SCHWAB STRATEGIC TRUST Form N-CSRS Filed 2019-10-31
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SECURITIES AND EXCHANGE COMMISSION FORM N-CSRS Certified semi-annual shareholder report of registered management investment companies filed on Form N-CSR Filing Date: 2019-10-31 | Period of Report: 2019-08-31 SEC Accession No. 0001193125-19-280335 (HTML Version on secdatabase.com) FILER SCHWAB STRATEGIC TRUST Mailing Address Business Address 211 MAIN STREET 211 MAIN STREET CIK:1454889| IRS No.: 000000000 | State of Incorp.:DE | Fiscal Year End: 1231 SAN FRANCISCO CA 94105 SAN FRANCISCO CA 94105 Type: N-CSRS | Act: 40 | File No.: 811-22311 | Film No.: 191183353 1-415-667-7000 Copyright © 2019 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSRS CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-22311 Schwab Strategic Trust Schwab U.S. REIT ETF and Fundamental Index ETFs (Exact name of registrant as specified in charter) 211 Main Street, San Francisco, California 94105 (Address of principal executive offices) (Zip code) Jonathan de. St. Paer Schwab Strategic Trust - Schwab U.S. REIT ETF and Fundamental Index ETFs 211 Main Street, San Francisco, California 94105 (Name and address of agent for service) Registrants telephone number, including area code: (415) 627-7000 Date of fiscal year end: February 28 Date of reporting period: August 31, 2019 Item 1: Report(s) to Shareholders. Copyright © 2019 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Table of Contents Semiannual Report | August 31, 2019 Schwab U.S. REIT ETF Ticker Symbol SCHH 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. Copyright © 2019 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 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. Copyright © 2019 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document In This Report Performance at a Glance 2 From the President 3 The Investment Environment 4 Fund Management 6 Performance and Fund Facts 7 Fund Expenses 9 Financial Statements and Portfolio Holdings 10 Financial Notes 16 Investment Advisory Agreement Approval 24 Trustees and Officers 26 Glossary 30 Fund investment adviser: Charles Schwab Investment Management, Inc. (CSIM) Distributor: SEI Investments Distribution Co. (SIDCO) Copyright © 2019 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The Sector/Industry classifications in this report use the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of MSCI Inc. (MSCI) and Standard & Poor’s (S&P). GICS is a service mark of MSCI and S&P and has been licensed for use by Charles Schwab & Co., Inc. The Industry classifications used in the schedule of Portfolio Holdings are sub-categories of Sector classifications. 1 Schwab U.S. REIT ETF | Semiannual Report Copyright © 2019 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Table of Contents 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, 2019 Schwab U.S. REIT ETF (Ticker Symbol: SCHH) Market Price Return1 7.68% NAV Return1 7.83% Dow Jones U.S. Select REIT IndexTM 7.88% ETF Category: Morningstar Real Estate2 10.31% 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 or sale 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 IndexTM 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. 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 using the Official Closing Price on the primary stock exchange (generally, 4:00 p.m. Eastern time) and may not represent the returns you would receive if shares were traded at other times. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively. 2 Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date. 2 Schwab U.S. REIT ETF | Semiannual Report Copyright © 2019 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Table of Contents Schwab U.S. REIT ETF From the President Dear Shareholder, If there’s a lesson investors may have learned from recent market cycles, it could be that markets are unpredictable. After a substantial drop in the fourth quarter of 2018, U.S. equity prices were on a steady climb during the first half of the year, with the S&P 500® Index returning more than 18% through June 2019. However, uncertainty about the economic outlook and global trade in the months that followed contributed to a cycle of unsettling one-day declines followed by recoveries. In this environment, the performance of U.S. REITs generally outpaced the broader stock market, bolstered by strong fundamentals as well as the Federal Reserve’s first interest rate cut since 2008. When all was said and done, U.S. REITs, represented by the Dow Jones U.S. Select REIT IndexTM, returned 7.9% during the six-month period ended August 31, 2019, while the S&P 500® Index returned 6.2%. Jonathan de St. Paer President and CEO of The ups and downs have understandably put investors on edge, leading many to Charles Schwab Investment seek safety in other asset classes such as cash and short-term fixed income. Management, Inc. and the Although market fluctuations can be unnerving, impulsive reactions to sudden market fund covered in this report. movements—such as chasing performance during a market upswing or fleeing to “ In this environment, safety during a market downturn—can often lead to less than optimal results. At the performance of Charles Schwab Investment Management, we believe that maintaining a long-term investing plan and a portfolio with exposure to a mix of asset classes that perform U.S. REITs generally differently over time is a better approach to weathering various market cycles. outpaced the broader That’s one of the reasons why we created the Schwab U.S. REIT ETF. REITs can stock market, add another layer of diversification when combined with more traditional asset bolstered by strong classes in a portfolio since they typically don’t move in lockstep with stocks or bonds, and also tend to perform better in a lower interest rate environment.