N-Q 1 f30116nvq.htm FORM N-Q nvq
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS
OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-22311
Schwab Strategic Trust – Schwab U.S. REIT ETF
(Exact name of registrant as specified in charter)
211 Main Street, San Francisco, California 94105
(Address of principal executive offices) (Zip code)
Marie Chandoha
Schwab Strategic Trust
211 Main Street, San Francisco, California 94105
(Name and address of agent for service)
Registrant’s telephone number, including area code: (415) 636-7000
Date of fiscal year end: February 28
Date of reporting period: May 31, 2013
 
 
Item 1. Schedule of Investments.

 

 

Schwab Strategic Trust
Schwab U.S. REIT ETF™
 
Portfolio Holdings as of May 31, 2013 (Unaudited)
 
 
The following are the portfolio holdings as of the report date. For more information, please refer to the fund’s semiannual or annual shareholder reports.
 
                         
        Cost
 		  Value
Holdings by Category   ($)   ($)
 
  99 .9%   Common Stock     549,355,051       584,807,919  
  0 .1%   Other Investment Companies     381,427       381,799  
 
 
  100 .0%   Total Investments     549,736,478       585,189,718  
  (0 .0)%   Other Assets and
Liabilities, Net 		            (101,037 )
 
 
  100 .0%   Net Assets             585,088,681  
 
                 
    Number
 		  Value
Security   of Shares   ($)
 
 Common Stock 99.9% of net assets
 
Diversified REITs 6.4%
Cousins Properties, Inc.
    131,317       1,355,192  
Duke Realty Corp.
    415,127       6,878,654  
First Potomac Realty Trust
    74,701       1,021,910  
Liberty Property Trust
    156,293       6,342,370  
PS Business Parks, Inc.
    23,382       1,784,280  
Vornado Realty Trust
    219,912       17,581,964  
Washington REIT
    86,852       2,416,223  
                 
              37,380,593  
 
Industrial REITs 5.6%
DCT Industrial Trust, Inc.
    366,775       2,706,799  
EastGroup Properties, Inc.
    39,187       2,303,020  
First Industrial Realty Trust, Inc.
    127,140       2,147,395  
ProLogis, Inc.
    641,152       25,838,426  
                 
              32,995,640  
 
Office REITs 14.7%
Alexandria Real Estate Equities, Inc.
    91,745       6,284,533  
BioMed Realty Trust, Inc.
    238,167       4,984,835  
Boston Properties, Inc.
    196,699       20,964,179  
Brandywine Realty Trust
    196,775       2,786,334  
CommonWealth REIT
    154,805       3,164,214  
Corporate Office Properties Trust
    112,135       2,986,155  
Digital Realty Trust, Inc.
    162,150       9,876,557  
Douglas Emmett, Inc.
    171,781       4,378,698  
DuPont Fabros Technology, Inc.
    86,602       2,098,366  
Franklin Street Properties Corp.
    106,743       1,453,840  
Highwoods Properties, Inc.
    105,419       3,839,360  
Kilroy Realty Corp.
    97,914       5,180,630  
Mack-Cali Realty Corp.
    109,358       2,897,987  
Parkway Properties, Inc.
    53,991       927,565  
Piedmont Office Realty Trust, Inc., Class A
    219,603       4,170,261  
SL Green Realty Corp.
    118,425       10,300,606  
                 
              86,294,120  
 
Residential REITs 18.0%
American Campus Communities, Inc.
    136,851       5,587,626  
Apartment Investment & Management Co., Class A
    190,741       5,771,823  
AvalonBay Communities, Inc.
    157,701       20,920,615  
BRE Properties, Inc.
    99,603       4,979,154  
Camden Property Trust
    109,593       7,589,315  
Colonial Properties Trust
    108,672       2,402,738  
Education Realty Trust, Inc.
    147,886       1,546,888  
Equity Lifestyle Properties, Inc.
    49,948       3,854,487  
Equity Residential
    415,528       23,498,108  
Essex Property Trust, Inc.
    49,652       7,802,315  
Home Properties, Inc.
    67,565       4,105,925  
Mid-America Apartment Communities, Inc.
    55,349       3,762,072  
Post Properties, Inc.
    71,599       3,422,432  
Sun Communities, Inc.
    41,671       2,082,300  
UDR, Inc.
    323,560       7,885,157  
                 
              105,210,955  
 
Retail REITs 26.7%
Acadia Realty Trust
    70,026       1,815,074  
CBL & Associates Properties, Inc.
    210,907       4,848,752  
Cedar Realty Trust, Inc.
    73,185       420,814  
DDR Corp.
    317,686       5,546,797  
Equity One, Inc.
    80,808       1,885,251  
Federal Realty Investment Trust
    84,260       9,079,015  
General Growth Properties, Inc.
    584,281       11,995,289  
Glimcher Realty Trust
    185,676       2,168,696  
Inland Real Estate Corp.
    103,193       1,059,792  
Kimco Realty Corp.
    529,062       11,718,723  
Kite Realty Group Trust
    107,046       649,769  
Pennsylvania REIT
    84,252       1,675,772  
Ramco-Gershenson Properties Trust
    76,767       1,198,333  
Regency Centers Corp.
    118,185       6,098,346  
Rouse Properties, Inc.
    29,479       592,823  
Saul Centers, Inc.
    16,478       738,050  
Simon Property Group, Inc.
    407,479       67,820,805  
Tanger Factory Outlet Centers
    123,019       4,241,695  
Taubman Centers, Inc.
    81,741       6,586,690  
The Macerich Co.
    178,512       11,587,214  
Weingarten Realty Investors
    146,145       4,659,102  
                 
              156,386,802  
 
Specialized REITs 28.5%
Ashford Hospitality Trust
    81,079       1,071,054  
CubeSmart
    158,715       2,483,890  
DiamondRock Hospitality Co.
    255,756       2,432,240  
Extra Space Storage, Inc.
    134,704       5,642,750  
FelCor Lodging Trust, Inc. *
    144,589       890,668  
HCP, Inc.
    588,304       27,873,843  
Health Care REIT, Inc.
    365,111       24,838,501  
Healthcare Realty Trust, Inc.
    116,264       3,093,785  
 
 
 
 1

 

 
 Schwab U.S. REIT ETF
 

 
Portfolio Holdings (Unaudited) continued
 
                 
    Number
 		  Value
Security   of Shares   ($)
Hersha Hospitality Trust
    226,265       1,294,236  
Hospitality Properties Trust
    178,428       5,206,529  
Host Hotels & Resorts, Inc.
    941,710       16,753,021  
LaSalle Hotel Properties
    124,873       3,296,647  
LTC Properties, Inc.
    44,982       1,871,701  
Pebblebrook Hotel Trust
    80,240       2,105,498  
Public Storage
    187,596       28,477,073  
Senior Housing Properties Trust
    242,720       6,274,312  
Sovran Self Storage, Inc.
    39,807       2,582,280  
Sunstone Hotel Investors, Inc. *
    207,649       2,504,247  
Universal Health Realty Income Trust
    16,512       745,847  
Ventas, Inc.
    379,735       27,101,687  
                 
              166,539,809  
                 
Total Common Stock
(Cost $549,355,051)     584,807,919  
         
                 
                 
 
 Other Investment Companies 0.1% of net assets
 
Equity Fund 0.0%
SPDR Dow Jones REIT ETF
    100       7,792  
 
Money Market Fund 0.1%
State Street Institutional U.S. Government Money Market Fund
    374,007       374,007  
                 
Total Other Investment Companies
(Cost $381,427)     381,799  
         
 
End of Investments
 
At 05/31/13, the tax basis cost of the fund’s investments was $550,103,732 and the unrealized appreciation and depreciation were $40,834,699 and ($5,748,713), respectively, with a net unrealized appreciation of $35,085,986.
 
* Non-income producing security.
 
     
ETF —
  Exchange Traded Fund
REIT —
  Real Estate Investment Trust
 
 
Under procedures approved by the fund’s Board of Trustees (the “Board”), the investment adviser has formed a Pricing Committee to administer the pricing and valuation of portfolio securities and other assets and to ensure that prices used for internal purposes or provided by third parties reasonably reflect fair market value. Among other things, these procedures allow the fund to utilize independent pricing services, quotations from securities and financial instrument dealers and other market sources to determine fair value.
 
The fund values the securities in its portfolio every business day. The fund uses the following policies to value various types of securities:
 
  •  Securities traded on an exchange or over-the-counter: Traded securities are valued at the closing value for the day, or, on days when no closing value has been reported, at halfway between the most recent bid and ask quotes. Securities that are primarily traded on foreign exchanges are valued at the official closing price or the last sales price on the exchange where the securities are principally traded with these values then translated into U.S. dollars at the current exchange rate, unless these securities are fair valued as discussed below.
 
  •  Securities for which no quoted value is available: The Board has adopted procedures to fair value the fund’s securities when market prices are not “readily available” or are unreliable. For example, a fund may fair value a security when it is 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 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 fund pursuant to the valuation procedures.
 
  •  Short-term securities (60 days or less to maturity): Short-term securities are valued at amortized cost, which approximates market value.
 
 
 
2 

 

 
 Schwab U.S. REIT ETF
 

 
Portfolio Holdings (Unaudited) continued
 
  •  Underlying funds: Mutual funds are valued at their respective net asset values. 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 generally accepted accounting principles in the United States of America (GAAP), the fund discloses the fair value of its investments in a hierarchy that prioritizes the 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. Investments in mutual funds are valued daily at their NAVs, which are classified as Level 1 prices.
 
  •  Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) — Investments that trade in markets that are not considered to be active, but whose values are based on quoted market prices, dealer quotations or valuations provided by alternative pricing sources supported by observable inputs are classified as Level 2 prices. These generally include U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, certain mortgage products, less liquid listed equities, and state, municipal and provincial obligations. As investments whose values are classified as Level 2 prices include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.
 
  •  Level 3 — significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments) — Investments whose values are classified as Level 3 prices have significant unobservable inputs, as they may trade infrequently or not at all. When observable prices are not available for these securities, the fund uses one or more valuation techniques for which sufficient and reliable data is available. The inputs used by the fund in estimating the value of Level 3 prices may include the original transaction price, quoted prices for similar securities or assets in active markets, completed or pending third-party transactions in the underlying investment or comparable issuers, and changes in financial ratios or cash flows. Level 3 prices may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the fund in the absence of market information. Assumptions used by the fund due to the lack of observable inputs may significantly impact the resulting fair value and therefore the fund’s results of operations.
 
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following is a summary of the inputs used to value the fund’s investments as of May 31, 2013:
 
                                 
    Quoted Prices in
 		      Significant
 		   
    Active Markets for
 		  Significant Other
 		  Unobservable
 		   
    Identical Assets
 		  Observable Inputs
 		  Inputs
 		   
Description
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
Total2
 
Common Stock1
    $584,807,919       $—       $—       $584,807,919  
Other Investment Companies1
    381,799       —       —       381,799  
                                 
Total
    $585,189,718       $—       $—       $585,189,718  
                                 
 
     
1
  As categorized in Portfolio Holdings.
2
  The fund had no Other Financial Instruments.
 
 
 
 3

 

 
 Schwab U.S. REIT ETF
 

 
Portfolio Holdings (Unaudited) continued
 
The fund’s policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were no transfers between Level 1, Level 2 and Level 3 for the period ended May 31, 2013.
 
REG66362MAY13
 
 
 
4 

 

Item 2. 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 Principal Financial Officer, George Pereira, 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 Registrant’s last fiscal quarter, there have been no changes in Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) 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 3. Exhibits.
Separate certifications for Registrant’s principal executive officer and principal financial officer, as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2(a)), are attached.
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    
 
        
By:
   /s/ Marie Chandoha    
 
 
 
Marie Chandoha 		   
 
  Chief Executive Officer    
 
        
Date:
  July 25, 2013    
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:
  July 25, 2013    
 
        
By:
   /s/ George Pereira    
 
 
 
George Pereira 		   
 
  Principal Financial Officer    
 
        
Date:
  July 25, 2013