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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 Capital Trust
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(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):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
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number, or the Form or Schedule and the date of its filing.
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September 21, 2001
SCHWAB
Analytics Fund(R)
Shareholder Proxy
Your vote is important!
Please read and respond today.
See inside for information about a proposal regarding
your Schwab Analytics Fund investment.
[Charles Schwab Logo]
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SCHWAB
ANALYTICS FUND(R)
SHAREHOLDER PROXY
1 Shareholder message
2 About the proposal
An overview of the proposal that shareholders are voting on and how the
fund would be affected.
4 Notice of special meeting
The official notice of the shareholder meeting associated with this proxy.
5 Proxy statement
A more detailed discussion of the proposal and additional information.
A-1 Appendix
A form of the New Sub-Advisory Agreement.
SHAREHOLDER REPORTS
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THE FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS MOST RECENT ANNUAL REPORT
AND, IF AVAILABLE, SEMIANNUAL REPORT, TO ANY SHAREHOLDER UPON REQUEST.
SHAREHOLDERS DESIRING A COPY OF SUCH REPORTS SHOULD DIRECT ALL WRITTEN REQUESTS
TO THE TRUST AT P.O. BOX 7575, SAN FRANCISCO, CA 94120-7575, OR SHOULD CALL
SCHWAB AT 800-435-4000.
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SHAREHOLDER MESSAGE
A special meeting of shareholders of Schwab Analytics Fund(R) will take place on
October 29, 2001, and we're asking for your participation.
You don't need to attend the meeting to participate, but it's important that you
take a few minutes to read the enclosed material and vote your shares. You can
vote by internet, by phone or by mailing the enclosed proxy voting card in the
postage-paid envelope.
Shareholders are being asked to approve a sub-advisory agreement between Charles
Schwab Investment Management, Inc. and Symphony Asset Management LLC. The
trustees, including myself, believe this proposal is in the best interests of
the shareholders, and we recommend a vote FOR the proposal.
No matter how many shares you own, your vote is important. A proxy solicitor,
D.F. King & Co., has been retained to make follow-up phone calls as may be
necessary on behalf of the fund, but your prompt response will help reduce proxy
costs and will also mean that you can avoid receiving follow-up phone calls or
mailings. Voting by internet or phone lowers proxy costs even further.
All of us thank you for your attention to this important matter, and we promise
to continue to work hard to help you achieve your financial goals.
Sincerely,
/s/ Charles R. Schwab
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Charles R. Schwab, Chairman
SchwabFunds(R)
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ABOUT THE PROPOSAL
The following information is only a summary. It is not a substitute for reading
the proxy. Before you vote, please read the proxy statement, which starts on
page 5. It is important to vote as soon as you can.
WHY IS A PROXY VOTE NEEDED?
On July 16, 2001, The John Nuveen Company purchased Symphony Asset Management
LLC, an affiliate of Symphony Asset Management, Inc., the Schwab Analytics
Fund's sub-adviser. As of the effective date of the acquisition, the
sub-advisory agreement between CSIM and Symphony Asset Management, Inc. was
terminated, and CSIM entered into a new agreement with Symphony Asset Management
LLC. The individuals who provided sub-advisory services on behalf of Symphony
Asset Management, Inc. now provide those services as employees of Symphony Asset
Management LLC.
The Investment Company Act of 1940 and Securities and Exchange Commission rules
require that shareholders must approve the new sub-adviser agreement between
CSIM and Symphony Asset Management LLC.
WHAT ARE THE DIFFERENCES BETWEEN THE PROPOSED NEW SUB-ADVISER AGREEMENT AND THE
PRIOR AGREEMENT?
The proposed new sub-advisory agreement is identical to the prior sub-advisory
agreement, with the exception of the name of the sub-adviser (Symphony Asset
Management, Inc. versus Symphony Asset Management LLC) and the dates of
execution. All terms of the agreement remain the same, including the fees paid
to the sub-adviser.
The Board of Trustees believes the proposal is in the best interest of fund
shareholders, and recommends a vote FOR the proposal.
WHAT IS THE JOHN NUVEEN COMPANY?
The John Nuveen Company manages or sponsors over $70 billion of investments for
more than one million investors. It offers a wide range of investment products,
with a focus on affluent clients. It is headquartered in Chicago, with
approximately 600 employees.
WHAT SERVICES DOES THE SUB-ADVISER PROVIDE?
Symphony Asset Management LLC is a leading provider of analytic models. These
models are used to help construct a diversified portfolio for the Schwab
Analytics Fund. Symphony Asset Management LLC uses a variety of quantitative
techniques to help screen and rank individual companies.
WILL THE RECENT PURCHASE AFFECT THE MANAGEMENT OF THE FUND?
No. The fund's overall objectives and day-to-day management will be exactly the
same.
WILL THE FUND INCUR ANY PROXY RELATED COSTS?
No. The fund will not incur any proxy related costs. All proxy costs will be
paid by Symphony Asset Management LLC.
HOW TO VOTE?
Voting shares is designed to be easy and time-efficient. For Internet and
touch-tone phone voting, shareholders will need to use the 12-digit number
printed on the proxy voting card.
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Shareholders may use the following options:
- Internet: www.proxyvote.com and follow the instructions.
- Phone: call toll-free 800-690-6903 and follow the recorded
instructions.
- Mail: mark your vote on the enclosed proxy card. Sign, date and mail
the card using the postage-paid envelope provided.
If shareholders have any additional
questions concerning the proxy, contact:
SCHWAB SIGNATURE SERVICES(TM) CLIENTS
Schwab Signature Services
INVESTMENT MANAGER CLIENTS
Schwab at 800-515-2157
ALL OTHER CLIENTS
Schwab at 800-435-4000
A proxy solicitor, D.F. King & Co., has been retained to make follow-up phone
calls as may be necessary on behalf of the fund.
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NOTICE OF SPECIAL MEETING
To shareholders of Schwab Analytics Fund(R): Notice is hereby given that a
special meeting of shareholders of Schwab Analytics Fund will be held at the
Schwab University Auditorium, 101 Montgomery Street, 2nd Floor, San Francisco,
California 94104 on October 29, 2001, beginning at 9:00 a.m. Pacific time for
the following purposes:
1. To approve a sub-advisory agreement between Charles Schwab Investment
Management, Inc. and Symphony Asset Management LLC; and
2. To transact such other business as may properly come before the meeting
or any adjournments thereof.
The close of business on September 5, 2001, was fixed as the record date for
determining which shareholders are entitled to notice of the meeting and any
adjournments thereof and are entitled to vote.
By order of the Board of Trustees,
KOJI FELTON
Secretary
September 21, 2001
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PROXY STATEMENT FOR SPECIAL MEETING OF SHAREHOLDERS OF SCHWAB
ANALYTICS FUND(R) TO BE HELD ON OCTOBER 29, 2001
Schwab Capital Trust
101 Montgomery Street
San Francisco, CA 94104-4104
PROXY STATEMENT
INTRODUCTION
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PURPOSE OF THIS DOCUMENT
This proxy statement is being furnished to shareholders of Schwab Analytics
Fund, in connection with the solicitation of proxies by and on behalf of the
Board of Trustees for use at the fund's meeting. The meeting will be held at the
Schwab University Auditorium, 101 Montgomery Street, 2nd Floor, San Francisco,
California 94104 on October 29, 2001, beginning at 9:00 a.m. Pacific time. This
proxy statement is first being mailed to shareholders on or about September 21,
2001.
WHO MAY VOTE
The Board of Trustees has fixed the record date as the close of business on
September 5, 2001. Only holders of shares of the fund at the close of business
on the record date are entitled to notice of, and to vote at, the meeting. As of
the record date, the fund had 17,257,276.036 issued and outstanding shares
entitled to vote.
The holder of each full share of the 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, and a proportionate fractional vote for each
fractional share held.
HOW TO VOTE
Shareholders are requested to vote by internet, phone or by returning the
enclosed proxy card. Voting by internet helps keep costs low compared to voting
by telephone or mail.
If you vote by mail, complete, date, sign and promptly return the enclosed proxy
card in the accompanying envelope. If you properly execute and return your proxy
card prior to the meeting, your shares will be voted in accordance with the
instructions marked on the proxy card. If no instructions are marked on the
proxy card, the proxy will be voted FOR the proposal described in this proxy
statement and in the discretion of the persons named as proxies in connection
with any other matter that may properly come before the meeting. You may revoke
your proxy at any time prior to its exercise by voting in person at the meeting
or by submitting, before the meeting, written notice of revocation or a
later-dated proxy.
QUORUM AND VOTING REQUIREMENTS
In order to take action on the proposal, a "quorum", or a majority of the shares
entitled to vote on the proposal, must be present in person or by proxy.
Approval of the proposal requires the favorable vote of a majority of
outstanding voting shares of the fund as defined by the 1940 Act. A majority of
outstanding 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.
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OTHER VOTING-RELATED ISSUES
If a quorum is not present at the meeting, or if sufficient votes to approve the
proposal are not received, the persons named as proxies may propose one or more
adjournments of the meeting to permit further solicitation of proxies. Any
adjournment of the meeting will require the affirmative vote of a majority of
those shares of the fund present at the meeting in person or by proxy.
A shareholder vote may be taken on any other matter to come properly before the
meeting prior to such adjournment if sufficient votes to approve such matters
have been received and such vote is otherwise appropriate. The Board of Trustees
does not presently know of any matter to be considered at the meeting other than
the matter described in the Notice of Special Meeting accompanying this proxy
statement.
Abstentions and broker "non votes" (i.e. proxies received from brokers or
nominees indicating that they have not received instructions from the beneficial
owner or another person entitled to vote) will be counted as shares that are
present for purposes of determining the presence of a quorum. Abstentions and
broker non votes received by the fund will not be counted as votes FOR the
proposal, and will have the effect of a vote AGAINST the proposal. However, the
fund believes that the proposal is a routine matter and that brokers who hold
shares as record owners for beneficial owners have the authority under
applicable rules to vote those shares FOR the proposal when such brokers have
not received instructions from beneficial owners. Accordingly, the fund does not
expect to receive a significant number of broker non votes. Shareholders who
wish their vote to count against the proposal should return an executed proxy
indicating a vote AGAINST the proposal.
SOLICITATION OF PROXIES
In addition to the solicitation of proxies by mail, officers of the trust and
officers and employees of the investment adviser and Schwab, the fund's
distributor, transfer agent and shareholder servicing agent, also may solicit
proxies electronically, by telephone, by fax, in person or by other means. D.F.
King & Co., Inc., a proxy solicitation firm, has been retained by the Trust at
an estimated total cost of $2,500, to assist in the solicitation of proxies, if
necessary. However, the exact cost will depend upon the amount and types of
services rendered. Symphony Asset Management LLC will bear all costs of
solicitation and expenses incurred in connection with the meeting and the
preparation of this proxy statement, including legal costs and the cost of
retaining a proxy solicitation firm.
Additional information about the fund and its operations may be
found throughout the proxy statement.
DEFINITIONS OF SOME TERMS USED IN THIS PROXY
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BOARD OR BOARD OF TRUSTEES -- The board of trustees for the trust.
BROKER "NON VOTES" -- Proxies received from brokers or nominees indicating that
they have not received instructions from the beneficial owner or other person
entitled to vote shares.
INDEPENDENT TRUSTEES -- Those trustees of the fund who, under the 1940 Act, are
not considered "interested persons" of the fund.
INVESTMENT ADVISER OR CSIM -- Charles Schwab Investment Management, Inc.
MEETING -- Special Meeting of Shareholders of the fund and any adjournment(s)
thereof.
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1940 ACT -- The Investment Company Act of 1940, as amended, and the rules and
regulations thereunder.
NEW SUB-ADVISORY AGREEMENT -- Proposed agreement between Charles Schwab
Investment Management, Inc. and Symphony Asset Management LLC.
NUVEEN -- The John Nuveen Company, the new parent company of Symphony Asset
Management LLC.
PRIOR SUB-ADVISORY AGREEMENT -- Agreement between Charles Schwab Investment
Management, Inc. and Symphony Asset Management, Inc., dated May 16, 1996, and
terminated as of July 16, 2001.
PROPOSAL -- The proposal described in the proxy statement.
PROXY STATEMENT -- The proxy statement itself, not including supplemental
material.
RECORD DATE -- The date for determining which fund shareholders are entitled to
notice of, and to vote at, the meeting and any adjournment(s) thereof.
SCHWAB -- Charles Schwab & Co., Inc.
SYMPHONY, INC. -- Symphony Asset Management, Inc., the sub-adviser to the fund
under the Prior Sub-Advisory Agreement.
SYMPHONY LLC -- Symphony Asset Management LLC, the proposed new sub-adviser to
the fund under the New Sub-Advisory Agreement.
TRUST -- Schwab Capital Trust, a Massachusetts business trust, of which the fund
is a series.
PROPOSAL
TO APPROVE THE NEW SUB-ADVISORY AGREEMENT BETWEEN CHARLES SCHWAB INVESTMENT
MANAGEMENT, INC. AND SYMPHONY ASSET MANAGEMENT LLC
Shareholders are being asked to approve the New Sub-Advisory Agreement for the
fund. Entry into the New Sub-Advisory Agreement is necessitated by a transaction
that affected the fund's investment sub-adviser.
BACKGROUND
CSIM, as the fund's investment adviser, has overall responsibility for the
fund's management. On July 16, 2001, Nuveen purchased Symphony LLC, which at the
time was an affiliate of Symphony, Inc. (the "Acquisition"), the fund's
investment sub-adviser. As a result of the Acquisition, the investment
professionals who provided sub-advisory services on behalf of Symphony, Inc. now
provide the same services as employees of Symphony LLC. In order to maintain
continuity in the sub-advisory services provided to the fund, the Prior
Sub-Advisory Agreement was terminated, and the Board of Trustees approved the
New Sub-Advisory Agreement (attached as the Appendix to this proxy statement)
between CSIM and Symphony LLC, subject to shareholder approval. The New
Sub-Advisory Agreement is identical to the Prior Sub-Advisory Agreement, except
for the effective date and the name of the sub-adviser. The Acquisition did not
affect CSIM or its responsibilities to the fund, and CSIM will continue to have
overall responsibility for management of the fund.
In anticipation of the Acquisition and termination of the Prior Sub-Advisory
Agreement, the Board also approved the temporary provision of sub-advisory
services by Symphony LLC pursuant to an interim sub-advisory agreement (the
"Interim Agreement") in accordance with Rule 15a-4 under the 1940 Act. The
Interim Agreement permits Symphony LLC to act as
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sub-adviser to the fund during the period between the termination of the Prior
Sub-Advisory Agreement and the meeting (for a maximum of 150 days). Compensation
earned by Symphony LLC under the Interim Agreement is held in an
interest-bearing escrow account pending shareholder approval of the New
Sub-Advisory Agreement. If shareholders approve the New Sub-Advisory Agreement,
the amount held in escrow, plus interest, will be paid to Symphony LLC. If
shareholders do not approve the New Sub-Advisory Agreement, Symphony LLC will be
paid the lesser of its costs incurred in performing services under the Interim
Agreement or the total amount in the escrow account, plus interest earned.
The Board determined, based on information provided to it by Symphony, Inc.,
Symphony LLC and CSIM, that the scope and quality of services to be provided to
the fund under the New Sub-Advisory Agreement will be at least equivalent in
scope and quality to the services provided under the Prior Sub-Advisory
Agreement. Representatives of Symphony, Inc. and Symphony LLC also indicated
that they did not expect the Acquisition to cause any changes in the investment
professionals who currently manage the fund.
THE PRIOR SUB-ADVISORY AGREEMENT
Prior to the Acquisition, Symphony, Inc. served as sub-adviser to the fund
pursuant to the Prior Sub-Advisory Agreement. The Prior Sub-Advisory Agreement
was initially approved by the sole shareholder of the fund on May 22, 1996, and
was last approved by the Board, including the independent trustees, on April 24,
2001. The Prior Sub-Advisory Agreement was terminated as of July 16, 2001, the
effective date of the Acquisition.
THE NEW SUB-ADVISORY AGREEMENT
Other than the dates of execution and the switch from Symphony, Inc. to Symphony
LLC, the New Sub-Advisory Agreement is identical to the Prior Sub-Advisory
Agreement. The terms of the New Sub-Advisory Agreement are summarized below and
are qualified by reference to the form of the New Sub-Advisory Agreement
attached as the Appendix to this proxy statement.
The sub-advisory fee as a percentage of net assets payable to Symphony LLC will
be the same under the New Sub-Advisory Agreement as under the Prior Sub-Advisory
Agreement. If the New Sub-Advisory Agreement had been in effect for the fund's
most recently completed fiscal year, Symphony LLC would have received the same
compensation as Symphony, Inc. received under the Prior Sub-Advisory Agreement.
For the fiscal year ended October 31, 2000, CSIM paid Symphony, Inc. an
aggregate fee of $693,663 for providing sub-advisory services to the fund.
The New Sub-Advisory Agreement provides that Symphony LLC, in return for its
fee, will: (a) furnish an investment program in respect of, and make investment
decisions for, all equity investments of the fund and place orders for the
purchase and sale of these securities, on behalf of the fund in compliance with
the trust's Declaration of Trust and By-Laws, as amended from time to time, and
the fund's stated investment objectives, policies and restrictions; (b) place
orders pursuant to its investment determinations for the fund either directly
with the issuer or with any broker-dealer; (c) report regularly to CSIM and to
the Board on the general investment strategy of the fund, the performance of the
fund in relation to standard industry indices and general conditions affecting
the equity marketplace and provide various other reports from time to time as
requested by CSIM; (d) maintain books and records with respect to the fund's
securities transactions and furnish CSIM and the Board such periodic and/or
special reports as the Board or CSIM may request; (e) act upon instructions from
CSIM not inconsistent with its fiduciary duties; (f) (i) treat confidentially
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and as proprietary information of the trust and CSIM or its affiliates all such
records and other information relative to the trust, or CSIM and its affiliates,
as applicable, maintained by Symphony LLC, and (ii) not use such records and
information for any purpose other than performance of its responsibilities and
duties, except after prior notification to and approval in writing by the trust,
or CSIM and its affiliates; and (g) vote proxies received in connection with
securities held by the fund consistent with its fiduciary duties.
Under the New Sub-Advisory Agreement, CSIM will pay Symphony LLC an annual fee
based on the fund's average daily net assets. This fee is calculated and accrued
daily and payable monthly, at the annual rate of 0.20% of the fund's average
daily net assets not in excess of $300 million, 0.15% of the next $500 million
and 0.10% of such assets over $800 million. From time to time, Symphony LLC may
agree to waive or reduce some or all of the compensation to which it is
entitled.
The services of Symphony LLC are not to be deemed exclusive, and it is free to
render investment advisory or other services to others (including other
investment companies), and to engage in other activities, so long as its
services under the agreement are not impaired thereby.
Following the expiration of its initial two-year term, the New Sub-Advisory
Agreement will continue in full force and effect from year to year, provided
that such continuance is approved at least annually (a) by the vote of a
majority of the independent trustees, cast in person at a meeting called for the
purpose of voting on such approval, and (b) by the Board or by vote of a
majority of the outstanding voting securities of the fund.
The New Sub-Advisory Agreement may be terminated at any time, without the
payment of any penalty (a) on sixty days' written notice by the trust or by
CSIM, or (b) on ninety days' written notice by Symphony LLC. The New
Sub-Advisory Agreement will immediately terminate in the event of its
assignment.
The New Sub-Advisory Agreement obligates Symphony LLC to use the same skill and
care in providing sub-advisory services as it uses in providing services to
fiduciary accounts for which it has investment responsibilities and imposes on
Symphony the same standard of care and limitation of liability as the Prior
Sub-Advisory Agreement.
BOARD CONSIDERATIONS
The Board held a meeting on May 22, 2001, at which the Board, including the
independent trustees, unanimously approved the New Sub-Advisory Agreement and
recommended the New Sub-Advisory Agreement for approval by shareholders. In
evaluating the New Sub-Advisory Agreement, the Board based its determination
primarily on (a) the fact that the Prior Sub-Advisory Agreement and the New
Sub-Advisory Agreement, including their terms relating to the services to be
provided thereunder by Symphony LLC and the fees and expenses, are substantially
identical and (b) representations from Symphony, Inc. and Symphony LLC that
there would be a high degree of continuity of services to the fund.
The Board also considered the terms of the Acquisition and the possible effects
of the Acquisition upon Symphony LLC's organization and upon the ability of
Symphony LLC to provide sub-advisory services to the fund. The Board considered
the skills and capabilities of Symphony LLC in this regard and the
representations of representatives of Symphony, Inc. and Symphony LLC that it is
expected that the investment management professionals who manage the fund would
not change.
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SYMPHONY ASSET MANAGEMENT LLC
Symphony LLC is a registered investment adviser that, as of June 30, 2001, had
approximately $4.1 billion under management, including assets of the fund.
Symphony LLC is a wholly-owned subsidiary of Nuveen. The St. Paul Companies,
Inc. owns 100% of Nuveen's outstanding Class B Common Stock, which represents
approximately 78.5% of Nuveen's total outstanding common stock. The principal
address of Symphony LLC is 555 California Street, Suite 2975, San Francisco, CA
94104, and the principal address of Nuveen is 333 West Wacker Drive, Chicago, IL
60606. The principal address of The St. Paul Companies, Inc. is 385 Washington
Street, St. Paul, MN 55102.
The following information is provided for the principal executive officers of
Symphony LLC. The principal occupation of each individual is his position at
Symphony LLC.
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Principal Executive Officers of Symphony LLC
NAME AND POSITION WITH SYMPHONY LLC ADDRESS
Jeffrey L. Skelton 555 California Street, Suite 2975
President & Chief Executive Officer San Francisco, CA 94104
Neil L. Rudolph 555 California Street, Suite 2975
Chief Operating Officer San Francisco, CA 94104
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SHAREHOLDER APPROVAL OF THE NEW SUB-ADVISORY AGREEMENT
Approval of the proposal requires the favorable vote of a majority of
outstanding voting shares of the fund as defined by the 1940 Act. A majority of
outstanding 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 that shareholders of the
fund do not approve the New Sub-Advisory Agreement, the Board will take such
action as it deems in the best interest of the fund and its shareholders, which
may include proposing that shareholders approve an agreement in lieu of the New
Sub-Advisory Agreement.
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THE BOARD OF TRUSTEES RECOMMENDS THAT
SHAREHOLDERS OF THE FUND
VOTE FOR APPROVAL OF THE SUB-ADVISORY AGREEMENT.
PORTFOLIO TRANSACTIONS
The fund did not pay any brokerage commissions to affiliated brokers during
the fiscal year ended October 31, 2000.
INVESTMENT ADVISER
Charles Schwab Investment Management, Inc., 101 Montgomery Street, San
Francisco, CA 94104
PRINCIPAL UNDERWRITER, TRANSFER AGENT, AND SHAREHOLDER SERVICING AGENT
Charles Schwab & Co., Inc., 101 Montgomery Street, San Francisco, CA 94104
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FUND ACCOUNTANTS
SEI Investments Mutual Fund Services, One Freedom Valley Drive, Oaks, PA 19456
CUSTODIAN
PFPC Trust Co., 88020 Tinicum Blvd., Third Floor, Suite 200, Philadelphia, PA
19153
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 (for example, to approve or
amend an investment advisory agreement) or as deemed desirable by its Board of
Trustees for other purposes.
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 such trust. Shareholders
wishing to submit proposals for inclusion in a proxy statement for a future
shareholder meeting should send their written submissions to the trust. The
address for the trust is 101 Montgomery Street, San Francisco, CA 94104.
Proposals must be received a reasonable time in advance of a proxy solicitation
to be included. Submission of a proposal does not guarantee inclusion in a proxy
statement, because the proposal must comply with certain federal securities
regulations.
NOTICE TO BANKS, BROKER/DEALERS AND VOTING TRUSTEES AND THEIR NOMINEES
Please advise the fund in writing whether other persons are the beneficial
owners of the shares for which proxies are being solicited, and if so, the
number of copies of the proxy statements, other soliciting material, and Annual
Reports (or Semiannual Reports) you wish to receive in order to supply copies to
the beneficial owners of shares. Write in care of the trust, 101 Montgomery
Street, San Francisco, CA 94104, Attention: Koji Felton, Secretary (120
KNY-14-109).
Shareholders who do not expect to attend the meeting in person are urged to vote
their shares promptly by internet, phone or mail.
BENEFICIAL OWNERS
To the knowledge of the trust as of August 15, 2001, no shareholder had
beneficial ownership of more than 5% of the outstanding shares of the fund.
The following table shows the number of shares of the fund beneficially owned by
each trustee and certain executive officers of the trust as of August 15, 2001.
As of August 15, 2001, the trustees and executive officers of the trust, as a
group, owned a total of 14,433.47 shares of the fund, which represented less
than 1% of the outstanding shares of the fund.
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NAME POSITION WITH THE TRUST SHARES (% OF FUND)*
Mariann Byerwalter Trustee 0
Jeremiah H. Chafkin Executive Vice President, Chief
Operating Officer and Trustee 0
John P. Coghlan President and Trustee 0
Donald F. Dorward Trustee 0
William A. Hasler Trustee 0
Robert G. Holmes Trustee 0
Charles R. Schwab Chairman, Chief Executive Officer
and Trustee 12,947.97
Gerald B. Smith Trustee 0
Donald R. Stephens Trustee 0
Michael W. Wilsey Trustee 1,485.50
* The trust has no knowledge as to whether any trustee has the right to acquire
beneficial ownership of shares of the fund. Each trustee owns less than 1% of
the outstanding shares of the fund.
The Board of Trustees recommends that you vote FOR the proposal.
Thank you for voting your shares promptly! We appreciate you placing your trust
in Schwab Analytics Fund(R) and look forward to helping you achieve your
financial goals.
SCHWAB ANALYTICS FUND
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APPENDIX
FORM OF NEW SUB-ADVISORY AGREEMENT
INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT executed and effective as of ___________, 2001, by and between CHARLES
SCHWAB INVESTMENT MANAGEMENT, INC., a Delaware corporation and registered
investment adviser ("CSIM"), and SYMPHONY ASSET MANAGEMENT LLC, a California
limited liability company and registered investment adviser ("Symphony").
WHEREAS, CSIM is the investment manager for Schwab Capital Trust (the "Trust"),
an open end management investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, CSIM desires to retain Symphony as CSIM's agent to furnish investment
sub-advisory services to the investment portfolios of the Trust listed on
Schedule A hereto (each a "Fund" and collectively the "Funds");
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
1. APPOINTMENT. CSIM hereby appoints Symphony to provide investment
sub-advisory services to the Funds for the period and on the terms set forth
in this Agreement. Symphony accepts such appointment and agrees to furnish
the services herein set forth for the compensation herein provided.
2. DELIVERY OF DOCUMENTS. CSIM has furnished Symphony with copies properly
certified or authenticated of each of the following:
(a) the Trust's Agreement and Declaration of the Trust, as filed with the
Secretary of State of The Commonwealth of Massachusetts on May 7, 1993,
and all amendments thereto or restatements thereof (such Declaration, as
presently in effect and as it shall from time to time be amended or
restated, is herein called the "Declaration of Trust");
(b) the Trust's Bylaws and amendments thereto;
(c) resolutions of the Trust's Board of Trustees authorizing the appointment
of Symphony and approving this Agreement;
(d) the Trust's Notification of Registration on Form N-8A under the 1940 Act
as filed with the Securities and Exchange Commission (the "SEC") on May
10, 1993, and all amendments thereto;
(e) the Trust's Registration Statement on Form N-1A under the Securities Act
of 1933, as amended (the "1933 Act") (File No. 33-62470), and under the
1940 Act (File No. 811-07704) as filed with the SEC and all amendments
thereto insofar as such Registration Statement and such amendments
relate to the Funds; and
(f) the Trust's most recent prospectus and Statement of Additional
Information for the Funds (such prospectus and Statement of Additional
Information, as presently in effect, and all amendments and supplements
thereto, are herein collectively called the "Prospectus").
CSIM will furnish Symphony from time to time with copies of all amendments
of or supplements to the foregoing.
3. SERVICES. Subject always to the supervision of the Trust's Board of Trustees
and CSIM, Symphony will furnish an investment program in respect of, and
make investment
A-1
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decisions for, all equity investments of a Fund and place orders for the
purchase and sale of these securities, on behalf of a Fund. Symphony
understands and agrees that it will obtain prior approval from CSIM before
investing in equity securities other than common stocks. Symphony will
utilize quantitative techniques, proprietary software models and real-time
databases (collectively, "quantitative models") in the performance of the
services to be provided under this Agreement. Symphony represents and
warrants that with respect to the quantitative models described above, it
maintains the full right and authority to use these quantitative models in
connection with the investment management of the Funds. Symphony further
covenants that it will not take any action, or fail to take any action,
including entering into any third party arrangement, that would prohibit its
use of the quantitative models in connection with the investment management
of the Funds. Notwithstanding the provisions of Section 8 hereto, Symphony
agrees to indemnify and hold CSIM, its affiliates and the Funds harmless
from any and all damages, liabilities, costs, and expenses, including
attorneys fees (collectively, "Losses"), resulting from a breach of the
above representation, warranty and covenant.
In the performance of its duties, Symphony will satisfy its fiduciary duties
to the Funds (as set forth in Section 8, below), monitor each Fund's
investments and comply with the provisions of the Trust's Declaration of
Trust and Bylaws, as amended from time to time, and each Fund's stated
investment objectives, policies and restrictions. Symphony and CSIM will
each make its officers and employees available to the other from time to
time at reasonable times to review investment policies of the Funds and to
consult with each other regarding each Fund's investment affairs. Symphony
will report to the Board of Trustees and to CSIM with respect to the
implementation of such investment program.
Symphony further agrees that it:
(a) will use the same skill and care in providing such services as it uses
in providing services to fiduciary accounts for which it has investment
responsibilities;
(b) will conform with all applicable statutes, rules and regulations of the
SEC and states pertaining to its investment sub-advisory activities and
services provided under this Agreement;
(c) will place orders pursuant to its investment determinations for the
Fund(s) either directly with the issuer or with any broker or dealer. In
placing orders with brokers and dealers, Symphony will attempt to obtain
the best combination of prompt execution of orders in an effective
manner and at the most favorable price. Consistent with this obligation,
when the execution and price ordered by two or more brokers or dealers
are comparable, Symphony may, in its discretion, purchase and sell
portfolio securities to and from brokers and dealers who provide
Symphony with research advice and other services. In no instance will
portfolio securities be purchased from or sold to CSIM, Symphony or any
affiliated person of either the Trust, CSIM or Symphony, except as may
be permitted under the 1940 Act;
(d) will report regularly to CSIM and to the Board of Trustees and will make
appropriate persons available for the purpose of reviewing with
representatives of CSIM and the Board of Trustees on a regular basis at
reasonable times the management of the Funds, including, without
limitation, review of the general investment strategy of the Funds, the
performance of the Funds in relation to standard industry indices and
general conditions affecting the equity marketplace and will provide
various other reports from time to time as requested by CSIM;
A-2
18
(e) will maintain books and records with respect to each Fund's securities
transactions and will furnish CSIM and the Trust's Board of Trustees
such periodic and/or special reports as the Board or CSIM may request;
(f) will act upon instructions from CSIM not inconsistent with its fiduciary
duties hereunder;
(g) will treat confidentially and as proprietary information of the Trust
and CSIM or its affiliates all such records and other information
relative to the Trust, or CSIM and its affiliates, as applicable,
maintained by Symphony, and will not use such records and information
for any purpose other than performance of its responsibilities and
duties hereunder, except after prior notification to and approval in
writing by the Trust, or CSIM and its affiliates, as applicable, which
approval shall not be unreasonably withheld and may not be withheld
where Symphony may be exposed to civil or criminal contempt proceedings
for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Trust; and
(h) will vote proxies received by Symphony in connection with securities
held by the Funds consistent with its fiduciary duties hereunder.
4. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3 under
the 1940 Act, and applicable requirements of the Investment Advisers Act of
1940 and rules thereunder, Symphony agrees to maintain and preserve all
required accounts, books and records with respect to Symphony's duties
related to the Funds and the Trust. Symphony understands and agrees that all
accounts, books and records it maintains for the Trust are the property of
the Trust and further agrees to surrender promptly to the Trust any of such
records upon the Trust's request.
5. EXPENSES. During the term of this Agreement, Symphony will pay all expenses
incurred by it in connection with its activities under this Agreement other
than the costs of purchasing securities, including brokerage commissions.
6. COMPENSATION. For the services provided and the expenses assumed pursuant to
this Agreement, CSIM will pay Symphony, and Symphony agrees to accept as
full compensation therefor, the fees, accrued daily and payable monthly, as
described on Schedule B hereto. From time to time, Symphony may agree to
waive or reduce some or all of the compensation to which it is entitled
under this Agreement.
7. SERVICES TO OTHERS. Symphony agrees that whenever one or more of the Funds
and one or more other investment companies or accounts advised by Symphony
have available funds for investment, investments suitable and appropriate
for each will be allocated in a manner believed by Symphony to be equitable
to each advised entity. CSIM recognizes, and has advised the Trust's Board
of Trustees, that in some cases this procedure may adversely affect the size
of the position that the participating Fund(s) may obtain in a particular
security.
8. LIMITATION OF LIABILITY. Symphony will not be liable for any error of
judgment or mistake of law or for any loss suffered by the Funds in
connection with the performance of Symphony's duties under this Agreement,
except a loss resulting from Symphony's willful misfeasance, bad faith, or
gross negligence in the performance of its duties under this Agreement.
9. INDEMNIFICATION. CSIM and Symphony each agree to indemnify the other against
any claim against, loss or liability to such other party (including
reasonable attorneys, fees) arising out of any action on the part of the
indemnifying party which constitutes willful misfeasance, bad faith or gross
negligence.
A-3
19
10. DURATION AND TERMINATION. This Agreement will become effective as to each
Fund as of the date and for the period set forth opposite each Fund's name
on Schedule A, provided that it has been approved by a vote of a majority of
the outstanding voting securities of such Fund in accordance with the
requirements under the 1940 Act and, unless sooner terminated as provided
herein, will continue in effect for two years from such date.
Thereafter, if not terminated as to a Fund, this Agreement will continue in
effect as to a Fund for successive periods of 12 months, provided that such
continuation is specifically approved at least annually (a) by the vote of a
majority of those members of the Trust's Board of Trustees who are not
interested persons of the Trust, Symphony, or CSIM, cast in person at a
meeting called for the purpose of voting on such approval, and (b) by the
Trust's Board of Trustees or by vote of a majority of the outstanding voting
securities of such Fund. Notwithstanding the foregoing, this Agreement may
be terminated as to each Fund at any time, without the payment of any
penalty, on sixty days' written notice by the Trust or by CSIM or on ninety
days' written notice by Symphony. This Agreement will immediately terminate
in the event of its assignment. (As used in this Agreement, the terms
"majority of the outstanding voting securities," "interested persons" and
"assignment" have the same meaning of such terms in the 1940 Act.)
11. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
12. MISCELLANEOUS. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect. If any provision of
this Agreement is held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement will not be affected thereby.
This Agreement will be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and will be governed by the
laws of the State of California.
The name "Schwab Capital Trust" and "Trustees of Schwab Capital Trust" refer
respectively to the Trust created by, and the Trustees, as trustees but not
individually or personally, acting from time to time under the Declaration
of the Trust, to which reference is hereby made and a copy of which is on
file at the office of the Secretary of State of The Commonwealth of
Massachusetts and elsewhere as required by law, and to any and all
amendments thereto so filed or hereafter filed. The obligations of the
"Schwab Capital Trust" entered in the name or on behalf thereof by any of
the Trustees, representatives or agents are made not individually but only
in such capacities and are not binding upon any of the Trustees,
Shareholders or representatives of the Trust personally, but bind only the
assets of the Trust, and persons dealing with a Fund must look solely to the
assets of the Trust belonging to such Fund for the enforcement of any claims
against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
CHARLES SCHWAB INVESTMENT SYMPHONY ASSET
MANAGEMENT, INC. MANAGEMENT LLC
By:______________________ By:______________________
Name:____________________ Name:____________________
Title:___________________ Title:___________________
A-4
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SCHEDULE A
TO INVESTMENT SUB-ADVISORY AGREEMENT BETWEEN
CHARLES SCHWAB INVESTMENT MANAGEMENT, INC. AND
SYMPHONY ASSET MANAGEMENT LLC
EFFECTIVE DATE
FUND AND INITIAL PERIOD
--------------------------------------------------------------------------------
Schwab Analytics Fund ___________________, 2001
SCHEDULE B
TO INVESTMENT SUB-ADVISORY AGREEMENT BETWEEN
CHARLES SCHWAB INVESTMENT MANAGEMENT, INC. AND
SYMPHONY ASSET MANAGEMENT LLC
FUND FEE (ANNUAL RATE)
--------------------------------------------------------------------------------
Schwab Analytics Fund Twenty one-hundredths of one
percent (0.20%) of the Fund's
average daily net assets not in
excess of $300 million, fifteen
one-hundredths of one percent
(0.15%) of the next $500 million
and ten one-hundredths of one
percent (0.10%) of such assets
over $800 million
A-5
21
SCHWABFUNDS(R)
101 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94104
SCHWAB ANALYTICS FUND(R)
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS
OCTOBER 29, 2001
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF
SCHWAB ANALYTICS FUND
This proxy is for your use in voting on the matter relating to Schwab Analytics
Fund (the "Fund") of Schwab Capital Trust (the "Trust"). The undersigned
shareholder(s) of the Fund, revoking previous proxies, hereby appoint(s)
Jeremiah H. Chafkin, Koji E. Felton and Stephen B. Ward, and each of them (with
full power of substitution), the proxies of the undersigned to attend the
Special Meeting of Shareholders of the Fund to be held on October 29, 2001 (the
"Special Meeting"), at the Schwab University Auditorium, 101 Montgomery Street,
2nd Floor, San Francisco, California 94104, commencing at 9:00 a.m. Pacific time
and any adjournments thereof, to vote all of the shares of the Fund that the
signer(s) would be entitled to vote at the Special Meeting and on any matter
incident to the conduct of the Special Meeting, all as set forth in the Notice
of Special Meeting of Shareholders and Proxy Statement of the Board of Trustees.
Said proxies are directed to vote or refrain from voting pursuant to the Proxy
Statement as indicated upon the matter set forth below.
This proxy will be voted as indicated below. If no indication is made, this
proxy will be voted FOR the proposal set forth below. The undersigned
acknowledges receipt with this proxy of a copy of the Notice of Special Meeting
of Shareholders and the Proxy Statement of the Board of Trustees.
To Vote by Telephone:
1) Read the Proxy Statement and have the Proxy card below at hand.
2) Call 1-800-690-6903.
3) Enter the 12-digit control number set forth on the Proxy card and follow the
simple instructions.
To Vote by Internet:
1) Read the Proxy Statement and have the Proxy card below at hand.
2) Go to website www.proxyvote.com.
3) Enter the 12-digit control number set forth on the Proxy card and follow the
simple instructions.
22
Please print and sign your name in the space provided to authorize the voting of
your shares as indicated and return promptly. When signing on behalf of a
corporation, partnership, estate, trust or in any other representative capacity,
please sign your name and title. For joint accounts, each joint owner must sign.
UNLESS VOTING BY TELEPHONE OR INTERNET, PLEASE COMPLETE, SIGN, DATE AND RETURN
THIS PROXY STATEMENT PROMPTLY USING THE ENCLOSED ENVELOPE.
NO POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: [x]
KEEP THIS PORTION FOR YOUR RECORDS
--------------------------------------------------------------------------------
SCHWAB ANALYTICS FUND
To approve a sub-advisory agreement between Charles Schwab Investment
Management, Inc. and Symphony Asset Management LLC.
FOR / /
AGAINST / /
ABSTAIN / /
Please print and sign your name in the space provided to authorize the voting of
your shares as indicated and return promptly. When signing on behalf of a
corporation, partnership, estate, trust or in any other representative capacity,
please sign your name and title. For joint accounts, each joint owner must sign.
--------------------------------------------------------------------------------
Signature [PLEASE SIGN WITHIN BOX] Date
Print Name
------------------------------- -----------------------------
--------------------------------------------------------------------------------
Signature (Joint Owners) Date
Print Name
------------------------------- -----------------------------
--------------------------------------------------------------------------------
PLEASE COMPLETE, SIGN, DATE, AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.
NO POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES.