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SCHWAB MONEY MARKET PORTFOLIO
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PROSPECTUS APRIL 29, 1996
THE SCHWAB MONEY MARKET PORTFOLIO(the "Fund")is designed for investors who seek
maximum current income consistent with liquidity and stability of capital. The
Fund is a diversified investment portfolio of Schwab Annuity Portfolios (the
"Trust"), a no-load, open-end, management investment company organized as a
Massachusetts business trust. The Fund is currently the only series of the
Trust.
INVESTING IN THE FUND: The Fund is designed to serve as an investment vehicle
to fund benefits under variable annuity contracts ("Contracts") issued through
separate accounts ("Separate Accounts") of participating life insurance
companies ("Participating Insurance Companies"). Fund shares are currently
offered to Participating Insurance Companies and their Separate Accounts to fund
benefits under Contracts. In the future, Fund shares may be offered to
Participating Insurance Companies and their Separate Accounts to fund benefits
under Contracts and variable life insurance policies ("VLI Policies") and to
retirement and pension plans qualified under the Internal Revenue Code of 1986,
as amended ("Plans").
ABOUT THIS PROSPECTUS: THIS PROSPECTUS CONCISELY PRESENTS IMPORTANT INFORMATION
YOU SHOULD KNOW BEFORE INVESTING IN THE FUND. PLEASE READ IT CAREFULLY AND
RETAIN IT FOR FUTURE REFERENCE. You can find more detailed information about
this Fund in the Statement of Additional Information dated April 29, 1996 (as
amended from time to time). The Statement of Additional Information has been
filed with the Securities and Exchange Commission ("SEC") and is incorporated by
reference into this Prospectus. To receive a free copy of this Prospectus or the
Statement of Additional Information, call the Annuity Service Center at Charles
Schwab & Co., Inc. ("Schwab") at 800-838-0650 or write to P.O. Box 7785, San
Francisco, California 94120-9420; in New York State, call 800-838-0649 or write
the Annuity Service Center at P.O. Box 7806, San Francisco, California
94120-9327.
TABLE OF CONTENTS
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KEY FEATURES OF THE FUND........................................................... 2
SUMMARY OF EXPENSES................................................................ 3
FINANCIAL HIGHLIGHTS............................................................... 4
INVESTMENT OBJECTIVE AND POLICIES.................................................. 5
INVESTMENT TECHNIQUES.............................................................. 6
ORGANIZATION AND MANAGEMENT OF THE FUND............................................ 8
DISTRIBUTIONS AND TAXES............................................................ 10
SHARE PRICE CALCULATION............................................................ 11
HOW THE FUND REPORTS PERFORMANCE................................................... 12
INVESTING IN SHARES OF THE FUND.................................................... 12
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
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KEY FEATURES OF THE FUND
The Fund is a diversified investment portfolio of Schwab Annuity Portfolios. The
Fund is intended as an investment vehicle for Contracts and VLI Policies issued
through the Separate Accounts of Participating Insurance Companies and for
Plans. (See "Investing in Shares of the Fund.")
MAXIMUM CURRENT INCOME AND CREDIT SAFETY. The Fund seeks maximum current income
consistent with liquidity and stability of capital. The Fund invests in
high-quality debt securities that are deemed to mature within 397 days. (See
"Investment Objective and Policies.")
STABILITY OF PRINCIPAL. The Fund seeks to maintain a stable net asset value
("NAV") of $1.00 per share, although there is no assurance that it will be able
to do so. The Fund's shares are neither insured nor guaranteed by the U.S.
Government. (See "Investment Objective and Policies" and "Share Price
Calculation.")
PURCHASE, SALE AND AVAILABILITY OF FUND SHARES. You cannot buy or sell Fund
shares directly, but you may nevertheless allocate account value under your
Contract to and from the Fund in accordance with the terms of your Contract.
Please refer to the appropriate Separate Account Prospectus for further
information on how to make such allocations. (See "Investing in Shares of the
Fund.")
PROFESSIONAL MANAGEMENT. Charles Schwab Investment Management, Inc. (the
"Investment Manager") currently provides investment management services to 23
mutual funds, including the Fund, with over $35 billion in assets as of April
15, 1996. (See "Organization and Management of the Fund.")
SHAREHOLDER COMMUNICATIONS. A representative of the Schwab Annuity Service
Center is available toll-free to assist you at 800-838-0650 (800-838-0649 in New
York State). (See "Investing in Shares of the Fund.")
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SUMMARY OF EXPENSES1
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Shareholder Transaction Expenses....................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE DAILY NET
ASSETS):
Management Fee (after fee reduction)2.................................. 0.44%
12b-1 Fees............................................................. None
Other Expenses (after expense reimbursement)3.......................... 0.06%
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TOTAL FUND OPERATING EXPENSES (AFTER FEE REDUCTION AND EXPENSE
REIMBURSEMENT)2,3.................................................... 0.50%
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(1) The table above refers only to expenses of the Fund. For expenses of the
Contracts, see the appropriate Separate Account Prospectuses.
(2) This amount reflects the Investment Manager's guarantee that, through at
least April 30, 1997, the Fund's management fee will not exceed 0.44% of the
Fund's average daily net assets. If there were no such reduction, the maximum
management fee for the Fund would have been 0.46% of the Fund's average daily
net assets for the fiscal year ended December 31, 1995. (See "Organization and
Management of the Fund--Operating Fees and Expenses.")
(3) This amount reflects the Investment Manager's guarantee that, through at
least April 30, 1997, the total fund operating expenses of the Fund will not
exceed 0.50% of the Fund's average daily net assets. Without this guarantee,
which was in effect during the fiscal year ended December 31, 1995, the Fund's
other expenses and total fund operating expenses would have been 0.56% and
1.02%, respectively, of the Fund's average daily net assets.
EXAMPLE. You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each period:
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1 YEAR 3 YEARS 5 YEARS 10 YEARS
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$5 $16 $28 $ 63
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THE PURPOSE OF THE PRECEDING TABLE IS TO ASSIST INVESTORS IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT AN INVESTOR IN THE FUND WILL BEAR DIRECTLY OR
INDIRECTLY. This example reflects the Investment Manager's guarantee that,
through at least April 30, 1997, the total fund operating expenses will not
exceed 0.50% of the Fund's average daily net assets. This example does not
reflect Separate Account or Contract charges. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN. The example assumes a 5% annual rate of return pursuant
to requirements of the SEC. THIS HYPOTHETICAL RATE OF RETURN IS NOT INTENDED TO
BE REPRESENTATIVE OF PAST OR FUTURE PERFORMANCE.
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FINANCIAL HIGHLIGHTS
The following information with respect to the Fund has been audited by Price
Waterhouse LLP, independent accountants, whose unqualified report is included in
the Statement of Additional Information, which contains additional financial
data and related notes. A free copy of this statement may be obtained by calling
the telephone number or writing to the address on the first page of this
Prospectus.
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FOR THE FISCAL PERIOD
MAY 3, 1994
FOR THE FISCAL (COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
DECEMBER 31, DECEMBER 31,
1995 1994
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Net asset value at beginning of period................... $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................................. 0.05 0.03
Net realized and unrealized gain (loss) on
investments......................................... -- --
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Total from investment operations....................... 0.05 0.03
LESS DISTRIBUTIONS
Dividends from net investment income................... (0.05) (0.03)
Distributions from realized gain on investments........ -- --
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Total distributions.................................... (0.05) (0.03)
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Net asset value at end of period......................... $ 1.00 $ 1.00
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Total return1............................................ 5.26% 2.55%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period.............................. $ 16,912,432 $ 7,409,454
Ratio of expenses to average net assets2............... 0.50% 0.50%*
Ratio of net investment income to average net assets2.. 5.17% 4.16%*
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(1) Total return figures do not reflect Separate Account or Contract charges. If
included, these charges would reduce the total return figures for each fiscal
period shown.
(2) The Investment Manager has reduced a portion of its fee and absorbed certain
expenses in order to limit the Fund's ratio of operating expenses to average net
assets. Had these fees and expenses not been reduced and absorbed, the ratio of
expenses to average net assets for the fiscal periods ended December 31, 1995
and 1994, would have been 1.02% and 2.10%*, respectively, and the ratio of net
investment income to average net assets would have been 4.65% and 2.56%*,
respectively.
* Annualized
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INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is maximum current income consistent with
liquidity and stability of capital. This investment objective is fundamental
and, along with certain investment restrictions adopted by the Fund (see
"Investment Policies and Restrictions" in the Statement of Additional
Information), cannot be changed without approval by holders of a majority of the
Fund's outstanding voting shares, as defined in the Investment Company Act of
1940, as amended (the "1940 Act"). The Fund pursues its objective by investing
in the following types of U.S. dollar-denominated debt instruments, which the
Investment Manager has determined to present minimal credit risk:
- - Certificates of deposit, time deposits, notes and bankers' acceptances of
domestic banks (including their foreign branches), U.S. branches of foreign
banks and foreign branches of foreign banks having capital, surplus and
undivided profits in excess of $100 million.
- - Commercial paper, including asset-backed commercial paper, rated in one of the
two highest rating categories by Moody's Investors Service, Standard & Poor's
Corporation, Duff & Phelps, Inc., Fitch Investors Service, Inc. or any other
nationally recognized statistical rating organization ("NRSRO"), or commercial
paper or notes of issuers with an unsecured debt issue outstanding currently
rated in one of the two highest rating categories by any NRSRO where the
obligation is on the same or a higher level of priority and collateralized to
the same extent as the rated issue. The Fund may also invest in other
corporate obligations such as publicly traded bonds, debentures and notes
rated in one of the two highest rating categories by any NRSRO and other
similar securities which, if unrated by any NRSRO, are determined by the
Investment Manager, using guidelines approved by the Board of Trustees, to be
at least equal in quality to one or more of the above referenced securities.
Notwithstanding the foregoing, the Fund may invest no more than 5% of its
total assets in securities that are given the second highest rating by any
NRSRO.
- - Obligations of, or guaranteed by, the U.S. or Canadian governments, their
agencies or instrumentalities.
- - Repurchase agreements involving obligations that are suitable for investment
under the categories listed above.
GOVERNMENT SECURITIES. The Fund may invest in U.S. Treasury notes, bills and
bonds, which are backed by the full faith and credit of the U.S. Government.
Some securities issued by U.S. Government agencies or instrumentalities are
supported by the credit of the agency or instrumentality, while others have an
additional line of credit with the U.S. Treasury. However, there is no guarantee
that the U.S. Government will provide support to such agencies or
instrumentalities. Accordingly, such securities may involve risk of loss of
principal and interest. Short-term U.S. Government obligations generally are
considered to be among the safest short-term investments. The Government
guarantee of certain securities owned by the Fund, however, does not guarantee
the net asset value of the Fund's shares. The Fund seeks to maintain its net
asset value at $1.00 per share. (See "Share Price Calculation.")
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EURODOLLAR CERTIFICATES OF DEPOSIT AND FOREIGN SECURITIES. To the extent the
Fund purchases Eurodollar certificates of deposit and other similar obligations,
consideration will be given to the fact that these issuers may not be subject to
the same regulatory requirements as U.S. issuers, including U.S. banks.
Investments in securities of foreign issuers or securities principally traded
overseas may involve certain special risks due to foreign economic, political
and legal developments. Furthermore, issuers of foreign securities are subject
to different, often less comprehensive, accounting, reporting and disclosure
requirements than domestic issuers. The securities of some foreign companies and
foreign securities markets are less liquid and at times more volatile than
securities of comparable U.S. companies and U.S. securities markets. Foreign
brokerage commissions and other fees are also generally higher than in the
United States. There are also special tax considerations which apply to
securities of foreign issuers and securities principally traded overseas.
PRIVATE PLACEMENTS. The Fund may invest in commercial paper that is exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933 ("Section
4(2) paper"). Federal securities laws restrict the disposition of Section 4(2)
paper. The Fund will not invest more than 10% of its assets in Section 4(2)
paper and other illiquid securities unless the Investment Manager determines, by
continuous reference to the appropriate trading markets and pursuant to
guidelines approved by the Board of Trustees, that any Section 4(2) paper held
by the Fund in excess of this level is liquid.
The Fund's ownership of Section 4(2) paper could have the effect of reducing the
Fund's liquidity to the extent that qualified institutional buyers become for a
time uninterested in purchasing these restricted securities.
ASSET-BACKED COMMERCIAL PAPER. The Fund may invest in asset-backed commercial
paper. Repayment of this type of commercial paper is intended to be obtained
from an identified pool of assets, including automobile receivables, credit-card
receivables and other types of assets. Asset-backed commercial paper is issued
by a special purpose vehicle (usually a corporation) that has been established
for the purpose of issuing the commercial paper and purchasing the underlying
pool of assets. The issuer of commercial paper bears the direct risk of
prepayment on the receivables constituting the underlying pool of assets. Credit
support for asset-backed securities may be based on the underlying assets or
provided by a third party. Credit enhancement techniques include letters of
credit, insurance bonds, limited guarantees and over-collateralization.
MATURITY. The Fund will purchase only securities that are deemed to mature in
397 days or less in accordance with federal securities regulations or securities
that have a variable rate of interest readjusted no less frequently than every
397 days.
INVESTMENT TECHNIQUES
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund may purchase securities
on a "when-issued" or "delayed delivery" basis. When-issued or delayed delivery
securities are securities purchased for future delivery at a stated price and
yield. The Fund generally will not pay for such securities or start earning
interest on them until they are received. Securities purchased on a when-issued
or delayed delivery basis are recorded as an asset. The value of such securities
may change as the general level of interest rates changes.
The Fund will not invest more than 25% of its assets in when-issued or delayed
delivery securities. The Fund will not purchase such securities for speculative
purposes and will expect to actually acquire the
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securities when purchased. However, the Fund reserves the right to sell any such
securities before their settlement dates if the Investment Manager deems such a
sale advisable.
REPURCHASE AGREEMENTS. The Fund may engage in repurchase agreements, which are
instruments under which the Fund acquires ownership of a security from a
broker-dealer or bank that agrees to repurchase the security at a mutually
agreed upon time and price (which price is higher than the purchase price),
thereby determining the yield during the Fund's holding period. Maturity of the
securities subject to repurchase may exceed one year.
If the seller of a repurchase agreement becomes bankrupt or otherwise defaults,
the Fund might incur expenses in enforcing its rights, and could experience
losses, including a decline in the value of the underlying securities and loss
of income. The Fund will enter into repurchase agreements only with banks and
other recognized financial institutions that the Investment Manager deems
creditworthy.
ILLIQUID SECURITIES. Pursuant to a fundamental policy as set forth in the
Statement of Additional Information, the Fund will not purchase illiquid
securities, including time deposits and repurchase agreements maturing in more
than 7 days, if, as a result thereof, more than 10% of the Fund's net assets
valued at the time of the transaction are invested in such securities.
VARIABLE RATE SECURITIES. The Fund may invest in instruments having rates of
interest that are adjusted periodically, or which "float" continuously according
to formulas intended to minimize any fluctuation in the values of the
instruments ("Variable Rate Securities"). The interest rate of Variable Rate
Securities ordinarily is determined by reference to, or is a percentage of, an
objective standard such as a bank's prime rate, the 90-day U.S. Treasury bill
rate or the rate of return on commercial paper or bank certificates of deposit.
As interest rates decrease or increase, Variable Rate Securities experience less
appreciation or depreciation than fixed rate obligations.
Some Variable Rate Securities ("Variable Rate Demand Securities") have a demand
feature entitling the purchaser to resell the securities at an amount
approximately equal to amortized cost, or the principal amount thereof plus
accrued interest. As is the case for other Variable Rate Securities, the
interest rate on Variable Rate Demand Securities varies according to some
objective standard intended to minimize fluctuation in the values of the
instruments. The Fund determines the maturity of Variable Rate Securities in
accordance with SEC rules.
SECURITIES LENDING. To increase its income, the Fund may lend its portfolio
securities to brokers, dealers and other financial institutions that borrow
securities. No more than one-third of the Fund's total assets may be represented
by loaned securities. The Fund's loans of portfolio securities will be fully
collateralized by cash, letters of credit or U.S. Government securities equal at
all times to 100% of the loaned securities' market value plus accrued interest.
As with other extensions of credit, there are risks of delay in recovery or even
losses of rights in the securities loaned should the borrower of the securities
fail financially. However, such loans will be made only to firms the Investment
Manager deems to be of good standing and when, in the judgment of the Investment
Manager, the income which can be earned currently from such loans justifies the
attendant risk.
BORROWING POLICY. Pursuant to a fundamental policy as set forth in the
Statement of Additional Information, the Fund may not borrow money except as a
temporary measure for extraordinary or
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emergency purposes, and then only in an amount up to one-third of the value of
its total assets in order to meet redemption requests. Any borrowings under this
provision will not be collateralized. The Fund will not borrow for leverage
purposes.
ADDITIONAL INFORMATION. Please see the Statement of Additional Information for
further information regarding foreign securities, Section 4(2) paper, the
investment rating categories employed by various NRSROs and other investment
techniques used by the Fund.
ORGANIZATION AND MANAGEMENT OF THE FUND
GENERAL OVERSIGHT. The Board of Trustees and officers of the Trust meet
regularly to review investments, performance, expenses and other business
affairs.
THE INVESTMENT MANAGER. Professional investment management for the Fund is
provided by the Investment Manager, Charles Schwab Investment Management, Inc.,
101 Montgomery Street, San Francisco, California 94104. The Investment Manager
provides a continuous investment program, including general investment and
economic advice regarding the Fund's investment strategies; manages the Fund's
investment portfolios; performs expense management, accounting and record
keeping; and provides other services necessary to the operation of the Fund and
the Trust. The Investment Manager, formed in 1989, is a wholly owned subsidiary
of The Charles Schwab Corporation and is the investment adviser and
administrator of the Schwab mutual fund complex, which as of April 15, 1996 had
aggregate net assets in excess of $35 billion.
TRANSFER AGENT AND SHAREHOLDER SERVICES. Schwab, 101 Montgomery Street, San
Francisco, California 94104, serves as shareholder services agent, transfer
agent and distributor for the Fund. Schwab was established in 1971 and is one of
America's largest discount brokers. The firm provides low-cost securities
brokerage and related financial services to over 3.3 million active customer
accounts and has over 230 branch offices. Schwab also offers convenient access
to financial information services and provides products and services that help
investors make investment decisions. Schwab is a wholly owned subsidiary of The
Charles Schwab Corporation. Charles R. Schwab is the founder, Chairman, Chief
Executive Officer and a Director of The Charles Schwab Corporation. As a result
of his beneficial ownership interests in and other relationships with The
Charles Schwab Corporation and its affiliates, Mr. Schwab may be deemed to be a
controlling person of Schwab and the Investment Manager.
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OPERATING FEES AND EXPENSES
Pursuant to its Investment Advisory and Administration Agreement with the Trust,
the Investment Manager receives from the Fund a graduated annual fee, payable
monthly, of 0.46% of the Fund's average daily net assets not in excess of $2
billion, 0.45% of such assets over $2 billion but not in excess of $3 billion,
and 0.40% of such net assets over $3 billion.
At least through April 30, 1997, the Investment Manager has guaranteed that the
management fee and total fund operating expenses for the Fund will not exceed
0.44% and 0.50%, respectively, of the Fund's average daily net assets. For the
fiscal year ended December 31, 1995, the Fund paid a management fee and total
fund operating expenses equal to 0.01% and 0.50%, respectively, of the Fund's
average daily net assets (after waivers and reimbursements). The following
expenses are not included as "operating expenses" for purposes of this
guarantee: interest expenses, taxes and capital items such as the cost of the
purchase or sale of portfolio securities, including brokerage fees or
commissions. The effect of this voluntary expense limitation is to maintain or
increase the Fund's total return to shareholders.
Schwab receives no compensation for its services as transfer agent, shareholder
services agent and distributor to the Fund. The Fund's Custodian is PNC Bank,
N.A.
OTHER EXPENSES. The Trust pays the expenses of its operations, including: the
fees and expenses for independent accountants, legal counsel and the custodian
of its assets; the cost of maintaining books and records of account;
registration fees; the fees and expenses of qualifying the Trust and its shares
for distribution under federal and state securities laws; and industry
association membership dues. These expenses generally will be allocated among
the Trust's investment portfolios ("Series"), including the Fund, on the basis
of relative net assets at the time the expense is incurred. However, expenses
directly attributable to a particular Series will be charged to that Series. The
organizational expenses of the Fund have been capitalized and are being
amortized over the first five years of the Fund's operations.
OTHER INFORMATION
Schwab Annuity Portfolios was organized as a business trust under the laws of
Massachusetts on January 21, 1994 and may issue an unlimited number of shares of
beneficial interest in one or more Series. Currently, only shares of the Fund
are offered. The Board of Trustees may authorize the issuance of shares of
additional Series if it deems it desirable. Shares within each Series have
equal, noncumulative voting rights and equal rights as to distributions, assets
and liquidation of such Series.
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SHAREHOLDER MEETINGS AND VOTING RIGHTS. The Trust is not required to hold
annual shareholders' meetings. It will, however, hold special meetings as
required or deemed desirable by the Board of Trustees for such purposes 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 at a special meeting called upon written request of shareholders
owning in the aggregate at least 10% of the outstanding shares of the Trust. The
Fund acknowledges that the voting rights held by Participating Insurance
Companies and their Separate Accounts will be passed through to Contract owners.
Contract owners will vote by Series and not in the aggregate (for example, when
voting to approve an investment advisory agreement), except when voting in the
aggregate is permitted under the 1940 Act, such as for the election of Trustees.
DISTRIBUTIONS AND TAXES
THE FUND DECLARES DAILY DIVIDENDS WHICH ARE PAID OR REINVESTED MONTHLY.
DIVIDENDS AND OTHER DISTRIBUTIONS. On each day that the Fund's net asset value
per share is determined ("Business Day"), the Fund's net investment income is
declared as of the close of trading on the New York Stock Exchange (the
"Exchange") (generally 4:00 p.m. Eastern time) as a dividend to shareholders
of record at that time. Dividends are normally paid or reinvested, pursuant to
elections by Separate Accounts, on the 25th of each month, if a Business Day,
otherwise on the next Business Day, with the exception of the dividend paid or
reinvested in December, which is scheduled to be paid or reinvested on the last
Business Day in December.
FEDERAL INCOME TAX INFORMATION. The Fund has elected to be treated as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the "Code"), qualified as such and intends to continue to so qualify. In order
to so qualify, the Fund will distribute on a current basis substantially all of
its investment company taxable income and its net capital gains (if any) on an
annual basis and will meet certain other requirements. Such qualification
relieves the Fund of liability for federal income taxes to the extent the Fund's
earnings are distributed.
Internal Revenue Service regulations applicable to Separate Accounts generally
require that portfolios that serve as the funding vehicles for Separate Accounts
invest no more than 55% of the value of their total assets in one investment,
70% in two investments, 80% in three investments and 90% in four investments.
Alternatively, a portfolio will be treated as meeting these requirements for any
quarter of its taxable year if, as of the close of such quarter, the portfolio
meets the diversification requirements applicable to regulated investment
companies (see "Federal Income Taxes" in the Statement of Additional
Information) and no more than 55% of the value of its total assets consists of
cash and cash items (including receivables), U.S. Government securities and
securities of other regulated investment companies. The Fund intends to meet
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these requirements. Internal Revenue Service regulations also limit the types of
investors that may invest in such a portfolio. The Fund intends to meet this
limitation by offering its shares only to Participating Insurance Companies and
their Separate Accounts in connection with the purchase of Contracts and VLI
Policies and to Plans.
For more information regarding the federal income tax consequences of investing
in the Fund, see "Federal Income Taxes" in the Statement of Additional
Information. For information concerning the tax consequences of Contract
ownership, Contract owners should consult the appropriate Separate Account
Prospectus.
SHARE PRICE CALCULATION
The price of a share on any given day is its "net asset value" or "NAV." This
figure is computed by taking total Fund assets, subtracting any liabilities and
dividing the resulting amount by the number of Fund shares outstanding. The net
asset value per share of the Fund is determined on each day both the Federal
Reserve Bank of New York and the Exchange are open for business as of the close
of normal business (generally 4:00 p.m. Eastern time). Purchase and redemption
orders from Separate Accounts investing in the Fund that are received and
accepted by a Participating Insurance Company, as the Fund's designee, by 4:00
p.m. Eastern time will generally be computed at the Fund's NAV determined on
that day. While the Fund attempts to maintain its NAV at a constant $1.00 per
share, Fund shares are not insured against a reduction in NAV.
The Fund values its portfolio securities at amortized cost, which means that
these securities are valued at their acquisition cost (as adjusted for
amortization of premium or discount) rather than at current market value.
Calculations are made to compare the value of the Fund's investments, using the
amortized cost method, with market values. Market valuations are obtained by
using: (1) actual quotations provided by third-party pricing services or market
makers; (2) estimates of market value; or (3) values obtained from yield data
relating to comparable classes of money market instruments published by
reputable sources at the mean between the bid and asked prices for the
instruments. If a deviation of 1/2 of 1% or more were to occur between the
Fund's NAV calculated by reference to market values and the Fund's $1.00 per
share amortized cost value, or if there were any other deviation which the Board
of Trustees believed would result in a material dilution to shareholders or
purchasers, the Board of Trustees would promptly consider what action, if any,
should be initiated.
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HOW THE FUND REPORTS PERFORMANCE
From time to time, the Fund may advertise its yield and effective yield.
Performance figures are based upon historical results and are not intended to
indicate future performance.
Yield refers to the income generated by a hypothetical investment in the Fund
over a specific 7-day period. This income is then annualized, which means that
the income generated during the 7-day period is assumed to be generated each
week over an annual period and is shown as a percentage of the hypothetical
investment.
Effective yield is calculated similarly, but the income earned by the investment
is assumed to be compounded weekly when annualized. Effective yield will be
slightly higher than yield due to this compounding effect. (See "Yield" in the
Statement of Additional Information.)
The performance of the Fund may be compared to that of other mutual funds
tracked by mutual fund rating services, various indices of investment
performance, U.S. Government obligations, bank certificates of deposit, other
investments for which reliable performance data is available and the consumer
price index.
Yields and effective yields quoted for the Fund include the effect of deducting
the Fund's expenses but may not include charges and expenses attributable to a
particular Contract. You cannot purchase shares of the Fund directly, but you
may allocate account value under your Contract to and from the Fund in
accordance with the terms of your Contract. You should carefully review the
appropriate Separate Account Prospectus for information on charges and expenses
relevant to your Contract. Excluding these charges from quotations of the Fund's
performance has the effect of increasing the performance quoted. You should bear
in mind the effect of these charges when comparing the Fund's performance to
those of other mutual funds.
Additional performance information about the Fund is available in its Annual
Report. To request a free copy, call the Annuity Service Center at 800-838-0650
(800-838-0649 in New York State).
INVESTING IN SHARES OF THE FUND
PURCHASING AND SELLING SHARES. Fund shares are currently offered on a
continuous, no-load basis to the Separate Accounts of Participating Insurance
Companies to fund benefits under Contracts issued by the Participating Insurance
Companies. Transamerica Occidental Life Insurance Company, a Participating
Insurance Company, through its Separate Account, may be deemed to beneficially
own more than 25% of the shares of the Fund and, as a result, may be deemed to
be a controlling person of the Fund.
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Although Fund shares are not available for purchase directly by the general
public, you may nevertheless allocate account value under your Contract to and
from the Fund in accordance with the terms of your Contract. Please refer to the
appropriate Separate Account Prospectus for further information on how to make
an allocation and how to purchase or surrender your Contract.
The Fund reserves the right, in its sole discretion, to withdraw or suspend all
or any part of the offering made by this Prospectus or to reject purchase
orders. All orders to purchase Fund shares are subject to acceptance by the Fund
and are not binding until confirmed or accepted in writing.
The Fund may suspend redemption rights or postpone payments at times when
trading on the Exchange is restricted, the Exchange is closed for any reason
other than its customary weekend or holiday closings, emergency circumstances as
determined by the SEC exist or for such other circumstances as the SEC may
permit.
In the future, Fund shares are expected to be offered on a continuous, no-load
basis to affiliated and unaffiliated Participating Insurance Companies and their
Separate Accounts to fund benefits under Contracts and VLI Policies as well as
to Plans. The relationships of Plans and Plan participants to the Fund would be
subject, in part, to the provisions of the individual Plans and applicable law.
Accordingly, such relationships could be different from those described in this
Prospectus for Separate Accounts and Contract owners in such areas, for example,
as tax matters and voting privileges.
The Fund does not foresee any disadvantage to Contract or VLI Policy owners or
Plan participants arising out of these arrangements. Nevertheless, differences
in treatment under tax and other laws, as well as other considerations, could
cause the interests of various purchasers of Contracts and VLI Policies (and the
interests of any Plan participants) to conflict. Material irreconcilable
conflicts between the interests of Contract owners, VLI Policy owners or Plan
participants possibly may arise. For example, violation of the federal tax laws
by one Separate Account investing in the Fund could cause the Contracts funded
through another Separate Account to lose their tax-deferred status, unless
remedial action were taken. The Fund and the Separate Accounts (and any Plans
investing in the Fund) would be subject to conditions imposed by the SEC, which
are designed to prevent or remedy any such conflicts.
If Fund shares are offered to affiliated and unaffiliated Participating
Insurance Companies and their Separate Accounts to fund benefits under VLI
Policies and other Contracts and to Plans, the Board of Trustees will monitor
events in order to identify the existence of any material irreconcilable
conflict that may possibly arise and to determine what action, if any, should be
taken in response to any such conflict. If a material irreconcilable conflict
arises involving Separate Accounts or Plans, a Separate Account or Plan may be
required to withdraw its participation in the Fund.
OTHER IMPORTANT INFORMATION. To obtain additional information regarding the
Fund, you may call the Schwab Annuity Service Center at 800-838-0650
(800-838-0649 in New York State), where trained representatives are available to
answer questions about the Fund.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR
ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR
BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE
LAWFULLY MADE.
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THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB ANNUITY SERVICE CENTER REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 15
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB ANNUITY SERVICE CENTER REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 16
2085-3 (4/96) 1996 CHARLES SCHWAB & CO., INC., DISTRIBUTOR MEMBER NYSE/SIPC
ALL RIGHTS RESERVED
