New Notice Regarding Shareholder Report Delivery Options

Beginning on January 1, 2021, paper copies of a fund’s shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from your financial intermediary (such as a bank or broker-dealer). Instead, the reports will be made available on a fund’s website www.schwabfunds.com/schwabetfs_prospectus, and you will be notified by mail each time a report is posted and the mailing will provide a website link to access the report. You will continue to receive other fund regulatory documents (such as prospectuses or supplements) in paper unless you have elected to receive all fund documents electronically.

If you would like to receive a fund’s future shareholder reports in paper free of charge after January 1, 2021, you can make that request:

•  If you invest through Charles Schwab & Co, Inc. (broker-dealer), by calling 1-866-345-5954 and using the unique identifier attached to this mailing; or

•  If you invest through another financial intermediary (such as a bank or broker-dealer) by contacting them directly.

If you already receive shareholder reports and other fund documents electronically, you will not be affected by this change and you need not take any action.

Fund investment adviser: Charles Schwab Investment Management, Inc. (CSIM)

Distributor: SEI Investments Distribution Co. (SIDCO)

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Schwab Fixed-Income ETFs  |  Annual Report

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Schwab Fixed-Income ETFs  |  Annual Report

Schwab Fixed-Income ETFs

From the President

Jonathan de St. Paer
President of Charles Schwab
Investment Management, Inc.
and the funds covered
in this report.

Dear Shareholder,

For many of us, the beginning of a new year is not only a time of resolution setting, but also an opportunity for reflection. Looking back on 2019, there are a number of events that may stand out for investors. Most noteworthy perhaps for the fixed income market was the Federal Reserve (the Fed) cutting interest rates in 2019—not once, but three times. This was also the first time the Fed had done so since the end of 2008. Another key milestone was the performance of the stock market, which entered the new year continuing the longest bull market cycle in history, reaching 129 months by the end of 2019. In this environment, the Bloomberg Barclays US Aggregate Bond Index, a benchmark for the overall U.S. fixed income market, returned 8.7% for the year ended December 31, 2019, as falling yields pushed up bond prices. The S&P 500^® Index, a bellwether for U.S. stocks, returned 31.5% for the same period, its second-best annual performance of the past two decades.

When there is strong and sustained investment performance such as this, many investors can’t imagine that the tide could quickly change and some of their gains could potentially be reversed. At Charles Schwab Investment Management, we know from our research in behavioral finance that one of the common pitfalls investors can be vulnerable to is known as “recency bias.” This is a tendency to be influenced by recent news, events, or experiences. This bias can often lead to an assumption that what has been happening will continue to happen. We believe it’s critical that investors remember that all market cycles, no matter how long and whether up or down, ultimately come to an end at some point.

That’s a key reason why we believe investors should focus on ensuring that they have an appropriate asset allocation for their stage in life, investment goals, and risk tolerance. The Schwab Fixed-Income ETFs are prime examples of how we can help in this regard, providing straightforward and cost-efficient options for gaining exposure to different segments of the fixed income market.

In October, we expanded our core fixed income offerings with the launch of three new bond ETFs. The Schwab 1-5 Year Corporate Bond ETF, Schwab 5-10 Year Corporate Bond ETF and Schwab Long-Term U.S. Treasury ETF complement our existing ETFs to give investors access to a broad spectrum of fixed income securities, including government and corporate bonds with short, intermediate or long-term exposure, as well as Treasury Inflation Protected Securities (TIPS). We take great pride in our role as one of the largest and fastest-growing ETF providers in the country, and our ETFs’ expense ratios remain among the lowest in the industry.

Thank you for investing with Charles Schwab Investment Management, and for trusting us to help you achieve your financial goals. For more information about the Schwab Fixed-Income 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,

“ In October, we expanded our core fixed income offerings with the launch of three new bond ETFs.”

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Schwab Fixed-Income ETFs  |  Annual Report

Schwab Fixed-Income ETFs

The Investment Environment

For the 12-month reporting period ended December 31, 2019, fixed-income markets generated positive returns. Equity markets were even more robust, particularly in the U.S., buoyed by steady, albeit slowing, economic growth, three interest rate cuts by the Federal Reserve (the Fed), and robust consumer spending. In this environment, the Bloomberg Barclays US Aggregate Bond Index returned 8.72% for the reporting period while the Bloomberg Barclays US Treasury 1-3 Year Index and the Bloomberg Barclays US Treasury 3-10 Year index returned 3.59% and 6.43%, respectively. Inflation-protected securities were particularly strong, with the Bloomberg Barclays US Treasury Inflation-Linked Bond Index (Series-L) returning 8.43%.

Despite escalating trade tensions with China over much of the reporting period, the U.S. economy maintained steady growth in its tenth year of expansion, although at a declining pace. After concerns of economic weakness intensified late in 2018, the U.S. economic outlook brightened considerably in the first six months of 2019. In the third quarter of 2019, signs of slowing growth increased amid a weakening global economy, waning manufacturing activity, and the ongoing U.S.-China trade war. However, in the fourth quarter, a partial trade resolution between the U.S. and China relieved much of the pressure. U.S. gross domestic product (GDP) grew at an annual rate of 2.1% in the third quarter of 2019, up slightly from 2.0% in the second quarter, but down from 3.1% in the first quarter of 2019. The unemployment rate ended the reporting period at a 50-year low. After reaching a near 18-year high during the summer, consumer confidence edged lower by December, although it remained a stable source of GDP growth in the U.S. Inflation remained benign.

After raising interest rates four times in 2018, the Fed held rates unchanged through the first half of 2019. But amid growing signs of global economic weakness that threatened to dampen U.S. economic growth, along with continued low inflation and weakness in manufacturing, the Fed enacted three interest rate cuts by the end of the period—in July, September, and October. Following the October interest rate cut, the Fed signaled that further interest rate cuts would be unlikely provided the economy continues to expand moderately and the labor market remains strong. The federal funds target rate ended the reporting period in a range of 1.50% to 1.75%.

Outside the U.S., major central banks maintained accommodative monetary policies. The European Central Bank held interest rates steady and launched an asset-purchase program to help stimulate the economy. The Bank of Japan maintained its short-term interest rate target of –0.1% throughout the period. Despite ongoing Brexit-related uncertainties, the Bank of England maintained its key official bank rate of 0.75% throughout the period, where it has remained since August 2018.

Yields of U.S. Treasury Securities: Effective Yields of Three-Month, Two-Year and 10-Year Treasuries    

 

Index figures assume dividends and distributions were reinvested. Index figures do not include trading and management costs, which would lower performance. Indices are unmanaged and cannot be invested in directly. Performance results less than one year are not annualized. Past performance is not an indication of future results.

For index definitions, please see the Glossary.

Data source: Bloomberg L.P.

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

Management views may have changed since the report date.

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Schwab Fixed-Income ETFs  |  Annual Report

Schwab Fixed-Income ETFs

The Investment Environment (continued)

Bond prices generally rose over the reporting period as yields fell. (Bond yields and bond prices move in opposite directions.) Short-term yields, which typically respond to changes in the federal funds rate, remained relatively flat for the first five months of the period before declining as the Fed implemented interest rate cuts, with the three-month Treasury yield falling from 2.45% at the outset of the period to 1.55% at the end of the period. Longer-term yields, which are influenced more by economic growth and inflation expectations, trended downward over most of the period before moderating in the last four months. During the reporting period, the U.S. Treasury yield curve flattened with portions of the yield curve inverting, which is often an indicator of a possible recession, before normalizing in the last quarter of the year. Over the reporting period, the 10-year Treasury yield fell from 2.69% to 1.92%. Outside the U.S., bond yields generally remained low.

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Schwab Fixed-Income ETFs  |  Annual Report

Schwab Fixed-Income ETFs

Fund Management

Matthew Hastings, CFA, Vice President and Head of Taxable Bond Strategies, leads the portfolio management team for Schwab Fixed-Income ETFs and Schwab’s taxable bond funds. He also has overall responsibility for all aspects of the management of the funds. Prior to joining CSIM in 1999, Mr. Hastings was in fixed-income sales and trading at Lehman Brothers. He has worked in the fixed-income securities industry since 1996.

    

Steven Hung, Senior Portfolio Manager, is responsible for the day-to-day co-management of the Schwab U.S. Aggregate Bond ETF, Schwab 1-5 Year Corporate Bond ETF and Schwab 5-10 Year Corporate Bond ETF. His primary focus is corporate bonds. Prior to joining CSIM in 1999, Mr. Hung was an associate in Schwab’s management training program for nine months. In that role, he worked as a clerk on the options trading floor of the Pacific Coast Stock Exchange.

    

Mark McKissick, CFA, Senior Portfolio Manager, is responsible for the day-to-day co-management of the Schwab U.S. TIPS ETF, Schwab Short-Term U.S. Treasury ETF, Schwab Intermediate-Term U.S. Treasury ETF, Schwab Long-Term U.S. Treasury ETF and Schwab U.S. Aggregate Bond ETF. Prior to joining CSIM in 2016, Mr. McKissick worked at Denver Investments for 17 years, most recently as a director of fixed income and portfolio manager where he co-managed multiple bond strategies, as well as oversaw the firm’s fixed-income business including the investment process, client service and other administrative functions.

    

Alfonso Portillo, Jr., Senior Portfolio Manager, is responsible for the day-to-day co-management of the Schwab U.S. Aggregate Bond ETF. His primary focus is securitized products. Prior to joining CSIM in 2007, Mr. Portillo worked for ten years at Pacific Investment Management Company, most recently as a vice president and member of the mortgage- and asset-backed portfolio management team. He has worked in fixed-income asset management since 1996.

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Schwab Fixed-Income ETFs  |  Annual Report

Schwab U.S. TIPS ETF

The Schwab U.S. TIPS ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of the Bloomberg Barclays US Treasury Inflation-Linked Bond Index (Series-L) (the index). To pursue this investment objective, the fund generally invests in securities that are included in the index and generally seeks to replicate the performance of the index by giving the same weight to a given security as the index does. For more information about the fund’s investment objective, strategy, and risks, please see the fund’s prospectus.

Market Highlights. Despite continuing signs of global economic weakness and escalating trade tensions with China over much of the reporting period, the U.S. economy exhibited steady, although slowing, growth throughout the period. Inflation remained benign for most of the reporting period despite a tight labor market and continued low unemployment, a more dovish Federal Reserve (Fed), and a soaring stock market. After four interest rate hikes in 2018, the Fed held rates unchanged for the first half of the year. But amid growing signs of global weakness that threatened to dampen U.S. economic growth, along with continued low inflation and weakness in manufacturing, the Fed enacted three interest rate cuts by the end of the period—in July, September, and October. Consistent with U.S. Treasury securities yields across the board, yields on U.S. Treasury Inflation-Protected Securities (TIPS) fell and prices rose. (Bond yields and bond prices move in opposite directions.) For the year, TIPS outperformed non-inflation protected U.S. Treasury securities.

Performance. For the 12 months ended December 31, 2019, the fund’s market price return was 8.52% and its NAV return was 8.36% (for an explanation of market price and NAV returns, please refer to footnote 2 on the following page). The index returned 8.43% during the same period. Differences between the return of the fund and the return of the index may be attributable to, among other things, the operational and transactional costs incurred by the fund and not the index.

Contributors and Detractors. The fund closely tracked the performance of the index for the 12-month reporting period. The fund’s gains came primarily from price appreciation, although coupon income and inflation accrual generated by the fund’s holdings further boosted fund performance.

By Security Type

Weighted Average Maturity4	8.0 Yrs
Weighted Average Duration4	7.4 Yrs

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

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

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.

TIPS generally have lower yields than conventional fixed rate bonds and will likely decline in price during periods of deflation, which could result in losses.

1	The percentage may differ from the Portfolio Holdings because the above calculation is based on a percentage of total investments, whereas the calculation in the Portfolio Holdings is based on a percentage of net assets.
2	Less than 0.05%.
3	Includes the fund’s position in money market mutual funds registered under the Investment Company Act of 1940, as amended.
4	See Glossary for definitions of maturity and duration.

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Schwab Fixed-Income ETFs  |  Annual Report

Schwab U.S. TIPS ETF

Performance and Fund Facts as of December 31, 2019

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.    

 

    

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

For index definitions, please see the Glossary.

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

Index ownership — Bloomberg Index Services Limited and its affiliates (collectively, Bloomberg) and Bloomberg’s licensors, including Barclays Bank PLC (Barclays), own all proprietary rights in the Bloomberg Barclays Indices. The fund is not sponsored, endorsed, sold or promoted by Bloomberg or Barclays. Neither Bloomberg nor Barclays endorses or recommends the fund. Neither Bloomberg nor Barclays guarantees the timeliness, accurateness or completeness of any data or information relating to the Bloomberg Barclays Indices, and neither shall be liable in any way in respect of the use or accuracy of the Bloomberg Barclays Indices.

*	Inception (8/5/10) represents the date that the shares began trading in the secondary market.
1	Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares.
2	ETF performance must be shown based on both a Market Price and a Net Asset Value (NAV) basis. The fund’s per share net asset value (NAV) is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (Market Price) is determined using the Official Closing Price of the primary stock exchange (generally, 4:00 p.m. Eastern time) and may not represent the returns you would receive if shares were traded at other times. NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively.
3	Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date.
4	As stated in the prospectus.

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Schwab Fixed-Income ETFs  |  Annual Report

Schwab Short-Term U.S. Treasury ETF

The Schwab Short-Term U.S. Treasury ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of the Bloomberg Barclays US Treasury 1-3 Year Index (the index). To pursue this investment objective, the fund generally invests in a representative sample of securities in the index. For more information about the fund’s investment objective, strategy, and risks, please see the fund’s prospectus.

Market Highlights. U.S. bond returns for 2019 were strong nearly across the board, with the strongest performance coming from longer-term corporate bond markets and long-term U.S. Treasuries, although shorter-term U.S. Treasuries, Treasury Inflation-Protected Securities (TIPS), and government and asset-backed securities all posted positive gains. Despite continuing signs of global economic weakness and escalating trade tensions with China over much of the period, the U.S. economy exhibited steady, although slowing, growth throughout the period. After four interest rate hikes in 2018, the Federal Reserve (Fed) held rates unchanged for the first half of the year. But amid growing signs of global weakness that threatened to dampen U.S. economic growth, along with continued low inflation and weakness in manufacturing, the Fed enacted three interest rate cuts by the end of the period—in July, September, and October. Despite a tight labor market and continued low unemployment, a more dovish Fed, and a soaring stock market, inflation remained benign.

Over the reporting period, yields on short-term U.S. Treasuries declined and prices rose—more steeply over the first half of the year as the Fed reconsidered its interest rate policy and paused on further rate increases, then at a slower pace over the second half as the Fed implemented rate cuts. (Bond yields and bond prices move in opposite directions.) Over the reporting period, the yield on the 1-year U.S. Treasury bill fell relatively steadily, from 2.63% to 1.59%. The yield on the 2-year U.S. Treasury began the year at 2.48%, hit its one-year low of 1.39% in early October, and ended the year at 1.58%. The yield on the 3-year U.S. Treasury followed a similar pattern, beginning the year at 2.46%, hitting its low of 1.34% in early October, and closing the year at 1.62%. The spread between the 1-year and 3-year yields somewhat normalized from -0.17% to 0.03% for the year.

Performance. For the 12 months ended December 31, 2019, the fund’s market price return was 3.46% and its NAV return was 3.53% (for an explanation of market price and NAV returns, please refer to footnote 2 on the following page). The index returned 3.59% during the same period. Differences between the return of the fund and the return of the index may be attributable to, among other things, the operational and transactional costs incurred by the fund and not the index.

Contributors and Detractors. The fund closely tracked the performance of the index for the 12-month reporting period. The fund’s gains came primarily from coupon income generated by the fund’s holdings, with price appreciation further boosting the fund’s return.

By Security Type

Weighted Average Maturity3	2.0 Yrs
Weighted Average Duration3	1.9 Yrs

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

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

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.

1	The percentage may differ from the Portfolio Holdings because the above calculation is based on a percentage of total investments, whereas the calculation in the Portfolio Holdings is based on a percentage of net assets.
2	Includes the fund’s position in money market mutual funds registered under the Investment Company Act of 1940, as amended.
3	See Glossary for definitions of maturity and duration.

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Schwab Fixed-Income ETFs  |  Annual Report

Schwab Short-Term U.S. Treasury ETF

Performance and Fund Facts as of December 31, 2019

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.    

 

    

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

For index definitions, please see the Glossary.

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

Index ownership — Bloomberg Index Services Limited and its affiliates (collectively, Bloomberg) and Bloomberg’s licensors, including Barclays Bank PLC (Barclays), own all proprietary rights in the Bloomberg Barclays Indices. The fund is not sponsored, endorsed, sold or promoted by Bloomberg or Barclays. Neither Bloomberg nor Barclays endorses or recommends the fund. Neither Bloomberg nor Barclays guarantees the timeliness, accurateness or completeness of any data or information relating to the Bloomberg Barclays Indices, and neither shall be liable in any way in respect of the use or accuracy of the Bloomberg Barclays Indices.

*	Inception (8/5/10) represents the date that the shares began trading in the secondary market.
1	Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares.
2	ETF performance must be shown based on both a Market Price and a Net Asset Value (NAV) basis. The fund’s per share net asset value (NAV) is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (Market Price) is determined using the Official Closing Price of the primary stock exchange (generally, 4:00 p.m. Eastern time) and may not represent the returns you would receive if shares were traded at other times. NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively.
3	Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date.
4	As stated in the prospectus. Effective December 13, 2019, the management fee was reduced to 0.05%. For more information, see financial note 4 or refer to the prospectus supplement dated December 13, 2019.

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Schwab Fixed-Income ETFs  |  Annual Report

Schwab Intermediate-Term U.S. Treasury ETF

The Schwab Intermediate-Term U.S. Treasury ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of the Bloomberg Barclays US Treasury 3-10 Year Index (the index). To pursue this investment objective, the fund generally invests in a representative sample of securities included in the index. For more information about the fund’s investment objective, strategy, and risks, please see the fund’s prospectus.

Market Highlights. U.S. bond returns for 2019 were strong nearly across the board, with the strongest performance coming from longer-term corporate bond markets and long-term U.S. Treasuries, although shorter-term U.S. Treasuries, Treasury Inflation-Protected Securities (TIPS), and government and asset-backed securities all posted positive gains. Despite continuing signs of global economic weakness and escalating trade tensions with China over much of the period, the U.S. economy exhibited steady, although slowing, growth throughout the period. After four interest rate hikes in 2018, the Federal Reserve (Fed) held rates unchanged for the first half of the year. But amid growing signs of global weakness that threatened to dampen U.S. economic growth, along with continued low inflation and weakness in manufacturing, the Fed enacted three interest rate cuts by the end of the period—in July, September, and October. Despite a tight labor market and continued low unemployment, a more dovish Fed, and a soaring stock market, inflation remained benign.

Over the reporting period, yields on intermediate-term U.S. Treasuries declined and prices rose—more steeply over the first half of the year as the Fed reconsidered its interest rate policy and paused on further rate increases, then stabilized over the second half as the Fed implemented rate cuts. (Bond yields and bond prices move in opposite directions.) Over the reporting period, the yield on the 3-year U.S. Treasury began the year at 2.46%, hit its one-year low of 1.34% in early October, and ended the year at 1.62%. The yield on the 5-year U.S. Treasury note began the year at 2.51%, hit its one-year low of 1.32% in early September, and ended the year at 1.69%. The yield on the 10-year U.S. Treasury began the year at 2.69%, hit its low of 1.47% in late August and early September, and ended the year at 1.92%.

Performance. For the 12 months ended December 31, 2019, the fund’s market price return was 6.18% and its NAV return was 6.38% (for an explanation of market price and NAV returns, please refer to footnote 2 on the following page). The index returned 6.43% during the same period. Differences between the return of the fund and the return of the index may be attributable to, among other things, the operational and transactional costs incurred by the fund and not the index.

Contributors and Detractors. The fund closely tracked the performance of the index for the 12-month reporting period. The fund’s gains came primarily from price appreciation, although coupon income generated by the fund’s holdings further boosted fund performance.

By Security Type

Weighted Average Maturity3	5.6 Yrs
Weighted Average Duration3	5.2 Yrs

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

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

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.

1	The percentage may differ from the Portfolio Holdings because the above calculation is based on a percentage of total investments, whereas the calculation in the Portfolio Holdings is based on a percentage of net assets.
2	Includes the fund’s position in money market mutual funds registered under the Investment Company Act of 1940, as amended.
3	See Glossary for definitions of maturity and duration.

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Schwab Fixed-Income ETFs  |  Annual Report

Schwab Intermediate-Term U.S. Treasury ETF

Performance and Fund Facts as of December 31, 2019

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.    

 

    

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

For index definitions, please see the Glossary.

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

Index ownership — Bloomberg Index Services Limited and its affiliates (collectively, Bloomberg) and Bloomberg’s licensors, including Barclays Bank PLC (Barclays), own all proprietary rights in the Bloomberg Barclays Indices. The fund is not sponsored, endorsed, sold or promoted by Bloomberg or Barclays. Neither Bloomberg nor Barclays endorses or recommends the fund. Neither Bloomberg nor Barclays guarantees the timeliness, accurateness or completeness of any data or information relating to the Bloomberg Barclays Indices, and neither shall be liable in any way in respect of the use or accuracy of the Bloomberg Barclays Indices.

*	Inception (8/5/10) represents the date that the shares began trading in the secondary market.
1	Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares.
2	ETF performance must be shown based on both a Market Price and a Net Asset Value (NAV) basis. The fund’s per share net asset value (NAV) is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (Market Price) is determined using the Official Closing Price of the primary stock exchange (generally, 4:00 p.m. Eastern time) and may not represent the returns you would receive if shares were traded at other times. NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively.
3	Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date.
4	As stated in the prospectus. Effective December 13, 2019, the management fee was reduced to 0.05%. For more information, see financial note 4 or refer to the prospectus supplement dated December 13, 2019.

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Schwab Fixed-Income ETFs  |  Annual Report

Schwab Long-Term U.S. Treasury ETF

The Schwab Long-Term U.S. Treasury ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of an index that measures the performance of the long-term U.S. Treasury bond market. To pursue this investment objective, the fund generally invests in securities that are included in Bloomberg Barclays US Long Treasury Index (the index) and generally seeks to replicate the performance of the index by giving the same weight to a given security as the index does. For more information about the fund’s investment objective, strategy, and risks, please see the fund’s prospectus.

Market Highlights. U.S. bond returns for 2019 were strong nearly across the board, with the strongest performance coming from longer-term corporate bond markets and long-term U.S. Treasuries, although shorter-term U.S. Treasuries, Treasury Inflation-Protected Securities (TIPS), and government and asset-backed securities all posted positive gains. Despite continuing signs of global economic weakness and escalating trade tensions with China over much of the period, the U.S. economy exhibited steady, although slowing, growth throughout the period. After four interest rate hikes in 2018, the Federal Reserve (Fed) held rates unchanged for the first half of the year. But amid growing signs of global weakness that threatened to dampen U.S. economic growth, along with continued low inflation and weakness in manufacturing, the Fed enacted three interest rate cuts by the end of the year—in July, September, and October. Despite a tight labor market and continued low unemployment, a more dovish Fed, and a soaring stock market, inflation remained benign.

Yields on long-term U.S. Treasuries declined relatively steadily over the first half of the year, as the Fed reconsidered its interest rate policy and paused on further rate increases, but became more volatile over the second half of the year as the Fed implemented rate cuts, U.S.-China trade tensions endured, and global uncertainties persisted. By year-end, as a partial U.S.-China trade resolution was announced and equity markets had regained their momentum, long-term yields had increased modestly from the lowest levels of the year. Over the fund’s reporting period from its inception on October 10, 2019 through December 31, 2019, the yield on the 10-year U.S. Treasury rose from 1.59% to 1.92% and the yield on the 30-year U.S. Treasury rose from 2.08% to 2.39%.

Performance. During the reporting period from fund inception on October 10, 2019 through December 31, 2019, the fund’s market price return was -5.16% and its NAV return was -4.91% (for an explanation of market price and NAV returns, please refer to footnote 2 on the following page). The index returned -4.92% during the same period. Differences between the return of the fund and the return of the index may be attributable to, among other things, the operational and transactional costs incurred by the fund and not the index.

Contributors and Detractors. Over the reporting period from fund inception on October 10, 2019 through December 31, 2019, the fund closely tracked the performance of the index. Declining market value of long-term U.S. Treasury securities detracted from fund performance. Coupon income generated by the fund’s holdings contributed to fund performance, partially offsetting the impact of negative price return that detracted from performance.

By Security Type

Weighted Average Maturity4	24.9 Yrs
Weighted Average Duration4	17.5 Yrs

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

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

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.

1	The percentage may differ from the Portfolio Holdings because the above calculation is based on a percentage of total investments, whereas the calculation in the Portfolio Holdings is based on a percentage of net assets.
2	Less than 0.05%.
3	Includes the fund’s position in money market mutual funds registered under the Investment Company Act of 1940, as amended.
4	See Glossary for definitions of maturity and duration.

₁₃

Schwab Fixed-Income ETFs  |  Annual Report

Schwab Long-Term U.S. Treasury ETF

Performance and Fund Facts as of December 31, 2019

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.    

 

    

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

For index definitions, please see the Glossary.

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

Index ownership — Bloomberg Index Services Limited and its affiliates (collectively, Bloomberg) and Bloomberg’s licensors, including Barclays Bank PLC (Barclays), own all proprietary rights in the Bloomberg Barclays Indices. The fund is not sponsored, endorsed, sold or promoted by Bloomberg or Barclays. Neither Bloomberg nor Barclays endorses or recommends the fund. Neither Bloomberg nor Barclays guarantees the timeliness, accurateness or completeness of any data or information relating to the Bloomberg Barclays Indices, and neither shall be liable in any way in respect of the use or accuracy of the Bloomberg Barclays Indices.

*	Inception (10/10/19) represents the date that the shares began trading in the secondary market.
1	Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares.
2	ETF performance must be shown based on both a Market Price and a Net Asset Value (NAV) basis. The fund’s per share net asset value (NAV) is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (Market Price) is determined using the Official Closing Price of the primary stock exchange (generally, 4:00 p.m. Eastern time) and may not represent the returns you would receive if shares were traded at other times. NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively.
3	Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date.
4	As stated in the prospectus. Effective December 13, 2019, the management fee was reduced to 0.05%. For more information, see financial note 4 or refer to the prospectus supplement dated December 13, 2019.

₁₄

Schwab Fixed-Income ETFs  |  Annual Report

Schwab U.S. Aggregate Bond ETF

The Schwab U.S. Aggregate Bond ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of the Bloomberg Barclays US Aggregate Bond Index (the index). To pursue this investment objective, the fund generally invests in a representative sample of securities included in the index. In addition, for the 12-month reporting period ended December 31, 2019, the fund also held positions in TBAs, or “to-be-announced” securities. TBAs are mortgage-backed bonds that settle on a forward date and are used to gain exposure to the mortgage market. The average month-end position in these securities was 2.2% of the fund, with a minimum exposure of 1.7% and a maximum exposure of 3.3%. For more information about the fund’s investment objective, strategy, and risks, please see the fund’s prospectus.

Market Highlights. U.S. bond returns for 2019 were strong nearly across the board, with the strongest performance coming from longer-term corporate bond markets and long-term U.S. Treasuries, although shorter-term U.S. Treasuries, Treasury Inflation-Protected Securities (TIPS), and government and asset-backed securities all posted positive gains. Despite continuing signs of global economic weakness and escalating trade tensions with China over much of the period, the U.S. economy exhibited steady, although slowing, growth throughout the period. After four interest rate hikes in 2018, the Federal Reserve (Fed) held rates unchanged for the first half of the year. But amid growing signs of global weakness that threatened to dampen U.S. economic growth, along with continued low inflation and weakness in manufacturing, the Fed enacted three interest rate cuts by the end of the period. Despite tight labor market and continued low unemployment, a more dovish Fed, and a soaring stock market, inflation remained benign.

Over much of the reporting period, the U.S. Treasury yield curve flattened. In late March, certain parts of the yield curve inverted as short-term yield exceeded long-term yields, raising recession concerns. But as trade tensions moderated, the Fed’s intentions became clearer, and investors regained their optimism, demand for longer-term U.S. Treasuries declined, driving yields higher, and by October the yield curve had regained its normal slope. Over the reporting period, the yield on the three-month U.S. Treasury fell from 2.45% to 1.55%, the yield on the 10-year U.S. Treasury fell from 2.69% to 1.92%, and the yield on the 30-year U.S. Treasury fell from 3.02% to 2.39%.

Performance. For the 12 months ended December 31, 2019, the fund’s market price return and NAV return were 8.64% (for an explanation of market price and NAV returns, please refer to footnote 2 on the following page). The index returned 8.72% during the same period. Differences between the return of the fund and the return of the index may be attributable to, among other things, the operational and transactional costs incurred by the fund and not the index.

Contributors and Detractors. The fund closely tracked the performance of the index for the 12-month reporting period, which meant keeping the fund’s credit quality, duration, and sector allocations aligned to the index. All bond sectors contributed positively, with gains primarily coming from price appreciation, although coupon income generated by the fund’s holdings further boosted fund performance. As a result of increased assets under management (AUM), the fund was able to increase its number of credit and securitized positions, providing it improved tracking of its index.

By Security Type

Weighted Average Maturity4	7.9 Yrs
Weighted Average Duration4	5.9 Yrs

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

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

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.

1	The percentage may differ from the Portfolio Holdings because the above calculation is based on a percentage of total investments, whereas the calculation in the Portfolio Holdings is based on a percentage of net assets.
2	The fund may seek to obtain exposure to U.S. agency mortgage pass-through securities, in part or in full, through the use of “to-be-announced” or “TBA” transactions, which are standardized contracts for future delivery of mortgage pass-through securities in which the exact mortgage pools to be delivered are not specified until a few days prior to settlement. These transactions represented approximately 1.8% of total investments on December 31, 2019.
3	Includes the fund’s position in money market mutual funds registered under the Investment Company Act of 1940, as amended.
4	See Glossary for definitions of maturity and duration.

₁₅

Schwab Fixed-Income ETFs  |  Annual Report

Schwab U.S. Aggregate Bond ETF

Performance and Fund Facts as of December 31, 2019

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.    

 

₁₆

Schwab Fixed-Income ETFs  |  Annual Report

Schwab 1-5 Year Corporate Bond ETF

The Schwab 1-5 Year Corporate Bond ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of an index that measures the performance of the short-term U.S. corporate bond market. To pursue this investment objective, the fund generally invests in a representative sample of securities included in the Bloomberg Barclays US 1-5 Year Corporate Bond Index (the index). For more information about the fund’s investment objective, strategy, and risks, please see the fund’s prospectus.

Market Highlights. U.S. bond returns for 2019 were strong nearly across the board, with the strongest performance coming from longer-term corporate bond markets and long-term U.S. Treasuries, although shorter-term U.S. Treasuries, Treasury Inflation-Protected Securities (TIPS), and government and asset-backed securities all posted positive gains. Despite continuing signs of global economic weakness and escalating trade tensions with China over much of the period, the U.S. economy exhibited steady, although slowing, growth throughout the period. After four interest rate hikes in 2018, the Federal Reserve (Fed) held rates unchanged for the first half of the year. But amid growing signs of global weakness that threatened to dampen U.S. economic growth, along with continued low inflation and weakness in manufacturing, the Fed enacted three interest rate cuts by the end of the year—in July, September, and October. Despite a tight labor market and continued low unemployment, a more dovish Fed, and a soaring stock market, inflation remained benign.

Over the fund’s reporting period from its inception on October 10, 2019 through December 31, 2019, yields on U.S. corporate debt fell, driving prices higher. (Bond yields and bond prices move in opposite directions.) Credit spreads between corporate bonds and U.S. Treasuries tightened, reflecting improving creditworthiness and a favorable environment for corporate bonds. Contributors to this tightening included the Fed’s interest rate cuts, strong corporate earnings, abating recessionary fears, and the easing of trade tensions that came with the December announcement of a partial trade resolution between the U.S. and China.

Performance. During the reporting period from fund inception on October 10, 2019 through December 31, 2019, the fund’s market price return was 0.52% and its NAV return was 0.50% (for an explanation of market price and NAV returns, please refer to footnote 2 on the following page). The index returned 0.57% during the same period. Differences between the return of the fund and the return of the index may be attributable to, among other things, the operational and transactional costs incurred by the fund and not the index.

Contributors and Detractors. Over the reporting period from fund inception on October 10, 2019 through December 31, 2019, the fund closely tracked the performance of the index. The fund’s gains came both from price appreciation and coupon income generated by the fund’s holdings.

By Security Type

Weighted Average Maturity3	2.8 Yrs
Weighted Average Duration3	2.6 Yrs

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

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

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.

1	The percentage may differ from the Portfolio Holdings because the above calculation is based on a percentage of total investments, whereas the calculation in the Portfolio Holdings is based on a percentage of net assets.
2	Includes the fund’s position in money market mutual funds registered under the Investment Company Act of 1940, as amended.
3	See Glossary for definitions of maturity and duration.

₁₇

Schwab Fixed-Income ETFs  |  Annual Report

Schwab 1-5 Year Corporate Bond ETF

Performance and Fund Facts as of December 31, 2019

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.    

 

    

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

For index definitions, please see the Glossary.

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

Index ownership — Bloomberg Index Services Limited and its affiliates (collectively, Bloomberg) and Bloomberg’s licensors, including Barclays Bank PLC (Barclays), own all proprietary rights in the Bloomberg Barclays Indices. The fund is not sponsored, endorsed, sold or promoted by Bloomberg or Barclays. Neither Bloomberg nor Barclays endorses or recommends the fund. Neither Bloomberg nor Barclays guarantees the timeliness, accurateness or completeness of any data or information relating to the Bloomberg Barclays Indices, and neither shall be liable in any way in respect of the use or accuracy of the Bloomberg Barclays Indices.

*	Inception (10/10/19) represents the date that the shares began trading in the secondary market.
1	Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares.
2	ETF performance must be shown based on both a Market Price and a Net Asset Value (NAV) basis. The fund’s per share net asset value (NAV) is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (Market Price) is determined using the Official Closing Price of the primary stock exchange (generally, 4:00 p.m. Eastern time) and may not represent the returns you would receive if shares were traded at other times. NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively.
3	Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date.
4	As stated in the prospectus. Effective December 13, 2019, the management fee was reduced to 0.05%. For more information, see financial note 4 or refer to the prospectus supplement dated December 13, 2019.

₁₈

Schwab Fixed-Income ETFs  |  Annual Report

Schwab 5-10 Year Corporate Bond ETF

The Schwab 5-10 Year Corporate Bond ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of an index that measures the performance of the intermediate-term U.S. corporate bond market. To pursue this investment objective, the fund generally invests in a representative sample of securities included in the Bloomberg Barclays US 5-10 Year Corporate Bond Index (the index). For more information about the fund’s investment objective, strategy, and risks, please see the fund’s prospectus.

Market Highlights. U.S. bond returns for 2019 were strong nearly across the board, with the strongest performance coming from longer-term corporate bond markets and long-term U.S. Treasuries, although U.S. shorter-term Treasuries, Treasury Inflation-Protected Securities (TIPS), and government and asset-backed securities all posted positive gains. Despite continuing signs of global economic weakness and escalating trade tensions with China over much of the period, the U.S. economy exhibited steady, although slowing, growth throughout the period. After four interest rate hikes in 2018, the Federal Reserve (Fed) held rates unchanged for the first half of the year. But amid growing signs of global weakness that threatened to dampen U.S. economic growth, along with continued low inflation and weakness in manufacturing, the Fed enacted three interest rate cuts by the end of the year—in July, September, and October. Despite a tight labor market and continued low unemployment, a more dovish Fed, and a soaring stock market, inflation remained benign.

Over the fund’s reporting period from its inception on October 10, 2019 through December 31, 2019, yields on U.S. corporate debt fell, driving prices higher. (Bond yields and bond prices move in opposite directions.) Credit spreads between corporate bonds and U.S. Treasuries tightened, reflecting improving creditworthiness and a favorable environment for corporate bonds. Contributors to this tightening included the Fed’s interest rate cuts, strong corporate earnings, abating recessionary fears, and the easing of trade tensions that came with the December announcement of a partial trade resolution between the U.S. and China. Longer-term corporate bonds performed more strongly than shorter-term bonds.

Performance. During the reporting period from fund inceptions on October 10, 2019 through December 31, 2019, the fund’s market price return and NAV return were 0.67% (for an explanation of market price and NAV returns, please refer to footnote 2 on the following page). The index returned 0.76% during the same period. Differences between the return of the fund and the return of the index may be attributable to, among other things, the operational and transactional costs incurred by the fund and not the index.

Contributors and Detractors. Over the reporting period from fund inception on October 10, 2019 through December 31, 2019, the fund closely tracked the performance of the index. The fund’s gains came both from price appreciation and coupon income generated by the fund’s holdings.

By Security Type

Weighted Average Maturity3	7.1 Yrs
Weighted Average Duration3	6.2 Yrs

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

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

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.

1	The percentage may differ from the Portfolio Holdings because the above calculation is based on a percentage of total investments, whereas the calculation in the Portfolio Holdings is based on a percentage of net assets.
2	Includes the fund’s position in money market mutual funds registered under the Investment Company Act of 1940, as amended.
3	See Glossary for definitions of maturity and duration.

₁₉

Schwab Fixed-Income ETFs  |  Annual Report

Schwab 5-10 Year Corporate Bond ETF

Performance and Fund Facts as of December 31, 2019

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.    

 

    

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

For index definitions, please see the Glossary.

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

Index ownership — Bloomberg Index Services Limited and its affiliates (collectively, Bloomberg) and Bloomberg’s licensors, including Barclays Bank PLC (Barclays), own all proprietary rights in the Bloomberg Barclays Indices. The fund is not sponsored, endorsed, sold or promoted by Bloomberg or Barclays. Neither Bloomberg nor Barclays endorses or recommends the fund. Neither Bloomberg nor Barclays guarantees the timeliness, accurateness or completeness of any data or information relating to the Bloomberg Barclays Indices, and neither shall be liable in any way in respect of the use or accuracy of the Bloomberg Barclays Indices.

*	Inception (10/10/19) represents the date that the shares began trading in the secondary market.
1	Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares.
2	ETF performance must be shown based on both a Market Price and a Net Asset Value (NAV) basis. The fund’s per share net asset value (NAV) is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (Market Price) is determined using the Official Closing Price of the primary stock exchange (generally, 4:00 p.m. Eastern time) and may not represent the returns you would receive if shares were traded at other times. NAV is used as a proxy for purposes of calculating Market Price Return on inception date. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively.
3	Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date.
4	As stated in the prospectus. Effective December 13, 2019, the management fee was reduced to 0.05%. For more information, see financial note 4 or refer to the prospectus supplement dated December 13, 2019.

₂₀

Schwab Fixed-Income ETFs  |  Annual Report

Schwab Fixed-Income ETFs

Fund Expenses (Unaudited)

	Expense Ratio (Annualized)1	Beginning Account Value at 7/1/19	Ending Account Value (Net of Expenses) at 12/31/19	Expenses Paid During Period 7/1/19-12/31/192
Schwab U.S. TIPS ETF
Actual Return	0.05%	$1,000.00	$1,021.40	$0.25
Hypothetical 5% Return	0.05%	$1,000.00	$1,024.95	$0.26
Schwab Short-Term U.S. Treasury ETF
Actual Return	0.06%	$1,000.00	$1,010.60	$0.30
Hypothetical 5% Return	0.06%	$1,000.00	$1,024.90	$0.31
Schwab Intermediate-Term U.S. Treasury ETF
Actual Return	0.06%	$1,000.00	$1,012.30	$0.30
Hypothetical 5% Return	0.06%	$1,000.00	$1,024.90	$0.31
Schwab Long-Term U.S. Treasury ETF3,4
Actual Return	0.06%	$1,000.00	$ 950.90	$0.13
Hypothetical 5% Return	0.06%	$1,000.00	$1,024.90	$0.31
Schwab U.S. Aggregate Bond ETF
Actual Return	0.04%	$1,000.00	$1,024.10	$0.20
Hypothetical 5% Return	0.04%	$1,000.00	$1,025.00	$0.20
Schwab 1-5 Year Corporate Bond ETF3,4
Actual Return	0.06%	$1,000.00	$1,005.00	$0.14
Hypothetical 5% Return	0.06%	$1,000.00	$1,024.90	$0.31
Schwab 5-10 Year Corporate Bond ETF3,4
Actual Return	0.06%	$1,000.00	$1,006.70	$0.14
Hypothetical 5% Return	0.06%	$1,000.00	$1,024.90	$0.31

₂₁

Schwab U.S. TIPS ETF

Financial Statements

Financial Highlights

	1/1/19– 12/31/19	1/1/18– 12/31/18	1/1/17– 12/31/17	1/1/16– 12/31/16	1/1/15– 12/31/15
Per-Share Data
Net asset value at beginning of period	$53.27	$55.39	$54.84	$53.15	$54.11
Income (loss) from investment operations:
Net investment income (loss)1	1.21	1.51	1.17	0.99	0.17
Net realized and unrealized gains (losses)	3.23	(2.23)	0.43	1.46	(0.98)
Total from investment operations	4.44	(0.72)	1.60	2.45	(0.81)
Less distributions:
Distributions from net investment income	(1.14)	(1.40)	(1.05)	(0.76)	(0.15)
Net asset value at end of period	$56.57	$53.27	$55.39	$54.84	$53.15
Total return	8.36%	(1.31%)	2.95%	4.60%	(1.50%)
Ratios/Supplemental Data
Ratios to average net assets:
Total expenses	0.05%	0.05%	0.05% 2	0.07%	0.07%
Net investment income (loss)	2.18%	2.80%	2.13%	1.78%	0.31%
Portfolio turnover rate3	20%	17%	19%	16%	19%
Net assets, end of period (x 1,000)	$8,733,970	$5,779,263	$2,880,386	$1,614,977	$815,816

¹

Calculated based on the average shares outstanding during the period.

²

Effective March 1, 2017, the annual operating expense ratio was reduced. The ratio presented for the period ended 12/31/17 is a blended ratio.

³

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

₂₂

Schwab Fixed-Income ETFs  |  Annual Report

See financial notes

Schwab U.S. TIPS ETF

Portfolio Holdings as of December 31, 2019

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 U.S. Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-PORT Part F. The fund’s Form N-PORT Part F is available on the SEC’s website at www.sec.gov. 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.

For fixed rate obligations, the rate shown is the interest rate (the rate established when the obligation was issued). For variable rate obligations, the rate shown is the rate as of the report date based on each security’s rate reset date. The reference rate and spread used is shown parenthetically in the security description if available; if not the reference rate is described in a footnote. The maturity date shown for all the securities is the final legal maturity.    

 

---

Description	Quoted Prices in Active Markets for Identical Assets (Level 1)	Other Significant Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Assets
Treasuries	$—	$8,710,648,666	$—	$8,710,648,666
Other Investment Company1	509,711	—	—	509,711
Total	$509,711	$8,710,648,666	$—	$8,711,158,377

₂₃

Schwab U.S. TIPS ETF

Statement of Assets and Liabilities

As of December 31, 2019

Assets
Investments in unaffiliated issuers, at value (cost $8,508,191,072)		$8,711,158,377
Receivables:
Investments sold		99,135,888
Interest		23,661,896
Fund shares sold		16,970,146
Dividends	+	8,433
Total assets		8,850,934,740
Liabilities
Payables:
Investments bought		116,598,549
Management fees	+	366,624
Total liabilities		116,965,173
Net Assets
Total assets		8,850,934,740
Total liabilities	–	116,965,173
Net assets		$8,733,969,567
Net Assets by Source
Capital received from investors		8,578,451,826
Total distributable earnings		155,517,741

    

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$8,733,969,567		154,400,000		$56.57

₂₄

Schwab U.S. TIPS ETF

Statement of Operations

For the period January 1, 2019 through December 31, 2019

Investment Income
Dividends		$89,669
Interest	+	156,475,399
Total investment income		156,565,068
Expenses
Management fees		3,513,832
Total expenses	–	3,513,832
Net investment income		153,051,236
Realized and Unrealized Gains (Losses)
Net realized losses on investments		(10,446,063)
Net realized gains on in-kind redemptions	+	12,404,585
Net realized gains		1,958,522
Net change in unrealized appreciation (depreciation) on investments	+	361,225,335
Net realized and unrealized gains		363,183,857
Increase in net assets resulting from operations		$516,235,093

₂₅

Schwab U.S. TIPS ETF

Statement of Changes in Net Assets

For the current and prior report periods

Operations
	1/1/19-12/31/19		1/1/18-12/31/18
Net investment income		$153,051,236	$129,670,175
Net realized gains (losses)		1,958,522	(19,770,508)
Net change in unrealized appreciation (depreciation)	+	361,225,335	(167,659,366)
Increase (decrease) in net assets resulting from operations		516,235,093	(57,759,699)
Distributions to Shareholders
Total distributions		($152,790,170)	($130,028,200)

    

₂₆

Schwab Short-Term U.S. Treasury ETF

Financial Statements

Financial Highlights

	1/1/19– 12/31/19	1/1/18– 12/31/18	1/1/17– 12/31/17	1/1/16– 12/31/16	1/1/15– 12/31/15
Per-Share Data
Net asset value at beginning of period	$49.88	$50.03	$50.41	$50.43	$50.55
Income (loss) from investment operations:
Net investment income (loss)1	1.14	0.94	0.57	0.42	0.35
Net realized and unrealized gains (losses)	0.60	(0.20) 2	(0.39)	(0.03)	(0.13)
Total from investment operations	1.74	0.74	0.18	0.39	0.22
Less distributions:
Distributions from net investment income	(1.14)	(0.89)	(0.56)	(0.41)	(0.34)
Net asset value at end of period	$50.48	$49.88	$50.03	$50.41	$50.43
Total return	3.53%	1.50%	0.35%	0.78%	0.44%
Ratios/Supplemental Data
Ratios to average net assets:
Total expenses	0.06% 3	0.06%	0.06%	0.08% 4	0.08%
Net investment income (loss)	2.27%	1.89%	1.13%	0.83%	0.69%
Portfolio turnover rate5	77%	65%	65%	66%	89%
Net assets, end of period (x 1,000)	$5,262,952	$4,254,630	$2,181,398	$1,414,092	$1,071,573

¹

Calculated based on the average shares outstanding during the period.

²

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

³

Effective December 13, 2019, the annual operating expense ratio was reduced to 0.05%. The ratio presented for the period ended 12/31/19 is a blended ratio. (See financial note 4)

⁴

Effective December 29, 2016, the annual operating expense ratio was reduced. The ratio presented for the period ended 12/31/16 is a blended ratio.

⁵

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

₂₇

Schwab Fixed-Income ETFs  |  Annual Report

See financial notes

Schwab Short-Term U.S. Treasury ETF

Portfolio Holdings as of December 31, 2019

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 U.S. Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-PORT Part F. The fund’s Form N-PORT Part F is available on the SEC’s website at www.sec.gov. 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.

For fixed rate obligations, the rate shown is the interest rate (the rate established when the obligation was issued). For variable rate obligations, the rate shown is the rate as of the report date based on each security’s rate reset date. The reference rate and spread used is shown parenthetically in the security description if available; if not the reference rate is described in a footnote. The maturity date shown for all the securities is the final legal maturity.    

 

Schwab Fixed-Income ETFs  |  Annual Report

See financial notes

Schwab Short-Term U.S. Treasury ETF

Statement of Assets and Liabilities

As of December 31, 2019

Assets
Investments in unaffiliated issuers, at value (cost $5,196,613,459)		$5,242,136,149
Receivables:
Investments sold		271,662,437
Interest		25,218,015
Fund shares sold		12,618,157
Dividends	+	5,132
Total assets		5,551,639,890
Liabilities
Payables:
Investments bought		159,715,050
Management fees		238,551
Fund shares redeemed	+	128,734,085
Total liabilities		288,687,686
Net Assets
Total assets		5,551,639,890
Total liabilities	–	288,687,686
Net assets		$5,262,952,204
Net Assets by Source
Capital received from investors		5,242,654,380
Total distributable earnings		20,297,824

    

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$5,262,952,204		104,250,000		$50.48

₃₀

Schwab Short-Term U.S. Treasury ETF

Statement of Operations

For the period January 1, 2019 through December 31, 2019

Investment Income
Dividends		$133,731
Interest	+	125,556,721
Total investment income		125,690,452
Expenses
Management fees		3,205,305
Total expenses	–	3,205,305
Net investment income		122,485,147
Realized and Unrealized Gains (Losses)
Net realized losses on investments		(4,609,671)
Net realized gains on in-kind redemptions	+	26,141,162
Net realized gains		21,531,491
Net change in unrealized appreciation (depreciation) on investments	+	44,234,324
Net realized and unrealized gains		65,765,815
Increase in net assets resulting from operations		$188,250,962

₃₁

Schwab Short-Term U.S. Treasury ETF

Statement of Changes in Net Assets

For the current and prior report periods

Operations
	1/1/19-12/31/19		1/1/18-12/31/18
Net investment income		$122,485,147	$51,698,208
Net realized gains (losses)		21,531,491	(16,347,813)
Net change in unrealized appreciation (depreciation)	+	44,234,324	19,233,560
Increase in net assets resulting from operations		188,250,962	54,583,955
Distributions to Shareholders
Total distributions		($122,565,815)	($51,440,855)

    

Transactions in Fund Shares
		1/1/19-12/31/19		1/1/18-12/31/18
		SHARES	VALUE	SHARES	VALUE
Shares sold		92,750,000	$4,666,572,488	52,000,000	$2,581,262,926
Shares redeemed	+	(73,800,000)	(3,723,935,297)	(10,300,000)	(511,174,627)
Net transactions in fund shares		18,950,000	$942,637,191	41,700,000	$2,070,088,299
Shares Outstanding and Net Assets
		1/1/19-12/31/19		1/1/18-12/31/18
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		85,300,000	$4,254,629,866	43,600,000	$2,181,398,467
Total increase	+	18,950,000	1,008,322,338	41,700,000	2,073,231,399
End of period		104,250,000	$5,262,952,204	85,300,000	$4,254,629,866

₃₂

Schwab Intermediate-Term U.S. Treasury ETF

Financial Statements

Financial Highlights

	1/1/19– 12/31/19	1/1/18– 12/31/18	1/1/17– 12/31/17	1/1/16– 12/31/16	1/1/15– 12/31/15
Per-Share Data
Net asset value at beginning of period	$52.89	$53.35	$53.41	$53.55	$53.52
Income (loss) from investment operations:
Net investment income (loss)1	1.28	1.21	0.89	0.79	0.85
Net realized and unrealized gains (losses)	2.07	(0.55) 2	(0.07)	(0.15)	0.02 2
Total from investment operations	3.35	0.66	0.82	0.64	0.87
Less distributions:
Distributions from net investment income	(1.27)	(1.12)	(0.88)	(0.78)	(0.84)
Net asset value at end of period	$54.97	$52.89	$53.35	$53.41	$53.55
Total return	6.38%	1.28%	1.54%	1.16%	1.62%
Ratios/Supplemental Data
Ratios to average net assets:
Total expenses	0.06% 3	0.06%	0.06%	0.09% 4	0.10% 5
Net investment income (loss)	2.35%	2.34%	1.66%	1.44%	1.59%
Portfolio turnover rate6	38%	41%	30%	30%	32%
Net assets, end of period (x 1,000)	$4,735,743	$3,480,449	$1,165,708	$790,506	$441,747

¹

Calculated based on the average shares outstanding during the period.

²

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

³

Effective December 13, 2019, the annual operating expense ratio was reduced to 0.05%. The ratio presented for the period ended 12/31/19 is a blended ratio. (See financial note 4)

⁴

Effective December 29, 2016, the annual operating expense ratio was reduced. The ratio presented for the period ended 12/31/16 is a blended ratio.

⁵

Effective February 24, 2015, the annual operating expense ratio was reduced. The ratio presented for the period ended 12/31/15 is a blended ratio.

⁶

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

₃₃

Schwab Fixed-Income ETFs  |  Annual Report

See financial notes

Schwab Intermediate-Term U.S. Treasury ETF

Portfolio Holdings as of December 31, 2019

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 U.S. Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-PORT Part F. The fund’s Form N-PORT Part F is available on the SEC’s website at www.sec.gov. 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.

For fixed rate obligations, the rate shown is the interest rate (the rate established when the obligation was issued). For variable rate obligations, the rate shown is the rate as of the report date based on each security’s rate reset date. The reference rate and spread used is shown parenthetically in the security description if available; if not the reference rate is described in a footnote. The maturity date shown for all the securities is the final legal maturity.    

 

Schwab Fixed-Income ETFs  |  Annual Report

See financial notes

Schwab Intermediate-Term U.S. Treasury ETF

Statement of Assets and Liabilities

As of December 31, 2019

Assets
Investments in unaffiliated issuers, at value (cost $4,572,777,617)		$4,711,978,986
Receivables:
Investments sold		130,203,966
Interest		24,498,185
Fund shares sold		8,245,701
Dividends	+	4,534
Total assets		4,874,931,372
Liabilities
Payables:
Investments bought		53,763,883
Management fees		218,628
Fund shares redeemed	+	85,205,580
Total liabilities		139,188,091
Net Assets
Total assets		4,874,931,372
Total liabilities	–	139,188,091
Net assets		$4,735,743,281
Net Assets by Source
Capital received from investors		4,621,473,065
Total distributable earnings		114,270,216

    

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$4,735,743,281		86,150,000		$54.97

₃₆

Schwab Intermediate-Term U.S. Treasury ETF

Statement of Operations

For the period January 1, 2019 through December 31, 2019

Investment Income
Dividends		$81,495
Interest	+	103,161,241
Total investment income		103,242,736
Expenses
Management fees		2,548,477
Total expenses	–	2,548,477
Net investment income		100,694,259
Realized and Unrealized Gains (Losses)
Net realized losses on investments		(2,683,161)
Net realized gains on in-kind redemptions	+	27,383,142
Net realized gains		24,699,981
Net change in unrealized appreciation (depreciation) on investments	+	127,844,208
Net realized and unrealized gains		152,544,189
Increase in net assets resulting from operations		$253,238,448

₃₇

Schwab Intermediate-Term U.S. Treasury ETF

Statement of Changes in Net Assets

For the current and prior report periods

Operations
	1/1/19-12/31/19		1/1/18-12/31/18
Net investment income		$100,694,259	$52,336,541
Net realized gains (losses)		24,699,981	(18,310,161)
Net change in unrealized appreciation (depreciation)	+	127,844,208	32,708,262
Increase in net assets resulting from operations		253,238,448	66,734,642
Distributions to Shareholders
Total distributions		($100,812,255)	($52,237,145)

    

Transactions in Fund Shares
		1/1/19-12/31/19		1/1/18-12/31/18
		SHARES	VALUE	SHARES	VALUE
Shares sold		46,950,000	$2,562,077,403	49,550,000	$2,591,430,842
Shares redeemed	+	(26,600,000)	(1,459,209,492)	(5,600,000)	(291,186,748)
Net transactions in fund shares		20,350,000	$1,102,867,911	43,950,000	$2,300,244,094
Shares Outstanding and Net Assets
		1/1/19-12/31/19		1/1/18-12/31/18
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		65,800,000	$3,480,449,177	21,850,000	$1,165,707,586
Total increase	+	20,350,000	1,255,294,104	43,950,000	2,314,741,591
End of period		86,150,000	$4,735,743,281	65,800,000	$3,480,449,177

₃₈

Schwab Long-Term U.S. Treasury ETF

Financial Statements

Financial Highlights

	10/10/19 1– 12/31/19
Per-Share Data
Net asset value at beginning of period	$50.00
Income (loss) from investment operations:
Net investment income (loss)2	0.22
Net realized and unrealized gains (losses)	(2.67)
Total from investment operations	(2.45)
Less distributions:
Distributions from net investment income	(0.21)
Net asset value at end of period	$47.34
Total return	(4.91%) 3
Ratios/Supplemental Data
Ratios to average net assets:
Total expenses	0.06% 4,5
Net investment income (loss)	2.07% 4
Portfolio turnover rate	3% 3
Net assets, end of period (x 1,000)	$18,935

¹

Commencement of operations.

²

Calculated based on the average shares outstanding during the period.

³

Not annualized.

⁴

Annualized.

⁵

Effective December 13, 2019, the annual operating expense ratio was reduced to 0.05%. The ratio presented for the period ended 12/31/19 is a blended ratio. (See financial note 4)

₃₉

Schwab Fixed-Income ETFs  |  Annual Report

See financial notes

Schwab Long-Term U.S. Treasury ETF

Portfolio Holdings as of December 31, 2019

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 U.S. Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-PORT Part F. The fund’s Form N-PORT Part F is available on the SEC’s website at www.sec.gov. 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.

For fixed rate obligations, the rate shown is the interest rate (the rate established when the obligation was issued). For variable rate obligations, the rate shown is the rate as of the report date based on each security’s rate reset date. The reference rate and spread used is shown parenthetically in the security description if available; if not the reference rate is described in a footnote. The maturity date shown for all the securities is the final legal maturity.    

 

Schwab Fixed-Income ETFs  |  Annual Report

See financial notes

Schwab Long-Term U.S. Treasury ETF

Statement of Assets and Liabilities

As of December 31, 2019

Assets
Investments in unaffiliated issuers, at value (cost $19,412,791)		$18,803,257
Receivables:
Investments sold		174,411
Interest		132,524
Dividends	+	16
Total assets		19,110,208
Liabilities
Payables:
Investments bought		174,344
Management fees	+	812
Total liabilities		175,156
Net Assets
Total assets		19,110,208
Total liabilities	–	175,156
Net assets		$18,935,052
Net Assets by Source
Capital received from investors		19,560,860
Total distributable loss		(625,808)

    

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$18,935,052		400,000		$47.34

₄₂

Schwab Long-Term U.S. Treasury ETF

Statement of Operations

For the period October 10, 2019* through December 31, 2019

Investment Income
Dividends		$98
Interest	+	71,276
Total investment income		71,374
Expenses
Management fees		1,920
Total expenses	–	1,920
Net investment income		69,454
Realized and Unrealized Gains (Losses)
Net realized losses on investments		(18,893)
Net change in unrealized appreciation (depreciation) on investments	+	(609,534)
Net realized and unrealized losses		(628,427)
Decrease in net assets resulting from operations		($558,973)

*	Commencement of operations.

₄₃

Schwab Fixed-Income ETFs  |  Annual Report

See financial notes

Schwab U.S. Aggregate Bond ETF

Financial Statements

Financial Highlights

	1/1/19– 12/31/19	1/1/18– 12/31/18	1/1/17– 12/31/17	1/1/16– 12/31/16	1/1/15– 12/31/15
Per-Share Data
Net asset value at beginning of period	$50.59	$52.07	$51.55	$51.41	$52.20
Income (loss) from investment operations:
Net investment income (loss)1	1.43	1.35	1.18	1.06	1.00
Net realized and unrealized gains (losses)	2.90	(1.42)	0.59	0.23 2	(0.71)
Total from investment operations	4.33	(0.07)	1.77	1.29	0.29
Less distributions:
Distributions from net investment income	(1.49)	(1.41)	(1.25)	(1.15)	(1.08)
Net asset value at end of period	$53.43	$50.59	$52.07	$51.55	$51.41
Total return	8.64%	(0.09%)	3.46%	2.49%	0.56%
Ratios/Supplemental Data
Ratios to average net assets:
Total expenses	0.04%	0.04%	0.04%	0.05% 3	0.05%
Net investment income (loss)	2.71%	2.67%	2.26%	2.01%	1.92%
Portfolio turnover rate4,5	63%	71%	101%	119%	104% 6
Net assets, end of period (x 1,000)	$7,383,509	$5,544,583	$4,925,693	$3,309,447	$2,102,482

¹

Calculated based on the average shares outstanding during the period.

²

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

³

Effective October 7, 2016, the annual operating expense ratio was reduced. The ratio presented for the period ended 12/31/16 is a blended ratio.

⁴

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

⁵

Includes to-be-announced (TBA) transactions. (See financial note 2)

⁶

Revised methodology adopted as of December 31, 2015. For comparison purposes, portfolio turnover rate would have been 146% using previous methodology.

₄₅

Schwab Fixed-Income ETFs  |  Annual Report

See financial notes

Schwab U.S. Aggregate Bond ETF

Portfolio Holdings as of December 31, 2019

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 U.S. Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-PORT Part F. The fund’s Form N-PORT Part F is available on the SEC’s website at www.sec.gov. 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.

For fixed rate obligations, the rate shown is the interest rate (the rate established when the obligation was issued). For variable rate obligations, the rate shown is the rate as of the report date based on each security’s rate reset date. The reference rate and spread used is shown parenthetically in the security description if available; if not the reference rate is described in a footnote. The maturity date shown for all the securities is the final legal maturity.    

 

Schwab Fixed-Income ETFs  |  Annual Report

See financial notes

Schwab Fixed-Income ETFs  |  Annual Report

See financial notes

Schwab Fixed-Income ETFs  |  Annual Report

See financial notes