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Prospectus | December 22, 2025
Schwab®
ETFs
Schwab®
International Equity ETFs
| | Schwab® International Dividend Equity ETF | | |
SCHY |
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| | Schwab® International Equity ETF | | |
SCHF |
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Schwab®
International Small-Cap Equity ETF |
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SCHC |
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| | Schwab® Emerging Markets Equity ETF | | |
SCHE |
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Principal U.S. Listing Exchange: NYSE Arca, Inc.
As with all exchange-traded funds, the
Securities and Exchange Commission (SEC) has not approved these securities or
passed on whether the information in this prospectus is adequate and accurate.
Anyone who indicates otherwise is committing a federal crime.
Schwab
International Equity ETFs
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Ticker Symbol: |
| | SCHY | |
The fund’s goal is to track as closely as
possible, before fees and expenses, the total return of an index composed of
high dividend yielding stocks issued by companies outside the United
States.
This table describes the
fees and expenses you may pay if you buy, hold and sell shares of the
fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and Example below.
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of the value of your investment) |
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Total annual fund operating
expenses |
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(1)
This example is intended to help you compare the
cost of investing in the fund with the cost of investing in other funds. The
example assumes that you invest $10,000 in the fund for the time periods
indicated and then sell all of your shares at the end of those time periods. The
example also assumes that your investment has a 5% return each year and that the
fund’s operating expenses remain the same. Your actual costs may be higher or
lower.
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The fund pays transaction costs, such as
commissions, when it buys and sells securities (or “turns over” its portfolio).
A higher portfolio turnover may indicate higher transaction costs and may result
in higher taxes when fund shares are held in a taxable account. These costs,
which are not reflected in the annual fund operating expenses or in the example,
affect the fund’s performance. During the most recent fiscal year, the fund’s
portfolio turnover rate was 20 % of the average value of its
portfolio.
To pursue its goal, the fund
generally invests in stocks that are included in the Dow Jones International
Dividend 100 Index†. The index is designed to measure the
performance of high dividend yielding stocks issued by companies in developed
and emerging countries outside the United States, as defined by the index
provider. High dividend yielding stocks are defined as those that have a record
of consistently paying dividends, selected for fundamental strength relative to
their peers, based on financial ratios, and then screened for lower volatility.
The 100-component index is derived from the constituents of the Dow Jones Global
ex-U.S. Large-Cap Index and Dow Jones Global ex-U.S. Mid-Cap Index (excluding
real estate investment trusts (REITs)). It is modified market capitalization
weighted.
All index eligible stocks must have sustained at
least 10 consecutive years of dividend payments, have a minimum float-adjusted
market capitalization of $500 million USD initially ($400 million USD for those
stocks already in the index at reconstitution) and must meet minimum liquidity
criteria. Eligible stocks are ranked based on four fundamental characteristics –
cash flow to total debt, return on equity, indicated dividend yield and 5-year
dividend growth rate – to select the top 400 highest ranked securities by
composite score. A volatility screen is then applied to those 400 highest ranked
securities to filter out the 200 most volatile securities. Only the 100
top-ranked securities by the composite score passing the volatility screen are
then selected to the index, subject to specific buffer rules that favor current
constituents during the annual review. No single stock can represent more than 4.0% of
the index, no single sector, as defined by the index provider, can represent
more than 15% of the index, and stocks from countries identified as emerging
markets by the index provider cannot represent more than 15% of the index, as
measured at the time of index construction, reconstitution and rebalance. The
index composition is reviewed annually and rebalanced quarterly.
It is the fund’s policy that under normal
circumstances it will invest at least 80% of its net assets (including, for this
purpose, any borrowings for investment purposes) in stocks included in the
index, including depositary receipts representing securities of the index; which
may be in the form of American Depositary Receipts (ADRs), Global Depositary
Receipts (GDRs) and European Depositary Receipts (EDRs). The fund will notify
its shareholders at least 60 days before changing this policy. The fund may sell
securities that are represented in the index in anticipation of their removal
from the index, or buy securities that are not yet represented in the index in
anticipation of their addition to the index.
†
Index ownership – Dow Jones® is a registered trademark of Dow Jones
Trademark Holdings LLC (Dow Jones). The Dow Jones International Dividend 100
Index is a product of S&P Dow Jones Indices LLC and/or its affiliates, and
has been licensed for use by Charles Schwab Investment Management, Inc., dba
Schwab Asset Management. The Schwab International Dividend Equity 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.
Schwab International Dividend Equity ETF | Fund
Summary1
Under normal circumstances, the fund may invest
up to 20% of its net assets in securities not included in the index. The
principal types of these investments include those that the investment adviser
believes will help the fund track the index, such as investments in (a)
securities that are not represented in the index but the investment adviser
anticipates will be added to the index or as necessary to reflect various
corporate actions (such as mergers and spin-offs); (b) other investment
companies; and (c) derivatives, principally futures contracts. The fund may use
futures contracts and other derivatives primarily to seek returns on the fund’s
otherwise uninvested cash assets to help it better track the index. The fund may
also invest in cash and cash equivalents, including money market funds, and may
lend its securities to minimize the difference in performance that naturally
exists between an index fund and its corresponding index. The fund does not
hedge its exposure to foreign currencies.
Because it may not be possible or practicable to
purchase all of the stocks in the index, the investment adviser seeks to track
the total return of the index by using sampling techniques. Sampling techniques
involve investing in a limited number of index securities which, when taken
together, are expected to perform similarly to the index as a whole. These
techniques are based on a variety of factors, including performance attributes,
tax considerations, country weightings, capitalization, industry factors, risk
factors and other characteristics. The fund generally expects that its portfolio
will hold less than the total number of securities in the index, but reserves
the right to hold as many securities as it believes necessary to achieve the
fund’s investment objective.
The fund will concentrate its investments (i.e.,
hold more than 25% of its total assets) in a particular industry, group of
industries or sector to approximately the same extent that the index is so
concentrated.
Principal Risks
Market Risk. Financial markets rise and fall in response to
a variety of factors, sometimes rapidly and unpredictably. Markets may be
impacted by economic, political, regulatory and other conditions, including
economic sanctions, tariffs and other government actions. In addition, the
occurrence of global events, such as war, terrorism, environmental disasters,
natural disasters and epidemics, may also negatively affect the financial
markets. As with any investment whose performance is tied to these markets, the
value of an investment in the fund will fluctuate, which means that an investor
could lose money over short or long periods.
Investment Style
Risk. The fund primarily invests in
dividend paying stocks. As a result, fund performance will correlate with the
performance of the dividend paying stock segment of the stock market, and the
fund may underperform funds that do not limit their investments to dividend
paying stocks. If stocks held by the fund reduce or stop paying dividends, the
fund’s ability to generate income may be affected.
The fund is an index fund. Therefore, the fund
follows the securities included in the index during upturns as well as
downturns. Because of its indexing strategy, the fund does not take steps to
reduce market exposure or to lessen the effects of a declining market. In
addition, because of the fund’s expenses, the fund’s performance may be below
that of the index. Errors relating to the index may occur from time to time and
may not be identified by the index provider for a period of time. In addition,
market disruptions could cause delays in the index’s rebalancing schedule. Such
errors and/or market disruptions may result in losses for the fund.
Equity Risk. The prices of equity securities rise and fall
daily. These price movements may result from factors affecting individual
companies, industries or the securities market as a whole. In addition, equity
markets tend to move in cycles, which may cause stock prices to fall over short
or extended periods of time.
Market Capitalization
Risk. Securities issued by
companies of different market capitalizations tend to go in and out of favor
based on market and economic conditions. During a period when securities of a
particular market capitalization fall behind other types of investments, the
fund’s performance could be impacted.
Large-Cap Company
Risk. Large-cap companies are
generally more mature and the securities issued by these companies may not be
able to reach the same levels of growth as the securities issued by small- or
mid-cap companies.
Mid-Cap Company
Risk. Mid-cap companies may be more
vulnerable to adverse business or economic events than larger, more established
companies and the value of securities issued by these companies may move
sharply.
Small-Cap Company
Risk. Securities issued by
small-cap companies may be riskier than those issued by larger companies, and
their prices may move sharply, especially during market upturns and
downturns.
Foreign Investment
Risk. The fund’s investments in
securities of foreign issuers involve certain risks that may be greater than
those associated with investments in securities of U.S. issuers. These include
risks of adverse changes in foreign economic, political, regulatory and other
conditions; changes in currency exchange rates or exchange control regulations
(including limitations on currency movements and exchanges); the imposition of
economic sanctions or other government restrictions; differing accounting,
auditing, financial reporting and legal standards and practices; differing
securities market structures; and higher transaction costs. These risks may
negatively impact the value or liquidity of the fund’s investments and could
impair the fund’s ability to meet its investment objective or invest in
accordance with its investment strategy. There is a risk that investments in
securities denominated in, and/or receiving revenues in, foreign currencies will
decline in value relative to the U.S. dollar. Foreign securities also include
ADRs, GDRs and EDRs, which may be less liquid than the underlying shares in
their primary trading market, and GDRs, in particular, many of which are issued
by companies in emerging markets, may be more volatile. To the extent the fund’s
investments in a single country or a
2Schwab International
Dividend Equity ETF | Fund
Summary
limited number of countries represent a
large percentage of the fund’s assets, the fund’s performance may be
adversely affected by the economic, political, regulatory and social conditions
in those countries, and the fund’s price may be more volatile than the price of
a fund that is geographically diversified.
Emerging Markets
Risk. Emerging market countries may
be more likely to experience political turmoil or rapid changes in market or
economic conditions than more developed countries. Emerging market countries
often have less uniformity in accounting, auditing, financial reporting and
recordkeeping requirements and greater risk associated with the custody of
securities. In addition, the financial stability of issuers (including
governments) in emerging market countries may be more precarious than in
developed countries. As a result, there may be an increased risk of illiquidity
and price volatility associated with the fund’s investments in emerging market
countries, which may be magnified by currency fluctuations relative to the U.S.
dollar, and, at times, it may be difficult to value such investments.
Sampling Index Tracking
Risk. The fund may not fully
replicate the index and may hold securities not included in the index. As a
result, the fund is subject to the risk that the investment adviser’s investment
management strategy, the implementation of which is subject to a number of
constraints, may not produce the intended results. Because the fund utilizes a
sampling approach it may not track the return of the index as well as it would
if the fund purchased all of the securities in the index.
Tracking Error and
Correlation Risk. As an index fund,
the fund seeks to track the performance of the index, although it may not be
successful in doing so. Further, there can be no guarantee that the fund will
achieve a high degree of correlation between the fund’s performance and that of
its index. The correlation between the performance of the fund and that of its
index, positive or negative, is called “tracking error.” Tracking error can be
caused by many factors and it may be significant.
Derivatives Risk. The fund’s use of derivative instruments
involves risks different from, or possibly greater than, the risks associated
with investing directly in securities and other traditional investments. The
fund’s use of derivatives could reduce the fund’s performance, increase its
volatility and cause the fund to lose more than the initial amount invested. In
addition, investments in derivatives may involve leverage, which means a
small percentage of assets invested in derivatives can have a
disproportionately large impact on the fund.
Liquidity Risk. The fund may be unable to sell certain
securities, such as illiquid securities, readily at a favorable time or price,
or the fund may have to sell them at a loss.
Securities Lending
Risk. Securities lending involves
the risk of loss of rights in, or delay in recovery of, the loaned securities if
the borrower fails to return the security loaned or becomes insolvent.
Concentration
Risk. To the extent that the fund’s
or the index’s portfolio is concentrated in the securities of issuers in a
particular market, industry, group of industries, sector, country or asset
class,
the fund may be adversely affected by the
performance of those securities, may be subject to increased price volatility
and may be more vulnerable to adverse economic, market, political or regulatory
occurrences affecting that market, industry, group of industries, sector,
country or asset class.
Market Trading
Risk. Although fund shares are
listed on national securities exchanges, there can be no assurance that an
active trading market for fund shares will develop or be maintained. If an
active market is not maintained, investors may find it difficult to buy or sell
fund shares.
Shares of the Fund May
Trade at Prices Other Than NAV.
Fund shares may be bought and sold in the secondary market at market prices.
Although it is expected that the market price of the shares of the fund will
approximate the fund’s net asset value (NAV), there may be times when the market
price and the NAV vary significantly. An investor may pay more than NAV when
buying shares of the fund in the secondary market, and an investor may receive
less than NAV when selling those shares in the secondary market. The market
price of fund shares may deviate, sometimes significantly, from NAV during
periods of market volatility or market disruption, or as a result of other
factors impacting foreign securities, including liquidity, irregular trading
activity and timing differences between foreign markets where securities trade
and the secondary market where fund shares are sold.
For more information on the risks of investing
in the fund, please see the “Fund Details” section in the
prospectus.
Schwab International Dividend Equity ETF | Fund
Summary3
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1 Year |
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Since Inception ( |
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After taxes on distributions and sale of
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Comparative
Indices |
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| MSCI EAFE Index (Net)(1) | | | | | | | | | | | | ||
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Dow Jones International Dividend 100
Index (Net)(1)
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(1)
Investment Adviser
Charles Schwab Investment Management, Inc., dba
Schwab Asset Management®
Portfolio Managers
Christopher Bliss,
CFA, Managing Director and Head of
Equity Index Strategies, is responsible for the day-to-day co-management of the
fund. He has managed the fund since inception.
Mariela Jobson, Senior Portfolio Manager, is responsible for
the day-to-day co-management of the fund. She has managed the fund since
2024.
Joselle Duncan,
CFA, Portfolio Manager, is
responsible for the day-to-day co-management of the fund. She has managed the
fund since 2023.
David Rios, Senior Portfolio Manager, is responsible for
the day-to-day co-management of the fund. He has managed the fund since
inception.
Purchase and Sale of Fund Shares
The fund issues and redeems shares at its NAV
only in large blocks of shares (Creation Units). These transactions are usually
in exchange for a basket of securities included in the index and/or an amount of
cash. As a practical matter, only Authorized Participants purchase or redeem
Creation Units.
Individual shares may only be purchased and sold
in the secondary market (i.e., on a national securities exchange) through a
broker or dealer at market prices. Because fund shares trade at market prices
rather than at NAV, fund shares may trade at a price greater than NAV (premium)
or less than NAV (discount). When buying or selling shares in the secondary
market, you may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the fund (bid) and the
lowest price a seller is willing to accept for shares of the fund (ask) (the
“bid-ask spread”). Recent information regarding the fund’s NAV, market price,
premiums and discounts, and bid-ask spreads is available at www.schwabassetmanagement.com.
Tax Information
Dividends and capital gains distributions
received from the fund will generally be taxable as ordinary income or capital
gains, unless you are investing through an IRA, 401(k) or other tax-advantaged
account (in which case you may be taxed later, upon withdrawal of your
investment from such account).
Payments to Financial Intermediaries
If you purchase shares of the fund through a
broker-dealer or other financial intermediary (such as a bank), the adviser and
its related companies may pay the intermediary for the sale of fund shares and
related services. These payments may create a conflict of interest by
influencing the broker-dealer or other financial intermediary and your
salesperson to recommend the fund over another investment. Ask your salesperson
or visit your financial intermediary’s website for more information.
4Schwab International
Dividend Equity ETF | Fund
Summary
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Ticker Symbol: |
| | SCHF | |
The fund’s goal is to track as closely as
possible, before fees and expenses, the total return of the FTSE Developed ex US
Index.
This table describes the
fees and expenses you may pay if you buy, hold and sell shares of the
fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and Example below.
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of the value of your investment) |
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(1)
This example is intended to help you compare the
cost of investing in the fund with the cost of investing in other funds. The
example assumes that you invest $10,000 in the fund for the time periods
indicated and then sell all of your shares at the end of those time periods. The
example also assumes that your investment has a 5% return each year and that the
fund’s operating expenses remain the same. Your actual costs may be higher or
lower.
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1 Year |
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3 Years |
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5 Years |
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10 Years |
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The fund pays transaction costs, such as
commissions, when it buys and sells securities (or “turns over” its portfolio).
A higher portfolio turnover may indicate higher transaction costs and may result
in higher taxes when fund shares are held in a taxable account. These costs,
which are not reflected in the annual fund operating expenses or in the example,
affect the fund’s performance. During the most recent fiscal year, the fund’s
portfolio turnover rate was 4 % of the average value of its
portfolio.
To pursue its goal, the fund generally invests
in stocks that are included in the FTSE Developed ex US Index†. The index is comprised
of large and mid capitalization companies in
developed countries outside the United States, as defined by the index provider.
The index defines the large and mid capitalization universe as approximately the
top 90% of the eligible universe. As of August 31, 2025, the index was
composed of 1,428 stocks in 24 developed market countries.
It is the fund’s policy that under normal
circumstances it will invest at least 90% of its net assets (including, for this
purposes, any borrowings for investment purposes) in these stocks, including
depositary receipts representing securities of the index; such depositary
receipts may be in the form of American Depositary Receipts (ADRs), Global
Depositary Receipts (GDRs) and European Depositary Receipts (EDRs). The fund
will notify its shareholders at least 60 days before changing this policy.
The fund may sell securities that are represented in the index in anticipation
of their removal from the index, or buy securities that are not yet represented
in the index in anticipation of their addition to the index.
Under normal circumstances, the fund may invest
up to 10% of its net assets in securities not included in the index. The
principal types of these investments include those that the investment adviser
believes will help the fund track the index, such as investments in
(a) securities that are not represented in the index but the investment
adviser anticipates will be added to the index or as necessary to reflect
various corporate actions (such as mergers and spin-offs); (b) other
investment companies; and (c) derivatives, principally futures contracts.
The fund may use futures contracts and other derivatives primarily to seek
returns on the fund’s otherwise uninvested cash assets to help it better track
the index. The fund may also invest in cash and cash equivalents, including
money market funds, and may lend its securities to minimize the difference in
performance that naturally exists between an index fund and its corresponding
index. The fund does not hedge its exposure to foreign currencies.
Because it may not be possible or practicable to
purchase all of the stocks in the index, the investment adviser seeks to track
the total return of the index by using sampling techniques. Sampling techniques
involve investing in a limited number of index securities which, when taken
together, are expected to perform similarly to the index as a whole. These
techniques are based on a variety of factors, including performance attributes,
tax considerations, country weightings, capitalization, industry factors, risk
factors and other characteristics. The fund generally expects that its portfolio
will hold less than the total number of securities in the index, but reserves
the right to hold as many securities as it believes necessary to achieve the
fund’s investment objective.
†
Index ownership — FTSE is a trademark of the
London Stock Exchange Group companies (LSEG) and is used by the fund under
license. The Schwab International Equity ETF is 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 fund. Fees payable
under the license are paid by the investment adviser.
Schwab International Equity ETF | Fund
Summary5
The fund will concentrate its investments
(i.e., hold more than 25% of its total assets) in a
particular industry, group of industries or sector to approximately the same
extent that the index is so concentrated.
Principal Risks
Market Risk. Financial markets rise and fall in response to
a variety of factors, sometimes rapidly and unpredictably. Markets may be
impacted by economic, political, regulatory and other conditions, including
economic sanctions, tariffs and other government actions. In addition, the
occurrence of global events, such as war, terrorism, environmental disasters,
natural disasters and epidemics, may also negatively affect the financial
markets. As with any investment whose performance is tied to these markets, the
value of an investment in the fund will fluctuate, which means that an investor
could lose money over short or long periods.
Investment Style
Risk. The fund is an index fund.
Therefore, the fund follows the securities included in the index during upturns
as well as downturns. Because of its indexing strategy, the fund does not take
steps to reduce market exposure or to lessen the effects of a declining market.
In addition, because of the fund’s expenses, the fund’s performance may be below
that of the index. Errors relating to the index may occur from time to time and
may not be identified by the index provider for a period of time. In addition,
market disruptions could cause delays in the index’s rebalancing schedule. Such
errors and/or market disruptions may result in losses for the fund.
Equity Risk. The prices of equity securities rise and fall
daily. These price movements may result from factors affecting individual
companies, industries or the securities market as a whole. In addition, equity
markets tend to move in cycles, which may cause stock prices to fall over short
or extended periods of time.
Market Capitalization
Risk. Securities issued by
companies of different market capitalizations tend to go in and out of favor
based on market and economic conditions. During a period when securities of a
particular market capitalization fall behind other types of investments, the
fund’s performance could be impacted.
Large-Cap Company
Risk. Large-cap companies are
generally more mature and the securities issued by these companies may not be
able to reach the same levels of growth as the securities issued by small- or
mid-cap companies.
Mid-Cap Company
Risk. Mid-cap companies may be more
vulnerable to adverse business or economic events than larger, more established
companies and the value of securities issued by these companies may move
sharply.
Foreign Investment
Risk. The fund’s investments in
securities of foreign issuers involve certain risks that may be greater than
those associated with investments in securities of U.S. issuers. These include
risks of adverse changes in foreign economic, political,
regulatory and other conditions; changes in
currency exchange rates or exchange control regulations (including limitations
on currency movements and exchanges); the imposition of economic sanctions or
other government restrictions; differing accounting, auditing, financial
reporting and legal standards and practices; differing securities market
structures; and higher transaction costs. These risks may negatively impact the
value or liquidity of the fund’s investments and could impair the fund’s ability
to meet its investment objective or invest in accordance with its investment
strategy. There is a risk that investments in securities denominated in, and/or
receiving revenues in, foreign currencies will decline in value relative to the
U.S. dollar. Foreign securities also include ADRs, GDRs and EDRs, which may be
less liquid than the underlying shares in their primary trading market, and
GDRs, in particular, many of which are issued by companies in emerging markets,
may be more volatile. To the extent the fund’s investments in a single country
or a limited number of countries represent a large percentage of the fund’s
assets, the fund’s performance may be adversely affected by the economic,
political, regulatory and social conditions in those countries, and the fund’s
price may be more volatile than the price of a fund that is geographically
diversified.
Sampling Index Tracking
Risk. The fund may not fully
replicate the index and may hold securities not included in the index. As a
result, the fund is subject to the risk that the investment adviser’s investment
management strategy, the implementation of which is subject to a number of
constraints, may not produce the intended results. Because the fund utilizes a
sampling approach it may not track the return of the index as well as it would
if the fund purchased all of the securities in the index.
Tracking Error and
Correlation Risk. As an index fund,
the fund seeks to track the performance of the index, although it may not be
successful in doing so. Further, there can be no guarantee that the fund will
achieve a high degree of correlation between the fund’s performance and that of
its index. The correlation between the performance of the fund and that of its
index, positive or negative, is called “tracking error.” Tracking error can be
caused by many factors and it may be significant.
Derivatives Risk. The fund’s use of derivative instruments
involves risks different from, or possibly greater than, the risks associated
with investing directly in securities and other traditional investments. The
fund’s use of derivatives could reduce the fund’s performance, increase its
volatility and cause the fund to lose more than the initial amount invested. In
addition, investments in derivatives may involve leverage, which means a
small percentage of assets invested in derivatives can have a
disproportionately large impact on the fund.
Liquidity Risk. The fund may be unable to sell certain
securities, such as illiquid securities, readily at a favorable time or price,
or the fund may have to sell them at a loss.
Securities Lending
Risk. Securities lending involves
the risk of loss of rights in, or delay in recovery of, the loaned securities if
the borrower fails to return the security loaned or becomes insolvent.
6Schwab International Equity
ETF | Fund Summary
Concentration
Risk. To the extent that the fund’s
or the index’s portfolio is concentrated in the securities of issuers in a
particular market, industry, group of industries, sector, country or asset
class, the fund may be adversely affected by the performance of those
securities, may be subject to increased price volatility and may be more
vulnerable to adverse economic, market, political or regulatory occurrences
affecting that market, industry, group of industries, sector, country or asset
class.
Market Trading
Risk. Although fund shares are
listed on national securities exchanges, there can be no assurance that an
active trading market for fund shares will develop or be maintained. If an
active market is not maintained, investors may find it difficult to buy or sell
fund shares.
Shares of the Fund May
Trade at Prices Other Than NAV.
Fund shares may be bought and sold in the secondary market at market prices.
Although it is expected that the market price of the shares of the fund will
approximate the fund’s net asset value (NAV), there may be times when the market
price and the NAV vary significantly. An investor may pay more than NAV when
buying shares of the fund in the secondary market, and an investor may receive
less than NAV when selling those shares in the secondary market. The market
price of fund shares may deviate, sometimes significantly, from NAV during
periods of market volatility or market disruption, or as a result of other
factors impacting foreign securities, including liquidity, irregular trading
activity and timing differences between foreign markets where securities trade
and the secondary market where fund shares are sold.
For more information on the risks of investing
in the fund, please see the “Fund Details” section in the
prospectus.
![[MISSING IMAGE: jcj083kuj2injruk8c3oe5l1j0uv.jpg]](jcj083kuj2injruk8c3oe5l1j0uv.jpg)
|
|
| ||||||||||||||||||
| | | |
1 Year |
| |
5 Years |
| |
10 Years |
| |||||||||
| Before taxes | | | | | | | | | | | | | | | | | |||
| After taxes on distributions | | | | | | | | | | | | | | | | | |||
|
After taxes on distributions and sale
of shares |
| | | | | | | | | | | | | | | | |||
|
Comparative
Indices |
| | | | | | | | | | | | | | | | | | |
| MSCI EAFE Index (Net)(1) | | | | | | | | | | | | | | | | | |||
|
FTSE Developed ex US Index
(Net)(1)
|
| | | | | | | | | | | | | | | | |||
(1)
Investment Adviser
Charles Schwab Investment Management, Inc., dba
Schwab Asset Management®
Portfolio Managers
Christopher Bliss,
CFA, Managing Director and Head of
Equity Index Strategies, is responsible for the day-to-day co-management of the
fund. He has managed the fund since 2017.
Mariela Jobson, Senior Portfolio Manager, is responsible for
the day-to-day co-management of the fund. She has managed the fund since
2024.
Joselle Duncan,
CFA, Portfolio Manager, is
responsible for the day-to-day co-management of the fund. She has managed the
fund since 2023.
David Rios, Senior Portfolio Manager, is responsible for
the day-to-day co-management of the fund. He has managed the fund since
2017.
Schwab International Equity ETF | Fund
Summary7
Purchase and Sale of Fund Shares
The fund issues and redeems shares at its NAV
only in large blocks of shares (Creation Units). These transactions are usually
in exchange for a basket of securities included in the index and/or an amount of
cash. As a practical matter, only Authorized Participants purchase or redeem
Creation Units.
Individual shares may only be purchased and sold
in the secondary market (i.e., on a national securities exchange) through a
broker or dealer at market prices. Because fund shares trade at market prices
rather than at NAV, fund shares may trade at a price greater than NAV (premium)
or less than NAV (discount). When buying or selling shares in the secondary
market, you may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the fund (bid) and the
lowest price a seller is willing to accept for shares of the fund (ask) (the
“bid-ask spread”). Recent information regarding the fund’s NAV, market price,
premiums and discounts, and bid-ask spreads is available at www.schwabassetmanagement.com.
Tax Information
Dividends and capital gains distributions
received from the fund will generally be taxable as ordinary income or capital
gains, unless you are investing through an IRA, 401(k) or other tax-advantaged
account (in which case you may be taxed later, upon withdrawal of your
investment from such account).
Payments to Financial Intermediaries
If you purchase shares of the fund through a
broker-dealer or other financial intermediary (such as a bank), the adviser and
its related companies may pay the intermediary for the sale of fund shares and
related services. These payments may create a conflict of interest by
influencing the broker-dealer or other financial intermediary and your
salesperson to recommend the fund over another investment. Ask your salesperson
or visit your financial intermediary’s website for more information.
8Schwab International Equity
ETF | Fund Summary
| |
Ticker Symbol: |
| | SCHC | |
The fund’s goal is to track as closely as
possible, before fees and expenses, the total return of the FTSE Developed Small
Cap ex US Liquid Index.
This table describes the
fees and expenses you may pay if you buy, hold and sell shares of the
fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and Example below.
|
|
| |||
| | | |
|
|
|
of the value of your investment) |
| |||
| Management fees | | |
|
|
| Other expenses | | |
|
|
| Total annual fund operating expenses | | |
|
|
(1)
This example is intended to help you compare the
cost of investing in the fund with the cost of investing in other funds. The
example assumes that you invest $10,000 in the fund for the time periods
indicated and then sell all of your shares at the end of those time periods. The
example also assumes that your investment has a 5% return each year and that the
fund’s operating expenses remain the same. Your actual costs may be higher or
lower.
| |
|
| |||||||||||||||||||||
| |
1 Year |
| |
3 Years |
| |
5 Years |
| |
10 Years |
| ||||||||||||
| | | $ | | | | | $ | | | | | $ | | | | | $ | | | ||||
The fund pays transaction costs, such as
commissions, when it buys and sells securities (or “turns over” its portfolio).
A higher portfolio turnover may indicate higher transaction costs and may result
in higher taxes when fund shares are held in a taxable account. These costs,
which are not reflected in the annual fund operating expenses or in the example,
affect the fund’s performance. During the most recent fiscal year, the fund’s
portfolio turnover rate was 16 % of the average value of its
portfolio.
To pursue its goal, the fund
generally invests in stocks that are included in the FTSE Developed Small Cap ex
US Liquid Index†. The index is comprised of small capitalization
companies in developed countries outside the United States, as defined by the
index provider. The index defines the small capitalization universe as
approximately the bottom 10% of the eligible universe with a minimum free float
capitalization of $150 million. As of August 31, 2025, the index was
composed of 2,118 stocks in 25 developed market countries.
It is the fund’s policy that under normal
circumstances it will invest at least 90% of its net assets (including, for this
purpose, any borrowings for investment purposes) in these stocks, including
depositary receipts representing securities of the index; such depositary
receipts may be in the form of American Depositary Receipts (ADRs), Global
Depositary Receipts (GDRs) and European Depositary Receipts (EDRs). The fund
will notify its shareholders at least 60 days before changing this policy.
The fund may sell securities that are represented in the index in anticipation
of their removal from the index, or buy securities that are not yet represented
in the index in anticipation of their addition to the index. The fund generally
expects that its country weightings will be similar to those of the
index.
Under normal circumstances, the fund may invest
up to 10% of its net assets in securities not included in the index. The
principal types of these investments include those that the investment adviser
believes will help the fund track the index, such as investments in
(a) securities that are not represented in the index but the investment
adviser anticipates will be added to the index or as necessary to reflect
various corporate actions (such as mergers and spin-offs); (b) other
investment companies; and (c) derivatives, principally futures contracts.
The fund may use futures contracts and other derivatives primarily to seek
returns on the fund’s otherwise uninvested cash assets to help it better track
the index. The fund may also invest in cash and cash equivalents, including
money market funds, and may lend its securities to minimize the difference in
performance that naturally exists between an index fund and its corresponding
index. The fund does not hedge its exposure to foreign currencies.
Because it may not be possible or practicable to
purchase all of the stocks in the index, the investment adviser seeks to track
the total return of the index by using sampling techniques. Sampling techniques
involve investing in a limited number of index securities which, when taken
together, are expected to perform similarly to the index as a whole. These
techniques are based on a variety of factors, including performance attributes,
tax considerations,
†
Index ownership — FTSE is a trademark of the
London Stock Exchange Group companies (LSEG) and is used by the fund under
license. The Schwab International Small-Cap Equity ETF is 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 fund.
Fees payable under the license are paid by the investment adviser.
Schwab International Small-Cap Equity
ETF | Fund Summary9
country weightings, capitalization, industry
factors, risk factors and other characteristics. The fund generally expects that
its portfolio will hold less than the total number of securities in the index,
but reserves the right to hold as many securities as it believes necessary to
achieve the fund’s investment objective.
The fund will concentrate its investments
(i.e., hold more than 25% of its total assets) in a
particular industry, group of industries or sector to approximately the same
extent that the index is so concentrated.
Principal Risks
Market Risk. Financial markets rise and fall in response to
a variety of factors, sometimes rapidly and unpredictably. Markets may be
impacted by economic, political, regulatory and other conditions, including
economic sanctions, tariffs and other government actions. In addition, the
occurrence of global events, such as war, terrorism, environmental disasters,
natural disasters and epidemics, may also negatively affect the financial
markets. As with any investment whose performance is tied to these markets, the
value of an investment in the fund will fluctuate, which means that an investor
could lose money over short or long periods.
Investment Style
Risk. The fund is an index fund.
Therefore, the fund follows the securities included in the index, which may
include real estate investment trusts, during upturns as well as downturns.
Because of its indexing strategy, the fund does not take steps to reduce market
exposure or to lessen the effects of a declining market. In addition, because of
the fund’s expenses, the fund’s performance may be below that of the index.
Errors relating to the index may occur from time to time and may not be
identified by the index provider for a period of time. In addition, market
disruptions could cause delays in the index’s rebalancing schedule. Such errors
and/or market disruptions may result in losses for the fund.
Equity Risk. The prices of equity securities rise and fall
daily. These price movements may result from factors affecting individual
companies, industries or the securities market as a whole. In addition, equity
markets tend to move in cycles, which may cause stock prices to fall over short
or extended periods of time.
Market Capitalization
Risk. Securities issued by
companies of different market capitalizations tend to go in and out of favor
based on market and economic conditions. During a period when securities of a
particular market capitalization fall behind other types of investments, the
fund’s performance could be impacted.
Small-Cap Company
Risk. Securities issued by
small-cap companies may be riskier than those issued by larger companies, and
their prices may move sharply, especially during market upturns and
downturns.
Foreign Investment
Risk. The fund’s investments in
securities of foreign issuers involve certain risks that may be greater than
those associated with investments in securities of U.S. issuers. These
include risks of adverse changes in foreign
economic, political, regulatory and other conditions; changes in currency
exchange rates or exchange control regulations (including limitations on
currency movements and exchanges); the imposition of economic sanctions or other
government restrictions; differing accounting, auditing, financial reporting and
legal standards and practices; differing securities market structures; and
higher transaction costs. These risks may negatively impact the value or
liquidity of the fund’s investments and could impair the fund’s ability to meet
its investment objective or invest in accordance with its investment strategy.
There is a risk that investments in securities denominated in, and/or receiving
revenues in, foreign currencies will decline in value relative to the U.S.
dollar. Foreign securities also include ADRs, GDRs and EDRs, which may be less
liquid than the underlying shares in their primary trading market, and GDRs, in
particular, many of which are issued by companies in emerging markets, may be
more volatile. To the extent the fund’s investments in a single country or a
limited number of countries represent a large percentage of the fund’s
assets, the fund’s performance may be adversely affected by the economic,
political, regulatory and social conditions in those countries, and the fund’s
price may be more volatile than the price of a fund that is geographically
diversified.
Sampling Index Tracking
Risk. The fund may not fully
replicate the index and may hold securities not included in the index. As a
result, the fund is subject to the risk that the investment adviser’s investment
management strategy, the implementation of which is subject to a number of
constraints, may not produce the intended results. Because the fund utilizes a
sampling approach it may not track the return of the index as well as it would
if the fund purchased all of the securities in the index.
Tracking Error and
Correlation Risk. As an index fund,
the fund seeks to track the performance of the index, although it may not be
successful in doing so. Further, there can be no guarantee that the fund will
achieve a high degree of correlation between the fund’s performance and that of
its index. The correlation between the performance of the fund and that of its
index, positive or negative, is called “tracking error.” Tracking error can be
caused by many factors and it may be significant.
Derivatives Risk. The fund’s use of derivative instruments
involves risks different from, or possibly greater than, the risks associated
with investing directly in securities and other traditional investments. The
fund’s use of derivatives could reduce the fund’s performance, increase its
volatility and cause the fund to lose more than the initial amount invested. In
addition, investments in derivatives may involve leverage, which means a
small percentage of assets invested in derivatives can have a
disproportionately large impact on the fund.
Liquidity Risk. The fund may be unable to sell certain
securities, such as illiquid securities, readily at a favorable time or price,
or the fund may have to sell them at a loss.
Securities Lending
Risk. Securities lending involves
the risk of loss of rights in, or delay in recovery of, the loaned securities if
the borrower fails to return the security loaned or becomes insolvent.
10Schwab International
Small-Cap Equity ETF | Fund
Summary
Concentration
Risk. To the extent that the fund’s
or the index’s portfolio is concentrated in the securities of issuers in a
particular market, industry, group of industries, sector, country or asset
class, the fund may be adversely affected by the performance of those
securities, may be subject to increased price volatility and may be more
vulnerable to adverse economic, market, political or regulatory occurrences
affecting that market, industry, group of industries, sector, country or asset
class.
Market Trading
Risk. Although fund shares are
listed on national securities exchanges, there can be no assurance that an
active trading market for fund shares will develop or be maintained. If an
active market is not maintained, investors may find it difficult to buy or sell
fund shares.
Shares of the Fund May
Trade at Prices Other Than NAV.
Fund shares may be bought and sold in the secondary market at market prices.
Although it is expected that the market price of the shares of the fund will
approximate the fund’s net asset value (NAV), there may be times when the market
price and the NAV vary significantly. An investor may pay more than NAV when
buying shares of the fund in the secondary market, and an investor may receive
less than NAV when selling those shares in the secondary market. The market
price of fund shares may deviate, sometimes significantly, from NAV during
periods of market volatility or market disruption, or as a result of other
factors impacting foreign securities, including liquidity, irregular trading
activity and timing differences between foreign markets where securities trade
and the secondary market where fund shares are sold.
For more information on the risks of investing
in the fund, please see the “Fund Details” section in the
prospectus.
![[MISSING IMAGE: do6hi92ohglngcet0rc0a0k0ul0i.jpg]](do6hi92ohglngcet0rc0a0k0ul0i.jpg)
|
|
| ||||||||||||||||||
| | | |
1 Year |
| |
5 Years |
| |
10 Years |
| |||||||||
| Before taxes | | | | | | | | | | | | | | | | | |||
| After taxes on distributions | | | | | | | | | | | | | | | | | |||
|
After taxes on distributions and sale
of shares |
| | | | | | | | | | | | | | | | |||
|
Comparative
Indices |
| | | | | | | | | | | | | | | | | | |
| MSCI EAFE Index (Net)(1) | | | | | | | | | | | | | | | | | |||
|
FTSE Developed Small Cap ex US Liquid
Index (Net)(1)
|
| | | | | | | | | | | | | | | | |||
(1)
Investment Adviser
Charles Schwab Investment Management, Inc., dba
Schwab Asset Management®
Portfolio Managers
Christopher Bliss,
CFA, Managing Director and Head of
Equity Index Strategies, is responsible for the day-to-day co-management of the
fund. He has managed the fund since 2017.
Mariela Jobson, Senior Portfolio Manager, is responsible for
the day-to-day co-management of the fund. She has managed the fund since
2024.
Joselle Duncan,
CFA, Portfolio Manager, is
responsible for the day-to-day co-management of the fund. She has managed the
fund since 2023.
Schwab International Small-Cap Equity
ETF | Fund Summary11
David Rios, Senior Portfolio Manager, is responsible for
the day-to-day co-management of the fund. He has managed the fund since
2017.
Purchase and Sale of Fund Shares
The fund issues and redeems shares at its NAV
only in large blocks of shares (Creation Units). These transactions are usually
in exchange for a basket of securities included in the index and/or an amount of
cash. As a practical matter, only Authorized Participants purchase or redeem
Creation Units.
Individual shares may only be purchased and sold
in the secondary market (i.e., on a national securities exchange) through a
broker or dealer at market prices. Because fund shares trade at market prices
rather than at NAV, fund shares may trade at a price greater than NAV (premium)
or less than NAV (discount). When buying or selling shares in the secondary
market, you may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the fund (bid) and the
lowest price a seller is willing to accept for shares of the fund (ask) (the
“bid-ask spread”). Recent information regarding the fund’s NAV, market price,
premiums and discounts, and bid-ask spreads is available at www.schwabassetmanagement.com.
Tax Information
Dividends and capital gains distributions
received from the fund will generally be taxable as ordinary income or capital
gains, unless you are investing through an IRA, 401(k) or other tax-advantaged
account (in which case you may be taxed later, upon withdrawal of your
investment from such account).
Payments to Financial Intermediaries
If you purchase shares of the fund through a
broker-dealer or other financial intermediary (such as a bank), the adviser and
its related companies may pay the intermediary for the sale of fund shares and
related services. These payments may create a conflict of interest by
influencing the broker-dealer or other financial intermediary and your
salesperson to recommend the fund over another investment. Ask your salesperson
or visit your financial intermediary’s website for more information.
12Schwab International
Small-Cap Equity ETF | Fund
Summary
| |
Ticker Symbol: |
| | SCHE | |
The fund’s goal is to track as closely as
possible, before fees and expenses, the total return of the FTSE Emerging
Index.
This table describes the
fees and expenses you may pay if you buy, hold and sell shares of the
fund. You may pay other fees, such
as brokerage commissions and other fees to financial intermediaries, which are
not reflected in the table and Example below.
|
|
| |||
| | | |
|
|
|
of the value of your investment) |
| |||
| Management fees | | |
|
|
| Other expenses | | |
|
|
| Total annual fund operating expenses | | |
|
|
(1)
This example is intended to help you compare the
cost of investing in the fund with the cost of investing in other funds. The
example assumes that you invest $10,000 in the fund for the time periods
indicated and then sell all of your shares at the end of those time periods. The
example also assumes that your investment has a 5% return each year and that the
fund’s operating expenses remain the same. Your actual costs may be higher or
lower.
| |
|
| |||||||||||||||||||||
| |
1 Year |
| |
3 Years |
| |
5 Years |
| |
10 Years |
| ||||||||||||
| | | $ | | | | | $ | | | | | $ | | | | | $ | | | ||||
The fund pays transaction costs, such as
commissions, when it buys and sells securities (or “turns over” its portfolio).
A higher portfolio turnover may indicate higher transaction costs and may result
in higher taxes when fund shares are held in a taxable account. These costs,
which are not reflected in the annual fund operating expenses or in the example,
affect the fund’s performance. During the most recent fiscal year, the fund’s
portfolio turnover rate was 7 % of the average value of its
portfolio.
To pursue its goal, the fund generally invests
in stocks that are included in the FTSE Emerging Index†. The index is comprised of
large
and mid capitalization companies in emerging
market countries, as defined by the index provider. The index defines the large
and mid capitalization universe as approximately the top 90% of the eligible
universe. As of August 31, 2025, the index was composed of 2,256 stocks in
23 emerging market countries.
It is the fund’s policy that under normal
circumstances it will invest at least 90% of its net assets (including, for this
purpose, any borrowings for investment purposes) in these stocks, including
depositary receipts representing securities of the index; such depositary
receipts may be in the form of American Depositary Receipts (ADRs), Global
Depositary Receipts (GDRs) and European Depositary Receipts (EDRs). The fund
will notify its shareholders at least 60 days before changing this policy.
The fund may sell securities that are represented in the index in anticipation
of their removal from the index, or buy securities that are not yet represented
in the index in anticipation of their addition to the index.
Under normal circumstances, the fund may invest
up to 10% of its net assets in securities not included in the index. The
principal types of these investments include those that the investment adviser
believes will help the fund track the index, such as investments in
(a) securities that are not represented in the index but the investment
adviser anticipates will be added to the index or as necessary to reflect
various corporate actions (such as mergers and spin-offs); (b) other
investment companies; and (c) derivatives, principally futures contracts.
The fund may use futures contracts and other derivatives primarily to seek
returns on the fund’s otherwise uninvested cash assets to help it better track
the index. The fund may also invest in cash and cash equivalents, including
money market funds, and may lend its securities to minimize the difference in
performance that naturally exists between an index fund and its corresponding
index. The fund does not hedge its exposure to foreign currencies.
Because it may not be possible or practicable to
purchase all of the stocks in the index, the investment adviser seeks to track
the total return of the index by using sampling techniques. Sampling techniques
involve investing in a limited number of index securities which, when taken
together, are expected to perform similarly to the index as a whole. These
techniques are based on a variety of factors, including performance attributes,
tax considerations, country weightings, capitalization, industry factors, risk
factors and other characteristics. The fund generally expects that its portfolio
will hold less than the total number of securities in the index, but reserves
the right to hold as many securities as it believes necessary to achieve the
fund’s investment objective.
†
Index ownership — FTSE is a trademark of the
London Stock Exchange Group companies (LSEG) and is used by the fund under
license. The Schwab Emerging Markets Equity ETF is 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 fund. Fees payable
under the license are paid by the investment adviser.
Schwab Emerging Markets Equity ETF | Fund
Summary13
The fund will concentrate its investments
(i.e., hold more than 25% of its total assets) in a
particular industry, group of industries or sector to approximately the same
extent that the index is so concentrated.
Principal Risks
Market Risk. Financial markets rise and fall in response to
a variety of factors, sometimes rapidly and unpredictably. Markets may be
impacted by economic, political, regulatory and other conditions, including
economic sanctions, tariffs and other government actions. In addition, the
occurrence of global events, such as war, terrorism, environmental disasters,
natural disasters and epidemics, may also negatively affect the financial
markets. As with any investment whose performance is tied to these markets, the
value of an investment in the fund will fluctuate, which means that an investor
could lose money over short or long periods.
Investment Style
Risk. The fund is an index fund.
Therefore, the fund follows the securities included in the index during upturns
as well as downturns. Because of its indexing strategy, the fund does not take
steps to reduce market exposure or to lessen the effects of a declining market.
In addition, because of the fund’s expenses, the fund’s performance may be below
that of the index. Errors relating to the index may occur from time to time and
may not be identified by the index provider for a period of time. In addition,
market disruptions could cause delays in the index’s rebalancing schedule. Such
errors and/or market disruptions may result in losses for the fund.
Equity Risk. The prices of equity securities rise and fall
daily. These price movements may result from factors affecting individual
companies, industries or the securities market as a whole. In addition, equity
markets tend to move in cycles, which may cause stock prices to fall over short
or extended periods of time.
Market Capitalization
Risk. Securities issued by
companies of different market capitalizations tend to go in and out of favor
based on market and economic conditions. During a period when securities of a
particular market capitalization fall behind other types of investments, the
fund’s performance could be impacted.
Large-Cap Company
Risk. Large-cap companies are
generally more mature and the securities issued by these companies may not be
able to reach the same levels of growth as the securities issued by small- or
mid-cap companies.
Mid-Cap Company
Risk. Mid-cap companies may be more
vulnerable to adverse business or economic events than larger, more established
companies and the value of securities issued by these companies may move
sharply.
Foreign Investment
Risk. The fund’s investments in
securities of foreign issuers involve certain risks that may be greater than
those associated with investments in securities of U.S. issuers. These include
risks of adverse changes in foreign economic, political,
regulatory and other conditions; changes in
currency exchange rates or exchange control regulations (including limitations
on currency movements and exchanges); the imposition of economic sanctions or
other government restrictions; differing accounting, auditing, financial
reporting and legal standards and practices; differing securities market
structures; and higher transaction costs. These risks may negatively impact the
value or liquidity of the fund’s investments and could impair the fund’s ability
to meet its investment objective or invest in accordance with its investment
strategy. There is a risk that investments in securities denominated in, and/or
receiving revenues in, foreign currencies will decline in value relative to the
U.S. dollar. Foreign securities also include ADRs, GDRs and EDRs, which may be
less liquid than the underlying shares in their primary trading market, and
GDRs, in particular, many of which are issued by companies in emerging markets,
may be more volatile. Foreign securities may also include investments in
variable interest entities (VIEs) structures, which are created by China-based
operating companies in jurisdictions outside of China to obtain indirect
financing due to Chinese regulations that prohibit non-Chinese ownership of
those companies. To the extent the fund’s investments in a single country or a
limited number of countries represent a large percentage of the fund’s
assets, the fund’s performance may be adversely affected by the economic,
political, regulatory and social conditions in those countries, and the fund’s
price may be more volatile than the price of a fund that is geographically
diversified.
Emerging Markets
Risk. Emerging market countries may
be more likely to experience political turmoil or rapid changes in market or
economic conditions than more developed countries. Emerging market countries
often have less uniformity in accounting, auditing, financial reporting and
recordkeeping requirements and greater risk associated with the custody of
securities. In addition, the financial stability of issuers (including
governments) in emerging market countries may be more precarious than in
developed countries. As a result, there may be an increased risk of illiquidity
and price volatility associated with the fund’s investments in emerging market
countries, which may be magnified by currency fluctuations relative to the U.S.
dollar, and, at times, it may be difficult to value such investments.
Sampling Index Tracking
Risk. The fund may not fully
replicate the index and may hold securities not included in the index. As a
result, the fund is subject to the risk that the investment adviser’s investment
management strategy, the implementation of which is subject to a number of
constraints, may not produce the intended results. Because the fund utilizes a
sampling approach it may not track the return of the index as well as it would
if the fund purchased all of the securities in the index.
Tracking Error and
Correlation Risk. As an index fund,
the fund seeks to track the performance of the index, although it may not be
successful in doing so. Further, there can be no guarantee that the fund will
achieve a high degree of correlation between the fund’s performance and that of
its index. The correlation between the performance of the fund and that of its
index, positive or negative, is called “tracking error.” Tracking error can be
caused by many factors and it may be significant.
14Schwab Emerging Markets
Equity ETF | Fund Summary
Derivatives Risk. The fund’s use of derivative instruments
involves risks different from, or possibly greater than, the risks associated
with investing directly in securities and other traditional investments. The
fund’s use of derivatives could reduce the fund’s performance, increase its
volatility and cause the fund to lose more than the initial amount invested. In
addition, investments in derivatives may involve leverage, which means a
small percentage of assets invested in derivatives can have a
disproportionately large impact on the fund.
Liquidity Risk. The fund may be unable to sell certain
securities, such as illiquid securities, readily at a favorable time or price,
or the fund may have to sell them at a loss.
Securities Lending
Risk. Securities lending involves
the risk of loss of rights in, or delay in recovery of, the loaned securities if
the borrower fails to return the security loaned or becomes insolvent.
Concentration
Risk. To the extent that the fund’s
or the index’s portfolio is concentrated in the securities of issuers in a
particular market, industry, group of industries, sector, country or asset
class, the fund may be adversely affected by the performance of those
securities, may be subject to increased price volatility and may be more
vulnerable to adverse economic, market, political or regulatory occurrences
affecting that market, industry, group of industries, sector, country or asset
class.
Market Trading
Risk. Although fund shares are
listed on national securities exchanges, there can be no assurance that an
active trading market for fund shares will develop or be maintained. If an
active market is not maintained, investors may find it difficult to buy or sell
fund shares.
Shares of the Fund May
Trade at Prices Other Than NAV.
Fund shares may be bought and sold in the secondary market at market prices.
Although it is expected that the market price of the shares of the fund will
approximate the fund’s net asset value (NAV), there may be times when the market
price and the NAV vary significantly. An investor may pay more than NAV when
buying shares of the fund in the secondary market, and an investor may receive
less than NAV when selling those shares in the secondary market. The market
price of fund shares may deviate, sometimes significantly, from NAV during
periods of market volatility or market disruption, or as a result of other
factors impacting foreign securities, including liquidity, irregular trading
activity and timing differences between foreign markets where securities trade
and the secondary market where fund shares are sold.
For more information on the risks of investing
in the fund, please see the “Fund Details” section in the
prospectus.
that are included in the FTSE Emerging Index
(Net). The fund does not seek to track the regulatory index. This information
provides some indication of the risks of investing in the fund. All figures
assume distributions were reinvested. Keep in mind
that future performance (both before and after taxes) may differ from past
performance. For current performance information, please see
www.schwabassetmanagement.com/prospectus .
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After taxes on distributions and sale
of shares |
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Comparative
Indices |
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MSCI Emerging Markets Index (Net)(1) |
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(1)
Investment Adviser
Charles Schwab Investment Management, Inc., dba
Schwab Asset Management®
Portfolio Managers
Christopher Bliss,
CFA, Managing Director and Head of
Equity Index Strategies, is responsible for the day-to-day co-management of the
fund. He has managed the fund since 2017.
Schwab Emerging Markets Equity ETF | Fund
Summary15
Mariela Jobson, Senior Portfolio Manager, is responsible for
the day-to-day co-management of the fund. She has managed the fund since
2024.
Joselle Duncan,
CFA, Portfolio Manager, is
responsible for the day-to-day co-management of the fund. She has managed the
fund since 2023.
David Rios, Senior Portfolio Manager, is responsible for
the day-to-day co-management of the fund. He has managed the fund since
2017.
Purchase and Sale of Fund Shares
The fund issues and redeems shares at its NAV
only in large blocks of shares (Creation Units). These transactions are usually
in exchange for a basket of securities included in the index and/or an amount of
cash. As a practical matter, only Authorized Participants purchase or redeem
Creation Units.
Individual shares may only be purchased and sold
in the secondary market (i.e., on a national securities exchange) through a
broker or dealer at market prices. Because fund shares trade at market prices
rather than at NAV, fund shares may trade at a price greater than NAV (premium)
or less than NAV (discount). When buying or selling shares in the secondary
market, you may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the fund (bid) and the
lowest price a seller is willing to accept for shares of the fund (ask) (the
“bid-ask spread”). Recent information regarding the fund’s NAV, market price,
premiums and discounts, and bid-ask spreads is available at www.schwabassetmanagement.com.
Tax Information
Dividends and capital gains distributions
received from the fund will generally be taxable as ordinary income or capital
gains, unless you are investing through an IRA, 401(k) or other tax-advantaged
account (in which case you may be taxed later, upon withdrawal of your
investment from such account).
Payments to Financial Intermediaries
If you purchase shares of the fund through a
broker-dealer or other financial intermediary (such as a bank), the adviser and
its related companies may pay the intermediary for the sale of fund shares and
related services. These payments may create a conflict of interest by
influencing the broker-dealer or other financial intermediary and your
salesperson to recommend the fund over another investment. Ask your salesperson
or visit your financial intermediary’s website for more information.
16Schwab Emerging Markets
Equity ETF | Fund Summary
About
the Funds
The funds described in this prospectus are
advised by Charles Schwab Investment Management, Inc., dba Schwab Asset
Management (the investment adviser). Each fund is an “exchange-traded fund”
(ETF). ETFs are funds that trade like other publicly-traded securities. The
funds in this prospectus are index funds and are designed to track the total
return of an index. Because the composition of an index tends to be
comparatively stable, most index funds historically have shown low portfolio
turnover compared to actively managed funds.
This strategy distinguishes an index fund from
an “actively managed” fund. Instead of choosing investments for the fund based
on portfolio management’s judgment, an index is used to determine which
securities the fund should own.
Unlike shares of a mutual fund, shares of the
funds are listed on a national securities exchange and trade at market prices
that change throughout the day. The market price for each of the fund’s shares
may be different from its net asset value per share (NAV). The funds have their
own CUSIP numbers and trade on the NYSE Arca, Inc. under the following
tickers:
| | Schwab International Dividend Equity ETF | | | SCHY | |
| | Schwab International Equity ETF | | | SCHF | |
| |
Schwab International Small-Cap Equity
ETF |
| | SCHC | |
| | Schwab Emerging Markets Equity ETF | | | SCHE | |
The funds issue and redeem shares at their NAV
only in large blocks of shares (Creation Units). These transactions are usually
in exchange for a basket of securities and/or an amount of cash. As a practical
matter, only institutional investors who have entered into an authorized
participant agreement (Authorized Participants) purchase or redeem Creation
Units.
A Note to Retail Investors
Shares can be purchased directly from the funds
only in exchange for a basket of securities and/or an amount of cash that is
expected to be worth a minimum of a million dollars or more. Most individual
investors, therefore, will not be able to purchase shares directly from the
funds. Instead, these investors will purchase shares in the secondary market
through a brokerage account or with the assistance of a broker. Thus, some of
the information contained in this prospectus — such as information about
purchasing and redeeming shares from the funds and references to transaction
fees imposed on purchases and redemptions — is not relevant to most individual
investors. Shares purchased or sold through a brokerage account or with the
assistance of a broker may be subject to brokerage commissions and
charges.
The funds’ performance will fluctuate over time
and, as with all investments, future performance may differ from past
performance.
Schwab International Equity ETFs | About the
Funds17
Fund Details
There can be no assurance that the funds will
achieve their objectives. Except as explicitly described otherwise, the
investment objectives, strategies and policies of each fund may be changed
without shareholder approval.
The principal investment strategies and the main
risks associated with investing in each fund are summarized in the fund
summaries at the front of this prospectus. This section takes a more detailed
look at some of the types of securities, the associated risks, and the various
investment strategies that may be used in the day-to-day portfolio management of
the funds, as described below. In addition to the particular types of securities
and strategies that are described in this prospectus, each fund may use
strategies that are not described herein in support of its overall investment
goal. These additional strategies and the risks associated with them are
described in the “Investment Objectives, Strategies, Risks and Limitations”
section in the Statement of Additional Information (SAI).
Investors should be aware that the investments
made by the funds and the results achieved by the funds at any given time are
not expected to be the same as those made by mutual funds for which Charles
Schwab Investment Management, Inc. serves as investment adviser, including
mutual funds with names, investment objectives and policies similar to the
funds.
Investment
Objectives and More About Principal Risks
Schwab International Dividend Equity ETF
Investment Objective
The fund’s goal is to track as closely as
possible, before fees and expenses, the total return of an index composed of
high dividend yielding stocks issued by companies outside the United States. The
fund’s investment objective is not fundamental and therefore may be changed by
the fund’s Board of Trustees without shareholder approval.
More Information About Principal Investment
Risks
The fund is subject to risks, any of which could
cause an investor to lose money.
Market Risk. Financial markets rise and fall in response to
a variety of factors, sometimes rapidly and unpredictably. Markets may be
impacted by economic, political, regulatory and other conditions, including
economic sanctions, tariffs, and other government actions. In addition, the
occurrence of global events, such as war, terrorism, environmental disasters,
natural disasters and epidemics, may also negatively affect the financial
markets. These events could reduce consumer demand or economic output; result in
market closures, changes in interest rates, inflation/deflation, travel
restrictions or quarantines; and significantly adversely impact the economy.
Governmental and quasi-governmental authorities and regulators throughout the
world have in the past often responded to serious economic disruptions with a
variety of significant fiscal and monetary policy changes which could have an
unexpected impact on financial markets and the fund’s investments. As with any
investment whose performance is tied to these markets, the value of an
investment in the fund will fluctuate, which means that an investor could lose
money over short or long periods.
Investment Style
Risk. The fund primarily invests in
dividend paying stocks. As a result, fund performance will correlate with the
performance of the dividend paying stock segment of the stock market, and the
fund may underperform funds that do not limit their investments to dividend
paying stocks. If stocks held by the fund reduce or stop paying dividends, the
fund’s ability to generate income may be affected.
The fund is an index fund. Therefore, the fund
follows the securities included in the index during upturns as well as
downturns. Because of its indexing strategy, the fund does not take steps to
reduce market exposure or to lessen the effects of a declining market, even
though these securities may go in and out of favor based on market and economic
conditions. The index does not weigh securities on the basis of investor
protection, limitations or differences in the quality of financial reporting or
other oversight mechanisms. Therefore, the fund will follow the securities in
the index without consideration of these factors. In addition, because of the
fund’s expenses, the fund’s performance may be below that of the index.
At times the segment of the markets represented
by the index may underperform other market segments. A significant percentage of
the index may be composed of securities in a single industry or sector of the
economy. If the fund is focused in an industry or sector, it may present more
risks than if it were broadly diversified over numerous industries and sectors
of the economy. Because of the way the index is composed, the index may perform
differently or worse than an index that is based solely on market
capitalization.
Index-Related
Risk. The index provider does not
provide any warranty as to the timeliness, accuracy or completeness of any data
relating to the index. Errors relating to the index, including index data,
computations and/or construction, may occur from time to time and may not be
identified by the index provider for a period of time or at all. Losses
resulting from index errors may be borne by the fund and its shareholders. In
addition, there can be no guarantee that the index will operate as intended
during volatile market conditions or over the course of a full market
cycle.
18Schwab International Equity
ETFs | Fund Details
In addition, market disruptions could cause
delays in the index’s rebalancing schedule which may result in the index and, in
turn, the fund experiencing returns different than those that would have been
achieved under a normal rebalancing schedule.
Equity Risk. The prices of equity securities rise and fall
daily. These price movements may result from factors affecting individual
companies, industries or the securities market as a whole. Individual companies
may report poor results or be negatively affected by industry and/or economic
trends and developments. The prices of securities issued by such companies may
suffer a decline in response. Governmental action, including the imposition of
trade embargoes or tariffs, may also impact individual companies or markets as a
whole. In addition, equity markets tend to move in cycles which may cause stock
prices to fall over short or extended periods of time.
Market Capitalization
Risk. Securities issued by
companies of different market capitalizations tend to go in and out of favor
based on market and economic conditions. In addition, there may be less trading
volume in securities issued by mid- and small-cap companies than those issued by
larger companies and, as a result, trading volatility may have a greater impact
on the value of securities of mid- and small-cap companies. Securities issued by
large-cap companies, on the other hand, may not be able to attain the high
growth rates of some mid- and small-cap companies. During a period when
securities of a particular market capitalization fall behind other types of
investments, the fund’s performance could be impacted.
Large-Cap Company
Risk. Large-cap companies are
generally more mature than smaller companies. They also may have fewer new
market opportunities for their products or services, may focus resources on
maintaining their market share, and may be unable to respond quickly to new
competitive challenges. As a result, the securities issued by these companies
may not be able to reach the same levels of growth as the securities issued by
small- or mid-cap companies.
Mid-Cap Company
Risk. Mid-cap companies may be more
vulnerable to adverse business or economic events than larger, more established
companies and their securities may be riskier than those issued by large-cap
companies. The value of securities issued by mid-cap companies may be based in
substantial part on future expectations rather than current achievements and
their prices may move sharply, especially during market upturns and
downturns.
Small-Cap Company
Risk. Small-cap companies may be
more vulnerable to adverse business or economic events than larger, more
established companies and their securities may be riskier than those issued by
larger companies. The value of securities issued by small-cap companies may be
based in substantial part on future expectations rather than current
achievements and their prices may move sharply, especially during market upturns
and downturns. In addition, small-cap companies may have limited financial
resources, management experience, product lines and markets, and their
securities may trade less frequently and in more limited volumes than the
securities of larger companies. Further, small-cap companies may have less
publicly available information and such information may be inaccurate or
incomplete.
Foreign Investment
Risk. The fund’s investments in
securities of foreign issuers involve certain risks that may be greater than
those associated with investments in securities of U.S. issuers. These include
risks of adverse changes in foreign economic, political, regulatory and other
conditions; changes in currency exchange rates or exchange control regulations
(including limitations on currency movements and exchanges); differing
accounting, auditing, financial reporting and legal standards and practices;
differing securities market structures; and higher transaction costs. In certain
countries, legal remedies available to investors may be more limited than those
available with respect to investments in the U.S. These risks may negatively
impact the value or liquidity of the fund’s investments and could impair the
fund’s ability to meet its investment objective or invest in accordance with its
investment strategy. In addition, the fund’s investments in foreign securities
may be subject to economic sanctions or other government restrictions, including
trade tariffs, embargoes or limitations on trade which could have a significant
impact on a country’s markets overall as well as global economies or markets.
There also is the risk that the cost of buying, selling, and holding foreign
securities, including brokerage, tax, and custody costs, may be higher than
those involved in domestic transactions. The securities of some foreign
companies may be less liquid and, at times, more volatile than securities of
comparable U.S. companies. The fund may also experience more rapid or extreme
changes in value as compared to a fund that invests solely in securities of U.S.
companies because the securities markets of many foreign countries are
relatively small, with a limited number of companies representing a small number
of industries. To the extent the fund’s investments in a single country or a
limited number of countries represent a large percentage of the fund’s assets,
the fund’s performance may be adversely affected by the economic, political,
regulatory and social conditions in those countries, and the fund’s price may be
more volatile than the price of a fund that is geographically
diversified.
Currency Risk. The fund’s investments in securities
denominated in, and/or receiving revenues in, foreign currencies, will subject
the fund to the risk that those currencies will decline in value relative to the
U.S. dollar. In either event, the dollar value of an investment in the fund
would be adversely affected. Currency exchange rates may fluctuate in response
to factors extrinsic to that country’s economy, which makes the forecasting of
currency market movements extremely difficult. Currency rates in foreign
countries may fluctuate significantly over short periods of time for a number of
reasons, including changes in interest rates; intervention (or failure to
intervene) by U.S. or foreign governments, central banks or supranational
entities such as the International Monetary Fund; or by the imposition of
currency controls or other political developments in the United States or
abroad. These can result in losses to the fund if it is unable to deliver or
receive currency or monies in settlement of obligations. Forward contracts on
foreign currencies are not traded on exchanges; rather, a bank or dealer will
act as agent or as principal in order to make or take future delivery of a
specified lot of a particular currency for the fund’s account. The fund is
subject to the risk of a counterparty’s failure, inability or refusal to perform
with respect to such contracts.
Schwab International Equity
ETFs | Fund Details19
Depositary Receipt
Risk. Foreign securities also
include ADRs, which are U.S. dollar-denominated receipts representing shares of
foreign-based corporations. ADRs are issued by U.S. banks or trust companies and
entitle the holder to all dividends and capital gains that are paid out on the
underlying foreign shares. Foreign securities also include GDRs, which are
similar to ADRs, but are shares of foreign-based corporations generally issued
by international banks in one or more markets around the world. In addition,
foreign securities include EDRs, which are similar to GDRs, but are shares of
foreign-based corporations generally issued by European banks that trade on
exchanges outside of the bank’s home country. Investment in ADRs, GDRs and EDRs
may be less liquid than the underlying shares in their primary trading market
and GDRs, many of which are issued by companies in emerging markets, may be more
volatile.
Variable Interest Entities
Risk. The fund may gain exposure to
certain operating companies in China through legal structures known as variable
interest entities (VIEs). In China, ownership of companies in certain sectors by
non-Chinese individuals and entities (including U.S. persons and entities, such
as the fund) is prohibited. To facilitate indirect non-Chinese investment, many
China-based operating companies have created VIE structures. In a VIE structure,
a China-based operating company will establish an entity outside of China that
will enter into service and other contracts with the China-based operating
company. Shares of the entities established outside of China are often listed
and traded on an exchange. Non-Chinese investors (such as the fund) hold equity
interests in the entities established outside of China rather than directly in
the China-based operating companies. This arrangement allows U.S. investors to
obtain economic exposure to the China-based operating company through
contractual means rather than through formal equity ownership. An investment in
a VIE structure subjects the fund to the risks associated with the underlying
China-based operating company. In addition, the fund may be exposed to certain
associated risks, including the risks that: the Chinese government could subject
the China-based operating company to penalties, revocation of business and
operating licenses or forfeiture of ownership interests; the Chinese government
may outlaw the VIE structure, which could cause an uncertain negative impact to
existing investors in the VIE structure; the contracts underlying the VIE
structure may not be enforced by Chinese courts; and shareholders of the
China-based operating company may leverage the VIE structure to their benefit
and to the detriment of the investors in the VIE structure. If these actions
were to occur, the market value of the fund’s investments in the VIE structure
would likely fall, causing investment losses, which could be substantial, for
the fund.
Emerging Markets
Risk. The risks of foreign
investments apply to, and may be heightened in connection with, investments in
emerging market countries or securities of issuers that conduct their business
in emerging markets. Emerging market countries may be more likely to experience
political turmoil or rapid changes in market or economic conditions than more
developed countries. Emerging market countries often have less uniformity in
accounting, auditing, financial reporting and recordkeeping requirements and
greater risk associated with the custody of securities. It is sometimes
difficult to obtain and enforce court judgments in such countries. Material
information about a company in an emerging market country may be unavailable or
unreliable, and U.S. regulators may be unable to enforce a company’s regulatory
obligations. There is often a greater potential for nationalization,
expropriation, confiscatory taxation, government regulation, social instability
or diplomatic developments (including war) in emerging market countries, which
could adversely affect the economies of, or investments in securities of issuers
located in, such countries. In addition, emerging markets are substantially
smaller than developed markets, and the financial stability of issuers
(including governments) in emerging market countries may be more precarious than
in developed countries. As a result, there will tend to be an increased risk of
illiquidity and price volatility associated with the fund’s investments in
emerging market countries which may be magnified by currency fluctuations
relative to the U.S. dollar, and, at times, it may be difficult to value such
investments.
Tracking Error and
Correlation Risk. As an index fund,
the fund seeks to track the performance of the index, although it may not be
successful in doing so. The divergence between the performance of the fund and
the index, positive or negative, is called “tracking error.” Tracking error can
be caused by many factors and it may be significant. For example, the fund may
not invest in certain securities in the index, match the securities’ weighting
to the index, or the fund may invest in securities not in the index, due to
regulatory, operational, custodial or liquidity constraints; corporate
transactions; asset valuations; transaction costs and timing; tax
considerations; and index rebalancing, which may result in tracking error. In
addition, the fund may not invest in issuers located in certain countries due to
these considerations. The fund may attempt to offset the effects of not being
invested in certain index securities by making substitute investments, but these
efforts may not be successful. In certain circumstances, the fund may value
individual securities based on fair value prices developed using methods
approved by the fund’s Board of Trustees. To the extent the fund calculates its
NAV based on fair value prices, the fund’s performance may diverge from that of
its index. In addition, cash flows into and out of the fund, timing variances,
operating expenses and trading costs all affect the ability of the fund to match
the performance of the index, because the index does not have to manage cash
flows and does not incur any costs. Tracking error may also be impacted by
timing differences in currency conversions between the fund and the index and by
the fund’s use of fair valuation. Lastly, differences between the fund’s
portfolio and the index resulting from legal restrictions (such as
diversification requirements) that apply to the fund but not to the index impact
correlation between the performance of the fund and that of its index.
Derivatives Risk. The fund may invest in derivative instruments.
The principal types of derivatives the fund may use are futures contracts. A
futures contract is an agreement to buy or sell a financial instrument at a
specific price on a specific day. The fund’s use of derivative instruments
involves risks different from, or possibly greater than, the risks associated
with investing directly in securities and other traditional investments. Certain
of these risks, such as market risk, liquidity risk and leverage risk, are
discussed elsewhere in this prospectus. The fund’s use of derivatives is also
subject to counterparty risk, lack of availability risk, valuation risk,
correlation risk and tax risk. Counterparty
20Schwab International Equity
ETFs | Fund Details
risk is the risk that the counterparty to a
derivative transaction may not fulfill its contractual obligations either
because the financial condition of the counterparty declines, or because the
counterparty is otherwise unable or unwilling to perform under the contract.
Lack of availability risk is the risk that suitable derivative transactions may
not be available in all circumstances for risk management or other purposes.
Valuation risk is the risk that a particular derivative may be valued
incorrectly. Correlation risk is the risk that changes in the value of the
derivative may not correlate perfectly with the underlying asset, rate or index.
Tax risk is the risk that the use of derivatives may cause the fund to realize
higher amounts of short-term capital gains. The fund’s use of derivatives could
reduce the fund’s performance, increase its volatility and cause the fund to
lose more than the initial amount invested. The fund’s use of derivatives also
could create a risk of counterparty default under certain transactions, risks
that the fund would need to liquidate portfolio positions when it may not be
advantageous to do so in order to meet margin and payment obligations, and legal
risks relating to insufficient documentation, insufficient capacity or authority
of a counterparty, or legality or enforceability of a contract. Furthermore, the
use of derivatives subject to regulation by the Commodity Futures Trading
Commission (CFTC) could cause the fund to become a commodity pool, which would
require the fund to comply with certain CFTC rules.
Liquidity Risk. Liquidity risk exists when particular
investments may be difficult to purchase, sell or value, especially during
stressed market conditions. The market for certain investments may become
illiquid due to specific adverse changes in the conditions of a particular
issuer or under adverse market or economic conditions independent of the issuer.
In such cases, the fund, due to limitations on investments in illiquid
securities and the difficulty in readily purchasing and selling such securities
at favorable times or prices, may decline in value, experience lower returns
and/or be unable to achieve its desired level of exposure to a certain issuer or
sector. Further, transactions in illiquid securities may entail transaction
costs that are higher than those for transactions in liquid securities.
Leverage Risk. Certain fund transactions, such as derivatives
transactions, may give rise to a form of leverage and may expose the fund to
greater risk. Leverage tends to magnify the effect of any decrease or increase
in the value of the fund’s portfolio securities which means even a small amount
of leverage can have a disproportionately large impact on the fund. The use of
leverage may cause the fund to liquidate portfolio positions when it would not
be advantageous to do so in order to satisfy its obligations.
Securities Lending
Risk. The fund may lend its
portfolio securities to brokers, dealers, and other financial institutions
provided a number of conditions are satisfied, including that the loan is fully
collateralized. When the fund lends portfolio securities, its investment
performance will continue to reflect changes in the value of the securities
loaned, and the fund will also receive a fee or interest on the collateral.
Securities lending involves the risk of loss of rights in, or delay in recovery
of, the loaned securities if the borrower fails to return the security loaned or
becomes insolvent. The fund will also bear the risk of any decline in value of
securities acquired with cash collateral. The fund may pay lending fees to a
party arranging the loan.
Market Trading
Risk. Although fund shares are
listed on national securities exchanges, there can be no assurance that an
active trading market for fund shares will develop or be maintained. If an
active market is not maintained, investors may find it difficult to buy or sell
fund shares. Trading of shares of the fund on a national securities exchange may
be halted if exchange officials deem such action appropriate, if the fund is
delisted, or if the activation of marketwide “circuit breakers” halts stock
trading generally. If the fund’s shares are delisted, the fund may seek to list
its shares on another market, merge with another ETF, or redeem its shares at
NAV.
Shares of the Fund May
Trade at Prices Other Than NAV. As
with all ETFs, fund shares may be bought and sold in the secondary market at
market prices. Although it is expected that the market price of the shares of
the fund will approximate the fund’s NAV, there may be times when the market
price and the NAV vary significantly. Thus, an investor may pay more than NAV
when buying shares of the fund in the secondary market, and an investor may
receive less than NAV when selling those shares in the secondary market. The
investment adviser cannot predict whether shares will trade above (premium),
below (discount) or at NAV. The fund may have a limited number of financial
institutions that may act as “Authorized Participants” or market makers. Only
Authorized Participants who have entered into agreements with the fund’s
distributor may engage in creation or redemption transactions directly with the
fund (as discussed in the “Creation and Redemption” section below). If those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders (including in situations where Authorized Participants
have limited or diminished access to capital required to post collateral), and
no other Authorized Participant is able to step forward to create and redeem in
either of these cases, fund shares may trade at a discount to NAV like
closed-end fund shares (and may even face delisting). Similar effects may result
if market makers exit the business or are unable to continue making markets in
the fund’s shares. Risks associated with having a limited number of Authorized
Participants may be heightened for ETFs that invest in securities issued by
non-U.S. issuers or other instruments that have lower trading volumes. More
generally, market makers are not obligated to make a market in the fund’s
shares, and Authorized Participants are not obligated to submit purchase or
redemption orders for Creation Units. Further, while the creation/redemption
feature is designed to make it likely that shares normally will trade close to
the value of the fund’s holdings, disruptions to creations and redemptions,
including disruptions at market makers, Authorized Participants or market
participants, or during periods of significant market volatility, may result in
market prices that differ significantly from the value of the fund’s holdings.
In addition, transactions by large shareholders may account for a
large percentage of trading volume on the fund’s primary listing exchange
and may, therefore, have a material effect on the market price of the fund’s
shares.
The market price of fund shares during the
trading day, like the price of any exchange-traded security, includes a
“bid/ask” spread charged by the exchange specialist, market makers or other
participants that trade the fund shares. The bid/ask spread on ETF shares varies
over time based on the fund’s trading volume and market liquidity. As a result,
the bid/ask spread on ETF shares is generally larger when the shares
Schwab International Equity
ETFs | Fund Details21
have little trading volume or market liquidity
and generally lower when the shares have high trading volume or market
liquidity. In addition, in times of severe market disruption, the bid/ask spread
can increase significantly. At those times, fund shares are most likely to be
traded at a discount to NAV, and the discount is likely to be greatest when the
price of shares is falling fastest, which may be the time that investors most
want to sell shares. The investment adviser believes that, under normal market
conditions, large market price discounts or premiums to NAV will not be
sustained because of arbitrage opportunities. There are various methods by which
investors can purchase and sell shares of the fund and various types of orders
that may be placed. Investors should consult their financial intermediary before
purchasing or selling shares of the fund.
In addition, the securities held by the fund are
generally traded in markets that close at a different time than the fund’s
secondary market and liquidity in those securities may be reduced after the
applicable market closing times. Accordingly, during the time when the fund’s
secondary market is open but after the applicable foreign market closing, fixing
or settlement times, bid/ask spreads and the resulting premium or discount to
the fund’s NAV may widen. The fund’s bid/ask spread may also be impacted by the
liquidity of the underlying securities held by the fund or in instances of
significant volatility of the underlying securities.
Schwab International Equity ETF
Investment Objective
The fund’s goal is to track as closely as
possible, before fees and expenses, the total return of the FTSE Developed ex US
Index. The fund’s investment objective is not fundamental and therefore may be
changed by the fund’s Board of Trustees without shareholder approval.
More Information About Principal Investment
Risks
The fund is subject to risks, any of which could
cause an investor to lose money.
Market Risk. Financial markets rise and fall in response to
a variety of factors, sometimes rapidly and unpredictably. Markets may be
impacted by economic, political, regulatory and other conditions, including
economic sanctions, tariffs, and other government actions. In addition, the
occurrence of global events, such as war, terrorism, environmental disasters,
natural disasters and epidemics, may also negatively affect the financial
markets. These events could reduce consumer demand or economic output; result in
market closures, changes in interest rates, inflation/deflation, travel
restrictions or quarantines; and significantly adversely impact the economy.
Governmental and quasi-governmental authorities and regulators throughout the
world have in the past often responded to serious economic disruptions with a
variety of significant fiscal and monetary policy changes which could have an
unexpected impact on financial markets and the fund’s investments. As with any
investment whose performance is tied to these markets, the value of an
investment in the fund will fluctuate, which means that an investor could lose
money over short or long periods.
Investment Style
Risk. The fund is an index fund.
Therefore, the fund follows the securities included in the index during upturns
as well as downturns. Because of its indexing strategy, the fund does not take
steps to reduce market exposure or to lessen the effects of a declining market,
even though these securities may go in and out of favor based on market and
economic conditions. The index does not weigh securities on the basis of
investor protection, limitations or differences in the quality of financial
reporting or other oversight mechanisms. Therefore, the fund will follow the
securities in the index without consideration of these factors. In addition,
because of the fund’s expenses, the fund’s performance may be below that of the
index.
At times the segment of the markets represented
by the index may underperform other market segments. A
significant percentage of the index may be composed of securities in a
single industry or sector of the economy. If the fund is focused in an industry
or sector, it may present more risks than if it were broadly diversified over
numerous industries and sectors of the economy.
Index-Related
Risk. The index provider does not
provide any warranty as to the timeliness, accuracy or completeness of any data
relating to the index. Errors relating to the index, including index data,
computations and/or construction, may occur from time to time and may not be
identified by the index provider for a period of time or at all. Losses
resulting from index errors may be borne by the fund and its shareholders. In
addition, there can be no guarantee that the index will operate as intended
during volatile market conditions or over the course of a full market
cycle.
In addition, market disruptions could cause
delays in the index’s rebalancing schedule which may result in the index and, in
turn, the fund experiencing returns different than those that would have been
achieved under a normal rebalancing schedule.
Equity Risk. The prices of equity securities rise and fall
daily. These price movements may result from factors affecting individual
companies, industries or the securities market as a whole. Individual companies
may report poor results or be negatively affected by industry and/or economic
trends and developments. The prices of securities issued by such companies may
suffer a decline in response. Governmental action, including the imposition of
trade embargoes or tariffs, may also impact individual companies or markets as a
whole. In addition, equity markets tend to move in cycles which may cause stock
prices to fall over short or extended periods of time.
Market Capitalization
Risk. Securities issued by
companies of different market capitalizations tend to go in and out of favor
based on market and economic conditions. In addition, there may be less trading
volume in securities issued by mid- and small-cap companies than those issued by
larger companies and, as a result, trading volatility may have a greater impact
on the value of securities of mid- and small-cap
22Schwab International Equity
ETFs | Fund Details
companies. Securities issued by large-cap
companies, on the other hand, may not be able to attain the high growth rates of
some mid- and small-cap companies. During a period when securities of a
particular market capitalization fall behind other types of investments, the
fund’s performance could be impacted.
Large-Cap Company
Risk. Large-cap companies are
generally more mature than smaller companies. They also may have fewer new
market opportunities for their products or services, may focus resources on
maintaining their market share, and may be unable to respond quickly to new
competitive challenges. As a result, the securities issued by these companies
may not be able to reach the same levels of growth as the securities issued by
small- or mid-cap companies.
Mid-Cap Company
Risk. Mid-cap companies may be more
vulnerable to adverse business or economic events than larger, more established
companies and their securities may be riskier than those issued by large-cap
companies. The value of securities issued by mid-cap companies may be based in
substantial part on future expectations rather than current achievements and
their prices may move sharply, especially during market upturns and
downturns.
Foreign Investment
Risk. The fund’s investments in
securities of foreign issuers involve certain risks that may be greater than
those associated with investments in securities of U.S. issuers. These include
risks of adverse changes in foreign economic, political, regulatory and other
conditions; changes in currency exchange rates or exchange control regulations
(including limitations on currency movements and exchanges); differing
accounting, auditing, financial reporting and legal standards and practices;
differing securities market structures; and higher transaction costs. In certain
countries, legal remedies available to investors may be more limited than those
available with respect to investments in the U.S. These risks may negatively
impact the value or liquidity of the fund’s investments and could impair the
fund’s ability to meet its investment objective or invest in accordance with its
investment strategy. In addition, the fund’s investments in foreign securities
may be subject to economic sanctions or other government restrictions, including
trade tariffs, embargoes or limitations on trade which could have a significant
impact on a country’s markets overall as well as global economies or markets.
There also is the risk that the cost of buying, selling, and holding foreign
securities, including brokerage, tax, and custody costs, may be higher than
those involved in domestic transactions. The securities of some foreign
companies may be less liquid and, at times, more volatile than securities of
comparable U.S. companies. The fund may also experience more rapid or extreme
changes in value as compared to a fund that invests solely in securities of U.S.
companies because the securities markets of many foreign countries are
relatively small, with a limited number of companies representing a small number
of industries. To the extent the fund’s investments in a single country or a
limited number of countries represent a large percentage of the fund’s assets,
the fund’s performance may be adversely affected by the economic, political,
regulatory and social conditions in those countries, and the fund’s price may be
more volatile than the price of a fund that is geographically
diversified.
Currency Risk. The fund’s investments in securities
denominated in, and/or receiving revenues in, foreign currencies, will subject
the fund to the risk that those currencies will decline in value relative to the
U.S. dollar. In either event, the dollar value of an investment in the fund
would be adversely affected. Currency exchange rates may fluctuate in response
to factors extrinsic to that country’s economy, which makes the forecasting of
currency market movements extremely difficult. Currency rates in foreign
countries may fluctuate significantly over short periods of time for a number of
reasons, including changes in interest rates; intervention (or failure to
intervene) by U.S. or foreign governments, central banks or supranational
entities such as the International Monetary Fund; or by the imposition of
currency controls or other political developments in the United States or
abroad. These can result in losses to the fund if it is unable to deliver or
receive currency or monies in settlement of obligations. Forward contracts on
foreign currencies are not traded on exchanges; rather, a bank or dealer will
act as agent or as principal in order to make or take future delivery of a
specified lot of a particular currency for the fund’s account. The fund is
subject to the risk of a counterparty’s failure, inability or refusal to perform
with respect to such contracts.
Depositary Receipt
Risk. Foreign securities also
include ADRs, which are U.S. dollar-denominated receipts representing shares of
foreign-based corporations. ADRs are issued by U.S. banks or trust companies and
entitle the holder to all dividends and capital gains that are paid out on the
underlying foreign shares. Foreign securities also include GDRs, which are
similar to ADRs, but are shares of foreign-based corporations generally issued
by international banks in one or more markets around the world. In addition,
foreign securities include EDRs, which are similar to GDRs, but are shares of
foreign-based corporations generally issued by European banks that trade on
exchanges outside of the bank’s home country. Investment in ADRs, GDRs and EDRs
may be less liquid than the underlying shares in their primary trading market
and GDRs, many of which are issued by companies in emerging markets, may be more
volatile.
Variable Interest Entities
Risk. The fund may gain exposure to
certain operating companies in China through legal structures known as variable
interest entities (VIEs). In China, ownership of companies in certain sectors by
non-Chinese individuals and entities (including U.S. persons and entities, such
as the fund) is prohibited. To facilitate indirect non-Chinese investment, many
China-based operating companies have created VIE structures. In a VIE structure,
a China-based operating company will establish an entity outside of China that
will enter into service and other contracts with the China-based operating
company. Shares of the entities established outside of China are often listed
and traded on an exchange. Non-Chinese investors (such as the fund) hold equity
interests in the entities established outside of China rather than directly in
the China-based operating companies. This arrangement allows U.S. investors to
obtain economic exposure to the China-based operating company through
contractual means rather than through formal equity ownership. An investment in
a VIE structure subjects the fund to the risks associated with the underlying
China-based operating company. In addition, the fund may be exposed to certain
associated risks, including the risks that: the Chinese government could subject
the China-based operating company to penalties,
Schwab International Equity
ETFs | Fund Details23
revocation of business and operating licenses or
forfeiture of ownership interests; the Chinese government may outlaw the VIE
structure, which could cause an uncertain negative impact to existing investors
in the VIE structure; the contracts underlying the VIE structure may not be
enforced by Chinese courts; and shareholders of the China-based operating
company may leverage the VIE structure to their benefit and to the detriment of
the investors in the VIE structure. If these actions were to occur, the market
value of the fund’s investments in the VIE structure would likely fall, causing
investment losses, which could be substantial, for the fund.
Tracking Error and
Correlation Risk. As an index fund,
the fund seeks to track the performance of the index, although it may not be
successful in doing so. The divergence between the performance of the fund and
the index, positive or negative, is called “tracking error.” Tracking error can
be caused by many factors and it may be significant. For example, the fund may
not invest in certain securities in the index, match the securities’ weighting
to the index, or the fund may invest in securities not in the index, due to
regulatory, operational, custodial or liquidity constraints; corporate
transactions; asset valuations; transaction costs and timing; tax
considerations; and index rebalancing, which may result in tracking error. In
addition, the fund may not invest in issuers located in certain countries due to
these considerations. The fund may attempt to offset the effects of not being
invested in certain index securities by making substitute investments, but these
efforts may not be successful. In certain circumstances, the fund may value
individual securities based on fair value prices developed using methods
approved by the fund’s Board of Trustees. To the extent the fund calculates its
NAV based on fair value prices, the fund’s performance may diverge from that of
its index. In addition, cash flows into and out of the fund, timing variances,
operating expenses and trading costs all affect the ability of the fund to match
the performance of the index, because the index does not have to manage cash
flows and does not incur any costs. Tracking error may also be impacted by
timing differences in currency conversions between the fund and the index and by
the fund’s use of fair valuation. Lastly, differences between the fund’s
portfolio and the index resulting from legal restrictions (such as
diversification requirements) that apply to the fund but not to the index impact
correlation between the performance of the fund and that of its index.
Derivatives Risk. The fund may invest in derivative instruments.
The principal types of derivatives the fund may use are futures contracts. A
futures contract is an agreement to buy or sell a financial instrument at a
specific price on a specific day. The fund’s use of derivative instruments
involves risks different from, or possibly greater than, the risks associated
with investing directly in securities and other traditional investments. Certain
of these risks, such as market risk, liquidity risk and leverage risk, are
discussed elsewhere in this prospectus. The fund’s use of derivatives is also
subject to counterparty risk, lack of availability risk, valuation risk,
correlation risk and tax risk. Counterparty risk is the risk that the
counterparty to a derivative transaction may not fulfill its contractual
obligations either because the financial condition of the counterparty declines,
or because the counterparty is otherwise unable or unwilling to perform under
the contract. Lack of availability risk is the risk that suitable derivative
transactions may not be available in all circumstances for risk management or
other purposes. Valuation risk is the risk that a particular derivative may be
valued incorrectly. Correlation risk is the risk that changes in the value of
the derivative may not correlate perfectly with the underlying asset, rate or
index. Tax risk is the risk that the use of derivatives may cause the fund to
realize higher amounts of short-term capital gains. The fund’s use of
derivatives could reduce the fund’s performance, increase its volatility and
cause the fund to lose more than the initial amount invested. The fund’s use of
derivatives also could create a risk of counterparty default under certain
transactions, risks that the fund would need to liquidate portfolio positions
when it may not be advantageous to do so in order to meet margin and payment
obligations, and legal risks relating to insufficient documentation,
insufficient capacity or authority of a counterparty, or legality or
enforceability of a contract. Furthermore, the use of derivatives subject to
regulation by the Commodity Futures Trading Commission (CFTC) could cause the
fund to become a commodity pool, which would require the fund to comply with
certain CFTC rules.
Liquidity Risk. Liquidity risk exists when particular
investments may be difficult to purchase, sell or value, especially during
stressed market conditions. The market for certain investments may become
illiquid due to specific adverse changes in the conditions of a particular
issuer or under adverse market or economic conditions independent of the issuer.
In such cases, the fund, due to limitations on investments in illiquid
securities and the difficulty in readily purchasing and selling such securities
at favorable times or prices, may decline in value, experience lower returns
and/or be unable to achieve its desired level of exposure to a certain issuer or
sector. Further, transactions in illiquid securities may entail transaction
costs that are higher than those for transactions in liquid securities.
Leverage Risk. Certain fund transactions, such as derivatives
transactions, may give rise to a form of leverage and may expose the fund to
greater risk. Leverage tends to magnify the effect of any decrease or increase
in the value of the fund’s portfolio securities which means even a small amount
of leverage can have a disproportionately large impact on the fund. The use of
leverage may cause the fund to liquidate portfolio positions when it would not
be advantageous to do so in order to satisfy its obligations.
Securities Lending
Risk. The fund may lend its
portfolio securities to brokers, dealers, and other financial institutions
provided a number of conditions are satisfied, including that the loan is fully
collateralized. When the fund lends portfolio securities, its investment
performance will continue to reflect changes in the value of the securities
loaned, and the fund will also receive a fee or interest on the collateral.
Securities lending involves the risk of loss of rights in, or delay in recovery
of, the loaned securities if the borrower fails to return the security loaned or
becomes insolvent. The fund will also bear the risk of any decline in value of
securities acquired with cash collateral. The fund may pay lending fees to a
party arranging the loan.
24Schwab International Equity
ETFs | Fund Details
Market Trading
Risk. Although fund shares are
listed on national securities exchanges, there can be no assurance that an
active trading market for fund shares will develop or be maintained. If an
active market is not maintained, investors may find it difficult to buy or sell
fund shares. Trading of shares of the fund on a national securities exchange may
be halted if exchange officials deem such action appropriate, if the fund is
delisted, or if the activation of marketwide “circuit breakers” halts stock
trading generally. If the fund’s shares are delisted, the fund may seek to list
its shares on another market, merge with another ETF, or redeem its shares at
NAV.
Shares of the Fund May
Trade at Prices Other Than NAV. As
with all ETFs, fund shares may be bought and sold in the secondary market at
market prices. Although it is expected that the market price of the shares of
the fund will approximate the fund’s NAV, there may be times when the market
price and the NAV vary significantly. Thus, an investor may pay more than NAV
when buying shares of the fund in the secondary market, and an investor may
receive less than NAV when selling those shares in the secondary market. The
investment adviser cannot predict whether shares will trade above (premium),
below (discount) or at NAV. The fund may have a limited number of financial
institutions that may act as “Authorized Participants” or market makers. Only
Authorized Participants who have entered into agreements with the fund’s
distributor may engage in creation or redemption transactions directly with the
fund (as discussed in the “Creation and Redemption” section below). If those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders (including in situations where Authorized Participants
have limited or diminished access to capital required to post collateral), and
no other Authorized Participant is able to step forward to create and redeem in
either of these cases, fund shares may trade at a discount to NAV like
closed-end fund shares (and may even face delisting). Similar effects may result
if market makers exit the business or are unable to continue making markets in
the fund’s shares. Risks associated with having a limited number of Authorized
Participants may be heightened for ETFs that invest in securities issued by
non-U.S. issuers or other instruments that have lower trading volumes. More
generally, market makers are not obligated to make a market in the fund’s
shares, and Authorized Participants are not obligated to submit purchase or
redemption orders for Creation Units. Further, while the creation/redemption
feature is designed to make it likely that shares normally will trade close to
the value of the fund’s holdings, disruptions to creations and redemptions,
including disruptions at market makers, Authorized Participants or market
participants, or during periods of significant market volatility, may result in
market prices that differ significantly from the value of the fund’s holdings.
In addition, transactions by large shareholders may account for a
large percentage of trading volume on the fund’s primary listing exchange
and may, therefore, have a material effect on the market price of the fund’s
shares.
The market price of fund shares during the
trading day, like the price of any exchange-traded security, includes a
“bid/ask” spread charged by the exchange specialist, market makers or other
participants that trade the fund shares. The bid/ask spread on ETF shares varies
over time based on the fund’s trading volume and market liquidity. As a result,
the bid/ask spread on ETF shares is generally larger when the shares have little
trading volume or market liquidity and generally lower when the shares have high
trading volume or market liquidity. In addition, in times of severe market
disruption, the bid/ask spread can increase significantly. At those times, fund
shares are most likely to be traded at a discount to NAV, and the discount is
likely to be greatest when the price of shares is falling fastest, which may be
the time that investors most want to sell shares. The investment adviser
believes that, under normal market conditions, large market price discounts or
premiums to NAV will not be sustained because of arbitrage opportunities. There
are various methods by which investors can purchase and sell shares of the fund
and various types of orders that may be placed. Investors should consult their
financial intermediary before purchasing or selling shares of the fund.
In addition, the securities held by the fund are
generally traded in markets that close at a different time than the fund’s
secondary market and liquidity in those securities may be reduced after the
applicable market closing times. Accordingly, during the time when the fund’s
secondary market is open but after the applicable foreign market closing, fixing
or settlement times, bid/ask spreads and the resulting premium or discount to
the fund’s NAV may widen. The fund’s bid/ask spread may also be impacted by the
liquidity of the underlying securities held by the fund or in instances of
significant volatility of the underlying securities.
Schwab International Small-Cap Equity
ETF
Investment Objective
The fund’s goal is to track as closely as
possible, before fees and expenses, the total return of the FTSE Developed Small
Cap ex US Liquid Index. The fund’s investment objective is not fundamental and
therefore may be changed by the fund’s Board of Trustees without shareholder
approval.
More Information About Principal Investment
Risks
The fund is subject to risks, any of which could
cause an investor to lose money.
Market Risk. Financial markets rise and fall in response to
a variety of factors, sometimes rapidly and unpredictably. Markets may be
impacted by economic, political, regulatory and other conditions, including
economic sanctions, tariffs, and other government actions. In addition, the
occurrence of global events, such as war, terrorism, environmental disasters,
natural disasters and epidemics, may also negatively affect the financial
markets. These events could reduce consumer demand or economic output; result in
market closures, changes in interest rates, inflation/deflation, travel
restrictions or quarantines; and significantly adversely impact the economy.
Governmental and quasi-governmental authorities and regulators throughout the
world have in the past often responded to serious economic disruptions with
Schwab International Equity
ETFs | Fund Details25
a variety of significant fiscal and monetary
policy changes which could have an unexpected impact on financial markets and
the fund’s investments. As with any investment whose performance is tied to
these markets, the value of an investment in the fund will fluctuate, which
means that an investor could lose money over short or long periods.
Investment Style
Risk. The fund is an index fund.
Therefore, the fund follows the securities included in the index, which may
include real estate investment trusts, during upturns as well as downturns.
Because of its indexing strategy, the fund does not take steps to reduce market
exposure or to lessen the effects of a declining market, even though these
securities may go in and out of favor based on market and economic conditions.
The index does not weigh securities on the basis of investor protection,
limitations or differences in the quality of financial reporting or other
oversight mechanisms. Therefore, the fund will follow the securities in the
index without consideration of these factors. In addition, because of the fund’s
expenses, the fund’s performance may be below that of the index.
At times the segment of the markets represented
by the index may underperform other market segments. A
significant percentage of the index may be composed of securities in a
single industry or sector of the economy. If the fund is focused in an industry
or sector, it may present more risks than if it were broadly diversified over
numerous industries and sectors of the economy.
Index-Related
Risk. The index provider does not
provide any warranty as to the timeliness, accuracy or completeness of any data
relating to the index. Errors relating to the index, including index data,
computations and/or construction, may occur from time to time and may not be
identified by the index provider for a period of time or at all. Losses
resulting from index errors may be borne by the fund and its shareholders. In
addition, there can be no guarantee that the index will operate as intended
during volatile market conditions or over the course of a full market
cycle.
In addition, market disruptions could cause
delays in the index’s rebalancing schedule which may result in the index and, in
turn, the fund experiencing returns different than those that would have been
achieved under a normal rebalancing schedule.
Equity Risk. The prices of equity securities rise and fall
daily. These price movements may result from factors affecting individual
companies, industries or the securities market as a whole. Individual companies
may report poor results or be negatively affected by industry and/or economic
trends and developments. The prices of securities issued by such companies may
suffer a decline in response. Governmental action, including the imposition of
trade embargoes or tariffs, may also impact individual companies or markets as a
whole. In addition, equity markets tend to move in cycles which may cause stock
prices to fall over short or extended periods of time.
Market Capitalization
Risk. Securities issued by
companies of different market capitalizations tend to go in and out of favor
based on market and economic conditions. In addition, there may be less trading
volume in securities issued by mid- and small-cap companies than those issued by
larger companies and, as a result, trading volatility may have a greater impact
on the value of securities of mid- and small-cap companies. Securities issued by
large-cap companies, on the other hand, may not be able to attain the high
growth rates of some mid- and small-cap companies. During a period when
securities of a particular market capitalization fall behind other types of
investments, the fund’s performance could be impacted.
Small-Cap Company
Risk. Small-cap companies may be
more vulnerable to adverse business or economic events than larger, more
established companies and their securities may be riskier than those issued by
larger companies. The value of securities issued by small-cap companies may be
based in substantial part on future expectations rather than current
achievements and their prices may move sharply, especially during market upturns
and downturns. In addition, small-cap companies may have limited financial
resources, management experience, product lines and markets, and their
securities may trade less frequently and in more limited volumes than the
securities of larger companies. Further, small-cap companies may have less
publicly available information and such information may be inaccurate or
incomplete.
Foreign Investment
Risk. The fund’s investments in
securities of foreign issuers involve certain risks that may be greater than
those associated with investments in securities of U.S. issuers. These include
risks of adverse changes in foreign economic, political, regulatory and other
conditions; changes in currency exchange rates or exchange control regulations
(including limitations on currency movements and exchanges); differing
accounting, auditing, financial reporting and legal standards and practices;
differing securities market structures; and higher transaction costs. In certain
countries, legal remedies available to investors may be more limited than those
available with respect to investments in the U.S. These risks may negatively
impact the value or liquidity of the fund’s investments and could impair the
fund’s ability to meet its investment objective or invest in accordance with its
investment strategy. In addition, the fund’s investments in foreign securities
may be subject to economic sanctions or other government restrictions, including
trade tariffs, embargoes or limitations on trade which could have a significant
impact on a country’s markets overall as well as global economies or markets.
There also is the risk that the cost of buying, selling, and holding foreign
securities, including brokerage, tax, and custody costs, may be higher than
those involved in domestic transactions. The securities of some foreign
companies may be less liquid and, at times, more volatile than securities of
comparable U.S. companies. The fund may also experience more rapid or extreme
changes in value as compared to a fund that invests solely in securities of U.S.
companies because the securities markets of many foreign countries are
relatively small, with a limited number of companies representing a small number
of industries. To the extent the fund’s investments in a single country or a
limited number of countries represent a large percentage of the fund’s assets,
the fund’s performance may be adversely affected by the economic, political,
regulatory and social conditions in those countries, and the fund’s price may be
more volatile than the price of a fund that is geographically
diversified.
26Schwab International Equity
ETFs | Fund Details
Currency Risk. The fund’s investments in securities
denominated in, and/or receiving revenues in, foreign currencies, will subject
the fund to the risk that those currencies will decline in value relative to the
U.S. dollar. In either event, the dollar value of an investment in the fund
would be adversely affected. Currency exchange rates may fluctuate in response
to factors extrinsic to that country’s economy, which makes the forecasting of
currency market movements extremely difficult. Currency rates in foreign
countries may fluctuate significantly over short periods of time for a number of
reasons, including changes in interest rates; intervention (or failure to
intervene) by U.S. or foreign governments, central banks or supranational
entities such as the International Monetary Fund; or by the imposition of
currency controls or other political developments in the United States or
abroad. These can result in losses to the fund if it is unable to deliver or
receive currency or monies in settlement of obligations. Forward contracts on
foreign currencies are not traded on exchanges; rather, a bank or dealer will
act as agent or as principal in order to make or take future delivery of a
specified lot of a particular currency for the fund’s account. The fund is
subject to the risk of a counterparty’s failure, inability or refusal to perform
with respect to such contracts.
Depositary Receipt
Risk. Foreign securities also
include ADRs, which are U.S. dollar-denominated receipts representing shares of
foreign-based corporations. ADRs are issued by U.S. banks or trust companies and
entitle the holder to all dividends and capital gains that are paid out on the
underlying foreign shares. Foreign securities also include GDRs, which are
similar to ADRs, but are shares of foreign-based corporations generally issued
by international banks in one or more markets around the world. In addition,
foreign securities include EDRs, which are similar to GDRs, but are shares of
foreign-based corporations generally issued by European banks that trade on
exchanges outside of the bank’s home country. Investment in ADRs, GDRs and EDRs
may be less liquid than the underlying shares in their primary trading market
and GDRs, many of which are issued by companies in emerging markets, may be more
volatile.
Real Estate Investment
Risk. Although the fund does not
invest directly in real estate, due to the composition of the index, the fund
may have exposure to securities of real estate investment trusts (REITs). Equity
REITs may be affected by changes in the value of the underlying properties owned
by the trusts. Further, REITs are dependent upon specialized management skills
and may have their investments in relatively few properties, or in a small
geographic area or a single property type. REITs are also subject to heavy cash
flow dependency, defaults by borrowers and self-liquidation. The value of a REIT
will also rise and fall in response to the creditworthiness of the issuer. In
particular, the value of these securities may be affected by changes in interest
rates. In addition, REITs could possibly fail to qualify for tax free
pass-through of income under the Internal Revenue Code of 1986, as amended, or
to maintain their exemptions from registration under the Investment Company Act
of 1940, as amended. The failure of a company to qualify as a REIT under federal
tax law may have adverse consequences to the fund. The above factors may also
adversely affect a borrower’s or a lessee’s ability to meet its obligations to
the REIT. In the event of a default by a borrower or lessee, the REIT may
experience delays in enforcing its rights as a mortgagee or lessor and may incur
substantial costs associated with protecting its investments. In addition, REITs
have their own expenses, and the fund will bear a proportionate share of those
expenses. Further, dividends paid by REITs are taxed as ordinary income and
generally do not qualify for the preferential rate applicable to qualified
dividend income. REITs may be more volatile and/or more illiquid than other
types of securities.
Variable Interest Entities
Risk. The fund may gain exposure to
certain operating companies in China through legal structures known as variable
interest entities (VIEs). In China, ownership of companies in certain sectors by
non-Chinese individuals and entities (including U.S. persons and entities, such
as the fund) is prohibited. To facilitate indirect non-Chinese investment, many
China-based operating companies have created VIE structures. In a VIE structure,
a China-based operating company will establish an entity outside of China that
will enter into service and other contracts with the China-based operating
company. Shares of the entities established outside of China are often listed
and traded on an exchange. Non-Chinese investors (such as the fund) hold equity
interests in the entities established outside of China rather than directly in
the China-based operating companies. This arrangement allows U.S. investors to
obtain economic exposure to the China-based operating company through
contractual means rather than through formal equity ownership. An investment in
a VIE structure subjects the fund to the risks associated with the underlying
China-based operating company. In addition, the fund may be exposed to certain
associated risks, including the risks that: the Chinese government could subject
the China-based operating company to penalties, revocation of business and
operating licenses or forfeiture of ownership interests; the Chinese government
may outlaw the VIE structure, which could cause an uncertain negative impact to
existing investors in the VIE structure; the contracts underlying the VIE
structure may not be enforced by Chinese courts; and shareholders of the
China-based operating company may leverage the VIE structure to their benefit
and to the detriment of the investors in the VIE structure. If these actions
were to occur, the market value of the fund’s investments in the VIE structure
would likely fall, causing investment losses, which could be substantial, for
the fund.
Tracking Error and
Correlation Risk. As an index fund,
the fund seeks to track the performance of the index, although it may not be
successful in doing so. The divergence between the performance of the fund and
the index, positive or negative, is called “tracking error.” Tracking error can
be caused by many factors and it may be significant. For example, the fund may
not invest in certain securities in the index, match the securities’ weighting
to the index, or the fund may invest in securities not in the index, due to
regulatory, operational, custodial or liquidity constraints; corporate
transactions; asset valuations; transaction costs and timing; tax
considerations; and index rebalancing, which may result in tracking error. In
addition, the fund may not invest in issuers located in certain countries due to
these considerations. The fund may attempt to offset the effects of not being
invested in certain index securities by making substitute investments, but these
efforts may not be successful. In certain circumstances, the fund may value
individual securities based on fair value prices developed using methods
approved by the fund’s Board of Trustees. To the extent the fund calculates its
NAV based on fair value prices, the fund’s performance may diverge from that of
its index. In addition, cash flows into and out of the fund, timing variances,
operating expenses and trading costs
Schwab International Equity
ETFs | Fund Details27
all affect the ability of the fund to match the
performance of the index, because the index does not have to manage cash flows
and does not incur any costs. Tracking error may also be impacted by timing
differences in currency conversions between the fund and the index and by the
fund’s use of fair valuation. Lastly, differences between the fund’s portfolio
and the index resulting from legal restrictions (such as diversification
requirements) that apply to the fund but not to the index impact correlation
between the performance of the fund and that of its index.
Derivatives Risk. The fund may invest in derivative instruments.
The principal types of derivatives the fund may use are futures contracts. A
futures contract is an agreement to buy or sell a financial instrument at a
specific price on a specific day. The fund’s use of derivative instruments
involves risks different from, or possibly greater than, the risks associated
with investing directly in securities and other traditional investments. Certain
of these risks, such as market risk, liquidity risk and leverage risk, are
discussed elsewhere in this prospectus. The fund’s use of derivatives is also
subject to counterparty risk, lack of availability risk, valuation risk,
correlation risk and tax risk. Counterparty risk is the risk that the
counterparty to a derivative transaction may not fulfill its contractual
obligations either because the financial condition of the counterparty declines,
or because the counterparty is otherwise unable or unwilling to perform under
the contract. Lack of availability risk is the risk that suitable derivative
transactions may not be available in all circumstances for risk management or
other purposes. Valuation risk is the risk that a particular derivative may be
valued incorrectly. Correlation risk is the risk that changes in the value of
the derivative may not correlate perfectly with the underlying asset, rate or
index. Tax risk is the risk that the use of derivatives may cause the fund to
realize higher amounts of short-term capital gains. The fund’s use of
derivatives could reduce the fund’s performance, increase its volatility and
cause the fund to lose more than the initial amount invested. The fund’s use of
derivatives also could create a risk of counterparty default under certain
transactions, risks that the fund would need to liquidate portfolio positions
when it may not be advantageous to do so in order to meet margin and payment
obligations, and legal risks relating to insufficient documentation,
insufficient capacity or authority of a counterparty, or legality or
enforceability of a contract. Furthermore, the use of derivatives subject to
regulation by the Commodity Futures Trading Commission (CFTC) could cause the
fund to become a commodity pool, which would require the fund to comply with
certain CFTC rules.
Liquidity Risk. Liquidity risk exists when particular
investments may be difficult to purchase, sell or value, especially during
stressed market conditions. The market for certain investments may become
illiquid due to specific adverse changes in the conditions of a particular
issuer or under adverse market or economic conditions independent of the issuer.
In such cases, the fund, due to limitations on investments in illiquid
securities and the difficulty in readily purchasing and selling such securities
at favorable times or prices, may decline in value, experience lower returns
and/or be unable to achieve its desired level of exposure to a certain issuer or
sector. Further, transactions in illiquid securities may entail transaction
costs that are higher than those for transactions in liquid securities.
Leverage Risk. Certain fund transactions, such as derivatives
transactions, may give rise to a form of leverage and may expose the fund to
greater risk. Leverage tends to magnify the effect of any decrease or increase
in the value of the fund’s portfolio securities which means even a small amount
of leverage can have a disproportionately large impact on the fund. The use of
leverage may cause the fund to liquidate portfolio positions when it would not
be advantageous to do so in order to satisfy its obligations.
Securities Lending
Risk. The fund may lend its
portfolio securities to brokers, dealers, and other financial institutions
provided a number of conditions are satisfied, including that the loan is fully
collateralized. When the fund lends portfolio securities, its investment
performance will continue to reflect changes in the value of the securities
loaned, and the fund will also receive a fee or interest on the collateral.
Securities lending involves the risk of loss of rights in, or delay in recovery
of, the loaned securities if the borrower fails to return the security loaned or
becomes insolvent. The fund will also bear the risk of any decline in value of
securities acquired with cash collateral. The fund may pay lending fees to a
party arranging the loan.
Market Trading
Risk. Although fund shares are
listed on national securities exchanges, there can be no assurance that an
active trading market for fund shares will develop or be maintained. If an
active market is not maintained, investors may find it difficult to buy or sell
fund shares. Trading of shares of the fund on a national securities exchange may
be halted if exchange officials deem such action appropriate, if the fund is
delisted, or if the activation of marketwide “circuit breakers” halts stock
trading generally. If the fund’s shares are delisted, the fund may seek to list
its shares on another market, merge with another ETF, or redeem its shares at
NAV.
Shares of the Fund May
Trade at Prices Other Than NAV. As
with all ETFs, fund shares may be bought and sold in the secondary market at
market prices. Although it is expected that the market price of the shares of
the fund will approximate the fund’s NAV, there may be times when the market
price and the NAV vary significantly. Thus, an investor may pay more than NAV
when buying shares of the fund in the secondary market, and an investor may
receive less than NAV when selling those shares in the secondary market. The
investment adviser cannot predict whether shares will trade above (premium),
below (discount) or at NAV. The fund may have a limited number of financial
institutions that may act as “Authorized Participants” or market makers. Only
Authorized Participants who have entered into agreements with the fund’s
distributor may engage in creation or redemption transactions directly with the
fund (as discussed in the “Creation and Redemption” section below). If those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders (including in situations where Authorized Participants
have limited or diminished access to capital required to post collateral), and
no other Authorized Participant is able to step forward to create and redeem in
either of these cases, fund shares may trade at a discount to NAV like
closed-end fund shares (and may even face delisting). Similar effects may result
if market makers exit the business or are unable to continue making
28Schwab International Equity
ETFs | Fund Details
markets in the fund’s shares. Risks associated
with having a limited number of Authorized Participants may be heightened for
ETFs that invest in securities issued by non-U.S. issuers or other instruments
that have lower trading volumes. More generally, market makers are not obligated
to make a market in the fund’s shares, and Authorized Participants are not
obligated to submit purchase or redemption orders for Creation Units. Further,
while the creation/redemption feature is designed to make it likely that shares
normally will trade close to the value of the fund’s holdings, disruptions to
creations and redemptions, including disruptions at market makers, Authorized
Participants or market participants, or during periods of significant market
volatility, may result in market prices that differ significantly from the value
of the fund’s holdings. In addition, transactions by large shareholders may
account for a large percentage of trading volume on the fund’s primary
listing exchange and may, therefore, have a material effect on the market price
of the fund’s shares.
The market price of fund shares during the
trading day, like the price of any exchange-traded security, includes a
“bid/ask” spread charged by the exchange specialist, market makers or other
participants that trade the fund shares. The bid/ask spread on ETF shares varies
over time based on the fund’s trading volume and market liquidity. As a result,
the bid/ask spread on ETF shares is generally larger when the shares have little
trading volume or market liquidity and generally lower when the shares have high
trading volume or market liquidity. In addition, in times of severe market
disruption, the bid/ask spread can increase significantly. At those times, fund
shares are most likely to be traded at a discount to NAV, and the discount is
likely to be greatest when the price of shares is falling fastest, which may be
the time that investors most want to sell shares. The investment adviser
believes that, under normal market conditions, large market price discounts or
premiums to NAV will not be sustained because of arbitrage opportunities. There
are various methods by which investors can purchase and sell shares of the fund
and various types of orders that may be placed. Investors should consult their
financial intermediary before purchasing or selling shares of the fund.
In addition, the securities held by the fund are
generally traded in markets that close at a different time than the fund’s
secondary market and liquidity in those securities may be reduced after the
applicable market closing times. Accordingly, during the time when the fund’s
secondary market is open but after the applicable foreign market closing, fixing
or settlement times, bid/ask spreads and the resulting premium or discount to
the fund’s NAV may widen. The fund’s bid/ask spread may also be impacted by the
liquidity of the underlying securities held by the fund or in instances of
significant volatility of the underlying securities.
Schwab Emerging Markets Equity ETF
Investment Objective
The fund’s goal is to track as closely as
possible, before fees and expenses, the total return of the FTSE Emerging Index.
The fund’s investment objective is not fundamental and therefore may be changed
by the fund’s Board of Trustees without shareholder approval.
More Information About Principal Investment
Risks
The fund is subject to risks, any of which could
cause an investor to lose money.
Market Risk. Financial markets rise and fall in response to
a variety of factors, sometimes rapidly and unpredictably. Markets may be
impacted by economic, political, regulatory and other conditions, including
economic sanctions, tariffs, and other government actions. In addition, the
occurrence of global events, such as war, terrorism, environmental disasters,
natural disasters and epidemics, may also negatively affect the financial
markets. These events could reduce consumer demand or economic output; result in
market closures, changes in interest rates, inflation/deflation, travel
restrictions or quarantines; and significantly adversely impact the economy.
Governmental and quasi-governmental authorities and regulators throughout the
world have in the past often responded to serious economic disruptions with a
variety of significant fiscal and monetary policy changes which could have an
unexpected impact on financial markets and the fund’s investments. As with any
investment whose performance is tied to these markets, the value of an
investment in the fund will fluctuate, which means that an investor could lose
money over short or long periods.
Investment Style
Risk. The fund is an index fund.
Therefore, the fund follows the securities included in the index during upturns
as well as downturns. Because of its indexing strategy, the fund does not take
steps to reduce market exposure or to lessen the effects of a declining market,
even though these securities may go in and out of favor based on market and
economic conditions. The index does not weigh securities on the basis of
investor protection, limitations or differences in the quality of financial
reporting or other oversight mechanisms. Therefore, the fund will follow the
securities in the index without consideration of these factors. In addition,
because of the fund’s expenses, the fund’s performance may be below that of the
index.
At times the segment of the markets represented
by the index may underperform other market segments. A
significant percentage of the index may be composed of securities in a
single industry or sector of the economy. If the fund is focused in an industry
or sector, it may present more risks than if it were broadly diversified over
numerous industries and sectors of the economy.
Index-Related
Risk. The index provider does not
provide any warranty as to the timeliness, accuracy or completeness of any data
relating to the index. Errors relating to the index, including index data,
computations and/or construction, may occur from time to time and may not be
identified by the index provider for a period of time or at all. Losses
resulting from index errors may be borne by the fund and its shareholders. In
addition, there can be no guarantee that the index will operate as intended
during volatile market conditions or over the course of a full market
cycle.
Schwab International Equity
ETFs | Fund Details29
In addition, market disruptions could cause
delays in the index’s rebalancing schedule which may result in the index and, in
turn, the fund experiencing returns different than those that would have been
achieved under a normal rebalancing schedule.
Equity Risk. The prices of equity securities rise and fall
daily. These price movements may result from factors affecting individual
companies, industries or the securities market as a whole. Individual companies
may report poor results or be negatively affected by industry and/or economic
trends and developments. The prices of securities issued by such companies may
suffer a decline in response. Governmental action, including the imposition of
trade embargoes or tariffs, may also impact individual companies or markets as a
whole. In addition, equity markets tend to move in cycles which may cause stock
prices to fall over short or extended periods of time.
Market Capitalization
Risk. Securities issued by
companies of different market capitalizations tend to go in and out of favor
based on market and economic conditions. In addition, there may be less trading
volume in securities issued by mid- and small-cap companies than those issued by
larger companies and, as a result, trading volatility may have a greater impact
on the value of securities of mid- and small-cap companies. Securities issued by
large-cap companies, on the other hand, may not be able to attain the high
growth rates of some mid- and small-cap companies. During a period when
securities of a particular market capitalization fall behind other types of
investments, the fund’s performance could be impacted.
Large-Cap Company
Risk. Large-cap companies are
generally more mature than smaller companies. They also may have fewer new
market opportunities for their products or services, may focus resources on
maintaining their market share, and may be unable to respond quickly to new
competitive challenges. As a result, the securities issued by these companies
may not be able to reach the same levels of growth as the securities issued by
small- or mid-cap companies.
Mid-Cap Company
Risk. Mid-cap companies may be more
vulnerable to adverse business or economic events than larger, more established
companies and their securities may be riskier than those issued by large-cap
companies. The value of securities issued by mid-cap companies may be based in
substantial part on future expectations rather than current achievements and
their prices may move sharply, especially during market upturns and
downturns.
Foreign Investment
Risk. The fund’s investments in
securities of foreign issuers involve certain risks that may be greater than
those associated with investments in securities of U.S. issuers. These include
risks of adverse changes in foreign economic, political, regulatory and other
conditions; changes in currency exchange rates or exchange control regulations
(including limitations on currency movements and exchanges); differing
accounting, auditing, financial reporting and legal standards and practices;
differing securities market structures; and higher transaction costs. In certain
countries, legal remedies available to investors may be more limited than those
available with respect to investments in the U.S. These risks may negatively
impact the value or liquidity of the fund’s investments and could impair the
fund’s ability to meet its investment objective or invest in accordance with its
investment strategy. In addition, the fund’s investments in foreign securities
may be subject to economic sanctions or other government restrictions, including
trade tariffs, embargoes or limitations on trade which could have a significant
impact on a country’s markets overall as well as global economies or markets.
There also is the risk that the cost of buying, selling, and holding foreign
securities, including brokerage, tax, and custody costs, may be higher than
those involved in domestic transactions. The securities of some foreign
companies may be less liquid and, at times, more volatile than securities of
comparable U.S. companies. The fund may also experience more rapid or extreme
changes in value as compared to a fund that invests solely in securities of U.S.
companies because the securities markets of many foreign countries are
relatively small, with a limited number of companies representing a small number
of industries. To the extent the fund’s investments in a single country or a
limited number of countries represent a large percentage of the fund’s assets,
the fund’s performance may be adversely affected by the economic, political,
regulatory and social conditions in those countries, and the fund’s price may be
more volatile than the price of a fund that is geographically
diversified.
Emerging Markets
Risk. The risks of foreign
investments apply to, and may be heightened in connection with, investments in
emerging market countries or securities of issuers that conduct their business
in emerging markets. Emerging market countries may be more likely to experience
political turmoil or rapid changes in market or economic conditions than more
developed countries. Emerging market countries often have less uniformity in
accounting, auditing, financial reporting and recordkeeping requirements and
greater risk associated with the custody of securities. It is sometimes
difficult to obtain and enforce court judgments in such countries. Material
information about a company in an emerging market country may be unavailable or
unreliable, and U.S. regulators may be unable to enforce a company’s regulatory
obligations. There is often a greater potential for nationalization,
expropriation, confiscatory taxation, government regulation, social instability
or diplomatic developments (including war) in emerging market countries, which
could adversely affect the economies of, or investments in securities of issuers
located in, such countries. In addition, emerging markets are substantially
smaller than developed markets, and the financial stability of issuers
(including governments) in emerging market countries may be more precarious than
in developed countries. As a result, there will tend to be an increased risk of
illiquidity and price volatility associated with the fund’s investments in
emerging market countries which may be magnified by currency fluctuations
relative to the U.S. dollar, and, at times, it may be difficult to value such
investments.
Currency Risk. The fund’s investments in securities
denominated in, and/or receiving revenues in, foreign currencies, will subject
the fund to the risk that those currencies will decline in value relative to the
U.S. dollar. In either event, the dollar value of an investment in the fund
would be adversely affected. Currency exchange rates may fluctuate in response
to factors extrinsic to that country’s economy, which
30Schwab International Equity
ETFs | Fund Details
makes the forecasting of currency market
movements extremely difficult. Currency rates in foreign countries may fluctuate
significantly over short periods of time for a number of reasons, including
changes in interest rates; intervention (or failure to intervene) by U.S. or
foreign governments, central banks or supranational entities such as the
International Monetary Fund; or by the imposition of currency controls or other
political developments in the United States or abroad. These can result in
losses to the fund if it is unable to deliver or receive currency or monies in
settlement of obligations. Forward contracts on foreign currencies are not
traded on exchanges; rather, a bank or dealer will act as agent or as principal
in order to make or take future delivery of a specified lot of a particular
currency for the fund’s account. The fund is subject to the risk of a
counterparty’s failure, inability or refusal to perform with respect to such
contracts.
Depositary Receipt
Risk. Foreign securities also
include ADRs, which are U.S. dollar-denominated receipts representing shares of
foreign-based corporations. ADRs are issued by U.S. banks or trust companies and
entitle the holder to all dividends and capital gains that are paid out on the
underlying foreign shares. Foreign securities also include GDRs, which are
similar to ADRs, but are shares of foreign-based corporations generally issued
by international banks in one or more markets around the world. In addition,
foreign securities include EDRs, which are similar to GDRs, but are shares of
foreign-based corporations generally issued by European banks that trade on
exchanges outside of the bank’s home country. Investment in ADRs, GDRs and EDRs
may be less liquid than the underlying shares in their primary trading market
and GDRs, many of which are issued by companies in emerging markets, may be more
volatile.
Variable Interest Entities
Risk. The fund may gain exposure to
certain operating companies in China through legal structures known as variable
interest entities (VIEs). In China, ownership of companies in certain sectors by
non-Chinese individuals and entities (including U.S. persons and entities, such
as the fund) is prohibited. To facilitate indirect non-Chinese investment, many
China-based operating companies have created VIE structures. In a VIE structure,
a China-based operating company will establish an entity outside of China that
will enter into service and other contracts with the China-based operating
company. Shares of the entities established outside of China are often listed
and traded on an exchange. Non-Chinese investors (such as the fund) hold equity
interests in the entities established outside of China rather than directly in
the China-based operating companies. This arrangement allows U.S. investors to
obtain economic exposure to the China-based operating company through
contractual means rather than through formal equity ownership. An investment in
a VIE structure subjects the fund to the risks associated with the underlying
China-based operating company. In addition, the fund may be exposed to certain
associated risks, including the risks that: the Chinese government could subject
the China-based operating company to penalties, revocation of business and
operating licenses or forfeiture of ownership interests; the Chinese government
may outlaw the VIE structure, which could cause an uncertain negative impact to
existing investors in the VIE structure; the contracts underlying the VIE
structure may not be enforced by Chinese courts; and shareholders of the
China-based operating company may leverage the VIE structure to their benefit
and to the detriment of the investors in the VIE structure. If these actions
were to occur, the market value of the fund’s investments in the VIE structure
would likely fall, causing investment losses, which could be substantial, for
the fund.
Tracking Error and
Correlation Risk. As an index fund,
the fund seeks to track the performance of the index, although it may not be
successful in doing so. The divergence between the performance of the fund and
the index, positive or negative, is called “tracking error.” Tracking error can
be caused by many factors and it may be significant. For example, the fund may
not invest in certain securities in the index, match the securities’ weighting
to the index, or the fund may invest in securities not in the index, due to
regulatory, operational, custodial or liquidity constraints; corporate
transactions; asset valuations; transaction costs and timing; tax
considerations; and index rebalancing, which may result in tracking error. In
addition, the fund may not invest in issuers located in certain countries due to
these considerations. The fund may attempt to offset the effects of not being
invested in certain index securities by making substitute investments, but these
efforts may not be successful. In certain circumstances, the fund may value
individual securities based on fair value prices developed using methods
approved by the fund’s Board of Trustees. To the extent the fund calculates its
NAV based on fair value prices, the fund’s performance may diverge from that of
its index. In addition, cash flows into and out of the fund, timing variances,
operating expenses and trading costs all affect the ability of the fund to match
the performance of the index, because the index does not have to manage cash
flows and does not incur any costs. Tracking error may also be impacted by
timing differences in currency conversions between the fund and the index and by
the fund’s use of fair valuation. Lastly, differences between the fund’s
portfolio and the index resulting from legal restrictions (such as
diversification requirements) that apply to the fund but not to the index impact
correlation between the performance of the fund and that of its index.
Derivatives Risk. The fund may invest in derivative instruments.
The principal types of derivatives the fund may use are futures contracts. A
futures contract is an agreement to buy or sell a financial instrument at a
specific price on a specific day. The fund’s use of derivative instruments
involves risks different from, or possibly greater than, the risks associated
with investing directly in securities and other traditional investments. Certain
of these risks, such as market risk, liquidity risk and leverage risk, are
discussed elsewhere in this prospectus. The fund’s use of derivatives is also
subject to counterparty risk, lack of availability risk, valuation risk,
correlation risk and tax risk. Counterparty risk is the risk that the
counterparty to a derivative transaction may not fulfill its contractual
obligations either because the financial condition of the counterparty declines,
or because the counterparty is otherwise unable or unwilling to perform under
the contract. Lack of availability risk is the risk that suitable derivative
transactions may not be available in all circumstances for risk management or
other purposes. Valuation risk is the risk that a particular derivative may be
valued incorrectly. Correlation risk is the risk that changes in the value of
the derivative may not correlate perfectly with the underlying asset, rate or
index. Tax risk is the risk that the use of derivatives may cause the fund to
realize higher amounts of short-term capital gains. The fund’s use of
derivatives could reduce the fund’s performance,
Schwab International Equity
ETFs | Fund Details31
increase its volatility and cause the fund to
lose more than the initial amount invested. The fund’s use of derivatives also
could create a risk of counterparty default under certain transactions, risks
that the fund would need to liquidate portfolio positions when it may not be
advantageous to do so in order to meet margin and payment obligations, and legal
risks relating to insufficient documentation, insufficient capacity or authority
of a counterparty, or legality or enforceability of a contract. Furthermore, the
use of derivatives subject to regulation by the Commodity Futures Trading
Commission (CFTC) could cause the fund to become a commodity pool, which would
require the fund to comply with certain CFTC rules.
Liquidity Risk. Liquidity risk exists when particular
investments may be difficult to purchase, sell or value, especially during
stressed market conditions. The market for certain investments may become
illiquid due to specific adverse changes in the conditions of a particular
issuer or under adverse market or economic conditions independent of the issuer.
In such cases, the fund, due to limitations on investments in illiquid
securities and the difficulty in readily purchasing and selling such securities
at favorable times or prices, may decline in value, experience lower returns
and/or be unable to achieve its desired level of exposure to a certain issuer or
sector. Further, transactions in illiquid securities may entail transaction
costs that are higher than those for transactions in liquid securities.
Leverage Risk. Certain fund transactions, such as derivatives
transactions, may give rise to a form of leverage and may expose the fund to
greater risk. Leverage tends to magnify the effect of any decrease or increase
in the value of the fund’s portfolio securities which means even a small amount
of leverage can have a disproportionately large impact on the fund. The use of
leverage may cause the fund to liquidate portfolio positions when it would not
be advantageous to do so in order to satisfy its obligations.
Securities Lending
Risk. The fund may lend its
portfolio securities to brokers, dealers, and other financial institutions
provided a number of conditions are satisfied, including that the loan is fully
collateralized. When the fund lends portfolio securities, its investment
performance will continue to reflect changes in the value of the securities
loaned, and the fund will also receive a fee or interest on the collateral.
Securities lending involves the risk of loss of rights in, or delay in recovery
of, the loaned securities if the borrower fails to return the security loaned or
becomes insolvent. The fund will also bear the risk of any decline in value of
securities acquired with cash collateral. The fund may pay lending fees to a
party arranging the loan.
Market Trading
Risk. Although fund shares are
listed on national securities exchanges, there can be no assurance that an
active trading market for fund shares will develop or be maintained. If an
active market is not maintained, investors may find it difficult to buy or sell
fund shares. Trading of shares of the fund on a national securities exchange may
be halted if exchange officials deem such action appropriate, if the fund is
delisted, or if the activation of marketwide “circuit breakers” halts stock
trading generally. If the fund’s shares are delisted, the fund may seek to list
its shares on another market, merge with another ETF, or redeem its shares at
NAV.
Shares of the Fund May
Trade at Prices Other Than NAV. As
with all ETFs, fund shares may be bought and sold in the secondary market at
market prices. Although it is expected that the market price of the shares of
the fund will approximate the fund’s NAV, there may be times when the market
price and the NAV vary significantly. Thus, an investor may pay more than NAV
when buying shares of the fund in the secondary market, and an investor may
receive less than NAV when selling those shares in the secondary market. The
investment adviser cannot predict whether shares will trade above (premium),
below (discount) or at NAV. The fund may have a limited number of financial
institutions that may act as “Authorized Participants” or market makers. Only
Authorized Participants who have entered into agreements with the fund’s
distributor may engage in creation or redemption transactions directly with the
fund (as discussed in the “Creation and Redemption” section below). If those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders (including in situations where Authorized Participants
have limited or diminished access to capital required to post collateral), and
no other Authorized Participant is able to step forward to create and redeem in
either of these cases, fund shares may trade at a discount to NAV like
closed-end fund shares (and may even face delisting). Similar effects may result
if market makers exit the business or are unable to continue making markets in
the fund’s shares. Risks associated with having a limited number of Authorized
Participants may be heightened for ETFs that invest in securities issued by
non-U.S. issuers or other instruments that have lower trading volumes. More
generally, market makers are not obligated to make a market in the fund’s
shares, and Authorized Participants are not obligated to submit purchase or
redemption orders for Creation Units. Further, while the creation/redemption
feature is designed to make it likely that shares normally will trade close to
the value of the fund’s holdings, disruptions to creations and redemptions,
including disruptions at market makers, Authorized Participants or market
participants, or during periods of significant market volatility, may result in
market prices that differ significantly from the value of the fund’s holdings.
In addition, transactions by large shareholders may account for a
large percentage of trading volume on the fund’s primary listing exchange
and may, therefore, have a material effect on the market price of the fund’s
shares.
The market price of fund shares during the
trading day, like the price of any exchange-traded security, includes a
“bid/ask” spread charged by the exchange specialist, market makers or other
participants that trade the fund shares. The bid/ask spread on ETF shares varies
over time based on the fund’s trading volume and market liquidity. As a result,
the bid/ask spread on ETF shares is generally larger when the shares have little
trading volume or market liquidity and generally lower when the shares have high
trading volume or market liquidity. In addition, in times of severe market
disruption, the bid/ask spread can increase significantly. At those times, fund
shares are most likely to be traded at a discount to NAV, and the discount is
likely to be greatest when the price of shares is falling fastest, which may be
the time that investors most want to sell shares. The investment adviser
believes that, under normal market conditions, large market price discounts or
premiums
32Schwab International Equity
ETFs | Fund Details
to NAV will not be sustained because of
arbitrage opportunities. There are various methods by which investors can
purchase and sell shares of the fund and various types of orders that may be
placed. Investors should consult their financial intermediary before purchasing
or selling shares of the fund.
In addition, the securities held by the fund are
generally traded in markets that close at a different time than the fund’s
secondary market and liquidity in those securities may be reduced after the
applicable market closing times. Accordingly, during the time when the fund’s
secondary market is open but after the applicable foreign market closing, fixing
or settlement times, bid/ask spreads and the resulting premium or discount to
the fund’s NAV may widen. The fund’s bid/ask spread may also be impacted by the
liquidity of the underlying securities held by the fund or in instances of
significant volatility of the underlying securities.
Portfolio
Holdings
A description of the funds’ policies and
procedures with respect to the disclosure of a fund’s portfolio securities is
available in the SAI.
Schwab International Equity
ETFs | Fund Details33
Financial
Highlights
This section provides further details about each
fund’s financial history for the past five years or, if shorter, for its period
of operations. Certain information reflects financial results for a single fund
share. “Total return” shows the percentage that an investor in a fund would have
earned or lost during a given period, assuming all distributions were
reinvested. The information has been audited by the funds’ independent
registered public accounting firm, Deloitte & Touche LLP (Deloitte).
Deloitte’s full report is included in each fund’s annual holdings and financial
statements, which are included in each fund’s Form N-CSR (see back
cover).
Schwab International Dividend Equity ETF
| | | |
9/1/24– 8/31/25 |
| |
9/1/23– 8/31/24 |
| |
9/1/22– 8/31/23 |
| |
9/1/21– 8/31/22 |
| |
4/29/21(1) – 8/31/21 |
| |||||||||||||||
| Per-Share Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net asset value at beginning of period | | | | $ | 26.05 | | | | | $ | 23.70 | | | | | $ | 21.72 | | | | | $ | 26.07 | | | | | $ | 25.00 | | |
| Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Net
investment income (loss)(2)
|
| | | | 1.14 | | | | | | 1.00 | | | | | | 1.08 | | | | | | 1.37 | | | | | | 0.41 | | |
|
Net
realized and unrealized gains (losses) |
| | | | 1.88 | | | | | | 2.54 | | | | | | 1.78 | | | | | | (5.09) | | | | | | 0.71 | | |
|
Total from investment operations
|
| | | | 3.02 | | | | | | 3.54 | | | | | | 2.86 | | | | | | (3.72) | | | | | | 1.12 | | |
| Less distributions: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Distributions from net investment
income |
| | | | (1.05) | | | | | | (1.19) | | | | | | (0.88) | | | | | | (0.63) | | | | | | (0.05) | | |
| Net asset value at end of period | | | | $ | 28.02 | | | | | $ | 26.05 | | | | | $ | 23.70 | | | | | $ | 21.72 | | | | | $ | 26.07 | | |
| Total return | | | | | 12.07% | | | | | | 15.55% | | | | | | 13.31% | | | | | | (14.47%) | | | | | | 4.48%(3) | | |
| Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratios to average net assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Total expenses |
| | | | 0.10%(4) | | | | | | 0.14% | | | | | | 0.14%(5) | | | | | | 0.14%(5) | | | | | | 0.14%(6) | | |
|
Net
investment income (loss) |
| | | | 4.42% | | | | | | 4.15% | | | | | | 4.67% | | | | | | 5.72% | | | | | | 4.76%(6) | | |
| Portfolio turnover rate(7) | | | | | 20% | | | | | | 59% | | | | | | 40% | | | | | | 45% | | | | | | 3%(3) | | |
| Net assets, end of period (x 1,000,000) | | | | $ | 1,297 | | | | | $ | 781 | | | | | $ | 754 | | | | | $ | 439 | | | | | $ | 102 | | |
(1)
Commencement of operations.
(2)
Calculated based on the average
shares outstanding during the period.
(3)
Not annualized.
?
(4)
Effective February 28, 2025,
the annual operating expense ratio was reduced to 0.08%. The ratio presented for
the period ended August 31, 2025, is a blended ratio.
(5)
Ratio includes less than 0.005%
of non-routine proxy expenses.
(6)
Annualized.
(7)
Portfolio turnover rate
excludes securities received or delivered from processing of in-kind creations
or redemptions.
34Schwab International Equity
ETFs | Financial Highlights
Schwab International Equity ETF
| | | |
9/1/24– 8/31/25(1) |
| |
9/1/23– 8/31/24(1) |
| |
9/1/22– 8/31/23(1) |
| |
9/1/21– 8/31/22(1) |
| |
9/1/20– 8/31/21(1) |
| |||||||||||||||
| Per-Share Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net asset value at beginning of period | | | | $ | 20.37 | | | | | $ | 17.64 | | | | | $ | 15.66 | | | | | $ | 20.03 | | | | | $ | 16.06 | | |
| Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Net
investment income (loss)(2)
|
| | | | 0.59 | | | | | | 0.53 | | | | | | 0.53 | | | | | | 0.58 | | | | | | 0.48 | | |
|
Net
realized and unrealized gains (losses) |
| | | | 2.39 | | | | | | 2.74 | | | | | | 1.96 | | | | | | (4.36) | | | | | | 3.92 | | |
|
Total from investment operations
|
| | | | 2.98 | | | | | | 3.27 | | | | | | 2.49 | | | | | | (3.78) | | | | | | 4.40 | | |
| Less distributions: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Distributions from net investment
income |
| | | | (0.57) | | | | | | (0.54) | | | | | | (0.51) | | | | | | (0.59) | | | | | | (0.43) | | |
| Net asset value at end of period | | | | $ | 22.78 | | | | | $ | 20.37 | | | | | $ | 17.64 | | | | | $ | 15.66 | | | | | $ | 20.03 | | |
| Total return | | | | | 15.07% | | | | | | 18.90% | | | | | | 16.09% | | | | | | (19.27%) | | | | | | 27.62% | | |
| Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratios to average net assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Total expenses |
| | | | 0.05%(3) | | | | | | 0.06% | | | | | | 0.06%(4) | | | | | | 0.06%(4) | | | | | | 0.06% | | |
|
Net
investment income (loss) |
| | | | 2.91% | | | | | | 2.86% | | | | | | 3.15% | | | | | | 3.20% | | | | | | 2.59% | | |
| Portfolio turnover rate(5) | | | | | 4% | | | | | | 4% | | | | | | 6% | | | | | | 6% | | | | | | 6% | | |
| Net assets, end of period (x 1,000,000) | | | | $ | 50,445 | | | | | $ | 41,540 | | | | | $ | 31,752 | | | | | $ | 26,120 | | | | | $ | 28,338 | | |
(1)
Per-Share Data has been
retroactively adjusted to reflect a 2-for-1 share split effective after the
close of U.S. markets on October 10, 2024.
(2)
Calculated based on the average
shares outstanding during the period.
?
(3)
Effective June 10, 2025, the
annual operating expense ratio was reduced to 0.03%. The ratio presented for the
period ended August 31, 2025, is a blended ratio.
(4)
Ratio includes less than 0.005%
of non-routine proxy expenses.
(5)
Portfolio turnover rate
excludes securities received or delivered from processing of in-kind creations
or redemptions.
Schwab International Equity ETFs | Financial
Highlights35
Schwab International Small-Cap Equity ETF
| | | |
9/1/24– 8/31/25 |
| |
9/1/23– 8/31/24 |
| |
9/1/22– 8/31/23 |
| |
9/1/21– 8/31/22 |
| |
9/1/20– 8/31/21 |
| |||||||||||||||
| Per-Share Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net asset value at beginning of period | | | | $ | 37.83 | | | | | $ | 34.02 | | | | | $ | 31.67 | | | | | $ | 43.21 | | | | | $ | 33.20 | | |
| Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Net
investment income (loss)(1)
|
| | | | 1.11 | | | | | | 0.93 | | | | | | 0.96 | | | | | | 0.93 | | | | | | 0.72 | | |
|
Net
realized and unrealized gains (losses) |
| | | | 6.66 | | | | | | 3.85 | | | | | | 2.12 | | | | | | (11.45) | | | | | | 10.11 | | |
|
Total from investment operations
|
| | | | 7.77 | | | | | | 4.78 | | | | | | 3.08 | | | | | | (10.52) | | | | | | 10.83 | | |
| Less distributions: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Distributions from net investment
income |
| | | | (1.26) | | | | | | (0.97) | | | | | | (0.73) | | | | | | (1.02) | | | | | | (0.82) | | |
| Net asset value at end of period | | | | $ | 44.34 | | | | | $ | 37.83 | | | | | $ | 34.02 | | | | | $ | 31.67 | | | | | $ | 43.21 | | |
| Total return | | | | | 21.38% | | | | | | 14.46% | | | | | | 9.87% | | | | | | (24.85%) | | | | | | 33.01% | | |
| Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratios to average net assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Total expenses |
| | | | 0.10%(2) | | | | | | 0.11% | | | | | | 0.11% | | | | | | 0.11%(3) | | | | | | 0.11% | | |
|
Net
investment income (loss) |
| | | | 2.93% | | | | | | 2.70% | | | | | | 2.95% | | | | | | 2.49% | | | | | | 1.87% | | |
| Portfolio turnover rate(4) | | | | | 16% | | | | | | 14% | | | | | | 15% | | | | | | 18% | | | | | | 22% | | |
| Net assets, end of period (x 1,000,000) | | | | $ | 4,793 | | | | | $ | 4,267 | | | | | $ | 3,767 | | | | | $ | 3,383 | | | | | $ | 3,832 | | |
?
(1)
Calculated based on the average
shares outstanding during the period.
?
(2)
Effective June 10, 2025, the annual operating
expense ratio was reduced to 0.08%. The ratio presented for the period ended
August 31, 2025, is a blended ratio.
?
(3)
Ratio includes less than 0.005%
of non-routine proxy expenses.
(4)
Portfolio turnover rate
excludes securities received or delivered from processing of in-kind creations
or redemptions.
36Schwab International Equity
ETFs | Financial Highlights
Schwab Emerging Markets Equity ETF
| | | |
9/1/24– 8/31/25 |
| |
9/1/23– 8/31/24 |
| |
9/1/22– 8/31/23 |
| |
9/1/21– 8/31/22 |
| |
9/1/20– 8/31/21 |
| |||||||||||||||
| Per-Share Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net asset value at beginning of period | | | | $ | 27.23 | | | | | $ | 24.62 | | | | | $ | 25.22 | | | | | $ | 31.64 | | | | | $ | 27.11 | | |
| Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Net
investment income (loss)(1)
|
| | | | 0.73 | | | | | | 0.69 | | | | | | 0.75 | | | | | | 0.93 | | | | | | 0.63 | | |
|
Net
realized and unrealized gains (losses) |
| | | | 4.06 | | | | | | 2.78 | | | | | | (0.62) | | | | | | (6.63) | | | | | | 4.64 | | |
|
Total from investment operations
|
| | | | 4.79 | | | | | | 3.47 | | | | | | 0.13 | | | | | | (5.70) | | | | | | 5.27 | | |
| Less distributions: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Distributions from net investment
income |
| | | | (0.81) | | | | | | (0.86) | | | | | | (0.73) | | | | | | (0.72) | | | | | | (0.74) | | |
| Net asset value at end of period | | | | $ | 31.21 | | | | | $ | 27.23 | | | | | $ | 24.62 | | | | | $ | 25.22 | | | | | $ | 31.64 | | |
| Total return | | | | | 17.98% | | | | | | 14.57% | | | | | | 0.61% | | | | | | (18.32%) | | | | | | 19.53% | | |
| Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratios to average net assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Total expenses |
| | | | 0.10%(2) | | | | | | 0.11% | | | | | | 0.11%(3) | | | | | | 0.11%(3) | | | | | | 0.11% | | |
|
Net
investment income (loss) |
| | | | 2.57% | | | | | | 2.73% | | | | | | 3.09% | | | | | | 3.33% | | | | | | 2.04% | | |
| Portfolio turnover rate(4) | | | | | 7% | | | | | | 8% | | | | | | 13% | | | | | | 13% | | | | | | 15% | | |
| Net assets, end of period (x 1,000,000) | | | | $ | 10,641 | | | | | $ | 9,089 | | | | | $ | 8,463 | | | | | $ | 8,557 | | | | | $ | 9,505 | | |
?
(1)
Calculated based on the average
shares outstanding during the period.
?
(2)
Effective June 10, 2025, the annual operating
expense ratio was reduced to 0.07%. The ratio presented for the period ended
August 31, 2025, is a blended ratio.
?
(3)
Ratio includes less than 0.005%
of non-routine proxy expenses.
(4)
Portfolio turnover rate
excludes securities received or delivered from processing of in-kind creations
or redemptions.
Schwab International Equity ETFs | Financial
Highlights37
Fund Management
The investment adviser for the funds is Charles
Schwab Investment Management, Inc., dba Schwab Asset Management, 9800 Schwab
Way, Lone Tree, CO 80124. The investment adviser was founded in 1989 and as of
October 31, 2025, managed approximately $1.5 trillion in assets.
The investment adviser oversees the asset
management and administration of the funds. As compensation for these services,
the investment adviser receives a management fee from each fund. For the 12
months ended August 31, 2025, these fees were 0.10% for the Schwab International
Dividend Equity ETF, 0.05% for the Schwab International Equity ETF, 0.10% for
the Schwab International Small-Cap Equity ETF and 0.10% for Schwab Emerging
Markets Equity ETF. These figures, which are expressed as a percentage of each
fund’s average daily net assets, represent the actual amounts paid. Effective
June 10, 2025, as compensation for these services, the investment adviser
receives a management fee of 0.03% of the average daily net assets of the Schwab
International Equity ETF, 0.08% of the average daily net assets of the Schwab
International Small-Cap Equity ETF, and 0.07% of the average daily net assets of
the Schwab Emerging Markets Equity ETF. Prior to June 10, 2025, as compensation
for these services, the investment adviser received a management fee of 0.06%,
0.11%, and 0.11%, respectively, of the average daily net assets of the Schwab
International Equity ETF, Schwab International Small-Cap ETF, and Schwab
Emerging Markets Equity ETF, respectively. Effective February 28, 2025, as
compensation for these services, the investment adviser receives a management
fee of 0.08% of the average daily net assets of the Schwab International
Dividend Equity ETF. Prior to February 28, 2025, as compensation for these
services, the investment adviser received a management fee of 0.14% of the
average daily net assets of the Schwab International Dividend Equity ETF.
Pursuant to the Amended and Restated Advisory
Agreement between the investment adviser and Schwab Strategic Trust (the Trust),
on behalf of each fund, the investment adviser pays the operating expenses of
each fund, excluding taxes, any brokerage expenses, and extraordinary or
non-routine expenses.
A discussion regarding the basis for the Board
of Trustees’ approval of each fund’s Amended and Restated Advisory Agreement is
available in the funds’ 2025 annual holdings and financial statements, which are
included in each fund’s Form N-CSR and covers the period from September 1, 2024
through August 31, 2025.
Christopher Bliss,
CFA, Managing Director and Head of
Equity Index Strategies for Schwab Asset Management. Mr. Bliss is responsible
for overseeing the portfolio management for equity index Schwab Funds and Schwab
ETFs, and Schwab Personalized Indexing® separately managed accounts. Before joining
Schwab in 2016, Mr. Bliss spent 12 years at BlackRock (formerly
Barclays Global Investors) managing and leading institutional index teams, most
recently as a managing director and the head of the Americas institutional index
team. In this role, Mr. Bliss was responsible for overseeing a team of portfolio
managers managing domestic, developed international and emerging markets index
strategies. Prior to BlackRock, he worked as an equity analyst and portfolio
manager for Harris Bretall and before that, as a research analyst for JP
Morgan.
Mariela Jobson, Senior Portfolio Manager for Schwab Asset
Management, is responsible for the day-to-day co-management of the funds. Prior
to joining Schwab in 2023, Ms. Jobson worked at BlackRock (formerly Barclays
Global Investors) for 16 years as a lead portfolio manager, where she managed
all aspects of iShares exchange traded funds in global equity, preferred equity,
and commodities. Most recently, she was responsible for leading a team of
portfolio managers who managed domestic, developed, emerging and frontier
markets covering market-cap, factor, ESG and thematic index strategies. Prior to
BlackRock, Ms. Jobson worked as an associate equity analyst at Wedbush Morgan
Securities and as an equity research analyst at ING Investments.
Joselle Duncan,
CFA, Portfolio Manager for Schwab
Asset Management, is responsible for the day-to-day co-management of the funds.
Prior to joining Schwab in 2022, Ms. Duncan worked at BlackRock (formerly
Barclays Global Investors) for over 20 years as a vice president and portfolio
manager focused on international ETFs and institutional funds. She began her
career at BlackRock on the securities lending team as a product specialist and
trader.
David Rios, Senior Portfolio Manager for Schwab Asset
Management, is responsible for the day-to-day co-management of the funds. Prior
to this role, Mr. Rios was a portfolio manager on the Schwab equity index
strategies team. His first role with Schwab Asset Management was as a trade
operations specialist. Prior to joining Schwab in 2008, Mr. Rios was a senior
fund accountant at Investors Bank & Trust (subsequently acquired by State
Street Corporation).
Additional information about the portfolio
managers’ compensation, other accounts managed by the portfolio managers and the
portfolio managers’ ownership of securities in each fund is available in the
SAI.
Distributor. The funds’ Distributor is SEI Investments
Distribution Co. The Distributor, located at 1 Freedom Valley Drive, Oaks, PA
19456, is a broker-dealer registered with the SEC. The Distributor distributes
Creation Units for the funds and does not maintain a secondary market in shares
of the funds.
38Schwab International Equity
ETFs | Fund Management
Investing
in the Funds
On the following pages, you will find
information on buying and selling shares. Most investors will invest in the
funds by placing orders through their brokerage account at Charles Schwab &
Co., Inc. (Schwab) or an account with another broker/dealer or other
intermediary. Authorized Participants (as defined in “Purchase and Redemption of
Creation Units,” below) may invest directly in the funds by placing orders for
Creation Units through the funds’ transfer agent, State Street Bank and Trust
Company (direct orders). Helpful information on taxes is included as
well.
The funds generally are not registered for sale
in jurisdictions outside the United States and are intended for purchase by
persons residing in the United States. A person is considered resident in the
United States if at the time of the investment (i) the account has an
address of record in the United States or a U.S. territory (including
APO/FPO/DPO) and (ii) all account owners are resident in the United States
or a U.S. territory and have a valid U.S. taxpayer identification number. If an
existing account is updated to reflect a non-U.S. address, the account may be
restricted from making additional investments.
Shares of the funds trade on national securities
exchanges and elsewhere during the trading day and can be bought and sold
throughout the trading day like other shares of publicly traded securities. When
buying or selling shares through a broker most investors will incur customary
brokerage commissions and charges. In addition, you may incur the cost of the
“spread” – that is, any difference between the bid price (the highest price a
buyer is willing to pay for a share of a fund) and the ask price (the lowest
price a seller is willing to accept for a share of a fund).
Shares of the funds trade under the following
trading symbols:
| | Schwab International Dividend Equity ETF | | | SCHY | |
| | Schwab International Equity ETF | | | SCHF | |
| |
Schwab International Small-Cap Equity
ETF |
| | SCHC | |
| | Schwab Emerging Markets Equity ETF | | | SCHE | |
Shares of the funds may be acquired or redeemed
directly from the funds only in Creation Units or multiples thereof, as
discussed in the “Creation and Redemption” section below. Once created, shares
of the funds trade in the secondary market in amounts less than a Creation Unit.
The funds do not impose any minimum investment for shares of the funds purchased
on an exchange or in the secondary market. Except when aggregated in Creation
Units, shares are not redeemable by the funds.
Share
Trading Prices
As with other types of securities, the trading
prices of shares in the secondary market can be affected by market forces such
as supply and demand, economic conditions and other factors. The price you pay
or receive when you buy or sell your shares in the secondary market may be more
(a premium) or less (a discount) than the NAV of such shares.
Premium/Discount Information
Information showing the number of days the
market price of each fund’s shares was greater than the fund’s NAV per share
(i.e., at a premium) and the number of days it was less than the fund’s NAV per
share (i.e., at a discount), for various time periods, is available by visiting
the funds’ website www.schwabassetmanagement.com.
Determination
of Net Asset Value
The NAV of a fund’s shares is calculated as of
the close of regular trading on the New York Stock Exchange (NYSE), generally
4:00 p.m. Eastern Time, on each day the NYSE is open for trading (each, a
Business Day). NAV per share is calculated by dividing a fund’s net assets by
the number of the fund’s shares outstanding. If the NYSE is closed due to
weather or other extenuating circumstances on a day it would typically be open
for business, or the NYSE has an unscheduled early closing on a day it has
opened for business, the funds reserve the right to treat such day as a Business
Day and accept purchase and redemption orders and calculate their respective
NAVs as of the normally scheduled close of regular trading on the NYSE for that
day.
The funds’ portfolio securities are valued using
market quotations or official closing prices if they are readily available. In
cases where market quotations are not readily available or the investment
adviser deems them unreliable, the funds’ portfolio securities are valued based
Schwab International Equity ETFs | Investing in
the Funds39
on fair values developed following procedures
approved by the funds’ Board of Trustees. The Board of Trustees has designated
the investment adviser as the valuation designee (Valuation Designee) for the
funds to perform the fair value determination relating to all fund
investments.
The funds’ Board of Trustees has approved
procedures to fair value the funds’ securities when market prices are not
“readily available” or are unreliable. For example, the funds may fair value a
security when a security is de-listed or its trading is halted or suspended;
when a security’s primary pricing source is unable or unwilling to provide a
price; when a security’s primary trading market is closed during regular market
hours; or when a security’s value is materially affected by events occurring
after the close of the security’s primary trading market. By fair valuing
securities whose prices may have been affected by events occurring after the
close of trading, the funds seek to establish prices that investors might expect
to realize upon the current sales of these securities. The Valuation Designee’s
policies and procedures, which govern the selection and application of
methodologies for determining the fair value of fund investments, seek to ensure
that the prices at which the funds’ shares are purchased and redeemed are fair
and do not result in dilution of shareholder interest or other harm to
shareholders. Generally, when fair valuing a security, the Valuation Designee
will take into account all reasonably available information that may be relevant
to a particular valuation including, but not limited to, fundamental analytical
data regarding the issuer, information relating to the issuer’s business, recent
trades or offers of the security, general and specific market conditions and the
specific facts giving rise to the need to fair value the security. The Valuation
Designee makes fair value determinations in good faith and in accordance with
the fair value procedures approved by the Board of Trustees. Due to the
subjective and variable nature of fair value pricing, there can be no assurance
that the funds could obtain the fair value assigned to the security upon the
sale of such security.
Shareholders of the funds should be aware that
because foreign markets are often open on weekends and other days when the funds
are closed, the value of the funds’ portfolios may change on days when it is not
possible to buy or sell shares of the funds.
Transactions in fund shares will be priced at
NAV only if you purchase or redeem shares directly from the funds in Creation
Units. Fund shares that are purchased or sold on the secondary market will be
effected at prevailing market prices, which may be higher or lower than NAV, and
may be subject to brokerage commissions and charges. As described below,
purchases and redemptions of Creation Units will be priced at the NAV next
determined after receipt of the purchase or redemption order.
Purchase
and Redemption of Creation Units
Creation and Redemption
The shares that trade in the secondary market
are “created” at NAV. The funds issue and redeem shares only in Creation Units,
which are large blocks of shares. Only institutional investors who have entered
into an authorized participant agreement (known as Authorized Participants) may
purchase or redeem Creation Units. Creation Units generally are issued and
redeemed in exchange for a specified basket of securities and/or a designated
amount of cash. Each Business Day, prior to the opening of trading, the funds
publish the specific securities and designated amount of cash included in that
day’s basket for the funds through the National Securities Clearing Corporation
(NSCC) or other method of public dissemination. The funds reserve the right to
accept or pay out a basket of securities or cash that differs from the published
basket. The prices at which creations and redemptions occur are based on the
next calculation of NAV after an order is received and deemed acceptable by the
transfer agent. Orders from Authorized Participants to create or redeem Creation
Units will only be accepted on a Business Day and are also subject to acceptance
by the funds and the transfer agent.
Creations and redemptions must be made by an
Authorized Participant that has executed an agreement with the Distributor with
respect to creations and redemptions of Creation Unit aggregations. Information
about the procedures regarding creation and redemption of Creation Units is
included in the SAI.
Authorized Participants and the Continuous
Offering of Shares
Because new shares may be created and issued on
an ongoing basis, at any point during the life of the funds, a “distribution,”
as such term is used in the Securities Act of 1933, as amended (the 1933 Act),
may be occurring. Broker-dealers and other persons are cautioned that some
activities on their part may, depending on the circumstances, result in them
being deemed participants in a distribution in a manner that could render them
statutory underwriters and subject to the prospectus-delivery and liability
provisions of the 1933 Act. Nonetheless, any determination of whether one is an
underwriter must take into account all the relevant facts and circumstances of
each particular case.
Broker-dealers should also note that dealers who
are not “underwriters,” but are participating in a distribution (as contrasted
to ordinary secondary transactions), and thus dealing with shares that are part
of an “unsold allotment” within the meaning of Section 4(a)(3)(C) of the
1933 Act, would be unable to take advantage of the prospectus delivery exemption
provided by Section 4(a)(3) of the 1933 Act. For delivery of prospectuses
to exchange members, the prospectus delivery mechanism of Rule 153 under
the 1933 Act is only available with respect to transactions on a national
securities exchange.
40Schwab International Equity
ETFs | Investing in the
Funds
Creation and Redemption Transaction Fees for
Creation Units
The funds may impose a creation transaction fee
and a redemption transaction fee to offset transfer and other transaction costs
associated with the issuance and redemption of Creation Units. The creation and
redemption transaction fees applicable to the funds are listed below. The
standard creation transaction fee is charged to each purchaser on the day such
purchaser creates a Creation Unit. The standard fee is a single charge and will
be the amount indicated below regardless of the number of Creation Units
purchased by an investor on the same day. Similarly, the standard redemption
transaction fee will be the amount indicated below regardless of the number of
Creation Units redeemed that day. In addition, purchasers and redeemers of
shares in Creation Units are responsible for payment of the costs of
transferring securities to or out of the funds. Purchasers and redeemers of
Creation Units for cash may also be subject to an additional variable charge up
to the maximum amount shown in the table below. This additional variable charge
will offset the transaction costs to the funds of buying or selling portfolio
securities. In certain circumstances, the cost of any standard transaction fees
and/or additional variable charges may be waived by a fund when doing so is
believed to be in the best interests of the fund. From time to time, the
investment adviser may cover the cost of any transaction fees.
The following table shows, as of
November 28, 2025, the approximate value of one Creation Unit of each fund,
including the standard and maximum additional creation and redemption
transaction fee. These fees are payable only by investors who purchase shares
directly from the funds. Retail investors who purchase shares through their
brokerage account will not pay these fees. Investors who use the services of a
broker or other such intermediary may pay fees for such services.
|
Name of Fund |
| |
Approximate Value of One Creation Unit |
| |
Standard Creation/Redemption Transaction Fee |
| |
Maximum Additional Creation Transaction Fee(1) |
| |
Maximum Additional Redemption Transaction Fee(1) |
| ||||||||||||
| Schwab International Dividend Equity ETF | | | | $ | 2,938,350 | | | | | $ | 500 | | | | | | 3.0% | | | | | | 2.0% | | |
| Schwab International Equity ETF | | | | $ | 4,788,220 | | | | | $ | 10,000 | | | | | | 3.0% | | | | | | 2.0% | | |
|
Schwab International Small-Cap Equity
ETF |
| | | $ | 4,616,300 | | | | | $ | 10,000 | | | | | | 3.0% | | | | | | 2.0% | | |
| Schwab Emerging Markets Equity ETF | | | | $ | 3,322,310 | | | | | $ | 6,000 | | | | | | 3.0% | | | | | | 2.0% | | |
(1)
As a percentage of total amount invested
or redeemed.
Additional
Policies
Policy Regarding Short-Term or Excessive
Trading
The funds do not impose any restrictions on the
frequency of purchases and redemptions of fund shares. When considering that a
policy regarding short-term or excessive trading was not necessary for the
funds, the Board of Trustees considered the structure of the funds as ETFs and
that fund shares are purchased and redeemed directly with the funds only in
large quantities (Creation Units) by Authorized Participants who are authorized
to purchase and redeem shares directly with the funds. Because purchase and
redemption transactions with Authorized Participants are an essential part of
the ETF process and help keep ETF trading prices in line with NAV, the funds
accommodate frequent purchases and redemptions by Authorized Participants.
Frequent purchases and redemptions for cash may increase index tracking error
and portfolio transaction costs and may lead to realization of capital gains.
Frequent in-kind creations and redemptions do not give rise to these concerns.
The funds reserve the right to reject or limit any purchase order at any
time.
The funds reserve the right to impose
restrictions on disruptive or abusive trading. Such trading is defined by the
funds as purchases and sales of fund shares in amounts and frequency determined
by the funds to be significant and in a pattern of activity that can potentially
be detrimental to the funds and their shareholders. Such adverse effects can
include diluting the value of the shareholders’ holdings, increasing fund
transaction costs, disrupting portfolio management strategy, incurring unwanted
taxable gains, or forcing funds to hold excess levels of cash. The funds may
reject purchase or redemption orders in such instances. The funds also impose a
transaction fee on Creation Unit transactions that is designed to offset the
funds’ transfer and other transaction costs associated with the issuance and
redemption of the Creation Units. The Board of Trustees may determine that
policies and procedures regarding the frequency of purchases and redemptions of
fund shares are necessary in the future.
Investments by Registered Investment
Companies
Section 12(d)(1) of the Investment Company
Act of 1940, as amended, restricts investments by registered investment
companies in the securities of other investment companies, including shares of
the funds. Registered investment companies are permitted to invest in the funds
beyond the limits set forth in section 12(d)(1), subject to certain terms and
conditions including in some cases that such investment companies enter into an
agreement with the funds.
Payments to Financial Intermediaries
The investment adviser or its affiliates make
payments out of their own resources, or provide products and services at a
discount, to certain brokerage firms, banks, insurance companies, retirement
plan service providers and other financial intermediaries that perform
shareholder,
Schwab International Equity ETFs | Investing in
the Funds41
recordkeeping, sub-accounting and other
administrative services in connection with investments in fund shares. The
investment adviser or its affiliates also make payments out of their own
resources, or provide products and services at a discount, to certain financial
intermediaries in connection with certain activities or services which may
facilitate, directly or indirectly, investment in the funds. These payments may
relate to marketing and/or fund promotion activities and presentations,
educational training programs, conferences, the development and support of
technology platforms and/or reporting systems, data analytics and support, or
making shares of the funds available to their customers. These payments, which
may be significant, are paid by the investment adviser or its affiliates out of
their own resources and not from the assets of the funds.
Payments to a financial intermediary may create
potential conflicts of interest between the intermediary and its clients as the
payments may provide such intermediary with an incentive to favor sales of
shares of the funds over other investment options they make available to their
customers. Please see the SAI for additional information.
Distributions
and Taxes
Any investment in the funds typically involves
several tax considerations. The information below is meant as a general summary
for U.S. citizens and residents. Please see the SAI for additional information.
Because each person’s tax situation is different, you should consult your tax
advisor about the tax implications of your investment in a fund. You also can
visit the Internal Revenue Service (IRS) website at www.irs.gov.
As a shareholder, you are entitled to your share
of the dividends and gains your fund earns. Dividends from net investment
income, if any, are generally declared and paid semiannually for Schwab
International Equity ETF, Schwab International Small-Cap Equity ETF and Schwab
Emerging Markets Equity ETF, and quarterly for Schwab International Dividend
Equity ETF. Net realized capital gains, if any, are generally declared and paid
annually, although the funds may do so more frequently as determined by the
Board of Trustees. To receive a dividend distribution, you must be a registered
shareholder on the date that dividends are declared. Dividend distributions are
paid to shareholders on the payable date. Although it is not generally expected,
if a fund’s distributions exceed its realized taxable income and capital gains
during a taxable year, then all or a portion of the distributions made during
that year may be characterized as a return of capital to shareholders. A return
of capital distribution generally will not be taxable but will reduce the
shareholder’s cost basis and result in a higher capital gain or lower capital
loss when those shares on which the distribution was received are sold. Each
fund reserves the right to declare special distributions if, in its reasonable
discretion, such action is necessary or advisable to preserve its status as a
regulated investment company or to avoid imposition of income or excise taxes on
undistributed income or realized gains. Dividends and other distributions on
shares of the funds are distributed on a pro rata basis to beneficial
owners of such shares. During the fourth quarter of the year, typically in early
November, an estimate of the funds’ year-end distributions, if any, may be made
available on the funds’ website www.schwabassetmanagement.com.
Unless you are investing through an IRA, 401(k)
or other tax-advantaged account, your fund distributions generally have tax
consequences. Each fund’s net investment income and short-term capital gains are
distributed as dividends and will be taxable as ordinary income or qualified
dividend income. Other capital gains distributions are taxable as long-term
capital gains, regardless of how long you have held your shares in the fund. The
maximum individual rate applicable to long-term capital gains and qualified
dividend income is generally either 15% or 20%, depending on whether the
individual’s income exceeds certain threshold amounts. Distributions generally
are taxable in the tax year in which they are declared, whether you reinvest
them or take them in cash.
Generally, any sale of your shares is a taxable
event. A sale of your shares may give rise to a gain or loss. In general, any
gain or loss realized upon a taxable disposition of shares will be treated as
long-term capital gain or loss if the shares have been held for more than one
year. Otherwise, the gain or loss on the taxable disposition of shares will be
treated as short-term capital gain or loss. The maximum individual rate
applicable to long-term capital gains is generally either 15% or 20%, depending
on whether the individual’s income exceeds certain threshold amounts. Any loss
realized upon a taxable disposition of shares held for six months or less
will be treated as long-term, rather than short-term, to the extent of any
long-term capital gains distributions received (or deemed received) by you with
respect to the shares. All or a portion of any loss realized upon a taxable
disposition of shares will be disallowed if you purchase other substantially
identical shares within 30 days before or after the disposition. In such a
case, the basis of the newly purchased shares will be adjusted to reflect the
disallowed loss.
An additional 3.8% Medicare tax is imposed on
certain net investment income (including ordinary dividends and capital gains
distributions received from a fund and net gains from redemptions or other
taxable dispositions of fund shares) of U.S. individuals, estates and trusts to
the extent that such person’s “modified adjusted gross income” (in the case of
an individual) or “adjusted gross income” (in the case of an estate or trust)
exceeds certain threshold amounts.
At the beginning of every year, the funds
provide shareholders with information detailing the tax status of any
distributions the funds paid during the previous calendar year. Schwab customers
also receive information on distributions and transactions in their monthly
account statements.
42Schwab International Equity
ETFs | Investing in the
Funds
If you are investing through a taxable account
and purchase shares of a fund just before it declares a distribution, you may
receive a portion of your investment back as a taxable distribution. This is
because when a fund makes a distribution, the share price is reduced by the
amount of the distribution. You can avoid “buying a dividend,” as it is often
called, by finding out if a distribution is imminent and waiting until
afterwards to invest. Of course, you may decide that the opportunity to gain a
few days of investment performance outweighs the tax consequences of buying a
dividend.
Shareholders in the funds may have additional
tax considerations as a result of foreign tax payments made by the funds.
Typically, these payments will reduce the funds’ dividends but, if eligible, a
fund may elect for these payments to be included in your taxable income. In such
event, you may be able to claim a tax credit or deduction for your portion of
foreign taxes paid by the fund.
Foreign shareholders may be subject to different
U.S. federal income tax treatment, including withholding tax at the rate of 30%
on amounts treated as ordinary dividends from a fund, as discussed in more
detail in the SAI. Furthermore, the funds are required to withhold U.S. tax (at
a 30% rate) on payments of taxable dividends made to certain non-U.S. entities
that fail to comply (or be deemed compliant) with extensive reporting and
withholding requirements designed to inform the U.S. Department of the Treasury
of U.S.-owned foreign investment accounts. Shareholders may be requested to
provide additional information to a fund to enable the fund to determine whether
withholding is required.
Taxes on Creation and Redemption of Creation
Units
An Authorized Participant who exchanges
securities for Creation Units generally will recognize a gain or a loss equal to
the difference between the market value of the Creation Units at the time of the
exchange and the sum of the exchanger’s aggregate basis in the securities
surrendered and the cash component paid. A person who redeems Creation Units
will generally recognize a gain or loss equal to the difference between the
exchanger’s basis in the Creation Units and the sum of the aggregate market
value of the securities and the amount of cash received for such Creation Units.
The IRS, however, may assert that a loss realized upon an exchange of securities
for Creation Units cannot be deducted currently under the rules governing “wash
sales,” or on the basis that there has been no significant change in economic
position. Persons exchanging securities for Creation Units should consult a tax
advisor with respect to whether wash sale rules apply and when a loss might be
deductible.
Any capital gain or loss realized upon a
redemption (or creation) of Creation Units is generally treated as long-term
capital gain or loss if the funds’ shares (or securities surrendered) have been
held for more than one year and as short-term capital gain or loss if the shares
(or securities surrendered) have been held for one year or less.
If you purchase or redeem Creation Units, you
will be sent a confirmation statement showing how many shares you purchased or
sold and at what price. Persons purchasing or redeeming Creation Units should
consult their own tax advisors with respect to the tax treatment of any creation
or redemption transaction.
Additional
Information
Index Providers
S&P Dow Jones Indices LLC (S&P Dow Jones
Indices) is a full service index provider that develops, maintains, and licenses
indices for use as benchmarks and as the basis of investment products. The
investment adviser has entered into a license agreement with S&P Dow Jones
Indices or its affiliates to use the Index (as defined below). Fees payable
under the license agreement are paid by the investment adviser. S&P Dow
Jones Indices and its affiliates have no obligation to continue to provide the
Index to the investment adviser beyond the term of the license agreement.
FTSE International Limited (FTSE) is an
independent company whose sole business is the creation and management of
indexes and associated data services. FTSE calculates hundreds of thousands of
indexes daily, including more than 1,400 real-time indexes. FTSE® is a trademark owned by London Stock Exchange
Group companies (LSEG) and is used by FTSE under license. FTSE is not affiliated
with the funds, the investment adviser, the Distributor or any of their
respective affiliates.
The investment adviser has entered into a
license agreement with FTSE to use the FTSE Developed ex US Index, FTSE Emerging
Index and FTSE Developed Small Cap ex US Liquid Index (the Indexes). Fees
payable under the license agreement are paid by the investment adviser. FTSE has
no obligation to continue to provide the Indexes to the investment adviser
beyond the term of the license agreement.
Disclaimers
“Dow Jones®” is a registered trademark of Dow Jones
Trademark Holdings LLC (Dow Jones). The Dow Jones International Dividend 100
Index (the Index) is a product of S&P Dow Jones Indices, and the trademark
and Index have been licensed for use by the investment adviser. “Schwab
International Dividend Equity ETF” is not sponsored, endorsed, sold or promoted
by S&P Dow Jones Indices, Dow Jones, any of their third party licensors, or
any of their respective affiliates (collectively, S&P Dow Jones Indices
Entities). S&P Dow Jones Indices Entities
Schwab International Equity ETFs | Investing in
the Funds43
do not make any representation or warranty,
express or implied, to the owners of the fund or any member of the public
regarding the advisability of investing in securities generally or in the fund
particularly or the ability of the Index to track general market performance.
S&P Dow Jones Indices Entities’ only relationship to the investment adviser
with respect to the Index is the licensing of the Index and certain trademarks,
service marks and/or trade names of S&P Dow Jones Indices Entities. The
Index is determined, composed and calculated by S&P Dow Jones Indices
Entities without regard to the investment adviser or the fund. S&P Dow Jones
Indices Entities have no obligation to take the needs of the investment adviser
or fund shareholders into consideration in determining, composing or calculating
the Index. S&P Dow Jones Indices Entities are not responsible for and have
not participated in the determination of the prices, and amount of the fund or
the timing of the issuance or sale of the fund or in the determination or
calculation of the equation by which the fund is to be converted into cash or
redeemed, as the case may be. S&P Dow Jones Indices Entities have no
obligation or liability in connection with the administration, marketing or
trading of the fund. There is no assurance that investment products based on the
Index will accurately track index performance or provide positive investment
returns. S&P Dow Jones Indices and its subsidiaries are not investment
advisors. Inclusion of a security within the Index is not a recommendation by
S&P Dow Jones Indices Entities to buy, sell, or hold such security, nor is
it considered to be investment advice.
S&P DOW JONES INDICES ENTITIES DO NOT
GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE
INDEX OR ANY DATA RELATED THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT
LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS)
WITH RESPECT THERETO. S&P DOW JONES INDICES ENTITIES SHALL NOT BE SUBJECT TO
ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P
DOW JONES INDICES ENTITIES MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY
DISCLAIM ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
OR USE OR AS TO RESULTS TO BE OBTAINED BY THE INVESTMENT ADVISER, FUND
SHAREHOLDERS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR WITH
RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN
NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES ENTITIES BE LIABLE FOR ANY
INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT
NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF
THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT,
TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF
ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES ENTITIES AND
THE INVESTMENT ADVISER, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES
ENTITIES.
The funds are not in any way sponsored,
endorsed, sold or promoted by FTSE or by LSEG (together the Licensor Parties)
and none of the Licensor Parties make any warranty or representation whatsoever,
expressly or impliedly, either as to the results to be obtained from the use of
the Indexes and/or the figure at which the said Index stands at any particular
time on any particular day or otherwise and/or the suitability of the Indexes
for the purposes to which they are being put in connection with the funds. The
Licensor Parties make no representation or warranty, express or implied, to the
owners of shares of the funds or any member of the public regarding the
advisability of trading in the funds. None of the Licensor Parties have provided
or will provide any financial or investment advice or recommendation in relation
to the Indexes to Schwab Asset Management or its clients. The Indexes are
compiled and calculated by FTSE or its agent. None of the Licensor Parties shall
be liable (whether in negligence or otherwise) to any person for any error in
the Indexes and none of the Licensor Parties shall be under any obligation to
advise any person of any error therein. FTSE® is a trademark of LSEG and is used by FTSE
under license. All rights in the Indexes vest in FTSE.
Shares of the funds are not sponsored, endorsed
or promoted by NYSE Arca, Inc. NYSE Arca makes no representation or warranty,
express or implied, to the owners of the shares of the funds or any member of
the public regarding the ability of a fund to track the total return performance
of its underlying index or the ability of the underlying index to track stock
market performance. NYSE Arca is not responsible for, nor has it participated
in, the determination of the compilation or the calculation of any underlying
index, nor in the determination of the timing of, prices of, or quantities of
shares of the funds to be issued, nor in the determination or calculation of the
equation by which the shares are redeemable. NYSE Arca has no obligation or
liability to owners of the shares of the funds in connection with the
administration, marketing or trading of the shares of the funds.
NYSE Arca shall have no liability for damages,
claims, losses or expenses caused by any errors, omissions, or delays in
calculating or disseminating any current index or portfolio value; the current
value of the portfolio of securities required to be deposited to the funds; the
amount of any dividend equivalent payment or cash distribution to holders of
shares of the funds; net asset value; or other information relating to the
creation, redemption or trading of shares of the funds, resulting from any
negligent act or omission by NYSE Arca, or any act, condition or cause beyond
the reasonable control of NYSE Arca, including, but not limited to, an act of
God; fire; flood; extraordinary weather conditions; war; insurrection; riot;
strike; accident; action of government; communications or power failure;
equipment or software malfunction; or any error, omission or delay in the
reporting of transactions in one or more underlying securities. NYSE Arca makes
no warranty, express or implied, as to results to be obtained by any person or
entity from the use of any underlying index or data included therein and NYSE
Arca makes no express or implied warranties, and disclaims all warranties of
merchantability or fitness for a particular purpose with respect to shares of
the funds or any underlying index or data included therein.
The funds and the investment adviser do not
guarantee the accuracy and/or the completeness of the indexes or any data
included therein and shall have no liability for any errors, omissions, or
interruptions therein. The funds and the investment adviser make no warranty,
express or implied, as to results to be obtained by the funds, or any other
person or entity from the use of the indexes or any data included therein.
44Schwab International Equity
ETFs | Investing in the
Funds
The funds and the investment adviser make no
express or implied warranties, and expressly disclaims all warranties, of
merchantability or fitness for a particular purpose or use with respect to the
indexes or any data included therein, without limiting any of the foregoing, in
no event shall the funds and the investment adviser have any liability for any
lost profits or indirect, punitive, special or consequential damages (including
lost profits), even if notified of the possibility of such damages.
Schwab International Equity ETFs | Investing in
the Funds45
Prospectus | December 22, 2025
Schwab
International Equity ETFs
To Learn More
This prospectus contains important information
on the funds and should be read and kept for reference. You also can obtain more
information from the following sources:
Recent information regarding a fund’s NAV,
market price, premiums and discounts, and bid-ask spreads is available at
www.schwabassetmanagement.com.
Additional information about a fund’s
investments is available in the fund’s annual and semiannual
reports to shareholders, which are
sent to current investors, and in Form N-CSR. In a fund’s annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the fund’s performance during its last fiscal year. In
Form N-CSR, you will find a fund’s annual and semiannual financial
statements.
The Statement of Additional
Information (SAI) includes a more
detailed discussion of investment policies and the risks associated with various
investments. The SAI is incorporated by reference into the prospectus, making it
legally part of the prospectus.
For a free copy of any of these documents, to
request other information, or ask questions about the funds, call 1-877-824-5615. In addition, you may visit
www.schwabassetmanagement.com/prospectus for a free copy of these documents.
www.schwabassetmanagement.com/prospectus for a free copy of these documents.
The SAI, annual and semiannual reports, holdings
and financial statements, and other related materials are available from the
EDGAR Database on the SEC’s website (www.sec.gov). You can obtain copies of this information,
after paying a duplicating fee, by sending a request by e-mail to
[email protected].
| | SEC File Number | | | | |
| |
Schwab Strategic Trust 811‑22311 |
| | REG51683-19 | |