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CONTENTS
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Expenses................................... 2
Key Features of Our Fund................... 3
Matching the Fund to Your Investment
Needs.................................... 4
Investment Objective and Policies.......... 4
Investments and Techniques Used by
Our Fund................................. 5
Investing in Our Fund...................... 7
How to Buy Shares........................ 8
How to Sell or Exchange Shares........... 10
Important Information About
Your Investment.......................... 11
Dividends and Other Distributions........ 11
Federal Income Tax Information........... 11
How We Determine the Price of
Your Shares............................ 12
How Our Fund Reports Performance......... 12
Annual and Semi-Annual Report Mailings... 12
Organization and Management of Our Fund.... 12
Management Functions
and Responsibilities................... 12
Operating Fees and Expenses.............. 13
Other Information on the Operation of
Our Fund............................... 14
Glossary of Important Terms................ 16
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READING THIS PROSPECTUS. Explanations of all italicized terms in this Prospectus
are included in the Glossary at the end of this Prospectus. References to "you"
and "your" in this Prospectus refer to prospective investors and/or
shareholders, while references to "we," "us," "our" and "our Fund" refer to the
Fund or in some cases, the Trust.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SCHWAB ANALYTICS FUND(TM)
The SCHWAB ANALYTICS FUND (THE "FUND") seeks to achieve long-term capital
growth. The Fund strives to achieve its objective by utilizing quantitative
techniques, proprietary software models and real-time databases to
systematically select stocks that exhibit a combination of attributes that
historically have been associated with aggregate total returns greater than that
of the Standard & Poor's Composite Index of 500 Stocks ("S&P 500(R)" or "S&P 500
Index") over the long term. The Fund will invest primarily in the common stocks
of large and medium capitalization publicly traded U.S. companies. The Fund is a
diversified investment portfolio of Schwab Capital Trust (the "Trust"), a
no-load, open-end management investment company managed by Charles Schwab
Investment Management, Inc. (the "Investment Manager" or "CSIM").
ABOUT THIS PROSPECTUS: THIS PROSPECTUS PROVIDES YOU WITH CONCISE INFORMATION
THAT YOU SHOULD KNOW BEFORE YOU DECIDE IF THE FUND PROVIDES THE INVESTMENT
OPPORTUNITIES YOU SEEK. READ IT CAREFULLY, AND RETAIN IT FOR FUTURE REFERENCE.
You can find more detailed information in the Statement of Additional
Information ("SAI") dated May 21, 1996 (as amended from time to time). The SAI
has been filed with the Securities and Exchange Commission ("SEC") and is
incorporated in this Prospectus by reference (which means that it is legally
considered part of this Prospectus even though it is not printed here). This
Prospectus is available electronically by using our Internet address:
http://www.schwab.com. You can get a free paper copy of this Prospectus or the
SAI by calling Charles Schwab & Co., Inc. ("Schwab") at 800-2 NO-LOAD, or by
writing Schwab at 101 Montgomery Street, San Francisco, California 94104.
TO PLACE ORDERS AND FOR ACCOUNT INFORMATION: Contact your local Schwab office,
or call 800-2 NO-LOAD. TDD users may contact Schwab at 800-345-2550, 24 hours a
day.
PROSPECTUS MAY 21, 1996
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EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are the fees and charges you pay for buying or
selling shares of a fund. You pay no sales fees or charges when you buy or sell
shares of our Fund.
ANNUAL FUND OPERATING EXPENSES include management fees paid to the Investment
Manager, transfer agency fees and other expenses. These expenses cover, for
example, services such as investment research and management of the Fund,
maintaining shareholder records and issuing shareholder statements. The Fund
pays its own annual operating expenses from its income, which is factored into
the dividends paid to shareholders and into the Fund's share price. As a
shareholder, you are not charged any of these fees directly.
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SHAREHOLDER TRANSACTION EXPENSES
Sales Charge on Purchases and
Reinvested Dividends............... None
Deferred Sales Charge or
Redemption Fees.................... None
Exchange Fees........................ None
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE
DAILY NET ASSETS)
Management Fee (after fee
reduction)(1)...................... 0.35%
12b-1 Fees........................... None
Other Expenses (after fee reduction
and expense reimbursement)(2,3).... 0.40%
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TOTAL FUND OPERATING EXPENSES
(AFTER FEE REDUCTION AND EXPENSE
REIMBURSEMENT)(3,4).................. 0.75%
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(1) This amount reflects a reduction guaranteed by the Investment Manager
through at least July 1, 1997. If there were no such reduction, the maximum
management fee would be 0.74% of the Fund's average daily net assets.
(2) "Other Expenses" are based on estimated amounts for the current fiscal year
for the Fund. See "Organization and Management of Our Fund - Operating Fees
and Expenses" for information regarding the expenses for the Fund.
(3) This amount reflects the guarantee by the Investment Manager and Schwab
that, through at least July 1, 1997, the Fund's total fund operating
expenses will not exceed 0.75% of its average daily net assets. After that,
the guarantee may be terminated, modified or continued. If there were no
such guarantee, the Fund's estimated total operating expenses would be 1.14%
of its average daily net assets.
(4) You may be charged a fee if applicable minimum balances are not maintained
in your Schwab brokerage or Schwab One(R) account. Schwab Individual
Retirement Accounts ("IRAs") with balances of $10,000 or more by September
15, 1996 will not be charged Schwab's $29 annual IRA account fee for the
life of the account. Schwab Keogh plans are currently charged an annual fee
of $45. See "Investing in Our Fund" for information regarding minimum
balance and investment requirements.
EXAMPLES. You would pay the following expenses on a $1,000 investment in the
Fund assuming: (1) 5% annual return and (2) redemption at the end of the period.
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1 YEAR 3 YEARS
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$8 $24
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THIS IS AN EXAMPLE ONLY AND DOES NOT REPRESENT PAST OR FUTURE EXPENSES. ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THE EXPENSES SHOWN IN THE EXAMPLE. This
example reflects the guarantee by the Investment Manager and Schwab that,
through at least July 1, 1997, total fund operating expenses will not exceed
0.75% of the Fund's average daily net assets. Please remember that, while this
example assumes a 5% annual return on investment, the actual returns may be more
or less than the 5% used in this example.
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The purpose of the table above is to help you understand the various costs and
expenses you will bear directly or indirectly when you invest in the Fund. See
"Organization and Management of Our Fund - Operating Fees and Expenses."
KEY FEATURES OF OUR FUND
INVESTMENT OBJECTIVE: The Fund seeks to achieve long-term capital growth.
STRATEGY: The Fund will invest primarily in the common stocks of publicly traded
U.S. companies with market capitalization generally greater than $500 million.
From this universe of over 1,300 common stocks, quantitative techniques,
proprietary software models and real-time databases will be used to continually
identify and rank stocks that exhibit a favorable combination of attributes, or
"factors." Stocks that exhibit these factors have historically been associated
with aggregate total returns greater than that of the S&P 500(R) over the long
term. Once stocks are ranked, statistical methodologies will be used to
construct a portfolio of the most attractive stocks in terms of potential
long-term capital growth. The Fund typically will invest in the stocks of at
least 50 issuers. The Fund intends to maintain industry diversification similar
to that of the S&P 500 Index. This broad industry diversification serves to
lessen portfolio risk. The Fund seeks to outperform the S&P 500 over the long
term. The models used to identify and rank stocks are continually refined and
reviewed to incorporate the most current academic research and institutional
money management techniques.
Common stock prices can be volatile in the short term. Market conditions or
other company, political and economic news often can cause large changes in a
stock's price. You should be comfortable with the volatility of an all-stock
investment and the risks of the stock market. When you sell your shares, they
may be worth more or less than what you paid for them.
The Fund may also invest in certain futures contracts and options, which are
types of derivative transactions. Their potential return and risk can vary
widely from type to type.
For more details on the Fund's investments and the risks associated with them,
see "Investment Objectives and Policies" and "Investment Techniques Used by Our
Fund." See "Investment Securities" in the SAI for details about the derivatives
that we use and the limits on them. You should pay special attention to these
descriptions of derivatives, for these investments carry more risk potential
than the Fund's other investments.
MANAGEMENT. The Investment Manager, Charles Schwab Investment Management, Inc.,
currently manages the mutual funds in the SchwabFunds Family(R), a family of 23
mutual funds with over $35 billion in assets as of April 30, 1996. The
Sub-Adviser of the Fund will be Symphony Asset Management, Inc. ("Symphony").
For more details, see "Organization and Management of Our Fund."
LOW-COST INVESTING. You pay no sales fees or charges when you buy or sell shares
of the Fund. The Investment Manager and Schwab guarantee that the Fund's total
fund operating expenses will not exceed 0.75% through at least July 1, 1997.
After that, the guarantee may be terminated, modified or continued. For more
details, see "Investing in Our Fund" and "Operating Fees and Expenses."
SHAREHOLDER SERVICES. Schwab's professional representatives are available
toll-free 24 hours a day at 800-2 NO-LOAD to service your account, or you can
visit or call your local Schwab office during regular business hours. TDD users
may contact Schwab at 800-345-2550, 24 hours a day. Schwab also enables you to
execute your trading requests through electronic products and services such
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as StreetSmart(TM), e.Schwab(TM), The Equalizer(R) and TeleBroker(R). See
"Investing in Our Fund."
CONVENIENT REPORTING. You receive regular Schwab statements that combine all
your investment activity, including mutual funds, on one report.
FREE AUTOMATIC INVESTMENT PLAN. Schwab's free Automatic Investment Plan allows
you to make regular investments in the Fund in amounts and at intervals that you
select. For more details, see "Schwab's Automatic Investment Plan."
RETIREMENT PLANS. Schwab offers tax-advantaged retirement plans for which the
Fund may be a particularly appropriate investment. For more information, see
"Investing in Our Fund - Tax-Advantaged Retirement Plans."
MATCHING THE FUND TO YOUR
INVESTMENT NEEDS
We designed the Fund to provide you with exposure to the growth potential of the
stock market. In the past, U.S. common stocks have outperformed most other
securities over time. The Fund may be appropriate for you if you have a
long-term investment horizon and want the growth potential of stock investments.
The Fund is designed for those who are looking for a systematic and disciplined
approach that seeks to outperform the S&P 500(R) over the long term. Typical
uses for the Fund might include investors saving for retirement or college
funding. The Fund is also appropriate for use in IRAs and other retirement
plans. A broadly-based stock fund, like the Fund, is also often used as a
component of an asset allocation plan. While the Fund is not a complete
investment plan, you may use it as part of your equity investments around which
you tailor your overall plan.
We designed the Fund for long-term investors. You should not use the Fund to
speculate on short-term market movements. Doing so can disrupt our investment
strategy and operations. It also raises costs for other Fund investors. As a
result, we may refuse any purchase or exchange order that we deem to be
disruptive to the Fund or its investments.
INVESTMENT OBJECTIVE
AND POLICIES
The Fund's investment objective is to seek to achieve long-term capital growth.
The Fund strives to achieve its objective by utilizing quantitative techniques,
proprietary software models and real-time databases to select stocks that
exhibit a combination of attributes that historically have been associated with
aggregate total returns greater than that of the S&P 500 over the long term. The
Fund will invest primarily in the common stocks of large and medium
capitalization publicly traded U.S. companies.
From a universe of over 1,300 U.S. common stocks, a quantitative, systematic
approach will be used to continually identify and rank stocks that exhibit a
favorable combination of attributes or "factors." Some of the factors that the
quantitative models currently include are: company size (a function of market
capitalization and asset size), dividend payout or yield, stock price to book
value ratios, stock price to earnings ratios, historic earnings growth and stock
price momentum, analysts' earnings estimates and revisions and the unusual sale
of shares by corporate directors and executives. Information from several
extensive databases is monitored and updated on a real-time basis, and the
proprietary models are constantly refined and reviewed to incorporate the most
advanced academic research and institutional money management techniques. The
factors utilized may change over time. Once stocks are ranked, statistical
methodologies will be used to construct a portfolio of the most
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attractive stocks in terms of potential long-term capital growth. The Fund
typically will invest in the stocks of at least 50 issuers. The Fund intends to
maintain industry diversification similar to that of the S&P 500(R) Index. This
broad industry diversification serves to lessen portfolio risk.
S&P 500(R). S&P 500 is the Standard & Poor's Composite Index of 500 Stocks, a
widely recognized, unmanaged index of common stock prices. Total returns for the
S&P 500 assume reinvestment of all dividends paid by stocks included in the
index. They do not, however, include any allowance for the brokerage commissions
or other fees you would pay if you actually invested in these stocks.
Under normal conditions, the Fund will invest at least 65% of its total assets
in U.S. common stocks. Although the Fund invests primarily in common stocks, it
may also buy and sell other equity securities and other types of instruments. It
also buys and sells short-term debt securities for cash management purposes. In
addition, the Fund uses various techniques, such as purchasing options and
futures contracts, to maintain cash reserves for potential redemptions while
simulating full investment. In addition, while the Fund will not purchase
when-issued and delayed delivery securities, the Fund may hold these securities
to the extent that such holdings are incident to the Fund's ownership of common
stocks.
The Fund's investment objective is fundamental and cannot be changed without
shareholder approval. The Fund's investment policies and techniques discussed
below are non-fundamental, unless otherwise noted. See "Investment Restrictions"
in the SAI for details. While there is no assurance that the Fund will achieve
its investment objective, it will endeavor to do so by following the investment
policies described below and on the following pages.
INVESTMENTS AND TECHNIQUES USED
BY OUR FUND
In seeking its objective, the Fund may buy and sell the investments and employ
the techniques described below. Please see the SAI for more details. The Fund's
investment policies and restrictions apply at the time the Fund makes an
investment. Except with respect to futures, options and illiquid securities,
later changes, such as changed market values, do not require the Fund to sell
the investment even if the Fund could not then make the same investment.
EQUITY SECURITIES. Equity securities are ownership interests in the net worth of
a corporation. They include common stocks, preferred stocks, convertible
securities and warrants. In the past, they have outperformed most other
securities over time. Their prices can be volatile in the short term though.
Market conditions or other company, political and economic news often can cause
large changes in a stock's price for the short term or long term. Smaller
company securities are especially sensitive to these factors.
RISK CONSIDERATIONS. We invest primarily in common stocks of medium and large
capitalization U.S. companies. Your investment in the Fund will expose you to
market risk; i.e., the risk of being invested in stocks when the market goes
down, resulting in stock prices declining over short or even long periods. Your
investment in the Fund also exposes you to the risk of under-performance, the
potential that the Fund's stock portfolio will under-perform the market as
represented, for example, by a benchmark index such as the S&P 500 Index. The
Fund's portfolio optimization techniques attempt to minimize this risk by
targeting stocks with above-average appreciation potential and by weighting the
industries in the portfolio approximately the same as they are weighted in the
S&P 500 Index. The wide range of industries represented in the Fund's stock
portfolio also tends to lessen the impact
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of one industry's decline. In addition, the Fund will seek to constrain the beta
of its stock portfolio within a targeted range around 1.0. Beta is a measure of
a stock's or portfolio's average sensitivity to market moves. Setting the
portfolio beta near to 1.0 means that in the event of an upward movement in the
overall market, the value of the Fund's portfolio would on average also increase
in a manner generally consistent with the S&P 500(R) Index. Even so, these
factors cannot protect you from possible losses.
SHORT-TERM DEBT SECURITIES. While the Fund tries to remain invested in equities
as fully as possible, it must manage cash flows resulting from the purchase and
sale of Fund shares. Thus, the Fund also may invest in U.S. dollar denominated
short-term bonds and money market instruments. The Fund may buy debt securities
of or guaranteed by the U.S. government, its agencies or related bodies. It also
may use certificates of deposit, time deposits and bankers' acceptances. The
Fund also may buy commercial paper if the commercial paper has one of an NRSRO's
top two ratings or has comparable quality if it is unrated. The Fund may enter
into repurchase agreements using any of these debt securities. It also may buy
and sell shares of other mutual funds to manage its cash flows.
THE FUND MAY USE FUTURES CONTRACTS AND OPTIONS. When investing cash in or
redeeming cash from the equity market, we may engage in certain stock futures
contracts and options, which are types of derivative transactions. Their
potential return and risk can vary widely from type to type. Specifically, the
Fund may enter into futures contracts and options on futures contracts provided
that the aggregate deposits required on these contracts do not exceed 5% of the
Fund's total assets. In addition, certain provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), may limit the Fund's use of futures
contracts and options. See "Investment Securities" in the SAI for details about
the derivatives that we use and the limits on them. You should pay special
attention to these descriptions of derivatives, for these investments carry more
risk potential than the Fund's other investments.
Although the Fund currently intends to limit its use of derivatives to S&P 500
futures for short-term cash management purposes, the Fund may also use futures
contracts and options to reallocate the Fund's assets among stocks while
minimizing transaction costs; maintain cash reserves while simulating full
investment; facilitate trading; seek higher investment returns; or simulate full
investment when a futures contract is priced more attractively or is otherwise
considered more advantageous than the underlying securities.
Because trading costs for futures contracts and options often are less than the
costs of direct investments, the Fund may use these instruments to reduce its
total trading costs. Also, futures contracts require only a small initial margin
deposit. That way, the Fund often is able to keep a cash reserve for future
redemptions but in effect remain fully invested. The Fund may reduce holdings of
futures contracts upon net redemptions to avoid leverage.
Futures contracts and options pose certain risks. The secondary market for a
futures contract also may not be liquid. As a result, the Fund may not be able
to close a futures position before it settles. The Fund also buys and sells
futures contracts and options on national exchanges that have an active and
liquid secondary market.
The risk of loss in trading futures contracts in some strategies can be
substantial. Low required margin deposits and the extremely high degree of
leverage of some contracts contribute to this risk. Thus, a relatively small
price change in a security or index linked to a futures contract may result in
immediate and substantial loss (or gain). When investing in futures contracts,
the Fund will segregate cash, cash-equivalents or
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liquid, high-quality debt instruments in the amount of the underlying
obligation.
Since the Fund will not use futures and options contracts for the purposes of
leveraging the portfolio, the Investment Manager does not believe that the Fund
is subject to the degree of risk frequently associated with futures and options
transactions.
ILLIQUID SECURITIES. The Fund may invest up to 10% of its net assets in illiquid
securities. Generally, an "illiquid security" is any security that cannot be
disposed of promptly and in the ordinary course of business at approximately the
amount at which the Fund has valued the instrument. The absence of a trading
market can make it difficult to ascertain the market value of illiquid
securities.
REPURCHASE AGREEMENTS. As an alternative to investing in short-term securities,
the Fund may engage in repurchase agreements. In a repurchase agreement, the
Fund buys a security at one price and simultaneously agrees to sell it back at a
higher price. In the event of a bankruptcy or other default of a repurchase
agreement counterparty, the Fund may incur expenses in enforcing its rights and
could experience losses, including a decline in the value of the underlying
securities and loss of income.
BORROWING POLICY. The Fund may borrow money only for temporary purposes to meet
redemption requests that it cannot otherwise meet without immediately selling
portfolio securities. The Fund may borrow up to one-third of its total assets
and pledge up to one-third of its total assets to secure such borrowings. The
Fund may not borrow to leverage. The Fund's borrowing and pledging policies, as
set forth in the SAI, are fundamental. Borrowing money may cause greater
fluctuations in the Fund's share price.
SECURITIES LENDING: As a means of increasing income, the Fund may lend
securities it owns worth up to one-third of its total assets. Loans must be
fully collateralized by the borrower at all times. If the borrower defaults or
becomes insolvent, the Fund may incur expenses or losses. The Fund may not
recover the loaned securities immediately and may even lose them entirely.
INVESTMENT COMPANIES. The Fund may buy shares of other investment companies,
including those managed by CSIM, the Investment Manager. These purchases will be
subject to the limitations imposed by the Investment Company Act of 1940 (the
"1940 Act"), and the Fund will only make these purchases after obtaining any
required regulatory approvals. Investment by the Fund in other investment
companies may cause you to bear duplicative fees for certain services.
PORTFOLIO TURNOVER. The Fund anticipates that its annual turnover rate will not
exceed 100%.
INVESTING IN OUR FUND
SHAREHOLDER SERVICES
You may place Fund purchase and redemption orders as well as request exchanges
at any one of over 230 Schwab offices nationwide or by calling 800-2 NO-LOAD,
where trained representatives are available to answer questions about the Fund
and your account. The right to initiate transactions by telephone, as discussed
below, is automatically available through your Schwab account. TDD users may
contact Schwab at 800-345-2550, 24 hours a day.
We will follow reasonable procedures to confirm that your telephone instructions
are genuine. If the Fund follows telephone orders that it reasonably believes to
be genuine, it will not be liable for any losses you may experience. If the Fund
does not follow reasonable procedures to confirm that a telephone order is
genuine, the Fund may be liable for any losses you may suffer from unauthorized
or fraudulent orders. These procedures may include requiring a form of personal
identification, providing written confirmation of your telephone instructions
and recording all telephone transactions. You should be aware that tele-
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phone transactions may be difficult to implement during periods of drastic
economic or market changes. If you experience difficulties in reaching us by
telephone, you can mail your orders or place them in person as set forth on the
following pages.
You may purchase shares through an account maintained with Schwab or through any
other entity that has been designated by Schwab. The following information
regarding the purchase, exchange and redemption of Fund shares through a Schwab
account relates solely to transactions through Schwab accounts and should not be
read to apply to transactions through other designated entities. For more
information, see "Purchase and Redemption of Shares" in the SAI.
HOW TO BUY SHARES
NEW INVESTORS TO SCHWAB need to open a Schwab account by completing and signing
an account application. Mail it, together with your check, to the address
indicated on the application. You may also open your account in person as
described in the table on the following page.
EXISTING SCHWAB INVESTORS must have funds in their Schwab account in order to
buy Fund shares. Schwab will charge your Schwab brokerage account a $15 service
fee for any check returned because of insufficient or uncollected funds or
because of a stop payment order.
Schwab also enables you to execute your trading requests through electronic
products and services such as StreetSmart(TM), e.Schwab(TM), The Equalizer(R)
and TeleBroker(R).
Within your Schwab account, you have access to other investments available at
Schwab, such as stocks, bonds and other mutual funds. The Securities Investor
Protection Corporation (known as "SIPC") will provide account protection in an
amount up to $500,000 for securities, including Fund shares, that you hold in a
Schwab account. Of course, SIPC account protection does not protect you from
share price fluctuations.
SCHWAB ACCOUNT AND FUND MINIMUMS AND FEES
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SCHWAB ACCOUNT MINIMUM BALANCE
Brokerage account................. $ 1,000
Custodial account................. $ 500
FUND INITIAL PURCHASE:
Brokerage account................. $ 1,000
IRA, other retirement plan
and custodial account.......... $ 500
FUND ADDITIONAL PURCHASE:
Any type of account............... $ 100
</TABLE>
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Schwab reserves the right to waive these minimums for clients of Schwab
Institutional and The Charles Schwab Trust Company (the "Trust Company") and for
certain tax-advantaged retirement plans.
A quarterly fee of $7.50 will be charged on Schwab brokerage accounts that fall
below the minimum. This fee, if applicable, will be charged at the end of each
quarter and will be waived if there has been at least one commissionable trade
within the last six months or if the shareholder's combined account balances at
Schwab total $10,000 or more. Schwab currently imposes no fee for opening a
Schwab One(R) account with a minimum balance of $5,000. Schwab One accounts with
balances below $5,000 are subject to a fee of $5 per month imposed by Schwab if
there have been fewer than two commissionable trades within the last twelve
months.
The Fund, in its sole discretion and without prior notice to you, reserves the
right to reject orders to buy shares, to change the minimum investment
requirements and to withdraw or suspend any part of the offering made by this
Prospectus. All orders to buy shares must be accepted by the Fund, and orders
are not binding until the Fund confirms or accepts them in writing.
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SPECIAL SUBSCRIPTION OFFERING
The distributor, Charles Schwab & Co., Inc., is soliciting subscriptions for
Fund shares during an initial offering period, currently scheduled to end June
28, 1996, subject to extension by the Fund and the distributor. Shares are being
offered at the initial net asset value of $10 per share. The Fund and its
distributor reserve the right to withdraw, cancel or modify the offering without
notice and to refuse any order in whole or in part. The Fund expects to commence
continuous offerings of its shares immediately following the settlement of the
subscription offerings.
Whether by phone, mail, electronically or in person, the following information
is always needed:
- - your Schwab account number.
- - the name of the Fund you wish to buy.
- - the amount you wish to invest.
BY PHONE
- - Call 800-2 NO-LOAD.
- - Place a buy order for your account.
- - TDD users may contact Schwab at 800-345-2550, 24 hours a day.
BY MAIL
- - Include a letter of instruction with the information requested above, signed
by one of the registered account holders in the exact form specified on the
account.
- - Make your check payable to Charles Schwab & Co., Inc.
- - Mail to 101 Montgomery Street, San Francisco, CA 94104 or your local Schwab
office.
- - Once your letter is mailed, you may not modify or cancel your instructions.
ELECTRONICALLY
- - Refer to product information on StreetSmart(TM), e.Schwab(TM), The
Equalizer(R) and TeleBroker(R) for details.
IN PERSON
- - Deposit your check at your local Schwab office.
- - For the Schwab office nearest you, call 800-2 NO-LOAD.
BY WIRE
- - Contact your local Schwab office for instructions.
AUTOMATICALLY
- - Use Schwab's Automatic Investment Plan.
- - Sign up for this service when opening your account.
SCHWAB'S AUTOMATIC INVESTMENT PLAN ("AIP") allows you to make periodic
investments in non-money market SchwabFunds(R)(and certain other funds available
through Schwab) automatically and conveniently. You can make automatic
investments in any amount, from $100 to $50,000, once you meet the Fund's
investment minimum. Automatic investments are made from your Schwab account, and
you may select from the following methods to make automatic investments: using
the uninvested cash in your Schwab account; using the proceeds of redemption of
shares of the Schwab Money Fund linked to your Schwab account; or using the
Schwab MoneyLink(R) Transfer Service. As long as you are purchasing a Fund's
shares through AIP, all distributions paid by the Fund must be reinvested in
additional shares of that Fund and may not be received in cash. For more
detailed information about this service, or to establish your AIP, call your
local Schwab office or 800-2 NO-LOAD, 24 hours a day.
TAX-ADVANTAGED RETIREMENT PLANS. Schwab offers tax-advantaged retirement plans
for which the Fund may be a particularly appropriate investment. Schwab's
retirement plans allow participants to defer taxes while helping them build
their retirement savings. The Schwab IRA is a retirement plan with a wide choice
of investments offering individuals with earned income the opportunity to
compound earnings on a tax-deferred basis. The Schwab Keogh is a tax-advantaged
plan for self-employed individuals and their employees that permits the employer
to make annual tax-deductible contributions of up to $30,000. Schwab also offers
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Corporate Retirement Plans to help a company attract and retain valuable
employees. Call your local Schwab office or 800-2 NO-LOAD, 24 hours a day, for
more information.
HOW TO SELL OR EXCHANGE YOUR SHARES
You can sell your Fund shares at any time, in person, by telephone,
electronically or by mail. When you sell your shares, you may receive more or
less than the amount you invested.
The exchange privilege allows you to exchange your SchwabFunds(R) shares for
shares of any other SchwabFunds class or series available to investors in your
state if your purchase meets that Fund's eligibility requirements. Thus, you can
conveniently modify your investments if your goals or market conditions change.
An exchange of shares will be treated as a sale of the shares for federal income
tax purposes. Note that you must meet the minimum initial or subsequent
investment requirements applicable to the shares you wish to receive in an
exchange. The Fund reserves the right on 60 days' written notice to modify,
limit or terminate the exchange privilege.
Whether by phone, mail, electronically or in person, the following information
is always needed:
When Selling Shares:
- - your Schwab account number.
- - the name of the Fund from which you wish to sell shares.
- - the number of shares you wish to sell.
When Exchanging Shares:
- - your Schwab account number.
- - the number of shares you want to exchange.
- - the name of the Fund from which you wish to exchange shares.
- - the name of the Fund and class into which shares are to be exchanged.
- - the distribution option you select.
BY PHONE
- - Call 800-2 NO-LOAD.
- - Place a sell or exchange request for your account.
- - TDD users may contact Schwab at 800-345-2550, 24 hours a day.
BY MAIL
- - Include a letter of instruction with the information requested above, signed
by one of the registered account holders in the exact form specified on the
account.
- - Mail to 101 Montgomery Street, San Francisco, CA 94104 or your local Schwab
office.
- - Once your letter is mailed, you may not modify or cancel your instructions.
ELECTRONICALLY
- - Refer to product information on StreetSmart(TM), e.Schwab(TM), The
Equalizer(R) and TeleBroker(R) for details.
IN PERSON
- - Place your sell or exchange request at your local Schwab office.
- - For the Schwab office nearest you, call 800-2 NO-LOAD.
Payment for redeemed shares will be credited directly to your Schwab account no
later than 7 days after the Transfer Agent or its authorized agent receives your
sell instructions in proper form. Proceeds will then be held in your Schwab
account or mailed to you depending on the account standing instructions you have
selected. For information on how to wire funds from your Schwab account to your
bank, contact your local Schwab office.
If you purchased shares by check, your sales proceeds may be held in your Schwab
account until your check clears (which may take up to 15 days). Depending on the
type of Schwab account you have, your money may earn interest during any holding
period.
The Fund may suspend redemption rights or postpone payments when trading on the
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New York Stock Exchange (the "Exchange") is restricted or is closed for any
reason other than its customary weekend or holiday closings, emergency
circumstances as determined by the SEC exist or for such other circumstances as
the SEC may permit. Each Fund may also elect to invoke a 7-day period for cash
settlement of individual redemption requests in excess of $250,000 or 1% of the
Fund's net assets, whichever is less. See "Purchase and Redemption of Shares" in
the SAI.
IMPORTANT INFORMATION
ABOUT YOUR INVESTMENT
DIVIDENDS AND OTHER DISTRIBUTIONS
DISTRIBUTION OPTIONS. When you first buy shares in our Fund, you may choose one
of the three following distribution options:
1. AUTOMATIC REINVESTMENT: We will reinvest all distributions in additional
shares of the Fund. The Fund chooses this option automatically unless you
specify otherwise. If you are purchasing Fund shares through Schwab's AIP, you
must choose this distribution option for this Fund.
2. CASH DIVIDENDS/REINVESTED CAPITAL GAINS: We will pay you income dividends in
cash and invest capital gains for you in additional Fund shares.
3. ALL CASH: We will pay you both income dividends and any capital gains in
cash.
The Fund reinvests distributions at the net asset value determined on the
declaration date. We credit your cash distributions to your Schwab account on
the date distributions are payable. We leave them there or mail them to you,
depending on your standing account instructions.
To change the distribution option you have selected, call your local Schwab
office or 800-2 NO-LOAD.
The Fund intends to distribute substantially all of its net investment income
each year, as determined by the Board of Trustees. The Fund will distribute net
investment income and capital gains, if any, annually in December. We will
automatically reinvest all your distributions in additional Fund shares unless
you elect otherwise.
FEDERAL INCOME TAX INFORMATION
The following is only a very brief summary of how some of the federal income tax
laws affect you and the Fund. Thus, you must consult with your own tax adviser
about your particular tax situation.
The Fund intends to qualify as a regulated investment company under the Code. To
qualify, we will distribute substantially all of our investment company taxable
income and our capital gain net income (if any) each year. In addition, we will
meet certain other Code requirements. As a regulated investment company, we will
pay no federal income taxes insofar as we distribute our earnings to our
shareholders.
Dividends that the Fund pays to you from net investment income generally are
taxable to you as ordinary income. So are distributions of the Fund's net
short-term capital gains in excess of any net long-term capital losses.
Distributions that the Fund designates as long-term capital gains (net of
capital losses) generally are taxable to you as long-term capital gains no
matter how long you own your Fund shares. These tax rules apply whether the
distributions are received in cash or reinvested.
If you are not subject to tax on your income, you may have different tax
treatment. In general, you will not pay tax on the Fund's distributions to you.
We will provide you with a record of all distributions, purchases and sales on
your regular Schwab brokerage account statement. Each year we will notify you of
the federal
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income tax treatment of all distributions made that year to your account.
HOW WE DETERMINE THE PRICE OF YOUR SHARES
The price of a single share of the Fund is the Fund's net asset value. We
determine net asset value each Business Day at the close of trading on the
Exchange, generally at 4:00 p.m. Eastern time. We determine the price by first
valuing the total assets of the Fund, then subtracting any liabilities, and
dividing the balance by the number of shares outstanding.
The Fund values its portfolio securities based on market quotes if they are
readily available. If they are not readily available, the Investment Manager
assigns fair values to the Fund's assets in good faith under Board of Trustees
guidelines. The Fund values illiquid and restricted securities in this way. The
Board of Trustees regularly reviews these values. The Fund uses prices furnished
by pricing services if it believes that they reflect market values.
Purchase or redemption orders and exchange requests will be executed at the NAV
next determined after receipt by the Transfer Agent or its authorized agent.
HOW OUR FUND REPORTS PERFORMANCE
From time to time the Fund may advertise the total return of the Fund. These
figures reflect past results and are not intended to predict future performance.
We often will compare our performance to the S&P 500(R) and other indices.
Since 1986, the S&P 500 has produced an average annual total return of 14.79%.
The models used by the Fund will seek to produce a greater average annual total
return than that of the S&P 500 over the long term.
Total return measures the percentage change in the value of an investment in the
shares of a fund over time. It reflects all share price movements, distributions
and expenses. It assumes the reinvestment of all distributions. Average annual
total return is a measure of the yearly changes in the value of the investment.
It is the constant compound rate of return, which if applied to the investment
each year, would result in the actual total return over that time. Other total
return figures we show may differ. We may base them on non-standard periods. We
may also show aggregate or cumulative returns.
ANNUAL AND SEMI-ANNUAL REPORT MAILINGS
Twice a year, the Fund provides you a report showing its performance and
outlining its investments. To reduce mailing costs, we combine these mailings by
household. If a household has multiple accounts and the same record address for
all the accounts, we send mailings for all accounts at that address in a single
package. If you do not want to combine mailings for your account, please write
to SchwabFunds(R) at the address on the front of this Prospectus. To request a
free copy of the Fund's Annual or Semi-Annual Report, call your local Schwab
office or call 800-2 NO-LOAD.
ORGANIZATION AND
MANAGEMENT OF OUR FUND
MANAGEMENT FUNCTIONS AND RESPONSIBILITIES
GENERAL OVERSIGHT OF OUR FUND. The Board of Trustees and officers meet regularly
to review the Fund's investments, performance, expenses and other business
affairs.
THE INVESTMENT MANAGER. The Investment Manager, Charles Schwab Investment
Management, Inc. or CSIM, manages the Fund's business affairs. Its actions are
subject to the authority of the Board of Trustees and officers of Schwab Capital
Trust. The Investment Manager also is responsible for overall management of the
Fund's investments. The Investment Manager, founded in 1989, is a wholly owned
subsidiary of The Charles
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Schwab Corporation. It also acts as investment manager and administrator to the
mutual funds in the SchwabFunds Family(R), a family of 23 mutual funds. As of
April 30, 1996, the SchwabFunds(R) had aggregate net assets in excess of $35
billion.
CSIM's portfolio manager for the Fund is Geri Hom. She joined Schwab in March
1995 as Portfolio Manager - Equities and currently manages the four Schwab index
funds and the equity portions of the three Schwab Asset Director(R) Funds with
combined assets of approximately $2 billion. For four years before joining
Schwab, she was a Principal for Wells Fargo Nikko Investment Advisors. For the
seven prior years, she was Vice President and Manager of the Domestic Equity
Portfolio Management Group for Wells Fargo Nikko.
Stephen B. Ward, CSIM's Senior Vice President and Chief Investment Officer, has
overall responsibility for the day-to-day operations of the Fund. He is the
supervising Portfolio Manager for CSIM.
The Investment Manager has retained Symphony, 555 California Street, Suite 2975,
San Francisco, California 94104, to serve as Sub-Adviser to the Fund. Symphony,
a registered investment adviser, was established in 1994 as a wholly owned
subsidiary of BARRA, Inc. BARRA, founded in 1975, provides innovative analytical
models, software and services. Symphony presently serves as Sub-Adviser to five
other investment companies and manages directly and indirectly over $700 million
in institutional and private account assets.
CSIM will manage the daily cash positions of the Fund and will monitor the risk
characteristics of the portfolio. Symphony, subject to the supervision of CSIM,
provides investment assistance and the day-to-day management of the Fund's
non-cash investments, as well as investment research and statistical
information.
Symphony's portfolio manager for the Fund is Praveen Gottipalli. Since May 1994,
he has been Symphony's Director of Investment. For more than five years prior
thereto, he was Director of the Active Strategies Group of BARRA, Inc.
TRANSFER AGENT AND SHAREHOLDER SERVICES. Schwab serves as the Shareholder
Services Agent and Transfer Agent for the Fund. Schwab was established in 1971
and is America's largest discount broker. Schwab provides low-cost securities
brokerage and related financial services to approximately 3.3 million active
customer accounts and has over 230 branch offices. Schwab also offers convenient
access to financial information services and provides products and services that
help investors make investment decisions. Schwab is a wholly owned subsidiary of
The Charles Schwab Corporation. Charles R. Schwab is the founder, Chairman and
Chief Executive Officer, and a Director of The Charles Schwab Corporation. As a
result of his beneficial ownership interests in and other relationships with The
Charles Schwab Corporation and its affiliates, Mr. Schwab may be deemed to be a
controlling person of Schwab and the Investment Manager.
OPERATING FEES AND EXPENSES
The Investment Manager provides investment management services under the terms
of its Investment Advisory and Administration Agreement with the Trust. For
these services, it is entitled to a graduated annual fee payable monthly from
the Fund. The rate is 0.74% of the first $1 billion of the Fund's average daily
net assets; 0.69% of the next $1 billion; and 0.64% of net assets over $2
billion.
The Investment Manager guarantees that, through at least July 1, 1997, the
management fees for the Fund will not exceed 0.35% of its average daily net
assets.
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For its services as Transfer Agent and Shareholder Services Agent, Schwab is
entitled to receive annual fees from the Fund of 0.05% and 0.20%, respectively,
of its average daily net assets. Schwab may absorb certain expenses incurred by
the Fund for these services in order to limit its ratio of operating expenses.
The Investment Manager and Schwab also guarantee that, through at least July 1,
1997, total fund operating expenses will not exceed 0.75% of the Fund's average
daily net assets (after waivers and reimbursements). For purposes of this
guarantee, "operating expenses" do not include interest expenses, taxes, foreign
taxes paid or withheld and capital items such as costs of purchase or sale of
portfolio securities, including brokerage fees or commissions. The effect of
this voluntary expense limitation is to maintain or increase the Fund's total
return to shareholders.
The Investment Manager pays the Sub-Adviser an annual fee payable monthly, of
0.20% of the Fund's average daily net assets not in excess of $300 million;
0.15% of the next $500 million; and 0.10% of such assets over $800 million. The
Sub-Adviser does not receive compensation directly from the Fund.
Schwab serves as the distributor for the Fund but receives no compensation for
this service.
OTHER EXPENSES. The Trust pays the expenses of the Fund's operations. These
expenses include the fees and expenses for independent accountants, legal
counsel and the custodian of its assets; the cost of maintaining books and
records of account; taxes; registration fees; the fees and expenses of
qualifying the Trust and its shares for distribution under federal and state
securities laws; and industry association membership dues. The Fund seeks to
keep transaction costs and other expenses low.
The Trust generally allocates these expenses among the individual investment
portfolios or series ("Series") of the Trust, including the Fund. This
allocation is based on the relative net assets of each Series at the time the
expenses are incurred. However, expenses directly attributable to a particular
Series are charged to that Series.
PORTFOLIO BROKERAGE. When placing orders for the Fund's securities transactions,
the Sub-Adviser uses its judgment to obtain the best price and execution. It
considers the full range and quality of brokerage services available in making
these determinations. For securities transactions in which Schwab is not a
principal, the Sub-Adviser may use Schwab or other qualified affiliated brokers
or dealers to execute the Fund's transactions. To do so, it must reasonably
believe that commissions (or prices) paid to and transaction quality received
from Schwab or other qualified affiliated brokers or dealers will be at least
comparable to those available from qualified non-affiliated brokers or dealers.
OTHER INFORMATION ON THE
OPERATION OF OUR FUND
The Trust is a business trust formed under the laws of Massachusetts on May 7,
1993. It may issue an unlimited number of shares of beneficial interest in one
or more Series or classes. Currently it offers shares of seven Series. The Board
of Trustees may authorize the issuance of shares of additional Series or
classes, if it deems it desirable. Shares within each Series have equal,
noncumulative voting rights, and have equal rights as to distributions, assets
and liquidation of such Series except to the extent that such voting rights or
rights as to distributions, assets and liquidation vary among classes of a
Series.
Due to the relatively high cost of maintaining accounts with smaller holdings,
the Fund reserves the right to redeem your shares if, as a result of
redemptions, the aggregate value of your account drops below the Fund's $500
minimum balance requirement ($250 in the case of IRAs, other retirement plans
and custodial accounts). You will be given
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30 days' advance written notice and a chance to increase your Fund balance to
the minimum requirement before the Fund redeems your shares. Fund shares will
automatically be redeemed should the Schwab account in which they are carried be
closed.
SHAREHOLDER MEETINGS. The Trust is not required to hold annual shareholders'
meetings and does not intend to do so. The Trust may, however, hold special
meetings in connection with certain matters. These include a change in a Fund's
fundamental policies, election or removal of Trustees, or approval of or
amendment to any investment advisory agreement. In addition, shareholders may
remove a Trustee at a special meeting called upon written request of
shareholders owning in the aggregate at least 10% of the outstanding shares of
the Trust.
YOUR VOTING RIGHTS. If we were to make changes to the Fund's management or
fundamental policies, we would ask you to vote as a shareholder. If we hold a
meeting and you cannot attend, you can vote by proxy. Before the meeting, the
Fund will send you proxy materials that explain the issues to be decided and
include a voting card for you to return. Shareholders have one vote for each
share owned. Unless permitted by the 1940 Act, shareholders will vote by Series
and not in the aggregate. For example, when voting to approve an investment
advisory agreement for a Series, only shareholders of that Series may vote. When
voting to elect Trustees, shareholders of all the Series vote in the aggregate.
In addition, holders of shares will vote exclusively as a class on any matter
relating solely to their arrangement as a class and on any matter in which the
interest of that class differ from the interest of any other class in that Fund.
SHARE CERTIFICATES. To assist in minimizing administrative costs, share
certificates will not be issued. Records regarding share ownership are
maintained by the Transfer Agent.
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GLOSSARY OF IMPORTANT TERMS
ANNUALIZED: calculated to represent a year; a statement produced by calculating
financial results covering less than a year to show what would happen were the
results hypothetically extended to cover an entire year.
BOND: a debt obligation that requires the issuer to pay a fixed sum of money
each year (the interest payments). Upon maturity, the bond comes due and the
principal (the amount borrowed) must be paid. Floating or variable rate bonds
have an interest rate that rises or falls if general interest rates or some
other security (such as Treasury bills) rises or falls.
BUSINESS DAY: any day the New York Stock Exchange is open for business. A
Business Day normally begins at 9:30 a.m. Eastern time when the Exchange opens,
and usually ends at 4 p.m. Eastern time when the Exchange closes.
CAPITAL GAIN OR LOSS: the increase or decrease in the value of a security
relative to the original purchase price. A gain is realized when the security
that has increased in value is sold. An unrealized gain or loss occurs when the
value of a security increases or decreases but the security is not sold. If a
security is held for more than 12 months and then sold at a profit, that profit
is a realized long-term capital gain. If it is sold at a profit after being held
for less than 12 months, that profit is a realized short-term capital gain.
CSIM: the Fund's Investment Manager, Charles Schwab Investment Management, Inc.,
101 Montgomery Street, San Francisco, CA 94104.
DISTRIBUTION: payment the Fund makes to shareholders. There are two kinds of
distributions: dividends, or the profits (after expenses) from the Fund's
investments, and capital gains distributions.
DIVERSIFIED: under the 1940 Act, a diversified fund generally may not invest
more than 5% of its assets in the securities of any one issuer and may not hold
more than 10% of the voting shares of any one issuer with respect to 75% of the
value of its total assets. Certain minor exceptions apply to this policy, which
are described in the SAI.
FUNDAMENTAL: a policy which cannot be changed without the approval of a majority
of the shareholders of the Fund.
INVESTMENT MANAGER: Charles Schwab Investment Management, Inc. (or CSIM), 101
Montgomery Street, San Francisco, CA 94104.
LARGE COMPANY STOCKS: the stocks of companies with the largest market
capitalizations, i.e., market capitalizations of about $1.5 billion and up.
MARKET CAPITALIZATION: the total value of a company as represented by the share
price times the number of shares outstanding.
MONEY MARKET INSTRUMENT: short-term liquid debt such as Treasury bills and
commercial paper.
NET ASSET VALUE (NAV): on a per share basis, the value of one share in a fund.
This value is determined by adding the total assets, subtracting all
liabilities, and then dividing the resulting amount by the number of shares
outstanding.
1940 ACT: the Investment Company Act of 1940, as amended.
NONCUMULATIVE VOTING RIGHTS: the right of a shareholder to vote only the number
of shares owned at the time of voting.
NRSRO: nationally recognized statistical rating organization.
PORTFOLIO: the total stocks, bonds and other securities held by an individual
investor, a mutual fund or a financial institution.
RISK: the possibility of losing all or part of your investment, that the value
of your investment
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will decrease or that you will receive little or no return on your investment.
SAI: the Trust's Statement of Additional Information, as amended from time to
time.
SCHWAB: Charles Schwab & Co., Inc. 101 Montgomery Street, San Francisco, CA
94104.
SECURITIES AND EXCHANGE COMMISSION (SEC): established by Congress to administer
the Securities Act of 1933, the Investment Company Act of 1940, and other
securities-related laws.
SHORT-TERM: with respect to the Fund's portfolio investments, maturing in 397
days or less.
STOCK RISK: the possibility that stock prices in general or particular will
decline over short or even extended periods.
SUB-ADVISER: Symphony Asset Management, Inc., 555 California Street, Suite
#2975, San Francisco, CA 94104.
TOTAL RETURN: the change in value of an investment in the Fund over a given
period, assuming reinvestment of any dividends and capital gains. Cumulative
total return reflects actual performance over a stated period of time. Average
annual total return is a hypothetical rate of return that would have produced
the same cumulative total return if performance had been constant over the
entire period. Average annual total returns smooth out variations in
performance; they are not the same as actual year-by-year results.
TRANSFER AGENT: Charles Schwab & Co., Inc., 101 Montgomery Street, San
Francisco, CA 94104.
TRUST: Schwab Capital Trust.
VOLATILITY: a measure of the magnitude and frequency of changes in securities
values. Statistically, volatility is the measure of the spread of the prices or
yields around the mean of the prices or yields.
- ------------------------------------------------------
NO ONE HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY STATEMENTS
ABOUT THIS OFFERING NOT CONTAINED IN THIS PROSPECTUS. IF ANYONE GIVES ANY OTHER
INFORMATION OR MAKES ANY OTHER REPRESENTATIONS, DO NOT RELY ON SUCH INFORMATION
OR REPRESENTATIONS AS HAVING BEEN AUTHORIZED BY THE TRUST OR ITS DISTRIBUTOR.
- ------------------------------------------------------
THIS PROSPECTUS IS NOT AN OFFER IN ANY STATE IN WHICH SUCH AN OFFER MAY NOT
LAWFULLY BE MADE, NOR IS IT AN OFFER TO ANY PERSON TO WHOM SUCH AN OFFER MAY NOT
LAWFULLY BE MADE.
- ------------------------------------------------------
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THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 19
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 20
SCHWAB
ANALYTICS FUNDS(TM)
PROSPECTUS May 21, 1996
[SchwabFunds Logo]
267(5/96) CRS 10336 Printed on recycled paper
[SchwabFunds Logo]
101 Montgomery Street
San Francisco, California 94104
