In This Report

Schwab International Equity ETFÏ
The Schwab International Equity ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total return of
the FTSE Developed ex-US Index (the index). The index is comprised of large- and mid-capitalization companies in developed
countries outside the U.S., as defined by the index provider. The index defines the large- and mid-capitalization universe as
approximately the top 90% of the eligible universe. The fund invests in a representative sample of securities included in the index
that collectively has a similar profile to the index. Due to the use of representative sampling, the fund may not hold all of the
securities included in the index.
During the 12-month period that ended August 31, 2012, the fund closely tracked the index. The fund’s market price return was
-0.27% and its NAV return was -0.79% (for an explanation of the market price and NAV returns, please refer to footnote 2 on the
following page). The index returned -0.85% during the same period. Because the return of the index does not include operational
and transactional costs, the return of the fund tends to differ from that of the index.
Market Highlights. Large- and mid-cap international stocks generated modestly negative overall returns in U.S. dollar terms, with
country markets in the index generating mixed results. The euro zone’s sovereign debt crisis weighed on the performance of
international stocks, as did lackluster overall growth in developed economies around the world. The decline of most major
currencies from the British pound to Swiss franc versus the U.S. dollar also reduced international stock returns in
U.S. dollar terms.
Contributors and Detractors. U.K. stocks were some of the biggest contributors to the index’s return, and to the return of the
fund. The large average weight of this market reflected part of the reason for this contribution, with shares of U.K. companies
representing approximately 19% of the fund. Stocks of U.K. companies benefitted from being alternatives to the crisis-plagued euro
zone. U.K. stocks returned nearly 8% in U.S. dollar terms, a return that would have been higher for U.S. investors if not for the
roughly 2% depreciation of the British pound versus the U.S. dollar. The fund’s holdings of mobile communications provider
Vodafone Group provided one example of this market’s performance, returning approximately 19% for the fund.
German stocks, which represented an average weight of nearly 7%, also provided meaningful contributions. Shares of German
companies returned approximately 5% for the fund in U.S. dollar terms, benefitting from the country’s safe-haven allure compared
with many of Europe’s more debt-challenged members. Although modest once converted into U.S. dollars, the return on German
stocks was far more significant in local-currency terms that excluded the euro’s roughly 12% decline versus the U.S. dollar. Shares
of pharmaceutical manufacturer Bayer AG provided one example of the performance of German stocks, returning 24% for
the fund.
Japanese stocks were some of the bigger detractors from the performance of the index, and from the performance of the fund.
Shares of Japanese companies represented an average weight of approximately 17% of the fund. With Japan continuing to grapple
with deflation and uninspiring economic growth, stocks in the country returned approximately -5% in U.S. dollar terms, which
included a 2% depreciation in the value of the yen relative to the U.S. dollar. Shares of imaging solutions company Canon Inc.
provided one example of the performance of Japanese stocks, returning -25% for the fund.
As of 08/31/12:
Statistics
Number of Holdings 1,078
Weighted Average Market
Cap ($ x 1,000,000) $46,533
Price/Earnings Ratio (P/E) 18.6
Price/Book Ratio (P/B) 1.1
Portfolio Turnover Rate 1
8%
Sector Weightings % of Investments
Financials 23.8%
Industrials 12.0%
Consumer Staples 11.3%
Consumer Discretionary 10.3%
Materials 10.1%
Energy 9.7%
Health Care 8.6%
Information Technology 5.6%
Telecommunication Services 4.9%
Utilities 3.7%
Total 100.0%
Top Equity Holdings % of Net Assets 2
Nestle S.A. – Reg’d 1.7%
Samsung Electronics Co., Ltd.
GDR – Reg’d 1.3%
Novartis AG – Reg’d 1.2%
HSBC Holdings plc 1.2%
Vodafone Group plc 1.1%
BP plc 1.1%
Royal Dutch Shell plc, A Shares 1.0%
Roche Holding AG 1.0%
Total S.A. 0.9%
GlaxoSmithKline plc 0.9%
Total 11.4%
Manager views and portfolio holdings may have changed since the report date.
An index is a statistical composite of a specified financial market or sector. Unlike the fund, an index does not actually hold a portfolio of
securities and its return is not inclusive of operational and transaction costs incurred by the fund.
Investment returns will fluctuate and are subject to market volatility, so that an investor’s shares, when redeemed or sold, may be worth more or
less than their original cost. Unlike mutual funds, shares of ETFs are not individually redeemable directly with the ETF.
Source of Sector Classification: S&P and MSCI.
1
Portfolio turnover rate excludes securities received or delivered from processing of in-kind creations or redemptions.
2
This list is not a recommendation of any security by the investment adviser.
6 Schwab International ETFs