<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
[x] Definitive Proxy Statement
[x] 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
4 About the proposals
An overview of the proposals that shareholders are voting on and how
the funds would be affected
6 Notice of special meeting
The official notice of the shareholder meeting associated with this
proxy
7 Proxy statement
A more detailed discussion of each proposal and additional information
21 Appendix
The Schwab Money Market Portfolio's current and proposed fundamental
investment policies that would be affected by Proposal 2
<PAGE> 4
A special meeting of shareholders of Schwab Annuity Portfolios will take place
on June 1, 2000, and we're asking for your participation.
You don't need to attend the meeting to participate. But it's important that you
take a few minutes to read the enclosed material and vote. You can vote by
internet, by phone or by mailing the enclosed proxy voting card(s) in the
postage-paid envelope.
Shareholders of Schwab MarketTrack Growth Portfolio II, Schwab S&P 500 Portfolio
and Schwab Money Market Portfolio 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 for 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
3
<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). The Schwab Money Market Portfolio currently
has several investment policies that 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 potentially more effective -- and more competitive --
investment management practices.
These pages tell you more about the proposals and explain the main reasons that
the trustees believe the proposals are in the best interests of shareholders.
If any other proposals are brought before the special meeting in an appropriate
fashion, these may be voted on as well. As of the time this document was
prepared, the trustees were not aware of any other proposals.
WHY ARE THE TRUSTEES INCREASING THE NUMBER OF INDEPENDENT BOARD MEMBERS?
The Board of Trustees is responsible for protecting the interests of the funds'
shareholders. The Board meets regularly to review the funds' activities,
contractual arrangements and performance. 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
mutual funds, announced a series of proposed amendments to existing laws and
regulations that govern the role of independent trustees of mutual funds. Their
proposals would require that a majority of trustees be independent (the current
requirement is 40%), and would encourage boards to make independent trustees a
super-majority (two-thirds majority). The trustees of the 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.
[ENVELOPE GRAPHIC]
BEFORE YOU VOTE
The information on these pages is only a summary. Before you vote, please read
the proxy statement, which starts on page 7.
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 POLICIES (PROPOSAL
2)?
Some of the Schwab Money Market Portfolio's policies reflect government
regulations that no longer exist. In other cases, policies are more stringent
than current government regulations require. The fund believes the proposed
changes in investment policies 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 policies.
<TABLE>
<CAPTION>
TRUSTEE PROPOSED CHANGES IN
ELECTION POLICIES
SCHWAB ANNUITY PORTFOLIOS (PROPOSAL 1) (PROPOSAL 2)
<S> <C> <C>
MarketTrack Growth Portfolio II -
S&P 500 Portfolio -
Money Market Portfolio - -
</TABLE>
None of the proposed changes will lower the standards for credit quality that
the fund's investments must meet.
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).
ABOUT THE PROPOSALS 5
<PAGE> 7
NOTICE OF SPECIAL MEETING
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 10:00 a.m. Pacific time for the following purposes:
1. To elect trustees of each fund to hold office until their successors are duly
elected and qualified;
2. To eliminate, reclassify or amend certain fundamental investment policies and
restrictions of the Schwab Money Market Portfolio; and
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
April 10, 2000
6 MEETING NOTICE
<PAGE> 8
PROXY STATEMENT
PROXY STATEMENT FOR SPECIAL MEETING OF SHAREHOLDERS OF THE FUNDS TO BE HELD ON
JUNE 1, 2000
Schwab Annuity Portfolios
101 Montgomery Street
San Francisco, CA 94104
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 Trust
to be held at the A.P. Giannini Auditorium, 555 California Street, Concourse
Level, San Francisco, California 94104-1502, on June 1, 2000, beginning at 10:00
a.m. Pacific time and at any adjournment(s) of the meeting. This proxy statement
is first being mailed to shareholders on or about April 10, 2000.
The Board of Trustees has fixed the record date as the close of business on
March 3, 2000 (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, contract owners may use the
internet, telephone or may 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 the Trust and each fund entitled to vote:
MarketTrack(TM) Growth Portfolio II -- 1,229,168
S&P 500 Portfolio -- 5,911,046
Money Market Portfolio -- 120,694,060
The holder of each full share of a fund outstanding as of the close of business
on the record date is entitled to one vote upon each matter properly submitted
to the 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.
7
<PAGE> 9
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 will bear its
pro rata share of costs of solicitation and expenses incurred in connection with
preparing this Proxy Statement. Each fund also will reimburse certain parties
for their expenses in forwarding proxy materials to beneficial owners of fund
shares. As described in the funds' prospectuses, the investment adviser and/or
Schwab have guaranteed that the total operating expenses of some funds will not
exceed a certain percentage of a fund's average daily net assets through a
specified period of time. For purposes of the guarantee, total operating
expenses do not include interest, taxes, brokerage commissions and extraordinary
expenses. As extraordinary expenses, expenses related to this proxy solicitation
will be excluded from the calculations of each fund's total operating expenses
for purposes of the investment adviser's and Schwab's guarantee.
QUORUM AND REQUIRED VOTE
In order to take action on any Proposal (or element of a Proposal), a "quorum"
or a majority of the shares entitled to vote on that Proposal must be present in
person or by proxy. 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 (10) Nominees receiving the highest number of
affirmative votes cast at the meeting will be elected as long as the vote "For"
each Nominee exceeds the vote "Against" such Nominee. Approval of each element
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 the 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.
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 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 no effect on Proposal 1 and the effect of a
vote against Proposal 2.
The following table lists each fund and the corresponding proposals.
<TABLE>
<CAPTION>
TRUSTEE PROPOSED CHANGES IN
ELECTION POLICIES
SCHWAB ANNUITY PORTFOLIOS (PROPOSAL 1) (PROPOSAL 2)
<S> <C> <C>
MarketTrack Growth Portfolio II * -
S&P 500 Portfolio * -
Money Market Portfolio * *
</TABLE>
8
<PAGE> 10
PROPOSAL 1
ELECTION OF TRUSTEES
FUNDS AFFECTED:
MarketTrack Growth Portfolio II
S&P 500 Portfolio
Money Market Portfolio
It is proposed that shareholders of the Trust elect ten (10) nominees to serve
as Trustees, each to hold office until a successor is elected and qualified. Six
of the nominees currently serve as Trustees and it is proposed that they be
reelected. It also is proposed that four nominees who have not previously served
as Trustees be elected, and, if elected, begin serving as Trustees as soon as
practicable. 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 outstanding voting shares
of the Trust. This means that the ten (10) 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. Each nominee owns less than 1% of the outstanding shares
of each fund.
INFORMATION REGARDING NOMINEES
Information about each nominee, including his or her name, date of birth,
positions with the Trust, length of service in such positions 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 of the Trust. The address of each individual
listed below is 101 Montgomery Street, San Francisco, California 94104. Each
Nominee owns less than 1% of the outstanding shares of each fund.
<TABLE>
<CAPTION>
NAME, DATE OF BIRTH, PRINCIPAL OCCUPATION & OTHER TRUSTEESHIPS TRUSTEE OF THE TRUST SINCE
- -------------------------------------------------------------------------------------------------------------
<S> <C>
MARIANN BYERWALTER First-time
August 13, 1960 nominee
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 America First
Companies, Omaha, NE (venture capital/fund management) and Redwood Trust, Inc.
(mortgage finance).
JEREMIAH H. CHAFKIN* First-time
May 5, 1959 nominee
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 First-time
November 22, 1941 nominee
Co-Chief Executive Officer, Aphton Corporation (bio-pharmaceuticals). Prior to
August 1998, Mr. Hasler was Dean of the Haas School of Business at the
University of California, Berkeley, (higher education). Mr. Hasler also is on
the Board of Directors of Solectron Corporation (manufacturing), Tenera, Inc.
(services and software), Airlease Ltd. (aircraft leasing) and Mission West
Properties (commercial real estate).
</TABLE>
9
<PAGE> 11
<TABLE>
<CAPTION>
NAME, DATE OF BIRTH, PRINCIPAL OCCUPATION & OTHER TRUSTEESHIPS TRUSTEE OF THE TRUST SINCE
- -------------------------------------------------------------------------------------------------------------
<S> <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;
Director, 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), Audiobase, Inc. (a financial services
organization), Vodaphone AirTouch plc (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 First-time
September 28, 1950 nominee
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 the Trust as defined in the 1940 Act. In
addition to their positions with the investment adviser and distributor, Messrs.
Chafkin, Scheid and Schwab also own stock of The Charles Schwab Corporation, a
publicly-traded company that is the parent of the investment adviser and
distributor. Because of the amount of his stock ownership, Mr. Schwab may be
deemed to control The Charles Schwab Corporation.
10
<PAGE> 12
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 those meetings. The Trust also has an Audit/Portfolio
Compliance Committee comprised of Messrs. Dorward, Holmes, Stephens and Wilsey,
none of whom is an "interested person" of the Trust (the "Independent
Trustees"), that reviews financial statements and other audit-related matters
for the Trust quarterly (and, as necessary, more frequently). The
Audit/Portfolio Compliance Committee met 4 times during the Trust's most recent
full fiscal year. In such year, each member attended at least 75% of those
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 members of the Board
of Trustees. The Nominating Committee did not meet during the Trust's most
recent full 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 for serving as Trustee. 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 more than two 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(2)
<S> <C> <C>
Donald F. Dorward, Trustee $6,450 $121,600
Robert G. Holmes, Trustee $6,450 $121,600
William J. Klipp, (3) Trustee $ 0 $ 0
Steven L. Scheid, President and Trustee $ 0 $ 0
Charles R. Schwab, Trustee; $ 0 $ 0
Chairman and Chief Executive Officer
Donald R. Stephens, Trustee $6,450 $121,600
Michael W. Wilsey, Trustee $5,850 $111,600
</TABLE>
(1) Amounts are for the fiscal year ended December 31, 1999.
(2) The Fund Complex includes the Trust, The Charles Schwab Family of Funds,
Schwab Capital Trust, and Schwab Investments.
(3) Mr. Klipp departed Schwab in 1999 and is expected to resign from the Board
of Trustees prior to the meeting.
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(R) 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 (10) 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.
11
<PAGE> 13
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 shareholder vote, 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 laws and
regulations that govern mutual 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
during the 1990's. 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 that are 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. Once converted to
non-fundamental, the fund's policies may be changed without shareholder
approval. 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
fund's prospectus and/or statement of additional information, as appropriate.
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 shows a list of the Money Market Portfolio's current
fundamental policies proposed to be replaced by new fundamental and/or
non-fundamental policies or eliminated.
VOTING REQUIREMENTS
Approval of each element of Proposal 2 requires the favorable vote of a majority
of outstanding voting shares of 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 new fundamental and/or non-fundamental policies. The fund intends to
implement new policies after the meeting, as soon as practicable.
(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 policy regarding borrowing 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> 14
The Appendix shows 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 technically may be
considered borrowings, but that may be permissible investment practices for
mutual funds.
Approval of this element of Proposal 2 would replace the fund's current
fundamental policy regarding borrowing with a more flexible, standard
fundamental borrowing policy. The Board of Trustees believes that this more
flexible fundamental policy is in the best interests of the fund and its
shareholders because it will allow the fund, subject to approval by the Board,
to adapt to future developments in investment practices and changes in laws and
regulations without the delay and cost of a shareholder meeting.
At the same time, the fund would amend and reclassify its current fundamental
policies so that they reflect the current borrowing practices permissible under
the 1940 Act. The Board of Trustees believes that this non-fundamental borrowing
policy is in the best interests of the fund and its shareholders because it
would limit the fund 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 policy regarding lending is 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 shows 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
policies regarding lending with a more flexible, standard fundamental policy.
The Board of Trustees believes that this more flexible fundamental policy is in
the best interests of the fund and its shareholders because it would allow the
fund, subject to approval by the Board, to adapt to future developments in
investment practices and changes in laws and regulations without the delay and
cost of a shareholder meeting.
At the same time, this element of Proposal 2 would amend and reclassify the
fund's current policy regarding lending as non-fundamental to reflect the
current lending practices permitted by the 1940 Act. The Board of Trustees
believes that this non-fundamental lending policy is in the best interests of
the fund and its shareholders because it would limit the fund 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.
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<PAGE> 15
(iii) PROPOSED CHANGE REGARDING ISSUANCE OF SENIOR SECURITIES
The fund has fundamental policies restricting it 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 short
or purchasing on margin be reclassified as non-fundamental policies. The
Appendix shows 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. Approval of this element of
Proposal 2, would permit the fund to replace its current fundamental policy
regarding the issuance of senior securities with a more flexible, standard
fundamental policy. The Board of Trustees believes that this more flexible
fundamental policy is in the best interests of the fund and its shareholders
because it would allow the fund, subject to Board approval, to adapt to future
developments in investment practices and changes in laws and regulations without
the delay and cost of a shareholder meeting.
Since the fund adopted its current fundamental policies, the SEC staff's
interpretation of what constitutes the issuance of a senior security has evolved
with changes in market conditions. For example, the SEC staff's current
interpretation is that the purchase of securities on margin, the making of
certain short sales, and the writing of puts and calls do not necessarily
involve the creation of senior securities if certain conditions are satisfied.
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 future changes.
(b) PROPOSAL TO AMEND FUND POLICY REGARDING DIVERSIFICATION
The fund is a diversified mutual fund. It is proposed that the current
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 shows the fund's
current fundamental policy 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 an issuer's voting
securities. Funds are not permitted to change their diversified status unless
approved by shareholders. This element of Proposal 2 does not seek to change the
fund's status as a diversified investment management company. Rather, approval
of this element of Proposal 2 would amend the fund's diversification policy so
that it would provide the maximum flexibility allowed for diversified funds
under the 1940 Act. The Board believes that this more flexible fundamental
policy is in the best interests of the fund and its shareholders 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 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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(c) PROPOSAL TO ELIMINATE FUND POLICY REGARDING INVESTMENTS IN "UNSEASONED
ISSUERS"
The current fundamental policy limits 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
has 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 elimination of the current fundamental policies
regarding investment in "unseasoned issuers" is in the best interests of the
fund and its shareholders.
(d) PROPOSAL TO AMEND AND RECLASSIFY FUND POLICIES REGARDING INVESTMENTS IN
RESTRICTED OR ILLIQUID SECURITIES
The fund currently operates subject to fundamental policies regarding
investments in restricted securities and illiquid securities, including
repurchase agreements that mature in more than seven days. It is proposed that
the fundamental policies regarding investments in restricted securities,
illiquid securities or repurchase agreements for the fund be amended and
reclassified as a non-fundamental policy. The Appendix shows the fund's current
fundamental policies and proposed non-fundamental policy.
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 investments in illiquid or restricted securities. If approved, this
element of Proposal 2 would amend and 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, would encompass the substance of the current
fundamental policy. Accordingly, approval of this element of Proposal 2 would
permit the elimination of the current fundamental policy.
The proposed non-fundamental policy 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 and
repurchase agreements that mature in more than seven days). 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 and
its shareholders.
(e) PROPOSAL TO AMEND AND RECLASSIFY FUND POLICY 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 shows 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> 17
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 that present minimal credit risk. Accordingly, money market funds
generally may only invest in other investment companies if the investment
companies are money market funds.
The proposed non-fundamental policy will allow 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 a portion of 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 replacing the fund's current fundamental
policies regarding investment in the securities of other investment companies
with a more flexible, standard non-fundamental policy, which the Board of
Trustees could take appropriate and timely action to amend in the future, if
necessary, without the expense and delay associated with a shareholder meeting
is in the best interests of the fund and its shareholders.
(f) PROPOSAL TO ELIMINATE FUND POLICY 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, Trustees or directors of the trust or the
investment adviser be eliminated. The Appendix shows 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 and its
shareholders because it would increase the investment adviser's flexibility in
managing the assets of the fund, and without any material increase in risks to
shareholders.
(g) PROPOSAL TO REPLACE AND RECLASSIFY FUND POLICY REGARDING INDUSTRY
CONCENTRATION
The fund's current fundamental policy generally prohibits investment of more
than 25% of fund assets in companies considered to be in the same industry. It
is proposed that the fundamental policy regarding concentration of investments
in certain industries be reclassified as non-fundamental and a new fundamental
policy be adopted. The Appendix shows 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 generally requires all funds to adopt a fundamental policy
regarding concentration of investments in particular industries. It is currently
the position of the staff of the SEC that if 25% or more of the value of a
fund's assets are invested in one industry, that fund's investments will be
deemed to be concentrated in that industry. However, this 25% or more 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 and its
shareholders.
(h) PROPOSAL TO REPLACE AND RECLASSIFY FUND POLICY REGARDING INVESTMENTS IN
COMMODITIES, FUTURES CONTRACTS AND REAL ESTATE
Under its current fundamental policy, the fund is restricted from investing in
commodities, futures contracts and real estate. It is proposed that the
fundamental policy regarding investments in commodities, futures contracts and
real estate be reclassified as a non-fundamental policy, and a new fundamental
policy regarding commodities and real estate investments be adopted. The
Appendix shows the fund's current fundamental policy and proposed fundamental
and non-fundamental policies.
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<PAGE> 18
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 policy
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 determines that
changing it would be in the best interests of the fund and its shareholders.
However, approval of this element of Proposal 2 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 and
its shareholders.
(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 shows 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 generally takes the position that funds should not engage in the
business of underwriting securities. While the Fund's current 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 amend non-fundamental policies, without the
expense and delay associated with a shareholder meeting. Accordingly, the Board
of Trustees believes that approval of this element of Proposal 2 is in the best
interests of the 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 shows 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 a fundamental policy regarding
investing for the purpose of exercising control of an issuer. The current
fundamental policy is based on requirements imposed by the administrators of
securities laws in various states. However, federal legislation passed in 1996
preempted substantive state regulation of mutual funds and the sale of their
shares. Approval of this element of Proposal 2 would allow the Board of Trustees
to take appropriate and timely action to amend the non-fundamental policy,
without the expense and delay associated with a shareholder meeting.
Accordingly, the Board of Trustees believes that approval of this element of
Proposal 2 is in the best interests of the Fund and its shareholders.
(k) PROPOSAL TO RECLASSIFY FUND POLICY 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 shows 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 a fundamental policy regarding
investing in oil, gas or mineral interests. The current fundamental policy is
based on requirements imposed by the administrators of securities laws in
various states. However, federal legislation passed in 1996 preempted
substantive state regulation of mutual funds and the sale of their shares.
Approval of this element of Proposal 2 would allow the Board of Trustees to take
appropriate and timely action to amend the non-fundamental policy, without the
expense and delay associated with a shareholder meeting. Accordingly, the Board
of Trustees believes that approval of this element of Proposal 2 is in the best
interests of the Fund and its shareholders.
THE BOARD OF TRUSTEES RECOMMEND THAT YOU VOTE
"FOR" PROPOSAL 2 AND ALL ELEMENTS CONTAINED THEREIN.
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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 1% of the shares of each
class of each fund.
<TABLE>
<CAPTION>
Name, Date of Birth and Principal Occupation Position*
- -------------------------------------------- ---------
<S> <C>
JEREMIAH H. CHAFKIN Executive Vice President and Chief Operating Officer
(for biographical information see p. 9)
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. 10)
CHARLES R. SCHWAB Trustee; Chairman and Chief Executive Officer
(for biographical information see p. 10)
TAI-CHIN TUNG Treasurer and Principal Financial Officer
March 7, 1951
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 Investment Officer
April 5, 1955
Senior Vice President and Chief Investment Officer, Charles Schwab
Investment Management, Inc.
</TABLE>
* Each officer will serve until the earlier of his or her resignation or his or
her successor is elected and qualified.
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<PAGE> 20
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 shareholder 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.
PORTFOLIO TRANSACTIONS
For the fiscal year ended December 31, 1999, the funds paid the following
brokerage commissions to affiliated brokers.
<TABLE>
<CAPTION>
FUND NAME AMOUNT
- --------------------------------------------------------------------------
<S> <C>
MarketTrack(TM) Growth Portfolio II $ 673
S&P 500 Portfolio $16,615
Money Market Portfolio $ 0
</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 by phone during the meeting, if
needed, to make a statement if desired and to respond to appropriate questions
from shareholders.
19
<PAGE> 21
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>
MarketTrack Growth Portfolio II Great West Life 1,229,168 100%
8515 E. Orchard Rd.
Englewood, CO 80111
S&P 500 Portfolio Great West Life 5,911,046 100%
8515 E. Orchard Rd.
Englewood, CO 80111
Money Market Portfolio Great West Life 120,694,060 100%
8515 E. Orchard Rd.
Englewood, CO 80111
</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
EACH 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.
20
<PAGE> 22
APPENDIX
The Appendix provides the current fundamental policies for the Money Market
Portfolio that are affected by Proposal 2, along with the proposed policies for
the fund. A more complete analysis of each Proposal is included in the Proxy
Statement, which starts on page 7. As you read the Proxy Statement, you may want
to refer to the Appendix to compare the Fund's current fundamental policies to
those being proposed.
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
CURRENT FUNDAMENTAL POLICY: NEW FUNDAMENTAL POLICY: NEW NON-FUNDAMENTAL POLICY:
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
The fund may not borrow money The fund may not borrow money, except to The fund may not borrow money except
except as a temporary measure the extent permitted under the 1940 Act, that the fund may (i) borrow money
for extraordinary or emergency the rules or regulations thereunder or any from banks and (ii) engage in reverse
purposes and then only in an exemption therefrom, as such statute, rules repurchase agreements with any party;
amount up to one-third of the or regulations may be amended or provided that (i) and (ii) in
value of its total assets in interpreted from time to time. combination do not exceed 33 1/3% of
order to meet redemption its total assets (any borrowings that
requests without immediately come to exceed this amount will be
selling any portfolio reduced to the extent necessary to
securities. The portfolio will comply with the limitation within
not borrow for leverage purposes three business days) and the fund
or purchase securities or make will not purchase securities while
investments while reverse borrowings represent more than 5% of
repurchase agreements or its total assets.
borrowings are outstanding. If,
for any reason, the current
value of the portfolio's total
net assets falls below an amount
equal to three times the amount
of its indebtedness from money
borrowed, the fund will, within
three business days, reduce its
indebtedness to the extent
necessary.
- --------------------------------------------------------------------------------------------------------------------------
The fund may not make loans to The fund may not make loans to other The fund may not lend any security or
others, except the portfolio may persons, except to the extent permitted make any other loan if, as a result,
(i) purchase a portion of an under the 1940 Act, the rules or more than 33 1/3% of its total assets
issue of short-term debt regulations thereunder or any exemption would be lent to other parties (this
securities or similar therefrom, as such statute, rules or restriction does not apply to
obligations (including regulations may be amended or interpreted purchases of debt securities or
repurchase agreements) that are from time to time. repurchase agreements).
publicly distributed or
customarily purchased by
institutional investors, and
(ii) lend its portfolio
securities (up to one-third of
the portfolio's total assets) in
accordance with its investment
objectives and policies.
- --------------------------------------------------------------------------------------------------------------------------
The fund may not issue senior The fund may not issue senior securities, None
securities as defined in the except to the extent permitted under the
1940 Act. 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 None The fund may not write, purchase or
or sell puts, calls or sell puts, calls or combinations
combinations thereof. thereof.
The fund may not make short None The fund may not make short sales of
sales of securities, or purchase securities, or purchase any
any securities on margin except securities on margin except to obtain
to obtain such short-term such short-term credits as may be
credits as may be necessary for necessary for the clearance of
the clearance of transactions. transactions.
- --------------------------------------------------------------------------------------------------------------------------
The fund may not purchase The fund may not purchase securities of an The fund may not purchase securities
securities of any issuer (other issuer, except as consistent with the of any issuer (other than obligations
than obligations of, or maintenance of its status as an open-end of, or guaranteed by, the U.S.
guaranteed by, the U.S. diversified company under the 1940 Act, the government, its agencies or
Government, its agencies or rules or regulations thereunder or any instrumentalities, or securities of
instrumentalities) if, as a exemption therefrom, as such statute, rules other investment companies) if, as a
result, more than 5% of the or regulations may be amended or result more than 5% of the value of
value of its assets would be interpreted from time to time. its assets would be invested in the
invested in securities of that securities of such issuer, except
issuer. that the fund may invest up to 25% of
The fund may not purchase more its total assets in the first tier
than 10% of any class of securities of a single issuer for up
securities of any issuer. All to three business days.
debt securities and all
preferred stocks are each
considered as one class.
</TABLE>
A-1
<PAGE> 23
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
CURRENT FUNDAMENTAL POLICY: NEW FUNDAMENTAL POLICY: NEW NON-FUNDAMENTAL POLICY:
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
The fund may not invest more None None
than 5% of its total net assets
in securities of issuers (other
than obligations of, or
guaranteed by, the U.S.
Government, its agencies or
instrumentalities) that, with
their predecessors, have a
record of less than three years
of continuous operation.
- --------------------------------------------------------------------------------------------------------------------------
The fund will invest no more None The fund may not invest more than 10%
than 10% of its net assets in of its net assets in illiquid
illiquid securities. The fund securities.
may not enter 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 None The fund may not purchase securities
securities of other investment of other investment companies, except
companies, except in connection as permitted by the Investment
with a merger, consolidation, Company Act of 1940, the rules or
reorganization or acquisition of regulations thereunder or any
assets. exemption therefrom, as such statute,
rules or regulations may be amended
from time to time.
- --------------------------------------------------------------------------------------------------------------------------
The fund may not purchase or None None
retain securities of an issuer
if any of the officers, trustees
or directors of the Trust or its
investment adviser individually
own beneficially more than 1/2
of 1% of the securities of that
issuer and together beneficially
own more than 5% of the
securities of such issuer.
- --------------------------------------------------------------------------------------------------------------------------
The fund may not concentrate 25% The fund may not concentrate investments in The fund may not concentrate 25% or
or more of the value of its a particular industry or group of more of the value of its assets in
assets in any one industry; industries, as concentration is defined any one industry; provided, however,
provided, however, that the under the 1940 Act, the rules or that the portfolio reserves the
portfolio reserves the freedom regulations thereunder or any exemption freedom of action to invest up to
of action to invest up to 100% therefrom, as such statute, rules or 100% of its assets in certificates of
of its assets in certificates of regulations may be amended or interpreted deposit or bankers' acceptances
deposit or bankers' acceptances from time to time. issued by domestic branches of U.S.
issued by domestic branches of banks and U.S. branches of foreign
U.S. banks and U.S. branches of banks (which the portfolio has
foreign banks (which the determined to be subject to the same
portfolio has determined to be regulation as U.S. banks), or
subject to the same regulation obligations of, or guaranteed by, the
as U.S. banks), or obligations U.S. Government, its agencies or
of, or guaranteed by, the U.S. instrumentalities in accordance with
Government, its agencies or its investment objective and
instrumentalities in accordance policies.
with its investment objective
and policies.
- --------------------------------------------------------------------------------------------------------------------------
The fund may not invest in The fund may not purchase or sell The fund may not invest in
commodities or commodity commodities or real estate, except to the commodities or commodity contracts,
contracts, including futures extent permitted under the 1940 Act, the including futures contracts, real
contracts, real estate or real rules or regulations thereunder or any estate or real estate limited
estate limited partnerships, exemption therefrom, as such statute, rules partnerships, although it may invest
although it may invest in or regulations may be amended or in securities which are secured by
securities which are secured by interpreted from time to time. real estate and securities of issuers
real estate and securities of which invest or deal in real estate.
issuers which invest or deal in
real estate.
</TABLE>
A-2
<PAGE> 24
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
CURRENT FUNDAMENTAL POLICY: NEW FUNDAMENTAL POLICY: NEW NON-FUNDAMENTAL POLICY:
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
The fund may not underwrite The fund may not underwrite securities None
securities issued by others issued by other persons, except to the
except to the extent it may be extent permitted under the 1940 Act, the
deemed to be an underwriter, rules or regulations thereunder or any
under the federal securities exemption therefrom, as such statute, rules
laws, in connection with the or regulations may be amended or
disposition of securities from interpreted from time to time.
its investment portfolio.
- --------------------------------------------------------------------------------------------------------------------------
The fund may not invest for the None The fund may not invest for the
purpose of exercising control or purpose of exercising control or
management of another issuer. management of another issuer.
- --------------------------------------------------------------------------------------------------------------------------
The fund may not invest in None The fund may not invest in interests
interests in oil, gas, mineral in oil, gas, mineral leases or other
leases or other mineral mineral exploration or development
exploration or development programs, although it may invest in
programs, although it may invest the securities of issuers which
in the securities of issuers invest in or sponsor such programs.
which invest in or sponsor such
programs.
</TABLE>
A-3
<PAGE> 25
SCHWABFUNDS(R)
<PAGE> 26
SCHWABFUNDS(R)
101 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94104
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 10:00 a.m. Pacific
time, and at any and all adjournment(s) thereof. Receipt of the Notice of and
Proxy Statement for said Meeting is acknowledged.
If properly executed and returned, the shares presented by this proxy will be
voted as specified by the undersigned. As to any other matter, the shares will
be voted by said attorneys in accordance with their judgment.
You may also vote your shares by touch-tone phone by calling
1-800-690-6903 or through the Internet at www.proxyvote.com
DO NOT MAIL THIS PROXY CARD IF YOU
ARE VOTING BY INTERNET OR TELEPHONE.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
PROTO1D
The Board of Trustees recommends a vote FOR the election of Trustees and all
other proposals. IF NO SPECIFICATION IS MADE, YOUR SHARES WILL BE VOTED FOR THE
ELECTION OF ALL TRUSTEES AND ALL OTHER PROPOSALS.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING:
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
Vote On Trustees
1. Nominees for the Board of Trustees:
01) Charles R. Schwab, 02) Mariann Byerwalter, 03) Jeremiah H. Chafkin, 04)
Donald F. Dorward, 05) William A. Hasler, 06) Robert G. Holmes, 07) Steven
L. Scheid, 08) Gerald B. Smith, 09) Donald R. Stephens, and 10) Michael W.
Wilsey.
For Withhold For All To Withhold authority to vote, mark "For All Except"
All All Except And write the nominee's number on the line below.
[ ] [ ] [ ] ____________________________________________________
Please sign exactly as your name(s) appears. If signing is by attorney,
executor, administrator, trustee or guardian, please give full title. If more
than one name appears, all must sign.
__________________________________ ______ ________________________ ______
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
<PAGE> 27
SCHWABFUNDS(R)
101 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94104
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 10:00 a.m. Pacific
time, and at any and all adjournment(s) thereof. Receipt of the Notice of and
Proxy Statement for said Meeting is acknowledged.
If properly executed and returned, the shares presented by this proxy will be
voted as specified by the undersigned. As to any other matter, the shares will
be voted by said attorneys in accordance with their judgment.
You may also vote your shares by touch-tone phone by calling 1-800-690-6903 or
through the Internet at www.proxyvote.com
DO NOT MAIL THIS PROXY CARD IF YOU
ARE VOTING BY INTERNET OR TELEPHONE.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
PROTO8D
The Board of Trustees recommends a vote FOR the election of Trustees
and all other proposals. IF NO SPECIFICATION IS MADE, YOUR
SHARES WILL BE VOTED FOR THE ELECTION OF ALL TRUSTEES AND ALL OTHER PROPOSALS.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING:
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
Vote on Trustees For Withhold For All
All All Except
1. Nominees for the Board of Trustees:
01) Charles R. Schwab, 02) Mariann
Byerwalter, 03) Jeremiah H. Chafkin, 04)
Donald F. Dorward, 05) William A. Hasler, [ ] [ ] [ ]
06) Robert G. Holmes, 07) Steven L.
Scheid, 08) Gerald B. Smith, 09) Donald
R. Stephens, and 10) Michael W. Wilsey.
Vote on Fundamental Policies For Against Abstain
2. To vote for all applicable elements [ ] [ ] [ ]
of Proposal 2.
Stop here unless you would like to vote on each applicable element of Proposal 2
To withhold authority to vote, mark "For All Except"
and write the nominee's number on the line below.
- ----------------------------------
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 [ ] [ ] [ ]
(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 [ ] [ ] [ ]
Please sign exactly as your name(s) appears. If signing is by attorney,
executor, administrator, trustee or guardian, please give full title.
If more than one name appears, all must sign.
- --------------------------------- ---------
Signature [PLEASE SIGN WITHIN BOX] Date
- --------------------------------- ---------
Signature (Joint Owners) Date
<PAGE> 28
TWO NEW WAYS
TO VOTE YOUR SHARES
ANNOUNCING TWO CONVENIENT VOTING METHODS
THAT HELP REDUCE FUND EXPENSES
Read the accompanying proxy statement to learn about important issues affecting
the Schwab Annuity Portfolios.
Then help reduce processing costs -- by voting on the internet or by touch-tone
telephone. If you vote by internet or telephone, do not mail your proxy card(s).
You should have a proxy card for each fund in which you beneficially own shares.
Please make sure that you vote all proxy cards that are enclosed.
<TABLE>
<CAPTION>
TO VOTE BY INTERNET: TO VOTE BY TOUCH-TONE TELEPHONE:
<S> <C>
1. Read the proxy statement with 1. Read the proxy statement with
your proxy card(s) handy. your proxy card(s) handy.
2. Go to www.proxyvote.com 2. Call toll free 800-690-6903
3. Enter the 12-digit control 3. Enter the 12-digit control
number from your proxy card. number from your proxy card.
4. Follow the easy instructions on 4. Follow the easy recorded
the website. Remember to vote instructions. Remember to vote
each card you received. each card you received.
</TABLE>
(C) Charles Schwab & Co., Inc. All rights reserved. Member SIPC/NYSE.
TF7469A (3/00)
<PAGE> 29
EMAIL FROM JERRY CHAFKIN TO ALL EMPLOYEES
DATE: 3/24/00
TO: ALL SCHWAB EMPLOYEES
FROM: JERRY CHAFKIN
RE: SCHWABFUNDS PROXY
Nearly 4 million SchwabFunds shareholders will be receiving proxy materials over
the next few weeks in connection with a meeting of all SchwabFunds shareholders
scheduled for June 1, 2000. The funds' trustees believe that the proposals are
in the best interests of the funds and their shareholders and recommend a vote
FOR all of the proposals.
TO THOSE OF YOU WHO ARE SCHWABFUNDS SHAREHOLDERS, PLEASE VOTE YOUR SHARES
PROMPTLY. You can help further reduce proxy expenses -- which are paid by the
funds and their shareholders -- BY VOTING THROUGH THE INTERNET OR BY TOUCH-TONE
TELEPHONE. Instructions for voting your shares are included in the proxy
materials, which you should be receiving in the next few weeks. Depending on the
number of funds you own and accounts you have, you may receive more than one
proxy card. Please make sure to vote ALL cards received.
IF YOU RECEIVE ANY CUSTOMER CALLS REGARDING THE PROXY PROPOSALS, PLEASE DIRECT
THEM TO THE FUNDS' SOLICITOR, D.F. KING & CO., INC., AT 800-431-9633. In
addition to handling inbound calls, D.F. King will be contacting certain
shareholders at our direction in order to assist the funds in obtaining the
number of votes necessary for a quorum.
There are three proxy proposals:
1) to elect trustees of each fund, including three new independent
trustees
2) to eliminate, reclassify or amend certain fundamental investment
policies and restrictions
3) to amend fundamental investment objectives of certain funds
Approval of the first proposal, election of trustees, will increase the number
of independent trustees from four to seven. By adding three independent
trustees, SchwabFunds is embracing the SEC's recently proposed guidelines for
board composition, which encourage boards to make independent trustees a
two-thirds "super-majority." Approval of the other two proposals will give the
funds a degree of strategic flexibility for potentially more effective -- and
more competitive -- investment management practices.
Thank you for your attention to this very important SchwabFunds matter. If you'd
like more information on the proxy, please visit BRAD at (link to BRAD).
Jerry Chafkin
President & COO Charles Schwab Investment Management, Inc.
<PAGE> 30
SCHWABFUNDS HOME PAGE, www.schwab.com/SCHWAB FUNDS
PROPOSED DATES: 3/31/00 - 6/1/00
BULLET TEXT:
Have you voted your SchwabFunds proxy yet? [links to jump page below]
JUMP PAGE TEXT:
Voting your shares is easy -- you can even use the internet or your touch-tone
telephone to vote. Plus, these convenient voting options reduce proxy vote
expenses, which translates into savings for the funds and their shareholders.
Please make sure you vote ALL proxy cards received. In order to vote, you must
have been a SchwabFunds shareholder as of March 3, 2000.
VOTING OPTIONS:
- - BY INTERNET - go to www.proxyvote.com
- - BY TOUCH-TONE TELEPHONE - call 1-800-690-6903
IF YOU VOTE BY INTERNET OR PHONE, DO NOT MAIL YOUR PROXY CARD.
- - BY MAIL - complete, sign and return your proxy card in the postage paid
envelope enclosed with your proxy materials
If you have questions about the proxy proposals or would like help in voting
yours shares, please call the funds' proxy solicitor, D.F. King & Co. Inc., at
1-800-431-9633.
<PAGE> 31
SCHWAB INVESTOR NEWSLETTER
PROPOSED DATE: APRIL STATEMENTS (MAILING IN EARLY MAY)
HAVE YOU VOTED YOUR SCHWABFUNDS PROXY YET?
Voting your shares is easy -- you can even use the internet or your touch-tone
telephone to vote. Plus, these convenient voting options reduce proxy vote
expenses, which translates into savings for the funds and their shareholders.
In order to vote, you must have been a SchwabFunds shareholder as of March 3,
2000 and should have received materials in the mail.
VOTING OPTIONS:
- - BY INTERNET - go to www.proxyvote.com
- - BY TOUCH-TONE TELEPHONE - call 1-800-690-6903
IF YOU VOTE BY INTERNET OR PHONE, DO NOT MAIL YOUR PROXY CARD.
- - BY MAIL - complete, sign and return your Proxy Card in the postage paid
envelope enclosed with your proxy materials
If you have questions about the proxy statement or would like help voting your
shares, please call the funds' proxy solicitor, D.F. King & Co. Inc., at
1-800-431-9633.
<PAGE> 32
@SCHWAB STORY
PROPOSED DATE: MONDAY, 3/27/00
CONTACTS: BILL CARR
Nearly 4 million SchwabFunds shareholders will be receiving proxy materials over
the next few weeks in connection with a meeting of all SchwabFunds shareholders
scheduled for June 1, 2000. March 3, 2000 was designated as the record date for
determining shareholders who are entitled to vote.
D.F. King & Co., Inc. has been retained as the solicitor for the proxy. ANY
CUSTOMER CALLS REGARDING THE PROXY SHOULD BE REFERRED TO D.F. KING AT
800-431-9633. In addition to handling inbound calls, D.F. King will be
contacting certain shareholders at our direction in order to assist the funds in
obtaining the number of votes necessary for a quorum.
FOR EMPLOYEES WHO ARE SCHWABFUNDS SHAREHOLDERS, PLEASE VOTE YOUR SHARES
PROMPTLY. You can help further reduce proxy expenses -- which are paid by the
funds and their shareholders -- BY VOTING THROUGH THE INTERNET OR BY TOUCH-TONE
TELEPHONE. Instructions for voting your shares are included in the proxy
materials, which you should be receiving in the next few weeks. Depending on the
number of funds you own and accounts you have, you may receive more than one
proxy card. Please make sure to vote ALL cards received.
FOR MORE INFORMATION REGARDING THE PROPOSALS, see the mutual funds site on BRAD
[link here].
<PAGE> 33
REVISED 3/21/00
INTERNAL
3.) MUTUAL FUNDS BRAD - SCHWABFUNDS PROXY
PROPOSED DATES: 3/24/00 - 6/1/00
CONTACT: PETER PERRETTI
BACKGROUND:
Nearly 4 million SchwabFunds shareholders will be receiving proxy materials
beginning the week of March 27, 2000. March 3, 2000 was designated as the record
date for determining shareholders who are entitled to vote. The meeting is
scheduled for June 1, 2000.
There are three proposals:
1) to elect trustees of each fund, including 3 new independent trustees
2) to eliminate, reclassify or amend certain fundamental investment policies
and restrictions
3) to amend fundamental investment objectives of certain funds
The trustees believe that these proposals are in the best interests of the funds
and their shareholders and recommend a vote FOR all of the proposals.
SUMMARY OF PROPOSALS:
Approval of the first proposal, election of trustees, will increase the number
of independent trustees from four to seven. By adding three independent
trustees, SchwabFunds is embracing the SEC's recently proposed guidelines for
board composition, which encourage boards to make independent trustees a
two-thirds "super-majority."
The other proposals relate to eliminating, amending or reclassifying investment
policies, many of which are outdated. These policies currently are fundamental
policies, meaning that they cannot be changed without shareholder approval.
Approval of these proposals would allow the funds a degree of strategic
flexibility for potentially more effective -- and more competitive -- investment
management practices.
HANDLING CUSTOMER CALLS:
Any calls regarding the proxy proposals should be referred to the funds'
solicitor, D.F. King & Co., Inc., at 800-431-9633. In addition to handling
inbound calls regarding the proxy proposals, D.F. King will be contacting
certain shareholders at our direction in order to assist the funds in obtaining
the number of votes necessary for a quorum.
HOW TO VOTE SHARES:
<PAGE> 34
Voting on the internet or by touch-tone phone reduces proxy expenses, which are
paid by the fund. IF SHAREHOLDERS VOTE BY INTERNET OR PHONE, THEY SHOULD NOT
MAIL THE PROXY CARDS.
- - BY INTERNET: go to www.proxyvote.com and follow the instructions
- - BY TOUCH-TONE PHONE: call toll-free at 1-800-690-6903 and follow the
recorded instructions
- - BY MAIL: mark votes on proxy card(s), sign and date, and mail using the
postage paid envelope provided with proxy materials
QUESTIONS (INTERNAL ONLY -NOT TO BE GIVEN TO CUSTOMERS): E-MAIL
[email protected]
CLICK HERE (ICON) TO VIEW THE PROXY STATEMENT (PDF FILE)
<PAGE> 35
EXTERNAL
11.) NOTICE TO INVESTMENT MANAGERS
PROPOSED SI.COM POSTING & BLAST EMAIL: 3/24/00
CONTACT: NICOLETTE ANGELOS
SchwabFunds Proxies Mailing to Clients
SchwabFunds is conducting a proxy mailing to all shareholders as of record date,
March 3, 2000. This mailing will occur over the next few weeks and includes
shareholders of the Schwab Money Market Funds. As a result, this proxy mailing
may impact many of your clients. This proxy mailing also may be an opportunity
to determine the proxy instructions your clients have on file with Schwab
Institutional and if necessary, alter them.
Proxy Mailing
Based on your clients' standing preferences for proxy voting, we have directed
the proxy materials, including voting ballot(s), to the authorized voting party
- - either you or your client.
If any of your clients reserved the right to vote proxies for their holdings,
they will receive the proxy materials and voting ballot(s) and you will receive
an "information only" copy of the proxy materials (if indicated by the standing
proxy preference).
If you have proxy voting authority for one or more of your clients' accounts,
you will receive one consolidated ballot for each fund totaling the number of
shares you are eligible to vote on behalf of your client(s). These clients will
receive an "information only" copy of the proxy materials (if indicated by the
standing proxy preference).
Amending Proxy Instructions
Your clients may change their proxy preference instructions on file with Schwab
Institutional. To change a current account's instructions, please complete the
Limited Power of Attorney Form (APP 504-7) as follows:
1. Initial the "Objection to Release of Information to Issuers" in
section 3 of the form,
and
2. Select you to receive "Proxy, Reorg, and Interim Mailings" (section 4,
5 & 6 of the form).
If you have any questions regarding your clients' proxy preference instructions,
please contact your Institutional Client Service Team.
SchwabFunds Using a Proxy Solicitation Firm
A proxy solicitor, D.F. King & Co., has been retained to make follow-up phone
calls as necessary on behalf of the funds. Prompt responses will reduce the
likelihood of you, or any of your clients, receiving follow-up phone calls or
mailings.
If you have questions about the proxy statement or would like help voting,
please call the funds' proxy solicitor, D.F. King & Co. Inc., at 800.431.9633.
<PAGE> 36
We encourage you, or if appropriate your clients, to vote their shares.
<PAGE> 37
SCHWAB ________ FUND
- --------------------------------------------------------------------------------
ANSWERING MACHINE MESSAGE
- --------------------------------------------------------------------------------
Hello, this is _______ calling on behalf of the SCHWAB ___________ FUND. You
should have received material in the mail concerning the SHAREHOLDERS MEETING
scheduled to be held on JUNE 1, 2000. At your earliest convenience please vote
your shares at www.proxyvote.com or sign, date and return the proxy card in the
envelope provided.
If you have not received these materials, have any questions, or would like to
vote by phone, PLEASE CALL US AT 1-800-431-9633. If you have already mailed back
your proxy, please disregard this message and accept our thanks!
<PAGE> 38
Dear Shareholder,
As we begin a new year, I'd like to take this opportunity to reflect on last
year's milestones at Charles Schwab Investment Management, Inc. (CSIM), the
investment adviser for the SchwabFunds(R) Family.
First of all SchwabFunds assets topped the $100 billion mark in September.
SchwabFunds continues to be among the largest and fastest growing fund families
in the nation, with the support of investors like you.
Secondly, we added two new products to our SchwabFunds offering in 1999:
o SCHWAB TOTAL STOCK MARKET INDEX FUND-TM- seeks to track the total return of
the entire U.S. stock market, as measured by the Wilshire 5000 Total Market
Index, the broadest measure of U.S. stock market performance. In one
single, low-cost investment, fund investors can benefit from exposure to
U.S companies of all types and sizes.
o SCHWAB YIELDPLUS FUND-TM- The fund seeks high current income with minimal
changes in share price. It is designed to provide the potential for higher
yields than a money fund and lower risk than a longer-term bond fund
through a management strategy designed to minimize price fluctuation.
Intended for your long-term (over one-year) cash needs, the fund seeks to
increase the overall yield potential of the cash portion of your portfolio.
For more information on either of these funds, please call 800-435-4000 and
request a free prospectus. The prospectus contains more information on fund fees
and expenses. Please read it carefully before investing.
I encourage you to take a moment to read this annual report as it is designed to
provide timely information about your SchwabFunds investments. You will find
information on each fund's total returns and performance, as well as commentary
on market conditions provided by the portfolio management team. In the section
"What Bond Fund Investors Should Know", we've also provided guidelines that can
help you reach your goals by establishing--or maintaining--an ongoing investment
program.
As a leader in online brokerage, we recognize the value of the web as a means of
communicating timely, relevant information to investors. Regular updates on all
of the SchwabFunds, including performance data, are available on our Web site at
WWW.SCHWAB.COM/SCHWABFUNDS. We encourage you to take advantage of this valuable
resource, which can help you keep track of your funds' performance.
I'd like to make all of you aware that March 3, 2000 was designated as the
record date for a proxy and shareholders' meeting for the entire SchwabFunds
complex. Every SchwabFund has at least one proposal up for a vote. No matter how
many shares you own, your vote is important. Your prompt response will help
reduce proxy costs - which are paid by the funds and their shareholders. Voting
by internet or phone lowers proxy costs even further. If you have questions
about the proxy, would like help in voting, or if you did not receive the proxy
materials, please call the funds' proxy solicitor, D.F. King & Co., at
800-431-9633.
At Schwab our philosophy has always been that a combination of regular investing
and diversification is the best strategy over the long term. By investing in
SchwabFunds, you've already taken an important step in building a portfolio that
can help you meet your future goals. Thank you for your investment in
SchwabFunds.
Sincerely,
Charles R. Schwab
February 29, 2000
<PAGE> 39
SCHWAB FUNDS(R)
VERBAL VOTING SCRIPT
INTRODUCTION
Hello, my name is __________. I'm calling from DF King on behalf of Schwab
___________Fund. May I please speak to __________?
ADDRESS SHAREHOLDER NEEDS
The Board of Trustees of your Schwab ___________ Fund mailed a proxy statement
that requires your attention. I'm calling to find out if you received these
materials. May I have a moment of your time?
Have you received the proxy materials in the mail?
If not, then help the shareholder obtain the material he/she requires.
In either case, make sure the address is correct, make any necessary
corrections, and code the disposition as "14" or "15". If the
shareholder says he/she just got the materials, offer him the 800 phone
number 1-800-431-9633 offer to give him/her a brief summary of the
proxy statement, and explain that someone may call in a few days to
answer any questions.
Are you familiar with the proposals? May I assist you with any questions?
Take time to answer all questions carefully. Do not give advice. Remind
the shareholder that the Board of Trustees has recommended that he/she
vote in favor. Many questions can be addressed by referring to the
proxy statement and reading the appropriate sections.
If it's convenient for you, I can record your vote over the telephone right now.
Is it convenient?
Allow the shareholder to give you a response. If the shareholder says
he/she has already sent in the proxy, do not ask the shareholder how
he/she voted.
Here's how we'll proceed. The phone call will be recorded to assure accuracy. I
will ask you for your name, confirmation that you received the proxy materials,
your address, and the last 4 digits of your social security number. We'll then
take your vote. Within 72 hours, we'll mail you a letter confirming your vote.
Are you ready?
Depending on answer, TAB down and choose either "Y" or "N". If you are
going to take a vote, remember to allow the phone call to be recorded.
BEGIN THE VOTE
At this time, I'll begin recording the call. First, I'll reintroduce myself. My
name is __________, calling from DF King & Co on behalf of Schwab _______ Fund.
Today's date is __________ and the time is __________.
May I please have your name?
<PAGE> 40
May I ask if you received the proxy materials?
May I please have your address?
And finally the last 4 digits of your social security number?
Input the last 4 digits of the SSN. You may not proceed without this
information. If the shareholder refuses to give this information,
explain that it is for security purposes only, to assure that only the
proper person can vote his/her shares. However, if the shareholder
continues to resist, you have no choice but to politely end the call.
In this case, return to the first screen (Shift TAB) and hit "N", which
will take you to the disposition screen.
ACTUAL VOTING
Your Board of Trustees recommends that you vote in favor of all proposals. Would
you like to vote in favor of the proposals as recommended by your Board?
Choose either "Y" or "N". If you choose "Y", then the computer will
fill in the response for all proposals. If you choose "N", you must
input a vote for each proposals. If you are required to read the
proposals individually, end each proposal by saying, "Your Board
recommends that you vote in favor. How would you like to vote?" For
most proposals, the valid responses are
F = For proposals.
A = Against proposals.
B = Abstain.
CLOSING
Your vote has been recorded. You have voted __________. Is that correct?
If it is correct, then choose "Y". If it is not correct, then choose
"N". The cursor will return to the top of the ballot and allow you to
make the appropriate corrections.
In the next 72 hours, we'll mail you a letter confirming your votes. If you wish
to change your vote for any reason, please call us at the number listed in the
letter. Thank you for your time.
Turn off the tape recorder. Record the shareholder's name and number of
shares on your log. Finish the phone call. If you get a verbal vote,
the only valid disposition is "01". If you do not get a verbal vote,
then you may use any valid disposition except "01".
