INVESTMENT OBJECTIVE: The Schwab US Dividend Equity ETF seeks to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Dividend 100 Index.

INDEX DESCRIPTION: The Dow Jones U.S. Dividend 100 Index is designed to measure the performance of high dividend yielding stocks issued by U.S. companies that have a record of consistently paying dividends, selected for fundamental strength relative to their peers, based on financial ratios. The 100-component Index is a subset of the Dow Jones U.S. Broad Market Index, excluding REITs, master limited partnerships, preferred stocks and convertibles. 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 and meet minimum liquidity criteria. The Index components are then selected by evaluating the highest dividend yielding stocks based on four fundamentals-based characteristics - cash flow to total debt, return on equity, dividend yield and 5-year dividend growth rate. Stocks in the Index are weighted based on a modified market capitalization approach. No single stock can represent more than 4.5% of the Index and no single sector can represent more than 25% of the Index, as measured at the time of Index construction, reconstitution and rebalance. The Index composition is reviewed annually and rebalanced quarterly.

FUND STRATEGY: It is the Fund’s policy that under normal circumstances it will invest at least 90% of its net assets in securities included in the Index. The Fund will generally give the same weight to a given security as the Index does. However, when the Adviser believes it is appropriate to do so, such as to avoid purchasing odd-lots (i.e., purchasing less than the usual number of shares traded for a security), for tax considerations, or to address liquidity considerations with respect to a security, the Adviser may cause the Fund’s weighting of a security to be more or less than the Index’s weighting of the security. 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 its Index. The principal types of these investments include (a) securities that are not represented in the Index but is anticipated will be added to or removed from the Index; (b) 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, enter into repurchase agreements, and may lend its securities to minimize the difference in performance that naturally exists between an Index Fund and its corresponding 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 its 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.