In This Report

Schwab Emerging Markets Equity ETFÏ
The Schwab Emerging Markets Equity ETF (the fund) seeks to track as closely as possible, before fees and expenses, the total
return of the FTSE All-Emerging Index (the index). The index is comprised of the 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. 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
-6.62% and its NAV return was -7.04% (for an explanation of the market price and NAV returns, please refer to footnote 2 on the
following page). The index returned -6.64% 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. Emerging market stocks generated disappointing returns, as global economic growth softened and the euro
zone’s sovereign debt crisis continued, while the country markets represented by the index generated mixed returns. Particularly
weighing on performance were signs of a slowdown in manufacturing activity in countries such as Brazil and Taiwan, while China,
Russia, and India were relative bright spots of economic activity.
Contributors and Detractors. Malaysian stocks were some of the biggest contributors to the index’s return, and to the return of
the fund. The relatively large average weight of this market compared with other markets reflected part of the reason for this
contribution. Shares of companies in Malaysia represented an average weight of approximately 5% of the fund. Malaysian stocks
returned nearly 11% in U.S. dollar terms, a return that would have been higher for U.S. investors if not for the roughly 5%
depreciation of the Malaysian ringgit versus the U.S. dollar. The fund’s shares of Malayan Banking provided one example of the
performance of this market, returning 9% for the fund as Malaysia enjoyed moderate economic growth and unemployment levels
that hovered around 3.1% in early 2012.
Turkish stocks, which represented an average weight of nearly 2%, also positively contributed to performance. Stocks in Turkey
returned an impressive 22% for the fund in U.S. dollar terms, a return that was more noteworthy still when considering the
roughly 6% decline in the value of Turkey’s lira relative to the U.S. dollar. Turkey enjoyed respectable economic growth in recent
years, holding up better than many other economies around the world. Shares of retail and commercial banking company Turkiye
Garanti Bankasi provided one example of the performance of Turkish stocks, returning approximately 21% for the fund.
Brazilian stocks were some of the most significant detractors from the performance of the index and fund. Shares of companies in
Brazil represented an average weight of approximately 18%. With Brazil facing decelerating economic growth, lighter demand for
private-sector loans, and continuing to grapple with inflation concerns, stocks in the country returned approximately -16% in
U.S. dollar terms. However, returns would have been far better for U.S. investors if not for the sharp 22% depreciation in the value
of Brazil’s real relative to the U.S. dollar. ADRs representing common stock of metals producer Vale SA provided one example of
the performance of Brazilian stocks, returning -39% for the fund.
As of 08/31/12:
Statistics
Number of Holdings 611
Weighted Average Market
Cap ($ x 1,000,000) $29,315
Price/Earnings Ratio (P/E) 13.6
Price/Book Ratio (P/B) 1.4
Portfolio Turnover Rate 1
9%
Sector Weightings % of Investments
Financials 26.7%
Energy 14.9%
Materials 11.8%
Telecommunication Services 9.8%
Consumer Staples 9.8%
Information Technology 9.0%
Consumer Discretionary 6.1%
Industrials 5.9%
Utilities 4.0%
Health Care 1.5%
Other 0.5%
Total 100.0%
Top Equity Holdings % of Net Assets 2
Taiwan Semiconductor
Manufacturing Co, Ltd. ADR 2.4%
China Mobile Ltd. 2.0%
Petroleo Brasileiro S.A. ADR, Pfd 1.8%
America Movil S.A.B. de C.V.,
Series L 1.5%
China Construction Bank Corp., H
Shares 1.5%
Gazprom OAO ADR 1.4%
Companhia de Bebidas das
Americas ADR 1.3%
Petroleo Brasileiro S.A. ADR 1.2%
MTN Group Ltd. 1.2%
LUKOIL OAO ADR 1.1%
Total 15.4%
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.
10 Schwab International ETFs