Co., Ltd. | 31,836 | 233,609 |
| Central Glass Co., Ltd. | 148,306 | 679,993 |
| Chiyoda Corp. | 88,081 | 566,817 |
| Chudenko Corp. | 13,097 | 278,714 |
| CKD Corp. | 26,616 | 345,174 |
| COMSYS Holdings Corp. | 66,555 | 1,184,945 |
| Daifuku Co., Ltd. | 27,074 | 634,957 |
| Daihen Corp. | 49,017 | 325,948 |
| DMG Mori Co., Ltd. | 50,750 | 806,484 |
| Fuji Machine Manufacturing Co., Ltd. | 38,081 | 509,517 |
| Fujikura Ltd. | 223,796 | 1,668,194 |
| Fujitec Co., Ltd. | 29,923 | 344,736 |
| Furukawa Co., Ltd. | 151,029 | 313,167 |
| Futaba Corp. | 17,737 | 321,972 |
| Glory Ltd. | 23,182 | 797,700 |
| GS Yuasa Corp. | 197,519 | 909,168 |
| Hazama Ando Corp. | 60,164 | 437,713 |
| Hitachi Koki Co., Ltd. | 31,998 | 247,953 |
| Hitachi Zosen Corp. | 137,044 | 803,511 |
| Hoshizaki Corp. | 9,143 | 727,289 |
| Inaba Denki Sangyo Co., Ltd. | 20,538 | 724,158 |
| Inabata & Co., Ltd. | 73,880 | 970,672 |
| Iseki & Co., Ltd. | 152,133 | 350,809 |
| Iwatani Corp. | 180,957 | 1,062,598 |
| Kanamoto Co., Ltd. | 14,787 | 376,927 |
| Kandenko Co., Ltd. | 77,840 | 648,406 |
| Kanematsu Corp. | 680,830 | 1,186,592 |
| Keihan Holdings Co., Ltd. | 113,626 | 721,048 |
| Kinden Corp. | 107,981 | 1,460,207 |
| Kitz Corp. | 79,509 | 545,054 |
| Komori Corp. | 25,612 | 342,913 |
| Kumagai Gumi Co., Ltd. | 120,588 | 331,958 |
| Kurita Water Industries Ltd. | 50,701 | 1,214,449 |
| Kuroda Electric Co., Ltd. | 32,247 | 672,983 |
| Kyowa Exeo Corp. | 70,896 | 987,228 |
| Kyudenko Corp. | 14,169 | 359,528 |
| Mabuchi Motor Co., Ltd. | 10,584 | 574,205 |
| Maeda Corp. | 56,473 | 503,227 |
| Maeda Road Construction Co., Ltd. | 40,886 | 733,050 |
| Makino Milling Machine Co., Ltd. | 52,944 | 494,494 |
| Meidensha Corp. | 91,696 | 316,349 |
| Minebea Mitsumi, Inc. | 200,193 | 2,476,356 |
| Mirait Holdings Corp. | 71,230 | 710,486 |
| MISUMI Group, Inc. | 54,511 | 956,385 |
| Mitsui Engineering & Shipbuilding Co., Ltd. | 800,403 | 1,323,453 |
| Miura Co., Ltd. | 20,230 | 312,802 |
| Nabtesco Corp. | 39,912 | 1,114,761 |
| Nachi-Fujikoshi Corp. | 101,648 | 551,462 |
| Namura Shipbuilding Co., Ltd. | 59,771 | 401,732 |
| Nichias Corp. | 58,303 | 549,237 |
| Nichiha Corp. | 18,419 | 518,567 |
| Nippo Corp. | 35,056 | 667,375 |
| Nippon Densetsu Kogyo Co., Ltd. | 19,833 | 345,839 |
| Nippon Sheet Glass Co., Ltd. * | 156,377 | 1,179,624 |
| Nippon Steel & Sumikin Bussan Corp. | 21,749 | 940,833 |
| Nishimatsu Construction Co., Ltd. | 131,588 | 686,843 |
| Nishio Rent All Co., Ltd. | 10,746 | 312,627 |
| Nisshinbo Holdings, Inc. | 102,658 | 1,051,491 |
| Nitta Corp. | 10,713 | 290,123 |
47
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Small Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Nitto Kogyo Corp. | 20,239 | 285,084 |
| Noritz Corp. | 24,045 | 445,505 |
| NTN Corp. | 312,174 | 1,559,684 |
| Oiles Corp. | 14,978 | 278,850 |
| OKUMA Corp. | 51,917 | 567,498 |
| Okumura Corp. | 77,296 | 490,505 |
| OSG Corp. | 21,274 | 449,115 |
| Penta-Ocean Construction Co., Ltd. | 109,340 | 518,922 |
| Ryobi Ltd. | 102,757 | 450,024 |
| Sanki Engineering Co., Ltd. | 38,004 | 332,197 |
| Sankyo Tateyama, Inc. | 30,965 | 462,738 |
| Sanwa Holdings Corp. | 76,916 | 728,703 |
| Seibu Holdings, Inc. | 60,754 | 1,044,197 |
| Shinmaywa Industries Ltd. | 71,141 | 735,667 |
| Sintokogio Ltd. | 32,403 | 298,877 |
| Sumitomo Mitsui Construction Co., Ltd. | 226,521 | 251,049 |
| Tadano Ltd. | 38,075 | 492,081 |
| Taihei Dengyo Kaisha Ltd. | 25,616 | 249,555 |
| Taikisha Ltd. | 16,831 | 431,738 |
| Takara Standard Co., Ltd. | 23,722 | 391,391 |
| Takasago Thermal Engineering Co., Ltd. | 27,689 | 414,524 |
| Takuma Co., Ltd. | 27,486 | 254,015 |
| The Japan Steel Works Ltd. | 40,509 | 726,653 |
| The Nippon Road Co., Ltd. | 65,353 | 282,709 |
| THK Co., Ltd. | 50,297 | 1,313,112 |
| Toa Corp. | 12,356 | 219,544 |
| Toda Corp. | 107,521 | 656,360 |
| TOKAI Holdings Corp. (a) | 54,417 | 401,738 |
| Toshiba Machine Co., Ltd. | 85,944 | 369,478 |
| Toshiba Plant Systems & Services Corp. | 18,008 | 253,981 |
| Totetsu Kogyo Co., Ltd. | 10,481 | 287,119 |
| Toyo Engineering Corp. * | 92,257 | 223,458 |
| Trusco Nakayama Corp. | 23,280 | 527,459 |
| Tsubakimoto Chain Co. | 62,161 | 535,023 |
| Ushio, Inc. | 56,965 | 731,123 |
| Wakita & Co., Ltd. | 29,805 | 274,381 |
| Yamazen Corp. | 55,252 | 516,545 |
| Yuasa Trading Co., Ltd. | 17,492 | 505,757 |
| Yurtec Corp. | 31,803 | 222,566 |
| 62,182,975 | ||
| Commercial & Professional Services 0.8% | ||
| Aeon Delight Co., Ltd. | 11,778 | 365,283 |
| Daiseki Co., Ltd. | 12,616 | 269,719 |
| Duskin Co., Ltd. | 35,854 | 789,599 |
| Kokuyo Co., Ltd. | 62,724 | 829,705 |
| Meitec Corp. | 9,860 | 386,874 |
| Nissha Printing Co., Ltd. (a) | 14,224 | 406,182 |
| Nomura Co., Ltd. | 18,852 | 312,557 |
| Okamura Corp. | 35,564 | 324,855 |
| Park24 Co., Ltd. | 21,169 | 596,936 |
| Relia, Inc. | 31,998 | 319,165 |
| Sato Holdings Corp. | 15,157 | 333,390 |
| Sohgo Security Services Co., Ltd. | 17,717 | 672,988 |
| Temp Holdings Co., Ltd. | 40,242 | 684,457 |
| Toppan Forms Co., Ltd. | 45,695 | 436,591 |
| 6,728,301 | ||
| Consumer Durables & Apparel 2.0% | ||
| Alpine Electronics, Inc. | 46,696 | 680,292 |
| Asics Corp. | 40,078 | 709,608 |
| Casio Computer Co., Ltd. | 69,811 | 946,537 |
| Foster Electric Co., Ltd. | 22,659 | 388,637 |
| Fujitsu General Ltd. | 19,788 | 388,385 |
| Funai Electric Co., Ltd. | 59,294 | 514,056 |
| Gunze Ltd. | 157,921 | 582,932 |
| Haseko Corp. | 93,741 | 1,114,319 |
| Heiwa Corp. | 21,149 | 574,634 |
| JVC Kenwood Corp. | 244,585 | 623,021 |
| Security | Number of Shares | Value ($) |
| Kurabo Industries Ltd. | 212,786 | 458,340 |
| Misawa Homes Co., Ltd. | 42,776 | 405,643 |
| Mizuno Corp. | 95,576 | 512,541 |
| Onward Holdings Co., Ltd. | 117,803 | 876,007 |
| PanaHome Corp. | 62,795 | 586,502 |
| Pioneer Corp. * | 397,993 | 811,033 |
| Rinnai Corp. | 10,514 | 851,382 |
| Sangetsu Corp. | 32,025 | 554,144 |
| Sankyo Co., Ltd. | 25,272 | 897,852 |
| Sanyo Shokai Ltd. | 170,360 | 269,506 |
| Seiko Holdings Corp. | 98,495 | 423,436 |
| Seiren Co., Ltd. | 27,303 | 363,601 |
| Tamron Co., Ltd. | 17,409 | 328,466 |
| The Japan Wool Textile Co., Ltd. | 32,312 | 257,606 |
| Token Corp. | 4,965 | 358,114 |
| Tomy Co., Ltd. | 47,136 | 498,807 |
| TSI Holdings Co., Ltd. | 73,526 | 513,240 |
| Wacoal Holdings Corp. | 68,907 | 868,997 |
| Yamaha Corp. | 41,042 | 1,073,691 |
| 17,431,329 | ||
| Consumer Services 0.9% | ||
| Accordia Golf Co., Ltd. | 49,197 | 529,411 |
| Doutor Nichires Holdings Co., Ltd. | 21,334 | 413,008 |
| Dynam Japan Holdings Co., Ltd. | 308,250 | 511,470 |
| HIS Co., Ltd. | 21,912 | 583,223 |
| Kyoritsu Maintenance Co., Ltd. | 2,528 | 159,066 |
| McDonald's Holdings Co. Japan, Ltd. | 32,662 | 934,159 |
| MOS Food Services, Inc. | 9,921 | 297,493 |
| Ohsho Food Service Corp. | 6,496 | 242,689 |
| Plenus Co., Ltd. | 18,034 | 392,643 |
| Resorttrust, Inc. | 16,032 | 295,177 |
| Round One Corp. | 62,479 | 470,750 |
| Royal Holdings Co., Ltd. | 15,731 | 285,558 |
| Saizeriya Co., Ltd. | 19,019 | 450,296 |
| Skylark Co., Ltd. | 44,710 | 663,747 |
| St Marc Holdings Co., Ltd. | 7,367 | 227,163 |
| Tokyo Dome Corp. | 30,510 | 306,504 |
| Yoshinoya Holdings Co., Ltd. (a) | 43,421 | 638,790 |
| Zensho Holdings Co., Ltd. | 36,789 | 626,056 |
| 8,027,203 | ||
| Diversified Financials 0.7% | ||
| Acom Co., Ltd. * | 50,220 | 210,961 |
| AEON Financial Service Co., Ltd. | 33,949 | 659,652 |
| Credit Saison Co., Ltd. | 63,185 | 1,203,443 |
| Fuyo General Lease Co., Ltd. | 6,504 | 312,164 |
| Hitachi Capital Corp. | 15,775 | 409,444 |
| Jaccs Co., Ltd. | 58,139 | 258,257 |
| Japan Exchange Group, Inc. | 32,892 | 456,552 |
| Mitsubishi UFJ Lease & Finance Co., Ltd. | 105,368 | 584,828 |
| Okasan Securities Group, Inc. | 55,366 | 368,166 |
| SBI Holdings, Inc. | 53,650 | 753,790 |
| Tokai Tokyo Financial Holdings, Inc. | 61,040 | 354,614 |
| Tokyo Century Corp. | 11,719 | 397,494 |
| 5,969,365 | ||
| Energy 0.3% | ||
| Fuji Oil Co., Ltd. * | 102,139 | 336,857 |
| Itochu Enex Co., Ltd. | 89,305 | 755,084 |
| Japan Petroleum Exploration Co., Ltd. | 31,269 | 757,376 |
| Nippon Gas Co., Ltd. | 10,501 | 312,538 |
| Shinko Plantech Co., Ltd. | 28,762 | 238,559 |
| 2,400,414 | ||
| Food & Staples Retailing 1.9% | ||
| Ain Holdings, Inc. | 6,275 | 452,601 |
| Arcs Co., Ltd. | 49,652 | 1,124,531 |
| Axial Retailing, Inc. | 9,155 | 369,440 |
| Belc Co., Ltd. | 7,832 | 317,802 |
48
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Small Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Cawachi Ltd. | 24,960 | 670,374 |
| Cocokara fine, Inc. | 21,554 | 914,097 |
| Cosmos Pharmaceutical Corp. | 2,354 | 450,665 |
| Create SD Holdings Co., Ltd. | 11,612 | 268,181 |
| FamilyMart UNY Holdings Co., Ltd. | 46,154 | 2,829,838 |
| Heiwado Co., Ltd. | 33,985 | 818,605 |
| Kato Sangyo Co., Ltd. | 38,325 | 1,019,054 |
| Life Corp. | 6,137 | 181,557 |
| Matsumotokiyoshi Holdings Co., Ltd. | 24,459 | 1,160,811 |
| Ministop Co., Ltd. | 11,415 | 223,841 |
| Mitsubishi Shokuhin Co., Ltd. | 25,324 | 791,057 |
| San-A Co., Ltd. | 9,871 | 454,356 |
| Sugi Holdings Co., Ltd. | 16,361 | 757,474 |
| Sundrug Co., Ltd. | 11,891 | 785,400 |
| Tsuruha Holdings, Inc. | 11,619 | 1,080,016 |
| Valor Holdings Co., Ltd. | 34,243 | 852,976 |
| Welcia Holdings Co., Ltd. | 12,604 | 353,162 |
| Yaoko Co., Ltd. | 8,521 | 348,045 |
| Yokohama Reito Co., Ltd. | 47,754 | 453,702 |
| 16,677,585 | ||
| Food, Beverage & Tobacco 2.3% | ||
| Calbee, Inc. | 14,894 | 507,183 |
| Coca-Cola East Japan Co., Ltd. | 38,200 | 847,409 |
| DyDo Group Holdings, Inc. | 8,463 | 430,393 |
| Ezaki Glico Co., Ltd. | 15,661 | 755,860 |
| Fuji Oil Holdings, Inc. | 38,250 | 865,612 |
| Hokuto Corp. | 12,347 | 239,800 |
| House Foods Group, Inc. | 33,418 | 714,447 |
| Ito En Ltd. | 27,387 | 939,948 |
| Kagome Co., Ltd. | 26,202 | 675,629 |
| Kikkoman Corp. | 38,736 | 1,171,930 |
| Marudai Food Co., Ltd. | 74,436 | 326,657 |
| Maruha Nichiro Corp. | 20,051 | 603,044 |
| Megmilk Snow Brand Co., Ltd. | 32,135 | 878,876 |
| Morinaga & Co., Ltd. | 10,183 | 460,526 |
| Morinaga Milk Industry Co., Ltd. | 174,374 | 1,352,787 |
| Nichirei Corp. | 61,286 | 1,433,485 |
| Nippon Flour Mills Co., Ltd. | 40,900 | 622,173 |
| Nippon Suisan Kaisha Ltd. | 150,428 | 763,669 |
| Nissin Foods Holdings Co., Ltd. | 23,791 | 1,337,493 |
| Prima Meat Packers Ltd. | 133,843 | 541,904 |
| Sapporo Holdings Ltd. | 39,085 | 986,164 |
| Takara Holdings, Inc. | 70,999 | 731,026 |
| The Nisshin Oillio Group Ltd. | 153,002 | 799,984 |
| Warabeya Nichiyo Holdings Co., Ltd. | 20,718 | 465,893 |
| Yakult Honsha Co., Ltd. | 21,295 | 1,166,719 |
| 19,618,611 | ||
| Health Care Equipment & Services 0.8% | ||
| BML, Inc. | 11,217 | 245,724 |
| Hogy Medical Co., Ltd. | 4,503 | 267,238 |
| Miraca Holdings, Inc. | 25,584 | 1,230,209 |
| NichiiGakkan Co., Ltd. | 41,941 | 328,001 |
| Nihon Kohden Corp. | 24,725 | 543,404 |
| Nikkiso Co., Ltd. | 30,210 | 332,112 |
| Nipro Corp. | 68,213 | 885,851 |
| Paramount Bed Holdings Co., Ltd. | 10,235 | 387,409 |
| Ship Healthcare Holdings, Inc. | 19,276 | 545,279 |
| Sysmex Corp. | 15,836 | 918,583 |
| Toho Holdings Co., Ltd. | 51,086 | 1,108,153 |
| Vital KSK Holdings, Inc. | 45,231 | 419,625 |
| 7,211,588 | ||
| Household & Personal Products 0.5% | ||
| Earth Chemical Co., Ltd. | 7,361 | 351,323 |
| Fancl Corp. | 24,882 | 368,499 |
| Kobayashi Pharmaceutical Co., Ltd. | 14,234 | 661,544 |
| Kose Corp. | 5,249 | 451,315 |
| Security | Number of Shares | Value ($) |
| Lion Corp. | 55,220 | 957,472 |
| Mandom Corp. | 8,185 | 386,992 |
| Pigeon Corp. | 15,663 | 462,673 |
| Pola Orbis Holdings, Inc. | 5,211 | 499,746 |
| 4,139,564 | ||
| Insurance 0.2% | ||
| Japan Post Insurance Co., Ltd. | 20,711 | 501,277 |
| Sony Financial Holdings, Inc. | 55,501 | 979,211 |
| 1,480,488 | ||
| Materials 4.5% | ||
| ADEKA Corp. | 51,236 | 719,873 |
| Aichi Steel Corp. | 11,044 | 485,646 |
| Asahi Holdings, Inc. | 28,410 | 493,623 |
| Chuetsu Pulp & Paper Co., Ltd. | 81,897 | 176,406 |
| Chugoku Marine Paints Ltd. | 45,719 | 345,697 |
| Daido Steel Co., Ltd. | 214,888 | 1,060,179 |
| Daio Paper Corp. (a) | 58,143 | 723,377 |
| FP Corp. | 8,229 | 374,363 |
| Fuji Seal International, Inc. | 20,139 | 406,074 |
| Fujimori Kogyo Co., Ltd. | 13,125 | 366,587 |
| Godo Steel Ltd. | 14,623 | 245,971 |
| Hitachi Chemical Co., Ltd. | 60,476 | 1,710,744 |
| Hitachi Metals Ltd. | 102,738 | 1,469,194 |
| Hokuetsu Kishu Paper Co., Ltd. | 93,450 | 644,800 |
| Ishihara Sangyo Kaisha Ltd. * | 35,412 | 350,053 |
| Kansai Paint Co., Ltd. | 50,791 | 990,535 |
| Kureha Corp. | 13,008 | 551,083 |
| Kyoei Steel Ltd. | 16,305 | 307,490 |
| Lintec Corp. | 37,339 | 796,939 |
| Maruichi Steel Tube Ltd. | 17,804 | 565,699 |
| Mitsubishi Gas Chemical Co., Inc. | 97,683 | 2,065,674 |
| Nihon Parkerizing Co., Ltd. | 36,061 | 437,367 |
| Nippon Kayaku Co., Ltd. | 76,340 | 1,051,436 |
| Nippon Light Metal Holdings Co., Ltd. | 392,308 | 967,753 |
| Nippon Paint Holdings Co., Ltd. | 19,008 | 615,847 |
| Nippon Shokubai Co., Ltd. | 16,551 | 1,099,110 |
| Nippon Soda Co., Ltd. | 90,548 | 530,088 |
| Nissan Chemical Industries Ltd. | 29,236 | 945,921 |
| Nisshin Steel Co., Ltd. (a) | 74,291 | 1,060,399 |
| Nittetsu Mining Co., Ltd. | 7,566 | 391,537 |
| NOF Corp. | 67,679 | 738,580 |
| Pacific Metals Co., Ltd. * | 104,172 | 380,805 |
| Rengo Co., Ltd. | 175,462 | 1,022,489 |
| Sakai Chemical Industry Co., Ltd. | 104,176 | 390,131 |
| Sakata INX Corp. | 25,289 | 355,540 |
| Sanyo Chemical Industries Ltd. | 9,098 | 380,151 |
| Sanyo Special Steel Co., Ltd. | 82,668 | 451,447 |
| Sumitomo Bakelite Co., Ltd. | 136,197 | 814,370 |
| Sumitomo Osaka Cement Co., Ltd. | 223,179 | 931,533 |
| Taiyo Nippon Sanso Corp. | 75,185 | 938,091 |
| Toagosei Co., Ltd. | 83,360 | 945,469 |
| Toho Zinc Co., Ltd. | 111,148 | 575,186 |
| Tokai Carbon Co., Ltd. | 168,607 | 685,670 |
| Tokuyama Corp. * | 367,727 | 1,768,219 |
| Tokyo Ohka Kogyo Co., Ltd. | 14,824 | 484,925 |
| Tokyo Steel Manufacturing Co., Ltd. | 50,524 | 438,927 |
| Topy Industries Ltd. | 19,428 | 547,842 |
| Toyo Ink SC Holdings Co., Ltd. | 166,677 | 832,752 |
| Toyo Kohan Co., Ltd. | 59,836 | 248,147 |
| Toyobo Co., Ltd. | 616,914 | 1,075,195 |
| UACJ Corp. | 165,764 | 457,801 |
| Yamato Kogyo Co., Ltd. | 22,012 | 627,593 |
| Yodogawa Steel Works Ltd. | 16,958 | 506,232 |
| Zeon Corp. | 112,132 | 1,236,724 |
| 38,783,284 | ||
49
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Small Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Media 0.6% | ||
| Asatsu-DK, Inc. | 37,022 | 980,106 |
| Avex Group Holdings, Inc. | 30,283 | 444,698 |
| CyberAgent, Inc. | 22,344 | 624,078 |
| Daiichikosho Co., Ltd. | 16,581 | 690,597 |
| SKY Perfect JSAT Holdings, Inc. | 100,195 | 446,863 |
| Toei Co., Ltd. | 24,961 | 223,541 |
| Toho Co., Ltd. | 29,898 | 849,762 |
| Tokyo Broadcasting System Holdings, Inc. | 21,458 | 390,093 |
| TV Asahi Holdings Corp. | 16,572 | 339,187 |
| 4,988,925 | ||
| Pharmaceuticals, Biotechnology & Life Sciences 1.1% | ||
| Hisamitsu Pharmaceutical Co., Inc. | 15,247 | 823,094 |
| Kaken Pharmaceutical Co., Ltd. | 8,193 | 442,291 |
| Kissei Pharmaceutical Co., Ltd. | 13,672 | 348,261 |
| KYORIN Holdings, Inc. | 20,446 | 433,279 |
| Mochida Pharmaceutical Co., Ltd. | 6,217 | 470,644 |
| Nichi-iko Pharmaceutical Co., Ltd. | 15,675 | 237,468 |
| Nippon Shinyaku Co., Ltd. | 6,788 | 367,657 |
| Ono Pharmaceutical Co., Ltd. | 41,041 | 912,450 |
| Rohto Pharmaceutical Co., Ltd. | 36,126 | 690,974 |
| Santen Pharmaceutical Co., Ltd. | 74,099 | 1,066,268 |
| Sawai Pharmaceutical Co., Ltd. | 8,468 | 459,407 |
| Sumitomo Dainippon Pharma Co., Ltd. | 49,356 | 874,764 |
| Taisho Pharmaceutical Holdings Co., Ltd. | 13,419 | 1,097,411 |
| Tsumura & Co. | 26,526 | 789,486 |
| 9,013,454 | ||
| Real Estate 1.3% | ||
| Activia Properties, Inc. | 35 | 173,616 |
| Advance Residence Investment Corp. | 177 | 480,131 |
| Aeon Mall Co., Ltd. | 43,711 | 673,920 |
| Daikyo, Inc. | 209,070 | 439,125 |
| Frontier Real Estate Investment Corp. | 61 | 279,144 |
| Hulic Co., Ltd. | 19,430 | 185,643 |
| Japan Excellent, Inc. | 232 | 302,117 |
| Japan Prime Realty Investment Corp. | 95 | 378,692 |
| Japan Real Estate Investment Corp. | 148 | 818,805 |
| Kenedix Office Investment Corp. | 61 | 364,195 |
| Leopalace21 Corp. | 152,067 | 801,891 |
| Mori Trust Sogo REIT, Inc. | 125 | 205,680 |
| Nippon Accommodations Fund, Inc. | 64 | 278,286 |
| Nippon Building Fund, Inc. | 198 | 1,111,355 |
| Nippon Prologis REIT, Inc. | 120 | 259,016 |
| Nomura Real Estate Holdings, Inc. | 64,759 | 1,103,192 |
| NTT Urban Development Corp. | 30,513 | 281,717 |
| Orix JREIT, Inc. | 289 | 456,934 |
| Relo Group, Inc. | 2,084 | 303,236 |
| Tokyo Tatemono Co., Ltd. | 53,517 | 758,140 |
| Tokyu Fudosan Holdings Corp. | 211,903 | 1,212,119 |
| Tokyu REIT, Inc. | 113 | 143,718 |
| United Urban Investment Corp. | 358 | 558,670 |
| 11,569,342 | ||
| Retailing 2.6% | ||
| ABC-Mart, Inc. | 5,940 | 359,421 |
| Adastria Co., Ltd. | 13,174 | 342,523 |
| Alpen Co., Ltd. | 18,312 | 326,354 |
| AOKI Holdings, Inc. | 30,474 | 376,414 |
| Aoyama Trading Co., Ltd. | 25,849 | 972,644 |
| Arcland Sakamoto Co., Ltd. | 31,511 | 414,007 |
| ASKUL Corp. | 9,301 | 267,679 |
| Autobacs Seven Co., Ltd. | 71,979 | 1,144,484 |
| Bic Camera, Inc. | 60,693 | 590,738 |
| Canon Marketing Japan, Inc. | 43,581 | 872,905 |
| Chiyoda Co., Ltd. | 21,228 | 527,071 |
| DCM Holdings Co., Ltd. | 118,859 | 1,061,270 |
| Doshisha Co., Ltd. | 17,426 | 323,180 |
| Security | Number of Shares | Value ($) |
| EDION Corp. (a) | 149,221 | 1,365,709 |
| Fuji Co., Ltd. | 11,652 | 249,734 |
| Geo Holdings Corp. | 56,934 | 690,017 |
| H2O Retailing Corp. | 73,126 | 1,243,113 |
| Hikari Tsushin, Inc. | 7,572 | 744,443 |
| IDOM, Inc. | 41,776 | 273,317 |
| Izumi Co., Ltd. | 15,460 | 693,652 |
| Joyful Honda Co., Ltd. | 20,041 | 634,090 |
| Kohnan Shoji Co., Ltd. | 35,454 | 678,755 |
| Komeri Co., Ltd. | 30,513 | 756,518 |
| Marui Group Co., Ltd. | 86,754 | 1,203,398 |
| Nojima Corp. | 26,721 | 346,058 |
| PALTAC Corp. | 22,736 | 646,203 |
| Rakuten, Inc. | 92,023 | 915,418 |
| Ryohin Keikaku Co., Ltd. | 4,686 | 994,704 |
| Sanrio Co., Ltd. | 20,906 | 415,747 |
| Seria Co., Ltd. | 2,618 | 206,847 |
| Shimachu Co., Ltd. | 26,603 | 677,885 |
| T-Gaia Corp. | 14,896 | 255,622 |
| United Arrows Ltd. | 12,636 | 399,234 |
| USS Co., Ltd. | 47,301 | 813,399 |
| Xebio Holdings Co., Ltd. | 38,378 | 636,289 |
| Yellow Hat Ltd. | 9,992 | 255,236 |
| 22,674,078 | ||
| Semiconductors & Semiconductor Equipment 0.6% | ||
| Advantest Corp. | 30,188 | 532,610 |
| Disco Corp. | 5,629 | 849,746 |
| Renesas Electronics Corp. *(a) | 33,851 | 276,532 |
| Sanken Electric Co., Ltd. * | 108,015 | 477,878 |
| SCREEN Holdings Co., Ltd. | 10,065 | 681,885 |
| Shindengen Electric Manufacturing Co., Ltd. | 66,558 | 281,378 |
| Shinko Electric Industries Co., Ltd. | 74,219 | 530,681 |
| Sumco Corp. | 58,214 | 859,539 |
| Tokyo Seimitsu Co., Ltd. | 14,587 | 476,520 |
| Ulvac, Inc. | 9,741 | 431,831 |
| 5,398,600 | ||
| Software & Services 1.9% | ||
| Capcom Co., Ltd. | 18,628 | 380,435 |
| DeNA Co., Ltd. | 51,889 | 1,171,949 |
| DTS Corp. | 13,672 | 316,368 |
| Fuji Soft, Inc. | 16,395 | 418,063 |
| Gree, Inc. | 97,015 | 613,037 |
| GungHo Online Entertainment, Inc. | 99,773 | 231,854 |
| Internet Initiative Japan, Inc. | 14,877 | 271,385 |
| Itochu Techno-Solutions Corp. | 26,045 | 708,826 |
| Konami Holdings Corp. | 37,752 | 1,599,361 |
| NEC Networks & System Integration Corp. | 28,161 | 538,378 |
| NET One Systems Co., Ltd. | 101,810 | 782,559 |
| Nexon Co., Ltd. | 30,935 | 516,482 |
| Nihon Unisys Ltd. | 34,781 | 465,985 |
| Nomura Research Institute Ltd. | 37,347 | 1,295,136 |
| NS Solutions Corp. | 14,808 | 300,832 |
| Obic Co., Ltd. | 8,798 | 411,257 |
| Oracle Corp. Japan | 6,707 | 392,043 |
| Otsuka Corp. | 23,411 | 1,194,770 |
| SCSK Corp. | 11,487 | 425,045 |
| Square Enix Holdings Co., Ltd. | 18,912 | 577,240 |
| TIS, Inc. | 51,817 | 1,262,485 |
| TKC Corp. | 6,794 | 198,868 |
| Transcosmos, Inc. | 14,949 | 352,197 |
| Trend Micro, Inc. | 26,051 | 1,145,559 |
| Yahoo Japan Corp. | 231,149 | 1,076,361 |
| 16,646,475 | ||
| Technology Hardware & Equipment 2.5% | ||
| Amano Corp. | 25,331 | 512,574 |
| Anritsu Corp. | 100,193 | 774,607 |
50
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Small Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Azbil Corp. | 31,646 | 1,021,067 |
| Canon Electronics, Inc. | 21,975 | 349,997 |
| Citizen Watch Co., Ltd. | 186,474 | 1,218,327 |
| Daiwabo Holdings Co., Ltd. | 281,384 | 762,027 |
| Eizo Corp. | 10,324 | 302,656 |
| Hamamatsu Photonics K.K. | 29,072 | 860,065 |
| Hirose Electric Co., Ltd. | 8,527 | 1,149,280 |
| Hitachi High-Technologies Corp. | 34,276 | 1,433,719 |
| Hitachi Kokusai Electric, Inc. | 18,580 | 426,949 |
| Hitachi Maxell Ltd. | 45,033 | 883,071 |
| Horiba Ltd. | 15,227 | 847,872 |
| Hosiden Corp. | 89,751 | 791,744 |
| Japan Aviation Electronics Industry Ltd. | 41,977 | 581,904 |
| Nichicon Corp. | 41,215 | 398,207 |
| Nippon Signal Co., Ltd. | 41,396 | 394,406 |
| Oki Electric Industry Co., Ltd. | 49,324 | 704,471 |
| Riso Kagaku Corp. | 15,157 | 273,784 |
| Ryosan Co., Ltd. | 26,960 | 862,643 |
| Ryoyo Electro Corp. | 27,191 | 385,683 |
| Shimadzu Corp. | 60,624 | 992,113 |
| Siix Corp. | 8,024 | 306,229 |
| Taiyo Yuden Co., Ltd. | 72,469 | 970,269 |
| Topcon Corp. | 21,496 | 378,104 |
| Toshiba TEC Corp. * | 147,138 | 785,104 |
| UKC Holdings Corp. | 28,036 | 547,515 |
| Wacom Co., Ltd. | 84,220 | 317,655 |
| Yaskawa Electric Corp. | 70,366 | 1,324,492 |
| Yokogawa Electric Corp. | 92,316 | 1,443,095 |
| 21,999,629 | ||
| Transportation 1.5% | ||
| Fukuyama Transporting Co., Ltd. (a) | 102,975 | 624,928 |
| Hitachi Transport System, Ltd. | 34,918 | 719,051 |
| Japan Airport Terminal Co., Ltd. (a) | 12,026 | 421,880 |
| Kamigumi Co., Ltd. | 132,532 | 1,247,318 |
| Keikyu Corp. | 86,354 | 953,958 |
| Keio Corp. | 149,534 | 1,180,127 |
| Keisei Electric Railway Co., Ltd. | 29,614 | 704,850 |
| Kintetsu World Express, Inc. | 41,480 | 638,411 |
| Konoike Transport Co., Ltd. | 26,762 | 341,088 |
| Mitsubishi Logistics Corp. | 45,014 | 649,351 |
| Mitsui-Soko Holdings Co., Ltd. | 105,374 | 319,272 |
| Nankai Electric Railway Co., Ltd. | 144,609 | 713,448 |
| Nippon Holdings Co., Ltd. | 32,242 | 715,240 |
| Nishi-Nippon Railroad Co., Ltd. | 130,983 | 578,322 |
| Sankyu, Inc. | 185,340 | 1,191,040 |
| Senko Co., Ltd. | 66,526 | 436,431 |
| Sotetsu Holdings, Inc. | 93,945 | 470,208 |
| The Sumitomo Warehouse Co., Ltd. | 76,340 | 442,135 |
| Trancom Co., Ltd. | 3,209 | 170,653 |
| Yusen Logistics Co., Ltd. | 17,079 | 190,352 |
| 12,708,063 | ||
| Utilities 0.2% | ||
| Hokkaido Electric Power Co., Inc. | 143,450 | 1,043,645 |
| Shizuoka Gas Co., Ltd. | 45,309 | 288,332 |
| The Okinawa Electric Power Co., Inc. | 28,846 | 668,523 |
| 2,000,500 | ||
| 339,775,379 | ||
| Luxembourg 0.5% | ||
| Banks 0.0% | ||
| Espirito Santo Financial Group S.A. *(b) | 8,470 | — |
| Commercial & Professional Services 0.1% | ||
| IWG plc | 119,304 | 420,147 |
| Consumer Durables & Apparel 0.1% | ||
| Samsonite International S.A. | 275,937 | 838,925 |
| Security | Number of Shares | Value ($) |
| Materials 0.3% | ||
| APERAM S.A. | 27,795 | 1,417,973 |
| Ternium S.A. ADR | 50,961 | 1,351,486 |
| 2,769,459 | ||
| Pharmaceuticals, Biotechnology & Life Sciences 0.0% | ||
| Eurofins Scientific SE | 606 | 259,699 |
| Retailing 0.0% | ||
| L'Occitane International S.A. | 137,181 | 270,388 |
| 4,558,618 | ||
| Netherlands 2.1% | ||
| Banks 0.1% | ||
| ABN AMRO Group N.V. | 40,947 | 939,822 |
| Capital Goods 0.6% | ||
| Aalberts Industries N.V. | 33,527 | 1,159,976 |
| Arcadis N.V. | 53,185 | 723,384 |
| IMCD Group N.V. | 6,170 | 293,588 |
| Koninklijke BAM Groep N.V. | 202,121 | 1,058,834 |
| Sensata Technologies Holding N.V. * | 22,178 | 910,407 |
| TKH Group N.V. | 15,397 | 629,893 |
| 4,776,082 | ||
| Commercial & Professional Services 0.0% | ||
| Brunel International N.V. | 12,596 | 201,169 |
| Consumer Durables & Apparel 0.0% | ||
| TomTom N.V. * | 28,614 | 248,928 |
| Diversified Financials 0.2% | ||
| Euronext N.V. | 11,637 | 504,511 |
| HAL Trust | 5,299 | 993,878 |
| 1,498,389 | ||
| Energy 0.3% | ||
| Core Laboratories N.V. | 5,617 | 642,697 |
| Koninklijke Vopak N.V. | 17,416 | 738,676 |
| Nostrum Oil & Gas plc * | 54,976 | 342,403 |
| SBM Offshore N.V. | 66,851 | 1,031,086 |
| 2,754,862 | ||
| Food & Staples Retailing 0.2% | ||
| X5 Retail Group N.V. GDR - Reg’d * | 47,708 | 1,445,552 |
| Food, Beverage & Tobacco 0.0% | ||
| Refresco Group N.V. | 7,910 | 115,529 |
| Materials 0.2% | ||
| Corbion N.V. | 35,881 | 926,490 |
| OCI N.V. * | 29,975 | 597,851 |
| 1,524,341 | ||
| Media 0.1% | ||
| Altice N.V., A Shares * | 19,137 | 404,768 |
| Altice N.V., B Shares * | 6,294 | 133,191 |
| 537,959 | ||
| Real Estate 0.1% | ||
| Eurocommercial Properties N.V. | 9,977 | 354,304 |
| NSI N.V. | 56,593 | 229,538 |
| Vastned Retail N.V. | 8,122 | 289,983 |
| Wereldhave N.V. | 8,779 | 384,617 |
| 1,258,442 | ||
| Retailing 0.0% | ||
| Beter Bed Holding N.V. | 10,800 | 177,879 |
| Semiconductors & Semiconductor Equipment 0.1% | ||
| ASM International N.V. | 16,340 | 833,071 |
| BE Semiconductor Industries N.V. | 6,288 | 241,107 |
| 1,074,178 | ||
51
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Small Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Software & Services 0.1% | ||
| InterXion Holding N.V. * | 5,006 | 194,733 |
| Yandex N.V., Class A * | 27,376 | 615,960 |
| 810,693 | ||
| Transportation 0.1% | ||
| PostNL N.V. * | 224,382 | 981,848 |
| 18,345,673 | ||
| New Zealand 1.0% | ||
| Consumer Services 0.1% | ||
| SKYCITY Entertainment Group Ltd. | 210,825 | 628,214 |
| Energy 0.1% | ||
| Z Energy Ltd. | 125,288 | 653,331 |
| Food, Beverage & Tobacco 0.0% | ||
| Fonterra Co-operative Group Ltd. | 83,979 | 388,114 |
| Health Care Equipment & Services 0.0% | ||
| Fisher & Paykel Healthcare Corp., Ltd. | 58,517 | 385,557 |
| Media 0.1% | ||
| SKY Network Television Ltd. | 220,116 | 604,956 |
| Real Estate 0.0% | ||
| Kiwi Property Group Ltd. | 290,916 | 300,879 |
| Telecommunication Services 0.1% | ||
| Chorus Ltd. | 263,713 | 789,624 |
| Transportation 0.2% | ||
| Air New Zealand Ltd. | 368,320 | 630,006 |
| Auckland International Airport Ltd. | 100,317 | 532,548 |
| Mainfreight Ltd. | 29,337 | 454,065 |
| 1,616,619 | ||
| Utilities 0.4% | ||
| Contact Energy Ltd. | 282,250 | 998,231 |
| Genesis Energy Ltd. | 239,009 | 362,149 |
| Infratil Ltd. | 379,494 | 791,843 |
| Mercury NZ Ltd. | 238,589 | 543,562 |
| Meridian Energy Ltd. | 433,608 | 846,739 |
| 3,542,524 | ||
| 8,909,818 | ||
| Norway 1.5% | ||
| Automobiles & Components 0.0% | ||
| Kongsberg Automotive A.S.A. * | 289,338 | 194,223 |
| Banks 0.1% | ||
| SpareBank 1 SMN | 64,287 | 553,844 |
| Capital Goods 0.1% | ||
| Veidekke A.S.A. | 34,790 | 499,536 |
| Commercial & Professional Services 0.0% | ||
| Tomra Systems A.S.A. | 26,200 | 293,903 |
| Diversified Financials 0.1% | ||
| Aker A.S.A., A Shares | 11,485 | 486,481 |
| Energy 0.5% | ||
| Aker Solutions A.S.A. * | 129,842 | 753,975 |
| BW LPG Ltd. | 59,545 | 291,763 |
| Fred. Olsen Energy A.S.A. *(a) | 273,976 | 750,722 |
| Petroleum Geo-Services A.S.A. *(a) | 456,621 | 1,286,703 |
| TGS Nopec Geophysical Co. A.S.A. | 59,444 | 1,308,752 |
| 4,391,915 | ||
| Food, Beverage & Tobacco 0.1% | ||
| Austevoll Seafood A.S.A. | 51,175 | 453,128 |
| Bakkafrost P/F | 5,253 | 196,233 |
| Leroy Seafood Group A.S.A. | 7,925 | 419,703 |
| Salmar A.S.A. | 8,524 | 216,125 |
| 1,285,189 | ||
| Security | Number of Shares | Value ($) |
| Insurance 0.3% | ||
| Gjensidige Forsikring A.S.A. | 73,579 | 1,154,218 |
| Storebrand A.S.A. * | 153,957 | 1,042,671 |
| 2,196,889 | ||
| Materials 0.0% | ||
| Borregaard A.S.A. | 37,067 | 416,914 |
| Media 0.1% | ||
| Schibsted A.S.A., B Shares | 10,521 | 256,184 |
| Schibsted A.S.A., Class A | 20,142 | 533,113 |
| 789,297 | ||
| Retailing 0.0% | ||
| XXL A.S.A. | 14,541 | 162,681 |
| Semiconductors & Semiconductor Equipment 0.1% | ||
| REC Silicon A.S.A. *(a) | 5,457,342 | 801,883 |
| Software & Services 0.1% | ||
| Atea A.S.A. * | 77,497 | 839,199 |
| 12,911,954 | ||
| Portugal 0.4% | ||
| Banks 0.1% | ||
| Banco Comercial Portugues S.A. * | 3,851,025 | 616,679 |
| Banco Espirito Santo S.A. - Reg'd *(b) | 45,383 | — |
| 616,679 | ||
| Capital Goods 0.0% | ||
| Mota-Engil, SGPS, S.A. | 141,636 | 247,426 |
| Food & Staples Retailing 0.1% | ||
| Sonae, SGPS, S.A. * | 698,029 | 614,890 |
| Materials 0.1% | ||
| Semapa-Sociedade de Investimento e Gestao | 27,039 | 397,933 |
| The Navigator Co. S.A. | 134,123 | 508,366 |
| 906,299 | ||
| Media 0.0% | ||
| NOS, SGPS S.A. | 60,700 | 360,554 |
| Transportation 0.0% | ||
| CTT-Correios de Portugal S.A. | 66,765 | 359,547 |
| Utilities 0.1% | ||
| REN - Redes Energeticas Nacionais, SGPS, S.A. | 132,750 | 370,565 |
| 3,475,960 | ||
| Singapore 2.0% | ||
| Capital Goods 0.5% | ||
| COSCO Corp. Singapore, Ltd. *(a) | 1,093,308 | 242,341 |
| Sembcorp Marine Ltd. | 788,787 | 1,003,926 |
| Singapore Technologies Engineering Ltd. | 500,873 | 1,317,946 |
| United Engineers Ltd. | 209,864 | 441,171 |
| Yangzijiang Shipbuilding Holdings Ltd. | 1,446,960 | 957,018 |
| 3,962,402 | ||
| Consumer Services 0.1% | ||
| Genting Singapore plc | 1,760,658 | 1,246,328 |
| Diversified Financials 0.1% | ||
| Singapore Exchange Ltd. | 114,899 | 616,169 |
| Food & Staples Retailing 0.1% | ||
| Olam International Ltd. | 405,257 | 594,027 |
| Real Estate 0.7% | ||
| Ascendas Real Estate Investment Trust | 380,486 | 680,144 |
| CapitaLand Commercial Trust | 321,146 | 358,219 |
| CapitaLand Mall Trust | 477,498 | 672,605 |
| City Developments Ltd. | 204,696 | 1,386,058 |
| Global Logistic Properties Ltd. | 378,760 | 720,390 |
| Mapletree Greater China Commercial Trust | 371,875 | 261,912 |
52
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Small Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Mapletree Industrial Trust | 214,482 | 255,345 |
| Mapletree Logistics Trust | 350,334 | 269,285 |
| Suntec Real Estate Investment Trust | 327,526 | 405,148 |
| UOL Group Ltd. | 135,646 | 639,167 |
| Wing Tai Holdings Ltd. | 259,915 | 332,664 |
| Yanlord Land Group Ltd. | 268,363 | 279,195 |
| 6,260,132 | ||
| Semiconductors & Semiconductor Equipment 0.1% | ||
| Kulicke & Soffa Industries, Inc. * | 32,299 | 661,161 |
| Technology Hardware & Equipment 0.1% | ||
| Venture Corp., Ltd. | 169,249 | 1,300,938 |
| Telecommunication Services 0.1% | ||
| M1 Ltd. | 162,524 | 241,714 |
| StarHub Ltd. | 198,748 | 409,277 |
| 650,991 | ||
| Transportation 0.2% | ||
| Hutchison Port Holdings Trust | 2,808,954 | 1,067,402 |
| SATS Ltd. | 197,393 | 705,706 |
| Singapore Post Ltd. | 406,152 | 402,217 |
| 2,175,325 | ||
| 17,467,473 | ||
| Spain 1.7% | ||
| Banks 0.2% | ||
| Bankia S.A. | 967,787 | 959,470 |
| Bankinter S.A. | 141,153 | 1,091,771 |
| 2,051,241 | ||
| Capital Goods 0.4% | ||
| Construcciones y Auxiliar de Ferrocarriles S.A. | 9,187 | 344,602 |
| Fomento de Construcciones y Contratas S.A. * | 77,363 | 718,480 |
| Gamesa Corp. Tecnologica S.A. | 33,667 | 747,688 |
| Obrascon Huarte Lain S.A. (a) | 226,318 | 793,602 |
| Sacyr S.A. * | 248,951 | 615,309 |
| Zardoya Otis S.A. | 41,356 | 331,345 |
| 3,551,026 | ||
| Commercial & Professional Services 0.1% | ||
| Applus Services S.A. | 22,085 | 257,204 |
| Prosegur Cia de Seguridad S.A. | 100,156 | 581,085 |
| 838,289 | ||
| Consumer Services 0.1% | ||
| Melia Hotels International S.A. | 25,650 | 335,790 |
| NH Hotel Group S.A. * | 52,829 | 246,437 |
| 582,227 | ||
| Diversified Financials 0.1% | ||
| Bolsas y Mercados Espanoles SHMSF S.A. | 18,721 | 584,852 |
| Energy 0.1% | ||
| Tecnicas Reunidas S.A. | 14,529 | 565,050 |
| Food, Beverage & Tobacco 0.1% | ||
| Ebro Foods S.A. | 27,529 | 561,205 |
| Viscofan S.A. | 12,753 | 669,775 |
| 1,230,980 | ||
| Insurance 0.1% | ||
| Grupo Catalana Occidente S.A. | 12,785 | 425,765 |
| Materials 0.2% | ||
| Acerinox S.A. | 94,889 | 1,352,622 |
| Ence Energia y Celulosa S.A. | 90,355 | 244,348 |
| Vidrala S.A. | 5,529 | 302,275 |
| 1,899,245 | ||
| Security | Number of Shares | Value ($) |
| Media 0.1% | ||
| Mediaset Espana Comunicacion S.A. | 50,021 | 588,928 |
| Promotora de Informaciones S.A., Class A * | 64,771 | 336,557 |
| 925,485 | ||
| Pharmaceuticals, Biotechnology & Life Sciences 0.0% | ||
| Almirall S.A. | 14,570 | 233,160 |
| Software & Services 0.1% | ||
| Indra Sistemas S.A. * | 53,879 | 681,583 |
| Telecommunication Services 0.0% | ||
| Cellnex Telecom SAU | 12,517 | 189,067 |
| Transportation 0.1% | ||
| Aena S.A. | 5,499 | 788,837 |
| Utilities 0.0% | ||
| EDP Renovaveis S.A. | 34,712 | 229,203 |
| 14,776,010 | ||
| Sweden 2.1% | ||
| Capital Goods 0.4% | ||
| B&B Tools AB, B Shares | 16,856 | 382,740 |
| Indutrade AB | 18,681 | 350,544 |
| Inwido AB | 16,413 | 194,997 |
| Lindab International AB | 21,496 | 179,606 |
| Nibe Industrier AB, B Shares | 54,547 | 439,707 |
| Nolato AB, B Shares | 6,738 | 204,992 |
| Peab AB | 109,562 | 1,038,900 |
| Saab AB, Class B | 17,863 | 710,058 |
| 3,501,544 | ||
| Commercial & Professional Services 0.2% | ||
| AF AB, B Shares | 20,963 | 423,392 |
| Intrum Justitia AB | 17,367 | 629,599 |
| Loomis AB, B Shares | 22,362 | 695,472 |
| 1,748,463 | ||
| Consumer Durables & Apparel 0.3% | ||
| Husqvarna AB, B Shares | 170,838 | 1,467,239 |
| JM AB | 32,308 | 1,018,072 |
| Nobia AB | 37,922 | 372,009 |
| 2,857,320 | ||
| Consumer Services 0.0% | ||
| Betsson AB * | 37,125 | 333,275 |
| Diversified Financials 0.2% | ||
| L E Lundbergfortagen AB, B Shares | 11,756 | 764,263 |
| Ratos AB, B Shares | 162,513 | 757,326 |
| 1,521,589 | ||
| Energy 0.1% | ||
| Lundin Petroleum AB * | 24,510 | 503,467 |
| Food & Staples Retailing 0.1% | ||
| Axfood AB | 30,564 | 468,323 |
| ICA Gruppen AB | 15,805 | 514,534 |
| 982,857 | ||
| Food, Beverage & Tobacco 0.1% | ||
| AAK AB | 5,350 | 357,607 |
| Health Care Equipment & Services 0.1% | ||
| Capio AB | 59,625 | 303,876 |
| Elekta AB, B Shares | 81,298 | 774,052 |
| 1,077,928 | ||
| Materials 0.2% | ||
| BillerudKorsnas AB | 42,922 | 682,939 |
| Hexpol AB | 43,364 | 435,747 |
| Holmen AB, B Shares | 14,280 | 554,314 |
| 1,673,000 | ||
53
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Small Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Media 0.1% | ||
| Modern Times Group MTG AB, B Shares | 22,935 | 744,615 |
| Real Estate 0.2% | ||
| Castellum AB | 40,076 | 544,210 |
| Fabege AB | 23,355 | 394,944 |
| Kungsleden AB | 50,639 | 291,535 |
| Wihlborgs Fastigheter AB | 12,303 | 245,206 |
| 1,475,895 | ||
| Retailing 0.1% | ||
| Bilia AB, A Shares | 23,236 | 521,157 |
| Clas Ohlson AB, B Shares | 16,642 | 251,305 |
| Mekonomen AB | 9,333 | 178,240 |
| 950,702 | ||
| Telecommunication Services 0.0% | ||
| Com Hem Holding AB | 22,486 | 252,667 |
| Transportation 0.0% | ||
| SAS AB * | 116,810 | 192,603 |
| 18,173,532 | ||
| Switzerland 3.1% | ||
| Automobiles & Components 0.0% | ||
| Autoneum Holding AG | 659 | 175,863 |
| Banks 0.1% | ||
| Banque Cantonale Vaudoise - Reg'd | 611 | 419,149 |
| Valiant Holding AG - Reg'd | 4,142 | 435,108 |
| 854,257 | ||
| Capital Goods 0.8% | ||
| Arbonia AG * | 21,437 | 359,620 |
| Belimo Holding AG - Reg'd | 112 | 372,755 |
| Bucher Industries AG - Reg'd | 2,683 | 767,567 |
| Burckhardt Compression Holding AG | 718 | 200,928 |
| Conzzeta AG - Reg'd | 455 | 367,789 |
| Daetwyler Holding AG | 2,397 | 366,210 |
| dormakaba Holding AG * | 602 | 498,937 |
| Georg Fischer AG - Reg'd | 1,449 | 1,259,528 |
| Implenia AG - Reg'd | 5,917 | 443,132 |
| OC Oerlikon Corp. AG - Reg'd * | 86,249 | 934,447 |
| Schweiter Technologies AG | 298 | 336,252 |
| SFS Group AG * | 3,000 | 274,103 |
| Sulzer AG - Reg'd | 7,417 | 773,214 |
| Zehnder Group AG - Reg'd * | 8,254 | 288,884 |
| 7,243,366 | ||
| Commercial & Professional Services 0.1% | ||
| DKSH Holding AG | 12,362 | 1,002,341 |
| Consumer Durables & Apparel 0.1% | ||
| Forbo Holding AG - Reg'd * | 335 | 458,285 |
| Diversified Financials 0.3% | ||
| Cembra Money Bank AG * | 5,581 | 454,193 |
| GAM Holding AG * | 76,685 | 849,971 |
| Partners Group Holding AG | 1,565 | 821,217 |
| Vontobel Holding AG - Reg'd | 4,406 | 241,539 |
| 2,366,920 | ||
| Food, Beverage & Tobacco 0.1% | ||
| Barry Callebaut AG - Reg'd * | 452 | 586,298 |
| Emmi AG - Reg'd * | 739 | 471,168 |
| 1,057,466 | ||
| Health Care Equipment & Services 0.2% | ||
| Sonova Holding AG - Reg'd | 8,269 | 1,089,102 |
| Straumann Holding AG - Reg'd | 755 | 320,787 |
| 1,409,889 | ||
| Household & Personal Products 0.1% | ||
| Oriflame Holding AG * | 24,041 | 982,061 |
| Security | Number of Shares | Value ($) |
| Insurance 0.1% | ||
| Helvetia Holding AG - Reg'd | 1,886 | 1,061,222 |
| Materials 0.1% | ||
| EMS-Chemie Holding AG - Reg'd | 1,240 | 707,634 |
| Schmolz + Bickenbach AG - Reg'd * | 733,784 | 571,523 |
| 1,279,157 | ||
| Pharmaceuticals, Biotechnology & Life Sciences 0.1% | ||
| Galenica AG - Reg'd | 707 | 831,640 |
| Real Estate 0.2% | ||
| Allreal Holding AG - Reg'd * | 3,368 | 527,674 |
| Mobimo Holding AG - Reg'd * | 1,048 | 279,149 |
| PSP Swiss Property AG - Reg'd | 2,098 | 196,089 |
| Swiss Prime Site AG - Reg'd * | 11,000 | 957,811 |
| 1,960,723 | ||
| Retailing 0.2% | ||
| Dufry AG - Reg'd * | 6,404 | 926,596 |
| Valora Holding AG - Reg'd | 2,148 | 716,393 |
| 1,642,989 | ||
| Software & Services 0.1% | ||
| Temenos Group AG - Reg'd * | 5,640 | 437,312 |
| Technology Hardware & Equipment 0.2% | ||
| Inficon Holding AG - Reg'd * | 452 | 198,028 |
| Kudelski S.A. * | 15,209 | 254,382 |
| Logitech International S.A. - Reg'd | 36,809 | 1,067,753 |
| 1,520,163 | ||
| Telecommunication Services 0.1% | ||
| Sunrise Communications Group AG * | 8,721 | 625,697 |
| Transportation 0.2% | ||
| Flughafen Zuerich AG - Reg’d | 3,565 | 721,935 |
| Panalpina Welttransport Holding AG - Reg'd | 5,236 | 661,395 |
| Wizz Air Holdings plc * | 10,315 | 214,489 |
| 1,597,819 | ||
| Utilities 0.0% | ||
| BKW AG | 3,908 | 199,605 |
| 26,706,775 | ||
| United Kingdom 11.1% | ||
| Banks 0.0% | ||
| The Paragon Group of Cos. plc | 69,794 | 368,338 |
| Capital Goods 1.7% | ||
| Bodycote plc | 82,156 | 807,656 |
| Chemring Group plc * | 240,106 | 580,396 |
| Diploma plc | 26,526 | 353,526 |
| Fenner plc | 204,825 | 709,215 |
| Galliford Try plc | 33,940 | 640,282 |
| Grafton Group plc | 110,327 | 864,933 |
| Howden Joinery Group plc | 111,660 | 594,566 |
| Interserve plc | 161,155 | 480,296 |
| Keller Group plc | 46,325 | 495,763 |
| Kier Group plc | 28,555 | 517,373 |
| Lavendon Group plc | 122,615 | 411,209 |
| Melrose Industries plc | 811,714 | 2,154,032 |
| Morgan Advanced Materials plc | 157,331 | 610,059 |
| QinetiQ Group plc | 247,320 | 852,817 |
| Rotork plc | 253,475 | 779,098 |
| Senior plc | 196,273 | 446,719 |
| SIG plc | 727,576 | 1,014,043 |
| Spirax-Sarco Engineering plc | 17,513 | 969,579 |
| Ultra Electronics Holdings plc | 21,296 | 515,704 |
| Vesuvius plc | 146,035 | 830,124 |
| 14,627,390 | ||
54
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Small Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Commercial & Professional Services 1.1% | ||
| Berendsen plc | 68,527 | 780,693 |
| De La Rue plc | 48,920 | 365,865 |
| Hays plc | 599,897 | 1,215,321 |
| HomeServe plc | 66,557 | 493,628 |
| IHS Markit Ltd. * | 37,203 | 1,480,679 |
| Mitie Group plc | 256,108 | 658,755 |
| Pagegroup plc | 154,821 | 818,609 |
| PayPoint plc | 16,307 | 197,851 |
| Rentokil Initial plc | 347,021 | 1,032,513 |
| RPS Group plc | 169,727 | 521,685 |
| Serco Group plc * | 761,115 | 1,115,721 |
| WS Atkins plc | 33,916 | 614,084 |
| 9,295,404 | ||
| Consumer Durables & Apparel 0.3% | ||
| Bellway plc | 27,493 | 891,572 |
| Bovis Homes Group plc | 36,422 | 353,524 |
| Coats Group plc * | 1,202,873 | 834,497 |
| Crest Nicholson Holdings plc | 53,121 | 358,282 |
| 2,437,875 | ||
| Consumer Services 0.8% | ||
| AA plc | 218,575 | 711,538 |
| Domino's Pizza Group plc | 44,966 | 214,870 |
| EI Group plc * | 584,538 | 981,989 |
| Greene King plc | 100,577 | 845,443 |
| J.D. Wetherspoon plc | 36,062 | 439,556 |
| Ladbrokes Coral Group plc | 544,406 | 829,210 |
| Marston's plc | 290,651 | 479,958 |
| Merlin Entertainments plc | 101,511 | 621,496 |
| Mitchells & Butlers plc | 143,095 | 439,292 |
| SSP Group plc | 42,881 | 222,409 |
| The Restaurant Group plc | 101,608 | 411,313 |
| Thomas Cook Group plc * | 878,180 | 956,206 |
| 7,153,280 | ||
| Diversified Financials 1.3% | ||
| Aberdeen Asset Management plc | 314,628 | 1,082,561 |
| Ashmore Group plc | 117,808 | 521,897 |
| Brewin Dolphin Holdings plc | 59,618 | 229,762 |
| Close Brothers Group plc | 35,757 | 671,000 |
| Hargreaves Lansdown plc | 18,316 | 304,279 |
| Henderson Group plc | 273,814 | 761,541 |
| IG Group Holdings plc | 90,040 | 600,005 |
| Intermediate Capital Group plc | 108,317 | 957,007 |
| International Personal Finance plc | 179,095 | 403,833 |
| Jupiter Fund Management plc | 105,518 | 550,569 |
| London Stock Exchange Group plc | 24,605 | 942,436 |
| NEX Group plc | 108,823 | 786,787 |
| Provident Financial plc | 28,691 | 1,042,530 |
| Schroders plc | 24,067 | 920,332 |
| SVG Capital plc * | 36,748 | 326,049 |
| TP ICAP plc | 171,772 | 1,045,253 |
| 11,145,841 | ||
| Energy 0.4% | ||
| EnQuest plc * | 1,928,516 | 1,157,926 |
| Hunting plc | 96,395 | 635,156 |
| Premier Oil plc * | 1,194,012 | 1,032,651 |
| Soco International plc | 135,612 | 222,757 |
| 3,048,490 | ||
| Food & Staples Retailing 0.1% | ||
| Conviviality plc | 89,038 | 311,622 |
| Greggs plc | 43,771 | 532,703 |
| 844,325 | ||
| Security | Number of Shares | Value ($) |
| Food, Beverage & Tobacco 0.2% | ||
| Britvic plc | 62,210 | 488,870 |
| Cranswick plc | 21,001 | 609,175 |
| Dairy Crest Group plc | 84,220 | 593,711 |
| Greencore Group plc | 99,467 | 321,325 |
| 2,013,081 | ||
| Health Care Equipment & Services 0.1% | ||
| LivaNova plc * | 5,000 | 252,000 |
| Spire Healthcare Group plc | 42,977 | 174,293 |
| STERIS plc | 12,318 | 863,862 |
| 1,290,155 | ||
| Household & Personal Products 0.1% | ||
| McBride plc * | 85,033 | 193,377 |
| PZ Cussons plc | 83,108 | 330,115 |
| 523,492 | ||
| Insurance 0.4% | ||
| esure Group plc | 61,135 | 162,651 |
| Hiscox Ltd. | 89,728 | 1,212,601 |
| Lancashire Holdings Ltd. | 131,133 | 1,132,483 |
| Novae Group plc | 17,650 | 136,943 |
| Saga plc | 186,053 | 437,813 |
| St. James's Place plc | 57,838 | 759,322 |
| 3,841,813 | ||
| Materials 1.5% | ||
| Acacia Mining plc | 53,977 | 360,026 |
| Centamin plc | 231,871 | 504,368 |
| Croda International plc | 26,805 | 1,170,134 |
| Elementis plc | 175,914 | 655,847 |
| Essentra plc | 77,975 | 527,369 |
| Evraz plc * | 543,788 | 1,559,094 |
| Hill & Smith Holdings plc | 14,565 | 199,915 |
| KAZ Minerals plc * | 364,345 | 2,389,370 |
| Marshalls plc | 50,308 | 186,307 |
| Petropavlovsk plc * | 3,848,507 | 321,826 |
| Randgold Resources Ltd. | 12,216 | 1,141,640 |
| RPC Group plc | 49,228 | 559,298 |
| Synthomer plc | 79,219 | 440,259 |
| Vedanta Resources plc | 201,383 | 2,157,675 |
| Victrex plc | 23,011 | 547,213 |
| 12,720,341 | ||
| Media 0.2% | ||
| Cineworld Group plc | 23,525 | 187,211 |
| Daily Mail & General Trust plc, A Shares | 93,738 | 838,696 |
| Trinity Mirror plc | 210,593 | 271,889 |
| UBM plc | 89,446 | 829,791 |
| 2,127,587 | ||
| Pharmaceuticals, Biotechnology & Life Sciences 0.1% | ||
| Genus plc | 11,349 | 244,888 |
| Indivior plc | 214,026 | 931,370 |
| 1,176,258 | ||
| Real Estate 0.6% | ||
| Countrywide plc | 47,476 | 115,204 |
| Derwent London plc | 7,285 | 255,646 |
| Grainger plc | 78,482 | 247,381 |
| Hammerson plc | 137,426 | 1,006,411 |
| Intu Properties plc (a) | 227,157 | 810,992 |
| Savills plc | 46,640 | 496,812 |
| Segro plc | 143,434 | 881,380 |
| Shaftesbury plc | 19,081 | 217,380 |
| The British Land Co. plc | 123,746 | 950,886 |
| 4,982,092 | ||
55
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental International Small Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Retailing 0.7% | ||
| B&M European Value Retail S.A. | 77,101 | 286,107 |
| Card Factory plc | 38,483 | 126,425 |
| Dixons Carphone plc | 170,247 | 641,922 |
| Dunelm Group plc | 26,210 | 210,698 |
| Halfords Group plc | 141,433 | 597,869 |
| Headlam Group plc | 27,578 | 201,276 |
| JD Sports Fashion plc | 45,217 | 197,951 |
| John Menzies plc | 62,832 | 460,528 |
| Lookers plc | 250,878 | 384,777 |
| N Brown Group plc | 133,665 | 336,491 |
| Pendragon plc | 1,648,847 | 697,621 |
| Pets at Home Group plc | 89,059 | 203,918 |
| Sports Direct International plc *(a) | 134,165 | 495,856 |
| Vertu Motors plc | 424,889 | 252,470 |
| WH Smith plc | 35,029 | 737,544 |
| 5,831,453 | ||
| Semiconductors & Semiconductor Equipment 0.1% | ||
| Dialog Semiconductor plc * | 8,706 | 460,191 |
| Software & Services 0.3% | ||
| AVEVA Group plc | 17,440 | 415,166 |
| Computacenter plc | 61,474 | 599,364 |
| Fidessa Group plc | 12,497 | 390,648 |
| Gocompare.Com Group Ltd. * | 25,279 | 30,041 |
| Micro Focus International plc | 20,062 | 545,239 |
| Moneysupermarket.com Group plc | 92,392 | 379,065 |
| Playtech plc | 40,777 | 452,880 |
| Rightmove plc | 3,498 | 171,113 |
| 2,983,516 | ||
| Technology Hardware & Equipment 0.5% | ||
| e2v technologies plc | 78,492 | 265,677 |
| Electrocomponents plc | 206,582 | 1,221,600 |
| Halma plc | 57,272 | 693,094 |
| Laird plc | 141,797 | 295,558 |
| Spectris plc | 42,051 | 1,271,577 |
| Spirent Communications plc | 375,726 | 493,269 |
| 4,240,775 | ||
| Telecommunication Services 0.1% | ||
| KCOM Group plc | 238,835 | 270,458 |
| TalkTalk Telecom Group plc (a) | 244,564 | 535,022 |
| 805,480 | ||
| Transportation 0.5% | ||
| BBA Aviation plc | 289,781 | 1,099,841 |
| Go-Ahead Group plc | 16,028 | 392,921 |
| National Express Group plc | 236,588 | 1,069,298 |
| Northgate plc | 139,332 | 977,890 |
| Stagecoach Group plc | 216,654 | 559,698 |
| 4,099,648 | ||
| Utilities 0.0% | ||
| Telecom Plus plc | 19,299 | 289,869 |
| 96,306,694 | ||
| Total Common Stock | ||
| (Cost $787,743,443) | 862,091,454 | |
| Preferred Stock 0.3% of net assets | ||
| Germany 0.3% | ||
| Automobiles & Components 0.0% | ||
| Schaeffler AG | 19,688 | 311,297 |
| Capital Goods 0.1% | ||
| Jungheinrich AG | 15,671 | 475,831 |
| Security | Number of Shares | Value ($) |
| Health Care Equipment & Services 0.1% | ||
| Draegerwerk AG & Co. KGaA | 9,734 | 883,632 |
| Transportation 0.1% | ||
| Sixt SE | 9,621 | 385,877 |
| 2,056,637 | ||
| Sweden 0.0% | ||
| Transportation 0.0% | ||
| SAS AB | 5,222 | 309,044 |
| Total Preferred Stock | ||
| (Cost $2,208,062) | 2,365,681 | |
| Other Investment Companies 1.2% of net assets | ||
| United States 1.2% | ||
| Money Market Fund 0.1% | ||
| State Street Institutional U.S. Government Money Market Fund, Premier Class 0.46% (c) | 762,104 | 762,104 |
| Securities Lending Collateral 1.1% | ||
| Wells Fargo Government Money Market Fund, Select Class 0.48% (c) | 9,480,517 | 9,480,517 |
| Total Other Investment Companies | ||
| (Cost $10,242,621) | 10,242,621 | |
End of Investments.
At 02/28/17, the tax basis cost of the fund's investments was $805,578,924 and the unrealized appreciation and depreciation were $94,261,623 and ($25,140,791), respectively, with a net unrealized appreciation of $69,120,832.
| * | Non-income producing security. |
| (a) | All or a portion of this security is on loan. Securities on loan were valued at $8,888,910. |
| (b) | Fair-valued by management in accordance with procedures approved by the Board of Trustees. |
| (c) | The rate shown is the 7-day yield. |
| ADR — | American Depositary Receipt |
| CDI — | CHESS Depositary Interest |
| GDR — | Global Depositary Receipt |
| Reg'd — | Registered |
| REIT — | Real Estate Investment Trust |
| RSP — | Risparmio (Convertible Savings Shares) |
In addition to the above, the fund held the following at 02/28/17:
| Number of Contracts | Contract Value ($) | Unrealized Depreciation ($) | ||||
| Futures Contracts | ||||||
| MSCI EAFE Index, e-mini, Long, expires 03/17/17 | 28 | 2,443,700 | (4,672) | |||
56
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental Emerging Markets Large Company Index ETF
Portfolio Holdings as of February 28, 2017
This section shows all the securities in the fund's portfolio and their values as of the report date.
The fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's website at www.sec.gov and may be viewed and copied at the SEC's Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the Public Reference Room. The fund also makes available its complete schedule of portfolio holdings on a daily basis on the fund's website at www.csimfunds.com/schwabetfs_prospectus.
| Holdings by Category | Cost ($) | Value ($) | |
| 86.2% | Common Stock | 775,409,528 | 871,196,104 |
| 13.5% | Preferred Stock | 87,593,754 | 136,810,047 |
| 0.0% | Rights | — | 13,961 |
| 0.1% | Other Investment Company | 1,388,488 | 1,388,488 |
| 99.8% | Total Investments | 864,391,770 | 1,009,408,600 |
| 0.2% | Other Assets and Liabilities, Net | 1,864,791 | |
| 100.0% | Net Assets | 1,011,273,391 | |
| Security | Number of Shares | Value ($) |
| Common Stock 86.2% of net assets | ||
| Brazil 7.9% | ||
| Banks 1.3% | ||
| Banco Bradesco S.A. | 273,237 | 2,865,871 |
| Banco do Brasil S.A. | 1,006,576 | 10,709,632 |
| 13,575,503 | ||
| Capital Goods 0.1% | ||
| Embraer S.A. | 262,904 | 1,515,226 |
| Diversified Financials 0.2% | ||
| BM&FBovespa S.A. - Bolsa de Valores Mercadorias e Futuros | 256,257 | 1,566,701 |
| Energy 2.0% | ||
| Petroleo Brasileiro S.A. * | 3,377,007 | 17,324,665 |
| Ultrapar Participacoes S.A. | 140,558 | 2,954,835 |
| 20,279,500 | ||
| Food, Beverage & Tobacco 0.9% | ||
| Ambev S.A. | 879,216 | 5,041,856 |
| BRF S.A. | 146,808 | 1,916,856 |
| JBS S.A. | 477,799 | 1,796,930 |
| 8,755,642 | ||
| Insurance 0.1% | ||
| Sul America S.A. | 172,919 | 1,079,424 |
| Materials 2.4% | ||
| Companhia Siderurgica Nacional S.A. * | 581,930 | 2,240,926 |
| Vale S.A. | 2,083,289 | 21,911,031 |
| 24,151,957 | ||
| Software & Services 0.1% | ||
| Cielo S.A. | 113,130 | 992,024 |
| Telecommunication Services 0.2% | ||
| Tim Participacoes S.A. | 544,367 | 1,707,818 |
| Transportation 0.1% | ||
| CCR S.A. | 233,278 | 1,356,477 |
| Utilities 0.5% | ||
| Centrais Eletricas Brasileiras S.A. * | 267,771 | 1,849,694 |
| Companhia de Saneamento Basico do Estado de Sao Paulo | 166,275 | 1,757,352 |
| CPFL Energia S.A. | 157,672 | 1,294,421 |
| 4,901,467 | ||
| 79,881,739 | ||
| Security | Number of Shares | Value ($) |
| Chile 0.6% | ||
| Energy 0.2% | ||
| Empresas COPEC S.A. | 167,303 | 1,754,944 |
| Food & Staples Retailing 0.2% | ||
| Cencosud S.A. | 522,051 | 1,540,705 |
| Transportation 0.1% | ||
| Latam Airlines Group S.A. * | 128,750 | 1,303,572 |
| Utilities 0.1% | ||
| Enel Americas S.A. | 6,648,857 | 1,296,327 |
| 5,895,548 | ||
| China 15.6% | ||
| Automobiles & Components 0.1% | ||
| Dongfeng Motor Group Co., Ltd., H Shares | 980,482 | 1,163,323 |
| Banks 6.3% | ||
| Agricultural Bank of China Ltd., H Shares | 7,783,917 | 3,589,900 |
| Bank of China Ltd., H Shares | 24,842,539 | 12,577,367 |
| Bank of Communications Co., Ltd., H Shares | 2,102,294 | 1,676,429 |
| China CITIC Bank Corp., Ltd., H Shares | 1,874,197 | 1,286,897 |
| China Construction Bank Corp., H Shares | 30,651,836 | 25,232,399 |
| China Merchants Bank Co., Ltd., H Shares | 756,510 | 2,012,500 |
| China Minsheng Banking Corp., Ltd., H Shares | 1,311,966 | 1,497,468 |
| Industrial & Commercial Bank of China Ltd., H Shares | 23,966,519 | 15,715,345 |
| 63,588,305 | ||
| Capital Goods 0.4% | ||
| China Communications Construction Co., Ltd., H Shares | 1,170,262 | 1,510,609 |
| China Railway Construction Corp., Ltd., H Shares | 642,993 | 909,515 |
| China Railway Group Ltd., H Shares | 964,028 | 843,258 |
| CITIC Ltd. | 617,108 | 885,620 |
| 4,149,002 | ||
| Consumer Durables & Apparel 0.2% | ||
| Belle International Holdings Ltd. | 2,840,260 | 1,957,551 |
| Energy 3.7% | ||
| China Petroleum & Chemical Corp., H Shares | 20,588,295 | 15,966,806 |
| China Shenhua Energy Co., Ltd., H Shares | 1,660,691 | 3,474,370 |
| CNOOC Ltd. | 7,485,040 | 8,851,930 |
| Kunlun Energy Co., Ltd. | 980,173 | 852,330 |
| PetroChina Co., Ltd., H Shares | 10,877,830 | 8,281,918 |
| 37,427,354 | ||
| Food, Beverage & Tobacco 0.1% | ||
| China Resources Beer Holdings Co., Ltd. * | 536,434 | 1,217,653 |
| Health Care Equipment & Services 0.1% | ||
| Sinopharm Group Co., Ltd., H Shares | 195,961 | 906,286 |
| Insurance 0.7% | ||
| China Life Insurance Co., Ltd., H Shares | 714,906 | 2,178,117 |
| China Pacific Insurance (Group) Co., Ltd., H Shares | 293,266 | 1,074,844 |
57
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental Emerging Markets Large Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| PICC Property & Casualty Co., Ltd., H Shares | 630,421 | 963,200 |
| Ping An Insurance Group Co. of China Ltd., H Shares | 463,729 | 2,473,237 |
| 6,689,398 | ||
| Materials 0.5% | ||
| Anhui Conch Cement Co., Ltd., H Shares | 329,113 | 1,146,868 |
| China National Building Material Co., Ltd., H Shares | 3,529,375 | 2,573,448 |
| Jiangxi Copper Co., Ltd., H Shares | 813,885 | 1,371,425 |
| 5,091,741 | ||
| Real Estate 0.4% | ||
| China Evergrande Group | 1,211,189 | 909,665 |
| China Overseas Land & Investment Ltd. | 519,809 | 1,600,453 |
| China Resources Land Ltd. | 371,731 | 1,015,233 |
| 3,525,351 | ||
| Software & Services 0.5% | ||
| Alibaba Group Holding Ltd. ADR * | 12,179 | 1,253,219 |
| Baidu, Inc. ADR * | 7,913 | 1,377,891 |
| Tencent Holdings Ltd. | 87,730 | 2,339,482 |
| 4,970,592 | ||
| Technology Hardware & Equipment 0.1% | ||
| Lenovo Group Ltd. | 2,439,941 | 1,464,760 |
| Telecommunication Services 2.3% | ||
| China Mobile Ltd. | 1,514,301 | 16,698,873 |
| China Telecom Corp., Ltd., H Shares | 6,221,232 | 2,925,300 |
| China Unicom (Hong Kong) Ltd. | 2,857,385 | 3,474,897 |
| 23,099,070 | ||
| Utilities 0.2% | ||
| China Resources Power Holdings Co., Ltd. | 692,503 | 1,254,320 |
| Huaneng Power International, Inc., H Shares | 1,594,990 | 1,086,963 |
| 2,341,283 | ||
| 157,591,669 | ||
| Colombia 0.4% | ||
| Banks 0.1% | ||
| Bancolombia S.A. | 70,248 | 600,955 |
| Energy 0.2% | ||
| Ecopetrol S.A. * | 6,258,260 | 2,826,801 |
| Materials 0.1% | ||
| Grupo Argos S.A. | 118,951 | 804,309 |
| 4,232,065 | ||
| Czech Republic 0.2% | ||
| Utilities 0.2% | ||
| CEZ A/S | 118,657 | 2,102,156 |
| Greece 0.7% | ||
| Banks 0.4% | ||
| Alpha Bank AE * | 685,740 | 1,246,021 |
| National Bank of Greece S.A. * | 7,183,240 | 1,831,898 |
| Piraeus Bank S.A. * | 6,038,607 | 1,174,242 |
| 4,252,161 | ||
| Consumer Services 0.1% | ||
| OPAP S.A. | 155,384 | 1,401,793 |
| Telecommunication Services 0.1% | ||
| Hellenic Telecommunications Organization S.A. | 101,856 | 916,726 |
| Security | Number of Shares | Value ($) |
| Utilities 0.1% | ||
| Public Power Corp. S.A. * | 290,675 | 849,396 |
| 7,420,076 | ||
| Hungary 0.4% | ||
| Banks 0.2% | ||
| OTP Bank plc | 68,327 | 1,988,997 |
| Energy 0.2% | ||
| MOL Hungarian Oil & Gas plc | 34,195 | 2,350,122 |
| 4,339,119 | ||
| India 4.1% | ||
| Automobiles & Components 0.4% | ||
| Mahindra & Mahindra Ltd. GDR | 57,820 | 1,127,490 |
| Tata Motors Ltd. | 105,609 | 436,880 |
| Tata Motors Ltd. ADR | 64,676 | 2,172,467 |
| 3,736,837 | ||
| Banks 0.6% | ||
| Housing Development Finance Corp., Ltd. | 107,879 | 2,215,264 |
| ICICI Bank Ltd. ADR | 231,100 | 1,895,020 |
| State Bank of India | 460,033 | 1,856,163 |
| 5,966,447 | ||
| Energy 1.8% | ||
| Bharat Petroleum Corp., Ltd. | 128,529 | 1,290,805 |
| Coal India Ltd. | 281,017 | 1,355,831 |
| Indian Oil Corp., Ltd. | 453,406 | 2,616,715 |
| Oil & Natural Gas Corp., Ltd. | 1,296,058 | 3,759,843 |
| Reliance Industries Ltd. GDR | 244,614 | 9,026,257 |
| 18,049,451 | ||
| Food, Beverage & Tobacco 0.1% | ||
| ITC Ltd. | 279,579 | 1,098,726 |
| Materials 0.3% | ||
| Hindalco Industries Ltd. | 617,488 | 1,706,176 |
| Tata Steel Ltd. | 184,849 | 1,337,354 |
| 3,043,530 | ||
| Software & Services 0.6% | ||
| Infosys Ltd. | 253,672 | 3,849,256 |
| Tata Consultancy Services Ltd. | 48,985 | 1,810,724 |
| 5,659,980 | ||
| Telecommunication Services 0.2% | ||
| Bharti Airtel Ltd. | 371,955 | 2,035,700 |
| Utilities 0.1% | ||
| NTPC Ltd. | 606,202 | 1,480,552 |
| 41,071,223 | ||
| Indonesia 1.3% | ||
| Automobiles & Components 0.3% | ||
| PT Astra International Tbk | 4,887,837 | 3,005,419 |
| Banks 0.4% | ||
| PT Bank Central Asia Tbk | 946,772 | 1,096,853 |
| PT Bank Mandiri (Persero) Tbk | 1,496,205 | 1,267,780 |
| PT Bank Rakyat Indonesia (Persero) Tbk | 1,599,512 | 1,433,276 |
| 3,797,909 | ||
| Energy 0.1% | ||
| PT United Tractors Tbk | 684,126 | 1,264,525 |
| Food, Beverage & Tobacco 0.1% | ||
| Golden Agri-Resources Ltd. | 3,642,856 | 989,800 |
| Telecommunication Services 0.3% | ||
| PT Telekomunikasi Indonesia (Persero) Tbk | 9,128,732 | 2,635,394 |
58
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental Emerging Markets Large Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Utilities 0.1% | ||
| PT Perusahaan Gas Negara (Persero) Tbk | 5,284,630 | 1,121,439 |
| 12,814,486 | ||
| Malaysia 1.7% | ||
| Banks 0.5% | ||
| CIMB Group Holdings Berhad | 1,059,152 | 1,185,582 |
| Malayan Banking Berhad | 1,337,500 | 2,590,653 |
| Public Bank Berhad | 402,800 | 1,810,786 |
| 5,587,021 | ||
| Capital Goods 0.2% | ||
| Sime Darby Berhad | 784,540 | 1,583,216 |
| Consumer Services 0.2% | ||
| Genting Berhad | 778,600 | 1,622,083 |
| Materials 0.1% | ||
| Petronas Chemicals Group Berhad | 664,900 | 1,085,704 |
| Telecommunication Services 0.4% | ||
| Axiata Group Berhad | 1,761,200 | 1,757,233 |
| DiGi.com Berhad | 717,900 | 814,914 |
| Maxis Berhad | 720,100 | 1,023,385 |
| Telekom Malaysia Berhad | 523,700 | 726,575 |
| 4,322,107 | ||
| Utilities 0.3% | ||
| Tenaga Nasional Berhad | 847,200 | 2,583,578 |
| 16,783,709 | ||
| Mexico 2.6% | ||
| Banks 0.2% | ||
| Grupo Financiero Banorte S.A.B. de C.V., O Shares | 267,488 | 1,335,918 |
| Grupo Financiero Santander Mexico S.A.B. de C.V., B Shares | 562,012 | 847,540 |
| 2,183,458 | ||
| Capital Goods 0.1% | ||
| Alfa S.A.B. de C.V., A Shares | 962,303 | 1,236,526 |
| Food & Staples Retailing 0.3% | ||
| Wal-Mart de Mexico S.A.B. de C.V. | 1,287,411 | 2,508,142 |
| Food, Beverage & Tobacco 0.4% | ||
| Coca-Cola Femsa S.A.B. de C.V., Series L | 121,181 | 799,782 |
| Fomento Economico Mexicano S.A.B. de C.V. | 297,854 | 2,410,811 |
| Grupo Bimbo S.A.B. de C.V., Series A | 397,347 | 942,451 |
| 4,153,044 | ||
| Materials 0.8% | ||
| Cemex S.A.B. de C.V., Series CPO * | 4,339,231 | 3,691,854 |
| Grupo Mexico S.A.B. de C.V., Series B | 1,048,884 | 3,197,109 |
| Industrias Penoles S.A.B. de C.V. | 52,508 | 1,253,610 |
| 8,142,573 | ||
| Media 0.2% | ||
| Grupo Televisa S.A.B., Series CPO | 435,472 | 2,228,683 |
| Telecommunication Services 0.6% | ||
| America Movil S.A.B. de C.V., Series L | 9,016,525 | 5,750,119 |
| 26,202,545 | ||
| Peru 0.1% | ||
| Banks 0.1% | ||
| Credicorp Ltd. | 7,053 | 1,161,065 |
| Security | Number of Shares | Value ($) |
| Philippines 0.1% | ||
| Telecommunication Services 0.1% | ||
| PLDT, Inc. | 42,153 | 1,225,597 |
| Poland 2.3% | ||
| Banks 0.3% | ||
| Bank Pekao S.A. | 33,120 | 1,141,562 |
| Powszechna Kasa Oszczednosci Bank Polski S.A. * | 274,989 | 2,253,903 |
| 3,395,465 | ||
| Energy 0.7% | ||
| Polski Koncern Naftowy Orlen S.A. | 253,244 | 5,875,254 |
| Polskie Gornictwo Naftowe i Gazownictwo S.A. | 727,633 | 1,120,028 |
| 6,995,282 | ||
| Insurance 0.2% | ||
| Powszechny Zaklad Ubezpieczen S.A. | 238,700 | 2,120,484 |
| Materials 0.6% | ||
| KGHM Polska Miedz S.A. | 176,333 | 5,602,216 |
| Telecommunication Services 0.1% | ||
| Orange Polska S.A. | 987,266 | 1,150,090 |
| Utilities 0.4% | ||
| PGE S.A. | 766,593 | 2,241,053 |
| Tauron Polska Energia S.A. * | 1,772,225 | 1,309,413 |
| 3,550,466 | ||
| 22,814,003 | ||
| Republic of Korea 16.6% | ||
| Automobiles & Components 2.0% | ||
| Hankook Tire Co., Ltd. | 21,978 | 1,162,312 |
| Hyundai Mobis Co., Ltd. | 21,528 | 4,854,866 |
| Hyundai Motor Co. | 70,320 | 9,297,228 |
| Kia Motors Corp. | 160,658 | 5,434,595 |
| 20,749,001 | ||
| Banks 1.3% | ||
| Hana Financial Group, Inc. | 87,531 | 2,728,691 |
| Industrial Bank of Korea | 94,040 | 1,027,101 |
| KB Financial Group, Inc. | 92,742 | 3,846,650 |
| Shinhan Financial Group Co., Ltd. | 126,613 | 5,229,120 |
| 12,831,562 | ||
| Capital Goods 1.4% | ||
| CJ Corp. | 5,095 | 777,261 |
| Daelim Industrial Co., Ltd. | 13,637 | 1,008,227 |
| Hyundai Engineering & Construction Co., Ltd. | 36,484 | 1,542,282 |
| Hyundai Heavy Industries Co., Ltd. * | 34,573 | 5,029,634 |
| LG Corp. | 32,108 | 1,783,226 |
| LG International Corp. | 27,020 | 778,998 |
| Samsung Heavy Industries Co., Ltd. * | 185,310 | 1,835,482 |
| SK Networks Co., Ltd. | 235,942 | 1,546,169 |
| 14,301,279 | ||
| Consumer Durables & Apparel 0.5% | ||
| LG Electronics, Inc. | 95,849 | 5,068,999 |
| Energy 0.9% | ||
| GS Holdings Corp. | 22,904 | 1,124,185 |
| S-Oil Corp. | 23,442 | 1,791,191 |
| SK Innovation Co., Ltd. | 46,665 | 6,376,071 |
| 9,291,447 | ||
| Food & Staples Retailing 0.2% | ||
| E-MART, Inc. | 10,646 | 1,958,318 |
59
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental Emerging Markets Large Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Food, Beverage & Tobacco 0.2% | ||
| KT&G Corp. | 20,975 | 1,901,338 |
| Insurance 0.3% | ||
| Samsung Fire & Marine Insurance Co., Ltd. | 6,255 | 1,410,590 |
| Samsung Life Insurance Co., Ltd. | 14,929 | 1,412,694 |
| 2,823,284 | ||
| Materials 2.2% | ||
| Hyundai Steel Co. | 39,473 | 2,181,793 |
| LG Chem Ltd. | 17,663 | 4,420,632 |
| Lotte Chemical Corp. | 5,477 | 1,765,524 |
| POSCO | 54,819 | 13,744,140 |
| 22,112,089 | ||
| Retailing 0.1% | ||
| Lotte Shopping Co., Ltd. | 5,548 | 1,133,396 |
| Semiconductors & Semiconductor Equipment 0.6% | ||
| SK Hynix, Inc. | 146,341 | 6,043,886 |
| Technology Hardware & Equipment 6.2% | ||
| LG Display Co., Ltd. | 178,244 | 4,319,156 |
| Samsung Electro-Mechanics Co., Ltd. | 31,327 | 1,620,720 |
| Samsung Electronics Co., Ltd. | 32,190 | 54,715,171 |
| Samsung SDI Co., Ltd. | 13,650 | 1,557,241 |
| 62,212,288 | ||
| Telecommunication Services 0.1% | ||
| LG Uplus Corp. | 107,602 | 1,218,046 |
| Transportation 0.2% | ||
| Hyundai Glovis Co., Ltd. | 5,342 | 725,180 |
| Korean Air Lines Co., Ltd. * | 32,769 | 837,518 |
| 1,562,698 | ||
| Utilities 0.4% | ||
| Korea Electric Power Corp. | 84,052 | 3,240,917 |
| Korea Gas Corp. * | 26,854 | 1,162,506 |
| 4,403,423 | ||
| 167,611,054 | ||
| Russia 11.4% | ||
| Banks 0.5% | ||
| Sberbank of Russia PJSC * | 1,874,790 | 5,004,895 |
| VTB Bank JSC * | 390,880,000 | 442,085 |
| 5,446,980 | ||
| Energy 8.8% | ||
| Gazprom PAO * | 17,068,183 | 39,138,999 |
| LUKOIL PJSC * | 547,300 | 28,902,741 |
| NOVATEK OAO * | 253,950 | 3,276,704 |
| Rosneft OJSC | 431,061 | 2,442,394 |
| Surgutneftegas * | 20,623,667 | 10,374,261 |
| Tatneft PAO * | 852,471 | 4,973,796 |
| 89,108,895 | ||
| Food & Staples Retailing 0.2% | ||
| Magnit PJSC * | 12,510 | 1,955,188 |
| Materials 0.4% | ||
| MMC Norilsk Nickel PJSC * | 26,261 | 4,184,323 |
| Telecommunication Services 0.9% | ||
| Mobile TeleSystems PJSC * | 879,250 | 4,145,258 |
| Rostelecom PJSC * | 1,257,900 | 1,680,322 |
| Sistema JSFC * | 8,261,115 | 3,197,779 |
| 9,023,359 | ||
| Transportation 0.4% | ||
| Aeroflot-Russian Airlines PJSC * | 1,001,581 | 2,831,481 |
| Globaltrans Investment plc GDR - Reg'd | 237,325 | 1,423,950 |
| 4,255,431 | ||
| Security | Number of Shares | Value ($) |
| Utilities 0.2% | ||
| RusHydro PJSC * | 108,299,465 | 1,738,206 |
| 115,712,382 | ||
| South Africa 5.9% | ||
| Banks 0.8% | ||
| Barclays Africa Group Ltd. | 138,650 | 1,610,693 |
| Nedbank Group Ltd. | 84,372 | 1,580,363 |
| Standard Bank Group Ltd. | 460,318 | 5,039,919 |
| 8,230,975 | ||
| Capital Goods 0.3% | ||
| Barloworld Ltd. | 220,438 | 1,952,595 |
| The Bidvest Group Ltd. | 131,403 | 1,557,347 |
| 3,509,942 | ||
| Consumer Durables & Apparel 0.1% | ||
| Steinhoff International Holdings N.V. | 277,280 | 1,480,311 |
| Diversified Financials 0.3% | ||
| FirstRand Ltd. | 740,751 | 2,815,760 |
| Food & Staples Retailing 0.3% | ||
| Bid Corp., Ltd. | 73,520 | 1,478,100 |
| Shoprite Holdings Ltd. | 140,124 | 2,027,406 |
| 3,505,506 | ||
| Food, Beverage & Tobacco 0.1% | ||
| Tiger Brands Ltd. | 47,562 | 1,519,948 |
| Health Care Equipment & Services 0.1% | ||
| Netcare Ltd. | 373,702 | 908,541 |
| Insurance 0.2% | ||
| Sanlam Ltd. | 352,089 | 1,824,241 |
| Materials 1.9% | ||
| AngloGold Ashanti Ltd. * | 159,211 | 1,772,379 |
| Gold Fields Ltd. | 551,766 | 1,697,904 |
| Impala Platinum Holdings Ltd. * | 513,803 | 1,729,960 |
| Kumba Iron Ore Ltd. * | 184,239 | 3,021,351 |
| Sappi Ltd. | 172,029 | 1,075,970 |
| Sasol Ltd. | 330,315 | 9,419,533 |
| 18,717,097 | ||
| Media 0.2% | ||
| Naspers Ltd., N Shares | 11,829 | 1,897,044 |
| Retailing 0.3% | ||
| Imperial Holdings Ltd. | 160,731 | 2,053,376 |
| Woolworths Holdings Ltd. | 163,839 | 876,814 |
| 2,930,190 | ||
| Telecommunication Services 1.3% | ||
| MTN Group Ltd. | 1,144,295 | 10,479,747 |
| Telkom S.A. SOC Ltd. | 236,464 | 1,232,397 |
| Vodacom Group Ltd. | 97,173 | 1,101,220 |
| 12,813,364 | ||
| 60,152,919 | ||
| Taiwan 11.4% | ||
| Automobiles & Components 0.1% | ||
| Cheng Shin Rubber Industry Co., Ltd. | 466,000 | 990,440 |
| Banks 0.3% | ||
| CTBC Financial Holding Co., Ltd. | 2,468,809 | 1,474,528 |
| Mega Financial Holding Co., Ltd. | 1,824,548 | 1,419,327 |
| 2,893,855 | ||
| Capital Goods 0.3% | ||
| Far Eastern New Century Corp. | 1,949,061 | 1,744,566 |
| Walsin Lihwa Corp. | 2,624,000 | 1,212,779 |
| 2,957,345 | ||
60
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental Emerging Markets Large Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Consumer Durables & Apparel 0.1% | ||
| Pou Chen Corp. | 845,000 | 1,146,891 |
| Diversified Financials 0.1% | ||
| Fubon Financial Holding Co., Ltd. | 990,116 | 1,603,277 |
| Energy 0.1% | ||
| Formosa Petrochemical Corp. | 451,704 | 1,573,139 |
| Food, Beverage & Tobacco 0.2% | ||
| Uni-President Enterprises Corp. | 937,796 | 1,666,596 |
| Insurance 0.2% | ||
| Cathay Financial Holding Co., Ltd. | 1,021,840 | 1,604,758 |
| Materials 1.5% | ||
| China Steel Corp. | 4,136,088 | 3,473,272 |
| Formosa Chemicals & Fibre Corp. | 1,118,882 | 3,539,809 |
| Formosa Plastics Corp. | 1,051,704 | 3,169,814 |
| Nan Ya Plastics Corp. | 1,286,588 | 3,123,976 |
| Taiwan Cement Corp. | 1,443,000 | 1,768,319 |
| 15,075,190 | ||
| Retailing 0.1% | ||
| Hotai Motor Co., Ltd. | 79,000 | 903,819 |
| Semiconductors & Semiconductor Equipment 2.5% | ||
| Advanced Semiconductor Engineering, Inc. | 1,670,000 | 2,073,673 |
| MediaTek, Inc. | 393,046 | 2,865,634 |
| Taiwan Semiconductor Manufacturing Co., Ltd. | 2,823,352 | 17,368,253 |
| United Microelectronics Corp. | 6,279,931 | 2,606,120 |
| 24,913,680 | ||
| Technology Hardware & Equipment 5.4% | ||
| Acer, Inc. * | 3,755,470 | 1,802,958 |
| Asustek Computer, Inc. | 399,176 | 3,605,427 |
| AU Optronics Corp. | 8,606,371 | 3,417,506 |
| Catcher Technology Co., Ltd. | 101,000 | 844,858 |
| Compal Electronics, Inc. | 4,879,000 | 3,056,968 |
| Delta Electronics, Inc. | 411,696 | 2,291,406 |
| Foxconn Technology Co., Ltd. | 328,858 | 981,538 |
| Hon Hai Precision Industry Co., Ltd. | 6,334,911 | 18,454,100 |
| HTC Corp. * | 918,822 | 2,359,596 |
| Innolux Corp. | 10,236,000 | 4,164,565 |
| Inventec Corp. | 1,745,646 | 1,295,449 |
| Lite-On Technology Corp. | 1,116,229 | 1,871,069 |
| Pegatron Corp. | 923,234 | 2,425,016 |
| Quanta Computer, Inc. | 1,424,058 | 2,952,544 |
| Synnex Technology International Corp. | 1,192,178 | 1,309,617 |
| Wistron Corp. | 2,992,085 | 2,507,728 |
| WPG Holdings Ltd. | 1,164,000 | 1,477,566 |
| 54,817,911 | ||
| Telecommunication Services 0.5% | ||
| Chunghwa Telecom Co., Ltd. | 1,033,764 | 3,432,028 |
| Far EasTone Telecommunications Co., Ltd. | 399,588 | 962,440 |
| Taiwan Mobile Co., Ltd. | 307,000 | 1,079,174 |
| 5,473,642 | ||
| 115,620,543 | ||
| Thailand 1.6% | ||
| Banks 0.2% | ||
| Kasikornbank PCL NVDR | 195,400 | 1,072,012 |
| The Siam Commercial Bank PCL NVDR | 297,100 | 1,310,779 |
| 2,382,791 | ||
| Energy 0.9% | ||
| PTT Exploration & Production PCL NVDR | 683,500 | 1,821,074 |
| PTT PCL NVDR | 542,900 | 6,174,709 |
| Thai Oil PCL NVDR | 508,500 | 1,096,235 |
| 9,092,018 | ||
| Security | Number of Shares | Value ($) |
| Materials 0.3% | ||
| PTT Global Chemical PCL NVDR | 983,500 | 2,007,545 |
| The Siam Cement PCL NVDR | 58,100 | 858,879 |
| 2,866,424 | ||
| Telecommunication Services 0.2% | ||
| Advanced Info Service PCL NVDR | 301,400 | 1,442,002 |
| 15,783,235 | ||
| Turkey 1.2% | ||
| Banks 0.6% | ||
| Akbank T.A.S. | 610,883 | 1,463,384 |
| Turkiye Garanti Bankasi A/S | 717,075 | 1,703,933 |
| Turkiye Halk Bankasi A/S | 347,961 | 1,081,023 |
| Turkiye Is Bankasi, C Shares | 740,828 | 1,292,712 |
| 5,541,052 | ||
| Capital Goods 0.1% | ||
| KOC Holding A/S | 361,789 | 1,479,030 |
| Diversified Financials 0.1% | ||
| Haci Omer Sabanci Holding A/S | 370,215 | 1,027,695 |
| Energy 0.2% | ||
| Tupras-Turkiye Petrol Rafinerileri A/S | 69,895 | 1,640,633 |
| Materials 0.1% | ||
| Eregli Demir ve Celik Fabrikalari T.A.S. | 596,437 | 976,633 |
| Telecommunication Services 0.1% | ||
| Turkcell Iletisim Hizmetleri A/S * | 376,233 | 1,232,123 |
| 11,897,166 | ||
| United Arab Emirates 0.1% | ||
| Telecommunication Services 0.1% | ||
| Emirates Telecommunications Group Co. PJSC | 184,419 | 883,805 |
| Total Common Stock | ||
| (Cost $775,409,528) | 871,196,104 | |
| Preferred Stock 13.5% of net assets | ||
| Brazil 10.9% | ||
| Banks 3.1% | ||
| Banco Bradesco S.A. | 1,035,385 | 11,122,651 |
| Itau Unibanco Holding S.A. | 1,436,673 | 18,486,024 |
| Itausa - Investimentos Itau S.A. | 672,721 | 2,171,044 |
| 31,779,719 | ||
| Energy 2.4% | ||
| Petroleo Brasileiro S.A. * | 5,048,549 | 24,634,193 |
| Food & Staples Retailing 0.3% | ||
| Cia Brasileira de Distribuicao | 140,111 | 2,587,392 |
| Materials 4.0% | ||
| Gerdau S.A. | 1,658,356 | 6,903,153 |
| Metalurgica Gerdau S.A. * | 2,738,901 | 5,159,100 |
| Vale S.A. | 2,838,923 | 28,754,248 |
| 40,816,501 | ||
| Telecommunication Services 0.3% | ||
| Telefonica Brasil S.A. | 184,907 | 2,728,730 |
61
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Schwab Fundamental Emerging Markets Large Company Index ETF
Portfolio Holdings as of February 28, 2017 (continued)
| Security | Number of Shares | Value ($) |
| Utilities 0.8% | ||
| Centrais Eletricas Brasileiras S.A., B Shares * | 203,099 | 1,605,990 |
| Companhia Energetica de Minas Gerais | 1,559,929 | 5,360,219 |
| Companhia Paranaense de Energia - Copel, B Shares | 119,717 | 1,296,838 |
| 8,263,047 | ||
| 110,809,582 | ||
| Colombia 0.1% | ||
| Banks 0.1% | ||
| Bancolombia S.A. | 118,460 | 1,106,629 |
| Republic of Korea 1.1% | ||
| Automobiles & Components 0.3% | ||
| Hyundai Motor Co. | 10,558 | 914,108 |
| Hyundai Motor Co. 2nd | 18,835 | 1,699,023 |
| 2,613,131 | ||
| Materials 0.0% | ||
| LG Chem Ltd. | 2,508 | 393,695 |
| Technology Hardware & Equipment 0.8% | ||
| Samsung Electronics Co., Ltd. | 5,886 | 7,787,270 |
| 10,794,096 | ||
| Russia 1.4% | ||
| Energy 1.4% | ||
| AK Transneft OAO * | 3,551 | 11,238,871 |
| Surgutneftegas OAO * | 5,255,531 | 2,860,869 |
| 14,099,740 | ||
| Total Preferred Stock | ||
| (Cost $87,593,754) | 136,810,047 | |
| Rights 0.0% of net assets | ||
| Brazil 0.0% | ||
| Banks 0.0% | ||
| Itausa - Investimentos Itau S.A. expires 03/31/17 *(a) | 11,024 | 13,961 |
| Total Rights | ||
| (Cost $—) | 13,961 | |
| Other Investment Company 0.1% of net assets | ||
| United States 0.1% | ||
| Money Market Fund 0.1% | ||
| State Street Institutional U.S. Government Money Market Fund, Premier Class 0.46% (b) | 1,388,488 | 1,388,488 |
| Total Other Investment Company | ||
| (Cost $1,388,488) | 1,388,488 | |
End of Investments.
At 02/28/17, the tax basis cost of the fund's investments was $878,316,139 and the unrealized appreciation and depreciation were $149,397,717 and ($18,305,256), respectively, with a net unrealized appreciation of $131,092,461.
| * | Non-income producing security. |
| (a) | Fair-valued by management in accordance with procedures approved by the Board of Trustees. |
| (b) | The rate shown is the 7-day yield. |
| ADR — | American Depositary Receipt |
| GDR — | Global Depositary Receipt |
| NVDR — | Non-Voting Depositary Receipt |
| Reg'd — | Registered |
In addition to the above, the fund held the following at 02/28/17:
| Number of Contracts | Contract Value ($) | Unrealized Depreciation ($) | ||||
| Futures Contracts | ||||||
| MSCI Emerging Markets Index, e-mini, Long, expires 03/17/17 | 83 | 3,862,820 | (6,246) | |||
62
Schwab Fundamental Index ETFs | Annual Report
See financial notes
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Schwab Strategic Trust and Shareholders of:
Schwab Fundamental U.S. Broad Market Index ETF
Schwab Fundamental U.S. Large Company Index ETF
Schwab Fundamental U.S. Small Company Index ETF
Schwab Fundamental International Large Company Index ETF
Schwab Fundamental International Small Company Index ETF
Schwab Fundamental Emerging Markets Large Company Index ETF
In our opinion, the accompanying statements of assets and liabilities, including the condensed portfolio holdings, and the related statements of operations and of changes in net assets and the financial highlights (included in Item 1 of this Form N-CSR) and the portfolio holdings (included in Item 6 of this Form N-CSR) present fairly, in all material respects, the financial position of Schwab Fundamental U.S. Broad Market Index ETF, Schwab Fundamental U.S. Large Company Index ETF, Schwab Fundamental U.S. Small Company Index ETF, Schwab Fundamental International Large Company Index ETF, Schwab Fundamental International Small Company Index ETF and Schwab Fundamental Emerging Markets Large Company Index ETF (six of the funds constituting Schwab Strategic Trust, hereafter referred to as the “Funds”) as of February 28, 2017, 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 the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements, financial highlights, and portfolio holdings (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 as of February 28, 2017 by correspondence with the custodian, brokers and authorized participants, or by other appropriate auditing procedures where replies were not received, provide a reasonable basis for our opinion.
April 17, 2017
| PricewaterhouseCoopers LLP, Three Embarcadero Center, San Francisco, CA 94111-4004 |
| T: (415) 498 5000, F: (415) 498 7100, www.pwc.com/us |
Table of Contents
Item 7: Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8: Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9: Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10: Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11: Controls and Procedures.
| (a) | Based on their evaluation of Registrant’s disclosure controls and procedures, as of a date within 90 days of the filing date, Registrant’s Chief Executive Officer, Marie Chandoha and Registrant’s Chief Financial Officer, Mark Fischer, have concluded that Registrant’s disclosure controls and procedures are: (i) reasonably designed to ensure that information required to be disclosed in this report is appropriately communicated to Registrant’s officers to allow timely decisions regarding disclosures required in this report; (ii) reasonably designed to ensure that information required to be disclosed in this report is recorded, processed, summarized and reported in a timely manner; and (iii) are effective in achieving the goals described in (i) and (ii) above. |
| (b) | During the second fiscal quarter of the period covered by this report, there have been no changes in Registrant’s internal control over financial reporting that the |
Table of Contents
| above officers believe to have materially affected, or to be reasonably likely to materially affect, Registrant’s internal control over financial reporting. |
Item 12: Exhibits.
| (a) | (1) Registrant’s code of ethics (that is the subject of the disclosure required by Item 2(a)) is attached. |
| (2) | Separate certifications for Registrant’s principal executive officer and principal financial officer, as required by Rule 30a-2(a) under the 1940 Act, are attached. |
| (3) | Not applicable. |
| (b) | A certification for Registrant’s principal executive officer and principal financial officer, as required by Rule 30a-2(b) under the 1940 Act, is attached. This certification is being furnished to the Securities and Exchange Commission solely pursuant to 18 U.S.C. section 1350 and is not being filed as part of the Form N-CSR with the Commission. |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Schwab Strategic Trust – Schwab U.S. REIT ETF and Schwab Fundamental Index ETFs
| By: | /s/ Marie Chandoha | |
| Marie Chandoha | ||
| Chief Executive Officer |
Date: 04/07/17
Table of Contents
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By: | /s/ Marie Chandoha | |
| Marie Chandoha | ||
| Chief Executive Officer |
Date: 04/07/17
| By: | /s/ Mark Fischer | |
| Mark Fischer | ||
| Chief Financial Officer |
Date: 04/07/17