N-CSRS

Number of
Contracts

Notional
Amount
($)

Current Value/
Unrealized
Appreciation
($)

Futures Contracts

S&P 500 Index, e-mini, expires 09/15/17

Schwab U.S. REIT ETF

Performance at a Glance

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

Total Returns for the 6 Months Ended August 31, 2017
Schwab U.S. REIT ETF (Ticker Symbol: SCHH)
Market Price Return¹	-1.10%
NAV Return¹	-1.17%
Dow Jones U.S. Select REIT Index^TM	-1.11%
ETF Category: Morningstar Real Estate²	1.02%
Performance Details	pages 7-8

All total returns on this page assume dividends and distributions were reinvested. Index figures do not include trading and management costs, which would lower performance. Indices are unmanaged and cannot be invested in directly. Performance results less than one year are not annualized.

For index definitions, please see the Glossary.

Small-company stocks are subject to greater volatility than many other asset classes.

The fund is subject to risks associated with the direct ownership of real estate securities and an investment in the fund will be closely linked to the performance of the real estate markets.

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

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

Index ownership — Dow Jones^® is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones). The Dow Jones U.S. Select REIT Index is a product of S&P Dow Jones Indices LLC and/or its affiliates, and has been licensed for use by CSIM. The Schwab U.S. REIT ETF is not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, or any of their respective affiliates and neither S&P Dow Jones Indices LLC, Dow Jones, nor any of their respective affiliates make any representation regarding the advisability of investing in such product.

ETF performance must be shown based on both a market price and NAV basis. The fund’s per share NAV is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which the shares of the fund are listed for trading, as of the time that the fund’s NAV is calculated. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively.

Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date.

₂

Schwab U.S. REIT ETF | Semiannual Report

Schwab U.S. REIT ETF

From the President

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

Dear Shareholder,

Investing in real estate can seem daunting to some investors, involving a layer of difficulty above and beyond traditional investments. The Schwab U.S. REIT ETF has made real estate equity investing more manageable by eliminating the need to select individual securities, saving shareholders both time and money. And with expenses among the lowest in the industry, the fund’s benefits are accessible to everyone.

At Charles Schwab Investment Management, we also strive to take a straightforward approach in our communications. In this and in every shareholder report, we provide the fund’s financial statements and other information in a consistent format that we believe will help you to evaluate the performance of the fund. We aim to help you understand not only the fund’s return, but also how its investments are managed.

Our commitment to quality and transparency continues to win us both new business and recognition. In this year’s second quarter, we achieved the largest ETF asset inflows in our history, topping $6 billion in quarterly flows for

Asset Class Performance Comparison % returns during the 6 months ended August 31, 2017

These figures 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. Remember that past performance is not a guarantee of future results.

For index definitions, please see the Glossary.

Data source: Index provider websites and CSIM.

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

Management views may have changed since the report date.

*	The net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.

₃

Schwab U.S. REIT ETF | Semiannual Report

Schwab U.S. REIT ETF

The Investment Environment

Over the six-month reporting period ended August 31, 2017, U.S. REITs produced mixed returns, with the Industrial and Diversified sectors producing solid returns while the Office and Retail sectors fell behind. The broader U.S. economy continued its slow but steady recovery and overall real estate fundamentals stayed resilient. Driven by a strong job market and low mortgage rates, housing demand remained strong, with foreign investment in the U.S. housing market reaching record highs over the reporting period. In this environment, the Dow Jones U.S. Select REIT Index^TM returned -1.11% for the six-month reporting period, and the FTSE EPRA/NAREIT Global Index (Net), representing general trends in eligible real estate securities worldwide, returned 5.28%. The overall U.S. stock market, as measured by the S&P 500^® Index, returned 5.65% for the reporting period.

The U.S. economy continued to chug along over the reporting period as it entered its ninth year of expansion. Nonfarm payrolls were steady and U.S. gross domestic product (GDP) grew modestly, while consumer confidence remained high. A stable economy, combined with relatively low short-term interest rates, generally supported the overall U.S. real estate market. A positive consumer outlook was especially evident in the residential housing market, with the Fannie Mae Home Purchase Sentiment Index^®, matching its all-time high in June. Over the reporting period, the office market saw tenant demand solidify as new supply increased, while industrial rents maintained an upward trajectory and reached an all-time high in the second quarter of 2017. The U.S. retail market fell over the reporting period with a decline in overall retail investments and headwinds from the sustained growth of e-commerce. Some additional signs of weakness were present during the six-month reporting period, including rising commercial mortgage defaults and softening rental growth in the U.S. family property market, though overall positive economic measurements helped offset some of these negative factors.

During the reporting period, the Federal Reserve (Fed) continued making progress toward a more normalized monetary policy environment. The Fed raised the target federal funds rate by 0.25% at meetings in March and in June, with short-term interest rates ending the reporting period in a target range of 1.00% to 1.25%. The Fed also communicated plans to begin unwinding its massive balance sheet later in 2017 by allowing securities to mature without reinvesting the proceeds. According to Fed Chair Janet Yellen, the Fed anticipates “…reducing reserve balances and our overall balance sheet to levels appreciably below those seen in recent years but larger than before the financial crisis.” These shifts in policy signaled the Fed’s increasing confidence in the strength of the U.S. economy, as well as in its progress toward goals of price stability and maximum sustainable employment. While dividend-paying investments (including REITs) are subject to interest-rate risk and can lose ground in a rising rate environment, continued strength in U.S. economic fundamentals provided a tailwind to some of these types of securities over the reporting period.

Over the six-month reporting period, the performance of U.S. REITs was mixed. Retail REITs had the worst returns in the Dow Jones U.S. Select REIT Index, due in large part to the negative performance of regional malls amid the closing of anchor stores and tenant bankruptcies. Continued competition from e-commerce and declining occupancy rates also played a role, as did rising short-term interest rates. By comparison, Industrial REITs generated double-digit returns and continued to be a top performer in the Dow Jones U.S. Select REIT Index. Industrial rents maintained an upward trajectory and reached an all-time high in the second quarter of 2017 as demand for space from e-commerce companies was greater than available supply. Industrials are also less sensitive to rising interest rates, helped even further by the high rent growth, and so were less affected by the Fed’s federal funds rate increases.

For index definitions, please see the Glossary.

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

Management views may have changed since the report date.

₅

Schwab U.S. REIT ETF | Semiannual Report

Schwab U.S. REIT ETF

Fund Management

Christopher Bliss, CFA, Vice President and Head of the Passive Equity Team, leads the portfolio management team for Schwab’s Passive Equity Funds and ETFs. He also has overall responsibility for all aspects of the management of the fund. Prior to joining CSIM in 2016, Mr. Bliss spent 12 years at BlackRock (formerly Barclays Global Investors) managing and leading institutional index teams, most recently as a Managing Director and Head of Americas Institutional Index team. Prior to BlackRock, he worked as an equity analyst and portfolio manager for Harris Bretall and before that, as a research analyst for JP Morgan.

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

Sabya Sinha, Portfolio Manager, is responsible for the day-to-day co-management of the fund. Prior to joining CSIM in 2015, Mr. Sinha spent a year at F-Squared Investments on the product development and analytics team. Prior to F-Squared, he worked at IndexIQ Advisors as a senior index portfolio manager for three years and for Bank of America’s Columbia Management subsidiary as a portfolio manager for three years.

₆

Schwab U.S. REIT ETF | Semiannual Report

Schwab U.S. REIT ETF

Average Annual Total Returns¹

Fund and Inception Date	6 Months	1 Year	5 Years	Since Inception^*
Fund: Schwab U.S. REIT ETF (1/13/11)
Market Price Return²	-1.10%	-3.28%	8.52%	10.36%
NAV Return²	-1.17%	-3.32%	8.54%	10.35%
Dow Jones U.S. Select REIT Index^TM	-1.11%	-3.13%	8.67%	10.50%
ETF Category: Morningstar Real Estate³	1.02%	0.32%	8.52%	9.82%
Fund Expense Ratio⁴: 0.07%

For index definitions, please see the Glossary.

Small-company stocks may be subject to greater volatility than many other asset classes.

The fund is subject to risks associated with the direct ownership of real estate securities, and an investment in the fund will be closely linked to the performance of the real estate markets.

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

^*	Inception (1/13/11) represents the date that the shares began trading in the secondary market.
¹	Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption of fund shares.
²	ETF performance must be shown based on both a market price and NAV basis. The fund’s per share NAV is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which the shares of the fund are listed for trading, as of the time that the fund’s NAV is calculated. NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively.
³	Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date.
⁴	As stated in the prospectus.

₇

Schwab U.S. REIT ETF | Semiannual Report

Schwab U.S. REIT ETF

Fund Expenses (Unaudited)

Examples for a $1,000 Investment

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

The expense examples below are intended to help you understand your ongoing cost (in dollars) of investing in the fund and to compare this cost with the ongoing cost of investing in other mutual funds. These examples are based on an investment of $1,000 invested for six months beginning March 1, 2017 and held through August 31, 2017.

Actual Return line in the table below provides information about actual account values and actual expenses. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value ÷ $1,000 = 8.6), then multiply the result by the number given for the fund under the heading entitled “Expenses Paid During Period.”

Hypothetical Return line in the table below provides information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed return of 5% per year before expenses. Because the return used is not an actual return, it may not be used to estimate the actual ending account value or expenses you paid for the period.

You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only, and do not reflect any transactional costs, including any brokerage commissions you may pay when purchasing or selling shares of a fund. Therefore, the hypothetical return lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Expense Ratio (Annualized)¹	Beginning Account Value at 3/1/17	Ending Account Value (Net of Expenses) at 8/31/17	Expenses Paid During Period 3/1/17-8/31/17²
Schwab U.S. REIT ETF
Actual Return	0.07%	$1,000.00	$ 988.30	$0.35
Hypothetical 5% Return	0.07%	$1,000.00	$1,024.85	$0.36

¹	Based on the most recent six-month expense ratio; may differ from the expense ratio provided in the Financial Highlights which covers a 12-month period.
²	Expenses for the fund are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by the 184 days of the period, and divided by 365 days of the fiscal year.

₉

Schwab U.S. REIT ETF | Semiannual Report

Schwab U.S. REIT ETF

Financial Statements

Financial Highlights

	3/1/17– 8/31/17*	3/1/16– 2/28/17	3/1/15– 2/29/16	3/1/14– 2/28/15	3/1/13– 2/28/14	3/1/12– 2/28/13
Per-Share Data
Net asset value at beginning of period	$42.08	$37.71	$40.04	$33.06	$31.96	$28.30
Income (loss) from investment operations:
Net investment income (loss)	0.75 ¹	1.04 ¹	1.03 ¹	0.92	0.80	0.72
Net realized and unrealized gains (losses)	(1.24)	4.48	(2.38)	6.91	1.08	3.71
Total from investment operations	(0.49)	5.52	(1.35)	7.83	1.88	4.43
Less distributions:
Distributions from net investment income	(0.36)	(1.15)	(0.98)	(0.85)	(0.78)	(0.77)
Net asset value at end of period	$41.23	$42.08	$37.71	$40.04	$33.06	$31.96
Total return	(1.17%) ²	14.74%	(3.41%)	24.04%	6.08%	15.83%
Ratios/Supplemental Data
Ratios to average net assets:
Total expenses	0.07% ³	0.07%	0.07%	0.07%	0.07%	0.10% ⁴
Net investment income (loss)	3.65% ³	2.50%	2.70%	2.56%	2.52%	2.43%
Portfolio turnover rate⁵	5% ²	14%	12%	15%	11%	7%
Net assets, end of period (x 1,000)	$3,613,831	$3,037,968	$1,823,208	$1,269,306	$790,052	$466,567

*	Unaudited.

Calculated based on the average shares outstanding during the period.

Not annualized.

Annualized.

⁴

Effective September 20, 2012, the annual operating expense ratio was reduced. The ratio presented for the period ended 2/28/13 is a blended ratio.

⁵

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

₁₀

Schwab U.S. REIT ETF | Semiannual Report

See financial notes

Schwab U.S. REIT ETF

Portfolio Holdings as of August 31, 2017 (Unaudited)

This section shows all the securities in the fund's portfolio and their values as of the report date.

The fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's website at www.sec.gov and may be viewed and copied at the SEC's Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the Public Reference Room. The fund also makes available its complete schedule of portfolio holdings on a daily basis on the fund's website at www.schwabfunds.com/schwabetfs_prospectus.

Security	Number of Shares	Value ($)
Common Stock 99.8% of net assets

Diversified REITs 2.9%
American Assets Trust, Inc.	227,728	9,250,311
First Potomac Realty Trust	326,469	3,633,600
Forest City Realty Trust, Inc., Class A	1,193,514	28,596,596
Liberty Property Trust	808,000	34,420,800
PS Business Parks, Inc.	106,036	14,326,524
Washington Real Estate Investment Trust	420,112	13,804,880
		104,032,711

Health Care REITs 11.8%
HCP, Inc.	2,572,252	76,678,832
Healthcare Realty Trust, Inc.	676,659	22,519,212
LTC Properties, Inc.	216,052	10,506,609
Quality Care Properties, Inc. *	505,913	6,941,126
Senior Housing Properties Trust	1,291,216	25,462,779
Universal Health Realty Income Trust	71,062	5,380,104
Ventas, Inc.	1,943,504	133,013,414
Welltower, Inc.	2,004,746	146,787,502
		427,289,578

Hotel & Resort REITs 7.5%
Apple Hospitality REIT, Inc.	856,929	15,578,969
Ashford Hospitality Prime, Inc.	174,060	1,674,457
Ashford Hospitality Trust, Inc.	435,954	2,707,274
Chesapeake Lodging Trust	332,449	8,507,370
DiamondRock Hospitality Co.	1,110,087	12,199,856
FelCor Lodging Trust, Inc.	722,841	5,276,739
Hersha Hospitality Trust	228,818	4,242,286
Hospitality Properties Trust	894,375	24,470,100
Host Hotels & Resorts, Inc.	4,047,127	73,333,941
LaSalle Hotel Properties	620,180	17,600,709
Park Hotels & Resorts, Inc.	783,889	20,921,998
Pebblebrook Hotel Trust	379,783	12,756,911
RLJ Lodging Trust	689,213	13,908,318
Ryman Hospitality Properties, Inc.	278,038	16,521,018
Summit Hotel Properties, Inc.	583,692	8,661,989
Sunstone Hotel Investors, Inc.	1,200,408	18,966,447
Xenia Hotels & Resorts, Inc.	583,268	11,642,029
		268,970,411

Industrial REITs 8.8%
DCT Industrial Trust, Inc.	505,742	29,510,046
Duke Realty Corp.	1,948,174	57,899,731
EastGroup Properties, Inc.	185,869	16,516,319
First Industrial Realty Trust, Inc.	640,010	19,827,510
Prologis, Inc.	2,901,765	183,855,831
Rexford Industrial Realty, Inc.	389,120	11,693,056
		319,302,493

Office REITs 16.2%
Alexandria Real Estate Equities, Inc.	498,953	60,527,988
Boston Properties, Inc.	842,451	101,599,591

Security	Number of Shares	Value ($)
Brandywine Realty Trust	956,745	16,436,879
Columbia Property Trust, Inc.	678,656	14,251,776
Corporate Office Properties Trust	550,341	18,359,376
Cousins Properties, Inc.	2,315,175	21,646,886
Douglas Emmett, Inc.	846,462	32,978,160
Easterly Government Properties, Inc.	142,928	2,867,136
Equity Commonwealth *	679,406	21,020,822
Franklin Street Properties Corp.	585,016	5,832,610
Highwoods Properties, Inc.	558,715	29,181,684
Hudson Pacific Properties, Inc.	853,801	28,175,433
JBG SMITH Properties *	470,043	15,384,507
Kilroy Realty Corp.	536,749	37,159,133
Mack-Cali Realty Corp.	488,949	11,192,043
NorthStar Realty Europe Corp.	307,590	3,823,344
Paramount Group, Inc.	1,003,063	15,828,334
Parkway, Inc.	236,413	5,428,042
Piedmont Office Realty Trust, Inc., Class A	793,120	16,060,680
SL Green Realty Corp.	557,731	53,754,114
Tier REIT, Inc.	267,301	4,921,011
Vornado Realty Trust	942,602	70,214,423
		586,643,972

Residential REITs 21.7%
American Campus Communities, Inc.	736,341	35,042,468
American Homes 4 Rent, Class A	1,294,341	28,682,597
Apartment Investment & Management Co., Class A	861,547	39,053,926
AvalonBay Communities, Inc.	754,410	141,625,389
Camden Property Trust	480,376	42,984,045
Education Realty Trust, Inc.	404,605	15,633,937
Equity LifeStyle Properties, Inc.	445,803	39,743,337
Equity Residential	2,010,269	134,989,563
Essex Property Trust, Inc.	359,126	95,516,742
Independence Realty Trust, Inc.	319,193	3,284,496
Invitation Homes, Inc.	428,880	9,924,283
Mid-America Apartment Communities, Inc.	621,966	66,214,500
Monogram Residential Trust, Inc.	911,749	10,940,988
NexPoint Residential Trust, Inc.	94,799	2,208,817
Starwood Waypoint Homes	687,762	25,605,379
Sun Communities, Inc.	386,225	34,879,980
UDR, Inc.	1,459,801	56,669,475
		782,999,922

Retail REITs 19.8%
Acadia Realty Trust	463,248	13,290,585
Brixmor Property Group, Inc.	1,430,112	26,771,697
CBL & Associates Properties, Inc.	944,915	7,559,320
Cedar Realty Trust, Inc.	452,574	2,280,973
DDR Corp.	1,681,318	16,275,158
Federal Realty Investment Trust	396,424	50,318,098
GGP, Inc.	3,188,962	66,170,962
Kimco Realty Corp.	2,322,275	45,563,036
Kite Realty Group Trust	459,738	9,249,929
Pennsylvania Real Estate Investment Trust	377,365	3,784,971
Ramco-Gershenson Properties Trust	436,225	5,736,359
Regency Centers Corp.	801,039	51,522,828
Retail Opportunity Investments Corp.	600,514	11,914,198

₁₁

Schwab U.S. REIT ETF | Semiannual Report

See financial notes

Schwab U.S. REIT ETF

Portfolio Holdings as of August 31, 2017 (Unaudited) (continued)

Security	Number of Shares	Value ($)
Retail Properties of America, Inc., Class A	1,288,274	17,172,692
Saul Centers, Inc.	64,666	3,918,760
Seritage Growth Properties, Class A (a)	138,624	6,662,269
Simon Property Group, Inc.	1,708,771	268,020,731
Tanger Factory Outlet Centers, Inc.	534,038	12,496,489
Taubman Centers, Inc.	329,889	17,233,401
The Macerich Co.	650,739	34,339,497
Urban Edge Properties	572,664	14,402,500
Washington Prime Group, Inc.	1,033,854	8,632,681
Weingarten Realty Investors	644,582	20,652,407
		713,969,541

Specialized REITs 11.1%
CubeSmart	991,059	24,429,605
Digital Realty Trust, Inc.	876,048	103,671,520
DuPont Fabros Technology, Inc.	426,280	27,435,381
Extra Space Storage, Inc.	689,491	53,525,186
Life Storage, Inc.	253,780	18,675,670
National Storage Affiliates Trust	250,557	5,592,432
Public Storage	818,700	168,111,858
		401,441,652
Total Common Stock
(Cost $3,440,694,472)		3,604,650,280

Other Investment Companies 0.3% of net assets

Money Market Fund 0.2%
State Street Institutional U.S. Government Money Market Fund, Premier Class 0.93% (b)	7,140,294	7,140,294

Security	Number of Shares	Value ($)
Securities Lending Collateral 0.1%
Wells Fargo Government Money Market Fund, Select Class 0.92% (b)	4,923,750	4,923,750
Total Other Investment Companies
(Cost $12,064,044)		12,064,044

*	Non-income producing security.
(a)	All or a portion of this security is on loan. Securities on loan were valued at $4,854,060.
(b)	The rate shown is the 7-day yield.

REIT —

Real Estate Investment Trust

The following is a summary of the inputs used to value the fund’s investments as of August 31, 2017 (see financial note 2(a) for additional information):

Description	Quoted Prices in Active Markets for Identical Assets (Level 1)	Other Significant Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Assets
Common Stock¹	$3,604,650,280	$—	$—	$3,604,650,280
Other Investment Companies¹	12,064,044	—	—	12,064,044
Futures Contracts²	29,224	—	—	29,224
Total	$3,616,743,548	$—	$—	$3,616,743,548

¹	As categorized in Portfolio Holdings.
²	Futures contracts are valued at unrealized appreciation or depreciation.

The fund's policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were no transfers between Level 1, Level 2 and Level 3 for the period ended August 31, 2017.

₁₂

Schwab U.S. REIT ETF | Semiannual Report

See financial notes

Schwab U.S. REIT ETF

Financial Notes, unaudited

1. Business Structure of the Fund:

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

SCHWAB STRATEGIC TRUST (ORGANIZED JANUARY 27, 2009)
Schwab U.S. REIT ETF	Schwab U.S. TIPS ETF™
Schwab U.S. Broad Market ETF™	Schwab Short-Term U.S. Treasury ETF™
Schwab U.S. Large-Cap ETF™	Schwab Intermediate-Term U.S. Treasury ETF™
Schwab U.S. Large-Cap Growth ETF™	Schwab U.S. Aggregate Bond ETF™
Schwab U.S. Large-Cap Value ETF™	Schwab Fundamental U.S. Broad Market Index ETF
Schwab U.S. Mid-Cap ETF™	Schwab Fundamental U.S. Large Company Index ETF
Schwab U.S. Small-Cap ETF™	Schwab Fundamental U.S. Small Company Index ETF
Schwab U.S. Dividend Equity ETF™	Schwab Fundamental International Large Company Index ETF
Schwab International Equity ETF™	Schwab Fundamental International Small Company Index ETF
Schwab International Small-Cap Equity ETF™	Schwab Fundamental Emerging Markets Large Company Index ETF
Schwab Emerging Markets Equity ETF™

The fund issues and redeems shares at its net asset value per share (NAV) only in large blocks of shares, typically 50,000 shares or more (Creation Units). These transactions are usually in exchange for a basket of securities and/or an amount of cash. As a practical matter, only institutions or large investors purchase or redeem Creation Units. Except when aggregated in Creation Units, shares of the fund are not redeemable securities.

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

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

2. Significant Accounting Policies:

The following is a summary of the significant accounting policies the fund uses in its preparation of financial statements. The fund follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standard Codification Topic 946 Financial Services — Investment Companies. The accounting policies are in conformity with accounting principles generally accepted in the United States of America (GAAP).

The fund may invest in certain other investment companies (underlying funds). For more information about the underlying funds' operations and policies, please refer to those funds' semiannual and annual reports, which are filed with the U.S. Securities and Exchange Commission (SEC).

Effective August 1, 2017, the fund adopted disclosure requirement changes for SEC Regulation S-X. The adopted changes are reflected throughout this report.

(a) Security Valuation:

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

The fund values the securities in its portfolio every business day. The fund uses the following policies to value various types of securities:

₁₆

Schwab U.S. REIT ETF | Semiannual Report

Schwab U.S. REIT ETF

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):

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

• Securities for which no quoted value is available: The Board has adopted procedures to fair value the fund’s securities when market prices are not “readily available” or are unreliable. For example, a fund may fair value a security when it is de-listed or its trading is halted or suspended; when a security’s primary pricing source is unable or unwilling to provide a price; or when a security’s primary trading market is closed during regular market hours. The fund makes fair value determinations in good faith in accordance with the fund’s valuation procedures. The Pricing Committee considers a number of factors, including unobservable market inputs when arriving at fair value. The Pricing Committee may employ techniques such as the review of related or comparable assets or liabilities, related market activities, recent transactions, market multiples, book values, transactional back-testing, disposition analysis and other relevant information. The Pricing Committee regularly reviews these inputs and assumptions to calibrate the valuations. Due to the subjective and variable nature of fair value pricing, there can be no assurance that the fund could obtain the fair value assigned to the security upon the sale of such security. The Board convenes on a regular basis to review fair value determinations made by the fund pursuant to the valuation procedures.

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

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

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

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

• Level 1—quoted prices in active markets for identical securities—Investments whose values are based on quoted market prices in active markets, and whose values are therefore classified as Level 1 prices, include active listed equities, ETFs and futures contracts. Investments in mutual funds are valued daily at their NAV, and investments in ETFs are valued daily at the last reported sale price or the official closing price, which are classified as Level 1 prices, without consideration to the classification level of the specific investments held by an underlying fund.

• Level 2—other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)—Investments that trade in markets that are not considered to be active, but whose values are based on quoted market prices, dealer quotations or valuations provided by alternative pricing sources supported by observable inputs are classified as Level 2 prices. These generally include U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, certain mortgage products, less liquid listed equities, and state, municipal and provincial obligations.

• Level 3—significant unobservable inputs (including the fund's own assumptions in determining the fair value of investments)—Investments whose values are classified as Level 3 prices have significant unobservable inputs, as they may trade infrequently or not at all. When observable prices are not available for these securities, the fund uses one or more valuation techniques for which sufficient and reliable data is available. The inputs used by the fund in estimating the value of Level 3 prices may include the original transaction price, quoted prices for similar securities or assets in active markets, completed or pending third-party transactions in the underlying investment or comparable issuers, and changes in financial ratios or cash flows. Level 3 prices may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the fund in the absence of market information. Assumptions used by the fund due to the lack of observable inputs may significantly impact the resulting fair value and therefore the fund’s results of operations.

₁₇

Schwab U.S. REIT ETF | Semiannual Report

Schwab U.S. REIT ETF

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):

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

The levels associated with valuing the fund's investments as of August 31, 2017 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. The fund must give the broker a deposit of cash and/or securities (initial margin) whenever it enters into a futures contract. The amount of the deposit may vary from one contract to another. Subsequent payments (variation margin) are made or received by the fund depending on the daily fluctuations in the value of the futures contract and are accounted for as unrealized appreciation or depreciation until the contract is closed, at which time the gains or losses are realized. Futures contracts are traded publicly on exchanges, and their market value may change daily.

Securities Lending: Under the trust's Securities Lending Program, the fund (lender) may make short-term loans of its securities to another party (borrower) to generate additional revenue for the fund. The borrower pledges collateral in the form of cash, securities issued or fully guaranteed by the U.S. government or foreign governments, or letters of credit issued by a bank. Collateral at the individual loan level is required to be maintained on a daily marked-to-market basis in an amount at least equal to the current value of the securities loaned. The lending agent provides the fund with indemnification against borrower default (the borrower fails to return the security on loan) reducing the risk of loss as a result of default. The cash collateral of securities loaned is currently invested in money market portfolios operating under Rule 2a-7 of the 1940 Act. The fund bears the risk of loss with respect to the investment of cash collateral. The terms of the securities lending agreement allow the fund or the lending agent to terminate any loan at any given time and the securities must be returned within the earlier of the standard trade settlement period or the specified time period under the relevant securities lending agreements. Securities lending income, as disclosed in the fund’s Statement of Operations, if applicable, represents the income earned from the investment of the cash collateral plus any fees paid by borrowers, less the fees paid to the lending agent and broker rebates which are subject to adjustments pursuant to the securities lending agreement. On loans not collateralized by cash, a fee is received from the borrower, and is allocated between the fund and the lending agent. The aggregate market value of securities loaned will not at any time exceed one-third of the total assets of the fund, including collateral received from the loan. Total costs and expenses, including lending agent fees and broker rebates, associated with securities lending activities under the trust’s Securities Lending Program paid to the unaffiliated lending agents start at 10% of gross lending revenue, with subsequent breakpoints to a low of 7.5%.

As of August 31, 2017, the fund had securities on loan, all of which were classified as common stocks. The value of the securities on loan and the related collateral as of August 31, 2017 are disclosed in the fund's Portfolio Holdings. The value of the securities on loan and investment of cash collateral are also disclosed in the fund's Statement of Assets and Liabilities.

Security transactions are recorded as of the date the order to buy or sell the security is executed. Realized gains and losses from security transactions are based on the identified costs of the securities involved.

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

The fund invests in real estate investment trusts (REITs) which report information on the source of their distributions annually. The fund policy is to record all REIT distributions initially as dividend income on the ex-dividend date and then re-designate them as return of capital and/or capital gain distributions at the end of the reporting period based on information provided annually by each REIT, and management estimates such re-designations when actual information has not yet been reported.

(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 fund records certain foreign security dividends on the day it learns of the ex-dividend date. Any distributions from underlying funds are recorded in accordance with the character of the distributions as designated by the underlying funds.

₁₈

Schwab U.S. REIT ETF | Semiannual Report

Schwab U.S. REIT ETF

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):

(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 the fund, excluding taxes, any brokerage expenses, and extraordinary or non-routine expenses. Taxes, any brokerage expenses and extraordinary or non-routine expenses that are specific to the fund are charged directly to the fund.

(f) Distributions to Shareholders:

The fund makes distributions from net investment income, if any, quarterly and from net realized capital gains, if any, once a year.

(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 fund intends to meet federal income and excise tax requirements for regulated investment companies under subchapter M of the Internal Revenue Code, as amended. Accordingly, the fund distributes substantially all of its net investment income and net realized capital gains, if any, to its shareholders each year. As long as the fund meets the tax requirements, it is not required to pay federal income tax.

(i) Indemnification:

Under the fund's organizational documents, the officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business the fund enters into contracts with its vendors and others that provide general indemnifications. The fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the fund. However, based on experience, the fund expects the risk of loss attributable to these arrangements to be remote.

3. Risk Factors:

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

Market Risk. Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictable. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

Investment Style Risk. The fund is not actively managed. Therefore, the fund follows the securities included in the index during upturns as well as downturns. Because of its indexing strategy, the fund does not take steps to reduce market exposure or to lessen the effects of a declining market. In addition, because of the fund's expenses, the fund’s performance may be below that of the index.

Equity Risk. The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles which may cause stock prices to fall over short or extended periods of time.

Market Capitalization Risk. Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, the fund’s performance could be impacted.

Large-Cap Company Risk. Large-cap companies are generally more mature and the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

Mid-Cap Company Risk. Mid-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and the value of securities issued by these companies may move sharply.

₁₉

Schwab U.S. REIT ETF | Semiannual Report

Schwab U.S. REIT ETF

Financial Notes, unaudited (continued)

3. Risk Factors (continued):

Small-Cap Company Risk. Securities issued by small-cap companies may be risker than those issued by larger companies, and their prices may move sharply, especially during market upturns and downturns.

Real Estate Investment Risk. Due to the composition of the index, the fund concentrates its investments in real estate companies and companies related to the real estate industry. As such, the fund is subject to risks associated with the direct ownership of real estate securities and an investment in the fund will be closely linked to the performance of the real estate markets. These risks include, among others: declines in the value of real estate; risks related to general and local economic conditions; possible lack of availability of mortgage funds or other limits to accessing the credit or capital markets; defaults by borrowers or tenants, particularly during an economic downturn; and changes in interest rates.

REITs Risk. In addition to the risks associated with investing in securities of real estate companies and real estate related companies, REITs are subject to certain additional risks. Equity REITs may be affected by changes in the value of the underlying properties owned by the trusts. Further, REITs are dependent upon specialized management skills and cash flows, and may have their investments in relatively few properties, or in a small geographic area or a single property type. Failure of a company to qualify as a REIT under federal tax law may have adverse consequences to the fund. In addition, REITs have their own expenses, and the fund will bear a proportionate share of those expenses.

Tracking Error Risk. As an index fund, the fund seeks to track the performance of its benchmark index, although it may not be successful in doing so. The divergence between the performance of the fund and its benchmark index, positive or negative, is called “tracking error.” Tracking error can be caused by many factors and it may be significant.

Derivatives Risk. The principal types of derivatives used by the fund are futures contracts. A futures contract is an agreement to buy or sell a financial instrument at a specific price on a specific day. The fund’s use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as leverage risk, market risk and liquidity risk, are discussed elsewhere. The fund's use of derivatives that are subject to regulation by the Commodity Futures Trading Commission (CFTC) could cause the fund to become a commodity pool, which would require the fund to comply with certain CFTC rules.

The fund’s use of derivatives is also subject to credit risk, lack-of-availability risk, valuation risk, correlation risk and tax risk. Credit risk is the risk that the counterparty to a derivative transaction may not fulfill its contractual obligations. Lack-of-availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gains. The fund’s use of derivatives could reduce the fund’s performance, increase the fund’s volatility, and cause the fund to lose more than the initial amount invested.

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

Liquidity Risk. The fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the fund may have to sell them at a loss.

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

Shares of the Fund May Trade at Prices Other Than NAV. Fund shares may be bought and sold in the secondary market at market prices. Although it is expected that the market price of the shares of the fund will approximate the fund’s NAV, there may be times when the market price and the NAV vary significantly. An investor may pay more than NAV when buying shares of the fund in the secondary market, and an investor may receive less than NAV when selling those shares in the secondary market. The market price of the fund shares may deviate, sometimes significantly, from NAV during periods of market volatility.

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

₂₀

Schwab U.S. REIT ETF | Semiannual Report

Schwab U.S. REIT ETF

Financial Notes, unaudited (continued)

4. Affiliates and Affiliated Transactions:

Investment Adviser

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

For its advisory services to the fund, CSIM is entitled to receive an annual fee, payable monthly, equal to 0.07% of the fund's average daily net assets.

Investment from Affiliates

Certain Schwab funds may own shares of other Schwab funds. The table below reflects the percentage of shares of the fund that are owned by other Schwab funds as of August 31, 2017.

Schwab VIT Balanced Portfolio	0.1%
Schwab VIT Balanced with Growth Portfolio	0.2%
Schwab VIT Growth Portfolio	0.2%
Schwab Target 2010 Index Fund	0.0%*
Schwab Target 2015 Index Fund	0.0%*
Schwab Target 2020 Index Fund	0.0%*
Schwab Target 2025 Index Fund	0.0%*
Schwab Target 2030 Index Fund	0.0%*
Schwab Target 2035 Index Fund	0.0%*
Schwab Target 2040 Index Fund	0.0%*
Schwab Target 2045 Index Fund	0.0%*
Schwab Target 2050 Index Fund	0.0%*
Schwab Target 2055 Index Fund	0.0%*
Schwab Target 2060 Index Fund	0.0%*

*	Less than 0.05%

Interfund Transactions

The fund may engage in direct transactions with certain other Schwab funds when practical. When one fund is seeking to sell a security that another is seeking to buy, an interfund transaction can allow both funds to benefit by reducing transaction costs. This practice is limited to funds that share the same investment adviser, trustees and/or officers. For the period ended August 31, 2017, the fund's total aggregate security transactions with other Schwab funds was $22,366,005 and includes realized losses of $2,475,264.

Interfund Borrowing and Lending

Pursuant to an exemptive order issued by the SEC, the fund may enter into interfund borrowing and lending transactions with other funds in the Fund Complex (for definition refer to Trustees and Officers section). All loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the overnight repurchase agreement rate and the short-term bank loan rate. All loans are subject to numerous conditions designed to ensure fair and equitable treatment of all participating funds/portfolios. The interfund lending facility is subject to the oversight and periodic review of the Board. The fund had no interfund borrowing or lending activity during the period.

5. Other Service Providers:

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

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

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

₂₁

Schwab U.S. REIT ETF | Semiannual Report

Schwab U.S. REIT ETF

Financial Notes, unaudited (continued)

6. Board of Trustees:

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

7. Borrowing from Banks:

During the period, the fund was a participant with other U.S. registered investment companies managed by CSIM in a joint, syndicated, committed $555 million line of credit (the Credit Facility). Under the terms of the Credit Facility, in addition to the interest charged on any borrowings by the fund, the fund paid a commitment fee of 0.15% per annum on its proportionate share of the unused portion of the Credit Facility. Effective March 1, 2017, where applicable, CSIM paid the commitment fee and any interest expense charged on any borrowings by the fund, since these expenses are now included in the advisory fee. There were no borrowings from the line of credit during the period.

The fund also has access to custodian overdraft facilities. The fund may have utilized the overdraft facility and incurred an interest expense. Since March 1, 2017, where applicable, CSIM paid any interest expense charged. The interest expense is determined based on a negotiated rate above the Federal Funds Rate.

8. Derivatives:

The fund entered into equity index futures contracts during the report period. The fund invested in futures contracts to equitize available cash. The current value and variation margin for futures contracts held at August 31, 2017 are presented on the Portfolio Holdings and Statement of Assets and Liabilities, respectively. The net realized and change in unrealized gains (losses) on futures contracts are presented on the Statement of Operations. Refer to financial note 2(b) for the fund’s accounting policies with respect to futures contracts and financial note 3 for disclosures concerning the risks of investing in futures contracts. During the period ended August 31, 2017, the month-end average notional amounts of futures contracts held by the fund was $9,744,423 and the month-end average number of contracts held was 81.

9. Purchases and Sales/Maturities of Investment Securities:

For the period ended August 31, 2017, purchases and sales/maturities of securities (excluding in-kind transactions and short-term obligations) were as follows:

	Purchases of Securities	Sales/Maturities of Securities
Schwab U.S. REIT ETF	$213,124,117	$177,583,879

10. In-Kind Transactions:

The consideration for the purchase of Creation Units of the fund often consists of the in-kind deposit of a designated portfolio of equity securities, which constitutes an optimized representation of the securities involved in a relevant fund’s underlying index, and an amount of cash. Investors purchasing and redeeming Creation Units are subject to a standard creation transaction fee and a standard redemption transaction fee paid to the custodian to offset transfer and other transaction costs associated with the issuance and redemption of Creation Units. Purchasers and redeemers of Creation Units for cash are subject to an additional variable charge paid to the fund that will offset the transaction costs to the fund of buying or selling portfolio securities. In addition, purchasers and redeemers of shares in Creation Units are responsible for payment of the costs of transferring securities to or out of the fund. From time to time, CSIM may cover the cost of any transaction fees when believed to be in the best interests of the fund.

The in-kind transactions for the period ended August 31, 2017, were as follows:

	In-Kind Purchases of Securities	In-Kind Sales of Securities
Schwab U.S. REIT ETF	$686,406,058	$52,621,925

₂₂

Schwab U.S. REIT ETF | Semiannual Report

Schwab U.S. REIT ETF

Financial Notes, unaudited (continued)

10. In-Kind Transactions (continued):

For the period ended August 31, 2017, the fund realized net capital gains or losses resulting from in-kind redemptions of Creation Units. Because such gains or losses are not taxable to the fund and are not distributed to existing fund shareholders, the gains or losses are reclassified from accumulated net realized gains or losses to capital received from investors at the end of the fund's tax year. These reclassifications have no effect on net assets or net asset values per share. The net realized in-kind gains or losses for the period ended August 31, 2017 are disclosed in the fund's Statement of Operations.

11. Federal Income Taxes

As of August 31, 2017, the tax basis cost of the fund's investments and gross unrealized appreciation and depreciation were as follows:

Tax cost	$3,458,163,149
Gross unrealized appreciation	$308,566,275
Gross unrealized depreciation	(150,334,006)
Net unrealized appreciation (depreciation)	$158,232,269

Capital loss carryforwards may be used to offset future realized capital gains for federal income tax purposes. As of February 28, 2017, the fund had no capital loss carryforwards.

As of February 28, 2017, management has reviewed the tax positions for open periods (for federal purposes, three years from the date of filing and for state purposes, four years from the date of filing) as applicable to the fund, and has determined that no provision for income tax is required in the fund's financial statements. The fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the period ended February 28, 2017, the fund did not incur any interest or penalties.

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.

₂₃

Schwab U.S. REIT ETF | Semiannual Report

Schwab U.S. REIT ETF

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

The Board, including a majority of the Independent Trustees, considered information specifically relating to its consideration of the continuance of the Agreement with respect to the Fund at meetings held on April 19, 2017 and June 6, 2017, and approved the renewal of the Agreement with respect to the Fund for an additional one-year term at the meeting held on June 6, 2017. As part of the Board’s consideration of the continuance of the Agreement, the Board considered information it reviewed in connection with an amended and restated advisory agreement between the Trust and CSIM that was approved by the Board at a meeting held on January 18, 2017. A discussion regarding the basis for the Board’s approval of the amended and restated advisory agreement is available in the Fund’s 2017 annual report, which covers the period from March 1, 2016 through February 28, 2017. The

Board’s approval of the continuance of the Agreement with respect to the Fund was based on consideration and evaluation of a variety of specific factors discussed at these meetings and at prior meetings, including:

1.	the nature, extent and quality of the services provided to the Fund under the Agreement, including the resources of CSIM and its affiliates dedicated to the Fund;
2.	the Fund’s investment performance and how it compared to that of certain other comparable exchange-traded funds;
3.	the 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 Fund, 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 Fund 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 Fund and the resources of CSIM and its affiliates dedicated to the Fund. In this regard, the Trustees evaluated, among other things, CSIM’s experience, track record, compliance program, resources dedicated to hiring and retaining qualified personnel, and information security resources. The Trustees also considered information provided by CSIM relating to the Fund’s portfolio management team, portfolio strategy and risk oversight structure, and internal investment guidelines. The Trustees also considered Schwab’s reputation in connection with the OneSource exchange-traded fund offering and its overall financial condition. Following such evaluation, the Board concluded, within the context of its full deliberations, that the nature, extent and quality of services provided by CSIM to the Fund and the resources of CSIM and its affiliates dedicated to the Fund supported renewal of the Agreement with respect to the Fund.

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

₂₄

Schwab U.S. REIT ETF | Semiannual Report

Schwab U.S. REIT ETF

context of their review of Fund expenses and adviser profitability discussed below and also noted that performance is reviewed throughout the year by a designated committee of the Board and by the Board. Following such evaluation, the Board concluded, within the context of its full deliberations, that the performance of the Fund supported renewal of the Agreement with respect to the Fund.

Fund Expenses. With respect to the Fund’s expenses, the Trustees considered the rate of compensation called for by the Agreement and the 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 provider of investment company data. The Trustees noted that the Fund’s operating expense ratio was well below the average operating expense ratio charged by other funds in its peer group. The Trustees also considered fees charged by CSIM to mutual funds that it manages. Following such evaluation, the Board concluded, within the context of its full deliberations, that the expenses of the Fund are reasonable and supported renewal of the Agreement with respect to the Fund.

Profitability. The Trustees considered the compensation flowing to CSIM and its affiliates, directly or indirectly, and reviewed profitability on a pre-tax basis, without regard to distribution expenses. In this connection, the Trustees reviewed management’s profitability analyses and methodology. The Trustees also reviewed profitability of CSIM relating to the Schwab fund complex as a whole, noting the benefit to Fund shareholders of being part of the Schwab fund complex, including the allocations of certain fixed costs across the funds in the complex. The Trustees also considered any

other benefits derived by CSIM from its relationship with the Fund, such as whether, by virtue of its management of the Fund, 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 Fund under the Agreement and other service agreements were reasonable and justified in light of the quality of all services rendered to the Fund 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 Fund.

Economies of Scale. The Trustees considered the existence of any economies of scale and whether those are passed along to the Fund’s shareholders by way of the relatively low advisory fee and unitary fee structure of the Fund. Based on this evaluation, the Board concluded, within the context of its full deliberations, that the Fund obtains 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 Fund and concluded that the compensation under the Agreement with respect to the Fund 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.

₂₅

Schwab U.S. REIT ETF | Semiannual Report

Schwab U.S. REIT ETF

Trustees and Officers

The tables below give information about the trustees and officers for the Schwab Strategic Trust, which includes the fund covered in this report. The “Fund Complex” includes The Charles Schwab Family of Funds, Schwab Capital Trust, Schwab Investments, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust. The Fund Complex includes 105 funds.

The address for all trustees and officers is 211 Main Street, San Francisco, CA 94105. You can find more information about the trustees and officers in the Statement of Additional Information, which is available free by calling 1-877-824-5615.

Independent Trustees
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Robert W. Burns 1959 Trustee (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016)	Retired/Private Investor (Jan. 2009 – present). Formerly, Managing Director, Pacific Investment Management Company, LLC (PIMCO) (investment management firm) and President, PIMCO Funds.	105	Director, PS Business Parks, Inc. (2005 – 2012)
John F. Cogan 1947 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Senior Fellow, The Hoover Institution at Stanford University (Oct. 1979 – present); Senior Fellow, Stanford Institute for Economic Policy Research (2000 – present); Professor of Public Policy, Stanford University (1994 – 2015).	105	Director, Gilead Sciences, Inc. (2005 – present)
Stephen Timothy Kochis 1946 Trustee (Trustee of Schwab Strategic Trust since 2012; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016)	CEO and Owner, Kochis Global (wealth management consulting) (May 2012 – present); Chairman and CEO, Aspiriant, LLC (wealth management) (Jan. 2008 – Apr. 2012).	105	None
David L. Mahoney 1954 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016)	Private Investor.	105	Director, Symantec Corporation (2003 – present) Director, Corcept Therapeutics Incorporated (2004 – present) Director, Adamas Pharmaceuticals, Inc. (2009 – present)

₂₆

Schwab U.S. REIT ETF | Semiannual Report

Schwab U.S. REIT ETF

Independent Trustees (continued)
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Kiran M. Patel 1948 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016)	Retired. Executive Vice President and General Manager of Small Business Group, Intuit, Inc. (financial software and services firm for consumers and small businesses) (Dec. 2008 – Sept. 2013).	105	Director, KLA-Tencor Corporation (2008 – present)
Kimberly S. Patmore 1956 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016)	Consultant, Patmore Management Consulting (management consulting) (2008 – present).	105	None
Charles A. Ruffel 1956 Trustee (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2015)	Co-Chief Executive Officer, Kudu Investment Management, LLC (financial services) (Jan. 2015 – present); Partner, Kudu Advisors, LLC (financial services) (June 2008 – Jan. 2015); Advisor, Asset International, Inc. (publisher of financial services information) (Aug. 2008 – Jan. 2015).	105	None
Gerald B. Smith 1950 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2000; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Chairman, Chief Executive Officer and Founder of Smith Graham & Co. (investment advisors) (Mar. 1990 – present).	105	Director, Eaton (2012 – present) Director and Chairman of the Audit Committee, Oneok Partners LP (2003 – 2013) Director, Oneok, Inc. (2009 – 2013) Lead Independent Director, Board of Cooper Industries (2002 – 2012)
Joseph H. Wender 1944 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Senior Consultant, Goldman Sachs & Co., Inc. (investment banking and securities firm) (Jan. 2008 – present); Partner, Colgin Partners, LLC (vineyards) (Feb. 1998 – present).	105	Board Member and Chairman of the Audit Committee, Ionis Pharmaceuticals (1994 – present) Lead Independent Director and Chair of Audit Committee, OUTFRONT Media Inc. (2014 – present)

₂₇

Schwab U.S. REIT ETF | Semiannual Report

Schwab U.S. REIT ETF

Interested Trustees
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Walter W. Bettinger II² 1960 Chairman and Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Schwab Strategic Trust since 2009; Laudus Trust since 2010)	Director, President and Chief Executive Officer, The Charles Schwab Corporation (Oct. 2008 – present); President and Chief Executive Officer (Oct. 2008 – present), Director (May 2008 – present), Charles Schwab & Co., Inc.; Director, Charles Schwab Bank (Apr. 2006 – present); Director, Schwab Holdings, Inc. (May 2008 – present); and Director, Charles Schwab Investment Management, Inc. (July 2016 – present).	105	Director, The Charles Schwab Corporation (2008 – present)
Marie A. Chandoha² 1961 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016)	Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; Trustee (Jan. 2016 – present), President, Chief Executive Officer (Dec. 2010 – present), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (Jan. 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (Mar. 2007 – Aug. 2010).	105	None
Joseph R. Martinetto² 1962 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016)	Senior Executive Vice President (July 2015 – present), Chief Financial Officer (July 2015 – May 2017), Executive Vice President and Chief Financial Officer (May 2007 – July 2015), The Charles Schwab Corporation and Charles Schwab & Co., Inc.; Director, Charles Schwab & Co., Inc. (May 2007 – present); Director (Apr. 2010 – present) and Chief Executive Officer (July 2013 – Apr. 2015), Charles Schwab Bank; Director (May 2007 – present), Chief Financial Officer (May 2007 – May 2017), Senior Executive Vice President (Feb. 2016 – present), and Executive Vice President (May 2007 – Feb. 2016), Schwab Holdings, Inc.	105	None

Officers of the Trust
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served³)	Principal Occupations During the Past Five Years
Marie A. Chandoha 1961 President and Chief Executive Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2010)	Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; Trustee (Jan. 2016 – present), President, Chief Executive Officer (Dec. 2010 – present), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (Jan. 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (Mar. 2007 – Aug. 2010).
Mark Fischer 1970 Treasurer and Chief Financial Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2013)	Treasurer and Chief Financial Officer, Schwab Funds, Laudus Funds and Schwab ETFs (Jan. 2016 – present); Assistant Treasurer, Schwab Funds and Laudus Funds (Dec. 2013 – Dec. 2015), Schwab ETFs (Nov. 2013 – Dec. 2015); Vice President, Charles Schwab Investment Management, Inc. (Oct. 2013 – present); Executive Director, J.P. Morgan Investor Services (Apr. 2011 – Sept. 2013); Assistant Treasurer, Massachusetts Financial Service Investment Management (May 2005 – Mar. 2011).

₂₈

Schwab U.S. REIT ETF | Semiannual Report

Schwab U.S. REIT ETF

Officers of the Trust (continued)
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served³)	Principal Occupations During the Past Five Years
George Pereira 1964 Senior Vice President and Chief Operating Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2004; Laudus Trust since 2006; Schwab Strategic Trust since 2009)	Senior Vice President and Chief Financial Officer (Nov. 2004 – present), Chief Operating Officer (Jan. 2011 – present), Charles Schwab Investment Management, Inc.; Senior Vice President and Chief Operating Officer (Jan. 2016 – present), Treasurer and Chief Financial Officer, Laudus Funds (June 2006 – Dec. 2015); Treasurer and Principal Financial Officer, Schwab Funds (Nov. 2004 – Dec. 2015) and Schwab ETFs (Oct. 2009 – Dec. 2015); Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (Apr. 2005 – present).
Omar Aguilar 1970 Senior Vice President and Chief Investment Officer – Equities and Multi-Asset Strategies (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President and Chief Investment Officer – Equities and Multi-Asset Strategies, Charles Schwab Investment Management, Inc. (Apr. 2011 – present); Senior Vice President and Chief Investment Officer – Equities, Schwab Funds, Laudus Funds and Schwab ETFs (June 2011 – present); Head of the Portfolio Management Group and Vice President of Portfolio Management, Financial Engines, Inc. (May 2009 – Apr. 2011); Head of Quantitative Equity, ING Investment Management (July 2004 – Jan. 2009).
Brett Wander 1961 Senior Vice President and Chief Investment Officer – Fixed Income (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President and Chief Investment Officer – Fixed Income, Charles Schwab Investment Management, Inc. (Apr. 2011 – present); Senior Vice President and Chief Investment Officer – Fixed Income, Schwab Funds, Laudus Funds and Schwab ETFs (June 2011 – present); Senior Managing Director, Global Head of Active Fixed-Income Strategies, State Street Global Advisors (Jan. 2008 – Oct. 2010); Director of Alpha Strategies Loomis, Sayles & Company (Apr. 2006 – Jan. 2008).
David Lekich 1964 Chief Legal Officer and Secretary, Schwab Funds and Schwab ETFs Vice President and Assistant Clerk, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President (Sept. 2011 – present), Vice President (Mar. 2004 – Sept. 2011), Charles Schwab & Co., Inc.; Senior Vice President and Chief Counsel (Sept. 2011 – present), Vice President (Jan. 2011 – Sept. 2011), Charles Schwab Investment Management, Inc.; Secretary (Apr. 2011 – present) and Chief Legal Officer (Dec. 2011 – present), Schwab Funds; Vice President and Assistant Clerk, Laudus Funds (Apr. 2011 – present); Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs.
Catherine MacGregor 1964 Vice President and Assistant Secretary, Schwab Funds and Schwab ETFs Chief Legal Officer, Vice President and Clerk, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2005; Schwab Strategic Trust since 2009)	Vice President, Charles Schwab & Co., Inc., Charles Schwab Investment Management, Inc. (July 2005 – present); Vice President (Dec. 2005 – present), Chief Legal Officer and Clerk (Mar. 2007 – present), Laudus Funds; Vice President (Nov. 2005 – present) and Assistant Secretary (June 2007 – present), Schwab Funds; Vice President and Assistant Secretary, Schwab ETFs (Oct. 2009 – present).

¹	Each Trustee shall hold office until the election and qualification of his or her successor, or until he or she dies, resigns or is removed. The retirement policy requires that each independent trustee retire by December 31 of the year in which the Trustee turns 74 or the Trustee’s twentieth year of service as an independent trustee on any trust in the Fund Complex, whichever occurs first.
²	Mr. Bettinger, Ms. Chandoha and Mr. Martinetto are Interested Trustees because they own stock of The Charles Schwab Corporation, the parent company of the investment adviser.
³	The President, Treasurer and Secretary/Clerk hold office until their respective successors are chosen and qualified or until he or she sooner dies, resigns, is removed or becomes disqualified. Each of the other officers serves at the pleasure of the Board.

₂₉

Schwab U.S. REIT ETF | Semiannual Report

Schwab U.S. REIT ETF

Glossary

ask See “offer.”

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

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

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

beta A historical measure of an investment’s volatility relative to a market index (usually the S&P 500^®). The index is defined as having a beta of 1.00. Investments with a beta higher than 1.00 have been more volatile than the index; those with a beta of less than 1.00 have been less volatile.

bid The highest price at which someone is willing to buy a security.

Bloomberg Barclays U.S. Aggregate Bond Index An index that represents securities that are SEC registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. The index excludes certain types of securities, including state and local government series bonds, structured notes embedded with swaps or other special features, private placements, floating rate securities, inflation-linked bonds and Eurobonds.

cap, capitalization See “market cap.”

capital gain, capital loss The difference between the amount paid for an investment and its value at a later time. If the investment has been sold, the capital gain or loss is considered a realized gain or loss. If the investment is still held, the gain or loss is still “on paper” and is considered unrealized.

commencement of operations The date that the first NAV was calculated.

creation unit (C.U.) A basket of securities that is delivered by an authorized participant (AP) to the fund equal to the current holdings of the ETF, plus a designated cash component. In return, the APs receive a large block of ETF shares (typically 50,000 shares), which investors can then buy and sell in the secondary market.

Dow Jones U.S. Select REIT Index An index that is a float-adjusted market-capitalization weighted index comprised of real estate investment trusts (REITs). REITs are real estate companies that own and commonly operate income-producing commercial and/or residential real estate. The index excludes mortgage REITs, net-lease REITs, real estate finance companies, mortgage brokers and bankers, commercial and residential real estate brokers and estate agents, homebuilders, large landowners and sub dividers of unimproved land, hybrid REITs, timber REITs and companies that have more than 25% of their assets in direct mortgage investments.

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

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

FTSE EPRA/NAREIT Global Index (Net) An index that provides a diverse representation of publicly traded equity real estate investment trusts (REITs) and listed property companies worldwide. The index constituents are free-float adjusted, and screened on liquidity, size and revenue. The index is comprised of countries in developed and emerging markets. The Net of Tax Index is calculated based on the maximum withholding tax rates applicable to dividends received by institutional investors who are not resident in the same country as the remitting company and who do not benefit from double taxation treaties.

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

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

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

market cap, market capitalization The value of a company as determined by the total value of all shares of its stock outstanding.

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

median market cap The midpoint of the range of market caps of the stocks held by a fund. There are different ways of calculating median market cap. With a simple median, half of the stocks in the fund’s portfolio would be larger than the median, and half would be smaller. With a weighted median (the type that is calculated for these funds), half of the fund’s assets are invested in stocks that are larger than the median market cap, and half in stocks that are smaller.

MSCI EAFE Index (Net) A free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets in Europe, Australasia, and the Far East. 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 (Net) A free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global emerging markets. This series approximates the minimum possible dividend reinvestment. The returns are calculated applying dividend withholding rates applicable to non-resident persons who do not benefit from double taxation treaties.

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

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

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

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

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

₃₀

Schwab U.S. REIT ETF | Semiannual Report

Schwab U.S. REIT ETF

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.

real estate investment trust (REIT) Real estate companies that own and commonly operate income producing commercial and/or residential real estate.

rights and warrants Rights and warrants are types of securities that entitle the holder to purchase a proportionate amount of common stock at a specified price for a specific period of time. Rights allow a shareholder to buy more shares directly from the company, usually at a price somewhat lower than the current market price of the outstanding shares. Warrants are usually issued with bonds and preferred stock. Rights and warrants can trade on the market separately from the company’s stock. The prices of rights and warrants do not necessarily move parallel to the prices of the underlying common stock. Rights usually expire within a few weeks of issuance, while warrants may not expire for several years. If a right or warrant is not exercised within the specified time period, it will become worthless and a fund will lose the purchase price it paid for the right or warrant and the right to purchase the underlying security.

S&P 500 Index An index that is designed to measure the performance of 500 leading publicly traded companies from a broad range of industries.

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.

₃₁

Schwab U.S. REIT ETF | Semiannual Report

Schwab U.S. REIT ETF

Schwab ETFs^™

Schwab ETFs are designed to be low-cost, diversified investments which follow broad market indices and provide exposure to specific segments of the market. These ETFs can serve as part of the foundation of a diversified portfolio. The list below shows all currently available Schwab ETFs.

Investors should carefully consider information contained in the prospectus, or if available, the summary prospectus, including investment objectives, risks, charges and expenses before investing. Please call 1-877-824-5615 for a prospectus and brochure for any Schwab ETF. Please read the prospectus carefully before you invest. This report must be preceded or accompanied by a current prospectus.

Proxy Voting Policies, Procedures and Results

A description of the proxy voting policies and procedures used to determine how to vote proxies on behalf of the funds is available without charge, upon request, by visiting the Schwab ETFs’ website at www.schwabfunds.com/schwabetfs_prospectus, the SEC’s website at www.sec.gov, or by contacting Schwab ETFs at 1-877-824-5615.

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

Schwab ETFs™

U.S. ETFs

Schwab U.S. Broad Market ETF™

Schwab 1000 Index^® ETF

Schwab U.S. Large-Cap ETF™

Schwab U.S. Large-Cap Growth ETF™

Schwab U.S. Large-Cap Value ETF™

Schwab U.S. Mid-Cap ETF™

Schwab U.S. Small-Cap ETF™

Schwab U.S. Dividend Equity ETF™

Schwab U.S. REIT ETF™

International ETFs

Schwab International Equity ETF™

Schwab International Small-Cap Equity ETF™

Schwab Emerging Markets Equity ETF™

Fixed Income ETFs

Schwab U.S. TIPS ETF™

Schwab Short-Term U.S. Treasury ETF™

Schwab Intermediate-Term U.S. Treasury ETF™

Schwab U.S. Aggregate Bond ETF™

Fundamental Index* ETFs

Schwab Fundamental U.S. Broad Market Index ETF

Schwab Fundamental U.S. Large Company Index ETF

Schwab Fundamental U.S. Small Company Index ETF

Schwab Fundamental International Large Company Index ETF

Schwab Fundamental International Small Company Index ETF

Schwab Fundamental Emerging Markets Large Company
Index ETF

Investment Adviser

Charles Schwab Investment Management, Inc.

211 Main Street, San Francisco, CA 94105

Schwab ETFs™

1-877-824-5615

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

Schwab Fundamental Index ETFs

Performance at a Glance

Total Returns for the 6 Months Ended August 31, 2017
Schwab Fundamental U.S. Broad Market Index ETF (Ticker Symbol: FNDB)
Market Price Return¹	1.55%
NAV Return¹	1.67%
Russell RAFI^TM US Index	1.74%
Russell 3000^® Index	5.23%
ETF Category: Morningstar Large Value²	1.62%
Performance Details	pages 7-8

Schwab Fundamental U.S. Large Company Index ETF (Ticker Symbol: FNDX)
Market Price Return¹	1.93%
NAV Return¹	1.90%
Russell RAFI^TM US Large Company Index	1.96%
Russell 1000^® Index	5.50%
ETF Category: Morningstar Large Value²	1.62%
Performance Details	pages 9-10

Schwab Fundamental U.S. Small Company Index ETF (Ticker Symbol: FNDA)
Market Price Return¹	-0.68%
NAV Return¹	-0.71%
Russell RAFI^TM US Small Company Index	-0.69%
Russell 2000^® Index	2.04%
ETF Category: Morningstar Small Blend²	0.69%
Performance Details	pages 11-12

Total Returns for the 6 Months Ended August 31, 2017
Schwab Fundamental International Large Company Index ETF (Ticker Symbol: FNDF)
Market Price Return¹	11.42%
NAV Return¹	11.00%
Russell RAFI^TM Developed ex US Large Company Index (Net)^*	10.90%
MSCI EAFE^® Index (Net)^*	12.14%
ETF Category: Morningstar Foreign Large Value²	11.01%
Performance Details	pages 13-14

Schwab Fundamental International Small Company Index ETF (Ticker Symbol: FNDC)
Market Price Return¹	13.45%
NAV Return¹	12.77%
Russell RAFI^TM Developed ex US Small Company Index (Net)^*	12.74%
S&P Developed ex-U.S. Small Cap Index (Net)^*	14.62%
ETF Category: Morningstar Foreign Small/Mid Blend²	15.28%
Performance Details	pages 15-16

Schwab Fundamental Emerging Markets Large Company Index ETF (Ticker Symbol: FNDE)
Market Price Return¹	11.15%
NAV Return¹	10.28%
Russell RAFI^TM Emerging Markets Large Company Index (Net)^*	10.47%
MSCI Emerging Markets Index (Net)^*	18.02%
ETF Category: Morningstar Diversified Emerging Markets²	16.68%
Performance Details	pages 17-18

The first index listed for each fund is the fund’s primary benchmark, as shown in the prospectus. Additional indices shown are provided for comparative purposes.

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 — Russell^® is a trademark owned by Frank Russell Company (Russell). The Russell RAFI™ Index Series are calculated by Russell in conjunction with Research Affiliates^® LLC (RA). Neither Russell nor RA sponsor, endorse or promote the Schwab Fundamental Index ETFs and are not in any way connected to them and do not accept any liability in relation to their issue, operation and trading. Any intellectual property rights in the index values and constituent list vests in Russell. “Research Affiliates^®”, “Fundamental Index^®” and “RAFI^®” trade names are the exclusive property of RA. CSIM has obtained full license from Russell to use such intellectual property rights in the creation of the funds. For full disclaimer please see the funds' statement of additional information. Effective December 1, 2016, the name of the index was changed by the index provider. No other changes to the index have occurred.

^*	The net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.
¹	ETF performance must be shown based on both a market price and NAV basis. The fund’s per share NAV is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which the shares of the fund are listed for trading, as of the time that the fund’s NAV is calculated. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively.
²	Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date.

₂

Schwab Fundamental Index ETFs | Semiannual Report

Schwab Fundamental Index ETFs

From the President

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

Dear Shareholder,

For more than 25 years, Charles Schwab Investment Management has been driven to give investors what they want and need—without confusion. One of our goals has been to reduce the complexity of investing. Our mutual funds and exchange-traded funds (ETFs) support this mission by reducing the complexity involved with building a diversified portfolio. The Schwab Fundamental Index ETFs have made equity investing more straightforward by eliminating the need to select individual stocks, saving shareholders time and money.

We have taken important steps over the years to democratize the investing landscape even further on behalf of investors by simplifying and lowering the cost of investing. For instance, earlier this year we reduced the expenses on all of the Fundamental Index ETFs, giving these funds among the lowest costs in the industry.

At Charles Schwab Investment Management, we also strive to take a straightforward approach in our communications. In this and in every shareholder report, we provide the funds’ financial statements and other information in a consistent format that we believe will help you to evaluate the

Asset Class Performance Comparison % returns during the 6 months ended August 31, 2017

For index definitions, please see the Glossary.

Data source: Index provider websites and CSIM.

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

Management views may have changed since the report date.

*	The net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.

₃

Schwab Fundamental Index ETFs | Semiannual Report

Schwab Fundamental Index ETFs

From the President (continued)

“ We have taken important steps over the years to democratize the investing landscape even further on behalf of investors by simplifying and lowering the cost of investing.”

performance of the funds. We aim to help you understand not only each fund’s return, but also how its investments are managed.

Our commitment to quality and transparency continues to win us both new business and recognition. During the second quarter, we achieved the largest ETF asset inflows in our history, topping $6 billion in quarterly flows for the second time since we began offering ETFs in 2009. And as of July, investors have entrusted us with $20 billion of their assets held in our Fundamental Index mutual funds and ETFs, reflecting the growing popularity of Fundamental Index strategies. Additionally, we were recently selected as one of Morningstar’s “9 Partners for the Next Decade,”¹ reflecting our differentiation, low costs, repeatable investment processes, and adaptable business models.

We’re proud of these achievements, but more importantly, we’re honored to serve our investors. We’re committed to putting investors first by reducing cost and complexity—a commitment that will continue to inform how we operate and the decisions that we make.

Thank you for investing with Charles Schwab Investment Management. For more information about the Schwab Fundamental Index ETFs, please continue reading this report. In addition, you can find further details about these funds by visiting our website at www.schwabfunds.com. We are also happy to hear from you at 1-877-824-5615.

Sincerely,

Morningstar, “9 Partners for the Next Decade.” Laura Pavlenko Lutton and Greggory Warren, CFA: April 27, 2017. Morningstar looked collectively across four traits (differentiation, low costs, repeatable investment processes, and adaptable business models) to identify firms that they believe are representative of these trends.

₄

Schwab Fundamental Index ETFs | Semiannual Report

Schwab Fundamental Index ETFs

The Investment Environment

Over the six-month reporting period ended August 31, 2017, most equity markets performed well amid generally accommodative monetary policies and a strengthening global economy. Even with several spikes over the reporting period, overall market volatility lessened, and many stocks, both in the U.S. and abroad, continued to rise in the wake of expectations for policy changes from the Trump administration. Meanwhile, the U.S. dollar weakened against many major currencies over the reporting period, including the euro and the British pound. In this environment, the S&P 500^® Index, a bellwether for the overall U.S. stock market, returned 5.65%, while the Russell RAFI™ US Large Company Index returned 1.96% over the same timeframe. In U.S. small-cap markets, the Russell 2000^® Index and the Russell RAFI™ US Small Company Index returned 2.04% and -0.69%, respectively. Internationally, the MSCI EAFE ^® Index (Net), a broad measure of developed international equity performance, returned 12.14%, while the Russell RAFI™ Developed ex US Large Company Index (Net) returned 10.90%. In emerging markets, the MSCI Emerging Markets Index (Net) and the Russell RAFI™ Emerging Markets Large Company Index (Net) returned 18.02% and 10.47%, respectively.

Central bank policies remained fairly accommodative over the six-month reporting period as inflation generally remained below targets, supporting both the global economy and global stock markets. Though the Federal Reserve (Fed) took additional steps toward a more normalized monetary policy environment, including raising the federal funds rate in March and June, short-term interest rates in the U.S. remained low compared to historical averages. Outside the U.S., the Bank of Japan maintained negative interest rates and continued to utilize yield curve management as a policy tool, while emphasizing that Japan’s policy stance would not change until inflation moved above the 2% target. The Bank of England left key interest rates at record lows and the European Central Bank (ECB) kept its interest rates unchanged, including a negative deposit facility rate. The ECB also reiterated on several occasions that though policy normalization was on the horizon, its bond purchase program would continue until at least the end of 2017. In emerging markets, central banks remained in different phases of monetary policy. For example, the People’s Bank of China maintained a “prudent and neutral” policy stance amid a generally stabilized Chinese economy, while the Central Bank of Brazil cut short-term interest rates several times over the six-month reporting period.

Global economic growth continued to improve over the reporting period, with the world’s major economies growing together for the first time in 10 years.¹ In the U.S., the economy continued to chug along as it entered its ninth year of expansion. Nonfarm payrolls were steady and U.S. gross domestic product (GDP) grew modestly, while consumer confidence remained high and unemployment hovered near a 16-year low. Outside the U.S., many international economies continued to gain momentum. Unemployment in the eurozone fell to its lowest level in more than eight years, and solid retail sales and manufacturing Purchasing Managers Index helped propel economic growth in the region. Meanwhile Japan’s economy grew for the sixth straight quarter amid robust domestic demand and increased business spending. China’s economic outlook was positive as growth remained steady, and according to the International Monetary Fund, the country has the potential to sustain strong growth over the medium term. Low oil prices and U.S. sanctions continued to negatively affect the Russian economy, while Brazil emerged from its worst recession on record in 2017 amid two consecutive quarters of growth. However, charges of corruption against Brazil’s president weighed on local stocks and threatened to derail the fragile recovery.

For index definitions, please see the Glossary.

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

Management views may have changed since the report date.

¹	As of August 2017, Organization for Economic Cooperation and Development.

₅

Schwab Fundamental Index ETFs | Semiannual Report

Schwab Fundamental Index ETFs

Fund Management

Christopher Bliss, CFA, Vice President and Head of the Passive Equity Team, leads the portfolio management team for Schwab’s Passive Equity Funds and ETFs. He also has overall responsibility for all aspects of the management of the funds. Prior to joining CSIM in 2016, Mr. Bliss spent 12 years at BlackRock (formerly Barclays Global Investors) managing and leading institutional index teams, most recently as a Managing Director and Head of Americas Institutional Index team. Prior to BlackRock, he worked as an equity analyst and portfolio manager for Harris Bretall and before that, as a research analyst for JP Morgan.

Chuck Craig, CFA, Senior Portfolio Manager, is responsible for the day-to-day co-management of the Schwab Fundamental International Large Company Index ETF, Schwab Fundamental International Small Company Index ETF, and Schwab Fundamental Emerging Markets Large Company Index ETF. Prior to joining CSIM in 2012, Mr. Craig worked at Guggenheim Funds (formerly Claymore Group), where he spent more than five years as a managing director of portfolio management and supervision, and three years as vice president of product research and development. Prior to that, he worked as an equity research analyst at First Trust Portfolios (formerly Niké Securities), and a trader and analyst at PMA Securities, Inc.

Ferian Juwono, CFA, Senior Portfolio Manager, is responsible for the day-to-day co-management of the Schwab Fundamental U.S. Broad Market Index ETF, Schwab Fundamental U.S. Large Company Index ETF, and Schwab Fundamental U.S. Small Company Index ETF. Prior to joining CSIM in 2010, Mr. Juwono worked at BlackRock (formerly Barclays Global Investors), where he spent more than three years as a portfolio manager, managing equity index funds for institutional clients, and nearly two years as a senior business analyst. Prior to that, Mr. Juwono worked for more than four years as a senior financial analyst with Union Bank of California.

Jane Qin, Portfolio Manager, is responsible for the day-to-day co-management of the Schwab Fundamental International Large Company Index ETF, Schwab Fundamental International Small Company Index ETF, and Schwab Fundamental Emerging Markets Large Company Index ETF. Prior to joining CSIM in 2012, Ms. Qin spent more than four years at The Bank of New York Mellon Corporation. During that time, Ms. Qin spent more than two years as an associate equity portfolio manager and nearly two years as a performance analyst. She also worked at Wells Fargo Funds Management as a mutual fund analyst and at CIGNA Reinsurance in Risk Management group as a risk analyst.

David Rios, Portfolio Manager, is responsible for the day-to-day co-management of the Schwab Fundamental International Large Company Index ETF, Schwab Fundamental International Small Company Index ETF, and Schwab Fundamental Emerging Markets Large Company Index ETF. He joined CSIM in 2008 and became a Portfolio Manager in September 2014. Prior to this role, Mr. Rios served as an Associate Portfolio Manager on the Schwab Equity Index Strategies team for four years. His first role with CSIM was as a trade operation specialist. He also previously worked as a senior fund accountant at Investors Bank & Trust (subsequently acquired by State Street Corporation).

Sabya Sinha, Portfolio Manager, is responsible for the day-to-day co-management of the Schwab Fundamental U.S. Broad Market Index ETF, Schwab Fundamental U.S. Large Company Index ETF, and Schwab Fundamental U.S. Small Company Index ETF. Prior to joining CSIM in 2015, Mr. Sinha spent a year at F-Squared Investments on the product development and analytics team. Prior to F-Squared, he worked at IndexIQ Advisors as a senior index portfolio manager for three years and for Bank of America’s Columbia Management subsidiary as a portfolio manager for three years.

₆

Schwab Fundamental Index ETFs | Semiannual Report

Schwab Fundamental U.S. Broad Market Index ETF

Average Annual Total Returns¹

Fund and Inception Date	6 Months	1 Year	3 Years	Since Inception^*
Fund: Schwab Fundamental U.S. Broad Market Index ETF (8/15/13)
Market Price Return²	1.55%	12.02%	7.03%	10.08%
NAV Return²	1.67%	12.22%	7.04%	10.11%
Russell RAFI^TM US Index	1.74%	12.46%	7.33%	10.43%
Russell 3000^® Index	5.23%	16.06%	9.08%	11.82%
ETF Category: Morningstar Large Value³	1.62%	12.48%	6.11%	8.61%
Fund Expense Ratio⁴: 0.25%

The first index listed for the fund is the fund’s primary benchmark, as shown in the prospectus. Additional indices shown are provided for comparative purposes.

For index definitions, please see the Glossary.

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

Index ownership — Russell^® is a trademark owned by Frank Russell Company (Russell). The Russell RAFI™ Index Series are calculated by Russell in conjunction with Research Affiliates^® LLC (RA). Neither Russell nor RA sponsor, endorse or promote the Schwab Fundamental U.S. Broad Market Index ETF and are not in any way connected to it and do not accept any liability in relation to its issue, operation and trading. Any intellectual property rights in the index values and constituent list vests in Russell. “Research Affiliates^®”, “Fundamental Index^®” and “RAFI^®” trade names are the exclusive property of RA. CSIM has obtained full license from Russell to use such intellectual property rights in the creation of this fund. For full disclaimer please see the fund’s statement of additional information. Effective December 1, 2016, the name of the index was changed by the index provider. No other changes to the index have occurred.

^*	Inception (8/15/13) represents the date that the shares began trading in the secondary market.
¹	Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption of fund shares.
²	ETF performance must be shown based on both a market price and NAV basis. The fund’s per share NAV is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which the shares of the fund are listed for trading, as of the time that the fund’s NAV is calculated. NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively.
³	Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date.
⁴	As stated in the prospectus.

₇

Schwab Fundamental Index ETFs | Semiannual Report

Schwab Fundamental U.S. Large Company Index ETF

Average Annual Total Returns¹

Fund and Inception Date	6 Months	1 Year	3 Years	Since Inception^*
Fund: Schwab Fundamental U.S. Large Company Index ETF (8/15/13)
Market Price Return²	1.93%	12.16%	7.06%	10.15%
NAV Return²	1.90%	12.20%	7.06%	10.15%
Russell RAFI^TM US Large Company Index	1.96%	12.45%	7.36%	10.47%
Russell 1000^® Index	5.50%	16.16%	9.21%	12.07%
ETF Category: Morningstar Large Value³	1.62%	12.48%	6.11%	8.61%
Fund Expense Ratio⁴: 0.25%

The first index listed for the fund is the fund’s primary benchmark, as shown in the prospectus. Additional indices shown are provided for comparative purposes.

For index definitions, please see the Glossary.

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

Index ownership — Russell^® is a trademark owned by Frank Russell Company (Russell). The Russell RAFI™ Index Series are calculated by Russell in conjunction with Research Affiliates^® LLC (RA). Neither Russell nor RA sponsor, endorse or promote the Schwab Fundamental U.S. Large Company Index ETF and are not in any way connected to it and do not accept any liability in relation to its issue, operation and trading. Any intellectual property rights in the index values and constituent list vests in Russell. “Research Affiliates^®”, “Fundamental Index^®” and “RAFI^®” trade names are the exclusive property of RA. CSIM has obtained full license from Russell to use such intellectual property rights in the creation of this fund. For full disclaimer please see the fund’s statement of additional information. Effective December 1, 2016, the name of the index was changed by the index provider. No other changes to the index have occurred.

^*	Inception (8/15/13) represents the date that the shares began trading in the secondary market.
¹	Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption of fund shares.
²	ETF performance must be shown based on both a market price and NAV basis. The fund’s per share NAV is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which the shares of the fund are listed for trading, as of the time that the fund’s NAV is calculated. NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively.
³	Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date.
⁴	As stated in the prospectus.

₉

Schwab Fundamental Index ETFs | Semiannual Report

Schwab Fundamental U.S. Small Company Index ETF

Average Annual Total Returns¹

Fund and Inception Date	6 Months	1 Year	3 Years	Since Inception^*
Fund: Schwab Fundamental U.S. Small Company Index ETF (8/15/13)
Market Price Return²	-0.68%	12.22%	6.76%	9.61%
NAV Return²	-0.71%	12.26%	6.74%	9.60%
Russell RAFI^TM US Small Company Index	-0.69%	12.46%	6.99%	9.91%
Russell 2000^® Index	2.04%	14.91%	7.67%	9.02%
ETF Category: Morningstar Small Blend³	0.69%	12.67%	5.80%	7.72%
Fund Expense Ratio⁴: 0.25%

The first index listed for the fund is the fund’s primary benchmark, as shown in the prospectus. Additional indices shown are provided for comparative purposes.

For index definitions, please see the Glossary.

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

Small-company stocks may be subject to greater volatility than many other asset classes.

Index ownership — Russell^® is a trademark owned by Frank Russell Company (Russell). The Russell RAFI™ Index Series are calculated by Russell in conjunction with Research Affiliates^® LLC (RA). Neither Russell nor RA sponsor, endorse or promote the Schwab Fundamental U.S. Small Company Index ETF and are not in any way connected to it and do not accept any liability in relation to its issue, operation and trading. Any intellectual property rights in the index values and constituent list vests in Russell. “Research Affiliates^®”, “Fundamental Index^®” and “RAFI^®” trade names are the exclusive property of RA. CSIM has obtained full license from Russell to use such intellectual property rights in the creation of this fund. For full disclaimer please see the fund’s statement of additional information. Effective December 1, 2016, the name of the index was changed by the index provider. No other changes to the index have occurred.

^*	Inception (8/15/13) represents the date that the shares began trading in the secondary market.
¹	Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption of fund shares.
²	ETF performance must be shown based on both a market price and NAV basis. The fund’s per share NAV is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which the shares of the fund are listed for trading, as of the time that the fund’s NAV is calculated. NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively.
³	Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date.
⁴	As stated in the prospectus.

₁₁

Schwab Fundamental Index ETFs | Semiannual Report

Schwab Fundamental International Large Company Index ETF

Average Annual Total Returns¹

Fund and Inception Date	6 Months	1 Year	3 Years	Since Inception^*
Fund: Schwab Fundamental International Large Company Index ETF (8/15/13)
Market Price Return²	11.42%	19.65%	2.32%	5.30%
NAV Return²	11.00%	19.68%	2.29%	5.20%
Russell RAFI^TM Developed ex US Large Company Index (Net)³	10.90%	19.79%	2.39%	5.39%
MSCI EAFE^® Index (Net)³	12.14%	17.64%	2.83%	4.84%
ETF Category: Morningstar Foreign Large Value⁴	11.01%	17.42%	1.24%	4.25%
Fund Expense Ratio⁵: 0.25%

The first index listed for the fund is the fund’s primary benchmark, as shown in the prospectus. Additional indices shown are provided for comparative purposes.

For index definitions, please see the Glossary.

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

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

Index ownership — Russell^® is a trademark owned by Frank Russell Company (Russell). The Russell RAFI™ Index Series are calculated by Russell in conjunction with Research Affiliates^® LLC (RA). Neither Russell nor RA sponsor, endorse or promote the Schwab Fundamental International Large Company Index ETF and are not in any way connected to it and do not accept any liability in relation to its issue, operation and trading. Any intellectual property rights in the index values and constituent list vests in Russell. “Research Affiliates^®”, “Fundamental Index^®” and “RAFI^®” trade names are the exclusive property of RA. CSIM has obtained full license from Russell to use such intellectual property rights in the creation of this fund. For full disclaimer please see the fund’s statement of additional information. Effective December 1, 2016, the name of the index was changed by the index provider. No other changes to the index have occurred.

^*	Inception (8/15/13) represents the date that the shares began trading in the secondary market.
¹	Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption of fund shares.
²	ETF performance must be shown based on both a market price and NAV basis. The fund’s per share NAV is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which the shares of the fund are listed for trading, as of the time that the fund’s NAV is calculated. NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively.
³	The net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.
⁴	Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date.
⁵	As stated in the prospectus.

₁₃

Schwab Fundamental Index ETFs | Semiannual Report

Schwab Fundamental International Small Company Index ETF

Average Annual Total Returns¹

Fund and Inception Date	6 Months	1 Year	3 Years	Since Inception^*
Fund: Schwab Fundamental International Small Company Index ETF (8/15/13)
Market Price Return²	13.45%	22.08%	7.80%	9.18%
NAV Return²	12.77%	21.86%	7.81%	9.05%
Russell RAFI^TM Developed ex US Small Company Index (Net)³	12.74%	22.18%	8.17%	9.55%
S&P Developed ex-U.S. Small Cap Index (Net)³	14.62%	20.16%	6.54%	8.63%
ETF Category: Morningstar Foreign Small/Mid Blend⁴	15.28%	22.16%	6.16%	7.92%
Fund Expense Ratio⁵: 0.39%

The first index listed for the fund is the fund’s primary benchmark, as shown in the prospectus. Additional indices shown are provided for comparative purposes.

For index definitions, please see the Glossary.

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

Small-company stocks may be subject to greater volatility than many other asset classes.

Index ownership — Russell^® is a trademark owned by Frank Russell Company (Russell). The Russell RAFI™ Index Series are calculated by Russell in conjunction with Research Affiliates^® LLC (RA). Neither Russell nor RA sponsor, endorse or promote the Schwab Fundamental International Small Company Index ETF and are not in any way connected to it and do not accept any liability in relation to its issue, operation and trading. Any intellectual property rights in the index values and constituent list vests in Russell. “Research Affiliates^®”, “Fundamental Index^®” and “RAFI^®” trade names are the exclusive property of RA. CSIM has obtained full license from Russell to use such intellectual property rights in the creation of this fund. For full disclaimer please see the fund’s statement of additional information. Effective December 1, 2016, the name of the index was changed by the index provider. No other changes to the index have occurred.

^*	Inception (8/15/13) represents the date that the shares began trading in the secondary market.
¹	Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption of fund shares.
²	ETF performance must be shown based on both a market price and NAV basis. The fund’s per share NAV is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which the shares of the fund are listed for trading, as of the time that the fund’s NAV is calculated. NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively.
³	The net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.
⁴	Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date.
⁵	As stated in the prospectus.

₁₅

Schwab Fundamental Index ETFs | Semiannual Report

Schwab Fundamental Emerging Markets Large Company Index ETF

Average Annual Total Returns¹

Fund and Inception Date	6 Months	1 Year	3 Years	Since Inception^*
Fund: Schwab Fundamental Emerging Markets Large Company Index ETF (8/15/13)
Market Price Return²	11.15%	26.91%	1.70%	4.90%
NAV Return²	10.28%	26.39%	1.68%	4.83%
Russell RAFI^TM Emerging Markets Large Company Index (Net)³	10.47%	27.07%	2.22%	5.43%
MSCI Emerging Markets Index (Net)³	18.02%	24.53%	2.38%	5.41%
ETF Category: Morningstar Diversified Emerging Markets⁴	16.68%	21.69%	1.68%	4.54%
Fund Expense Ratio⁵: 0.39%

The first index listed for the fund is the fund’s primary benchmark, as shown in the prospectus. Additional indices shown are provided for comparative purposes.

For index definitions, please see the Glossary.

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

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

Index ownership — Russell^® is a trademark owned by Frank Russell Company (Russell). The Russell RAFI™ Index Series are calculated by Russell in conjunction with Research Affiliates^® LLC (RA). Neither Russell nor RA sponsor, endorse or promote the Schwab Fundamental Emerging Markets Large Company Index ETF and are not in any way connected to it and do not accept any liability in relation to its issue, operation and trading. Any intellectual property rights in the index values and constituent list vests in Russell. “Research Affiliates^®”, “Fundamental Index^®” and “RAFI^®” trade names are the exclusive property of RA. CSIM has obtained full license from Russell to use such intellectual property rights in the creation of this fund. For full disclaimer please see the fund’s statement of additional information. Effective December 1, 2016, the name of the index was changed by the index provider. No other changes to the index have occurred.

^*	Inception (8/15/13) represents the date that the shares began trading in the secondary market.
¹	Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption of fund shares.
²	ETF performance must be shown based on both a market price and NAV basis. The fund’s per share NAV is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which the shares of the fund are listed for trading, as of the time that the fund’s NAV is calculated. NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively.
³	The net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.
⁴	Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date.
⁵	As stated in the prospectus.

₁₇

Schwab Fundamental Index ETFs | Semiannual Report

Schwab Fundamental Index ETFs

Fund Expenses (Unaudited)

Examples for a $1,000 Investment

The expense examples below are intended to help you understand your ongoing cost (in dollars) of investing in a fund and to compare this cost with the ongoing cost of investing in other mutual funds. These examples are based on an investment of $1,000 invested for six months beginning March 1, 2017 and held through August 31, 2017.

Actual Return lines in the table below provide information about actual account values and actual expenses. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value ÷ $1,000 = 8.6), then multiply the result by the number given for your fund under the heading entitled “Expenses Paid During Period.”

Hypothetical Return lines in the table below provide information about hypothetical account values and hypothetical expenses based on a fund’s actual expense ratio and an assumed return of 5% per year before expenses. Because the return used is not an actual return, it may not be used to estimate the actual ending account value or expenses you paid for the period.

You may use this information to compare the ongoing costs of investing in a fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

	Expense Ratio (Annualized)¹	Beginning Account Value at 3/1/17	Ending Account Value (Net of Expenses) at 8/31/17	Expenses Paid During Period 3/1/17-8/31/17²
Schwab Fundamental U.S. Broad Market Index ETF
Actual Return	0.25%	$1,000.00	$1,016.70	$1.27
Hypothetical 5% Return	0.25%	$1,000.00	$1,023.94	$1.28
Schwab Fundamental U.S. Large Company Index ETF
Actual Return	0.25%	$1,000.00	$1,019.00	$1.27
Hypothetical 5% Return	0.25%	$1,000.00	$1,023.94	$1.28
Schwab Fundamental U.S. Small Company Index ETF
Actual Return	0.25%	$1,000.00	$ 992.90	$1.26
Hypothetical 5% Return	0.25%	$1,000.00	$1,023.94	$1.28
Schwab Fundamental International Large Company Index ETF
Actual Return	0.25%	$1,000.00	$1,110.00	$1.33
Hypothetical 5% Return	0.25%	$1,000.00	$1,023.94	$1.28
Schwab Fundamental International Small Company Index ETF
Actual Return	0.39%	$1,000.00	$1,127.70	$2.09
Hypothetical 5% Return	0.39%	$1,000.00	$1,023.23	$1.99
Schwab Fundamental Emerging Markets Large Company Index ETF
Actual Return	0.39%	$1,000.00	$1,102.80	$2.07
Hypothetical 5% Return	0.39%	$1,000.00	$1,023.23	$1.99

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 or share class are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by 184 days of the period, and divided by 365 days of the fiscal year.

₁₉

Schwab Fundamental Index ETFs | Semiannual Report

Schwab Fundamental U.S. Broad Market Index ETF

Condensed Portfolio Holdings as of August 31, 2017 (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™ at 1-877-824-5615. This complete schedule, filed on the fund's Form N-CSR(S), is also available on the SEC's website at www.sec.gov.

In addition, the fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's website and may be viewed and copied at the SEC's Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the Public Reference Room. The fund also makes available its complete schedule of portfolio holdings on a daily basis on the fund's website at www.schwabfunds.com/schwabetfs_prospectus.

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 99.5% of net assets

Automobiles & Components 1.4%
General Motors Co.	34,235	0.5	1,250,947
Other Securities		0.9	2,584,905
		1.4	3,835,852

Banks 5.0%
Bank of America Corp.	61,555	0.5	1,470,549
Citigroup, Inc.	30,675	0.8	2,086,820
JPMorgan Chase & Co.	34,472	1.2	3,133,160
Wells Fargo & Co.	46,819	0.9	2,391,046
Other Securities		1.6	4,392,487
		5.0	13,474,062

Capital Goods 8.6%
3M Co.	6,149	0.5	1,256,364
Caterpillar, Inc.	10,223	0.4	1,201,100
General Electric Co.	96,647	0.9	2,372,684
The Boeing Co.	5,903	0.5	1,414,713
United Technologies Corp.	11,913	0.5	1,426,224
Other Securities		5.8	15,433,958
		8.6	23,105,043

Commercial & Professional Services 1.0%
Other Securities		1.0	2,589,605

Consumer Durables & Apparel 1.3%
Other Securities		1.3	3,577,622

Consumer Services 2.2%
McDonald's Corp.	11,108	0.7	1,776,947
Other Securities		1.5	4,033,494
		2.2	5,810,441

Diversified Financials 4.7%
Berkshire Hathaway, Inc., Class B *	15,230	1.0	2,759,067
The Charles Schwab Corp. (a)	3,526	0.1	140,687
The Goldman Sachs Group, Inc.	5,734	0.5	1,282,925
Other Securities		3.1	8,430,902
		4.7	12,613,581

Energy 11.7%
Chevron Corp.	54,950	2.2	5,913,719
ConocoPhillips	49,392	0.8	2,156,455

Security	Number of Shares	% of Net Assets	Value ($)
Exxon Mobil Corp.	115,992	3.3	8,853,669
Marathon Petroleum Corp.	20,312	0.4	1,065,364
Phillips 66	18,243	0.6	1,528,946
Schlumberger Ltd.	17,783	0.4	1,129,398
Valero Energy Corp.	22,100	0.6	1,505,010
Other Securities		3.4	9,049,126
		11.7	31,201,687

Food & Staples Retailing 3.4%
Costco Wholesale Corp.	6,692	0.4	1,048,904
CVS Health Corp.	26,412	0.8	2,042,704
Wal-Mart Stores, Inc.	46,095	1.3	3,598,637
Other Securities		0.9	2,349,260
		3.4	9,039,505

Food, Beverage & Tobacco 4.4%
PepsiCo, Inc.	15,652	0.7	1,811,406
Philip Morris International, Inc.	18,333	0.8	2,143,678
The Coca-Cola Co.	39,497	0.7	1,799,088
Other Securities		2.2	6,031,939
		4.4	11,786,111

Health Care Equipment & Services 5.5%
Anthem, Inc.	7,700	0.6	1,509,508
Express Scripts Holding Co. *	16,777	0.4	1,053,931
UnitedHealth Group, Inc.	11,403	0.8	2,268,057
Other Securities		3.7	9,964,652
		5.5	14,796,148

Household & Personal Products 1.8%
The Procter & Gamble Co.	33,715	1.2	3,110,883
Other Securities		0.6	1,704,567
		1.8	4,815,450

Insurance 3.7%
American International Group, Inc.	24,466	0.6	1,479,704
Other Securities		3.1	8,478,775
		3.7	9,958,479

Materials 4.2%
Other Securities		4.2	11,338,915

Media 3.0%
Comcast Corp., Class A	44,750	0.7	1,817,297
The Walt Disney Co.	15,655	0.6	1,584,286

₂₁

Schwab Fundamental Index ETFs | Semiannual Report

See financial notes

Schwab Fundamental U.S. Broad Market Index ETF

Condensed Portfolio Holdings as of August 31, 2017 (Unaudited) (continued)

Security	Number of Shares	% of Net Assets	Value ($)
Time Warner, Inc.	13,673	0.5	1,382,340
Other Securities		1.2	3,117,042
		3.0	7,900,965

Pharmaceuticals, Biotechnology & Life Sciences 5.7%
Amgen, Inc.	6,249	0.4	1,110,885
Johnson & Johnson	22,411	1.1	2,966,544
Merck & Co., Inc.	34,070	0.8	2,175,710
Pfizer, Inc.	100,247	1.3	3,400,378
Other Securities		2.1	5,679,837
		5.7	15,333,354

Real Estate 2.1%
Other Securities		2.1	5,519,925

Retailing 4.4%
Lowe's Cos., Inc.	14,947	0.4	1,104,434
The Home Depot, Inc.	12,858	0.7	1,927,028
Other Securities		3.3	8,792,136
		4.4	11,823,598

Semiconductors & Semiconductor Equipment 2.9%
Intel Corp.	83,849	1.1	2,940,584
Other Securities		1.8	4,715,450
		2.9	7,656,034

Software & Services 7.2%
International Business Machines Corp.	19,940	1.1	2,852,018
Microsoft Corp.	62,087	1.7	4,642,245
Oracle Corp.	36,643	0.7	1,844,242
Other Securities		3.7	9,854,722
		7.2	19,193,227

Technology Hardware & Equipment 6.0%
Apple, Inc.	47,356	2.9	7,766,384
Cisco Systems, Inc.	58,073	0.7	1,870,531
Other Securities		2.4	6,288,530
		6.0	15,925,445

Telecommunication Services 3.0%
AT&T, Inc.	110,586	1.5	4,142,551
Verizon Communications, Inc.	58,699	1.1	2,815,791
Other Securities		0.4	1,013,094
		3.0	7,971,436

Security	Number of Shares	% of Net Assets	Value ($)
Transportation 2.2%
Union Pacific Corp.	10,062	0.4	1,059,529
Other Securities		1.8	4,835,506
		2.2	5,895,035

Utilities 4.1%
Other Securities		4.1	10,947,916
Total Common Stock
(Cost $235,599,208)			266,109,436

Other Investment Companies 0.8% of net assets

Money Market Fund 0.2%
Other Securities		0.2	526,652

Securities Lending Collateral 0.6%
Wells Fargo Government Money Market Fund, Select Class 0.92% (c)		0.6	1,646,898
Total Other Investment Companies
(Cost $2,173,550)			2,173,550

	Number of Contracts	Notional Amount ($)	Current Value/ Unrealized Appreciation ($)
Futures Contracts
Long
S&P 500 Index, e-mini, expires 09/15/17	10	1,235,050	7,219

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

*	Non-income producing security.
(a)	Issuer is affiliated with the fund's investment adviser.
(b)	All or a portion of this security is on loan. Securities on loan were valued at $1,592,372.
(c)	The rate shown is the 7-day yield.

REIT —

Real Estate Investment Trust

The fund may engage in certain transactions involving affiliates. For instance, the fund may own shares of The Charles Schwab Corporation (CSC) if that company is included in its index. Below is the summary of investment activities involving CSC shares owned by the fund during the report period:

	Balance of Shares Held at 2/28/17	Gross Purchases	Gross Sales	Balance of Shares Held at 8/31/17	Net change in unrealized appreciation (depreciation)	Realized Gains(Losses) 3/1/17 to 8/31/17	Dividends Received 3/1/17 to 8/31/17
The Charles Schwab Corp.	3,460	154	(88)	3,526	($3,435)	$1,440	$566

₂₂

Schwab Fundamental Index ETFs | Semiannual Report

See financial notes

Schwab Fundamental U.S. Large Company Index ETF

Condensed Portfolio Holdings as of August 31, 2017 (Unaudited)

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 99.7% of net assets

Automobiles & Components 1.5%
General Motors Co.	422,688	0.5	15,445,020
Other Securities		1.0	29,619,190
		1.5	45,064,210

Banks 5.0%
Bank of America Corp.	773,323	0.6	18,474,687
Citigroup, Inc.	380,595	0.9	25,891,878
JPMorgan Chase & Co.	425,633	1.3	38,685,783
Wells Fargo & Co.	575,195	1.0	29,375,209
Other Securities		1.2	39,257,786
		5.0	151,685,343

Capital Goods 8.4%
3M Co.	74,613	0.5	15,244,928
Caterpillar, Inc.	127,242	0.5	14,949,663
General Electric Co.	1,198,752	1.0	29,429,362
The Boeing Co.	71,943	0.6	17,241,859
United Technologies Corp.	145,045	0.6	17,364,787
Other Securities		5.2	158,197,468
		8.4	252,428,067

Commercial & Professional Services 0.6%
Other Securities		0.6	17,760,740

Consumer Durables & Apparel 1.2%
Other Securities		1.2	36,466,138

Consumer Services 1.9%
McDonald's Corp.	135,480	0.7	21,672,736
Other Securities		1.2	36,110,534
		1.9	57,783,270

Diversified Financials 4.8%
Berkshire Hathaway, Inc., Class B *	188,230	1.1	34,099,747
The Charles Schwab Corp. (a)	39,188	0.1	1,563,601
The Goldman Sachs Group, Inc.	70,774	0.5	15,834,975
Other Securities		3.1	92,036,618
		4.8	143,534,941

Energy 12.3%
Chevron Corp.	678,362	2.4	73,005,318
ConocoPhillips	606,301	0.9	26,471,102

Security	Number of Shares	% of Net Assets	Value ($)
Exxon Mobil Corp.	1,429,908	3.6	109,144,878
Marathon Petroleum Corp.	247,457	0.4	12,979,120
Phillips 66	225,298	0.6	18,882,225
Schlumberger Ltd.	219,094	0.5	13,914,660
Valero Energy Corp.	270,179	0.6	18,399,190
Other Securities		3.3	99,517,538
		12.3	372,314,031

Food & Staples Retailing 3.6%
Costco Wholesale Corp.	82,128	0.4	12,872,743
CVS Health Corp.	326,947	0.8	25,286,081
Wal-Mart Stores, Inc.	570,659	1.5	44,551,348
Other Securities		0.9	26,738,531
		3.6	109,448,703

Food, Beverage & Tobacco 4.6%
PepsiCo, Inc.	193,814	0.7	22,430,094
Philip Morris International, Inc.	223,728	0.9	26,160,515
The Coca-Cola Co.	488,740	0.7	22,262,107
Other Securities		2.3	67,771,021
		4.6	138,623,737

Health Care Equipment & Services 5.6%
Anthem, Inc.	93,514	0.6	18,332,485
Express Scripts Holding Co. *	206,018	0.4	12,942,051
UnitedHealth Group, Inc.	139,966	0.9	27,839,237
Other Securities		3.7	110,487,201
		5.6	169,600,974

Household & Personal Products 1.9%
The Procter & Gamble Co.	414,353	1.3	38,232,351
Other Securities		0.6	19,087,165
		1.9	57,319,516

Insurance 3.8%
American International Group, Inc.	302,470	0.6	18,293,386
Other Securities		3.2	96,255,634
		3.8	114,549,020

Materials 4.0%
Other Securities		4.0	122,221,308

Media 3.0%
Comcast Corp., Class A	556,650	0.7	22,605,557
The Walt Disney Co.	195,422	0.7	19,776,706

₂₈

Schwab Fundamental Index ETFs | Semiannual Report

See financial notes

Schwab Fundamental U.S. Large Company Index ETF

Condensed Portfolio Holdings as of August 31, 2017 (Unaudited) (continued)

Security	Number of Shares	% of Net Assets	Value ($)
Time Warner, Inc.	166,607	0.6	16,843,968
Other Securities		1.0	32,123,910
		3.0	91,350,141

Pharmaceuticals, Biotechnology & Life Sciences 6.0%
Amgen, Inc.	77,660	0.5	13,805,618
Johnson & Johnson	277,186	1.2	36,691,111
Merck & Co., Inc.	419,768	0.9	26,806,385
Pfizer, Inc.	1,234,277	1.4	41,866,676
Other Securities		2.0	61,085,465
		6.0	180,255,255

Real Estate 1.3%
Other Securities		1.3	39,697,138

Retailing 4.4%
Lowe's Cos., Inc.	181,150	0.4	13,385,174
The Home Depot, Inc.	157,730	0.8	23,638,995
Other Securities		3.2	96,038,139
		4.4	133,062,308

Semiconductors & Semiconductor Equipment 2.9%
Intel Corp.	1,034,522	1.2	36,280,687
Other Securities		1.7	52,128,717
		2.9	88,409,404

Software & Services 7.3%
International Business Machines Corp.	244,801	1.2	35,013,887
Microsoft Corp.	761,965	1.9	56,972,123
Oracle Corp.	454,149	0.8	22,857,319
Other Securities		3.4	104,070,726
		7.3	218,914,055

Technology Hardware & Equipment 6.0%
Apple, Inc.	583,903	3.2	95,760,092
Cisco Systems, Inc.	714,369	0.8	23,009,825
Other Securities		2.0	63,905,641
		6.0	182,675,558

Telecommunication Services 3.2%
AT&T, Inc.	1,360,526	1.7	50,965,304
Verizon Communications, Inc.	718,401	1.1	34,461,696
Other Securities		0.4	10,930,374
		3.2	96,357,374

Security	Number of Shares	% of Net Assets	Value ($)
Transportation 2.2%
Union Pacific Corp.	122,586	0.4	12,908,306
Other Securities		1.8	52,374,664
		2.2	65,282,970

Utilities 4.2%
Other Securities		4.2	125,520,762
Total Common Stock
(Cost $2,769,717,336)			3,010,324,963

Other Investment Companies 0.8% of net assets

Money Market Fund 0.2%
Other Securities		0.2	6,604,197

Securities Lending Collateral 0.6%
Wells Fargo Government Money Market Fund, Select Class 0.92% (c)		0.6	17,801,055
Total Other Investment Companies
(Cost $24,405,252)			24,405,252

	Number of Contracts	Notional Amount ($)	Current Value/ Unrealized Appreciation ($)
Futures Contracts
Long
S&P 500 Index, e-mini, expires 09/15/17	62	7,657,310	82,252

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

*	Non-income producing security.
(a)	Issuer is affiliated with the fund's adviser.
(b)	All or a portion of this security is on loan. Securities on loan were valued at $17,201,227.
(c)	The rate shown is the 7-day yield.

	Balance of Shares Held at 2/28/17	Gross Purchases	Gross Sales	Balance of Shares Held at 8/31/17	Net change in unrealized appreciation (depreciation)	Realized Gains(Losses) 3/1/17 to 8/31/17	Dividends Received 3/1/17 to 8/31/17
The Charles Schwab Corp.	31,379	11,024	(3,215)	39,188	($19,007)	($2,065)	$5,956

₂₉

Schwab Fundamental Index ETFs | Semiannual Report

See financial notes

Schwab Fundamental U.S. Small Company Index ETF

Condensed Portfolio Holdings as of August 31, 2017 (Unaudited)

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 99.8% of net assets

Automobiles & Components 0.8%
Other Securities		0.8	15,699,771

Banks 5.4%
East West Bancorp, Inc.	89,155	0.2	4,936,512
Other Securities		5.2	104,222,110
		5.4	109,158,622

Capital Goods 12.0%
Armstrong World Industries, Inc. *	134,605	0.3	6,393,737
GATX Corp. (a)	80,446	0.2	4,873,419
Kennametal, Inc.	151,375	0.3	5,298,125
Triumph Group, Inc.	209,431	0.3	5,508,035
Other Securities		10.9	220,651,121
		12.0	242,724,437

Commercial & Professional Services 5.2%
Copart, Inc. *	155,937	0.3	5,097,581
IHS Markit Ltd. *	134,805	0.3	6,314,266
The Brink's Co.	64,062	0.2	5,025,664
Verisk Analytics, Inc. *	75,104	0.3	6,087,179
Other Securities		4.1	82,806,215
		5.2	105,330,905

Consumer Durables & Apparel 2.9%
Other Securities		2.9	59,152,144

Consumer Services 5.2%
Graham Holdings Co., Class B	8,584	0.2	5,040,525
Hilton Worldwide Holdings, Inc.	78,323	0.2	5,038,519
Weight Watchers International, Inc. *	214,616	0.5	10,046,175
Other Securities		4.3	85,170,750
		5.2	105,295,969

Diversified Financials 4.4%
ETRADE Financial Corp.	134,381	0.3	5,510,965
FNFV Group *	503,697	0.4	8,487,294
Other Securities		3.7	74,454,513
		4.4	88,452,772

Security	Number of Shares	% of Net Assets	Value ($)
Energy 4.4%
Cimarex Energy Co.	49,732	0.2	4,957,783
Other Securities		4.2	83,648,749
		4.4	88,606,532

Food & Staples Retailing 0.8%
Other Securities		0.8	15,523,105

Food, Beverage & Tobacco 2.5%
Sanderson Farms, Inc.	44,754	0.3	6,602,110
Other Securities		2.2	44,595,596
		2.5	51,197,706

Health Care Equipment & Services 4.7%
IDEXX Laboratories, Inc. *	34,865	0.3	5,419,067
Select Medical Holdings Corp. *	291,489	0.3	5,421,695
The Cooper Cos., Inc.	20,633	0.3	5,175,375
Other Securities		3.8	79,245,516
		4.7	95,261,653

Household & Personal Products 0.7%
Edgewell Personal Care Co. *	64,741	0.2	4,916,431
Other Securities		0.5	10,126,735
		0.7	15,043,166

Insurance 3.0%
Other Securities		3.0	60,515,778

Materials 6.7%
AptarGroup, Inc.	76,331	0.3	6,382,035
Cabot Corp.	100,734	0.3	5,306,667
Olin Corp.	152,466	0.2	4,913,979
Southern Copper Corp.	145,602	0.3	5,926,001
Other Securities		5.6	112,873,069
		6.7	135,401,751

Media 2.2%
Sirius XM Holdings, Inc. (a)	847,949	0.2	4,875,707
Time, Inc.	387,970	0.3	5,101,805
Other Securities		1.7	35,714,228
		2.2	45,691,740

₃₅

Schwab Fundamental Index ETFs | Semiannual Report

See financial notes

Schwab Fundamental U.S. Small Company Index ETF

Condensed Portfolio Holdings as of August 31, 2017 (Unaudited) (continued)

Security	Number of Shares	% of Net Assets	Value ($)
Pharmaceuticals, Biotechnology & Life Sciences 3.2%
PerkinElmer, Inc.	76,978	0.3	5,156,756
Quintiles IMS Holdings, Inc. *	67,844	0.3	6,515,059
Other Securities		2.6	52,517,577
		3.2	64,189,392

Real Estate 10.7%
Camden Property Trust	56,912	0.3	5,092,486
Liberty Property Trust	115,495	0.2	4,920,087
Mid-America Apartment Communities, Inc.	53,463	0.3	5,691,671
SBA Communications Corp. *	35,054	0.3	5,382,542
UDR, Inc.	135,671	0.3	5,266,748
Other Securities		9.3	190,038,099
		10.7	216,391,633

Retailing 4.5%
Aaron's, Inc.	119,858	0.3	5,306,114
Guess?, Inc.	413,063	0.3	6,435,521
Other Securities		3.9	79,802,027
		4.5	91,543,662

Semiconductors & Semiconductor Equipment 2.0%
Teradyne, Inc.	163,231	0.3	5,812,656
Other Securities		1.7	35,836,401
		2.0	41,649,057

Software & Services 6.7%
CSRA, Inc.	214,833	0.3	6,769,388
Gartner, Inc. *	40,655	0.2	4,902,586
Red Hat, Inc. *	55,679	0.3	5,985,493
Synopsys, Inc. *	61,933	0.2	4,980,652
VeriSign, Inc. *	57,089	0.3	5,922,984
Other Securities		5.4	107,554,679
		6.7	136,115,782

Technology Hardware & Equipment 4.9%
Insight Enterprises, Inc. *	129,208	0.3	5,178,657
Trimble, Inc. *	133,155	0.3	5,150,435
Vishay Intertechnology, Inc.	361,468	0.3	6,397,984
Other Securities		4.0	82,806,680
		4.9	99,533,756

Telecommunication Services 0.6%
Other Securities		0.6	11,777,529

Security	Number of Shares	% of Net Assets	Value ($)
Transportation 2.8%
Copa Holdings S.A., Class A	44,244	0.3	5,489,353
Landstar System, Inc.	56,820	0.3	5,304,147
Other Securities		2.2	46,418,995
		2.8	57,212,495

Utilities 3.5%
Hawaiian Electric Industries, Inc.	148,332	0.2	4,957,255
PNM Resources, Inc.	126,025	0.3	5,343,460
Portland General Electric Co.	106,255	0.2	5,048,175
Other Securities		2.8	54,840,125
		3.5	70,189,015
Total Common Stock
(Cost $1,864,811,114)			2,021,658,372

Other Investment Companies 2.5% of net assets

Money Market Fund 0.1%
Other Securities		0.1	1,132,435

Securities Lending Collateral 2.4%
Wells Fargo Government Money Market Fund, Select Class 0.92% (b)		2.4	49,095,431
Total Other Investment Companies
(Cost $50,227,866)			50,227,866

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 $47,820,174.
(b)	The rate shown is the 7-day yield.

REIT —

Real Estate Investment Trust

₃₆

Schwab Fundamental Index ETFs | Semiannual Report

See financial notes

Schwab Fundamental International Large Company Index ETF

Financial Statements

Financial Highlights

	3/1/17– 8/31/17*	3/1/16– 2/28/17	3/1/15– 2/29/16	3/1/14– 2/28/15	8/14/13 ¹– 2/28/14
Per-Share Data
Net asset value at beginning of period	$26.00	$22.08	$27.17	$28.26	$25.00
Income (loss) from investment operations:
Net investment income (loss)	0.55 ²	0.74 ²	0.70 ²	0.30	0.36
Net realized and unrealized gains (losses)	2.31	3.79	(5.30)	(0.92) ³	3.04
Total from investment operations	2.86	4.53	(4.60)	(0.62)	3.40
Less distributions:
Distributions from net investment income	—	(0.61)	(0.49)	(0.47)	(0.14)
Net asset value at end of period	$28.86	$26.00	$22.08	$27.17	$28.26
Total return	11.00% ⁴	20.62%	(17.02%)	(2.11%)	13.60% ⁴
Ratios/Supplemental Data
Ratios to average net assets:
Total expenses	0.25% ⁵	0.32%	0.32%	0.32%	0.32% ⁵
Net investment income (loss)	3.95% ⁵	2.98%	2.80%	2.50%	4.00% ⁵
Portfolio turnover rate⁶	5% ⁴	11%	12%	11%	8% ⁴
Net assets, end of period (x 1,000)	$2,854,221	$1,928,861	$885,348	$290,670	$62,164

*	Unaudited.

Commencement of operations.

Calculated based on the average shares outstanding during the period.

The per share amount does not accord with the change in aggregate gains and losses in securities during the period because of the timing of sales and repurchases of fund shares in relation to fluctuating market values.

⁴

Not annualized.

⁵

Annualized.

⁶

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

₄₁

Schwab Fundamental Index ETFs | Semiannual Report

See financial notes

Schwab Fundamental International Large Company Index ETF

Condensed Portfolio Holdings as of August 31, 2017 (Unaudited)

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 98.9% of net assets

Australia 6.2%
Australia & New Zealand Banking Group Ltd.	538,456	0.4	12,556,041
BHP Billiton Ltd.	1,087,235	0.8	23,610,873
Commonwealth Bank of Australia	247,674	0.5	14,890,346
National Australia Bank Ltd.	485,092	0.4	11,619,468
Wesfarmers Ltd.	386,171	0.5	13,054,140
Westpac Banking Corp.	578,762	0.5	14,354,335
Other Securities		3.1	85,769,325
		6.2	175,854,528

Austria 0.4%
Other Securities		0.4	12,690,445

Belgium 0.8%
Other Securities		0.8	23,666,525

Canada 6.8%
Royal Bank of Canada	176,268	0.5	13,030,124
Suncor Energy, Inc.	418,664	0.5	13,066,658
Other Securities		5.8	167,602,556
		6.8	193,699,338

Denmark 1.0%
Other Securities		1.0	27,116,191

Finland 0.9%
Other Securities		0.9	27,022,794

France 10.1%
BNP Paribas S.A.	196,842	0.5	14,956,560
Engie S.A.	1,052,297	0.6	17,540,077
Orange S.A.	816,436	0.5	13,856,176
Sanofi	205,513	0.7	19,952,339
Societe Generale S.A.	240,979	0.5	13,474,086
Total S.A.	903,617	1.6	46,673,389
Other Securities		5.7	162,186,065
		10.1	288,638,692

Germany 9.4%
Allianz SE	85,642	0.6	18,302,096
BASF SE	234,683	0.8	22,703,410
Bayer AG	113,584	0.5	14,516,796

Security	Number of Shares	% of Net Assets	Value ($)
Daimler AG	276,626	0.7	20,137,354
Deutsche Telekom AG	886,999	0.6	15,987,018
E.ON SE	2,026,200	0.8	22,872,963
RWE AG *	513,503	0.4	12,793,100
Siemens AG	134,195	0.6	17,517,971
Other Securities		4.4	123,067,408
		9.4	267,898,116

Hong Kong 1.4%
Other Securities		1.4	39,410,557

Ireland 0.6%
Other Securities		0.6	16,522,309

Israel 0.3%
Other Securities		0.3	8,305,537

Italy 3.7%
Enel S.p.A.	3,344,182	0.7	20,217,432
Eni S.p.A.	1,576,558	0.9	24,685,440
UniCredit S.p.A. *	749,050	0.5	15,219,417
Other Securities		1.6	45,142,210
		3.7	105,264,499

Japan 21.6%
Hitachi Ltd.	2,111,117	0.5	14,520,403
Honda Motor Co., Ltd.	517,423	0.5	14,484,647
Mitsubishi UFJ Financial Group, Inc.	2,088,134	0.4	12,789,489
Nippon Telegraph & Telephone Corp.	302,675	0.5	15,037,497
Toyota Motor Corp.	515,071	1.0	28,935,889
Other Securities		18.7	529,768,352
		21.6	615,536,277

Luxembourg 0.5%
Other Securities		0.5	14,235,048

Netherlands 4.8%
Royal Dutch Shell plc, A Shares	1,006,182	1.0	27,687,189
Royal Dutch Shell plc, B Shares	1,544,668	1.5	43,002,209
Unilever N.V. CVA	191,404	0.4	11,380,281
Other Securities		1.9	55,183,293
		4.8	137,252,972

₄₂

Schwab Fundamental Index ETFs | Semiannual Report

See financial notes

Schwab Fundamental International Large Company Index ETF

Condensed Portfolio Holdings as of August 31, 2017 (Unaudited) (continued)

Security	Number of Shares	% of Net Assets	Value ($)
New Zealand 0.1%
Other Securities		0.1	3,130,925

Norway 1.0%
Statoil A.S.A.	633,750	0.4	11,974,685
Other Securities		0.6	15,466,721
		1.0	27,441,406

Portugal 0.2%
Other Securities		0.2	6,709,216

Singapore 0.8%
Other Securities		0.8	23,696,934

Spain 4.3%
Banco Santander S.A.	6,012,382	1.4	39,021,575
Repsol S.A.	735,379	0.4	12,616,029
Telefonica S.A.	2,170,095	0.8	23,372,445
Other Securities		1.7	48,447,897
		4.3	123,457,946

Sweden 2.4%
Other Securities		2.4	69,895,733

Switzerland 6.3%
Glencore plc *	4,770,498	0.8	22,098,559
Nestle S.A.	385,403	1.1	32,624,905
Novartis AG	291,600	0.9	24,547,804
Roche Holding AG	75,007	0.7	19,005,416
Other Securities		2.8	80,767,206
		6.3	179,043,890

United Kingdom 15.3%
AstraZeneca plc	258,807	0.5	15,143,591
BHP Billiton plc	731,653	0.5	13,920,023
BP plc	9,896,855	2.0	56,768,174
British American Tobacco plc	246,681	0.5	15,355,858
GlaxoSmithKline plc	803,856	0.6	15,884,128
HSBC Holdings plc	3,726,985	1.3	36,042,067
Rio Tinto plc	337,985	0.6	16,316,406
Vodafone Group plc	8,863,873	0.9	25,287,301
Other Securities		8.4	242,612,935
		15.3	437,330,483
Total Common Stock
(Cost $2,540,212,981)			2,823,820,361

Preferred Stock 0.6% of net assets

Germany 0.6%
Volkswagen AG	88,671	0.5	13,214,511
Other Securities		0.1	3,076,163
		0.6	16,290,674

Security	Number of Shares	% of Net Assets	Value ($)
Italy 0.0%
Other Securities		0.0	750,564

Spain 0.0%
Other Securities		0.0	397,696
Total Preferred Stock
(Cost $17,280,713)			17,438,934

Other Investment Companies 0.4% of net assets

United States 0.4%
Money Market Fund 0.2%
Other Securities		0.2	6,320,727

Securities Lending Collateral 0.2%
Other Securities		0.2	4,647,234
Total Other Investment Companies
(Cost $10,967,961)			10,967,961

	Number of Contracts	Notional Amount ($)	Current Value/ Unrealized Appreciation ($)
Futures Contracts
Long
MSCI EAFE Index, e-mini, expires 09/15/17	114	11,028,360	43,962

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 $4,429,591.
(b)	Fair-valued by management in accordance with procedures approved by the Board of Trustees.
(c)	The rate shown is the 7-day yield.

CDI —	CHESS Depositary Interest
CVA —	Dutch Certificate
GDR —	Global Depositary Receipt
REIT —	Real Estate Investment Trust
RSP —	Risparmio (Convertible Savings Shares)

₄₃

Schwab Fundamental Index ETFs | Semiannual Report

See financial notes

Schwab Fundamental International Small Company Index ETF

Financial Statements

Financial Highlights

	3/1/17– 8/31/17*	3/1/16– 2/28/17	3/1/15– 2/29/16	3/1/14– 2/28/15	8/14/13 ¹– 2/28/14
Per-Share Data
Net asset value at beginning of period	$29.99	$24.81	$27.22	$27.75	$25.00
Income (loss) from investment operations:
Net investment income (loss)	0.42 ²	0.55 ²	0.43 ²	0.41	0.15
Net realized and unrealized gains (losses)	3.41	5.18	(2.49)	(0.53) ³	2.78
Total from investment operations	3.83	5.73	(2.06)	(0.12)	2.93
Less distributions:
Distributions from net investment income	—	(0.55)	(0.35)	(0.41)	(0.18)
Net asset value at end of period	$33.82	$29.99	$24.81	$27.22	$27.75
Total return	12.77% ⁴	23.26%	(7.64%)	(0.32%)	11.73% ⁴
Ratios/Supplemental Data
Ratios to average net assets:
Total expenses	0.39% ⁵	0.46%	0.46%	0.46%	0.46% ⁵
Net investment income (loss)	2.58% ⁵	1.94%	1.65%	1.73%	1.09% ⁵
Portfolio turnover rate⁶	10% ⁴	25%	22%	21%	18% ⁴
Net assets, end of period (x 1,000)	$1,342,466	$866,749	$379,667	$68,046	$24,977

*	Unaudited.

Commencement of operations.

Calculated based on the average shares outstanding during the period.

⁴

Not annualized.

⁵

Annualized.

⁶

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

₄₈

Schwab Fundamental Index ETFs | Semiannual Report

See financial notes

Schwab Fundamental International Small Company Index ETF

Condensed Portfolio Holdings as of August 31, 2017 (Unaudited)

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 99.6% of net assets

Australia 5.9%
ALS Ltd.	328,224	0.2	2,074,836
Qantas Airways Ltd.	687,940	0.2	3,121,057
Other Securities		5.5	74,406,432
		5.9	79,602,325

Austria 1.1%
Other Securities		1.1	14,654,632

Belgium 1.3%
Other Securities		1.3	17,186,305

Canada 8.7%
Bombardier, Inc., B Shares *	1,562,340	0.2	3,115,334
Canadian Utilities Ltd., Class A	95,136	0.2	2,953,295
IAMGOLD Corp. *	337,325	0.2	2,230,448
IGM Financial, Inc.	74,488	0.2	2,429,363
Kinross Gold Corp. *	542,160	0.2	2,460,531
Quebecor, Inc., Class B	67,032	0.2	2,555,102
Waste Connections, Inc.	56,239	0.3	3,737,006
Yamana Gold, Inc.	756,520	0.2	2,226,567
Other Securities		7.0	95,806,713
		8.7	117,514,359

Denmark 1.5%
FLSmidth & Co. A/S	38,026	0.2	2,391,232
Other Securities		1.3	17,231,085
		1.5	19,622,317

Finland 1.5%
Other Securities		1.5	19,601,026

France 4.1%
Aeroports de Paris	12,058	0.2	2,148,212
Neopost S.A.	58,991	0.2	2,560,606
Other Securities		3.7	49,954,900
		4.1	54,663,718

Security	Number of Shares	% of Net Assets	Value ($)
Germany 2.6%
Fraport AG Frankfurt Airport Services Worldwide	21,217	0.2	2,090,890
STADA Arzneimittel AG	25,047	0.2	2,339,984
Other Securities		2.2	30,487,022
		2.6	34,917,896

Hong Kong 4.3%
Orient Overseas International Ltd.	308,287	0.2	2,851,865
Other Securities		4.1	55,285,412
		4.3	58,137,277

Ireland 0.8%
Other Securities		0.8	10,313,218

Israel 0.8%
Other Securities		0.8	11,181,435

Italy 3.3%
A2A S.p.A.	1,322,076	0.2	2,217,832
Ferrari N.V.	27,759	0.2	3,171,556
Hera S.p.A.	678,376	0.2	2,167,928
Leonardo S.p.A.	141,987	0.2	2,398,765
Other Securities		2.5	34,926,769
		3.3	44,882,850

Japan 37.9%
Benesse Holdings, Inc.	67,780	0.2	2,605,028
FamilyMart UNY Holdings Co., Ltd.	50,928	0.2	2,757,867
Fujikura Ltd.	282,475	0.2	2,294,500
Kamigumi Co., Ltd.	204,440	0.2	2,260,617
Kanematsu Corp.	954,197	0.2	2,245,475
Kinden Corp.	147,212	0.2	2,402,260
Konami Holdings Corp.	46,067	0.2	2,398,364
Kurita Water Industries Ltd.	74,264	0.2	2,135,613
Otsuka Corp.	32,908	0.2	2,176,724
Sharp Corp. *(a)	1,663,560	0.4	4,987,959
Shikoku Electric Power Co., Inc.	194,660	0.2	2,532,738
THK Co., Ltd.	65,327	0.2	2,178,358
TIS, Inc.	78,004	0.2	2,299,864
Yaskawa Electric Corp.	91,882	0.2	2,780,002
Other Securities		34.9	473,503,175
		37.9	509,558,544

₄₉

Schwab Fundamental Index ETFs | Semiannual Report

See financial notes

Schwab Fundamental International Small Company Index ETF

Condensed Portfolio Holdings as of August 31, 2017 (Unaudited) (continued)

Security	Number of Shares	% of Net Assets	Value ($)
Luxembourg 0.6%
Other Securities		0.6	7,620,596

Netherlands 2.4%
Aalberts Industries N.V.	52,561	0.2	2,335,554
VEON Ltd. ADR	541,481	0.2	2,285,050
Other Securities		2.0	27,102,589
		2.4	31,723,193

New Zealand 1.0%
Other Securities		1.0	12,888,304

Norway 1.4%
Other Securities		1.4	19,302,126

Portugal 0.5%
Other Securities		0.5	7,409,117

Singapore 2.0%
City Developments Ltd.	270,542	0.2	2,332,877
Genting Singapore plc	2,511,682	0.2	2,191,711
Venture Corp., Ltd.	212,890	0.2	2,476,923
Yangzijiang Shipbuilding Holdings Ltd.	2,023,542	0.2	2,227,684
Other Securities		1.2	17,386,959
		2.0	26,616,154

Spain 1.7%
Other Securities		1.7	22,252,474

Sweden 2.3%
Other Securities		2.3	31,189,426

Switzerland 3.0%
GAM Holding AG *	141,367	0.2	2,169,785
Sonova Holding AG	12,908	0.2	2,177,302
Other Securities		2.6	35,862,258
		3.0	40,209,345

United Kingdom 10.9%
Berendsen plc	142,797	0.2	2,327,614
Evraz plc	513,592	0.2	2,218,317
Hays plc	879,208	0.2	2,073,214
Janus Henderson Group plc	82,599	0.2	2,854,621
KAZ Minerals plc *	281,721	0.2	3,051,113
SIG plc	1,276,901	0.2	2,930,370
Other Securities		9.7	131,180,872
		10.9	146,636,121
Total Common Stock
(Cost $1,154,545,466)			1,337,682,758

Security	Number of Shares	% of Net Assets	Value ($)
Preferred Stock 0.1% of net assets

Germany 0.1%
Other Securities		0.1	688,804

Sweden 0.0%
Other Securities		0.0	520,385
Total Preferred Stock
(Cost $1,215,927)			1,209,189

Other Investment Companies 3.3% of net assets

United States 3.3%
Money Market Fund 0.2%
State Street Institutional U.S. Government Money Market Fund, Premier Class 0.93% (c)		0.2	2,638,859

Securities Lending Collateral 3.1%
Wells Fargo Government Money Market Fund, Select Class 0.92% (c)		3.1	41,240,693
Total Other Investment Companies
(Cost $43,879,552)			43,879,552

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 $39,283,192.
(b)	Fair-valued by management in accordance with procedures approved by the Board of Trustees.
(c)	The rate shown is the 7-day yield.

ADR —	American Depositary Receipt
CDI —	CHESS Depositary Interest
CVA —	Dutch Certificate
REIT —	Real Estate Investment Trust
RSP —	Risparmio (Convertible Savings Shares)

₅₀

Schwab Fundamental Index ETFs | Semiannual Report

See financial notes

Schwab Fundamental Emerging Markets Large Company Index ETF

Condensed Portfolio Holdings as of August 31, 2017 (Unaudited)

Security	Number of Shares	% of Net Assets	Value ($)
Common Stock 89.9% of net assets

Brazil 5.9%
Ambev S.A.	1,303,666	0.5	8,228,577
Banco do Brasil S.A.	1,000,807	0.6	9,764,902
Petroleo Brasileiro S.A. *	3,646,808	1.1	16,191,552
Vale S.A.	2,061,472	1.5	22,983,501
Other Securities		2.2	32,206,850
		5.9	89,375,382

Chile 0.6%
Other Securities		0.6	9,417,121

China 17.4%
Bank of China Ltd., H Shares	36,962,224	1.3	19,457,655
China Construction Bank Corp., H Shares	44,439,398	2.6	38,951,794
China Mobile Ltd.	2,381,011	1.7	25,250,773
China Petroleum & Chemical Corp., H Shares	31,545,477	1.6	24,143,438
China Unicom (Hong Kong) Ltd. *	4,227,937	0.4	6,158,409
CNOOC Ltd.	12,316,657	1.0	14,730,038
Industrial & Commercial Bank of China Ltd., H Shares	32,906,062	1.6	24,638,185
PetroChina Co., Ltd., H Shares	17,232,381	0.7	11,009,066
Tencent Holdings Ltd.	136,133	0.4	5,722,615
Other Securities		6.1	94,178,534
		17.4	264,240,507

Colombia 0.5%
Other Securities		0.5	6,778,645

Czech Republic 0.2%
Other Securities		0.2	3,360,669

Greece 1.0%
Other Securities		1.0	15,132,702

Hungary 0.5%
Other Securities		0.5	8,004,680

Security	Number of Shares	% of Net Assets	Value ($)
India 4.7%
Infosys Ltd.	428,949	0.4	6,139,370
Reliance Industries Ltd. GDR	328,994	1.1	16,268,753
Other Securities		3.2	48,887,545
		4.7	71,295,668

Indonesia 1.3%
Other Securities		1.3	20,483,764

Malaysia 2.0%
Other Securities		2.0	29,745,039

Mexico 3.2%
America Movil S.A.B. de C.V., Series L	15,706,204	1.0	14,646,287
Other Securities		2.2	34,739,010
		3.2	49,385,297

Peru 0.1%
Other Securities		0.1	1,992,294

Philippines 0.2%
Other Securities		0.2	2,403,946

Poland 2.6%
KGHM Polska Miedz S.A.	207,610	0.5	7,326,250
Polski Koncern Naftowy Orlen S.A.	310,504	0.7	10,244,703
Other Securities		1.4	22,587,059
		2.6	40,158,012

Republic of Korea 18.1%
Hyundai Mobis Co., Ltd.	35,294	0.5	7,386,825
Hyundai Motor Co.	104,517	0.9	13,022,915
KB Financial Group, Inc.	123,496	0.4	6,067,469
Kia Motors Corp.	284,183	0.6	8,934,274
Korea Electric Power Corp.	166,021	0.4	6,316,336
LG Chem Ltd.	27,306	0.6	9,177,877
LG Display Co., Ltd.	266,490	0.5	7,361,798
LG Electronics, Inc.	133,775	0.6	9,668,910
POSCO	73,675	1.5	22,443,564
Samsung Electronics Co., Ltd.	38,964	5.3	80,028,932
Shinhan Financial Group Co., Ltd.	169,535	0.5	7,818,216
SK Hynix, Inc.	189,392	0.8	11,522,074

₅₆

Schwab Fundamental Index ETFs | Semiannual Report

See financial notes

Schwab Fundamental Emerging Markets Large Company Index ETF

Condensed Portfolio Holdings as of August 31, 2017 (Unaudited) (continued)

Security	Number of Shares	% of Net Assets	Value ($)
SK Innovation Co., Ltd.	68,720	0.8	11,487,868
Other Securities		4.7	74,704,744
		18.1	275,941,802

Russia 10.1%
Gazprom PJSC	25,715,131	3.4	52,236,148
LUKOIL PJSC	729,810	2.4	36,952,325
MMC Norilsk Nickel PJSC	37,708	0.4	6,356,630
Sberbank of Russia PJSC	2,985,500	0.6	9,433,819
Surgutneftegas OJSC	33,531,917	1.0	15,589,525
Tatneft PJSC	1,131,969	0.5	7,562,703
Other Securities		1.8	25,406,244
		10.1	153,537,394

South Africa 5.9%
MTN Group Ltd.	1,710,761	1.1	17,009,551
Sasol Ltd.	525,032	1.0	15,829,932
Standard Bank Group Ltd.	600,822	0.5	7,739,614
Other Securities		3.3	49,857,902
		5.9	90,436,999

Taiwan 12.2%
Hon Hai Precision Industry Co., Ltd.	9,181,911	2.3	35,749,181
Innolux Corp.	15,435,000	0.5	7,518,291
Taiwan Semiconductor Manufacturing Co., Ltd.	3,990,352	1.9	28,626,237
Other Securities		7.5	114,364,245
		12.2	186,257,954

Thailand 1.6%
PTT PCL NVDR	743,600	0.6	8,935,293
Other Securities		1.0	15,697,656
		1.6	24,632,949

Turkey 1.7%
Other Securities		1.7	25,209,304

United Arab Emirates 0.1%
Other Securities		0.1	1,786,063
Total Common Stock
(Cost $1,168,771,966)			1,369,576,191

Preferred Stock 9.7% of net assets

Brazil 7.1%
Banco Bradesco S.A.	1,350,052	0.9	14,408,221
Itau Unibanco Holding S.A.	1,713,782	1.4	21,977,500

Security	Number of Shares	% of Net Assets	Value ($)
Petroleo Brasileiro S.A. *	4,503,287	1.3	19,536,261
Vale S.A.	2,409,938	1.6	24,946,108
Other Securities		1.9	26,396,214
		7.1	107,264,304

Colombia 0.1%
Other Securities		0.1	2,115,631

Republic of Korea 1.1%
Samsung Electronics Co., Ltd.	7,070	0.8	11,818,863
Other Securities		0.3	5,273,504
		1.1	17,092,367

Russia 1.4%
AK Transneft OAO	5,524	1.1	16,954,851
Other Securities		0.3	4,720,247
		1.4	21,675,098
Total Preferred Stock
(Cost $99,347,013)			148,147,400

Other Investment Company 0.2% of net assets

United States 0.2%
Money Market Fund 0.2%
Other Securities		0.2	2,812,293
Total Other Investment Company
(Cost $2,812,293)			2,812,293

	Number of Contracts	Notional Amount ($)	Current Value/ Unrealized Appreciation ($)
Futures Contracts
Long
MSCI Emerging Markets Index, e-mini, expires 09/15/17	89	4,833,590	66,696

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

*	Non-income producing security.
(a)	The rate shown is the 7-day yield.

ADR —	American Depositary Receipt
GDR —	Global Depositary Receipt
NVDR —	Non-Voting Depositary Receipt

₅₇

Schwab Fundamental Index ETFs | Semiannual Report

See financial notes

Schwab Fundamental Index 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 Fundamental U.S. Broad Market Index ETF	Schwab U.S. Small-Cap ETF™
Schwab Fundamental U.S. Large Company Index ETF	Schwab U.S. Dividend Equity ETF™
Schwab Fundamental U.S. Small Company Index ETF	Schwab U.S. REIT ETF™
Schwab Fundamental International Large Company Index ETF	Schwab International Equity ETF™
Schwab Fundamental International Small Company Index ETF	Schwab International Small-Cap Equity ETF™
Schwab Fundamental Emerging Markets Large Company Index ETF	Schwab Emerging Markets Equity ETF™
Schwab U.S. Broad Market ETF™	Schwab U.S. TIPS ETF™
Schwab U.S. Large-Cap ETF™	Schwab Short-Term U.S. Treasury ETF™
Schwab U.S. Large-Cap Growth ETF™	Schwab Intermediate-Term U.S. Treasury ETF™
Schwab U.S. Large-Cap Value ETF™	Schwab U.S. Aggregate Bond ETF™
Schwab U.S. Mid-Cap ETF™

The funds issue and redeem shares at their net asset value per share (NAV) only in large blocks of shares, typically 50,000 shares or more (Creation Units). These transactions are usually in exchange for a basket of securities and/or an amount of cash. As a practical matter, only institutions or large investors purchase or redeem Creation Units. Except when aggregated in Creation Units, shares of the funds are not redeemable securities.

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

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

2. Significant Accounting Policies:

The following is a summary of the significant accounting policies the funds use in their preparation of financial statements. The funds follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standard Codification Topic 946 Financial Services — Investment Companies. The accounting policies are in conformity with accounting principles generally accepted in the United States of America (GAAP).

The funds may invest in certain other investment companies (underlying funds). For specific investments in underlying funds, please refer to the complete schedule of portfolio holdings on Form N-CSR(S) for this reporting period, which is filed with the U.S. Securities and Exchange Commission (SEC). For more information about the underlying funds’ operations and policies, please refer to those funds’ semiannual and annual reports, which are filed with the SEC.

Effective August 1, 2017, the funds adopted disclosure requirement changes for SEC Regulation S-X. The adopted changes are reflected throughout this report.

(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:

₆₂

Schwab Fundamental Index ETFs | Semiannual Report

Schwab Fundamental Index ETFs

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):

• Securities for which no quoted value is available: The Board has adopted procedures to fair value each fund’s securities when market prices are not “readily available” or are unreliable. For example, a fund may fair value a security when it is de-listed or its trading is halted or suspended; when a security’s primary pricing source is unable or unwilling to provide a price; or when a security’s primary trading market is closed during regular market hours. Each fund makes fair value determinations in good faith in accordance with the fund’s valuation procedures. The Pricing Committee considers a number of factors, including unobservable market inputs when arriving at fair value. The Pricing Committee may employ techniques such as the review of related or comparable assets or liabilities, related market activities, recent transactions, market multiples, book values, transactional back-testing, disposition analysis and other relevant information. The Pricing Committee regularly reviews these inputs and assumptions to calibrate the valuations. Due to the subjective and variable nature of fair value pricing, there can be no assurance that a fund could obtain the fair value assigned to the security upon the sale of such security. The Board convenes on a regular basis to review fair value determinations made by the funds pursuant to the valuation procedures.

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

• Underlying funds: Mutual funds are valued at their respective NAVs.

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

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

• Level 1—quoted prices in active markets for identical securities—Investments whose values are based on quoted market prices in active markets, and whose values are therefore classified as Level 1 prices, include active listed equities and futures contracts. Investments in mutual funds are valued daily at their NAVs, which are classified as Level 1 prices, without consideration to the classification level of the specific investments held by an underlying fund.

• Level 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.

₆₃

Schwab Fundamental Index ETFs | Semiannual Report

Schwab Fundamental Index ETFs

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):

The levels associated with valuing the funds' investments as of August 31, 2017 are disclosed in the Condensed Portfolio Holdings.

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

Futures Contracts: Futures contracts are instruments that represent an agreement between two parties that obligates one party to buy, and the other party to sell, specific instruments at an agreed upon price on a stipulated future date. A fund must give the broker a deposit of cash and/or securities (initial margin) whenever it enters into a futures contract. The amount of the deposit may vary from one contract to another. Subsequent payments (variation margin) are made or received by a fund depending on the daily fluctuations in the value of the futures contract and are accounted for as unrealized appreciation or depreciation until the contract is closed, at which time the gains or losses are realized. Futures contracts are traded publicly on exchanges, and their market value may change daily.

Securities Lending: Under the trust’s Securities Lending Program, a fund (lender) may make short-term loans of its securities to another party (borrower) to generate additional revenue for the fund. The borrower pledges collateral in the form of cash, securities issued or fully guaranteed by the U.S. government or foreign governments, or letters of credit issued by a bank. Collateral at the individual loan level is required to be maintained on a daily marked-to-market basis in an amount at least equal to the current value of the securities loaned. The lending agent provides a fund with indemnification against borrower default (the borrower fails to return the security on loan) reducing the risk of loss as a result of default. The cash collateral of securities loaned is currently invested in money market portfolios operating under Rule 2a-7 of the 1940 Act. Each fund bears the risk of loss with respect to the investment of cash collateral. The terms of the securities lending agreement allow the funds or the lending agent to terminate any loan at any given time and the securities must be returned within the earlier of the standard trade settlement period or the specified time period under the relevant securities lending agreement. Securities lending income, as disclosed in each fund’s Statement of Operations, if applicable, represents the income earned from the investment of the cash collateral plus any fees paid by borrowers, less the fees paid to the lending agent and broker rebates which are subject to adjustments pursuant to the securities lending agreement. On loans not collateralized by cash, a fee is received from the borrower, and is allocated between a fund and the lending agent. The aggregate market value of securities loaned will not at any time exceed one-third of the total assets of a fund, including collateral received from the loan. Total costs and expenses, including lending agent fees and broker rebates, associated with securities lending activities under the trust’s Securities Lending Program paid to the unaffiliated lending agents start at 10% of gross lending revenue, with subsequent breakpoints to a low of 7.5%.

As of August 31, 2017, the funds had securities on loan, all of which were classified as common stocks. The value of the securities on loan and the related collateral as of August 31, 2017, if any, are disclosed in each fund's Condensed Portfolio Holdings. The value of the securities on loan and the investment of cash collateral are also disclosed in each fund's Statement of Assets and Liabilities.

Assets and liabilities denominated in foreign currencies are reported in U.S. dollars. For assets and liabilities held on a given date, the dollar value is based on market exchange rates in effect on that date. Transactions involving foreign currencies, including purchases, sales, income receipts and expense payments, are calculated using exchange rates in effect on the transaction date. Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange appreciation or depreciation arises from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period. These realized and unrealized foreign exchange gains or losses are reported in foreign currency transactions or translations on the Statement of Operations. The funds do not isolate the portion of the fluctuations on investments resulting from changes in foreign currency exchange rates from the fluctuations in market prices of investments held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.

Gains realized by the funds on the sale of securities in certain foreign countries may be subject to non-U.S. taxes. In those instances, the funds record a liability based on unrealized gains to provide for potential non-U.S. taxes payable upon the sale of these securities.

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

₆₄

Schwab Fundamental Index ETFs | Semiannual Report

Schwab Fundamental Index ETFs

Financial Notes, unaudited (continued)

2. Significant Accounting Policies (continued):

(d) Investment Income:

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

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

(e) Expenses:

Pursuant to the Amended and Restated 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 taxes, any brokerage expenses, and extraordinary or non-routine expenses. Taxes, any brokerage expenses and extraordinary or non-routine expenses that are specific to a fund are charged directly to the fund. Prior to March 1, 2017, under the previous investment advisory agreement, the funds were responsible for interest expenses.

(f) Distributions to Shareholders:

Schwab Fundamental U.S. Broad Market Index ETF, Schwab Fundamental U.S. Large Company Index ETF, and Schwab Fundamental U.S. Small Company Index ETF generally make distributions from net investment income, if any, quarterly. Schwab Fundamental International Large Company Index ETF, Schwab Fundamental International Small Company Index ETF, and Schwab Fundamental Emerging Markets Large Company Index ETF generally make distributions from net investment income, if any, annually. All funds generally make distributions from net realized capital gains, if any, once a year.

(g) Accounting Estimates:

(h) Federal Income Taxes:

The funds intend to meet federal income and excise tax requirements for regulated investment companies under subchapter M of the Internal Revenue Code, as amended. Accordingly, the funds distribute substantially all of their net investment income and net realized capital gains, if any, to their respective shareholders each year. As long as a fund meets the tax requirements, it is not required to pay federal income tax.

(i) Foreign Taxes:

The funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, corporate events, foreign currency exchanges and capital gains on investments. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in foreign markets in which the funds invest. These foreign taxes, if any, are paid by the funds and are disclosed in the Statement of Operations. Foreign taxes payable as of August 31, 2017, if any, are reflected in each fund's Statement of Assets and Liabilities.

(j) Indemnification:

Under the funds’ organizational documents, the officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the funds. In addition, in the normal course of business the funds enter into contracts with their vendors and others that provide general indemnifications. The funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the funds. However, based on experience, the funds expect the risk of loss attributable to these arrangements to be remote.

₆₅

Schwab Fundamental Index ETFs | Semiannual Report

Schwab Fundamental Index ETFs

Financial Notes, unaudited (continued)

3. Risk Factors:

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

Market Risk. Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. As with any investment whose performance is tied to these markets, the value of an investment in a fund will fluctuate, which means that the investors could lose money over short or long periods.

Investment Style Risk. The funds are not actively managed. Therefore, each fund follows the securities included in its respective index during upturns as well as downturns. Because of their indexing strategies, the funds do not take steps to reduce market exposure or to lessen the effects of a declining market. In addition, because of the funds' expenses, the funds' performance may be below that of their respective index.

Large-Cap Company Risk. Certain funds invest in large-cap company stocks. Large-cap companies are generally more mature and the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

Mid-Cap Company Risk. Certain funds invest in mid-cap company stocks. Mid-cap companies may be more vulnerable to adverse business or economic events than larger, more established companies and the value of securities issued by these companies may move sharply.

Small-Cap Company Risk. Certain funds invest in small-cap company stocks. Securities issued by small-cap companies may be riskier than those issued by larger companies, and their prices may move sharply, especially during market upturns and downturns.

Foreign Investment Risk. A fund’s investments in securities of foreign issuers may involve certain risks that are greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of a fund's investments, and could impair the fund's ability to meet its investment objective or invest in accordance with its investment strategy. There is a risk that investments in securities denominated in, and/or receiving revenues in, foreign currencies will decline in value relative to the U.S. dollar. Foreign securities also include American Depositary receipts (ADRs), Global Depositary receipts (GDRs) and European Depositary receipts (EDRs) which may be less liquid than the underlying shares in their primary trading market and GDRs, many of which are issued by companies in emerging markets, may be more volatile. To the extent the fund’s investments in a single country or a limited number of countries represent a large percentage of the fund’s assets, a fund’s performance may be adversely affected by the economic, political, regulatory and social conditions in those countries, and the fund’s price may be more volatile than the price of a fund that is geographically diversified.

Emerging Markets Risk. Certain funds invest in emerging markets. Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting and reporting requirements and greater risk associated with the custody of securities. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in developed countries. As a result, there may be an increased risk of liquidity and price volatility associated with a fund’s investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar and, at times, it may be difficult to value such investments.

Sampling Index Tracking Risk. Certain funds may not fully replicate the index and may hold securities not included in the index. As a result, a fund is subject to the risk that the investment adviser’s investment management strategy, the implementation of which is subject to a number of constraints, may not produce the intended results. Because certain funds utilize a sampling approach they may not track the return of their respective index as well as they would if the funds purchased all of the securities in their respective index.

₆₆

Schwab Fundamental Index ETFs | Semiannual Report

Schwab Fundamental Index ETFs

Financial Notes, unaudited (continued)

3. Risk Factors (continued):

Tracking Error Risk. As index funds, each fund seeks to track the performance of its respective index, although it may not be successful in doing so. The divergence between the performance of a fund and the index, positive or negative, is called “tracking error.” Tracking error can be caused by many factors and it may be significant.

Derivatives Risk. Each fund may use derivatives to enhance returns or hedge against market declines. Examples of derivatives are options, futures, options on futures and swaps. An option is the right to buy or sell an instrument at a specific price before a specific date. A future is an agreement to buy or sell a financial instrument at a specific price on a specific day. A swap is an agreement whereby two parties agree to exchange payment streams calculated in relation to a rate, index, instrument or certain securities and a predetermined amount. A fund's use of derivatives that are subject to regulation by the Commodity Futures Trading Commission (CFTC) could cause the fund to become a commodity pool, which would require the fund to comply with certain CFTC rules.

A fund’s use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Certain of these risks, such as liquidity risk and market risk, are discussed elsewhere in this section. The fund’s use of derivatives is also subject to lack of availability risk, credit risk, leverage risk, valuation risk, correlation risk and tax risk. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Credit risk is the risk that the counterparty to a derivatives transaction may not fulfill its obligations. Leverage risk is the risk that a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gains. A fund's use of derivatives could reduce the fund's performance, increase the fund's volatility, and could cause the fund to lose more than the initial amount invested.

Liquidity Risk. A fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or a fund may have to sell them at a loss.

Securities Lending Risk. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities 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 vulnerable to adverse economic, market, political or regulatory occurrences affecting that market, industry, group of industries, sector or asset class.

Shares of the Fund May Trade at Prices Other Than NAV. Fund shares may be bought and sold in the secondary market at market prices. Although it is expected that the market price of the shares of a fund will approximate the fund’s NAV, there may be times when the market price and the NAV vary significantly. An investor may pay more than NAV when buying shares of a fund in the secondary market, and an investor may receive less than NAV when selling those shares in the secondary market. The market price of the fund shares may deviate, sometimes significantly, from NAV during periods of market volatility or as a result of other factors impacting foreign securities, including liquidity, irregular trading activity and timing differences between foreign markets where securities trade and the secondary market where fund shares are sold.

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:

Investment Adviser

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.

₆₇

Schwab Fundamental Index ETFs | Semiannual Report

Schwab Fundamental Index ETFs

Financial Notes, unaudited (continued)

4. Affiliates and Affiliated Transactions (continued):

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

Schwab Fundamental U.S. Broad Market Index ETF	Schwab Fundamental U.S. Large Company Index ETF	Schwab Fundamental U.S. Small Company Index ETF	Schwab Fundamental International Large Company Index ETF	Schwab Fundamental International Small Company Index ETF	Schwab Fundamental Emerging Markets Large Company Index ETF
0.25%	0.25%	0.25%	0.25%	0.39%	0.39%

Interfund Transactions

The funds may engage in direct transactions with certain other Schwab funds when practical. When one fund is seeking to sell a security that another is seeking to buy, an interfund transaction can allow both funds to benefit by reducing transaction costs. This practice is limited to funds that share the same investment adviser, trustees and/or officers. For the period ended August 31, 2017, each fund's total aggregate security transactions with other Schwab funds as well as any realized gains (losses) were as follows:

	Total Aggregate Transactions	Realized Gains (Losses)
Schwab Fundamental U.S. Broad Market Index ETF	$1,704,665	($482,171)
Schwab Fundamental U.S. Large Company Index ETF	47,052,920	(4,043,894)
Schwab Fundamental U.S. Small Company Index ETF	17,489,052	(1,864,177)
Schwab Fundamental International Large Company Index ETF	32,727,359	(561,487)
Schwab Fundamental International Small Company Index ETF	4,280,788	(747,564)
Schwab Fundamental Emerging Markets Large Company Index ETF	283,282	(94,028)

Interfund Borrowing and Lending

Pursuant to an exemptive order issued by the SEC, the funds may enter into interfund borrowing and lending transactions with other funds in the Fund Complex (for definition refer to Trustees and Officers section). All loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the overnight repurchase agreement rate and the short-term bank loan rate. All loans are subject to numerous conditions designed to ensure fair and equitable treatment of all participating funds/portfolios. The interfund lending facility is subject to the oversight and periodic review of the Board. The funds had no interfund borrowing or lending activity during the period.

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:

₆₈

Schwab Fundamental Index ETFs | Semiannual Report

Schwab Fundamental Index ETFs

Financial Notes, unaudited (continued)

7. Borrowing from Banks:

During the period, the funds were participants with other U.S. registered investment companies managed by CSIM in a joint, syndicated, committed $555 million line of credit (the Credit Facility). Under the terms of the Credit Facility, in addition to the interest charged on any borrowings by a fund, each fund paid a commitment fee of 0.15% per annum on its proportionate share of the unused portion of the Credit Facility. Effective March 1, 2017, where applicable, CSIM paid the commitment fee and any interest expense charged on any borrowings by a fund, since these expenses are now included in the advisory fee. There were no borrowings from the line of credit during the period.

The funds also have access to custodian overdraft facilities. A fund may have utilized the overdraft facility and incurred an interest expense. Since March 1, 2017, where applicable, CSIM paid any interest expense charged. The interest expense is determined based on a negotiated rate above the Federal Funds Rate.

8. Derivatives:

Certain funds entered into equity index futures contracts during the report period. The funds invested in futures contracts to equitize available cash. The current value and variation margin for futures contracts held at August 31, 2017 are presented on the Condensed Portfolio Holdings and Statement of Assets and Liabilities, respectively. The net realized and change in unrealized gains (losses) on futures contracts are presented on the Statement of Operations. Refer to financial note 2(b) for the funds’ accounting policies with respect to futures contracts and financial note 3 for disclosures concerning the risks of investing in futures contracts. During the period ended August 31, 2017, the month-end average notional amounts of futures contracts held by the funds and the month-end average number of contracts held were as follows:

	Notional Amounts	Number of Contracts
Schwab Fundamental U.S. Broad Market Index ETF	$810,399	7
Schwab Fundamental U.S. Large Company Index ETF	7,133,571	59
Schwab Fundamental U.S. Small Company Index ETF	4,422,704	63
Schwab Fundamental International Large Company Index ETF	10,494,947	113
Schwab Fundamental International Small Company Index ETF	4,742,888	51
Schwab Fundamental Emerging Markets Large Company Index ETF	5,899,316	116

9. Purchases and Sales/Maturities of Investment Securities:

For the period ended August 31, 2017, purchases and sales/maturities of securities (excluding in-kind transactions and short-term obligations) were as follows:

	Purchases of Securities	Sales/Maturities of Securities
Schwab Fundamental U.S. Broad Market Index ETF	$13,775,684	$12,391,470
Schwab Fundamental U.S. Large Company Index ETF	163,995,466	133,333,973
Schwab Fundamental U.S. Small Company Index ETF	311,523,073	253,371,569
Schwab Fundamental International Large Company Index ETF	167,402,662	111,897,835
Schwab Fundamental International Small Company Index ETF	153,514,762	107,061,255
Schwab Fundamental Emerging Markets Large Company Index ETF	437,881,624	98,893,864

10. In-Kind Transactions:

The consideration for the purchase of Creation Units of a fund often consists of the in-kind deposit of a designated portfolio of equity securities, which constitutes an optimized representation of the securities involved in a relevant fund’s underlying index, and an amount of cash. Investors purchasing and redeeming Creation Units are subject to a standard creation transaction fee and a standard redemption transaction fee paid to the custodian to offset transfer and other transaction costs associated with the issuance and redemption of Creation Units. Purchasers and redeemers of Creation Units for cash are subject to an additional variable charge paid to the fund that will offset the transaction costs to the fund of buying or selling portfolio securities. In addition, purchasers and redeemers of shares in Creation Units are responsible for payment of the costs of transferring securities to or out of the fund. From time to time, CSIM may cover the cost of any transaction fees when believed to be in the best interests of a fund.

₆₉

Schwab Fundamental Index ETFs | Semiannual Report

Schwab Fundamental Index ETFs

Financial Notes, unaudited (continued)

10. In-Kind Transactions (continued):

The in-kind transactions for the period ended August 31, 2017, were as follows:

	In-Kind Purchases of Securities	In-Kind Sales of Securities
Schwab Fundamental U.S. Broad Market Index ETF	$11,506,594	$9,825,824
Schwab Fundamental U.S. Large Company Index ETF	784,594,020	8,366,556
Schwab Fundamental U.S. Small Company Index ETF	596,709,701	141,831,483
Schwab Fundamental International Large Company Index ETF	680,767,866	15,881,193
Schwab Fundamental International Small Company Index ETF	391,573,681	78,042,832
Schwab Fundamental Emerging Markets Large Company Index ETF	70,752,185	—

For the period ended August 31, 2017, where applicable, the funds realized net capital gains or losses resulting from in-kind redemptions of Creation Units. Because such gains or losses are not taxable to the funds and are not distributed to existing fund shareholders, the gains or losses are reclassified from accumulated net realized gains or losses to capital received from investors at the end of the funds' tax year. These reclassifications have no effect on net assets or net asset values per share. The net realized in-kind gains or losses for the period ended August 31, 2017 are disclosed in the funds' Statements of Operations, if any.

11. Federal Income Taxes

As of August 31, 2017, the tax basis cost of the funds' investments and gross unrealized appreciation and depreciation were as follows:

	Schwab Fundamental U.S. Broad Market Index ETF	Schwab Fundamental U.S. Large Company Index ETF	Schwab Fundamental U.S. Small Company Index ETF	Schwab Fundamental International Large Company Index ETF	Schwab Fundamental International Small Company Index ETF	Schwab Fundamental Emerging Markets Large Company Index ETF
Tax cost	$237,792,799	$2,794,526,062	$1,916,427,009	$2,571,185,116	$1,200,999,448	$1,287,583,336
Gross unrealized appreciation	$44,716,769	$346,133,867	$258,667,376	$342,993,326	$211,006,384	$257,645,289
Gross unrealized depreciation	(14,219,363)	(105,847,462)	(103,157,729)	(61,907,224)	(29,216,493)	(24,626,045)
Net unrealized appreciation (depreciation)	$30,497,406	$240,286,405	$155,509,647	$281,086,102	$181,789,891	$233,019,244

Capital loss carryforwards may be used to offset future realized capital gains for federal income tax purposes. As of February 28, 2017, the funds had capital loss carryforwards available to offset future net capital gains as follows:

Expiration Date	Schwab Fundamental U.S. Broad Market Index ETF	Schwab Fundamental U.S. Large Company Index ETF	Schwab Fundamental U.S. Small Company Index ETF	Schwab Fundamental International Large Company Index ETF	Schwab Fundamental International Small Company Index ETF	Schwab Fundamental Emerging Markets Large Company Index ETF
No expiration	$2,886,323	$9,735,348	$18,248,707	$32,967,455	$16,086,481	$7,761,845
Total	$2,886,323	$9,735,348	$18,248,707	$32,967,455	$16,086,481	$7,761,845

As of February 28, 2017, management has reviewed the tax positions for open periods (for federal purposes, three years from the date of filing and for state purposes, four years from the date of filing) as applicable to the funds, and has determined that no provision for income tax is required in the funds' financial statements. The funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the period ended February 28, 2017, the funds did not incur any interest or penalties.

12. Subsequent Events:

₇₀

Schwab Fundamental Index ETFs | Semiannual Report

Schwab Fundamental Index ETFs

Investment Advisory Agreement Approval

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

restated advisory agreement between the Trust and CSIM that was approved by the Board at a meeting held on January 18, 2017. A discussion regarding the basis for the Board’s approval of the amended and restated advisory agreement is available in the Funds’ 2017 annual report, which covers the period from March 1, 2016 through February 28, 2017. The Board’s approval of the continuance of the Agreement with respect to the Funds was based on consideration and evaluation of a variety of specific factors discussed at these meetings and at prior meetings, including:

1.	the nature, extent and quality of the services provided to the Funds under the Agreement, including the resources of CSIM and its affiliates dedicated to the Funds;
2.	each Fund’s investment performance and how it compared to that of certain other comparable exchange-traded funds;
3.	each Fund’s expenses and how those expenses compared to those of certain other comparable exchange-traded funds;
4.	the profitability of CSIM and its affiliates, including Charles Schwab & Co., Inc. (Schwab), with respect to the Funds, including both direct and indirect benefits accruing to CSIM and its affiliates; and
5.	the extent to which economies of scale would be realized as the Funds grow and whether fee levels in the Agreement reflect those economies of scale for the benefit of Fund investors.

Nature, Extent and Quality of Services. The Board considered the nature, extent and quality of the services provided by CSIM to the Funds and the resources of CSIM and its affiliates dedicated to the Funds. In this regard, the Trustees evaluated, among other things, CSIM’s experience, track record, compliance program, resources dedicated to hiring and retaining qualified personnel, and information security resources. The Trustees also considered information provided by CSIM relating to the Funds’ portfolio management team, portfolio strategy and risk oversight structure, and internal investment guidelines. The Trustees also considered Schwab’s reputation in connection with the OneSource exchange-traded fund offering and its overall financial condition. Following such evaluation, the Board concluded, within the context of its full deliberations, that the nature, extent and quality of services provided by CSIM to the Funds and the resources of CSIM and its affiliates dedicated to the Funds supported renewal of the Agreement with respect to the Funds.

Fund Performance. The Board considered each Fund’s performance in determining whether to renew the Agreement with respect to the Funds. Specifically, the Trustees considered each Fund’s performance relative to a peer category of other exchange-traded funds and relevant indices/benchmarks, in

₇₁

Schwab Fundamental Index ETFs | Semiannual Report

Schwab Fundamental Index ETFs

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

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

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

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

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

₇₂

Schwab Fundamental Index ETFs | Semiannual Report

Schwab Fundamental Index ETFs

Trustees and Officers

The tables below give information about the trustees and officers for the Schwab Strategic Trust, which includes the funds covered in this report. The “Fund Complex” includes The Charles Schwab Family of Funds, Schwab Capital Trust, Schwab Investments, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust. The Fund Complex includes 105 funds.

Independent Trustees
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Robert W. Burns 1959 Trustee (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016)	Retired/Private Investor (Jan. 2009 – present). Formerly, Managing Director, Pacific Investment Management Company, LLC (PIMCO) (investment management firm) and President, PIMCO Funds.	105	Director, PS Business Parks, Inc. (2005 – 2012)
John F. Cogan 1947 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Senior Fellow, The Hoover Institution at Stanford University (Oct. 1979 – present); Senior Fellow, Stanford Institute for Economic Policy Research (2000 – present); Professor of Public Policy, Stanford University (1994 – 2015).	105	Director, Gilead Sciences, Inc. (2005 – present)
Stephen Timothy Kochis 1946 Trustee (Trustee of Schwab Strategic Trust since 2012; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016)	CEO and Owner, Kochis Global (wealth management consulting) (May 2012 – present); Chairman and CEO, Aspiriant, LLC (wealth management) (Jan. 2008 – Apr. 2012).	105	None
David L. Mahoney 1954 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016)	Private Investor.	105	Director, Symantec Corporation (2003 – present) Director, Corcept Therapeutics Incorporated (2004 – present) Director, Adamas Pharmaceuticals, Inc. (2009 – present)

₇₃

Schwab Fundamental Index ETFs | Semiannual Report

Schwab Fundamental Index ETFs

Independent Trustees (continued)
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Kiran M. Patel 1948 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016)	Retired. Executive Vice President and General Manager of Small Business Group, Intuit, Inc. (financial software and services firm for consumers and small businesses) (Dec. 2008 – Sept. 2013).	105	Director, KLA-Tencor Corporation (2008 – present)
Kimberly S. Patmore 1956 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016)	Consultant, Patmore Management Consulting (management consulting) (2008 – present).	105	None
Charles A. Ruffel 1956 Trustee (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2015)	Co-Chief Executive Officer, Kudu Investment Management, LLC (financial services) (Jan. 2015 – present); Partner, Kudu Advisors, LLC (financial services) (June 2008 – Jan. 2015); Advisor, Asset International, Inc. (publisher of financial services information) (Aug. 2008 – Jan. 2015).	105	None
Gerald B. Smith 1950 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2000; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Chairman, Chief Executive Officer and Founder of Smith Graham & Co. (investment advisors) (Mar. 1990 – present).	105	Director, Eaton (2012 – present) Director and Chairman of the Audit Committee, Oneok Partners LP (2003 – 2013) Director, Oneok, Inc. (2009 – 2013) Lead Independent Director, Board of Cooper Industries (2002 – 2012)
Joseph H. Wender 1944 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Senior Consultant, Goldman Sachs & Co., Inc. (investment banking and securities firm) (Jan. 2008 – present); Partner, Colgin Partners, LLC (vineyards) (Feb. 1998 – present).	105	Board Member and Chairman of the Audit Committee, Ionis Pharmaceuticals (1994 – present) Lead Independent Director and Chair of Audit Committee, OUTFRONT Media Inc. (2014 – present)

₇₄

Schwab Fundamental Index ETFs | Semiannual Report

Schwab Fundamental Index ETFs

Interested Trustees
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Walter W. Bettinger II² 1960 Chairman and Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Schwab Strategic Trust since 2009; Laudus Trust since 2010)	Director, President and Chief Executive Officer, The Charles Schwab Corporation (Oct. 2008 – present); President and Chief Executive Officer (Oct. 2008 – present), Director (May 2008 – present), Charles Schwab & Co., Inc.; Director, Charles Schwab Bank (Apr. 2006 – present); Director, Schwab Holdings, Inc. (May 2008 – present); and Director, Charles Schwab Investment Management, Inc. (July 2016 – present).	105	Director, The Charles Schwab Corporation (2008 – present)
Marie A. Chandoha² 1961 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016)	Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; Trustee (Jan. 2016 – present), President, Chief Executive Officer (Dec. 2010 – present), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (Jan. 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (Mar. 2007 – Aug. 2010).	105	None
Joseph R. Martinetto² 1962 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016)	Senior Executive Vice President (July 2015 – present), Chief Financial Officer (July 2015 – May 2017), Executive Vice President and Chief Financial Officer (May 2007 – July 2015), The Charles Schwab Corporation and Charles Schwab & Co., Inc.; Director, Charles Schwab & Co., Inc. (May 2007 – present); Director (Apr. 2010 – present) and Chief Executive Officer (July 2013 – Apr. 2015), Charles Schwab Bank; Director (May 2007 – present), Chief Financial Officer (May 2007 – May 2017), Senior Executive Vice President (Feb. 2016 – present), and Executive Vice President (May 2007 – Feb. 2016), Schwab Holdings, Inc.	105	None

Officers of the Trust
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served³)	Principal Occupations During the Past Five Years
Marie A. Chandoha 1961 President and Chief Executive Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2010)	Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; Trustee (Jan. 2016 – present), President, Chief Executive Officer (Dec. 2010 – present), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (Jan. 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (Mar. 2007 – Aug. 2010).
Mark Fischer 1970 Treasurer and Chief Financial Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2013)	Treasurer and Chief Financial Officer, Schwab Funds, Laudus Funds and Schwab ETFs (Jan. 2016 – present); Assistant Treasurer, Schwab Funds and Laudus Funds (Dec. 2013 – Dec. 2015), Schwab ETFs (Nov. 2013 – Dec. 2015); Vice President, Charles Schwab Investment Management, Inc. (Oct. 2013 – present); Executive Director, J.P. Morgan Investor Services (Apr. 2011 – Sept. 2013); Assistant Treasurer, Massachusetts Financial Service Investment Management (May 2005 – Mar. 2011).

₇₅

Schwab Fundamental Index ETFs | Semiannual Report

Schwab Fundamental Index ETFs

Officers of the Trust (continued)
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served³)	Principal Occupations During the Past Five Years
George Pereira 1964 Senior Vice President and Chief Operating Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2004; Laudus Trust since 2006; Schwab Strategic Trust since 2009)	Senior Vice President and Chief Financial Officer (Nov. 2004 – present), Chief Operating Officer (Jan. 2011 – present), Charles Schwab Investment Management, Inc.; Senior Vice President and Chief Operating Officer (Jan. 2016 – present), Treasurer and Chief Financial Officer, Laudus Funds (June 2006 – Dec. 2015); Treasurer and Principal Financial Officer, Schwab Funds (Nov. 2004 – Dec. 2015) and Schwab ETFs (Oct. 2009 – Dec. 2015); Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (Apr. 2005 – present).
Omar Aguilar 1970 Senior Vice President and Chief Investment Officer – Equities and Multi-Asset Strategies (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President and Chief Investment Officer – Equities and Multi-Asset Strategies, Charles Schwab Investment Management, Inc. (Apr. 2011 – present); Senior Vice President and Chief Investment Officer – Equities, Schwab Funds, Laudus Funds and Schwab ETFs (June 2011 – present); Head of the Portfolio Management Group and Vice President of Portfolio Management, Financial Engines, Inc. (May 2009 – Apr. 2011); Head of Quantitative Equity, ING Investment Management (July 2004 – Jan. 2009).
Brett Wander 1961 Senior Vice President and Chief Investment Officer – Fixed Income (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President and Chief Investment Officer – Fixed Income, Charles Schwab Investment Management, Inc. (Apr. 2011 – present); Senior Vice President and Chief Investment Officer – Fixed Income, Schwab Funds, Laudus Funds and Schwab ETFs (June 2011 – present); Senior Managing Director, Global Head of Active Fixed-Income Strategies, State Street Global Advisors (Jan. 2008 – Oct. 2010); Director of Alpha Strategies Loomis, Sayles & Company (Apr. 2006 – Jan. 2008).
David Lekich 1964 Chief Legal Officer and Secretary, Schwab Funds and Schwab ETFs Vice President and Assistant Clerk, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President (Sept. 2011 – present), Vice President (Mar. 2004 – Sept. 2011), Charles Schwab & Co., Inc.; Senior Vice President and Chief Counsel (Sept. 2011 – present), Vice President (Jan. 2011 – Sept. 2011), Charles Schwab Investment Management, Inc.; Secretary (Apr. 2011 – present) and Chief Legal Officer (Dec. 2011 – present), Schwab Funds; Vice President and Assistant Clerk, Laudus Funds (Apr. 2011 – present); Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs.
Catherine MacGregor 1964 Vice President and Assistant Secretary, Schwab Funds and Schwab ETFs Chief Legal Officer, Vice President and Clerk, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2005; Schwab Strategic Trust since 2009)	Vice President, Charles Schwab & Co., Inc., Charles Schwab Investment Management, Inc. (July 2005 – present); Vice President (Dec. 2005 – present), Chief Legal Officer and Clerk (Mar. 2007 – present), Laudus Funds; Vice President (Nov. 2005 – present) and Assistant Secretary (June 2007 – present), Schwab Funds; Vice President and Assistant Secretary, Schwab ETFs (Oct. 2009 – present).

¹	Each Trustee shall hold office until the election and qualification of his or her successor, or until he or she dies, resigns or is removed. The retirement policy requires that each independent trustee retire by December 31 of the year in which the Trustee turns 74 or the Trustee’s twentieth year of service as an independent trustee on any trust in the Fund Complex, whichever occurs first.
²	Mr. Bettinger, Ms. Chandoha and Mr. Martinetto are Interested Trustees because they own stock of The Charles Schwab Corporation, the parent company of the investment adviser.
³	The President, Treasurer and Secretary/Clerk hold office until their respective successors are chosen and qualified or until he or she sooner dies, resigns, is removed or becomes disqualified. Each of the other officers serves at the pleasure of the Board.

₇₆

Schwab Fundamental Index ETFs | Semiannual Report

Schwab Fundamental Index ETFs

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 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.

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

cap, capitalization See “market cap.”

commencement of operations The date that the first NAV was calculated.

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.

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.