INVESTMENT OBJECTIVE: The Schwab International Small-Cap Equity ETF seeks to track, as closely as possible before fees and expenses, the total return of the FTSE Developed Small Cap ex-US Liquid Index.

INDEX DESCRIPTION: The FTSE Developed Small Cap ex-US Liquid Index is comprised of small capitalization companies in developed countries outside the United States. 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 June 30, 2009, the index was composed of 1,820 stocks in 23 developed market countries.

FUND STRATEGY: To pursue its goal, the fund generally invests in stocks that are included in the index. Under normal circumstances it will invest at least 90% of its net assets in these stocks. Under normal circumstances, the fund may invest up to 10% of its net assets in securities not included in its index. The principal types of these investments include those which 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. The fund may sell securities that are represented in the index in anticipation of their removal from 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 seek 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. The fund generally expects that its portfolio will hold less than the total number of securities in the index. The Adviser seeks to achieve, over time, a correlation between the fund’s performance and that of its index, before fees and expenses, of 95% or better. However, there can be no guarantee that the fund will achieve a high degree of correlation with the index.