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 – Schwab Ariel ESG ETF
(Exact name of registrant as specified in charter)
211 Main Street, San Francisco, California 94105
(Address of principal executive offices) (Zip code)
Jonathan de St. Paer
Schwab Strategic Trust – Schwab Ariel ESG ETF
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: March 31
Date of reporting period: March 31, 2022
Item 1: Report(s) to Shareholders.
![(CHARLES SCHWAB ASSET MANAGMENT LOGO)](https://capedge.com/proxy/N-CSR/0001193125-22-163700/g260351img12d8f2ca1.jpg)
THIS FUND IS DIFFERENT FROM TRADITIONAL ETFs |
Traditional ETFs tell the public what assets they hold each day. This fund will not. This may create additional risks for your investment. For example: |
• You may have to pay more money to trade the fund’s shares. This fund will provide less information to traders, who tend to charge more for trades when they have less information. |
• The price you pay to buy fund shares on an exchange may not match the value of the fund’s portfolio. The same is true when you sell shares. These price differences may be greater for this fund compared to other ETFs because it provides less information to traders. |
• These additional risks may be even greater in bad or uncertain market conditions. |
• The ETF will publish on its website each day a “Proxy Portfolio” designed to help trading in shares of the ETF. While the Proxy Portfolio includes some of the ETF’s holdings, it is not the ETF’s actual portfolio. |
The differences between this fund and other ETFs may also have advantages. By keeping certain information about the fund secret, this fund may face less risk that other traders can predict or copy its investment strategy. This may improve the fund’s performance. If other traders are able to copy or predict the fund’s investment strategy, however, this may hurt the fund’s performance. |
For additional information regarding the unique attributes and risks of the fund, see Proxy Portfolio Risk, Premium/Discount Risk, Trading Halt Risk, Authorized Participant Concentration Risk, Tracking Error Risk and Shares of the Fund May Trade at Prices Other Than NAV in the Principal Risks and Proxy Portfolio and Proxy Overlap sections of the prospectus and/or the Statement of Additional Information. These risks are also discussed in the Financial Notes of this report. |
Total Returns for the 12 Months Ended March 31, 2022 | |
Schwab Ariel ESG ETF (Ticker Symbol: SAEF) | |
Market Price Return1 | -8.34% * |
NAV Return1 | -8.46% * |
Russell 2500TM Index | -9.91% * |
Fund Category: Mid-Cap Blend2 | N/A |
Performance Details | pages 5-7 |
* | Total returns shown are since the fund’s inception date of November 16, 2021. |
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 fair 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 using the Official Closing Price on the primary stock exchange (generally, 4:00 p.m. Eastern time) and may not represent the returns you would receive if shares were traded at other times. 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. |
![](https://capedge.com/proxy/N-CSR/0001193125-22-163700/g260351imgdc610b8d2.jpg)
President of Schwab Asset
Management and the fund
covered in this report.
![](https://capedge.com/proxy/N-CSR/0001193125-22-163700/g260351img9f1d0e373.jpg)
![](https://capedge.com/proxy/N-CSR/0001193125-22-163700/g260351imga93f4a464.jpg)
* | The net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes. |
* | Inception represents the date that the shares began trading in the secondary market. |
![](https://capedge.com/proxy/N-CSR/0001193125-22-163700/g260351lg_2mgc.jpg)
Fund and Inception Date | Since Inception* |
Fund: Schwab Ariel ESG ETF (11/16/2021) | |
Market Price Return2 | -8.34% |
NAV Return2 | -8.46% |
Russell 2500TM Index | -9.91% |
Fund Category: Mid-Cap Blend3 | N/A |
Fund Expense Ratio4: 0.59% |
* | Inception (11/16/21) 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 or sale 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 fair 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 using the Official Closing Price on the primary stock exchange (generally, 4:00 p.m. Eastern time) and may not represent the returns you would receive if shares were traded at other times. 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. |
Number of Holdings | 62 |
Weighted Average Market Cap (millions) | $16,652 |
Price/Earnings Ratio (P/E) | 14.3 |
Price/Book Ratio (P/B) | 2.2 |
Portfolio Turnover Rate | 15% 1,2 |
![](https://capedge.com/proxy/N-CSR/0001193125-22-163700/g260351img58127c085.jpg)
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1 | Not annualized. |
2 | Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions. |
3 | The percentage may differ from the Portfolio Holdings because the above calculation is based on a percentage of total investments, whereas the calculation in the Portfolio Holdings is based on a percentage of net assets. |
4 | This list is not a recommendation of any security by the investment adviser. |
EXPENSE RATIO (ANNUALIZED) 1 | BEGINNING ACCOUNT VALUE AT 10/1/21 | ENDING ACCOUNT VALUE (NET OF EXPENSES) AT 3/31/222 | EXPENSES PAID DURING PERIOD 10/1/21-3/31/222 | |
Schwab Ariel ESG ETF | ||||
Actual Return | 0.59% | $1,000.00 | $ 915.40 | $2.11 |
Hypothetical 5% Return | 0.59% | $1,000.00 | $1,021.99 | $2.97 |
1 | The expense ratio provided for the fund is for the period from 11/16/21 (commencement of operations) through 3/31/22. See financial note 4. |
2 | Actual expenses for the fund are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by the 136 days of the period from commencement of operations on 11/16/21 through 3/31/22, and divided by 365 days of the fiscal year. Hypothetical expenses for the fund are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by the 182 days of the period, and divided by 365 days of the fiscal year. |
11/16/21 1– 3/31/22 | ||||||
Per-Share Data | ||||||
Net asset value at beginning of period | $25.00 | |||||
Income (loss) from investment operations: | ||||||
Net investment income (loss)2 | 0.05 | |||||
Net realized and unrealized gains (losses) | (2.16) | |||||
Total from investment operations | (2.11) | |||||
Less distributions: | ||||||
Distributions from net investment income | (0.05) | |||||
Net asset value at end of period | $22.84 | |||||
Total return | (8.46%) 3 | |||||
Ratios/Supplemental Data | ||||||
Ratios to average net assets: | ||||||
Total expenses | 0.59% 4 | |||||
Net investment income (loss) | 0.61% 4 | |||||
Portfolio turnover rate5 | 15% 3 | |||||
Net assets, end of period (x 1,000) | $10,622 |
1 | Commencement of operations. |
2 | Calculated based on the average shares outstanding during the period. |
3 | Not annualized. |
4 | Annualized. |
5 | Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions. |
SECURITY | NUMBER OF SHARES | VALUE ($) |
COMMON STOCKS 98.3% OF NET ASSETS | ||
Automobiles & Components 3.2% | ||
BorgWarner, Inc. | 3,487 | 135,644 |
Gentex Corp. | 6,975 | 203,461 |
339,105 | ||
Banks 2.1% | ||
M&T Bank Corp. | 1,337 | 226,621 |
Capital Goods 13.8% | ||
Generac Holdings, Inc. * | 618 | 183,707 |
Kennametal, Inc. | 6,625 | 189,541 |
Masco Corp. | 1,906 | 97,206 |
nVent Electric plc | 6,053 | 210,523 |
Resideo Technologies, Inc. * | 11,467 | 273,259 |
Sensata Technologies Holding plc * | 3,035 | 154,330 |
Simpson Manufacturing Co., Inc. | 1,024 | 111,657 |
Snap-on, Inc. | 651 | 133,767 |
The Middleby Corp. * | 651 | 106,725 |
1,460,715 | ||
Commercial & Professional Services 9.9% | ||
Brady Corp., Class A | 1,860 | 86,062 |
Dun & Bradstreet Holdings, Inc. * | 8,928 | 156,419 |
Korn Ferry | 1,242 | 80,655 |
Nielsen Holdings plc | 9,264 | 252,351 |
Stericycle, Inc. * | 3,627 | 213,703 |
The Brink's Co. | 3,895 | 264,860 |
1,054,050 | ||
Consumer Durables & Apparel 3.1% | ||
Mattel, Inc. * | 9,555 | 212,217 |
Mohawk Industries, Inc. * | 930 | 115,506 |
327,723 | ||
Consumer Services 8.5% | ||
ADT, Inc. | 21,156 | 160,574 |
Adtalem Global Education, Inc. * | 2,880 | 85,565 |
Lindblad Expeditions Holdings, Inc. * | 10,737 | 161,914 |
Norwegian Cruise Line Holdings Ltd. * | 10,122 | 221,469 |
OneSpaWorld Holdings Ltd. * | 26,237 | 267,618 |
897,140 | ||
Diversified Financials 7.7% | ||
KKR & Co., Inc. | 3,720 | 217,508 |
Lazard Ltd., Class A | 4,453 | 153,629 |
Northern Trust Corp. | 2,138 | 248,970 |
The Goldman Sachs Group, Inc. | 606 | 200,041 |
820,148 | ||
SECURITY | NUMBER OF SHARES | VALUE ($) |
Food & Staples Retailing 1.3% | ||
Walgreens Boots Alliance, Inc. | 2,976 | 133,236 |
Food, Beverage & Tobacco 1.3% | ||
The JM Smucker Co. | 1,035 | 140,149 |
Health Care Equipment & Services 7.8% | ||
Cardinal Health, Inc. | 1,767 | 100,189 |
Envista Holdings Corp. * | 4,427 | 215,639 |
Laboratory Corp. of America Holdings * | 682 | 179,816 |
Patterson Cos., Inc. | 4,536 | 146,830 |
Zimmer Biomet Holdings, Inc. | 1,435 | 183,537 |
Zimvie, Inc. * | 143 | 3,266 |
829,277 | ||
Household & Personal Products 1.0% | ||
Reynolds Consumer Products, Inc. | 3,606 | 105,800 |
Insurance 6.2% | ||
Aflac, Inc. | 3,895 | 250,799 |
First American Financial Corp. | 3,069 | 198,932 |
The Progressive Corp. | 1,825 | 208,032 |
657,763 | ||
Materials 1.3% | ||
Axalta Coating Systems Ltd. * | 5,394 | 132,585 |
Media & Entertainment 9.3% | ||
Madison Square Garden Entertainment Corp. * | 3,662 | 305,081 |
Madison Square Garden Sports Corp. * | 744 | 133,444 |
Manchester United plc, Class A | 12,741 | 184,362 |
Paramount Global, Class B | 5,229 | 197,709 |
The Interpublic Group of Cos., Inc. | 4,765 | 168,919 |
989,515 | ||
Pharmaceuticals, Biotechnology & Life Sciences 4.0% | ||
Bio-Rad Laboratories, Inc., Class A * | 221 | 124,474 |
Charles River Laboratories International, Inc. * | 537 | 152,492 |
Prestige Consumer Healthcare, Inc. * | 2,782 | 147,279 |
424,245 | ||
Real Estate 3.4% | ||
CBRE Group, Inc., Class A * | 1,953 | 178,739 |
Jones Lang LaSalle, Inc. * | 766 | 183,426 |
362,165 | ||
Retailing 0.8% | ||
CarMax, Inc. * | 930 | 89,726 |
SECURITY | NUMBER OF SHARES | VALUE ($) |
Software & Services 5.9% | ||
Fair Isaac Corp. * | 558 | 260,284 |
Fiserv, Inc. * | 2,232 | 226,325 |
The Hackett Group, Inc. | 6,279 | 144,794 |
631,403 | ||
Technology Hardware & Equipment 7.7% | ||
Keysight Technologies, Inc. * | 1,111 | 175,505 |
Knowles Corp. * | 5,095 | 109,695 |
Littelfuse, Inc. | 675 | 168,352 |
Motorola Solutions, Inc. | 741 | 179,470 |
Zebra Technologies Corp., Class A * | 440 | 182,028 |
815,050 | ||
Total Common Stocks (Cost $10,965,386) | 10,436,416 |
SECURITY | NUMBEROF SHARES | VALUE ($) |
SHORT-TERM INVESTMENTS 1.7% OF NET ASSETS | ||
Money Market Funds 1.7% | ||
State Street Institutional U.S. Government Money Market Fund, Premier Class 0.25% (a) | 183,955 | 183,955 |
Total Short-Term Investments (Cost $183,955) | 183,955 | |
Total Investments in Securities (Cost $11,149,341) | 10,620,371 |
* | Non-income producing security. |
(a) | The rate shown is the 7-day yield. |
DESCRIPTION | QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1) | OTHER SIGNIFICANT OBSERVABLE INPUTS (LEVEL 2) | SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3) | TOTAL |
Assets | ||||
Common Stocks1 | $10,436,416 | $— | $— | $10,436,416 |
Short-Term Investments1 | 183,955 | — | — | 183,955 |
Total | $10,620,371 | $— | $— | $10,620,371 |
1 | As categorized in the Portfolio Holdings. |
Assets | ||
Investments in securities, at value - unaffiliated (cost $11,149,341) | $10,620,371 | |
Receivables: | ||
Dividends | + | 6,428 |
Total assets | 10,626,799 | |
Liabilities | ||
Payables: | ||
Management fees | + | 5,127 |
Total liabilities | 5,127 | |
Net assets | $10,621,672 | |
Net Assets by Source | ||
Capital received from investors | $11,180,064 | |
Total distributable loss | + | (558,392) |
Net assets | $10,621,672 |
Net Asset Value (NAV) | ||||
Net Assets | ÷ | Shares Outstanding | = | NAV |
$10,621,672 | 465,000 | $22.84 | ||
For the period November 16, 2021* through March 31, 2022 | ||
Investment Income | ||
Dividends received from securities - unaffiliated | $37,588 | |
Expenses | ||
Management fees | 18,454 | |
Total expenses | – | 18,454 |
Net investment income | 19,134 | |
REALIZED AND UNREALIZED GAINS (LOSSES) | ||
Net realized losses on sales of securities - unaffiliated | (31,335) | |
Net change in unrealized appreciation (depreciation) on securities - unaffiliated | + | (528,970) |
Net realized and unrealized losses | (560,305) | |
Decrease in net assets resulting from operations | ($541,171) |
* | Commencement of operations. |
OPERATIONS | ||
11/16/21 1-3/31/22 | ||
Net investment income | $19,134 | |
Net realized losses | (31,335) | |
Net change in unrealized appreciation (depreciation) | + | (528,970) |
Decrease in net assets from operations | ($541,171) | |
DISTRIBUTIONS TO SHAREHOLDERS | ||
Total distributions | ($18,371) |
TRANSACTIONS IN FUND SHARES | |||
11/16/21 1-3/31/22 | |||
SHARES | VALUE | ||
Shares sold | 465,000 | $11,181,214 | |
Net transactions in fund shares | 465,000 | $11,181,214 | |
SHARES OUTSTANDING AND NET ASSETS | |||
11/16/21 1-3/31/22 | |||
SHARES | NET ASSETS | ||
Beginning of period | — | $— | |
Total increase | + | 465,000 | 10,621,672 |
End of period | 465,000 | $10,621,672 |
1 | Commencement of operations. |
SCHWAB STRATEGIC TRUST (ORGANIZED JANUARY 27, 2009) | |
Schwab Ariel ESG ETF | Schwab U.S. TIPS ETF |
Schwab U.S. REIT ETF | Schwab Short-Term U.S. Treasury ETF |
Schwab 1000 Index® ETF | Schwab Intermediate-Term U.S. Treasury ETF |
Schwab U.S. Broad Market ETF | Schwab Long-Term U.S. Treasury ETF |
Schwab U.S. Large-Cap ETF | Schwab U.S. Aggregate Bond ETF |
Schwab U.S. Large-Cap Growth ETF | Schwab 1-5 Year Corporate Bond ETF |
Schwab U.S. Large-Cap Value ETF | Schwab 5-10 Year Corporate Bond ETF |
Schwab U.S. Mid-Cap ETF | Schwab Fundamental U.S. Broad Market Index ETF |
Schwab U.S. Small-Cap ETF | Schwab Fundamental U.S. Large Company Index ETF |
Schwab U.S. Dividend Equity ETF | Schwab Fundamental U.S. Small Company Index ETF |
Schwab International 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 |
PURCHASES OF SECURITIES | SALES OF SECURITIES |
$1,940,425 | $1,281,720 |
9. In-Kind Transactions: |
IN-KIND PURCHASES OF SECURITIES | IN-KIND SALES OF SECURITIES |
$10,338,017 | $0 |
TAX COST | GROSS UNREALIZED APPRECIATION | GROSS UNREALIZED DEPRECIATION | NET UNREALIZED APPRECIATION (DEPRECIATION) |
$11,164,005 | $327,372 | ($871,006) | ($543,634) |
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS | CAPITAL LOSS CARRYFORWARDS AND OTHER LOSSES | TOTAL |
($543,634) | ($14,758) | ($558,392) |
CURRENT FISCAL PERIOD END DISTRIBUTIONS | |
ORDINARY INCOME | |
$18,371 |
Denver, Colorado
May 17, 2022
1. | the nature, extent and quality of the services to be provided to the Fund under the Agreements, including the resources of CSIM and its affiliates, and Ariel, to be dedicated to the Fund; |
2. | CSIM’s and Ariel’s investment performance in managing other funds having relevant investment objectives and strategies; |
3. | the Fund’s estimated expenses and how those expenses compared to those of certain other similar exchange-traded funds; |
4. | the expected profitability of CSIM and its affiliates, including Charles Schwab & Co., Inc. (Schwab), with respect to management of other funds, including both direct and indirect benefits accruing to CSIM and its affiliates, as well as the expected profitability of Ariel; and |
5. | the extent to which economies of scale would be realized as the Fund grows and whether fee levels in the Agreements reflect those economies of scale for the benefit of Fund investors. |
1 | The meeting on February 24, 2021 was held by means of videoconference in reliance on exemptive relief from the in-person voting requirement under the 1940 Act as provided by the Securities and Exchange Commission. |
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. | 103 | None |
Nancy F. Heller 1956 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2018) | Retired. | 103 | 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. | 103 | Director (2004 – present), Corcept Therapeutics Incorporated Director (2009 – 2021), Adamas Pharmaceuticals, Inc. Director (2003 – 2019), Symantec Corporation |
Jane P. Moncreiff 1961 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2019) | Consultant (2018 – present), Fulham Advisers LLC (management consulting); Chief Investment Officer (2009 – 2017), CareGroup Healthcare System, Inc. (healthcare). | 103 | None |
Kiran M. Patel 1948 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016) | Retired. | 103 | Director (2008 – present), KLA-Tencor Corporation |
Independent Trustees (continued) | |||
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served1) | Principal Occupations During the Past Five Years | Number of Portfolios in Fund Complex Overseen by the Trustee | Other Directorships |
Kimberly S. Patmore 1956 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016) | Consultant (2008 – present), Patmore Management Consulting (management consulting). | 103 | None |
J. Derek Penn 1957 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2021) | Head of Equity Sales and Trading (2006 – 2018), BNY Mellon (financial services). | 103 | None |
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 and Chief Executive Officer (Oct. 2008 – present) and President (Feb. 2007 – Oct. 2021), The Charles Schwab Corporation; President and Chief Executive Officer (Oct. 2008 – Oct. 2021) and Director (May 2008 – Oct. 2021), Charles Schwab & Co., Inc.; Director (Apr. 2006 – present), Charles Schwab Bank, SSB; Director (Nov. 2017 – present), Charles Schwab Premier Bank, SSB; Director (July 2019 – present), Charles Schwab Trust Bank; Director (May 2008 – present) and President and Chief Executive Officer (Aug. 2017 – present), Schwab Holdings, Inc.; Director (Oct. 2020 – present), TD Ameritrade Holding Corporation; Director (July 2016 – Oct. 2021), Charles Schwab Investment Management, Inc. | 103 | Director (2008 – present), The Charles Schwab Corporation |
Joseph R. Martinetto2 1962 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016) | Chief Operating Officer (Feb. 2018 – present), The Charles Schwab Corporation; Senior Executive Vice President (July 2015 – present), Charles Schwab & Co., Inc.; Director (May 2007 – present), Charles Schwab & Co., Inc.; Director (Apr. 2010 – Apr. 2020), Charles Schwab Bank, SSB; Director (Nov. 2017 – Apr. 2020), Charles Schwab Premier Bank, SSB; Director (May 2007 – Apr. 2020), and Senior Executive Vice President (Feb. 2016 – present), Schwab Holdings, Inc.; Director (Oct. 2020 – present), TD Ameritrade Holding Corporation. | 103 | None |
Officers of the Trust | |
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served3) | Principal Occupations During the Past Five Years |
Jonathan de St. Paer 1973 President and Chief Executive Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2018) | Director (Apr. 2019 – present), President (Oct. 2018 – present), Chief Operating Officer (Jan. 2020 – present), and Chief Executive Officer (Apr. 2019 – Nov. 2019), Charles Schwab Investment Management, Inc.; Senior Vice President (June 2020 – Mar. 2022) and Chief Operating Officer (Jan. 2020 – Mar. 2022), Charles Schwab Investment Advisory, Inc.; Chief Executive Officer (Apr. 2019 – present), President (Nov. 2018 – present) and Trustee (Apr. 2019 – Dec. 2020), Schwab Funds, Laudus Trust and Schwab ETFs; Director (Apr. 2019 – Apr. 2022), Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited; Senior Vice President (Apr. 2019 – present), and Senior Vice President – Strategy and Product Development (CSIM) (Jan. 2014 – Mar. 2019), Charles Schwab & Co., Inc. |
Mark Fischer 1970 Treasurer, Chief Financial Officer and Chief Operating Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2013) | Treasurer and Chief Financial Officer (Jan. 2016 – present) and Chief Operating Officer (Dec. 2020 – present), Schwab Funds, Laudus Trust and Schwab ETFs; Chief Financial Officer (Mar. 2020 – present) and Vice President (Oct. 2013 – present), Charles Schwab Investment Management, Inc.; Director (July 2020 – Apr. 2022), Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited. |
Omar Aguilar 1970 Vice President and Chief Investment Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011) | Chief Executive Officer (Jan. 2022 – present) and Chief Investment Officer (Apr. 2011 – present), Senior Vice President (Apr. 2011 – Dec. 2021), Charles Schwab Investment Management, Inc.; Vice President and Chief Investment Officer (June 2011 – present), Schwab Funds, Laudus Trust and Schwab ETFs. |
Brett Wander 1961 Vice President and Chief Investment Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011) | Senior Vice President and Chief Investment Officer (Apr. 2011 – present), Charles Schwab Investment Management, Inc.; Vice President and Chief Investment Officer (June 2011 – present), Schwab Funds, Laudus Trust and Schwab ETFs. |
William P. McMahon, Jr. 1972 Vice President and Chief Investment Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2021) | Senior Vice President and Chief Investment Officer (Jan. 2020 – present), Charles Schwab Investment Management, Inc.; Vice President and Chief Investment Officer (June 2021 – present), Schwab Funds, Laudus Trust and Schwab ETFs; Senior Vice President and Chief Investment Officer – ThomasPartners Strategies (Apr. 2018 – Dec. 2019), Charles Schwab Investment Advisory, Inc.; Senior Vice President and Chief Investment Officer (May 2001 – Apr. 2018), ThomasPartners, Inc. |
Catherine MacGregor 1964 Chief Legal Officer and Secretary, Schwab Funds and Schwab ETFs Chief Legal Officer, Vice President and Clerk, Laudus Trust (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) | Chief Legal Officer (Mar. 2022 – present) and Vice President (Sept. 2005 – present), Charles Schwab Investment Management, Inc.; Vice President (July 2005 – present), Charles Schwab & Co., Inc.; Vice President (Dec. 2005 – present) and Chief Legal Officer and Clerk (Mar. 2007 – present), Laudus Trust; Chief Legal Officer and Secretary (Oct. 2021 – present), Vice President (Nov. 2005 – Oct. 2021) and Assistant Secretary (June 2007 – Oct. 2021), Schwab Funds; Chief Legal Officer and Secretary (Oct. 2021 – present), Vice President and Assistant Secretary (Oct. 2009 – Oct. 2021), Schwab ETFs. |
1 | Each Trustee shall hold office until the election and qualification of his or her successor, or until he or she dies, resigns or is removed. The retirement policy requires that each independent trustee retire by December 31 of the year in which the Trustee turns 74 or the Trustee’s twentieth year of service as an independent trustee on any trust in the Fund Complex, whichever occurs first. |
2 | Mr. Bettinger and Mr. Martinetto are Interested Trustees. Mr. Bettinger is an Interested Trustee because he owns stock of The Charles Schwab Corporation (CSC), the parent company of Charles Schwab Investment Management, Inc., the investment adviser for the trusts in the Fund Complex, and is an employee of Charles Schwab & Co., Inc. (Schwab), the principal underwriter for The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust. Mr. Martinetto is an Interested Trustee because he owns stock of CSC and is an employee and director of Schwab. |
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. |
Schwab ETFs
Index ETF
Printed on recycled paper.
* | FUNDAMENTAL INDEX is a registered trademark of Research Affiliates LLC. |
• | You may have to pay more money to trade the fund’s shares. This fund will provide less information to traders, who tend to charge more for trades when they have less information. |
• | The price you pay to buy fund shares on an exchange may not match the value of the fund’s portfolio. The same is true when you sell shares. These price differences may be greater for this fund compared to other ETFs because it provides less information to traders. |
• | These additional risks may be even greater in bad or uncertain market conditions. |
• | The ETF will publish on its website each day a “Proxy Portfolio” designed to help trading in shares of the ETF. While the Proxy Portfolio includes some of the ETF’s holdings, it is not the ETF’s actual portfolio. |
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 13(a)(1) of Form N-CSR. |
Item 3: Audit Committee Financial Expert.
Registrant’s Board of Trustees has determined that Kiran M. Patel, Kimberly S. Patmore and J. Derek Penn, 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, Ms. Patmore and Mr. Penn 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.
Item 4: Principal Accountant Fees and Services.
Registrant is composed of twenty-seven operational series. One has a fiscal year-end of March 31, whose annual financial statements are reported in Item 1, seven series have a fiscal year-end of the last day of February, twelve series have a fiscal year-end of August 31, and seven series have a fiscal year-end of December 31. Principal accountant fees disclosed in Items 4(a)-(d) and 4(g) include fees billed for services rendered to each of the twenty-seven operational series during 2021/2022 and the twenty-five operational series during 2020/2021, based on their respective 2021/2022 and 2020/2021 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 Fees1 | (b)Audit-Related Fees | (c) Tax Fees2 | (d) All Other Fees | |||||||||||
Fiscal Year 2021/2022 | Fiscal Year 2020/2021 | Fiscal Year 2021/2022 | Fiscal Year 2020/2021 | Fiscal Year 2021/2022 | Fiscal Year 2020/2021 | Fiscal Year 2021/2022 | Fiscal Year 2020/2021 | |||||||
$468,400 | $450,900 | $0 | $0 | $83,700 | $77,500 | $0 | $0 |
1 The nature of the services includes audit of the registrant’s annual financial statements and normally provided services in connection with regulatory filings for those fiscal years.
2 The nature of the services includes tax compliance, tax advice and tax planning.
(e) (1) Registrant’s audit, compliance and valuation 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, compliance and valuation committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X) that were approved by Registrant’s audit, compliance and valuation 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.
2021/2022: $2,320,631 2020/2021: $4,326,956
(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, compliance and valuation 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, compliance and valuation committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Registrant’s audit, compliance and valuation committee members are Kiran M. Patel, J. Derek Penn and Kimberly S. Patmore.
Item 6: Schedule of Investments.
The schedules of investments are included as part of the report to shareholders filed under Item 1 of this Form.
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, Jonathan de St. Paer 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 period covered by this report, there have been no changes in Registrant’s internal control over financial reporting that the above officers believe to have materially affected, or to be reasonably likely to materially affect, Registrant’s internal control over financial reporting. |
Item 12: Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable.
Item 13: Exhibits.
(a) (1) |
(2) |
(3) | Not applicable. |
(b) |
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 Ariel ESG ETF
By: | /s/ Jonathan de St. Paer | |
Jonathan de St. Paer Chief Executive Officer | ||
Date: | May 17, 2022 |
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/ Jonathan de St. Paer | |
Jonathan de St. Paer Chief Executive Officer | ||
Date: | May 17, 2022 | |
By: | /s/ Mark Fischer | |
Mark Fischer Chief Financial Officer | ||
Date: | May 17, 2022 |