nvcsrs

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT
OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-22311

Schwab Strategic Trust

(Exact name of registrant as specified in charter)

211 Main Street, San Francisco, California 94105

(Address of principal executive offices) (Zip code)

Marie Chandoha
Schwab Strategic Trust
211 Main Street, San Francisco, California 94105
(Name and address of agent for service)

Registrant’s telephone number, including area code: (415) 636-7000

Date of fiscal year end: August 31

Date of reporting period: February 28, 2014

Item 1: Report(s) to Shareholders.

Semiannual report dated February 28, 2014, enclosed.

Schwab International Equity ETFs

Schwab International

Equity ETF^tm

Schwab International Small-Cap

Equity ETF^tm

Schwab Emerging Markets

Equity ETF^tm

Go paperless today.

Simplify your financial life

by viewing these documents online.

This wrapper is not part of the shareholder report.

Schwab International Equity ETFs

Semiannual Report

February 28, 2014

Schwab International

Equity ETF^tm

Schwab International Small-Cap

Equity ETF^tm

Schwab Emerging Markets

Equity ETF^tm

This page is intentionally left blank.

In This Report


Performance at a Glance		2
From the President		3
Fund Management		5
Performance and Fund Facts
Schwab International Equity ETF™		6
Schwab International Small-Cap Equity ETF™		8
Schwab Emerging Markets Equity ETF™		10
Fund Expenses		12
Financial Statements and Portfolio Holdings
Schwab International Equity ETF™		13
Schwab International Small-Cap Equity ETF™		20
Schwab Emerging Markets Equity ETF™		27
Financial Notes		34
Investment Advisory Agreement Approval		43
Trustees and Officers		45
Glossary		47

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.

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.schwabetfs.com.


Total Returns for the 6 Months Ended February 28, 2014

Schwab International Equity ETF^tm (Ticker Symbol: SCHF)


Market Price Return¹			13.89%
NAV Return¹			13.76%
FTSE Developed ex-US Index (Net)			13.88%
ETF Category: Morningstar Foreign Large Blend²			14.72%


Performance Details			pages 6-7




Schwab International Small-Cap Equity ETF^tm (Ticker Symbol: SCHC)


Market Price Return¹			17.82%
NAV Return¹			19.09%
FTSE Developed Small Cap ex-US Liquid Index (Net)			19.93%
ETF Category: Morningstar Foreign Small/Mid Blend²			17.88%


Performance Details			pages 8-9




Schwab Emerging Markets Equity ETF^tm (Ticker Symbol: SCHE)


Market Price Return¹			4.97%
NAV Return¹			4.32%
FTSE Emerging Index (Net)			4.19%
ETF Category: Morningstar Diversified Emerging Markets²			4.04%


Performance Details			pages 10-11

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 you cannot invest in them directly. Performance results less than one year are not annualized.

For index definitions, please see the Glossary.

Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption of fund shares.

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

Index ownership — “FTSE^®” is a trademark owned by the London Stock Exchange Group companies and is used by FTSE International Limited (“FTSE”) under license. FTSE does not sponsor, endorse or promote Schwab ETFs and does not accept any liability in relation to their issue, operation and trading.


¹		Since ETFs are baskets of securities that trade on a stock exchange, ETF performance must be shown based on both a market price and NAV basis. The fund’s per share net asset value (“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.

2 Schwab International Equity ETFs

From the President

Marie Chandoha is President and CEO of Charles Schwab Investment Management, Inc. and the funds covered in this report.

Dear Shareholder,

As President and CEO of Charles Schwab Investment Management, Inc., I’d like to thank you for trusting us to help you meet your investment goals, and for reading this important report about the Schwab International Equity ETFs. These funds are part of our line-up of core investment solutions and are available at some of the lowest operating expense ratios in the industry. The funds are designed to track market-leading international stock indices and provide the full benefits of an ETF, including transparency, intraday trading, and potential tax efficiency.

Turning to the six months ended February 28, 2014, the funds generated positive returns that were generally aligned with their respective indices. The environment for these results included efforts by many central banks around the world to stimulate economic growth by keeping short-term interest rates low. This was particularly true in Europe, where stocks also benefitted from the European Central Bank’s efforts to unify the euro zone’s banking system.

Amid this backdrop, stocks from Greece and Ireland were some of the better performers, while gains on Japanese stocks slowed after rallying early in the period. Meanwhile, stocks from the emerging markets of Brazil, Russia, and Turkey faced challenges. Some of these challenges were political unrest and potentially higher U.S. interest rates that translated into smaller overall gains compared with many developed markets. Reflecting this environment, the FTSE Developed ex-U.S. Index returned 13.9%, while the FTSE Emerging Index returned 4.2%.* Currency fluctuations also played a role in these results,

Asset Class Performance Comparison % returns during the six months ended 2/28/2014

This graph compares the performance of various asset classes during the report period. Final performance figures for the period are in the key below.



		15.07%		S&P 500^® Index: measures U.S. large-cap stocks

		17.75%		Russell 2000^® Index: measures U.S. small-cap stocks

		15.01%		MSCI EAFE^® Index (Net): measures (in U.S. dollars) large-cap stocks in Europe, Australasia and the Far East

		2.84%		Barclays U.S. Aggregate Bond Index: measures the U.S. bond market

		0.02%		Barclays U.S. Treasury Bills 1-3 Months Index: measures short-term U.S. Treasury obligations

For index definitions, please see the Glossary.

Data source: Index provider websites and Charles Schwab Investment Management, Inc.

Nothing in this report represents a recommendation of a security by the investment adviser.

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

Schwab International Equity ETFs 3

From the President continued

Turning to the six months ended February 28, 2014, the funds generated positive returns that were generally aligned with their respective indices.

with currencies from many developed markets strengthening and enhancing returns in U.S. dollar terms, while emerging market currencies finished mixed versus the U.S. dollar by comparison.

For more information about the performance, holdings, and portfolio characteristics of the Schwab International Equity ETFs, please continue reading this report. In addition, you can find further details about these ETFs and about ETF investing by visiting www.schwabetfs.com, or by contacting us at 1-800-435-4000.

Sincerely,

Indices are unmanaged, do not incur management fees, costs and expenses, and cannot be invested in directly. Index return figures assume dividends and distributions were reinvested. Past performance is not an indication of future results.


*		The total returns cited for the FTSE Developed ex-U.S. Index and the FTSE Emerging Index are net of foreign withholding taxes; the underlying tax rate information is available from FTSE.

4 Schwab International Equity ETFs

Fund Management



		Agnes Hong, CFA, Managing Director and Head of Passive Equity Strategies, leads the portfolio management teams of Schwab’s index mutual funds and equity ETFs. She also has overall responsibility for all aspects of the management of the funds. Prior to joining CSIM in 2009, Ms. Hong spent five years as a portfolio manager at Barclays Global Investors (subsequently acquired by BlackRock), where she managed institutional index funds and quantitative active funds. Prior to that, Ms. Hong worked in management consulting and product management, servicing global financial services clients.

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

		Chuck Craig, CFA, Managing Director and Senior Portfolio Manager, is responsible for the day-to-day co-management of the funds. Prior to joining CSIM in 2012, Mr. Craig worked at Guggenheim Funds (formerly Claymore Group), where he spent over five years as a managing director of portfolio management and supervision, and three years as vice president of product research and development. Prior to that, he worked as an equity research analyst at First Trust Portfolios (formerly Niké Securities), and a trader and analyst at PMA Securities, Inc.

Schwab International Equity ETFs 5

Schwab International Equity ETF™

Performance and Fund Facts as of 02/28/14

Average Annual Total Returns¹


Fund and Inception Date	6 Months			1 Year			3 Years			Since Inception*


Fund: Schwab International Equity ETF^tm (11/3/09)
Market Price Return²		13.89	%		17.07	%		5.39	%	8.32%
NAV Return²		13.76	%		16.77	%		5.62	%	8.31%
FTSE Developed ex-US Index (Net)		13.88	%		16.85	%		5.65	%	8.45%
ETF Category: Morningstar Foreign Large Blend³		14.72	%		15.47	%		5.08	%	8.14%

Fund Expense Ratio⁴: 0.09%

For index definitions, please see the Glossary.

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

International investing may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations.


*		Inception 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		Since ETFs are baskets of securities that trade on a stock exchange, ETF performance must be shown based on both a market price and NAV basis. The fund’s per share net asset value (“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.

6 Schwab International Equity ETFs

Schwab International Equity ETF^tm

Performance and Fund Facts as of 02/28/14 continued

Statistics


Number of Holdings			1,123
Weighted Average Market Cap ($ x 1,000,000)			$61,805
Price/Earnings Ratio (P/E)			17.7
Price/Book Ratio (P/B)			1.6
Portfolio Turnover Rate^1,2			4%

Sector Weightings % of Investments


Financials			25.8%
Industrials			12.9%
Consumer Discretionary			11.5%
Consumer Staples			10.1%
Health Care			9.6%
Materials			8.8%
Energy			7.8%
Information Technology			5.4%
Telecommunication Services			3.8%
Utilities			3.4%
Other			0.9%
Total			100.0%

Top Equity Holdings % of Net Assets³


Nestle S.A. – Reg’d			1.6%
Roche Holding AG			1.4%
HSBC Holdings plc			1.3%
Novartis AG – Reg’d			1.2%
BP plc			1.0%
Toyota Motor Corp.			0.9%
Royal Dutch Shell plc, A Shares			0.9%
Samsung Electronics Co., Ltd. GDR – Reg’d			0.9%
GlaxoSmithKline plc			0.8%
Total S.A.			0.8%
Total			10.8%

Country Weightings % of Investments


Japan			18.7%
United Kingdom			18.6%
France			8.5%
Germany			8.1%
Switzerland			8.0%
Canada			7.8%
Australia			6.7%
Republic of Korea			3.7%
Hong Kong			3.1%
Spain			2.9%
Other Countries			13.9%
Total			100.0%

Portfolio holdings may have changed since the report date.

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

Source of Sector Classification: S&P and MSCI.


¹		Not annualized.
²		Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
³		This list is not a recommendation of any security by the investment adviser.

Schwab International Equity ETFs 7

Schwab International Small-Cap Equity ETF™

Performance and Fund Facts as of 02/28/14

Average Annual Total Returns¹


Fund and Inception Date	6 Months			1 Year			3 Years			Since Inception*


Fund: Schwab International Small-Cap Equity ETF^tm (1/14/10)
Market Price Return²		17.82	%		21.40	%		6.55	%	10.02%
NAV Return²		19.09	%		22.56	%		6.99	%	10.15%
FTSE Developed Small Cap ex-US Liquid Index (Net)		19.93	%		23.31	%		7.06	%	10.47%
ETF Category: Morningstar Foreign Small/Mid Blend³		17.88	%		21.79	%		7.44	%	10.05%

Fund Expense Ratio⁴: 0.20%

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.

Investments in smaller companies typically exhibit higher volatility.


*		Inception 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		Since ETFs are baskets of securities that trade on a stock exchange, ETF performance must be shown based on both a market price and NAV basis. The fund’s per share net asset value (“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 dated December 27, 2013. Effective March 5, 2014, the management fee was reduced to 0.19%. For more information, see financial note 4 or refer to the prospectus supplement dated March 5, 2014.

8 Schwab International Equity ETFs

Schwab International Small-Cap Equity ETF^tm

Performance and Fund Facts as of 02/28/14 continued

Statistics


Number of Holdings			1,306
Weighted Average Market Cap ($ x 1,000,000)			$2,820
Price/Earnings Ratio (P/E)			26.2
Price/Book Ratio (P/B)			1.7
Portfolio Turnover Rate^1,2			6%

Sector Weightings % of Investments


Industrials			20.9%
Financials			19.6%
Consumer Discretionary			18.7%
Materials			9.7%
Information Technology			8.3%
Energy			8.1%
Health Care			5.8%
Consumer Staples			5.1%
Utilities			2.3%
Telecommunication Services			1.3%
Other			0.2%
Total			100.0%

Top Equity Holdings % of Net Assets³


ProSiebenSat.1 Media AG – Reg’d			0.6%
Travis Perkins plc			0.5%
Barratt Developments plc			0.4%
Tourmaline Oil Corp.			0.4%
Ashtead Group plc			0.4%
Vestas Wind Systems A/S			0.4%
Taylor Wimpey plc			0.4%
Methanex Corp.			0.4%
Mondi plc			0.4%
Persimmon plc			0.4%
Total			4.3%

Country Weightings % of Investments


United Kingdom			24.3%
Canada			15.4%
Japan			12.3%
Germany			6.0%
Australia			4.5%
Republic of Korea			4.0%
Switzerland			3.8%
Italy			3.4%
France			3.3%
Sweden			3.3%
Other Countries			19.7%
Total			100.0%

Portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.


¹		Not annualized.
²		Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
³		This list is not a recommendation of any security by the investment adviser.

Schwab International Equity ETFs 9

Schwab Emerging Markets Equity ETF™

Performance and Fund Facts as of 02/28/14

Average Annual Total Returns¹


Fund and Inception Date	6 Months			1 Year			3 Years			Since Inception*


Fund: Schwab Emerging Markets Equity ETF^tm (1/14/10)
Market Price Return²		4.97	%		-8.12	%		-3.69	%	0.17%
NAV Return²		4.32	%		-7.35	%		-3.18	%	0.32%
FTSE Emerging Index (Net)		4.19	%		-7.31	%		-3.05	%	0.66%
ETF Category: Morningstar Diversified Emerging Markets³		4.04	%		-6.94	%		-3.37	%	-0.25%

Fund Expense Ratio⁴: 0.15%

For index definitions, please see the Glossary.

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

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


*		Inception 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		Since ETFs are baskets of securities that trade on a stock exchange, ETF performance must be shown based on both a market price and NAV basis. The fund’s per share net asset value (“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 dated December 27, 2013. Effective March 5, 2014, the management fee was reduced to 0.14%. For more information, see financial note 4 or refer to the prospectus supplement dated March 5, 2014.

10 Schwab International Equity ETFs

Schwab Emerging Markets Equity ETF^tm

Performance and Fund Facts as of 02/28/14 continued

Statistics


Number of Holdings			649
Weighted Average Market Cap ($ x 1,000,000)			$42,129
Price/Earnings Ratio (P/E)			12.6
Price/Book Ratio (P/B)			1.5
Portfolio Turnover Rate^1,2			4%

Sector Weightings % of Investments


Financials			28.7%
Information Technology			12.9%
Energy			12.5%
Materials			10.2%
Consumer Staples			8.5%
Telecommunication Services			8.3%
Consumer Discretionary			7.2%
Industrials			5.7%
Utilities			3.8%
Health Care			1.9%
Other			0.3%
Total			100.0%

Top Equity Holdings % of Net Assets³


Taiwan Semiconductor Manufacturing Co., Ltd. ADR			2.7%
Tencent Holdings Ltd.			2.4%
Naspers Ltd., N Shares			1.5%
China Mobile Ltd.			1.5%
China Construction Bank Corp., H Shares			1.5%
Gazprom OAO ADR			1.4%
Industrial & Commercial Bank of China Ltd., H Shares			1.3%
AMBEV S.A. ADR			1.1%
Itau Unibanco Holding S.A. ADR			1.1%
MTN Group Ltd.			1.0%
Total			15.5%

Country Weightings % of Investments


China			21.9%
Taiwan			14.0%
Brazil			12.4%
South Africa			9.8%
India			9.6%
Russia			6.4%
Mexico			5.3%
Malaysia			4.8%
Indonesia			2.9%
Thailand			2.7%
Other Countries			10.2%
Total			100.0%

Portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.


¹		Not annualized.
²		Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
³		This list is not a recommendation of any security by the investment adviser.

Schwab International Equity ETFs 11

Fund Expenses (Unaudited)

Examples for a $1,000 Investment

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

The expense examples below are intended to help you understand your ongoing cost (in dollars) of investing in a fund and to compare this cost with the ongoing cost of investing in other mutual funds. These examples are based on an investment of $1,000 invested for six months beginning September 1, 2013 and held through February 28, 2014.

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.


					Ending
			Beginning		Account Value		Expenses Paid
	Expense Ratio¹		Account Value		(Net of Expenses)		During Period²
	(Annualized)		at 9/1/13		at 2/28/14		9/1/13–2/28/14

Schwab International Equity ETF^tm
Actual Return		0.09%	$	1,000.00	$	1,137.60	$	0.48
Hypothetical 5% Return		0.09%	$	1,000.00	$	1,024.35	$	0.45


Schwab International Small-Cap Equity ETF^tm
Actual Return		0.20%	$	1,000.00	$	1,190.90	$	1.09
Hypothetical 5% Return		0.20%	$	1,000.00	$	1,023.80	$	1.00


Schwab Emerging Markets Equity ETF^tm
Actual Return		0.15%	$	1,000.00	$	1,043.20	$	0.76
Hypothetical 5% Return		0.15%	$	1,000.00	$	1,024.05	$	0.75


¹		Based on the most recent six-month expense ratio; may differ from the expense ratio provided in the Financial Highlights.
²		Expenses for each fund are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by 181 days of the period, and divided by 365 days of the fiscal year.

12 Schwab International Equity ETFs

Schwab International Equity ETF™

Financial Statements

Financial Highlights


	9/1/13–			9/1/12–			9/1/11–			9/1/10–			10/30/09¹–
	2/28/14*			8/31/13			8/31/12			8/31/11			8/31/10


Per-Share Data ($)

Net asset value at beginning of period		28.32			24.96			25.99			23.82			25.00

Income (loss) from investment operations:
Net investment income (loss)		0.39			0.66			0.76			0.68			0.38
Net realized and unrealized gains (losses)		3.49			3.42			(1.04	)		1.96	²		(1.52	)

Total from investment operations		3.88			4.08			(0.28	)		2.64			(1.14	)
Less distributions:
Distributions from net investment income		(0.70	)		(0.72	)		(0.75	)		(0.47	)		(0.04	)

Net asset value at end of period		31.50			28.32			24.96			25.99			23.82

Total return (%)		13.76	³		16.55			(0.75	)		11.04			(4.57	)³

Ratios/Supplemental Data (%)

Ratios to average net assets:
Total expenses		0.09	⁴		0.09			0.13			0.13			0.14	^4,5
Net investment income (loss)		3.13	⁴		3.03			3.40			3.10			2.94	⁴
Portfolio turnover rate⁶		4	³		9			8			6			6	³
Net assets, end of period ($ x 1,000)		2,072,613			1,464,105			768,666			634,208			285,869

* Unaudited.

¹ Commencement of operations.

² 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.

³ Not annualized.

⁴ Annualized.

⁵ Effective June 14, 2010, the annual operating expense ratio was reduced. The ratio presented for period ended 8/31/10 is a blended ratio.

⁶ Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.

See financial notes 13

Schwab International Equity ETF

Portfolio Holdings as of February 28, 2014 (Unaudited)

This section shows the fund’s 50 largest portfolio holdings in unaffiliated issuers, any holdings exceeding 1% of the fund’s net assets as of the report date, and any affiliated issuers. The remaining securities held by the fund are grouped as “Other Securities” in each category. You can request a complete schedule of portfolio holdings as of the report date, free of charge, by calling Schwab ETFs^TM at 1-800-435-4000. This complete schedule, filed on the fund’s Form N-CSR, is also available on the SEC’s website at http://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.schwabetfs.com.


				Cost		Value
Holdings by Category				($)		($)

	99	.1%	Common Stock		1,774,745,504		2,053,883,307
	0	.1%	Other Investment Companies		1,442,235		1,633,339
	0	.5%	Preferred Stock		7,060,101		9,919,023
	0	.0%	Short-Term Investment		6,000		6,000


	99	.7%	Total Investments		1,783,253,840		2,065,441,669
	0	.3%	Collateral Invested for Securities on Loan		5,957,868		5,957,868
	0	.0%	Other Assets and Liabilities, Net				1,213,101


	100	.0%	Net Assets				2,072,612,638


	Number		% of Net		Value
Security	of Shares		Assets		($)

Common Stock 99.1% of net assets

Australia 6.7%
Australia & New Zealand Banking Group Ltd.		362,558		0.5		10,427,339
BHP Billiton Ltd.		397,582		0.7		13,654,689
Commonwealth Bank of Australia		206,019		0.7		13,764,023
National Australia Bank Ltd.		300,048		0.5		9,327,617
Westpac Banking Corp.		412,313		0.6		12,349,031
Other Securities				3.7		79,144,678

				6.7		138,667,377

Austria 0.3%
Other Securities				0.3		5,454,975

Belgium 1.0%
Anheuser-Busch InBev N.V.		101,575		0.5		10,655,054
Other Securities				0.5		10,638,162

				1.0		21,293,216

Canada 7.7%
Bank of Nova Scotia		149,416		0.4		8,546,927
Royal Bank of Canada		192,176		0.6		12,491,136
The Toronto-Dominion Bank		263,200		0.6		11,926,566
Other Securities				6.1		127,528,630

				7.7		160,493,259

Denmark 1.2%
Novo Nordisk A/S, B Shares		256,645		0.6		12,240,643
Other Securities				0.6		13,523,964

				1.2		25,764,607

Finland 0.8%
Other Securities				0.8		16,335,814

France 8.5%
BNP Paribas S.A.		136,864		0.5		11,239,712
Sanofi		150,682		0.8		15,677,268
Total S.A.		259,252		0.8		16,839,847
Other Securities				6.4		132,379,739

				8.5		176,136,566

Germany 7.6%
Allianz SE - Reg’d		59,220		0.5		10,608,389
BASF SE		123,046		0.7		14,176,817
Bayer AG - Reg’d		108,610		0.7		15,435,696
Daimler AG - Reg’d		131,640		0.6		12,276,126
SAP AG		117,996		0.5		9,537,019
Siemens AG - Reg’d		106,747		0.7		14,265,683
Other Securities				3.9		80,754,067

				7.6		157,053,797

Greece 0.0%
Other Securities				0.0		677,611

Hong Kong 3.0%
AIA Group Ltd.		1,603,400		0.4		7,840,309
Other Securities				2.6		55,084,193

				3.0		62,924,502

Ireland 0.2%
Other Securities				0.2		3,592,911

Israel 0.5%
Other Securities				0.5		10,568,613

Italy 2.2%
Eni S.p.A.		332,948		0.4		8,038,201
Other Securities				1.8		36,459,031

				2.2		44,497,232

Japan 18.6%
Honda Motor Co., Ltd.		238,300		0.4		8,514,967
Mitsubishi UFJ Financial Group, Inc.		1,916,700		0.5		11,023,396
SoftBank Corp.		110,700		0.4		8,316,735
Toyota Motor Corp.		337,070		0.9		19,283,317
Other Securities				16.4		338,537,012

				18.6		385,675,427

14 See financial notes

Schwab International Equity ETF

Portfolio Holdings (Unaudited) continued


	Number		% of Net		Value
Security	of Shares		Assets		($)

Netherlands 2.5%
Unilever N.V. CVA		212,579		0.4		8,435,232
Other Securities				2.1		43,801,948

				2.5		52,237,180

New Zealand 0.1%
Other Securities				0.1		2,871,831

Norway 0.7%
Other Securities				0.7		13,709,849

Portugal 0.2%
Other Securities				0.2		3,013,449

Republic of Korea 3.7%
Samsung Electronics Co., Ltd. GDR - Reg’d		28,075		0.9		17,687,250
Other Securities				2.8		59,635,233

				3.7		77,322,483

Singapore 1.2%
Other Securities				1.2		25,578,808

Spain 2.9%
Banco Bilbao Vizcaya Argentaria S.A.		744,198		0.4		9,245,506
Banco Santander S.A.		1,506,820		0.7		13,664,801
Telefonica S.A.		527,873		0.4		8,099,991
Other Securities				1.4		29,488,122

				2.9		60,498,420

Sweden 2.9%
Other Securities				2.9		59,082,723

Switzerland 8.0%
ABB Ltd. - Reg’d *		337,554		0.4		8,618,971
Nestle S.A. - Reg’d		427,042		1.6		32,289,960
Novartis AG - Reg’d		304,046		1.2		25,354,426
Roche Holding AG		92,120		1.4		28,384,841
UBS AG - Reg’d *		502,224		0.5		10,759,499
Other Securities				2.9		60,044,432

				8.0		165,452,129

United Kingdom 18.6%
AstraZeneca plc		165,303		0.5		11,313,623
Barclays plc		2,052,047		0.4		8,669,526
BG Group plc		440,945		0.4		8,043,556
BHP Billiton plc		286,888		0.4		9,271,868
BP plc		2,483,292		1.0		20,991,240
British American Tobacco plc		236,962		0.6		12,906,168
Diageo plc		329,000		0.5		10,357,199
GlaxoSmithKline plc		624,797		0.8		17,501,713
HSBC Holdings plc		2,538,564		1.3		26,789,033
Lloyds Banking Group plc *		6,193,096		0.4		8,565,543
Prudential plc		372,528		0.4		8,459,281
Rio Tinto plc		171,432		0.5		9,861,379
Royal Dutch Shell plc, A Shares		506,403		0.9		18,483,720
Royal Dutch Shell plc, B Shares		324,504		0.6		12,654,695
Vodafone Group plc		3,534,608		0.7		14,749,450
Other Securities				9.2		186,362,534

				18.6		384,980,528

Total Common Stock
(Cost $1,774,745,504)						2,053,883,307




Other Investment Companies 0.1% of net assets

United States 0.1%
Equity Fund 0.1%
Other Securities				0.1		1,618,800

Money Market Fund 0.0%
Other Securities				0.0		14,539

Total Other Investment Companies
(Cost $1,442,235)						1,633,339




Preferred Stock 0.5% of net assets

Germany 0.5%
Other Securities				0.5		9,919,023

Total Preferred Stock
(Cost $7,060,101)						9,919,023




Short-Term Investment 0.0% of net assets

U.S. Treasury Obligation 0.0%
Other Securities				0.0		6,000

Total Short-Term Investment
(Cost $6,000)						6,000



End of Investments.



Collateral Invested for Securities on Loan 0.3% of net assets


State Street Institutional U.S. Government Money Market Fund, Institutional Class 0.00% (d)		5,957,868		0.3		5,957,868

Total Collateral Invested for Securities on Loan
(Cost $5,957,868)						5,957,868



End of Collateral Invested for Securities on Loan

See financial notes 15

Schwab International Equity ETF

Portfolio Holdings (Unaudited) continued

At 02/28/14, the tax basis cost of the fund’s investments was $1,783,998,555 and the unrealized appreciation and depreciation were $333,991,777 and ($52,548,663), respectively, with a net unrealized appreciation of $281,443,114.

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


*		Non-income producing security.
(a)		All or a portion of this security is on loan. Securities on loan were valued at $5,622,561.
(b)		Fair-valued by management in accordance with procedures approved by the Board of Trustees.
(c)		Illiquid security. At the period end, the value of these amounted to $0 or 0.0% of net assets.
(d)		The rate shown is the 7-day yield.
(e)		The rate shown is the purchase yield.
(f)		All or a portion of this security is held as collateral for open futures contracts.


ADR —		American Depositary Receipt
CVA —		Dutch Certificate
ETF —		Exchange Traded Fund
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 02/28/14:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contracts

MSCI EAFE, e-mini, Long, expires 03/21/14

96,465

4,533

The following is a summary of the inputs used to value the fund’s investments as of February 28, 2014 (see financial note 2(a) for additional information):


	Quoted Prices in				Significant
	Active Markets for		Other Significant		Unobservable
	Identical Assets		Observable Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total

Common Stock¹		$2,053,883,307		$—		$—		$2,053,883,307
Other Investment Companies¹		1,633,339		—		—		1,633,339
Preferred Stock¹		9,919,023		—		—		9,919,023
Short-Term Investment¹		—		6,000		—		6,000

Total		$2,065,435,669		$6,000		$—		$2,065,441,669

Other Financial Instruments
Collateral Invested for Securities on Loan		$5,957,868		$—		$—		$5,957,868
Futures Contracts²		4,533		—		—		4,533


¹		As categorized in the complete schedule of 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 following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:


	Balance					Change in												Balance
	as of		Realized			Unrealized								Gross		Gross		as of
	August 31,		Gains			Appreciation			Gross		Gross			Transfers		Transfers		February 28,
Investments in Securities	2013		(Losses)			(Depreciation)			Purchases		Sales			in		out		2014

Common Stock
Hong Kong		$467		($9	)		($467	)		$3,129		($3,120	)		$—		$—		$—
Rights
Italy		44		—			(44	)		—		—			—		—		—

Total		$511		($9	)		($511	)		$3,129		($3,120	)		$—		$—		$—

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, 2014.

16 See financial notes

Schwab International Equity ETF

Statement of

Assets and Liabilities

As of February 28, 2014; unaudited



Assets

Investments, at value (cost $1,783,253,840) including securities on loan of $5,622,561		$2,065,441,669
Collateral invested for securities on loan		5,957,868
Cash		10,965
Foreign currency, at value (cost $605,200)		607,837
Receivables:
Investments sold		46
Dividends		15,729,481
Foreign tax reclaims		1,225,050
Income from securities on loan		13,064
Variation margin on futures contracts	+	180

Total assets		2,088,986,160

Liabilities

Collateral held for securities on loan		5,957,868
Payables:
Investments bought		10,400,158
Investment adviser fees	+	15,496

Total liabilities		16,373,522

Net Assets

Total assets		2,088,986,160
Total liabilities	—	16,373,522

Net assets		$2,072,612,638

Net Assets by Source
Capital received from investors		1,820,693,772
Net investment income not yet distributed		11,616,390
Net realized capital losses		(41,839,660	)
Net unrealized capital appreciation		282,142,136

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$2,072,612,638

65,800,000

$31.50

See financial notes 17

Schwab International Equity ETF

Statement of

Operations

For the period September 1, 2013 through February 28, 2014; unaudited



Investment Income

Dividends (net of foreign withholding tax of $1,243,313)		$28,744,119
Securities on loan	+	73,367

Total investment income		28,817,486

Expenses

Investment adviser fees		804,494

Total expenses	−	804,494

Net investment income		28,012,992

Realized and Unrealized Gains (Losses)

Net realized losses on investments		(3,173,974	)
Net realized losses on foreign currency transactions	+	(11,759	)

Net realized losses		(3,185,733	)
Net change in unrealized appreciation (depreciation) on investments		192,242,346
Net change in unrealized appreciation (depreciation) on futures contracts		4,533
Net change in unrealized appreciation (depreciation) on foreign currency translations	+	(16,279	)

Net change in unrealized appreciation (depreciation)	+	192,230,600

Net realized and unrealized gains		189,044,867

Increase in net assets resulting from operations		$217,057,859

18 See financial notes

Schwab International Equity ETF

Statements of

Changes in Net Assets

For the current and prior report periods
Figures for the current period are unaudited



Operations


9/1/13-2/28/14				9/1/12-8/31/13
Net investment income		$28,012,992			$34,368,378
Net realized losses		(3,185,733	)		(10,635,508	)
Net change in unrealized appreciation (depreciation)	+	192,230,600			116,473,721

Increase in net assets resulting from operations		217,057,859			140,206,591

Distributions to Shareholders

Distributions from net investment income		($41,541,200	)		($26,201,560	)

Transactions in Fund Shares

9/1/13-2/28/14

9/1/12-8/31/13

SHARES

VALUE

SHARES

VALUE

Shares sold

14,100,000

$432,991,223

21,400,000

$595,025,541

Shares redeemed

—

(500,000

)

(13,592,136

)

Net transactions in fund shares

14,100,000

$432,991,223

20,900,000

$581,433,405

Shares Outstanding and Net Assets

9/1/13-2/28/14

9/1/12-8/31/13

SHARES

NET ASSETS

SHARES

NET ASSETS

Beginning of period

51,700,000

$1,464,104,756

30,800,000

$768,666,320

Total increase

14,100,000

608,507,882

20,900,000

695,438,436

End of period

65,800,000

$2,072,612,638

51,700,000

$1,464,104,756

Net investment income not yet distributed

$11,616,390

$25,144,598

See financial notes 19

Schwab International Small-Cap Equity ETF™

Financial Statements

Financial Highlights


	9/1/13–			9/1/12–			9/1/11–			9/1/10–			1/13/10¹–
	2/28/14*			8/31/13			8/31/12			8/31/11			8/31/10


Per-Share Data ($)

Net asset value at beginning of period		28.61			24.94			27.48			23.54			25.00

Income (loss) from investment operations:
Net investment income (loss)		0.22			0.76			0.67			0.72			0.21
Net realized and unrealized gains (losses)		5.18			3.72			(2.39	)		3.88			(1.67	)

Total from investment operations		5.40			4.48			(1.72	)		4.60			(1.46	)
Less distributions:
Distributions from net investment income		(0.90	)		(0.81	)		(0.82	)		(0.66	)		—

Net asset value at end of period		33.11			28.61			24.94			27.48			23.54

Total return (%)		19.09	²		18.23			(5.91	)		19.52			(5.84	)²

Ratios/Supplemental Data (%)

Ratios to average net assets:
Total expenses		0.20	³		0.21	⁴		0.35			0.35			0.35	³
Net investment income (loss)		1.49	³		2.86			2.65			2.46			2.18	³
Portfolio turnover rate⁵		6	²		20			25			18			7	²
Net assets, end of period ($ x 1,000)		367,520			280,422			159,610			162,139			58,848

* Unaudited.

¹ Commencement of operations.

² Not annualized.

³ Annualized.

⁴ Effective September 20, 2012, the annual operating expense ratio was reduced. The ratio presented for the period ended 8/31/13 is a blended ratio.

⁵ Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.

20 See financial notes

Schwab International Small-Cap Equity ETF

Portfolio Holdings as of February 28, 2014 (Unaudited)


				Cost		Value
Holdings by Category				($)		($)

	99	.1%	Common Stock		290,539,333		364,195,007
	0	.4%	Other Investment Companies		1,184,852		1,619,860
	0	.3%	Preferred Stock		519,620		930,756
	0	.0%	Rights		—		190


	99	.8%	Total Investments		292,243,805		366,745,813
	1	.2%	Collateral Invested for Securities on Loan		4,405,737		4,405,737
	(1	.0)%	Other Assets and Liabilities, Net				(3,631,201	)


	100	.0%	Net Assets				367,520,349


	Number		% of Net		Value
Security	of Shares		Assets		($)

Common Stock 99.1% of net assets

Australia 4.5%
Seek Ltd.		67,168		0.3		1,028,401
Other Securities				4.2		15,487,024

				4.5		16,515,425

Austria 0.8%
Other Securities				0.8		2,904,712

Belgium 1.4%
Other Securities				1.4		5,255,076

Canada 15.4%
AltaGas Ltd.		23,984		0.3		920,620
Atco Ltd., Class I		21,234		0.3		994,418
Baytex Energy Corp.		23,984		0.2		874,686
Dollarama, Inc.		12,903		0.3		1,006,526
Gildan Activewear, Inc.		23,984		0.3		1,230,021
Keyera Corp.		15,876		0.3		957,910
Methanex Corp.		22,234		0.4		1,558,660
Onex Corp.		21,135		0.3		1,126,487
Open Text Corp.		23,984		0.3		1,223,304
Tourmaline Oil Corp. *		35,976		0.4		1,648,081
Vermilion Energy, Inc.		20,224		0.3		1,141,876
Other Securities				12.0		43,727,895

				15.4		56,410,484

Denmark 2.2%
GN Store Nord A/S		38,164		0.3		944,370
Jyske Bank A/S *		15,819		0.3		951,523
Pandora A/S		19,980		0.4		1,354,902
Vestas Wind Systems A/S *		43,191		0.4		1,561,977
Other Securities				0.8		3,078,743

				2.2		7,891,515

Finland 2.3%
Elisa Oyj		33,300		0.3		932,724
Pohjola Bank plc, A Shares		38,894		0.2		902,470
Other Securities				1.8		6,686,111

				2.3		8,521,305

France 3.3%
Other Securities				3.3		12,210,712

Germany 5.8%
Freenet AG		30,669		0.3		1,037,571
ProSiebenSat.1 Media AG - Reg’d		44,067		0.6		2,102,822
Sky Deutschland AG *		124,127		0.4		1,301,215
Symrise AG		21,806		0.3		1,071,877
Wirecard AG		23,681		0.3		1,111,712
Other Securities				3.9		14,751,415

				5.8		21,376,612

Greece 1.1%
Other Securities				1.1		4,195,146

Hong Kong 1.6%
Other Securities				1.6		5,932,105

Ireland 0.9%
Smurfit Kappa Group plc		35,976		0.3		1,003,206
Other Securities				0.6		2,366,903

				0.9		3,370,109

Israel 0.4%
Other Securities				0.4		1,315,915

Italy 3.3%
Azimut Holding S.p.A.		27,750		0.3		927,128
Other Securities				3.0		11,043,236

				3.3		11,970,364

Japan 12.3%
Other Securities				12.3		45,229,686

Netherlands 2.2%
Delta Lloyd N.V.		33,796		0.3		965,521
Other Securities				1.9		7,026,897

				2.2		7,992,418

See financial notes 21

Schwab International Small-Cap Equity ETF

Portfolio Holdings (Unaudited) continued


	Number		% of Net		Value
Security	of Shares		Assets		($)

New Zealand 0.6%
Other Securities				0.6		2,038,038

Norway 1.8%
DNO International A.S.A. *		251,832		0.3		1,033,642
Other Securities				1.5		5,670,802

				1.8		6,704,444

Portugal 0.5%
Other Securities				0.5		1,981,961

Republic of Korea 4.0%
Other Securities				4.0		14,757,355

Singapore 1.9%
Other Securities				1.9		7,084,906

Spain 1.7%
Other Securities				1.7		6,259,941

Sweden 3.3%
Trelleborg AB, B Shares		58,417		0.3		1,152,718
Other Securities				3.0		10,845,203

				3.3		11,997,921

Switzerland 3.6%
Dufry AG - Reg’d *		5,382		0.2		911,665
Galenica AG - Reg’d		1,023		0.3		1,085,950
Other Securities				3.1		11,300,364

				3.6		13,297,979

United Kingdom 24.2%
Ashtead Group plc		109,722		0.4		1,610,768
Barratt Developments plc		223,670		0.4		1,649,285
Britvic plc		65,875		0.2		858,334
Capital & Counties Properties plc		145,775		0.3		919,534
DCC plc		17,598		0.3		932,820
Derwent London plc		19,338		0.2		898,014
Direct Line Insurance Group plc		222,000		0.3		984,042
DS Smith plc		210,103		0.3		1,242,565
Howden Joinery Group plc		161,892		0.3		1,029,880
Inchcape plc		92,324		0.3		971,649
Mondi plc		81,840		0.4		1,503,181
Pennon Group plc		68,631		0.2		854,564
Persimmon plc *		60,550		0.4		1,467,296
Provident Financial plc		29,980		0.3		943,042
Rightmove plc		19,168		0.2		884,980
Spirax-Sarco Engineering plc		17,893		0.3		929,866
St. James’s Place plc		94,128		0.4		1,380,264
Taylor Wimpey plc		745,370		0.4		1,561,411
The Berkeley Group Holdings plc		24,578		0.3		1,128,992
Travis Perkins plc		52,725		0.5		1,727,423
Other Securities				17.8		65,502,968

				24.2		88,980,878

Total Common Stock
(Cost $290,539,333)						364,195,007




Other Investment Companies 0.4% of net assets

Switzerland 0.1%
Pharmaceuticals, Biotechnology & Life Sciences 0.1%
Other Securities				0.1		615,504

United Kingdom 0.1%
Real Estate 0.1%
Other Securities				0.1		257,042

United States 0.2%
Equity Fund 0.1%
Other Securities				0.1		263,700

Money Market Fund 0.1%
Other Securities				0.1		483,614

				0.2		747,314

Total Other Investment Companies
(Cost $1,184,852)						1,619,860




Preferred Stock 0.3% of net assets

Germany 0.2%
Other Securities				0.2		508,179

Italy 0.1%
Other Securities				0.1		422,577

Total Preferred Stock
(Cost $519,620)						930,756




Rights 0.0% of net assets

Australia 0.0%
Other Securities				0.0		190

Total Rights
(Cost $—)						190



End of Investments.



Collateral Invested for Securities on Loan 1.2% of net assets


State Street Institutional U.S. Government Money Market Fund, Institutional Class 0.00% (d)		4,405,737		1.2		4,405,737

Total Collateral Invested for Securities on Loan
(Cost $4,405,737)						4,405,737



End of Collateral Invested for Securities on Loan

22 See financial notes

Schwab International Small-Cap Equity ETF

Portfolio Holdings (Unaudited) continued

At 02/28/14, the tax basis cost of the fund’s investments was $292,257,076 and the unrealized appreciation and depreciation were $91,321,873 and ($16,833,136), respectively, with a net unrealized appreciation of $74,488,737.

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)		Illiquid security. At the period end, the value of these amounted to $127,026 or 0.0% of net assets.
(c)		All or a portion of this security is on loan. Securities on loan were valued at $4,153,269.
(d)		The rate shown is the 7-day yield.
(e)		Securities are traded on separate exchanges for the same entity.


ETF —		Exchange Traded Fund
Reg’d —		Registered
REIT —		Real Estate Investment Trust
RSP —		Risparmio (Convertible Savings Shares)

The following is a summary of the inputs used to value the fund’s investments as of February 28, 2014 (see financial note 2(a) for additional information):


	Quoted Prices in				Significant
	Active Markets for		Other Significant		Unobservable
	Identical Assets		Observable Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total

Common Stock¹		$344,182,576		$—		$—		$344,182,576
Belgium		5,096,265		—		158,811		5,255,076
Republic of Korea		14,608,667		—		148,688		14,757,355
Other Investment Companies¹		1,619,860		—		—		1,619,860
Preferred Stock¹		930,756		—		—		930,756
Rights¹		—		—		190		190

Total		$366,438,124		$—		$307,689		$366,745,813

Other Financial Instruments
Collateral Invested for Securities on Loan		$4,405,737		$—		$—		$4,405,737


¹		As categorized in the complete schedule of portfolio holdings.

The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:


	Balance				Change in												Balance
	as of		Realized		Unrealized								Gross		Gross		as of
	August 31,		Gains		Appreciation			Gross		Gross			Transfers		Transfers		February 28,
Investments in Securities	2013		(Losses)		(Depreciation)			Purchases		Sales			in		out		2014

Common Stock
Belgium		$—		$409		($1,946	)		$162,976		($2,628	)		$—		$—		$158,811
Republic of Korea		—		4		(56,766	)		205,454		(4	)		—		—		148,688
Rights
Australia		13,988		8,461		(13,798	)		—		(8,461	)		—		—		190

Total		$13,988		$8,874		($72,510	)		$368,430		($11,093	)		$—		$—		$307,689

All net realized and change in unrealized gains (losses) in the table above are reflected on the accompanying Statement of Operations. The change in net unrealized appreciation (depreciation) for Level 3 Investments held by the fund at February 28, 2014 was ($72,510).

See financial notes 23

Schwab International Small-Cap Equity ETF

Statement of

Assets and Liabilities

As of February 28, 2014; unaudited



Assets

Investments, at value (cost $292,243,805) including securities on loan of $4,153,269		$366,745,813
Collateral invested for securities on loan		4,405,737
Foreign currency, at value (cost $173,672)		173,935
Receivables:
Investments sold		7,178,026
Dividends		402,759
Foreign tax reclaims		105,608
Income from securities on loan	+	8,062

Total assets		379,019,940

Liabilities

Collateral held for securities on loan		4,405,737
Payables:
Investments bought		551,538
Investment adviser fees		6,109
Fund shares redeemed	+	6,536,207

Total liabilities		11,499,591

Net Assets

Total assets		379,019,940
Total liabilities	—	11,499,591

Net assets		$367,520,349

Net Assets by Source
Capital received from investors		315,131,886
Distributions in excess of net investment income		(4,576,148	)
Net realized capital losses		(17,543,561	)
Net unrealized capital appreciation		74,508,172

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$367,520,349

11,100,000

$33.11

24 See financial notes

Schwab International Small-Cap Equity ETF

Statement of

Operations

For the period September 1, 2013 through February 28, 2014; unaudited



Investment Income

Dividends (net of foreign withholding tax of $237,729)		$2,666,955
Interest		3
Securities on loan	+	112,377

Total investment income		2,779,335

Expenses

Investment adviser fees		328,446

Total expenses	−	328,446

Net investment income		2,450,889

Realized and Unrealized Gains (Losses)

Net realized losses on investments		(2,993,545	)
Net realized gains on in-kind redemptions		2,512,603
Net realized losses on foreign currency transactions	+	(3,081	)

Net realized losses		(484,023	)
Net change in unrealized appreciation (depreciation) on investments		54,204,964
Net change in unrealized appreciation (depreciation) on foreign currency translations	+	13,155

Net change in unrealized appreciation (depreciation)	+	54,218,119

Net realized and unrealized gains		53,734,096

Increase in net assets resulting from operations		$56,184,985

See financial notes 25

Schwab International Small-Cap Equity ETF

Statements of

Changes in Net Assets

For the current and prior report periods
Figures for the current period are unaudited



Operations


9/1/13-2/28/14				9/1/12-8/31/13
Net investment income		$2,450,889			$6,497,603
Net realized losses		(484,023	)		(1,029,360	)
Net change in unrealized appreciation (depreciation)	+	54,218,119			28,483,543

Increase in net assets resulting from operations		56,184,985			33,951,786

Distributions to Shareholders

Distributions from net investment income		($9,580,780	)		($6,079,500	)

Transactions in Fund Shares

9/1/13-2/28/14

9/1/12-8/31/13

SHARES

VALUE

SHARES

VALUE

Shares sold

1,500,000

$47,030,633

4,100,000

$112,716,098

Shares redeemed

(200,000

)

(6,536,207

)

(700,000

)

(19,776,267

)

Net transactions in fund shares

1,300,000

$40,494,426

3,400,000

$92,939,831

Shares Outstanding and Net Assets

9/1/13-2/28/14

9/1/12-8/31/13

SHARES

NET ASSETS

SHARES

NET ASSETS

Beginning of period

9,800,000

$280,421,718

6,400,000

$159,609,601

Total increase

1,300,000

87,098,631

3,400,000

120,812,117

End of period

11,100,000

$367,520,349

9,800,000

$280,421,718

Distributions in excess of net investment income/
Net investment income not yet distributed

($4,576,148

)

$2,553,743

26 See financial notes

Schwab Emerging Markets Equity ETF™

Financial Statements

Financial Highlights


	9/1/13–			9/1/12–			9/1/11–			9/1/10–			1/13/10¹–
	2/28/14*			8/31/13			8/31/12			8/31/11			8/31/10


Per-Share Data ($)

Net asset value at beginning of period		22.94			23.65			26.10			24.30			25.00

Income (loss) from investment operations:
Net investment income (loss)		0.16			0.50			0.63			0.62			0.27
Net realized and unrealized gains (losses)		0.85			(0.65	)		(2.51	)		1.41	²		(0.97	)

Total from investment operations		1.01			(0.15	)		(1.88	)		2.03			(0.70	)
Less distributions:
Distributions from net investment income		(0.63	)		(0.56	)		(0.57	)		(0.23	)		—

Net asset value at end of period		23.32			22.94			23.65			26.10			24.30

Total return (%)		4.32	³		(0.89	)		(7.04	)		8.31			(2.80	)³

Ratios/Supplemental Data (%)

Ratios to average net assets:
Total expenses		0.15	⁴		0.15			0.25			0.25			0.30	^4,5
Net investment income (loss)		1.51	⁴		2.63			2.96			2.78			2.94	⁴
Portfolio turnover rate⁶		4	³		15			9			9			23	³
Net assets, end of period ($ x 1,000)		860,402			811,915			515,595			396,661			148,222

* Unaudited.

¹ Commencement of operations.

³ Not annualized.

⁴ Annualized.

⁵ Effective June 14, 2010, the annual operating expense ratio was reduced. The ratio presented for period ended 8/31/10 is a blended ratio.

⁶ Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.

See financial notes 27

Schwab Emerging Markets Equity ETF

Portfolio Holdings as of February 28, 2014 (Unaudited)


				Cost		Value
Holdings by Category				($)		($)

	94	.3%	Common Stock		831,038,495		811,207,887
	0	.0%	Corporate Bond		4,588		239
	0	.3%	Other Investment Companies		2,437,822		2,444,996
	5	.3%	Preferred Stock		60,224,237		45,464,870
	0	.0%	Rights		—		1


	99	.9%	Total Investments		893,705,142		859,117,993
	1	.2%	Collateral Invested for Securities on Loan		10,518,310		10,518,310
	(1	.1)%	Other Assets and Liabilities, Net				(9,233,982	)


	100	.0%	Net Assets				860,402,321


	Number		% of Net		Value
Security	of Shares		Assets		($)

Common Stock 94.3% of net assets

Brazil 7.3%
AMBEV S.A. ADR		1,298,880		1.1		9,351,936
BRF S.A. ADR		246,492		0.5		4,500,944
Petroleo Brasileiro S.A.		1,033,200		0.7		5,745,406
Vale S.A.		369,000		0.6		5,212,757
Other Securities				4.4		37,748,128

				7.3		62,559,171

Chile 1.8%
Other Securities				1.8		15,302,120

China 21.8%
Bank of China Ltd., H Shares		20,664,000		1.0		8,679,836
China Construction Bank Corp., H Shares		18,819,000		1.5		12,924,188
China Life Insurance Co., Ltd., H Shares		2,214,000		0.8		6,475,644
China Mobile Ltd.		1,382,000		1.5		13,132,566
China Petroleum & Chemical Corp., H Shares		6,710,000		0.7		5,956,913
CNOOC Ltd.		4,488,000		0.9		7,355,623
Industrial & Commercial Bank of China Ltd., H Shares		18,819,336		1.3		11,275,525
PetroChina Co., Ltd., H Shares		5,904,000		0.7		6,222,704
Ping An Insurance Group Co. of China Ltd., H Shares		573,500		0.5		4,659,057
Tencent Holdings Ltd.		258,300		2.4		20,717,783
Other Securities				10.5		90,344,820

				21.8		187,744,659

Colombia 0.9%
Other Securities				0.9		7,645,994

Czech Republic 0.3%
Other Securities				0.3		2,869,433

Egypt 0.3%
Other Securities				0.3		2,864,056

Hungary 0.3%
Other Securities				0.3		2,683,305

India 9.6%
HDFC Bank Ltd.		308,365		0.4		3,331,417
Housing Development Finance Corp.		407,745		0.6		5,389,892
Infosys Ltd.		140,958		1.0		8,698,664
ITC Ltd.		643,905		0.4		3,403,928
Reliance Industries Ltd.		397,429		0.6		5,129,450
Tata Consultancy Services Ltd.		103,320		0.4		3,793,651
Other Securities				6.2		52,286,360

				9.6		82,033,362

Indonesia 2.9%
PT Astra International Tbk		5,538,800		0.4		3,315,932
PT Bank Central Asia Tbk		3,505,500		0.4		3,087,582
Other Securities				2.1		18,679,730

				2.9		25,083,244

Malaysia 4.8%
Malayan Banking Berhad		1,275,400		0.4		3,806,932
Other Securities				4.4		37,777,057

				4.8		41,583,989

Mexico 5.3%
America Movil S.A.B. de C.V., Series L		8,708,400		1.0		8,442,596
Cemex S.A.B. de C.V., Series CPO *		3,062,700		0.5		4,009,832
Fomento Economico Mexicano S.A.B. de C.V.		613,600		0.6		5,257,939
Grupo Financiero Banorte S.A.B. de C.V., O Shares		638,300		0.5		4,146,173
Grupo Mexico S.A.B. de C.V., Series B		1,143,900		0.4		3,517,832
Grupo Televisa S.A.B., Series CPO		774,900		0.5		4,557,805
Wal-Mart de Mexico S.A.B. de C.V., Series V		1,623,600		0.4		3,443,526
Other Securities				1.4		12,419,393

				5.3		45,795,096

Pakistan 0.0%
Other Securities				0.0		252,096

28 See financial notes

Schwab Emerging Markets Equity ETF

Portfolio Holdings (Unaudited) continued

Number

% of Net

Value

Security

of Shares

Assets

($)

Peru 0.4%

Other Securities

0.4

2,910,524

Philippines 1.6%

Other Securities

1.6

13,248,488

Poland 1.9%

Powszechna Kasa Oszczednosci Bank Polski S.A.

209,223

0.4

3,058,168

Other Securities

1.5

13,430,001

1.9

16,488,169

Russia 6.3%

Gazprom OAO ADR

1,596,731

1.4

12,294,828

LUKOIL OAO ADR

147,600

0.9

8,118,000

Magnit OJSC GDR - Reg’d

91,512

0.6

5,124,672

Sberbank of Russia ADR

751,087

0.9

7,743,707

Other Securities

2.5

21,207,088

6.3

54,488,295

South Africa 9.7%

MTN Group Ltd.

484,128

1.0

8,874,234

Naspers Ltd., N Shares

109,224

1.5

13,206,223

Sasol Ltd.

148,707

0.9

7,559,702

Standard Bank Group Ltd.

331,731

0.4

3,805,020

Other Securities

5.9

50,240,939

9.7

83,686,118

Taiwan 14.0%

Chunghwa Telecom Co., Ltd. ADR

107,010

0.4

3,237,052

Delta Electronics, Inc.

669,000

0.4

3,720,592

Formosa Plastics Corp.

1,529,120

0.5

3,886,139

Hon Hai Precision Industry Co., Ltd.

3,167,468

1.0

8,781,679

MediaTek, Inc.

426,469

0.7

6,263,737

Nan Ya Plastics Corp.

1,966,060

0.5

4,211,410

Taiwan Semiconductor Manufacturing Co., Ltd. ADR

1,301,094

2.7

23,510,769

Other Securities

7.8

66,439,589

14.0

120,050,967

Thailand 2.7%

Other Securities

2.7

23,334,767

Turkey 1.6%

Other Securities

1.6

13,942,684

United Arab Emirates 0.8%

Other Securities

0.8

6,641,350

Total Common Stock

(Cost $831,038,495)

811,207,887

Corporate Bond 0.0% of net assets

India 0.0%

Other Securities

0.0

239

Total Corporate Bond

(Cost $4,588)

239

Other Investment Companies 0.3% of net assets

United States 0.3%

Equity Fund 0.3%

Other Securities

0.3

2,138,950

Money Market Fund 0.0%

Other Securities

0.0

306,046

Total Other Investment Companies

(Cost $2,437,822)

2,444,996

Preferred Stock 5.3% of net assets

Brazil 5.1%

Banco Bradesco S.A.

577,723

0.8

6,754,116

Itau Unibanco Holding S.A. ADR

695,196

1.1

9,260,011

Petroleo Brasileiro S.A.

1,180,800

0.8

6,869,466

Vale S.A. ADR

568,445

0.8

7,099,878

Other Securities

1.6

14,116,714

5.1

44,100,185

Chile 0.0%

Other Securities

0.0

322,053

Colombia 0.1%

Other Securities

0.1

704,111

Russia 0.1%

Other Securities

0.1

338,521

Total Preferred Stock

(Cost $60,224,237)

45,464,870

Rights 0.0% of net assets

Brazil 0.0%

Other Securities

0.0

Total Rights

(Cost $—)

End of Investments.

See financial notes 29

Schwab Emerging Markets Equity ETF

Portfolio Holdings (Unaudited) continued

Number

% of Net

Value

Security

of Shares

Assets

($)

Collateral Invested for Securities on Loan 1.2% of net assets

State Street Institutional U.S. Government Money Market Fund, Institutional Class 0.00% (d)

10,518,310

1.2

10,518,310

Total Collateral Invested for Securities on Loan

(Cost $10,518,310)

10,518,310

End of Collateral Invested for Securities on Loan

At 02/28/14, the tax basis cost of the fund’s investments was $898,165,812 and the unrealized appreciation and depreciation were $82,919,806 and ($121,967,625), respectively, with a net unrealized depreciation of ($39,047,819).

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 $10,933,873.
(b)		Securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registrations, normally to qualified institutional buyers. At the period end, the value of these amounted to $172,741 or 0.0% of net assets.
(c)		Illiquid security. At the period end, the value of these amounted to $1,263,087 or 0.1% of net assets.
(d)		The rate shown is the 7-day yield.


ADR —		American Depositary Receipt
ETF —		Exchange Traded Fund
GDR —		Global Depositary Receipt
NVDR —		Non-Voting Depositary Receipt
Reg’d —		Registered
INR —		Indian rupee

The following is a summary of the inputs used to value the fund’s investments as of February 28, 2014 (see financial note 2(a) for additional information):


	Quoted Prices in				Significant
	Active Markets for		Other Significant		Unobservable
	Identical Assets		Observable Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total

Common Stock¹		$811,207,887		$—		$—		$811,207,887
Corporate Bonds¹		—		239		—		239
Other Investment Companies¹		2,444,996		—		—		2,444,996
Preferred Stock¹		45,464,870		—		—		45,464,870
Rights¹		1		—		—		1

Total		$859,117,754		$239		$—		$859,117,993

Other Financial Instruments
Collateral Invested for Securities on Loan		$10,518,310		$—		$—		$10,518,310


¹		As categorized in the complete schedule of portfolio holdings.

The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:


	Balance				Change in												Balance
	as of		Realized		Unrealized							Gross		Gross			as of
	August 31,		Gains		Appreciation			Gross		Gross		Transfers		Transfers			February 28,
Investments in Securities	2013		(Losses)		(Depreciation)			Purchases		Sales		in		out			2014

Common Stock
China		$242,410		$—		$—			$—		$—		$—		($242,410	)		$—
Pakistan		209,664		—		—			—		—		—		(209,664	)		—
Rights
China		39,538		—		(39,538	)		—		—		—		—			—

Total		$491,612		$—		($39,538	)		$—		$—		$—		($452,074	)		$—

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 transfers in and out of Level 3 from Level 1 due to the result of fair valued securities for which no quoted value was available. There were no transfers between Level 1 and Level 2 for the period ended February 28, 2014.

30 See financial notes

Schwab Emerging Markets Equity ETF

Statement of

Assets and Liabilities

As of February 28, 2014; unaudited



Assets

Investments, at value (cost $893,705,142) including securities on loan of $10,933,873		$859,117,993
Collateral invested for securities on loan		10,518,310
Foreign currency, at value (cost $627,630)		627,654
Receivables:
Dividends		637,346
Income from securities on loan		15,869
Foreign tax reclaims		13,648
Interest	+	399

Total assets		870,931,219

Liabilities

Collateral held for securities on loan		10,518,310
Payables:
Investment adviser fees	+	10,588

Total liabilities		10,528,898

Net Assets

Total assets		870,931,219
Total liabilities	—	10,528,898

Net assets		$860,402,321

Net Assets by Source
Capital received from investors		959,855,579
Distributions in excess of net investment income		(224,131	)
Net realized capital losses		(64,646,047	)
Net unrealized capital depreciation		(34,583,080	)

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$860,402,321

36,900,000

$23.32

See financial notes 31

Schwab Emerging Markets Equity ETF

Statement of

Operations

For the period September 1, 2013 through February 28, 2014; unaudited



Investment Income

Dividends (net of foreign withholding tax of $987,636)		$7,204,301
Interest (net of foreign withholding tax of $11)		2,043
Securities on loan	+	100,518

Total investment income		7,306,862

Expenses

Investment adviser fees		661,927

Total expenses	−	661,927

Net investment income		6,644,935

Realized and Unrealized Gains (Losses)

Net realized losses on investments		(8,091,490	)
Net realized losses on foreign currency transactions	+	(35,459	)

Net realized losses		(8,126,949	)
Net change in unrealized appreciation (depreciation) on investments		35,476,904
Net change in unrealized appreciation (depreciation) on foreign currency translations	+	30,083

Net change in unrealized appreciation (depreciation)	+	35,506,987

Net realized and unrealized gains		27,380,038

Increase in net assets resulting from operations		$34,024,973

32 See financial notes

Schwab Emerging Markets Equity ETF

Statements of

Changes in Net Assets

For the current and prior report periods
Figures for the current period are unaudited



Operations


9/1/13-2/28/14				9/1/12-8/31/13
Net investment income		$6,644,935			$19,909,084
Net realized losses		(8,126,949	)		(35,145,718	)
Net change in unrealized appreciation (depreciation)	+	35,506,987			(24,210,404	)

Increase (Decrease) in net assets resulting from operations		34,024,973			(39,447,038	)

Distributions to Shareholders

Distributions from net investment income		($23,217,480	)		($14,760,500	)

Transactions in Fund Shares

9/1/13-2/28/14

9/1/12-8/31/13

SHARES

VALUE

SHARES

VALUE

Shares sold

1,500,000

$37,679,688

14,400,000

$368,497,242

Shares redeemed

—

(800,000

)

(17,970,050

)

Net transactions in fund shares

1,500,000

$37,679,688

13,600,000

$350,527,192

Shares Outstanding and Net Assets

9/1/13-2/28/14

9/1/12-8/31/13

SHARES

NET ASSETS

SHARES

NET ASSETS

Beginning of period

35,400,000

$811,915,140

21,800,000

$515,595,486

Total increase

1,500,000

48,487,181

13,600,000

296,319,654

End of period

36,900,000

$860,402,321

35,400,000

$811,915,140

Distributions in excess of net investment income/
Net investment income not yet distributed

($224,131

)

$16,348,414

See financial notes 33

Schwab International Equity ETFs

Financial Notes, unaudited

1. Business Structure of the Funds

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



Schwab Strategic Trust (organized January 27, 2009)		Schwab U.S. REIT ETF
Schwab International Equity ETF		Schwab U.S. TIPS ETF
Schwab International Small-Cap Equity ETF		Schwab Short-Term U.S. Treasury ETF
Schwab Emerging Markets Equity ETF		Schwab Intermediate-Term U.S. Treasury ETF
Schwab U.S. Broad Market ETF		Schwab U.S. Aggregate Bond ETF
Schwab U.S. Large-Cap ETF		Schwab Fundamental U.S. Broad Market Index ETF
Schwab U.S. Large-Cap Growth ETF		Schwab Fundamental U.S. Large Company Index ETF
Schwab U.S. Large-Cap Value ETF		Schwab Fundamental U.S. Small Company Index ETF
Schwab U.S. Mid-Cap ETF		Schwab Fundamental International Large Company Index ETF
Schwab U.S. Small-Cap ETF		Schwab Fundamental International Small Company Index ETF
Schwab U.S. Dividend Equity ETF		Schwab Fundamental Emerging Markets Large Company Index ETF

The funds issue and redeem shares at their net assets value per share (“NAV”) only in large blocks of shares, typically 100,000 shares or more (“Creation Units”). These transactions are usually in exchange for a basket of securities and an amount of cash. As a practical matter, only institutions or large investors purchase or redeem Creation Units. Except when aggregated in Creation Units, shares of the fund are not redeemable securities.

Individual shares of the funds trade on national securities exchanges and elsewhere during the trading day and can only be bought and sold at market prices throughout the trading day through a broker-dealer. Because fund shares trade at market prices rather than NAV, shares may trade at a price greater than NAV (premium) or less than NAV (discount).

Each fund maintains its own account for purposes of holding assets and accounting, and is considered a separate entity for tax purposes. Within its account, each fund may also keep certain assets in segregated accounts, as required by securities law.

2. Significant Accounting Policies:

The following is a summary of the significant accounting policies the funds use in their preparation of financial statements. The accounting policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

For more information about the underlying funds’ operations and policies, please refer to those funds’ semiannual and annual reports, which are filed with the Securities Exchange Commission (“SEC”).

(a) Security Valuation:

Under procedures approved by the funds’ Board of Trustees (the “Board”), the investment adviser has formed a Pricing Committee to administer the pricing and valuation of portfolio securities and other assets and to ensure that prices used for internal purposes or provided by third parties reasonably reflect fair market value. Among other things, these procedures allow the funds to utilize independent pricing services, quotations from securities and financial instrument dealers and other market sources to determine fair value.

The funds value the securities in their portfolios every business day. The funds use the following policies to value various types of securities:


	•	Securities traded on an exchange or over-the-counter: Traded securities are valued at the closing value for the day, or, on days when no closing value has been reported, at halfway between the most recent bid and ask quotes. Securities that are primarily traded on foreign exchanges are valued at the official closing price or the last sales price on the exchange where the securities are principally traded with these values then translated into U.S. dollars at the current exchange rate, unless these securities are fair valued as discussed below.

	•	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

Schwab International Equity ETFs

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):


		price; or when a security’s primary trading market is closed during regular market hours. Each fund makes fair value determinations in good faith in accordance with the fund’s valuation procedures. The Pricing Committee considers a number of factors, including unobservable market inputs when arriving at fair value. The Pricing Committee may employ techniques such as the review of related or comparable assets or liabilities, related market activities, recent transactions, market multiples, book values, transactional back-testing, disposition analysis and other relevant information. The Pricing Committee regularly reviews these inputs and assumptions to calibrate the valuations. Due to the subjective and variable nature of fair value pricing, there can be no assurance that a fund could obtain the fair value assigned to the security upon the sale of such security. The Board convenes on a regular basis to review fair value determinations made by the funds pursuant to the valuation procedures.


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

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

	•	Short-term securities (60 days or less to maturity): Short-term securities are valued at amortized cost, which approximates market value.

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

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

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


	•	Level 1 — quoted prices in active markets for identical securities — Investments whose values are based on quoted market prices in active markets, and whose values are therefore classified as Level 1 prices, include active listed equities, ETFs and futures contracts. Investments in mutual funds are valued daily at their NAVs, and investments in ETFs are valued daily at the last reported sale price or the official closing price, which are classified as Level 1 prices.

	•	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 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

Schwab International Equity ETFs

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):


		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, 2014 are disclosed in the Portfolio Holdings.

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

Futures Contracts: Futures contracts are instruments that represent an agreement between two parties that obligates one party to buy, and the other party to sell, specific instruments at an agreed upon price on a stipulated future date. A fund must give the broker a deposit of cash and/or securities (initial margin) whenever it enters into a futures contract. The amount of the deposit may vary from one contract to another. Subsequent payments (variation margin) are made or received by a fund depending on the daily fluctuations in the value of the futures contract and are accounted for as unrealized gains or losses until the contract is closed, at which time the gains or losses are realized. Futures are traded publicly on exchanges, and their market value changes 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 have a value of at least 102% of the prior day’s market value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities and is marked to market daily. The lending agent provides the fund with indemnification against borrower default. The fund bears the risk of loss with respect to the investment of cash collateral. The cash collateral of securities loaned is invested in money market portfolios operating under Rule 2a-7 of the 1940 Act. Securities lending income, as disclosed in a 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. Costs and expenses, including agent fees, associated with securities lending activities under the trust’s Securities Lending Program paid to the unaffiliated lending agent are approximately 15% of the gross lending revenues.

The values of the securities on loan and the related cash collateral are disclosed in the Portfolio Holdings and the Statement of Assets and Liabilities for each fund. The following table presents the non-cash collateral as of February 28, 2014.


	Non-Cash
	Collateral Received

Schwab International Small-Cap Equity ETF		$117,865
Schwab Emerging Markets Equity ETF		1,185,564

(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 gains or losses arise 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

Schwab International Equity ETFs

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):

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 position, it calculates the difference between the value of the position at the beginning and at the end of the contract, and records a realized gain or loss accordingly.

(d) Investment Income:

Interest income is recorded as it accrues. Dividends and distributions from portfolio securities and underlying funds are recorded on the date they are effective (the ex-dividend date), although the funds record certain foreign security dividends on the day they learn of the ex-dividend date. Any distributions from underlying funds are recorded in accordance with the character of the distributions as designated by the underlying funds.

Income received from foreign sources may result in withholding tax. Withholding taxes are accrued at the same time as the related income if the tax is fixed and known, unless a tax withheld is reclaimable from the local tax authorities in which case it is recorded as receivable. If the tax rate is not known or estimable, such expense or reclaim receivable is recorded when the net proceeds are received.

(e) Expenses:

Pursuant to the Investment Advisory Agreement (“Advisory Agreement”) between Charles Schwab Investment Management, Inc. (“CSIM” or the “investment adviser”) and the trust, the investment adviser will pay the operating expenses of each fund, excluding interest expense, taxes, any brokerage expenses, and extraordinary or non-routine expenses. Interest expense, taxes, any brokerage expenses and extraordinary or non-routine expenses that are specific to a fund are charged directly to the fund.

(f) Distributions to Shareholders:

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

(g) Accounting Estimates:

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

(h) Federal Income Taxes:

The funds intend to meet federal income and excise tax requirements for regulated investment companies. Accordingly, the funds distribute substantially all of their net investment income and realized net 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, 2014, if any, are reflected in the funds’ Statements of Assets and Liabilities.

(j) Indemnification:

Schwab International Equity ETFs

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):

vendors and others that provide general indemnifications. The funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the funds. However, based on experience, the funds expect the risk of loss attributable to these arrangements to be remote.

3. Risk Factors:

Investing in the funds may involve certain risks, as discussed in the funds’ prospectus, including, but not limited to, those described below. Any of these risks could cause an investor to lose money.

Market Risk. Stock markets rise and fall daily. As with any investment whose performance is tied to these markets, the value of the investment in a fund will fluctuate, which means that the investors could lose money.

Investment Style Risk. The funds are not actively managed. Therefore, a fund follows the securities included in an 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 a fund’s expenses, the fund’s performance is normally 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 and Mid-Cap Risk. Certain funds invest in large- and mid-cap stocks. Both large- and mid-cap stocks tend to go in and out of favor based on market and economic conditions. However, stocks of mid-cap companies tend to be more vulnerable to adverse business or economic events than larger more established companies. During a period when large-and mid-cap U.S. stocks fall behind other types of investments — small-cap stocks, for instance — a fund’s large- and mid-cap holdings could reduce performance.

Small-Cap Risk. Certain funds invest in small-cap stocks. Historically, small-cap stocks have been riskier than large- and mid-cap stocks, and their prices may move sharply, especially during market upturns and downturns. Small-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies. During a period when small-cap stocks fall behind other types of investments — large-cap and 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); differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may be heightened in connection with investments in emerging markets. Foreign securities also include ADRs, GDRs, and 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.

Emerging Markets Risk. Certain funds invest in emerging markets. Emerging markets 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. It is sometimes difficult to obtain and enforce court judgments in such countries and there is often a greater potential for nationalization and/or expropriation of assets by the government of an emerging market country. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in other countries. As a result, there will tend to be an increased risk of price volatility associated with a fund’s investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar.

Sampling Index Tracking Risk. Each fund uses statistical sampling techniques, and as a result, a fund may not fully replicate the index and may hold securities not included in the index. As a result, a fund is subject to the risk that the adviser’s investment management strategy, the implementation of which is subject to a number of constraints, may not produce the intended results.

Schwab International Equity ETFs

Financial Notes, unaudited (continued)

3. Risk Factors (continued):

Because each fund uses a sampling approach, it may not track the return of the index as well as it would if a fund purchased all of the securities in its benchmark index.

Tracking Error Risk. As an index fund, each 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 a 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. Each fund may invest in derivative instruments. The principal types of derivatives a fund may use are futures contracts. A futures contract is an agreement to buy or sell a financial instrument at a specific price on a specific day. A fund’s use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as market risk and liquidity risk, are discussed elsewhere in this section. A fund’s use of derivatives is also subject to leverage risk, credit risk, lack of availability risk, valuation risk, correlation risk and tax risk. Leverage risk is the risk that use of derivatives may magnify the effect of any decrease or increase in the value of the fund’s portfolio securities. Credit risk is the risk that the counterparty to a derivative transaction may not fulfill its contractual obligations. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause a fund to realize higher amounts of short-term capital gain. These risks could cause a fund to lose more than the principal amount invested.

Liquidity Risk. A particular investment may be difficult to purchase or sell. A fund may be unable to sell illiquid securities at an advantageous time or price.

Securities Lending Risk. Securities lending involves the risk of loss of rights in the collateral or delay in recovery of the collateral if the borrower fails to return the security loaned or becomes insolvent.

Concentration Risk. To the extent that a fund’s or an index’s portfolio is concentrated in the securities of issuers in a particular market, industry, group of industries, sector or asset class, the fund may be adversely affected by the performance of those securities, may be subject to increased price volatility and may be more susceptible to adverse economic, market, political or regulatory occurrences affecting that market, industry, group of industries, sector or asset class.

Market Trading Risk. Although fund shares are listed on national securities exchanges, there can be no assurance that an active trading market for fund shares will develop or be maintained. If an active market is not maintained, investors may find it difficult to buy or sell fund shares.

Shares of the Fund May Trade at Prices Other Than NAV. Fund shares may be bought and sold in the secondary market at market prices. Although it is expected that the market price of the shares of a fund will approximate the fund’s NAV, there may be times when the market price and the NAV vary significantly. Investors may pay more than NAV when they buy shares of a fund in the secondary market, and may receive less than NAV when they sell those shares in the secondary market.

Lack of Government Insurance or Guarantee. An investment in a fund is not a bank deposit and it is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.

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

4. Affiliates and Affiliated Transactions:

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

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


		Schwab		Schwab
Schwab		International		Emerging
International		Small-Cap		Markets
Equity ETF		Equity ETF		Equity ETF

	0.09%		0.20%		0.15%

Schwab International Equity ETFs

Financial Notes, unaudited (continued)

4. Affiliates and Affiliated Transactions (continued):

Subsequent to the reporting period ended February 28, 2014, and effective March 5, 2014, the management fee of the Schwab International Small-Cap Equity ETF and Schwab Emerging Markets Equity ETF has been reduced to 0.19% and 0.14%, respectively.

Certain Schwab funds may own shares of other Schwab funds. The table below reflects the percentages of shares of each fund in this report that are owned by other Schwab funds as of February 28, 2014, as applicable:

Schwab

International

Emerging

International

Small-Cap

Markets

Equity ETF

Schwab VIT Balanced Portfolio

0.2%

Schwab VIT Balanced with Growth Portfolio

0.6%

0.5%

Schwab VIT Growth Portfolio

0.9%

1.2%

0.8%

Pursuant to an exemptive order issued by the SEC, the funds may enter into interfund borrowing and lending transactions with other Schwab Funds including Schwab ETFs. All loans are for temporary or emergency purposes only. The interest rate to be charged on a loan is the average of the overnight repurchase agreement rate and the short-term bank loan rate. The interfund lending facility is subject to the oversight and periodic review of the Board. The funds had no interfund borrowing or lending activity during the period.

5. Other Service Providers:

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

State Street Bank and Trust Company (“State Street”) serves as the funds’ transfer agent. As part of these services, the transfer agent maintains records pertaining to the sale, redemption and transfer of the funds’ shares.

State Street also serves as custodian and accountant for the funds. The custodian is responsible for the daily safekeeping of securities and cash held by the funds. The funds’ accountant maintains all books and records related to the funds’ transactions.

6. Board of Trustees:

The Board may include people who are officers and/or directors of CSIM or its affiliate. Federal securities law limits the percentage of such “interested persons” who may serve on a trust’s board, and the trust was in compliance with these limitations throughout the report period. The trust did not pay any of these interested persons for their services as trustees. For information regarding the trustees please refer to Trustees and Officers table at the end of this report.

7. Borrowing from Banks:

The funds have access to custodian overdraft facilities and to an uncommitted line of credit of $100 million with State Street. The funds pay interest on the amounts they borrow at rates that are negotiated periodically.

There were no borrowings from the line of credit by the funds during the period. However, the funds may have utilized their overdraft facility and incurred interest expense, which is disclosed on the funds’ Statements of Operations, if any. The interest expense is determined based on a negotiated rate above the current Federal Funds Rate.

8. Derivatives:

The Schwab International Equity ETF entered into equity index futures contracts (“futures”) during the report period. The fund invested in futures to equitize available cash. The fair value and variation margin for futures contracts held at February 28, 2014 are presented on the Portfolio Holdings and Statement of Assets and Liabilities, respectively. The net realized/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, the month-end average contract values of futures contracts held by the fund was $16,078 and the month-end average number of contracts held was 1.

Schwab International Equity ETFs

Financial Notes, unaudited (continued)

9. Purchases and Sales/Maturities of Investment Securities:

For the period ended February 28, 2014, purchases and sales/maturities of securities (excluding in-kind transactions and short-term obligations) were as follows:


	Purchases of Securities		Sales/Maturities of Securities

Schwab International Equity ETF		$108,855,108		$73,213,844
Schwab International Small-Cap Equity ETF		20,300,189		22,451,111
Schwab Emerging Markets Equity ETF		38,663,217		38,077,672

10. In-Kind Transactions:

The consideration for the purchase of Creation Units of a fund generally 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, 2014 were as follows:


	In-Kind Purchases of Securities		In-Kind Sales of Securities

Schwab International Equity ETF		$374,667,685		$—
Schwab International Small-Cap Equity ETF		41,777,753		5,809,959
Schwab Emerging Markets Equity ETF		22,761,652		—

For the period ended February 28, 2014, 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, 2014 are disclosed in the funds’ Statements of Operations.

11. Federal Income Taxes

Capital loss carryforwards may be used to offset future realized capital gains for federal income tax purposes. As of August 31, 2013, the funds had capital loss carryforwards available to offset future net capital gains before the expiration dates as follows:

Schwab

International

Emerging

International

Small-Cap

Markets

Expiration Date

Equity ETF

August 31, 2019

$2,345,874

$215,545

$1,091,404

No expiration*

23,051,268

11,827,747

18,095,395

Total

$25,397,142

$12,043,292

$19,186,799


*		As a result of the passage of the Regulated Investment Company Modernization Act of 2010, capital losses incurred after December 31, 2010 may now be carried forward indefinitely, but must retain the character of the original loss. However, such losses must be utilized prior to the pre-enactment capital losses, which may increase the likelihood that the pre-enactment capital losses may expire unused. Under pre-enactment law, capital losses could be carried forward for eight years, and carried forward as short-term capital loss, irrespective of the character of the original loss.

Schwab International Equity ETFs

Financial Notes, unaudited (continued)

11. Federal Income Taxes (continued):

For tax purposes, realized net capital losses and late-year ordinary losses incurred after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the year ended August 31, 2013, the funds had capital losses deferred as follows:

Schwab

International

Emerging

International

Small-Cap

Markets

Equity ETF

Deferred capital losses

$12,622,924

$5,004,504

$32,950,026

As of August 31, 2013, management has reviewed the tax positions for open periods (for federal purposes, three years from the date of filing and for state purposes, four years from the date of filing) as applicable to the funds, and has determined that no provision for income tax is required in the funds’ financial statements. The funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the period ended August 31, 2013, the funds did not incur any interest or penalties.

12. Subsequent Events:

Management has determined there are no subsequent events or transactions through the date the financial statements were issued that would have materially impacted the financial statements as presented.

Investment Advisory Agreement Approval

The Investment Company Act of 1940 (the “1940 Act”) requires that initial approval of, as well as the continuation of, a fund’s investment advisory agreement must be specifically approved (1) by the vote of the trustees or by a vote of the shareholders of the fund, and (2) by the vote of a majority of the trustees who are not parties to the investment advisory agreement or “interested persons” of any party (the “Independent Trustees”), cast in person at a meeting called for the purpose of voting on such approval. In connection with such approvals, the fund’s trustees must request and evaluate, and the investment adviser is required to furnish, such information as may be reasonably necessary to evaluate the terms of the investment advisory agreement.

The Board of Trustees (the “Board” or the “Trustees”, as appropriate) calls and holds a meeting each year that is dedicated, in part, to considering whether to renew the investment advisory agreement between Schwab Strategic Trust (the “Trust”) and Charles Schwab Investment Management, Inc. (“CSIM”) (the “Agreement”) with respect to the existing funds in the Trust, including Schwab International Equity ETF, Schwab International Small-Cap Equity ETF and Schwab Emerging Markets Equity ETF (the “Funds”), and to review certain other agreements pursuant to which CSIM provides investment advisory services to certain other registered investment companies. In preparation for the meeting, the Board requests and reviews a wide variety of materials provided by CSIM, including information about CSIM’s affiliates, personnel and operations. The Board also receives extensive data provided by third parties. This information is in addition to the detailed information about the Funds that the Board reviews during the course of each year, including information that relates to Fund operations and Fund performance. In addition, the Independent Trustees meet in executive session outside the presence of fund management and participate in question and answer sessions with representatives of CSIM.

The Board, including a majority of the Independent Trustees, considered information specifically relating to its consideration of the continuance of the Agreement with respect to the Funds at a meeting held on September 4, 2013 and approved the renewal of the Agreement with respect to the Funds for an additional one year term. The Board’s approval of the Agreement with respect to the Funds was based on consideration and evaluation of a variety of specific factors discussed at this meeting and at prior meetings, including:


1.	the nature, extent and quality of the services provided to the Funds under the Agreement, including the resources of CSIM and its affiliates dedicated to the Funds;

2.	each Fund’s investment performance and how it compared to that of certain other comparable exchange-traded funds;

3.	each Fund’s expenses and how those expenses compared to those of certain other comparable exchange-traded funds;

4.	the profitability of CSIM and its affiliates, including Charles Schwab & Co., Inc. (“Schwab”), with respect to the Funds, including both direct and indirect benefits accruing to CSIM and its affiliates; and

5.	the extent to which economies of scale would be realized as the Funds grow and whether fee levels in the Agreement reflect those economies of scale for the benefit of Fund investors.

Nature, Extent and Quality of Services. The Board considered the nature, extent and quality of the services provided by CSIM to the Funds and the resources of CSIM and its affiliates dedicated to the Funds. In this regard, the Trustees evaluated, among other things, CSIM’s personnel, experience, track record and compliance program. The Trustees also considered Schwab’s wide range of products, services, and channel alternatives such as free advice, investment research tools and Internet access and an array of account features that benefit the Funds and their shareholders. The Trustees also considered Schwab’s excellent reputation as a full service brokerage firm and its overall financial condition. Finally, the Trustees considered that the vast majority of the Funds’ shareholders are also brokerage clients of Schwab. Following such evaluation, the Board concluded, within the context of its full deliberations, that the nature, extent and quality of services provided by CSIM to the Funds and the resources of CSIM and its affiliates dedicated to the Funds supported renewal of the Agreement with respect to the Funds.

Fund Performance. The Board considered each Fund’s performance in determining whether to renew the Agreement with respect to the Fund. Specifically, the Trustees considered each Fund’s performance relative to a peer category of other exchange-traded funds and appropriate indices/benchmarks, in light of total return, yield, if applicable, and market trends. As part of this review, the Trustees considered the composition of the peer category, selection criteria and the reputation of the third party who prepared the peer category analysis. In evaluating the performance of each Fund, the Trustees considered both risk and shareholder risk expectations for such Fund. The Trustees further considered the level of Fund performance in the context of its review of Fund expenses and adviser profitability discussed below. Following such evaluation the Board concluded, within the context of its full deliberations, that the performance of the Funds supported renewal of the Agreement with respect to the Funds.

Fund Expenses. With respect to the Funds’ expenses, the Trustees considered the rate of compensation called for by the Agreement, and each Fund’s operating expense ratio, in comparison to those of other comparable exchange-traded funds, such peer groups and comparisons having been selected and calculated by an independent third party. The Trustees also considered fees charged by CSIM to mutual funds that it manages. Following such evaluation, the Board concluded, within the context of its full deliberations, that the expenses of the Funds are reasonable and supported renewal of the Agreement with respect to the Funds.

Profitability. With regard to profitability, the Trustees considered the compensation flowing to CSIM and its affiliates, directly or indirectly. In this connection, the Trustees reviewed management’s profitability analyses. The Trustees also considered any other benefits derived by CSIM from its relationship with the Funds, such as whether, by virtue of its management of the Funds, CSIM obtains investment information or other research resources that aid it in providing advisory services to other clients. The Trustees considered whether the varied levels of compensation and profitability with respect to the Funds under the Agreement and other service agreements were reasonable and justified in light of the quality of all services rendered to the Funds by CSIM and its affiliates. Based on this evaluation, the Board concluded, within the context of its full deliberations, that the profitability of CSIM is reasonable and supported renewal of the Agreement with respect to the Funds.

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

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

Trustees and Officers

The tables below give information about the trustees and officers for the Schwab Strategic Trust which includes the funds covered in this report. The “Fund Complex” includes the Charles Schwab Family of Funds, Schwab Capital Trust, Schwab Investments, Schwab Annuity Portfolios, Schwab Strategic Trust, Laudus Trust and Laudus Institutional Trust. The Fund Complex includes 97 funds.

The address for all trustees and officers is 211 Main Street, San Francisco, CA 94105. You can find more information about the trustees and officers in the Statement of Additional Information, which is available free by calling 1-800-435-4000.

Independent Trustees


Name, Year of Birth,		Number of
and Position(s) with		Portfolios in
the trust; (Terms of		Fund Complex
office, and length of	Principal Occupations	Overseen by
Time Served¹)	During the Past Five Years	the Trustee	Other Directorships

Robert W. Burns 1959 Trustee (Trustee of Schwab Strategic Trust since 2009.)	Retired/Private Investor (January 2009 – present); Formerly, Managing Director, Pacific Investment Management Company, LLC (PIMCO) and President, PIMCO Funds.	21	Director, PS Business Parks, Inc. (2005 – 2012).


Stephen Timothy Kochis 1946 Trustee (Trustee of Schwab Strategic Trust since 2012.)	CEO and Owner, Kochis Global (wealth management consulting) (May 2012 – present); Chairman and CEO, Aspiriant (wealth management) (January 2008 – April 2012).	21	None


Charles A. Ruffel 1956 Trustee (Trustee of Schwab Strategic Trust since 2009.)	Advisor (January 2008 – present) and Chief Executive Officer (January 1998 – January 2008), Asset International, Inc. (publisher of financial services information); Managing Partner and Co-Founder, Kudu Advisors, LLC (financial services) (June 2008 – present).	21	None

Interested Trustees


Name, Year of Birth,		Number of
and Position(s) with		Portfolios in
the trust; (Terms of		Fund Complex
office, and length of	Principal Occupations	Overseen by
Time Served)	During the Past Five Years	the Trustee	Other Directorships

Walter W. Bettinger II²1960 Trustee (Trustee of Schwab Strategic Trust since 2009.)	As of October 2008, President and Chief Executive Officer, Charles Schwab & Co., Inc. and The Charles Schwab Corporation. Since October 2008, Director, The Charles Schwab Corporation. Since May 2008, Director, Charles Schwab & Co., Inc. and Schwab Holdings, Inc. Since 2006, Director, Charles Schwab Bank. Until October 2008, President and Chief Operating Officer, Charles Schwab & Co., Inc. and The Charles Schwab Corporation. From 2004 through 2007, Executive Vice President and President, Schwab Investor Services. From 2004 through 2005, Executive Vice President and Chief Operating Officer, Individual Investor Enterprise, and from 2002 through 2004, Executive Vice President, Corporate Services.	97	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 Chandoha 1961 President and Chief Executive Officer (Officer of Schwab Strategic Trust since 2010.)		Executive Vice President, Charles Schwab & Co., Inc. (Sept. 2010 – present); Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; President, Chief Executive Officer (Dec. 2010 – present), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (March 2007 – August 2010).


George Pereira 1964 Treasurer and Principal Financial Officer (Officer of 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.; Treasurer and Chief Financial Officer, Laudus Funds (June 2006 – present); Treasurer and Principal Financial Officer, Schwab Funds (Nov. 2004 – present) and Schwab ETFs (Oct. 2009 – present); Director, Charles Schwab Worldwide Fund, PLC and Charles Schwab Asset Management (Ireland) Limited (April 2005 – present).


Omar Aguilar 1970 Senior Vice President and Chief Investment Officer – Equities (Officer of Schwab Strategic Trust since 2011.)		Senior Vice President and Chief Investment Officer — Equities, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer — Equities, Schwab Funds and Laudus Funds (June 2011 – present); Head of the Portfolio Management Group and Vice President of Portfolio Management, Financial Engines, Inc. (May 2009 – April 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 Schwab Strategic Trust since 2011.)		Senior Vice President and Chief Investment Officer – Fixed Income, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer – Fixed Income, Schwab Funds and Laudus Funds (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 (April 2006 – Jan. 2008).


David Lekich 1964 Chief Legal Officer and Secretary (Officer of Schwab Strategic Trust since 2011.)		Senior Vice President, Charles Schwab & Co., Inc. (Sept. 2011 – present); Senior Vice President and Chief Counsel, Charles Schwab Investment Management Inc. (Sept. 2011 – present); Vice President, Charles Schwab & Co., Inc., (March 2004 – Sept. 2011) and Charles Schwab Investment Management, Inc. (Jan 2011 – Sept. 2011); Secretary (April 2011 – present) and Chief Legal Officer (Dec. 2011 – present), Schwab Funds (April 2011 – present); Vice President and Assistant Clerk, Laudus Funds (April 2011 – present); Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs.


Catherine MacGregor 1964 Vice President and Assistant Secretary (Officer of 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 (March 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 Schwab ETF’s retirement policy requires that independent trustees retire by December 31 of the year in which the Trustee turns 72 or the Trustee’s twentieth year of service as an independent trustee, whichever comes first.
²		Mr. Bettinger is an Interested Trustee because he owns stock of The Charles Schwab Corporation, the parent company of the investment adviser.
³		The President, Treasurer and Secretary 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.

Glossary

144A securities These securities may be sold only to qualified institutional buyers under Securities Act Rule 144A.

American Depositary Receipt (ADR) U.S. dollar-denominated receipts issued by U.S. banks or trust companies that represent shares of foreign-based corporations.

ask See “offer.”

asset allocation The practice of dividing a portfolio among different asset classes, with each asset class assigned a particular percentage to help offset risks and rewards, based on your goals, time horizon and risk tolerance.

asset class A group of securities with similar structure and basic characteristics. Stocks, bonds and cash are the three main examples of asset classes.

authorized participant (AP) A large institutional investor that places orders for creation units with the funds’ distributor.

Barclays U.S. Treasury Bills 1 − 3 Months Index An index that includes all publicly issued zero-coupon U.S. Treasury Bills that have a remaining maturity of less than 3 months and more than 1 month, are rated investment grade, and have $250 million or more of outstanding face value

Barclays U.S. Aggregate Bond Index A broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, mortgage-back securities (agency fixed-rate and hybrid ARM passthroughs), 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.

European Depositary Receipt (EDR) A negotiable security (receipt) that is issued by a European bank, and that represents shares of foreign-based corporations.

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

expense ratio The amount that is taken from the fund’s assets each year to cover the operating expenses. An expense ratio of 0.50% means that a fund’s expenses amount to half of one percent of its average net assets a year.

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

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

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

Global Depositary Receipt (GDR) A negotiable security (receipt) that is issued by a foreign bank, and that represents shares of foreign-based corporations.

gross domestic product (GDP) The output of goods and services produced by labor and property located in the United States.

inception date The date that the shares began trading in the secondary market.

indicative optimized portfolio value (IOPV) A calculation disseminated by the stock exchange that approximates the fund’s NAV every 15 seconds throughout the trading day.

liquidity The ability to convert a security or asset quickly into cash.

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

market price return The return based on the change in market price per share of the fund over a given time period. Market price returns assume that dividends and capital gain distributions have been reinvested in the fund at market price.

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.

net asset value (NAV) The value of one share of a fund. NAV is calculated by taking the fund’s total assets, subtracting liabilities, and dividing by the number of shares outstanding.

NAV return The return based on the change in NAV of the fund over a given time period. NAV returns assume that dividends and capital gain distributions have been reinvested in the fund.

offer (ask) The lowest price at which an individual is willing to sell a security.

open The price at which a security opened for trading on a given day.

outstanding shares, shares outstanding When speaking of the fund, indicates all shares currently held by investors.

price-to-book ratio (P/B) The market price of a company’s stock compared with its “book value.” A mutual fund’s P/B is the weighted average of the P/B of all stocks in the fund’s portfolio.

price-to-earnings ratio (P/E) The market price of a company’s stock compared with earnings over the past year. A mutual fund’s P/E is the weighted average of the P/E of all stocks in the fund’s portfolio.

primary market The market that deals with the issuance of new securities.

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

S&P 500 Index A market capitalization index that is designed to measure the performance of 500 leading publicly held companies in leading industries of the U.S. economy.

sampling If a fund uses a sampling method, the fund will not fully replicate the benchmark index and may hold securities not included in the index. A fund that utilizes a sampling approach may not track the return of the index.

secondary market The market in which investors purchase securities from other investors rather than directly from the issuing companies. Organized exchanges facilitate the trading of securities in the secondary market.

spread The gap between bid and ask prices of a security.

stock A share of ownership, or equity, in the issuing company.

total return The percentage that an investor would have earned or lost on an investment in the fund assuming dividends and distributions were reinvested.

tracking error The difference between the performance of the fund and its benchmark index, positive or negative.

Schwab ETFs^tm are designed to be low-cost, diversified investments. Each fund follows broad market indices and provides exposure to specific segments of the market, making each an investment option for the core portions of an investor portfolio. The list to the right shows all currently available Schwab ETFs.

Investors should carefully consider information contained in the prospectus, including investment objectives, risks, charges and expenses before investing. Please call 1-800-435-4000 for a prospectus and brochure for any Schwab ETF. Please read the prospectus carefully before you invest. This report must be preceded or accompanied by a current prospectus.

Proxy Voting Policies, Procedures and Results

A description of the proxy voting policies and procedures used to determine how to vote proxies on behalf of the funds is available without charge, upon request, by visiting the Schwab ETFs’ website at www.schwabetfs.com, the SEC’s website at http://www.sec.gov, or by contacting Schwab ETFs at 1-800-435-4000.

Information regarding how a fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available, without charge, by visiting the fund’s website at www.schwabetfs.com or the SEC’s website at http://www.sec.gov.

Schwab ETFs^tm

U.S. ETFs

Schwab U.S. Broad Market ETF^tm

Schwab U.S. Large-Cap ETF^tm

Schwab U.S. Large-Cap Growth ETF^tm

Schwab U.S. Large-Cap Value ETF^tm

Schwab U.S. Mid-Cap ETF^tm

Schwab U.S. Small-Cap ETF^tm

Schwab U.S. Dividend Equity ETF^tm

Schwab U.S. REIT ETF^tm

International ETFs

Schwab International Equity ETF^tm

Schwab International Small-Cap Equity ETF^tm

Schwab Emerging Markets Equity ETF^tm

Fixed Income ETFs

Schwab U.S. Aggregate Bond ETF^tm

Schwab Short-Term U.S. Treasury ETF^tm

Schwab Intermediate-Term U.S. Treasury ETF^tm

Schwab U.S. TIPS ETF^tm

Fundamental Index* ETFs

Schwab Fundamental U.S. Broad Market Index ETF

Schwab Fundamental U.S. Large Company Index ETF

Schwab Fundamental U.S. Small Company Index ETF

Schwab Fundamental International Large Company Index ETF

Schwab Fundamental International Small Company Index ETF

Schwab Fundamental Emerging Markets Large Company Index ETF


*		FUNDAMENTAL INDEX is a registered trademark of Research Affiliates LLC.

Investment Adviser

Charles Schwab Investment Management, Inc.

211 Main Street, San Francisco, CA 94105

Schwab ETFs^tm

1-800-435-4000

This report is not authorized for distribution to prospective investors

unless preceded or accompanied by a current prospectus.

Printed on recycled paper.

MFR54790-04

00113730

Semiannual report dated February 28, 2014, enclosed.

Schwab U.S. Equity ETFs

Schwab U.S. Broad Market ETF^tm

Schwab U.S. Large-Cap ETF^tm

Schwab U.S. Large-Cap

Growth ETF^tm

Schwab U.S. Large-Cap

Value ETF^tm

Schwab U.S. Mid-Cap ETF^tm

Schwab U.S. Small-Cap ETF^tm

Schwab U.S. Dividend

Equity ETF^tm

Go paperless today.

Simplify your financial life

by viewing these documents online.

This wrapper is not part of the shareholder report.

Schwab U.S. Equity ETFs

Semiannual Report

February 28, 2014

Schwab U.S. Broad Market ETF^tm

Schwab U.S. Large-Cap ETF^tm

Schwab U.S. Large-Cap

Growth ETF^tm

Schwab U.S. Large-Cap

Value ETF^tm

Schwab U.S. Mid-Cap ETF^tm

Schwab U.S. Small-Cap ETF^tm

Schwab U.S. Dividend

Equity ETF^tm

This page is intentionally left blank.

In This Report


Performance at a Glance		2
From the President		3
Fund Management		5
Performance and Fund Facts
Schwab U.S. Broad Market ETF™		6
Schwab U.S. Large-Cap ETF™		7
Schwab U.S. Large-Cap Growth ETF™		8
Schwab U.S. Large-Cap Value ETF™		9
Schwab U.S. Mid-Cap ETF™		10
Schwab U.S. Small-Cap ETF™		11
Schwab U.S. Dividend Equity ETF™		12
Fund Expenses		13
Financial Statements and Portfolio Holdings
Schwab U.S. Broad Market ETF™		14
Schwab U.S. Large-Cap ETF™		21
Schwab U.S. Large-Cap Growth ETF™		28
Schwab U.S. Large-Cap Value ETF™		35
Schwab U.S. Mid-Cap ETF™		42
Schwab U.S. Small-Cap ETF™		49
Schwab U.S. Dividend Equity ETF™		56
Financial Notes		62
Investment Advisory Agreement Approval		70
Trustees and Officers		72
Glossary		74

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.

Performance at a Glance


Total Returns for the 6 Months Ended February 28, 2014

Schwab U.S. Broad Market ETF^tm (Ticker Symbol: SCHB)


Market Price Return¹			15.77%
NAV Return¹			15.74%
Dow Jones U.S. Broad Stock Market Index			15.80%
ETF Category: Morningstar Large Blend²			13.98%


Performance Details			page 6




Schwab U.S. Large-Cap ETF^tm (Ticker Symbol: SCHX)


Market Price Return¹			15.33%
NAV Return¹			15.33%
Dow Jones U.S. Large-Cap Total Stock Market Index			15.40%
ETF Category: Morningstar Large Blend²			13.98%


Performance Details			page 7




Schwab U.S. Large-Cap Growth ETF^tm (Ticker Symbol: SCHG)


Market Price Return¹			18.02%
NAV Return¹			17.91%
Dow Jones U.S. Large-Cap Growth Total Stock Market Index			17.99%
ETF Category: Morningstar Large Growth²			19.20%


Performance Details			page 8




Schwab U.S. Large-Cap Value ETF^tm (Ticker Symbol: SCHV)


Market Price Return¹			12.81%
NAV Return¹			12.82%
Dow Jones U.S. Large-Cap Value Total Stock Market Index			12.90%
ETF Category: Morningstar Large Value²			12.32%


Performance Details			page 9




Schwab U.S. Mid-Cap ETF^tm (Ticker Symbol: SCHM)


Market Price Return¹			18.75%
NAV Return¹			18.72%
Dow Jones U.S. Mid-Cap Total Stock Market Index			18.77%
ETF Category: Morningstar Mid-Cap Blend²			17.91%


Performance Details			page 10




Schwab U.S. Small-Cap ETF^tm (Ticker Symbol: SCHA)


Market Price Return¹			18.97%
NAV Return¹			18.93%
Dow Jones U.S. Small-Cap Total Stock Market Index			18.96%
ETF Category: Morningstar Small Blend²			17.70%


Performance Details			page 11




Schwab U.S. Dividend Equity ETF^tm (Ticker Symbol: SCHD)


Market Price Return¹			11.81%
NAV Return¹			11.78%
Dow Jones U.S. Dividend 100^tm Index			11.86%
ETF Category: Morningstar Large Blend²			13.98%


Performance Details			page 12

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—“Standard & Poor’s” and “S&P” are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and “Dow Jones” is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”) and have been licensed for use by S&P Dow Jones Indices LLC and its affiliates and sublicensed for certain purposes by Charles Schwab Investment Management, Inc. (CSIM). The Dow Jones Indexes are a product of S&P Dow Jones Indices LLC or its affiliates, and have been licensed for use by CSIM. The Schwab U.S. Equity ETFs, based on their respective Dow Jones Indexes, are not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P, or their respective affiliates and neither S&P Dow Jones Indices LLC, Dow Jones, S&P, nor their respective affiliates make any representation regarding the advisability of investing in such product.


¹		Since ETFs are baskets of securities that trade on a stock exchange, ETF performance must be shown based on both a market price and NAV basis. The fund’s per share net asset value (“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.

2 Schwab U.S. Equity ETFs

From the President

Marie Chandoha is President and CEO of Charles Schwab Investment Management, Inc. and the funds covered in this report.

Dear Shareholder,

As President and CEO of Charles Schwab Investment Management, Inc., I’d like to thank you for trusting us to help you meet your investment goals, and for reading this important report about the Schwab U.S. Equity ETFs. These funds are part of our line-up of core investment solutions and are available at some of the lowest operating expense ratios in the industry. The funds are designed to track market-leading U.S. stock indices and provide the full benefits of an ETF, including transparency, intraday trading, and potential tax efficiency.

Turning to the six-month reporting period ended February 28, 2014, the funds generated positive returns that were closely aligned with their respective indices. U.S. stocks generated double-digit overall returns, even as media headlines often seemed to focus on Federal Reserve developments and political unrest overseas. Improvements in the U.S. economy helped to make the stock rally possible, leading the Federal Reserve to begin “tapering” its stimulative economic policies in 2014. Although market volatility and bond yields rose ahead of the Fed’s policy shift, many major U.S. stock market indices overcame these obstacles to finish at or near record highs.

Amid this backdrop, small- and mid-cap stocks generally outperformed large-cap stocks, while growth stocks outperformed value stocks. From a sector standpoint, shares of companies in the Health Care and Industrials sectors were some of the better performers, while shares of companies involved in Telecommunication Services and Consumer Staples underperformed by comparison. Reflecting this backdrop, the Dow Jones U.S. Broad Stock Market Index returned 15.8% for the reporting period.

Asset Class Performance Comparison % returns during the six months ended 2/28/2014

This graph compares the performance of various asset classes during the report period. Final performance figures for the period are in the key below.



		15.07%		S&P 500^® Index: measures U.S. large-cap stocks

		17.75%		Russell 2000^® Index: measures U.S. small-cap stocks

		15.01%		MSCI EAFE^® Index (Net): measures (in U.S. dollars) large-cap stocks in Europe, Australasia and the Far East

		2.84%		Barclays U.S. Aggregate Bond Index: measures the U.S. bond market

		0.02%		Barclays U.S. Treasury Bills 1—3 Months Index: measures short-term U.S. Treasury obligations

For index definitions, please see the Glossary.

Data source: Index provider websites and Charles Schwab Investment Management, Inc.

Nothing in this report represents a recommendation of a security by the investment adviser.

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

Schwab U.S. Equity ETFs 3

From the President continued

Turning to the six-month reporting period ended February 28, 2014, the funds generated positive returns that were closely aligned with their respective indices.

For more information about the performance, holdings, and portfolio characteristics of the Schwab U.S. Equity ETFs, please continue reading this report. In addition, you can find further details about these ETFs and about ETF investing by visiting www.schwabetfs.com, or by contacting us at 1-800-435-4000.

Sincerely,

4 Schwab U.S. Equity ETFs

Fund Management



		Agnes Hong, CFA, Managing Director and Head of Passive Equity Strategies, leads the portfolio management teams of Schwab’s index mutual funds and equity ETFs. She also has overall responsibility for all aspects of the management of the funds. Prior to joining CSIM in 2009, Ms. Hong spent five years as a portfolio manager at Barclays Global Investors (subsequently acquired by BlackRock), where she managed institutional index funds and quantitative active funds. Prior to that, Ms. Hong worked in management consulting and product management, servicing global financial services clients.

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

		Chuck Craig, CFA, Managing Director and Senior Portfolio Manager, is responsible for the day-to-day co-management of the funds. Prior to joining CSIM in 2012, Mr. Craig worked at Guggenheim Funds (formerly Claymore Group), where he spent over five years as a managing director of portfolio management and supervision, and three years as vice president of product research and development. Prior to that, he worked as an equity research analyst at First Trust Portfolios (formerly Niké Securities), and a trader and analyst at PMA Securities, Inc.

Schwab U.S. Equity ETFs 5

Schwab U.S. Broad Market ETF™

Performance and Fund Facts as of 02/28/14

Average Annual Total Returns¹


Fund and Inception Date	6 Months			1 Year			3 Years			Since Inception*


Fund: Schwab U.S. Broad Market ETF^tm (11/3/09)
Market Price Return²		15.77	%		26.74	%		14.58	%	17.61%
NAV Return²		15.74	%		26.60	%		14.60	%	17.61%
Dow Jones U.S. Broad Stock Market Index		15.80	%		26.63	%		14.57	%	17.67%
ETF Category: Morningstar Large Blend³		13.98	%		24.40	%		13.78	%	16.16%

Fund Expense Ratio⁴: 0.04%

Statistics


Number of Holdings			1,995
Weighted Average Market Cap ($ x 1,000,000)			$95,127
Price/Earnings Ratio (P/E)			19.8
Price/Book Ratio (P/B)			2.6
Portfolio Turnover Rate^5,6			3%

Sector Weightings % of Investments


Information Technology			18.2%
Financials			17.0%
Health Care			13.2%
Consumer Discretionary			13.2%
Industrials			11.5%
Energy			9.3%
Consumer Staples			8.3%
Materials			3.9%
Utilities			3.0%
Telecommunication Services			2.3%
Other			0.1%
Total			100.0%

Top Equity Holdings % of Net Assets⁷


Apple, Inc.			2.3%
Exxon Mobil Corp.			2.0%
Google, Inc., Class A			1.6%
Microsoft Corp.			1.4%
Johnson & Johnson			1.3%
General Electric Co.			1.2%
Wells Fargo & Co.			1.1%
Chevron Corp.			1.1%
The Procter & Gamble Co.			1.0%
JPMorgan Chase & Co.			1.0%
Total			14.0%

For index definitions, please see the Glossary.

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

Index ownership—“Standard & Poor’s” and “S&P” are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and “Dow Jones” is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”) and have been licensed for use by S&P Dow Jones Indices LLC and its affiliates and sublicensed for certain purposes by Charles Schwab Investment Management, Inc. (CSIM). The “Dow Jones U.S. Broad Stock Market Index” is a product of S&P Dow Jones Indices LLC or its affiliates, and has been licensed for use by CSIM. The Schwab U.S. Broad Market ETF is not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P, or their respective affiliates and neither S&P Dow Jones Indices LLC, Dow Jones, S&P, nor their respective affiliates make any representation regarding the advisability of investing in such product.

Portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.


*		Inception 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		Since ETFs are baskets of securities that trade on a stock exchange, ETF performance must be shown based on both a market price and NAV basis. The fund’s per share net asset value (“NAV”) is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which the shares of the fund are listed for trading, as of the time that the fund’s NAV is calculated. NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively.
³		Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date.
⁴		As stated in the prospectus.
⁵		Not annualized.
⁶		Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
⁷		This list is not a recommendation of any security by the investment adviser.

6 Schwab U.S. Equity ETFs

Schwab U.S. Large-Cap ETF™

Performance and Fund Facts as of 02/28/14

Average Annual Total Returns¹


Fund and Inception Date	6 Months			1 Year			3 Years			Since Inception*


Fund: Schwab U.S. Large-Cap ETF^tm (11/3/09)
Market Price Return²		15.33	%		25.74	%		14.31	%	16.99%
NAV Return²		15.33	%		25.74	%		14.34	%	17.00%
Dow Jones U.S. Large-Cap Total Stock Market Index		15.40	%		25.85	%		14.44	%	17.12%
ETF Category: Morningstar Large Blend³		13.98	%		24.40	%		13.78	%	16.16%

Fund Expense Ratio⁴: 0.04%

Statistics


Number of Holdings			754
Weighted Average Market Cap ($ x 1,000,000)			$107,078
Price/Earnings Ratio (P/E)			18.8
Price/Book Ratio (P/B)			2.6
Portfolio Turnover Rate^5,6			3%

Sector Weightings % of Investments


Information Technology			18.4%
Financials			16.2%
Health Care			13.4%
Consumer Discretionary			13.1%
Industrials			10.9%
Energy			9.7%
Consumer Staples			9.0%
Materials			3.6%
Utilities			3.1%
Telecommunication Services			2.5%
Other			0.1%
Total			100.0%

Top Equity Holdings % of Net Assets⁷


Apple, Inc.			2.6%
Exxon Mobil Corp.			2.3%
Google Inc., Class A			1.9%
Microsoft Corp.			1.6%
Johnson & Johnson			1.4%
General Electric Co.			1.4%
Wells Fargo & Co.			1.2%
Chevron Corp.			1.2%
The Procter & Gamble Co.			1.2%
JPMorgan Chase & Co.			1.2%
Total			16.0%

For index definitions, please see the Glossary.

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

Index ownership—“Standard & Poor’s” and “S&P” are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and “Dow Jones” is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”) and have been licensed for use by S&P Dow Jones Indices LLC and its affiliates and sublicensed for certain purposes by Charles Schwab Investment Management, Inc. (CSIM). The “Dow Jones U.S. Large-Cap Total Stock Market Index” is a product of S&P Dow Jones Indices LLC or its affiliates, and has been licensed for use by CSIM. The Schwab U.S. Large-Cap ETF is not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P, or their respective affiliates and neither S&P Dow Jones Indices LLC, Dow Jones, S&P, nor their respective affiliates make any representation regarding the advisability of investing in such product.

Portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.


*		Inception 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		Since ETFs are baskets of securities that trade on a stock exchange, ETF performance must be shown based on both a market price and NAV basis. The fund’s per share net asset value (“NAV”) is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which the shares of the fund are listed for trading, as of the time that the fund’s NAV is calculated. NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively.
³		Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date.
⁴		As stated in the prospectus.
⁵		Not annualized.
⁶		Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
⁷		This list is not a recommendation of any security by the investment adviser.

Schwab U.S. Equity ETFs 7

Schwab U.S. Large-Cap Growth ETF™

Performance and Fund Facts as of 02/28/14

Average Annual Total Returns¹


Fund and Inception Date	6 Months			1 Year			3 Years			Since Inception*


Fund: Schwab U.S. Large-Cap Growth ETF^tm (12/11/09)
Market Price Return²		18.02	%		30.48	%		14.86	%	16.68%
NAV Return²		17.91	%		30.28	%		14.81	%	16.67%
Dow Jones U.S. Large-Cap Growth Total Stock Market Index		17.99	%		30.42	%		14.94	%	16.82%
ETF Category: Morningstar Large Growth³		19.20	%		32.64	%		16.27	%	17.79%

Fund Expense Ratio⁴: 0.07%

Statistics


Number of Holdings			397
Weighted Average Market Cap ($ x 1,000,000)			$110,691
Price/Earnings Ratio (P/E)			22.2
Price/Book Ratio (P/B)			3.7
Portfolio Turnover Rate^5,6			6%

Sector Weightings % of Investments


Information Technology			28.1%
Health Care			17.4%
Consumer Discretionary			15.0%
Industrials			11.1%
Financials			9.4%
Energy			8.0%
Consumer Staples			6.9%
Materials			3.2%
Telecommunication Services			0.6%
Utilities			0.2%
Other			0.1%
Total			100.0%

Top Equity Holdings % of Net Assets⁷


Apple, Inc.			5.2%
Google, Inc., Class A			3.7%
Microsoft Corp.			3.2%
Johnson & Johnson			2.8%
Berkshire Hathaway, Inc., Class B			2.3%
Oracle Corp.			1.5%
Comcast Corp., Class A			1.5%
Amazon.com, Inc			1.5%
QUALCOMM, Inc.			1.4%
Gilead Sciences, Inc			1.4%
Total			24.5%

For index definitions, please see the Glossary.

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

Index ownership—“Standard & Poor’s” and “S&P” are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and “Dow Jones” is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”) and have been licensed for use by S&P Dow Jones Indices LLC and its affiliates and sublicensed for certain purposes by Charles Schwab Investment Management, Inc. (CSIM). The “Dow Jones U.S. Large-Cap Growth Total Stock Market Index” is a product of S&P Dow Jones Indices LLC or its affiliates, and has been licensed for use by CSIM. The Schwab U.S. Large-Cap Growth ETF is not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P, or their respective affiliates and neither S&P Dow Jones Indices LLC, Dow Jones, S&P, nor their respective affiliates make any representation regarding the advisability of investing in such product.

Portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.


*		Inception 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		Since ETFs are baskets of securities that trade on a stock exchange, ETF performance must be shown based on both a market price and NAV basis. The fund’s per share net asset value (“NAV”) is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which the shares of the fund are listed for trading, as of the time that the fund’s NAV is calculated. NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively.
³		Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date.
⁴		As stated in the prospectus.
⁵		Not annualized.
⁶		Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
⁷		This list is not a recommendation of any security by the investment adviser.

8 Schwab U.S. Equity ETFs

Schwab U.S. Large-Cap Value ETF™

Performance and Fund Facts as of 02/28/14

Average Annual Total Returns¹


Fund and Inception Date	6 Months			1 Year			3 Years			Since Inception*


Fund: Schwab U.S. Large-Cap Value ETF^tm (12/11/09)
Market Price Return²		12.81	%		21.38	%		13.70	%	14.89%
NAV Return²		12.82	%		21.31	%		13.70	%	14.89%
Dow Jones U.S. Large-Cap Value Total Stock Market Index		12.90	%		21.46	%		13.88	%	15.10%
ETF Category: Morningstar Large Value³		12.32	%		20.95	%		13.80	%	15.10%

Fund Expense Ratio⁴: 0.07%

Statistics


Number of Holdings			359
Weighted Average Market Cap ($ x 1,000,000)			$103,545
Price/Earnings Ratio (P/E)			16.3
Price/Book Ratio (P/B)			2.0
Portfolio Turnover Rate^5,6			8%

Sector Weightings % of Investments


Financials			23.0%
Energy			11.5%
Consumer Discretionary			11.3%
Consumer Staples			11.0%
Industrials			10.7%
Health Care			9.3%
Information Technology			8.7%
Utilities			5.9%
Telecommunication Services			4.4%
Materials			4.1%
Other			0.1%
Total			100.0%

Top Equity Holdings % of Net Assets⁷


Exxon Mobil Corp.			4.6%
General Electric Co.			2.8%
Wells Fargo & Co.			2.4%
Chevron Corp.			2.4%
The Procter & Gamble Co.			2.3%
JPMorgan Chase & Co.			2.3%
Pfizer, Inc.			2.3%
Verizon Communications, Inc.			2.1%
International Business Machines Corp.			2.1%
Bank of America Corp.			1.9%
Total			25.2%

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—“Standard & Poor’s” and “S&P” are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and “Dow Jones” is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”) and have been licensed for use by S&P Dow Jones Indices LLC and its affiliates and sublicensed for certain purposes by Charles Schwab Investment Management, Inc. (CSIM). The “Dow Jones U.S. Large-Cap Value Total Stock Market Index” is a product of S&P Dow Jones Indices LLC or its affiliates, and has been licensed for use by CSIM. The Schwab U.S. Large-Cap Value ETF is not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P, or their respective affiliates and neither S&P Dow Jones Indices LLC, Dow Jones, S&P, nor their respective affiliates make any representation regarding the advisability of investing in such product.

Portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.


*		Inception 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		Since ETFs are baskets of securities that trade on a stock exchange, ETF performance must be shown based on both a market price and NAV basis. The fund’s per share net asset value (“NAV”) is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which the shares of the fund are listed for trading, as of the time that the fund’s NAV is calculated. NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively.
³		Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date.
⁴		As stated in the prospectus.
⁵		Not annualized.
⁶		Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
⁷		This list is not a recommendation of any security by the investment adviser.

Schwab U.S. Equity ETFs 9

Schwab U.S. Mid-Cap ETF™

Performance and Fund Facts as of 02/28/14

Average Annual Total Returns¹


Fund and Inception Date	6 Months			1 Year			3 Years			Since Inception*


Fund: Schwab U.S. Mid-Cap ETF^tm (1/13/11)
Market Price Return²		18.75	%		29.93	%		15.48	%	16.46%
NAV Return²		18.72	%		29.85	%		15.47	%	16.45%
Dow Jones U.S. Mid-Cap Total Stock Market Index		18.77	%		29.97	%		15.57	%	16.57%
ETF Category: Morningstar Mid-Cap Blend³		17.91	%		29.45	%		14.77	%	16.01%

Fund Expense Ratio⁴: 0.07%

Statistics


Number of Holdings			508
Weighted Average Market Cap ($ x 1,000,000)			$6,105
Price/Earnings Ratio (P/E)			24.7
Price/Book Ratio (P/B)			2.5
Portfolio Turnover Rate^5,6			6%

Sector Weightings % of Investments


Financials			21.2%
Industrials			17.4%
Consumer Discretionary			15.5%
Information Technology			14.0%
Health Care			9.2%
Materials			7.5%
Energy			6.6%
Utilities			5.1%
Consumer Staples			2.5%
Telecommunication Services			1.0%
Total			100.0%

Top Equity Holdings % of Net Assets⁷


BioMarin Pharmaceutical, Inc.			0.5%
Akamai Techmologies, Inc.			0.5%
Cheniere Energy, Inc			0.5%
Endo Health Solutions, Inc			0.5%
Helmerich & Payne, Inc			0.4%
Cimarex Energy Co.			0.4%
Trimble Navigation Ltd.			0.4%
Tractor Supply Co.			0.4%
Pall Corp.			0.4%
TRW Automotive Holdings Corp			0.4%
Total			4.4%

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—“Standard & Poor’s” and “S&P” are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and “Dow Jones” is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”) and have been licensed for use by S&P Dow Jones Indices LLC and its affiliates and sublicensed for certain purposes by Charles Schwab Investment Management, Inc. (CSIM). The “Dow Jones U.S. Mid-Cap Total Stock Market Index” is a product of S&P Dow Jones Indices LLC or its affiliates, and has been licensed for use by CSIM. The Schwab U.S. Mid-Cap ETF is not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P, or their respective affiliates and neither S&P Dow Jones Indices LLC, Dow Jones, S&P, nor their respective affiliates make any representation regarding the advisability of investing in such product.

Portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.


*		Inception 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		Since ETFs are baskets of securities that trade on a stock exchange, ETF performance must be shown based on both a market price and NAV basis. The fund’s per share net asset value (“NAV”) is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which the shares of the fund are listed for trading, as of the time that the fund’s NAV is calculated. NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively.
³		Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date.
⁴		As stated in the prospectus.
⁵		Not annualized.
⁶		Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
⁷		This list is not a recommendation of any security by the investment adviser.

10 Schwab U.S. Equity ETFs

Schwab U.S. Small-Cap ETF™

Performance and Fund Facts as of 02/28/14

Average Annual Total Returns¹


Fund and Inception Date	6 Months			1 Year			3 Years			Since Inception*


Fund: Schwab U.S. Small-Cap ETF^tm (11/3/09)
Market Price Return²		18.97	%		33.07	%		15.67	%	21.99%
NAV Return²		18.93	%		33.11	%		15.72	%	22.00%
Dow Jones U.S. Small-Cap Total Stock Market Index		18.96	%		33.13	%		15.75	%	22.13%
ETF Category: Morningstar Small Blend³		17.70	%		33.27	%		15.17	%	20.46%

Fund Expense Ratio⁴: 0.08%

Statistics


Number of Holdings			1,756
Weighted Average Market Cap ($ x 1,000,000)			$2,741
Price/Earnings Ratio (P/E)			43.3
Price/Book Ratio (P/B)			2.3
Portfolio Turnover Rate^5,6			8%

Sector Weightings % of Investments


Financials			23.1%
Information Technology			16.9%
Industrials			16.4%
Consumer Discretionary			13.4%
Health Care			12.3%
Energy			5.7%
Materials			5.7%
Consumer Staples			3.0%
Utilities			2.6%
Telecommunication Services			0.6%
Other			0.3%
Total			100.0%

Top Equity Holdings % of Net Assets⁷


American Realty Capital Properties, Inc., REIT			0.3%
Splunk, Inc			0.3%
Jazz Pharmaceuticals plc			0.3%
athenahealth, Inc.			0.3%
American Airlines Group, Inc.			0.3%
Harman International Industries, Inc.			0.3%
Alkermes plc			0.3%
Salix Pharmaceuticals Ltd.			0.3%
The Goodyear Tire & Rubber Co.			0.3%
E*TRADE Financial Corp.			0.3%
Total			3.0%

For index definitions, please see the Glossary.

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

Investments in smaller companies typically exhibit higher volatility.

Index ownership—“Standard & Poor’s” and “S&P” are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and “Dow Jones” is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”) and have been licensed for use by S&P Dow Jones Indices LLC and its affiliates and sublicensed for certain purposes by Charles Schwab Investment Management, Inc. (CSIM). The “Dow Jones U.S. Small-Cap Total Stock Market Index” is a product of S&P Dow Jones Indices LLC or its affiliates, and has been licensed for use by CSIM. The Schwab U.S. Small-Cap ETF is not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P, or their respective affiliates and neither S&P Dow Jones Indices LLC, Dow Jones, S&P, nor their respective affiliates make any representation regarding the advisability of investing in such product.

Portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.


*		Inception 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		Since ETFs are baskets of securities that trade on a stock exchange, ETF performance must be shown based on both a market price and NAV basis. The fund’s per share net asset value (“NAV”) is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which the shares of the fund are listed for trading, as of the time that the fund’s NAV is calculated. NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively.
³		Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date.
⁴		As stated in the prospectus.
⁵		Not annualized.
⁶		Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
⁷		This list is not a recommendation of any security by the investment adviser.

Schwab U.S. Equity ETFs 11

Schwab U.S. Dividend Equity ETF™

Performance and Fund Facts as of 02/28/14

Average Annual Total Returns¹


Fund and Inception Date	6 Months			1 Year			Since Inception*


Fund: Schwab U.S. Dividend Equity ETF^tm (10/20/11)
Market Price Return²		11.81	%		22.41	%	20.49%
NAV Return²		11.78	%		22.25	%	20.49%
Dow Jones U.S. Dividend 100^tm Index		11.86	%		22.38	%	20.69%
ETF Category: Morningstar Large Blend³		13.98	%		24.40	%	21.49%

Fund Expense Ratio⁴: 0.07%

Statistics


Number of Holdings			100
Weighted Average Market Cap ($ x 1,000,000)			$122,035
Price/Earnings Ratio (P/E)			17.5
Price/Book Ratio (P/B)			3.4
Portfolio Turnover Rate^5,6			3%

Sector Weightings % of Investments


Consumer Staples			25.2%
Industrials			20.3%
Information Technology			12.8%
Energy			12.3%
Health Care			12.2%
Consumer Discretionary			8.6%
Materials			3.5%
Financials			2.8%
Utilities			1.7%
Telecommunication Services			0.5%
Other			0.1%
Total			100.0%

Top Equity Holdings % of Net Assets⁷


Exxon Mobil Corp.			4.5%
Microsoft Corp.			4.5%
Johnson & Johnson			4.4%
The Coca-Cola Co.			4.2%
Chevron Corp.			4.2%
The Procter & Gamble Co.			4.1%
Intel Corp.			3.6%
PepsiCo, Inc			3.5%
Wal-Mart Stores, Inc.			3.5%
The Home Depot, Inc.			3.3%
Total			39.8%

For index definitions, please see the Glossary.

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

Index ownership—“Standard & Poor’s” and “S&P” are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and “Dow Jones” is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”) and have been licensed for use by S&P Dow Jones Indices LLC and its affiliates and sublicensed for certain purposes by Charles Schwab Investment Management, Inc. (CSIM). The “Dow Jones U.S. Dividend 100 Index” is a product of S&P Dow Jones Indices LLC or its affiliates, and has been licensed for use by CSIM. The Schwab U.S. Dividend Equity ETF is not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P, or their respective affiliates and neither S&P Dow Jones Indices LLC, Dow Jones, S&P, nor their respective affiliates make any representation regarding the advisability of investing in such product.

Portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.


*		Inception 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		Since ETFs are baskets of securities that trade on a stock exchange, ETF performance must be shown based on both a market price and NAV basis. The fund’s per share net asset value (“NAV”) is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which the shares of the fund are listed for trading, as of the time that the fund’s NAV is calculated. NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively.
³		Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date.
⁴		As stated in the prospectus.
⁵		Not annualized.
⁶		Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
⁷		This list is not a recommendation of any security by the investment adviser.

12 Schwab U.S. Equity ETFs

Fund Expenses (Unaudited)

Examples for a $1,000 Investment


					Ending
			Beginning		Account Value		Expenses Paid
	Expense Ratio¹		Account Value		(Net of Expenses)		During Period²
	(Annualized)		at 9/1/13		at 2/28/14		9/1/13–2/28/14

Schwab U.S. Broad Market ETF^tm
Actual Return		0.04%	$	1,000.00	$	1,157.40	$	0.21
Hypothetical 5% Return		0.04%	$	1,000.00	$	1,024.60	$	0.20


Schwab U.S. Large-Cap ETF^tm
Actual Return		0.04%	$	1,000.00	$	1,153.30	$	0.21
Hypothetical 5% Return		0.04%	$	1,000.00	$	1,024.60	$	0.20


Schwab U.S. Large-Cap Growth ETF^tm
Actual Return		0.07%	$	1,000.00	$	1,179.10	$	0.38
Hypothetical 5% Return		0.07%	$	1,000.00	$	1,024.45	$	0.35


Schwab U.S. Large-Cap Value ETF^tm
Actual Return		0.07%	$	1,000.00	$	1,128.20	$	0.37
Hypothetical 5% Return		0.07%	$	1,000.00	$	1,024.45	$	0.35


Schwab U.S. Mid-Cap ETF^tm
Actual Return		0.07%	$	1,000.00	$	1,187.20	$	0.38
Hypothetical 5% Return		0.07%	$	1,000.00	$	1,024.45	$	0.35


Schwab U.S. Small-Cap ETF^tm
Actual Return		0.08%	$	1,000.00	$	1,189.30	$	0.43
Hypothetical 5% Return		0.08%	$	1,000.00	$	1,024.40	$	0.40


Schwab U.S. Dividend Equity ETF^tm
Actual Return		0.07%	$	1,000.00	$	1,117.80	$	0.37
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.
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 the 365 days of the fiscal year.

Schwab U.S. Equity ETFs 13

Schwab U.S. Broad Market ETF™

Financial Statements

Financial Highlights


	9/1/13–			9/1/12–			9/1/11–			9/1/10–			10/30/09¹–
	2/28/14*			8/31/13			8/31/12			8/31/11			8/31/10


Per-Share Data ($)

Net asset value at beginning of period		39.79			33.84			29.47			25.11			25.00

Income (loss) from investment operations:
Net investment income (loss)		0.43	²		0.80	²		0.65	²		0.56	²		0.42	²
Net realized and unrealized gains (losses)		5.81			5.92			4.32			4.32			(0.05	)

Total from investment operations		6.24			6.72			4.97			4.88			0.37
Less distributions:
Distributions from net investment income		(0.39	)		(0.77	)		(0.60	)		(0.52	)		(0.26	)

Net asset value at end of period		45.64			39.79			33.84			29.47			25.11

Total return (%)		15.74	³		20.12			17.07			19.41			1.42	³

Ratios/Supplemental Data (%)

Ratios to average net assets:
Total expenses		0.04	⁴		0.04			0.06			0.06			0.07	^4,5
Net investment income (loss)		1.99	⁴		2.15			2.06			1.83			1.92	⁴
Portfolio turnover rate⁶		3	³		4			5			3			2	³
Net assets, end of period ($ x 1,000)		3,094,465			2,182,671			1,072,825			742,651			272,490

* Unaudited.

¹ Commencement of operations.

² Calculated based on the average shares outstanding during the period.

³ Not annualized.

⁴ Annualized.

⁵ Effective June 14, 2010, the annual operating expense ratio was reduced. The ratio presented for period ended 8/31/10 is a blended ratio.

⁶ Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.

14 See financial notes

Schwab U.S. Broad Market ETF

Portfolio Holdings as of February 28, 2014 (Unaudited)


				Cost		Value
Holdings by Category				($)		($)

	99	.8%	Common Stock		2,437,804,531		3,088,776,926
	0	.1%	Other Investment Companies		1,149,903		1,241,262


	99	.9%	Total Investments		2,438,954,434		3,090,018,188
	0	.4%	Collateral Invested for Securities on Loan		13,091,426		13,091,426
	(0	.3)%	Other Assets and Liabilities, Net				(8,644,741	)


	100	.0%	Net Assets				3,094,464,873


	Number		% of Net		Value
Security	of Shares		Assets		($)

Common Stock 99.8% of net assets

Automobiles & Components 1.3%
Other Securities				1.3		40,523,260

Banks 3.4%
U.S. Bancorp		273,104		0.4		11,235,499
Wells Fargo & Co.		717,806		1.1		33,320,555
Other Securities				1.9		60,588,403

				3.4		105,144,457

Capital Goods 8.4%
3M Co.		95,393		0.4		12,852,299
General Electric Co.		1,511,091		1.2		38,487,488
The Boeing Co.		103,278		0.4		13,314,600
United Technologies Corp.		126,432		0.5		14,795,073
Other Securities				5.9		181,874,591

				8.4		261,324,051

Commercial & Professional Services 1.0%
Other Securities				1.0		32,101,021

Consumer Durables & Apparel 1.6%
Other Securities				1.6		49,985,120

Consumer Services 2.2%
McDonald’s Corp.		148,079		0.5		14,089,717
Other Securities				1.7		54,101,413

				2.2		68,191,130

Diversified Financials 7.1%
American Express Co.		135,721		0.4		12,388,613
Bank of America Corp.		1,595,636		0.9		26,375,863
Berkshire Hathaway, Inc., Class B *		268,968		1.0		31,141,115
Citigroup, Inc.		453,042		0.7		22,031,432
JPMorgan Chase & Co.		561,448		1.0		31,901,475
The Charles Schwab Corp. (b)		168,227		0.1		4,459,698
Other Securities				3.0		89,928,618

				7.1		218,226,814

Energy 9.3%
Chevron Corp.		288,030		1.1		33,218,500
ConocoPhillips		183,472		0.4		12,200,888
Exxon Mobil Corp.		652,645		2.0		62,830,134
Occidental Petroleum Corp.		120,798		0.4		11,659,423
Schlumberger Ltd.		198,676		0.6		18,476,868
Other Securities				4.8		147,903,884

				9.3		286,289,697

Food & Staples Retailing 2.0%
CVS Caremark Corp.		177,220		0.4		12,961,871
Wal-Mart Stores, Inc.		240,593		0.6		17,972,297
Other Securities				1.0		30,870,641

				2.0		61,804,809

Food, Beverage & Tobacco 4.4%
PepsiCo, Inc.		229,506		0.6		18,376,545
Philip Morris International, Inc.		240,402		0.6		19,450,926
The Coca-Cola Co.		568,191		0.7		21,704,896
Other Securities				2.5		77,532,547

				4.4		137,064,914

Health Care Equipment & Services 4.5%
UnitedHealth Group, Inc.		152,380		0.4		11,774,403
Other Securities				4.1		127,836,282

				4.5		139,610,685

Household & Personal Products 1.8%
The Procter & Gamble Co.		405,862		1.0		31,925,105
Other Securities				0.8		24,907,861

				1.8		56,832,966

Insurance 3.1%
Other Securities				3.1		95,585,451

Materials 3.9%
Other Securities				3.9		120,179,830

Media 3.6%
Comcast Corp., Class A		385,900		0.6		19,947,171

See financial notes 15

Schwab U.S. Broad Market ETF

Portfolio Holdings (Unaudited) continued


	Number		% of Net		Value
Security	of Shares		Assets		($)
The Walt Disney Co.		244,361		0.6		19,746,812
Other Securities				2.4		71,034,302

				3.6		110,728,285

Pharmaceuticals, Biotechnology & Life Sciences 8.7%
AbbVie, Inc.		235,971		0.4		12,013,284
Amgen, Inc.		111,810		0.4		13,866,676
Biogen Idec, Inc. *		35,329		0.4		12,035,884
Bristol-Myers Squibb Co.		245,996		0.4		13,227,205
Gilead Sciences, Inc. *		227,854		0.6		18,864,033
Johnson & Johnson		422,803		1.3		38,948,612
Merck & Co., Inc.		437,826		0.8		24,951,704
Pfizer, Inc.		967,397		1.0		31,063,118
Other Securities				3.4		104,344,051

				8.7		269,314,567

Real Estate 3.5%
Other Securities				3.5		106,768,220

Retailing 4.5%
Amazon.com, Inc. *		55,348		0.6		20,041,511
The Home Depot, Inc.		209,645		0.6		17,197,179
Other Securities				3.3		100,990,295

				4.5		138,228,985

Semiconductors & Semiconductor Equipment 2.2%
Intel Corp.		747,156		0.6		18,499,583
Other Securities				1.6		50,317,307

				2.2		68,816,890

Software & Services 10.3%
Facebook, Inc., Class A *		244,828		0.5		16,760,925
Google, Inc., Class A *		41,919		1.6		50,958,832
International Business Machines Corp.		152,739		0.9		28,282,681
MasterCard, Inc., Class A		156,090		0.4		12,131,315
Microsoft Corp.		1,134,545		1.4		43,464,419
Oracle Corp.		525,794		0.7		20,563,803
Visa, Inc., Class A		76,567		0.6		17,299,548
Other Securities				4.2		130,603,359

				10.3		320,064,882

Technology Hardware & Equipment 5.7%
Apple, Inc.		134,424		2.3		70,739,286
Cisco Systems, Inc.		798,130		0.6		17,399,234
QUALCOMM, Inc.		251,592		0.6		18,942,362
Other Securities				2.2		68,127,176

				5.7		175,208,058

Telecommunication Services 2.3%
AT&T, Inc.		791,203		0.8		25,263,112
Verizon Communications, Inc.		616,508		0.9		29,333,451
Other Securities				0.6		15,544,513

				2.3		70,141,076

Transportation 2.0%
Union Pacific Corp.		68,797		0.4		12,409,603
Other Securities				1.6		50,949,012

				2.0		63,358,615

Utilities 3.0%
Other Securities				3.0		93,283,143

Total Common Stock
(Cost $2,437,804,531)						3,088,776,926




Other Investment Companies 0.1% of net assets

Equity Fund 0.0%
Other Securities				0.0		560,850

Money Market Fund 0.1%
Other Securities				0.1		680,412

Total Other Investment Companies
(Cost $1,149,903)						1,241,262



End of Investments.



Collateral Invested for Securities on Loan 0.4% of net assets


State Street Institutional U.S. Government Money Market Fund, Institutional Class 0.00% (c)		13,091,426		0.4		13,091,426

Total Collateral Invested for Securities on Loan
(Cost $13,091,426)						13,091,426



End of Collateral Invested for Securities on Loan

At 02/28/14, the tax basis cost of the fund’s investments was $2,439,577,556 and the unrealized appreciation and depreciation were $667,761,115 and ($17,320,483), respectively, with a net unrealized appreciation of $650,440,632.

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


*		Non-income producing security.
(a)		All or a portion of this security is on loan. Securities on loan were valued at $13,157,317.
(b)		Issuer is affiliated with the fund’s adviser.
(c)		The rate shown is the 7-day yield.


ETF —		Exchange Traded Fund
Reg’d —		Registered
REIT —		Real Estate Investment Trust

16 See financial notes

Schwab U.S. Broad Market ETF

Portfolio Holdings (Unaudited) continued

The following is a summary of the inputs used to value the fund’s investments as of February 28, 2014 (see financial note 2(a) for additional information):


	Quoted Prices in				Significant
	Active Markets for		Other Significant		Unobservable
	Identical Assets		Observable Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total

Common Stock¹		$3,088,776,926		$—		$—		$3,088,776,926
Other Investment Companies¹		1,241,262		—		—		1,241,262

Total		$3,090,018,188		$—		$—		$3,090,018,188

Other Financial Instruments
Collateral Invested for Securities on Loan		$13,091,426		$—		$—		$13,091,426


¹		As categorized in the complete schedule of portfolio holdings.

See financial notes 17

Schwab U.S. Broad Market ETF

Statement of

Assets and Liabilities

As of February 28, 2014; unaudited



Assets

Investments in affiliated issuers, at value (cost $3,118,907)		$4,459,698
Investments in unaffiliated issuers, at value (cost $2,435,835,527) including securities on loan of $13,157,317	+	3,085,558,490

Total investments, at value (cost $2,438,954,434)		3,090,018,188
Collateral invested for securities on loan		13,091,426
Cash		1,832
Receivables:
Investments sold		139,126
Fund shares sold		20,395,119
Dividends		5,862,401
Income from securities on loan		30,065
Foreign tax reclaims	+	9,115

Total assets		3,129,547,272

Liabilities

Collateral held for securities on loan		13,091,426
Payables:
Investments bought		21,980,775
Investment adviser fees	+	10,198

Total liabilities		35,082,399

Net Assets

Total assets		3,129,547,272
Total liabilities	—	35,082,399

Net assets		$3,094,464,873

Net Assets by Source
Capital received from investors		2,416,913,806
Net investment income not yet distributed		9,674,820
Net realized capital gains		16,368,895
Net unrealized capital appreciation		651,507,352

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$3,094,464,873

67,800,000

$45.64

18 See financial notes

Schwab U.S. Broad Market ETF

Statement of

Operations

For the period September 1, 2013 through February 28, 2014; unaudited



Investment Income

Dividends received from affiliated issuer		$18,992
Dividends received from unaffiliated issuers (net of foreign withholding tax of $5,303)		26,531,223
Interest		1
Securities on loan	+	168,061

Total investment income		26,718,277

Expenses

Investment adviser fees		525,547

Total expenses	−	525,547

Net investment income		26,192,730

Realized and Unrealized Gains (Losses)

Net realized gains on affiliated issuer		42,798
Net realized losses on unaffiliated investments		(1,577,337	)
Net realized gains on in-kind redemptions	+	24,849,041

Net realized gains		23,314,502
Net change in unrealized appreciation (depreciation) on affiliated issuer		795,964
Net change in unrealized appreciation (depreciation) on unaffiliated investments	+	320,753,776

Net change in unrealized appreciation (depreciation)	+	321,549,740

Net realized and unrealized gains		344,864,242

Increase in net assets resulting from operations		$371,056,972

See financial notes 19

Schwab U.S. Broad Market ETF

Statements of

Changes in Net Assets

For the current and prior report periods
Figures for the current period are unaudited



Operations


9/1/13-2/28/14				9/1/12-8/31/13
Net investment income		$26,192,730			$35,059,379
Net realized gains		23,314,502			21,299,132
Net change in unrealized appreciation (depreciation)	+	321,549,740			228,484,344

Increase in net assets resulting from operations		371,056,972			284,842,855

Distributions to Shareholders

Distributions from net investment income		($23,201,580	)		($32,174,430	)

Transactions in Fund Shares

9/1/13-2/28/14

9/1/12-8/31/13

SHARES

VALUE

SHARES

VALUE

Shares sold

14,450,000

$628,025,307

25,500,000

$945,290,050

Shares redeemed

(1,500,000

)

(64,086,671

)

(2,350,000

)

(88,113,025

)

Net transactions in fund shares

12,950,000

$563,938,636

23,150,000

$857,177,025

Shares Outstanding and Net Assets

9/1/13-2/28/14

9/1/12-8/31/13

SHARES

NET ASSETS

SHARES

NET ASSETS

Beginning of period

54,850,000

$2,182,670,845

31,700,000

$1,072,825,395

Total increase

12,950,000

911,794,028

23,150,000

1,109,845,450

End of period

67,800,000

$3,094,464,873

54,850,000

$2,182,670,845

Net investment income not yet distributed

$9,674,820

$6,683,670

20 See financial notes

Schwab U.S. Large-Cap ETF™

Financial Statements

Financial Highlights


	9/1/13–			9/1/12–			9/1/11–			9/1/10–			10/30/09¹–
	2/28/14*			8/31/13			8/31/12			8/31/11			8/31/10


Per-Share Data ($)

Net asset value at beginning of period		39.06			33.49			29.11			24.98			25.00

Income (loss) from investment operations:
Net investment income (loss)		0.41			0.77			0.64			0.53			0.34
Net realized and unrealized gains (losses)		5.55			5.56			4.35			4.13			(0.12	)

Total from investment operations		5.96			6.33			4.99			4.66			0.22
Less distributions:
Distributions from net investment income		(0.39	)		(0.76	)		(0.61	)		(0.53	)		(0.24	)

Net asset value at end of period		44.63			39.06			33.49			29.11			24.98

Total return (%)		15.33	²		19.17			17.36			18.66			0.83	²

Ratios/Supplemental Data (%)

Ratios to average net assets:
Total expenses		0.04	³		0.04			0.08			0.08			0.08	³
Net investment income (loss)		2.03	³		2.18			2.10			1.88			2.01	³
Portfolio turnover rate⁴		3	²		5			4			5			3	²
Net assets, end of period ($ x 1,000)		2,492,826			1,781,282			890,808			615,781			273,503

* Unaudited.

¹ Commencement of operations.

² Not annualized.

³ Annualized.

⁴ Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.

See financial notes 21

Schwab U.S. Large-Cap ETF

Portfolio Holdings as of February 28, 2014 (Unaudited)


				Cost		Value
Holdings by Category				($)		($)

	99	.8%	Common Stock		1,970,150,694		2,486,772,686
	0	.0%	Other Investment Companies		1,123,811		1,185,273


	99	.8%	Total Investments		1,971,274,505		2,487,957,959
	0	.2%	Collateral Invested for Securities on Loan		5,787,449		5,787,449
	(0	.0)%	Other Assets and Liabilities, Net				(919,389	)


	100	.0%	Net Assets				2,492,826,019


	Number		% of Net		Value
Security	of Shares		Assets		($)

Common Stock 99.8% of net assets

Automobiles & Components 1.3%
Other Securities				1.3		32,255,470

Banks 2.8%
U.S. Bancorp		248,657		0.4		10,229,749
Wells Fargo & Co.		651,385		1.2		30,237,292
Other Securities				1.2		29,251,117

				2.8		69,718,158

Capital Goods 8.1%
3M Co.		86,955		0.5		11,715,447
General Electric Co.		1,379,286		1.4		35,130,414
The Boeing Co.		94,637		0.5		12,200,602
United Technologies Corp.		115,225		0.5		13,483,630
Other Securities				5.2		129,442,672

				8.1		201,972,765

Commercial & Professional Services 0.8%
Other Securities				0.8		19,788,250

Consumer Durables & Apparel 1.5%
Other Securities				1.5		37,032,499

Consumer Services 2.0%
McDonald’s Corp.		135,169		0.5		12,861,330
Other Securities				1.5		36,277,247

				2.0		49,138,577

Diversified Financials 7.6%
American Express Co.		125,192		0.5		11,427,526
Bank of America Corp.		1,449,358		1.0		23,957,888
Berkshire Hathaway, Inc., Class B *		245,361		1.1		28,407,897
Citigroup, Inc.		410,974		0.8		19,985,666
JPMorgan Chase & Co.		511,083		1.2		29,039,736
The Charles Schwab Corp. (b)		156,393		0.2		4,145,978
Other Securities				2.8		73,565,781

				7.6		190,530,472

Energy 9.7%
Chevron Corp.		261,238		1.2		30,128,579
ConocoPhillips		166,920		0.4		11,100,180
Exxon Mobil Corp.		593,928		2.3		57,177,449
Occidental Petroleum Corp.		110,020		0.4		10,619,130
Schlumberger Ltd.		178,835		0.7		16,631,655
Other Securities				4.7		116,611,794

				9.7		242,268,787

Food & Staples Retailing 2.1%
CVS Caremark Corp.		161,743		0.5		11,829,883
Wal-Mart Stores, Inc.		219,808		0.7		16,419,657
Other Securities				0.9		25,037,380

				2.1		53,286,920

Food, Beverage & Tobacco 4.8%
PepsiCo, Inc.		208,335		0.7		16,681,383
Philip Morris International, Inc.		217,826		0.7		17,624,302
The Coca-Cola Co.		517,068		0.8		19,751,998
Other Securities				2.6		65,714,625

				4.8		119,772,308

Health Care Equipment & Services 4.4%
UnitedHealth Group, Inc.		136,787		0.4		10,569,531
Other Securities				4.0		98,069,102

				4.4		108,638,633

Household & Personal Products 2.0%
The Procter & Gamble Co.		369,320		1.2		29,050,711
Other Securities				0.8		21,066,950

				2.0		50,117,661

Insurance 3.1%
Other Securities				3.1		76,930,994

Materials 3.6%
Other Securities				3.6		90,608,230

Media 3.9%
Comcast Corp., Class A		353,686		0.7		18,282,029
The Walt Disney Co.		222,189		0.7		17,955,093

22 See financial notes

Schwab U.S. Large-Cap ETF

Portfolio Holdings (Unaudited) continued


	Number		% of Net		Value
Security	of Shares		Assets		($)
Other Securities				2.5		59,937,077

				3.9		96,174,199

Pharmaceuticals, Biotechnology & Life Sciences 9.0%
AbbVie, Inc.		216,732		0.4		11,033,826
Amgen, Inc.		102,871		0.5		12,758,062
Biogen Idec, Inc. *		32,081		0.4		10,929,355
Bristol-Myers Squibb Co.		224,756		0.5		12,085,130
Gilead Sciences, Inc. *		208,561		0.7		17,266,765
Johnson & Johnson		383,327		1.4		35,312,083
Merck & Co., Inc.		398,267		0.9		22,697,236
Pfizer, Inc.		881,149		1.1		28,293,694
Other Securities				3.1		73,658,531

				9.0		224,034,682

Real Estate 2.6%
Other Securities				2.6		66,175,065

Retailing 4.5%
Amazon.com, Inc. *		50,254		0.7		18,196,973
The Home Depot, Inc.		191,363		0.6		15,697,507
Other Securities				3.2		78,139,851

				4.5		112,034,331

Semiconductors & Semiconductor Equipment 2.1%
Intel Corp.		678,070		0.7		16,789,013
Other Securities				1.4		35,217,812

				2.1		52,006,825

Software & Services 10.6%
Facebook, Inc., Class A *		223,469		0.6		15,298,688
Google, Inc., Class A *		38,151		1.9		46,378,263
International Business Machines Corp.		138,676		1.0		25,678,635
MasterCard, Inc., Class A		140,796		0.4		10,942,665
Microsoft Corp.		1,034,830		1.6		39,644,337
Oracle Corp.		477,118		0.7		18,660,085
Visa, Inc., Class A		69,230		0.6		15,641,826
Other Securities				3.8		90,884,108

				10.6		263,128,607

Technology Hardware & Equipment 5.7%
Apple, Inc.		122,318		2.6		64,368,624
Cisco Systems, Inc.		730,263		0.6		15,919,734
QUALCOMM, Inc.		229,641		0.7		17,289,671
Other Securities				1.8		45,460,220

				5.7		143,038,249

Telecommunication Services 2.5%
AT&T, Inc.		715,853		0.9		22,857,186
Verizon Communications, Inc.		561,182		1.1		26,701,040
Other Securities				0.5		12,527,931

				2.5		62,086,157

Transportation 2.0%
Union Pacific Corp.		62,580		0.5		11,288,180
Other Securities				1.5		38,407,201

				2.0		49,695,381

Utilities 3.1%
Other Securities				3.1		76,339,466

Total Common Stock
(Cost $1,970,150,694)						2,486,772,686




Other Investment Companies 0.0% of net assets

Equity Fund 0.0%
Other Securities				0.0		418,520

Money Market Fund 0.0%
Other Securities				0.0		766,753

Total Other Investment Companies
(Cost $1,123,811)						1,185,273



End of Investments.



Collateral Invested for Securities on Loan 0.2% of net assets


State Street Institutional U.S. Government Money Market Fund, Institutional Class 0.00% (c)		5,787,449		0.2		5,787,449

Total Collateral Invested for Securities on Loan
(Cost $5,787,449)						5,787,449



End of Collateral Invested for Securities on Loan

At 02/28/14, the tax basis cost of the fund’s investments was $1,971,965,920 and the unrealized appreciation and depreciation were $529,718,002 and ($13,725,963), respectively, with a net unrealized appreciation of $515,992,039.

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


*		Non-income producing security.
(a)		All or a portion of this security is on loan. Securities on loan were valued at $5,993,542.
(b)		Issuer is affiliated with the fund’s adviser.
(c)		The rate shown is the 7-day yield.


ETF —		Exchange Traded Fund
Reg’d —		Registered
REIT —		Real Estate Investment Trust

See financial notes 23

Schwab U.S. Large-Cap ETF

Portfolio Holdings (Unaudited) continued

The following is a summary of the inputs used to value the fund’s investments as of February 28, 2014 (see financial note 2(a) for additional information):


	Quoted Prices in				Significant
	Active Markets for		Other Significant		Unobservable
	Identical Assets		Observable Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total

Common Stock¹		$2,486,772,686		$—		$—		$2,486,772,686
Other Investment Companies¹		1,185,273		—		—		1,185,273

Total		$2,487,957,959		$—		$—		$2,487,957,959

Other Financial Instruments
Collateral Invested for Securities on Loan		$5,787,449		$—		$—		$5,787,449


¹		As categorized in the complete schedule of portfolio holdings.

24 See financial notes

Schwab U.S. Large-Cap ETF

Statement of

Assets and Liabilities

As of February 28, 2014; unaudited



Assets

Investments in affiliated issuers, at value (cost $2,929,146)		$4,145,978
Investments in unaffiliated issuers, at value (cost $1,968,345,359) including securities on loan of $5,993,542	+	2,483,811,981

Total investments, at value (cost $1,971,274,505)		2,487,957,959
Collateral invested for securities on loan		5,787,449
Receivables:
Fund shares sold		6,679,193
Dividends		5,060,124
Foreign tax reclaims		7,921
Income from securities on loan	+	6,944

Total assets		2,505,499,590

Liabilities

Collateral held for securities on loan		5,787,449
Payables:
Investments bought		6,877,910
Investment adviser fees	+	8,212

Total liabilities		12,673,571

Net Assets

Total assets		2,505,499,590
Total liabilities	—	12,673,571

Net assets		$2,492,826,019

Net Assets by Source
Capital received from investors		1,958,509,383
Net investment income not yet distributed		8,000,978
Net realized capital gains		9,443,603
Net unrealized capital appreciation		516,872,055

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$2,492,826,019

55,850,000

$44.63

See financial notes 25

Schwab U.S. Large-Cap ETF

Statement of

Operations

For the period September 1, 2013 through February 28, 2014; unaudited



Investment Income

Dividends received from affiliated issuer		$17,398
Dividends received from unaffiliated issuers (net of foreign withholding tax of $4,308)		21,954,302
Interest		1
Securities on loan	+	45,063

Total investment income		22,016,764

Expenses

Investment adviser fees		426,089

Total expenses	−	426,089

Net investment income		21,590,675

Realized and Unrealized Gains (Losses)

Net realized gains on affiliated issuer		30,347
Net realized losses on unaffiliated investments		(576,902	)
Net realized gains on in-kind redemptions	+	17,440,084

Net realized gains		16,893,529
Net change in unrealized appreciation (depreciation) on affiliated issuer		742,981
Net change in unrealized appreciation (depreciation) on unaffiliated investments	+	252,963,476

Net change in unrealized appreciation (depreciation)	+	253,706,457

Net realized and unrealized gains		270,599,986

Increase in net assets resulting from operations		$292,190,661

26 See financial notes

Schwab U.S. Large-Cap ETF

Statements of

Changes in Net Assets

For the current and prior report periods
Figures for the current period are unaudited



Operations


9/1/13-2/28/14				9/1/12-8/31/13
Net investment income		$21,590,675			$28,040,996
Net realized gains		16,893,529			17,040,438
Net change in unrealized appreciation (depreciation)	+	253,706,457			167,106,932

Increase in net assets resulting from operations		292,190,661			212,188,366

Distributions to Shareholders

Distributions from net investment income		($19,449,955	)		($25,323,080	)

Transactions in Fund Shares

9/1/13-2/28/14

9/1/12-8/31/13

SHARES

VALUE

SHARES

VALUE

Shares sold

11,700,000

$498,577,531

20,800,000

$771,113,187

Shares redeemed

(1,450,000

)

(59,774,011

)

(1,800,000

)

(67,504,590

)

Net transactions in fund shares

10,250,000

$438,803,520

19,000,000

$703,608,597

Shares Outstanding and Net Assets

9/1/13-2/28/14

9/1/12-8/31/13

SHARES

NET ASSETS

SHARES

NET ASSETS

Beginning of period

45,600,000

$1,781,281,793

26,600,000

$890,807,910

Total increase

10,250,000

711,544,226

19,000,000

890,473,883

End of period

55,850,000

$2,492,826,019

45,600,000

$1,781,281,793

Net investment income not yet distributed

$8,000,978

$5,860,258

See financial notes 27

Schwab U.S. Large-Cap Growth ETF™

Financial Statements

Financial Highlights


	9/1/13–			9/1/12–			9/1/11–			9/1/10–			12/9/09¹–
	2/28/14*			8/31/13			8/31/12			8/31/11			8/31/10


Per-Share Data ($)

Net asset value at beginning of period		39.60			34.05			29.44			24.21			25.00

Income (loss) from investment operations:
Net investment income (loss)		0.26			0.55			0.36			0.27			0.15
Net realized and unrealized gains (losses)		6.81			5.52			4.59			5.20			(0.83	)

Total from investment operations		7.07			6.07			4.95			5.47			(0.68	)
Less distributions:
Distributions from net investment income		(0.27	)		(0.52	)		(0.34	)		(0.24	)		(0.11	)

Net asset value at end of period		46.40			39.60			34.05			29.44			24.21

Total return (%)		17.91	²		18.02			16.96			22.57			(2.75	)²

Ratios/Supplemental Data (%)

Ratios to average net assets:
Total expenses		0.07	³		0.07			0.13			0.13			0.14	^3,4
Net investment income (loss)		1.28	³		1.55			1.17			0.93			0.86	³
Portfolio turnover rate⁵		6	²		11			8			10			6	²
Net assets, end of period ($ x 1,000)		1,229,726			827,613			475,062			309,155			108,946

* Unaudited.

¹ Commencement of operations.

² Not annualized.

³ Annualized.

⁴ Effective June 14, 2010, the annual operating expense ratio was reduced. The ratio presented for period ended 8/31/10 is a blended ratio.

⁵ Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.

28 See financial notes

Schwab U.S. Large-Cap Growth ETF

Portfolio Holdings as of February 28, 2014 (Unaudited)


				Cost		Value
Holdings by Category				($)		($)

	99	.8%	Common Stock		930,686,099		1,227,611,220
	0	.1%	Other Investment Companies		891,773		902,279


	99	.9%	Total Investments		931,577,872		1,228,513,499
	0	.2%	Collateral Invested for Securities on Loan		2,980,313		2,980,313
	(0	.1)%	Other Assets and Liabilities, Net				(1,768,013	)


	100	.0%	Net Assets				1,229,725,799


	Number		% of Net		Value
Security	of Shares		Assets		($)

Common Stock 99.8% of net assets

Automobiles & Components 0.4%
Other Securities				0.4		4,532,077

Banks 0.2%
Other Securities				0.2		1,892,051

Capital Goods 6.6%
Caterpillar, Inc.		85,611		0.7		8,301,699
Danaher Corp.		81,090		0.5		6,202,574
The Boeing Co.		93,280		1.0		12,025,658
Other Securities				4.4		55,016,211

				6.6		81,546,142

Commercial & Professional Services 0.8%
Other Securities				0.8		10,032,898

Consumer Durables & Apparel 2.2%
NIKE, Inc., Class B		100,185		0.6		7,844,485
Other Securities				1.6		19,604,034

				2.2		27,448,519

Consumer Services 2.2%
Starbucks Corp.		101,326		0.6		7,190,093
Other Securities				1.6		20,189,571

				2.2		27,379,664

Diversified Financials 6.1%
American Express Co.		123,499		0.9		11,272,989
Berkshire Hathaway, Inc., Class B *		242,570		2.3		28,084,754
The Charles Schwab Corp. (b)		154,887		0.3		4,106,054
Other Securities				2.6		31,004,207

				6.1		74,468,004

Energy 7.9%
Anadarko Petroleum Corp.		67,337		0.5		5,667,082
EOG Resources, Inc.		36,770		0.6		6,964,973
Halliburton Co.		114,364		0.5		6,518,748
Schlumberger Ltd.		177,550		1.3		16,512,150
Other Securities				5.0		62,030,594

				7.9		97,693,547

Food & Staples Retailing 3.7%
Costco Wholesale Corp.		58,463		0.6		6,828,479
CVS Caremark Corp.		159,620		0.9		11,674,607
Wal-Mart Stores, Inc.		218,360		1.3		16,311,492
Walgreen Co.		116,394		0.6		7,908,972
Other Securities				0.3		2,696,392

				3.7		45,419,942

Food, Beverage & Tobacco 2.2%
PepsiCo, Inc.		206,925		1.3		16,568,485
Other Securities				0.9		9,931,339

				2.2		26,499,824

Health Care Equipment & Services 6.4%
Express Scripts Holding Co. *		108,994		0.7		8,208,338
McKesson Corp.		30,913		0.4		5,473,147
Medtronic, Inc.		133,610		0.6		7,917,729
UnitedHealth Group, Inc.		134,939		0.8		10,426,736
Other Securities				3.9		46,286,687

				6.4		78,312,637

Household & Personal Products 1.0%
Colgate-Palmolive Co.		117,987		0.6		7,413,123
Other Securities				0.4		5,172,300

				1.0		12,585,423

Insurance 0.4%
Other Securities				0.4		4,781,472

Materials 3.2%
Monsanto Co.		71,324		0.6		7,847,067
Other Securities				2.6		31,536,006

				3.2		39,383,073

Media 4.0%
Comcast Corp., Class A		350,860		1.5		18,135,954
Time Warner Cable, Inc.		38,261		0.4		5,369,931

See financial notes 29

Schwab U.S. Large-Cap Growth ETF

Portfolio Holdings (Unaudited) continued


	Number		% of Net		Value
Security	of Shares		Assets		($)
Other Securities				2.1		25,072,030

				4.0		48,577,915

Pharmaceuticals, Biotechnology & Life Sciences 11.0%
Amgen, Inc.		101,376		1.0		12,572,651
Biogen Idec, Inc. *		31,832		0.9		10,844,526
Celgene Corp. *		55,381		0.7		8,902,496
Gilead Sciences, Inc. *		205,826		1.4		17,040,335
Johnson & Johnson		380,010		2.8		35,006,521
Thermo Fisher Scientific, Inc.		53,091		0.5		6,611,953
Other Securities				3.7		44,523,272

				11.0		135,501,754

Real Estate 2.8%
Simon Property Group, Inc.		42,158		0.6		6,799,664
Other Securities				2.2		27,304,305

				2.8		34,103,969

Retailing 6.2%
Amazon.com, Inc. *		49,996		1.5		18,103,552
Lowe’s Cos., Inc.		140,785		0.6		7,043,474
priceline.com, Inc. *		6,897		0.8		9,302,949
TJX Cos., Inc.		95,739		0.5		5,884,119
Other Securities				2.8		36,201,260

				6.2		76,535,354

Semiconductors & Semiconductor Equipment 0.7%
Other Securities				0.7		9,186,568

Software & Services 17.9%
Accenture plc, Class A		86,289		0.6		7,192,188
eBay, Inc. *		156,029		0.7		9,169,824
Facebook, Inc., Class A *		220,722		1.2		15,110,628
Google, Inc., Class A *		37,762		3.7		45,905,375
MasterCard, Inc., Class A		139,507		0.9		10,842,484
Microsoft Corp.		1,022,900		3.2		39,187,299
Oracle Corp.		473,290		1.5		18,510,372
Visa, Inc., Class A		68,230		1.3		15,415,886
Other Securities				4.8		58,658,036

				17.9		219,992,092

Technology Hardware & Equipment 9.4%
Apple, Inc.		121,056		5.2		63,704,509
Cisco Systems, Inc.		717,725		1.3		15,646,405
EMC Corp.		276,169		0.6		7,282,577
QUALCOMM, Inc.		227,370		1.4		17,118,687
Other Securities				0.9		12,219,932

				9.4		115,972,110

Telecommunication Services 0.6%
Other Securities				0.6		7,474,176

Transportation 3.7%
FedEx Corp.		40,524		0.4		5,403,065
Union Pacific Corp.		61,730		0.9		11,134,857
United Parcel Service, Inc., Class B		95,794		0.7		9,174,191
Other Securities				1.7		19,529,125

				3.7		45,241,238

Utilities 0.2%
Other Securities				0.2		3,050,771

Total Common Stock
(Cost $930,686,099)						1,227,611,220




Other Investment Companies 0.1% of net assets

Equity Fund 0.0%
Other Securities				0.0		175,460

Money Market Fund 0.1%
Other Securities				0.1		726,819

Total Other Investment Companies
(Cost $891,773)						902,279



End of Investments.



Collateral Invested for Securities on Loan 0.2% of net assets


State Street Institutional U.S. Government Money Market Fund, Institutional Class 0.00% (c)		2,980,313		0.2		2,980,313

Total Collateral Invested for Securities on Loan
(Cost $2,980,313)						2,980,313



End of Collateral Invested for Securities on Loan

At 02/28/14, the tax basis cost of the fund’s investments was $931,896,604 and the unrealized appreciation and depreciation were $301,747,689 and ($5,130,794), respectively, with a net unrealized appreciation of $296,616,895.

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 $3,266,090.
(b)		Issuer is affiliated with the fund’s adviser.
(c)		The rate shown is the 7-day yield.


ETF —		Exchange Traded Fund
Reg’d —		Registered

30 See financial notes

Schwab U.S. Large-Cap Growth ETF

Portfolio Holdings (Unaudited) continued

The following is a summary of the inputs used to value the fund’s investments as of February 28, 2014 (see financial note 2(a) for additional information):


	Quoted Prices in				Significant
	Active Markets for		Other Significant		Unobservable
	Identical Assets		Observable Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total

Common Stock¹		$1,227,611,220		$—		$—		$1,227,611,220
Other Investment Companies¹		902,279		—		—		902,279

Total		$1,228,513,499		$—		$—		$1,228,513,499

Other Financial Instruments
Collateral Invested for Securities on Loan		$2,980,313		$—		$—		$2,980,313


¹		As categorized in the complete schedule of portfolio holdings.

See financial notes 31

Schwab U.S. Large-Cap Growth ETF

Statement of

Assets and Liabilities

As of February 28, 2014; unaudited



Assets

Investments in affiliated issuers, at value (cost $2,868,352)		$4,106,054
Investments in unaffiliated issuers, at value (cost $928,709,520) including securities on loan of $3,266,090	+	1,224,407,445

Total investments, at value (cost $931,577,872)		1,228,513,499
Collateral invested for securities on loan		2,980,313
Receivables:
Fund shares sold		11,552,643
Dividends		1,368,836
Income from securities on loan		5,697
Foreign tax reclaims	+	4,981

Total assets		1,244,425,969

Liabilities

Collateral held for securities on loan		2,980,313
Payables:
Investments bought		11,712,773
Investment adviser fees	+	7,084

Total liabilities		14,700,170

Net Assets

Total assets		1,244,425,969
Total liabilities	—	14,700,170

Net assets		$1,229,725,799

Net Assets by Source
Capital received from investors		938,874,320
Net investment income not yet distributed		2,392,683
Net realized capital losses		(8,495,479	)
Net unrealized capital appreciation		296,954,275

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$1,229,725,799

26,500,000

$46.40

32 See financial notes

Schwab U.S. Large-Cap Growth ETF

Statement of

Operations

For the period September 1, 2013 through February 28, 2014; unaudited



Investment Income

Dividends received from affiliated issuer		$16,975
Dividends received from unaffiliated issuers (net of foreign withholding tax of $2,280)		6,773,451
Securities on loan	+	35,120

Total investment income		6,825,546

Expenses

Investment adviser fees		354,704

Total expenses	−	354,704

Net investment income		6,470,842

Realized and Unrealized Gains (Losses)

Net realized gains on affiliated issuer		2,517
Net realized losses on unaffiliated investments		(79,873	)
Net realized gains on in-kind redemptions	+	827,568

Net realized gains		750,212
Net change in unrealized appreciation (depreciation) on affiliated issuer		751,965
Net change in unrealized appreciation (depreciation) on unaffiliated investments	+	155,485,480

Net change in unrealized appreciation (depreciation)	+	156,237,445

Net realized and unrealized gains		156,987,657

Increase in net assets resulting from operations		$163,458,499

See financial notes 33

Schwab U.S. Large-Cap Growth ETF

Statements of

Changes in Net Assets

For the current and prior report periods
Figures for the current period are unaudited



Operations


9/1/13-2/28/14				9/1/12-8/31/13
Net investment income		$6,470,842			$9,674,413
Net realized gains		750,212			372,254
Net change in unrealized appreciation (depreciation)	+	156,237,445			91,118,212

Increase in net assets resulting from operations		163,458,499			101,164,879

Distributions to Shareholders

Distributions from net investment income		($6,139,960	)		($8,617,825	)

Transactions in Fund Shares

9/1/13-2/28/14

9/1/12-8/31/13

SHARES

VALUE

SHARES

VALUE

Shares sold

5,650,000

$246,844,633

7,700,000

$287,234,792

Shares redeemed

(50,000

)

(2,050,274

)

(750,000

)

(27,230,664

)

Net transactions in fund shares

5,600,000

$244,794,359

6,950,000

$260,004,128

Shares Outstanding and Net Assets

9/1/13-2/28/14

9/1/12-8/31/13

SHARES

NET ASSETS

SHARES

NET ASSETS

Beginning of period

20,900,000

$827,612,901

13,950,000

$475,061,719

Total increase

5,600,000

402,112,898

6,950,000

352,551,182

End of period

26,500,000

$1,229,725,799

20,900,000

$827,612,901

Net investment income not yet distributed

$2,392,683

$2,061,801

34 See financial notes

Schwab U.S. Large-Cap Value ETF™

Financial Statements

Financial Highlights


	9/1/13–			9/1/12–			9/1/11–			9/1/10–			12/9/09¹–
	2/28/14*			8/31/13			8/31/12			8/31/11			8/31/10


Per-Share Data ($)

Net asset value at beginning of period		36.49			31.24			27.34			24.36			25.00

Income (loss) from investment operations:
Net investment income (loss)		0.51			0.93			0.82			0.70			0.47
Net realized and unrealized gains (losses)		4.15			5.24			3.89			2.99			(0.78	)

Total from investment operations		4.66			6.17			4.71			3.69			(0.31	)
Less distributions:
Distributions from net investment income		(0.48	)		(0.92	)		(0.81	)		(0.71	)		(0.33	)

Net asset value at end of period		40.67			36.49			31.24			27.34			24.36

Total return (%)		12.82	²		20.06			17.53			15.12			(1.29	)²

Ratios/Supplemental Data (%)

Ratios to average net assets:
Total expenses		0.07	³		0.07			0.13			0.13			0.14	^3,4
Net investment income (loss)		2.70	³		2.73			2.89			2.68			2.98	³
Portfolio turnover rate⁵		8	²		9			8			7			5	²
Net assets, end of period ($ x 1,000)		864,305			700,693			385,791			241,994			84,052

* Unaudited.

¹ Commencement of operations.

² Not annualized.

³ Annualized.

⁴ Effective June 14, 2010, the annual operating expense ratio was reduced. The ratio presented for period ended 8/31/10 is a blended ratio.

⁵ Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.

See financial notes 35

Schwab U.S. Large-Cap Value ETF

Portfolio Holdings as of February 28, 2014 (Unaudited)


				Cost		Value
Holdings by Category				($)		($)

	99	.7%	Common Stock		710,050,429		862,106,897
	0	.1%	Other Investment Companies		654,204		674,486


	99	.8%	Total Investments		710,704,633		862,781,383
	0	.1%	Collateral Invested for Securities on Loan		1,172,640		1,172,640
	0	.1%	Other Assets and Liabilities, Net				351,242


	100	.0%	Net Assets				864,305,265


	Number		% of Net		Value
Security	of Shares		Assets		($)

Common Stock 99.7% of net assets

Automobiles & Components 2.2%
Ford Motor Co.		370,822		0.7		5,706,951
General Motors Co. *		123,083		0.5		4,455,605
Other Securities				1.0		8,967,526

				2.2		19,130,082

Banks 5.4%
The PNC Financial Services Group, Inc.		50,273		0.5		4,111,326
U.S. Bancorp		171,796		0.8		7,067,687
Wells Fargo & Co.		451,829		2.4		20,973,902
Other Securities				1.7		14,883,543

				5.4		47,036,458

Capital Goods 9.6%
3M Co.		60,165		0.9		8,106,031
Emerson Electric Co.		66,344		0.5		4,329,609
General Electric Co.		953,386		2.8		24,282,741
Honeywell International, Inc.		73,810		0.8		6,970,616
Lockheed Martin Corp.		25,309		0.5		4,107,651
United Technologies Corp.		79,409		1.1		9,292,441
Other Securities				3.0		25,643,344

				9.6		82,732,433

Commercial & Professional Services 0.7%
Other Securities				0.7		6,575,695

Consumer Durables & Apparel 0.8%
Other Securities				0.8		6,586,422

Consumer Services 1.7%
McDonald’s Corp.		93,600		1.0		8,906,040
Other Securities				0.7		6,012,516

				1.7		14,918,556

Diversified Financials 9.2%
Bank of America Corp.		1,003,347		1.9		16,585,326
Capital One Financial Corp.		54,238		0.5		3,982,696
Citigroup, Inc.		286,091		1.6		13,912,605
JPMorgan Chase & Co.		354,354		2.3		20,134,394
Morgan Stanley		130,094		0.5		4,006,895
The Goldman Sachs Group, Inc.		39,648		0.8		6,599,410
Other Securities				1.6		14,488,935

				9.2		79,710,261

Energy 11.5%
Chevron Corp.		181,275		2.4		20,906,446
ConocoPhillips		115,242		0.9		7,663,593
Exxon Mobil Corp.		411,736		4.6		39,637,825
Occidental Petroleum Corp.		75,790		0.8		7,315,251
Phillips 66		56,491		0.5		4,228,916
Other Securities				2.3		19,581,629

				11.5		99,333,660

Food & Staples Retailing 0.6%
Other Securities				0.6		5,060,972

Food, Beverage & Tobacco 7.4%
Altria Group, Inc.		188,137		0.8		6,821,848
Mondelez International, Inc., Class A		165,268		0.7		5,624,070
Philip Morris International, Inc.		150,714		1.4		12,194,270
The Coca-Cola Co.		357,244		1.6		13,646,721
Other Securities				2.9		26,119,256

				7.4		64,406,165

Health Care Equipment & Services 2.3%
Abbott Laboratories		145,416		0.7		5,784,649
Other Securities				1.6		14,528,555

				2.3		20,313,204

Household & Personal Products 3.0%
Kimberly-Clark Corp.		35,847		0.5		3,955,716
The Procter & Gamble Co.		256,235		2.3		20,155,445
Other Securities				0.2		1,769,550

				3.0		25,880,711

Insurance 5.8%
American International Group, Inc.		138,500		0.8		6,893,145
MetLife, Inc.		105,609		0.6		5,351,208
Other Securities				4.4		37,628,682

				5.8		49,873,035

36 See financial notes

Schwab U.S. Large-Cap Value ETF

Number
% of Net
Value

Security of Shares Assets ($)

Materials 4.1%

E.I. du Pont de Nemours & Co.
87,096 0.7 5,802,336

The Dow Chemical Co.
114,093 0.6 5,557,470

Other Securities
2.8 23,822,266

4.1 35,182,072

Media 3.8%

The Walt Disney Co.
153,734 1.4 12,423,244

Time Warner, Inc.
85,250 0.7 5,722,832

Twenty-First Century Fox, Inc., Class A
184,401 0.7 6,184,810

Other Securities
1.0 8,257,209

3.8 32,588,095

Pharmaceuticals, Biotechnology & Life Sciences 6.9%

AbbVie, Inc.
149,648 0.9 7,618,580

Bristol-Myers Squibb Co.
154,858 1.0 8,326,715

Eli Lilly & Co.
93,577 0.6 5,578,125

Merck & Co., Inc.
274,859 1.8 15,664,214

Pfizer, Inc.
610,980 2.3 19,618,568

Other Securities
0.3 3,263,830

6.9 60,070,032

Real Estate 2.6%

Other Securities
2.6 22,145,072

Retailing 2.8%

The Home Depot, Inc.
132,471 1.3 10,866,596

Other Securities
1.5 13,087,226

2.8 23,953,822

Semiconductors & Semiconductor Equipment 3.4%

Intel Corp.
467,612 1.3 11,578,073

Texas Instruments, Inc.
102,963 0.5 4,629,216

Other Securities
1.6 13,186,981

3.4 29,394,270

Software & Services 3.3%

International Business Machines Corp.
96,244 2.1 17,821,501

Other Securities
1.2 10,530,384

3.3 28,351,885

Technology Hardware & Equipment 2.1%

Hewlett-Packard Co.
181,543 0.6 5,424,505

Other Securities
1.5 12,408,435

2.1 17,832,940

Telecommunication Services 4.4%

AT&T, Inc.
495,552 1.8 15,822,975

Verizon Communications, Inc.
389,533 2.1 18,533,980

Other Securities
0.5 3,357,812

4.4 37,714,767

Transportation 0.3%

Other Securities
0.3 2,679,912

Utilities 5.8%

Duke Energy Corp.
66,603 0.5 4,720,821

Other Securities
5.3 45,915,555

5.8 50,636,376

Total Common Stock

(Cost $710,050,429) 862,106,897

Other Investment Companies 0.1% of net assets

Equity Fund 0.0%

Other Securities
0.0 189,360

Money Market Fund 0.1%

Other Securities
0.1 485,126

Total Other Investment Companies

(Cost $654,204) 674,486

End of Investments.

Collateral Invested for Securities on Loan 0.1% of net assets

State Street Institutional U.S. Government Money Market Fund, Institutional Class 0.00% (b)
1,172,640 0.1 1,172,640

Total Collateral Invested for Securities on Loan

(Cost $1,172,640) 1,172,640

End of Collateral Invested for Securities on Loan

At 02/28/14, the tax basis cost of the fund’s investments was $711,333,961 and the unrealized appreciation and depreciation were $156,148,641 and ($4,701,219), respectively, with a net unrealized appreciation $151,447,442.

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 $1,128,282.
(b)		The rate shown is the 7-day yield.


ETF —		Exchange Traded Fund
REIT —		Real Estate Investment Trust

See financial notes 37

Schwab U.S. Large-Cap Value ETF

The following is a summary of the inputs used to value the fund’s investments as of February 28, 2014 (see financial note 2(a) for additional information):


	Quoted Prices in				Significant
	Active Markets for		Other Significant		Unobservable
	Identical Assets		Observable Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total

Common Stock¹		$862,106,897		$—		$—		$862,106,897
Other Investment Companies¹		674,486		—		—		674,486

Total		$862,781,383		$—		$—		$862,781,383

Other Financial Instruments
Collateral Invested for Securities on Loan		$1,172,640		$—		$—		$1,172,640


¹		As categorized in the complete schedule of portfolio holdings.

38 See financial notes

Schwab U.S. Large-Cap Value ETF

Statement of

Assets and Liabilities

As of February 28, 2014; unaudited



Assets

Investments, at value (cost $710,704,633) including securities on loan of $1,128,282		$862,781,383
Collateral invested for securities on loan		1,172,640
Receivables:
Dividends		2,542,027
Foreign tax reclaims		1,934
Income from securities on loan	+	634

Total assets		866,498,618

Liabilities

Collateral held for securities on loan		1,172,640
Payables:
Investments bought		1,015,717
Investment adviser fees	+	4,996

Total liabilities		2,193,353

Net Assets

Total assets		866,498,618
Total liabilities	—	2,193,353

Net assets		$864,305,265

Net Assets by Source
Capital received from investors		698,456,035
Net investment income not yet distributed		3,776,161
Net realized capital gains		9,895,200
Net unrealized capital appreciation		152,177,869

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$864,305,265

21,250,000

$40.67

See financial notes 39

Schwab U.S. Large-Cap Value ETF

Statement of

Operations

For the period September 1, 2013 through February 28, 2014; unaudited



Investment Income

Dividends (net of foreign withholding tax of $1,451)		$10,713,521
Securities on loan	+	4,777

Total investment income		10,718,298

Expenses

Investment adviser fees		271,346

Total expenses	−	271,346

Net investment income		10,446,952

Realized and Unrealized Gains (Losses)

Net realized losses on investments		(1,535,442	)
Net realized gains on in-kind redemptions	+	14,077,080

Net realized gains		12,541,638
Net change in unrealized appreciation (depreciation) on investments	+	68,683,109

Net realized and unrealized gains		81,224,747

Increase in net assets resulting from operations		$91,671,699

40 See financial notes

Schwab U.S. Large-Cap Value ETF

Statements of

Changes in Net Assets

For the current and prior report periods
Figures for the current period are unaudited



Operations


9/1/13-2/28/14				9/1/12-8/31/13
Net investment income		$10,446,952			$14,394,685
Net realized gains		12,541,638			16,349,174
Net change in unrealized appreciation (depreciation)	+	68,683,109			52,823,018

Increase in net assets resulting from operations		91,671,699			83,566,877

Distributions to Shareholders

Distributions from net investment income		($9,428,860	)		($13,282,460	)

Transactions in Fund Shares

9/1/13-2/28/14

9/1/12-8/31/13

SHARES

VALUE

SHARES

VALUE

Shares sold

3,250,000

$128,240,880

9,400,000

$328,362,220

Shares redeemed

(1,200,000

)

(46,871,473

)

(2,550,000

)

(83,744,269

)

Net transactions in fund shares

2,050,000

$81,369,407

6,850,000

$244,617,951

Shares Outstanding and Net Assets

9/1/13-2/28/14

9/1/12-8/31/13

SHARES

NET ASSETS

SHARES

NET ASSETS

Beginning of period

19,200,000

$700,693,019

12,350,000

$385,790,651

Total increase

2,050,000

163,612,246

6,850,000

314,902,368

End of period

21,250,000

$864,305,265

19,200,000

$700,693,019

Net investment income not yet distributed

$3,776,161

$2,758,069

See financial notes 41

Schwab U.S. Mid-Cap ETF™

Financial Statements

Financial Highlights


	9/1/13–			9/1/12–			9/1/11–			1/12/11¹–
	2/28/14*			8/31/13			8/31/12			8/31/11


Per-Share Data ($)

Net asset value at beginning of period		32.94			26.56			23.75			25.00

Income (loss) from investment operations:
Net investment income (loss)		0.29			0.51			0.37			0.18
Net realized and unrealized gains (losses)		5.86			6.40			2.77			(1.29	)

Total from investment operations		6.15			6.91			3.14			(1.11	)
Less distributions:
Distributions from net investment income		(0.24	)		(0.53	)		(0.33	)		(0.14	)

Net asset value at end of period		38.85			32.94			26.56			23.75

Total return (%)		18.72	²		26.27			13.32			(4.49	)²

Ratios/Supplemental Data (%)

Ratios to average net assets:
Total expenses		0.07	³		0.07			0.13			0.13	³
Net investment income (loss)		1.70	³		1.70			1.53			1.18	³
Portfolio turnover rate⁴		6	²		25			19			9	²
Net assets, end of period ($ x 1,000)		1,014,074			611,081			205,840			79,550

* Unaudited.

¹ Commencement of operations.

² Not annualized.

³ Annualized.

⁴ Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.

42 See financial notes

Schwab U.S. Mid-Cap ETF

Portfolio Holdings as of February 28, 2014 (Unaudited)


				Cost		Value
Holdings by Category				($)		($)

	99	.9%	Common Stock		839,627,426		1,013,089,005
	0	.0%	Other Investment Companies		344,583		346,617


	99	.9%	Total Investments		839,972,009		1,013,435,622
	1	.5%	Collateral Invested for Securities on Loan		15,088,468		15,088,468
	(1	.4)%	Other Assets and Liabilities, Net				(14,450,400	)


	100	.0%	Net Assets				1,014,073,690


	Number		% of Net		Value
Security	of Shares		Assets		($)

Common Stock 99.9% of net assets

Automobiles & Components 1.5%
TRW Automotive Holdings Corp. *		49,455		0.4		4,071,136
Other Securities				1.1		11,633,406

				1.5		15,704,542

Banks 3.9%
Huntington Bancshares, Inc.		357,847		0.3		3,410,282
Other Securities				3.6		35,909,990

				3.9		39,320,272

Capital Goods 12.5%
B/E Aerospace, Inc. *		42,115		0.3		3,548,189
Chicago Bridge & Iron Co. N.V.		45,062		0.4		3,793,770
Jacobs Engineering Group, Inc. *		56,484		0.3		3,425,755
Masco Corp.		150,625		0.3		3,517,094
Pall Corp.		47,371		0.4		4,073,906
TransDigm Group, Inc.		21,402		0.4		3,812,552
United Rentals, Inc. *		39,974		0.3		3,531,303
Other Securities				10.1		101,349,830

				12.5		127,052,399

Commercial & Professional Services 2.8%
Equifax, Inc.		52,310		0.4		3,664,839
Other Securities				2.4		25,140,052

				2.8		28,804,891

Consumer Durables & Apparel 5.0%
Mohawk Industries, Inc. *		26,203		0.4		3,708,511
Newell Rubbermaid, Inc.		121,901		0.4		3,914,241
Polaris Industries, Inc.		27,448		0.4		3,678,855
Under Armour, Inc., Class A *		33,624		0.4		3,804,556
Other Securities				3.4		35,452,252

				5.0		50,558,415

Consumer Services 3.0%
H&R Block, Inc.		115,904		0.4		3,667,203
MGM Resorts International *		143,028		0.4		3,940,421
Other Securities				2.2		23,053,424

				3.0		30,661,048

Diversified Financials 2.5%
Other Securities				2.5		25,375,630

Energy 6.6%
Cheniere Energy, Inc. *		92,941		0.5		4,594,074
Cimarex Energy Co.		37,175		0.4		4,301,519
Core Laboratories N.V.		19,153		0.4		3,601,722
Helmerich & Payne, Inc.		45,809		0.4		4,523,639
Oceaneering International, Inc.		46,466		0.3		3,326,036
Whiting Petroleum Corp. *		50,381		0.3		3,461,679
Other Securities				4.3		43,323,573

				6.6		67,132,242

Food & Staples Retailing 0.7%
Safeway, Inc.		102,752		0.4		3,848,063
Other Securities				0.3		2,778,650

				0.7		6,626,713

Food, Beverage & Tobacco 1.1%
Other Securities				1.1		10,898,500

Health Care Equipment & Services 4.1%
Other Securities				4.1		41,939,978

Household & Personal Products 0.8%
Other Securities				0.8		8,074,081

Insurance 5.8%
Fidelity National Financial, Inc., Class A		115,729		0.4		3,826,001
Markel Corp. *		5,961		0.3		3,445,458
Other Securities				5.1		51,310,702

				5.8		58,582,161

Materials 7.5%
Rock-Tenn Co., Class A		30,574		0.3		3,412,670
Vulcan Materials Co.		55,603		0.4		3,777,112
W.R. Grace & Co. *		32,949		0.3		3,339,052

See financial notes 43

Schwab U.S. Mid-Cap ETF

Portfolio Holdings (Unaudited) continued


	Number		% of Net		Value
Security	of Shares		Assets		($)
Other Securities				6.5		65,399,077

				7.5		75,927,911

Media 1.5%
Other Securities				1.5		15,363,548

Pharmaceuticals, Biotechnology & Life Sciences 5.1%
BioMarin Pharmaceutical, Inc. *		60,917		0.5		4,934,277
Endo Health Solutions, Inc. *		57,512		0.5		4,590,608
Incyte Corp., Ltd. *		61,950		0.4		3,980,907
Jazz Pharmaceuticals plc *		22,291		0.3		3,387,006
Pharmacyclics, Inc. *		28,455		0.4		3,945,570
Other Securities				3.0		30,494,115

				5.1		51,332,483

Real Estate 9.1%
CBRE Group, Inc., Class A *		119,453		0.3		3,338,711
Realty Income Corp. (a)		87,077		0.4		3,867,960
SL Green Realty Corp.		40,235		0.4		3,996,543
Other Securities				8.0		80,809,311

				9.1		92,012,525

Retailing 4.4%
Advance Auto Parts, Inc.		31,031		0.4		3,952,108
LKQ Corp. *		127,378		0.4		3,552,572
Signet Jewelers Ltd.		34,452		0.3		3,291,889
Tractor Supply Co.		59,198		0.4		4,177,011
Other Securities				2.9		29,907,339

				4.4		44,880,919

Semiconductors & Semiconductor Equipment 2.2%
Lam Research Corp. *		68,397		0.3		3,538,177
Other Securities				1.9		18,780,819

				2.2		22,318,996

Software & Services 8.2%
Akamai Technologies, Inc. *		76,449		0.5		4,673,327
Computer Sciences Corp.		62,477		0.4		3,948,546
Electronic Arts, Inc. *		133,857		0.4		3,826,972
FleetCor Technologies, Inc. *		31,193		0.4		4,052,906
Splunk, Inc. *		36,485		0.3		3,383,984
Other Securities				6.2		63,683,393

				8.2		83,569,128

Technology Hardware & Equipment 3.5%
Harris Corp.		45,001		0.3		3,321,974
Trimble Navigation Ltd. *		110,523		0.4		4,216,452
Other Securities				2.8		28,224,157

				3.5		35,762,583

Telecommunication Services 1.0%
Other Securities				1.0		9,687,871

Transportation 2.0%
Other Securities				2.0		20,183,413

Utilities 5.1%
American Water Works Co., Inc.		75,753		0.3		3,396,765
NRG Energy, Inc.		138,618		0.4		4,029,625
Other Securities				4.4		43,892,366

				5.1		51,318,756

Total Common Stock
(Cost $839,627,426)						1,013,089,005




Other Investment Companies 0.0% of net assets

Equity Fund 0.0%
Other Securities				0.0		12,520

Money Market Fund 0.0%
Other Securities				0.0		334,097

Total Other Investment Companies
(Cost $344,583)						346,617



End of Investments.



Collateral Invested for Securities on Loan 1.5% of net assets


State Street Institutional U.S. Government Money Market Fund, Institutional Class 0.00% (b)		15,088,468		1.5		15,088,468

Total Collateral Invested for Securities on Loan
(Cost $15,088,468)						15,088,468



End of Collateral Invested for Securities on Loan

At 02/28/14, the tax basis cost of the fund’s investments was $840,547,808 and the unrealized appreciation and depreciation were $180,425,769 and ($7,537,955), respectively, with a net unrealized appreciation of $172,887,814.

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


*		Non-income producing security.
(a)		All or a portion of this security is on loan. Securities on loan were valued at $16,414,185.
(b)		The rate shown is the 7-day yield.


ETF —		Exchange Traded Fund

44 See financial notes

Schwab U.S. Mid-Cap ETF

Portfolio Holdings (Unaudited) continued

The following is a summary of the inputs used to value the fund’s investments as of February 28, 2014 (see financial note 2(a) for additional information):


	Quoted Prices in				Significant
	Active Markets for		Other Significant		Unobservable
	Identical Assets		Observable Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total

Common Stock¹		$1,013,089,005		$—		$—		$1,013,089,005
Other Investment Companies¹		346,617		—		—		346,617

Total		$1,013,435,622		$—		$—		$1,013,435,622

Other Financial Instruments
Collateral Invested for Securities on Loan		$15,088,468		$—		$—		$15,088,468


¹		As categorized in the complete schedule of portfolio holdings.

See financial notes 45

Schwab U.S. Mid-Cap ETF

Statement of

Assets and Liabilities

As of February 28, 2014; unaudited



Assets

Investments, at value (cost $839,972,009) including securities on loan of $16,414,185		$1,013,435,622
Collateral invested for securities on loan		15,088,468
Receivables:
Investments sold		123,971
Fund shares sold		7,768,296
Dividends		1,116,767
Income from securities on loan	+	23,639

Total assets		1,037,556,763

Liabilities

Collateral held for securities on loan		15,088,468
Payables:
Investments bought		8,388,769
Investment adviser fees		5,836

Total liabilities		23,483,073

Net Assets

Total assets		1,037,556,763
Total liabilities	—	23,483,073

Net assets		$1,014,073,690

Net Assets by Source
Capital received from investors		833,719,751
Net investment income not yet distributed		2,731,265
Net realized capital gains		3,891,266
Net unrealized capital appreciation		173,731,408

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$1,014,073,690

26,100,000

$38.85

46 See financial notes

Schwab U.S. Mid-Cap ETF

Statement of

Operations

For the period September 1, 2013 through February 28, 2014; unaudited



Investment Income

Dividends (net of foreign withholding tax of $2,673)		$6,836,907
Securities on loan	+	134,788

Total investment income		6,971,695

Expenses

Investment adviser fees		275,536

Total expenses	−	275,536

Net investment income		6,696,159

Realized and Unrealized Gains (Losses)

Net realized losses on investments		(1,675,112	)
Net realized gains on in-kind redemptions	+	14,277,774

Net realized gains		12,602,662
Net change in unrealized appreciation (depreciation) on investments	+	112,835,918

Net realized and unrealized gains		125,438,580

Increase in net assets resulting from operations		$132,134,739

See financial notes 47

Schwab U.S. Mid-Cap ETF

Statements of

Changes in Net Assets

For the current and prior report periods
Figures for the current period are unaudited



Operations


9/1/13-2/28/14				9/1/12-8/31/13
Net investment income		$6,696,159			$6,975,894
Net realized gains		12,602,662			20,516,426
Net change in unrealized appreciation (depreciation)	+	112,835,918			59,061,955

Increase in net assets resulting from operations		132,134,739			86,554,275

Distributions to Shareholders

Distributions from net investment income		($4,951,300	)		($6,489,136	)

Transactions in Fund Shares

9/1/13-2/28/14

9/1/12-8/31/13

SHARES

VALUE

SHARES

VALUE

Shares sold

9,150,000

$331,658,755

14,550,000

$441,831,535

Shares redeemed

(1,600,000

)

(55,849,680

)

(3,750,001

)

(116,655,372

)

Net transactions in fund shares

7,550,000

$275,809,075

10,799,999

$325,176,163

Shares Outstanding and Net Assets

9/1/13-2/28/14

9/1/12-8/31/13

SHARES

NET ASSETS

SHARES

NET ASSETS

Beginning of period

18,550,000

$611,081,176

7,750,001

$205,839,874

Total increase

7,550,000

402,992,514

10,799,999

405,241,302

End of period

26,100,000

$1,014,073,690

18,550,000

$611,081,176

Net investment income not yet distributed

$2,731,265

$986,406

48 See financial notes

Schwab U.S. Small-Cap ETF™

Financial Statements

Financial Highlights


	9/1/13–			9/1/12–			9/1/11–			9/1/10–			10/30/09¹–
	2/28/14*			8/31/13			8/31/12			8/31/11			8/31/10


Per-Share Data ($)

Net asset value at beginning of period		45.71			36.55			32.34			26.48			25.00

Income (loss) from investment operations:
Net investment income (loss)		0.41			0.74			0.49			0.39			0.23
Net realized and unrealized gains (losses)		8.22			9.18			4.16			5.86			1.45	²

Total from investment operations		8.63			9.92			4.65			6.25			1.68
Less distributions:
Distributions from net investment income		(0.32	)		(0.76	)		(0.44	)		(0.39	)		(0.20	)

Net asset value at end of period		54.02			45.71			36.55			32.34			26.48

Total return (%)		18.93	³		27.47			14.52			23.55			6.67	³

Ratios/Supplemental Data (%)

Ratios to average net assets:
Total expenses		0.08	⁴		0.09	⁵		0.13			0.13			0.14	^4,6
Net investment income (loss)		1.68	⁴		1.74			1.44			1.17			1.05	⁴
Portfolio turnover rate⁷		8	³		22			12			11			8	³
Net assets, end of period ($ x 1,000)		2,074,403			1,446,857			641,516			462,523			193,310

* Unaudited.

¹ Commencement of operations.

³ Not annualized.

⁴ Annualized.

⁵ Effective September 20, 2012, the annual operating expense ratio was reduced to 0.10%. On March 11, 2013, the rate was further reduced to 0.08%. The ratio presented for the period ended 8/31/13 is a blended ratio.

⁶ Effective June 14, 2010, the annual operating expense ratio was reduced. The ratio presented for period ended 8/31/10 is a blended ratio.

⁷ Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.

See financial notes 49

Schwab U.S. Small-Cap ETF

Portfolio Holdings as of February 28, 2014 (Unaudited)


				Cost		Value
Holdings by Category				($)		($)

	99	.8%	Common Stock		1,633,540,681		2,071,006,614
	0	.1%	Other Investment Companies		1,046,027		1,069,775
	0	.0%	Rights		—		—
	0	.0%	Warrants		—		—


	99	.9%	Total Investments		1,634,586,708		2,072,076,389
	2	.6%	Collateral Invested for Securities on Loan		53,197,518		53,197,518
	(2	.5)%	Other Assets and Liabilities, Net				(50,870,619	)


	100	.0%	Net Assets				2,074,403,288


	Number		% of Net		Value
Security	of Shares		Assets		($)

Common Stock 99.8% of net assets

Automobiles & Components 1.5%
Gentex Corp.		123,960		0.2		3,888,625
The Goodyear Tire & Rubber Co.		211,469		0.3		5,682,172
Other Securities				1.0		20,580,424

				1.5		30,151,221

Banks 7.8%
East West Bancorp, Inc.		122,492		0.2		4,371,739
Signature Bank *		40,505		0.3		5,303,320
SVB Financial Group *		39,168		0.2		4,931,643
Other Securities				7.1		148,167,187

				7.8		162,773,889

Capital Goods 11.0%
Acuity Brands, Inc.		36,700		0.2		5,176,535
Allegion plc *		77,481		0.2		4,211,092
Graco, Inc.		52,693		0.2		4,111,635
Huntington Ingalls Industries, Inc.		42,700		0.2		4,326,791
Terex Corp.		95,602		0.2		4,257,157
The Middleby Corp. *		16,400		0.2		4,863,584
Trinity Industries, Inc.		65,759		0.2		4,722,154
Other Securities				9.6		195,543,948

				11.0		227,212,896

Commercial & Professional Services 3.0%
Pitney Bowes, Inc.		173,385		0.2		4,412,648
Other Securities				2.8		57,117,401

				3.0		61,530,049

Consumer Durables & Apparel 2.5%
Harman International Industries, Inc.		57,305		0.3		6,001,553
Other Securities				2.2		46,846,888

				2.5		52,848,441

Consumer Services 3.9%
Domino’s Pizza, Inc.		47,813		0.2		3,780,096
Other Securities				3.7		77,477,338

				3.9		81,257,434

Diversified Financials 2.6%
CBOE Holdings, Inc.		75,404		0.2		4,074,078
ETRADE Financial Corp.		246,768		0.3		5,544,877
Waddell & Reed Financial, Inc., Class A		72,585		0.2		5,059,175
Other Securities				1.9		39,307,321

				2.6		53,985,451

Energy 5.7%
Dril-Quip, Inc. *		35,429		0.2		3,810,743
Energen Corp.		61,333		0.2		4,933,627
Gulfport Energy Corp. *		72,324		0.2		4,780,616
Other Securities				5.1		104,815,510

				5.7		118,340,496

Food & Staples Retailing 0.9%
Rite Aid Corp. *		758,272		0.2		4,997,012
Other Securities				0.7		13,931,718

				0.9		18,928,730

Food, Beverage & Tobacco 1.7%
The WhiteWave Foods Co., Class A *		148,742		0.2		4,209,399
Other Securities				1.5		30,244,029

				1.7		34,453,428

Health Care Equipment & Services 5.6%
athenahealth, Inc. *		31,644		0.3		6,134,822
Other Securities				5.3		110,265,899

				5.6		116,400,721

Household & Personal Products 0.5%
Nu Skin Enterprises, Inc., Class A		50,381		0.2		4,207,821
Other Securities				0.3		5,424,692

				0.5		9,632,513

Insurance 3.2%
Assurant, Inc.		61,792		0.2		4,055,409

50 See financial notes

Schwab U.S. Small-Cap ETF

Number
% of Net
Value

Security of Shares Assets ($)

Other Securities
3.0 61,750,057

3.2 65,805,466

Materials 5.7%

Other Securities
5.7 118,161,675

Media 1.4%

Other Securities
1.4 29,213,851

Pharmaceuticals, Biotechnology & Life Sciences 6.6%

Alkermes plc *
123,041 0.3 5,988,405

Cubist Pharmaceuticals, Inc. *
63,781 0.2 5,071,865

Isis Pharmaceuticals, Inc. *
100,388 0.2 5,119,788

Jazz Pharmaceuticals plc *
44,697 0.3 6,791,486

Salix Pharmaceuticals Ltd. *
53,023 0.3 5,722,242

United Therapeutics Corp. *
39,460 0.2 4,002,033

Other Securities
5.1 104,679,852

6.6 137,375,671

Real Estate 9.4%

American Realty Capital Properties, Inc. REIT
492,888 0.3 7,240,525

Mid-America Apartment Communities, Inc.
64,331 0.2 4,351,349

NorthStar Realty Finance Corp.
265,641 0.2 4,120,092

Starwood Property Trust, Inc.
166,001 0.2 3,987,344

Other Securities
8.5 176,173,311

9.4 195,872,621

Retailing 4.3%

Liberty Ventures, Series A *
30,322 0.2 4,321,188

Other Securities
4.1 84,195,364

4.3 88,516,552

Semiconductors & Semiconductor Equipment 3.3%

SunEdison, Inc. *
206,612 0.2 3,793,396

Other Securities
3.1 64,320,267

3.3 68,113,663

Software & Services 8.6%

Broadridge Financial Solutions, Inc.
102,350 0.2 3,864,736

CoStar Group, Inc. *
24,588 0.2 4,943,171

Pandora Media, Inc. *
138,016 0.2 5,164,559

PTC, Inc. *
102,699 0.2 4,037,098

Splunk, Inc. *
74,258 0.3 6,887,429

Ultimate Software Group, Inc. *
23,730 0.2 3,939,180

Yelp, Inc. *
48,875 0.2 4,614,777

Other Securities
7.1 145,781,020

8.6 179,231,970

Technology Hardware & Equipment 5.0%

Ingram Micro, Inc., Class A *
130,631 0.2 3,847,083

Other Securities
4.8 100,161,076

5.0 104,008,159

Telecommunication Services 0.5%

Other Securities
0.5 11,418,890

Transportation 2.5%

Alaska Air Group, Inc.
60,016 0.3 5,199,786

American Airlines Group, Inc. *
164,972 0.3 6,092,416

Avis Budget Group, Inc. *
92,767 0.2 4,359,121

Other Securities
1.7 35,370,378

2.5 51,021,701

Utilities 2.6%

Atmos Energy Corp.
84,417 0.2 3,891,624

Other Securities
2.4 50,859,502

2.6 54,751,126

Total Common Stock

(Cost $1,633,540,681) 2,071,006,614

Other Investment Companies 0.1% of net assets

Equity Fund 0.1%

Other Securities
0.1 587,600

Money Market Fund 0.0%

Other Securities
0.0 482,175

Total Other Investment Companies

(Cost $1,046,027) 1,069,775

Rights 0.0% of net assets

Pharmaceuticals, Biotechnology & Life Sciences 0.0%

Other Securities
0.0 —

Total Rights

(Cost $—) —

Warrants 0.0% of net assets

Energy 0.0%

Other Securities
0.0 —

Total Warrants

(Cost $—) —

End of Investments.

Collateral Invested for Securities on Loan 2.6% of net assets

State Street Institutional U.S. Government Money Market Fund, Institutional Class 0.00% (d)
53,197,518 2.6 53,197,518

Total Collateral Invested for Securities on Loan

(Cost $53,197,518) 53,197,518

End of Collateral Invested for Securities on Loan

See financial notes 51

Schwab U.S. Small-Cap ETF

At 02/28/14, the tax basis cost of the fund’s investments was $1,636,914,482 and the unrealized appreciation and depreciation were $473,286,641 and ($38,124,734), respectively, with a net unrealized appreciation of $435,161,907.

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 $52,369,818.
(b)		Fair-valued by management in accordance with procedures approved by the Board of Trustees.
(c)		Illiquid security. At the period end, the value of these amounted to $0 or 0.0% of net assets.
(d)		The rate shown is the 7-day yield.


ETF —		Exchange Traded Fund
REIT —		Real Estate Investment Trust

The following is a summary of the inputs used to value the fund’s investments as of February 28, 2014 (see financial note 2(a) for additional information):


	Quoted Prices in				Significant
	Active Markets for		Other Significant		Unobservable
	Identical Assets		Observable Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total

Common Stock¹		$2,071,006,614		$—		$—		$2,071,006,614
Other Investment Companies¹		1,069,775		—		—		1,069,775
Rights¹		—		—		—		—
Warrants¹		—		—		—		—

Total		$2,072,076,389		$—		$—		$2,072,076,389

Other Financial Instruments
Collateral Invested for Securities on Loan		$53,197,518		$—		$—		$53,197,518


¹		As categorized in the complete schedule of portfolio holdings.

52 See financial notes

Schwab U.S. Small-Cap ETF

Statement of

Assets and Liabilities

As of February 28, 2014; unaudited



Assets

Investments, at value (cost $1,634,586,708) including securities on loan of $52,369,818		$2,072,076,389
Collateral invested for securities on loan		53,197,518
Receivables:
Investments sold		753,736
Fund shares sold		21,599,814
Dividends		1,811,043
Income from securities on loan	+	175,003

Total assets		2,149,613,503

Liabilities

Collateral held for securities on loan		53,197,518
Payables:
Investments bought		21,999,022
Investment adviser fees	+	13,675

Total liabilities		75,210,215

Net Assets

Total assets		2,149,613,503
Total liabilities	—	75,210,215

Net assets		$2,074,403,288

Net Assets by Source
Capital received from investors		1,625,384,984
Net investment income not yet distributed		5,165,052
Net realized capital gains		5,089,480
Net unrealized capital appreciation		438,763,772

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$2,074,403,288

38,400,000

$54.02

See financial notes 53

Schwab U.S. Small-Cap ETF

Statement of

Operations

For the period September 1, 2013 through February 28, 2014; unaudited



Investment Income

Dividends (net of foreign withholding tax of $1,134)		$14,226,386
Securities on loan	+	954,544

Total investment income		15,180,930

Expenses

Investment adviser fees		689,602

Total expenses	−	689,602

Net investment income		14,491,328

Realized and Unrealized Gains (Losses)

Net realized losses on investments		(2,742,193	)
Net realized gains on in-kind redemptions	+	24,550,772

Net realized gains		21,808,579
Net change in unrealized appreciation (depreciation) on investments	+	253,070,658

Net realized and unrealized gains		274,879,237

Increase in net assets resulting from operations		$289,370,565

54 See financial notes

Schwab U.S. Small-Cap ETF

Statements of

Changes in Net Assets

For the current and prior report periods
Figures for the current period are unaudited



Operations


9/1/13-2/28/14				9/1/12-8/31/13
Net investment income		$14,491,328			$17,041,896
Net realized gains		21,808,579			39,537,428
Net change in unrealized appreciation (depreciation)	+	253,070,658			163,291,817

Increase in net assets resulting from operations		289,370,565			219,871,141

Distributions to Shareholders

Distributions from net investment income		($10,806,850	)		($16,364,820	)

Transactions in Fund Shares

9/1/13-2/28/14

9/1/12-8/31/13

SHARES

VALUE

SHARES

VALUE

Shares sold

8,150,000

$415,665,883

19,050,000

$801,652,843

Shares redeemed

(1,400,000

)

(66,682,894

)

(4,950,000

)

(199,818,780

)

Net transactions in fund shares

6,750,000

$348,982,989

14,100,000

$601,834,063

Shares Outstanding and Net Assets

9/1/13-2/28/14

9/1/12-8/31/13

SHARES

NET ASSETS

SHARES

NET ASSETS

Beginning of period

31,650,000

$1,446,856,584

17,550,000

$641,516,200

Total increase

6,750,000

627,546,704

14,100,000

805,340,384

End of period

38,400,000

$2,074,403,288

31,650,000

$1,446,856,584

Net investment income not yet distributed

$5,165,052

$1,480,574

See financial notes 55

Schwab U.S. Dividend Equity ETF™

Financial Statements

Financial Highlights


	9/1/13–			9/1/12–			10/19/11¹–
	2/28/14*			8/31/13			8/31/12


Per-Share Data ($)

Net asset value at beginning of period		33.00			28.58			25.00

Income (loss) from investment operations:
Net investment income (loss)		0.47			0.91			0.62
Net realized and unrealized gains (losses)		3.40			4.40			3.43

Total from investment operations		3.87			5.31			4.05
Less distributions:
Distributions from net investment income		(0.48	)		(0.89	)		(0.47	)

Net asset value at end of period		36.39			33.00			28.58

Total return (%)		11.78	²		18.93			16.31	²

Ratios/Supplemental Data (%)

Ratios to average net assets:
Total expenses		0.07	³		0.07			0.17	³
Net investment income (loss)		2.85	³		3.09			3.19	³
Portfolio turnover rate⁴		3	²		13			17	²
Net assets, end of period ($ x 1,000)		1,591,879			1,141,690			504,464

* Unaudited.

¹ Commencement of operations.

² Not annualized.

³ Annualized.

⁴ Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.

56 See financial notes

Schwab U.S. Dividend Equity ETF

Portfolio Holdings as of February 28, 2014 (Unaudited)

Cost

Value

Holdings by Category

($)

.6%

Common Stock

1,376,447,948

1,586,306,247

.1%

Other Investment Companies

772,335

818,951

.7%

Total Investments

1,377,220,283

1,587,125,198

.3%

Other Assets and
Liabilities, Net

4,753,597

100

.0%

Net Assets

1,591,878,795


	Number		% of Net		Value
Security	of Shares		Assets		($)

Common Stock 99.6% of net assets

Banks 0.0%
Other Securities				0.0		468,804

Capital Goods 17.9%
3M Co.		293,966		2.5		39,606,039
Eaton Corp. plc		218,046		1.0		16,290,217
Emerson Electric Co.		323,124		1.3		21,087,072
General Dynamics Corp.		153,907		1.1		16,858,973
Honeywell International, Inc.		360,653		2.1		34,060,069
Illinois Tool Works, Inc.		187,705		1.0		15,485,663
Lockheed Martin Corp.		123,398		1.3		20,027,495
Northrop Grumman Corp.		101,604		0.8		12,297,132
Raytheon Co.		147,026		0.9		14,395,316
Rockwell Automation, Inc.		63,636		0.5		7,817,046
The Boeing Co.		317,764		2.6		40,966,135
United Technologies Corp.		387,963		2.8		45,399,430

				17.9		284,290,587

Commercial & Professional Services 0.5%
Waste Management, Inc.		201,123		0.5		8,346,605

Consumer Durables & Apparel 1.0%
Other Securities				1.0		15,633,153

Consumer Services 3.2%
McDonald’s Corp.		457,178		2.7		43,500,487
Other Securities				0.5		8,153,110

				3.2		51,653,597

Diversified Financials 1.5%
McGraw Hill Financial, Inc.		124,764		0.6		9,938,700
T. Rowe Price Group, Inc.		119,481		0.6		9,698,273
Other Securities				0.3		3,938,314

				1.5		23,575,287

Energy 12.2%
Chevron Corp.		574,247		4.2		66,227,907
ConocoPhillips		562,945		2.4		37,435,842
Exxon Mobil Corp.		743,625		4.5		71,588,779
The Williams Cos., Inc.		313,644		0.8		12,953,497
Other Securities				0.3		6,163,059

				12.2		194,369,084

Food & Staples Retailing 5.8%
Sysco Corp.		267,510		0.6		9,635,710
Wal-Mart Stores, Inc.		743,074		3.5		55,507,628
Walgreen Co.		399,616		1.7		27,153,907

				5.8		92,297,245

Food, Beverage & Tobacco 12.4%
Altria Group, Inc.		919,356		2.1		33,335,849
General Mills, Inc.		291,818		0.9		14,599,654
PepsiCo, Inc.		704,393		3.5		56,400,747
Reynolds American, Inc.		143,943		0.5		7,316,623
The Coca-Cola Co.		1,745,553		4.2		66,680,125
Other Securities				1.2		18,540,258

				12.4		196,873,256

Health Care Equipment & Services 3.5%
Baxter International, Inc.		249,535		1.1		17,342,683
Becton Dickinson & Co.		89,173		0.6		10,274,513
Medtronic, Inc.		459,161		1.7		27,209,881
Other Securities				0.1		1,385,682

				3.5		56,212,759

Household & Personal Products 6.9%
Colgate-Palmolive Co.		403,144		1.6		25,329,537
Kimberly-Clark Corp.		175,393		1.2		19,354,618
The Procter & Gamble Co.		834,333		4.1		65,628,634

				6.9		110,312,789

Insurance 1.3%
Aflac, Inc.		214,491		0.9		13,744,583
Other Securities				0.4		6,465,561

				1.3		20,210,144

Materials 3.5%
Air Products & Chemicals, Inc.		96,676		0.7		11,728,732
E.I. du Pont de Nemours & Co.		425,767		1.8		28,364,598
International Paper Co.		203,949		0.6		9,971,067
Other Securities				0.4		5,933,820

				3.5		55,998,217

See financial notes 57

Schwab U.S. Dividend Equity ETF

Portfolio Holdings (Unaudited) continued

Number

% of Net

Value

Security

of Shares

Assets

($)

Media 0.2%

Other Securities

0.2

3,910,855

Pharmaceuticals, Biotechnology & Life Sciences 8.6%

Bristol-Myers Squibb Co.

756,618

2.5

40,683,350

Eli Lilly & Co.

454,929

1.7

27,118,318

Johnson & Johnson

752,946

4.4

69,361,385

8.6

137,163,053

Retailing 4.1%

The Home Depot, Inc.

646,918

3.3

53,066,683

Other Securities

0.8

12,558,185

4.1

65,624,868

Semiconductors & Semiconductor Equipment 6.3%

Intel Corp.

2,285,654

3.6

56,592,793

Texas Instruments, Inc.

503,551

1.4

22,639,653

Other Securities

1.3

20,670,354

6.3

99,902,800

Software & Services 6.3%

Automatic Data Processing, Inc.

220,919

1.1

17,183,080

Microsoft Corp.

1,863,584

4.5

71,393,903

Other Securities

0.7

11,219,971

6.3

99,796,954

Technology Hardware & Equipment 0.3%

Other Securities

0.3

4,147,900

Telecommunication Services 0.5%

CenturyLink, Inc.

270,563

0.5

8,457,799

Transportation 1.9%

CSX Corp.

465,099

0.8

12,887,893

Norfolk Southern Corp.

141,945

0.8

13,046,165

Other Securities

0.3

3,597,062

1.9

29,531,120

Utilities 1.7%

PPL Corp.

290,855

0.6

9,391,708

Other Securities

1.1

18,137,663

1.7

27,529,371

Total Common Stock

(Cost $1,376,447,948)

1,586,306,247

Other Investment Companies 0.1% of net assets

Equity Fund 0.0%

Other Securities

0.0

374,850

Money Market Fund 0.1%

Other Securities

0.1

444,101

Total Other Investment Companies

(Cost $772,335)

818,951

End of Investments.

At 02/28/14, the tax basis cost of the fund’s investments was $1,377,350,202 and the unrealized appreciation and depreciation were $215,722,641 and ($5,947,645), respectively, with a net unrealized appreciation of $209,774,996.

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


ETF —		Exchange Traded Fund


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

The following is a summary of the inputs used to value the fund’s investments as of February 28, 2014 (see financial note 2(a) for additional information):

Quoted Prices in

Significant

Active Markets for

Other Significant

Unobservable

Identical Assets

Observable Inputs

Inputs

Description

(Level 1)

(Level 2)

(Level 3)

Total

Common Stock¹

$1,586,306,247

$—

$1,586,306,247

Other Investment Companies¹

818,951

—

818,951

Total

$1,587,125,198

$—

$1,587,125,198


¹		As categorized in the complete schedule of portfolio holdings.

58 See financial notes

Schwab U.S. Dividend Equity ETF

Statement of

Assets and Liabilities

As of February 28, 2014; unaudited



Assets

Investments, at value (cost $1,377,220,283)		$1,587,125,198
Receivables:
Fund shares sold		14,528,490
Dividends	+	6,022,753

Total assets		1,607,676,441

Liabilities

Payables:
Investments bought		15,788,548
Investment adviser fees	+	9,098

Total liabilities		15,797,646

Net Assets

Total assets		1,607,676,441
Total liabilities	—	15,797,646

Net assets		$1,591,878,795

Net Assets by Source
Capital received from investors		1,362,550,737
Net investment income not yet distributed		7,309,603
Net realized capital gains		12,113,540
Net unrealized capital appreciation		209,904,915

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$1,591,878,795

43,750,001

$36.39

See financial notes 59

Schwab U.S. Dividend Equity ETF

Statement of

Operations

For the period September 1, 2013 through February 28, 2014; unaudited



Investment Income

Dividends		$20,043,657

Expenses

Investment adviser fees		480,603

Total expenses	−	480,603

Net investment income		19,563,054

Realized and Unrealized Gains (Losses)

Net realized losses on investments		(581,313	)
Net realized gains on in-kind redemptions	+	16,085,728

Net realized gains		15,504,415
Net change in unrealized appreciation (depreciation) on investments	+	108,431,060

Net realized and unrealized gains		123,935,475

Increase in net assets resulting from operations		$143,498,529

60 See financial notes

Schwab U.S. Dividend Equity ETF

Statements of

Changes in Net Assets

For the current and prior report periods
Figures for the current period are unaudited



Operations


9/1/13-2/28/14				9/1/12-8/31/13
Net investment income		$19,563,054			$24,058,072
Net realized gains		15,504,415			16,571,413
Net change in unrealized appreciation (depreciation)	+	108,431,060			79,098,606

Increase in net assets resulting from operations		143,498,529			119,728,091

Distributions to Shareholders

Distributions from net investment income		($18,281,025	)		($20,742,506	)

Transactions in Fund Shares

9/1/13-2/28/14

9/1/12-8/31/13

SHARES

VALUE

SHARES

VALUE

Shares sold

10,900,000

$387,380,523

22,050,000

$691,326,939

Shares redeemed

(1,750,000

)

(62,409,554

)

(5,100,000

)

(153,085,998

)

Net transactions in fund shares

9,150,000

$324,970,969

16,950,000

$538,240,941

Shares Outstanding and Net Assets

9/1/13-2/28/14

9/1/12-8/31/13

SHARES

NET ASSETS

SHARES

NET ASSETS

Beginning of period

34,600,001

$1,141,690,322

17,650,001

$504,463,796

Total increase

9,150,000

450,188,473

16,950,000

637,226,526

End of period

43,750,001

$1,591,878,795

34,600,001

$1,141,690,322

Net investment income not yet distributed

$7,309,603

$6,027,574

See financial notes 61

Schwab U.S. Equity ETFs

Financial Notes, unaudited

1. Business Structure of the Funds



Schwab Strategic Trust (organized January 27, 2009)		Schwab Emerging Markets Equity ETF
Schwab U.S. Broad Market ETF		Schwab U.S. TIPS ETF
Schwab U.S. Large-Cap ETF		Schwab Short-Term U.S. Treasury ETF
Schwab U.S. Large-Cap Growth ETF		Schwab Intermediate-Term U.S. Treasury ETF
Schwab U.S. Large-Cap Value ETF		Schwab U.S. Aggregate Bond ETF
Schwab U.S. Mid-Cap ETF		Schwab Fundamental U.S. Broad Market Index ETF
Schwab U.S. Small-Cap ETF		Schwab Fundamental U.S. Large Company Index ETF
Schwab U.S. Dividend Equity ETF		Schwab Fundamental U.S. Small Company Index ETF
Schwab U.S. REIT ETF		Schwab Fundamental International Large Company Index ETF
Schwab International Equity ETF		Schwab Fundamental International Small Company Index ETF
Schwab International Small-Cap Equity ETF		Schwab Fundamental Emerging Markets Large Company Index ETF

The funds issue and redeem shares at their net assets 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 an amount of cash. As a practical matter, only institutions or large investors purchase or redeem Creation Units. Except when aggregated in Creation Units, shares of the fund are not redeemable securities.

2. Significant Accounting Policies:

(a) Security Valuation:

The funds value the securities in their portfolios every business day. The funds use the following policies to value various types of securities:


	•	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 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

Schwab U.S. Equity ETFs

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):


		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.


	•	Short-term securities (60 days or less to maturity): Short-term securities are valued at amortized cost, which approximates 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.

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 ETFs. Investments in mutual funds are valued daily at their NAVs, and investments in ETFs are valued daily at the last reported sale price or the official closing price, which are classified as Level 1 prices.

	•	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 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.

Schwab U.S. Equity ETFs

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):

The levels associated with valuing the funds’ investments as of February 28, 2014 are disclosed in the Portfolio Holdings.

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


	Non-Cash
	Collateral Received

Schwab U.S. Broad Market ETF		$521,549
Schwab U.S. Large-Cap ETF		377,416
Schwab U.S. Large-Cap Growth ETF		351,680
Schwab U.S. Mid-Cap ETF		1,816,181
Schwab U.S. Small-Cap ETF		1,699,579

(c) Security Transactions:

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

(d) Investment Income:

(e) Expenses:

(f) Distributions to Shareholders:

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

Schwab U.S. Equity ETFs

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):

(g) Accounting Estimates:

(h) Federal Income Taxes:

(i) Indemnification:

Under the funds’ organizational documents, the officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the funds. In addition, in the normal course of business the funds enter into contracts with their vendors and others that provide general indemnifications. The funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the funds. However, based on experience, the funds expect the risk of loss attributable to these arrangements to be remote.

3. Risk Factors:

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

Large Cap Risk. Certain funds invest in large-cap stocks. Large-cap stocks tend to go in and out of favor based on market and economic conditions. During a period when large-cap U.S. 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. Historically, mid-cap stocks have been riskier than large-cap stocks. Mid-cap companies themselves may be more vulnerable to adverse business or economic events than larger, more established companies. Stock prices of mid-sized companies may be based in substantial part on future expectations rather than current achievements and may move sharply, especially during market upturns and downturns. During a period when mid-cap stocks fall behind other types of investments — bonds or large-cap stocks, for instance — a fund’s mid-cap holdings could reduce performance.

Schwab U.S. Equity ETFs

Financial Notes, unaudited (continued)

3. Risk Factors (continued):

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

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

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

Sampling Index Tracking Risk. Certain funds may not fully replicate the index and may hold securities not included in the index. As a result, a fund is subject to the risk that the 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 benchmark index.

Liquidity Risk. A particular investment may be difficult to purchase or sell. A fund may be unable to sell illiquid securities at an advantageous time or price.

Schwab U.S. Equity ETFs

Financial Notes, unaudited (continued)

3. Risk Factors (continued):

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

4. Affiliates and Affiliated Transactions:

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

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

Schwab U.S.

Broad

Schwab U.S.

Large-Cap

Schwab U.S.

Dividend

Market

Large-Cap

Growth

Value

Mid-Cap

Small-Cap

Equity

ETF

0.04%

0.07%

0.08%

0.07%

The funds may engage in certain transactions involving affiliates. For instance, a fund may own shares of The Charles Schwab Corporation if that company is included in its index. Below is the summary of investment activities involving The Charles Schwab Corporation shares owned by the funds during the report period:


	Balance							Balance				Realized		Dividends
	of Shares							of Shares		Market		Gains (Losses)		Received
	Held at		Gross		Gross			Held at		Value at		9/1/13 to		9/1/13 to
Fund	08/31/13		Purchases		Sales			2/28/14		2/28/14		2/28/14		2/28/14

Schwab U.S. Broad Market ETF		131,904		44,941		(8,618	)		168,227		$4,459,698		$42,798		$18,992
Schwab U.S. Large-Cap ETF		120,748		38,725		(3,080	)		156,393		4,145,978		30,347		17,398
Schwab U.S. Large-Cap Growth ETF		111,623		43,556		(292	)		154,887		4,106,054		2,517		16,975


	Schwab U.S.		Schwab U.S.
	Large-Cap		Small-Cap
	ETF		ETF

Schwab VIT Balanced Portfolio		0.2%		0.1%
Schwab VIT Balanced with Growth Portfolio		0.7%		0.2%
Schwab VIT Growth Portfolio		1.0%		0.3%

5. Other Service Providers:

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

Schwab U.S. Equity ETFs

Financial Notes, unaudited (continued)

6. Board of Trustees:

7. Borrowing from Banks:

8. Purchases and Sales/Maturities of Investment Securities:

For the period ended February 28, 2014, purchases and sales/maturities of securities (excluding in-kind transactions and short-term obligations) were as follows:


	Purchases of Securities		Sales/Maturities of Securities

Schwab U.S. Broad Market ETF		$86,517,659		$72,251,766
Schwab U.S. Large-Cap ETF		79,179,239		70,960,440
Schwab U.S. Large-Cap Growth ETF		64,094,087		62,079,513
Schwab U.S. Large-Cap Value ETF		61,265,013		59,115,052
Schwab U.S. Mid-Cap ETF		57,364,087		45,091,181
Schwab U.S. Small-Cap ETF		156,361,600		136,525,605
Schwab U.S. Dividend Equity ETF		38,338,633		36,617,237

9. In-Kind Transactions:

The in-kind transactions for the period ended February 28, 2014 were as follows:


	In-Kind Purchases of Securities		In-Kind Sales of Securities

Schwab U.S. Broad Market ETF		$617,074,920		$61,252,843
Schwab U.S. Large-Cap ETF		476,816,734		44,211,913
Schwab U.S. Large-Cap Growth ETF		244,709,156		2,029,687
Schwab U.S. Large-Cap Value ETF		123,199,966		42,459,793
Schwab U.S. Mid-Cap ETF		323,290,684		54,544,881
Schwab U.S. Small-Cap ETF		410,028,287		65,363,755
Schwab U.S. Dividend Equity ETF		385,493,427		62,080,604

Schwab U.S. Equity ETFs

Financial Notes, unaudited (continued)

9. In-Kind Transactions (continued):

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, 2014 are disclosed in the funds’ Statements of Operations.

10. Federal Income Taxes

Schwab U.S.

Broad

Schwab U.S.

Large-Cap

Schwab U.S.

Dividend

Market

Large-Cap

Growth

Value

Mid-Cap

Small-Cap

Equity

Expiration Date

ETF

August 31, 2019

$—

$721,062

$691,441

$295,384

$218,695

$927,631

$—

No expiration*

4,554,355

5,529,477

6,744,656

1,569,350

5,846,538

4,840,344

372,704

Total

$4,554,355

$6,250,539

$7,436,097

$1,864,734

$6,065,233

$5,767,975

$372,704


*		As a result of the passage of the Regulated Investment Company Modernization Act of 2010, capital losses incurred after December 31, 2010 may now be carried forward indefinitely, but must retain the character of the original loss. However, such losses must be utilized prior to the pre-enactment capital losses, which may increase the likelihood that the pre-enactment capital losses may expire unused. Under pre-enactment law, capital losses could be carried forward for eight years, and carried forward as short-term capital loss, irrespective of the character of the original loss.

Schwab U.S.

Broad

Schwab U.S.

Large-Cap

Schwab U.S.

Dividend

Market

Large-Cap

Growth

Value

Mid-Cap

Small-Cap

Equity

ETF

Deferred capital losses

$2,115,845

$762,826

$1,550,092

$237,973

$2,093,285

$9,039,525

$2,908,217

11. Subsequent Events:

Investment Advisory Agreement Approval

The Board of Trustees (the “Board” or the “Trustees”, as appropriate) calls and holds a meeting each year that is dedicated, in part, to considering whether to renew the investment advisory agreement between Schwab Strategic Trust (the “Trust”) and Charles Schwab Investment Management, Inc. (“CSIM”) (the “Agreement”) with respect to the existing funds in the Trust, including Schwab U.S. Broad Market ETF, Schwab U.S. Large-Cap ETF, Schwab U.S. Large-Cap Growth ETF, Schwab U.S. Large-Cap Value ETF, Schwab U.S. Mid-Cap ETF, Schwab U.S. Small-Cap ETF and Schwab U.S. Dividend Equity ETF (the “Funds”), and to review certain other agreements pursuant to which CSIM provides investment advisory services to certain other registered investment companies. In preparation for the meeting, the Board requests and reviews a wide variety of materials provided by CSIM, including information about CSIM’s affiliates, personnel and operations. The Board also receives extensive data provided by third parties. This information is in addition to the detailed information about the Funds that the Board reviews during the course of each year, including information that relates to Fund operations and Fund performance. In addition, the Independent Trustees meet in executive session outside the presence of fund management and participate in question and answer sessions with representatives of CSIM.

The Board, including a majority of the Independent Trustees, considered information specifically relating to its consideration of the continuance of the Agreement with respect to the Funds at a meeting held on September 4, 2013, and approved the renewal of the Agreement with respect to the Funds for an additional one year term. The Board’s approval of the Agreement with respect to the Funds was based on consideration and evaluation of a variety of specific factors discussed at this meeting and at prior meetings, including:


1.	the nature, extent and quality of the services provided to the Funds under the Agreement, including the resources of CSIM and its affiliates dedicated to the Funds;

2.	each Fund’s investment performance and how it compared to that of certain other comparable exchange-traded funds;

3.	each Fund’s expenses and how those expenses compared to those of certain other comparable exchange-traded funds;

4.	the profitability of CSIM and its affiliates, including Charles Schwab & Co., Inc. (“Schwab”), with respect to the Funds, including both direct and indirect benefits accruing to CSIM and its affiliates; and

5.	the extent to which economies of scale would be realized as the Funds grow and whether fee levels in the Agreement reflect those economies of scale for the benefit of Fund investors.

below. Following such evaluation the Board concluded, within the context of its full deliberations, that the performance of the Funds supported renewal of the Agreement with respect to the Funds.

Trustees and Officers

Independent Trustees


Name, Year of Birth,		Number of
and Position(s) with		Portfolios in
the trust; (Terms of		Fund Complex
office, and length of	Principal Occupations	Overseen by
Time Served¹)	During the Past Five Years	the Trustee	Other Directorships

Robert W. Burns 1959 Trustee (Trustee of Schwab Strategic Trust since 2009.)	Retired/Private Investor (January 2009 – present); Formerly, Managing Director, Pacific Investment Management Company, LLC (PIMCO) and President, PIMCO Funds.	21	Director, PS Business Parks, Inc. (2005 – 2012).


Stephen Timothy Kochis 1946 Trustee (Trustee of Schwab Strategic Trust since 2012.)	CEO and Owner, Kochis Global (wealth management consulting) (May 2012 – present); Chairman and CEO, Aspiriant (wealth management) (January 2008 – April 2012).	21	None


Charles A. Ruffel 1956 Trustee (Trustee of Schwab Strategic Trust since 2009.)	Advisor (January 2008 – present) and Chief Executive Officer (January 1998 – January 2008), Asset International, Inc. (publisher of financial services information); Managing Partner and Co-Founder, Kudu Advisors, LLC (financial services) (June 2008 – present).	21	None

Interested Trustees


Name, Year of Birth,		Number of
and Position(s) with		Portfolios in
the trust; (Terms of		Fund Complex
office, and length of	Principal Occupations	Overseen by
Time Served)	During the Past Five Years	the Trustee	Other Directorships

Walter W. Bettinger II²1960 Trustee (Trustee of Schwab Strategic Trust since 2009.)	As of October 2008, President and Chief Executive Officer, Charles Schwab & Co., Inc. and The Charles Schwab Corporation. Since October 2008, Director, The Charles Schwab Corporation. Since May 2008, Director, Charles Schwab & Co., Inc. and Schwab Holdings, Inc. Since 2006, Director, Charles Schwab Bank. Until October 2008, President and Chief Operating Officer, Charles Schwab & Co., Inc. and The Charles Schwab Corporation. From 2004 through 2007, Executive Vice President and President, Schwab Investor Services. From 2004 through 2005, Executive Vice President and Chief Operating Officer, Individual Investor Enterprise, and from 2002 through 2004, Executive Vice President, Corporate Services.	97	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 Chandoha 1961 President and Chief Executive Officer (Officer of Schwab Strategic Trust since 2010.)		Executive Vice President, Charles Schwab & Co., Inc. (Sept. 2010 – present); Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; President, Chief Executive Officer (Dec. 2010 – present), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (March 2007 – August 2010).


George Pereira 1964 Treasurer and Principal Financial Officer (Officer of 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.; Treasurer and Chief Financial Officer, Laudus Funds (June 2006 – present); Treasurer and Principal Financial Officer, Schwab Funds (Nov. 2004 – present) and Schwab ETFs (Oct. 2009 – present); Director, Charles Schwab Worldwide Fund, PLC and Charles Schwab Asset Management (Ireland) Limited (April 2005 – present).


Omar Aguilar 1970 Senior Vice President and Chief Investment Officer – Equities (Officer of Schwab Strategic Trust since 2011.)		Senior Vice President and Chief Investment Officer — Equities, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer — Equities, Schwab Funds and Laudus Funds (June 2011 – present); Head of the Portfolio Management Group and Vice President of Portfolio Management, Financial Engines, Inc. (May 2009 – April 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 Schwab Strategic Trust since 2011.)		Senior Vice President and Chief Investment Officer – Fixed Income, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer – Fixed Income, Schwab Funds and Laudus Funds (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 (April 2006 – Jan. 2008).


David Lekich 1964 Chief Legal Officer and Secretary (Officer of Schwab Strategic Trust since 2011.)		Senior Vice President, Charles Schwab & Co., Inc. (Sept. 2011 – present); Senior Vice President and Chief Counsel, Charles Schwab Investment Management Inc. (Sept. 2011 – present); Vice President, Charles Schwab & Co., Inc., (March 2004 – Sept. 2011) and Charles Schwab Investment Management, Inc. (Jan 2011 – Sept. 2011); Secretary (April 2011 – present) and Chief Legal Officer (Dec. 2011 – present), Schwab Funds (April 2011 – present); Vice President and Assistant Clerk, Laudus Funds (April 2011 – present); Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs.


Catherine MacGregor 1964 Vice President and Assistant Secretary (Officer of 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 (March 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 Schwab ETF’s retirement policy requires that independent trustees retire by December 31 of the year in which the Trustee turns 72 or the Trustee’s twentieth year of service as an independent trustee, whichever comes first.
²		Mr. Bettinger is an Interested Trustee because he owns stock of The Charles Schwab Corporation, the parent company of the investment adviser.
³		The President, Treasurer and Secretary 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.

Glossary

ask See “offer.”

asset class A group of securities with similar structure and basic characteristics. Stocks, bonds and cash are the three main examples of asset classes.

authorized participant (AP) A large institutional investor that places orders for creation units with the funds’ distributor.

bid The highest price at which someone is willing to buy a security.

cap, capitalization See “market cap.”

commencement of operations The date that the first NAV was calculated.

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

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

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

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

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

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

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

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

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