<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[x] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
The Charles Schwab Family of Funds
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement., if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
-------------------------------------------
2) Form, Schedule or Registration Statement No.:
---------------------
3) Filing Party:
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4) Date Filed:
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<PAGE> 2
March 21, 2000
SCHWABFUNDS(R)
Shareholder Proxy
YOUR VOTE IS IMPORTANT!
PLEASE READ AND RESPOND TODAY.
See inside for information about
proposals that affect your
SchwabFunds investment.
<PAGE> 3
Shareholder message
SCHWABFUNDS(R)
Shareholder Proxy
3 Shareholder message
4 About the proposals
An overview of the three proposals that shareholders are voting on and
how the funds would be affected.
7 Notice of special meeting
The official notice of the shareholder meeting associated with this
proxy.
8 Proxy statement
A more detailed discussion of all three proposals and additional
information.
11 Proposal 1: Election of trustees
14 Proposal 2: Changes in investment policies
29 Proposal 3: Changes in fund objectives
33 Appendix
The current and proposed fundamental
investment policies for each fund that
would be affected by Proposals 2 or 3.
A-1 Schwab Equity Funds
A-13 Schwab Bond Funds
A-19 Schwab Money Funds
<PAGE> 4
A special meeting of shareholders of all SchwabFunds(R) will take place on June
1, 2000, and we're asking for your participation.
You don't need to attend the meeting to participate. But it's important that you
take a few minutes to read the enclosed material and vote your shares. You can
vote by internet, by phone or by mailing the enclosed proxy voting card(s) in
the postage-paid envelope.
Every SchwabFund has at least one proposal up for a vote. Shareholders of all
funds are being asked to vote for trustees, including candidates to fill new
seats for additional independent trustees. In addition, some funds have
proposals that are intended to help them increase their management efficiency by
granting them additional investment flexibility. The trustees, including myself,
believe these proposals are in the best interests of the shareholders, and we
recommend a vote FOR each of them.
No matter how many shares you own, your vote is important. A proxy solicitor,
D.F. King & Co., has been retained to make follow-up phone calls as may be
necessary on behalf of the funds. But your prompt response will help reduce
proxy costs -- which are paid for by the funds and their shareholders -- and
will also mean that you can avoid receiving follow-up phone calls or mailings.
Voting by internet or phone lowers proxy costs even further.
All of us thank you for your attention to this important matter, and we promise
to continue to work hard to help you achieve your financial goals.
Sincerely,
Charles R. Schwab, Chairman
SchwabFunds
SHAREHOLDER MESSAGE 3
<PAGE> 5
WHAT ARE SHAREHOLDERS VOTING ON?
The funds are asking shareholders to vote on two types of proposals:
- - TO ELECT TRUSTEES. In this election, most of the nominees are current
SchwabFunds(R) trustees who are up for re-election. Four are first-time
nominees. Three of the four would fill newly created seats for independent
trustees.
- - TO CONSIDER CHANGING OR ELIMINATING CERTAIN INVESTMENT POLICIES (NOT FOR
ALL FUNDS). These policies currently are fundamental policies, meaning that
they cannot be changed without shareholder approval. The main reason for
these proposed changes is to allow the funds a degree of strategic
flexibility for potentially more effective -- and more competitive --
investment management practices.
These pages tell you more about the proposals and explain the main reasons that
the trustees believe the proposals are in the best interests of shareholders.
If any other proposals are brought before the special meeting in an appropriate
fashion, these may be voted on as well. As of the time this document was
prepared, the trustees were not aware of any other proposals.
WHY ARE THE TRUSTEES INCREASING THE NUMBER OF INDEPENDENT BOARD MEMBERS?
The Board of Trustees is responsible for protecting the interests of the funds'
shareholders. The Board meets regularly to review the funds' activities,
contractual arrangements and performance. SchwabFunds agrees that independent
trustees play an important role in fulfilling this responsibility.
SchwabFunds is not alone in holding this view. Recently, the Securities and
Exchange Commission (SEC), the main federal body that regulates mutual funds,
announced a series of proposed amendments to existing laws that govern the role
of independent trustees of mutual funds. Their proposal would require that a
majority of trustees be independent (the current requirement is 40%), and would
encourage boards to make independent trustees a super-majority (two-thirds
majority). The trustees of the SchwabFunds agree that a super-majority is in the
best interests of shareholders, and have voted to create three new seats,
which, if approved by shareholders, will give independent trustees more than a
two-thirds majority.
The information on these pages is only a summary. Before you vote, please read
the proxy statement, which starts on page 8.
It's important to vote as soon as you can. That way, the funds -- and their
shareholders -- won't have to bear the costs of additional solicitations.
ABOUT THE PROPOSALS 4
<PAGE> 6
WHO WOULD THE NEW TRUSTEES BE?
The SchwabFunds(R) trustees set the number of seats on the board and present
nominees to the shareholders, who then vote on them. The current trustees
nominated the candidates who are up for election and urge you to vote for all of
them. This proposal affects all SchwabFunds. To find out more, including
information on each nominee, see Proposal 1 in the full proxy statement.
DO THE PROPOSED POLICY CHANGES AFFECT MY FUND AND, IF SO, HOW?
Many of the funds have NO PROPOSED POLICY CHANGES. The table on the next page
shows which funds would be affected by proposed policy changes (Proposals 2 and
3 in the full proxy statement), and which funds would be affected by which types
of changes. If your fund is among those with proposed policy changes, you should
read the questions below and their corresponding proposals in the full proxy
statement. There are two types of proposed policy changes: changes to
fundamental investment policies (Proposal 2), and changes to investment
objectives (Proposal 3).
WHAT ARE THE REASONS FOR THE PROPOSED CHANGES IN FUNDAMENTAL POLICIES (PROPOSAL
2)?
Some of the funds' policies reflect government regulations that no longer exist.
In other cases, limitations are more stringent than current government
regulations require. SchwabFunds believes the proposed changes in investment
policies will benefit shareholders by allowing funds to adapt more quickly to
future changes in investment opportunities.
The funds' trustees believe that it would benefit shareholders if SchwabFunds
updated their fundamental investment policies.
WHAT ARE THE REASONS FOR THE PROPOSED CHANGES IN INVESTMENT OBJECTIVES (PROPOSAL
3)?
By approving new investment objectives that require a fund simply to track its
target sector using an indexing strategy -- without naming the index
specifically or including any other index criteria -- the funds will have the
flexibility necessary to more accurately capture the returns of their market
sector without the cost and delay of future shareholder meetings.
This increased flexibility could be important in a number of situations. For
example, the Schwab Small-Cap Index Fund currently tracks the Schwab Small Cap
Index(R), which consists of the second-largest 1,000 U.S. stocks (as measured by
market capitalization). However, this universe of stocks may not always be the
best barometer of the small-cap U.S. stock sector and, in the future, could lack
the typical characteristics of small-cap stocks, e.g., higher potential for
long-term growth. If this were to happen, the benchmark index might need to be
materially modified or the fund might need to select a different benchmark index
in order to continue to accurately track the small-cap sector of the U.S. stock
market.
To avoid such a situation in the future, the funds' trustees believe that it
would benefit shareholders if the two funds amended their investment objectives.
None of the proposed changes will lower the standards for credit quality that a
fund's investments must meet.
ABOUT THE PROPOSALS 5
<PAGE> 7
<TABLE>
<CAPTION>
PROPOSED CHANGES IN PROPOSED CHANGES IN
POLICIES OBJECTIVES
SCHWABFUNDS(R) (PROPOSAL 2) (PROPOSAL 3)
SCHWAB EQUITY FUNDS
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Analytics Fund(R) -
Institutional Select(TM) Large-Cap Value Index Fund
Institutional Select(TM) S&P 500 Fund
Institutional Select(TM) Small-Cap Value Index Fund
MarketManager Balanced Portfolio MarketManager Growth
Portfolio MarketManager International Portfolio -
MarketManager Small Cap Portfolio
MarketTrack All Equity Portfolio
MarketTrack Balanced Portfolio -
MarketTrack Conservative Portfolio -
MarketTrack Growth Portfolio -
S&P 500 Fund -
Schwab 1000 Fund(R) -
Schwab International Index Fund(R) - -
Schwab Small-Cap Index Fund(R) - -
Schwab Total Stock Market Index Fund(TM)
SCHWAB BOND FUNDS
- -----------------------------------------------------------------------------------------------------
California Long-Term Tax-Free Bond Fund -
California Short/Intermediate Tax-Free Bond Fund -
Long-Term Tax-Free Bond Fund -
Short/Intermediate Tax-Free Bond Fund -
Short-Term Bond Market Index Fund -
Total Bond Market Index Fund(TM) -
YieldPlus Fund(TM)
SCHWAB MONEY FUNDS
- -----------------------------------------------------------------------------------------------------
California Municipal Money Fund -
Florida Municipal Money Fund
Government Cash Reserves Fund
Government Money Fund -
Institutional Advantage Money Fund(R) -
Money Market Fund -
Municipal Money Fund -
New Jersey Municipal Money Fund
New York Municipal Money Fund -
Pennsylvania Municipal Money Fund
Retirement Money Fund(R) -
U.S. Treasury Money Fund -
Value Advantage Money Fund(R) -
</TABLE>
HOW TO VOTE
YOUR SHARES
Voting your shares is easy and doesn't have to take long. Use any of the
following options -- and remember that VOTING BY INTERNET OR PHONE WILL HELP
LOWER FUND EXPENSES. For internet and touch tone phone voting, you'll need the
12-digit number(s) on your enclosed proxy voting card(s).
- - BY INTERNET: go to www.proxyvote.com and follow the instructions
- - BY TOUCH TONE PHONE: call toll-free 800-690-6903 and follow the recorded
instructions
- - BY MAIL: mark your votes on the enclosed proxy card(s), sign and date, and
mail using the postage-paid envelope provided
Remember: if you vote by internet or phone, do not mail in your proxy card(s).
Please make sure you vote all the enclosed proxy card(s).
Questions on any part of this document? Call our proxy solicitor, D.F. King, at
800-431-9633.
6 ABOUT THE PROPOSALS
<PAGE> 8
NOTICE OF SPECIAL MEETING
To shareholders of all SchwabFunds(R): Notice is hereby given that a special
meeting of shareholders of all SchwabFunds will be held at the A.P. Giannini
Auditorium, 555 California Street, Concourse Level, San Francisco, California
94104-1502 on June 1, 2000 beginning at 10:00 a.m. Pacific time for the
following purposes:
1. To elect trustees of each fund to hold office until their successors are duly
elected and qualified;
2. To eliminate, reclassify or amend certain fundamental investment policies and
restrictions;
3. To amend fundamental investment objectives of certain funds; and
4. To transact such other business as may properly come before the meeting or
any adjournments thereof.
The close of business on March 3, 2000 was fixed as the record date for
determining which shareholders are entitled to notice of the meeting and any
adjournments thereof and are entitled to vote.
By order of the Board of Trustees,
FRANCES COLE
Secretary
March 21, 2000
MEETING NOTICE 7
<PAGE> 9
PROXY STATEMENT
INTRODUCTION
PURPOSE OF THIS DOCUMENT
This proxy statement is being furnished to shareholders of each SchwabFunds(R)
mutual fund, in connection with the solicitation of proxies by and on behalf of
the Board of Trustees for use at each fund's meeting. The meetings will be held
at the A.P. Giannini Auditorium, 555 California Street, Concourse Level, San
Francisco, California 94104-1502, on June 1, 2000, beginning at 10:00 a.m.
Pacific time. This proxy statement is first being mailed to shareholders on or
about March 21, 2000.
WHO MAY VOTE
The Board of Trustees has fixed the record date as the close of business on
March 3, 2000. Only holders of shares of the funds at the close of business on
the record date are entitled to notice of, and to vote at, the meetings. A chart
on page 32 shows the number of issued and outstanding shares of each trust and
fund entitled to vote.
The holder of each full share of a fund outstanding as of the close of business
on the record date is entitled to one vote upon each matter properly submitted
to the meetings, and a proportionate fractional vote for each fractional share
held. Shareholders of a fund with more than one class of shares will vote in the
aggregate on each of the proposals and any element thereof. Shareholders of a
fund may vote by class or in the aggregate, as appropriate, on such other
business as may properly come before the meeting as required by law, including
the 1940 Act.
HOW TO VOTE
Shareholders are requested to vote by internet, phone or by returning the
enclosed proxy cards. Voting by internet costs the funds less than if you vote
by telephone or mail. Depending on the number of funds for which you are a
shareholder and the number of accounts you have, you may receive more than one
proxy card.
If you vote by mail, complete, date, sign and promptly return the enclosed proxy
cards in the accompanying envelope. If you properly execute and return your
proxy cards prior to the meeting, your shares will be voted in accordance with
the instructions marked on the proxy cards. If no instructions are marked on the
proxy cards, the proxies will be voted FOR the proposals described in this proxy
statement and in the discretion of the persons named as proxies in connection
with any other matter that may properly come before the meeting.
You may revoke your proxy at any time prior to its exercise by voting in person
at the meeting or by submitting, before the meeting, written notice of
revocation or a later-dated proxy.
QUORUM AND VOTING REQUIREMENTS
In order to take action on any proposal (or element of a proposal), a "quorum"
or a majority of the shares entitled to vote on that proposal must be present in
person or by proxy.
To be elected, each nominee must receive the affirmative vote of the holders of
a plurality of the outstanding voting shares of each trust. This means that the
ten (10) nominees receiving the highest number of affirmative votes cast at the
meeting will be elected, as long as the votes FOR each nominee exceed the votes
AGAINST each nominee. Approval of each element of Proposals 2 and 3, applicable
to a fund, requires the favorable vote of a majority of outstanding voting
shares of a fund as defined by the 1940 Act. A majority of outstanding shares of
a fund is the lesser of (i) 67% or more of the shares represented at the
meeting, if more than 50% of the outstanding voting shares of the fund are
represented at the meeting, or (ii) more than 50% of the outstanding voting
shares of the fund.
The table on the page 10 lists each fund and the proposals bearing on it.
PROXY STATEMENT FOR SPECIAL MEETINGS OF SHAREHOLDERS OF THE FUNDS TO BE HELD ON
JUNE 1, 2000
The Charles Schwab
Family of Funds
Schwab Investments
Schwab Capital Trust
101 Montgomery Street
San Francisco, CA 94104
8 PROXY STATEMENT
<PAGE> 10
OTHER VOTING-RELATED ISSUES
If a quorum is not present at a meeting, or if sufficient votes to approve a
proposal are not received, the persons named as proxies may propose one or more
adjournments of such meeting to permit further solicitation of proxies. Any
adjournment(s) of a meeting will require the affirmative vote of a majority of
those shares of the funds of the trust present at the meeting in person or by
proxy.
A shareholder vote may be taken on any other matter to come properly before the
meeting prior to such adjournment(s) if sufficient votes to approve such matters
have been received and such vote is otherwise appropriate. The Board of Trustees
does not presently know of any matter to be considered at the meeting other than
the matters described in the Notice of Special Meeting accompanying this proxy
statement.
Abstentions and broker "non-votes" (i.e., proxies received from brokers or
nominees indicating that they have not received instructions from the beneficial
owner or other person entitled to vote shares) will be counted as shares that
are present for purposes of determining the presence of a quorum, but will have
no effect on Proposal 1 and not be counted as votes FOR Proposals 2 and 3.
Accordingly, abstentions and broker non-votes will have the effect of a vote
AGAINST Proposals 2 and 3.
SOLICITATION OF PROXIES
Each fund has retained D.F. King & Co., Inc., a proxy solicitation firm, at an
estimated total cost of $1.5 million, to assist in the solicitation of proxies.
However, the exact cost will depend upon the amount and types of services
rendered. Each fund will bear its pro rata share of costs of solicitation and
expenses incurred in connection with preparing this proxy statement, including
the cost of retaining a proxy solicitation firm. Each fund also will reimburse
certain parties for their expenses in forwarding proxy materials to beneficial
owners of fund shares.
As described in the funds' prospectuses, the investment adviser and/or Schwab
have guaranteed that the total operating expenses of some funds will not exceed
a certain percentage of a fund's average daily net assets through a specified
period of time. For purposes of the guarantee, total operating expenses do not
include interest, taxes, brokerage commissions and extraordinary expenses. As
extraordinary expenses, expenses related to this proxy solicitation will be
excluded from the calculations of each fund's total operating expenses for
purposes of the investment adviser's and Schwab's guarantee.
In addition to the solicitation of proxies by mail, officers of the trusts,
officers and employees of the investment adviser and Schwab, the funds'
distributor, transfer agent and shareholder servicing agent, also may solicit
proxies electronically, by telephone, by fax, in person or by other means.
Additional information about the funds and their operations may be found
throughout the proxy statement.
DEFINITIONS OF SOME TERMS USED IN THIS PROXY
BOARD OR BOARD OF TRUSTEES -- The board of trustees for each trust. The term is
used in the singular because the board for each trust and fund is comprised of
the same individuals.
CAPITAL TRUST - Schwab Capital Trust, a Massachusetts business trust.
FAMILY OF FUNDS - The Charles Schwab Family of Funds, a Massachusetts business
trust.
FUND COMPLEX - the trusts, plus Schwab Annuity Portfolios, a Massachusetts
business trust.
INDEPENDENT TRUSTEES - Those trustees of a fund who, under the 1940 Act, are
not considered an "interested person" of the fund.
INVESTMENT ADVISER - Charles Schwab Investment Management, Inc.
INVESTMENTS - Schwab Investments, a Massachusetts business trust.
MEETING - A trust's Special Meeting of Shareholders of the Funds and any
adjournment(s) thereof.
MEETINGS - The meetings of any two or all three trusts.
1940 ACT - The Investment Company Act of 1940, as amended, and the rules and
regulations thereunder.
NOMINEE - An individual nominated for election or re-election to the Board of
Trustees.
PLAN - A trust's deferred compensation plan for its trustees.
POLICIES - The investment objectives, policies and restrictions described in a
fund's prospectus and statement of additional information.
PROPOSAL - One of the three proposals described in the proxy statement.
PROPOSALS - The three proposals described in the proxy statement.
PROXY STATEMENT - The proxy statement itself, not including supplemental
material.
RECORD DATE - The date for determining which fund shareholders are entitled to
notice of, and to vote at, a meeting and any adjournment(s) thereof.
SCHWAB - Charles Schwab & Co., Inc.
SCHWABFUNDS(R) - All funds in the trusts.
SEC - The Securities and Exchange Commission.
TRUST - Capital Trust, Family of Funds or Investments.
TRUSTEE - A member of the Board of Trustees.
TRUSTS - Any two or all three trusts.
PROXY STATEMENT 9
<PAGE> 11
<TABLE>
<CAPTION>
ELECTION OF PROPOSED CHANGES IN PROPOSED CHANGES IN
TRUSTEES POLICIES OBJECTIVES
SCHWABFUNDS (PROPOSAL 1) (PROPOSAL 2) (PROPOSAL 3)
<S> <C> <C> <C>
SCHWAB EQUITY FUNDS
- -----------------------------------------------------------------------------------------------------------------------------
Analytics Fund(R) - C, D, I-K -
Institutional Select(TM) Large-Cap Value Index Fund - - -
Institutional Select(TM) S&P 500 Fund - - -
Institutional Select(TM) Small-Cap Value Index Fund - - -
MarketManager Balanced Portfolio - - -
MarketManager Growth Portfolio - - -
MarketManager International Portfolio - C, D, I-K -
MarketManager Small Cap Portfolio - - -
MarketTrack All Equity Portfolio - - -
MarketTrack Balanced Portfolio - C, D, F, H-L -
MarketTrack Conservative Portfolio - C, D, F, H-L -
MarketTrack Growth Portfolio - C, D, F, H-L -
S&P 500 Fund - C, D, F, H-L -
Schwab 1000 Fund(R) - C, D, F, H-L -
Schwab International Index Fund(R) - C, D, F, H-L B
Schwab Small-Cap Index Fund(R) - C, D, F, H-L A
Schwab Total Stock Market Index Fund(TM) - - -
SCHWAB BOND FUNDS
- -----------------------------------------------------------------------------------------------------------------------------
California Long-Term Tax-Free Bond Fund - C, F, H-L, N -
California Short/Intermediate Tax-Free Bond Fund - C, F, H-L, N -
Long-Term Tax-Free Bond Fund - C, F, H-L, N -
Short/Intermediate Tax-Free Bond Fund - C, F, H-L, N -
Short-Term Bond Market Index Fund(TM) - D, L -
Total Bond Market Index Fund - D, L -
YieldPlus Fund(TM) - - -
SCHWAB MONEY FUNDS
- -----------------------------------------------------------------------------------------------------------------------------
California Municipal Money Fund - F, H-N -
Florida Municipal Money Fund - - -
Government Cash Reserves Fund - - -
Government Money Fund - A-M -
Institutional Advantage Money Fund(R) - C-M -
Money Market Fund - A-M -
Municipal Money Fund - F, H-M -
New Jersey Municipal Money Fund - - -
New York Municipal Money Fund - F, H-N -
Pennsylvania Municipal Money Fund - - -
Retirement Money Fund(R) - C-M -
U.S. Treasury Money Fund - B-D, I-L -
Value Advantage Money Fund(R) - C, I-K -
</TABLE>
10 PROXY STATEMENT
<PAGE> 12
PROPOSAL 1
ELECTION OF TRUSTEES
It is proposed that shareholders of each trust elect ten (10) nominees to serve
as trustees, each to hold office until a successor is elected and qualified. Six
of the nominees currently serve as trustees and it is proposed that they be
reelected. It also is proposed that four nominees who have not previously served
as trustees be elected, and, if elected, begin serving as trustees as soon as
practicable. The persons named in the accompanying proxies intend to vote for
the election of the persons listed below unless shareholders indicate on their
proxy cards their desire to withhold authority to vote for elections to office.
Each nominee has consented to being named in this proxy statement and has agreed
to serve as a trustee if elected. The Board of Trustees does not know of any
reason why any nominee would be unable or unwilling to serve as a trustee, but
if any nominee should become unable to serve prior to the meeting, the proxy
holders reserve the right to vote for another person of their choice as nominee
or nominees.
INFORMATION ABOUT THE NOMINEES
The table on the next page shows basic information about each nominee. Except
for Mariann Byerwalter, Jeremiah H. Chafkin, William A. Hasler, and Gerald B.
Smith, each nominee currently serves as a trustee of each trust. For purposes of
their duties as trustees, the address of each individual listed below is 101
Montgomery Street, San Francisco, California 94104.
This table shows the number of shares of each fund beneficially owned by each
nominee as of March 10, 2000. In cases where the amount owned in any class of a
fund is more than 1% of the fund's or class' assets, as applicable, the
percentage owned is also noted.
<TABLE>
<CAPTION>
NOMINEE FUND SHARES (%)*
- --------------------------------------------------------------------------------------
<S> <C> <C>
MARIANN BYERWALTER Schwab 1000 Fund 1,965
Money Market fund 2,397
JEREMIAH H. CHAFKIN MarketManager
International Portfolio 5,681
MarketManager Small
Cap Portfolio 7,812
S&P 500 Fund 4,415
California Municipal
Money Fund 12,413
Government Cash
Reserves Fund 301,702
DONALD F. DORWARD MarketTrack Growth Portfolio 2,105
Schwab 1000 Fund 1,158
Money Market Fund 745
WILLIAM A. HASLER Money Market Fund 102,000
ROBERT G. HOLMES Schwab 1000 Fund 1,909
Money Market Fund 331
Value Advantage Money Fund 1,016,608
STEVEN L. SCHEID Analytics Fund 2,027
Schwab International
Index Fund 4,719
YieldPlus Fund 62,532
California Municipal
Money Fund 804,017
Government Cash
Reserves Fund 20,589
Money Market Fund 37,282
CHARLES R. SCHWAB Analytics Fund 10,471
MarketManager International
Portfolio 350,095(2.9%)
MarketManager Small
Cap Portfolio 12,433
NOMINEE FUND SHARES (%)*
- --------------------------------------------------------------------------------------
MarketTrack All Equity
Portfolio 11,445
MarketTrack Balanced
Portfolio 28,170
MarketTrack Conservative
Portfolio 33,840
MarketTrack Growth Portfolio 129,038
S&P 500 Fund 7,930
Schwab 1000 Fund 283,348
Schwab International
Index Fund 272,754
Schwab Small-Cap Index Fund 61,881
Short-Term Bond Market
Index Fund 2,526,050(11%)
YieldPlus Fund 270,000(1.5%)
California Municipal
Money Fund 87,130
Government Cash Reserves
Fund 4,173,143(1.8%)
Money Market Fund 309,101
U.S. Treasury Money Fund 380,000
Value Advantage Money
Fund 96,788,905
GERALD B. SMITH Money Market Fund 212,291
Municipal Money Fund 69,064
DONALD R. STEPHENS Money Market Fund 2,414
Value Advantage Money Fund 1,081,055
MICHAEL W. WILSEY Analytics Fund 1,356
S&P 500 Fund 150,077
Money Market Fund 18
Value Advantage Money Fund 2,154,581
</TABLE>
* The trusts have no knowledge as to whether any nominee has the right to
acquire beneficial ownership of shares of any class of a fund.
Unless otherwise noted, each nominee owns less than 1% of the outstanding shares
of each fund.
PROXY STATEMENT 11
<PAGE> 13
<TABLE>
<CAPTION>
TRUSTEE
NAME/BIRTHDATE SINCE PRINCIPAL OCCUPATION
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MARIANN BYERWALTER First-time Vice President for Business Affairs and Chief Financial Officer,
August 13, 1960 nominee Stanford University (higher education). Prior to February 1996,
Ms. Byerwalter was Chief Financial Officer of Eureka Bank
(savings and loans) and Chief Financial Officer and Chief
Operating Officer of America First Eureka Holdings, Inc. (holding
company). Ms. Byerwalter also is on the Board of Directors of
America First Companies, Omaha, NE (venture capital/fund
management) and Redwood Trust, Inc. (mortgage finance).
JEREMIAH H. CHAFKIN* First-time Executive Vice President, SchwabFunds(R), Charles Schwab & Co.,
May 5, 1959 nominee Inc.; President and Chief Operating Officer, Charles Schwab
Investment Management, Inc. Prior to November 1999, Mr. Chafkin
was a Senior Managing Director for Bankers Trust Company.
DONALD F. DORWARD 1989 - Chief Executive Officer, Dorward & Associates. From 1996 to 1999,
September 23, 1931 Family of Funds Mr. Dorward was Executive Vice President and Managing Director,
1991 - Grey Advertising. From 1990 to 1996, Mr. Dorward was President
Investments and Chief Executive Officer, Dorward & Associates (advertising
1993 - and marketing/consulting firm). Trustee of Schwab Annuity
Capital Trust Portfolios since 1994.
WILLIAM A. HASLER First-time Co-Chief Executive Officer, Aphton Corporation
November 22, 1941 nominee (bio-pharmaceuticals). Prior to August 1998, Mr. Hasler was Dean
of the Haas School of Business at the University of California,
Berkeley (higher education). Mr. Hasler also is on the Board of
Directors of Solectron Corporation (manufacturing), Tenera, Inc.
(services and software), Airlease Ltd. (aircraft leasing) and
Mission West Properties (commercial real estate).
ROBERT G. HOLMES 1989 - Chairman, Chief Executive Officer and Director, Semloh Financial,
May 15, 1931 Family of Funds Inc. (international financial services and investment advisory
1991 - firm). Trustee of Schwab Annuity Portfolios since 1994.
Investments
1993 -
Capital Trust
STEVEN L. SCHEID* 1998 - Vice Chairman and Executive Vice President, The Charles Schwab
June 28, 1953 Family of Funds Corporation; Director, Vice Chairman and Enterprise President -
1998 - Financial Products and Services, Charles Schwab & Co., Inc.;
Investments Chief Executive Officer, Chief Financial Officer and Director,
1998 - Charles Schwab Investment Management, Inc. From 1994 to 1996, Mr
Capital Trust Scheid was Executive Vice President of Finance for First
Interstate Bancorp and Principal Financial Officer from 1995 to
1996. Prior to 1994, Mr. Scheid was Chief Financial Officer,
First Interstate Bank of Texas. Trustee of Schwab Annuity
Portfolios since 1998.
CHARLES R. SCHWAB* 1989 - Chairman, Co-Chief Executive Officer and Director, The Charles
July 29, 1937 Family of Funds Schwab Corporation; Chairman, Chief Executive Officer and
1991 - Director, Charles Schwab Holdings, Inc.; Chairman and Director,
Investments Charles Schwab & Co., Inc., Charles Schwab Investment Management,
1993 - Inc., The Charles Schwab Trust Company and Schwab Retirement Plan
Capital Trust Services, Inc.; Chairman and Director (current board positions),
and Chairman (officer position) until December 1995, Mayer &
Schweitzer, Inc. (a securities brokerage subsidiary of The
Charles Schwab Corporation); Director; The Gap, Inc. (a clothing
retailer), Audiobase, Inc. (a financial services organization),
Vodaphone AirTouch plc (a telecommunications company) and Siebel
Systems (a software company). Trustee of Schwab Annuity
Portfolios since 1994.
GERALD B. SMITH First-time Chairman and Chief Executive Officer, Smith Graham & Co.
September 28, 1950 nominee (investment management). Mr. Smith also is on the Board of
Directors of Pennzoil-Quaker State Company (automotive).
DONALD R. STEPHENS 1989 - Managing Partner, D.R. Stephens & Company (investments) and
June 28, 1938 Family of Funds Chairman and Chief Executive Officer of North American Trust (a
1991 - real estate investment trust). Trustee of Schwab Annuity
Investments Portfolios since 1994.
1993 -
Capital Trust
MICHAEL W. WILSEY 1989 - Chairman and Chief Executive Officer, Wilsey Bennett, Inc. (truck
August 18, 1943 Family of Funds and air transportation, real estate investment and management,
1991 - and investments). Trustee of Schwab Annuity Portfolios since
Investments 1994.
1993 -
Capital Trust
</TABLE>
* Denotes an "interested person" of the trusts as defined in the 1940 Act. In
addition to their positions with the investment adviser and distributor,
Messrs. Chafkin, Scheid and Schwab also own stock of The Charles Schwab
Corporation, a publicly traded company that is the parent of the investment
adviser and distributor. Because of the amount of his stock ownership, Mr.
Schwab may be deemed to control The Charles Schwab Corporation.
The Board of Trustees recommends that you vote FOR each nominee.
12 PROXY STATEMENT
<PAGE> 14
TRUSTEE ACTIVITIES AND COMPENSATION
MEETINGS AND COMMITTEES: During each fund's most recent full fiscal year, the
Board of Trustees met six times on behalf of Family of Funds, and five times on
behalf of Capital Trust and Investments. In each such fiscal year, each trustee,
except Mr. Schwab, attended at least 80% of those meetings.
Each trust has an Audit/Portfolio Compliance Committee, which is comprised of
all of the independent trustees. The Audit/Portfolio Compliance Committee
reviews financial statements and other audit-related matters for the trust; it
does this at least quarterly and, if necessary, more frequently. The
Audit/Portfolio Compliance Committee met four times during each fund's most
recent full fiscal year. In each such year, each member attended at least 75% of
those meetings.
Each trust also has a Nominating Committee, which is comprised of the
independent trustees, which meets as often as deemed appropriate by the
Nominating Committee for the primary purpose of nominating persons to serve as a
member of the Board of Trustees. The Nominating Committee did not meet during
each fund's most recent fiscal year. The Nominating Committee will not consider
nominees recommended by shareholders.
None of the trusts has a standing compensation committee or any committee
performing similar functions.
COMPENSATION OF TRUSTEES, OFFICERS, AND OTHERS: Trustees and officers of the
trusts who are also "interested persons" of such trusts receive no compensation
from the trusts. However, each independent trustee currently receives a
quarterly fee of $21,650 from the fund complex, and an additional $5,000 from
the fund complex for each regular meeting of the Board of Trustees and each
meeting of the Audit/Portfolio Compliance Committee attended, and is reimbursed
for all reasonable out-of-pocket expenses. Each independent trustee also
receives $1,000 from the fund complex for each special meeting attended with a
duration of more than two hours, and is reimbursed for all reasonable
out-of-pocket expenses. The compensation paid to current trustees from each
trust and the fund complex is shown in the table below.
The trusts have no bonus, pension, profit sharing or retirement plans, although
pursuant to exemptive relief received from the SEC, each trust may enter into a
deferred compensation plan with the independent trustees. However, as of the
date of this proxy statement, none of the independent trustees has elected to
participate in the plan. If an independent trustee elects to participate in the
plan, deferred fees will be credited to an account established by the trust as
of the date that such fees would have been paid to the trustee. The value of
this account will increase or decrease as if the fees credited to the account
had been invested in the shares of SchwabFunds(R) selected by the trustee.
The election of each nominee requires the affirmative vote of the holders of a
plurality of the outstanding voting shares of each trust.
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION FROM THE TRUSTS
Family of Capital TOTAL COMPENSATION
NAME/POSITION Funds(1) Trust(2) Investments(3) FROM THE FUND COMPLEX
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DONALD F. DORWARD $ 66,100 $ 25,150 $ 25,150 $122,850
Trustee
ROBERT G. HOLMES $ 66,100 $ 25,150 $ 25,150 $122,850
Trustee
WILLIAM J. KLIPP 4 $ 0 $ 0 $ 0 $ 0
Trustee
STEVEN L. SCHEID $ 0 $ 0 $ 0 $ 0
Trustee and President
CHARLES R. SCHWAB $ 0 $ 0 $ 0 $ 0
Trustee; Chairman and
Chief Executive Officer
DONALD R. STEPHENS $ 66,100 $ 25,150 $ 25,150 $122,850
Trustee
MICHAEL W. WILSEY $ 60,100 $ 23,350 $ 23,350 $112,650
Trustee
</TABLE>
1 Amounts are for the fiscal year ended December 31, 1999.
2 Amounts are for the fiscal year ended October 31, 1999.
3 Amounts are for the fiscal year ended August 31, 1999, except amounts for
the Schwab 1000 Fund(R), which are for the fiscal year ended October 31,
1999.
4 Mr. Klipp departed Schwab in 1999 and is expected to resign from the Board
of Trustees prior to the meetings.
PROXY STATEMENT 13
<PAGE> 15
PROPOSAL 2
ELIMINATING, AMENDING OR RECLASSIFYING CERTAIN FUNDAMENTAL INVESTMENT POLICIES
AND RESTRICTIONS
FUNDS AFFECTED
EQUITY FUNDS
- --------------------------------------------------------------------------------
Analytics Fund(R)
MarketManager International Portfolio
MarketTrack Balanced Portfolio
MarketTrack Conservative Portfolio
MarketTrack Growth Portfolio
S&P 500 Fund
Schwab 1000 Fund(R)
Schwab International Index Fund(R)
Schwab Small-Cap Index Fund(R)
BOND FUNDS
- --------------------------------------------------------------------------------
California Long-Term Tax-Free Bond Fund
California Short/Intermediate Tax-Free Bond Fund
Long-Term Tax-Free Bond Fund
Short/Intermediate Tax-Free Bond Fund
Short-Term Bond Market Index Fund
Total Bond Market Index Fund(TM)
MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
California Municipal Money Fund
Government Money Fund
Institutional Advantage Money Fund(R)
Money Market Fund
Municipal Money Fund
New York Municipal Money Fund
Retirement Money Fund(R)
U.S. Treasury Money Fund
Value Advantage Money Fund(R)
BACKGROUND
Each fund operates in accordance with the investment objectives, policies and
restrictions described in its prospectus and statement of additional
information.
The funds generally classify their policies as either "fundamental" or
"non-fundamental." A fundamental policy may be changed only by shareholder vote,
while non-fundamental policies may be changed by vote of a fund's Board of
Trustees. The 1940 Act requires the funds to classify only certain policies as
fundamental. With this proposal, the funds seek to modernize their fundamental
policies by reclassifying as non-fundamental those policies that the 1940 Act
doesn't require to be fundamental.
Since the time each fund was created, there have been a number of changes in the
laws and regulations that govern the funds. First, significant federal
legislation in 1996 pre-empted state regulation of all mutual funds. As a
result, many investment policies previously imposed on the funds by various
states are no longer required.
Second, significant changes to Rule 2a-7 under the 1940 Act, which governs the
investments and operations of money market funds, took effect during the 1990s.
Thus, many of the current fundamental policies of the money market funds predate
the current requirements of Rule 2a-7 and are, in significant respects, more
restrictive than Rule 2a-7 currently requires. In addition, new types of
instruments have been developed, which the funds may not be permitted to invest
in because of their outdated fundamental policies.
Recently, the investment adviser performed a comprehensive review of the funds'
fundamental policies. Based on the recommendations of the investment adviser,
the Board of Trustees has approved policy revisions that are designed to
simplify and modernize those policies that are required to be fundamental, and
eliminate or recharacterize as non-fundamental those policies that aren't
required to be fundamental.
Approval of these changes by shareholders would allow the investment adviser
greater flexibility to respond to a changing investment environment -- subject
to the supervision of the Board of Trustees, and consistent with legal
requirements. The Board of Trustees also believes that the proposed changes will
enhance the investment adviser's ability to manage the funds' investment
portfolios, such that your fund's investment opportunities, accordingly, may
increase.
14 PROXY STATEMENT
<PAGE> 16
In some cases the Board of Trustees recommends that fundamental policies be
amended or eliminated completely. In other cases, the Board recommends amending
or reclassifying policies as non-fundamental. Once converted to non-fundamental,
a fund's policies may be changed without shareholder approval. If the Board
decides in the future to change or eliminate a reclassified non-fundamental
policy, the change would be disclosed in the funds' prospectus or statement of
additional information, if required.
Each proposed change to a fund's fundamental policies recommended by the Board
of Trustees is discussed in detail below. In order to help you understand the
proposed changes, we have attached an Appendix at the end of this proxy
statement. The Appendix shows the funds affected by Proposals 2 and 3, and a
list of their current fundamental policies proposed to be replaced by new
fundamental and/or non-fundamental policies or eliminated.
VOTING REQUIREMENTS
Approval of each element of Proposal 2 requires the favorable vote of a majority
of outstanding voting shares of a fund as defined by the 1940 Act. Proposal 2 is
separated into elements specific to each type of fundamental policy involved,
e.g., maturity, borrowing, and concentration. YOU MAY VOTE FOR THE ELEMENTS OF
PROPOSAL 2 APPLICABLE TO YOUR FUND EITHER AS A GROUP OR BY EACH ELEMENT. If you
vote on the elements of Proposal 2 as a group, a fund will record your votes as
having been cast FOR or AGAINST, according to your vote, each applicable element
within the proposal. Alternatively, you may vote separately for or against each
element of Proposal 2. If you return a proxy card with a vote on the entire
proposal as a group and separate votes on specific elements of the proposal,
your vote on the entire proposal as a group will control and be recorded as your
intended vote.
If shareholders of a fund approve some, but not all, elements of Proposal 2, the
fund will have a combination of certain current fundamental policies and certain
new fundamental and/or non-fundamental policies. The funds intend to implement
new policies after the meeting, as soon as practicable.
The Board of Trustees recommends that you vote FOR Proposal 2 and all its
elements.
2A. PROPOSAL TO ELIMINATE FUNDAMENTAL POLICY MAKING ALL POLICIES FUNDAMENTAL
FUNDS AFFECTED
MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
Government Money Fund
Money Market Fund
POLICIES
Each fund adopted a fundamental policy at its inception requiring that all of
its policies be fundamental. It is proposed that, for each fund above, the
fundamental policy making all fund policies fundamental be eliminated. The
Appendix shows each fund's current fundamental policy.
ANALYSIS
As described in the "Background" section, the 1940 Act requires only a limited
number of fund policies to be fundamental. However, disclosure practices at the
time these funds were created resulted in the adoption of more restrictive and
more detailed fundamental policies than new funds of this type would adopt
today. If all of the funds' policies remain fundamental, the funds will continue
to be prohibited from taking advantage of new investment opportunities that are
potentially beneficial to shareholders and available to other money funds.
If approved, this element of Proposal 2 would allow each fund to adopt
non-fundamental policies, which the Board of Trustees could take appropriate and
timely action to amend as necessary, without the expense and delay associated
with a shareholder meeting, in the event that regulatory changes occur, or new
types of investments become available. Accordingly, the Board of Trustees
believes that eliminating this current fundamental policy is in the best
interests of the funds and their shareholders.
PROXY STATEMENT 15
<PAGE> 17
2B. PROPOSAL TO AMEND AND RECLASSIFY FUND POLICIES REGARDING MATURITY OF FUND
INVESTMENTS
FUNDS AFFECTED
MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
Government Money Fund
Money Market Fund
U.S. Treasury Money Fund
POLICIES
Each fund has a fundamental policy restricting the purchase of securities with
remaining maturities in excess of a certain time. The U.S. Treasury Money Fund's
fundamental policy restricts the purchase of securities issued or guaranteed by
the U.S. government that mature in more than 397 days. For the other two funds,
the policy restricts investment in securities that mature in more than 365 days.
It is proposed that the fundamental policy regarding maturity of fund
investments be (i) for the Government Money Fund and Money Market Fund, amended
to permit investment in securities that mature in not more than 397 days and
reclassified as non-fundamental, and (ii) for the U.S. Treasury Money Fund,
reclassified as a non-fundamental policy. The Appendix shows each fund's current
fundamental policy and proposed non-fundamental policy regarding maturity of
fund investments.
SHAREHOLDER REPORTS
Each fund will furnish, without charge, a copy of its most recent Annual Report
and, if available, Semiannual Report, to any shareholder upon request.
Shareholders desiring a copy of such reports should direct all written requests
to the particular fund's trust at P.O. Box 7575, San Francisco, CA 94120-7575,
or should call Schwab at 800-435-4000.
ANALYSIS
Since the time the Money Market Fund and Government Money Fund were created,
amendments to Rule 2a-7 have extended the maximum permissible remaining maturity
for money market fund investments to 397 days. This element of Proposal 2 seeks
to reclassify the policy on maturity of investments of the Money Market Fund and
Government Money Fund as non-fundamental, and extend it up to the maximum 397
days permitted under Rule 2a-7. These changes would make additional investment
opportunities available to both funds and would increase the investment
adviser's flexibility in managing the assets of each fund.
If approved, this element of Proposal 2 would allow the funds to invest in money
market securities with remaining maturities of up to 397 days. Investing in
instruments with longer maturities has the potential to increase each fund's
yield. However, prices of securities with longer maturities tend to be more
sensitive to changes in interest rates than prices of securities with shorter
maturities. The Board of Trustees believes that the Government Money Fund and
Money Market Fund and their shareholders would benefit from extending the
maximum remaining maturity for fund investments to 397 days and by reclassifying
their current fundamental policy regarding maturity of fund investments as
non-fundamental.
The U.S. Treasury Money Fund's current fundamental policy is consistent with the
limit currently imposed by Rule 2a-7 as to maturity of fund investments.
Accordingly, the fund would continue to be managed in accordance with this
policy even if it is reclassified as non-fundamental. However, approval of this
element of Proposal 2 would allow the Board of Trustees to take appropriate and
timely action to amend the policy in the future, without the expense and delay
associated with a shareholder meeting, in the event that Rule 2a-7 is amended
with respect to maturity of fund investments. The Board of Trustees believes
this additional flexibility would benefit the fund and its shareholders.
16 PROXY STATEMENT
<PAGE> 18
2C. PROPOSAL TO AMEND AND RECLASSIFY FUND POLICIES REGARDING BORROWING, LENDING,
THE ISSUANCE OF SENIOR SECURITIES AND PLEDGING, MORTGAGING OR HYPOTHECATING FUND
ASSETS
2Ci. PROPOSED CHANGES REGARDING BORROWING
FUNDS AFFECTED
EQUITY FUNDS
- --------------------------------------------------------------------------------
Analytics Fund(R)
MarketManager International Portfolio
MarketTrack Balanced Portfolio
MarketTrack Conservative Portfolio
MarketTrack Growth Portfolio
S&P 500 Fund
Schwab 1000 Fund(R)
Schwab International Index Fund(R)
Schwab Small-Cap Index Fund(R)
BOND FUNDS
- --------------------------------------------------------------------------------
California Long-Term Tax-Free Bond Fund
California Short/Intermediate Tax-Free Bond Fund
Long-Term Tax-Free Bond Fund
Short/Intermediate Tax-Free Bond Fund
MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
Government Money Fund
Institutional Advantage Money Fund(R)
Money Market Fund
Retirement Money Fund(R)
U.S. Treasury Money Fund
POLICIES
Each fund's current fundamental policy regarding borrowing is more restrictive
than required by the 1940 Act. It is proposed, for each fund above, that the
fundamental policy regarding borrowing be amended and reclassified as
non-fundamental, and a new fundamental policy regarding borrowing be adopted.
The Appendix shows each fund's current fundamental policy and proposed
fundamental and non-fundamental policies regarding borrowing.
THE NEW FUNDAMENTAL POLICY ON BORROWING WOULD BE:
The fund may not borrow money, except to the extent permitted under the 1940
Act, the rules or regulations thereunder or any exemption therefrom, as such
statute, rules or regulations may be amended or interpreted from time to time.
THE NEW NON-FUNDAMENTAL POLICY ON BORROWING WOULD BE: The fund may not borrow
money except that the fund may (i) borrow money from banks and (ii) engage in
reverse repurchase agreements with any party; provided that (i) and (ii) in
combination do not exceed 33 1/3% of its total assets (any borrowings that come
to exceed this amount will be reduced to the extent necessary to comply with the
limitation within three business days) and the fund will not purchase securities
while borrowings represent more than 5% of its total assets.
ANALYSIS
The 1940 Act requires all mutual funds to adopt fundamental policies regarding
borrowing. The 1940 Act presently limits each fund's ability to borrow more than
one-third of the value of its total assets. Over time, the SEC has acknowledged
the existence of new types of investment practices that technically may be
considered borrowings, but that may be permissible investment practices for
mutual funds.
Approval of this element of Proposal 2 would replace the funds' current
fundamental policies regarding borrowing with a more flexible, standard
fundamental borrowing policy. The Board of Trustees believes that this more
flexible fundamental policy is in the best interests of the funds and their
shareholders because it will allow the funds, subject to approval by the Board,
to adapt to future developments in investment practices and changes in the
governing laws and regulations without the delay and cost of a shareholder
meeting.
At the same time, the funds would amend and reclassify their current fundamental
policies so that they reflect the current borrowing practices permissible under
the 1940 Act. The Board of Trustees believes that this non-fundamental borrowing
policy is in the best interests of the funds and their shareholders because it
would limit the funds only as required by the 1940 Act, thereby improving their
ability to remain competitive. The Board of Trustees also would be able to make
changes to the non-fundamental policy in the future if deemed to be in the best
interests of the funds and their shareholders.
PROXY STATEMENT 17
<PAGE> 19
2Cii. PROPOSED CHANGES REGARDING LENDING
FUNDS AFFECTED
EQUITY FUNDS
- --------------------------------------------------------------------------------
Analytics Fund(R)
MarketManager International Portfolio
MarketTrack Balanced Portfolio
MarketTrack Conservative Portfolio
MarketTrack Growth Portfolio
S&P 500 Fund
Schwab 1000 Fund(R)
Schwab International Index Fund(R)
Schwab Small-Cap Index Fund(R)
BOND FUNDS
- --------------------------------------------------------------------------------
California Long-Term Tax-Free Bond Fund
California Short/Intermediate Tax-Free Bond Fund
Long-Term Tax-Free Bond Fund
Short/Intermediate Tax-Free Bond Fund
MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
Government Money Fund
Institutional Advantage Money Fund(R)
Money Market Fund
Retirement Money Fund(R)
U.S. Treasury Money Fund
Value Advantage Money Fund
INDEPENDENT AUDITORS
A majority of each trust's Board of Trustees, including the independent
trustees, has selected PricewaterhouseCoopers LLP as the independent auditors of
the funds for the most recently completed fiscal years. A representative of
PricewaterhouseCoopers LLP will be available by phone during the meeting, if
needed, to make a statement if desired and to respond to appropriate questions
from shareholders.
POLICIES
In many cases the funds' current fundamental policies regarding lending are more
restrictive than required by the 1940 Act. It is proposed, for each fund, that
the fundamental policy regarding lending be amended and reclassified as
non-fundamental, and a new fundamental policy regarding lending be adopted. The
Appendix shows each fund's current fundamental policy and proposed fundamental
and non-fundamental policies regarding lending.
THE NEW FUNDAMENTAL POLICY ON LENDING WOULD BE:
The fund may not make loans to other persons, except to the extent permitted
under the 1940 Act, the rules or regulations thereunder or any exemption
therefrom, as such statute, rules or regulations may be amended or interpreted
from time to time.
THE NEW NON-FUNDAMENTAL POLICY ON LENDING WOULD BE:
The fund may not lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties (this
restriction does not apply to purchases of debt securities or repurchase
agreements).
ANALYSIS
The 1940 Act requires all mutual funds to adopt fundamental policies regarding
lending. Although the 1940 Act does not impose percentage limits on the amount
that funds may lend, the 1940 Act prohibits funds from making loans to persons
who control or are under common control with the funds, effectively prohibiting
loans where conflicts of interest or undue influence are most likely present.
Approval of this element of Proposal 2 would allow the funds to lend to the
extent permitted by current law by replacing the funds' current fundamental
policies regarding lending with a more flexible, standard fundamental policy.
The Board of Trustees believes that this more flexible fundamental policy is in
the best interests of the funds and their shareholders because it would allow
the funds, subject to approval by the Board, to adapt to future developments in
investment practices and changes in laws and regulations without the delay and
cost of a shareholder meeting.
At the same time, this element of Proposal 2 would amend and reclassify the
funds' current policies regarding lending as non-fundamental to reflect the
current lending practices permitted by the 1940 Act. The Board of Trustees
believes that this non-fundamental lending policy is in the best interests of
the funds and their shareholders because it would limit the funds only as
required by the 1940 Act, thereby improving their ability to remain competitive.
The Board of Trustees also would be able to make changes to the non-fundamental
policy in the future if deemed to be in the best interests of the funds and
their shareholders.
18 PROXY STATEMENT
<PAGE> 20
2Ciii. PROPOSED CHANGES REGARDING ISSUANCE OF SENIOR SECURITIES AND PLEDGING,
MORTGAGING OR HYPOTHECATING FUND ASSETS
FUNDS AFFECTED
EQUITY FUNDS
- --------------------------------------------------------------------------------
Analytics Fund(R)
MarketManager International Portfolio
MarketTrack Balanced Portfolio
MarketTrack Conservative Portfolio
MarketTrack Growth Portfolio
S&P 500 Fund
Schwab 1000 Fund(R)
Schwab International Index Fund(R)
Schwab Small-Cap Index Fund(R)
BOND FUNDS
- --------------------------------------------------------------------------------
California Long-Term Tax-Free Bond Fund
California Short/Intermediate Tax-Free Bond Fund
Long-Term Tax-Free Bond Fund
Short/Intermediate Tax-Free Bond Fund
MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
Government Money Fund
Institutional Advantage Money Fund(R)
Money Market Fund
Retirement Money Fund(R)
U.S. Treasury Money Fund
Value Advantage Money Fund
POLICIES
The funds generally have fundamental policies restricting them from issuing
senior securities. It is proposed that, for the funds listed above, (i) the
fundamental policy regarding issuance of senior securities and any fundamental
policies regarding pledging, mortgaging or hypothecating assets be replaced with
a new fundamental policy, and (ii) any fundamental policies regarding writing,
purchasing or selling puts and calls, selling short or purchasing on margin be
reclassified as non-fundamental policies. The Appendix shows each fund's current
fundamental policies and proposed fundamental and non-fundamental policies.
THE NEW FUNDAMENTAL POLICY REGARDING ISSUANCE OF SENIOR SECURITIES WOULD BE:
The fund may not issue senior securities, except to the extent permitted under
the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as
such statute, rules or regulations may be amended or interpreted from time to
time.
ANALYSIS
The 1940 Act currently prohibits all mutual funds from issuing senior
securities. Additionally, the 1940 Act requires all funds to adopt a fundamental
policy regarding the issuance of senior securities. Approval of this element of
Proposal 2 would permit each fund to replace its current fundamental policy
regarding the issuance of senior securities with a more flexible, standard
fundamental policy. The Board of Trustees believes that this more flexible
fundamental policy is in the best interests of the funds and their shareholders
because it would allow the funds, subject to Board approval, to adapt to future
developments in investment practices and changes in laws and regulations without
the delay and cost of a shareholder meeting.
Since the funds adopted their current fundamental policies, the SEC staff's
interpretation of what constitutes the issuance of a senior security has evolved
with changes in market conditions. For example, the SEC staff's current
interpretation is that the purchase of securities on margin, the making of
certain short sales, and the writing of puts and calls do not necessarily
involve the creation of senior securities if certain conditions are satisfied.
To the extent a fund has a current policy prohibiting writing, purchasing or
selling puts or calls, selling shares short or purchasing securities on margin,
this element of Proposal 2 would reclassify the current policies as
non-fundamental. The proposed changes would enable the Board of Trustees to
evaluate the use of new portfolio management techniques and give the funds the
flexibility to respond to future changes.
Some of the funds also have current fundamental policies regarding pledging,
mortgaging or hypothecating assets. These policies were adopted by the funds
because of requirements imposed by the administrators of securities laws in
various states. However, federal legislation passed in 1996 preempted
substantive state regulation of mutual funds and the sale of their shares.
Therefore, the funds are no longer required to maintain these fundamental
policies and this element of Proposal 2 seeks to eliminate them. The Board of
Trustees believes that elimination of these policies would benefit the funds and
their shareholders by increasing the investment adviser's flexibility in
managing the assets of each fund.
PROXY STATEMENT 19
<PAGE> 21
2D. PROPOSAL TO AMEND FUND POLICIES REGARDING DIVERSIFICATION
FUNDS AFFECTED
EQUITY FUNDS
- --------------------------------------------------------------------------------
Analytics Fund(R)
MarketManager International Portfolio
MarketTrack Balanced Portfolio
MarketTrack Conservative Portfolio
MarketTrack Growth Portfolio
S&P 500 Fund
Schwab 1000 Fund(R)
Schwab International Index Fund(R)
Schwab Small-Cap Index Fund(R)
BOND FUNDS
- --------------------------------------------------------------------------------
Short-Term Bond Market Index Fund
Total Bond Market Index Fund(TM)
MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
Government Money Fund
Institutional Advantage Money Fund(R)
Money Market Fund
Retirement Money Fund(R)
U.S. Treasury Money Fund
POLICIES
Each of the funds listed above is a diversified mutual fund. It is proposed that
the current fundamental policy regarding diversification (i) for equity and bond
funds listed above, be reclassified as non-fundamental, and (ii) for money
market funds listed above, be amended and reclassified as non-fundamental. It is
also proposed that all funds listed above adopt a new fundamental policy
regarding diversification. The Appendix shows each fund's current fundamental
policies and proposed fundamental and non-fundamental policies regarding
diversification.
THE NEW FUNDAMENTAL POLICY ON DIVERSIFICATION FOR ALL FUNDS WOULD BE:
The fund may not purchase securities of an issuer, except as consistent with the
maintenance of its status as an open-end diversified company under the 1940 Act,
the rules or regulations thereunder or any exemption therefrom, as such statute,
rules or regulations may be amended or interpreted from time to time.
ANALYSIS
Under this element of Proposal 2, the funds' current fundamental policies would
be replaced by a more flexible fundamental policy regarding diversification. As
diversified funds, the funds are limited by Section 5(b) of the 1940 Act, as to
75% of total assets, to invest no more than 5% of total assets in the securities
of a single issuer and to purchase no more than 10% of an issuer's voting
securities. Funds are not permitted to change their diversified status unless
approved by shareholders. This element of Proposal 2 does not seek to change the
funds' status as diversified investment management companies. Rather, approval
of this element of Proposal 2 would amend the funds' diversification policy so
that it would provide the maximum flexibility allowed for diversified funds
under the 1940 Act. The Board believes that this more flexible fundamental
policy is in the best interests of the funds and their shareholders because it
will allow the Board to take necessary and timely action to make changes to the
funds' non-fundamental diversification policies when necessary.
In addition to the above limitations imposed on diversified funds, the money
market funds are subject to additional, stricter diversification requirements
imposed by Rule 2a-7. Rule 2a-7 limits a money market fund to investing no more
than 5% of its assets in the securities of a single issuer. This requirement
applies with respect to 100% of a fund's assets, in contrast to Section 5(b)
diversification requirements which apply only with respect to 75% of a fund's
assets. Rule 2a-7 does provide a safe harbor for a money market fund to invest
up to 25% of its assets in the securities of a single issuer, but only for a
period of up to three days. If this element of Proposal 2 is approved, the money
market funds would adopt these Rule 2a-7 limitations as non-fundamental
policies.
Also, under this element of Proposal 2, the money market funds would no longer
be limited to owning, in the aggregate with the holdings of other Schwab Money
Funds, 10% of any class of securities of any issuer. This limitation is not
currently required under Rule 2a-7 or the diversification requirements of the
1940 Act. The Board of Trustees believes that eliminating this limitation will
increase the potential investment opportunities for the money funds.
Approval of this element of Proposal 2 will not affect the funds' status as
diversified mutual funds, which could only be changed in the future by
shareholder vote. Additionally, if this element of Proposal 2 is approved, the
U.S. Treasury Money Fund will adopt a new fundamental investment policies making
the fund diversified.
20 PROXY STATEMENT
<PAGE> 22
2E. PROPOSAL TO ELIMINATE FUND POLICIES REGARDING INVESTMENTS IN "UNSEASONED
ISSUERS"
FUNDS AFFECTED
MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
Government Money Fund
Institutional Advantage Money Fund(R)
Money Market Fund
Retirement Money Fund(R)
POLICIES
The current fundamental policies limit the funds' ability to purchase securities
issued by "unseasoned issuers" (i.e., issuers which have less than three years
of operations), to 5% of total assets. It is proposed that the fundamental
policy regarding investments in "unseasoned issuers" for each fund above be
eliminated. The Appendix shows each fund's current fundamental policy.
ANALYSIS
Each fund's current fundamental policy is based on requirements imposed by the
administrators of securities laws in various states. However, federal
legislation passed in 1996 preempted substantive state regulation of mutual
funds and the sale of their shares, and the 1940 Act does not require the
current fundamental policy. If this policy is eliminated and the investment
adviser determines it is advisable to so invest, shareholders would have a
greater exposure to the risks associated with such investments. The Board of
Trustees does not believe that elimination of the current fundamental policy
would materially increase the risks to fund shareholders. Accordingly, the Board
of Trustees believes that elimination of the current fundamental policies
regarding investment in "unseasoned issuers" is in the best interests of the
funds and their shareholders.
PORTFOLIO TRANSACTIONS
The following funds paid brokerage commissions to affiliated brokers during the
fiscal year ended October 31, 1999.
<TABLE>
<CAPTION>
FUND NAME AMOUNT
- --------------------------------------------------
<S> <C>
Schwab 1000 Fund(R) $13,000
S&P 500 Fund $5,040
</TABLE>
2F. PROPOSAL TO AMEND AND RECLASSIFY FUND POLICIES REGARDING INVESTMENTS IN
RESTRICTED OR ILLIQUID SECURITIES
FUNDS AFFECTED
- --------------------------------------------------------------------------------
EQUITY FUNDS
MarketTrack(TM) Balanced Portfolio
MarketTrack(TM) Conservative Portfolio
MarketTrack(TM) Growth Portfolio
S&P 500 Fund
Schwab 1000 Fund(R)
Schwab International Index Fund(R)
Schwab Small-Cap Index Fund(R)
BOND FUNDS
- --------------------------------------------------------------------------------
California Long-Term Tax-Free Bond Fund
California Short/Intermediate Tax-Free Bond Fund
Long-Term Tax-Free Bond Fund
Short/Intermediate Tax-Free Bond Fund
MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
California Municipal Money Fund
Government Money Fund
Institutional Advantage Money Fund(R)
Money Market Fund
Municipal Money Fund
New York Municipal Money Fund
Retirement Money Fund(R)
POLICIES
The funds currently operate subject to a variety of fundamental policies
regarding investments in restricted securities and illiquid securities,
including repurchase agreements that mature in more than seven days. It is
proposed that the fundamental policies regarding investments in restricted
securities, illiquid securities or repurchase agreements for each fund above be
amended and reclassified as non-fundamental. The Appendix shows each fund's
current fundamental policies and proposed non-fundamental policies.
FOR EACH EQUITY AND BOND FUND, THE NEW NON-FUNDAMENTAL POLICY REGARDING ILLIQUID
SECURITIES WOULD BE: The fund may not invest more than 15% of its net assets in
illiquid securities.
FOR EACH MONEY MARKET FUND, THE NEW NON-FUNDAMENTAL POLICY REGARDING ILLIQUID
SECURITIES WOULD BE: The fund may not invest more than 10% of its net assets in
illiquid securities.
PROXY STATEMENT 21
<PAGE> 23
ANALYSIS
The 1940 Act does not currently require the funds to have fundamental policies
restricting investment in illiquid or restricted securities. If approved, this
element of Proposal 2 would amend and reclassify the funds' various fundamental
policies as a standard non-fundamental policy.
Generally, restricted securities may be sold only in privately negotiated
transactions that meet an exception to securities registration requirements. The
funds' current fundamental policies limiting investment in restricted securities
reflect requirements imposed by the administrators of certain states' securities
laws that such restricted securities should be deemed illiquid. However, federal
legislation passed in 1996 preempted the states' ability to impose such
limitations, and the 1940 Act does not require such a limitation. In addition,
the exception to securities registration requirements added by Rule 144A under
the Securities Act of 1933, permits trading of restricted securities among
institutional investors, such as the funds. This has created active markets in
restricted securities, allowing certain restricted securities to be considered
liquid under guidelines approved by the funds' Board of Trustees.
SEC staff interpretations have indicated that funds should consider repurchase
agreements that mature in more than seven days to be illiquid. Certain of the
funds have this as a fundamental policy. The 1940 Act does not require that this
policy be a fundamental policy. As discussed above, the proposed non-fundamental
policy will limit fund investments in illiquid securities and, accordingly,
would encompass the substance of the current fundamental policy. Accordingly,
approval of this element of Proposal 2 would permit the elimination of the
current fundamental policy.
The proposed non-fundamental policy will limit the funds to investing 15% (10%
for the money market funds) of their net assets in illiquid securities
(including restricted securities that are deemed illiquid under guidelines
approved by the Board of Trustees and repurchase agreements that mature in more
than seven days). However, the proposed non-fundamental policy will permit the
funds to invest without limit in restricted securities that, in accordance with
the funds' procedures, are determined to be liquid. Of course, all of the funds'
investments in restricted securities will still satisfy the funds' other
investment criteria. It is believed that eliminating this restriction with
respect to liquid restricted securities will expand the funds' universe of
available investments. In addition, by converting this policy to
non-fundamental, the Board will be able to take appropriate and timely action to
amend the non-fundamental policy without the expense and delay associated with a
shareholder meeting, in the event that regulatory changes occur in the future.
The Board believes that this more flexible non-fundamental policy is in the best
interests of the funds and their shareholders.
2G. PROPOSAL TO AMEND AND RECLASSIFY FUND POLICIES REGARDING INVESTMENTS IN
SECURITIES OF OTHER INVESTMENT COMPANIES
FUNDS AFFECTED
MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
Government Money Fund
Institutional Advantage Money Fund(R)
Money Market Fund
Retirement Money Fund(R)
POLICIES
The current fundamental policy limits each fund's ability to purchase securities
of other investment companies except in narrow circumstances. It is proposed
that, for each fund above, the fundamental policy regarding investments in
securities of other investment companies be amended and reclassified as
non-fundamental. The Appendix shows each fund's current fundamental policy and
proposed non-fundamental policy.
INVESTMENT ADVISER
Charles Schwab Investment Management, Inc.
101 Montgomery Street
San Francisco, CA 94104
PRINCIPAL UNDERWRITER,
TRANSFER AGENT, AND
SHAREHOLDER SERVICING AGENT
Charles Schwab & Co., Inc.
101 Montgomery Street
San Francisco, CA 94104
FUND ACCOUNTANTS
Bond and Money Market Funds
PFPC, Inc.
103 Bellevue Parkway
Wilmington, DE 19809
Equity Funds
SEI Investments Mutual Fund Services
One Freedom Valley Drive
Oaks, PA 19456
CUSTODIAN
Bond and Money Market Funds, Analytics Fund(R), Institutional Select(TM) Funds,
S&P 500 Fund, and Total Stock Market Index Fund(TM)
PFPC Trust Co.
8800 Tinicum Blvd.,
Third Floor, Suite 200, Philadelphia, PA 19153
All other funds
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
22 PROXY STATEMENT
<PAGE> 24
THE NEW NON-FUNDAMENTAL POLICY REGARDING INVESTMENTS IN SECURITIES OF OTHER
INVESTMENT COMPANIES WOULD BE: The fund may not purchase securities of other
investment companies, except as permitted under the 1940 Act, the rules and
regulations thereunder or any exemption therefrom, as such statute, rules or
regulations may be interpreted from time to time.
ANALYSIS
The funds' current fundamental policies are based on requirements imposed by the
administrators of securities laws in various states. However, federal
legislation passed in 1996 preempted substantive state regulation of mutual
funds and the sale of their shares. Investment in shares of other investment
companies is specifically addressed by section 12(d)(1) of the 1940 Act and is
further limited for money market funds by Rule 2a-7. The 1940 Act generally
limits a fund to (i) purchasing 3% of the total outstanding voting stock of a
single other investment company; (ii) investing 5% of its total assets in the
securities of a single other investment company; and (iii) investing 10% of its
total assets in securities of all other investment companies.
Rule 2a-7 imposes additional limitations on the money market funds' investments
in other investment companies because Rule 2a-7 limits money market fund
investments to high quality instruments that present minimal credit risk.
Accordingly, money market funds generally may only invest in other investment
companies if the investment companies are money market funds.
The proposed non-fundamental policy will allow each fund to invest in other
investment companies to the extent permitted by the 1940 Act. To the extent a
fund invests in shares of other investment companies, shareholders may
indirectly bear a portion of the expenses of the investment companies in which
the fund invests. The investment adviser will take these expenses into account
prior to deciding that such an investment is suitable for a fund and its
shareholders.
The Board of Trustees believes that replacing the funds'
current fundamental policies regarding investment in the securities of other
investment companies with a more flexible, standard non-fundamental policy,
which the Board of Trustees could take appropriate and timely action to amend in
the future, if necessary, without the expense and delay associated with a
shareholder meeting is in the best interests of the funds and their
shareholders.
2H. PROPOSAL TO ELIMINATE FUND POLICIES REGARDING THE BENEFICIAL OWNERSHIP OF
SECURITIES BY FUND OFFICERS AND TRUSTEES
FUNDS AFFECTED
EQUITY FUNDS
- --------------------------------------------------------------------------------
MarketTrack Balanced Portfolio
MarketTrack Conservative Portfolio
MarketTrack Growth Portfolio
S&P 500 Fund
Schwab 1000 Fund(R)
Schwab International Index Fund(R)
Schwab Small-Cap Index Fund(R)
BOND FUNDS
- --------------------------------------------------------------------------------
California Long-Term Tax-Free Bond Fund
California Short/Intermediate Tax-Free Bond Fund
Long-Term Tax-Free Bond Fund
Short/Intermediate Tax-Free Bond Fund
MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
California Municipal Money Fund
Government Money Fund
Institutional Advantage Money Fund(R)
Money Market Fund
Municipal Money Fund
New York Municipal Money Fund
Retirement Money Fund(R)
POLICIES
Each fund's current fundamental policy limits the fund's ability to purchase
securities of issuers whose securities are owned by officers, trustees or
directors of the trusts or the investment adviser. It is proposed that, for each
fund above, the fundamental policy regarding investments in issuers whose
securities are beneficially owned by officers, trustees or directors of the
trusts or the investment adviser be eliminated. The Appendix shows each fund's
current fundamental policy.
PROXY STATEMENT 23
<PAGE> 25
ANALYSIS
The current fundamental policy is based on a requirement imposed by the
administrators of securities laws in various states. However, federal
legislation passed in 1996 preempted substantive state regulation of mutual
funds and the sale of their shares. The Board of Trustees believes that
eliminating this policy would be in the best interests of the funds and their
shareholders because it would increase the investment adviser's flexibility in
managing the assets of each fund without any material increase in risks to
shareholders.
2I. PROPOSAL TO REPLACE AND RECLASSIFY FUND POLICIES REGARDING INDUSTRY
CONCENTRATION
FUNDS AFFECTED
EQUITY FUNDS
- --------------------------------------------------------------------------------
Analytics Fund(R)
MarketManager International Portfolio
MarketTrack Balanced Portfolio
MarketTrack Conservative Portfolio
MarketTrack Growth Portfolio
S&P 500 Fund
Schwab 1000 Fund(R)
Schwab International Index Fund(R)
Schwab Small-Cap Index Fund(R)
BOND FUNDS
- --------------------------------------------------------------------------------
California Long-Term Tax-Free Bond Fund
California Short/Intermediate Tax-Free Bond Fund
Long-Term Tax-Free Bond Fund
Short/Intermediate Tax-Free Bond Fund
MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
California Municipal Money Fund
Government Money Fund
Institutional Advantage Money Fund(R)
Money Market Fund
Municipal Money Fund
New York Municipal Money Fund
Retirement Money Fund(R)
U.S. Treasury Money Fund
Value Advantage Money Fund
POLICIES
Each fund's current fundamental policy generally prohibits investment of more
than 25% of fund assets in companies considered to be in the same industry. It
is proposed that, for each fund, the fundamental policy regarding concentration
of investments in certain industries be reclassified as non-fundamental and a
new fundamental policy be adopted. The Appendix shows each fund's current
fundamental policy and proposed fundamental and non-fundamental policies.
THE NEW FUNDAMENTAL POLICY REGARDING INDUSTRY CONCENTRATION WOULD BE:
The fund may not concentrate investments in securities of issuers in a
particular industry, as concentration is defined under the 1940 Act, the rules
or regulations thereunder or any exemption therefrom, as such statute, rules or
regulations may be amended or interpreted from time to time.
SUBMISSION OF SHAREHOLDER PROPOSALS
The trusts are not required to hold annual shareholders' meetings, and none of
the trusts intends to do so.
A trust may hold special meetings as required or as deemed desirable by its
Board of Trustees for other purposes, such as changing fundamental policies,
electing or removing trustees, or approving or amending an investment advisory
agreement.
In addition, a trustee may be removed by shareholders of the funds of such trust
at a special meeting called upon written request of shareholders owning, in the
aggregate, at least 10% of the outstanding shares of such trust.
Shareholders wishing to submit proposals for inclusion in a proxy statement for
a future shareholder meeting should send their written submissions to the
particular trust in which they own shares. The address for each trust is 101
Montgomery Street, San Francisco, CA 94104.
Proposals must be received a reasonable time in advance of a proxy solicitation
to be included. Submission of a proposal does not guarantee inclusion in a proxy
statement, because the proposal must comply with certain federal securities
regulations.
24 PROXY STATEMENT
<PAGE> 26
ANALYSIS
The 1940 Act generally requires all funds to adopt a fundamental policy
regarding concentration of investments in particular industries. It is currently
the position of the staff of the SEC that if 25% or more of the value of a
fund's assets are invested in one industry, that fund's investments will be
deemed to be concentrated in that industry. However, this 25% limitation does
not apply to (i) fund investments in government securities, (ii) municipal bond
fund investments in industrial development and pollution control bonds, and
(iii) money market fund investments in certain obligations of domestic banks.
By reclassifying the funds' current fundamental policies regarding concentration
as non-fundamental, and adopting the proposed fundamental policy, the Board of
Trustees would be permitted to take appropriate and timely action to amend the
funds' non-fundamental policies in the future, without the expense and delay
associated with a shareholder meeting. The Board of Trustees anticipates taking
such action only in the event that the SEC changes its position on the meaning
of industry concentration. The Board of Trustees believes that this more
flexible fundamental policy is in the best interests of the funds and their
shareholders.
Additionally, if this element of Proposal 2 is approved, the U.S. Treasury Money
Fund will adopt the proposed fundamental policy regarding concentration.
NOTICE TO BANKS, BROKER/DEALERS AND VOTING TRUSTEES AND THEIR NOMINEES
Please advise the funds in writing whether other persons are the beneficial
owners of the shares for which proxies are being solicited, and if so, the
number of copies of the proxy statements, other soliciting material, and Annual
Reports (or Semiannual Reports) you wish to receive in order to supply copies to
the beneficial owners of shares. Write in care of the particular fund's trust,
101 Montgomery Street, San Francisco, CA 94104, Attention: Frances Cole,
Secretary (120 KNY-14-109).
2J. PROPOSAL TO REPLACE AND RECLASSIFY FUND POLICIES REGARDING INVESTMENTS IN
COMMODITIES, FUTURES CONTRACTS AND REAL ESTATE
FUNDS AFFECTED
EQUITY FUNDS
- --------------------------------------------------------------------------------
Analytics Fund(R)
MarketManager International Portfolio
MarketTrack Balanced Portfolio
MarketTrack Conservative Portfolio
MarketTrack Growth Portfolio
S&P 500 Fund
Schwab 1000 Fund(R)
Schwab International Index Fund(R)
Schwab Small-Cap Index Fund(R)
BOND FUNDS
- --------------------------------------------------------------------------------
California Long-Term Tax-Free Bond Fund
California Short/Intermediate Tax-Free Bond Fund
Long-Term Tax-Free Bond Fund
Short/Intermediate Tax-Free Bond Fund
MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
California Municipal Money Fund
Government Money Fund
Institutional Advantage Money Fund(R)
Money Market Fund
Municipal Money Fund
New York Municipal Money Fund
Retirement Money Fund(R)
U.S. Treasury Money Fund
Value Advantage Money Fund
POLICIES
Under the current fundamental policies, each fund is restricted from investing
in commodities, futures contracts and/or real estate. It is proposed that, for
each fund above, the fundamental policies regarding investments in commodities,
futures contracts and real estate be reclassified as non-fundamental policies,
and a new fundamental policy regarding commodities and real estate investments
be adopted. The Appendix shows each fund's current fundamental policy and
proposed fundamental and non-fundamental policies.
PROXY STATEMENT 25
<PAGE> 27
THE NEW FUNDAMENTAL POLICY REGARDING INVESTMENTS IN COMMODITIES AND REAL ESTATE
WOULD BE:
The fund may not purchase or sell commodities or real estate, except to the
extent permitted under the 1940 Act, the rules and regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
ANALYSIS
The 1940 Act requires all funds to adopt a fundamental policy regarding
investment in real estate and commodities and the proposed fundamental policy
would limit such investments to the extent permitted under the 1940 Act. In
addition, each fund's current fundamental policy would be converted to a
non-fundamental policy, and each fund would continue to operate in accordance
with its non-fundamental policy until such time as the Board determines that
changing it would be in the best interests of the funds and their shareholders.
However, approval of this element of Proposal 2 would allow the Board of
Trustees to take appropriate and timely action to amend the funds'
non-fundamental policies in the future if such investments were determined to be
desirable. In addition, such a change could be made without the expense and
delay associated with a shareholder meeting. The Board of Trustees believes that
this more flexible fundamental policy is in the best interests of the funds and
their shareholders.
2K. PROPOSAL TO REPLACE POLICY REGARDING THE UNDERWRITING OF SECURITIES
FUNDS AFFECTED
EQUITY FUNDS
- --------------------------------------------------------------------------------
Analytics Fund(R)
MarketManager International Portfolio
MarketTrack Balanced Portfolio
MarketTrack Conservative Portfolio
MarketTrack Growth Portfolio
S&P 500 Fund
Schwab 1000 Fund(R)
Schwab International Index Fund(R)
Schwab Small-Cap Index Fund(R)
BOND FUNDS
- --------------------------------------------------------------------------------
California Long-Term Tax-Free Bond Fund
California Short/Intermediate Tax-Free Bond Fund
Long-Term Tax-Free Bond Fund
Short/Intermediate Tax-Free Bond Fund
OFFICERS OF THE TRUSTS
This table gives information about each trust's current executive officers. As
of March 10, 2000, the trustees and officers together owned less than 1% of the
shares of each class of each fund, except for MarketManager International
Portfolio (3%), YieldPlus Fund (2.2%), Short-Term Bond Market Index Fund (11%)
and Government Cash Reserves Fund (1.9%).*
<TABLE>
<CAPTION>
NAME/BIRTHDATE POSITION** PRINCIPAL OCCUPATION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
JEREMIAH H. CHAFKIN Executive Vice President & Chief See p.12
May 5, 1959 Operating Officer
FRANCES COLE Secretary Senior Vice President, Chief Counsel and
September 9, 1955 Assistant Corporate Secretary, Charles Schwab
Investment Management, Inc.
STEVEN L. SCHEID Trustee; President See p.12
June 28, 1953
CHARLES R. SCHWAB Trustee; Chairman & Chief See p.12
July 29, 1937 Executive Officer
TAI-CHIN TUNG Treasurer & Principal Vice President, Treasurer and Controller,
March 7, 1951 Financial Officer Charles Schwab Investment Management, Inc. From
1994 to 1996, Ms. Tung was Controller for
Robertson Stephens Investment Management, Inc.
STEPHEN B. WARD Senior Vice President & Senior Vice President and Chief Investment
April 5, 1955 Chief Investment Officer Officer, Charles Schwab Investment Management,
Inc.
</TABLE>
* The trusts have no knowledge as to whether any executive officer or trustee
has the right to acquire beneficial ownership of shares of any class of a
fund.
** Each officer will serve until the earlier of his or her resignation or his
or her successor is elected and qualified.
26 PROXY STATEMENT
<PAGE> 28
MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
California Municipal Money Fund
Government Money Fund
Institutional Advantage Money Fund(R)
Money Market Fund
Municipal Money Fund
New York Municipal Money Fund
Retirement Money Fund(R)
U.S. Treasury Money Fund
Value Advantage Money Fund
POLICIES
Under the current fundamental policy, a fund may not underwrite the securities
of other issuers, except in connection with the disposition of securities from
its investment portfolio. It is proposed that, for each fund, the fundamental
policy regarding the underwriting of securities be replaced with a new
fundamental policy. The Appendix shows each fund's current fundamental policy
and proposed fundamental policy.
THE NEW FUNDAMENTAL POLICY REGARDING THE UNDERWRITING OF SECURITIES WOULD BE:
The fund may not underwrite securities issued by other persons, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
ANALYSIS
The SEC staff generally takes the position that funds should not engage in the
business of underwriting securities. While the funds' current fundamental policy
has not affected the funds' investments in the past, its replacement with a more
flexible fundamental policy could provide investment flexibility in the future.
Approval of this element of Proposal 2 would allow the Board of Trustees to take
appropriate and timely action to amend non-fundamental policies, without the
expense and delay associated with a shareholder meeting. Accordingly, the Board
of Trustees believes that approval of this element of Proposal 2 is in the best
interests of the funds and their shareholders.
2L. PROPOSAL TO RECLASSIFY FUND POLICY REGARDING CONTROL OF AN ISSUER
FUNDS AFFECTED
EQUITY FUNDS:
- --------------------------------------------------------------------------------
MarketTrack Balanced Portfolio
MarketTrack Conservative Portfolio
MarketTrack Growth Portfolio
S&P 500 Fund
Schwab 1000 Fund(R)
Schwab International Index Fund(R)
Schwab Small-Cap Index Fund(R)
BOND FUNDS
- --------------------------------------------------------------------------------
California Long-Term Tax-Free Bond Fund
California Short/Intermediate Tax-Free Bond Fund
Long-Term Tax-Free Bond Fund
Short/Intermediate Tax-Free Bond Fund
Short-Term Bond Market Index Fund
Total Bond Market Index Fund(TM)
MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
California Municipal Money Fund
Government Money Fund
Institutional Advantage Money Fund(R)
Money Market Fund
Municipal Money Fund
New York Municipal Money Fund
Retirement Money Fund(R)
U.S. Treasury Money Fund
POLICIES
Under the current fundamental policy, a fund may not invest with the purpose of
exercising control over an issuer. It is proposed that, for each fund above, the
fundamental policy regarding control of an issuer be reclassified as
non-fundamental. The Appendix shows each fund's current fundamental policy and
proposed non-fundamental policy.
ANALYSIS
The 1940 Act does not require the funds to have a fundamental policy regarding
investing for the purpose of exercising control of an issuer. The current
fundamental policy is based on requirements imposed by the administrators of
securities laws in various states. However, federal legislation passed in 1996
preempted substantive state regulation of mutual funds and the sale of their
shares. Approval of this element of Proposal 2 would allow the Board of Trustees
to take appropriate and timely action to amend the non-fundamental policy,
without the expense and delay associated with a shareholder meeting.
Accordingly, the Board of Trustees believes approval of this element of Proposal
2 would be in the best interests of the funds and their shareholders.
PROXY STATEMENT 27
<PAGE> 29
2M. PROPOSAL TO RECLASSIFY FUND POLICIES REGARDING PURCHASES OF OIL, GAS OR
MINERAL INTERESTS
FUNDS AFFECTED
MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
California Municipal Money Fund
Government Money Fund
Institutional Advantage Money Fund(R)
Money Market Fund
Municipal Money Fund
New York Municipal Money Fund
Retirement Money Fund(R)
POLICIES
Under each fund's current fundamental policy, a fund may not invest in oil, gas
or mineral interests. It is proposed that, for each fund above, the fundamental
policy regarding investments in oil, gas or mineral exploration or development
programs be reclassified as non-fundamental. The Appendix shows each fund's
current fundamental policy and proposed non-fundamental policy.
ANALYSIS
The 1940 Act does not require the funds to have a fundamental policy regarding
investment in oil, gas, or mineral interests. The current fundamental policy is
based on requirements imposed by the administrators of securities laws in
various states. However, federal legislation passed in 1996 preempted
substantive state regulation of mutual funds and the sale of their shares.
Approval of this element of Proposal 2 would allow the Board of Trustees to take
appropriate and timely action to amend the non-fundamental policy, without the
expense and delay associated with a shareholder meeting. Accordingly, the Board
of Trustees believes that approval of this element of Proposal 2 would be in the
best interests of the funds and their shareholders.
2N. PROPOSAL TO RECLASSIFY FUND POLICIES REGARDING NON-DIVERSIFICATION
FUNDS AFFECTED
BOND FUNDS
- --------------------------------------------------------------------------------
California Long-Term Tax-Free Bond Fund
California Short/Intermediate Tax-Free Bond Fund
Long-Term Tax-Free Bond Fund
Short/Intermediate Tax-Free Bond Fund
MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
California Municipal Money Fund
New York Municipal Money Fund
POLICIES
Each fund is a non-diversified investment company, which means that it is not
required by the 1940 Act to diversify its investments. It is proposed that, for
each fund above, the fundamental policy regarding non-diversification be
reclassified as non-fundamental. The Appendix shows each fund's current
fundamental policy and proposed non-fundamental policy.
ANALYSIS
Unlike diversified mutual funds, the 1940 Act does not require that a
non-diversified fund obtain shareholder approval prior to changing its
diversification status. Although it is anticipated that the funds will continue
to be non-diversified, if the Board of Trustees determines it is advisable and
in the best interest of the funds and their shareholders, the funds would be
permitted to change their classification from non-diversified to diversified if
this element of Proposal 2 is approved. The Proposal also would allow the Board
of Trustees to take appropriate and timely action to amend the
funds'non-fundamental policies, without the expense and delay associated with a
shareholder meeting. Accordingly, the Board of Trustees believes that approval
of this element of Proposal 2 would be in the best interests of the funds and
their shareholders.
Shareholders who do not expect to attend the meeting in person are urged to vote
their shares promptly by internet, phone or mail.
28 PROXY STATEMENT
<PAGE> 30
PROPOSAL 3
AMENDING INVESTMENT OBJECTIVES
VOTING REQUIREMENTS
Approval of each element of Proposal 3 requires the favorable vote of a majority
of outstanding voting shares of a fund as defined by the 1940 Act.
FUNDS AFFECTED
EQUITY FUNDS
- --------------------------------------------------------------------------------
Schwab Small-Cap Index Fund(R)
Schwab International Index Fund(R)
3A. PROPOSAL TO AMEND THE INVESTMENT OBJECTIVE OF THE SCHWAB SMALL-CAP INDEX
FUND(R) AND ELIMINATE THE INVESTMENT POLICY REGARDING PORTFOLIO COMPOSITION
POLICIES
The fund's investment objective sets forth the fund's benchmark index. It is
proposed that the investment objective of the fund be amended so that its policy
to track the Schwab Small-Cap Index is reclassified as a non-fundamental
investment policy. It is also proposed that the fund's fundamental investment
policy regarding portfolio composition be eliminated.
THE FUND'S CURRENT INVESTMENT OBJECTIVE IS:
The fund seeks to track the price and dividend performance (total return) of the
Schwab Small-Cap Index, an index created to represent the performance of common
stocks of the second 1,000 largest U.S. companies, ranked by market
capitalization (share price times the number of shares outstanding).
THE FUND'S NEW INVESTMENT OBJECTIVE WOULD BE:
The fund seeks to track the performance of a benchmark index that measures total
return of small capitalization U.S. stocks.
THE FUND'S NEW NON-FUNDAMENTAL INVESTMENT POLICY WOULD BE:
The fund intends to achieve its investment objective by tracking the price and
dividend performance (total return) of the Schwab Small-Cap Index.
ANALYSIS
The Board of Trustees has determined that it would be in the best interests of
the fund and its shareholders to amend the fund's investment objective. As
currently stated, the fund's investment objective requires the fund to seek to
track the price and dividend performance (total return) of the Schwab Small-Cap
Index. At the time the fund was created it was thought that tracking this index,
which uses the second-largest 1,000 U.S. stocks to represent the small-cap U.S.
sector, would provide the best opportunity for the fund to track the overall
performance of the small-cap U.S. market. In addition, the disclosure practices
at that time resulted in the adoption of a more restrictive and detailed
investment objective than an index fund of this type would adopt today.
The fund is asking its shareholders to approve a more flexible investment
objective that requires the fund to seek to track the performance of a benchmark
index that measures the total return of small-cap U.S. stocks. The proposed
investment objective would not specifically name the fund's benchmark index or
include any other index criteria. The Board of Trustees believes that the
proposed investment objective is in the best interests of the fund and its
shareholders because it will allow the Board to take necessary and timely action
to change the fund's benchmark index, including selecting a new one, if such
changes would better enable the fund to seek its objective of tracking the
small-cap U.S. stock sector.
For example, the Schwab Small-Cap Index consists of the second-largest 1,000
U.S. stocks. Although the fund currently does not intend to change its benchmark
index, this universe of stocks may not always be the best representation of the
small-cap U.S. stock sector, and, in the future, could lack the typical
characteristics of small-cap stocks. If this were to happen, the fund's
benchmark index might need to be materially modified or the fund might need to
select a different index in order to continue to accurately track the small-cap
sector of the U.S. stock market.
If shareholders approve these changes to the fund's investment objective, the
current objective would be amended and reclassified as a non-fundamental policy.
This means that the
The investment adviser has extensive experience employing indexing strategies.
The investment adviser currently manages nine equity index funds, two bond index
funds, and four asset allocation funds that use indexing strategies.
PROXY STATEMENT 29
<PAGE> 31
fund would continue to seek to track the Schwab Small-Cap Index, but the Board
of Trustees could make changes to this policy in the future. The Board of
Trustees believes that these changes would provide the fund greater flexibility
to pursue its investment goals as market and regulatory conditions change over
time.
The Board of Trustees also has determined that it would be in the best interests
of the fund and its shareholders to eliminate the fundamental policy requiring
the fund to invest at least 65% of its total assets in common stocks, or other
equity securities including preferred stocks, rights and warrants. The 1940 Act
does not require that this policy be fundamental, and the fund would retain its
current non-fundamental policy to invest at least 80% of its assets in the
securities of issuers represented in its benchmark index. Approval of this
element of Proposal 3 would allow the fund to invest in any type of equity
security, providing more opportunities for the fund's future investments. The
Board of Trustees has considered various factors and believes that all of these
changes will increase investment opportunities for, and are in the best
interests of, the fund and its shareholders.
BENEFICIAL OWNERS
To the knowledge of each trust as of March 3, 2000, the following persons had
beneficial ownership of more than 5% of any class of shares of a fund:
<TABLE>
<CAPTION>
% OF SHARES
FUND/CLASS OWNER'S NAME AND ADDRESS FUND/CLASS OWNED*
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTERNATIONAL MarketTrack All Equity Portfolio 14.4% 4,472,979
INDEX FUND 101 Montgomery Street
San Francisco, CA 94104
MarketTrack Balanced Portfolio 11.2% 3,475,188
101 Montgomery Street
San Francisco, CA 94104
MarketTrack Growth Portfolio 17% 5,247,266
101 Montgomery Street
San Francisco, CA 94104
NEW JERSEY Netravali c/o Asset Management Group 5.5% 12,876,000
MUNICIPAL MONEY FUND 6200 South Syracuse Way
Englewood, CO 80111
MARKETMANAGER Orange County Community Foundation 7.6% 809,973
BALANCED PORTFOLIO 2081 Business Center Drive, Suite 110
Irvine, CA 92715
CALIFORNIA SHORT-TERM William S. Jr. & Nancy E. Thompson 5.8% 646,468
TAX-FREE BOND FUND 2431 Riviera Drive
Laguna Beach, CA 92651
TOTAL BOND MarketTrack Balanced Portfolio 55.6% 16,224,870
MARKET INDEX FUND 101 Montgomery Street
San Francisco, CA 94104
MarketTrack Conservative Portfolio 35.4% 10,342,468
101 Montgomery Street
San Francisco, CA 94104
MarketTrack Growth Portfolio 27.6% 8,057,085
101 Montgomery Street
San Francisco, CA 94104
SCHWAB SMALL-CAP MarketTrack All Equity Portfolio 11.25% 3,273,943
INDEX FUND 101 Montgomery Street
San Francisco, CA 94104
MarketTrack Balanced Portfolio 10.5% 3,077,290
101 Montgomery Street
San Francisco, CA 94104
MarketTrack Growth Portfolio 5.8% 1,697,202
101 Montgomery Street
San Francisco, CA 94104
SHORT-TERM BOND Charles R. Schwab 11% 2,517,680
MARKET INDEX FUND 101 Montgomery Street
San Francisco, CA 94104
</TABLE>
* The trusts have no knowledge as to whether the listed beneficial owner has
the right to acquire beneficial ownership of shares of any class of a fund.
30 PROXY STATEMENT
<PAGE> 32
3B. PROPOSAL TO AMEND THE INVESTMENT OBJECTIVE OF THE SCHWAB INTERNATIONAL INDEX
FUND AND ELIMINATE THE INVESTMENT POLICY REGARDING PORTFOLIO COMPOSITION
POLICIES
The fund's investment objective sets forth the fund's benchmark index. It is
proposed that the investment objective of the fund be amended so that its policy
to track the Schwab International Index is reclassified as a non-fundamental
investment policy. It is also proposed that the fund's fundamental policy
regarding portfolio composition be eliminated.
THE FUND'S CURRENT INVESTMENT OBJECTIVE IS:
The fund seeks to track the price and dividend performance (total return) of the
Schwab International Index (International Index), an index created to represent
the performance of common stocks and other equity securities issued by large
publicly traded companies from countries around the world with major developed
securities markets, excluding the United States.
THE FUND'S NEW INVESTMENT OBJECTIVE WOULD BE:
The fund seeks to track the performance of a benchmark index that measures the
total return of large, publicly traded non-U.S. companies from countries with
developed equity markets outside of the United States.
THE FUND'S NEW NON-FUNDAMENTAL INVESTMENT POLICY TO TRACK THE SCHWAB
INTERNATIONAL INDEX WOULD BE:
The fund intends to achieve its investment objective by tracking the price and
dividend performance (total return) of the Schwab International Index.
ANALYSIS
The Board of Trustees has determined that it would be in the best interests of
the fund and its shareholders to amend the fund's investment objective. As
currently stated, the fund's investment objective requires the fund to seek to
track the price and dividend performance (total return) of the Schwab
International Index. At the time the fund was created it was thought that
tracking this index would provide the best opportunity for the fund to track the
overall performance of the international stock market. In addition, the
disclosure practices at that time resulted in the adoption of a more restrictive
and detailed investment objective than an index fund of this type would adopt
today.
The fund is asking its shareholders to approve a more flexible investment
objective that requires the fund to seek to track the performance of a benchmark
index that measures the total return of international stocks. The proposed
investment objective would not specifically name the fund's benchmark index or
include any other index criteria. The Board of Trustees believes that the
proposed investment objective is in the best interests of the fund and its
shareholders because it will allow the Board in the future to take necessary and
timely action to change the fund's benchmark index, including selecting a new
one, if such changes will better enable the fund to seek its objective of
tracking the international stock sector.
For example, the Schwab International Index consists of the common stocks of the
350 largest publicly traded companies from selected countries outside the United
States. Although the fund currently does not intend to change its benchmark
index, this universe of stocks may not always be the best representation of the
international stock market, and, in the future could lack the typical
characteristics of international stocks. If this were to happen, the fund's
benchmark index might need to be materially modified or the fund might need to
select a different index in order to continue to accurately track the
international stock market.
If shareholders approve these changes to the fund's investment objective, the
current objective would be reclassified as a non-fundamental policy. This means
that the fund would continue to seek to track the Schwab International Index,
but the Board of Trustees could make changes to this policy in the future. The
Board of Trustees believes that these changes would provide the fund greater
flexibility to pursue its investment goals as market and regulatory conditions
change over time.
The Board of Trustees has also determined that it would be in the best interests
of the fund and its shareholders to eliminate the fundamental policy requiring
the fund to invest at least 65% of its total assets in common stocks, or other
equity securities including preferred stocks, rights and warrants. The 1940 Act
does not require that this policy be fundamental. Approval of this proposal
would allow the fund to invest in any type of equity security, providing more
opportunities for the funds' future investments. The Board of Trustees has
considered various factors and believes that all of these changes will increase
investment opportunities for, and are in the best interests of, the fund and its
shareholders.
The Board of Trustees recommends that you vote FOR each element of Proposal 3.
Thank you for voting your shares promptly! We appreciate you placing your trust
in SchwabFunds and look forward to helping you achieve your financial goals.
PROXY STATEMENT 31
<PAGE> 33
NUMBER OF EACH FUND'S SHARES ELIGIBLE TO VOTE
<TABLE>
<CAPTION>
FAMILY OF CAPITAL
EQUITY FUNDS: FUNDS INVESTMENTS TRUST
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Analytics Fund(R) 19,205,292.861
Institutional Select(TM) Large-Cap Value Index Fund 9,037,398.207
Institutional Select(TM) S&P 500 Fund 27,812,775.387
Institutional Select(TM) Small-Cap Value Index Fund 3,353,308.651
MarketManager Balanced Portfolio 10,593,774.630
MarketManager Growth Portfolio 15,793,488.365
MarketManager International Portfolio 11,317,040.723
MarketManager Small Cap Portfolio 12,312,940.261
MarketTrack(TM) All Equity Portfolio 23,245,464.856
MarketTrack(TM) Balanced Portfolio 29,007,296.910
MarketTrack(TM) Conservative Portfolio 13,717,539.186
MarketTrack(TM) Growth Portfolio 29,583,906.616
S&P 500 Fund 356,119,429.165
Schwab 1000 Fund(R) 188,381,569.126
Schwab International Index Fund(R) 60,195,126.093
Small-Cap Index Fund(R) 59,247,113.059
Total Stock Market Index Fund 16,683,860.210
BOND FUNDS:
- ------------------------------------------------------------------------------------------------------------------------------------
California Long-Term Tax-Free Bond Fund 15,677,621.415
California Short/Intermediate Tax-Free Bond Fund 11,107,759.712
Long-Term Tax-Free Bond Fund 7,575,669.279
Short/Intermediate Tax-Free Bond Fund 8,254,874.365
Short-Term Bond Market Index Fund 22,821,128.792
Total Bond Market Index Fund(TM) 59,332,232.869
YieldPlus Fund(TM) 20,477,698.683
MONEY MARKET FUNDS:
- ------------------------------------------------------------------------------------------------------------------------------------
California Municipal Money Fund 5,480,551,325.024
Florida Municipal Money Fund 749,161,453.010
Government Cash Reserves Fund 225,803,355.340
Government Money Fund 2,570,850,021.580
Institutional Advantage Money Fund(R) 596,745,140.599
Money Market Fund 37,466,748,956.780
Municipal Money Fund 8,584,495,797.467
New Jersey Municipal Money Fund 232,055,197.440
New York Municipal Money Fund 986,207,198.666
Pennsylvania Municipal Money Fund 189,746,458.950
Retirement Money Fund(R) 302,088,735.403
U.S. Treasury Money Fund 2,430,410,903.820
Value Advantage Money Fund(R) 30,172,474,161.032
TOTAL 91,424,256,816.239 333,628,559.241 952,894,303.798
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
32 PROXY STATEMENT
<PAGE> 34
APPENDIX
<TABLE>
<CAPTION>
Table of Contents
<S> <C>
A-1 Schwab Equity Funds
A-1 Analytics Fund(R)
A-2 MarketManager International Portfolio
A-3 MarketTrack Balanced Portfolio
A-4 MarketTrack Conservative Portfolio
A-6 MarketTrack Growth Portfolio
A-7 S&P 500 Fund
A-8 Schwab 1000 Fund(R)
A-10 Schwab International Index Fund(R)
A-11 Schwab Small-Cap Index Fund(R)
A-13 Schwab Bond Funds
A-13 California Long-Term Tax-Free Bond Fund
A-14 California Short/Intermediate Tax-Free Bond Fund
A-15 Long-Term Tax-Free Bond Fund
A-17 Short/Intermediate Tax-Free Bond Fund
A-18 Short-Term Bond Market Index Fund
A-18 Total Bond Market Index Fund(TM)
A-19 Schwab Money Funds
A-19 California Municipal Money Fund
A-19 Government Money Fund
A-21 Institutional Advantage Money Fund(R)
A-23 Money Market Fund
A-25 Municipal Money Fund
A-26 New York Municipal Money Fund
A-27 Retirement Money Fund(R)
A-29 U.S. Treasury Money Fund
A-30 Value Advantage Money Fund(R)
</TABLE>
THIS APPENDIX PROVIDES EACH FUND'S CURRENT FUNDAMENTAL POLICIES AFFECTED BY
PROPOSALS 2 AND 3, ALONG WITH THE PROPOSED POLICIES FOR EACH FUND.
THE PROXY STATEMENT (PAGES 8 - 32) PROVIDES AN ANALYSIS OF EACH PROPOSAL. YOU
MAY FIND IT HELPFUL TO REFER TO THIS APPENDIX WHILE READING THE PROXY STATEMENT
IN ORDER TO GET A MORE COMPLETE PICTURE OF THE CURRENT AND PROPOSED POLICIES FOR
A GIVEN FUND.
APPENDIX 33
<PAGE> 35
ANALYTICS FUND(R)
BORROWING/SENIOR SECURITIES Proposals 2Ci, 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not borrow money or issue senior securities, except that the fund
may borrow from banks as a temporary measure to satisfy redemption requests or
for extraordinary or emergency purposes and then only in an amount not to exceed
one-third of the value of its total assets (including the amount borrowed),
provided that the fund will not purchase securities while borrowings represent
more than 5% of its total assets.
NEW FUNDAMENTAL POLICY
The fund may not borrow money, except to the extent permitted under the 1940
Act, the rules or regulations thereunder or any exemption therefrom, as such
statute, rules or regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not borrow money except that the fund may (i) borrow money from
banks and (ii) engage in reverse repurchase agreements with any party; provided
that (i) and (ii) in combination do not exceed 33 1/3% of its total assets (any
borrowings that come to exceed this amount will be reduced to the extent
necessary to comply with the limitation within three business days) and the fund
will not purchase securities while borrowings represent more than 5% of its
total assets.
LENDING Proposal 2Cii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not lend money to any person, except that the fund may (1) purchase
a portion of an issue of short-term debt securities or similar obligations
(including repurchase agreements) that are distributed publicly or customarily
purchased by institutional investors, and (2) lend its portfolio securities.
NEW FUNDAMENTAL POLICY
The fund may not make loans to other persons, except to the extent permitted
under the 1940 Act, the rules or regulations thereunder or any exemption
therefrom, as such statute, rules or regulations may be amended or interpreted
from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not lend any security or make any other loan if, as a result, more
than 331/3% of its total assets would be lent to other parties (this restriction
does not apply to purchases of debt securities or repurchase agreements).
SENIOR SECURITIES/PLEDGING OF ASSETS Proposal 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not pledge, mortgage or hypothecate any of its assets, except that,
to secure allowable borrowings, the fund may do so with respect to no more than
one-third of the value of its total assets.
NEW FUNDAMENTAL POLICY
The fund may not issue senior securities, except to the extent permitted under
the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as
such statute, rules or regulations may be amended or interpreted from time to
time.
DIVERSIFICATION Proposal 2D
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not, as to 75% of its assets, purchase securities of any issuer
(other than obligations of, or guaranteed by, the U.S. government, its agencies
or instrumentalities or investments in other registered investment companies)
if, as a result, more than 5% of the value of its total assets would be invested
in the securities of such issuer.
NEW FUNDAMENTAL POLICY
The fund may not purchase securities of an issuer, except as consistent with the
maintenance of its status as an open-end diversified company under the 1940 Act,
the rules or regulations thereunder or any exemption therefrom, as such statute,
rules or regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not, as to 75% of its assets, purchase securities of any issuer
(other than obligations of, or guaranteed by, the U.S. government, its agencies
or instrumentalities or investments in other registered investment companies)
if, as a result, more than 5% of the value of its total assets would be invested
in the securities of such issuer.
INDUSTRY CONCENTRATION Proposal 2I
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase securities (other than securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities) if, as a result of
such purchase, 25% or more of the value of its total assets would be invested in
any industry (except that the fund may purchase securities under such
circumstances only to the extent that the S&P 500(R) also is so concentrated).
NEW FUNDAMENTAL POLICY
The fund may not concentrate investments in a particular
industry or group of industries, as concentration is defined under the 1940 Act,
the rules or regulations thereunder or any exemption therefrom, as such statute,
rules or regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase securities (other than securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities) if, as a result of
such purchase, 25% or more of the value of its total assets would be invested in
any industry (except that the fund may purchase securities under such
circumstances only to the extent that the S&P 500(R) also is so concentrated).
COMMODITIES Proposal 2J
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase or sell commodities, commodity contracts or real
estate, including interests in real estate limited partnerships, provided that
the fund may (1) purchase securities of companies that deal in real estate or
interests therein, (2) purchase or sell futures contracts, options contracts,
equity index participations and index participation contracts, and (3) purchase
securities of companies that deal in precious metals or interests therein.
NEW FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
A-1 ANALYTICS FUND(R) - APPENDIX
<PAGE> 36
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase or sell commodities, commodity contracts or real
estate, including interests in real estate limited partnerships, provided that
the fund may (1) purchase securities of companies that deal in real estate or
interests therein, (2) purchase or sell futures contracts, options contracts,
equity index participations and index participation contracts, and (3) purchase
securities of companies that deal in precious metals or interests therein.
UNDERWRITING Proposal 2K
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not underwrite securities issued by others, except to the extent it
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of securities from its investment portfolio.
NEW FUNDAMENTAL POLICY
The fund may not underwrite securities issued by other persons, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
MARKETMANAGER(TM) INTERNATIONAL PORTFOLIO
BORROWING/SENIOR SECURITIES Proposals 2Ci, 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not borrow money or issue senior securities, except that the
portfolio may borrow from banks as a temporary measure to satisfy redemption
requests or for extraordinary or emergency purposes and then only in an amount
not to exceed one-third of the value of its total assets (including the amount
borrowed), provided that the portfolio will not purchase securities while
borrowings represent more than 5% of its total assets.
NEW FUNDAMENTAL POLICY
The fund may not borrow money, except to the extent permitted under the 1940
Act, the rules or regulations thereunder or any exemption therefrom, as such
statute, rules or regulations may be amended or interpreted from time to time.
See also new fundamental policy on senior securities below.
NEW NON-FUNDAMENTAL POLICY
The fund may not borrow money except that the fund may (i) borrow money from
banks and (ii) engage in reverse repurchase agreements with any party; provided
that (i) and (ii) in combination do not exceed 33 1/3% of its total assets (any
borrowings that come to exceed this amount will be reduced to the extent
necessary to comply with the limitation within three business days) and the fund
will not purchase securities while borrowings represent more than 5% of its
total assets.
LENDING Proposal 2Cii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not lend money to any person, except that the portfolio may (1)
purchase a portion of an issue of short-term debt securities or similar
obligations (including repurchase agreements) that are distributed publicly or
customarily purchased by institutional investors, and (2) lend its portfolio
securities.
NEW FUNDAMENTAL POLICY
The fund may not make loans to other persons, except to the extent permitted
under the 1940 Act, the rules or regulations thereunder or any exemption
therefrom, as such statute, rules or regulations may be amended or interpreted
from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties (this
restriction does not apply to purchases of debt securities or repurchase
agreements).
SENIOR SECURITIES/PLEDGING OF ASSETS Proposal 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not pledge, mortgage or hypothecate any of its assets, except that,
to secure allowable borrowings, the portfolio may do so with respect to no more
than one-third of the value of its total assets.
NEW FUNDAMENTAL POLICY
The fund may not issue senior securities, except to the extent permitted under
the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as
such statute, rules or regulations may be amended or interpreted from time to
time.
DIVERSIFICATION Proposal 2D
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not, as to 75% of its assets, purchase securities of any issuer
(other than obligations of, or guaranteed by, the U.S. government, its agencies
or instrumentalities or investments in other registered investment companies)
if, as a result, more than 5% of the value of its total assets would be invested
in the securities of such issuer.
NEW FUNDAMENTAL POLICY
The fund may not purchase securities of an issuer, except as consistent with the
maintenance of its status as an open-end diversified company under the 1940 Act,
the rules or regulations thereunder or any exemption therefrom, as such statute,
rules or regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not, as to 75% of its assets, purchase securities of any issuer
(other than obligations of, or guaranteed by, the U.S. government, its agencies
or instrumentalities or investments in other registered investment companies)
if, as a result, more than 5% of the value of its total assets would be invested
in the securities of such issuer.
INDUSTRY CONCENTRATION Proposal 2I
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase securities (other than securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities) if, as a result of
such purchase, 25% or more of the value of its total assets would be invested in
any industry (except the portfolio will invest 25% or more of its total assets
in other investment companies).
NEW FUNDAMENTAL POLICY
The fund may not concentrate investments in a particular industry or group of
industries, as concentration is defined under the 1940 Act, the rules or
regulations thereunder or any exemption therefrom, as such statute, rules or
regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase securities (other than securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities) if, as a result of
such purchase, 25% or more of the value of its total assets would be invested in
any industry (except the portfolio will invest 25% or more of its total assets
in other investment companies).
Appendix - Analytics Fund(R) - MarketManager(TM) International Portfolio A-2
<PAGE> 37
COMMODITIES Proposal 2J
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase or sell commodities, commodity contracts or real
estate, including interests in real estate limited partnerships, provided that
the portfolio may (1) purchase securities of companies that deal in real estate
or interests therein, (2) purchase or sell futures contracts, options contracts,
equity index participations and index participation contracts.
NEW FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase or sell commodities, commodity contracts or real
estate, including interests in real estate limited partnerships, provided that
the portfolio may (1) purchase securities of companies that deal in real estate
or interests therein, (2) purchase or sell futures contracts, options contracts,
equity index participations and index participation contracts.
UNDERWRITING Proposal 2K
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not underwrite securities issued by others, except to the extent it
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of securities from its investment portfolio.
NEW FUNDAMENTAL POLICY
The fund may not underwrite securities issued by other persons, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
MARKETTRACK(TM) BALANCED PORTFOLIO
BORROWING/SENIOR SECURITIES Proposals 2Ci, 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not borrow money or issue senior securities, except that each
portfolio may borrow from banks as a temporary measure to satisfy redemption
requests or for extraordinary or emergency purposes and then only in an amount
not to exceed one-third of the value of its total assets (including the amount
borrowed), provided that each portfolio will not purchase securities while
borrowings represent more than 5% of its total assets.
NEW FUNDAMENTAL POLICY
The fund may not borrow money, except to the extent permitted under the 1940
Act, the rules or regulations thereunder or any exemption therefrom, as such
statute, rules or regulations may be amended or interpreted from time to time.
See also new fundamental policy on senior securities below.
NEW NON-FUNDAMENTAL POLICY
The fund may not borrow money except that the fund may (i) borrow money from
banks and (ii) engage in reverse repurchase agreements with any party; provided
that (i) and (ii) in combination do not exceed 33 1/3% of its total assets (any
borrowings that come to exceed this amount will be reduced to the extent
necessary to comply with the limitation within three business days) and the fund
will not purchase securities while borrowings represent more than 5% of its
total assets.
LENDING Proposal 2Cii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not lend money to any person, except that each portfolio may (1)
purchase a portion of an issue of short-term debt securities or similar
obligations (including repurchase agreements) that are distributed publicly or
customarily purchased by institutional investors, and (2) lend its portfolio
securities.
NEW FUNDAMENTAL POLICY
The fund may not make loans to other persons, except to the extent permitted
under the 1940 Act, the rules or regulations thereunder or any exemption
therefrom, as such statute, rules or regulations may be amended or interpreted
from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties (this
restriction does not apply to purchases of debt securities or repurchase
agreements).
SENIOR SECURITIES/PLEDGING OF ASSETS Proposal 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not pledge, mortgage or hypothecate any of its assets, except that,
to secure allowable borrowings, each portfolio may do so with respect to no more
than one-third of the value of its total assets.
NEW FUNDAMENTAL POLICY
The fund may not issue senior securities, except to the extent permitted under
the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as
such statute, rules or regulations may be amended or interpreted from time to
time.
DIVERSIFICATION Proposal 2D
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not, as to 75% of its assets, purchase securities of any issuer
(other than obligations of, or guaranteed by, the U.S. government, its agencies
or instrumentalities or investments in other registered investment companies)
if, as a result, more than 5% of the value of its total assets would be invested
in the securities of such issuer.
NEW FUNDAMENTAL POLICY
The fund may not purchase securities of an issuer, except as consistent with the
maintenance of its status as an open-end diversified company under the 1940 Act,
the rules or regulations thereunder or any exemption therefrom, as such statute,
rules or regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not, as to 75% of its assets, purchase securities of any issuer
(other than obligations of, or guaranteed by, the U.S. government, its agencies
or instrumentalities or investments in other registered investment companies)
if, as a result, more than 5% of the value of its total assets would be invested
in the securities of such issuer.
RESTRICTED/ILLIQUID SECURITIES Proposal 2F
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest more than 10% of its net assets in illiquid securities,
including repurchase agreements with maturities in excess of seven days.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest more than 15% of its net assets in illiquid securities.
A-3 MARKETMANAGER(TM) INTERNATIONAL PORTFOLIO - MARKETTRACK(TM) BALANCED
PORTFOLIO - APPENDIX
<PAGE> 38
OFFICER/TRUSTEE OWNERSHIP Proposal 2H
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase or retain securities of an issuer if any of the
officers, trustees or directors of the trust or the investment adviser
individually own beneficially more than one-half of 1% of the securities of such
issuer and together beneficially own more than 5% of the securities of such
issuer.
INDUSTRY CONCENTRATION Proposal 2I
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase securities (other than securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities) if, as a result of
such purchase, 25% or more of the value of its total assets would be invested in
any industry.
NEW FUNDAMENTAL POLICY
The fund may not concentrate investments in a particular industry or group of
industries, as concentration is defined under the 1940 Act, the rules or
regulations thereunder or any exemption therefrom, as such statute, rules or
regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase securities (other than securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities) if, as a result of
such purchase, 25% or more of the value of its total assets would be invested in
any industry.
COMMODITIES Proposal 2J
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase or sell commodities, commodity contracts or real
estate, including interests in real estate limited partnerships, provided that
each portfolio may (1) purchase securities of companies that deal in real estate
or interests therein, (2) purchase or sell futures contracts, options contracts,
equity index participations and index participation contracts and (3) purchase
securities of companies that deal in precious metals or interests therein.
NEW FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase or sell commodities, commodity contracts or real
estate, including interests in real estate limited partnerships, provided that
each portfolio may (1) purchase securities of companies that deal in real estate
or interests therein, (2) purchase or sell futures contracts, options contracts,
equity index participations and index participation contracts and (3) purchase
securities of companies that deal in precious metals or interests therein.
UNDERWRITING Proposal 2K
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not underwrite securities issued by others, except to the extent it
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of securities from its investment portfolio.
NEW FUNDAMENTAL POLICY
The fund may not underwrite securities issued by other persons, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
ISSUER CONTROL Proposal 2L
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
MARKETTRACK(TM) CONSERVATIVE PORTFOLIO
BORROWING/SENIOR SECURITIES Proposals 2Ci, 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not borrow money or issue senior securities, except that each
portfolio may borrow from banks as a temporary measure to satisfy redemption
requests or for extraordinary or emergency purposes and then only in an amount
not to exceed one-third of the value of its total assets (including the amount
borrowed), provided that each portfolio will not purchase securities while
borrowings represent more than 5% of its total assets.
NEW FUNDAMENTAL POLICY
The fund may not borrow money, except to the extent permitted under the 1940
Act, the rules or regulations thereunder or any exemption therefrom, as such
statute, rules or regulations may be amended or interpreted from time to time.
See also new fundamental policy on senior securities below.
NEW NON-FUNDAMENTAL POLICY
The fund may not borrow money except that the fund may (i) borrow money from
banks and (ii) engage in reverse repurchase agreements with any party; provided
that (i) and (ii) in combination do not exceed 33 1/3% of its total assets (any
borrowings that come to exceed this amount will be reduced to the extent
necessary to comply with the limitation within three business days) and the fund
will not purchase securities while borrowings represent more than 5% of its
total assets.
LENDING Proposal 2Cii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not lend money to any person, except that each portfolio may (1)
purchase a portion of an issue of short-term debt securities or similar
obligations (including repurchase agreements) that are distributed publicly or
customarily purchased by institutional investors, and (2) lend its portfolio
securities.
NEW FUNDAMENTAL POLICY
The fund may not make loans to other persons, except to the extent permitted
under the 1940 Act, the rules or regulations thereunder or any exemption
therefrom, as such statute, rules or regulations may be amended or interpreted
from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties (this
restriction does not apply to purchases of debt securities or repurchase
agreements).
APPENDIX - MARKETTRACK(TM) BALANCED PORTFOLIO - MARKETTRACK(TM)
CONSERVATIVE PORTFOLIO A-4
<PAGE> 39
SENIOR SECURITIES/PLEDGING OF ASSETS Proposal 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not pledge, mortgage or hypothecate any of its assets, except that,
to secure allowable borrowings, each portfolio may do so with respect to no more
than one-third of the value of its total assets.
NEW FUNDAMENTAL POLICY
The fund may not issue senior securities, except to the extent permitted under
the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as
such statute, rules or regulations may be amended or interpreted from time to
time.
DIVERSIFICATION Proposal 2D
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not, as to 75% of its assets, purchase securities of any issuer
(other than obligations of, or guaranteed by, the U.S. government, its agencies
or instrumentalities or investments in other registered investment companies)
if, as a result, more than 5% of the value of its total assets would be invested
in the securities of such issuer.
NEW FUNDAMENTAL POLICY
The fund may not purchase securities of an issuer, except as consistent with the
maintenance of its status as an open-end diversified company under the 1940 Act,
the rules or regulations thereunder or any exemption therefrom, as such statute,
rules or regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not, as to 75% of its assets, purchase securities of any issuer
(other than obligations of, or guaranteed by, the U.S. government, its agencies
or instrumentalities or investments in other registered investment companies)
if, as a result, more than 5% of the value of its total assets would be invested
in the securities of such issuer.
RESTRICTED/ILLIQUID SECURITIES Proposal 2F
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest more than 10% of its net assets in illiquid securities,
including repurchase agreements with maturities in excess of seven days.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest more than 15% of its net assets in illiquid securities.
OFFICER/TRUSTEE OWNERSHIP Proposal 2H
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase or retain securities of an issuer if any of the
officers, trustees or directors of the trust or the investment adviser
individually own beneficially more than one-half of 1% of the securities of such
issuer and together beneficially own more than 5% of the securities of such
issuer.
INDUSTRY CONCENTRATION Proposal 2I
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase securities (other than securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities) if, as a result of
such purchase, 25% or more of the value of its total assets would be invested in
any industry.
NEW FUNDAMENTAL POLICY
The fund may not concentrate investments in a particular industry or group of
industries, as concentration is defined under the 1940 Act, the rules or
regulations thereunder or any exemption therefrom, as such statute, rules or
regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase securities (other than securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities) if, as a result of
such purchase, 25% or more of the value of its total assets would be invested in
any industry.
COMMODITIES Proposal 2J
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase or sell commodities, commodity contracts or real
estate, including interests in real estate limited partnerships, provided that
each portfolio may (1) purchase securities of companies that deal in real estate
or interests therein, (2) purchase or sell futures contracts, options contracts,
equity index participations and index participation contracts and (3) purchase
securities of companies that deal in precious metals or interests therein.
NEW FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase or sell commodities, commodity contracts or real
estate, including interests in real estate limited partnerships, provided that
each portfolio may (1) purchase securities of companies that deal in real estate
or interests therein, (2) purchase or sell futures contracts, options contracts,
equity index participations and index participation contracts and (3) purchase
securities of companies that deal in precious metals or interests therein.
UNDERWRITING Proposal 2K
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not underwrite securities issued by others, except to the extent it
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of securities from its investment portfolio.
NEW FUNDAMENTAL POLICY
The fund may not underwrite securities issued by other persons, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
ISSUER CONTROL Proposal 2L
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
A-5 MARKETTRACK(TM) CONSERVATIVE PORTFOLIO - APPENDIX
<PAGE> 40
MARKETTRACK(TM) GROWTH PORTFOLIO
BORROWING/SENIOR SECURITIES Proposals 2Ci, 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not borrow money or issue senior securities, except that each
portfolio may borrow from banks as a temporary measure to satisfy redemption
requests or for extraordinary or emergency purposes and then only in an amount
not to exceed one-third of the value of its total assets (including the amount
borrowed), provided that each portfolio will not purchase securities while
borrowings represent more than 5% of its total assets.
NEW FUNDAMENTAL POLICY
The fund may not borrow money, except to the extent permitted under the 1940
Act, the rules or regulations thereunder or any exemption therefrom, as such
statute, rules or regulations may be amended or interpreted from time to time.
See also new fundamental policy on senior securities below.
NEW NON-FUNDAMENTAL POLICY
The fund may not borrow money except that the fund may (i) borrow money from
banks and (ii) engage in reverse repurchase agreements with any party; provided
that (i) and (ii) in combination do not exceed 33 1/3% of its total assets (any
borrowings that come to exceed this amount will be reduced to the extent
necessary to comply with the limitation within three business days) and the fund
will not purchase securities while borrowings represent more than 5% of its
total assets.
LENDING Proposal 2Cii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not lend money to any person, except that each portfolio may (1)
purchase a portion of an issue of short-term debt securities or similar
obligations (including repurchase agreements) that are distributed publicly or
customarily purchased by institutional investors, and (2) lend its portfolio
securities.
NEW FUNDAMENTAL POLICY
The fund may not make loans to other persons, except to the extent permitted
under the 1940 Act, the rules or regulations thereunder or any exemption
therefrom, as such statute, rules or regulations may be amended or interpreted
from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties (this
restriction does not apply to purchases of debt securities or repurchase
agreements).
SENIOR SECURITIES/PLEDGING OF ASSETS Proposal 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not pledge, mortgage or hypothecate any of its assets, except that,
to secure allowable borrowings, each portfolio may do so with respect to no more
than one-third of the value of its total assets.
NEW FUNDAMENTAL POLICY
The fund may not issue senior securities, except to the extent permitted under
the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as
such statute, rules or regulations may be amended or interpreted from time to
time.
DIVERSIFICATION Proposal 2D
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not, as to 75% of its assets, purchase securities of any issuer
(other than obligations of, or guaranteed by, the U.S. government, its agencies
or instrumentalities or investments in other registered investment companies)
if, as a result, more than 5% of the value of its total assets would be invested
in the securities of such issuer.
NEW FUNDAMENTAL POLICY
The fund may not purchase securities of an issuer, except as consistent with the
maintenance of its status as an open-end diversified company under the 1940 Act,
the rules or regulations thereunder or any exemption therefrom, as such statute,
rules or regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not, as to 75% of its assets, purchase securities of any issuer
(other than obligations of, or guaranteed by, the U.S. government, its agencies
or instrumentalities or investments in other registered investment companies)
if, as a result, more than 5% of the value of its total assets would be invested
in the securities of such issuer.
RESTRICTED/ILLIQUID SECURITIES Proposal 2F
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest more than 10% of its net assets in illiquid securities,
including repurchase agreements with maturities in excess of seven days.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest more than 15% of its net assets in illiquid securities.
OFFICER/TRUSTEE OWNERSHIP Proposal 2H
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase or retain securities of an issuer if any of the
officers, trustees or directors of the trust or the investment adviser
individually own beneficially more than one-half of 1% of the securities of such
issuer and together beneficially own more than 5% of the securities of such
issuer.
INDUSTRY CONCENTRATION Proposal 2I
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase securities (other than securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities) if, as a result of
such purchase, 25% or more of the value of its total assets would be invested in
any industry.
NEW FUNDAMENTAL POLICY
The fund may not concentrate investments in a particular industry or group of
industries, as concentration is defined under the 1940 Act, the rules or
regulations thereunder or any exemption therefrom, as such statute, rules or
regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase securities (other than securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities) if, as a result of
such purchase, 25% or more of the value of its total assets would be invested in
any industry.
APPENDIX - MARKETTRACK(TM) GROWTH PORTFOLIO A-6
<PAGE> 41
COMMODITIES Proposal 2J
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase or sell commodities, commodity contracts or real
estate, including interests in real estate limited partnerships, provided that
each portfolio may (1) purchase securities of companies that deal in real estate
or interests therein, (2) purchase or sell futures contracts, options contracts,
equity index participations and index participation contracts and (3) purchase
securities of companies that deal in precious metals or interests therein.
NEW FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase or sell commodities, commodity contracts or real
estate, including interests in real estate limited partnerships, provided that
each portfolio may (1) purchase securities of companies that deal in real estate
or interests therein, (2) purchase or sell futures contracts, options contracts,
equity index participations and index participation contracts and (3) purchase
securities of companies that deal in precious metals or interests therein.
UNDERWRITING Proposal 2K
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not underwrite securities issued by others, except to the extent it
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of securities from its investment portfolio.
NEW FUNDAMENTAL POLICY
The fund may not underwrite securities issued by other persons, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
ISSUER CONTROL Proposal 2L
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
S&P 500 FUND
BORROWING/SENIOR SECURITIES Proposals 2Ci, 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not borrow money or issue senior securities, except that the fund
may borrow from banks as a temporary measure to satisfy redemption requests or
for extraordinary or emergency purposes and then only in an amount not to exceed
one-third of the value of its total assets (including the amount borrowed),
provided that each fund will not purchase securities while borrowings represent
more than 5% of its total assets.
NEW FUNDAMENTAL POLICY
The fund may not borrow money, except to the extent permitted under the 1940
Act, the rules or regulations thereunder or any exemption therefrom, as such
statute, rules or regulations may be amended or interpreted from time to time.
See also new fundamental policy on senior securities above.
NEW NON-FUNDAMENTAL POLICY
The fund may not borrow money except that the fund may (i) borrow money from
banks and (ii) engage in reverse repurchase agreements with any party; provided
that (i) and (ii) in combination do not exceed 33 1/3% of its total assets (any
borrowings that come to exceed this amount will be reduced to the extent
necessary to comply with the limitation within three business days) and the fund
will not purchase securities while borrowings represent more than 5% of its
total assets.
LENDING Proposal 2Cii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not lend money to any person, except that each fund may (i)
purchase a portion of an issue of short-term debt securities or similar
obligations (including repurchase agreements) that are distributed publicly or
customarily purchased by institutional investors, and (ii) lend its portfolio
securities.
NEW FUNDAMENTAL POLICY
The fund may not make loans to other persons, except to the extent permitted
under the 1940 Act, the rules or regulations thereunder or any exemption
therefrom, as such statute, rules or regulations may be amended or interpreted
from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties (this
restriction does not apply to purchases of debt securities or repurchase
agreements).
SENIOR SECURITIES/PLEDGING OF ASSETS Proposal 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not pledge, mortgage or hypothecate any of its assets, except that,
to secure allowable borrowings, each fund may do so with respect to no more than
one-third of the value of its total assets.
NEW FUNDAMENTAL POLICY
The fund may not issue senior securities, except to the extent permitted under
the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as
such statute, rules or regulations may be amended or interpreted from time to
time.
DIVERSIFICATION Proposal 2D
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not, as to 75% of its assets, purchase securities of any issuer
(other than obligations of, or guaranteed by, the U.S. government, its agencies
or instrumentalities or investments in other registered investment companies)
if, as a result, more than 5% of the value of its total assets would be invested
in the securities of such issuer.
NEW FUNDAMENTAL POLICY
The fund may not purchase securities of an issuer, except as consistent with the
maintenance of its status as an open-end diversified company under the 1940 Act,
the rules or regulations thereunder or any exemption therefrom, as such statute,
rules or regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not, as to 75% of its assets, purchase securities of any issuer
(other than obligations of, or guaranteed by, the U.S. government, its agencies
or instrumentalities or investments in other registered investment companies)
if, as a result, more than 5% of the value of its total assets would be invested
in the securities of such issuer.
A-7 MARKETTRACK(TM) GROWTH PORTFOLIO - S&P 500 FUND - APPENDIX
<PAGE> 42
RESTRICTED/ILLIQUID SECURITIES Proposal 2F
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest more than 10% of its net assets in illiquid securities,
including repurchase agreements with maturities in excess of seven days.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest more than 15% of its net assets in illiquid securities.
OFFICER/TRUSTEE OWNERSHIP Proposal 2H
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase or retain securities of an issuer if any of the
officers, trustees or directors of the trust or the investment adviser
individually own beneficially more than half of 1% of the securities of such
issuer and together beneficially own more than 5% of the securities of such
issuer.
INDUSTRY CONCENTRATION Proposal 2I
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase securities (other than securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities) if, as a result of
such purchase, 25% or more of the value of its total assets would be invested in
any industry (except that each fund may purchase securities under such
circumstances only to the extent that its index is also so concentrated).
NEW FUNDAMENTAL POLICY
The fund may not concentrate investments in a particular industry or group of
industries, as concentration is defined under the 1940 Act, the rules or
regulations thereunder or any exemption therefrom, as such statute, rules or
regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase securities (other than securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities) if, as a result of
such purchase, 25% or more of the value of its total assets would be invested in
any industry (except that each fund may purchase securities under such
circumstances only to the extent that its index is also so concentrated).
COMMODITIES Proposal 2J
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase or sell commodities, commodity contracts or real
estate, including interests in real estate limited partnerships, provided that
each fund may (i) purchase securities of companies that deal in real estate or
interests therein, (ii) purchase or sell futures contracts, options contracts,
equity index participations and index participation contracts, and (iii) for the
S&P 500 Fund, purchase securities of companies that deal in precious metals or
interests therein.
NEW FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase or sell commodities, commodity contracts or real
estate, including interests in real estate limited partnerships, provided that
each fund may (i) purchase securities of companies that deal in real estate or
interests therein, (ii) purchase or sell futures contracts, options contracts,
equity index participations and index participation contracts, and (iii) for the
S&P 500 Fund, purchase securities of companies that deal in precious metals or
interests therein.
UNDERWRITING Proposal 2K
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not underwrite securities issued by others, except to the extent it
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of securities from its investment portfolio.
NEW FUNDAMENTAL POLICY
The fund may not underwrite securities issued by other persons, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
ISSUER CONTROL Proposal 2L
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
SCHWAB 1000 FUND(R)
BORROWING Proposal 2Ci
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not borrow money except from banks as a temporary measure to
satisfy redemption requests or for extraordinary or emergency purposes and then
only in an amount not to exceed one-third of the value of its total assets
(including the amount borrowed), provided that the fund will not purchase
securities while borrowings represent more than 5% of its total assets.
NEW FUNDAMENTAL POLICY
The fund may not borrow money, except to the extent permitted under the 1940
Act, the rules or regulations thereunder or any exemption therefrom, as such
statute, rules or regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not borrow money except that the fund may (i) borrow money from
banks and (ii) engage in reverse repurchase agreements with any party; provided
that (i) and (ii) in combination do not exceed 33 1/3% of its total assets (any
borrowings that come to exceed this amount will be reduced to the extent
necessary to comply with the limitation within three business days) and the fund
will not purchase securities while borrowings represent more than 5% of its
total assets.
LENDING Proposal 2Cii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not lend money to any person, except that each fund may (i)
purchase a portion of an issue of short-term debt securities or similar
obligations (including repurchase agreements) that are distributed publicly or
customarily purchased by institutional investors, and (ii) lend its portfolio
securities.
NEW FUNDAMENTAL POLICY
The fund may not make loans to other persons, except to the extent permitted
under the 1940 Act, the rules or regulations thereunder or any exemption
therefrom, as such statute, rules or regulations may be amended or interpreted
from time to time.
APPENDIX - S&P 500 FUND - SCHWAB 1000 FUND(R) A-8
<PAGE> 43
<PAGE> 44
NEW NON-FUNDAMENTAL POLICY
The fund may not lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties (this
restriction does not apply to purchases of debt securities or repurchase
agreements).
SENIOR SECURITIES/PLEDGING OF ASSETS Proposal 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not pledge, mortgage or hypothecate any of its assets, except that,
to secure allowable borrowings, each fund may do so with respect to no more than
one-third of the value of its total assets.
NEW FUNDAMENTAL POLICY
The fund may not issue senior securities, except to the extent permitted under
the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as
such statute, rules or regulations may be amended or interpreted from time to
time.
DIVERSIFICATION Proposal 2D
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not, as to 75% of its assets, purchase securities of any issuer
(other than obligations of, or guaranteed by, the U.S. government, its agencies
or instrumentalities) if, as a result, more than 5% of the value of its total
assets would be invested in the securities of such issuer.
NEW FUNDAMENTAL POLICY
The fund may not purchase securities of an issuer, except as consistent with the
maintenance of its status as an open-end diversified company under the 1940 Act,
the rules or regulations thereunder or any exemption therefrom, as such statute,
rules or regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not, as to 75% of its assets, purchase securities of any issuer
(other than obligations of, or guaranteed by, the U.S. government, its agencies
or instrumentalities) if, as a result, more than 5% of the value of its total
assets would be invested in the securities of such issuer.
RESTRICTED/ILLIQUID SECURITIES Proposal 2F
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest more than 10% of the total value of its assets in
illiquid securities, including repurchase agreements with maturities in excess
of seven days.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest more than 15% of net assets in illiquid securities.
OFFICER/TRUSTEE OWNERSHIP Proposal 2H
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase or retain securities of an issuer if any of the
officers, trustees or directors of the trust or the investment adviser
individually own beneficially more than half of 1% of the securities of such
issuer and together beneficially own more than 5% of the securities of such
issuer.
INDUSTRY CONCENTRATION Proposal 2I
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase securities (other then securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities) if, as a result of
such purchase, 25% or more of the value of its total assets would be invested in
any industry (except to the extent that the Schwab 1000 Index(R) is also so
concentrated). Securities issued by governments or political subdivisions or
authorities of governments are not considered to be securities subject to this
concentration restriction.
NEW FUNDAMENTAL POLICY
The fund may not concentrate investments in a particular industry or group of
industries, as concentration is defined under the 1940 Act, the rules or
regulations thereunder or any exemption therefrom, as such statute, rules or
regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase securities (other then securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities) if, as a result of
such purchase, 25% or more of the value of its total assets would be invested in
any industry (except to the extent that the Schwab 1000 Index(R) is also so
concentrated). Securities issued by governments or political subdivisions or
authorities of governments are not considered to be securities subject to this
concentration restriction.
COMMODITIES Proposal 2J
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, including
interests in real estate limited partnerships, provided that the fund may (i)
purchase securities of companies that deal in real estate or interests therein,
and (ii) purchase or sell futures contracts, options contracts, equity index
participations and index participation contracts.
NEW FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, including
interests in real estate limited partnerships, provided that the fund may (i)
purchase securities of companies that deal in real estate or interests therein,
and (ii) purchase or sell futures contracts, options contracts, equity index
participations and index participation contracts.
UNDERWRITING Proposal 2K
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not underwrite securities issued by others, except to the extent it
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of securities from its investment portfolio.
NEW FUNDAMENTAL POLICY
The fund may not underwrite securities issued by other persons, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
A-9 SCHWAB 1000 FUND(R) - APPENDIX
<PAGE> 45
ISSUER CONTROL Proposal 2L
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
SCHWAB INTERNATIONAL INDEX FUND(R)
BORROWING/SENIOR SECURITIES Proposals 2Ci, 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not borrow money or issue senior securities, except that the fund
may borrow from banks as a temporary measure to satisfy redemption requests or
for extraordinary or emergency purposes and then only in an amount not to exceed
one-third of the value of its total assets (including the amount borrowed),
provided that each fund will not purchase securities while borrowings represent
more than 5% of its total assets.
NEW FUNDAMENTAL POLICY
The fund may not borrow money, except to the extent permitted under the 1940
Act, the rules or regulations thereunder or any exemption therefrom, as such
statute, rules or regulations may be amended or interpreted from time to time.
See also new fundamental policy on senior securities above.
NEW NON-FUNDAMENTAL POLICY
The fund may not borrow money except that the fund may (i) borrow money from
banks and (ii) engage in reverse repurchase agreements with any party; provided
that (i) and (ii) in combination do not exceed 33 1/3% of its total assets (any
borrowings that come to exceed this amount will be reduced to the extent
necessary to comply with the limitation within three business days) and the fund
will not purchase securities while borrowings represent more than 5% of its
total assets.
LENDING Proposals 2Cii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not lend money to any person, except that each fund may (i)
purchase a portion of an issue of short-term debt securities or similar
obligations (including repurchase agreements) that are distributed publicly or
customarily purchased by institutional investors, and (ii) lend its portfolio
securities.
NEW FUNDAMENTAL POLICY
The fund may not make loans to other persons, except to the extent permitted
under the 1940 Act, the rules or regulations thereunder or any exemption
therefrom, as such statute, rules or regulations may be amended or interpreted
from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties (this
restriction does not apply to purchases of debt securities or repurchase
agreements).
SENIOR SECURITIES/PLEDGING OF ASSETS Proposals 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not pledge, mortgage or hypothecate any of its assets, except that,
to secure allowable borrowings, each fund may do so with respect to no more than
one-third of the value of its total assets.
NEW FUNDAMENTAL POLICY
The fund may not issue senior securities, except to the extent permitted under
the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as
such statute, rules or regulations may be amended or interpreted from time to
time.
DIVERSIFICATION Proposal 2D
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not, as to 75% of its assets, purchase securities of any issuer
(other than obligations of, or guaranteed by, the U.S. government, its agencies
or instrumentalities or investments in other registered investment companies)
if, as a result, more than 5% of the value of its total assets would be invested
in the securities of such issuer.
NEW FUNDAMENTAL POLICY
The fund may not purchase securities of an issuer, except as consistent with the
maintenance of its status as an open-end diversified company under the 1940 Act,
the rules or regulations thereunder or any exemption therefrom, as such statute,
rules or regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not, as to 75% of its assets, purchase securities of any issuer
(other than obligations of, or guaranteed by, the U.S. government, its agencies
or instrumentalities or investments in other registered investment companies)
if, as a result, more than 5% of the value of its total assets would be invested
in the securities of such issuer.
RESTRICTED/ILLIQUID SECURITIES Proposal 2F
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest more than 10% of its net assets in illiquid securities,
including repurchase agreements with maturities in excess of seven days.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest more than 15% of its net assets in illiquid securities.
OFFICER/TRUSTEE OWNERSHIP Proposal 2H
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase or retain securities of an issuer if any of the
officers, trustees or directors of the trust or the investment adviser
individually own beneficially more than half of 1% of the securities of such
issuer and together beneficially own more than 5% of the securities of such
issuer.
INDUSTRY CONCENTRATION Proposal 2I
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase securities (other than securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities) if, as a result of
such purchase, 25% or more of the value of its total assets would be invested in
any industry (except that each fund may purchase securities under such
circumstances only to the extent that its index is also so concentrated).
NEW FUNDAMENTAL POLICY
The fund may not concentrate investments in a particular industry or group of
industries, as concentration is defined under the 1940 Act, the rules or
regulations thereunder or any exemption therefrom, as such statute, rules or
regulations may be amended or interpreted from time to time.
APPENDIX - SCHWAB 1000 FUND(R) - SCHWAB INTERNATIONAL INDEX FUND(R) A-10
<PAGE> 46
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase securities (other than securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities) if, as a result of
such purchase, 25% or more of the value of its total assets would be invested in
any industry (except that each fund may purchase securities under such
circumstances only to the extent that its index is also so concentrated).
COMMODITIES Proposal 2J
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase or sell commodities, commodity contracts or real
estate, including interests in real estate limited partnerships, provided that
each fund may (i) purchase securities of companies that deal in real estate or
interests therein, (ii) purchase or sell futures contracts, options contracts,
equity index participations and index participation contracts, and (iii) for the
S&P 500 Fund, purchase securities of companies that deal in precious metals or
interests therein.
NEW FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase or sell commodities, commodity contracts or real
estate, including interests in real estate limited partnerships, provided that
each fund may (i) purchase securities of companies that deal in real estate or
interests therein, (ii) purchase or sell futures contracts, options contracts,
equity index participations and index participation contracts, and (iii) for the
S&P 500 Fund, purchase securities of companies that deal in precious metals or
interests therein.
UNDERWRITING Proposal 2K
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not underwrite securities issued by others, except to the extent it
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of securities from its investment portfolio.
NEW FUNDAMENTAL POLICY
The fund may not underwrite securities issued by other persons, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
ISSUER CONTROL Proposal 2L
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
INVESTMENT OBJECTIVE Proposal 3b
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund seeks to track the price and dividend performance (total return) of the
Schwab International Index(R), an index created to represent the performance of
common stocks and other equity securities issued by large publicly traded
companies from countries around the world with major developed securities
markets, excluding the United States).
NEW FUNDAMENTAL POLICY
The fund seeks to track the performance of a benchmark index that measures the
total return of large, publicly-traded non U.S. companies from countries with
developed equity markets outside the United States.
NEW NON-FUNDAMENTAL POLICY
The fund intends to achieve its investment objective by tracking the price and
dividend performance (total return) of the Schwab International Index.
PORTFOLIO COMPOSITION Proposal 3b
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund will invest at least 65% of its total assets in common stocks and other
equity securities including preferred stocks, rights and warrants of companies
located in at least three countries other than the United States.
SCHWAB SMALL-CAP INDEX FUND(R)
BORROWING/SENIOR SECURITIES Proposals 2Ci, 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not borrow money or issue senior securities, except that the fund
may borrow from banks as a temporary measure to satisfy redemption requests or
for extraordinary or emergency purposes and then only in an amount not to exceed
one-third of the value of its total assets (including the amount borrowed),
provided that each fund will not purchase securities while borrowings represent
more than 5% of its total assets.
NEW FUNDAMENTAL POLICY
The fund may not borrow money, except to the extent permitted under the 1940
Act, the rules or regulations thereunder or any exemption therefrom, as such
statute, rules or regulations may be amended or interpreted from time to time.
See also new fundamental policy on senior securities above.
NEW NON-FUNDAMENTAL POLICY
The fund may not borrow money except that the fund may (i) borrow money from
banks and (ii) engage in reverse repurchase agreements with any party; provided
that (i) and (ii) in combination do not exceed 33 1/3% of its total assets (any
borrowings that come to exceed this amount will be reduced to the extent
necessary to comply with the limitation within three business days) and the fund
will not purchase securities while borrowings represent more than 5% of its
total assets.
LENDING Proposal 2Cii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not lend money to any person, except that each fund may (i)
purchase a portion of an issue of short-term debt securities or similar
obligations (including repurchase agreements) that are distributed publicly or
customarily purchased by institutional investors, and (ii) lend its portfolio
securities.
NEW FUNDAMENTAL POLICY
The fund may not make loans to other persons, except to the extent permitted
under the 1940 Act, the rules or regulations thereunder or any exemption
therefrom, as such statute, rules or regulations may be amended or interpreted
from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties (this
restriction does not apply to purchases of debt securities or repurchase
agreements).
A-11 SCHWAB INTERNATIONAL INDEX FUND(R) - SCHWAB SMALL-CAP INDEX
FUND(R) - APPENDIX
<PAGE> 47
SENIOR SECURITIES/PLEDGING OF ASSETS Proposal 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not pledge, mortgage or hypothecate any of its assets, except that,
to secure allowable borrowings, each fund may do so with respect to no more than
one-third of the value of its total assets.
NEW FUNDAMENTAL POLICY
The fund may not issue senior securities, except to the extent permitted under
the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as
such statute, rules or regulations may be amended or interpreted from time to
time.
DIVERSIFICATION Proposal 2D
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not, as to 75% of its assets, purchase securities of any issuer
(other than obligations of, or guaranteed by, the U.S. government, its agencies
or instrumentalities or investments in other registered investment companies)
if, as a result, more than 5% of the value of its total assets would be invested
in the securities of such issuer.
NEW FUNDAMENTAL POLICY
The fund may not purchase securities of an issuer, except as consistent with the
maintenance of its status as an open-end diversified company under the 1940 Act,
the rules or regulations thereunder or any exemption therefrom, as such statute,
rules or regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not, as to 75% of its assets, purchase securities of any issuer
(other than obligations of, or guaranteed by, the U.S. government, its agencies
or instrumentalities or investments in other registered investment companies)
if, as a result, more than 5% of the value of its total assets would be invested
in the securities of such issuer.
RESTRICTED/ILLIQUID SECURITIES Proposal 2F
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest more than 10% of its net assets in illiquid securities,
including repurchase agreements with maturities in excess of seven days.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest more than 15% of its net assets in illiquid securities.
OFFICER/TRUSTEE OWNERSHIP Proposal 2H
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase or retain securities of an issuer if any of the
officers, trustees or directors of the trust or the investment adviser
individually own beneficially more than half of 1% of the securities of such
issuer and together beneficially own more than 5% of the securities of such
issuer.
INDUSTRY CONCENTRATION Proposal 2I
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase securities (other than securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities) if, as a result of
such purchase, 25% or more of the value of its total assets would be invested in
any industry (except that each fund may purchase securities under such
circumstances only to the extent that its index is also so concentrated).
NEW FUNDAMENTAL POLICY
The fund may not concentrate investments in a particular industry or group of
industries, as concentration is defined under the 1940 Act, the rules or
regulations thereunder or any exemption therefrom, as such statute, rules or
regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase securities (other than securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities) if, as a result of
such purchase, 25% or more of the value of its total assets would be invested in
any industry (except that each fund may purchase securities under such
circumstances only to the extent that its index is also so concentrated).
COMMODITIES Proposal 2J
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase or sell commodities, commodity contracts or real
estate, including interests in real estate limited partnerships, provided that
each fund may (i) purchase securities of companies that deal in real estate or
interests therein, (ii) purchase or sell futures contracts, options contracts,
equity index participations and index participation contracts, and (iii) for the
S&P 500 Fund, purchase securities of companies that deal in precious metals or
interests therein.
NEW FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase or sell commodities, commodity contracts or real
estate, including interests in real estate limited partnerships, provided that
each fund may (i) purchase securities of companies that deal in real estate or
interests therein, (ii) purchase or sell futures contracts, options contracts,
equity index participations and index participation contracts, and (iii) for the
S&P 500 Fund, purchase securities of companies that deal in precious metals or
interests therein.
UNDERWRITING Proposal 2K
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not underwrite securities issued by others, except to the extent it
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of securities from its investment portfolio.
NEW FUNDAMENTAL POLICY
The fund may not underwrite securities issued by other persons, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
ISSUER CONTROL Proposal 2L
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
APPENDIX - SCHWAB SMALL-CAP INDEX FUND(R) A-12
<PAGE> 48
INVESTMENT OBJECTIVE Proposal 3a
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund seeks to track the price and dividend performance (total return) of the
Schwab Small-Cap Index(R), an index created to represent the performance of
common stocks of the second 1,000 largest U.S. companies, ranked by market
capitalization (share price times the number of shares outstanding).
NEW FUNDAMENTAL POLICY
The fund seeks to track the performance of a benchmark index that measures the
total return of small capitalization U.S. stocks.
NEW NON-FUNDAMENTAL POLICY
The fund intends to achieve its investment objective by tracking the price and
dividend performance (total return) of the Schwab Small-Cap Index.
PORTFOLIO COMPOSITION Proposal 3a
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund will invest at least 65% of its total assets in common stocks, or other
equity securities including preferred stocks, rights and warrants.
CALIFORNIA LONG-TERM TAX-FREE BOND FUND
BORROWING Proposal 2Ci
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not borrow money except from banks as a temporary measure to
satisfy redemption requests or for extraordinary or emergency purposes and then
only in an amount not to exceed one-third of the value of its total assets
(including the amount borrowed), provided that the fund will not purchase
securities while borrowings represent more than 5% of its total assets.
NEW FUNDAMENTAL POLICY
The fund may not borrow money, except to the extent permitted under the 1940
Act, the rules or regulations thereunder or any exemption therefrom, as such
statute, rules or regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not borrow money except that the fund may (i) borrow money from
banks and (ii) engage in reverse repurchase agreements with any party; provided
that (i) and (ii) in combination do not exceed 33 1/3% of its total assets (any
borrowings that come to exceed this amount will be reduced to the extent
necessary to comply with the limitation within three business days) and the fund
will not purchase securities while borrowings represent more than 5% of its
total assets.
LENDING Proposal 2Cii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not lend money to any person, except that it may (i) purchase a
portion of an issue of short-term debt securities or similar obligations
(including repurchase agreements) that are publicly distributed or customarily
purchased by institutional investors, and (ii) lend its portfolio securities.
NEW FUNDAMENTAL POLICY
The fund may not make loans to other persons, except to the extent permitted
under the 1940 Act, the rules or regulations thereunder or any exemption
therefrom, as such statute, rules or regulations may be amended or interpreted
from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties (this
restriction does not apply to purchases of debt securities or repurchase
agreements).
SENIOR SECURITIES/PLEDGING OF ASSETS Proposal 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not pledge, mortgage or hypothecate any of its assets except that
to secure allowable borrowings, the fund may do so with respect to no more than
10% of its net assets.
NEW FUNDAMENTAL POLICY
The fund may not issue senior securities, except to the extent permitted under
the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as
such statute, rules or regulations may be amended or interpreted from time to
time.
RESTRICTED/ILLIQUID SECURITIES Proposal 2F
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest more than 10% of the total value of its net assets in
illiquid securities, including repurchase agreements with maturities in excess
of seven days.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest more than 15% of its net assets in illiquid securities.
OFFICER/TRUSTEE OWNERSHIP Proposal 2H
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase or retain securities of an issuer if any of the
officers, trustees or directors of the trust or the investment adviser
individually own beneficially more than 1/2 of 1% of the securities of such
issuer and together beneficially own more than 5% of the securities of such
issuer.
INDUSTRY CONCENTRATION Proposal 2I
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase securities (other than securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities) if, as a result of
such purchase, 25% or more of the value of its total assets would be invested in
any industry. Securities issued by governments or political subdivisions or
authorities of governments are not considered to be securities subject to this
industry concentration restriction.
NEW FUNDAMENTAL POLICY
The fund may not concentrate investments in a particular industry or group of
industries, as concentration is defined under the 1940 Act, the rules or
regulations thereunder or any exemption therefrom, as such statute, rules or
regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase securities (other than securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities) if, as a result of
such purchase, 25% or more of the value of its total assets would be invested in
any industry. Securities issued by governments or political subdivisions or
authorities of governments are not considered to be securities subject to this
industry concentration restriction.
A-13 SCHWAB SMALL-CAP INDEX FUND(R) - CALIFORNIA LONG-TERM TAX-FREE
BOND FUND - APPENDIX
<PAGE> 49
COMMODITIES Proposal 2J
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, including
interests in real estate limited partnerships, provided that the fund may (i)
purchase securities of companies that deal in real estate or interests therein,
and (ii) purchase or sell futures contracts, options contracts, equity index
participations and index participation contracts.
NEW FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, including
interests in real estate limited partnerships, provided that the fund may (i)
purchase securities of companies that deal in real estate or interests therein,
and (ii) purchase or sell futures contracts, options contracts, equity index
participations and index participation contracts.
UNDERWRITING Proposal 2K
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not underwrite securities issued by others except to the extent it
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of securities from its investment portfolio.
NEW FUNDAMENTAL POLICY
The fund may not underwrite securities issued by other persons, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
ISSUER CONTROL Proposal 2L
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
NON-DIVERSIFICATION Proposal 2N
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not, as to 75% of its assets, purchase securities of any issuer
(other than obligations of, or guaranteed by, the U.S. government, its agencies
or instrumentalities) if, as a result, more than 5% of the value of its total
assets would be invested in the securities of such issuer, except that provided
that no more than 25% of the fund's total assets would be invested in the
securities of a single issuer, up to 50% of the fund's total assets may be
invested without regard to this 5% limitation.
NEW NON-FUNDAMENTAL POLICY
The fund may not, as to 75% of its assets, purchase securities of any issuer
(other than obligations of, or guaranteed by, the U.S. government, its agencies
or instrumentalities) if, as a result, more than 5% of the value of its total
assets would be invested in the securities of such issuer, except that provided
that no more than 25% of the fund's total assets would be invested in the
securities of a single issuer, up to 50% of the fund's total assets may be
invested without regard to this 5% limitation.
CALIFORNIA SHORT/INTERMEDIATE TAX-FREE BOND FUND
BORROWING Proposal 2Ci
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not borrow money except from banks as a temporary measure to
satisfy redemption requests or for extraordinary or emergency purposes and then
only in an amount not to exceed one-third of the value of its total assets
(including the amount borrowed), provided that the fund will not purchase
securities while borrowings represent more than 5% of its total assets.
NEW FUNDAMENTAL POLICY
The fund may not borrow money, except to the extent permitted under the 1940
Act, the rules or regulations thereunder or any exemption therefrom, as such
statute, rules or regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not borrow money except that the fund may (i) borrow money from
banks and (ii) engage in reverse repurchase agreements with any party; provided
that (i) and (ii) in combination do not exceed 33 1/3% of its total assets (any
borrowings that come to exceed this amount will be reduced to the extent
necessary to comply with the limitation within three business days) and the fund
will not purchase securities while borrowings represent more than 5% of its
total assets.
LENDING Proposal 2Cii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not lend money to any person, except that it may (i) purchase a
portion of an issue of short-term debt securities or similar obligations
(including repurchase agreements) that are publicly distributed or customarily
purchased by institutional investors, and (ii) lend its portfolio securities.
NEW FUNDAMENTAL POLICY
The fund may not make loans to other persons, except to the extent permitted
under the 1940 Act, the rules or regulations thereunder or any exemption
therefrom, as such statute, rules or regulations may be amended or interpreted
from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties (this
restriction does not apply to purchases of debt securities or repurchase
agreements).
SENIOR SECURITIES/PLEDGING OF ASSETS Proposal 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not pledge, mortgage or hypothecate any of its assets except that
to secure allowable borrowings, the fund may do so with respect to no more than
10% of its net assets.
NEW FUNDAMENTAL POLICY
The fund may not issue senior securities, except to the extent permitted under
the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as
such statute, rules or regulations may be amended or interpreted from time to
time.
RESTRICTED/ILLIQUID SECURITIES Proposal 2F
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest more than 10% of the total value of its net assets in
illiquid securities, including repurchase agreements with maturities in excess
of seven days.
APPENDIX - CALIFORNIA LONG-TERM TAX-FREE BOND FUND - CALIFORNIA
SHORT/INTERMEDIATE TAX-FREE BOND FUND A-14
<PAGE> 50
NEW NON-FUNDAMENTAL POLICY
The fund may not invest more than 15% of its net assets in illiquid securities.
OFFICER/TRUSTEE OWNERSHIP Proposal 2H
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase or retain securities of an issuer if any of the
officers, trustees or directors of the trust or the investment adviser
individually own beneficially more than 1/2 of 1% of the securities of such
issuer and together beneficially own more than 5% of the securities of such
issuer.
INDUSTRY CONCENTRATION Proposal 2I
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase securities (other than securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities) if, as a result of
such purchase, 25% or more of the value of its total assets would be invested in
any industry. Securities issued by governments or political subdivisions or
authorities of governments are not considered to be securities subject to this
industry concentration restriction.
NEW FUNDAMENTAL POLICY
The fund may not concentrate investments in a particular industry or group of
industries, as concentration is defined under the 1940 Act, the rules or
regulations thereunder or any exemption therefrom, as such statute, rules or
regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase securities (other than securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities) if, as a result of
such purchase, 25% or more of the value of its total assets would be invested in
any industry. Securities issued by governments or political subdivisions or
authorities of governments are not considered to be securities subject to this
industry concentration restriction.
COMMODITIES Proposal 2J
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, including
interests in real estate limited partnerships, provided that the fund may (i)
purchase securities of companies that deal in real estate or interests therein,
and (ii) purchase or sell futures contracts, options contracts, equity index
participations and index participation contracts.
NEW FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, including
interests in real estate limited partnerships, provided that the fund may (i)
purchase securities of companies that deal in real estate or interests therein,
and (ii) purchase or sell futures contracts, options contracts, equity index
participations and index participation contracts.
UNDERWRITING Proposal 2K
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not underwrite securities issued by others except to the extent it
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of securities from its investment portfolio.
NEW FUNDAMENTAL POLICY
The fund may not underwrite securities issued by other persons, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
ISSUER CONTROL Proposal 2L
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
NON-DIVERSIFICATION Proposal 2N
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not, as to 75% of its assets, purchase securities of any issuer
(other than obligations of, or guaranteed by, the U.S. government, its agencies
or instrumentalities) if, as a result, more than 5% of the value of its total
assets would be invested in the securities of such issuer, except that provided
that no more than 25% of the fund's total assets would be invested in the
securities of a single issuer, up to 50% of the fund's total assets may be
invested without regard to this 5% limitation.
NEW NON-FUNDAMENTAL POLICY
The fund may not, as to 75% of its assets, purchase securities of any issuer
(other than obligations of, or guaranteed by, the U.S. government, its agencies
or instrumentalities) if, as a result, more than 5% of the value of its total
assets would be invested in the securities of such issuer, except that provided
that no more than 25% of the fund's total assets would be invested in the
securities of a single issuer, up to 50% of the fund's total assets may be
invested without regard to this 5% limitation.
LONG-TERM TAX-FREE BOND FUND
BORROWING Proposal 2Ci
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not borrow money except from banks as a temporary measure to
satisfy redemption requests or for extraordinary or emergency purposes and then
only in an amount not to exceed one-third of the value of its total assets
(including the amount borrowed), provided that the fund will not purchase
securities while borrowings represent more than 5% of its total assets.
NEW FUNDAMENTAL POLICY
The fund may not borrow money, except to the extent permitted under the 1940
Act, the rules or regulations thereunder or any exemption therefrom, as such
statute, rules or regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not borrow money except that the fund may (i) borrow money from
banks and (ii) engage in reverse repurchase agreements with any party; provided
that (i) and (ii) in combination do not exceed 33 1/3% of its total assets (any
borrowings that come to exceed this amount will be reduced to the extent
necessary to comply with the limitation within three business days) and the fund
will not purchase securities while borrowings represent more than 5% of its
total assets.
A-15 CALIFORNIA SHORT/INTERMEDIATE TAX-FREE BOND FUND - LONG-TERM
TAX-FREE BOND FUND - APPENDIX
<PAGE> 51
LENDING Proposal 2Cii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not lend money to any person, except that it may (i) purchase a
portion of an issue of short-term debt securities or similar obligations
(including repurchase agreements) that are publicly distributed or customarily
purchased by institutional investors, and (ii) lend its portfolio securities.
NEW FUNDAMENTAL POLICY
The fund may not make loans to other persons, except to the extent permitted
under the 1940 Act, the rules or regulations thereunder or any exemption
therefrom, as such statute, rules or regulations may be amended or interpreted
from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties (this
restriction does not apply to purchases of debt securities or repurchase
agreements).
SENIOR SECURITIES/PLEDGING OF ASSETS Proposal 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not pledge, mortgage or hypothecate any of its assets except that
to secure allowable borrowings, the fund may do so with respect to no more than
10% of its net assets.
NEW FUNDAMENTAL POLICY
The fund may not issue senior securities, except to the extent permitted under
the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as
such statute, rules or regulations may be amended or interpreted from time to
time.
RESTRICTED/ILLIQUID SECURITIES Proposal 2F
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest more than 10% of the total value of its net assets in
illiquid securities, including repurchase agreements with maturities in excess
of seven days.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest more than 15% of its net assets in illiquid securities.
OFFICER/TRUSTEE OWNERSHIP Proposal 2H
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase or retain securities of an issuer if any of the
officers, trustees or directors of the trust or the investment adviser
individually own beneficially more than 1/2 of 1% of the securities of such
issuer and together beneficially own more than 5% of the securities of such
issuer.
INDUSTRY CONCENTRATION Proposal 2I
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase securities (other than securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities) if, as a result of
such purchase, 25% or more of the value of its total assets would be invested in
any industry. Securities issued by governments or political subdivisions or
authorities of governments are not considered to be securities subject to this
industry concentration restriction.
NEW FUNDAMENTAL POLICY
The fund may not concentrate investments in a particular industry or group of
industries, as concentration is defined under the 1940 Act, the rules or
regulations thereunder or any exemption therefrom, as such statute, rules or
regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase securities (other than securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities) if, as a result of
such purchase, 25% or more of the value of its total assets would be invested in
any industry. Securities issued by governments or political subdivisions or
authorities of governments are not considered to be securities subject to this
industry concentration restriction.
COMMODITIES Proposal 2J
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, including
interests in real estate limited partnerships, provided that the fund may (i)
purchase securities of companies that deal in real estate or interests therein,
and (ii) purchase or sell futures contracts, options contracts, equity index
participations and index participation contracts.
NEW FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, including
interests in real estate limited partnerships, provided that the fund may (i)
purchase securities of companies that deal in real estate or interests therein,
and (ii) purchase or sell futures contracts, options contracts, equity index
participations and index participation contracts.
UNDERWRITING Proposal 2K
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not underwrite securities issued by others except to the extent it
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of securities from its investment portfolio.
NEW FUNDAMENTAL POLICY
The fund may not underwrite securities issued by other persons, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
ISSUER CONTROL Proposal 2L
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
APPENDIX - LONG-TERM TAX-FREE BOND FUND A-16
<PAGE> 52
NON-DIVERSIFICATION Proposal 2N
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not, as to 75% of its assets, purchase securities of any issuer
(other than obligations of, or guaranteed by, the U.S. government, its agencies
or instrumentalities) if, as a result, more than 5% of the value of its total
assets would be invested in the securities of such issuer, except that provided
that no more than 25% of the fund's total assets would be invested in the
securities of a single issuer, up to 50% of the fund's total assets may be
invested without regard to this 5% limitation.
NEW NON-FUNDAMENTAL POLICY
The fund may not, as to 75% of its assets, purchase securities of any issuer
(other than obligations of, or guaranteed by, the U.S. government, its agencies
or instrumentalities) if, as a result, more than 5% of the value of its total
assets would be invested in the securities of such issuer, except that provided
that no more than 25% of the fund's total assets would be invested in the
securities of a single issuer, up to 50% of the fund's total assets may be
invested without regard to this 5% limitation.
SHORT/INTERMEDIATE TAX-FREE BOND FUND
BORROWING Proposal 2Ci
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not borrow money except from banks as a temporary measure to
satisfy redemption requests or for extraordinary or emergency purposes and then
only in an amount not to exceed one-third of the value of its total assets
(including the amount borrowed), provided that the fund will not purchase
securities while borrowings represent more than 5% of its total assets.
NEW FUNDAMENTAL POLICY
The fund may not borrow money, except to the extent permitted under the 1940
Act, the rules or regulations thereunder or any exemption therefrom, as such
statute, rules or regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not borrow money except that the fund may (i) borrow money from
banks and (ii) engage in reverse repurchase agreements with any party; provided
that (i) and (ii) in combination do not exceed 33 1/3% of its total assets (any
borrowings that come to exceed this amount will be reduced to the extent
necessary to comply with the limitation within three business days) and the fund
will not purchase securities while borrowings represent more than 5% of its
total assets.
LENDING Proposal 2Cii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not lend money to any person, except that it may (i) purchase a
portion of an issue of short-term debt securities or similar obligations
(including repurchase agreements) that are publicly distributed or customarily
purchased by institutional investors, and (ii) lend its portfolio securities.
NEW FUNDAMENTAL POLICY
The fund may not make loans to other persons, except to the extent permitted
under the 1940 Act, the rules or regulations thereunder or any exemption
therefrom, as such statute, rules or regulations may be amended or interpreted
from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties (this
restriction does not apply to purchases of debt securities or repurchase
agreements).
SENIOR SECURITIES/PLEDGING OF ASSETS Proposal 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not pledge, mortgage or hypothecate any of its assets except that
to secure allowable borrowings, the fund may do so with respect to no more than
10% of its net assets.
NEW FUNDAMENTAL POLICY
The fund may not issue senior securities, except to the extent permitted under
the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as
such statute, rules or regulations may be amended or interpreted from time to
time.
RESTRICTED/ILLIQUID SECURITIES Proposal 2F
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest more than 10% of the total value of its net assets in
illiquid securities, including repurchase agreements with maturities in excess
of seven days.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest more than 15% of its net assets in illiquid securities.
OFFICER/TRUSTEE OWNERSHIP Proposal 2H
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase or retain securities of an issuer if any of the
officers, trustees or directors of the trust or the investment adviser
individually own beneficially more than 1/2 of 1% of the securities of such
issuer and together beneficially own more than 5% of the securities of such
issuer.
INDUSTRY CONCENTRATION Proposal 2I
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase securities (other than securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities) if, as a result of
such purchase, 25% or more of the value of its total assets would be invested in
any industry. Securities issued by governments or political subdivisions or
authorities of governments are not considered to be securities subject to this
industry concentration restriction.
NEW FUNDAMENTAL POLICY
The fund may not concentrate investments in a particular industry or group of
industries, as concentration is defined under the 1940 Act, the rules or
regulations thereunder or any exemption therefrom, as such statute, rules or
regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase securities (other than securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities) if, as a result of
such purchase, 25% or more of the value of its total assets would be invested in
any industry. Securities issued by governments or political subdivisions or
authorities of governments are not considered to be securities subject to this
industry concentration restriction.
A-17 LONG-TERM TAX-FREE BOND FUND - SHORT/INTERMEDIATE TAX-FREE
BOND FUND - APPENDIX
<PAGE> 53
COMMODITIES Proposal 2J
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, including
interests in real estate limited partnerships, provided that the fund may (i)
purchase securities of companies that deal in real estate or interests therein,
and (ii) purchase or sell futures contracts, options contracts, equity index
participations and index participation contracts.
NEW FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, including
interests in real estate limited partnerships, provided that the fund may (i)
purchase securities of companies that deal in real estate or interests therein,
and (ii) purchase or sell futures contracts, options contracts, equity index
participations and index participation contracts.
UNDERWRITING Proposal 2K
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not underwrite securities issued by others except to the extent it
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of securities from its investment portfolio.
NEW FUNDAMENTAL POLICY
The fund may not underwrite securities issued by other persons, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
ISSUER CONTROL Proposal 2L
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
NON-DIVERSIFICATION Proposal 2N
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not, as to 75% of its assets, purchase securities of any issuer
(other than obligations of, or guaranteed by, the U.S. government, its agencies
or instrumentalities) if, as a result, more than 5% of the value of its total
assets would be invested in the securities of such issuer, except that provided
that no more than 25% of the fund's total assets would be invested in the
securities of a single issuer, up to 50% of the fund's total assets may be
invested without regard to this 5% limitation.
NEW NON-FUNDAMENTAL POLICY
The fund may not, as to 75% of its assets, purchase securities of any issuer
(other than obligations of, or guaranteed by, the U.S. government, its agencies
or instrumentalities) if, as a result, more than 5% of the value of its total
assets would be invested in the securities of such issuer, except that provided
that no more than 25% of the fund's total assets would be invested in the
securities of a single issuer, up to 50% of the fund's total assets may be
invested without regard to this 5% limitation.
SHORT-TERM BOND MARKET INDEX FUND
DIVERSIFICATION Proposal 2D
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not, as to 75% of the fund's assets, purchase securities of any
issuer (other than obligations of, or guaranteed by, the U.S. government, its
agencies or instrumentalities) if, as a result more than 5% of the value of its
total assets would be invested in the securities of such issuer.
NEW FUNDAMENTAL POLICY
The fund may not purchase securities of an issuer, except as consistent with the
maintenance of its status as an open-end diversified company under the 1940 Act,
the rules or regulations thereunder or any exemption therefrom, as such statute,
rules or regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not, as to 75% of its assets, purchase securities of any issuer
(other than obligations of, or guaranteed by, the U.S. government, its agencies
or instrumentalities) if, as a result more than 5% of the value of its total
assets would be invested in the securities of such issuer.
ISSUER CONTROL Proposal 2L
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
TOTAL BOND MARKET INDEX FUND(TM)
DIVERSIFICATION Proposal 2D
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not, as to 75% of the fund's assets, purchase securities of any
issuer (other than obligations of, or guaranteed by, the U.S. government, its
agencies or instrumentalities) if, as a result more than 5% of the value of its
total assets would be invested in the securities of such issuer.
NEW FUNDAMENTAL POLICY
The fund may not purchase securities of an issuer, except as consistent with the
maintenance of its status as an open-end diversified company under the 1940 Act,
the rules or regulations thereunder or any exemption therefrom, as such statute,
rules or regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not, as to 75% of the fund's assets, purchase securities of any
issuer (other than obligations of, or guaranteed by, the U.S. government, its
agencies or instrumentalities) if, as a result more than 5% of the value of its
total assets would be invested in the securities of such issuer.
ISSUER CONTROL Proposal 2L
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
APPENDIX - SHORT/INTERMEDIATE TAX-FREE BOND FUND - TOTAL BOND
MARKET INDEX FUND(TM) A-18
<PAGE> 54
NEW NON-FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
CALIFORNIA MUNICIPAL MONEY FUND
RESTRICTED/ILLIQUID SECURITIES Proposal 2F
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not enter into a repurchase agreement if more than 10% of its net
assets would be subject to repurchase agreements maturing in more than 7-days.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest more than 10% of its net assets in illiquid securities.
OFFICER/TRUSTEE OWNERSHIP Proposal 2H
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase or retain securities of an issuer if any of the
officers, trustees or directors of the trust or its investment adviser
individually own beneficially more than 1/2 of 1% of the securities of such
issuer and together own more than 5% of the securities of such issuer.
INDUSTRY CONCENTRATION Proposal 2I
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase securities (other than securities of the U.S.
government, its agencies or instrumentalities) if, as a result of such purchase,
25% or more of its total assets would be invested in any industry (although
securities issued by governments or political subdivisions of governments are
not considered to be securities subject to this industry concentration
restriction).
NEW FUNDAMENTAL POLICY
The fund may not concentrate investments in a particular industry or group of
industries, as concentration is defined under the 1940 Act, the rules or
regulations thereunder or any exemption therefrom, as such statute, rules or
regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase securities (other than securities of the U.S.
government, its agencies or instrumentalities) if, as a result of such purchase,
25% or more of its total assets would be invested in any industry (although
securities issued by governments or political subdivisions of governments are
not considered to be securities subject to this industry concentration
restriction).
COMMODITIES Proposal 2J
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest in commodities or commodity futures contracts or in real
estate, except that each fund may invest in municipal securities secured by real
estate or interests therein.
NEW FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest in commodities or commodity futures contracts or in real
estate, except that each fund may invest in municipal securities secured by real
estate or interests therein.
UNDERWRITING Proposal 2K
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not underwrite securities issued by others, except to the extent it
may be deemed an underwriter under the federal securities laws in connection
with the disposition of securities from its investment portfolio.
NEW FUNDAMENTAL POLICY
The fund may not underwrite securities issued by other persons, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
ISSUER CONTROL Proposal 2L
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
OIL/GAS/MINERAL INTERESTS Proposal 2M
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest in interests in oil, gas or other mineral exploration or
development programs, although it may invest in municipal securities of issuers
which invest in or sponsor such programs.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest in interests in oil, gas or other mineral exploration or
development programs, although it may invest in municipal securities of issuers
which invest in or sponsor such programs.
NON-DIVERSIFICATION Proposal 2N
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase securities of any issuer unless consistent with the
maintenance of its status as a non-diversified company under the Investment
Company Act of 1940 or the rules or regulations thereunder, as such statute,
rules or regulations may be amended from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase securities of any issuer unless consistent with the
maintenance of its respective status as a non-diversified company under the
Investment Company Act of 1940 or the rules or regulations thereunder, as such
statute, rules or regulations may be amended from time to time.
GOVERNMENT MONEY FUND
"ALL FUNDAMENTAL" POLICY Proposal 2A
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not amend any investment policy without approval by holders of a
majority of its outstanding voting shares as defined by the 1940 Act.
MATURITY Proposal 2B
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase securities deemed to mature in more than 365 days.
A-19 TOTAL BOND MARKET INDEX FUND(TM) - GOVERNMENT MONEY FUND - APPENDIX
<PAGE> 55
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase money market securities deemed to mature in more than
397 days.
BORROWING Proposal 2Ci
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not borrow money, except as a temporary measure for extraordinary
or emergency purposes, and then only in an amount up to one-third of the value
of its total assets in order to meet redemption requests without immediately
selling any portfolio securities. The fund will not borrow for leverage purposes
or purchase securities or make investments while reverse repurchase agreements
or borrowings are outstanding. Any borrowings will not be collateralized. If for
any reason the current value of the total net assets of the fund falls below an
amount equal to three times the amount of indebtedness from money borrowed, the
fund will, within three business days, reduce its indebtedness to the extent
necessary.
NEW FUNDAMENTAL POLICY
The fund may not borrow money, except to the extent permitted under the 1940
Act, the rules or regulations thereunder or any exemption therefrom, as such
statute, rules or regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not borrow money except that the fund may (i) borrow money from
banks and (ii) engage in reverse repurchase agreements with any party; provided
that (i) and (ii) in combination do not exceed 33 1/3% of its total assets (any
borrowings that come to exceed this amount will be reduced to the extent
necessary to comply with the limitation within three business days) and the fund
will not purchase securities while borrowings represent more than 5% of its
total assets.
LENDING Proposal 2Cii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not make loans to others (except through the purchase of debt
obligations or repurchase agreements in accordance with its investment
objectives and policies).
NEW FUNDAMENTAL POLICY
The fund may not make loans to other persons, except to the extent permitted
under the 1940 Act, the rules or regulations thereunder or any exemption
therefrom, as such statute, rules or regulations may be amended or interpreted
from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties (this
restriction does not apply to purchases of debt securities or repurchase
agreements).
SENIOR SECURITIES Proposal 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not issue senior securities as defined in the 1940 Act.
NEW FUNDAMENTAL POLICY
The fund may not issue senior securities, except to the extent permitted under
the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as
such statute, rules or regulations may be amended or interpreted from time to
time.
PUTS AND CALLS Proposal 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not write, purchase or sell puts, calls or combinations thereof.
NEW NON-FUNDAMENTAL POLICY
The fund may not write, purchase or sell puts, calls or combinations thereof.
SHORT SALES Proposal 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not make short sales of securities, or purchase any securities on
margin, except to obtain such short-term credits as may be necessary for the
clearance of transactions.
NEW NON-FUNDAMENTAL POLICY
The fund may not make short sales of securities, or purchase any securities on
margin, except to obtain such short-term credits as may be necessary for the
clearance of transactions.
DIVERSIFICATION Proposal 2D
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase securities of any issuer (other than obligations of,
or guaranteed by, the U.S. government, its agencies or instrumentalities) if, as
a result thereof, more than 5% of the value of its assets would be invested in
the securities of such issuer.
The fund may not purchase, in the aggregate with all other Schwab Money
Funds, more than 10% of any class of securities of any issuer. All debt
securities and all preferred stocks are each considered as one class.
NEW FUNDAMENTAL POLICY
The fund may not purchase securities of an issuer, except as consistent with the
maintenance of its status as an open-end diversified company under the 1940 Act,
the rules or regulations thereunder or any exemption therefrom, as such statute,
rules or regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase securities of any issuer (other than obligations of,
or guaranteed by, the U.S. government, its agencies or instrumentalities, or
securities of other investment companies) if, as a result more than 5% of the
value of its assets would be invested in the securities of such issuer, except
that the fund may invest up to 25% of its total assets in the first tier
securities of a single issuer for up to three business days.
UNSEASONED ISSUERS Proposal 2E
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest more than 5% of its total assets in securities of
issuers (other than obligations of, or guaranteed by, the U.S. government, its
agencies or instrumentalities) that, with their predecessors, have a record of
less than three years of continuous operation.
RESTRICTED/ILLIQUID SECURITIES Proposal 2F
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund will invest no more than 10% of its net assets in illiquid securities.
The fund may not enter into repurchase agreements if, as a result thereof, more
than 10% its net assets valued at the time of the transaction would be subject
to repurchase agreements maturing in more than 7-days. The fund may not invest
more than 5% of its total assets in securities restricted as to disposition
under the federal securities laws (except commercial paper issued under Section
4(2) of the Securities Act of 1933, as amended).
APPENDIX - GOVERNMENT MONEY FUND A-20
<PAGE> 56
NEW NON-FUNDAMENTAL POLICY
The fund may not invest more than 10% of its net assets in illiquid securities.
INVESTMENT COMPANY SECURITIES Proposal 2G
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase securities of other investment companies, except as
permitted by the Investment Company Act of 1940, the rules or regulations
thereunder or any exemption therefrom, as such statute, rules or regulations may
be amended from time to time.
OFFICER/TRUSTEE OWNERSHIP Proposal 2H
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase or retain securities of an issuer if any of the
officers, trustees or directors of the Trust or its investment adviser or
sub-adviser individually owns beneficially more than 1/2 of 1% of the securities
of such issuer and together beneficially own more than 5% of the securities of
such issuer.
INDUSTRY CONCENTRATION Proposal 2I
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not concentrate 25% or more of the value of its assets in any one
industry; provided, however, that it reserves the freedom of action to invest up
to 100% of its assets in certificates of deposit or bankers' acceptances issued
by domestic branches of U.S. banks and U.S. branches of foreign banks (which the
fund has determined to be subject to the same regulation as U.S. banks), or
obligations of, or guaranteed by, the U.S. government, its agencies or
instrumentalities in accordance with its investment objective and policies.
NEW FUNDAMENTAL POLICY
The fund may not concentrate investments in a particular industry or group of
industries, as concentration is defined under the 1940 Act, the rules or
regulations thereunder or any exemption therefrom, as such statute, rules or
regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not concentrate 25% or more of the value of its assets in any one
industry; provided, however, that it reserves the freedom of action to invest up
to 100% of its assets in certificates of deposit or bankers' acceptances issued
by domestic branches of U.S. banks and U.S. branches of foreign banks (which the
fund has determined to be subject to the same regulation as U.S. banks), or
obligations of, or guaranteed by, the U.S. government, its agencies or
instrumentalities in accordance to its investment objective and policies.
COMMODITIES Proposal 2J
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest in commodities or commodity contracts, futures
contracts, real estate or real estate limited partnerships, although it may
invest in securities which are secured by real estate and securities of issuers
which invest or deal in real estate.
NEW FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest in commodities or commodity contracts, futures
contracts, real estate or real estate limited partnerships, although it may
invest in securities which are secured by real estate and securities of issuers
which invest or deal in real estate.
UNDERWRITING Proposal 2K
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not underwrite securities issued by others except to the extent it
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of securities from its investment portfolio.
NEW FUNDAMENTAL POLICY
The fund may not underwrite securities issued by other persons, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
ISSUER CONTROL Proposal 2L
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
OIL/GAS/MINERAL INTERESTS Proposal 2M
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest in interests in oil, gas, mineral leases or other
mineral exploration or development programs, although it may invest in the
securities of issuers which invest in or sponsor such programs.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest in interests in oil, gas, mineral leases or other
mineral exploration or development programs, although it may invest in the
securities of issuers which invest in or sponsor such programs.
INSTITUTIONAL ADVANTAGE MONEY FUND(R)
BORROWING Proposal 2Ci
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not borrow money, except as a temporary measure for extraordinary
or emergency purposes, and then only in an amount up to one-third of the value
of its total assets in order to meet redemption requests without immediately
selling any portfolio securities. The fund will not borrow for leverage purposes
or purchase securities or make investments while reverse repurchase agreements
or borrowings are outstanding. If for any reason the current value of the total
net assets of the fund falls below an amount equal to three times the amount of
indebtedness from money borrowed, the fund will, within three business days,
reduce its indebtedness to the extent necessary.
NEW FUNDAMENTAL POLICY
The fund may not borrow money, except to the extent permitted under the 1940
Act, the rules or regulations thereunder or any exemption therefrom, as such
statute, rules or regulations may be amended or interpreted from time to time.
A-21 GOVERNMENT MONEY FUND - INSTITUTIONAL ADVANTAGE MONEY FUND(R) - APPENDIX
<PAGE> 57
NEW NON-FUNDAMENTAL POLICY
The fund may not borrow money except that the fund may (i) borrow money from
banks and (ii) engage in reverse repurchase agreements with any party; provided
that (i) and (ii) in combination do not exceed 33 1/3% of its total assets (any
borrowings that come to exceed this amount will be reduced to the extent
necessary to comply with the limitation within three business days) and the fund
will not purchase securities while borrowings represent more than 5% of its
total assets.
LENDING Proposal 2Cii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not make loans to others (except through the purchase of debt
obligations or repurchase agreements in accordance with its investment
objectives and policies), except the fund may (1) purchase a portion of an issue
of short-term debt securities or similar obligations (including repurchase
agreements) that are publicly distributed or customarily purchased by
institutional investors; and (2) lend its portfolio securities.
NEW FUNDAMENTAL POLICY
The fund may not make loans to other persons, except to the extent permitted
under the 1940 Act, the rules or regulations thereunder or any exemption
therefrom, as such statute, rules or regulations may be amended or interpreted
from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties (this
restriction does not apply to purchases of debt securities or repurchase
agreements).
SENIOR SECURITIES Proposal 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not issue senior securities as defined in the 1940 Act.
NEW FUNDAMENTAL POLICY
The fund may not issue senior securities, except to the extent permitted under
the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as
such statute, rules or regulations may be amended or interpreted from time to
time.
PUTS AND CALLS Proposal 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not write, purchase or sell puts, calls or combinations thereof.
NEW NON-FUNDAMENTAL POLICY
The fund may not write, purchase or sell puts, calls or combinations thereof.
SHORT SALES Proposal 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not make short sales of securities, or purchase any securities on
margin, except to obtain such short-term credits as may be necessary for the
clearance of transactions.
NEW NON-FUNDAMENTAL POLICY
The fund may not make short sales of securities, or purchase any securities on
margin, except to obtain such short-term credits as may be necessary for the
clearance of transactions.
DIVERSIFICATION Proposal 2D
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase securities of any issuer (other than obligations of,
or guaranteed by, the U.S. government, its agencies or instrumentalities) if, as
a result thereof, more than 5% of the value of its assets would be invested in
the securities of such issuer.
The fund may not purchase, in the aggregate with all other Schwab Money
Funds, more than 10% of any class of securities of any issuer. All debt
securities and all preferred stocks are each considered as one class.
NEW FUNDAMENTAL POLICY
The fund may not purchase securities of an issuer, except as consistent with the
maintenance of its status as an open-end diversified company under the 1940 Act,
the rules or regulations thereunder or any exemption therefrom, as such statute,
rules or regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase securities of any issuer (other than obligations of,
or guaranteed by, the U.S. government, its agencies or instrumentalities, or
securities of other investment companies) if, as a result more than 5% of the
value of its assets would be invested in the securities of such issuer, except
that the fund may invest up to 25% of its total assets in the first tier
securities of a single issuer for up to three business days.
UNSEASONED ISSUERS Proposal 2E
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest more than 5% of its total assets in securities of
issuers (other than obligations of, or guaranteed by, the U.S. government, its
agencies or instrumentalities) that, with their predecessors, have a record of
less than three years of continuous operation.
RESTRICTED/ILLIQUID SECURITIES Proposal 2F
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund will invest no more than 10% of its net assets in illiquid securities.
The fund may not enter into repurchase agreements if, as a result thereof, more
than 10% its net assets valued at the time of the transaction would be subject
to repurchase agreements maturing in more than 7-days. The fund may not invest
more than 5% of its total assets in securities restricted as to disposition
under the federal securities laws (except commercial paper issued under Section
4(2) of the Securities Act of 1933, as amended).
NEW NON-FUNDAMENTAL POLICY
The fund may not invest more than 10% of its net assets in illiquid securities.
INVESTMENT COMPANY SECURITIES Proposal 2G
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase securities of other investment companies, except as
permitted by the Investment Company Act of 1940, the rules or regulations
thereunder or any exemption therefrom, as such statute, rules or regulations may
be amended from time to time.
APPENDIX - INSTITUTIONAL ADVANTAGE MONEY FUND(R) A-22
<PAGE> 58
OFFICER/TRUSTEE OWNERSHIP Proposal 2H
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase or retain securities of an issuer if any of the
officers, trustees or directors of the Trust or its investment adviser or the
sub-adviser individually own beneficially more than 1/2 of 1% of the securities
of such issuer and together beneficially own more than 5% of the securities of
such issuer.
INDUSTRY CONCENTRATION Proposal 2I
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not concentrate 25% or more of the value of its assets in any one
industry; provided, however, that it reserves the freedom of action to invest up
to 100% of its assets in certificates of deposit or bankers' acceptances issued
by domestic branches of U.S. banks and U.S. branches of foreign banks (which the
fund has determined to be subject to the same regulation as U.S. banks), or
obligations of, or guaranteed by, the U.S. government, its agencies or
instrumentalities in accordance with its investment objective and policies.
NEW FUNDAMENTAL POLICY
The fund may not concentrate investments in a particular industry or group of
industries, as concentration is defined under the 1940 Act, the rules or
regulations thereunder or any exemption therefrom, as such statute, rules or
regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not concentrate 25% or more of the value of its assets in any one
industry; provided, however, that it reserves the freedom of action to invest up
to 100% of its assets in certificates of deposit or bankers' acceptances issued
by domestic branches of U.S. banks and U.S. branches of foreign banks (which the
fund has determined to be subject to the same regulation as U.S. banks), or
obligations of, or guaranteed by, the U.S. government, its agencies or
instrumentalities in accordance its investment objective and policies.
COMMODITIES Proposal 2J
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest in commodities or commodity contracts, futures
contracts, real estate or real estate limited partnerships, although it may
invest in securities which are secured by real estate and securities of issuers
which invest or deal in real estate.
NEW FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest in commodities or commodity contracts, futures
contracts, real estate or real estate limited partnerships, although it may
invest in securities which are secured by real estate and securities of issuers
which invest or deal in real estate.
UNDERWRITING Proposal 2K
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not underwrite securities issued by others except to the extent it
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of securities from its investment portfolio.
NEW FUNDAMENTAL POLICY
The fund may not underwrite securities issued by other persons, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
ISSUER CONTROL Proposal 2L
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
OIL/GAS/MINERAL INTERESTS Proposal 2M
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest in interests in oil, gas, mineral leases or other
mineral exploration or development programs, although it may invest in the
securities of issuers which invest in or sponsor such programs.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest in interests in oil, gas, mineral leases or other
mineral exploration or development programs, although it may invest in the
securities of issuers which invest in or sponsor such programs.
MONEY MARKET FUND
"ALL FUNDAMENTAL" POLICY Proposal 2A
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not amend any investment policy without approval by holders of a
majority of its outstanding voting shares as defined by the 1940 Act.
MATURITY Proposal 2B
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase securities deemed to mature in more than 365 days.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase money market securities deemed to mature in more than
397 days.
BORROWING Proposal 2Ci
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not borrow money, except as a temporary measure for extraordinary
or emergency purposes, and then only in an amount up to one-third of the value
of its total assets in order to meet redemption requests without immediately
selling any portfolio securities. The fund will not borrow for leverage purposes
or purchase securities or make investments while reverse repurchase agreements
or borrowings are outstanding. Any borrowings will not be collateralized. If for
any reason the current value of the total net assets of the fund falls below an
amount equal to three times the amount of indebtedness from money borrowed, the
fund will, within three business days, reduce its indebtedness to the extent
necessary.
NEW FUNDAMENTAL POLICY
The fund may not borrow money, except to the extent permitted under the 1940
Act, the rules or regulations thereunder or any exemption therefrom, as such
statute, rules or regulations may be amended or interpreted from time to time.
A-23 INSTITUTIONAL ADVANTAGE MONEY FUND(R) - MONEY MARKET FUND - APPENDIX
<PAGE> 59
NEW NON-FUNDAMENTAL POLICY
The fund may not borrow money except that the fund may (i) borrow money from
banks and (ii) engage in reverse repurchase agreements with any party; provided
that (i) and (ii) in combination do not exceed 33 1/3% of its total assets (any
borrowings that come to exceed this amount will be reduced to the extent
necessary to comply with the limitation within three business days) and the fund
will not purchase securities while borrowings represent more than 5% of its
total assets.
LENDING Proposal 2Cii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not make loans to others (except through the purchase of debt
obligations or repurchase agreements in accordance with its investment
objectives and policies).
NEW FUNDAMENTAL POLICY
The fund may not make loans to other persons, except to the extent permitted
under the 1940 Act, the rules or regulations thereunder or any exemption
therefrom, as such statute, rules or regulations may be amended or interpreted
from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties (this
restriction does not apply to purchases of debt securities or repurchase
agreements).
SENIOR SECURITIES Proposal 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not issue senior securities as defined in the 1940 Act.
NEW FUNDAMENTAL POLICY
The fund may not issue senior securities, except to the extent permitted under
the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as
such statute, rules or regulations may be amended or interpreted from time to
time.
PUTS AND CALLS Proposal 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not write, purchase or sell puts, calls or combinations thereof.
NEW NON-FUNDAMENTAL POLICY
The fund may not write, purchase or sell puts, calls or combinations thereof.
SHORT SALES Proposal 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not make short sales of securities, or purchase any securities on
margin, except to obtain such short-term credits as may be necessary for the
clearance of transactions.
NEW NON-FUNDAMENTAL POLICY
The fund may not make short sales of securities, or purchase any securities on
margin, except to obtain such short-term credits as may be necessary for the
clearance of transactions.
DIVERSIFICATION Proposal 2D
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase securities of any issuer (other than obligations of,
or guaranteed by, the U.S. government, its agencies or instrumentalities) if, as
a result thereof, more than 5% of the value of its assets would be invested in
the securities of such issuer.
The fund may not purchase, in the aggregate with all other Schwab Money Funds,
more than 10% of any class of securities of any issuer. All debt securities and
all preferred stocks are each considered as one class.
NEW FUNDAMENTAL POLICY
The fund may not purchase securities of an issuer, except as consistent with the
maintenance of its status as an open-end diversified company under the 1940 Act,
the rules or regulations thereunder or any exemption therefrom, as such statute,
rules or regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase securities of any issuer (other than obligations of,
or guaranteed by, the U.S. government, its agencies or instrumentalities, or
securities of other investment companies) if, as a result more than 5% of the
value of its assets would be invested in the securities of such issuer, except
that the fund may invest up to 25% of its total assets in the first tier
securities of a single issuer for up to three business days.
UNSEASONED ISSUERS Proposal 2E
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest more than 5% of its total assets in securities of
issuers (other than obligations of, or guaranteed by, the U.S. government, its
agencies or instrumentalities) that, with their predecessors, have a record of
less than three years of continuous operation.
RESTRICTED/ILLIQUID SECURITIES Proposal 2F
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund will invest no more than 10% of its net assets in illiquid securities.
The fund may not enter into repurchase agreements if, as a result thereof, more
than 10% its net assets valued at the time of the transaction would be subject
to repurchase agreements maturing in more than 7-days. The fund may not invest
more than 5% of its total assets in securities restricted as to disposition
under the federal securities laws (except commercial paper issued under Section
4(2) of the Securities Act of 1933, as amended).
NEW NON-FUNDAMENTAL POLICY
The fund may not invest more than 10% of its net assets in illiquid securities.
INVESTMENT COMPANY SECURITIES Proposal 2G
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase securities of other investment companies, except as
permitted by the Investment Company Act of 1940, the rules or regulations
thereunder or any exemption therefrom, as such statute, rules or regulations may
be amended from time to time.
APPENDIX - MONEY MARKET FUND A-24
<PAGE> 60
OFFICER/TRUSTEE OWNERSHIP Proposal 2H
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase or retain securities of an issuer if any of the
officers, trustees or directors of the Trust or its investment adviser or
sub-adviser individually owns beneficially more than 1/2 of 1% of the securities
of such issuer and together beneficially own more than 5% of the securities of
such issuer.
INDUSTRY CONCENTRATION Proposal 2I
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not concentrate 25% or more of the value of its assets in any one
industry; provided, however, that it reserves the freedom of action to invest up
to 100% of its assets in certificates of deposit or bankers' acceptances issued
by domestic branches of U.S. banks and U.S. branches of foreign banks (which the
fund has determined to be subject to the same regulation as U.S. banks), or
obligations of, or guaranteed by, the U.S. government, its agencies or
instrumentalities in accordance with its investment objective and policies.
NEW FUNDAMENTAL POLICY
The fund may not concentrate investments in a particular industry or a group of
industries, as concentration is defined under the 1940 Act, the rules or
regulations thereunder or any exemption therefrom, as such statute, rules or
regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not concentrate 25% or more of the value of its assets in any one
industry; provided, however, that it reserves the freedom of action to invest up
to 100% of its assets in certificates of deposit or bankers' acceptances issued
by domestic branches of U.S. banks and U.S. branches of foreign banks (which the
fund has determined to be subject to the same regulation as U.S. banks), or
obligations of, or guaranteed by, the U.S. government, its agencies or
instrumentalities in accordance to its investment objective and policies.
COMMODITIES Proposal 2J
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest in commodities or commodity contracts, futures
contracts, real estate or real estate limited partnerships, although it may
invest in securities which are secured by real estate and securities of issuers
which invest or deal in real estate.
NEW FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest in commodities or commodity contracts, futures
contracts, real estate or real estate limited partnerships, although it may
invest in securities which are secured by real estate and securities of issuers
which invest or deal in real estate.
UNDERWRITING Proposal 2K
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not underwrite securities issued by others except to the extent it
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of securities from its investment portfolio.
NEW FUNDAMENTAL POLICY
The fund may not underwrite securities issued by other persons, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
ISSUER CONTROL Proposal 2L
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
OIL/GAS/MINERAL INTERESTS Proposal 2M
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest in interests in oil, gas, mineral leases or other
mineral exploration or development programs, although it may invest in the
securities of issuers which invest in or sponsor such programs.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest in interests in oil, gas, mineral leases or other
mineral exploration or development programs, although it may invest in the
securities of issuers which invest in or sponsor such programs.
MUNICIPAL MONEY FUND
RESTRICTED/ILLIQUID SECURITIES Proposal 2F
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not enter into a repurchase agreement if more than 10% of its net
assets would be subject to repurchase agreements maturing in more than 7-days.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest more than 10% of its net assets in illiquid securities.
OFFICER/TRUSTEE OWNERSHIP Proposal 2H
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase or retain securities of an issuer if any of the
officers, trustees or directors of the trust or its investment adviser
individually own beneficially more than 1/2 of 1% of the securities of such
issuer and together own more than 5% of the securities of such issuer.
INDUSTRY CONCENTRATION Proposal 2I
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase securities (other than securities of the U.S.
government, its agencies or instrumentalities) if, as a result of such purchase,
25% or more of its total assets would be invested in any industry (although
securities issued by governments or political subdivisions of governments are
not considered to be securities subject to this industry concentration
restriction) or in any one state.
NEW FUNDAMENTAL POLICY
The fund may not concentrate investments in a particular industry or group of
industries, as concentration is defined under the 1940 Act, the rules or
regulations thereunder or any exemption therefrom, as such statute, rules or
regulations may be amended or interpreted from time to time.
A-25 MONEY MARKET FUND - MUNICIPAL MONEY FUND - APPENDIX
<PAGE> 61
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase securities (other than securities of the U.S.
government, its agencies or instrumentalities) if, as a result of such purchase,
25% or more of its total assets would be invested in any industry (although
securities issued by governments or political subdivisions of governments are
not considered to be securities subject to this industry concentration
restriction) or in any one state.
COMMODITIES Proposal 2J
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest in commodities or commodity futures contracts or in real
estate, except that each fund may invest in municipal securities secured by real
estate or interests therein.
NEW FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest in commodities or commodity futures contracts or in real
estate, except that each fund may invest in municipal securities secured by real
estate or interests therein.
UNDERWRITING Proposal 2K
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not underwrite securities issued by others, except to the extent it
may be deemed an underwriter under the federal securities laws in connection
with the disposition of securities from its investment portfolio.
NEW FUNDAMENTAL POLICY
The fund may not underwrite securities issued by other persons, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
ISSUER CONTROL Proposal 2L
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
OIL/GAS/MINERAL INTERESTS Proposal 2M
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest in interests in oil, gas or other mineral exploration or
development programs, although it may invest in municipal securities of issuers
which invest in or sponsor such programs.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest in interests in oil, gas or other mineral exploration or
development programs, although it may invest in municipal securities of issuers
which invest in or sponsor such programs.
NEW YORK MUNICIPAL MONEY FUND
RESTRICTED/ILLIQUID SECURITIES Proposal 2F
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not enter into a repurchase agreement if more than 10% of its net
assets would be subject to repurchase agreements maturing in more than 7-days.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest more than 10% of its net assets in illiquid securities.
OFFICER/TRUSTEE OWNERSHIP Proposal 2H
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase or retain securities of an issuer if any of the
officers, trustees or directors of the trust or its investment adviser
individually own beneficially more than 1/2 of 1% of the securities of such
issuer and together own more than 5% of the securities of such issuer.
INDUSTRY CONCENTRATION Proposal 2I
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase securities (other than securities of the U.S.
government, its agencies or instrumentalities) if, as a result of such purchase,
25% or more of its total assets would be invested in any industry (although
securities issued by governments or political subdivisions of governments are
not considered to be securities subject to this industry concentration
restriction).
NEW FUNDAMENTAL POLICY
The fund may not concentrate investments in a particular industry or group of
industries, as concentration is defined under the 1940 Act, the rules or
regulations thereunder or any exemption therefrom, as such statute, rules or
regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase securities (other than securities of the U.S.
government, its agencies or instrumentalities) if, as a result of such purchase,
25% or more of its total assets would be invested in any industry (although
securities issued by governments or political subdivisions of governments are
not considered to be securities subject to this industry concentration
restriction).
COMMODITIES Proposal 2J
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest in commodities or commodity futures contracts or in real
estate, except that each fund may invest in municipal securities secured by real
estate or interests therein.
NEW FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest in commodities or commodity futures contracts or in real
estate, except that each fund may invest in municipal securities secured by real
estate or interests therein.
APPENDIX - MUNICIPAL MONEY FUND - NEW YORK MUNICIPAL MONEY FUND A-26
<PAGE> 62
UNDERWRITING Proposal 2K
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not underwrite securities issued by others, except to the extent it
may be deemed an underwriter under the federal securities laws in connection
with the disposition of securities from its investment portfolio.
NEW FUNDAMENTAL POLICY
The fund may not underwrite securities issued by other persons, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
ISSUER CONTROL Proposal 2L
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
OIL/GAS/MINERAL INTERESTS Proposal 2M
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest in interests in oil, gas or other mineral exploration or
development programs, although it may invest in municipal securities of issuers
which invest in or sponsor such programs.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest in interests in oil, gas or other mineral exploration or
development programs, although it may invest in municipal securities of issuers
which invest in or sponsor such programs.
NON-DIVERSIFICATION Proposal 2N
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase securities of any issuer unless consistent with the
maintenance of its status as a non-diversified company under the Investment
Company Act of 1940 or the rules or regulations thereunder, as such statute,
rules or regulations may be amended from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase securities of any issuer unless consistent with the
maintenance of its status as a non-diversified company under the Investment
Company Act of 1940 or the rules or regulations thereunder, as such statute,
rules or regulations may be amended from time to time.
RETIREMENT MONEY FUND(R)
BORROWING Proposal 2Ci
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not borrow money, except as a temporary measure for extraordinary
or emergency purposes, and then only in an amount up to one-third of the value
of its total assets in order to meet redemption requests without immediately
selling any portfolio securities. The fund will not borrow for leverage purposes
or purchase securities or make investments while reverse repurchase agreements
or borrowings are outstanding. If for any reason the current value of the total
net assets of the fund falls below an amount equal to three times the amount of
indebtedness from money borrowed, the fund will, within three business days,
reduce its indebtedness to the extent necessary.
NEW FUNDAMENTAL POLICY
The fund may not borrow money, except to the extent permitted under the 1940
Act, the rules or regulations thereunder or any exemption therefrom, as such
statute, rules or regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not borrow money except that the fund may (i) borrow money from
banks and (ii) engage in reverse repurchase agreements with any party; provided
that (i) and (ii) in combination do not exceed 33 1/3% of its total assets (any
borrowings that come to exceed this amount will be reduced to the extent
necessary to comply with the limitation within three business days) and the fund
will not purchase securities while borrowings represent more than 5% of its
total assets.
LENDING Proposal 2Cii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not make loans to others (except through the purchase of debt
obligations or repurchase agreements in accordance with its investment
objectives and policies), except the fund may (1) purchase a portion of an issue
of short-term debt securities or similar obligations (including repurchase
agreements) that are publicly distributed or customarily purchased by
institutional investors; and (2) lend its portfolio securities.
NEW FUNDAMENTAL POLICY
The fund may not make loans to other persons, except to the extent permitted
under the 1940 Act, the rules or regulations thereunder or any exemption
therefrom, as such statute, rules or regulations may be amended or interpreted
from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties (this
restriction does not apply to purchases of debt securities or repurchase
agreements).
SENIOR SECURITIES Proposal 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not issue senior securities as defined in the 1940 Act.
NEW FUNDAMENTAL POLICY
The fund may not issue senior securities, except to the extent permitted under
the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as
such statute, rules or regulations may be amended or interpreted from time to
time.
PUTS AND CALLS Proposal 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not write, purchase or sell puts, calls or combinations thereof.
NEW NON-FUNDAMENTAL POLICY
The fund may not write, purchase or sell puts, calls or combinations thereof.
SHORT SALES Proposal 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not make short sales of securities, or purchase any securities on
margin, except to obtain such short-term credits as may be necessary for the
clearance of transactions.
A-27 NEW YORK MUNICIPAL MONEY FUND - RETIREMENT MONEY FUND(R) - APPENDIX
<PAGE> 63
NEW NON-FUNDAMENTAL POLICY
The fund may not make short sales of securities, or purchase any securities on
margin, except to obtain such short-term credits as may be necessary for the
clearance of transactions.
DIVERSIFICATION Proposal 2D
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase securities of any issuer (other than obligations of,
or guaranteed by, the U.S. government, its agencies or instrumentalities) if, as
a result thereof, more than 5% of the value of its assets would be invested in
the securities of such issuer.
The fund may not purchase, in the aggregate with all other Schwab Money Funds,
more than 10% of any class of securities of any issuer. All debt securities and
all preferred stocks are each considered as one class.
NEW FUNDAMENTAL POLICY
The fund may not purchase securities of an issuer, except as consistent with the
maintenance of its status as an open-end diversified company under the 1940 Act,
the rules or regulations thereunder or any exemption therefrom, as such statute,
rules or regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase securities of any issuer (other than obligations of,
or guaranteed by, the U.S. government, its agencies or instrumentalities, or
securities of other investment companies) if, as a result more than 5% of the
value of its assets would be invested in the securities of such issuer, except
that the fund may invest up to 25% of its total assets in the first tier
securities of a single issuer for up to three business days.
UNSEASONED ISSUERS Proposal 2E
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest more than 5% of its total assets in securities of
issuers (other than obligations of, or guaranteed by, the U.S. government, its
agencies or instrumentalities) that, with their predecessors, have a record of
less than three years of continuous operation.
RESTRICTED/ILLIQUID SECURITIES Proposal 2F
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund will invest no more than 10% of its net assets in illiquid securities.
The fund may not enter into repurchase agreements if, as a result thereof, more
than 10% its net assets valued at the time of the transaction would be subject
to repurchase agreements maturing in more than 7-days. The fund may not invest
more than 5% of its total assets in securities restricted as to disposition
under the federal securities laws (except commercial paper issued under Section
4(2) of the Securities Act of 1933, as amended).
NEW NON-FUNDAMENTAL POLICY
The fund may not invest more than 10% of its net assets in illiquid securities.
INVESTMENT COMPANY SECURITIES Proposal 2G
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase securities of other investment companies, except as
permitted by the Investment Company Act of 1940, the rules or regulations
thereunder or any exemption therefrom, as such statute, rules or regulations may
be amended from time to time.
OFFICER/TRUSTEE OWNERSHIP Proposal 2H
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase or retain securities of an issuer if any of the
officers, trustees or directors of the Trust or its investment adviser or the
sub-adviser individually own beneficially more than 1/2 of 1% of the securities
of such issuer and together beneficially own more than 5% of the securities of
such issuer.
INDUSTRY CONCENTRATION Proposal 2I
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not concentrate 25% or more of the value of its assets in any one
industry; provided, however, that it reserves the freedom of action to invest up
to 100% of its assets in certificates of deposit or bankers' acceptances issued
by domestic branches of U.S. banks and U.S. branches of foreign banks (which the
fund has determined to be subject to the same regulation as U.S. banks), or
obligations of, or guaranteed by, the U.S. government, its agencies or
instrumentalities in accordance with its investment objective and policies.
NEW FUNDAMENTAL POLICY
The fund may not concentrate investments in a particular industry or group of
industries, as concentration is defined under the 1940 Act, the rules or
regulations thereunder or any exemption therefrom, as such statute, rules or
regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not concentrate 25% or more of the value of its assets in any one
industry; provided, however, that it reserves the freedom of action to invest up
to 100% of its assets in certificates of deposit or bankers' acceptances issued
by domestic branches of U.S. banks and U.S. branches of foreign banks (which the
fund has determined to be subject to the same regulation as U.S. banks), or
obligations of, or guaranteed by, the U.S. government, its agencies or
instrumentalities in accordance its investment objective and policies.
COMMODITIES Proposal 2J
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest in commodities or commodity contracts, futures
contracts, real estate or real estate limited partnerships, although it may
invest in securities which are secured by real estate and securities of issuers
which invest or deal in real estate.
NEW FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest in commodities or commodity contracts, futures
contracts, real estate or real estate limited partnerships, although it may
invest in securities which are secured by real estate and securities of issuers
which invest or deal in real estate.
UNDERWRITING Proposal 2K
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not underwrite securities issued by others except to the extent it
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of securities from its investment portfolio.
APPENDIX - RETIREMENT MONEY FUND(R) A-28
<PAGE> 64
NEW FUNDAMENTAL POLICY
The fund may not underwrite securities issued by other persons, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
ISSUER CONTROL Proposal 2L
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control or management of
another issuer.
OIL/GAS/MINERAL INTERESTS Proposal 2M
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest in interests in oil, gas, mineral leases or other
mineral exploration or development programs, although it may invest in the
securities of issuers which invest in or sponsor such programs.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest in interests in oil, gas, mineral leases or other
mineral exploration or development programs, although it may invest in the
securities of issuers which invest in or sponsor such programs.
U.S. TREASURY MONEY FUND
MATURITY Proposals 2B
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not purchase securities other than obligations issued by the U.S.
Treasury and securities backed by the "full faith and credit" guarantee of the
U.S. government that mature in 397 days or less.
NEW NON-FUNDAMENTAL POLICY
The fund may not purchase securities other than obligations issued by the U.S.
Treasury and securities backed by the "full faith and credit" guarantee of the
U.S. government that mature in more than 397 days or less.
BORROWING Proposal 2Ci
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not borrow money, except as a temporary measure for extraordinary
or emergency purposes, and then only in an amount up to one-third of the value
of the fund's total assets in order to meet redemption requests without
immediately selling any portfolio securities; or pledge its securities or
receivables or transfer or assign or otherwise encumber them in an amount to
exceed 33% of the fund's net assets to secure borrowings. The fund will not
borrow for leverage purposes or purchase securities or make investments while
reverse repurchase agreements or borrowings are outstanding. If for any reason
the current value of the total net assets of the fund falls below an amount
equal to three times the amount of its indebtedness from money borrowed, the
fund will, within three business days, reduce its indebtedness to the extent
necessary.
NEW FUNDAMENTAL POLICY
The fund may not borrow money, except to the extent permitted under the 1940
Act, the rules or regulations thereunder or any exemption therefrom, as such
statute, rules or regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not borrow money except that the fund may (i) borrow money from
banks and (ii) engage in reverse repurchase agreements with any party; provided
that (i) and (ii) in combination do not exceed 33 1/3% of its total assets (any
borrowings that come to exceed this amount will be reduced to the extent
necessary to comply with the limitation within three business days) and the fund
will not purchase securities while borrowings represent more than 5% of its
total assets.
LENDING Proposal 2Cii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not make loans to others (except through the purchase of debt
obligations).
NEW FUNDAMENTAL POLICY
The fund may not make loans to other persons, except to the extent permitted
under the 1940 Act, the rules or regulations thereunder or any exemption
therefrom, as such statute, rules or regulations may be amended or interpreted
from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties (this
restriction does not apply to purchases of debt securities or repurchase
agreements).
SENIOR SECURITIES Proposal 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not issue senior securities as defined in the 1940 Act.
NEW FUNDAMENTAL POLICY
The fund may not issue senior securities, except to the extent permitted under
the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as
such statute, rules or regulations may be amended or interpreted from time to
time.
DIVERSIFICATION Proposal 2D
- --------------------------------------------------------------------------------
NEW FUNDAMENTAL POLICY
The fund may not purchase securities of an issuer, except as consistent with the
maintenance of its status as an open-end diversified company under the 1940 Act,
the rules or regulations thereunder or any exemption therefrom, as such statute,
rules or regulations may be amended or interpreted from time to time.
CONCENTRATION Proposal I
- --------------------------------------------------------------------------------
NEW FUNDAMENTAL POLICY
The fund may not concentrate investments in a particular industry or group of
industries, as concentration is defined under the 1940 Act, the rules or
regulations thereunder or any exemption therefrom, as such statute, rules or
regulations may be amended or interpreted from time to time.
COMMODITIES Proposal 2J
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest in commodities or in real estate.
NEW FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
A-29 RETIREMENT MONEY FUND(R) - U.S. TREASURY MONEY FUND - APPENDIX
<PAGE> 65
NEW NON-FUNDAMENTAL POLICY
The fund may not invest in commodities or in real estate.
UNDERWRITING Proposal 2K
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not underwrite securities issued by others, except to the extent it
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of securities from its investment portfolio.
NEW FUNDAMENTAL POLICY
The fund may not underwrite securities issued by other persons, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
ISSUER CONTROL Proposal 2L
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control over management of
another company.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest for the purpose of exercising control over management of
another company.
VALUE ADVANTAGE MONEY FUND(R)
LENDING Proposal 2Cii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not make loans to others (except through the purchase of debt
obligations or repurchase agreements in accordance with its investment objective
and policies).
NEW FUNDAMENTAL POLICY
The fund may not make loans to other persons, except to the extent permitted
under the 1940 Act, the rules or regulations thereunder or any exemption
therefrom, as such statute, rules or regulations may be amended or interpreted
from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties (this
restriction does not apply to purchases of debt securities or repurchase
agreements).
SENIOR SECURITIES Proposal 2Ciii
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not issue senior securities as defined in the 1940 Act.
NEW FUNDAMENTAL POLICY
The fund may not issue senior securities, except to the extent permitted under
the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as
such statute, rules or regulations may be amended or interpreted from time to
time.
INDUSTRY CONCENTRATION Proposal 2I
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not concentrate 25% or more of the value of its assets in any one
industry; provided, however, that the fund reserves freedom of action to invest
up to 100% of its assets in certificates of deposit or banker's acceptances
issued by U.S. banks and U.S. branches of those foreign banks that the
investment adviser has determined to be subject to the same regulation as U. S.
banks, or obligations of or guaranteed by the U.S. government, its agencies or
instrumentalities.
NEW FUNDAMENTAL POLICY
The fund may not concentrate investments in a particular industry or group of
industries, as concentration is defined under the 1940 Act, the rules or
regulations thereunder or any exemption therefrom, as such statute, rules or
regulations may be amended or interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not concentrate 25% or more of the value of its assets in any one
industry; provided, however, that the fund reserves freedom of action to invest
up to 100% of its assets in certificates of deposit or banker's acceptances
issued by U.S. banks and U.S. branches of those foreign banks that the
investment adviser has determined to be subject to the same regulation as U.S.
banks, or obligations of or guaranteed by the U.S. government, its agencies or
instrumentalities.
COMMODITIES Proposal 2J
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not invest in commodities or commodity contracts, including futures
contracts, or in real estate, although it may invest in securities that are
secured by real estate and securities of issuers that invest or deal in real
estate.
NEW FUNDAMENTAL POLICY
The fund may not purchase or sell commodities or real estate, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
NEW NON-FUNDAMENTAL POLICY
The fund may not invest in commodities or commodity contracts, including futures
contracts, or in real estate, although it may invest in securities that are
secured by real estate and securities of issuers that invest or deal in real
estate.
UNDERWRITING Proposal 2K
- --------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY
The fund may not underwrite securities issued by others, except to the extent it
may be deemed to be an underwriter under the federal securities laws in
connection with the disposition of securities from its investment portfolio.
NEW FUNDAMENTAL POLICY
The fund may not underwrite securities issued by other persons, except to the
extent permitted under the 1940 Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.
APPENDIX - U.S. TREASURY MONEY FUND - VALUE ADVANTAGE MONEY FUND(R) A-30
<PAGE> 66
If you have any questions,
or if you'd like help voting,
please call the funds' proxy
solicitor, D.F. King & Co., Inc., at
800-431-9633.
SCHWABFUNDS(R)
TF7468
<PAGE> 67
SCHWABFUNDS(R)
101 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94104
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
TRUSTEES OF THE CHARLES SCHWAB FAMILY OF FUNDS
The undersigned, revoking previous proxies for such shares, hereby appoints
Jeremiah H. Chafkin, Stephen B. Ward and Frances Cole, or any of them, attorneys
of the undersigned with full power of substitution, to vote all shares of the
above-referenced fund (the "Fund"), which the undersigned is entitled to vote at
the Special Meeting of Shareholders of the Fund (the "Meeting") to be held on
June 1, 2000, at A.P. Giannini Auditorium, 555 California Street, Concourse
Level, San Francisco, California 94104-1502, commencing at 10:00 a.m. Pacific
time, and at any and all adjournment(s) thereof. Receipt of the Notice of and
Proxy Statement for said Meeting is acknowledged.
If properly executed and returned, the shares presented by this proxy will be
voted as specified by the undersigned. As to any other matter, the shares will
be voted by said attorneys in accordance with their judgment.
You may also vote your shares by touch-tone phone by calling
1-800-690-6903 or through the Internet at www.proxyvote.com
DO NOT MAIL THIS PROXY CARD IF YOU
ARE VOTING BY INTERNET OR TELEPHONE.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
PROTO1A
The Board of Trustees recommends a vote FOR the election of Trustees and all
other proposals. IF NO SPECIFICATION IS MADE, YOUR SHARES WILL BE VOTED FOR THE
ELECTION OF ALL TRUSTEES AND ALL OTHER PROPOSALS.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING:
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
VOTE ON TRUSTEES
1. Nominees for the Board of Trustees:
01) Charles R. Schwab, 02) Mariann Byerwalter, 03) Jeremiah H. Chafkin, 04)
Donald F. Dorward, 05) William A. Hasler, 06) Robert G. Holmes, 07) Steven
L. Scheid, 08) Gerald B. Smith, 09) Donald R. Stephens, and 10) Michael W.
Wilsey.
FOR WITHHOLD FOR ALL To Withhold authority to vote, mark "For All Except"
ALL ALL EXCEPT And write the nominee's number on the line below.
[ ] [ ] [ ] ____________________________________________________
PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEARS. IF SIGNING IS BY ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE. IF MORE
THAN ONE NAME APPEARS, ALL MUST SIGN.
__________________________________ ______ ________________________ ______
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
<PAGE> 68
SCHWABFUNDS(R)
101 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94104
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
TRUSTEES OF THE CHARLES SCHWAB FAMILY OF FUNDS
The undersigned, revoking previous proxies for such shares, hereby appoints
Jeremiah H. Chafkin, Stephen B. Ward and Frances Cole, or any of them, attorneys
of the undersigned with full power of substitution, to vote all shares of the
above-referenced fund (the "Fund"), which the undersigned is entitled to vote at
the Special Meeting of Shareholders of the Fund (the "Meeting") to be held on
June 1, 2000, at A.P. Giannini Auditorium, 555 California Street, Concourse
Level, San Francisco, California 94104-1502, commencing at 10:00 a.m. Pacific
time, and at any and all adjournment(s) thereof. Receipt of the Notice of and
Proxy Statement for said Meeting is acknowledged.
If properly executed and returned, the shares presented by this proxy will be
voted as specified by the undersigned. As to any other matter, the shares will
be voted by said attorneys in accordance with their judgment.
You may also vote your shares by touch-tone phone by calling 1-800-690-6903 or
through the Internet at www.proxyvote.com
DO NOT MAIL THIS PROXY CARD IF YOU ARE VOTING BY INTERNET OR TELEPHONE.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
PROTO6A
The Board of Trustees recommends a vote FOR the election of Trustees
and all other proposals. IF NO SPECIFICATION IS MADE, YOUR
SHARES WILL BE VOTED FOR THE ELECTION OF ALL TRUSTEES AND ALL OTHER PROPOSALS.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING:
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
VOTE ON TRUSTEES
1. Nominees for the Board of Trustees:
01) Charles R. Schwab, 02) Mariann Byerwalter, 03) Jeremiah H.
Chafkin, 04) Donald F. Dorward, 05) William A. Hasler, 06) Robert G.
Holmes, 07) Steven L. Scheid, 08) Gerald B. Smith, 09) Donald R.
Stephens, and 10) Michael W. Wilsey.
FOR WITHHOLD FOR ALL
ALL ALL EXCEPT
[ ] [ ] [ ]
To withhold authority to vote, mark "For All Except"
and write the nominee's number on the line below.
_____________________________________________________
VOTE ON FUNDAMENTAL POLICIES
2. To vote for all applicable elements
of Proposal 2.
For Against Abstain
[ ] [ ] [ ]
STOP HERE UNLESS YOU WOULD LIKE TO VOTE ON EACH APPLICABLE ELEMENT OF PROPOSAL 2
(f) Restricted or Illiquid Securities
For Against Abstain
[ ] [ ] [ ]
(h) Ownership of Securities
For Against Abstain
[ ] [ ] [ ]
(i) Industry Concentration
For Against Abstain
[ ] [ ] [ ]
(j) Commodities, Futures & Real Estate
For Against Abstain
[ ] [ ] [ ]
(k) Underwriting of Securities
For Against Abstain
[ ] [ ] [ ]
(l) Control of an Issuer
For Against Abstain
[ ] [ ] [ ]
(m) Oil, Gas or Mineral Interests
For Against Abstain
[ ] [ ] [ ]
(n) Non-Diversification
For Against Abstain
[ ] [ ] [ ]
Please sign exactly as your name(s) appears. If signing is by attorney,
executor, administrator, trustee or guardian, please give full title. If more
than one name appears, all must sign.
__________________________________ _____________________
Signature [PLEASE SIGN WITHIN BOX] Date
__________________________________ _____________________
Signature (Joint Owners) Date
<PAGE> 69
SCHWABFUNDS(R)
101 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94104
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
TRUSTEES OF THE CHARLES SCHWAB FAMILY OF FUNDS
The undersigned, revoking previous proxies for such shares, hereby appoints
Jeremiah H. Chafkin, Stephen B. Ward and Frances Cole, or any of them, attorneys
of the undersigned with full power of substitution, to vote all shares of the
above-referenced fund (the "Fund"), which the undersigned is entitled to vote at
the Special Meeting of Shareholders of the Fund (the "Meeting") to be held on
June 1, 2000, at A.P. Giannini Auditorium, 555 California Street, Concourse
Level, San Francisco, California 94104-1502, commencing at 10:00 a.m. Pacific
time, and at any and all adjournment(s) thereof. Receipt of the Notice of and
Proxy Statement for said Meeting is acknowledged.
If properly executed and returned, the shares presented by this proxy will be
voted as specified by the undersigned. As to any other matter, the shares will
be voted by said attorneys in accordance with their judgment.
You may also vote your shares by touch-tone phone by calling 1-800-690-6903
or through the Internet at www.proxyvote.com
DO NOT MAIL THIS PROXY CARD IF YOU ARE VOTING BY INTERNET OR TELEPHONE.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
PROTO7A
The Board of Trustees recommends a vote FOR the election of Trustees
and all other proposals. IF NO SPECIFICATION IS MADE, YOUR
SHARES WILL BE VOTED FOR THE ELECTION OF ALL TRUSTEES AND ALL OTHER PROPOSALS.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING:
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
VOTE ON TRUSTEES
1. Nominees for the Board of Trustees:
01) Charles R. Schwab, 02) Mariann Byerwalter, 03) Jeremiah H.
Chafkin, 04) Donald F. Dorward, 05) William A. Hasler, 06) Robert G.
Holmes, 07) Steven L. Scheid, 08) Gerald B. Smith, 09) Donald R.
Stephens, and 10) Michael W. Wilsey.
FOR WITHHOLD FOR ALL
ALL ALL EXCEPT
[ ] [ ] [ ]
To withhold authority to vote, mark "For All Except"
and write the nominee's number on the line below.
_____________________________________________________
VOTE ON FUNDAMENTAL POLICIES
2. To vote for all applicable elements
of Proposal 2.
For Against Abstain
[ ] [ ] [ ]
STOP HERE UNLESS YOU WOULD LIKE TO VOTE ON EACH APPLICABLE ELEMENT OF PROPOSAL 2
(a) Fundamental Policies
For Against Abstain
[ ] [ ] [ ]
(b) Maturity of Investments
For Against Abstain
[ ] [ ] [ ]
(c)(i) Borrowing
For Against Abstain
[ ] [ ] [ ]
(c)(ii) Lending
For Against Abstain
[ ] [ ] [ ]
(c)(iii) Senior Securities
For Against Abstain
[ ] [ ] [ ]
(d) Diversification
For Against Abstain
[ ] [ ] [ ]
(e) Unseasoned Issuers
For Against Abstain
[ ] [ ] [ ]
(f) Restricted or Illiquid Securities
For Against Abstain
[ ] [ ] [ ]
(g) Other Investment Companies
For Against Abstain
[ ] [ ] [ ]
(h) Ownership of Securities
For Against Abstain
[ ] [ ] [ ]
(i) Industry Concentration
For Against Abstain
[ ] [ ] [ ]
(j) Commodities, Futures & Real Estate
For Against Abstain
[ ] [ ] [ ]
(k) Underwriting of Securities
For Against Abstain
[ ] [ ] [ ]
(l) Control of an Issuer
For Against Abstain
[ ] [ ] [ ]
(m) Oil, Gas or Mineral Interests
For Against Abstain
[ ] [ ] [ ]
Please sign exactly as your name(s) appears. If signing is by attorney,
executor, administrator, trustee or guardian, please give full title. If more
than one name appears, all must sign.
__________________________________ _____________________
Signature [PLEASE SIGN WITHIN BOX] Date
__________________________________ _____________________
Signature (Joint Owners) Date
<PAGE> 70
SCHWABFUNDS(R)
101 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94104
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
TRUSTEES OF THE CHARLES SCHWAB FAMILY OF FUNDS
The undersigned, revoking previous proxies for such shares, hereby appoints
Jeremiah H. Chafkin, Stephen B. Ward and Frances Cole, or any of them, attorneys
of the undersigned with full power of substitution, to vote all shares of the
above-referenced fund (the "Fund"), which the undersigned is entitled to vote at
the Special Meeting of Shareholders of the Fund (the "Meeting") to be held on
June 1, 2000, at A.P. Giannini Auditorium, 555 California Street, Concourse
Level, San Francisco, California 94104-1502, commencing at 10:00 a.m. Pacific
time, and at any and all adjournment(s) thereof. Receipt of the Notice of and
Proxy Statement for said Meeting is acknowledged.
If properly executed and returned, the shares presented by this proxy will be
voted as specified by the undersigned. As to any other matter, the shares will
be voted by said attorneys in accordance with their judgment.
You may also vote your shares by touch-tone phone by calling 1-800-690-6903
or through the Internet at www.proxyvote.com
DO NOT MAIL THIS PROXY CARD IF YOU ARE VOTING BY INTERNET OR TELEPHONE.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
PROTO8A
The Board of Trustees recommends a vote FOR the election of Trustees
and all other proposals. IF NO SPECIFICATION IS MADE, YOUR
SHARES WILL BE VOTED FOR THE ELECTION OF ALL TRUSTEES AND ALL OTHER PROPOSALS.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING:
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
VOTE ON TRUSTEES
1. Nominees for the Board of Trustees:
01) Charles R. Schwab, 02) Mariann Byerwalter, 03) Jeremiah H.
Chafkin, 04) Donald F. Dorward, 05) William A. Hasler, 06) Robert G.
Holmes, 07) Steven L. Scheid, 08) Gerald B. Smith, 09) Donald R.
Stephens, and 10) Michael W. Wilsey.
FOR WITHHOLD FOR ALL
ALL ALL EXCEPT
[ ] [ ] [ ]
To withhold authority to vote, mark "For All Except"
and write the nominee's number on the line below.
_____________________________________________________
VOTE ON FUNDAMENTAL POLICIES
2. To vote for all applicable elements
of Proposal 2.
For Against Abstain
[ ] [ ] [ ]
STOP HERE UNLESS YOU WOULD LIKE TO VOTE ON EACH APPLICABLE ELEMENT OF PROPOSAL 2
(c)(i) Borrowing
For Against Abstain
[ ] [ ] [ ]
(c)(ii) Lending
For Against Abstain
[ ] [ ] [ ]
(c)(iii) Senior Securities
For Against Abstain
[ ] [ ] [ ]
(d) Diversification
For Against Abstain
[ ] [ ] [ ]
(e) Unseasoned Issuers
For Against Abstain
[ ] [ ] [ ]
(f) Restricted or Illiquid Securities
For Against Abstain
[ ] [ ] [ ]
(g) Other Investment Companies
For Against Abstain
[ ] [ ] [ ]
(h) Ownership of Securities
For Against Abstain
[ ] [ ] [ ]
(i) Industry Concentration
For Against Abstain
[ ] [ ] [ ]
(j) Commodities, Futures & Real Estate
For Against Abstain
[ ] [ ] [ ]
(k) Underwriting of Securities
For Against Abstain
[ ] [ ] [ ]
(l) Control of an Issuer
For Against Abstain
[ ] [ ] [ ]
(m) Oil, Gas or Mineral Interests
For Against Abstain
[ ] [ ] [ ]
Please sign exactly as your name(s) appears. If signing is by attorney,
executor, administrator, trustee or guardian, please give full title. If more
than one name appears, all must sign.
__________________________________ _____________________
Signature [PLEASE SIGN WITHIN BOX] Date
__________________________________ _____________________
Signature (Joint Owners) Date
<PAGE> 71
SCHWABFUNDS(R)
101 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94104
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
TRUSTEES OF SCHWAB FAMILY OF FUNDS
The undersigned, revoking previous proxies for such shares, hereby appoints
Jeremiah H. Chafkin, Stephen B. Ward and Frances Cole, or any of them, attorneys
of the undersigned with full power of substitution, to vote all shares of the
above-referenced fund (the "Fund"), which the undersigned is entitled to vote at
the Special Meeting of Shareholders of the Fund (the "Meeting") to be held on
June 1, 2000, at A.P. Giannini Auditorium, 555 California Street, Concourse
Level, San Francisco, California 94104-1502, commencing at 10:00 a.m. Pacific
time, and at any and all adjournment(s) thereof. Receipt of the Notice of and
Proxy Statement for said Meeting is acknowledged.
If properly executed and returned, the shares presented by this proxy will be
voted as specified by the undersigned. As to any other matter, the shares will
be voted by said attorneys in accordance with their judgment.
You may also vote your shares by touch-tone phone by calling 1-800-690-6903 or
through the Internet at www.proxyvote.com
DO NOT MAIL THIS PROXY CARD IF YOU
ARE VOTING BY INTERNET OR TELEPHONE.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
PROTO9A
The Board of Trustees recommends a vote FOR the election of Trustees
and all other proposals. IF NO SPECIFICATION IS MADE, YOUR
SHARES WILL BE VOTED FOR THE ELECTION OF ALL TRUSTEES AND ALL OTHER PROPOSALS.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING:
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
Vote on Trustees For Withhold For All
All All Except
1. Nominees for the Board of Trustees:
01) Charles R. Schwab, 02) Mariann
Byerwalter, 03) Jeremiah H. Chafkin, 04)
Donald F. Dorward, 05) William A. Hasler, [ ] [ ] [ ]
06) Robert G. Holmes, 07) Steven L.
Scheid, 08) Gerald B. Smith, 09) Donald
R. Stephens, and 10) Michael W. Wilsey.
Vote on Fundamental Policies For Against Abstain
2. To vote for all applicable elements [ ] [ ] [ ]
of Proposal 2.
To withhold authority to vote, mark "For All Except" and write the nominee's
number on the line below.
- ----------------------------------
Stop here unless you would like to vote on each applicable element of Proposal 2
For Against Abstain
(c)(ii) Lending [ ] [ ] [ ]
(c)(iii) Senior Securities [ ] [ ] [ ]
(i) Industry Concentration [ ] [ ] [ ]
(j) Commodities, Futures & Real Estate [ ] [ ] [ ]
(k) Underwriting of Securities [ ] [ ] [ ]
Please sign exactly as your name(s) appears. If signing is by attorney,
executor, administrator, trustee or guardian, please give full title.
If more than one name appears, all must sign.
- ---------------------------------- ------
Signature [PLEASE SIGN WITHIN BOX] Date
- ---------------------------------- ------
Signature (Joint Owners) Date
<PAGE> 72
SCHWABFUNDS(R)
101 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94104
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
TRUSTEES OF SCHWAB FAMILY OF FUNDS
The undersigned, revoking previous proxies for such shares, hereby appoints
Jeremiah H. Chafkin, Stephen B. Ward and Frances Cole, or any of them, attorneys
of the undersigned with full power of substitution, to vote all shares of the
above-referenced fund (the "Fund"), which the undersigned is entitled to vote at
the Special Meeting of Shareholders of the Fund (the "Meeting") to be held on
June 1, 2000, at A.P. Giannini Auditorium, 555 California Street, Concourse
Level, San Francisco, California 94104-1502, commencing at 10:00 a.m. Pacific
time, and at any and all adjournment(s) thereof. Receipt of the Notice of and
Proxy Statement for said Meeting is acknowledged.
If properly executed and returned, the shares presented by this proxy will be
voted as specified by the undersigned. As to any other matter, the shares will
be voted by said attorneys in accordance with their judgment.
You may also vote your shares by touch-tone phone by calling 1-800-690-6903 or
through the Internet at www.proxyvote.com
DO NOT MAIL THIS PROXY CARD IF YOU
ARE VOTING BY INTERNET OR TELEPHONE.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
PROT10A
The Board of Trustees recommends a vote FOR the election of Trustees
and all other proposals. IF NO SPECIFICATION IS MADE, YOUR
SHARES WILL BE VOTED FOR THE ELECTION OF ALL TRUSTEES AND ALL OTHER PROPOSALS.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING:
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
Vote on Trustees For Withhold For All
All All Except
1. Nominees for the Board of Trustees:
01) Charles R. Schwab, 02) Mariann
Byerwalter, 03) Jeremiah H. Chafkin, 04)
Donald F. Dorward, 05) William A. Hasler, [ ] [ ] [ ]
06) Robert G. Holmes, 07) Steven L.
Scheid, 08) Gerald B. Smith, 09) Donald
R. Stephens, and 10) Michael W. Wilsey.
Vote on Fundamental Policies For Against Abstain
2. To vote for all applicable elements [ ] [ ] [ ]
of Proposal 2.
Stop here unless you would like to vote on each applicable element of Proposal 2
To withhold authority to vote, mark "For All Except" and write the nominee's
number on the line below.
- ----------------------------------
Stop here unless you would like to vote on each applicable element of Proposal 2
For Against Abstain
(b) Maturity of Investments [ ] [ ] [ ]
(c)(i) Borrowing [ ] [ ] [ ]
(c)(ii) Lending [ ] [ ] [ ]
(c)(iii) Senior Securities [ ] [ ] [ ]
(d) Diversification [ ] [ ] [ ]
(i) Industry Concentration [ ] [ ] [ ]
(j) Commodities, Futures & Real Estate [ ] [ ] [ ]
(k) Underwriting of Securities [ ] [ ] [ ]
(l) Control of an Issuer [ ] [ ] [ ]
Please sign exactly as your name(s) appears. If signing is by attorney,
executor, administrator, trustee or guardian, please give full title.
If more than one name appears, all must sign.
- ---------------------------------- ------
Signature [PLEASE SIGN WITHIN BOX] Date
- ---------------------------------- ------
Signature (Joint Owners) Date
<PAGE> 73
SCHWABFUNDS(R)
101 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94104
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
TRUSTEES OF SCHWAB FAMILY OF FUNDS
The undersigned, revoking previous proxies for such shares, hereby appoints
Jeremiah H. Chafkin, Stephen B. Ward and Frances Cole, or any of them, attorneys
of the undersigned with full power of substitution, to vote all shares of the
above-referenced fund (the "Fund"), which the undersigned is entitled to vote at
the Special Meeting of Shareholders of the Fund (the "Meeting") to be held on
June 1, 2000, at A.P. Giannini Auditorium, 555 California Street, Concourse
Level, San Francisco, California 94104-1502, commencing at 10:00 a.m. Pacific
time, and at any and all adjournment(s) thereof. Receipt of the Notice of and
Proxy Statement for said Meeting is acknowledged.
If properly executed and returned, the shares presented by this proxy will be
voted as specified by the undersigned. As to any other matter, the shares will
be voted by said attorneys in accordance with their judgment.
You may also vote your shares by touch-tone phone by calling 1-800-690-6903 or
through the Internet at www.proxyvote.com
DO NOT MAIL THIS PROXY CARD IF YOU
ARE VOTING BY INTERNET OR TELEPHONE.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
PROT11A
The Board of Trustees recommends a vote FOR the election of Trustees and all
other proposals. IF NO SPECIFICATION IS MADE, YOUR SHARES WILL BE VOTED FOR THE
ELECTION OF ALL TRUSTEES AND ALL OTHER PROPOSALS. THE BOARD OF TRUSTEES
RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING:
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
Vote on Trustees For Withhold For All
All All Except
1. Nominees for the Board of Trustees:
01) Charles R. Schwab, 02) Mariann
Byerwalter, 03) Jeremiah H. Chafkin, 04)
Donald F. Dorward, 05) William A. Hasler, [ ] [ ] [ ]
06) Robert G. Holmes, 07) Steven L.
Scheid, 08) Gerald B. Smith, 09) Donald
R. Stephens, and 10) Michael W. Wilsey.
Vote on Fundamental Policies For Against Abstain
2. To vote for all applicable elements [ ] [ ] [ ]
of Proposal 2.
To withhold authority to vote, mark "For All Except"
and write the nominee's number on the line below.
- ----------------------------------
Stop here unless you would like to vote on each applicable element of Proposal 2
For Against Abstain
(f) Restricted or Illiquid Securities [ ] [ ] [ ]
(h) Ownership of Securities [ ] [ ] [ ]
(i) Industry Concentration [ ] [ ] [ ]
(j) Commodities, Futures & Real Estate [ ] [ ] [ ]
(k) Underwriting of Securities [ ] [ ] [ ]
(l) Control of an Issuer [ ] [ ] [ ]
(m) Oil, Gas or Mineral Interests [ ] [ ] [ ]
Please sign exactly as your name(s) appears. If signing is by attorney,
executor, administrator, trustee or guardian, please give full title.
If more than one name appears, all must sign.
- ---------------------------------- ------
Signature [PLEASE SIGN WITHIN BOX] Date
- ---------------------------------- ------
Signature (Joint Owners) Date
<PAGE> 74
[SCHWAB GRAPHIC]
Read the accompanying proxy statement to learn about important issues affecting
your SchwabFund.
Then help your funds reduce processing costs -- by voting on the internet or by
touch-tone telephone. If you vote by internet or telephone, do not mail your
proxy card.
You should have a proxy card for each fund you own shares in. Please make sure
that you vote all proxy cards that are enclosed.
TO VOTE BY INTERNET:
1. Read the proxy statement with your proxy card(s) handy.
2. Go to www.proxyvote.com
3. Enter the 12-digit control number from your proxy card.
4. Follow the easy instructions on the website. Remember to vote each card you
received.
TO VOTE BY TOUCH-TONE TELEPHONE:
1. Read the proxy statement with your proxy card(s) handy.
2. Call toll free 1-800-690-6903
3. Enter the 12-digit control number from your proxy card.
4. Follow the easy recorded instructions. Remember to vote each card you
received.
<PAGE> 75
EMAIL FROM JERRY CHAFKIN TO ALL EMPLOYEES
DATE: 3/24/00
TO: ALL SCHWAB EMPLOYEES
FROM: JERRY CHAFKIN
RE: SCHWABFUNDS PROXY
Nearly 4 million SchwabFunds shareholders will be receiving proxy materials over
the next few weeks in connection with a meeting of all SchwabFunds shareholders
scheduled for June 1, 2000. The funds' trustees believe that the proposals are
in the best interests of the funds and their shareholders and recommend a vote
FOR all of the proposals.
TO THOSE OF YOU WHO ARE SCHWABFUNDS SHAREHOLDERS, PLEASE VOTE YOUR SHARES
PROMPTLY. You can help further reduce proxy expenses -- which are paid by the
funds and their shareholders -- BY VOTING THROUGH THE INTERNET OR BY TOUCH-TONE
TELEPHONE. Instructions for voting your shares are included in the proxy
materials, which you should be receiving in the next few weeks. Depending on the
number of funds you own and accounts you have, you may receive more than one
proxy card. Please make sure to vote ALL cards received.
IF YOU RECEIVE ANY CUSTOMER CALLS REGARDING THE PROXY PROPOSALS, PLEASE DIRECT
THEM TO THE FUNDS' SOLICITOR, D.F. KING & CO., INC., AT 800-431-9633. In
addition to handling inbound calls, D.F. King will be contacting certain
shareholders at our direction in order to assist the funds in obtaining the
number of votes necessary for a quorum.
There are three proxy proposals:
1) to elect trustees of each fund, including three new independent
trustees
2) to eliminate, reclassify or amend certain fundamental investment
policies and restrictions
3) to amend fundamental investment objectives of certain funds
Approval of the first proposal, election of trustees, will increase the number
of independent trustees from four to seven. By adding three independent
trustees, SchwabFunds is embracing the SEC's recently proposed guidelines for
board composition, which encourage boards to make independent trustees a
two-thirds "super-majority." Approval of the other two proposals will give the
funds a degree of strategic flexibility for potentially more effective -- and
more competitive -- investment management practices.
Thank you for your attention to this very important SchwabFunds matter. If you'd
like more information on the proxy, please visit BRAD at (link to BRAD).
Jerry Chafkin
President & COO Charles Schwab Investment Management, Inc.
<PAGE> 76
SCHWABFUNDS HOME PAGE, www.schwab.com/SCHWAB FUNDS
PROPOSED DATES: 3/31/00 - 6/1/00
BULLET TEXT:
Have you voted your SchwabFunds proxy yet? [links to jump page below]
JUMP PAGE TEXT:
Voting your shares is easy -- you can even use the internet or your touch-tone
telephone to vote. Plus, these convenient voting options reduce proxy vote
expenses, which translates into savings for the funds and their shareholders.
Please make sure you vote ALL proxy cards received. In order to vote, you must
have been a SchwabFunds shareholder as of March 3, 2000.
VOTING OPTIONS:
- - BY INTERNET - go to www.proxyvote.com
- - BY TOUCH-TONE TELEPHONE - call 1-800-690-6903
IF YOU VOTE BY INTERNET OR PHONE, DO NOT MAIL YOUR PROXY CARD.
- - BY MAIL - complete, sign and return your proxy card in the postage paid
envelope enclosed with your proxy materials
If you have questions about the proxy proposals or would like help in voting
yours shares, please call the funds' proxy solicitor, D.F. King & Co. Inc., at
1-800-431-9633.
<PAGE> 77
SCHWAB INVESTOR NEWSLETTER
PROPOSED DATE: APRIL STATEMENTS (MAILING IN EARLY MAY)
HAVE YOU VOTED YOUR SCHWABFUNDS PROXY YET?
Voting your shares is easy -- you can even use the internet or your touch-tone
telephone to vote. Plus, these convenient voting options reduce proxy vote
expenses, which translates into savings for the funds and their shareholders.
In order to vote, you must have been a SchwabFunds shareholder as of March 3,
2000 and should have received materials in the mail.
VOTING OPTIONS:
- - BY INTERNET - go to www.proxyvote.com
- - BY TOUCH-TONE TELEPHONE - call 1-800-690-6903
IF YOU VOTE BY INTERNET OR PHONE, DO NOT MAIL YOUR PROXY CARD.
- - BY MAIL - complete, sign and return your Proxy Card in the postage paid
envelope enclosed with your proxy materials
If you have questions about the proxy statement or would like help voting your
shares, please call the funds' proxy solicitor, D.F. King & Co. Inc., at
1-800-431-9633.
<PAGE> 78
@SCHWAB STORY
PROPOSED DATE: MONDAY, 3/27/00
CONTACTS: BILL CARR
Nearly 4 million SchwabFunds shareholders will be receiving proxy materials over
the next few weeks in connection with a meeting of all SchwabFunds shareholders
scheduled for June 1, 2000. March 3, 2000 was designated as the record date for
determining shareholders who are entitled to vote.
D.F. King & Co., Inc. has been retained as the solicitor for the proxy. ANY
CUSTOMER CALLS REGARDING THE PROXY SHOULD BE REFERRED TO D.F. KING AT
800-431-9633. In addition to handling inbound calls, D.F. King will be
contacting certain shareholders at our direction in order to assist the funds in
obtaining the number of votes necessary for a quorum.
FOR EMPLOYEES WHO ARE SCHWABFUNDS SHAREHOLDERS, PLEASE VOTE YOUR SHARES
PROMPTLY. You can help further reduce proxy expenses -- which are paid by the
funds and their shareholders -- BY VOTING THROUGH THE INTERNET OR BY TOUCH-TONE
TELEPHONE. Instructions for voting your shares are included in the proxy
materials, which you should be receiving in the next few weeks. Depending on the
number of funds you own and accounts you have, you may receive more than one
proxy card. Please make sure to vote ALL cards received.
FOR MORE INFORMATION REGARDING THE PROPOSALS, see the mutual funds site on BRAD
[link here].
<PAGE> 79
REVISED 3/21/00
INTERNAL
3.) MUTUAL FUNDS BRAD - SCHWABFUNDS PROXY
PROPOSED DATES: 3/24/00 - 6/1/00
CONTACT: PETER PERRETTI
BACKGROUND:
Nearly 4 million SchwabFunds shareholders will be receiving proxy materials
beginning the week of March 27, 2000. March 3, 2000 was designated as the record
date for determining shareholders who are entitled to vote. The meeting is
scheduled for June 1, 2000.
There are three proposals:
1) to elect trustees of each fund, including 3 new independent trustees
2) to eliminate, reclassify or amend certain fundamental investment policies
and restrictions
3) to amend fundamental investment objectives of certain funds
The trustees believe that these proposals are in the best interests of the funds
and their shareholders and recommend a vote FOR all of the proposals.
SUMMARY OF PROPOSALS:
Approval of the first proposal, election of trustees, will increase the number
of independent trustees from four to seven. By adding three independent
trustees, SchwabFunds is embracing the SEC's recently proposed guidelines for
board composition, which encourage boards to make independent trustees a
two-thirds "super-majority."
The other proposals relate to eliminating, amending or reclassifying investment
policies, many of which are outdated. These policies currently are fundamental
policies, meaning that they cannot be changed without shareholder approval.
Approval of these proposals would allow the funds a degree of strategic
flexibility for potentially more effective -- and more competitive -- investment
management practices.
HANDLING CUSTOMER CALLS:
Any calls regarding the proxy proposals should be referred to the funds'
solicitor, D.F. King & Co., Inc., at 800-431-9633. In addition to handling
inbound calls regarding the proxy proposals, D.F. King will be contacting
certain shareholders at our direction in order to assist the funds in obtaining
the number of votes necessary for a quorum.
HOW TO VOTE SHARES:
<PAGE> 80
Voting on the internet or by touch-tone phone reduces proxy expenses, which are
paid by the fund. IF SHAREHOLDERS VOTE BY INTERNET OR PHONE, THEY SHOULD NOT
MAIL THE PROXY CARDS.
- - BY INTERNET: go to www.proxyvote.com and follow the instructions
- - BY TOUCH-TONE PHONE: call toll-free at 1-800-690-6903 and follow the
recorded instructions
- - BY MAIL: mark votes on proxy card(s), sign and date, and mail using the
postage paid envelope provided with proxy materials
QUESTIONS (INTERNAL ONLY -NOT TO BE GIVEN TO CUSTOMERS): E-MAIL
[email protected]
CLICK HERE (ICON) TO VIEW THE PROXY STATEMENT (PDF FILE)
<PAGE> 81
EXTERNAL
11.) NOTICE TO INVESTMENT MANAGERS
PROPOSED SI.COM POSTING & BLAST EMAIL: 3/24/00
CONTACT: NICOLETTE ANGELOS
SchwabFunds Proxies Mailing to Clients
SchwabFunds is conducting a proxy mailing to all shareholders as of record date,
March 3, 2000. This mailing will occur over the next few weeks and includes
shareholders of the Schwab Money Market Funds. As a result, this proxy mailing
may impact many of your clients. This proxy mailing also may be an opportunity
to determine the proxy instructions your clients have on file with Schwab
Institutional and if necessary, alter them.
Proxy Mailing
Based on your clients' standing preferences for proxy voting, we have directed
the proxy materials, including voting ballot(s), to the authorized voting party
- - either you or your client.
If any of your clients reserved the right to vote proxies for their holdings,
they will receive the proxy materials and voting ballot(s) and you will receive
an "information only" copy of the proxy materials (if indicated by the standing
proxy preference).
If you have proxy voting authority for one or more of your clients' accounts,
you will receive one consolidated ballot for each fund totaling the number of
shares you are eligible to vote on behalf of your client(s). These clients will
receive an "information only" copy of the proxy materials (if indicated by the
standing proxy preference).
Amending Proxy Instructions
Your clients may change their proxy preference instructions on file with Schwab
Institutional. To change a current account's instructions, please complete the
Limited Power of Attorney Form (APP 504-7) as follows:
1. Initial the "Objection to Release of Information to Issuers" in
section 3 of the form,
and
2. Select you to receive "Proxy, Reorg, and Interim Mailings" (section 4,
5 & 6 of the form).
If you have any questions regarding your clients' proxy preference instructions,
please contact your Institutional Client Service Team.
SchwabFunds Using a Proxy Solicitation Firm
A proxy solicitor, D.F. King & Co., has been retained to make follow-up phone
calls as necessary on behalf of the funds. Prompt responses will reduce the
likelihood of you, or any of your clients, receiving follow-up phone calls or
mailings.
If you have questions about the proxy statement or would like help voting,
please call the funds' proxy solicitor, D.F. King & Co. Inc., at 800.431.9633.
<PAGE> 82
We encourage you, or if appropriate your clients, to vote their shares.
<PAGE> 83
SCHWAB ________ FUND
- --------------------------------------------------------------------------------
ANSWERING MACHINE MESSAGE
- --------------------------------------------------------------------------------
Hello, this is _______ calling on behalf of the SCHWAB ___________ FUND. You
should have received material in the mail concerning the SHAREHOLDERS MEETING
scheduled to be held on JUNE 1, 2000. At your earliest convenience please vote
your shares at www.proxyvote.com or sign, date and return the proxy card in the
envelope provided.
If you have not received these materials, have any questions, or would like to
vote by phone, PLEASE CALL US AT 1-800-431-9633. If you have already mailed back
your proxy, please disregard this message and accept our thanks!
<PAGE> 84
Dear Shareholder,
As we begin a new year, I'd like to take this opportunity to reflect on last
year's milestones at Charles Schwab Investment Management, Inc. (CSIM), the
investment adviser for the SchwabFunds(R) Family.
First of all SchwabFunds assets topped the $100 billion mark in September.
SchwabFunds continues to be among the largest and fastest growing fund families
in the nation, with the support of investors like you.
Secondly, we added two new products to our SchwabFunds offering in 1999:
o SCHWAB TOTAL STOCK MARKET INDEX FUND-TM- seeks to track the total return of
the entire U.S. stock market, as measured by the Wilshire 5000 Total Market
Index, the broadest measure of U.S. stock market performance. In one
single, low-cost investment, fund investors can benefit from exposure to
U.S companies of all types and sizes.
o SCHWAB YIELDPLUS FUND-TM- The fund seeks high current income with minimal
changes in share price. It is designed to provide the potential for higher
yields than a money fund and lower risk than a longer-term bond fund
through a management strategy designed to minimize price fluctuation.
Intended for your long-term (over one-year) cash needs, the fund seeks to
increase the overall yield potential of the cash portion of your portfolio.
For more information on either of these funds, please call 800-435-4000 and
request a free prospectus. The prospectus contains more information on fund fees
and expenses. Please read it carefully before investing.
I encourage you to take a moment to read this annual report as it is designed to
provide timely information about your SchwabFunds investments. You will find
information on each fund's total returns and performance, as well as commentary
on market conditions provided by the portfolio management team. In the section
"What Bond Fund Investors Should Know", we've also provided guidelines that can
help you reach your goals by establishing--or maintaining--an ongoing investment
program.
As a leader in online brokerage, we recognize the value of the web as a means of
communicating timely, relevant information to investors. Regular updates on all
of the SchwabFunds, including performance data, are available on our Web site at
WWW.SCHWAB.COM/SCHWABFUNDS. We encourage you to take advantage of this valuable
resource, which can help you keep track of your funds' performance.
I'd like to make all of you aware that March 3, 2000 was designated as the
record date for a proxy and shareholders' meeting for the entire SchwabFunds
complex. Every SchwabFund has at least one proposal up for a vote. No matter how
many shares you own, your vote is important. Your prompt response will help
reduce proxy costs - which are paid by the funds and their shareholders. Voting
by internet or phone lowers proxy costs even further. If you have questions
about the proxy, would like help in voting, or if you did not receive the proxy
materials, please call the funds' proxy solicitor, D.F. King & Co., at
800-431-9633.
At Schwab our philosophy has always been that a combination of regular investing
and diversification is the best strategy over the long term. By investing in
SchwabFunds, you've already taken an important step in building a portfolio that
can help you meet your future goals. Thank you for your investment in
SchwabFunds.
Sincerely,
Charles R. Schwab
February 29, 2000