INVESTMENT OBJECTIVE: The Schwab Fundamental U.S. Broad Market Index ETF seeks to track as closely as possible, before fees and expenses, the total return of the Russell Fundamental U.S. Index.

INDEX DESCRIPTION: The Russell Fundamental U.S. Index selects, ranks, and weights securities by fundamental measures of company size adjusted sales, retained operating cash flow, and dividends plus buyback rather than market capitalization. The Index measures the performance of the constituent companies by fundamental overall company scores which are created using as the universe the companies included in the Russell 3000 Index. Securities are grouped in order of decreasing score and each company receives a weight based on the total weights of the companies within the Russell Index. The weights of the companies included in the Index are determined annually and are implemented using a partial quarterly reconstitution methodology in which the Index is split into four equal segments and each segment is rebalanced on a rolling quarterly basis.

FUND STRATEGY: It is the Fund’s policy that, under normal circumstances, it will invest at least 90% of its net assets in stocks included in the Index. 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 Adviser believes will help the Fund track the Index, such as investments in (a) securities that are not represented in the Index but the 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, and may lend its securities to minimize the difference in performance that naturally exists between an index Fund and its corresponding index. Because it may not be possible or practicable to purchase all of the stocks in the Index, the Adviser seeks to track the total return of the Index by using statistical sampling techniques. These 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, capitalization, dividend yield, price/earnings ratio, 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 generally expects that its industry weightings, dividend yield and price/earnings ratio will be similar to those of the Index. The Fund will concentrate its investments (i.e., hold 25% or more of its total assets) in a particular industry, group of industries or sector to approximately the same extent that the Index is so concentrated. For purposes of this limitation, securities of the U.S. government (including its agencies and instrumentalities), and repurchase agreements collateralized by U.S. government securities are not considered to be issued by members of any industry.