<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:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SCHWAB ANNUITY PORTFOLIOS
-----------------------------------------------------------
(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:
________________________________________________________________
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):
________________________________________________________________
4) Proposed maximum aggregate value of transaction:
________________________________________________________________
5) Total fee paid:
________________________________________________________________
[ ] 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:___________________________________________________
4) Date Filed:_____________________________________________________
<PAGE> 2
March 21, 2000
Schwab Annuity Portfolios
Shareholder Proxy
YOUR VOTE IS IMPORTANT!
PLEASE READ AND RESPOND TODAY.
SEE INSIDE FOR INFORMATION ABOUT
PROPOSALS THAT AFFECT YOUR INVESTMENT.
<PAGE> 3
SHAREHOLDER MESSAGE
Schwab Annuity Portfolios
SHAREHOLDER PROXY
3 Shareholder message a letter to you from Charles R. Schwab
4 About the proposals a brief overview of the Proposals
7 Meeting notice the official "legal" notice of the meeting
8 Proxy statement contains a complete, more detailed discussion of each
Proposal
25 Appendix
a comprehensive list of Schwab Money Market Portfolio's current and
proposed fundamental policies
<PAGE> 4
A special meeting of shareholders of Schwab Annuity Portfolios will take place
on June 1, 2000, and we're asking for your response.
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. You can vote by
internet, by phone or by mailing the enclosed proxy voting card(s) in the
postage-paid envelope.
Shareholders are being asked to vote for trustees, including candidates to fill
new seats for additional independent trustees. In addition, the Schwab Money
Market Portfolio has a proposal that is intended to help it increase its
management efficiency by granting the fund 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.
Your vote is important. Your prompt response will help reduce proxy costs --
which are paid by the funds and their shareholders -- and will also mean that
you can avoid receiving follow-up 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
Schwab Annuity Portfolios
<PAGE> 5
ABOUT THE PROPOSALS
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
Schwab Annuity Portfolios' 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 (SCHWAB
MONEY MARKET PORTFOLIO ONLY). These policies are fundamental policies,
meaning that they cannot be changed without shareholder approval. The main
reason for these proposed changes is to allow the fund a degree of
strategic flexibility for more effective -- and more competitive --
investment management practices.
These pages tell you more about the proposals and explain the main reasons why
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. Schwab Annuity Portfolios agrees that
independent trustees play an important role in fulfilling this responsibility.
Schwab Annuity Portfolios is not alone in holding this view. Recently, the
Securities and Exchange Commission (SEC), the main federal body that regulates
investment companies, 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 for the Schwab Annuity
Portfolios 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.
BEFORE YOU VOTE
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.
4 ABOUT THE PROPOSALS
<PAGE> 6
WHO WOULD THE NEW TRUSTEES BE?
The Schwab Annuity Portfolios' 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 Schwab Annuity Portfolios. To find
out more, including information on each nominee, see Proposal 1 in the full
proxy statement.
WHAT ARE THE REASONS FOR THE PROPOSED CHANGES IN FUNDAMENTAL LIMITATIONS
(PROPOSAL 2)?
Some of the Schwab Money Market Portfolios' policies reflect government
regulations that no longer exist. In other cases, limitations are more stringent
than current government regulations require. The fund believes the proposed
changes in investment limitations will benefit shareholders by allowing the fund
to adapt more quickly to future changes in investment opportunities.
The trustees believe that it would benefit shareholders of the Schwab Money
Market Portfolio if the fund updated its fundamental investment limitations.
None of the proposed changes will lower the standards for credit quality that
the fund's investments must meet.
ABOUT THE PROPOSALS 5
<PAGE> 7
<TABLE>
<CAPTION>
PROPOSED CHANGES IN
LIMITATIONS
SCHWAB ANNUITY PORTFOLIOS (PROPOSAL 2)
<S> <C>
MarketTrack(TM) Growth Portfolio II
S&P 500 Portfolio
Money Market Portfolio -
</TABLE>
HOW TO VOTE
Voting 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).
6 ABOUT THE PROPOSALS
<PAGE> 8
MEETING NOTICE
NOTICE OF SPECIAL MEETING
OF SCHWAB ANNUITY PORTFOLIOS' SHAREHOLDERS TO BE HELD JUNE 1, 2000
TO SHAREHOLDERS OF ALL SCHWAB ANNUITY PORTFOLIOS: Notice is hereby given that a
special meeting of shareholders 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 10:45 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 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.
Life insurance companies and their separate accounts are the record owners of
fund shares. They have agreed to vote their shares in accordance with timely
instructions received from contractholders who allocated contract values to the
Schwab Annuity Portfolios as of March 3, 2000.
By order of the Board of Trustees,
Frances Cole
Secretary
March 21, 2000
Meeting Notice 7
<PAGE> 9
SCHWAB ANNUITY PORTFOLIOS
101 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94104
PROXY STATEMENT
FOR
SPECIAL MEETINGS OF SHAREHOLDERS OF THE FUNDS
TO BE HELD ON JUNE 1, 2000
This Proxy Statement is being furnished to the shareholders of each fund of
Schwab Annuity Portfolios, a Massachusetts business trust (the "Trust"), in
connection with the solicitation of proxies by and on behalf of the Trust's
Board of Trustees for use at the Special Meetings of Shareholders of the Funds
to be held at the A.P. Giannini Auditorium, 555 California Street, Concourse
Level, San Francisco, California 94104-1502, on June 1, 2000, at 10:45 a.m.
Pacific time and at any adjournment(s) of the meeting. This proxy statement is
first being mailed to shareholders on or about March 21, 2000.
The Board of Trustees has fixed the close of business on March 3, 2000 as the
record date (the "record date") for determining fund shareholders entitled to
notice of, and to vote at, the meetings and any adjournment(s) thereof. 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 meeting and at any adjournment(s)
thereof.
Shares of the funds are currently sold only to separate accounts of certain life
insurance companies to fund variable annuity contracts ("contracts") issued by
those companies. Although these life insurance companies are the record owners
of fund shares, contract owners are beneficial owners of the shares of the funds
to which they have allocated contract values. For convenience, this proxy
statement refers to life insurance companies and/or contract owners as
"shareholders," as the context requires.
The funds understand that the life insurance companies will vote their shares
according to timely instructions they receive from contract owners that have
allocated contract values to the funds as of the record date, and that they will
vote shares for which they receive no timely instructions in proportion to the
shares for which they receive timely voting instructions. To submit voting
instructions to your life insurance company, please complete and sign the
enclosed proxy card and return it before the meeting. The following chart shows
the number of issued and outstanding shares of each fund entitled to vote:
<TABLE>
<CAPTION>
EQUITY FUNDS: BOND FUNDS: MONEY MARKET FUNDS:
<S> <C> <C>
MarketTrack(TM) Growth Portfolio II Money Market Portfolio
S&P 500 Portfolio
</TABLE>
The holder of each outstanding full share of a fund as of the close of business
on the record date is entitled to one vote upon each matter properly submitted
to the meeting or any adjournment(s) thereof, and a proportionate fractional
vote for each fractional share held. Shareholders of a fund may vote on such
other business as may properly come before the meeting as required by law,
including the Investment Company Act of 1940, as amended, and the rules and
regulations thereunder (together, the "1940 Act").
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
entitled to vote, 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 the enclosed proxy cards are properly
executed and returned prior to the meeting, the shares represented thereby will
be voted in accordance with the instructions marked on the proxy cards or, 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 or any adjournment(s) thereof.
You may revoke your proxy at any time prior to its exercise by attending the
meeting and voting in person or by submitting, prior to the meeting, a written
notice of revocation or subsequently dated proxy.
The Board of Trustees does not 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.
In the event a quorum is not present at a meeting or 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. 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
8
<PAGE> 10
such vote is otherwise appropriate. 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. Abstentions will be counted as
shares that are present for purposes of determining the presence of a quorum,
but will not be counted as votes "For" Proposal 2. Accordingly, abstentions will
have the effect of a vote against Proposal 2.
In addition to the solicitation of proxies by mail, officers of the trusts,
officers and employees of Charles Schwab Investment Management, Inc. (the
"investment adviser"), the funds' investment adviser and administrator, and
Charles Schwab & Co., Inc. ("Schwab"), the funds' distributor, transfer agent
and shareholder servicing agent, also may solicit proxies electronically, by
telephone, by telegraph, in person or by other means.
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 the 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, therefore, 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.
QUORUM AND REQUIRED VOTE
In order to take action on any Proposal, a "quorum" or a majority of the shares
entitled to vote on that Proposal must be present in person or by proxy.
Election of each Nominee in Proposal 1 requires the affirmative vote of a
plurality of the outstanding voting shares of the Trust, which means that the
ten Nominees receiving the highest number of affirmative votes cast at the
meeting will be elected. Approval of the elements of Proposal 2 requires the
favorable vote of a majority of outstanding voting shares of Schwab Money Market
Portfolio as defined by the 1940 Act. The favorable vote of a majority of
outstanding voting 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.
On the next page is a table, which lists each fund and the corresponding
proposals.
9
<PAGE> 11
<TABLE>
<CAPTION>
TRUSTEE PROPOSED CHANGES IN
ELECTION LIMITATIONS
SCHWAB ANNUITY PORTFOLIOS (PROPOSAL 1) (PROPOSAL 2)
<S> <C> <C>
MarketTrack(TM) Growth Portfolio II X -
S&P 500 Portfolio X -
Money Market Portfolio X X
</TABLE>
10
<PAGE> 12
PROPOSAL 1
ANNUITY PORTFOLIOS
ELECTION OF TRUSTEES
It is proposed that shareholders of the Trust elect ten 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. It is the intention of the persons named in the
accompanying proxies 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. A nominee shall
be elected to the Board by the vote of a plurality of the Trust's outstanding
voting shares. This means that the ten nominees receiving the highest number of
votes cast at the meeting will be 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 REGARDING NOMINEES
Information about each nominee, including his or her name, date of birth,
position with the Trust, length of service in such position and principal
occupation or employment for the past 5 years, and shares of each fund
beneficially owned is set forth below. Each nominee, except for Mariann
Byerwalter, Jeremiah H. Chafkin, William A. Hasler, and Gerald B. Smith,
currently serves as a Trustee to the Trust. The address of each individual
listed below is 101 Montgomery Street, San Francisco, California 94104.
<TABLE>
<CAPTION>
NUMBER AND % OF SHARES OF A
FUND BENEFICIALLY OWNED AS
NAME, DATE OF BIRTH, PRINCIPAL OCCUPATION & OTHER TRUSTEESHIPS TRUSTEE OF THE TRUST SINCE OF RECORD DATE**
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MARIANN BYERWALTER
August 13, 1960
Vice President for Business Affairs and Chief Financial Officer,
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 American First Companies, Omaha, NE (investment
banking) and Redwood Trust, Inc. (mortgaging).
JEREMIAH H. CHAFKIN*
May 5, 1959
Executive Vice President, SchwabFunds(R), Charles Schwab & Co.,
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 1994
September 23, 1931
Chief Executive Officer, Dorward & Associates. From 1996 to
1999, Mr. Dorward was Executive Vice President and Managing
Director, Grey Advertising. From 1990 to 1996, Mr. Dorward was
President and Chief Executive Officer, Dorward & Associates
(advertising and marketing/consulting firm). Trustee of Charles
Schwab Family of Funds since 1989, Schwab Investments since 1991
and Schwab Capital Trust since 1993.
WILLIAM A. HASLER
November 22, 1941
Co-Chief Executive Officer, Aphton Corporation
(bio-pharmaceuticals). Prior to August 1998, Mr. Hasler was Dean
of the Business School for Haas School of Business (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).
</TABLE>
11
<PAGE> 13
<TABLE>
<CAPTION>
NUMBER AND % OF SHARES OF A
FUND BENEFICIALLY OWNED AS
NAME, DATE OF BIRTH, PRINCIPAL OCCUPATION & OTHER TRUSTEESHIPS TRUSTEE OF THE TRUST SINCE OF RECORD DATE**
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ROBERT G. HOLMES 1994
May 15, 1931
Chairman, Chief Executive Officer and Director, Semloh
Financial, Inc. (international financial services and investment
advisory firm). Trustee of Charles Schwab Family of Funds since
1989, Schwab Investments since 1991 and Schwab Capital Trust
since 1993.
STEVEN L. SCHEID* 1998
June 28, 1953
Vice Chairman and Executive Vice President, The Charles Schwab
Corporation; Vice Chairman and Enterprise President - Financial
Products and Services, Charles Schwab & Co., Inc.; Chief
Executive Officer, Chief Financial Officer and Director, Charles
Schwab Investment Management, Inc. From 1994 to 1996, Mr. 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 Charles Schwab Family of
Funds, Schwab Investments and Schwab Capital Trust since 1998.
CHARLES R. SCHWAB* 1994
July 29, 1937
Chairman, Co-Chief Executive Officer and Director, The Charles
Schwab Corporation; Chairman, Chief Executive Officer and
Director, Charles Schwab Holdings, Inc.; Chairman and Director,
Charles Schwab & Co., Inc., Charles Schwab Investment
Management, Inc., The Charles Schwab Trust Company and Schwab
Retirement Plan 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), Transamerica Corporation (a
financial services organization), AirTouch Communications (a
telecommunications company) and Siebel Systems (a software
company). Trustee of Charles Schwab Family of Funds since 1989,
Schwab Investments since 1991 and Schwab Capital Trust since
1993.
GERALD B. SMITH
September 28, 1950
Chairman and Chief Executive Officer, Smith Graham & Co.
(investment management). Mr. Smith also is on the Board of
Directors of Pennzoil-Quaker State Company (automotive).
DONALD R. STEPHENS 1994
June 28, 1938
Managing Partner, D.R. Stephens & Company (investments) and
Chairman and Chief Executive Officer of North American Trust (a
real estate investment trust). Trustee of Charles Schwab Family
of Funds since 1989, Schwab Investments since 1991 and Schwab
Capital Trust since 1993.
MICHAEL W. WILSEY 1994
August 18, 1943
Chairman and Chief Executive Officer, Wilsey Bennett, Inc.
(truck and air transportation, real estate investment and
management, and investments). Trustee of Charles Schwab Family
of Funds since 1989, Schwab Investments since 1991 and Schwab
Capital Trust since 1993.
</TABLE>
*Denotes an "interested person" of a Trust as defined in the 1940 Act.
**The Trust has no knowledge as to whether any nominee has the right to acquire
beneficial ownership of shares of any class of a fund.
[Each Nominee owns less than 1% of the outstanding shares of each fund.]
12
<PAGE> 14
MEETINGS AND COMMITTEES OF THE BOARD OF TRUSTEES
The Board of Trustees met 5 times on behalf of the Trust during the Trust's most
recent full fiscal year. In such fiscal year, each Trustee, except Mr. Schwab,
attended at least 80% of these meetings. Each Trust also has an Audit/Portfolio
Compliance Committee comprised of all of the Trustees who are not "interested
persons" of such Trust (the "Independent Trustees"), which quarterly (and, as
necessary, more frequently) reviews financial statements and other audit-related
matters for the Trust. The Audit/Portfolio Compliance Committee met 4 times
during the Trust's last fiscal year. In such year, each member attended at least
75% of these meetings. The Trust also has a Nominating Committee 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
the Trust's most recent fiscal year. The Nominating Committee will not consider
nominees recommended by shareholders. The Trust does not have a standing
compensation committee or any committee performing similar functions.
COMPENSATION OF TRUSTEES, OFFICERS AND OTHERS
Trustees and officers of the Trust who are also "interested persons" of the
Trust, receive no compensation from the Trust. However, each Independent Trustee
currently receives a quarterly fee of $21,650 from the Fund Complex, which
includes the Trust, as well as Schwab Capital Trust, Schwab Investments and
Charles Schwab Family of Funds, 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 over
2 hours, and is reimbursed for all reasonable out-of-pocket expenses. The Trust
has no bonus, pension, profit sharing or retirement plan, although the Trust has
adopted deferred compensation plans for the Trustees, as described following the
table below. The compensation paid to current Trustees from the Trust and the
Fund Complex is shown in the table below.
COMPENSATION TABLE
<TABLE>
<CAPTION>
NAME OF PERSON, POSITION WITH THE TRUST AGGREGATE COMPENSATION FROM THE TRUST(1) TOTAL COMPENSATION FROM THE FUND COMPLEX
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Donald F. Dorward, Trustee
Robert G. Holmes, Trustee
William J. Klipp, (2) Trustee $0
Steven L. Scheid, President and Trustee $0
Charles R. Schwab, Trustee;
Chairman and Chief Executive Officer $0
Donald R. Stephens, Trustee
Michael W. Wilsey, Trustee
</TABLE>
(1) Amounts are for the fiscal year ended December 31, 1999.
(2) Mr. Klipp departed Schwab in 1999 and is expected to resign from the
Board of Trustees effective [ ].
DEFERRED COMPENSATION PLAN
Pursuant to exemptive relief received from the Securities and Exchange
Commission ("SEC"), the Trust may enter into a deferred compensation plan (the
"Plan") with the Independent Trustees. 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 selected by the Trustee.
VOTING REQUIREMENTS
Election of each Nominee requires the affirmative vote of a plurality of the
outstanding voting shares of the Trust, which means that the ten nominees
receiving the highest number of affirmative votes cast at the meeting will be
elected.
THE BOARD OF TRUSTEES RECOMMEND THAT YOU VOTE
"FOR" EACH NOMINEE.
13
<PAGE> 15
PROPOSAL 2
ELIMINATING, AMENDING OR RECLASSIFYING CERTAIN FUNDAMENTAL
INVESTMENT POLICIES AND RESTRICTIONS
FUND AFFECTED:
Money Market Portfolio
BACKGROUND
The fund operates in accordance with its investment objective, policies and
restrictions described in its prospectus and statement of additional information
(together, the fund's "policies"). The fund generally classifies its policies as
either "fundamental" or "non-fundamental." A fundamental policy may be changed
only by vote of a majority of a fund's outstanding voting shares while
non-fundamental policies may be changed by vote of a fund's Board of Trustees.
The 1940 Act requires funds to classify only certain policies as fundamental.
With this Proposal, the fund seeks to modernize its fundamental policies by
reclassifying policies that are not required by the 1940 Act to be fundamental
as non-fundamental so that, with Board approval, the fund may more easily
respond to a changing investment environment.
Since the fund was created, there have been a number of changes in the SEC
regulations that govern funds. First, significant federal legislation in 1996
preempted state regulation of all mutual funds. As a result, many investment
policies previously imposed on the fund 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 in
1991, 1997 and 1998. Thus, many of the current fundamental policies of the fund
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 fund may not be permitted to invest
in because of its outdated fundamental policies.
Recently, the investment adviser performed a comprehensive review of the fund's
fundamental policies and, the Board of Trustees, based on the recommendations of
the investment adviser, has approved revisions to these policies designed to:
(1) simplify and modernize policies required to be fundamental; and (2)
eliminate or recharacterize as non-fundamental, policies not required to be
fundamental.
Approval of these changes by shareholders would allow the investment adviser
greater flexibility, subject to the supervision of the Board of Trustees and
consistent with legal requirements, in selecting investments for the fund. The
Board of Trustees also believes that the proposed changes will enhance the
investment adviser's ability to manage the fund's investment portfolios, such
that the fund's investment opportunities, accordingly, may increase.
In some cases the Board of Trustees recommends that fundamental policies be
amended and/or eliminated completely. In other cases the Board recommends
amending and/or reclassifying policies as non-fundamental. If the Board of
Trustees decides in the future to change or eliminate a reclassified
non-fundamental policy, the change would be disclosed in the funds' prospectus
and/or statement of additional information, if required.
Each proposed change to the fund's fundamental policies recommended by the Board
of Trustees is discussed in detail below. In order to help you understand the
proposed changes, an Appendix has been attached at the end of this proxy
statement. The Appendix contains a comprehensive list of the Money Market
Portfolio's current fundamental policies and proposed fundamental and
non-fundamental policies.
VOTING REQUIREMENTS
Approval of each element of Proposal 2 requires the favorable vote of a majority
of outstanding voting shares of the 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 either (i) as a group; or (ii) by each element. If you vote on the
elements of Proposal 2 as a group, the fund will record your votes as having
been cast "FOR" or "AGAINST," as applicable, 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 the fund approve some, but not all, elements of Proposal 2,
the fund will have a combination of certain current fundamental policies and
certain proposed fundamental and non-fundamental policies.
(a) PROPOSAL TO AMEND AND RECLASSIFY FUND POLICIES REGARDING BORROWING,
LENDING, THE ISSUANCE OF SENIOR SECURITIES AND PLEDGING, MORTGAGING OR
HYPOTHECATING FUND ASSETS
(i) PROPOSED CHANGES REGARDING BORROWING
The fund's current fundamental borrowing policy is more restrictive than
required by the 1940 Act. It is proposed that the fundamental policy regarding
borrowing be amended and reclassified as a non-fundamental policy, and a new
fundamental policy regarding borrowing be adopted.
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<PAGE> 16
The Appendix contains a complete statement of the 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 OF PROPOSED CHANGES
The 1940 Act requires all mutual funds to adopt fundamental policies regarding
borrowing. The 1940 Act presently limits the 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 may be considered
borrowings and may be permissible investments for mutual funds.
Approval of this element of Proposal 2 would replace the fund's current
fundamental borrowing policies 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 fund because it will allow
the fund, 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 fund would amend and reclassify its current fundamental
policies so that they reflected 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 shareholders because it would allow
the fund to be limited only as required by the 1940 Act, thereby improving its
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 fund and its shareholders.
(ii) PROPOSED CHANGE REGARDING LENDING
The fund's current fundamental lending policies are more restrictive than
required by the 1940 Act. It is proposed that the fundamental policy regarding
lending be amended and reclassified as a non-fundamental policy, and a new
fundamental policy regarding lending be adopted. The Appendix contains a
complete statement of the 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 many 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 OF PROPOSED CHANGES
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 fund to lend to the
extent permitted by current law by replacing the fund's current fundamental
lending policies with a more flexible, standard fundamental lending policy. The
Board of Trustees believes that this more flexible fundamental policy is in the
best interests of the fund because it would allow the fund, 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, this element of Proposal 2 would amend and reclassify the
fund's current lending policies as nonfundamental to reflect the current lending
practices permitted by the 1940 Act. The Board of Trustees believes that this
nonfundamental lending policy is in the best interests of the fund because it
would allow the fund to be limited only as required by the 1940 Act, thereby
improving its ability to remain competitive. The Board of Trustees also would be
able to make changes to the nonfundamental policy in the future if deemed to be
in the best interests of the fund and its shareholders.
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<PAGE> 17
(iii) PROPOSED CHANGE REGARDING ISSUANCE OF SENIOR SECURITIES AND
PLEDGING, MORTGAGING OR HYPOTHECATING FUND ASSETS
The fund has fundamental policies restricting them from issuing senior
securities. It is proposed that (i) the fundamental policy regarding issuance of
senior securities be replaced with a new fundamental policy, and (ii) the
fundamental policies regarding writing, purchasing or selling puts and calls,
selling shares short or purchasing on margin be reclassified as non-fundamental
policies. The Appendix contains a complete statement of the 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 OF PROPOSED CHANGES
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. Under this element of
Proposal 2, the fund seeks 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 fund because it would allow the fund,
subject to Board approval, 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.
Since the fund adopted its current fundamental policies, the SEC staff's
interpretation of what constituted the issuance of a senior security has evolved
as market conditions warranted. 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 generally do not
necessarily involve the creation of senior securities. 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 fund the flexibility to respond to potential
future changes.
(b) PROPOSAL TO AMEND FUND POLICIES REGARDING DIVERSIFICATION
The fund is a diversified mutual fund. It is proposed that the fundamental
policy regarding diversification be amended and reclassified as a
non-fundamental policy. It is also proposed that the fund adopt a new
fundamental policy regarding diversification. The Appendix contains a complete
statement of the fund's current fundamental policies and proposed fundamental
and non-fundamental policies regarding diversification.
The new fundamental policy 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 OF PROPOSED CHANGE
Under this element of Proposal 2, the fund's current fundamental policies would
be replaced by a more flexible fundamental policy regarding diversification. As
a diversified fund, the fund is 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 the 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
fund's status as a diversified investment management company. This element of
Proposal 2 does seek to amend the fund's diversification policy so that it would
provide the maximum flexibility allowed for diversified mutual funds under the
1940 Act. The Board believes that this more flexible fundamental policy is in
the best interests of the fund because it will allow the Board to take necessary
and timely action to make changes to the fund's non-fundamental diversification
policies when necessary.
In addition to the above limitations imposed on diversified mutual funds, the
fund is 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 fund would adopt
these as a non-fundamental policy.
Also, under this element of Proposal 2, the fund would no longer be limited to
owning no more than 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
fund.
Approval of this element of Proposal 2 will not affect the fund's status as a
diversified mutual fund, which could only be changed in the future by
shareholder vote.
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<PAGE> 18
(c) PROPOSAL TO ELIMINATE FUND POLICIES REGARDING INVESTMENTS IN "UNSEASONED
ISSUERS"
The current fundamental policies limit the fund's 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" be eliminated. The Appendix
contains a complete statement of the fund's current fundamental policy.
ANALYSIS OF PROPOSED CHANGE
The 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 the fund would benefit by eliminating its current
fundamental policies regarding investment in "unseasoned issuers."
(d) PROPOSAL TO AMEND AND RECLASSIFY FUND POLICIES REGARDING INVESTMENTS IN
RESTRICTED OR ILLIQUID SECURITIES
The fund currently operates 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 policy regarding investments in restricted
securities, illiquid securities or repurchase agreements for the fund be amended
and reclassified as a non-fundamental policy. The Appendix contains a complete
statement of the fund's current fundamental policies and proposed
non-fundamental policies.
The new non-fundamental policy regarding investments in illiquid securities
would be:
The fund may not invest more than 10% of its net assets in illiquid
securities.
ANALYSIS OF PROPOSED CHANGES
The 1940 Act does not currently require the fund to have fundamental policies
restricting illiquid or restricted securities investments. Therefore, this
element of Proposal 2 would reclassify the fund's 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
fund's 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 fund. This has created active markets in
restricted securities, allowing certain restricted securities to be considered
liquid under guidelines approved by the fund's Board of Trustees.
SEC staff interpretations have indicated that funds should consider repurchase
agreements that mature in more than seven days to be illiquid. 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, will encompass the restriction imposed by the
current fundamental policy. Accordingly, this element of Proposal 2 would
eliminate this fundamental policy.
The proposed non-fundamental policy would limit the fund to investing 10% of its
net assets in illiquid securities (including restricted securities that are
deemed illiquid under guidelines approved by the Board of Trustees). However,
the proposed non-fundamental policy will permit the fund to invest without limit
in restricted securities that, in accordance with the fund's procedures, are
determined to be liquid. Of course, all of the fund's investments in restricted
securities will still satisfy the fund's other investment criteria. It is
believed that eliminating this restriction with respect to liquid restricted
securities will expand the fund's 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 fund.
(e) PROPOSAL TO AMEND AND RECLASSIFY FUND POLICIES REGARDING INVESTMENTS IN
SECURITIES OF OTHER INVESTMENT COMPANIES
The current fundamental policy limits the fund's ability to purchase securities
of other investment companies except in narrow circumstances. It is proposed
that the fundamental policy regarding investments in securities of other
investment companies be amended and reclassified as a non-fundamental policy.
The Appendix contains a complete statement of the fund's current fundamental
policy and proposed non-fundamental policy.
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.
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<PAGE> 19
ANALYSIS OF PROPOSED CHANGE
The fund's 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 fund's investments in other investment companies
because Rule 2a-7 limits money market fund investments to high quality
instruments which 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 the fund to invest in other
investment companies to the extent permitted by the 1940 Act. To the extent the
fund invests in shares of other investment companies, shareholders may
indirectly bear any 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 the fund and its shareholders.
The Board of Trustees believes that the fund would benefit by replacing its
current fundamental policies regarding investment in the securities of other
investment companies with a more flexible, standard nonfundamental 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.
(f) PROPOSAL TO ELIMINATE FUND POLICIES REGARDING THE BENEFICIAL OWNERSHIP
OF SECURITIES BY FUND OFFICERS AND TRUSTEES
The 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 Trust or the investment adviser. It is proposed that the
fundamental policy regarding investments in issuers whose securities are
beneficially owned by officers and Trustees be eliminated. The Appendix contains
a complete statement of the fund's current fundamental policy.
ANALYSIS OF PROPOSED CHANGE
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 fund because it
would increase the investment adviser's flexibility in managing the assets of
the fund, and that any increase in risks to shareholders would be immaterial.
Accordingly, the Board of Trustees recommends that shareholders vote to
eliminate this policy for the fund.
(g) PROPOSAL TO REPLACE AND RECLASSIFY FUND POLICIES REGARDING INDUSTRY
CONCENTRATION
The fund's current fundamental investment policy generally prohibits investment
of more than 25% of fund assets in companies considered to be in the same
industry. It is proposed that the fundamental policy regarding concentration of
investments in certain industries be reclassified as non-fundamental and a new
fundamental policy be adopted. The Appendix contains a complete statement of the
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.
ANALYSIS OF PROPOSED CHANGES
The 1940 Act 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 more than 25% 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 fund's 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
fund's 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 fund.
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<PAGE> 20
(h) PROPOSAL TO REPLACE AND RECLASSIFY FUND POLICIES REGARDING INVESTMENTS
IN COMMODITIES, FUTURES CONTRACTS AND REAL ESTATE
Under its current fundamental policies, the fund is restricted from investing in
commodities, futures contracts and real estate. It is proposed that 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 contains a complete statement of the fund's current fundamental policy
and proposed fundamental and non-fundamental policies.
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 OF PROPOSED CHANGE
The 1940 Act requires all funds to adopt a fundamental policy regarding
investment in real estate and commodities and the proposed fundamental
limitation would limit such investments to the extent permitted under the 1940
Act. In addition, the fund's current fundamental policy would be converted to a
non-fundamental policy, and the fund would continue to operate in accordance
with its non-fundamental policy until such time as the Board decided that
changing it would be in the best interests of the fund and its shareholders.
These changes, however, would allow the Board of Trustees to take appropriate
and timely action to amend the fund's 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 fund.
(i) PROPOSAL TO REPLACE POLICY REGARDING THE UNDERWRITING OF SECURITIES
Under its current fundamental policy, the 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 the fundamental policy regarding
the underwriting of securities be replaced with a new fundamental policy. The
Appendix contains a complete statement of the 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 OF PROPOSED CHANGE
The SEC staff's interpretation with respect to the underwriting of securities,
is that funds should generally not engage in the business of underwriting
securities. While this fundamental policy has not affected the fund's
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 adopt non-fundamental policies, without the expense and delay
associated with a shareholder meeting. Accordingly, the Board of Trustees
believes that this change is in the best interests of the fund and its
shareholders.
(j) PROPOSAL TO RECLASSIFY FUND POLICY REGARDING CONTROL OF AN ISSUER
Under its current fundamental policy, the fund may not invest with the purpose
of exercising control over an issuer. It is proposed that the fundamental policy
regarding the control of an issuer be reclassified as a non-fundamental policy.
The Appendix contains a complete statement of the fund's current fundamental
policy and proposed non-fundamental policy.
ANALYSIS OF PROPOSED CHANGE
The 1940 Act does not require the fund to have such a fundamental policy. 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. This element of Proposal 2 would reclassify
this policy as non-fundamental. The Board of Trustees believes that the fund
would benefit by the change because of the increased future flexibility it would
provide for the fund.
(k) PROPOSAL TO RECLASSIFY FUND POLICIES REGARDING PURCHASES OF OIL, GAS OR
MINERAL INTERESTS
Under the fund's current fundamental policy, it may not invest in oil, gas or
mineral interests. It is proposed that the fundamental policy regarding
investments in oil, gas or mineral exploration or development programs be
reclassified as a non-fundamental policy. The Appendix contains a complete
statement of the fund's current fundamental policy and proposed non-fundamental
policy.
ANALYSIS OF PROPOSED CHANGE
The 1940 Act does not require the fund to have such a fundamental policy. 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. This element of Proposal 2 would reclassify
the policy as non-fundamental. The Board of Trustees believes that the fund
would benefit from the change because of the increased future flexibility it
would provide for the fund.
THE BOARD OF TRUSTEES RECOMMEND THAT YOU VOTE
"FOR" PROPOSAL 2 AND ALL ELEMENTS CONTAINED THEREIN.
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<PAGE> 21
ADDITIONAL INFORMATION
OFFICERS OF THE TRUSTS
Information about the Trust's current executive officers, including his or her
name, date of birth, positions with the trust and principal occupations or
employment during the past five years is stated below. As of March 3, 2000, the
Trustees and officers, as a group, owned less than __% of the shares of each
class of each fund.
<TABLE>
<CAPTION>
NAME, DATE OF BIRTH AND POSITION WITH NUMBER AND % OF SHARES OF A FUND
PRINCIPAL OCCUPATION THE TRUST BENEFICIALLY OWNED AS OF RECORD DATE*
- ------------------------------------- --------------------------------- -------------------------------------
<S> <C> <C>
JEREMIAH H. CHAFKIN Executive Vice President and
(for biographical information Chief Operating Officer
see p.__)
FRANCES COLE Secretary
September 9, 1955
Senior Vice President, Chief Counsel
and Assistant Corporate Secretary,
Charles Schwab Investment
Management, Inc.
STEVEN L. SCHEID* Trustee; President
(for biographical information
see p. __)
CHARLES R. SCHWAB* Trustee; Chairman and
(for biographical information Chief Executive Officer
see p. __)
TAI-CHIN TUNG Treasurer and Principal Financial
March 7, 1951 Officer
Vice President, Treasurer and
Controller, 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 and Chief
April 5, 1955 Investment Officer
Senior Vice President and Chief
Investment Officer, Charles Schwab
Investment Management, Inc.
</TABLE>
- ----------
* The Trust has no knowledge as to whether any executive officer has the right
to acquire beneficial ownership of shares of a Fund.
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<PAGE> 22
OTHER MATTERS
The Board of Trustees is not aware of any other matter that may come before any
of the meetings. However, should any such matters properly come before a
meeting, the persons named in the accompanying proxy card intend to vote the
proxy in accordance with their judgment on such matters.
SUBMISSION OF SHAREHOLDER PROPOSALS
The Trust is not required to hold annual shareholders' meetings and the Trust
does not intend to do so. The 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 the Trust at a special meeting called upon written
request of shareholders owning, in the aggregate, at least 10% of the
outstanding shares of the Trust.
Shareholders wishing to submit proposals for inclusion in a proxy statement for
a future shareholders meeting should send their written submissions to the Trust
c/o 101 Montgomery, 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.
INVESTMENT ADVISER
Charles Schwab Investment Management, Inc., located at 101 Montgomery Street,
San Francisco, CA 94104, serves as investment adviser to the funds.
PRINCIPAL UNDERWRITER
Charles Schwab & Co., Inc., located at 101 Montgomery Street, San Francisco, CA
94104, acts as each fund's principal underwriter.
TRANSFER AGENT AND SHAREHOLDER SERVICING AGENT
Charles Schwab & Co., Inc., located at 101 Montgomery Street, San Francisco, CA
94104, acts as each fund's transfer agent and shareholder servicing agent.
FUND ACCOUNTANTS
PFPC, Inc., located at 103 Bellevue Parkway, Wilmington, Delaware 19809, serves
as fund accountant for Schwab Money Market Portfolio. SEI Investments Mutual
Fund Services, located at One Freedom Valley Drive, Oaks, Pennsylvania 19456,
serves as fund accountant for Schwab MarketTrack Growth Portfolio II and Schwab
S&P 500 Portfolio.
CUSTODIAN
PFPC Trust Co., located at 8800 Tinicum Blvd., Third Floor, Suite 200,
Philadelphia, Pennsylvania 19153, serves as custodian for Schwab Money Market
Portfolio and Schwab S&P 500 Portfolio. Brown Brothers Harriman & Co., located
at 40 Water Street, Boston, Massachusetts 02109, serves as custodian for Schwab
MarketTrack Growth Portfolio II.
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<PAGE> 23
PORTFOLIO TRANSACTIONS
For the fiscal years indicated below, [the funds paid the following brokerage
commissions to affiliated brokers/none of the funds paid brokerage commissions
to affiliated brokers].
<TABLE>
<CAPTION>
FUND NAME FISCAL YEAR ENDING 1999
- ----------------------------------- -----------------------
<S> <C>
MarketTrack(TM) Growth Portfolio II December 31
S&P 500 Portfolio December 31
Money Market Portfolio December 31
</TABLE>
INDEPENDENT AUDITORS
A majority of the 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 year. [A representative of
PricewaterhouseCoopers LLP will be available in person or by phone during the
meeting, if needed, to make a statement if desired and to respond to appropriate
questions from shareholders.]
22
<PAGE> 24
BENEFICIAL OWNERS
To the knowledge of the Trust as of March 3, 2000, the following persons owned
more than 5% of the shares of a fund:
<TABLE>
<CAPTION>
NAME AND ADDRESS TOTAL NUMBER OF PERCENTAGE OF
FUND/CLASS OF BENEFICIAL OWNER SHARES OWNED* FUND
- ---------- ------------------- --------------- -------------
<S> <C> <C> <C>
</TABLE>
- ----------
* The Trust has no knowledge as to whether the listed beneficial owner has the
right to acquire beneficial ownership of shares of a fund.
SHAREHOLDER REPORTS
The fund will furnish, without charge, a copy of its most recent Annual Report
and, if available, Semi-Annual Report, to any shareholder upon request.
Shareholders desiring a copy of such reports should direct all written requests
to the fund's Trust c/o P.O. Box 7575, San Francisco, California 94120-7575, or
should call Schwab at 1-800-435-4000.
IT IS IMPORTANT THAT YOUR VOTE BE RETURNED PROMPTLY, THEREFORE,
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING IN PERSON
ARE URGED TO VOTE THEIR SHARES BY INTERNET, PHONE OR MAIL.
Thank you for voting your shares promptly!
We appreciate you placing your trust in Schwab Annuity Portfolios and look
forward to helping you achieve your financial goals.
23
<PAGE> 25
The Proxy rules require us to disclose both the current fundamental policies and
the proposed policies for each fund affected by Proposal 2. On the next page you
will find the Appendix, which contains this information. A complete analysis of
each Proposal is included in the Proxy Statement, which starts on page 8. As you
read the Proxy Statement, you may want to refer to the Appendix to compare your
fund's current fundamental policies to those being proposed.
24
<PAGE> 26
APPENDIX
TABLE OF CONTENTS
Page
MarketTrack(TM) Growth Portfolio II N/A
S&P 500 Portfolio N/A
Money Market Portfolio A-1
<PAGE> 27
APPENDIX
Money Market Portfolio
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
CURRENT FUNDAMENTAL POLICY: PROPOSAL: NEW FUNDAMENTAL POLICY: NEW NON-FUNDAMENTAL POLICY:
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The fund seeks maximum current income No change Same None
consistent with stability of capital.
- -----------------------------------------------------------------------------------------------------------------------------------
The fund may not purchase securities No change Same None
or make investments other than in
accordance with its investment
objective and policies.
- -----------------------------------------------------------------------------------------------------------------------------------
The fund may not purchase securities Amend and convert The fund may not purchase The fund may not purchase securities
of any issuer (other than obligations to NFP; replace securities of an issuer, except of any issuer (other than
of, or guaranteed by, the U.S. with new FP - as consistent with the obligations of, or guaranteed by,
Government, its agencies or Proposal 2(b) maintenance of its status as an the U.S. government, its agencies or
instrumentalities) if, as a result, open-end diversified company instrumentalities, or securities of
more than 5% of the value of its under the 1940 Act, the rules other investment companies) if, as a
assets would be invested in securities or regulations thereunder or result more than 5% of the value of
of that issuer. any exemption therefrom, as such its assets would be invested in the
statute, rules or regulations securities of such issuer, except
The fund may not purchase more than may be amended or interpreted that the fund may invest up to 25%
10% of any class of securities of any from time to time. of its total assets in the first
issuer. All debt securities and all Eliminate - tier securities of a single issuer
preferred stocks are each considered Proposal 2(b) for up to three business days.
as one class.
- -----------------------------------------------------------------------------------------------------------------------------------
The fund may not concentrate 25% or Convert to NFP and The fund may not concentrate The fund may not concentrate 25% or
more of the value of its assets in any replace with new investments in a particular more of the value of its assets in
one industry; provided, however, that FP - Proposal 2(g) industry or group of industries, any one industry; provided, however,
the portfolio reserves the freedom of as concentration is defined that the portfolio reserves the
action to invest up to 100% of its under the 1940 Act, the rules freedom of action to invest up to
assets in certificates of deposit or or regulations thereunder or 100% of its assets in certificates
bankers' acceptances issued by any exemption therefrom, as of deposit or bankers' acceptances
domestic branches of U.S. banks and such statute, rules or issued by domestic branches of U.S.
U.S. branches of foreign banks (which regulations may be amended or banks and U.S. branches of foreign
the portfolio has determined to be interpreted from time to time. banks (which the portfolio has
subject to the same regulation as U.S. determined to be subject to the same
banks), or obligations of, or regulation as U.S. banks), or
guaranteed by, the U.S. Government, obligations of, or guaranteed by,
its agencies or instrumentalities in the U.S. Government, its agencies or
accordance with its investment instrumentalities in accordance with
objective and policies. its investment objective and
policies.
- -----------------------------------------------------------------------------------------------------------------------------------
The fund may not invest more than 5% Eliminate - None None
of its total net assets in securities Proposal 2(c)
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.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
A-1
<PAGE> 28
APPENDIX
<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
The fund will invest no more than 10% Amend and convert The fund may not invest more than
of its net assets in illiquid to NFP - Proposal 10% of its net assets in illiquid
securities. The fund may not enter 2(d) securities.
into repurchase agreements if, as a
result thereof, more than 10% of its
net assets valued at the time of the
transaction would be subject to
repurchase agreements maturing in more
than seven 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
1933 Act).
- -----------------------------------------------------------------------------------------------------------------------------------
The fund may not purchase or retain Eliminate - None None
securities of an issuer if any of the Proposal 2(f)
officers, trustees or directors of the
Trust or its investment adviser
individually own beneficially more
than 1/2 of 1% of the securities of
that issuer and together beneficially
own more than 5% of the securities of
such issuer.
- -----------------------------------------------------------------------------------------------------------------------------------
The fund may not invest in commodities Convert to NFP and The fund may not purchase or The fund may not invest in
or commodity contracts, including replace with new sell commodities or real estate, commodities or commodity contracts,
futures contracts, real estate or real FP - Proposal 2(h) except to the extent permitted including futures contracts, real
estate limited partnerships, although under the 1940 Act, the rules or estate or real estate limited
it may invest in securities which are regulations thereunder or any partnerships, although it may invest
secured by real estate and securities exemption therefrom, as such in securities which are secured by
of issuers which invest or deal in statute, rules or regulations real estate and securities of
real estate. may be amended or interpreted issuers which invest or deal in real
from time to time. estate.
- -----------------------------------------------------------------------------------------------------------------------------------
The fund may not invest for the Convert to NFP - None The fund may not invest for the
purpose of exercising control or Proposal 2(j) purpose of exercising control or
management of another issuer. management of another issuer.
- -----------------------------------------------------------------------------------------------------------------------------------
The fund may not purchase securities Amend and convert None The fund may not purchase securities
of other investment companies, except to NFP - Proposal of other investment companies,
in connection with a merger, 2(e) except as permitted by the
consolidation, reorganization or Investment Company Act of 1940, the
acquisition of assets. rules or regulations thereunder or
any exemption therefrom, as such
statute, rules or regulations
may be amended from time to
time.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
A-2
<PAGE> 29
APPENDIX
<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
The fund may not make loans to others, Amend and convert The fund may not make loans to The fund may not lend any security
except the portfolio may (I) purchase to NFP; replace other persons, except to the or make any other loan if, as a
a portion of an issue of short-term with new FP - extent permitted under the 1940 result, more than 33 1/3% of its
debt securities or similar obligations Proposal 2(a)(ii) Act, the rules or regulations total assets would be lent to other
(including repurchase agreements) that thereunder or any exemption parties (this restriction does not
are publicly distributed or therefrom, as such statute, apply to purchases of debt
customarily purchased by institutional rules or regulations may be securities or repurchase
investors, and (ii) lend its portfolio amended or interpreted from agreements).
securities (up to one-third of the time to time.
portfolio's total assets) in
accordance with its investment
objectives and policies.
- -----------------------------------------------------------------------------------------------------------------------------------
The fund may not borrow money except Amend and convert The fund may not borrow money, The fund may not borrow money except
as a temporary measure for to NFP; replace except to the extent permitted that the fund may (i) borrow money
extraordinary or emergency purposes with new FP - under the 1940 Act, the rules from banks and (ii) engage in
and then only in an amount up to Proposal 2(a)(i) or regulations thereunder or reverse repurchase agreements with
one-third of the value of its total any exemption therefrom, as any party; provided that (i) and
assets in order to meet redemption such statute, rules or (ii) in combination do not exceed
requests without immediately selling regulations may be amended or 33 1/3% of its total assets (any
any portfolio securities. The interpreted from time to time. borrowings that come to exceed this
portfolio will not borrow for leverage amount will be reduced to the extent
purposes or purchase securities or necessary to comply with the
make investments while reverse limitation within three business
repurchase agreements or borrowings days) and the fund will not purchase
are outstanding. If, for any reason, securities while borrowings
the current value of the portfolio's represent more than 5% of its total
total net assets falls below an amount assets.
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.
- -----------------------------------------------------------------------------------------------------------------------------------
The fund may not invest in interests Convert to NFP - None The fund may not invest in interests
in oil, gas, mineral leases or other Proposal 2(k) in oil, gas, mineral leases or other
mineral exploration or development mineral exploration or development
programs, although it may invest in programs, although it may invest in
the securities of issuers which invest the securities of issuers which
in or sponsor such programs. invest in or sponsor such programs.
- -----------------------------------------------------------------------------------------------------------------------------------
The fund may not underwrite securities Replace with new The fund may not underwrite None
issued by others except to the extent FP - Proposal 2(i) securities issued by other
it may be deemed to be an underwriter, persons, except to the extent
under the federal securities laws, in permitted under the 1940 Act,
connection with the disposition of the rules or regulations
securities from its investment thereunder or any exemption
portfolio. therefrom, as such statute,
rules or regulations may be
amended or interpreted from
time to time.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
A-3
<PAGE> 30
APPENDIX
<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
The fund may not issue senior Eliminate and The fund may not issue senior None
securities as defined in the 1940 Act. replace with new securities, except to the
FP - Proposal extent permitted under the
2(a)(iii) 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 fund may not write, purchase or Convert to NFP - None The fund may not write, purchase or
sell puts, calls or combinations Proposal 2(a)(iii) sell puts, calls or combinations
thereof. thereof.
- -----------------------------------------------------------------------------------------------------------------------------------
The fund may not make short sales of Convert to NFP - None The fund may not make short sales of
securities, or purchase any securities Proposal 2(a)(iii) securities, or purchase any
on margin except to obtain such securities on margin except to
short-term credits as may be necessary obtain such short-term credits as
for the clearance of transactions. may be necessary for the clearance
of transactions.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
A-4
<PAGE> 31
Schwabfunds'
<PAGE> 32
SCHWAB MARKETTRACK(TM) GROWTH PORTFOLIO II
SCHWAB ANNUITY PORTFOLIOS
101 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94104
TO VOTE BY INTERNET
1)Read the proxy statement and have the proxy
card below at hand.
2)Go to the website www.proxyvote.com
3)Enter the 12-digit control number on this proxy
card and follow the simple instructions.
TO VOTE BY TOUCH-TONE TELEPHONE
1)Read the proxy statement and have the proxy card below at hand.
2)Call toll-free 1-800-690-6903.
3)Enter the 12-digit control number on this
proxy card and follow the simple instructions.
DO NOT MAIL THIS PROXY CARD IF YOU ARE VOTING BY INTERNET OR TELEPHONE.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK X
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF TRUSTEES OF SCHWAB ANNUITY PORTFOLIOS
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 10:45 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.
This proxy serves as a voting instruction card for owners of variable annuity
contracts ("contract owners") issued by life insurance companies that own
shares of the funds. The funds understand that the life insurance companies
will vote their shares according to timely instructions they receive from
their contract owners, and that they will vote shares for which they receive
no timely instructions in proportion to the shares for which they receive
timely voting instructions.
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.
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.
SWH1Z KEEP THIS PORTION FOR YOUR RECORDS
- --------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
- --------------------------------------------------------------------------------
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
- --------------------------------------------------------------------------------
SCHWAB MARKETTRACK(TM) GROWTH PORTFOLIO II
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING:
VOTE ON TRUSTEES
1. Nominees for the Board of Trustees:
Charles R. Schwab, Jeremiah H. Chafkin, Donald F. Dorward, Robert G.
Holmes, Steven L. Scheid, Donald R. Stephens and Michael W. Wilsey,
Mariann Byerwalter, Gerald B. Smith and William A. Hasler
For Withhold For All To withhold authority to vote,
All All Except mark "For All Except" and write the
name(s) of the nominee(s) on the line below
|_| |_| |_|
--------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
- ----------------------------------------------- ------------------------------
Signature (PLEASE SIGN WITHIN BOX) Date Signature (Joint Owner) Date
</TABLE>
<PAGE> 33
SCHWAB MONEY MARKET PORTFOLIO
SCHWAB ANNUITY PORTFOLIOS
101 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94104
TO VOTE BY INTERNET
1)Read the proxy statement and have the proxy
card below at hand.
2)Go to the website www.proxyvote.com
3)Enter the 12-digit control number on this proxy
card and follow the simple instructions.
TO VOTE BY TOUCH-TONE TELEPHONE
1)Read the proxy statement and have the proxy card below at hand.
2)Call toll-free 1-800-690-6903.
3)Enter the 12-digit control number on this
proxy card and follow the simple instructions.
DO NOT MAIL THIS PROXY CARD IF YOU ARE VOTING BY INTERNET OR TELEPHONE.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK X
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF TRUSTEES OF SCHWAB ANNUITY PORTFOLIOS
The undersigned, revoking previous provision 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 10:45 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.
This proxy serves as a voting instruction card for owners of variable annuity
contracts ("contract owners") issued by life insurance companies that own shares
of the funds. The funds understand that the life insurance companies will vote
their shares according to timely instructions they receive from their contract
owners, and that they will vote shares for which they receive no timely
instructions in proportion to the shares for which they receive timely voting
instructions.
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.
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.
SWPXX KEEP THIS PORTION FOR YOUR RECORDS
- --------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
- --------------------------------------------------------------------------------
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
- --------------------------------------------------------------------------------
SCHWAB MONEY MARKET PORTFOLIO
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING:
VOTE ON TRUSTEES
1. Nominees for the Board of Trustees:
Charles R. Schwab, Jeremiah H. Chafkin, Donald F. Dorward,
Robert G. Holmes, Steven L. Scheid, Donald R. Stephens
and Michael W. Wilsey, Mariann Byerwalter, Gerald B. Smith and
William A. Hasler
For Withhold For All To withhold authority to vote,
All All Except mark "For All Except" and write the
name(s) of the nominee(s) on the line below
|_| |_| |_|
--------------------------------------------
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
================================================================================
For Against Abstain
(a)(i) Borrowing |_| |_| |_|
(a)(ii) Lending |_| |_| |_|
(a)(iii) Senior Securities |_| |_| |_|
(b) Diversification |_| |_| |_|
(c) Unseasoned Issuers |_| |_| |_|
(d) Restricted or Illiquid Securities |_| |_| |_|
(e) Other Investment Companies |_| |_| |_|
For Against Abstain
(f) Ownership of Securities |_| |_| |_|
(g) Industry Concentration |_| |_| |_|
(h) Commodities, Futures & Real Estate |_| |_| |_|
(i) Underwriting of Securities |_| |_| |_|
(j) Control of an Issuer |_| |_| |_|
(k) Oil, Gas or Mineral Interests |_| |_| |_|
|_| |_| |_|
<TABLE>
<CAPTION>
<S> <C>
- ----------------------------------------------- ------------------------------
Signature (PLEASE SIGN WITHIN BOX) Date Signature (Joint Owner) Date
</TABLE>
<PAGE> 34
SCHWAB S&P 500 PORTFOLIO
SCHWAB ANNUITY PORTFOLIOS
101 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94104
TO VOTE BY INTERNET
1)Read the proxy statement and have the proxy
card below at hand.
2)Go to the website www.proxyvote.com
3)Enter the 12-digit control number on this proxy
card and follow the simple instructions.
TO VOTE BY TOUCH-TONE TELEPHONE
1)Read the proxy statement and have the proxy card below at hand.
2)Call toll-free 1-800-690-6903.
3)Enter the 12-digit control number on this
proxy card and follow the simple instructions.
DO NOT MAIL THIS PROXY CARD IF YOU ARE VOTING BY INTERNET OR TELEPHONE.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK X
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF TRUSTEES OF SCHWAB ANNUITY PORTFOLIOS
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 10:45 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.
This proxy serves as a voting instruction card for owners of variable annuity
contracts ("contract owners") issued by life insurance companies that own
shares of the funds. The funds understand that the life insurance companies
will vote their shares according to timely instructions they receive from
their contract owners, and that they will vote shares for which they receive
no timely instructions in proportion to the shares for which they receive
timely voting instructions.
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.
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.
SWP1Z KEEP THIS PORTION FOR YOUR RECORDS
- --------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
- --------------------------------------------------------------------------------
SCHWAB S&P 500 PORTFOLIO
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING:
VOTE ON TRUSTEES
1. Nominees for the Board of Trustees:
Charles R. Schwab, Jeremiah H. Chafkin, Donald F. Dorward,
Robert G. Holmes, Steven L. Scheid, Donald R. Stephens
and Michael W. Wilsey, Mariann Byerwalter, Gerald B. Smith and
William Hasler
For Withhold For All To withhold authority to vote,
All All Except mark "For All Except" and write the
name(s) of the nominee(s) on the line below
|_| |_| |_|
--------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
- ----------------------------------------------- ------------------------------
Signature (PLEASE SIGN WITHIN BOX) Date Signature (Joint Owner) Date
</TABLE>
