SCHWAB STRATEGIC TRUST Form N-CSRS Filed 2018-05-01
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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: 2018-05-01 | Period of Report: 2018-02-28 SEC Accession No. 0001193125-18-146758 (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.: 18796246 1-415-667-7000 Copyright © 2018 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-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-22311 Schwab Strategic Trust (Exact name of registrant as specified in charter) 211 Main Street, San Francisco, California 94105 (Address of principal executive offices) (Zip code) Marie Chandoha Schwab Strategic Trust 211 Main Street, San Francisco, California 94105 (Name and address of agent for service) Registrants telephone number, including area code: (415) 636-7000 Date of fiscal year end: August 31 Date of reporting period: February 28, 2018 Item 1: Report(s) to Shareholders. Copyright © 2018 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Table of Contents Semiannual Report | February 28, 2018 Schwab International Equity ETFs Schwab International Equity ETF™ SCHF Schwab International Small-Cap Equity SCHC ETF™ Schwab Emerging Markets Equity ETF™ SCHE Copyright © 2018 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document This page is intentionally left blank. Copyright © 2018 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 5 Fund Management 7 Performance and Fund Facts Schwab International Equity ETF 8 Schwab International Small-Cap Equity ETF 10 Schwab Emerging Markets Equity ETF 12 Fund Expenses 14 Financial Statements and Condensed Portfolio Holdings Schwab International Equity ETF 15 Schwab International Small-Cap Equity ETF 22 Schwab Emerging Markets Equity ETF 29 Financial Notes 36 Trustees and Officers 46 Glossary 50 Fund investment adviser: Charles Schwab Investment Management, Inc. (CSIM) Copyright © 2018 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Distributor: SEI Investments Distribution Co. (SIDCO) The Sector/Industry classifications in this report use the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of 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. 1 Schwab International Equity ETFs | Semiannual Report Copyright © 2018 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Table of Contents Schwab International Equity ETFs 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 FEBRUARY 28, 2018 Schwab International Equity ETF (Ticker Symbol: SCHF) Market Price Return1 6.03% NAV Return1 7.00% FTSE Developed ex US Index (Net)* 7.09% ETF Category: Morningstar Foreign Large Blend2 6.01% Performance Details pages 8-9 Schwab International Small-Cap Equity ETF (Ticker Symbol: SCHC) Market Price Return1 7.55% NAV Return1 8.41% FTSE Developed Small Cap ex US Liquid Index (Net)* 8.25% ETF Category: Morningstar Foreign Small/Mid Blend2 8.29% Performance Details pages 10-11 Schwab Emerging Markets Equity ETF (Ticker Symbol: SCHE) Market Price Return1 9.12% NAV Return1 10.35% FTSE Emerging Index (Net)* 10.38% ETF Category: Morningstar Diversified Emerging Markets2 9.07% Performance Details pages 12-13 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. 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 — FTSE is a trademark of the London Stock Exchange Group companies (LSEG) and is used by the Schwab International Equity ETFs under license. The Schwab International Equity ETFs are not sponsored, endorsed, sold or promoted by FTSE nor LSEG and neither FTSE nor LSEG makes any representation regarding the advisability of investing in shares of the funds. Fees payable under the license are paid by the investment adviser. * The total return cited for the index is calculated net of foreign withholding taxes; the underlying tax rate information is available from FTSE. 1 ETF performance must be shown based on both a market price and NAV basis. The fund’s per share NAV is the value of one share of the fund. NAV is calculated by taking the fund’s total assets (including the market value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV Return is based on the NAV of the fund, and the Market Price Return is based on the market price per share of the fund. The price used to calculate market return (Market Price) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which the shares of the fund are listed for trading, as of the time that the fund’s NAV is calculated. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the fund at Market Price and NAV, respectively. 2 Source for category information: Morningstar, Inc. The Morningstar Category return represents all passively- and actively-managed ETFs within the category as of the report date. 2 Schwab International Equity ETFs | Semiannual Report Copyright © 2018 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Table of Contents Schwab International Equity ETFs From the President Dear Shareholder, Investors’ ability to follow the investing principle “ignore the noise” was put to the test in February. Amid inflation fears and concerns about higher interest rates, stocks slid for two weeks, with some U.S. and European indices dropping around 10%. While markets largely recovered much of the lost ground by February’s end, the episode interrupted a long period of steady gains. No one can predict what comes next, of course, but we may continue to see increased market volatility—especially compared to the unusually low volatility of recent years. Marie Chandoha During times of higher volatility, it can be tempting to veer from your financial President and CEO of plan. But split-second decisions can prove costly over time. Instead, we Charles Schwab Investment believe that now may be an opportune time to check in on your portfolio and Management, Inc. and the evaluate whether your investments are still positioned to help you achieve funds covered in this report. your financial goals. When it comes to ETFs, that can include not only knowing that your provider is transparent and dedicated to keeping costs low, but also that it is committed to the business for the long haul. The ETF industry has grown rapidly in recent years with many new offerings, and it’s likely that some will not survive. In 2017, for instance, fund providers introduced 275 ETFs but also broke the record for ETF closures in a single year with 136.1 While ETFs close for a variety of reasons, some of the more common causes are lack of issuer support and lack of investor demand. Whatever the cause, an ETF closure tends to be bad for investors, as it can lead to surprise taxes and gains or losses. At Charles Schwab Investment Management, we are selective in which ETFs we choose to launch and make a commitment to the ongoing support of every ETF we introduce. We work hard to help our investors build better portfolios, and that starts with providing funds that can help form a solid foundation. We have a quarter-century of experience managing index investments and more than $170 billion under management in our index mutual funds and ETFs—all while offering some of the lowest expenses available in the industry today. We’re here to serve our investors over the long-term—with funds that can simplify your investment decisions and help you implement your financial plan. We appreciate that you have chosen Charles Schwab Investment Management, and we look forward to continuing to help you achieve your financial goals. Copyright © 2018 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1 ETF.com, “Record ETF Closures, Healthy Launch Levels,” Heather Bell, December 29, 2017. 3 Schwab International Equity ETFs | Semiannual Report Copyright © 2018 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Table of Contents Schwab International Equity ETFs From the President (continued) “ At Charles Schwab Thank you for investing with Charles Schwab Investment Management.