INVESTMENT OBJECTIVE: Schwab Intermediate-Term U.S. Treasury ETF seeks to track as closely as possible, before fees and expenses, the price and yield performance of the Barclays Capital U.S. 3-10 Year Treasury Bond Index.

INDEX DESCRIPTION: The Barclays Capital U.S. 3-10 Year Treasury Bond Index includes all publicly-issued U.S. Treasury securities that have a remaining maturity of greater than or equal to three years and less than ten years, are rated investment grade, and have $250 million or more of outstanding face value. The securities in the index must be denominated in U.S. dollars and must be fixed-rate and non-convertible. The Index excludes state and local government series bonds and coupon issues that have been stripped from bonds. The Index is market capitalization weighted and the securities in the Index are updated on the last business day of each month. As of June 30, 2010, there were 82 issues in the Index.

FUND STRATEGY: To pursue its goal, 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 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. 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 that is believed will help the fund track the Index, such as investments in (a) securities that are not represented in the Index but anticipates will be added to or removed from the index; (b) securities issued by the U.S. government, its agencies or instrumentalities, including obligations that are not guaranteed by the U.S. Treasury, and obligations that are issued by private issuers that are guaranteed as to principal or interest by the U.S. government, its agencies or instrumentalities, and (c) investment companies, including money market funds. 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. Sampling techniques are used which involve investing in a limited number of Index securities that, when taken together, are expected to perform similarly to the Index as a whole. These techniques are based on a variety of factors, including industry weightings, market capitalization, yield and other performance attributes, maturity, duration, credit ratings, liquidity, tax considerations, 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 yield and maturity will be similar to those of the Index. In addition, the Fund generally expects that its weighted average effective duration will closely correspond to the weighted average effective duration of the Index, which as of June 30, 2010 was 5.28 years. 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. A number of factors may affect the Fund's ability to achieve a high correlation with its Index, including the degree to which the fund utilizes a sampling technique. The correlation between the performance of the Fund and its Index may also diverge due to transaction costs, asset valuations, timing variances, and differences between the Fund's portfolio and the Index resulting from legal restrictions (such as diversification requirements) that apply to the Fund but not to the Index.