INVESTMENT OBJECTIVE: The Schwab U.S. Mid-Cap ETF seeks to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Mid-Cap Total Stock Market Index.

INDEX DESCRIPTION: The Dow Jones U.S. Mid-Cap Total Stock Market Index is a float-adjusted market capitalization weighted index. The Index includes the mid-cap portion of the Dow Jones U.S. Total Stock Market Index actually available to investors in the marketplace and includes the components ranked 501-1000 by full market capitalization. As of August 31, 2010, the Index was composed of 491 stocks.

FUND STRATEGY: To pursue its goal, the Fund generally invests in securities that are included in the Index. 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 other investment companies and 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. 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.