<PAGE> 1
Registration Nos. 33-06547/811-4717
- -----------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. /_/
-------------
Post-Effective Amendment No. 16 /X/
---------------
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 17 /X/
-------------
(Check appropriate box or boxes.)
SAFECO RESOURCE SERIES TRUST
----------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
SAFECO Plaza, Seattle, Washington 98185
---------------------------------------------------- --------
(Address of Principal Executive Offices) ZIP Code
Registrant's Telephone Number, including Area Code (206) 545-5000
-------------------------
Name and Address of Agent
-----------------------------
for Service
-----------
DAVID F. HILL
SAFECO Plaza
Seattle, Washington 98185
(206) 545- 5269
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective
____ immediately upon filing pursuant to paragraph (b)
X on April 29, 1996 pursuant to paragraph (b)
---- -------------------
____ 60 days after filing pursuant to paragraph (a)(1)
____ on __________________ pursuant to paragraph (a)(1)
____ 75 days after filing pursuant to paragraph (a)(2)
____on __________________ pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
=============================================================================
Registrant hereby declares that, pursuant to Rule 24f-2 under the Investment
Company Act of 1940, an indefinite number of its shares have previously been
registered. The notice required by such Rule for Registrant's most recent
fiscal year was filed on or about February 29, 1996. Registrant adopts such
declarations pursuant to Rule 24f-2.
=============================================================================
The Exhibit Index is at page ____.
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SAFECO RESOURCE SERIES TRUST
Registration Statement on Form N-1A
Cross Reference Sheet
Part A
<TABLE>
<CAPTION>
Item No. Location in Prospectus
-------- ----------------------
<S> <C>
1. Cover Page Cover page
2. Synopsis Introduction to the Trust and the Portfolios; Fund Expenses
3. Condensed Financial Information Financial Highlights; Performance Information
4. General Description of Registrant The Trust and Each Portfolio's Investment
Policies; Persons Controlling the Trust
5. Management of the Fund Information about Share Ownership and Companies
that Provide Services to the Trust; Portfolio
Managers
6. Capital Stock and Other Securities Information about Share Ownership and Companies
that Provide Services to the Trust; Persons
Controlling the Trust; Portfolio Distribution and
Tax Information
7. Purchase of Securities Being Offered Sale and Redemption of Shares
8. Redemption or Repurchase Sale and Redemption of Shares
9. Pending Legal Proceedings Not applicable
</TABLE>
Part B
<TABLE>
<CAPTION>
Item No. Location in Statement
-------- ---------------------
of Additional Information
-------------------------
<S> <C>
10. Cover page Cover page
11. Table of Contents Cover page
12. General Information and History Not applicable
13. Investment Objectives and Policies Investment Policies; Additional Investment
Information
14. Management of the Fund Trustees and Officers
15. Control Persons and Principal Holders of Securities Principal Shareholders of
the Portfolios
</TABLE>
2
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<TABLE>
<S> <C>
16. Investment Advisory and Other Services Investment Advisory and Other
Services
17. Brokerage Allocation and Other Practices Brokerage Practices
18. Capital Stock and Other Securities Not Applicable
19. Purchase, Redemption and Pricing of Securities Being Additional Information On Calculation of Net
Offered Asset Value Per Share
20. Tax Status Distributions and Tax Information
21. Underwriters Investment Advisory and Other Services
22. Calculations of Yield Quotations of Money Market Additional Performance Information
Funds
23. Financial Statements Financial Statements
</TABLE>
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
3
<PAGE> 4
[SAFECO LOGO] PROSPECTUS
SAFECO RESOURCE SERIES TRUST
SAFECO Plaza
Seattle, Washington 98185 APRIL 29, 1996
- -------------------------------------------------------------------------------
Each of the portfolios described in this Prospectus is a series of the SAFECO
Resource Series Trust ("Trust"), an open-end, management investment company
consisting of five separate series. Shares of the Trust are offered to life
insurance companies, which may or may not be affiliated with one another
("Participating Insurance Companies"), for allocation to certain of their
separate accounts established for the purpose of funding variable life
insurance policies and variable annuity contracts ("Variable Contracts") and
may also be offered directly to qualified pension and retirement plans
("Qualified Plans").
The EQUITY PORTFOLIO has as its investment objective to seek long-term growth
of capital and reasonable current income. The Equity Portfolio ordinarily
invests principally in common stocks or securities convertible into common
stocks.
The GROWTH PORTFOLIO has as its investment objective to seek growth of capital
and the increased income that ordinarily follows from such growth. The Growth
Portfolio ordinarily invests a preponderance of its assets in common stock
selected for potential appreciation.
The NORTHWEST PORTFOLIO has as its investment objective to seek the long-term
growth of capital through investing primarily in Northwest companies. The
Northwest Portfolio invests at least 65% of its total assets in securities
issued by companies with their principal executive offices located in Alaska,
Idaho, Montana, Oregon or Washington (the "Northwest").
The BOND PORTFOLIO has as its investment objective to seek to provide as high a
level of current income as is consistent with the relative stability of
capital. The Bond Portfolio invests primarily in medium-term debt securities.
The MONEY MARKET PORTFOLIO has as its investment objective to seek as high a
level of current income as is consistent with the preservation of capital and
liquidity through investments in high-quality money market instruments maturing
in thirteen months or less. THE MONEY MARKET PORTFOLIO SEEKS TO MAINTAIN A
$1.00 PER SHARE NET ASSET VALUE. SHARES OF THE MONEY MARKET PORTFOLIO ARE
NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. THERE IS NO ASSURANCE
THAT THE MONEY MARKET PORTFOLIO WILL MAINTAIN A STABLE $1.00 PER SHARE NET
ASSET VALUE.
There are market risks in all securities transactions. This Prospectus sets
forth the information a prospective investor should know before investing.
PLEASE READ AND RETAIN THE PROSPECTUS FOR FUTURE REFERENCE. A Statement of
Additional Information, dated April 29, 1996 and incorporated herein by
reference, has been filed with the Securities and Exchange Commission and is
available at no charge upon request by calling 1-800-624-5711 or writing SAFECO
Securities, Inc. SAFECO Plaza, Seattle, WA 98185. The Statement of Additional
Information contains more information about most of the topics in this
Prospectus as well as information about the trustees and officers of the Trust.
4
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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.
No dealer, salesperson or other person has been authorized to give any
information or to make any representation, other than those contained in this
Prospectus, and, if given or made, such other information or representations
must not be relied upon as having been authorized by the Trust or SAFECO
Securities. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy by the Trust or by SAFECO Securities in any
state in which such offer or solicitation may not lawfully be made.
5
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Introduction to the Trust and the Portfolios........
Fund Expenses.......................................
Financial Highlights................................
The Trust and Each Portfolio's Investment Policies..
Portfolio Managers..................................
Information about Share Ownership and Companies that
Provide Services to the Trust.......................
Persons Controlling the Trust.......................
Sale and Redemption of Shares.......................
Performance Information.............................
Portfolio Distributions and Tax Information.........
Share Price Calculation.............................
Ratings Supplement..................................
</TABLE>
6
<PAGE> 7
___________________________________________
INTRODUCTION TO THE TRUST AND THE PORTFOLIOS
____________________________________________
The Trust is a series investment company that currently issues shares
representing five mutual funds: Equity Portfolio, Growth Portfolio, Northwest
Portfolio, Bond Portfolio and Money Market Portfolio (collectively, the
"Portfolios"). Each Portfolio is a diversified series of the Trust, an
open-end, management investment company that continuously offers to sell and to
redeem (buy back) its shares at the current net asset value per share without
any sales or redemption charges or 12b-1 fees. (See "Share Price Calculation"
for more information.)
Shares of each Portfolio are issued and redeemed in connection with
investments in and payments under certain Variable Contracts issued through
separate accounts of Participating Insurance Companies. Shares of the Trust
may also be offered directly to Qualified Plans. The Participating Insurance
Companies and the Qualified Plans may or may not make all Portfolios described
in this Prospectus available for investment.
Although the Trust does not foresee any disadvantage to Variable Contract
owners arising out of the fact that the Trust may offer its shares to Qualified
Plans and for products offered by Participating Insurance Companies, the
interests of Variable Contract owners or Qualified Plan participants might at
some time be in conflict due to future differences in tax treatment or other
considerations. Therefore, the Trust's Board of Trustees intends to monitor
events in order to identify any material irreconcilable conflicts which may
occur and to determine what action, if any, should be taken in response to such
conflicts. If such a conflict were to occur, one or more insurance company
separate accounts or Qualified Plans might withdraw its investment in the
Trust, which might force the Trust to sell portfolio securities at
disadvantageous prices. In addition, the Trust's Board of Trustees may refuse
to sell shares of any Portfolio to any separate account or Qualified Plan or
terminate the offering of shares of any Portfolio if such action is required by
law or regulatory authority or is in the best interests of the shareholders of
any Portfolio.
The Equity Portfolio has as its investment objective to seek long-term growth
of capital and reasonable current income. To pursue its objective, the Equity
Portfolio invests principally in common stocks or securities convertible into
common stocks.
The Growth Portfolio has as its investment objective to seek growth of capital
and the increased income that ordinarily follows from such growth. To pursue
its objective, the Growth Portfolio ordinarily invests a preponderance of its
assets in common stock selected for potential appreciation.
The Northwest Portfolio has as its investment objective to seek the long-term
growth of capital through investing primarily in Northwest companies. To
pursue its objective, the Northwest Portfolio invests at least 65% of its total
assets in securities issued by companies with their principal executive offices
located in Alaska, Idaho, Montana, Oregon or Washington.
The Bond Portfolio has as its investment objective to seek as high a level of
current income as is consistent with the relative stability of capital. To
7
<PAGE> 8
pursue its objective, the Bond Portfolio invests primarily in medium-term debt
securities.
The Money Market Portfolio has as its investment objective to seek as high a
level of current income as is consistent with the preservation of capital and
liquidity through investments in high-quality money market instruments maturing
in thirteen months or less.
There is, of course, no assurance that a Portfolio will achieve its investment
objective. See "The Trust and Each Portfolio's Investment Policies" for more
information.
Each Portfolio is managed by SAFECO Asset Management Company ("SAM"). SAM is
headquartered in Seattle, Washington and manages over $2 billion in mutual fund
assets as of March 31, 1996. SAM has been an advisor to mutual funds and
other investment portfolios since 1973 and its predecessors have been such
advisers since 1932. See "Information about Share Ownership and Companies that
Provide Services to the Trust" for more information.
There is a risk associated with an investment in the Equity, Growth, Northwest
and Bond Portfolios that the market value of each portfolio's securities may
decrease and result in a decrease in the value of a shareholder's investment.
The value of the Bond Portfolio will normally fluctuate inversely with changes
in interest rates. An investment in the Northwest Portfolio may be subject to
different risks than a portfolio whose securities are issued by more
geographically diverse companies. The principal risk associated with
investment in the Money Market Portfolio is that it may experience a delay or
failure in principal or interest payments at maturity of one or more of the
portfolio securities. See "The Trust and Each Portfolio's Investment Policies"
for more information.
_____________
FUND EXPENSES
____________
A. Shareholder Transaction Expenses for Each Portfolio
<TABLE>
<CAPTION>
Sales Load Sales Load Imposed
Imposed on Reinvested Deferred
on Purchases Dividends Sales Load Redemption Fees Exchange Fees
------------ ------------------ -------------- --------------- -------------
<S> <C> <C> <C> <C>
None None None None None
</TABLE>
B. Annual Operating Expenses
(as a percentage of average net assets)
<TABLE>
<CAPTION>
Total Operating
Management Other Expenses After
Portfolio 12b-1 Fees Fees Expenses Reimbursement
--------- ---------- ---------- -------- -------------
<S> <C> <C> <C> <C>
Equity None .72% .03% .75%
Growth* None .72% .07% .79%
Northwest* None .71% .00% .71%
Bond* None .72% .00% .72%
Money Market* None .62% .00% .62%
</TABLE>
* SAFECO Life Insurance Company ("SAFECO Life") pays all Other Expenses
of each Portfolio until a Portfolio's assets reach $20 million. Once
a Portfolio's assets exceed $20 million, the Other Expenses of the
Portfolio will be paid by such Portfolio. (See "Persons Controlling
the Trust" for more information.)
The Growth Portfolio began paying Other Expenses in August 1995.
During the Year ended December 31, 1995, SAFECO Life paid for or
reimbursed a portion of the Other Expenses of the Growth Portfolio
and all of the Other Expenses of the Northwest, Bond and Money Market
Portfolios. Expenses before such reimbursement as a percentage
average of net assets were as follows:
<TABLE>
<S> <C>
SAFECO Resource Growth Portfolio .84%
SAFECO Resource Northwest Portfolio 1.18%
SAFECO Resource Bond Portfolio .94%
SAFECO Resource Money Market Portfolio .87%
</TABLE>
C. Example of Expenses
You would pay the following expenses on a $1,000 investment assuming a 5%
annual return. The example assumes that all dividends and other distributions
are reinvested and that the percentage amounts listed in "Total Annual
Operating Expenses After Reimbursement" above remain the same in the years
shown.
<TABLE>
<CAPTION>
Portfolio 1 Year 3 Years 5 Years 10 Years
--------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Equity $ 8 $24 $42 $93
Growth $ 8 $25 $44 $98
Northwest $ 7 $23 $40 $88
Bond $ 7 $23 $40 $89
Money Market $ 6 $20 $35 $77
</TABLE>
The purpose of the tables is to assist you in understanding the various costs
and expenses that an investor in each Portfolio would bear, directly or
indirectly. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. A PORTFOLIO'S ACTUAL EXPENSES OR PERFORMANCE MAY BE GREATER
OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS REQUIRED BY
SECURITIES AND EXCHANGE COMMISSION REGULATIONS APPLICABLE TO ALL MUTUAL FUNDS
AND IT IS NOT A PREDICTION OF, NOR DOES IT REPRESENT, PAST OR FUTURE EXPENSES
OR THE PERFORMANCE OF ANY PORTFOLIO.
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<PAGE> 9
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO RESOURCE SERIES TRUST - EQUITY PORTFOLIO
The supplemental financial information and performance data has been derived
from the Financial Statements and should be read in conjunction therewith.
<TABLE>
<CAPTION>
July 21, 1987
(Initial Public
Year Ended December 31 Offering) to
Dec. 31,
1995 1994 1993 1992 1991 1990 1989 1988 1987
-------- -------- -------- -------- -------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at beginning
of period $16.83 $17.02 $14.20 $13.48 $11.38 $12.35 $10.40 $8.63 $11.98
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .39 .31 .23 .20 .24 .25 .43 .29 .21
Net realized and unrealized gain
(loss) on investment 4.43 1.21 3.74 .89 2.82 (.90) 2.39 1.95 (2.63)
-------- -------- ------- ------- ------- ------ ------ ------ ------
Total from investment operations 4.82 1.52 3.97 1.09 3.06 (.65) 2.82 2.24 (2.42)
-------- -------- ------- ------- ------- ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (.39) (.31) (.23) (.20) (.24) (.25) (.43) (.29) (.21)
Distributions from capital gains (2.02) (1.40) (.92) (.17) (.72) (.07) (.44) (.18) (.72)
-------- -------- ------- ------- ------- ------ ------ ------ ------
Total distributions (2.41) (1.71) (1.15) (.37) (.96) (.32) (.87) (.47) (.93)
-------- -------- ------- ------- ------- ------ ------ ------ ------
NET ASSET VALUE AT END OF PERIOD $19.24 $16.83 $17.02 $14.20 $13.48 $11.38 $12.35 $10.40 $8.63
======== ======== ======= ======= ======= ====== ====== ====== ======
Total Return 28.63% 8.94% 27.92% 8.06% 26.85% -5.21% 27.11% 25.98% -14.29%+*
Net assets at end of period
(000's omitted) $169,479 $102,321 $68,157 $36,064 $20,402 $9,742 $6,366 $3,256 $2,199
Ratio of expenses to average
net assets .75% .77% .73% .73% .73% .73% .73% .73% .74%++
Ratio of expenses to average net
assets before expense reimbursement N/A .78% - - - - - - -
Ratio of net investment income
to average net assets 2.26% 1.98% 1.71% 1.80% 2.31% 2.71% 4.47% 3.08% 2.89%++
Portfolio turnover ratio 69.18% 28.71% 41.35% 24.75% 43.60% 30.13% 50.74% 58.38% 91.62%++
</TABLE>
* Unaudited
+ Not annualized
++ Annualized
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FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO Resource Series Trust - Growth Portfolio
The supplemental financial information and performance data has been derived
from the Financial Statements and should be read in conjunction therewith.
<TABLE>
<CAPTION>
Year Ended December 31 January 7, 1993
(Initial Public Offering)
1995 1994 To December 31, 1993
-------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $12.98 $12.16 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .06 -- .01
Net realized and unrealized gain (loss) on
investments 5.26 1.45 3.60
Total from investment operations 5.32 1.45 3.61
LESS DISTRIBUTIONS:
Dividends from net investment income (.06) -- (.01)
Distributions from capital gains (2.36) (.63) (1.44)
Total distributions (2.42) (.63) (1.45)
NET ASSET VALUE AT END OF PERIOD $15.88 $12.98 $12.16
========= ========= =========
Total Return 41% 11.92% 34.73%+
Net assets at end of period (000's omitted) $44,458 $16,156 $4,850
Ratio of expenses to average net assets .79% .71% .72%++
Ratio of expenses to average net assets
before expense reimbursements .84% .96% --
Ratio of net investment income
to average net assets .55% -.05% .08%++
Portfolio turnover ratio 111.70% 41.24% 108.67%++
</TABLE>
+ Not annualized
++ Annualized
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FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO Resource Series Trust - Northwest Portfolio
The supplemental financial information and performance data has been derived
from the Financial Statements and should be read in conjunction therewith.
<TABLE>
<CAPTION>
Year Ended December 31 January 7, 1993
(Initial Public Offering)
1995 1994 To December 31, 1993
-------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $10.24 $9.94 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .08 .06 .09
Net realized and unrealized gain (loss) on
investments .68 .30 (.06)
Total from investment operations .76 .36 .03
LESS DISTRIBUTIONS:
Dividends from net investment income (.08) (.06) (.09)
Distributions from capital gains (.07) -- --
Total distributions (.15) (.06) (.09)
NET ASSET VALUE AT END OF PERIOD $10.85 $10.24 $9.94
====== ====== =====
Total Return 7.42% 3.65% -.55%+
Net assets at end of period (000's omitted) $6,312 $4,564 $3,183
Ratio of expenses to average net assets .71% .71% .72%++
Ratio of expenses to average net assets
before expense reimbursements 1.18% 1.23% -
Ratio of net investment income
to average net assets .81% .72% 1.06%++
Portfolio turnover ratio 21.30% 7.29% 3.93%++
</TABLE>
+ Not annualized
++ Annualized
11
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FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO Resource Series Trust - Bond Portfolio
The supplemental financial information and performance data has been derived
from the Financial Statements and should be read in conjunction therewith.
<TABLE>
<CAPTION>
July 21, 1987
Year Ended December 31 (Initial
Public
Offering) To
1995 1994 1993 1992 1991 1990 1989 1988 Dec. 31, 1987
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $10.20 $11.12 $10.82 $10.80 $10.09 $10.18 $9.83 $9.90 $10.15
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .71 .59 .56 .58 .70 .74 .75 .75 .32
Net realized and unrealized gain (loss)
on investments 1.11 (.92) .58 .16 .71 (.07) .36 (.06) (.25)
Total from investment operations 1.82 (.33) 1.14 .74 1.41 .67 1.11 .69 .07
LESS DISTRIBUTIONS:
Dividends from net investment income (.71) (.59) (.56) (.58) (.70) (.74) (.75) (.75) (.32)
Distributions from capital gains -- -- (.28) (.14) -- (.02) (.01) (.01) --
Total distributions (.71) (.59) (.84) (.72) (.70) (.76) (.76) (.76) (.32)
NET ASSET VALUE AT END OF PERIOD $11.31 $10.20 $11.12 $10.82 $10.80 $10.09 $10.18 $9.83 $9.90
====== ====== ====== ====== ====== ====== ====== ===== =====
Total Return 17.87% -2.93% 10.55% 6.82% 13.98% 6.57% 11.30% 7.03% 2.90%+*
Net assets at end of period
(000's omitted) $14,257 $13,361 $13,245 $9,172 $4,852 $3,228 $2,700 $2,244 $2,079
Ratio of expenses to average net assets .72% .72% .73% .74% .74% .74% .73% .74% .74%++
Ratio of expenses to average net assets
before expense reimbursement .94% .89% - - - - - - -
Ratio of net investment income
to average net assets 6.50% 5.53% 5.68% 6.96% 7.26% 7.48% 7.47% 7.37% 7.11%++
Portfolio turnover ratio 77.93% 147.22% 60.20% 46.66% 36.31% 7.21% 8.42% 5.36% 2.81%++
</TABLE>
* Unaudited
+ Not annualized
++ Annualized
12
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FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO Resource Series Trust - Money Market Portfolio
The supplemental financial information and performance data has been derived
from the Financial Statements and should be read in conjunction therewith.
<TABLE>
<CAPTION>
July 21, 1987
Year Ended December 31 (Initial
Public
Offering) To
1995 1994 1993 1992 1991 1990 1989 1988 Dec. 31, 1987
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .05 .04 .03 .03 .06 .08 .08 .07 .03
LESS DISTRIBUTIONS:
Dividends from net investment income (.05) (.04) (.03) (.03) (.06) (.08) (.08) (.07) (.03)
NET ASSET VALUE AT END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== ===== ===== ===== =======
Total Return 5.56% 3.65% 2.61% 3.26% 5.67% 7.86% 8.96% 7.11% 2.70%+*
Net assets at end of period (000's omitted) $8,719 9,315 $6,327 $5,399 $4,534 $4,284 $3,275 $2,908 $2,238
Ratio of expenses to average net assets .62% .63% .64% .68% .74% .73% .73% .74% .74%++
Ratio of expenses to average net assets
before expense reimbursements .87% .87% - - - - - - -
Ratio of net investment income
to average net assets 5.32% 3.63% 2.61% 3.23% 5.54% 7.60% 8.55% 7.00% 6.45%++
Portfolio turnover ratio N/A N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
* Unaudited
+ Not annualized
++ Annualized
13
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__________________________________________________
THE TRUST AND EACH PORTFOLIO'S INVESTMENT POLICIES
__________________________________________________
The Trust is a Delaware business trust established by a Trust Instrument dated
May 13, 1993. The Trust currently consists of five series: Equity Portfolio,
Growth Portfolio, Northwest Portfolio, Bond Portfolio and Money Market
Portfolio, each of which is a diversified series of the Trust.
The investment objective and investment policies for each Portfolio are
described below. The Trust's Board of Trustees may change a Portfolio's
objective without shareholder vote, but no such change will be made without 30
days' prior written notice to shareholders of that Portfolio. In the event a
Portfolio changes its investment objective, the new objective may not meet the
investment needs of every shareholder and may be different from the objective a
shareholder considered appropriate at the time of initial investment.
Unless otherwise stated, all investment policies and limitations described
below under each Portfolio's description and "Common Investment Practices" are
non-fundamental and may be changed by the Board of Trustees without shareholder
vote. If a Portfolio follows a percentage limitation at the time of
investment, a later increase or decrease in values, net assets or other
circumstances will not be considered in determining whether a Portfolio
complies with the applicable policy (except to the extent the change may impact
a Portfolio's borrowing limits or restrictions on its holding of illiquid
securities).
EQUITY PORTFOLIO
The investment objective of the Equity Portfolio is to seek long-term growth of
capital and reasonable current income. The Equity Portfolio does not seek to
achieve both growth and income with every portfolio security investment.
Rather, it attempts to achieve a reasonable balance between growth and income
on an overall basis.
To pursue its objective, the Equity Portfolio:
1. WILL INVEST PRINCIPALLY IN COMMON STOCKS SELECTED BY SAM PRIMARILY FOR
APPRECIATION AND/OR DIVIDEND POTENTIAL AND FROM A LONG-RANGE
INVESTMENT STANDPOINT.
2. MAY INVEST UP TO 35% OF ITS TOTAL ASSETS IN SECURITIES CONVERTIBLE
INTO COMMON STOCK (INCLUDING CORPORATE BONDS AND PREFERRED STOCK THAT
CONVERT TO COMMON STOCKS, WHETHER AUTOMATICALLY AFTER A SPECIFIED
PERIOD OF TIME OR AT THE OPTION OF THE ISSUER). The Portfolio may
invest in convertible securities if such securities offer a higher
yield than an issuer's common stock and provide reasonable potential
for capital appreciation. The value of convertible corporate bonds
will normally vary inversely with interest rates and the value of
convertible corporate bonds and convertible preferred stock will
normally vary with the value of the underlying common stock.
The Portfolio may invest in convertible corporate bonds that are
rated investment grade by Moody's Investors Service, Inc. ("Moody's")
or Standard & Poor's Ratings Group ("S&P") or unrated bonds determined
by SAM to be of comparable quality to such rated bonds. Bonds rated
in the lowest category
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of investment grade (Baa by Moody's and BBB by S&P) and comparable
unrated bonds are medium grade, have speculative characteristics and
are more likely to have a weakened capacity to make principal and
interest payments under changing economic conditions or upon
deterioration in the financial condition of the issuer.
After purchase by the Portfolio, a corporate bond may be downgraded
or, if unrated, may cease to be comparable to a rated security.
Neither event will require the Portfolio to dispose of that security,
but SAM will take a downgrade or loss of comparability into account in
determining whether the Portfolio should continue to hold the security
in its portfolio. The Portfolio will not hold more than 3% of its
total assets in bonds that go into default on the payment of principal
and interest after purchase.
SAM uses S&P and Moody's ratings only as a preliminary indicator of
investment quality. SAM will determine the quality of unrated bonds
by evaluating the issuer's capital structure, earning power and
quality of management. Unrated securities are not necessarily of
lower quality than rated securities, but may not be as attractive to
as many investors. In addition, SAM will periodically monitor the
issuer's creditworthiness whether rated or not rated.
3. MAY INVEST UP TO 10% OF TOTAL ASSETS IN REAL ESTATE INVESTMENT TRUSTS
("REITS"). REITs purchase real property which is then leased and make
mortgage investments. REITs are dependent upon the successful
operation of properties owned and the financial condition of lessees
and mortgagors. The value of REITs will fluctuate depending on the
underlying value of the real property and mortgages owned and the
amount of cashflow generated and paid out. In addition, REITs
typically borrow to increase funds available for investment.
Generally, there is a greater risk associated with REITs which are
highly leveraged.
4. MAY INVEST UP TO 5% OF ITS TOTAL ASSETS IN CLOSED-END INVESTMENT
COMPANIES AND INVESTMENT TRUSTS (OTHER THAN REITS).
5. MAY PURCHASE FIXED-INCOME SECURITIES IN ACCORDANCE WITH BUSINESS AND
FINANCIAL CONDITIONS.
6. MAY INVEST IN DEBT SECURITIES WHOSE PERFORMANCE AND PRINCIPAL AMOUNT
AT MATURITY IS LINKED TO A SPECIFIC EQUITY SECURITY OR SECURITIES
INDEX.
The principal risk factor associated with the Equity Portfolio is that the
market value of its portfolio securities may decrease .
GROWTH PORTFOLIO
The investment objective of the Growth Portfolio is to seek growth of capital
and the increased income that ordinarily follows from such growth.
To pursue its objective, the Growth Portfolio:
1. WILL INVEST A PREPONDERANCE OF ITS ASSETS IN COMMON STOCKS SELECTED
PRIMARILY FOR POTENTIAL APPRECIATION. To determine those common
stocks which have the potential for long-term growth, SAM will
evaluate the issuer's financial strength, quality of management and
earnings power.
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2. MAY INVEST UP TO 5% OF ITS TOTAL ASSETS IN CLOSED-END INVESTMENT
COMPANIES AND INVESTMENT TRUSTS.
3. MAY INVEST IN SECURITIES CONVERTIBLE INTO COMMON STOCK (INCLUDING
CORPORATE BONDS AND PREFERRED STOCK THAT CONVERT TO COMMON STOCK ,
WHETHER AUTOMATICALLY AFTER A SPECIFIED PERIOD OF TIME OR AT THE
OPTION OF THE ISSUER).
4. MAY INVEST IN DEBT SECURITIES WHOSE PERFORMANCE AND PRINCIPAL AMOUNT
AT MATURITY IS LINKED TO A SPECIFIC EQUITY SECURITY OR SECURITIES
INDEX.
The principal risk factor associated with an investment in the Growth Portfolio
is that the market value of the portfolio securities may decrease. The Growth
Portfolio's policy of investing in securities believed to have a potential for
growth means that the assets of the Portfolio generally will be subject to
greater risk than may be involved in investing in securities which are not
selected for such growth characteristics.
NORTHWEST PORTFOLIO
The investment objective of the Northwest Portfolio is to seek long-term growth
of capital through investing primarily in Northwest companies. To pursue its
objective, the Northwest Portfolio will invest at least 65% of its total assets
in securities issued by companies with their principal executive offices
located in Alaska, Idaho, Montana, Oregon or Washington.
To pursue its objective, the Northwest Portfolio:
1. WILL ORDINARILY INVEST ITS ASSETS IN SHARES OF COMMON STOCK SELECTED
PRIMARILY FOR POTENTIAL LONG-TERM APPRECIATION. In determining those
common stocks which have the potential for long-term growth, SAM will
evaluate the issuer's financial strength, quality of management and
earnings power.
2. MAY INVEST IN SECURITIES CONVERTIBLE INTO COMMON STOCK WHEN, IN THE
OPINION OF SAM, THE EXPECTED TOTAL RETURN OF A CONVERTIBLE SECURITY
EXCEEDS THE EXPECTED TOTAL RETURN OF COMMON STOCK ELIGIBLE FOR
PURCHASE BY THE PORTFOLIO. The Portfolio may purchase corporate bonds
and preferred stock that convert to common stock either automatically
after a specified period of time or at the option of the issuer. The
Portfolio will purchase those convertible securities which, in SAM's
opinion, have underlying common stock with potential for long-term
growth. The Portfolio will purchase convertible securities which are
investment grade, i.e., rated in the top four categories by either S&P
or Moody's. Moody's deems securities rated in the fourth category
(Baa) to have speculative characteristics. The Portfolio may retain a
convertible security that is down-graded to below investment grade
after purchase. For a description of ratings, see the "Ratings
Supplement" in this Prospectus. The value of convertible securities
will normally vary with the value of the underlying common stock and
fluctuate inversely with interest rates.
3. MAY INVEST IN DEBT SECURITIES WHOSE PERFORMANCE AND PRINCIPAL AMOUNT
AT MATURITY IS LINKED TO A SPECIFIC EQUITY SECURITY OR SECURITIES
INDEX.
The principal risk factor associated with an investment in the Northwest
Portfolio is that the market value of the portfolio securities may decrease.
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An investment in the Northwest Portfolio is also subject to different risks
than a portfolio whose securities are issued by more geographically diverse
companies. Since the Portfolio invests primarily in companies with their
principal executive offices located in the Northwest, the number of issuers
whose securities are eligible for purchase is significantly less than for many
other portfolios. Also, some companies whose securities are held in the
Portfolio may primarily distribute products or provide services in a specific
locale or in the Northwest region. The long-term growth of these companies
can be significantly affected by business trends in and the economic health of
those areas. Other companies whose securities are held by the Portfolio may
have a predominately national or partially international market for their
products or services and are more likely to be impacted by national or
international trends. As a result, the performance of the Portfolio may be
influenced by business trends or economic conditions not only in a specific
locale or in the Northwest region, but also on a national or international
level depending on the companies whose securities are held in the Portfolio at
any particular time.
BOND PORTFOLIO
The investment objective of the Bond Portfolio is to seek as high a level of
current income as is consistent with the relative stability of capital.
To pursue its objective, the Bond Portfolio:
1. WILL INVEST PRIMARILY IN MEDIUM-TERM DEBT SECURITIES.
2. MAY INVEST UP TO 50% OF ITS TOTAL ASSETS IN MORTGAGE RELATED
SECURITIES. These securities (a) are either investments in a pool of
mortgages or in securities secured by a pool of mortgages and (b) must
be rated in the top two grades by either S&P or Moody's. Unlike
conventional bonds, the principal on mortgage-related securities is
paid back over the life of the loan rather than at maturity.
Consequently, the Bond Portfolio will receive monthly scheduled
payments of both principal and interest. In addition, the Bond
Portfolio may receive unscheduled principal payments representing
unscheduled prepayments on the underlying mortgages which could lower
the overall return of the investment.
Because the Bond Portfolio must reinvest scheduled and unscheduled
principal payments at prevailing interest rates at the time of such
investment, and because such interest rates may be higher or lower
than the current yield of the Bond Portfolio, mortgage-related
securities may not be an effective means to lock in long-term interest
rates. In addition, prices of mortgage-related securities like
conventional bonds are inversely affected by changes in interest rate
levels. Because of the likelihood of increased prepayments of
mortgages in times of declining interest rates, they have less
potential for capital appreciation than comparable fixed-income
securities and may in fact decrease in value when interest rates fall.
Mortgage-related securities include:
(a) Government National Mortgage Association ("GNMA") securities,
which are interests in pools of mortgage loans issued by the
Federal Housing Administration or the Farmer's Home
Administration or guaranteed by the Veterans Administration
and issued by GNMA. Once approved by GNMA, the timely payment
of principal and interest by each mortgage pool is guaranteed
by GNMA. This guarantee represents a general obligation of
the U.S. Treasury.
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(b) Mortgage pass-through securities issued by the Federal
National Mortgage Association ("FNMA") and the Federal Home
Loan Mortgage Corporation ("FHLMC").
(c) Conventional pass-through mortgage securities issued by
non-governmental issuers.
(d) Collateralized Mortgage Obligations ("CMOs"), which are
securities that have been pledged as collateral mortgages or
mortgage-backed securities and are issued by non-government
issuers.
(e) Mortgage pass-through bonds and mortgage-backed bonds issued
by non-government issuers. A mortgage pass-through bond is an
interest in a pool of mortgages where the cash flow generated
from the mortgage collateral pool is dedicated to the
repayment of the bond. A mortgage-backed bond is a general
obligation of an issuer secured by a first lien on a pool of
mortgages.
(f) Securities which are derivatives of securities listed in
(a),(b) and (c) above. Derivative mortgage securities are
created from the cash flows of mortgages or pools of
mortgages. While the derivative securities retain the
combination of quality and yield possessed by the underlying
collateral, the cash flows are reshaped to suit various
investment strategies. Examples of such securities include
residuals from CMOs, floating rate notes, inverse floating
rate notes, interest only and principal only strips and
junior/senior securities. Certain derivatives may be
extremely risky investments because, among other things, they
may be particularly sensitive to changes in interest rates.
(The Portfolio will not invest in leveraged derivatives.)
3. MAY INVEST UP TO 30% OF ITS TOTAL ASSETS IN DEBT SECURITIES OF ISSUERS
IN EACH OF THE FOLLOWING SECTORS: DOMESTIC INDUSTRIALS, DOMESTIC
UTILITIES, SUPRANATIONALS, YANKEE AND FOREIGN.
SUPRANATIONAL ISSUERS are organizations whose memberships include two
or more national governments and which have a limited right to draw on
the resources of such governments. Examples of such issuers include
the World Bank, the European Investment Bank, the European Economic
Community and the European Coal and Steel Community.
The YANKEE SECTOR is made up of securities issued in the U.S. by
foreign issuers. These bonds involve investment risks that are
different from those of domestic issuers. Such risks may include
nationalization of the issuer, confiscatory taxation by the foreign
government, establishment of controls by the foreign government that
would inhibit the remittance of amounts due the Bond Portfolio, lack
of comparable publicly-available information concerning foreign
issuers, the lack of comparable accounting and auditing practices in
foreign countries and finally, in the event of default, difficulty of
enforcing claims against foreign issuers.
The FOREIGN SECTOR is made up of securities issued and traded outside
of the U.S. by either U.S. or foreign issuers. These securities may
be denominated in U.S. dollars (e.g., Eurobonds) or foreign currency
and may be held in the U.S. or a foreign country. In addition to the
risks discussed in connection with the Yankee sector, these bonds
would be traded in a market subject to less regulation than U.S.
markets and have the
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liquidity and settlement problems attendant in some foreign markets.
Those bonds denominated in foreign currencies have the risk of an
unfavorable exchange rate fluctuation subsequent to purchase by the
Bond Portfolio.
SAM will make every effort to analyze potential investments in foreign
issuers on the same basis as the rating services analyze domestic
issuers. Because public information is not always comparable to that
available on domestic issuers, this may not be possible. Therefore,
while SAM will make every effort to select investments in foreign
securities on the same basis relative to quality and risk as its
investments in domestic securities, it may not always be able to do
so. There are also currency risks associated with foreign
investments.
4. MAY INVEST IN INVESTMENT GRADE AND BELOW INVESTMENT GRADE CORPORATE
DEBT SECURITIES. No more than 20% of the Bond Portfolio's assets will
be invested in corporate debt securities which are rated lower than
the top four grades by S&P or Moody's (such top four grades constitute
"investment grade" securities) or, if not rated, are in the opinion of
SAM of less than investment grade quality.
Bonds which are rated lower than the top four grades by S&P (BB and
below) and Moody's (Ba and below) are referred to as high-yield bonds
or "junk bonds." The Bond Portfolio does not intend to purchase
high-yield bonds for the coming year, but may retain bonds which were
investment grade at the time of purchase but later downgraded to lower
than the top four grades assigned by S&P or Moody's. High-yield bonds
normally offer a current yield or yield-to-maturity which is
significantly higher than the yield available from investment grade
bonds. However, high-yield bonds are speculative and involve greater
investment risks due to the issuer's reduced creditworthiness and
increased likelihood of default and bankruptcy. Generally, high-yield
bonds are subject to greater price changes, fluctuations in yield and
risk to principal and income than higher rated bonds of the same
maturity. For more information on ratings see the "Ratings
Supplement" section of this Prospectus, and for more information on
the special risks associated with high-yield bonds see the Trust's
Statement of Additional Information.
SAM uses S&P and Moody's ratings only as a preliminary indicator of
investment quality. SAM will periodically research each high-yield
bond held in the Bond Portfolio, whether rated or not rated, to
analyze such factors as the issuer's interest and dividend coverage,
asset coverage, earnings prospects and managerial strength.
5. MAY INVEST IN OBLIGATIONS OF, OR GUARANTEED BY THE U.S. GOVERNMENT,
ITS AGENCIES OR INSTRUMENTALITIES including (a) securities backed by
the full faith and credit of the U.S. Government, such as U.S.
Treasury bills, notes and bonds; (b) securities issued by U.S.
Government agencies or instrumentalities that are not backed by the
full faith and credit of the U.S. Government but are supported by the
issuer's right to borrow from the U.S. Treasury, such as securities
issued by FNMA and FHLMC; and (c) securities supported solely by the
creditworthiness of the issuer, such as securities issued by Tennessee
Valley Association ("TVA"). While U.S. Government securities are
considered to be of the highest credit quality available, they are
subject to the same market risks as comparable debt securities.
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6. MAY INVEST IN ASSET-BACKED SECURITIES, WHICH REPRESENT INTERESTS IN,
OR ARE SECURED BY AND PAYABLE FROM, POOLS OF ASSETS SUCH AS CONSUMER
LOANS, AUTOMOBILE RECEIVABLE SECURITIES, CREDIT CARD RECEIVABLE
SECURITIES, AND INSTALLMENT LOAN CONTRACTS. These securities may be
supported by credit enhancements such as letters of credit. Payment
of interest and principal ultimately depends upon borrowers paying the
underlying loans. There exists a risk of default by the underlying
borrowers and recovery on repossessed collateral may be unavailable or
inadequate to support payments on asset-backed securities. In
addition, asset-backed securities are subject to prepayment risks
which may reduce the overall return of the investment.
Generally, bond values fluctuate inversely with changes in interest rates. The
longer the maturity or the poorer the quality of a bond, the greater volatility
it will have. The principal risks of investment in the Bond Portfolio have
been discussed in connection with specific types of securities above.
MONEY MARKET PORTFOLIO
The investment objective of the Money Market Portfolio is to seek as high a
level of current income as is consistent with the preservation of capital and
liquidity through investments in high-quality money market instruments maturing
in thirteen months or less. The remaining maturity of a money market
instrument is measured from its trade date. The Money Market Portfolio may
occasionally purchase an instrument with a remaining maturity exceeding
thirteen months, but which is eligible for purchase because it has a demand
feature permitting the Portfolio to receive the principal amount of the
instrument on no more than 30 days prior notice or at specified intervals of
less than thirteen months (except that variable rate U.S. Government securities
are not required to have such a demand feature).
To pursue its objective, the Money Market Portfolio:
1. WILL PURCHASE SECURITIES WHICH IN THE OPINION OF SAM, OPERATING
PURSUANT TO GUIDELINES ESTABLISHED BY THE BOARD OF TRUSTEES, PRESENT
MINIMAL CREDIT RISKS AFTER AN EVALUATION OF THE CREDIT QUALITY OF THE
ISSUER OR OF ANY ENTITY PROVIDING A CREDIT ENHANCEMENT FOR THE
SECURITY AND WHICH AT THE TIME OF PURCHASE ARE:
(a) Rated in the highest rating category by at least two
nationally recognized rating organizations (for example, A-1
by S&P, P-1 by Moody's, Duff 1 by Duff & Phelps Credit Rating
Company or F-1 by Fitch Investors Services, Inc., or, if rated
by only one organization, rated in the highest category by
that organization); or
(b) Split-rated, i.e., securities which have received the highest
rating from one nationally recognized rating organization and
the second highest rating from at least one other nationally
recognized rating organization (however, no more than 5% of
the Money Market Portfolio's total assets may be invested in
split-rated securities and the Portfolio may invest only the
greater of $1 million or 1% of total assets in such securities
from the same issuer); or
(c) Unrated, but in the opinion of SAM are comparable in quality
to securities that are rated in the highest category or are
split-rated (the Portfolio will invest no more than 20% of
total assets in unrated
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securities which in the opinion of SAM are comparable to
securities in the highest rating category).
A security is considered to be rated if either the security itself is
assigned a rating or the issuer is assigned a rating for comparable
short-term debt obligations. The rating of a security with a
remaining maturity greater than thirteen months which has a demand
feature is determined by looking either to the rating of the party
ultimately responsible for payment (for example, a bank issuing a
letter of credit or company providing a guarantee) or to the short and
long-term ratings of the security, depending on whether the demand
feature is unconditional or conditional. See "Ratings Supplement" in
this Prospectus for a further explanation of rating categories.
2. MAY INVEST, SUBJECT TO THE MATURITY AND QUALITY REQUIREMENTS DESCRIBED
ABOVE, IN:
(a) Commercial paper obligations, including obligations sold
pursuant to Section 4(2) ("Section 4(2) paper") of the
Securities Act of 1933 ("1933 Act"). Section 4(2) exempts
from the registration requirements of the 1933 Act securities
sold by the issuer in private transactions. Section 4(2)
paper may be purchased by the Money Market Portfolio only if
SAM has determined that such securities are liquid under
guidelines adopted by the Board of Trustees. Because Section
4(2) paper is a restricted security, investing in Section 4(2)
paper could have the effect of increasing the Money Market
Portfolio's illiquidity to the extent buyers are unwilling to
purchase the securities. In addition to commercial paper
obligations of domestic corporations, the Money Market
Portfolio may also purchase dollar-denominated commercial
paper issued in the U.S. by foreign entities. While
investments in foreign securities are intended to reduce risk
by providing further diversification, such investments involve
sovereign and other risks, in addition to the credit and
market risks normally associated with domestic securities.
These additional risks include the possibility of adverse
political and economic developments (including political
instability) and the potentially adverse effects of
unavailability of public information regarding issuers,
reduced governmental supervision regarding financial markets,
reduced liquidity of certain financial markets, and the lack
of uniform accounting, auditing, and financial standards or
the application of standards that are different or less
stringent than those applied in the U.S. The Portfolio will
purchase such securities only if in SAM's opinion the
security is of an investment quality comparable to other
obligations which may be purchased by the Money Market
Portfolio.
(b) Negotiable and non-negotiable deposits, bankers' acceptances
and other short-term obligations of banks (provided the
issuing bank has total assets of at least $1 billion, or in
the case of a bank not having total assets of at least $1
billion, the bank is a member of and insured by the Federal
Deposit Insurance Corporation in which case the Money Market
Portfolio will limit its investment to the statutory insurance
coverage); and
(c) Dollar-denominated securities issued by foreign banks
(including foreign branches of U.S. banks) provided that in
SAM's opinion the
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security is of an investment quality comparable to other
obligations which may be purchased by the Money Market
Portfolio.
3. WILL MAINTAIN A DOLLAR-WEIGHTED AVERAGE MATURITY OF 90 DAYS OR LESS.
4. MAY INVEST IN OBLIGATIONS OF, OR GUARANTEED BY, THE U.S. GOVERNMENT,
ITS AGENCIES OR INSTRUMENTALITIES including (a) securities backed by
the full faith and credit of the U.S. Government, such as U.S.
Treasury bills, notes and bonds; (b) securities issued by U.S.
Government agencies or instrumentalities that are not backed by the
full faith and credit of the U.S. Government but are supported by the
issuer's right to borrow from the U.S. Treasury, such as securities
issued by FNMA and FHLMC; and (c) securities supported solely by the
creditworthiness of the issuer, such as securities issued by TVA.
While U.S. Government securities are considered to be of the highest
credit quality available, they are subject to the same market risks as
comparable debt securities.
The principal risk factor associated with investment in the Money Market
Portfolio is that it may experience a delay or failure in principal or interest
payments at maturity of one or more of the portfolio securities. The Money
Market Portfolio's yield will fluctuate with general money market interest
rates.
COMMON INVESTMENT PRACTICES
Each of the Portfolios may also follow the investment practices described
below:
1. MAY HOLD CASH OR INVEST TEMPORARILY IN HIGH-QUALITY COMMERCIAL PAPER,
CERTIFICATES OF DEPOSIT, SHARES OF NO-LOAD, OPEN-END MONEY MARKET
FUNDS OR REPURCHASE AGREEMENTS. (Equity, Growth, Northwest and Bond
Portfolios only.) A Portfolio may purchase these short-term securities
as a cash management technique under those circumstances where it has
cash to manage for a short time period, for example, after receiving
proceeds from dividend distributions or the sale of portfolio
securities. SAM will waive its management fees for assets invested in
money market funds. With respect to repurchase agreements, each
Portfolio will invest no more than 5% of its total assets in qualified
repurchase agreements and will not purchase repurchase agreements that
mature in more than seven days.
2. MAY INVEST FOR SHORT-TERM PURPOSES WHEN SAM BELIEVES SUCH ACTION TO BE
DESIRABLE AND CONSISTENT WITH SOUND INVESTMENT PROCEDURES. (Equity,
Growth, Northwest and Bond Portfolios only.) A Portfolio, however,
will not engage primarily in trading for the purpose of short-term
profits. A Portfolio may dispose of securities whenever it is deemed
advisable without regard to the length of time the securities have
been held.
3. MAY EACH INVEST UP TO 5% OF NET ASSETS IN WARRANTS. (Equity, Growth
and Northwest Portfolios only.) A warrant is an option issued by a
corporation that gives the holder the right to buy the corporation's
common stock at a specific price within a certain time period.
4. MAY INVEST UP TO 10% OF TOTAL ASSETS IN RESTRICTED SECURITIES ELIGIBLE
FOR RESALE UNDER RULE 144A ("RULE 144A SECURITIES"), PROVIDED THAT SAM
HAS DETERMINED THAT SUCH SECURITIES ARE LIQUID UNDER GUIDELINES
ADOPTED BY THE BOARD OF TRUSTEES. Restricted securities may be sold
only in offerings registered under the Securities Act of 1933 ("1933
Act") or in transactions exempt from the registration requirements
under the 1933 Act. Rule 144A
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under the 1933 Act provides an exemption for the resale of certain
restricted securities to qualified institutional buyers. Investing in
Rule 144A securities could have the effect of increasing the
Portfolio's illiquidity to the extent that qualified institutional
buyers or other buyers are unwilling to purchase the securities.
5. MAY INVEST IN AMERICAN DEPOSITARY RECEIPTS ("ADRS"), WHICH REPRESENT
SECURITIES ISSUED BY A FOREIGN ISSUER. (Equity, Growth and Northwest
Portfolios only.) ADRs are registered receipts evidencing ownership
of an underlying foreign security. ADRs involve risks in addition to
risks normally associated with securities issued by domestic issuers,
including the possibility of adverse political or economic
developments in foreign countries. Foreign companies may not be
subject to accounting standards or governmental supervision comparable
to U.S. companies, there may be less public or less current
information about their operations, and the foreign issuer of the
underlying security may not provide financial and other material
information to the issuer of the receipts. In addition, foreign
markets may be less liquid or more volatile than U.S. markets and may
offer less protection to investors. Investments in foreign securities
may also be subject to special risks, such as governmental regulations
of foreign exchange transactions and changes in rates of exchange
between the foreign currency and the U.S. dollar.
Each of the Portfolios is subject to the following fundamental policies which
cannot be changed without shareholder vote:
1. MAY NOT INVEST MORE THAN 5% OF ITS TOTAL ASSETS IN THE SECURITIES OF
ANY ONE ISSUER (OTHER THAN SECURITIES ISSUED BY THE U.S. GOVERNMENT,
ITS AGENCIES OR INSTRUMENTALITIES), EXCEPT (I) WITH RESPECT TO THE
EQUITY, GROWTH, NORTHWEST AND BOND PORTFOLIOS, UP TO 25% OF THE VALUE
OF ASSETS (NOT INCLUDING SECURITIES ISSUED BY ANOTHER INVESTMENT
COMPANY) MAY BE INVESTED WITHOUT REGARD TO THIS LIMIT, AND (II) WITH
RESPECT TO THE MONEY MARKET AND BOND PORTFOLIOS, UP TO 100% OF TOTAL
ASSETS MAY BE INVESTED IN OBLIGATIONS OF OR GUARANTEED BY THE U.S.
GOVERNMENT, ITS AGENCIES OR INSTRUMENTALITIES;
2. MAY NOT, WITH RESPECT TO 100% OF THE VALUE OF ITS TOTAL ASSETS,
PURCHASE MORE THAN 10% OF THE OUTSTANDING VOTING SECURITIES OF ANY ONE
ISSUER (OTHER THAN U.S. GOVERNMENT SECURITIES);
3. MAY NOT INVEST MORE THAN 25% OF THE TOTAL ASSETS IN ANY ONE INDUSTRY.
SECURITIES OF FOREIGN BANKS AND FOREIGN BRANCHES OF U.S. BANKS ARE
CONSIDERED TO BE ONE INDUSTRY. The Equity, Growth, Northwest, Bond
and Money Market Portfolios will not concentrate their assets in
particular industries. With respect to the Equity, Growth, Northwest
and Money Market Portfolios, the 25% limitation does not apply to
obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities or to certificates of deposit or bankers'
acceptances issued by domestic banks. With respect to the Bond
Portfolio, the 25% limitation does not apply to obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities
or to mortgage-related securities; and
4. MAY BORROW MONEY ONLY FOR TEMPORARY OR EMERGENCY PURPOSES FROM A BANK
OR AFFILIATE OF SAFECO CORPORATION AT AN INTEREST RATE NOT GREATER
THAN THAT AVAILABLE FROM COMMERCIAL BANKS. Each Portfolio will not
borrow amounts in excess of 5% of its total assets. The Portfolios
intend to exercise
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their borrowing authority primarily to meet shareholder redemptions
under circumstances where redemptions exceed available cash.
For more information, see the "Investment Policies" and "Additional Investment
Information" sections of the Trust's Statement of Additional Information.
__________________
PORTFOLIO MANAGERS
__________________
EQUITY PORTFOLIO
The manager for the Equity Portfolio is Richard D. Meagley, Vice President,
SAM. Mr. Meagley has served as portfolio manager for the Portfolio since
January 1995. He is also the portfolio manager for other SAFECO Funds. He
served from 1992 to 1994 as portfolio manager and analyst for Kennedy
Associates, Inc., an investment advisory firm located in Seattle, Washington .
He was an Assistant Vice President of SAM and the fund manager of the SAFECO
Northwest Fund from 1991 to 1992. From 1983 to 1991 he was an investment
portfolio manager and securities analyst for SAM.
GROWTH PORTFOLIO
The manager for the Growth Portfolio is Thomas M. Maguire, Vice President, SAM.
Mr. Maguire has served as portfolio manager for the Portfolio since it
commenced operations in 1993. He has served as portfolio manager for the
SAFECO Growth Fund since 1989.
NORTHWEST PORTFOLIO
The manager for the Northwest Portfolio is Charles R. Driggs, Vice President,
SAM. Mr. Driggs has served as portfolio manager for the Portfolio since it
commenced operations in 1993. From 1984 through 1992 Mr. Driggs was a security
analyst for SAM specializing in banks, savings and loan institutions and the
insurance industry.
BOND PORTFOLIO
The manager for the Bond Portfolio is Michael C. Knebel, Vice President, SAM.
Mr. Knebel began serving as portfolio manager for the Portfolio in 1995. He
has served as portfolio manager for other SAFECO mutual funds since 1989.
MONEY MARKET PORTFOLIO
The manager for the Money Market Portfolio is Naomi Urata, Assistant Vice
President, SAM. Ms. Urata began serving as portfolio manager for the Portfolio
in 1995. Ms. Urata has served as portfolio manager for another SAFECO mutual
fund since 1994. From 1993 to 1994 she was a Fixed Income Analyst for SAM.
From 1990 to 1993 Ms. Urata was Cash Manager for the Seattle Times newspaper,
Seattle, Washington.
Each portfolio manager and certain other persons related to SAM and the
Portfolios are subject to written policies and procedures designed to prevent
abusive personal securities trading. Incorporated within these policies and
procedures are each of the recommendations made by the Investment Company
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<PAGE> 25
Institute (the trade group for the mutual fund industry) with respect to
personal securities trading by persons associated with mutual funds. Those
recommendations include preclearance procedures and blackout periods when
certain personnel may not trade in securities that are the same or related
securities being considered for purchase or sale by a Portfolio.
_____________________________________________________________________
INFORMATION ABOUT SHARE OWNERSHIP AND COMPANIES THAT PROVIDE SERVICES
TO THE TRUST
_____________________________________________________________________
Shares of each Portfolio represent equal proportionate interests in the assets
of that Portfolio only and have identical voting, dividend, redemption,
liquidation and other rights. All shares issued are fully paid and
non-assessable, and shareholders have no preemptive or other right to subscribe
to any additional shares.
Shares of the Trust may be owned by the separate accounts of Participating
Insurance Companies and by Qualified Plans (see "Introduction to the Trust and
the Portfolios"). Pursuant to the Investment Company Act of 1940 (the "1940
Act"), Participating Insurance Companies will solicit voting instructions from
Variable Contract owners with respect to any matters that are presented to a
vote of shareholders . See the separate account prospectus for the Variable
Contract for more information regarding the pass-through of these voting
rights. With respect to Qualified Plans, the Trustees of such plans will vote
the shares held by the Qualified Plans, except that in certain cases such
shares may be voted by a named fiduciary or an investment manager pursuant to
the Employee Retirement Security Act of 1974. There is no pass-through voting
to the participants in the Qualified Plans.
On any matter submitted to a vote of shareholders, all shares of the Portfolios
then issued and outstanding and entitled to vote shall be voted in the
aggregate and not by Portfolio except for matters concerning only a Portfolio.
Certain matters approved by a vote of all shareholders of the Trust may not be
binding on a Portfolio whose shareholders have not approved such matter. The
holders of each share of a Portfolio shall be entitled to one vote for each
full share and a fractional vote for each fractional share. Shares of one
Portfolio may not bear the same economic relationship to the Trust as another
Portfolio.
The Trust does not intend to hold annual meetings of shareholders of the
Portfolios. The Trustees will call a special meeting of shareholders of a
Portfolio only if required by the 1940 Act, in their written discretion, or
upon the written notice of holders of 10% or more of the outstanding shares of
the Portfolio entitled to vote.
Under Delaware law, the shareholders of the Portfolios will not be personally
liable for the obligations of any Portfolio; a shareholder is entitled to the
same limitation of personal liability extended to shareholders of corporations.
To guard against the risk that Delaware law might not be applied in other
states, the Trust Instrument requires that every written obligation of the
Trust or Portfolio contain a statement that such obligation may only be
enforced against the assets of the Trust or Portfolio and provides for
indemnification out of
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Trust or Portfolio property of any shareholder nevertheless held personally
liable for Trust or Portfolio obligations, respectively.
SAM is the investment adviser for each Portfolio under an agreement with the
Trust. Under the agreement, SAM is responsible for the overall management of
the Trust's and each Portfolio's business affairs. SAM provides investment
research, advice, management and supervision to the Trust and each Portfolio.
Consistent with each Portfolio's investment objectives and policies, SAM
determines what securities will be purchased, retained or sold by each
Portfolio, and implements those decisions. Each Portfolio's turnover rate is
set forth in the "Financial Highlights" section. High turnover rates increase
transaction costs and may increase taxable gains. SAM considers these effects
when making investment decisions. Each Portfolio pays SAM an annual management
fee based on a percentage of that Portfolio's net assets ascertained each
business day and paid monthly in accordance with the following annual rates:
.74% of net assets for the Equity, Growth, Northwest and Bond Portfolios and
.65% of net assets for the Money Market Portfolio.
The distributor of each Portfolio's shares under an agreement with the Trust is
SAFECO Securities, Inc. ("SAFECO Securities"), a broker-dealer registered under
the Securities Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc. SAFECO Securities is not compensated by the Trust or
any Portfolio for these services.
The transfer, dividend and distribution disbursement and shareholder servicing
agent for each Portfolio under an agreement with the Trust is SAFECO Services
Corporation ("SAFECO Services"). SAFECO Services is not compensated by the
Trust or any Portfolio for these services.
______________________________
PERSONS CONTROLLING THE TRUST
______________________________
At March 31, 1996, SAFECO Life Insurance Company ("SAFECO Life") controlled the
Equity, Growth, Northwest, Bond and Money Market Portfolios, and all shares of
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<PAGE> 27
the Portfolios of the Trust were owned by separate accounts of SAFECO Life,
except for certain shares of the Northwest Portfolio which were issued directly
to SAM at net asset value for its contribution of initial operating capital for
that Portfolio. SAFECO Life is a stock life insurance company incorporated
under the laws of Washington, with headquarters at 15411 N.E. 51st Street,
Redmond, Washington. SAFECO Life is a wholly-owned subsidiary of SAFECO
Corporation, and is an affiliated company of SAM, SAFECO Securities and SAFECO
Services, the investment adviser, principal underwriter and transfer agent,
respectively, of the Trust. SAFECO Life has advanced all costs for the
organization of the Trust. SAFECO Corporation, SAM, SAFECO Securities and
SAFECO Services have their principal place of business at SAFECO Plaza,
Seattle, Washington 98185.
_____________________________
SALE AND REDEMPTION OF SHARES
_____________________________
Each Portfolio is a series of SAFECO Resource Series Trust, a Delaware business
trust, which issues an unlimited number of shares of beneficial interest. The
Board of Trustees may establish additional series of shares of the trust
without the approval of shareholders.
Shares are sold to the separate accounts of Participating Insurance Companies
and may also be sold to Qualified Plans. Shares of each Portfolio are purchased
and redeemed at net asset value. Redemptions will be effected by the
separate accounts to meet obligations under the Variable Contracts and by
the Qualified Plans. Variable Contract owners and Qualified Plan participants
do not deal directly with the Trust with respect to acquisition or redemption
of shares. The Board of Trustees of the Trust may refuse to sell shares of
any Portfolio to any person, or may suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by any regulatory
authority having jurisdiction or is, in the sole discretion of the Trustees
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
_______________________
PERFORMANCE INFORMATION
_______________________
Each Portfolio's yield, effective yield, total return and average annual total
return may be quoted in advertisements. Performance figures are indicative
only of past performance and are not intended to represent future investment
results. The yield and share price of the Equity, Growth Northwest and Bond
Portfolios will fluctuate and your shares, when redeemed, may be worth more or
less than you originally paid for them. The yield of the Money Market
Portfolio will also fluctuate.
EQUITY, GROWTH, NORTHWEST AND BOND PORTFOLIOS
Yield is the annualization on a 360-day basis of a Portfolio's net income per
share over a 30-day period divided by the Portfolio's net asset value per share
on the last day of the period. Total return is the total percentage change in
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<PAGE> 28
an investment in a Portfolio, assuming the reinvestment of dividends and
capital gains distributions over a stated period of time. Average annual total
return is the annual percentage change in an investment in a Portfolio,
assuming the reinvestment of dividends and capital gains distributions, over a
stated period of time.
MONEY MARKET PORTFOLIO
Yield is the annualization on a 365-day basis of the Money Market Portfolio's
net income over a 7-day period. Effective yield is the annualization on a
365-day basis of the Money Market Portfolio's net income over a 7-day period
with dividends reinvested. The effective yield will be slightly higher than the
yield because of the compounding effect of this assumed reinvestment.
RANKINGS
From time to time, a Portfolio may advertise its rankings. Rankings are
calculated by independent companies that monitor mutual fund performance (e.g.
CDA Technologies, Lipper Analytical Services, Inc. and Morningstar, Inc.) and
are reported periodically in national financial publications such as Barron's,
Business Week, Forbes, Investor's Business Daily, Money Magazine and The Wall
Street Journal. In addition, non-standardized performance figures may
accompany the standardized figures described above. Non-standardized figures
may be calculated in a variety of ways, including but not necessarily limited
to, different time periods and different initial investment amounts. Each
Portfolio may also compare its performance to the performance of the Standard &
Poor's 500 Index and other relevant indices.
OTHER CHARGES
None of the Portfolios impose a sales charge. However, other charges payable
by all shareholders include investment advisory fees. These charges affect
each Portfolio's calculation of yield, effective yield, total return and
average annual total return.
___________________________________________
PORTFOLIO DISTRIBUTIONS AND TAX INFORMATION
___________________________________________
Each Portfolio intends to continue to elect and to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code by
distributing substantially all of its net investment income and net capital
gains to its shareholders (the separate accounts of Participating Insurance
Companies and Qualified Plans) and meeting other requirements of the Internal
Revenue Code relating to the sources of its income and diversification of its
assets.
Each Portfolio is treated as a separate entity for federal income tax purposes
and, therefore, the investments and results of the Portfolios are not
aggregated for purposes of determining net ordinary income (loss) or net
realized capital gains (losses).
All dividends are distributed to shareholders (separate accounts of
Participating Insurance Companies and Qualified Plans) and will be
automatically reinvested in trust shares. Dividends and distributions made by
the Portfolios to the separate accounts are taxable, if at all, to the
Participating Insurance Companies; they are not taxable to Variable Contract
owners. Dividends and distributions made by the Portfolios to Qualified Plans
are not taxable to the Qualified Plans or to the participants thereunder.
In addition to the diversification requirements in Subchapter M, each Portfolio
is required to satisfy diversification requirements of Section 817(h) of the
Internal Revenue Code and the Investment Company Act. Failure to comply with
the requirements of Section 817(h) could result in taxation of the insurance
company and immediate taxation of the owners of variable annuity and variable
life insurance contracts to the full extent of appreciation under the
contracts.
Variable Contracts owners should refer to the prospectuses relating to their
contracts regarding the federal income tax treatment of ownership of such
contracts. Also see Distributions and Tax Information in the Statement of
Additional Information.
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_______________________
SHARE PRICE CALCULATION
_______________________
The net asset value per share of a Portfolio is determined by subtracting the
liabilities of the Portfolio from its assets, valued at market, and dividing
the result by the number of outstanding shares. Shares of the Portfolios of
the Trust are sold and redeemed at the net asset value next determined after
receipt by the transfer agent of the sales order or request for redemption in
good order. There is no sales charge. Net asset value per share is computed
as of the close of regular trading of the New York Stock Exchange (currently
1:00 P.M. Pacific Time) each day that the Exchange is open for trading.
For the purpose of computing the net asset value per share for the Equity,
Growth, Northwest and Bond Portfolios, securities are valued on the basis of
valuations provided by a pricing service approved by the Trust's Board of
Trustees. In general, portfolio securities are valued at the last reported sale
price on the national exchange on which the securities are primarily traded,
unless there are no transactions in which case they shall be valued at the last
reported bid price. Securities traded over-the-counter are valued at the last
sale price, unless there is no reported sale price in which case the last
reported bid price will be used. Portfolio securities that are traded on a
stock exchange and over-the-counter are valued according to the broadest and
most representative market. For bonds and other fixed income securities, this
usually is the over-the-counter market. Long-term corporate bonds and
securities not traded on a national exchange shall be valued based on
consideration of information with respect to transactions in similar
securities, quotations from dealers and various relationships between
securities. Other assets for which a representative value cannot be
established are valued at their fair value as determined in good faith by or
under the direction of the Trust's Board of Trustees.
The Money Market Portfolio intends to maintain a net asset value per share of
$1.00. There can be no assurance that it will be able to maintain this
constant value per share. The shares of the Money Market Portfolio are neither
insured, nor guaranteed, by the U.S. Government. The Money Market Portfolio's
securities are valued on the basis of amortized cost. Amortized cost
valuation, which may be used so long as the Board of Trustees believes that it
fairly reflects market value, involves valuing a security at its cost and
adding or subtracting, ratably to maturity, any discount or premium, regardless
of the impact of fluctuating interest rates on the market value of the
security. This method provides stability of net asset value per share. For
additional information concerning the impact of amortized cost on the
calculation of net asset value, see "Additional Information Concerning
Calculation of Net Asset Value Per Share" in the Statement of Additional
Information.
__________________
RATINGS SUPPLEMENT
__________________
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Ratings by Moody's Investors Service, Inc. ("Moody's")and Standard & Poor's
Ratings Group ("S&P"), represent the respective opinions of those organizations
as to the investment quality of the rated obligations. Investors should
realize these ratings do not constitute a guarantee that the principal and
interest payable under these obligations will be paid when due.
DESCRIPTION OF DEBT RATINGS
MOODY'S
Investment Grade:
AAA -- Judged to be of the best quality. They carry the smallest degree of
investment risk and are generally referred to as "gilt edge." Interest
payments are protected by a large or an exceptionally stable margin and
principal is secure. While the various protective elements are likely to
change, such changes as can be anticipated are most unlikely to impair the
fundamentally strong position of such issues.
AA -- Judged to be of high quality. Together with the Aaa group they comprise
what are generally known as high-grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A -- Have many favorable investment attributes and are to be considered upper
medium-grade obligations. Factors giving security to principal and interest
are considered adequate but elements may be present which suggest a
susceptibility to impairment sometime in the future.
BAA -- Considered as medium-grade obligations, i.e., they are neither highly
protected nor poorly secured. Interest payments and principal security appear
adequate for the present but certain protective elements may be lacking or may
be characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and have speculative
characteristics as well.
Non-Investment Grade:
BA -- Judged to have speculative elements; their future cannot be considered as
well assured. Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during both good and bad times
over the future. Uncertainty of position characterizes bonds in this class.
B -- Generally lack characteristics of a desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the
contract over any long period of time may be uncertain.
CAA -- Have poor standing. Such issues may be in default or there may be
present elements of danger with respect to principal or interest.
CA -- Represent obligations which are speculative to a high degree. Such
issues are often in default or have other marked shortcomings.
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C -- The lowest-rated class of bonds. Issues so rated have extremely poor
prospects of ever attaining any real investment standing.
CON.(...) -- The security depends upon the completion of some act or the
fulfillment of some condition. These are bonds secured by (a) earnings of
projects under construction, (b) earnings of projects unseasoned in operating
experience, (c) rentals which begin when facilities are completed, or (d)
payments to which some other limiting condition attaches. Parenthetical rating
denotes probable credit stature upon completion of construction or elimination
of basis of condition.
S&P
Investment Grade:
AAA -- Highest rating assigned by S&P. Capacity to pay interest and repay
principal is extremely strong.
AA -- Very strong capacity to pay interest and repay principal. Differs from
the highest-rated issues only in a small degree.
A -- Strong capacity to pay interest and repay principal although it is
somewhat more susceptible to the adverse effects of changes in circumstances
and economic conditions than debt in higher-rated categories.
BBB -- Adequate capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse economic conditions
or changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher- rated
categories.
PLUS (+) OR MINUS (-): The ratings from "AA" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Not Investment Grade:
BB, B, CCC, CC -- Regarded, on balance, as predominantly speculative with
respect to capacity to pay interest and repay principal in accordance with the
terms of the obligation. "BB" indicates the lowest degree of speculation and
"CC" the highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
C -- Reserved for income bonds on which no interest is being paid.
D -- In default. Payment of interest and/or repayment of principal is in
arrears.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
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MOODY'S
Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually senior debt obligations with an original maturity not exceeding one
year.
Prime-1 - Issuers (or supporting institutions) rated Prime-1 (P-1) have a
superior ability for repayment of senior short-term debt obligations. P-1
repayment ability will often be evidenced by many of the following
characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance on debt
and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Prime-2 - Issuers (or supporting institutions) rated Prime-2 (P-2) have a
strong ability for repayment of senior short-term obligations. This will
normally be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, may be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
S&P
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1 - Degree of safety regarding timely payment is strong. Those issues
determined to possess extremely strong safety characteristics are denoted with
a plus sign (+) designation.
A-2 - Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
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SAFECO RESOURCE SERIES TRUST
EQUITY PORTFOLIO
GROWTH PORTFOLIO
NORTHWEST PORTFOLIO
BOND PORTFOLIO
MONEY MARKET PORTFOLIO
Statement of Additional Information
----------
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Prospectus for the Trust. A copy of the Prospectus may
be obtained by calling 1-800-624-5711 or by writing SAFECO Securities, Inc.,
S-3 SAFECO Plaza, Seattle, Washington 98185.
The date of the most current Prospectus of the Trust to which this Statement of
Additional Information relates is April 29, 1996.
The date of the Statement of Additional Information is April 29, 1996.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Investment Policies Additional Performance
Information
Additional Investment Information
Trustees and Officers
Special Risks of Below Investment
Grade Bonds Investment Advisory and
Other Services
Principal Shareholders of the Brokerage Practices:
Portfolio Distributions and Tax Information
Additional Information On Financial Statements
Calculation of Net Asset Value
Per Share
</TABLE>
<PAGE> 34
INVESTMENT POLICIES
The Equity Portfolio, Growth Portfolio, Northwest Portfolio, Bond Portfolio and
Money Market Portfolio (collectively, the "Portfolios") are each a series of
the SAFECO Resource Series Trust ("Trust"). The investment policies of each
Portfolio are described in the Prospectus and this Statement of Additional
Information. These policies state the investment practices that the Portfolios
will follow, in some cases limiting investments to a certain percentage of
assets, as well as those investment activities that are prohibited. The types
of securities (e.g., common stock, U.S. Government securities or bonds) a
Portfolio may purchase is also disclosed in the Prospectus. Before a Portfolio
purchases a security that the following policies permit but which is not
currently described in the Prospectus, the Prospectus will be amended or
supplemented to describe the security. If a policy's percentage limitation is
adhered to immediately after and as a result of the investment, a later
increase or decrease in values, net assets or other circumstances will not be
considered in determining whether a Portfolio complies with the applicable
limitation. The following information supplements the discussion in the
Prospectus of the investment policies and limitations of each Portfolio.
FUNDAMENTAL INVESTMENT POLICIES
Each Portfolio's fundamental policies may not be changed without the approval
of a majority of its outstanding voting securities as defined in the Investment
Company Act of 1940 ("1940 Act"). For purposes of such approval, the vote of a
majority of the outstanding voting securities of a Portfolio means the vote,
at a meeting of the shareholders of such Portfolio duly called, (i) of 67% or
more of the voting securities present at such meeting if the holders of more
than 50% of the outstanding voting securities are present or represented by
proxy, or (ii) of more than 50% of the outstanding voting securities, whichever
is less.
Each Portfolio will NOT:
1. Invest more than five percent (5%) of any Portfolio's total assets in the
securities of any one issuer (other than securities issued by the U.S.
Government, its agencies and instrumentalities), except (i) with respect to
the Equity, Growth, Northwest, Bond and Money Market Portfolios, up to
twenty-five percent (25%) of the value of each Portfolio's assets (not
including securities issued by another investment company) may be invested
without regard to this limit and (ii) with respect to the Bond and Money
Market Portfolios, up to one hundred percent (100%) of total assets may be
invested in obligations of or guaranteed by the U.S. Government, its
agencies or instrumentalities.
2. Purchase securities of any issuer (other than obligations of, or guaranteed
by, the U.S. Government, its agencies and instrumentalities) if such
purchase would cause more than ten percent (10%) of any class of securities
of such issuer to be held by a Portfolio.
3. a. With respect to the Equity, Growth, Northwest and Money Market
Portfolios, concentrate its investments in particular industries
and in no event will the respective Portfolio invest twenty-five
(25%) or more of its assets in any one industry. Securities of
foreign banks and foreign branches of U.S. banks are considered
to be one industry. This limitation does not apply to
obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities or to certificates of
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<PAGE> 35
deposit or bankers' acceptances issued by domestic banks.
b. With respect to the Bond Portfolio, invest more than twenty-five
percent (25%) of its assets in securities of issuers in the same
industry. This restriction does not apply to mortgage-related
securities or to obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
4. Invest more than five percent (5%) of the total assets of any Portfolio in
securities of issuers which with their predecessors have a record of less
than three years continuous operation.
5. Make loans to others, except through the purchase of publicly-distributed
debt obligations or repurchase agreements.
6. Borrow money, except from banks or affiliates of SAFECO Corporation at an
interest rate not greater than that available to a Portfolio from
commercial banks, and then only for temporary or emergency purposes and not
for investment purposes, and in an amount not exceeding five percent (5%)
of a Portfolio's assets at the time of borrowing.
7. Make short sales (sales of securities not presently owned) or purchase
securities on margin, except where the Trust has at the time of the sale by
virtue of its ownership in other securities the right to obtain securities
equivalent in kind and amount to the securities sold and except for such
short-term credits as are necessary for the clearance of transactions,
respectively.
8. Purchase or retain the securities of any issuer any of whose officers,
directors or security holders is an officer or trustee of the Trust if, or
so long as, any such officer or trustee owns beneficially more than
one-half (1/2) of one percent (1%) of such securities and the officers or
trustees of the Trust, together own beneficially more than five percent
(5%) of such securities.
9. Invest in commodities or commodity futures contracts or in real estate,
except the Trust may invest in securities which are secured by real estate
and securities which are of issuers which invest in or deal in real estate.
10. Underwrite securities issued by others, except to the extent that the Trust
may be deemed to be an underwriter under the federal securities laws in
connection with the disposition of portfolio securities.
11. Issue or sell any senior security.
12. Purchase from or sell portfolio securities to any officer or director, the
Trust's investment adviser, principal underwriter or any affiliates or
subsidiaries thereof.
NON-FUNDAMENTAL INVESTMENT POLICIES
In addition to the policies described in the Prospectus, each Portfolio has
adopted the following non-fundamental policies that may be changed by the
Trust's Board of Trustees without shareholder approval:
1. A Portfolio may not participate on a joint or joint and several basis in
any
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<PAGE> 36
trading account in securities, except that a Portfolio may join with other
transactions executed by the investment adviser or the investment adviser's
parent company and any subsidiary thereof, for the purpose of seeking better
net results on portfolio transactions or lower brokerage commission rates.
2. A Portfolio may not purchase securities with unlimited liability, e.g.
securities for which the holder may be assessed for amounts in addition to
the subscription or other price paid for the security.
3. A Portfolio may not purchase or sell put or call options or combinations
thereof.
4. A Portfolio may not invest in oil, gas or other mineral exploration or
development programs or in arbitrage transactions.
5. A Portfolio may not trade in foreign exchange, except as may be necessary
to convert the proceeds of the sale of foreign portfolio securities into
U.S. dollars.
6. A Portfolio may not enter into a repurchase agreement for longer than seven
days.
7. A Portfolio may not purchase the securities of any other investment company
or investment trust, except by purchase in the open market where no
commission or profit to a broker or dealer results from such purchase other
than the customary broker's commissions, or except as part of a merger,
consolidation or acquisition. A Portfolio will not invest more than ten
percent (10%) of its total assets in shares of other investment companies,
invest more than five percent (5%) of its total assets in a single
investment company nor purchase more than three percent (3%) of the
outstanding voting securities of a single investment company. The Trust's
investment adviser will waive its advisory fees for assets invested in
other investment companies.
8. The Trust's Equity, Growth, Northwest and Bond Portfolios may purchase as
temporary investments for their cash commercial paper, certificates of
deposit, no-load, open-end money market funds (subject to the limitations
in subparagraph 7 above), repurchase agreements (subject to the limitations
in subparagraph 6 above) or any other short-term instrument that the
Trust's investment adviser deems appropriate.
Commercial paper must be rated A-1 or A-2 by Standard & Poor's Ratings
Group ("S&P") or Prime-1 or Prime-2 by Moody's Investors Service, Inc.
("Moodys") or issued by companies with an unsecured debt issue currently
outstanding rated AA by S&P or Aa or higher by Moody's.
9. While the Trust will not engage primarily in trading in the Equity, Growth,
Northwest and Bond Portfolios for the purpose of short-term profits, it may
at times make investments for short-term purposes when such action is
believed to be desirable and consistent with sound investment procedures.
The Trust will dispose of securities whenever it is deemed advisable
without regard to the length of time the securities have been held.
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10. The Trust's Money Market Portfolio may invest in short-term instruments, or
long-term instruments with characteristics qualifying them as short-term
instruments, which at the time of purchase are rated in the highest rating
category by at least two nationally recognized rating organizations or, if
rated by only one organization, are rated in the highest category by that
organization, and which in the opinion of the Money Market Portfolio's
investment adviser present minimal credit risks.
11. The Trust's Money Market Portfolio may invest in short-term instruments, or
long-term instruments with characteristics qualifying them as short-term
instruments, which at the time of purchase are split-rated (i.e. rated in
the highest category by one nationally recognized rating organization and
the second highest category by at least one other such organization), are
rated in the second highest rating category by at least two nationally
recognized rating organizations or, if rated by only one organization are
rated in the second highest category by that organization and which in the
opinion of the Money Market Portfolio's investment adviser present minimal
credit risks. However, the Money Market Portfolio may invest no more than
five percent (5%) of total assets in these securities and may invest only
the greater of $1 million or one percent (1%) of total assets in such
securities from the same issuer.
12. The Trust's Money Market Portfolio may invest in short-term instruments, or
long-term instruments with characteristics qualifying them as short-term
instruments, which are unrated if such securities are determined to be
comparable in quality to securities rated as described in paragraphs 10 and
11 and which in the opinion of the Money Market Portfolio's investment
adviser present minimal credit risks. The Money Market Portfolio will
invest no more than twenty percent (20%) of total assets in unrated
securities which in SAM's opinion are comparable to securities in the
highest rating category. Purchases of unrated securities which in SAM's
opinion are comparable to split-rated securities are subject to the five
percent (5%) and one percent (1%) limitations described in paragraph 11.
13. Subject to the maturity requirements stated in the Money Market Portfolio's
investment objective and the quality and credit risk requirements set forth
in paragraphs 10-12, the Money Market Portfolio may purchase the following
types of securities:
a. Commercial paper obligations.
b. Negotiable and non-negotiable deposits, bankers' acceptances and
other short-term debt obligations of banks. The Money Market
Portfolio will not invest in any security issued by a commercial bank
unless (a) the bank has total assets of at least $1 billion or the
equivalent in other currencies or, in the case of United States banks
which do not have total assets of at least $1 billion, the aggregate
investment made in any one such bank is limited to $100,000 and the
principal sum of such investment is insured in full by the Federal
Deposit Insurance Corporation (FDIC), (b) in the case of a United
States bank, it is a member of the FDIC, and (c) in the case of a
foreign bank, the security is in the opinion of management of an
investment quality comparable with other debt securities which may be
purchased by the Money Market Portfolio. These limitations do not
prohibit investment in securities issued by foreign branches of U.S.
banks, provided the U. S. banks meet the foregoing requirements.
c. Corporate obligations such as publicly-traded bonds, debentures and
notes.
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<PAGE> 38
14. The Trust may not invest more than five percent (5%) of the net assets of
the Equity, Growth and Northwest Portfolios in warrants valued at the lower
of cost or market. Warrants acquired as a result of unit offerings or
attached to securities may be deemed without value for purposes of the five
percent (5%) limitation.
15. A Portfolio will not issue long-term debt securities.
16. A Portfolio will not invest in any security for the purpose of acquiring or
exercising control or management of the issuer.
17. The Growth Portfolio will normally invest a preponderance of assets in
common stocks selected primarily for potential appreciation. The Northwest
Portfolio will invest primarily in shares of common stock selected
primarily for potential appreciation that have been issued by Northwest
companies. In determining these common stocks which have the potential for
long-term growth, the Trust's investment adviser will evaluate the issuer's
financial strength, quality of management and earnings power.
18. The Northwest Portfolio may occasionally invest in securities convertible
into common stock when, in the opinion of SAM, the expected total return of
a convertible security exceeds the expected total return of common stock
eligible for purchase by the Portfolio.
19. The Equity Portfolio may invest up to ten percent (10%) of its total assets
in shares of real estate investment trusts ("REITs"). The Growth and
Northwest Portfolios may invest up to five percent (5%) of their total
assets in shares of real estate investment trusts ("REITs").
20. The Equity Portfolio may invest up to 5% of total assets in closed-end
investment companies and investment trusts (other than REITS).
21. The Equity Portfolio may purchase fixed-income securities in accordance
with business and financial conditions.
22. A Portfolio may invest up to 10% of total assets in restricted securities
eligible for resale under Rule 144A ("Rule 144A securities"), provided that
SAM has determined that such securities are liquid under guidelines adopted
by the Board of Trustees.
WHILE THE TRUST CAN INVEST IN THE TYPES OF SECURITIES OR ENGAGE IN THE
PRACTICES WHICH FOLLOW IF THE APPLICABLE LIMITATIONS ARE MET, IT HAS NO PRESENT
INTENTION TO DO SO IN THE COMING YEAR. BEFORE THE TRUST PURCHASES THESE TYPES
OF SECURITIES OR ENGAGES IN THESE PRACTICES WITHIN THE ALLOWED LIMITS, THE
PROSPECTUS WILL BE AMENDED OR SUPPLEMENTED TO DESCRIBE THE SECURITY.
23. The Equity, Growth, Northwest and Money Market Portfolios of the Trust may
not purchase foreign securities, unless at the time thereof, such purchase
would not cause more than five percent (5%) of the total assets of a
Portfolio (taken at market value) to be invested in foreign securities.
This restriction does not apply to the Bond Portfolio.
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<PAGE> 39
24. A Portfolio may not pledge, mortgage or hypothecate portfolio
securities, except that to secure borrowings permitted by the
fundamental policy on borrowing, a Portfolio may pledge securities
having a market value at the time of the pledge not exceeding ten
percent (10%) of the Portfolio's net assets.
ADDITIONAL INVESTMENT INFORMATION
Each Portfolio may make some or all of the following investments, among others,
although they may not buy all of the types of securities that are described.
1. RESTRICTED SECURITIES AND RULE 144A SECURITIES. Restricted securities are
securities that may be sold only in a public offering with respect to which
a registration statement is in effect under the Securities Act of 1933
("1933 Act") or, if they are unregistered, in a privately negotiated
transaction or pursuant to an exemption from registration. In recognition
of the increased size and liquidity of the institutional markets for
unregistered securities and the importance of institutional investors in
the formation of capital, the Securities and Exchange Commission ("SEC")
has adopted Rule 144A under the 1933 Act, which is designed to further
facilitate efficient trading among institutional investors by permitting
the sale of Rule 144A securities to qualified institutional buyers. To the
extent privately placed securities held by a Portfolio qualify under Rule
144A and an institutional market develops for those securities, the
Portfolio likely will be able to dispose of the securities without
registering them under the 1933 Act. SAM, acting under guidelines
established by the Trust's Board of Trustees, may determine that certain
securities qualified for trading under Rule 144A are liquid.
Where registration is required, a Portfolio may be obligated to pay all or
part of the registration expenses, and a considerable period may elapse
between the decision to sell and the time the Portfolio may be permitted to
sell a security under an effective registration statement. If during such
a period adverse market conditions were to develop, the Portfolio might
obtain a less favorable price than prevailed when it decided to sell. To
the extent privately placed securities are illiquid, purchases thereof will
be subject to any limitations on investments in illiquid securities.
Restricted securities for which no market exists are priced at fair value
as determined in accordance with procedures approved and periodically
reviewed by the Trust's Board of Trustees.
2. REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which a
Portfolio purchases securities from a bank or recognized securities dealer
and simultaneously commits to resell the securities to the bank or dealer
at an agreed-upon date and price reflecting a market rate of interest
unrelated to the coupon rate or maturity of the purchased securities. A
Portfolio maintains custody of the underlying securities prior to their
repurchase; thus, the obligation of the bank or dealer to pay the
repurchase price on the date agreed to is, in effect, secured by such
securities. If the value of these securities is less than the repurchase
price, plus any agreed-upon additional amount, the other party to the
agreement must provide additional collateral so that at all times the
collateral is at least equal to the repurchase price, plus any agreed-upon
additional amount.
Repurchase agreements carry certain risks not associated with direct
investments in securities, including possible declines in the market value
of the underlying securities and delays and costs to a Portfolio if the
other party to a repurchase agreement becomes bankrupt. Each Portfolio
intends to enter into repurchase
7
<PAGE> 40
agreements only with banks and dealers in transactions believed by SAM to
present minimum credit risks in accordance with guidelines established by
the Trust's Board of Trustees. SAM will review and monitor the
creditworthiness of those institutions under the general supervision of the
Board of Trustees.
3. YANKEE DEBT SECURITIES AND EURODOLLAR BONDS. The Yankee Sector is made up
of securities issued in the U.S. by foreign issuers. These bonds involve
investment risks that are different from those of domestic issuers. Such
risks may include nationalization of the issuer, confiscatory taxation by
the foreign government, establishment of controls by the foreign government
that would inhibit the remittance of amounts due a Portfolio, lack of
comparable publicly-available information concerning foreign issuers, lack
of comparable accounting and auditing practices in foreign countries and
finally, difficulty in enforcing claims against foreign issuers in the
event of default.
SAM will make every effort to analyze potential investments in foreign
issuers on the same basis as the rating services analyze domestic issuers.
Because public information is not always comparable to that available on
domestic issuers, this may not be possible. Therefore, while SAM will make
every effort to select investments in foreign securities on the same basis
relative to quality and risk as its investments in domestic securities, it
may not always be able to do so.
Eurodollar Bonds are denominated in U.S. dollars. A Portfolio will
purchase Eurodollar Bonds through U.S. securities dealers and hold such
bonds in the U.S. The delivery of Eurodollar Bonds to a Portfolio's
custodian in the U.S. may cause slight delays in settlement which are not
anticipated to affect the Portfolio in any material, adverse manner.
Eurodollar Bonds issued by foreign issuers are subject to the same risks as
Yankee Sector bonds.
4. MORTGAGE-BACKED SECURITIES. Unlike conventional bonds, the principal with
respect to mortgage-backed securities is paid back over the life of the
loan rather than at maturity. Consequently, the GNMA Portfolio will
receive monthly scheduled payments of both principal and interest. In
addition, the GNMA Portfolio may receive unscheduled principal payments
representing unscheduled prepayments on the underlying mortgages. Since
the GNMA Portfolio must reinvest scheduled and unscheduled principal
payments at prevailing interest rates at the time of such investment and
such interest rates may be higher or lower than the current yield of the
GNMA Portfolio's portfolio, mortgage-backed securities may not be an
effective means to lock in long-term interest rates. In addition, while
prices of mortgage-backed securities, like conventional bonds, are
inversely affected by changes in interest rate levels, because of the
likelihood of increased prepayments of mortgages in times of declining
interest rates, they have less potential for capital appreciation than
comparable fixed-income securities and may in fact decrease in value when
interest rates fall.
The rate of interest payable on CMO classes may be set at levels that are
either above or below market rates at the time of issuance, so that the
securities will be sold at a substantial premium to, or at a discount from,
par value. If the mortgage assets underlying an CMO experience greater
than anticipated principal prepayments, an investor may fail to recoup
fully its initial investment even though the security is government-issued
or guaranteed.
Some CMO classes are structured to pay interest at rates that are adjusted
in accordance with a formula, such as a multiple or fraction of the change
in a specified interest rate index, so as to pay at a rate that will be
attractive in
8
<PAGE> 41
certain interest rate environments but not in others. For example, a CMO
may be structured so that its yield moves in the same direction as market
interest rates - i.e., the yield may increase as rates increase and
decrease as rates decrease -but may do so more rapidly or to a greater
degree. Other CMO classes may be structured to pay floating interest rates
that either move in the same direction or the opposite of short-term
interest rates. The market value of such securities may be more volatile
than that of a fixed rate obligation. Such interest rate formulas may be
combined with other CMO characteristics. The GNMA Portfolio will not
invest in interest-only or principal-only classes -- such investments are
extremely sensitive to changes in interest rates.
5. ILLIQUID SECURITIES. Illiquid securities are securities that cannot be
sold within seven days in the ordinary course of business for approximately
the amount at which they are valued. Due to the absence of an active
trading market, a Portfolio may experience difficulty in valuing or
disposing of illiquid securities. SAM determines the liquidity of the
securities pursuant to guidelines adopted by the Trust's Board of Trustees.
6. WARRANTS. A warrant is an option issued by a corporation that gives the
holder the right to buy a stated number of shares of common stock of the
corporation at a specified price within a designated time period. Warrants
may be purchased and sold separately or attached to stocks or bonds as part
of a unit offering. The term of a warrant may run from two to five years
and in some cases the term may be longer. The exercise price carried by
the warrant is usually well above the prevailing market price of the
underlying common stock at the time the warrant is issued. The holder of a
warrant has no voting rights and receives no dividends. Warrants are
freely transferable and may trade on the major national exchanges.
Warrants may be speculative. Generally, the value of a warrant will
fluctuate by greater percentages than the value of the underlying common
stock. The primary risk associated with a warrant is that the term of the
warrant may expire before the exercise price of the common stock has been
reached. Under these circumstances, a Portfolio could lose all of its
principal investment in the warrant.
A Portfolio will invest in a warrant only if the Portfolio has the
authority to hold the underlying common stock. Additionally, if a warrant
is part of a unit offering, a Portfolio will purchase the warrant only if
it is attached to a security in which the Portfolio has authority to
invest. In all cases, a Portfolio will purchase warrants only after SAM
determines that the exercise price for the underlying common stock is
likely to be achieved within the required time-frame and that an actively
traded market exists. SAM will make this determination by analyzing the
issuer's financial health, quality of management and any other factors
deemed to be relevant.
7. REAL ESTATE INVESTMENT TRUSTS. Real estate investment trusts ("REITs")
purchase real property, which is then leased, and make mortgage
investments. For federal income tax purposes REITs attempt to qualify for
beneficial tax treatment by distributing at least 95% of their taxable
income. If a REIT were unable to qualify for such beneficial tax
treatment, it would be taxed as a corporation and distributions to its
shareholders would not be deductible by it in computing its taxable income.
REITs are dependent upon the successful operation of the properties owned
and the financial condition of lessees and mortgagors. The value of REIT
units will
9
<PAGE> 42
fluctuate depending on the underlying value of the real property and
mortgages owned and the amount of cashflow (net income plus depreciation)
generated and paid out. In addition, REITs typically borrow to increase
funds available for investment. Generally there is a greater risk
associated with REITs which are highly leveraged.
8. CONVERTIBLE SECURITIES. Convertible bonds and convertible preferred stock
may be exchanged for a stated number of shares of the issuer's common stock
at a certain price known as the conversion price. The conversion price is
usually greater than the price of the common stock at the time the
convertible security is purchased. Generally, the interest rate of
convertible bonds and the yield of convertible preferred stock will be
lower than the issuer's non-convertible securities. Also, the value of
convertible securities will normally vary with the value of the underlying
common stock and fluctuate inversely with interest rates. However,
convertible securities may show less volatility in value than the issuer's
non-convertible securities. A risk associated with convertible bonds and
convertible preferred stock is that the conversion price of the common
stock will not be attained.
9. SHORT-TERM INVESTMENTS. The Equity, Growth, Northwest and Bond Portfolios
may purchase short-term securities under those circumstances where they have
cash to manage for a short-term time period or as a defensive measure when,
in the investment adviser's opinion, business or economic conditions
warrant. Certificates of deposit must be issued by banks or savings and
loan associations which have total assets of at least $1 billion or, in the
case of a bank or savings and loan association not having total assets of
at least $1 billion, the bank or savings and loan association is insured by
the Federal Deposit Insurance Corporation in which case the Portfolio will
limit its investment to the statutory insurance coverage.
10. FOREIGN SECURITIES. Foreign securities are securities issued in and traded
in foreign markets and contain greater risks (including currency risk)
than securities issued in and traded in U.S. markets. The Equity, Growth,
Northwest and Money Market Portfolios of the Trust may not purchase foreign
securities, unless at the time thereof, such purchase would not cause more
than five percent (5%) of the total assets of a Portfolio (taken at market
value) to be invested in foreign securities. This restriction does not
apply to the Bond Portfolio. This restriction is not intended to limit the
Money Market Portfolio which may purchase dollar-denominated commercial
paper issued in the U.S. by foreign entities (as described in the
Prospectus). While investments in foreign securities are intended to
reduce risk by providing further diversification, such investments involve
sovereign and other risks, in addition to the credit and market risks
normally associated with domestic securities. These additional risks
include the possibility of adverse political and economic developments
(including political instability) and the potentially adverse effects of
unavailability of public information regarding issuers, reduced
governmental supervision regarding financial markets, reduced liquidity of
certain financial markets, and the lack of uniform accounting, auditing,
and financial standards or the application of standards that are different
or less stringent than those applied in the U.S.
11. ASSET-BACKED SECURITIES. Asset-backed securities represent interests in,
or are secured by and payable from, pools of assets such as consumer loans,
automobile receivable securities, credit card receivable securities, and
installment loan contracts. The assets underlying the securities are
securitized through the use of trusts and special purpose corporations.
These securities may be supported
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<PAGE> 43
by credit enhancements such as letters of credit. Payment of interest and
principal ultimately depends upon borrowers paying the underlying loans.
There exists a risk of default by the underlying borrowers and recovery on
repossessed collateral may be unavailable or inadequate to support payments
on asset-backed securities. In addition, asset-backed securities are
subject to prepayment risks which may reduce the overall return of the
investment.
Automobile receivable securities represent undivided fractional interests
in a trust whose assets consist of a pool of automobile retail installment
sales contracts and security interests in vehicles securing the contracts.
Payments of principal and interest on the certificates issued by the
automobile receivable trust are passed through periodically to certificate
holders and are guaranteed up to specified amounts by a letter of credit
issued by a financial institution. Certificate holders may experience
delays in payments or losses if the full amounts due on the underlying
installment sales contracts are not realized by the trust because of
factors such as unanticipated legal or administrative costs of enforcing
the contracts, or depreciation, damage or loss of the vehicles securing the
contracts.
Credit card receivable securities are backed by receivables from revolving
credit card accounts. Certificates issued by credit card receivable trusts
generally are pass-through securities. Competitive and general economic
factors and accelerated cardholder payment rate can adversely affect the
rate at which new receivables are credited to an account, potentially
shortening the expected weighted average life of the credit card receivable
security and reducing its yield. Credit card accounts are unsecured
obligations of the cardholder.
SPECIAL RISKS OF BELOW INVESTMENT GRADE BONDS
The Bond Portfolio may invest up to 20% of its assets in below investment grade
bonds (commonly referred to as "high-yield" or "junk" bonds). Certain
additional risks are associated with these bonds. Yields on below investment
grade bonds will fluctuate over time. These bonds tend to reflect short-term
economic and corporate developments to a greater extent than higher quality
bonds which primarily react to fluctuations in interest rates. During an
economic downturn or period of rising interest rates, issuers of below
investment grade bonds may experience financial difficulties which adversely
affect their ability to make principal and interest payments, meet projected
business goals and obtain additional financing. In addition, issuers often
rely on cash flow to service debt. Failure to realize projected cash flows may
seriously impair the issuer's ability to service its debt load which in turn
might cause a Portfolio to lose all or part of its investment in that security.
SAM will seek to minimize these additional risks through diversification,
careful assessment of the issuer's financial structure, business plan and
management team and monitoring of the issuer's progress toward its financial
goals.
The liquidity and price of below investment grade bonds can be affected by a
number of factors, including investor perceptions and adverse publicity
regarding major issues, underwriters or dealers of lower-quality corporate
obligations. These effects can be particularly pronounced in a thinly-traded
market with few participants and may adversely impact the Portfolio's ability
to dispose of the bonds as well as make valuation of the bonds more difficult.
Because there tend to be fewer investors in below investment grade bonds, it
may be difficult for the Portfolio to sell these securities at an optimum time.
Consequently, these bonds may be subject to more price changes, fluctuations in
yield and risk to principal and income than higher-rated bonds of the same
maturity.
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<PAGE> 44
Credit ratings evaluate the likelihood that an issuer will make principal and
interest payments, but may not reflect market value risks associated with
lower-rated bonds. Credit rating agencies may not timely revise ratings to
reflect subsequent events affecting an issuer's ability to pay principal and
interest.
PRINCIPAL SHAREHOLDERS OF THE PORTFOLIOS
At March 31, 1996, SAFECO Life Insurance Company ("SAFECO Life") owned 68% of
the outstanding shares of the Northwest Portfolio and 100%, of the outstanding
shares of each of the Equity, Growth, Bond and Money Market Portfolios. At
March 31, 1996, SAFECO Asset Management Company ("SAM") owned 32% of the
outstanding shares of the Northwest Portfolio. SAFECO Life and SAM are
wholly-owned subsidiaries of SAFECO Corporation, SAFECO Plaza, Seattle,
Washington 98185.
ADDITIONAL INFORMATION ON CALCULATION OF NET ASSET VALUE PER SHARE
The portfolio instruments of the Money Market Portfolio are valued on the basis
of amortized cost. The valuation of the Money Market Portfolio securities
based upon its amortized cost and the maintenance of its net asset value per
share at $1.00 is permitted pursuant to Rule 2a-7 under the 1940 Act. Pursuant
to that rule, the Money Market Portfolio has established the following
policies: the Portfolio will maintain a dollar-weighted average portfolio
maturity of 90 days or less, purchase only securities having remaining
maturities of thirteen months or less and invest only in securities determined
by SAM under guidelines adopted by the Board of Trustees to be of high quality
with minimal credit risks. The Board of Trustees has established procedures
designed to stabilize, to the extent reasonably possible, the Portfolio's
price-per-share as computed for the purpose of sales and redemptions at $1.00.
These procedures include a review of the Portfolio's holdings by the Board of
Trustees, at such intervals as it may deem appropriate, to determine whether
the Portfolio's net asset value per share, calculated by using available market
quotations, deviates from $1.00 per share and, if so, whether such deviation
may result in material dilution or is otherwise unfair to existing contract
owners. In the event the Board of Trustees determines that such a deviation
exists, it will take such corrective action as it regards as necessary and
appropriate, including: selling portfolio investments prior to maturity to
realize capital gains or losses or to shorten average portfolio maturity;
withholding dividends; redeeming shares in kind; establishing the net asset
value per share by using available market quotations; or taking such other
measures as it may deem appropriate.
Each other Portfolio has selected a pricing service to assist in computing the
value of its securities. There are a number of pricing services available and
the decision as to whether, or how, a pricing service should be used by a
Portfolio will be subject to review by the Trust's Board of Trustees.
Short-term debt securities held by each Portfolio have a remaining maturity of
less than 60 days when purchased, and securities originally purchased with
maturities in excess of 60 days but which currently have maturities of 60 days
or less, may be valued at cost adjusted for amortization of premiums or accrual
of discounts, or under such other methods as the Board of Trustees may from
time to time deem to be appropriate. The cost of those securities that had
original maturities in excess of 60 days shall be determined by their fair
market value as of the 61st day prior to maturity. All other securities and
assets in the portfolios will be appraised in accordance with those procedures
established by the Board of Trustees in good faith in computing the fair market
value of those assets.
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<PAGE> 45
ADDITIONAL PERFORMANCE INFORMATION
EQUITY, GROWTH, NORTHWEST AND BOND PORTFOLIOS
The yields for the 30-day period ended December 31, 1995 for the Equity,
Growth, Northwest and Bond Portfolios of the Trust were 1.39%, 0.65%, 1.12%
and 6.53%, respectively.
Yield is computed using the following formula:
a-b
Yield = 2 [(--- +1)6 - 1]
cd
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period
The total returns, expressed as a percentage, for the one-year, five-year and
since inception periods ended December 31, 1995 for the Equity and Bond
Portfolios were as follows:
<TABLE>
<CAPTION>
Since Initial # of Initial
Portfolio 1 Year 5 Year Public Offering Months Public Offering
- --------- ------ ------ --------------- ------ ---------------
<S> <C> <C> <C> <C> <C>
Equity 28.63% 145.68% 186.74% 101 July 21, 1987
Bond 17.87% 54.01% 101.18% 101 July 21, 1987
</TABLE>
The total returns, expressed as a percentage, for the one-year, and since
inception periods ended December 31, 1995 for the Growth and Northwest
Portfolios were as follows:
<TABLE>
<CAPTION>
Since Initial # of Initial
Portfolio 1 Year Public Offering Months Public Offering
- --------- ------ --------------- ------ ---------------
<S> <C> <C> <C> <C>
Growth 41.00% 112.61% 35 January 7, 1993
Northwest 7.42% 10.74% 35 January 7, 1993
</TABLE>
The average annual total returns, expressed as a percentage, for the one-year,
five-year and since inception periods ended December 31, 1995 for the Equity
and Bond Portfolios were as follows:
<TABLE>
<CAPTION>
Since Initial # of Initial
Portfolio 1 Year 5 Year Public Offering Months Public Offering
- --------- ------ ------ --------------- ------ ---------------
<S> <C> <C> <C> <C> <C>
Equity 28.63% 19.69% 13.33% 101 July 21, 1987
Bond 17.87% 9.02% 8.66% 101 July 21, 1987
</TABLE>
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<PAGE> 46
The average annual total returns, expressed as a percentage, for the one-year
and since inception periods ended December 31, 1995 for the Growth and
Northwest Portfolios were as follows:
<TABLE>
<CAPTION>
Since Initial # of Initial
Portfolio 1 Year Public Offering Months Public Offering
- --------- ------ --------------- ------ ---------------
<S> <C> <C> <C> <C>
Growth 41.00% 29.51% 35 January 7, 1993
Northwest 7.42% 3.56% 35 January 7, 1993
</TABLE>
The total return is computed using the following formula:
ERV-P
T = ------- X 100
P
The average annual total return is computed using the following formula:
N _______
A = \/ ERV/P - 1
Where: T = total return
A = average annual total return
N = number of years
ERV = ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
P = a hypothetical initial investment of $1,000
In making the above calculations, all dividends and capital-gain distributions
are assumed to be reinvested at the respective Portfolio's NAV on the
reinvestment date.
MONEY MARKET PORTFOLIO:
The yield and effective yield for the Money Market Portfolio of the Trust for
the 7-day period ended December 31, 1995, are 3.73% and 3.79%, respectively.
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<PAGE> 47
Yield is computed using the following formula:
(x-y) -z 365
Yield = [------ ] = Base Period Return X -----
y 7
Where: x = value of one share at the end of a 7-day period
y = value of one share at the beginning of a 7-day
period ($1.00)
z = capital changes during the 7-day period, if any
Effective yield is computed using the following formula:
365/7
Effective yield = [(Base Period Return + 1) ] -1
15
<PAGE> 48
TRUSTEES AND OFFICERS
<TABLE>
<CAPTION>
TRUSTEES POSITION HELD PRINCIPAL OCCUPATION
NAME, ADDRESS AND AGE WITH TRUST DURING PAST 5 YEARS
--------------------- --------------- --------------------
<S> <C> <C>
Boh A. Dickey* Trustee Executive Vice President,
SAFECO Plaza and Chief Financial Officer and
Seattle, Washington 98185 Chairman Director of SAFECO Corporation.
(51) He has been an executive officer
of SAFECO Corporation subsidiaries
since 1982. Director of First SAFECO
National Life Insurance Company of
New York; See table under
"Investment Advisory and Other
Services."
Barbara J. Dingfield Trustee Manager, Corporate Contributions and Community
Microsoft Corporation Programs for Microsoft Corporation, Redmond,
One Microsoft Way Washington, a computer software company; Director
Redmond, Washington 98052 and former Executive Vice President, Wright
(50) Runstad & Co., Seattle, Washington, a real estate
development company; Director of First SAFECO
National Life Insurance Company of New York.
Richard W. Hubbard* Trustee Retired Vice President and Treasurer of the Trust
1270 NW Blakely Ct. and other SAFECO Trusts; retired Senior Vice
Seattle, Washington 98177 President and Treasurer of SAFECO Corporation;
(67) former President of SAFECO Asset Management
Company. Director of First SAFECO National
Life Insurance Company of New York.
Richard E. Lundgren Trustee Director of Marketing and Customer Relations,
764 S. 293rd Street Building Materials Distribution, Weyerhaeuser
Federal Way, Washington Company, Tacoma, Washington; Director of First
98032 SAFECO National Life Insurance Company of New
(58) York.
L. D. McClean* Trustee Retired Assistant Secretary of SAFECO Corporation
7231 91st Avenue S.E. and its property and casualty and life insurance
Mercer Island, Washington affiliates; Director of First SAFECO National
98040 Life Insurance Company of New York; former
(69) President of the SAFECO Mutual Funds; former
Director of SAFECO Asset Management Company,
SAFECO Securities, Inc. and SAFECO Services
Corporation.
</TABLE>
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<PAGE> 49
<TABLE>
<CAPTION>
TRUSTEES POSITION HELD PRINCIPAL OCCUPATION
NAME, ADDRESS AND AGE WITH TRUST DURING PAST 5 YEARS
--------------------- ---------------- -------------------
<S> <C> <C>
Larry L. Pinnt Trustee Retired Vice President and Chief Financial Officer
1600 Bell Plaza, Room 1802 of U.S. WEST Communications, Seattle, Washington;
Seattle, Washington 98191 Director of Key Bank of Washington; Director of
(61) University of Washington Medical Center, Seattle,
Washington; Director of First SAFECO National Life
Insurance Company of New York; Direcotor of
Cascade Natural Gas Corporation, Seattle,
Washington
John W. Schneider Trustee President of Wallingford Group, Inc., Seattle,
1808 N. 41st Street Washington; former President of Coast Hotels,
Seattle, Washington 98103 Inc.; Director of First SAFECO National Life
(54) Insurance Company of New York.
David F. Hill President+ President of the SAFECO Mutual Funds, SAFECO
SAFECO Plaza Securities, Inc. and SAFECO Services Corporation
Seattle, Washington 98185 Senior Vice President of SAFECO Asset Management
(47) Company. See table under "Investment Advisory and
Other Services."
Neal A. Fuller Vice President Vice President, Controller, Assistant Secretary
SAFECO Plaza Controller and Treasurer of SAFECO Securities, Inc. and
Seattle, Washington 98185 Assistant SAFECO Services Corporation. Vice President,
(33) Secretary Controller, Secretary and Treasurer of SAFECO
Asset Management Company. See table under
"Investment Advisory and Other Services."
</TABLE>
*Trustees who are interested persons as defined by the 1940 Act.
+As of May 1, 1996. Prior to that date, R.E. Zunker, the President of SAFECO
Life Insurance Company, served as the President of the Trust.
For the fiscal year ended December 31, 1995, the Trustees of the Trust not
employed by SAFECO Corporation or its affiliates, as a group received $21,496
for their services as such Trustees. The officers received no compensation for
their services as officers or, if applicable, as Trustees.
At March 31, 1996, the Trustees and officers of the Trust as a group owned
none of the outstanding shares of the Trust.
17
<PAGE> 50
COMPENSATION TABLE
<TABLE>
<CAPTION>
Total
Compensation
Pension or From
Retirement Estimated Registrant and
Aggregate Benefits Accrued Annual Fund Complex
Compensation As Part of Fund Benefits Upon Paid to
Trustee from Registrant Expenses Retirement Trustees
------- --------------- -------- ---------- --------
<S> <C> <C> <C> <C>
Barbara J.
Dingfield $3,716 $0 $0 $23,875
Richard E.
Lundgren $3,716 $0 $0 $23,875
L.D. McClean $3,316 $0 $0 $22,000
Larry L. Pinnt $3,716 $0 $0 $23,875
John W.
Schneider $3,716 $0 $0 $23,875
Boh A. Dickey $0 $0 $0 $0
Richard W.
Hubbard $3,316 $0 $0 $26,900
</TABLE>
Currently, there is no pension, retirement, or other plan or any arrangement
pursuant to which Trustees or officers of the Trust are compensated by the
Trust. Each Trustee also serves as Trustee for six other registered open-end,
management investment companies that have, in the aggregate, twenty-six series
companies managed by SAM.
INVESTMENT ADVISORY AND OTHER SERVICES
SAM, SAFECO Securities, Inc. ("SAFECO Securities") and SAFECO Services
Corporation ("SAFECO Services") are wholly-owned subsidiaries of SAFECO
Corporation. SAFECO Securities is the principal underwriter and SAFECO
Services is the transfer, dividend and distribution disbursement and
shareholder servicing agent for each Portfolio under agreements with the Trust.
The following individuals have the following positions and offices with the
Trust, SAM, SAFECO Securities and SAFECO Services:
18
<PAGE> 51
<TABLE>
<CAPTION>
SAFECO SAFECO
Name Trust SAM Securities Services
---- ----- --- ---------- --------
<S> <C> <C> <C> <C>
B. A. Dickey Chairman Director Director
Trustee Chairman
D. F. Hill President Senior President President
Vice Director Director
President Secretary Secretary
Director
N. A. Fuller Vice Vice Vice Vice
President President President President
Controller Controller Controller Controller
Assistant Secretary Assistant Assistant
Secretary Secretary Secretary
Treasurer Treasurer
R.A. Spaulding Vice Vice Director Director
President Chairman
Treasurer Director
S.C. Bauer President
Director
</TABLE>
Mr. Dickey is Executive Vice President and Chief Financial Officer of SAFECO
Corporation, and Mr. Spaulding is Treasurer of SAFECO Corporation. Messrs.
Dickey and Spaulding are also directors of other SAFECO Corporation
subsidiaries.
In connection with the investment advisory contract with the Trust, SAM
furnishes or pays for all facilities and services furnished or performed for or
on behalf of the Trust and each Portfolio that include furnishing office
facilities, books, records and personnel to manage the Trust's and each
Portfolio's affairs and paying certain expenses.
For the services and facilities furnished by SAM, the Trust has agreed to pay
an annual fee of .74% for the Equity, Growth, Northwest and Bond Portfolios,
and .65% for the Money Market Portfolio computed on the basis of the average
market value of the net assets of each Portfolio ascertained each business day
and paid monthly. During its last three fiscal years, the Trust paid SAM the
following investment advisory fees for each Portfolio:
19
<PAGE> 52
Investment Advisory Fees Paid to SAM
<TABLE>
<CAPTION>
Years Ended
December 31 December 31 December 31
Portfolio 1995 1994 1993
- --------- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity $961,000 $623,000 $368,000
Bond $93,000 $96,000 $79,000
Money Market $54,000 $47,000 $37,000
</TABLE>
<TABLE>
<CAPTION> December 31 December 31 January 7, 1993 -
Portfolio 1995 1994 December 31, 1993
- --------- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Growth $200,000 $68,000 $23,000
Northwest $40,000 $28,000 $18,000
</TABLE>
U.S. Bank of Washington, N.A., 1420 Fifth Avenue, Seattle, Washington 98111, is
the custodian of the securities and cash of each Portfolio under an agreement
with the Trust. Ernst & Young LLP, 999 Third Avenue, Suite 3500, Seattle,
Washington 98104 is the independent auditor which audits the financial
statements of the Trust.
SAFECO Services, SAFECO Plaza, Seattle, Washington 98185, is the transfer,
dividend distribution disbursement and shareholder servicing agent for each
Portfolio under an agreement with the Trust. SAFECO Services is responsible for
all required transfer agent activity, including maintenance of records for each
Portfolio's shareholders, records of transactions involving each Portfolio's
shares and the compilation, distribution, or reinvestment of income dividends
or capital gains distributions. SAFECO Services is not compensated by the
Trust or the Portfolios for these services.
SAFECO Securities is the principal underwriter for each Portfolio and
distributes each Portfolio's shares on a continuous best efforts basis under an
agreement. SAFECO Securities is not compensated by the Trust or the Portfolios
for underwriting, distribution or other activities.
BROKERAGE PRACTICES
SAM places orders for the purchase or sale of each Portfolio's portfolio
securities. In deciding which broker to use in a given transaction SAM uses
the following criteria:
1. Which broker gives the best execution, (i.e., which broker is able to
trade the securities in the amounts and at the price desired and on a
timely basis);
2. Whether the broker is known to SAM as being reputable; and
3. All other things being equal, which broker has provided useful research
services to SAM.
Such research services as are furnished to SAM during the year (e.g., written
reports analyzing economic and financial characteristics of industries and
companies, telephone conversations between brokerage security analysts and
members of SAM's staff, and personal visits by such analysts and brokerage
strategists and economists to SAM's office) are used by SAM to advise all of
its clients including
20
<PAGE> 53
the Portfolios, but not all such research services furnished to SAM are used by
it to advise the Portfolios. SAM will not pay excess commissions or mark-ups
to any broker or dealer for research services or for any other reason. During
the fiscal year or period ended December 31, 1995, 100% of the total
brokerage expenses for the Equity, Growth and Northwest Portfolios were
commissions paid to brokers providing research services. The Equity Portfolio
incurred and paid brokerage expenses of $286,000, $138,000, and $123,000 for
the fiscal years ended December 31, 1995, 1994 and 1993 respectively. The
following table states the total amount of brokerage expenses for the Growth
and Northwest Portfolios for the three fiscal periods indicated:
<TABLE>
<CAPTION>
December 31 December 31 January 7, 1993 through
1995 1994 December 31, 1993
---- ---- -----------------
<S> <C> <C> <C>
Growth $82,000 $23,000 $5,000
Northwest $ 1,000 $ 1,000 $4,000
</TABLE>
Because the portfolio securities purchased and sold by the Bond and Money
Market Portfolios are traded on a principal basis, no commission is charged.
DISTRIBUTIONS AND TAX INFORMATION
Distributions. The Portfolios will receive income in the form of dividends and
interest earned on their investments in securities. This income, less the
expenses incurred in their operations, is the Portfolios' net investment
income, substantially all of which will be declared as dividends to the
Portfolios' shareholders (the separate accounts of Participating Insurance
Companies and Qualified Plans).
The Portfolios also may derive capital gains or losses in connection with sales
or other dispositions of their portfolio securities. Any net gain a Portfolio
may realize from transactions involving investments held less than the period
required for long-term capital gain or loss recognition or otherwise producing
short-term capital gain or loss recognition or otherwise producing short-term
capital gains and losses (taking into account any carryover of capital losses
from previous years), although technically a distribution from capital gains,
will be distributed to shareholders with and as part of income dividends. If
during any year a Portfolio realizes a net gain on transactions involving
investments held more than the period required for long-term capital gain or
loss recognition or otherwise producing long-term capital gains and losses, the
Portfolio will have a net long-term capital gain. After deduction of the
amount of any net short-term capital loss, the balance (to the extent not
offset by any capital losses carried over from previous years) will be
distributed and treated as long-term capital gains in the hands of the
shareholders regardless of the length of time for the Portfolio's shares may
have been held.
Any per-share dividend or distribution paid by a Portfolio reduces the
Portfolio's net asset value per share on the date paid by the amount of the
dividend or distribution per share. Accordingly, a dividend or distribution
paid shortly after a purchase of shares by a shareholder would represent, in
substance, a partial return of capital (to the extent it is paid on the shares
so purchased), even though it would be subject to income taxes.
As stated in the Prospectus, dividends and other distributions will generally
be made in the form of additional shares of the Portfolios.
Tax Information. Each Portfolio intends to continue to qualify and elect to be
treated as a regulated investment company under Subchapter M of the Internal
Revenue Code for each taxable year by complying with all applicable
requirements regarding the sources of its income, the diversification of its
assets, and the timing of its distributions. Each Portfolio's policy is to
distribute to its shareholders all of its investment company taxable income and
any net realized capital gains for each fiscal year in a manner that complies
with the distribution requirements of the Internal Revenue Code, so that a
Portfolio will not be subject to any federal income tax or excise taxes based
on net income.
In order to qualify as a regulated investment company, a Portfolio must, among
other things, (a) derive at least 90% of its gross income each year from
dividends, interest, payments with respect to loans of stock and securities,
gains from the sale or other disposition of stock or securities or foreign
currency gains related to investments in stocks or other securities, or other
income (generally including gains from options, futures or forward contracts)
derived with respect to the business of investing in stock, securities or
currency, (b) derive less than 30% of its gross income each year from the sale
or other disposition of stock or securities (or options thereon) held less than
three months (excluding some amounts otherwise included in income as a result
of certain hedging transactions), and (c) diversify its holders so that, at the
end of each fiscal quarter, (i) at least 50% of the market value of its assets
is represented by cash, cash items, U.S. Government securities, securities of
other regulated investment companies and other securities limited, for purposes
of this calculation, in the case of other securities of any one issuer to an
amount not greater than 5% of the Portfolio's assets or 10% of the voting
securities of the issuer, and (ii) not more than 25% of the value of its assets
is invested in the securities of any one issuer (other than U.S. Government
securities or securities of other regulated investment companies). As such,
and by complying with the applicable provisions of the Internal Revenue Code, a
Portfolio will not be subject to federal income tax on taxable income
(including realized capital gains) that is distributed to shareholders in
accordance with the timing requirements of the Internal Revenue Code. If a
Portfolio is unable to meet certain requirements of the Internal Revenue Code,
it may be subject to taxation as a corporation.
The Portfolios intend to declare and pay dividends and other distributions, as
stated in the Prospectus. In order to avoid the payment of any federal excise
tax based on net income, a Portfolio must declare on or before December 31 of
each year, and pay on or before January 31 of the following year, distributions
at least equal to 98% of its ordinary income for that calendar year and at
least 98% of the excess of any capital gains over any capital losses realized
in the one-year period ending October 31 of that year, together with any
undistributed amounts of ordinary income and capital gains (in excess of
capital losses) from the previous calendar year.
The Trust and the Portfolios intend to comply with the requirements of Section
817(h) of the Internal Revenue Code and related regulations, including certain
diversification requirements that are in addition to the diversification
requirements of Subchapter M and the Investment Company Act. Failure to comply
with the requirements of Section 817(h) could result in taxation of the
insurance company and immediate taxation of the owners of variable contracts to
the full extent of appreciation under the contracts.
Shares of a Portfolio underlying variable contracts that comply with the
requirements of Section 817(h) and related regulations will generally be
treated as owned by the insurance company and not by the owners of variable
contracts. In that case, income derived from the appreciation in shares of the
Portfolio would not be currently taxable to the owners of variable contracts.
Owners of variable contracts that do not comply with the requirements of
Section 817(h) would generally be subject to immediate taxation of the
appreciation under the contracts.
Section 817(h) requires that the investment portfolios underlying variable life
insurance and variable annuity contracts be "adequately diversified". Section
817(h) contains a safe harbor provision which provides that a variable life
insurance or variable annuity contract will meet the diversification
requirements if, as of the close of each calendar quarter, (i) the assets
underlying the contract meet the diversification standards for a regulated
investment company under Subchapter M of the Internal Revenue Code, and (ii) no
more than 55% of the total assets of the account consist of cash, cash items,
U.S. Government securities and securities of regulated investment companies.
Treasury Department regulations provide an alternative test to the safe harbor
provision to meet the diversification requirements. Under these regulations,
an investment portfolio will be adequately diversified if (i) not more than 55%
of the value of its total assets is represented by any one investment; (ii) not
more than 70% of the value of its total assets is represented by any two
investments; (iii) not more than 80% of the value of its total assets is
represented by any three investments; and (iv) not more than 90% of the value
of its total assets is represented by any four investments. These limitations
are increased for investment portfolios which are invested in whole or in part
of U.S. Treasury securities.
Stock of a regulated investment company, such as a Portfolio, held in an
insurance company's separate accounts underlying variable life insurance or
variable annuity contracts may be treated as a single investment for purposes
of the diversification rules of Section 817(h). A special rule in Section
817(h), however, allows a shareholder of a regulated investment company to
"look-through" the company and treat a pro rata share of the company's assets
as owned directly by the shareholder. This special "look-through" rule may
make it easier to comply with the diversification requirements of Section
817(h). To qualify for "look-through" treatment, public access to the
regulated investment company must generally be limited to (i) the purchase of a
variable contract, (ii) life insurance companies' general accounts, and (iii)
qualified pension or retirement plans. Interests in the Portfolios are sold
only to insurance company separate accounts to fund the benefits of variable
contracts, and may be sold to qualified pension and retirement plans.
Even if the diversification requirements of Section 817(h) are met, the owner
of a variable contract might be subject to current federal income taxation if
the owner has excessive control over the investments underlying the contract.
The Treasury Department has indicated that guidelines might be forthcoming that
address this issue. At this time, it is impossible to predict where they may
be issued, what the guidelines will include and the extent, if any, to which
they may be retroactive.
In order to maintain the variable contracts' status as annuities or insurance
contracts, the Trust may in the future find it necessary, and reserves the
right, to take certain actions, including, without limitation, amending a
Portfolio's investment objective (upon SEC or shareholder approval) or
substituting shares of one Portfolio for another.
FINANCIAL STATEMENTS
The following financial statements and the report thereon of Ernst & Young LLP,
independent auditors, are incorporated herein by reference to the Trust's
Annual Report for the year ended December 31, 1995:
Portfolio of Investments as of December 31, 1995
Statement of Assets and Liabilities as of December 31, 1995
Statement of Operations for the Year Ended December 31, 1995
Statement of Changes in Net Assets for the Years Ended December 31, 1995 and
December 31, 1994
Notes to Financial Statements
A copy of the Trust's Annual Report accompanies this Statement of Additional
Information. Additional copies may be obtained by calling 1-800-624-5711 or
by writing to the address on the Prospectus cover.
21
<PAGE> 54
SAFECO RESOURCE SERIES TRUST
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) The following financial statements for each series of the Registrant
for the fiscal year ended December 31, 1995 including the report
thereon of Ernst & Young LLP, independent auditors, are incorporated
in the Statement of Additional Information by reference to
Registrant's Annual Report that was filed with the Securities and
Exchange Commission on February 29, 1996:
Portfolio of Investments as of December 31, 1995
Statement of Assets and Liabilities as of December 31, 1995
Statement of Operations for the Year Ended December 31, 1995
Statement of Changes in Net Assets for the Years Ended
December 31, 1995 and December 31, 1994
Notes to Financial Statements
Financial Statements from Registrant's Annual Report are filed as Exhibit 12.
(b) Exhibits:
<TABLE>
<CAPTION>
Exhibit Number Description of Document Page
-------------- ----------------------- ----
<S> <C> <C>
(27.1) Financial Data Schedule
(99.1) Trust Instrument/Certificate of Trust
(99.2) Bylaws
(99.5) Investment Advisory and Management
Contract
(99.6) Distribution Agreement
(99.8) Custody Agreement
(99.9a) Transfer Agent Agreement
(99.9b) Fund Participation Agreement
(99.10) Opinion and Consent of Counsel
(99.11) Consent of Independent Auditors
</TABLE>
<PAGE> 55
<TABLE>
<S> <C> <C>
(99.12) Registrant's Annual Report for the Year
Ended December 31, 1995+ including financial
statements
(99.13) Agreement Governing Contribution
to SAFECO Resource Series Trust
by SAFECO Life Insurance Company
dated June 23, 1986.
(99.14) Not Applicable
(99.15) Not Applicable
(99.16) Calculation of Performance Information
</TABLE>
+ Registrant's Annual Report was filed with the SEC on or about
February 29, 1996. The Report contains the financial statements
incorporated by reference in Registrant's Statement of Additional
Information.
Item 25. Persons Controlled by or Under Common Control With Registrant
SAFECO Corporation, a Washington corporation, owns 100% of SAFECO Asset
Management Company (SAM), SAFECO Services Corporation (SAFECO Services) and
SAFECO Securities, Inc. (SAFECO Securities), each a Washington corporation.
SAM is the investment advisor, SAFECO Services is the transfer agent and SAFECO
Securities is the principal underwriter for each of the SAFECO mutual funds.
The SAFECO Mutual Funds consist of seven Delaware business trusts: SAFECO
Common Stock Trust, SAFECO Taxable Bond Trust, SAFECO Tax-Exempt Bond Trust,
SAFECO Advisor Series Trust, SAFECO Money Market Trust, SAFECO Institutional
Series Trust and SAFECO Resource Series Trust. The SAFECO Common Stock Trust
consists of seven mutual funds: SAFECO Growth Fund, SAFECO Equity Fund, SAFECO
Income Fund, SAFECO Northwest Fund, SAFECO International Stock Fund, SAFECO
Balanced Fund and SAFECO Small Company Stock Fund. The SAFECO Taxable Bond
Trust consists of three mutual funds: SAFECO Intermediate-Term U.S. Treasury
Fund, SAFECO GNMA Fund and SAFECO High-Yield Bond Fund. The SAFECO Tax-Exempt
Bond Trust consists of five mutual funds: SAFECO Intermediate-Term Municipal
Bond Fund, SAFECO Insured Municipal Bond Fund, SAFECO Municipal Bond Fund,
SAFECO California Tax-Free Income Fund and SAFECO Washington State Municipal
Bond Fund. The SAFECO Advisor Series Trust consists of eight mutual funds:
Advisor Equity Fund, Advisor Northwest Fund, Advisor Intermediate-Term Treasury
Fund, Advisor GNMA Fund, Advisor U.S. Government Fund, Advisor Municipal Bond
Fund, Advisor Intermediate-Term Municipal Bond Fund and Advisor Washington
Municipal Bond Fund. The SAFECO Money Market Fund consists of two mutual
funds: SAFECO Money Market Fund and SAFECO Tax-Free Money Market Fund. The
SAFECO Institutional Series Trust consists of one mutual fund: Fixed-Income
Portfolio. The SAFECO Resource Series Trust consists of five mutual funds:
Equity Portfolio, Growth Portfolio, Northwest Portfolio, Bond Portfolio and
Money Market Portfolio.
SAFECO Corporation, a Washington Corporation, owns 100% of the following
Washington corporations: SAFECO Insurance Company of America, General Insurance
Company of America, First National Insurance Company of America, SAFECO Life
Insurance Company of America, SAFECO Assigned Benefits Service Company, SAFECO
Administrative Services, Inc., SAFECO Properties Inc., SAFECO Credit Company,
Inc., SAFECO Asset Management Company, SAFECO Securities, Inc., SAFECO Services
Corporation, SAFECO Trust Company and General America Corporation. SAFECO
Corporation owns 100% of SAFECO National Insurance Company, a Missouri
corporation, and SAFECO Insurance Company of Illinois, an Illinois
<PAGE> 56
corporation. SAFECO Corporation owns 20% of Agena, Inc., a Washington
corporation. SAFECO Insurance Company of America owns 100% of SAFECO
Management Corp., a New York corporation, and SAFECO Surplus Lines Insurance
Company, a Washington corporation. SAFECO Life Insurance Company owns 100% of
SAFECO National Life Insurance Company, a Washington corporation, and First
SAFECO National Life Insurance Company of New York, a New York corporation.
SAFECO Administrative Services, Inc. owns 100% of Employee Benefit Claims of
Wisconsin, Inc. and Wisconsin Pension and Group Services, Inc., each a
Wisconsin corporation. General America Corporation owns 100% of COMAV Mangers,
Inc., an Illinois corporation, F.B. Beattie & Co., Inc., a Washington
corporation, General America Corp. of Texas, a Texas corporation, Talbot
Financial Corporation, a Washington corporation and SAFECO Select Insurance
Services, Inc., a California corporation. F.B. Beattie & Co., Inc. owns 100%
of F.B. Beattie Insurance Services, Inc., a California corporation. General
America Corp. of Texas is Attorney-in-fact for SAFECO Lloyds Insurance Company,
a Texas corporation. Talbot Financial Corporation owns 100% of Talbot Agency,
Inc., a New Mexico Corporation. Talbot Agency, Inc. owns 100% of PNMR
Securities, Inc., a Washington corporation. SAFECO Properties Inc. owns 100%
of the following, each a Washington corporation: RIA Development, Inc.,
SAFECARE Company, Inc. and Winmar Company, Inc. SAFECARE Company, Inc. owns
100% of the following, each a Washington corporation: S.C. Bellevue, Inc.,
S.C. Everett, Inc., S.C. Marysville, Inc., S.C. Simi Valley, Inc. and S.C.
Vancouver, Inc. SAFECARE Company, Inc. owns 50% of Lifeguard Ventures, Inc.,
a California corporation, 50% of Mission Oaks Hospital, Inc., a California
corporation, S.C. River Oaks, Inc., a Washington corporation, Mississippi
Health Services, Inc., a Louisiana corporation, and Safecare Texas, Inc., a
Texas corporation. S.C. Simi Valley, Inc. owns 100% of Simi Valley Hospital,
Inc., a Washington corporation. Winmar Company, Inc. owns 100% of C-W
Properties, Inc., a Washington corporation. Winmar Company, Inc. owns 100% of
the following: Barton Street Corp., Gem State Investors, Inc., Kitsap Mall,
Inc., WNY Development, Inc., Winmar Cascade, Inc., Winmar Metro, Inc., Winmar
Northwest, Inc., Winmar Redmond, Inc. and Winmar of Kitsap, Inc., each a
Washington corporation, and Capitol Court Corp., a Wisconsin corporation,
SAFECO Properties of Boise, Inc., an Idaho corporation, SCIT, Inc., a
Massachusetts corporation, Valley Fair Shopping Centers, Inc., a Delaware
corporation, WDI Golf Club, Inc., a California corporation, Winmar Oregon,
Inc., an Oregon corporation, Winmar of Texas, Inc., a Texas corporation, Winmar
of Wisconsin, Inc., a Wisconsin corporation, and Winmar of the Desert, Inc., a
California corporation. Winmar Oregon, Inc. owns 100% of the following, each
an Oregon corporation: North Coast Management, Inc., Pacific Surfside Corp.,
Winmar of Jantzen Beach, Inc. and W-P Development, Inc., and 100% of the
following, each a Washington corporation: Washington Square, Inc. and Winmar
Pacific, Inc.
Item 26. Number of Holders of Securities
At March 31, 1996, SAFECO Life Insurance Company was the sole shareholder of
the Equity Portfolio, Growth Portfolio, Money Market Portfolio and Bond
Portfolio. As of the same date, SAFECO Life Insurance Company and SAFECO Asset
Management Company owned all of the shares of the Northwest Portfolio.
Item 27. Indemnification
Under the Trust Instrument of the Registrant, the Registrant's trustees,
officers, employees and agents are indemnified against certain liabilities,
subject to specified conditions and limitations.
Under the indemnification provisions in the Registrant's Trust Instrument and
subject to the limitations described in the paragraph below, every person who
is, or has been, a trustee, officer, employee or agent of the Registrant shall
be indemnified by the Registrant or the appropriate Series of the Registrant to
the fullest extent permitted
<PAGE> 57
by law against liability and against all expenses reasonably incurred or paid
by him or her in connection with any claim, action, suit or proceeding in which
he or she becomes involved as a party or otherwise by virtue of his or her
being, or having been, a trustee, officer, employee or agent and against
amounts paid or incurred by him or her in the settlement thereof. As used in
this paragraph, "claim," "action," "suit" or "proceeding" shall apply to all
claims, actions, suits or proceedings (civil, criminal or other, including
appeals), actual or threatened, and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgements, amounts paid
in settlement, fines, penalties and other liabilities.
No indemnification will be provided to a trustee, officer, employee or agent:
(i) who shall have been adjudicated by a court or body before which the
proceeding was brought (a) to be liable to the Registrant or its shareholders
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office, or (b)
not to have acted in good faith in the reasonable belief that his or her action
was in the best interest of the Registrant; or (ii) in the event of settlement,
unless there has been a determination that such trustee, officer, employee or
agent did not engage in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office
(a) by the court or other body approving the settlement, (b) by the vote of at
least a majority of a quorum of those trustees who are neither interested
persons, as that term is defined by the Investment Company Act of 1940 ("1940
Act"), of the Registrant nor are parties to the proceeding based upon a review
of readily available facts (as opposed to a full trial type inquiry) or (c) by
written opinion of independent legal counsel based upon a review of readily
available facts (as opposed to a full trial type inquiry).
To the maximum extent permitted by applicable law, expenses incurred in
connection with the preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described above may be paid by the
Registrant or applicable Series from time to time prior to final disposition
thereof upon receipt of an undertaking by or on behalf of such trustee,
officer, employee or agent that such amount will be paid over by him or her to
the Registrant or the applicable Series if it is ultimately determined that he
or she is not entitled to indemnification under the Trust Instrument; provided,
however, that either (i) such trustee, officer, employee or agent shall have
provided appropriate security for such undertaking, (ii) the Registrant is
insured against such losses arising out of such advance payments or (iii)
either a majority of the trustees who are neither interested persons, as that
term is defined by the 1940 Act, of the Registrant nor parties to the
proceeding, or independent legal counsel in a written opinion, shall have
determined, based on a review of readily available facts (as opposed to a full
trial type inquiry), that there is reason to believe that such trustee,
officer, employee or agent, will not be disqualified from indemnification under
Registrant's Trust Instrument.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 ("1933 Act") may be permitted to trustees, officers, employees and agents
of the Registrant pursuant to such provisions of the Trust Instrument or
statutes or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission, such indemnification is against public
policy as expressed in said Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a trustee, officer,
employee or agent of the Registrant in the successful defense of any such
action, suit or proceeding) is asserted by such trustee, officer, employee or
agent in connection with the shares of the Registrant, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such
<PAGE> 58
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.
Under an agreement with its distributor ("Distribution Agreement"), Registrant
has agreed to indemnify, defend and hold the distributor, the distributor's
several directors, officers and employees, and any person who controls the
distributor within the meaning of Section 15 of the 1933 Act, free and harmless
from and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which the
distributor, its directors, officers or employees, or any such controlling
person may incur, under the 1933 Act or under common law or otherwise, arising
out of or based upon any alleged untrue statement of a material fact contained
in the Registration Statement or arising out of or based upon any alleged
omission to state a material fact required to be stated or necessary to make
the Registration Statement not misleading, provided that in no event shall
anything contained in the Distribution Agreement be construed so as to protect
the distributor against any liability to the Registrant or its shareholders to
which the distributor would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of its duties,
or by reason of its reckless disregard of its obligations and duties under the
Distribution Agreement, and further provided that the Registrant shall not
indemnify the distributor for conduct set forth in this subparagraph.
Under an agreement with its transfer agent, Registrant has agreed to indemnify
and hold the transfer agent harmless against any losses, claims, damages,
liabilities or expenses (including reasonable attorneys' fees and expenses)
resulting from: (1) any claim, demand, action or suit brought by any person
other than the Registrant, including by a shareholder, which names the transfer
agent and/or the Registrant as a party, and is not based on and does not result
from the transfer agent's willful misfeasance, bad faith or negligence or
reckless disregard of duties, and arises out of or in connection with the
transfer agent's performance hereunder; or (2) any claim, demand, action or
suit (except to the extent contributed to by the transfer agent's willful
misfeasance, bad faith or negligence or reckless disregard of duties) which
results from the negligence of the Registrant, or from the transfer agent
acting upon any instruction(s) reasonably believed by it to have been executed
or communicated by any person duly authorized by the Registrant, or as a result
of the transfer agent acting in reliance upon advice reasonable believed by the
transfer agent to have been given by counsel for the Registrant, or as a result
of the transfer agent acting in reliance upon any instrument or stock
certificate reasonably believed by it to have been genuine and signed,
countersigned or executed by the proper person.
Item 28. Business and Other Connections of Investment Adviser
The investment adviser to Registrant, SAM, serves as an adviser to (a)
thirty-one series (portfolios) of seven registered investment companies,
including five series of Registrant, and (b) a number of pension funds not
affiliated with SAFECO Corporation or its affiliates. The directors and
officers of SAM serve in similar capacities with SAFECO Corporation or its
affiliates. The information set forth under "Investment Advisory and Other
Services" in the Registrant's Statement of Additional Information is
incorporated by reference.
<PAGE> 59
Item 29. Principal Underwriters
(a) SAFECO Securities, Inc., the principal underwriter for the Registrant,
also acts as the principal underwriter for the sale of variable
annuity contracts (SAFECO Resource Variable Account B and SAFECO
Separate Account C) and variable universal life insurance policies
(SAFECO Separate Account SL) issued by SAFECO Life Insurance Company
as well as for the SAFECO Common Stock Trust, SAFECO Taxable Bond
Trust, SAFECO Tax-Exempt Bond Trust, SAFECO Money Market Trust, SAFECO
Institutional Series Trust and SAFECO Advisor Series Trust.
(b) The information set forth under "Investment Advisory and Other
Services" of Registrant's Statement of Additional Information is
incorporated by reference.
Item 30. Location of Accounts and Records
U.S. Bank of Washington, N.A., 1420 Fifth Avenue, Seattle, Washington 98101
maintains physical possession of the accounts, books and documents of
Registrant relating to its activities as custodian of the Registrant. SAFECO
Asset Management Company, SAFECO Plaza, Seattle, Washington, 98185, maintains
physical possession of all other accounts, books or documents of the Registrant
required to be maintained by Section 31(a) of the Investment Company Act of
1940 and the rules promulgated thereunder.
Item 31. Management Services
Inapplicable.
Item 32. Undertakings
Registrant undertakes to furnish each person to whom a prospectus is delivered
with a copy of the Registrant's latest annual report to shareholders, upon
request and without charge.
<PAGE> 60
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereto duly
authorized, in the City of Seattle, and State of Washington on the ___ day of
April, 1996.
SAFECO RESOURCE SERIES TRUST
By:
_______________________________
Richard E. Zunker, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
President
- -------------------------- Principal Executive Officer _____________
Richard E. Zunker
RONALD L. SPAULDING* Vice President
- -------------------------- Treasurer _____________
Ronald L. Spaulding
Vice President
NEAL A. FULLER* Controller _____________
- -------------------------- Assistant Secretary
Neal A. Fuller Principal Financial Officer
Chairman and Trustee _____________
- --------------------------
Boh A. Dickey
BARBARA J. DINGFIELD* Trustee _____________
- --------------------------
Barbara J. Dingfield
RICHARD W. HUBBARD* Trustee _____________
- --------------------------
Richard W. Hubbard
RICHARD E. LUNDGREN* Trustee _____________
- --------------------------
Richard E. Lundgren
L.D. MCCLEAN* Trustee _____________
- --------------------------
L. D. McClean
LARRY L. PINNT* Trustee _____________
- --------------------------
Larry L. Pinnt
JOHN W. SCHNEIDER* Trustee _____________
- --------------------------
John W. Schneider
*By:
--------------------------
David F. Hill, Attorney-in-Fact
*By:
--------------------------
Boh A. Dickey, Attorney-in-Fact
</TABLE>
<PAGE> 61
Registration Nos. 33-06547
811-4717
===============================================================================
EXHIBITS
to
FORM N-1A
REGISTRATION STATEMENT
Under
The Securities Act of 1933
Post-Effective Amendment No. 16
and
Post-Effective Amendment No. 17
Under
The Investment Company Act of 1940
SAFECO Resource Series Trust
(Exact Name of Registrant as Specified in Charter)
SAFECO Plaza
Seattle, Washington 98185
(Address of Principal Executive Offices)
206-545-5000
(Registrant's Telephone Number, including Area Code)
===============================================================================
<PAGE> 62
SAFECO RESOURCE SERIES TRUST
FORM N-1A
Post-Effective Amendment No. 16
Exhibit Index
<TABLE>
<CAPTION>
Exhibit Number Description of Document Page
- -------------- ----------------------- ----
<S> <C> <C>
(27.1-5) Financial Data Schedule
(99.1) Trust Instrument/Certificate of Trust
(99.2) Bylaws
(99.5) Investment Advisory and Management
Contract
(99.6) Distribution Agreement
(99.8) Custody Agreement
(99.9a) Transfer Agent Agreement
(99.9b) Fund Participation Agreement
(99.10) Opinion and Consent of Counsel
(99.11) Consent of Independent Auditor
(99.12) Registrant's Annual Report for the
Year Ended December 31, 1995+ including
Financial Statements
(99.13) Agreement Governing Contribution to
SAFECO Resource Series Trust by SAFECO
Life Insurance Company dated June 23, 1986
(99.16) Calculation of Performance Information
</TABLE>
+ Registrant's Annual Report was filed with the SEC on or about February 28,
1996.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> SAFECO RST EQUITY PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 147,569
<INVESTMENTS-AT-VALUE> 172,053
<RECEIVABLES> 851
<ASSETS-OTHER> 443
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 173,347
<PAYABLE-FOR-SECURITIES> 3,758
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 100
<TOTAL-LIABILITIES> 3,868
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 144,995
<SHARES-COMMON-STOCK> 8,807
<SHARES-COMMON-PRIOR> 6,081
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 24,484
<NET-ASSETS> 169,479
<DIVIDEND-INCOME> 3,617
<INTEREST-INCOME> 421
<OTHER-INCOME> 0
<EXPENSES-NET> 1,011
<NET-INVESTMENT-INCOME> 3,027
<REALIZED-GAINS-CURRENT> 15,778
<APPREC-INCREASE-CURRENT> 14,951
<NET-CHANGE-FROM-OPS> 33,756
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,027
<DISTRIBUTIONS-OF-GAINS> 15,778
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,832
<NUMBER-OF-SHARES-REDEEMED> (1,083)
<SHARES-REINVESTED> 977
<NET-CHANGE-IN-ASSETS> 67,158
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 961
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,011
<AVERAGE-NET-ASSETS> 134,093
<PER-SHARE-NAV-BEGIN> 16.83
<PER-SHARE-NII> 0.39
<PER-SHARE-GAIN-APPREC> 4.43
<PER-SHARE-DIVIDEND> 0.39
<PER-SHARE-DISTRIBUTIONS> 2.02
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.24
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> SAFECO RST GROWTH PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 39,475
<INVESTMENTS-AT-VALUE> 44,602
<RECEIVABLES> 45
<ASSETS-OTHER> 326
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 44,973
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 515
<TOTAL-LIABILITIES> 515
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 39,331
<SHARES-COMMON-STOCK> 2,800
<SHARES-COMMON-PRIOR> 1,245
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,127
<NET-ASSETS> 44,458
<DIVIDEND-INCOME> 316
<INTEREST-INCOME> 55
<OTHER-INCOME> 0
<EXPENSES-NET> 218
<NET-INVESTMENT-INCOME> 153
<REALIZED-GAINS-CURRENT> 5,752
<APPREC-INCREASE-CURRENT> 4,187
<NET-CHANGE-FROM-OPS> 10,092
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 153
<DISTRIBUTIONS-OF-GAINS> 5,752
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,537
<NUMBER-OF-SHARES-REDEEMED> (323)
<SHARES-REINVESTED> 341
<NET-CHANGE-IN-ASSETS> 28,301
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 200
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 232
<AVERAGE-NET-ASSETS> 27,635
<PER-SHARE-NAV-BEGIN> 12.98
<PER-SHARE-NII> 0.06
<PER-SHARE-GAIN-APPREC> 5.26
<PER-SHARE-DIVIDEND> 0.06
<PER-SHARE-DISTRIBUTIONS> 2.36
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.88
<EXPENSE-RATIO> 0.79
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> SAFECO RST NORTHWEST PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 5,998
<INVESTMENTS-AT-VALUE> 6,336
<RECEIVABLES> 5
<ASSETS-OTHER> 5
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,346
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 34
<TOTAL-LIABILITIES> 34
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,974
<SHARES-COMMON-STOCK> 582
<SHARES-COMMON-PRIOR> 446
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 338
<NET-ASSETS> 6,312
<DIVIDEND-INCOME> 35
<INTEREST-INCOME> 50
<OTHER-INCOME> 0
<EXPENSES-NET> 40
<NET-INVESTMENT-INCOME> 45
<REALIZED-GAINS-CURRENT> 66
<APPREC-INCREASE-CURRENT> 196
<NET-CHANGE-FROM-OPS> 307
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 45
<DISTRIBUTIONS-OF-GAINS> 41
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 176
<NUMBER-OF-SHARES-REDEEMED> (45)
<SHARES-REINVESTED> 5
<NET-CHANGE-IN-ASSETS> 1,748
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 40
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 66
<AVERAGE-NET-ASSETS> 5,596
<PER-SHARE-NAV-BEGIN> 10.24
<PER-SHARE-NII> 0.08
<PER-SHARE-GAIN-APPREC> 0.68
<PER-SHARE-DIVIDEND> 0.08
<PER-SHARE-DISTRIBUTIONS> 0.07
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.85
<EXPENSE-RATIO> 0.71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> SAFECO RST BOND PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 13,541
<INVESTMENTS-AT-VALUE> 14,110
<RECEIVABLES> 114
<ASSETS-OTHER> 41
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 14,265
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8
<TOTAL-LIABILITIES> 8
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13,920
<SHARES-COMMON-STOCK> 1,261
<SHARES-COMMON-PRIOR> 1,310
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 569
<NET-ASSETS> 14,257
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 936
<OTHER-INCOME> 0
<EXPENSES-NET> 93
<NET-INVESTMENT-INCOME> 843
<REALIZED-GAINS-CURRENT> 116
<APPREC-INCREASE-CURRENT> 1,162
<NET-CHANGE-FROM-OPS> 2,121
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 843
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 266
<NUMBER-OF-SHARES-REDEEMED> (390)
<SHARES-REINVESTED> 75
<NET-CHANGE-IN-ASSETS> 896
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 93
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 121
<AVERAGE-NET-ASSETS> 12,959
<PER-SHARE-NAV-BEGIN> 10.20
<PER-SHARE-NII> 0.71
<PER-SHARE-GAIN-APPREC> 1.11
<PER-SHARE-DIVIDEND> 0.71
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.31
<EXPENSE-RATIO> 0.72
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> SAFECO RST MONEY MARKET PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 9,063
<INVESTMENTS-AT-VALUE> 9,063
<RECEIVABLES> 1
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 9,064
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 345
<TOTAL-LIABILITIES> 345
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,719
<SHARES-COMMON-STOCK> 8,719
<SHARES-COMMON-PRIOR> 9,315
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 8,719
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 522
<OTHER-INCOME> 0
<EXPENSES-NET> 54
<NET-INVESTMENT-INCOME> 468
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 468
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 468
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 21,270
<NUMBER-OF-SHARES-REDEEMED> (22,298)
<SHARES-REINVESTED> 432
<NET-CHANGE-IN-ASSETS> (596)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 54
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 76
<AVERAGE-NET-ASSETS> 8,784
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.05
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.62
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<PAGE> 1
EXHIBIT 99.1
TRUST INSTRUMENT/CERTIFICATE OF TRUST
<PAGE> 2
SAFECO RESOURCE SERIES TRUST
TRUST INSTRUMENT
This TRUST INSTRUMENT is made on __________ __, 1993, by the Trustees,
to establish a business trust for the investment and reinvestment of funds
contributed to the Trust by investors. The Trustees declare that all money and
property contributed to the Trust shall be held and managed in trust pursuant
to this Trust Instrument. The name of the Trust created by this Trust
Instrument is SAFECO Resource Series Trust.
ARTICLE I
DEFINITIONS
Unless otherwise provided or required by the context:
(a) "Bylaws" means the Bylaws of the Trust adopted by the Trustees,
as amended from time to time;
(b) "Class" means the class of Shares of a Series established
pursuant to Article IV;
(c) "Commission," "Interested Person," and "Principal Underwriter"
have the meanings provided in the 1940 Act;
(d) "Covered Person" means a person so defined in Article IX, Section
2;
(e) "Delaware Act" means Chapter 38 of Title 12 of the Delaware Code
entitled "Treatment of Delaware Business Trusts," as amended from time to time;
(f) "Majority Shareholder Vote" means "the vote of a majority of the
outstanding voting securities" as defined in the 1940 Act;
(g) "Net Asset Value" means the net asset value of each Series of the
Trust, determined as provided in Article V, Section 3;
(h) "Outstanding Shares" means Shares shown on the books of
<PAGE> 3
the Trust or its transfer agent as then issued and outstanding, but does not
include Shares which have been repurchased by the Trust;
(i) "Series" means a series of Shares established pursuant to Article
IV;
(j) "Shareholder" means a record owner of Outstanding Shares;
(k) "Shares" means the equal proportionate transferable units of
interest into which the beneficial interest of each Series or Class is divided
from time to time (including whole Shares and fractions of Shares);
(l) "Trust" means SAFECO Resource Series Trust established hereby,
and reference to the Trust, when applicable to one or more Series, refers to
that Series;
(m) "Trustees" means the persons who have signed this Trust
Instrument, so long as they shall continue in office in accordance with the
terms hereof, and all other persons who may from time to time be duly qualified
and serving as Trustees in accordance with Article II, in all cases in their
capacities as Trustees hereunder;
(n) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the Trust or any
Series or the Trustees on behalf of the Trust or any Series;
(o) The "1940 Act" means the Investment Company Act of 1940, as
amended from time to time.
ARTICLE II
TRUSTEES
Section 1. Management of the Trust. The business and affairs of the
Trust shall be managed by or under the direction of the Trustees, and they
shall have all powers necessary or desirable to carry out that responsibility.
The Trustees may execute all instruments and take all action they deem
necessary or desirable to promote the interests of the Trust. Any
determination made by the Trustees in good faith as to what is in the interests
of the Trust shall be conclusive. The Trustees, in their capacity as such,
shall not be expected to devote their entire time to the business and affairs
of the Trust.
Section 2. Initial Trustees; Number, Election and Qualification of
Trustees. The initial Trustees shall be the persons initially signing this
Trust Instrument. The number of
- 2 -
<PAGE> 4
Trustees (other than the initial Trustees) shall be fixed from time to time by
a majority of the Trustees; provided, that there shall be at least two (2)
Trustees. The Shareholders shall elect the Trustees (other than the initial
Trustees) on such dates as the Trustees may fix from time to time.
Section 3. Term of Office. Each Trustee shall hold office for life,
or until he or she reaches seventy-two (72) years of age, or until his or her
successor is elected, or the Trust terminates; except that (a) any Trustee may
resign by delivering to the Board of Trustees or to any Trust officer a written
resignation effective upon such delivery or a later date specified therein; (b)
any Trustee may be removed with or without cause at any time by a written
instrument signed by at least two-thirds of the other Trustees, specifying the
effective date of removal; (c) any Trustee who has become physically or
mentally incapacitated or is otherwise unable to serve, may be retired by a
written instrument signed by a majority of the other Trustees, specifying the
effective date of retirement; and (d) any Trustee may be removed at any meeting
of the Shareholders by a vote of at least two-thirds of the Outstanding Shares.
Section 4. Vacancies; Appointment of Trustees. Whenever a vacancy
shall exist in the Board of Trustees, regardless of the reason for such
vacancy, the remaining Trustees shall appoint any person as they determine in
their sole discretion to fill that vacancy, subject to Sections 10 and 16(a) of
the 1940 Act. Such appointment shall be made by a written instrument signed by
a majority of the Trustees or by a resolution of the Trustees, duly adopted and
recorded in the records of the Trust, specifying the effective date of the
appointment. The Trustees may appoint a new Trustee as provided above in
anticipation of a vacancy expected to occur because of the retirement,
resignation, or removal of a Trustee, or an increase in number of Trustees,
provided that such appointment shall become effective only at or after the
expected vacancy occurs. As soon as any such Trustee has accepted his
appointment in writing, the trust estate shall vest in the new Trustee,
together with the continuing Trustees, without any further act or conveyance,
and he shall be deemed a Trustee hereunder.
Section 5. Chairman. The Trustees shall appoint one of their number
to be Chairman of the Board of Trustees. The Chairman shall preside at all
meetings of the Trustees and the Shareholders and shall perform such other
powers and duties as may from time to time be assigned by the Board of Trustees
or prescribed by the Bylaws.
Section 6. Action by the Trustees. The Trustees shall act by
majority vote at a meeting duly called (including at a telephonic meeting,
unless the 1940 Act requires that a particular action be
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taken only at a meeting of Trustees in person) at which a quorum is present or
by written consent of a majority of Trustees (or such greater number as may be
required by applicable law) without a meeting. A majority of the Trustees
shall constitute a quorum at any meeting. Meetings of the Trustees may be
called orally or in writing by the President of the Trust, the Secretary of the
Trust, the Chairman of the Board of Trustees, or by any two other Trustees.
Notice of the time, date and place of all Trustees meetings shall be given to
each Trustee in person or by telephone, telegram, facsimile or other electronic
mechanism sent to his or her home or business address at least twenty-four
hours in advance of the meeting or by written notice mailed to his or her home
or business address at least seventy-two hours in advance of the meeting. Oral
notice is deemed to be given upon communication. Written notice is deemed to
be given, if mailed, when deposited in the United States mail, postage
pre-paid, or if sent by telegram, facsimile or other electronic transmission,
when dispatched, to the address, telephone number or other number of the
Trustee as it appears on the records of the Trust. Notice need not be given to
any Trustee who attends the meeting without objecting to the lack of notice or
who signs a waiver of notice either before or after the meeting. Subject to
the requirements of the 1940 Act, the Trustees by majority vote may delegate to
any Trustee or Trustees authority to approve particular matters or take
particular actions on behalf of the Trust. Any written consent or waiver may
be provided and delivered to the Trust by facsimile or other similar electronic
mechanism.
Section 7. Ownership of Trust Property. The Trust Property of the
Trust and of each Series shall be held separate and apart from any assets now
or hereafter held in any capacity other than as Trustee hereunder by the
Trustees or any successor Trustees. All of the Trust Property and legal title
thereto shall at all times be considered as vested in the Trustees on behalf of
the Trust, except that the Trustees may cause legal title to any Trust
Property to be held by or in the name of the Trust, or in the name of any
person as nominee. No Shareholder shall be deemed to have a severable
ownership in any individual asset of the Trust or of any Series or any right of
partition or possession thereof, but each Shareholder shall have, as provided
in Article IV, a proportionate undivided beneficial interest in the Trust or
Series represented by Shares.
Section 8. Effect of Trustees Not Serving. The death, resignation,
retirement, removal, incapacity, or inability or refusal to serve of the
Trustees, or any one of them, shall not operate to annul the Trust or to revoke
any existing agency created pursuant to the terms of this Trust Instrument.
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Section 9. Trustees, etc. as Shareholders. Subject to any
restrictions in the Bylaws, any Trustee, officer, agent or independent
contractor of the Trust may acquire, own and dispose of Shares to the same
extent as any other Shareholder; the Trustees may issue and sell Shares to and
buy Shares from any such person or any firm or company in which such person is
interested, subject only to any general limitations herein.
ARTICLE III
POWERS OF THE TRUSTEES
Section 1. Powers. The Trustees in all instances shall act as
principals, free of the control of the Shareholders. The Trustees shall have
full power and authority to take or refrain from taking any action and to
execute any contracts and instruments that they may consider necessary or
desirable in the management of the Trust. The Trustees shall not in any way be
bound or limited by current or future laws or customs applicable to trust
investments, but shall have full power and authority to make any investments
which they, in their discretion, deem proper to accomplish the purposes of the
Trust. The Trustees may exercise all of their powers without recourse to any
court or other authority. Subject to any applicable limitation herein or in
the Bylaws or resolutions of the Trust, the Trustees shall have power and
authority, without limitation:
(a) To invest and reinvest cash and other property, and to hold cash
or other property uninvested, without in any event being bound or limited by
any current or future law or custom concerning investments by trustees, and to
sell, exchange, lend, pledge, mortgage, hypothecate, write options on and lease
any or all of the Trust Property; to invest in obligations and securities of
any kind, and without regard to whether they may mature before the possible
termination of the Trust; and without limitation to invest all or any part of
its cash and other property in securities issued by a registered investment
company or series thereof, subject to the provisions of the 1940 Act;
(b) To operate as and carry on the business of a registered investment
company, and exercise all the powers necessary and proper to conduct such a
business;
(c) To adopt Bylaws not inconsistent with this Trust Instrument
providing for the conduct of the business of the Trust and to amend and repeal
them to the extent such right is not reserved to the Shareholders;
(d) To elect and remove such officers and appoint and terminate such
agents as they deem appropriate;
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(e) To employ as custodian of any assets of the Trust, subject to any
provisions herein or in the Bylaws, one or more banks, trust companies or
companies that are members of a national securities exchange, or other entities
permitted by the Commission to serve as such;
(f) To retain one or more transfer agents and Shareholder servicing
agents, or both;
(g) To provide for the distribution of Shares either through a
Principal Underwriter as provided herein or by the Trust itself, or both, or
pursuant to a distribution plan of any kind;
(h) To set record dates in the manner provided for herein or in the
Bylaws;
(i) To delegate such authority as they consider desirable to any
officers of the Trust and to any agent, independent contractor, manager,
investment adviser, custodian or underwriter;
(j) To sell or exchange any or all of the assets of the Trust, subject
to Article X, Section 4;
(k) To vote or give assent, or exercise any rights of ownership, with
respect to other securities or property; and to execute and deliver powers of
attorney delegating such power to other persons;
(l) To exercise powers and rights of subscription or otherwise which
in any manner arise out of ownership of securities;
(m) To hold any security or other property (i) in a form not
indicating any trust, whether in bearer, book entry, unregistered or other
negotiable form, or (ii) either in the Trust's or Trustees' own name or in the
name of a custodian or a nominee or nominees, subject to safeguards according
to the usual practice of business trusts or investment companies;
(n) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes, and with
separate Shares representing beneficial interests in such Series, and to
establish separate Classes, all in accordance with the provisions of Article
IV;
(o) To the full extent permitted by Section 3804 of the Delaware Act,
to allocate assets, liabilities and expenses of the Trust to a particular
Series and liabilities and expenses to a particular Class or to apportion the
same between or among two or more Series or Classes, provided that any
liabilities or expenses incurred by a particular Series or Class shall be
payable solely out of the assets
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belonging to that Series or Class as provided for in Article IV, Section 4;
(p) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern whose securities are held
by the Trust; to consent to any contract, lease, mortgage, purchase, or sale of
property by such corporation or concern; and to pay calls or subscriptions with
respect to any security held in the Trust;
(q) To compromise, arbitrate, or otherwise adjust claims in favor of
or against the Trust or any matter in controversy including, but not limited
to, claims for taxes;
(r) To make distributions of income and of capital gains to
Shareholders in the manner hereinafter provided for;
(s) To borrow money;
(t) To establish, from time to time, a minimum total investment for
Shareholders, and to require the redemption of the Shares of any Shareholders
whose investment is less than such minimum upon giving notice to such
Shareholder;
(u) To establish committees for such purposes, with such membership,
and with such responsibilities as the Trustees may consider proper, including a
committee consisting of fewer than all of the Trustees then in office, which
may act for and bind the Trustees and the Trust with respect to the
institution, prosecution, dismissal, settlement, review or investigation of any
legal action, suit or proceeding, pending or threatened;
(v) To issue, sell, repurchase, redeem, cancel, retire, acquire, hold,
resell, reissue, dispose of and otherwise deal in Shares; to establish terms
and conditions regarding the issuance, sale, repurchase, redemption,
cancellation, retirement, acquisition, holding, resale, reissuance, disposition
of or dealing in Shares; and, subject to Articles IV and V, to apply to any
such repurchase, redemption, retirement, cancellation or acquisition of Shares
any funds or property of the Trust or of the particular Series with respect to
which such Shares are issued; and
(w) To carry on any other business in connection with or incidental to
any of the foregoing powers, to do everything necessary or desirable to
accomplish any purpose or to further any of the foregoing powers, and to take
every other action incidental to the foregoing business or purposes, objects or
powers.
The clauses above shall be construed as objects and powers, and
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the enumeration of specific powers shall not limit in any way the general
powers of the Trustees. Any action by one or more of the Trustees in their
capacity as such hereunder shall be deemed an action on behalf of the Trust or
the applicable Series, and not an action in an individual capacity. No one
dealing with the Trustees shall be under any obligation to make any inquiry
concerning the authority of the Trustees, or to see to the application of any
payments made or property transferred to the Trustees or upon their order. In
construing this Trust Instrument, the presumption shall be in favor of a grant
of power to the Trustees.
Section 2. Certain Transactions. Except as prohibited by applicable
law, the Trustees may, on behalf of the Trust, buy any securities from or sell
any securities to, or lend any assets of the Trust to, any Trustee or officer
of the Trust or any firm of which any such Trustee or officer is a member
acting as principal, or have any such dealings with any investment adviser,
administrator, distributor or transfer agent for the Trust or with any
Interested Person of such person. The Trust may employ any such person or
entity in which such person is an Interested Person, as broker, legal counsel,
registrar, investment adviser, administrator, distributor, transfer agent,
dividend disbursing agent, custodian or in any other capacity upon customary
terms.
ARTICLE IV
SERIES; CLASSES; SHARES
Section 1. Establishment of Series or Class. The Trust shall consist
of one or more Series. The Trustees hereby establish the Series listed in
Exhibit A attached hereto and made a part hereof. Each additional Series shall
be established by the adoption of a resolution of the Trustees. The Trustees
may designate the relative rights and preferences of the Shares of each Series.
The Trustees may divide the Shares of any Series into Classes. In such case
each Class of a Series shall represent interests in the assets of that Series
and have identical voting, dividend, liquidation and other rights and the same
terms and conditions, except that expenses allocated to a Class may be borne
solely by such Class as determined by the Trustees and a Class may have
exclusive voting rights with respect to matters affecting only that Class. The
Trust shall maintain separate and distinct records for each Series and hold and
account for the assets thereof separately from the other assets of the Trust or
of any other Series. A Series may issue any number of Shares and need not
issue Shares. Each Share of a Series shall represent an equal beneficial
interest in the net assets of such Series. Each holder of Shares of a Series
shall be entitled to receive his or her pro rata share of all distributions
made with respect to such Series. Upon redemption of
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his or her Shares, such Shareholder shall be paid solely out of the funds and
property of such Series. The Trustees may change the name of any Series or
Class without Shareholder approval.
Section 2. Shares. The beneficial interest in the Trust shall be
divided into Shares of one or more separate and distinct Series or Classes
established by the Trustees. The number of Shares of each Series and Class is
unlimited and each Share shall have a par value of $0.001 per Share. All
Shares issued hereunder shall be fully paid and nonassessable. Shareholders
shall have no preemptive or other right to subscribe to any additional Shares
or other securities issued by the Trust. The Trustees shall have full power
and authority, in their sole discretion and without obtaining Shareholder
approval: to issue original or additional Shares or fractional Shares at such
times and on such terms and conditions as they deem appropriate; to issue
Shares which have been repurchased by the Trust; to establish and to change in
any manner Shares of any Series or Classes with such preferences, terms of
conversion, voting powers, rights and privileges as the Trustees may determine
(but the Trustees may not change Outstanding Shares in a manner materially
adverse to the Shareholders of such Shares); to divide or combine the Shares of
any Series or Classes into a greater or lesser number; to classify or
reclassify any unissued Shares of any Series or Classes into one or more Series
or Classes of Shares; to abolish any one or more Series or Classes of Shares;
to issue Shares to acquire other assets (including assets subject to, and in
connection with, the assumption of liabilities) and businesses; and to take
such other action with respect to the Shares as the Trustees may deem
desirable. Shares which have been repurchased by the Trust and have not been
reissued shall not confer any voting rights on the Trustees and shall not be
entitled to any dividends or other distributions declared with respect to the
Shares.
Section 3. Investment in the Trust. The Trustees shall accept
investments in any Series from such persons and on such terms as they may from
time to time authorize. At the Trustees' discretion, such investments, subject
to applicable law, may be in the form of cash or securities in which that
Series is authorized to invest, valued as provided in Article V, Section 3.
Investments in a Series shall be credited to each Shareholder's account in the
form of full or fractional Shares at the Net Asset Value per Share next
determined after the investment is received or accepted in good form as may be
determined by the Trustees; provided, however, that the Trustees may, in their
sole discretion (a) impose a sales charge upon investments in any Series or
Class or (b) determine the Net Asset Value per Share of the initial capital
contribution. The Trustees shall have the right to refuse to accept
investments in any Series at any time without any cause or reason therefor
whatsoever.
Section 4. Assets and Liabilities of Series. All consideration
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received by the Trust for the issue or sale of Shares of a particular Series,
together with all assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof (including any proceeds
derived from the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in whatever form the
same may be), shall be held and accounted for separately from the other assets
of the Trust and every other Series and are referred to as "assets belonging
to" that Series. The assets belonging to a Series shall belong only to that
Series for all purposes, and to no other Series, subject only to the rights of
creditors of that Series. Any assets, income, earnings, profits, and proceeds
thereof, funds, or payments which are not readily identifiable as belonging to
any particular Series shall be allocated by the Trustees between and among one
or more Series as the Trustees deem fair and equitable. Each such allocation
shall be conclusive and binding upon the Shareholders of all Series for all
purposes, and such assets, earnings, income, profits or funds, or payments and
proceeds thereof shall be referred to as assets belonging to that Series. The
assets belonging to a Series shall be so recorded upon the books of the Trust,
and shall be held by the Trustees in trust for the benefit of the Shareholders
of that Series. The assets belonging to a Series shall be charged with the
liabilities of that Series and all expenses, costs, charges and reserves
attributable to that Series, except that liabilities and expenses allocated
solely to a particular Class shall be borne by that Class. Any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular Series or Class shall be
allocated and charged by the Trustees between or among any one or more of the
Series or Classes in such manner as the Trustees deem fair and equitable. Each
such allocation shall be conclusive and binding upon the Shareholders of all
Series or Classes for all purposes.
Without limiting the foregoing, but subject to the right of the
Trustees to allocate general liabilities, expenses, costs, charges or reserves
as herein provided, the debts, liabilities, obligations and expenses incurred,
contracted for or otherwise existing with respect to a particular Series shall
be enforceable against the assets of such Series only, and not against the
assets of the Trust generally or of any other Series. Notice of this
contractual limitation on liabilities among Series may, in the Trustees'
discretion, be set forth in the certificate of trust of the Trust (whether
originally or by amendment) as filed or to be filed in the Office of the
Secretary of State of the State of Delaware pursuant to the Delaware Act, and
upon the giving of such notice in the certificate of trust, the statutory
provisions of Section 3804 of the Delaware Act relating to limitations on
liabilities among Series (and the statutory effect under Section 3804 of
setting forth such notice in the certificate of trust) shall become applicable
to the Trust and each Series. Any
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person extending credit to, contracting with or having any claim against any
Series may look only to the assets of that Series to satisfy or enforce any
debt, with respect to that Series. No Shareholder or former Shareholder of any
Series shall have a claim on or any right to any assets allocated or belonging
to any other Series.
Section 5. Ownership and Transfer of Shares. The Trust shall
maintain a register containing the names and addresses of the Shareholders of
each Series and Class thereof, the number of Shares of each Series and Class
held by such Shareholders, and a record of all Share transfers. The register
shall be conclusive as to the identity of Shareholders of record and the number
of Shares held by them from time to time. The Trustees, in their sole
discretion, may authorize the issuance of certificates representing Shares and
adopt rules governing their use. The Trustees may make rules governing the
transfer of Shares, whether or not represented by certificates.
Section 6. Status of Shares; Limitation of Shareholder Liability.
Shares shall be deemed to be personal property giving Shareholders only the
rights provided in this Trust Instrument. Every Shareholder, by virtue of
having acquired a Share, shall be held expressly to have assented to and agreed
to be bound by the terms of this Trust Instrument and to have become a party
hereto. No Shareholder shall be personally liable for the debts, liabilities,
obligations and expenses incurred by, contracted for, or otherwise existing
with respect to, the Trust or any Series. Neither the Trust nor the Trustees
shall have any power to bind any Shareholder personally or to demand payment
from any Shareholder for anything, other than as agreed by the Shareholder.
Shareholders shall have the same limitation of personal liability as is
extended to shareholders of a private corporation for profit incorporated in
the State of Delaware. Every written obligation of the Trust or any Series
shall contain a statement to the effect that such obligation may only be
enforced against the assets of the Trust or such Series; however, the omission
of such statement shall not operate to bind or create personal liability for
any Shareholder or Trustee.
ARTICLE V
DISTRIBUTIONS AND REDEMPTIONS
Section 1. Distributions. The Trustees may declare and pay dividends
and other distributions, including dividends on Shares of a particular Series
and other distributions from the assets belonging to that Series. The amount
and payment of dividends or distributions and their form, whether they are in
cash, Shares or other Trust Property, shall be determined by the Trustees.
Dividends and other distributions may be paid pursuant to a standing resolution
adopted
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once or more often as the Trustees determine. All dividends and other
distributions on Shares of a particular Series shall be distributed pro rata to
the Shareholders of that Series in proportion to the number of Shares of that
Series they held on the record date established for such payment, except that
such dividends and distributions shall appropriately reflect expenses allocated
to a particular Class of such Series. The Trustees may adopt and offer to
Shareholders such dividend reinvestment plans, cash dividend payout plans or
similar plans as the Trustees deem appropriate.
Section 2. Redemptions. Each Shareholder of a Series or Class shall
have the right at such times as may be permitted by the Trustees to require the
Series to redeem all or any part of his or her Shares at a redemption price per
Share equal to the Net Asset Value per Share at such time as the Trustees shall
have prescribed by resolution. In the absence of such resolution, the
redemption price per Share shall be the Net Asset Value next determined after
receipt by the Series of a request for redemption in proper form less such
charges as are determined by the Trustees and described in the Trust's
Registration Statement for that Series or Class under the Securities Act of
1933. The Trustees may specify conditions, prices, and places of redemption,
and may specify binding requirements for the proper form or forms of requests
for redemption. Payment of the redemption price may be wholly or partly in
securities or other assets at the value of such securities or assets used in
such determination of Net Asset Value, or may be in cash. Upon redemption,
Shares may be reissued from time to time. The Trustees may require
Shareholders to redeem Shares for any reason under terms set by the Trustees,
including the failure of a Shareholder to supply a personal identification
number if required to do so, or to have the minimum investment required, or to
pay when due for the purchase of Shares issued to him. To the extent permitted
by law, the Trustees may retain the proceeds of any redemption of Shares
required by them for payment of amounts due and owing by a Shareholder to the
Trust or any Series or Class. Notwithstanding the foregoing, the Trustees may
postpone payment of the redemption price and may suspend the right of the
Shareholders to require any Series or Class to redeem Shares during any period
of time when and to the extent permissible under the 1940 Act.
Section 3. Determination of Net Asset Value. The Trustees shall
cause the Net Asset Value of Shares of each Series or Class to be determined
from time to time in a manner consistent with applicable laws and regulations.
The Trustees may delegate the power and duty to determine Net Asset Value per
Share to one or more Trustees or officers of the Trust or to an investment
adviser, custodian, depository or other agent appointed for such purpose. The
Net Asset Value of Shares shall be determined separately for each Series or
Class at such times as may be prescribed by the Trustees or, in the absence of
action by the Trustees, as of the close of trading on the
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New York Stock Exchange on each day for all or part of which such Exchange is
open for unrestricted trading.
Section 4. Suspension of Right of Redemption. If, as referred to in
Section 2 of this Article, the Trustees postpone payment of the redemption
price and suspend the right of Shareholders to redeem their Shares, such
suspension shall take effect at the time the Trustees shall specify, but not
later than the close of business on the business day next following the
declaration of suspension. Thereafter Shareholders shall have no right of
redemption or payment until the Trustees declare the end of the suspension. If
the right of redemption is suspended, a Shareholder may either withdraw his or
her request for redemption or receive payment based on the Net Asset Value per
Share next determined after the suspension terminates.
ARTICLE VI
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 1. Voting Powers. The Shareholders shall have power to vote
only with respect to (a) the election of Trustees as provided in Section 2 of
this Article; (b) the removal of Trustees as provided in Article II, Section
3(d); (c) any investment advisory or management contract as provided in Article
VII, Section 1; (d) any termination of the Trust as provided in Article X,
Section 4; (e) the amendment of this Trust Instrument to the extent and as
provided in Article X, Section 8; and (f) such additional matters relating to
the Trust as may be required or authorized by law, this Trust Instrument, or
the Bylaws or any registration of the Trust with the Commission or any State,
or as the Trustees may consider desirable.
On any matter submitted to a vote of the Shareholders, all Shares
shall be voted by individual Series or Class, except (a) when required by the
1940 Act, Shares shall be voted in the aggregate and not by individual Series
or Class, and (b) when the Trustees have determined that the matter affects the
interests of more than one Series or Class, then the Shareholders of all such
Series or Classes shall be entitled to vote thereon. Each whole Share shall be
entitled to one vote as to any matter on which it is entitled to vote, and each
fractional Share shall be entitled to a proportionate fractional vote. There
shall be no cumulative voting in the election of Trustees. Shares may be voted
in person or by proxy or in any manner provided for in the Bylaws. The Bylaws
may provide that proxies may be given by any electronic or telecommunications
device or in any other manner, but if a proposal by anyone other than the
officers or Trustees is submitted to a vote of the Shareholders of any Series
or Class, or if there is a proxy contest or proxy solicitation or proposal in
opposition to any proposal by the officers or Trustees, Shares may be voted
only in person or by written proxy. Until Shares of a Series
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are issued, as to that Series the Trustees may exercise all rights of
Shareholders and may take any action required or permitted to be taken by
Shareholders by law, this Trust Instrument or the Bylaws.
Section 2. Meetings of Shareholders. The first Shareholders' meeting
shall be held to elect Trustees at such time and place as the Trustees
designate. There shall be no annual Shareholders' meetings except as required
by law or set forth in the Bylaws. Special meetings of the Shareholders of any
Series or Class may be called by the Trustees and shall be called by the
Trustees upon the written request of Shareholders owning at least ten percent
of the Outstanding Shares of such Series or Class entitled to vote. Special
meetings of Shareholders shall be held, notice of such meetings shall be
delivered and waiver of notice shall occur according to the provisions of the
Trust's Bylaws. Any action that may be taken at a meeting of Shareholders may
be taken without a meeting according to the procedures set forth in the Trust's
Bylaws.
Section 3. Quorum; Required Vote. One-third of the Outstanding
Shares of each Series or Class, or one-third of the Outstanding Shares of the
Trust, entitled to vote in person or by proxy shall be a quorum for the
transaction of business at a Shareholders' meeting with respect to such Series
or Class, or with respect to the entire Trust, respectively. Any lesser number
shall be sufficient for adjournments. Any adjourned session of a Shareholders'
meeting may be held within a reasonable time without further notice. Except
when a larger vote is required by law, this Trust Instrument or the Bylaws, a
majority of the Outstanding Shares voted in person or by proxy shall decide any
matters to be voted upon with respect to the entire Trust and a plurality of
such Outstanding Shares shall elect a Trustee; provided, that if this Trust
Instrument or applicable law permits or requires that Shares be voted on any
matter by individual Series or Classes, then a majority of the Outstanding
Shares of that Series or Class (or, if required by law, a Majority Shareholder
Vote of that Series or Class) voted in person or by proxy voted on the matter
shall decide that matter insofar as that Series or Class is concerned.
Shareholders may act as to the Trust or any Series or Class by the written
consent of a majority (or such greater amount as may be required by applicable
law) of the Outstanding Shares of the Trust or of such Series or Class, as the
case may be.
ARTICLE VII
CONTRACTS WITH SERVICE PROVIDERS
Section 1. Investment Adviser. Subject to a Majority Shareholder
Vote, the Trustees may enter into one or more investment advisory contracts on
behalf of the Trust or any Series, providing for
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investment advisory services, statistical and research facilities and services,
and other facilities and services to be furnished to the Trust or Series on
terms and conditions acceptable to the Trustees. Any such contract may provide
for the investment adviser to effect purchases, sales or exchanges of portfolio
securities or other Trust Property on behalf of the Trustees or may authorize
any officer or agent of the Trust to effect such purchases, sales or exchanges
pursuant to recommendations of the investment adviser. The Trustees may
authorize the investment adviser to employ one or more sub-advisers.
Section 2. Principal Underwriter. The Trustees may enter into
contracts on behalf of the Trust or any Series or Class, providing for the
distribution and sale of Shares by the other party, either directly or as sales
agent, on terms and conditions acceptable to the Trustees. The Trustees may
adopt a plan or plans of distribution with respect to Shares of any Series or
Class and enter into any related agreements, whereby the Series or Class
finances directly or indirectly any activity that is primarily intended to
result in sales of its Shares, subject to the requirements of Section 12 of the
1940 Act, Rule 12b-1 thereunder, and other applicable rules and regulations.
Section 3. Transfer Agency, Shareholder Services, and Administration
Agreements. The Trustees, on behalf of the Trust or any Series or Class, may
enter into transfer agency agreements, Shareholder service agreements, and
administration and management agreements with any party or parties on terms and
conditions acceptable to the Trustees.
Section 4. Custodian. The Trustees shall at all times place and
maintain the cash, securities and other assets of the Trust and of each Series
with a custodian meeting the requirements of Section 17(f) of the 1940 Act and
the rules thereunder or such other entities permitted by Commission order. The
Trustees, on behalf of the Trust or any Series, may enter into an agreement
with a custodian on terms and conditions acceptable to the Trustees, providing
for the custodian, among other things, to (a) hold the securities owned by the
Trust or any Series and deliver the same upon written order or oral order
confirmed in writing, (b) to receive and receipt for any moneys due to the
Trust or any Series and deposit the same in its own banking department or
elsewhere, (c) to disburse such funds upon orders or vouchers, and (d) to
employ one or more sub-custodians.
Section 5. Parties to Contracts with Service Providers. The Trustees
may enter into any contract referred to in this Article with any entity,
although one or more of the Trustees or officers of the Trust may be an
officer, director, trustee, partner, shareholder, or member of such entity, and
no such contract shall be invalidated or
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<PAGE> 17
rendered void or voidable because of such relationship. No person having such
a relationship shall be disqualified from voting on or executing a contract in
his or her capacity as Trustee and/or Shareholder, or be liable merely by
reason of such relationship for any loss or expense to the Trust with respect
to such a contract or accountable for any profit realized directly or
indirectly therefrom; provided, that the contract was reasonable and fair and
not inconsistent with this Trust Instrument or the Bylaws.
Any contract referred to in Sections 1 and 2 of this Article shall be
consistent with and subject to the applicable requirements of Section 15 of the
1940 Act and the rules and orders thereunder with respect to its continuance in
effect, its termination, and the method of authorization and approval of such
contract or renewal. No amendment to a contract referred to in Section 1 of
this Article shall be effective unless assented to in a manner consistent with
the requirements of Section 15 of the 1940 Act, and the rules and orders
thereunder.
ARTICLE VIII
EXPENSES OF THE TRUST AND SERIES
Subject to Article IV, Section 4, the Trust or a particular Series
shall pay, or shall reimburse the Trustees from the Trust estate or the assets
belonging to the particular Series, for the expenses and disbursements of its
organization, operations and business (unless a third party has agreed to bear
such expenses and disbursements). Such expenses and disbursements may include,
but are not limited to, the following: fees, expenses and charges of certain
third parties which may include the Trust's investment advisers, distributors,
transfer agents, custodian, independent auditors, legal counsel and
administrators; expenses of the organization of the Trust or a particular
Series; expenses of the issue, redemption and transfer of Shares; brokers'
commissions and other charges; expenses of custody and accounting services;
expenses of maintaining and servicing Shareholder accounts; expenses of bonding
and insurance; all taxes or governmental fees; costs of membership in trade
associations; all charges and expenses for equipment or services used for
communication between the Trust or any Series and any third party providing
services to the Trust or any Series; fees and expenses of Trustees' meetings,
including the compensation of Trustees who are not Interested Persons of the
Trust; Commission registration fees and related expenses; state or foreign
securities laws registration fees and related expenses; expenses of Shareholder
meetings, including the printing and distribution of proxy materials and any
other costs associated with a proxy solicitation; costs of preparing, printing
and distributing
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<PAGE> 18
Shareholder communications such as prospectuses, statements of additional
information, and financial reports; and non-recurring expenses which may arise,
including the costs of actions, suit or proceedings to which the Trust or a
Series (or a Trustee or officer of the Trust acting as such) is a party, and
the expenses the Trust or Series may incur as a result of its obligation to
provide indemnification to its Trustees, Officers, employees or agents. The
Trustees shall have a lien on the assets belonging to the appropriate Series,
or in the case of an expense allocable to more than one Series, on the assets
of each such Series, prior to any rights or interests of the Shareholders
thereto, for the reimbursement to them of such expenses, disbursements, losses
and liabilities.
ARTICLE IX
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 1. Limitation of Liability. All persons contracting with or
having any claim against the Trust or a particular Series shall look only to
the assets of the Trust or such Series for payment under such contract or
claim; and neither the Trustees nor any of the Trust's officers, employees or
agents, whether past, present or future, shall be personally liable therefor.
Every written instrument or obligation on behalf of the Trust or any Series
shall contain a statement to the foregoing effect, but the absence of such
statement shall not operate to make any Trustee or officer of the Trust liable
thereunder. Provided they have exercised reasonable care and have acted under
the reasonable belief that their actions are in the best interest of the Trust,
the Trustees and officers of the Trust shall not be responsible or liable for
any act or omission or for neglect or wrongdoing of them or any officer, agent,
employee, investment adviser or independent contractor of the Trust, but
nothing contained in this Trust Instrument or in the Delaware Act shall protect
any Trustee or officer of the Trust against liability to the Trust or to
Shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office.
Section 2. Indemnification. (a) Subject to the exceptions and
limitations contained in subsection (b) below:
(i) every person who is, or has been, a Trustee or an officer,
employee or agent of the Trust ("Covered Person") shall be
indemnified by the Trust or the appropriate Series to the
fullest extent permitted by law against
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<PAGE> 19
liability and against all expenses reasonably incurred or paid
by him or her in connection with any claim, action, suit or
proceeding in which he or she becomes involved as a party or
otherwise by virtue of his or her being or having been a
Covered Person and against amounts paid or incurred by him or
her in the settlement thereof;
(ii) as used herein, the words "claim," "action," "suit," or
"proceeding" shall apply to all claims, actions, suits or
proceedings (civil, criminal or other, including appeals),
actual or threatened, and the words "liability" and "expenses"
shall include, without limitation, attorneys' fees, costs,
judgments, amounts paid in settlement, fines, penalties and
other liabilities.
(b) No indemnification shall be provided hereunder to a Covered
Person:
(i) who shall have been adjudicated by a court or body before
which the proceeding was brought (A) to be liable to the Trust
or its Shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office, or (B) not to
have acted in good faith in the reasonable belief that his or
her action was in the best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Covered Person did not engage in
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her
office; (A) by the court or other body approving the
settlement; (B) by the vote of at least a majority of a quorum
of those Trustees who are neither Interested Persons of the
Trust nor are parties to the proceeding based upon a review of
readily available facts (as opposed to a full trial-type
inquiry); or (C) by written opinion of independent legal
counsel based upon a review of readily available facts (as
opposed to a full trial-type inquiry).
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now or
hereafter be entitled, and shall inure to the benefit of the heirs, executors
and administrators of a Covered Person.
(d) To the maximum extent permitted by applicable law,
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<PAGE> 20
expenses in connection with the preparation and presentation of a defense to
any claim, action, suit or proceeding of the character described in subsection
(a) of this Section may be paid by the Trust or applicable Series from time to
time prior to final disposition thereof upon receipt of an undertaking by or on
behalf of such Covered Person that such amount will be paid over by him or her
to the Trust or applicable Series if it is ultimately determined that he or she
is not entitled to indemnification under this Section; provided, however, that
either (i) such Covered Person shall have provided appropriate security for
such undertaking, (ii) the Trust is insured against losses arising out of any
such advance payments or (iii) either a majority of the Trustees who are
neither Interested Persons of the Trust nor parties to the proceeding, or
independent legal counsel in a written opinion, shall have determined, based
upon a review of readily available facts (as opposed to a full trial-type
inquiry) that there is reason to believe that such Covered Person will not be
disqualified from indemnification under this Section.
(e) Any repeal or modification of this Article IX by the Shareholders
of the Trust, or adoption or modification of any other provision of the Trust
Instrument or Bylaws inconsistent with this Article, shall be prospective only,
to the extent that such repeal or modification would, if applied
retrospectively, adversely affect any limitation on the liability of any
Covered Person or indemnification available to any Covered Person with respect
to any act or omission which occurred prior to such repeal, modification or
adoption.
Section 3. Indemnification of Shareholders. If any Shareholder or
former Shareholder of any Series shall be held personally liable solely by
reason of his or her being or having been a Shareholder and not because of his
or her acts or omissions or for some other reason, the Shareholder or former
Shareholder (or his or her heirs, executors, administrators or other legal
representatives or in the case of any entity, its general successor) shall be
entitled out of the assets belonging to the applicable Series to be held
harmless from and indemnified against all loss and expense arising from such
liability. The Trust, on behalf of the affected Series, shall, upon request by
such Shareholder, assume the defense of any claim made against such Shareholder
for any act or obligation of the Series and satisfy any judgment thereon from
the assets of the Series.
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<PAGE> 21
ARTICLE X
MISCELLANEOUS
Section 1. Trust Not a Partnership. This Trust Instrument creates a
trust and not a partnership. No Trustee shall have any power to bind
personally either the Trust's officers or any Shareholder.
Section 2. Trustee Action; Expert Advice; No Bond or Surety. The
exercise by the Trustees of their powers and discretion hereunder in good faith
and with reasonable care under the circumstances then prevailing shall be
binding upon everyone interested. Subject to the provisions of Article IX, the
Trustees shall not be liable for errors of judgment or mistakes of fact or law.
The Trustees may take advice of counsel or other experts with respect to the
meaning and operation of this Trust Instrument, and subject to the provisions
of Article IX, shall not be liable for any act or omission in accordance with
such advice or for failing to follow such advice. The Trustees shall not be
required to give any bond as such, nor any surety if a bond is obtained.
Section 3. Record Dates. The Trustees may fix in advance a date up
to seventy (70) days before the date of any Shareholders' meeting, or the date
for the payment of any dividends or other distributions, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
Shares shall go into effect as a record date for the determination of the
Shareholders entitled to notice of, and to vote at, any such meeting, or
entitled to receive payment of such dividend or other distribution, or to
receive any such allotment of rights, or to exercise such rights in respect of
any such change, conversion or exchange of Shares. Record dates for adjourned
Shareholders' meetings shall be set according to the Trust's Bylaws.
Section 4. Termination of the Trust. (a) This Trust shall have
perpetual existence. Subject to a Majority Shareholder Vote of the Trust or of
each Series to be affected, the Trustees may
(i) sell and convey all or substantially all of the assets of
the Trust or any affected Series to another Series or to
another entity which is an open-end investment company as
defined in the 1940 Act, or is a series thereof, for adequate
consideration, which may include the assumption of all
outstanding obligations, taxes and other liabilities, accrued
or contingent, of the Trust or any affected Series, and which
may include shares of or interests in such Series, entity, or
series thereof; or
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<PAGE> 22
(ii) at any time sell and convert into money all or
substantially all of the assets of the Trust or any affected
Series.
Upon making reasonable provision for the payment of all known liabilities of
the Trust or any affected Series in either (i) or (ii), by such assumption or
otherwise, the Trustees shall distribute the remaining proceeds or assets (as
the case may be) ratably among the Shareholders of the Trust or any affected
Series; however, the payment to any particular Class of such Series may be
reduced by any fees, expenses or charges allocated to that Class.
(b) The Trustees may take any of the actions specified in subsection
(a) (i) and (ii) above without obtaining a Majority Shareholder Vote of the
Trust or any Series if a majority of the Trustees determines that the
continuation of the Trust or Series is not in the best interests of the Trust,
such Series, or their respective Shareholders as a result of factors or events
adversely affecting the ability of the Trust or such Series to conduct its
business and operations in an economically viable manner. Such factors and
events may include the inability of the Trust or a Series to maintain its
assets at an appropriate size, changes in laws or regulations governing the
Trust or the Series or affecting assets of the type in which the Trust or
Series invests, or economic developments or trends having a significant adverse
impact on the business or operations of the Trust or such Series.
(c) Upon completion of the distribution of the remaining proceeds or
assets pursuant to subsection (a), the Trust or affected Series shall terminate
and the Trustees and the Trust shall be discharged of any and all further
liabilities and duties hereunder with respect thereto and the right, title and
interest of all parties therein shall be canceled and discharged. Upon
termination of the Trust, following completion of winding up of its business,
the Trustees shall cause a certificate of cancellation of the Trust's
certificate of trust to be filed in accordance with the Delaware Act, which
certificate of cancellation may be signed by any one Trustee.
Section 5. Reorganization. Notwithstanding anything else herein, to
change the Trust's form of organization the Trustees may, without Shareholder
approval, (a) cause the Trust to merge or consolidate with or into one or more
entities, if the surviving or resulting entity is the Trust or another open-end
management investment company under the 1940 Act, or a series thereof, that
will succeed to or assume the Trust's registration under the 1940 Act, or (b)
cause the Trust to incorporate under the laws of Delaware. Any agreement of
merger or consolidation or certificate of merger may be signed by a majority of
Trustees and facsimile
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<PAGE> 23
signatures conveyed by electronic or telecommunication means shall be valid.
Pursuant to and in accordance with the provisions of Section 3815(f)
of the Delaware Act, an agreement of merger or consolidation approved by the
Trustees in accordance with this Section 5 may effect any amendment to the
Trust Instrument or effect the adoption of a new trust instrument of the Trust
if it is the surviving or resulting trust in the merger or consolidation.
Section 6. Trust Instrument. The original or a copy of this Trust
Instrument and of each amendment hereto or Trust Instrument supplemental shall
be kept at the office of the Trust where it may be inspected by any
Shareholder. Anyone dealing with the Trust may rely on a certificate by a
Trustee or an officer of the Trust as to the authenticity of the Trust
Instrument or any such amendments or supplements and as to any matters in
connection with the Trust. The masculine gender herein shall include the
feminine and neuter genders. Headings herein are for convenience only and
shall not affect the construction of this Trust Instrument. This Trust
Instrument may be executed in any number of counterparts, each of which shall
be deemed an original.
Section 7. Applicable Law. This Trust Instrument and the Trust
created hereunder are governed by and construed and administered according to
the Delaware Act and the applicable laws of the State of Delaware; provided,
however, that there shall not be applicable to the Trust, the Trustees or this
Trust Instrument (a) the provisions of Section 3540 of Title 12 of the Delaware
Code, or (b) any provisions of the laws (statutory or common) of the State of
Delaware (other than the Delaware Act) pertaining to trusts which relate to or
regulate (i) the filing with any court or governmental body or agency of
trustee accounts or schedules of trustee fees and charges, (ii) affirmative
requirements to post bonds for trustees, officers, agents or employees of a
trust, (iii) the necessity for obtaining court or other governmental approval
concerning the acquisition, holding or disposition of real or personal
property, (iv) fees or other sums payable to trustees, officers, agents or
employees of a trust, (v) the allocation of receipts and expenditures to income
or principal, (vi) restrictions or limitations on the permissible nature,
amount or concentration of trust investments or requirements relating to the
titling, storage or other manner of holding of trust assets, or (vii) the
establishment of fiduciary or other standards of responsibilities or
limitations on the acts or powers of trustees, which are inconsistent with the
limitations or liabilities or authorities and powers of the Trustees set forth
or referenced in this Trust Instrument. The Trust shall be of the type
commonly called a Delaware business trust, and, without limiting the provisions
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<PAGE> 24
hereof, the Trust may exercise all powers which are ordinarily exercised by
such a trust under Delaware law. The Trust specifically reserves the right to
exercise any of the powers or privileges afforded to trusts or actions that may
be engaged in by trusts under the Delaware Act, and the absence of a specific
reference herein to any such power, privilege or action shall not imply that
the Trust may not exercise such power or privilege or take such actions.
Section 8. Amendments. The Trustees may, without any Shareholder
vote, amend or otherwise supplement this Trust Instrument by making an
amendment, a Trust Instrument supplemental hereto or an amended and restated
trust instrument; provided, that Shareholders shall have the right to vote on
any amendment (a) which would affect the voting rights of Shareholders granted
in Article VI, Section 1, (b) to this Section 8, (c) required to be approved by
Shareholders by law or by the Trust's registration statement(s) filed with the
Commission, and (d) submitted to them by the Trustees in their discretion. Any
amendment submitted to Shareholders which the Trustees determine would affect
the Shareholders of any Series shall be authorized by vote of the Shareholders
of such Series and no vote shall be required of Shareholders of a Series not
affected. Notwithstanding anything else herein, any amendment to Article IX
which would have the effect of reducing the indemnification and other rights
provided thereby to Trustees, officers, employees, and agents of the Trust or
to Shareholders or former Shareholders, and any repeal or amendment of this
sentence shall each require the affirmative vote of the holders of two-thirds
of the Outstanding Shares of the Trust entitled to vote thereon.
Section 9. Fiscal Year. The fiscal year of the Trust shall end on a
specified date as set forth in the Bylaws. The Trustees may change the fiscal
year of the Trust without Shareholder approval.
Section 10. Severability. The provisions of this Trust Instrument
are severable. If the Trustees determine, with the advice of counsel, that any
provision hereof conflicts with the 1940 Act, the regulated investment company
provisions of the Internal Revenue Code or with other applicable laws and
regulations, the conflicting provision shall be deemed never to have
constituted a part of this Trust Instrument; provided, however, that such
determination shall not affect any of the remaining provisions of this Trust
Instrument or render invalid or improper any action taken
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<PAGE> 25
or omitted prior to such determination. If any provision hereof shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision only in such jurisdiction
and shall not affect any other provision of this Trust Instrument.
IN WITNESS WHEREOF, the undersigned, being the initial
Trustees, have executed this Trust Instrument as of the date first above
written.
__________________________
Boh A. Dickey, as
Trustee and not individually
__________________________
Richard W. Hubbard, as
Trustee and not individually
Address: SAFECO Plaza
Seattle, Washington 98185
STATE OF WASHINGTON ss
CITY OF SEATTLE
Before me this ___ day of ________, 1993, personally appeared the
above-named __________________, and _____________, known to me to be the
persons who executed the foregoing instrument and who acknowledged that they
executed the same.
_________________________________
Notary Public
My Commission expires______________________________.
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<PAGE> 26
EXHIBIT A
Equity Portfolio
Bond Portfolio
Money Market Portfolio
Northwest Portfolio
Growth Portfolio
- 25 -
<PAGE> 27
CERTIFICATE OF TRUST
OF
SAFECO RESOURCE SERIES TRUST
This Certificate of Trust ("Certificate") is filed in accordance with
the provisions of the Delaware Business Trust Act (12 Del. Code Ann. Tit. 12
Section 3801 et seq.) and sets forth the following:
1. The name of the trust is: SAFECO Resource Series Trust
("Trust").
2. The business address of the registered office of the Trust and
of the registered agent of the Trust is:
The Corporation Trust Company
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
3. This Certificate is effective upon filing.
4. The Trust is a Delaware business trust registered under the
Investment Company Act of 1940. Notice is hereby given that the Trust shall
consist of one or more series. The debts, liabilities, obligations and
expenses incurred, contracted for or otherwise existing with respect to a
particular series of the Trust shall be enforceable against the assets of such
series only, and not against the assets of the Trust generally or any other
series.
IN WITNESS WHEREOF, the undersigned, being the initial Trustees, have
executed this Certificate on this ___ day of _______, 1993.
__________________________
Boh A. Dickey, as
Trustee and not individually
_________________________
Richard W. Hubbard, as
Trustee and not individually
<PAGE> 28
Address: SAFECO Plaza
Seattle, Washington 98185
STATE OF WASHINGTON ss
CITY OF SEATTLE
Before me this ___ day of _________, 1993, personally appeared the
above-named Boh A. Dickey and Richard W. Hubbard, known to me to be the persons
who executed the foregoing instrument and who acknowledged that they executed
the same.
_________________________________
Notary Public
My Commission expires_______________________________.
<PAGE> 1
EXHIBIT 99.2
BYLAWS
<PAGE> 2
BYLAWS
(As amended 2/2/95)
SAFECO RESOURCE SERIES TRUST
(A DELAWARE BUSINESS TRUST)
These Bylaws of SAFECO RESOURCE SERIES TRUST (the "Trust"), a Delaware
business trust, are subject to the Trust Instrument of the Trust dated May 13,
1993, as from time to time amended, supplemented or restated (the "Trust
Instrument"). Capitalized terms used herein have the same meanings as in the
Trust Instrument.
ARTICLE I
PRINCIPAL OFFICE AND SEAL
Section 1. Principal Office. The principal office of the Trust shall be
located in Seattle, Washington, or such other location as the Board of Trustees
may from time to time determine. The Trust may establish and maintain other
offices and places of business as the Board of Trustees may from time to time
determine.
Section 2. Seal. The seal of the Trust shall consist of a flat-faced circular
die with the words "SAFECO Resource Series Trust", and with the words "Trust
Seal, 1993" in the center, and with the word "Delaware" also being shown on the
face of the seal. Any Trustee or officer of the Trust shall have authority to
affix the seal to any document requiring the same.
ARTICLE II
MEETINGS OF BOARD OF TRUSTEES
Section 1. Meetings. Meetings of the Board of Trustees may be held at such
places and such times as the Trustees may from time to time determine as
provided in Article II, Section 7, of the Trust Instrument.
Section 2. Action Without a Meeting. Actions may be taken by the Board of
Trustees without a meeting or by a telephone meeting, as provided in Article
II, Section 7, of the Trust Instrument.
Section 3. Compensation of Trustees. No compensation for services as a
Trustee shall be paid to any Trustee who is at the time an employee of an
investment adviser of the Trust or any Series or Class thereof or of any entity
affiliated with the investment adviser. A Trustee who is not an employee of
such investment adviser or any of its affiliates may receive such compensation
from the Trust for his or her services and reimbursement for his or her
<PAGE> 3
expenses as may be fixed from time to time by the Board of Trustees.
ARTICLE III
BOARD COMMITTEES
Section 1. Establishment. The Board of Trustees may designate one or more
committees and shall determine the number of members of each such committee and
its powers. Each committee member shall hold office at the pleasure of the
Board of Trustees. The Board of Trustees may abolish any such committee at any
time in its sole discretion. Any committee to which the Board of Trustees
delegates any of its powers shall maintain records of its meetings and shall
report its actions to the Board of Trustees. The Board of Trustees shall have
the power to rescind any action of any committee, but no such recision shall
have retroactive effect. The Board of Trustees shall have the power at any
time to fill vacancies in the committees. The Board of Trustees may delegate
to any committee any of its powers, except the power to declare a dividend or
distribution on Shares, authorize the issuance of Shares, recommend to
Shareholders any action requiring Shareholders' approval, amend these Bylaws,
approve any merger or Share exchange, approve or terminate any contract with an
investment adviser or Principal Underwriter, or to take any other action
required by applicable law to be taken by the Board.
Section 2. Notice, Waiver, Consent, Quorum and Proceedings. In the absence of
a provision in these Bylaws or an appropriate resolution of the Trustees, each
committee may adopt such rules and regulations governing notice of its meetings
and waiver and consent to thereof, quorum and manner of acting as it shall deem
proper and desirable. In the event any member of any committee is absent from
any meeting, the members present at the meeting, whether or not they constitute
a quorum, may appoint another Trustee to act in the place of such absent
member.
Section 3. Audit Committee.
(a) Membership. The members of the Audit Committee shall be those
Trustees who are not Interested Persons of the Trust.
(b) Responsibilities and Duties. The Audit Committee shall assist
the Board of Trustees to fulfill its responsibility to shareholders, potential
shareholders and the investment community relating to corporate accounting,
financial reporting practices of the Trust and the quality and integrity of the
financial reports of the Trust. In carrying out these responsibilities the
Audit Committee will:
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<PAGE> 4
(i) Review and recommend to the Board of Trustees the
independent accountants to be selected to audit the financial statements of the
Trust;
(ii) Meet with the independent accountants and the
officers of the Trust to review the scope of the proposed audit for the current
year and the audit procedures to be utilized;
(iii) Meet with the independent accountants and the officers
of the Trust at the conclusion of each audit to review the audit, including a
review of any comments or recommendations of the independent accountants;
(iv) Review with the independent accountants and the
officers of the Trust the adequacy and effectiveness of the internal auditing,
accounting and financial controls of the Trust and elicit any recommendations
from the independent accountants and officers of the Trust for improvements in
such controls;
(v) Review the internal audit services provided to the
Trust by the Trust's investment adviser or its affiliates;
(vi) Review the planning and results of any internal audit
examinations;
(vii) Determine whether the independent accountants are
satisfied with the disclosure and content of the financial statements included
in the annual report to shareholders and review any change in accounting
principles which materially affect such financial statements;
(viii) Review the scope of and fees for consulting services
provided by the independent accountants;
(ix) Meet in separate executive sessions with the
independent accountants and management;
(x) Report to the Board of Trustees following each
meeting.
(c) Rules of Procedure. The Audit Committee shall adopt its own
rules and keep minutes of all of its meetings.
(d) Quorum. A quorum of the Audit Committee shall consist of at
least two members of the Committee.
(e) Action Without Meeting. Subject to the requirements of the
1940 Act, any action that may be or is required to be taken at a meeting of the
Audit Committee may be conducted by telephone or
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<PAGE> 5
taken without a meeting if a consent in writing setting forth the action so
taken shall be signed by all members of the Audit Committee. Such consent
shall have the same effect as a unanimous vote.
Section 4. Pricing Committee.
(a) Membership. The Board of Trustees may annually appoint a
Pricing Committee comprised of two or more trustees or officers of SAFECO Asset
Management Company.
(b) Responsibilities and Duties. The purpose of the Pricing
Committee shall be to value, on behalf of the Board of Trustees between
regularly scheduled trustees' meetings, any security held by or to be purchased
for the Trust or any Series which cannot be otherwise valued under the Trust's
guidelines for valuation of portfolio securities, e.g., an unrestricted
security for which market quotes are not readily available or a restricted
security ("Security").
(c) Rules of Procedure. In determining the fair value of a
Security, the Pricing Committee shall consider such factors and follow such
procedures as may be established under guidelines approved by the Trust's Board
of Trustees. The guidelines shall be periodically reviewed and approved by the
Board as frequently as the Board shall deem appropriate, but in no event less
than annually. Minutes shall be kept of each meeting of the Pricing Committee.
At the next regularly scheduled Board of Trustees' meeting following the
Pricing Committee's determination of a fair value for a Security, the Board of
Trustees shall ratify the Pricing Committee's action.
(d) Vote Required. The members of the Pricing Committee must
unanimously approve a fair value for the Security.
(e) Action Without Meeting. Any action that may be or is required
to be taken at a meeting of the Pricing Committee may be conducted by telephone
or may be taken without a meeting, if a consent in writing setting forth the
action so taken shall be signed by all members of the Pricing Committee. Such
consent shall have the same effect as a unanimous vote.
Section 5. Compensation of Committee Members. Each committee member who is
not an Interested Person of the Trust may receive such compensation from the
Trust for his or her services and reimbursement for his or her expenses as may
be fixed from time to time by the Trustees.
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<PAGE> 6
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Trust shall be a President, a
Treasurer, a Secretary, and may include one or more Vice Presidents, Assistant
Treasurers or Assistant Secretaries, and such other officers as the Board of
Trustees may from time to time elect. The Board of Trustees may appoint any
other officers or agents and prescribe their respective rights, terms of
office, authorities and duties.
Section 2. Election, Tenure and Qualifications of Officers. The officers of
the Trust shall be elected annually by the Trustees. Each officer elected by
the Board of Trustees shall hold office until his or her successor shall have
been elected and qualified or his or her earlier resignation. Any person may
hold one or more offices of the Trust, except no one person may serve
concurrently as President and Secretary. A person who holds more than one
office in the Trust may not act in more than one capacity to execute,
acknowledge, or verify an instrument required by law to be executed,
acknowledged, or verified by more than one officer. No officer need be a
Trustee or a Shareholder of the Trust.
Section 3. Vacancies and Newly Created Offices. Whenever a vacancy shall
occur in any office, regardless of the reason for such vacancy, or if any new
office shall be created, such vacancies or newly created offices may be filled
by the Trustees at any meeting.
Section 4. Removal and Resignation. The Board of Trustees may remove any
officer or agent from office, with or without cause, by the vote of a majority
of the Trustees. Any officer may resign from office at any time by delivering a
written resignation to the Trustees, the President, the Secretary, or any
Assistant Secretary. Unless otherwise specified therein, such resignation
shall take effect upon delivery.
Section 5. Chairman. The Chairman shall have the powers and responsibilities
set forth in Article II, section 6 of the Trust Instrument and shall exercise
and perform such other powers and duties as may from time to time be assigned
by the Board of Trustees or prescribed by these Bylaws.
Section 6. President. The President shall be the chief executive officer of
the Trust. Subject to the direction of the Trustees, the President shall have
general charge, supervision and control over the business affairs of the Trust
and shall be responsible for the management thereof. In the absence of the
Chairman, or if no
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Chairman of the Board of Trustees has been elected, the President shall preside
at all Shareholders' and Board of Trustees' meetings and shall in general
exercise the powers and perform the duties of the Chairman. Except as the
Board of Trustees may otherwise order, the President shall have the power to
grant, issue, execute or sign such powers of attorney, proxies, agreements or
other documents as may be deemed advisable or necessary. The President also
shall have the power to employ attorneys, accountants and other advisers and
agents for the Trust. The President shall exercise such other powers and
perform such other duties as the Board of Trustees may from time to time assign
to the President.
Section 7. Vice President. If the Board of Trustees elects one or more Vice
President(s), the Vice-President(s) shall have such powers and perform such
duties as may from time to time be assigned to them by the Board of Trustees or
the President. At the request or in the absence or disability of the
President, the Vice President (or, if there are two or more Vice Presidents,
then the senior of the Vice Presidents present and able to act) may perform all
the duties of the President and, when so acting, shall have all the powers of
the President. The Board of Trustees may designate one (1) or more of the Vice
Presidents as an Executive Vice President or with such other designation or
title as the Board of Trustees deem appropriate for his or her position or
duties.
Section 8. Treasurer and Assistant Treasurers. The Treasurer shall be the
principal financial officer of the Trust and shall have general charge of the
finances and books of the Trust. The Treasurer shall be responsible for
delivering all funds and securities of the Trust to its custodian. The
Treasurer shall make annual reports to the Board of Trustees regarding the
business and financial condition of the Trust as soon as possible after the
close of the Trust's fiscal year. The Treasurer also shall furnish such other
reports concerning the business and financial condition of the Trust as the
Board of Trustees may from time to time require. The Treasurer shall perform
all acts incidental to the office of Treasurer, subject to the supervision of
the Board of Trustees, and shall perform such additional duties as the Board
may from time to time designate.
Any Assistant Treasurer may perform such duties of the Treasurer as
the Board of Trustees or the Treasurer may assign, and, in the absence of the
Treasurer, may perform all the duties of the Treasurer.
Section 9. Secretary and Assistant Secretaries. The Secretary shall record
all votes and proceedings of the meetings of Trustees and Shareholders in books
to be kept for that purpose. The Secretary shall be responsible for the giving
and serving of all
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notices of the Trust. The Secretary shall have custody of any seal of the
Trust. The Secretary shall be responsible for the records of the Trust,
including the Share register and such other books and papers as the Trustees
may direct and such books, reports, certificates and other documents required
by law. All of such records and documents shall at all reasonable times be
kept open by the Secretary for inspection by any Trustee. The Secretary shall
perform all acts incidental to the office of Secretary, subject to the
supervision of the Trustees, and shall perform such additional duties as the
Trustees may from time to time designate.
Any Assistant Secretary may perform such duties of the Secretary as
the Trustees or the Secretary may assign, and, in the absence of the Secretary,
may perform all the duties of the Secretary.
ARTICLE V
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meetings. There shall be no annual Shareholders' meetings.
Section 2. Special Meetings. Special meetings of Shareholders of the Trust or
of any Series or Class shall be called by the Chairman, President or Secretary
whenever ordered by the Trustees, and shall be held at such time and place as
may be stated in the notice of the meeting.
Special meetings of the Shareholders of the Trust or of any Series or
Class shall also be called by the Chairman, President or Secretary upon the
written request of Shareholders owning at least ten percent of the Outstanding
Shares of the Trust or such Series or Class entitled to vote at such meeting,
provided that (1) such request shall state the purposes of such meeting and the
matters proposed to be acted on, and (2) the Shareholders requesting such
meeting shall have paid to the Trust the reasonably estimated cost of preparing
and mailing the notice thereof, which the Secretary shall determine and specify
to such Shareholders. No special meeting shall be called upon the request of
Shareholders of the Trust or of any Series or Class to consider any matter
which is substantially the same as a matter voted upon at any special meeting
of the Shareholders held during the preceding twelve months, unless requested
by the holders of a majority of all Outstanding Shares of the Trust or the
Series or Class entitled to be voted at such meeting.
If the Chairman, President or Secretary fails for more than thirty
days to call a special meeting when required to do so, the Trustees or the
Shareholders requesting such a meeting may, in the
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name of the Chairman, President or Secretary, call the meeting by giving the
required notice. If the meeting is a meeting of Shareholders of any Series or
Class, but not a meeting of all Shareholders of the Trust, then only a special
meeting of Shareholders of such Series or Class shall be called and only
Shareholders of such Series or Class shall be entitled to notice of and to vote
at such meeting.
Section 3. Notice of Meetings; Waiver. The Chairman, President or Secretary
shall cause written notice of the place, date and time, and the purpose or
purposes for which the meeting is called. Notice shall be given at least ten
days before the date of the meeting. The written notice of any meeting may be
delivered or mailed, postage prepaid, to each Shareholder entitled to vote at
such meeting. If mailed, notice shall be deemed to be given when deposited in
the United States mail directed to the Shareholder at his or her address as it
appears on the records of the Trust. Notice of any Shareholders' meeting need
not be given to any Shareholder who is present at such meeting in person or by
proxy if a written waiver of notice, executed before or after such meeting, is
filed with the record of such meeting. Any irregularities in the notice of any
meeting or the nonreceipt of any such notice by any of the Shareholders shall
not invalidate any action otherwise properly taken at any such meeting.
Section 4. Adjourned Meetings. One or more adjournments of any Shareholders'
meetings may be taken by reason of failure of a quorum to attend a meeting or
for any other reason. Notice of adjournment of a Shareholders' meeting to
another time or place need not be given, if such time and place are announced
at the meeting at which the adjournment is taken, or reasonable notice is given
to persons present at the meeting, and the adjourned meeting is held within a
reasonable time after the date set for the original meeting. At the adjourned
meeting the Trust may transact any business which might have been transacted at
the original meeting. If after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to
Shareholders of record entitled to vote at such meeting.
Section 5. Validity of Proxies. Subject to the provisions of the Trust
Instrument, Shareholders entitled to vote may vote either in person or by
proxy, provided that either (1) a written instrument authorizing such proxy to
act has been signed and dated by the Shareholder or by his or her duly
authorized attorney, or (2) the Trustees adopt by resolution an electronic,
telephonic, computerized or other alternative to execution of a written
instrument authorizing the proxy to act, but if a proposal by anyone other than
the officers or Trustees is submitted to a vote of the Shareholders of the
Trust or of any Series or Class, or if
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there is a proxy contest or proxy solicitation or proposal in opposition to any
proposal by the officers or Trustees, Shares may be voted only in person or by
written proxy. Unless the proxy provides otherwise, it shall not be valid for
more than eleven months before the date of the meeting. All proxies shall be
delivered to the Secretary or other person responsible for recording the
proceedings before being voted. A proxy with respect to Shares held in the
name of two or more persons shall be valid if executed by one of them unless at
or prior to exercise of such proxy the Trust receives a specific written notice
to the contrary from any one of them. Unless otherwise specifically limited by
their terms, proxies shall entitle the Shareholder to vote at any adjournment
of a Shareholders' meeting. A proxy purporting to be executed by or on behalf
of a Shareholder shall be deemed valid unless challenged at or prior to its
exercise, and the burden of proving invalidity shall rest on the challenger.
At every meeting of Shareholders, unless the voting is conducted by inspectors,
all questions concerning the qualifications of voters, the validity of proxies,
and the acceptance or rejection of votes, shall be decided by the chairman of
the meeting. Subject to the provisions of the Delaware Business Trust Act, the
Trust Instrument or these Bylaws, all matters concerning the giving, voting or
validity of proxies shall be governed by the General Corporation Law of the
State of Delaware relating to proxies, and judicial interpretations thereunder,
as if the Trust were a Delaware corporation and the Shareholders were
shareholders of a Delaware corporation.
Section 6. Quorum; Required Vote. The quorum and required vote for any
Shareholders' meeting shall be as specified in Article VI, section 3 of the
Trust Instrument.
Section 7. Record Date. The Board of Trustees may fix in advance a date up to
seventy (70) days before the date of any Shareholders' meeting as a record date
for the determination of the Shareholders entitled to notice of, and to vote
at, any such meeting. The Shareholders of record entitled to vote at a
Shareholders' meeting shall be deemed the Shareholders of record at any meeting
reconvened after one or more adjournments, unless the Board of Trustees has
fixed a new record date. If the Shareholders' meeting is adjourned for more
than one hundred twenty (120) days after the original date, the Board of
Trustees shall establish a new record date.
Section 8. Place of Meeting. All special meetings of Shareholders shall
be held at the principal place of business of the Trust or at such other place
as the Board of Trustees may from time to time designate.
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Section 9. Action Without a Meeting. Any action to be taken by Shareholders
may be taken without a meeting if a majority (or such other amount as may be
required by law) of the Outstanding Shares entitled to vote on the matter
consent to the action in writing and such written consents are filed with the
records of the Shareholders' meetings. Such written consent shall be treated
for all purposes as a vote at a meeting of the Shareholders held at the
principal place of business of the Trust.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
Section 1. Share Certificates. In lieu of issuing certificates representing
Shares, the Board of Trustees or the transfer agent or Shareholder servicing
agent may keep accounts upon the books of the Trust for record holders of such
Shares. The record holders shall be deemed, for all purposes, to be holders of
certificates for such Shares as if they accepted such certificates and shall be
held to have expressly consented to the terms thereof.
If the Board of Trustees authorizes the issuance of certificates
pursuant to Article V, Section 5 of the Trust Instrument, then such
certificates shall be in the form prescribed from time to time by the Board and
shall be signed by the President or a Vice President and by the Treasurer,
Assistant Treasurer, Secretary or Assistant Secretary of the Trust. Such
signatures may be facsimile if the certificate is signed by a transfer agent or
Shareholder servicing agent or by a registrar, other than a Trustee, officer or
employee of the Trust. If any officer who has signed any such certificate or
whose facsimile signature has been placed thereon shall have ceased to be such
an officer before the certificate is issued, then such certificate may be
issued by the Trust with the same effect as if he or she were such an officer
at the date of issue. The issuance of a certificate to one or more
Shareholders shall not require the issuance of certificates to all
Shareholders. The Board of Trustees may at any time discontinue the issuance
of certificates and may, by written notice to each Shareholder, require the
surrender of certificates to the Trust for cancellation. Such surrender and
cancellation shall not affect the ownership of Shares in the Trust.
Section 2. Transfer of Shares. The Shares of the Trust shall be transferable
only by a transfer recorded on the books of the Trust by the Shareholder of
record in person or by his or her duly authorized attorney or legal
representative. The Shares of the Trust may be freely transferred, and the
Board of Trustees may, from time to time, adopt rules and regulations regarding
the method of transfer of such Shares. Shares shall not be transferred on the
books of the Trust until all requirements of the Board, including
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the proper tender of any outstanding certificates, if any, have been satisfied.
The Trust shall be entitled to treat the holder of record of any Share or
Shares as the absolute owner for all purposes, and shall not be bound to
recognize any legal, equitable or other claim or interest in such Share or
Shares on the part of any other person except as otherwise expressly provided
by law.
Section 3. Lost, Stolen or Destroyed Certificates. If any Share certificate
should become lost, stolen or destroyed, a duplicate Share certificate may be
issued in place thereof, upon such terms and conditions as the Board of
Trustees may prescribe, including, but not limited to, requiring the owner of
the lost, stolen or destroyed certificate to give the Trust a bond or other
indemnity, in such form and in such amount as the Board of Trustees may direct
and with such surety or sureties as may be satisfactory to the Board sufficient
to indemnify the Trust against any claim that may be made against it on account
of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate.
ARTICLE VII
CUSTODY OF SECURITIES
Section 1. Employment of a Custodian. The Trust shall at all times place and
maintain all cash, securities and other assets of the Trust and of each Series
in the custody of a custodian meeting the requirements set forth in Article
VII, section 4 of the Trust Instrument ("Custodian"). The Custodian shall be
appointed from time to time by the Board of Trustees, who shall determine its
remuneration.
Section 2. Termination of Custodian Agreement. Upon termination of any
Custodian Agreement or the inability of the Custodian to continue to serve as
custodian, in either case with respect to the Trust or any Series, the Board of
Trustees shall (a) use its best efforts to obtain a successor Custodian; and
(b) require that the cash, securities and other assets owned by the Trust or
any Series be delivered directly to the successor Custodian.
Section 3. Other Arrangements. The Trust may make such other arrangements for
the custody of its assets (including deposit arrangements) as may be required
by any applicable law, rule or regulation.
ARTICLE VIII
FISCAL YEAR AND ACCOUNTANT
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Section 1. Fiscal Year. The fiscal year of the Trust shall, unless otherwise
ordered by the Board of Trustees, be twelve calendar months ending on the 30th
day of September.
Section 2. Accountant. The Trust shall employ independent certified public
accountants as its Accountant to examine the accounts of the Trust and to sign
and certify financial statements filed by the Trust. The Accountant shall be
appointed in accordance with the requirements of Section 32(a) of the 1940 Act
and the rules thereunder. The Accountant's certificates and reports shall be
addressed both to the Board of Trustees and to the Shareholders.
ARTICLE IX
AMENDMENTS
Section 1. General. Except as provided in Section 2 of this Article, all
Bylaws of the Trust shall be subject to amendment, alteration or repeal, and
new Bylaws may be made by the affirmative vote of a majority of either: (1)
the Outstanding Shares of the Trust entitled to vote at any meeting; or (2) the
Trustees.
Section 2. By Shareholders Only. After the issue of any Shares of the Trust,
no amendment, alteration or repeal of this Article shall be made except by the
affirmative vote of the holders of either: (a) more than two-thirds of the
Trust's Outstanding Shares present at a meeting at which the holders of more
than fifty percent of the Outstanding Shares are present in person or by proxy,
or (b) more than fifty percent of the Trust's Outstanding Shares.
ARTICLE X
NET ASSET VALUE
Section 1. Determination of Net Asset Value. The term "Net Asset Value" of
any Series or Class shall mean that amount by which the assets belonging to
that Series or Class exceed its liabilities, all as determined by or under the
direction of the Board of Trustees. Such value per Share shall be determined
separately for each Series or Class and shall be determined on such days and at
such times as the Board of Trustees may determine. Such determination shall be
made with respect to securities for which market quotations are readily
available, at the market value of such securities; and with respect to other
securities and assets, at the fair value as determined in good faith by the
Board of Trustees, provided, however, that the Board, without Shareholder
approval, may alter the method of appraising portfolio securities insofar as
permitted under the 1940 Act and the rules, regulations and interpretations
thereof promulgated or issued by the Commission or insofar as permitted by any
order of the Commission applicable
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<PAGE> 14
to a Series or Class. The Board of Trustees may delegate any of its powers and
duties under this Section 1 with respect to appraisal of assets and
liabilities. At any time the Board of Trustees may cause the Net Asset Value
per Share last determined to be determined again in a similar manner and may
fix the time when such redetermined values shall become effective.
ARTICLE XI
INVESTMENTS
Section 1. Investment Objectives, Policies and Restrictions. The Trust and/or
each Series shall adhere to the fundamental and non-fundamental investment
objectives, policies and restrictions applicable to the Trust and/or each
Series included in the Trust's current effective registration statement as
filed with the Commission. If a percentage limitation is adhered to at the
time of an investment, a later increase or decrease in the percentage resulting
from a change in the value of the assets of a Series shall not be a violation
of such investment restrictions.
Section 2. Amendment of Investment Objectives, Policies and Restrictions. Any
investment objectives, policies and restrictions of the Trust or any Series
which are deemed to be fundamental may not be changed without the approval of
the holders of a majority of the Outstanding Shares of the Trust or of the
Series affected which shall mean the lesser of (i) 67% of the Shares
represented at a meeting at which more than 50% of the Outstanding Shares are
present or represented by proxy or (ii) more than 50% of the Outstanding
Shares. Any investment objectives, policies or restrictions deemed
non-fundamental may be changed by vote of the Board of Trustees.
ARTICLE XII
MISCELLANEOUS
Section 1. Inspection of Books. The Board of Trustees shall from time to
time determine whether and to what extent, and at what times and places, and
under what conditions the accounts and books of the Trust or any Series or
Class shall be open to the inspection of Shareholders. No Shareholder shall
have any right to inspect any account or book or document of the Trust except
as conferred by law or otherwise by the Board of Trustees or by resolution of
Shareholders.
Section 2. Severability. The provisions of these Bylaws are severable. If
the Board of Trustees determine, with the advice of counsel, that any provision
hereof conflicts with the 1940 Act, the regulated investment company provisions
of the Internal Revenue Code or with other applicable laws and regulations, the
conflicting
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provision shall be deemed never to have constituted a part of these Bylaws;
provided, however, that such determination shall not affect any of the
remaining provisions of these Bylaws or render invalid or improper any action
taken or omitted prior to such determination. If any provision hereof shall be
held invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision only in such jurisdiction
and shall not affect any other provision of these Bylaws.
Section 3. Headings. Headings are placed in these Bylaws for convenience of
reference only and in case of any conflict, the text of these Bylaws rather
than the headings shall control.
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<PAGE> 1
EXHIBIT 99.5
INVESTMENT ADVISORY AND MANAGEMENT CONTRACT
<PAGE> 2
INVESTMENT ADVISORY AND MANAGEMENT CONTRACT
THIS AGREEMENT is made and executed this 3Oth day of September, 1993, between
SAFECO RESOURCE SERIES TRUST ("Trust"), a Delaware business trust and SAFECO
ASSET MANAGEMENT COMPANY ("Manager"), a Washington corporation.
WHEREAS, the Trust is registered with the Securities & Exchange
Commission as a series type, open-end, management investment company under the
Investment Company Act of 1940, as amended ("1940 Act"), and has caused its
shares of beneficial interest to be registered for sale to the public under the
Securities Act of 1933 (the "1933 Act") and various state securities laws; and
WHEREAS, the Trust intends to offer for public sale distinct series of
shares of beneficial interest ("Series"), each Series corresponding to a
distinct portfolio; and
WHEREAS, the Trust wishes to retain the Manager to provide investment
advisory, management, and administrative services to the Trust and each Series
as now exists and as hereafter may be established as listed in Exhibit A to
this Agreement as amended from time to time; and
WHEREAS, the Manager is willing to furnish such services on the terms
and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the promises and mutual covenants
hereinafter contained, it is agreed as follows:
1. Appointment of Manager. The Trust hereby appoints the Manager
as investment adviser and manager of each Series to administer its affairs,
subject to the supervision of the Trust's Board of Trustees, for the period and
on the terms set forth in this Agreement. The Manager hereby accepts such
appointment and agrees to render the services required by this Agreement for
the compensation and upon such other terms and conditions as are set forth in
this Agreement. The Manager shall for all purposes herein be deemed an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Trust in any way or
otherwise be deemed an agent of the Trust.
2. Duties of Series. Each Series shall at all times keep the
Manager fully informed with regard to the securities owned by it, its funds
available or to become available for investment, and generally as to the
condition of its affairs. It shall furnish the Manager with such other
documents and information with regard to its affairs as the Manager may from
time to time reasonably request.
<PAGE> 3
3. Duties of Manager.
(a) General. The Manager shall furnish to the Trust space in the
offices of the Manager or in such other place as may be agreed upon from time
to time and all necessary office facilities, equipment and personnel for
managing the affairs and investments and keeping the books of the Trust.
Subject to the supervision of the Trust's Board of Trustees, the Manager shall
regularly provide each Series with investment research, advice, management and
supervision and shall furnish a continuous investment program for each Series'
portfolio of securities consistent with each Series' investment objectives and
policies. The Manager shall determine from time to time what securities will be
purchased, retained or sold by each Series, and shall implement those
decisions, all subject to the provisions of the Trust's Trust Instrument and
Bylaws, the 1940 Act, the applicable rules and regulations of the Securities
and Exchange Commission, and other applicable federal and state law, as well as
the investment objectives and policies of each Series. The Manager will place
orders pursuant to its investment determinations for each Series either
directly with the issuer or with any broker or dealer. In placing orders with
brokers and dealers the Manager will attempt to obtain the best net price and
the most favorable execution of its orders. The Manager shall also provide
advice and recommendations with respect to other aspects of the business and
affairs of the Trust and each Series, and shall perform such other functions of
management and supervision as may be directed by the Board of Trustees of the
Trust.
(b) Reports and Records. The Manager, at its expense, shall supply
the Trust's Board of Trustees and officers with all statistical information and
reports reasonably requested by them and reasonably available to the Manager.
The Manager shall oversee the maintenance of all books and records with respect
to the Trust's and each Series' securities transactions and the keeping of the
Trust's and each Series' books of account in accordance with all applicable
federal and state laws and regulations. In compliance with the requirements of
Rule 3la-3 under the 1940 Act, the Manager hereby agrees that any records which
it maintains for the Trust or any Series are the property of the Trust, and
further agrees to surrender promptly to the Trust any of such records upon the
Trust's request. The Manager further agrees to arrange for the preservation of
the records required to be maintained by Rule 31a-1 under the 1940 Act for the
periods prescribed by Rule 31a-2 under the 1940 Act. The Manager shall
authorize and permit any of its directors, officers and employees, who may be
elected as directors or officers of the Trust, to serve in the capacities in
which they are elected.
2
<PAGE> 4
4. Non-Exclusive Services. The services of the Manager to the
Trust and each Series hereunder are not to be deemed exclusive, and the Manager
shall be free to render similar services to others so long as its services
hereunder are not impaired thereby.
5. Compensation for Services.
(a) For the services and facilities to be furnished by the
Manager, each existing Series shall pay the Manager an annual fee computed on
the basis of the average net asset value of the Series as ascertained each
business day and paid either monthly or quarterly in accordance with the
schedule set forth in Exhibit A to this Agreement. For purposes of computing
the annual fee, the net asset value of the Series shall be equal to the
difference between its total assets and its total liabilities (excluding from
such liabilities its capital stock and surplus) with its assets and its
liabilities to be valued in accordance with the procedures set forth in the
Trust's Registration Statement.
(b) For the services and facilities to be furnished by the
Manager, any new Series of the Trust which is issued on a future date will pay
the Manager a fee according to a Schedule which will be set forth in an amended
Exhibit A to this Agreement.
(c) If SAFECO Securities, Inc., receives portfolio brokerage
commissions resulting from transactions in the portfolio of any Series
("commissions"), any management fee earned by Manager will be reduced by the
amount of such commissions so received by SAFECO Securities, Inc.
(d) The Trust and the Manager may mutually agree to reduce the
fees payable by any Series if the reduction is in the best long-range interest
of the Trust and the Manager.
(e) If the Manager shall serve for less than the whole of any
month or quarter as the case may be, the monthly or quarterly management fee
payable by each Series shall be prorated.
3
<PAGE> 5
6. Liability of Manager. The Manager assumes no responsibility
under this Agreement other than to render the services called for hereunder, in
good faith, and shall not be responsible for any action of the Trust's Board of
Trustees in following or declining to follow any advice or recommendations of
the Manager; provided, that nothing in this Agreement shall protect the Manager
against any liability to the Trust or its shareholders to which it would
otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties hereunder.
7. Books and Records. The Trust shall cause its books and
accounts to be audited at least once each year by a reputable, independent
public accountant or organization of public accountants who shall render a
report to the Trust.
8. Affiliation. (a) It is understood that trustees,
officers, shareholders and agents of the Trust and each Series are or may be
interested in the Manager (or any successor thereof) as directors, officers,
shareholders or otherwise, and that the Manager (or any such successor) is or
may be interested in the Trust as a shareholder or otherwise.
(b) No trustee, officer or employee of the Trust and each Series
shall receive from the Trust any salary or other compensation as such director,
officer or employee while he or she is at the same time a director, officer, or
employee of the Manager or any affiliated company of the Manager. This
paragraph shall not apply to directors or other persons who are not regular
members of the Manager's or any affiliated company's staff.
9. Unrestricted Activities. Nothing in this Agreement shall limit
or restrict the right of any director, officer, or employee of the Manager who
may also be a trustee, officer, or employee of the Trust or any Series, to
engage in any other business or to devote his or her time and attention in part
to the management or other aspects of any other business, whether of a similar
nature or a dissimilar nature, or limit or restrict the right of the Manager to
engage in any other business or to render services of any kind, including
investment advisory and management services, to any other corporation, firm,
individual or association.
10. Use of Name. In the event this Agreement is terminated by
either party or upon written notice from the Manager at any time, the Trust
hereby agrees that it will eliminate from its corporate name any reference to
the name of "SAFECO." The Trust shall have the non-exclusive use of the name
"SAFECO" in whole or in part only so long as this Agreement is effective or
until such notice is given. Notwithstanding the foregoing, if this Agreement is
terminated by either party, the Manager may elect to permit the Trust to
continue to use the name "SAFECO" under such terms and conditions as the
Manager shall set forth in writing.
4
<PAGE> 6
11. Effectiveness Date/Renewal. This Agreement will become
effective with respect to each Series on the date first written above or such
later date as indicated on Exhibit A, provided that it shall have been approved
by the Trust's Board of Trustees and by the shareholders of that Series in
accordance with the requirements of the 1940 Act and, unless sooner terminated
as provided herein, will continue in effect for one year from the above written
date. Thereafter, if not terminated, this Agreement shall continue in effect
with respect to each Series for successive annual periods ending on the same
date of each year, provided that such continuance is specifically approved at
least annually (I) by the Trust's Board of Trustees or (ii) by a vote of a
majority of the outstanding voting securities of the Series (as defined in the
1940 Act), provided that in either event the continuance is also approved by a
majority of the Trust's trustees who are not interested persons (as defined in
the 1940 Act) of the Trust or the Manager by vote cast at a meeting called for
the purpose of voting on such continuance.
12. Amendment. This Agreement may be amended by the parties only
if the terms of the amendment are approved by a majority of the Trust's Board
of Trustees or, with respect to any given Series, by a vote of a majority of
the outstanding voting securities of that Series at a duly called meeting of
the shareholders. In either case, the majority of the trustees, who are neither
interested persons of the Trust or the Manager, must approve the amendment.
13. Termination. This Agreement is terminable with respect to any
Series or in its entirety without penalty by the Trust's Board of Trustees, by
vote of a majority of the outstanding voting securities of each affected Series
(as defined in the 1940 Act), or by the Manager, on not less than 60 days'
notice to the other party and will be terminated upon the mutual written
consent of the Manager and the Trust. This Agreement shall terminate
automatically in the event of its assignment by the Manager and shall not be
assignable by the Trust without the consent of the Manager.
14. Limitation of Liability. Manager is hereby expressly put on
notice of (I) the limitation of shareholder, officer and trustee liability as
set forth in the Trust Instrument of the Trust and (ii) of the provisions in
the Trust Instrument permitting the establishment of separate Series and
limiting the liability of each Series to obligations of that Series. Manager
hereby agrees that obligations assumed by the Trust pursuant to this Agreement
are in all cases assumed on behalf of a particular Series and each such
obligation shall be limited in all cases to that Series and its assets. Manager
agrees that it shall not seek satisfaction of any such obligation from the
shareholders or any individual shareholder of the Trust nor from the officers
or trustees of any individual officer or trustee of the Trust.
15. Defined Terms. For the purpose of this Agreement, the terms
"vote of a majority of the outstanding voting securities," "assignment," and
"interested persons," shall have the
5
<PAGE> 7
respective meanings specified in the Investment Company Act of 1940 when such
terms are used in reference to the Trust and the Series.
16. Entire Agreement/Enforcement of Rights. This Agreement
embodies the entire agreement between the Manager and the Trust with respect to
the services to be provided by the Manager to the Trust and each Series and
supersedes any prior written or oral agreement between those parties. In the
event that either party should be required to take legal action in order to
enforce its rights under this Agreement, the prevailing party in any such
action or proceeding shall be entitled to recover from the other party costs
and reasonable attorneys' fees.
17. 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. This
Agreement may be executed in counterparts, each of which taken together shall
constitute one and the same instrument. Manager understands that the rights and
obligations of each Series under the Trust Instrument are separate and distinct
from those of any and all other Series.
18. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Washington and, to the
extent it involves any United States statute, in accordance with the laws of
the United States.
6
<PAGE> 8
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
ATTEST: SAFECO RESOURCE SERIES TRUST
By
- ---------------------------- --------------------------------
Elna A. Thomson David F. Hill
Secretary Vice President
ATTEST: SAFECO ASSET MANAGEMENT COMPANY
By
- ---------------------------- --------------------------------
Elna A. Thomson Richard W. Hubbard
Secretary President
7
<PAGE> 9
EXHIBIT A
FEE SCHEDULE
SAFECO RESOURCE SERIES TRUST
EQUITY PORTFOLIO
.74 of 1% of the average total net asset value of the Portfolio.
SAFECO Asset Management Company SAFECO Resource Series Trust
on behalf of its
Equity Portfolio
By: By:
------------------------------- ------------------------------
Its: President Its: Vice President
Attest: Attest:
--------------------------- -------------------------
Secretary Secretary
As of 9-30-93
8
<PAGE> 10
EXHIBIT A
FEE SCHEDULE
SAFECO RESOURCE SERIES TRUST
BOND PORTFOLIO
.74 of 1% of the average total net asset value of the Portfolio.
SAFECO Asset Management Company SAFECO Resource Series Trust
on behalf of its
Equity Portfolio
By: By:
------------------------------- ------------------------------
Its: President Its: Vice President
Attest: Attest:
--------------------------- -------------------------
Secretary Secretary
As of 9-30-93
9
<PAGE> 11
EXHIBIT A
FEE SCHEDULE
SAFECO RESOURCE SERIES TRUST
MONEY MARKET PORTFOLIO
.74 of 1% of the average total net asset value of the Portfolio.
SAFECO Asset Management Company SAFECO Resource Series Trust
on behalf of its
Money Market Portfolio
By: By:
------------------------------- ------------------------------
Its: President Its: Vice President
Attest: Attest:
--------------------------- -------------------------
Secretary Secretary
As of 9-30-93
10
<PAGE> 12
EXHIBIT A
FEE SCHEDULE
SAFECO RESOURCE SERIES TRUST
GROWTH PORTFOLIO
.74 of 1% of the average total net asset value of the Portfolio.
SAFECO Asset Management Company SAFECO Resource Series Trust
on behalf of its
Growth Portfolio
By: By:
------------------------------- ------------------------------
Its: President Its: Vice President
Attest: Attest:
--------------------------- -------------------------
Secretary Secretary
As of 9-30-93
11
<PAGE> 13
EXHIBIT A
FEE SCHEDULE
SAFECO RESOURCE SERIES TRUST
NORTHWEST PORTFOLIO
.74 of 1% of the average total net asset value of the Portfolio.
SAFECO Asset Management Company SAFECO Resource Series Trust
on behalf of its
Northwest Portfolio
By: By:
------------------------------- ------------------------------
Its: President Its: Vice President
Attest: Attest:
--------------------------- -------------------------
Secretary Secretary
As of 9-30-93
12
<PAGE> 1
EXHIBIT 99.6
DISTRIBUTION AGREEMENT
<PAGE> 2
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT, made this 5th day of May, 1994, by and
between SAFECO RESOURCE SERIES TRUST, a Delaware business trust ("Trust"), and
SAFECO SECURITIES, INC., a Washington corporation (the "Distributor").
WHEREAS, the Trust is registered with the Securities and Exchange
Commission as a series type open-end investment company under the Investment
Company Act of 1940, as amended (the "1940 Act") and has caused its shares of
beneficial interest to be registered for sale to the public under the
Securities Act of 1933 (the "1933 Act") and various state securities laws; and
WHEREAS, the Trust intends to offer for public sale distinct series of
shares of beneficial interest, each corresponding to a distinct portfolio
("Series"); and
WHEREAS, the Trust wishes to retain the Distributor as the principal
underwriter in connection with the offering and sale of the shares of
beneficial interest of each Series as now exists and as hereafter may be
established which are listed on Exhibit A to this Agreement as amended from
time to time ("Shares") and to furnish certain other services to the Trust as
specified in this Agreement; and
WHEREAS, this Agreement has been approved by a vote of the Trust's
Board of Trustees, and certain trustees who are not interested persons in
conformity with Section 15(c) under the 1940 Act; and
WHEREAS, the Distributor is willing to act as principal underwriter
and to furnish such services on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed as follows:
1. Appointment of Distributor. The Trust hereby appoints the
Distributor as principal underwriter in connection with the offering and sale
of Shares of each Series. The Trust authorizes the Distributor, as exclusive
agent for the Trust, upon the commencement of operations of any Series and
subject to applicable federal and state law and the Trust Instrument and Bylaws
of the Trust: (a) to promote the Series; (b) to solicit orders for the
purchase of the Shares of the Series subject to such terms and conditions as
the Trust may specify; and (c) to accept orders for the purchase of the Shares
of the Series on behalf of the Trust. The Distributor shall comply with all
<PAGE> 3
applicable federal and state laws and offer the Shares of each Series on an
agency or "best efforts" basis under which the Trust shall issue only such
Shares as are actually sold. The Distributor shall have the right to use any
list of shareholders of the Trust or any Series or any other list of investors
which it obtains in connection with its provision of services under this
Agreement; provided, however, that the Distributor shall not sell or knowingly
provide such list or lists to any unaffiliated person without the consent of
the Trust's Board of Trustees.
2. Duties of Trust. The Trust agrees to register the Shares with the
Securities and Exchange Commission, state and other regulatory bodies, and to
prepare and file from time to time such Prospectuses, Statements of Additional
Information, amendments, reports and other documents as may be necessary to
maintain the Registration Statement. Each Series shall bear all expenses
related to preparing and typesetting such Prospectuses, Statements of
Additional Information and other materials required by law and such other
expenses, including printing and mailing expenses, related to such Series'
communications with persons who are shareholders of that Series.
3. Duties of Distributor. The Distributor shall print and distribute
to prospective investors Prospectuses, and shall print and distribute, upon
request, to prospective investors Statements of Additional Information, and may
print and distribute such other sales literature, reports, forms and
advertisements in connection with the sale of the Shares as comply with the
applicable provisions of federal and state law. In connection with such sales
and offers of sale, the Distributor shall give only such information and make
only such statements or representations as are contained in the Prospectus,
Statement of Additional Information, or in information furnished in writing to
the Distributor by the Trust, and the Trust shall not be responsible in any way
for any other information, statements or representations given or made by the
Distributor or its representatives or agents. Except as specifically provided
in this Agreement, the Trust shall bear none of the expenses of the Distributor
in connection with its offer and sale of the Shares.
4. Other Broker Dealers. The Distributor may enter into dealer
agreements with registered and qualified securities dealers for the sale of the
Shares. The form of any such dealer agreement shall be mutually agreed upon and
approved by the Trust and the Distributor.
5. Public Offering Price. The public offering price of the Shares of
each Series shall be the net asset value per share (as determined by the Trust)
of the outstanding Shares of the Series
- 2 -
<PAGE> 4
as described in the Registration Statement. The Trust shall furnish the
Distributor with a statement of each computation of public offering price and
of the details entering into such computation.
6. Repurchase of Shares. The Distributor may at its sole discretion
repurchase Shares offered for sale by the shareholders. Repurchase of Shares
by the Distributor shall be at the net asset value next determined after a
repurchase order has been received. The Distributor will receive no commission
or other remuneration for repurchasing Shares. At the end of each business
day, the Distributor shall notify by any appropriate means, the Trust and
SAFECO Services Corporation, the Trust's transfer agent, of the orders for
repurchase of Shares received by the Distributor since the last such report,
the amount to be paid for such Shares, and the identity of the shareholders
offering Shares for repurchase. Upon such notice, the Trust shall pay the
Distributor such amounts as are required by the Distributor for the repurchase
of such Shares in cash or in the form of a credit against moneys due the Trust
from the Distributor as proceeds from the sale of Shares. The Trust reserves
the right to suspend such repurchase right upon written notice to the
Distributor. The Distributor further agrees to act as agent for the Trust to
receive and transmit promptly to the Trust's transfer agent shareholder
requests for redemption of Shares.
7. Indemnification.
(a) The Distributor shall be entitled to receive and act on the
advice of counsel for the Trust which advice shall be at the expense of the
Trust and shall be without liability for any action taken, or things done, or
omitted to be done, pursuant to such advice.
(b) The Trust agrees to indemnify, defend and hold the Distributor,
its several directors, officers and employees, and any person who controls the
Distributor within the meaning of Section 15 of the 1933 Act, free and harmless
from and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which the
Distributor, its directors, officers or employees, or any such controlling
person may incur, under the 1933 Act or under common law or otherwise, arising
out of or based upon any alleged untrue statement of a material fact contained
in the Registration Statement or arising out of or based upon any alleged
omission to state a material fact required to be stated or necessary to make
the Registration Statement not
- 3 -
<PAGE> 5
misleading, provided that in no event shall anything contained in this
Agreement be construed so as to protect the Distributor against any liability
to the Trust or its shareholders to which the Distributor would otherwise be
subject by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations and duties under this Agreement, and further provided that the
Trust shall not indemnify the Distributor for conduct set forth in this
subparagraph 7(b).
(c) The Distributor agrees to indemnify, defend and hold the Trust,
its several trustees, officers and employees and any person who controls the
Trust within the meaning of Section 15 of the 1933 Act, free and harmless from
and against any and all claims, demands, liabilities and expenses (including
the cost of investigating or defending such claims, demands or liabilities and
any counsel fees incurred in connection therewith) which the Trust, its
trustees, officers or employees or any such controlling person may incur, under
the 1933 Act or under common law or otherwise, arising out of or based upon any
alleged untrue statement of a material fact contained in information furnished
in writing by the Distributor to the Trust for use in the Registration
Statement or arising out of or based upon any alleged omission to state a
material fact in connection with such information required to be stated in the
Registration Statement or necessary to make such information not misleading.
As used in this subparagraph 7(c), the term "employee" shall not include a
corporate entity under contract to provide services to the Trust or any Series,
or any employee of such a corporate entity, unless such person is otherwise an
employee of the Trust.
8. Certificates. The Trust shall not be required to issue
certificates representing Shares. If the Trust elects to issue certificates
and a shareholder request for certificates is transmitted through the
Distributor, the Trust will cause certificates evidencing the Shares owned to
be issued in such names and denominations as the Distributor shall from time to
time direct, provided that no certificates shall be issued for fractional
Shares.
9. Withdrawal of Offering. The Trust reserves the right at any time
to withdraw all offerings of the Shares of any or all Series by written notice
to the Distributor at its principal office.
10. Independent Contractor Status. The Distributor is an independent
contractor and shall be agent for the Trust only in respect to the sale and
redemption of the Shares.
- 4 -
<PAGE> 6
11. Non-Exclusive Services. The services of the Distributor to the
Trust under this Agreement are not to be deemed exclusive, and the Distributor
shall be free to render similar services or other services to others so long as
its services hereunder are not impaired thereby.
12. Use of Name. In the event this Agreement is terminated by either
party or upon written notice from the Distributor at any time, the Trust hereby
agrees that it will eliminate from its corporate name any reference to the name
of "SAFECO." The Trust shall have the non-exclusive use of the name "SAFECO" in
whole or in part only so long as this Agreement is effective or until such
notice is given. Notwithstanding this subparagraph and in the event this
Agreement is terminated by either party, the Distributor may elect to permit
the Trust to continue to use the name "SAFECO" under such terms and conditions
as the Distributor shall set forth in writing.
13. Effective Date/Renewal. This Agreement will become effective
with respect to each Series on the date first written above or such later date
as indicated on Exhibit A and, unless sooner terminated as provided herein,
will continue in effect for two years from the above written date. Thereafter,
if not terminated, this Agreement shall continue in effect with respect to each
Series for successive annual periods ending on the same date of each year,
provided that such continuance is specifically approved at least annually (i)
by the Trust's Board of Trustees or (ii) with respect to any given Series, by a
vote of a majority of the outstanding voting securities of that Series (as
defined in the 1940 Act), provided that in either event the continuance is also
approved by majority of the Trust's trustees who are neither interested persons
(as defined in the 1940 Act) of the Trust or the Distributor by vote cast at a
meeting called for the purpose of voting on such continuance.
14. Amendment. This Agreement may be amended by the parties only if
the terms of the amendment are either (i) approved by the Trust's Board of
Trustees or, (ii) with respect to any given Series, by a vote of a majority of
the outstanding voting securities of that Series at a duly called meeting of
the shareholders. In either case, the majority of the trustees, who are
neither interested persons of the Trust or the Distributor, must approve the
amendment.
15. Termination. This Agreement is terminable with respect to any
Series or in its entirety without penalty by the Trust's Board of Trustees, by
vote of a majority of the outstanding voting securities of each affected Series
(as defined in the 1940 Act), or by the Distributor, on not less than 60 days'
notice to
- 5 -
<PAGE> 7
the other party and will be terminated upon the mutual written consent of the
Distributor and the Trust. This Agreement will also automatically and
immediately terminate in the event of its assignment.
16. Limitation of Liability. Distributor is hereby expressly put on
notice of (i) the limitation of shareholder, officer and trustee liability as
set forth in the Trust Instrument of the Trust and (ii) of the provisions in
the Trust Instrument permitting the establishment of separate Series and
limiting the liability of each Series to obligations of that Series.
Distributor hereby agrees that obligations assumed by the Trust pursuant to
this Agreement are in all cases assumed on behalf of a particular Series and
each such obligation shall be limited in all cases to that Series and its
assets. Distributor agrees that it shall not seek satisfaction of any such
obligation from the shareholders or any individual shareholder of the Trust nor
from the officers or trustees or any individual officer or trustee of the
Trust.
17. Definitions. As used in this Agreement, the term(s):
(a) "net assets" shall have the meaning ascribed to it in the Trust's
Trust Instrument;
(b) "assignment", "interested person", and "majority of the
outstanding voting securities" shall have the meanings given to them by Section
2(a) of the 1940 Act, subject to such exemptions as may be granted by the
Securities and Exchange Commission by any rule, regulation or order.
(c) "Registration Statement" shall mean the registration statement
most recently filed by the Trust with the Securities and Exchange Commission
and effective under the 1940 Act and 1933 Act, as such Registration Statement
is amended by any amendments thereto at the time in effect;
(d) "Prospectus" and "Statement of Additional Information" shall mean,
respectively, the form of prospectus and statement of additional information
with respect to each Series filed by the Trust as part of the Registration
Statement.
18. Entire Agreement/Enforcement of Rights. This Agreement
embodies the entire Agreement between the Distributor and the Trust with
respect to the services to be provided by the Distributor to the Trust and each
Series and supersedes any prior written or oral agreement between those
parties. In the event that either party should be required to take legal
action in order to enforce its rights under this Agreement, the prevailing
- 6 -
<PAGE> 8
party in any such action or proceeding shall be entitled to recover from the
other party costs and reasonable attorneys' fees.
19. 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. This
Agreement may be executed in counterparts, each of which taken together shall
constitute one and the same instrument. Distributor understands that the
rights and obligations of each Series under the Trust Instrument are separate
and distinct from those of any and all other Series.
20. Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of Washington.
IN WITNESS WHEREOF, the parties hereto caused this Agreement to be
executed by their officers thereunto duly authorized.
Attest: SAFECO RESOURCE SERIES TRUST
By:________________________ By:_____________________________
Secretary Vice President
Attest: SAFECO SECURITIES, INC.
By:________________________ By:_____________________________
Secretary President
- 7 -
<PAGE> 9
EXHIBIT A
SAFECO RESOURCE SERIES TRUST
The SAFECO Resource Series Trust consists of the following Series:
1. Equity Portfolio
2. Bond Portfolio
3. Money Market Portfolio
4. Growth Portfolio
5. Northwest Portfolio
As of __________, 1994
- 8 -
<PAGE> 1
EXHIBIT 99.8
CUSTODY AGREEMENT
<PAGE> 2
CUSTODY AGREEMENT
THIS AGREEMENT executed as of the 30th day of September, 1993, between
SAFECO RESOURCE SERIES TRUST, a Delaware business trust, ("Trust"), and U. S.
BANK OF WASHINGTON, N.A., a national banking association ("Bank").
WHEREAS, the Trust is registered with the Securities and Exchange
Commission as a series type open-end, management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), and has caused its
shares of beneficial interest to be registered for sale to the public under the
Securities Act of 1933 (the "1933 Act") and various state securities laws; and
WHEREAS, the Trust may, from time to time, organize one or more series
of shares, in addition to the series set forth in Exhibit A attached hereto,
each of which shall represent an interest in a separate portfolio of cash,
securities and other assets (all such existing and additional series now or
hereafter listed on Exhibit A are referred to herein individually, as a
"Series" and collectively, as "the Series," and
WHEREAS, the Trust desires to appoint the Custodian as custodian on
behalf of the Series in accordance with the provisions of the Investment
Company Act of 1940 (the "1940 Act") and the rules and regulations thereunder,
under the terms and conditions set forth in this Agreement, and the Custodian
has agreed to act as custodian;
NOW, THEREFORE, it is agreed by and between the parties hereto as
follows:
1. Appointment. The Trust on behalf of the Series hereby
appoints the Bank as custodian of all of the Series' cash, securities and other
assets, and the Bank hereby agrees to act as such upon the terms and conditions
set forth in this Agreement.
2. Delivery, Safe Keeping. The Trust will deliver or cause to be
delivered to the Bank from time to time all cash, securities and other assets
acquired by the Series from time to time during the term of this Agreement and
shall specify the Series to which such cash, securities and other assets are to
be allocated. The Bank shall keep safely such cash, securities and other
assets as custodian for the Series and shall deposit such cash, securities and
other assets with the Bank for the account of the Series.
3. Registration of Securities. Bank will hold stocks and other
registerable portfolio securities (other than bearer securities) registered in
the name of the Series, or in the name of any nominee of the Trust on behalf of
the Series, or in the name of
<PAGE> 3
any nominee of Bank, or in the name or nominee name of any sub-custodian or
agent appointed under paragraph 4 for whose fidelity and liabilities Bank shall
be fully responsible, or in street certificate form, so-called, with or without
any indication of fiduciary capacity. Unless otherwise instructed by the
Trust, Bank will register all such portfolio securities in the name of its
authorized nominee. In any event, all such securities and other assets shall
be held in an account of the Bank containing only assets of a Series, or only
assets held by a Bank as a fiduciary or custodian for customers, and provided
further, that the records of the Bank shall indicate at all times the Series or
other customer for which such securities and other assets are held in such
account and their respective interests therein. The Trust agrees to hold Bank
and its nominee harmless for any liability as a record holder of securities
held in custody.
4. Custody of Moneys or Securities/Appointment of Agents.
Notwithstanding any other provisions of this Agreement, all or any of the cash,
securities or other assets of a Series may be held in Bank's custody, provided,
however, that the Bank may at any time or times in its discretion appoint (and
may at any time remove) any other bank or trust company which is itself
qualified under the 1940 Act to act as a sub-custodian or its agent to carry
out such of the provisions of this Agreement as the Bank may from time to time
direct. The appointment of any sub-custodian or agent shall not relieve the
Bank of its responsibilities or liabilities hereunder. Neither Bank nor any
sub-custodian or agent shall be entitled to reimbursement by Trust or the
Series for any fees or expenses of any sub-custodian or agent.
5. Deposit of Trust Assets in Securities Systems. Upon order of
the Trust on behalf of any Series, the Bank may deposit and/or maintain
securities owned by a Series in a clearing agency registered with the
Securities and Exchange Commission under Section 17A of the Securities Exchange
Act of 1934, which acts as a securities depository, or in the book-entry system
authorized by the U.S. Department of the Treasury and certain federal agencies,
collectively referred to herein as "Securities Systems" in accordance with
applicable Federal Reserve Board and Securities and Exchange Commission rules
and regulations, if any, and subject to the following provisions:
(a) The Bank may keep securities of the Series in a Securities
System provided that such securities are represented in an
account ("Account") of the Bank in the Securities System which
shall not include any assets of the Bank other than assets
held as a fiduciary, custodian or otherwise for customers;
2
<PAGE> 4
(b) The records of the Bank with respect to securities of the
Series which are maintained in a Securities System shall
identify by book-entry those securities belonging to the
Series;
(c) The Bank shall pay for securities purchased for the account of
the Series upon (i) receipt of advice from the Securities
System that such securities have been transferred to the
Account, and (ii) the making of an entry on the records of the
Bank to reflect such payment and transfer for the account of
the Series. The Bank shall transfer securities sold for the
account of the Series upon (i) receipt of advice from the
Securities System that payment for such securities has been
transferred to the Account, and (ii) the making of an entry on
the records of the Bank to reflect such transfer and payment
for the account of the Series. Copies of all advice from the
Securities System of transfers of securities for the account
of the Series shall identify the Series, be maintained for the
Series by the Bank and be provided to the Trust as its
request. Upon request, the Bank shall furnish the Trust on
behalf of the Series confirmation of each transfer to or from
the account of the Series in the form of a written advice or
notice and shall furnish to the Trust on behalf of the Series
copies of daily transaction sheets reflecting each day's
transactions in the Securities System for the account of the
Series.
(d) The Bank shall provide the Trust for the Series with any
report obtained by the Bank on the Securities System's
accounting system, internal accounting control and procedures
for safeguarding securities deposited in the Securities
System;
(e) The Bank shall exercise reasonable care and diligence in the
use of the Securities System on behalf of the Trust and the
Series. The Bank shall be liable to the Trust for the benefit
of the Series for any loss or damage to the Series resulting
from use of the Securities System by reason of any negligence
or willful misconduct of the Bank or any of its agents, or of
any of the Bank's or any agent's employees, or from failure of
the Bank or any such agent to enforce effectively such rights
as it may have against the Securities System. At the election
of the Trust, it shall be entitled to be subrogated to the
rights of the Bank with respect to any claim against the
Securities System or any other person which the Bank may have
as a consequence of any such loss or damage if and
3
<PAGE> 5
to the extent that the Series has not been made whole for any
such loss or damage.
6. Segregated Account. The Bank shall upon order of the Trust on
behalf of each applicable Series establish and maintain a segregated account or
accounts for and on behalf of each such Series, into which account or accounts
may be transferred cash and/or securities, including securities maintained in
an account by the Bank pursuant to paragraph 5 hereof, (i) for the purposes of
compliance by the Series with the procedures required by Investment Company Act
Release No. 10666, or any subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of segregated accounts by
registered investment companies and (ii) for other proper corporate purposes,
but only, in the case of clause (ii), upon receipt of, in addition to an order
of the Trust on behalf of the applicable Series, a writing signed by any two
individuals whose names and signatures are covered by the most recent letter
provided to the Bank as provided in paragraph 12 setting forth the purpose or
purposes of such segregated account and declaring such purposes to be proper
corporate purposes.
7. Purchases of Securities. Upon the order of the Trust on
behalf of the Series, the Bank shall receive all securities purchased for the
account of the Trust and make payment according to the terms of the order
insofar as funds are available.
8. Sale and Delivery of Securities.
(a) Upon the order of the Trust on behalf of the Series, the Bank
shall make delivery of securities held by it as custodian or held in a
Securities System account of the Bank which have been sold by the Trust. Such
delivery shall be made upon payment in a manner satisfactory to the Bank of the
amount specified in said order. The Bank shall also deliver such securities as
may be called, redeemed, retired or otherwise become payable.
(b) Subparagraph (a) shall not prevent the Bank from making:
(i) Delivery of securities for examination to the broker
selling the same in accord with the "street" delivery
custom whereby such securities are delivered to such
broker in exchange for a delivery receipt exchanged
on the same day for an uncertified check of such
broker to be presented on the same day for
certification;
(ii) Delivery of securities as collateral on borrowing
effected by the Trust or any Series; and
4
<PAGE> 6
(iii) Delivery of securities owned by the Trust or any
Series as a redemption in kind of securities issued
by the Trust or any Series.
9. Collections.
(a) On a timely basis, the Bank shall: (i) collect, receive and
hold on deposit for the account of the appropriate Series, all income and other
payments with respect to the securities held by it on behalf of a Series as
custodian; (ii) advise the Trust once each business day of such receipts;
(iii) execute ownership and other certificates and affidavits for all federal
and state tax purposes in connection with the collection of bond and note
coupons; (iv) present for payment all coupons and all other income items
requiring presentation, present for payment all securities which have become
payable at maturity, upon call for redemption or otherwise; (v) endorse for
collection checks, drafts or other negotiable instruments; and (vi) do all
other things which may be necessary or proper in connection with the receipt
and collection of any such item.
(b) The Bank shall not be under any obligation or duty to take
action to effect collection of any amount, if the securities upon which such
amount is payable are in default and payment is refused after due demand or
presentation. The Bank will, however, notify the Trust of such default and
refusal to pay.
10. Disbursements.
(a) Notwithstanding anything contained elsewhere in this Agreement
to the contrary and subparagraphs (b) and (c) below, the Bank shall deliver
funds of the Trust only upon the purchase of securities by the Trust on behalf
of the Series.
(b) Upon the order of the Trust for the Series, the Bank shall
make cash disbursements for the account of the Trust and any Series insofar as
funds are available for such disbursements, for the payment of taxes, expenses
and liabilities including, without limitation:
(i) Management fees payable under any management
agreement with SAFECO Asset Management Company (or
its successors) or any other person selected to serve
as an investment advisor to the Trust or any Series.
(ii) Compensation payable by the Trust or any Series to
any person, firm or corporation, including
compensation payable to the Bank under this
5
<PAGE> 7
Agreement.
(iii) Cash dividends or distributions for any Series
declared by the Board of Trustees of the Trust.
(c) Without the order of the Trust, the Bank may make cash
disbursements for non-discretionary ministerial items, including but not
limited to expenses in handling securities, stamp taxes, reimbursement of the
Bank for its out-of-pocket expenses incurred in the performance of its duties
hereunder and other similar items in connection with its duties under this
Agreement. The Bank shall advise the Trust once each business day of
disbursements so made.
11. Redemption and Repurchase of Shares of the Trust. From such
funds as may be available for the purpose but subject to the limitations of the
Trust Instrument and any applicable votes of the Trust's Board of Trustees
pursuant to the Trust Instrument, the Bank shall, upon receipt of instructions
from the Trust's Transfer Agent, make funds available for payment to
shareholders who have delivered to the Transfer Agent a request for redemption
or repurchase of their shares. If payment is to be made in kind, the
instructions must be accompanied by a certified copy of a resolution of the
Trust's Board of Trustees. In connection with the redemption or repurchase of
shares of a Series, the Bank is authorized upon receipt of instructions from
the Transfer Agent to wire funds to or through a commercial bank designated by
the redeeming shareholders. In connection with the redemption or repurchase of
shares of any Series, the Bank shall honor checks drawn on the Bank by a
shareholder, which checks have been furnished by the Trust to the shareholder,
when presented to the Bank in accordance with such procedures and controls as
are mutually agreed upon from time to time between the Trust and the Bank.
12. Proper Instructions.
(a) Except in the case of non-discretionary ministerial acts, and
as otherwise specifically provided in this Agreement, all action to be taken by
the Bank as custodian shall be taken upon the order of the Trust on behalf of
the Series. An "order" of the Trust on behalf of the Series shall consist of
written instructions with respect to a specified transaction, or transactions,
which instructions shall be signed by any two individuals whose names and
signatures are covered by the most recent letter addressed to the Bank setting
forth such names and signatures and signed by the President or Treasurer and
Secretary of the Trust. An "order" may consist of oral instructions in the
case of purchases and sales of shares of registered investment companies by any
Series, but only if the Bank reasonably believes such instructions to have been
6
<PAGE> 8
provided by a person authorized to give such instructions for the transaction
involved and if such instruction is transmitted and received in accordance with
any procedures acceptable to both the Fund and the Bank. Oral instructions
shall not be accepted by the Bank for any other type of transaction.
(b) Notwithstanding anything to the contrary contained in the
Agreement, no person authorized to give an "order" as described in the
preceding paragraph, Trustee, officer, employee or agent of the Trust shall
have physical access to the assets of any Series held by the Bank nor shall the
Bank deliver any assets of a Series for delivery to an account of such person;
provided, however, that nothing in this sub-paragraph (b) shall prohibit the
Trust's independent certified public accountants from examining or reviewing
the assets of the Series held by the Bank.
13. Forwarding of Information and Proxies. The Bank will forward
promptly to the Trust for each Series all information or documents which it may
receive with respect to any securities held by a Series under this Agreement,
including all notices, reports and other financial information. Neither the
Bank, nor its nominee, shall vote any of the securities or authorize the voting
of any securities or give any consent or take any other action with respect
thereto, except as otherwise provided herein, unless directed to do so upon
order of the Trust on behalf of any Series.
14. Reorganization or Liquidation, Etc. of the Trust. In the case
of the following transactions, not in the ordinary course of business, namely,
the merger or consolidation of the Trust and another investment company, the
sale by the Trust of all, or substantially all, of its assets to another
investment company, or the liquidation or dissolution of the Trust and
distribution of its assets, the Bank shall deliver the securities held by it
under this Agreement and disburse cash only upon the order of the Trust and
upon receipt of opinion of counsel of the Trust (upon which opinion the Bank
may rely without liability to any party) to the effect that all necessary
corporate action therefore has been taken, or, concurrently with the Bank's
action will be taken.
15. Compensation. Each Series shall pay to the Bank compensation
for its services under this Agreement in accordance with the attached schedule
of charges set forth in Exhibit D which may be amended from time to time by
mutual agreement. In addition, each Series will reimburse the Bank for all
out-of-pocket expenses, including taxes and other charges required to be paid
by the Bank with respect to the property of each Series, incurred by the Bank
in the performance of its duties hereunder.
7
<PAGE> 9
16. Responsibility.
(a) In the performance of its duties under this Agreement, the
Bank shall exercise reasonable care and diligence. The Bank shall be liable to
the Trust for the benefit of the Series for any loss or damage to the Series
resulting from any negligence or willful misconduct of the Bank or any of its
agents, or of any of the Bank's or any agent's employees in the performance of
the Bank's duties under this Agreement.
(b) Except as otherwise provided herein, the Bank shall not incur
liability to anyone and shall be indemnified and held harmless by the Trust and
the Series from and against all liability, claims, demands, actions, suits,
costs or expenses (including the fees of its counsel) for anything done or
suffered by the Bank in good faith in accordance with an order of the Trust or
pursuant to the terms of this Agreement. The Bank may apply for and obtain the
advice and opinion of counsel to the Trust or its own counsel with respect to
questions of law and shall be fully protected with respect to anything done or
omitted by it in good faith in conformity with such advice or opinion. The
Bank shall be protected in any action taken or omitted by it in reliance upon
any order, notice, request, certificate or other instrument reasonably believed
by it to be genuine.
(c) The Bank shall be under no duty or obligation to inquire into
and shall not be liable for:
(i) The validity of the issue of any securities purchased
by or for the Trust or any Series, the legality of
the purchases thereof or the propriety of the amount
paid therefor;
(ii) The legality of any sale of any securities by or for
the Trust or any Series or on the propriety of the
amount for which the same are sold;
(iii) The legality of an issue or sale of any shares of the
Trust or any Series or the sufficiency of the amount
to be received therefor;
(iv) The legality of the repurchase of any shares of the
Trust or any Series or the propriety of the amount to
be paid therefor;
(v) The legality of the declaration of any dividend by
the Trust or any Series or the legality of the issue
of any securities held by the Trust or any Series as
a payment in kind of such dividend;
8
<PAGE> 10
(vi) Any property or moneys of the Trust or any Series
unless and until received by it, and any such
property or moneys delivered or paid by it pursuant
to the terms hereof.
(d) The Bank shall not be under any duty or obligation to ascertain
whether any securities at any time delivered to or held by it for the account
of a Series are such as may properly be held by a Series under the provisions
of the Trust's Instrument or Bylaws, any federal or state statutes or any rule
or regulation of any governmental agency.
17. Liability for Payment in Advance of Receipt of Securities
Purchased. In any and every case where payment for purchase of securities for
the account of a Series is made by the Bank in advance of receipt of the
securities purchased in the absence of specific written instructions from the
Trust on behalf of such Series to so pay in advance, the Bank shall be
absolutely liable to the Trust for such securities to the same extent as if the
securities had been received by the Bank.
18. Records. The Bank shall with respect to each Series create
and maintain all records relating to its activities and obligations under this
Agreement in such manner as will meet the obligations of the Trust under the
1940 Act, particularly Section 31 thereof and Rules 31a-1 and 31a-2 thereunder.
All such records shall be the property of the Trust and shall at all times
during the regular business hours of the Bank be open for inspection by duly
authorized officers, employees and agents of the Trust and employees and agents
of the Securities and Exchange Commission. The Bank shall, at the Trust's
request, supply the Trust with a tabulation of securities owned by each Series
and held by the Bank and shall, when requested to do so by the Trust and for
such compensation as shall be agreed upon between the Trust and the Bank,
include certificate numbers in such tabulations.
19. Termination. This Agreement may be terminated at any time
without penalty with respect to one or more Series by execution of any amended
Exhibit A or in its entirety by written notice delivered by either party to the
other. The effective date of termination shall be as specified in such notice,
except that at the option of the Bank or the Trust, the effective date of the
termination may be postponed to a date not more than sixty (60) days from the
date of the delivery of such notice in order to give the Bank an opportunity to
prepare for the transfer of the Trust or any Series' assets or to give the
Trust or any Series an opportunity to make suitable arrangements for a
successor custodian. Upon termination of this Agreement, the Bank shall
deliver at its office all cash, securities and other assets held by
9
<PAGE> 11
it in accordance with paragraph 20.
20. Successor Custodian.
(a) If a successor custodian for the Trust or one or more of the
Series shall be appointed by the Trust's Board of Trustees, the Bank shall,
upon termination, deliver to such successor custodian at the office of the Bank
all cash and other assets of the Trust then held by it hereunder and, in the
case of securities, duly endorsed and in the form for transfer, all securities
of each applicable Series then held by it hereunder and shall transfer to an
account of the successor custodian all of the securities of each such Series
held in a Securities System. The Bank shall take all reasonable steps to
assist in the transfer of the cash, securities and other assets of the
applicable Series to the successor custodian.
(b) If no such successor custodian shall be appointed, the Bank
shall, in like manner, upon receipt of a certified copy of a vote of the
Trust's Board of Trustees, deliver at the office of the Bank and transfer such
cash, securities and other assets in accordance with such vote.
(c) In the event that no written order designating a successor
custodian or certified copy of a vote of the Board of Trustees shall have been
delivered to the Bank on or before the date when such termination shall become
effective, then the Bank shall have the right to deliver to a bank or trust
company of its own selection (which is a "bank" as defined in the 1940 Act)
doing business in Seattle, Washington, having an aggregate capital, surplus,
and undivided profits, as shown by its last published report, of not less than
the amounts required by the 1940 Act, all cash, securities and other assets
held by the Bank on behalf of each applicable Series and all instruments held
by the Bank relative thereto and all other property held by it under this
Agreement on behalf of each applicable Series and to transfer to an account of
such successor custodian all the securities of each such Series held in any
Securities System. Thereafter, such bank or trust company shall be the
successor of the Bank under this Agreement.
(d) In the event that cash, securities and other assets remain in
the possession of the Bank after the date of termination hereof owing to
failure of the Trust to procure the certified copy of the vote referred to or
of the Board of Trustees to appoint a successor custodian, the Bank shall be
entitled to fair compensation for its services during such period as the Bank
retains possession of such cash, securities and other assets and the provisions
of this Agreement relating to the duties and
10
<PAGE> 12
obligations of the Bank shall remain in full force and effect.
21. Notices. Any notice or other instrument in writing authorized
or required by this Agreement to be given to either party hereto shall be
sufficiently given if addressed to such party and mailed or delivered to it at
its office at the address set forth below, namely:
In the case of the Trust:
SAFECO Resource Series Trust
Attn: David F. Hill, Vice President
SAFECO Plaza
Seattle, Washington 98185
and
In the case of the Bank:
U. S. Bank of Washington, N.A.
Attn: Trust Operations Department
1414 Fourth Avenue
Seattle, Washington 98101
or at such other place as such party may from time to time designate in
writing.
22. Bank representation. Bank represents that it does meet, and
will continue to meet at all times that this Agreement is in effect, the
requirements of the rules and regulations promulgated pursuant to Section 17(f)
of the Investment Company Act of 1940.
23. Limitation of Liability. Bank is hereby expressly put on
notice of (i) the limitation of shareholder, officer and trustee liability as
set forth in the Trust Instrument of the Trust and (ii) of the provisions in
the Trust Instrument permitting the establishment of separate Series and
limiting the liability of each Series to obligations of that Series. Bank
hereby agrees that obligations assumed by the Trust pursuant to this Agreement
are in all cases assumed on behalf of a particular Series and each such
obligation shall be limited in all cases to that Series and its assets. Bank
agrees that it shall not seek satisfaction of any such obligation from the
shareholders or any individual shareholder of the Trust nor from the officers
or trustees or any individual officer or trustee of the Trust.
24. Entire Agreement. This Agreement embodies the entire
Agreement between the Bank and the Trust with respect to the
11
<PAGE> 13
services to be provided by the Bank to the Trust and each Series and supersedes
any prior written or oral agreement between those parties.
25. Miscellaneous. This Agreement shall be binding on and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that this Agreement shall not be assignable by the
Trust without the written consent of the Bank or by the Bank without the
written consent of the Trust. 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. This
Agreement may be executed in counterparts, each of which taken together shall
constitute one and the same instrument. Bank understands that the rights and
obligations of each Series under the Trust Instrument are separate and distinct
from those of any and all other Series.
26. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Washington.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
Attest: U. S. BANK OF WASHINGTON, N.A.
__________________________ By ______________________________
Its _____________________________
Attest: SAFECO RESOURCE SERIES TRUST
___________________________ By ______________________________
Secretary Its: Vice President
12
<PAGE> 14
EXHIBIT A
SAFECO RESOURCE SERIES TRUST
The SAFECO Resource Series Trust consists of the following Series:
1. Equity Portfolio
2. Bond Portfolio
3. Money Market Portfolio
4. Growth Portfolio
5. Northwest Portfolio
As of 9-30-93
13
<PAGE> 15
EXHIBIT B
RESOURCE SERIES TRUST
ALL SERIES
PROCEDURES FOR CONTROL
Securities Held by Nominee Puget & Co.
1. All securities held in safe keeping at U.S. Bank of Washington, N.A.,
main office, will be in the name of the nominee, Puget & Co.
2. Instructions from the Trust on behalf of a Series or SAFECO Asset
Management Company, the investment adviser to the Trust, relative to
the purchase and sale of securities will be in written form on a
"Transaction Advice" form. See Exhibit C attached.
3. All accounting documents, minutes, bank records, and instructions to
brokers will identify the real ownership of securities being bought or
sold and of interest and dividends received.
4. Certificates for shares of stock and par value of bonds will be in
lots which will permit the physical separation of the securities
according to their real ownership. U.S. Bank of Washington, N.A. will
maintain such a physical separation.
5. Proceeds on securities sold and dividends or interest received in the
name of Puget & Co. will be collected by U.S. Bank of Washington,
N.A., main office. On the business day of receipt of such proceeds
the bank will credit the custodial account of the Trust with the total
amount of such proceeds, dividends or interest and will specifically
identify all collections on the statement of the Trust's account.
6. Payments for securities purchased will be made from the Trust's
custodial account upon delivery of the securities.
As of 11/4/93
14
<PAGE> 16
EXHIBIT D
SAFECO RESOURCE SERIES TRUST
ALL SERIES
----------
Schedule of Custodian Fees with U.S. Bank of Washington, N.A.
-----------------------------
<TABLE>
<S> <C>
Gross Billing
Cash/Asset Statements $ 5.75 each
------------------------
Cash Dividends, Registered Bonds
and Savings/Commercial Paper
Interest $ 5.50 each transaction
------------------------
Cash Disbursements $ 3.25 each transaction
------------------------
Purchase/Sale Stocks and Bonds
and Commercial Paper $38.50 each transaction
------------------------
Coupon Bond Interest $ 8.25 each transaction
------------------------
Deposits/Withdrawals -
Master Notes/Money Funds $10.00 each transaction
------------------------
Repurchase Agreements $22.00 each transaction
------------------------
Stock Dividends, Splits,
Entering Assets, Exchanges and
Transfers of Registered
Securities $14.00 each transaction
------------------------
Collateral Receipt/Delivery $20.00 each transaction
------------------------
Money Market Interest $ 2.00 each transaction
------------------------
Money Market Sweep Feature .30 of 1% on Balance in
Money Market Fund/Prime Fund
----------------------------
Administration - if applicable $45.00 per hour
------------------------
Out of Pocket Expenses (Postage,
insurance, long distance calls,
mileage, photocopying) As Incurred
</TABLE>
As of 11/4/93
15
<PAGE> 1
EXHIBIT 99.9A
TRANSFER AGENT AGREEMENT
<PAGE> 2
TRANSFER AGENT AGREEMENT
THIS AGREEMENT is made and entered into this 30th day of
September, 1993, between SAFECO RESOURCE SERIES TRUST ("Trust"), a Delaware
business trust, and SAFECO SERVICES CORPORATION ("SAFECO Services"), a
Washington corporation.
WHEREAS, the Trust is registered with the Securities and Exchange
Commission as a series type open-end, management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act") and has caused its
shares of beneficial interest ("Shares") to be registered for sale to the
public under the Securities Act of 1933 (the "1933 Act") and various state
securities laws; and
WHEREAS, the Trust intends to offer for public sale distinct series of
Shares of beneficial interest, each corresponding to a distinct portfolio
(individually, "a Series" and collectively "the Series"), and
WHEREAS, the Trust wishes to retain SAFECO Services as its transfer
agent, dividend and distribution disbursement agent, and shareholder services
agent on behalf of each Series as now exists or as hereafter may be established
which are listed on Exhibit A to this Agreement as amended from time to time
("Shares")
WHEREAS, SAFECO Services is qualified and authorized to act in such
capacities;
NOW, THEREFORE, It is agreed by the parties hereto as follows:
1. Appointment. The Trust on behalf of the Series hereby appoints SAFECO
Services as the Series' transfer agent, dividend and distribution disbursement
agent and shareholder services agent, and SAFECO Services agrees to act as such
upon the terms and conditions herein set forth.
2. Documents. The Trust agrees to deliver to SAFECO Services the
following documents to enable SAFECO Services to exercise its functions under
this Agreement: (a) copies of all basic corporate documentation, including the
Trust's Trust Instrument and Bylaws; (b) evidence of creation and authorization
for issue and sale of the Trust's Shares; (c) evidence of the status of the
Trust's Shares under applicable laws, including copies of the current
registration statement or post-effective amendments to the registration
statement of the Trust's securities under the
<PAGE> 3
Securities Act of 1933, copies of current prospectuses and evidence of
compliance with all applicable state securities laws. The Trust shall furnish
promptly to SAFECO Services a copy of any amendment or supplement to the
above-mentioned documents. The Trust shall furnish to SAFECO Services any
additional documents requested by SAFECO Services as necessary to perform the
services required hereunder.
3. Duties of SAFECO Services. SAFECO Services shall perform as agent of
the Trust on behalf of the Series the following duties:
(a) Maintain a complete computerized record of each Series'
shareholders, including name(s) in which the Shares are registered, address,
account number, broker/dealer or registered representative number (if
required), type of account, number of Shares owned in certificate and
non-certificate form, dates and amounts of purchases and redemptions, dates and
amounts of dividends and capital gains distributed and reinvested, together
with cost amounts.
(b) With respect to requests for the purchase, repurchase,
redemption or transfer of the Series' Shares and the receipt or disbursement of
monies, maintain records of all such transactions and from these records
furnish to the Trust as heretofore agreed, the following for each Series:
(1) Number of Shares purchased and dollar net asset value
per Share.
(2) Number of Shares repurchased or redeemed and dollar
net asset value per Share.
(3) Number of accumulated Shares outstanding.
(4) Number of opened and closed accounts.
(5) Current number of shareholder accounts.
(c) With respect to orders for the purchase of Shares of a Series
received by SAFECO Securities, Inc., principal underwriter of each Series'
Shares, from authorized broker/dealers or SAFECO registered representatives,
and orders for the repurchase of such Shares from authorized broker/dealers or
SAFECO registered representatives, SAFECO Services shall accept and execute
such orders at the prices per share next computed in accordance with Rule 22c-1
of the Investment Company Act of 1940.
2
<PAGE> 4
(d) Following receipt of payments, upon receipt of proper
instructions, SAFECO Services, as transfer agent, shall prepare computer input
entries to register each Series' Shares upon its books in such name or names as
directed. If the Trust elects to issue certificates representing Shares of a
Series, such certificates shall be issued, recorded and forwarded for delivery
to proper person(s) upon request. Whether or not certificates evidencing
ownership are issued, a confirmation showing the registration and listing the
purchase transaction shall be mailed to the Trust's shareholders.
Upon receipt of Shares for redemption or repurchase, in good
delivery form, SAFECO Services shall prepare computer input entries to clear
the Shares out of the shareholders' accounts and effect prompt payment to the
authorized broker/dealer or the shareholder.
(e) New investors or shareholders of the Trust may forward monies
directly to SAFECO Services for the purchase of shares under various plans as
described in the Trust's then current Prospectus.
With respect to such plans, SAFECO Services for each Series
shall:
(1) Receive monies for the purchase of full and
fractional Shares with respect to any of the Plans. When purchase
orders are received by SAFECO Services in proper form, they shall be
time-stamped and priced in accordance with Rule 22c-1 of the
Investment Company Act of 1940.
(2) Prepare computer input entries to effect the issuance
of confirmations, registration of Shares and recording of cost amounts
in shareholder accounts; record shares and net asset value amounts in
the Series' records; record shares and aggregate dollar amounts for
updating Blue Sky records, production reports, etc.
(3) Secure signed applications from each shareholder
which shall include details as to registration of Shares, social
security number, birth date (for accounts which require it),
citizenship, type of account, broker/dealer, registered representative
(if required) and signature(s).
(4) Maintain signed applications, correspondence, etc.
3
<PAGE> 5
for individual shareholders.
(5) With respect to the redemption of Shares of a Series
tendered by shareholders:
(i) Accept redemption orders as described in the
Series' then current Prospectus directly from shareholders, or
their qualified agents, upon tender of properly endorsed
certificates which meet the redemption requirements of the
Trust. Shares not represented by certificates tendered by the
presentation of a written request signed by the shareholder
may be accepted without a signature guarantee provided a
signature is on file with SAFECO Services.
(ii) Pay proceeds for Shares so tendered at the net
asset value per share next computed after receipt of tender in
accordance with Rule 22c-1 of the Investment Company Act of
1940 within the settlement period required by the Securities
Exchange Act of 1934.
(g) SAFECO Services shall perform all necessary details to
complete any transactions in connection with any exchange privileges as
described in the Series' then current Prospectus.
(h) SAFECO Services shall maintain a bank account in its own name
with any bank which qualifies under the Bylaws of the Trust, for deposit of
funds received in payment of Shares and for the withdrawal of funds in payment
of repurchases or redemptions of Shares, expenses and dividends and capital
gains distributions. After each computer run, written instructions, signed by
authorized officers or other authorized signatories, are to be forwarded to
such bank requesting the transfer of net balance to or from the Series'
custodian account with such bank.
(i) SAFECO Services shall perform all necessary details in
connection with any Withdrawal Plan, as described in the Series' then current
Prospectus including making the monthly or quarterly payments to the Plan
participant, and informing the Series with regard to Shares redeemed and total
dollar amount involved on each payment date.
Although a Withdrawal Plan terminates upon the death of the
shareholder, SAFECO Services shall not be responsible for any payments made or
other action taken in accordance with the
4
<PAGE> 6
provisions of the Plan until it has knowledge of such death.
(j) With reference to the registration and transfer of Shares
referred to in Section (a) above, SAFECO Services shall be entitled to treat
the person in whose name any Shares are registered as the owner thereof for all
purposes, and shall not be bound to recognize any other person, whether or not
SAFECO Services shall have notice hereof, except as expressly provided under
applicable state law.
(k) SAFECO Services shall use reasonable efforts to assure the
accuracy of the records it maintains under this Agreement and to issue
certificates or register Shares only to those persons or entities entitled
thereto.
When a transfer of shares is demanded, SAFECO Services shall
take reasonable steps to ascertain whether or not a transfer of the Shares
requested is duly authorized. If SAFECO Services fails to take such reasonable
steps, it will be liable to any insured party for any damages incurred as a
result. SAFECO Services' transfer obligations shall run to the owners of
beneficial interest in the Shares as well as to the owners of record. SAFECO
Services shall take reasonable steps to ascertain the identity and authority of
each assignor, where he is acting in a representative capacity.
Before permitting a transfer of Shares, SAFECO Services shall
make reasonable efforts to insure that the transferee is properly described and
that the transfer instructions for the Shares are clear and not ambiguous or
subject to doubt.
(l) Upon receipt of proper instructions, SAFECO Services shall
compile, distribute or reinvest, authorized dividends and capital gains
distributions to Trust's shareholders. In this regard data shall be
accumulated to enable SAFECO Services to provide and process year-end income
tax information for shareholders, states and the Internal Revenue Service.
Where required, taxes shall be withheld from alien shareholders with foreign
addresses and accumulated for surrender to the Internal Revenue Service.
(m) Prior to each meeting of the Trust's or any Series'
shareholders, SAFECO Services shall address the Proxy Cards, prepare the Proxy
Cards, Notice of Meeting of Shareholders and Proxy Statement for mailing, and
mail them to the shareholders entitled to vote at such meeting. Upon their
return by the
5
<PAGE> 7
shareholders, SAFECO Services shall examine them and prepare a tabulation that
provides the following information for the Trust or Series as the case may be:
(1) Number of Shares outstanding and entitled to vote on
the record date for the meeting.
(2) Number of Shares voted by proxy.
(3) Number of Shares voting "for" each proposal.
(4) Number of Shares voting "against" each proposal.
(5) Number of Shares voting "abstain" for each proposal.
(6) Number of shareholders involved in each above instance.
SAFECO Services shall prepare a certified list of shareholders
eligible to vote at each meeting which shall be available on the day of the
meeting. SAFECO Services shall also prepare an "Affidavit of Mailing" to be
available for reading at each meeting stating that on the appropriate date a
responsible, named individual caused the Notice of Meeting, Proxy Card and
Proxy Statement to be mailed by United States Mail, postage prepaid, to each
and every shareholder of the Shares entitled to vote at the meeting.
(n) Countersign all certificates to be issued to shareholders of
the Trust upon receipt of payments for the Shares and request of a certificate
or certificates representing the Shares being purchased.
(o) SAFECO Services in the performance of its duties may contract
from time to time with other persons to provide software or computer time.
SAFECO Services shall advise the Trust of any such arrangements.
4. Appointment of Agents. SAFECO Services may at any time or times in
its discretion appoint (and may at any time remove) one or more other parties
as Agent to perform any or all of the services specified hereunder and carry
out such provisions of this Agreement as SAFECO Services may from time to time
direct; provided, however, that the appointment of any such Agent shall not
relieve SAFECO Services of any of its responsibilities or
6
<PAGE> 8
liabilities hereunder.
5. Record Keeping and Other Information. SAFECO Services shall create
and maintain all records required by all applicable laws, rules and regulations
relating to the services to be performed under this Agreement, including but
not limited to records required by Section 31(a) of the Investment Company Act
of 1940 and the Rules thereunder, as the same may be amended from time to time.
All records shall be the property of the Trust and shall be available for
inspection and use by the Trust at all times. Where applicable, such records
shall be maintained by SAFECO Services for the periods and in the places
required by Rule 31a-2 under the Investment Company Act of 1940.
6. Net Asset Value. Wherever used herein, the term "net asset value"
shall mean the "net asset value" as computed for each Series or Class in
accordance with the Trust's Trust Instrument and Bylaws. If any amendment is
made to said Trust Instrument or Bylaws that changes the method of said
computation, the Trust shall give SAFECO Services immediate notice of such
amendment.
7. Proper Instructions. The term "proper instructions" used in this
Agreement shall be deemed to mean any written instructions signed by authorized
persons or any oral instructions delivered in accordance with Trust
requirements.
8. Disbursement of Funds. Funds deposited in the bank account maintained
by SAFECO Services shall not be disbursed to any trustee, officer or employee
of the Trust. This provision shall not be deemed to apply to dividend payments
to any trustee, officer, or employee in his or her capacity as shareholder.
Neither shall this provision apply to the above individuals upon payments to
them for any shares redeemed for their personal accounts.
9. Certification of Officers/Reliance upon Certifications.
(a) The Secretary of the Trust shall be, and is hereby, directed
to certify to SAFECO Services the names of the officers of the Trust, and their
respective signatures, and in case of any change of any holder of any such
office, the fact of such change, and the name of such new officer and the
office held by him or her, together with specimens of his or her signature.
SAFECO Services is hereby authorized to honor any instructions given to SAFECO
Services by any such new officer in respect of whom it has received any such
certificate with the same force and effect (and
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not otherwise), as if such new officer were named in this Agreement in the
place of any person with the same title of office.
(b) The Secretary of the Trust shall be, and is hereby, authorized
and directed to notify SAFECO Services promptly in writing of any change of
officers as above provided, and that until SAFECO Services has actually
received and accepted such notice of any such change, SAFECO Services is hereby
authorized and directed to act in pursuance of this Agreement and the latest
certificates theretofore received by it; and SAFECO Services shall be
indemnified and saved harmless from any loss suffered or liability incurred by
it in so acting, even though any such officer may have been changed.
10. Audits, Inspections and Visits. SAFECO Services shall make available
during regular business hours all records and other data created and maintained
pursuant to this Agreement for reasonable audit and inspection by the Trust,
any agent or person designated by the Trust, or any regulatory agency having
authority over the Trust. Upon reasonable notice by the Trust, SAFECO Services
shall make available during regular business hours its facilities and premises
employed in connection with its performance of this Agreement for reasonable
visits by the Trust, any agent or person designated by the Trust, or any
regulatory agency having authority over the Trust.
11. Acts of God, Etc. SAFECO Services shall not be liable for delays or
errors occurring by reason of circumstances beyond its control, including but
not limited to acts of civil or military authority, national emergencies, work
stoppages, fire, flood, catastrophe, acts of God, war, riot or failure of
communications equipment of common carriers or power supply. In the event of
equipment breakdowns beyond its control, SAFECO Services shall at no additional
expense to the Trust take reasonable steps to minimize service interruptions
and mitigate their effects but shall have no liability with respect thereto.
12. Liability and Indemnification.
(a) SAFECO Services shall use reasonable care in the performance
of its duties under this Agreement.
(b) SAFECO Services shall be entitled to receive and act on the
advice of counsel for the Trust which advice shall be at the
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expense of the Trust and shall be without liability for any action taken, or
things done, or omitted to be done, pursuant to such advice.
(c) SAFECO Services shall not be liable for, or considered to be,
the custodian of any money called for or represented by any check, draft, or
other instrument for the payment of money delivered to it, or on behalf of the
Trust.
(d) The Trust shall indemnify and hold SAFECO Services harmless
against any losses, claims, damages, liabilities or expenses (including
reasonable attorneys' fees and expenses) resulting from:
(1) any claim, demand, action or suit brought by any
person other than the Trust, including by a
shareholder, which names SAFECO Services and/or the
Trust as a party, and is not based on and does not
result from SAFECO Services' willful misfeasance, bad
faith or negligence or reckless disregard of duties,
and arises out of or in connection with SAFECO
Services' performance hereunder; or
(2) any claim, demand, action or suit (except to the
extent contributed to by SAFECO Services' willful
misfeasance, bad faith or negligence or reckless
disregard of duties) which results from the
negligence of the Trust, or from SAFECO Services
acting upon any instruction(s) reasonably believed by
it to have been executed or communicated by any
person duly authorized by the Trust, or as a result
of SAFECO Services' acting in reliance upon advice
reasonably believed by SAFECO Services to have been
given by counsel for the Trust, or as a result of
SAFECO Services acting in reliance upon any
instrument or stock certificate reasonably believed
by it to have been genuine and signed, countersigned
or executed by the proper person.
13. Effective Date/Renewal. This Agreement shall become effective with
respect to the Trust and each Series on the date first written above or such
later date as indicated on Exhibit A and, unless sooner terminated as provided
herein, will continue in effect for two years from the above written date.
Thereafter,
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if not terminated, this Agreement shall continue in effect with respect to each
Series for successive annual periods ending on the same date of each year,
provided that such continuance is specifically approved at least annually by a
vote of the Board of Trustees of the Trust, including the vote of a majority of
the trustees who are neither interested persons of SAFECO Services nor of the
Trust at a meeting called for the purpose of voting on such continuance.
14. Amendment. This Agreement may be modified by written mutual consent,
such consent on the part of the Trust to be authorized by the vote of the Board
of Trustees.
15. Termination.
(a) Either party hereto may, at any time on no less than
sixty (60) days prior written notice to the other, terminate this Agreement
with respect to the Trust or any Series (by deleting such Series from Exhibits
A and B), in any case, without the payment of any penalty.
(b) Upon termination each Series shall pay to SAFECO Services such
compensation as may be due as of the date of such termination and shall
likewise reimburse SAFECO Services for its costs, expenses and disbursements.
(c) If a successor transfer agent is appointed by the Board of
Trustees of the Trust, SAFECO Services shall, upon termination, deliver to such
successor transfer agent at the office of the transfer agent, all transfer
records then held hereunder and all funds or other properties of the Trust and
deposited with or held by it hereunder.
(d) If no successor transfer agent is appointed, SAFECO Services
shall, in like manner, at its office, upon receipt of a certified copy of a
vote of the Trust's Board of Trustees deliver such transfer records, funds and
other properties in accordance with such vote.
(e) In the event that no written order designating a successor
transfer agent or certified copy of a vote of the shareholders shall have been
delivered to SAFECO Services on or before the date when such termination shall
become effective, then SAFECO Services shall have the right to deliver to a
bank or trust company doing business in Seattle, Washington, of its own
selection, having proper qualifications, all transfer records,
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funds and other properties held by SAFECO Services and all instruments held by
it relative thereto and all other property held by it under this Agreement.
Thereafter such bank or trust company shall be the successor of SAFECO Services
under this Agreement.
(f) In the event that transfer records, funds and other properties
remain in the possession of SAFECO Services after the date of termination
hereof owing to failure of the Trust to procure the certified copy above
referred to, or of the trustees to appoint a successor transfer agent, SAFECO
Services shall be entitled to fair compensation for its services during such
period and the provisions of this Agreement relating to the duties and
obligations of SAFECO Services shall remain in full force and effect.
16. Limitation of Liability. SAFECO Services is hereby expressly put on
notice of (i) the limitation of shareholder, officer and trustee liability as
set forth in the Trust Instrument of the Trust and (ii) of the provisions in
the Trust Instrument permitting the establishment of separate Series and
limiting the liability of each Series to obligations of that Series. SAFECO
Services hereby agrees that obligations assumed by the Trust pursuant to this
Agreement are in all cases assumed on behalf of a particular Series and each
such obligation shall be limited in all cases to that Series and its assets.
SAFECO Services agrees that it shall not seek satisfaction of any such
obligation from the shareholders or any individual shareholder of the Trust nor
from the officers or trustees or any individual officer or trustee of the
Trust.
17. Entire Agreement/Enforcement of Rights. This Agreement embodies the
entire agreement between SAFECO Services and the Trust with respect to the
services to be provided by SAFECO Services to the Trust and each Series and
supersedes any prior written or oral agreement between those parties. In the
event that either party should be required to take legal action in order to
enforce its rights under this Agreement, the prevailing party in any such
action or proceeding shall be entitled to recover from the other party costs
and reasonable attorneys' fees. In the event that either party should be
required to take legal action in order to enforce its rights under this
Agreement, the prevailing party in any such action or proceeding shall be
entitled to recover from the other party costs and reasonable attorney's fees.
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18. 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. This
Agreement may be executed in counterparts, each of which taken together shall
constit ute one and the same instrument. SAFECO Services understands that the
rights and obligations of each Series under the Trust Instrument are separate
and distinct from those of any and all other Series.
19. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington and, to the extent it
involves any United States statute, in accordance with the laws of the United
States.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their proper officers as of the day and year first above written.
SAFECO RESOURCE SERIES TRUST
By __________________________________
David F. Hill, Vice President
By __________________________________
Elna A. Thomson, Secretary
SAFECO SERVICES CORPORATION
By __________________________________
David F. Hill, President
By __________________________________
Elna A. Thomson, Secretary
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EXHIBIT A
SAFECO RESOURCE SERIES TRUST
The SAFECO Resource Series Trust consists of the following Series:
1. Equity Portfolio
2. Bond Portfolio
3. Money Market Portfolio
4. Growth Portfolio
5. Northwest Portfolio
As of 9-30-93
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EXHIBIT 99.9B
FUND PARTICIPATION AGREEMENT
<PAGE> 2
FUND PARTICIPATION AGREEMENT
_______________________ (the "Company"), SAFECO Resource Series Trust, an
unincorporated business trust organized under the laws of the state of Delaware
(the "Trust"), and its investment adviser, SAFECO Asset Management Company, a
Washington corporation ("SAM"), hereby agree to an arrangement whereby shares
of the series funds comprising the Trust (the "Portfolios") shall be made
available to serve as underlying investment media for variable annuity and/or
variable life insurance contracts ("Variable Contracts") to be issued by the
Company, subject to the following provisions:
1. Establishment of Accounts: Availability of Portfolios.
(a) The Company represents that it has established variable
annuity accounts and variable life accounts (the "Accounts"), each of which is
a separate account under the insurance laws of the state of the Company's
domicile, and has registered each of the Accounts as a unit investment trust
under the Investment Company Act of 1940 (the "1940 Act") to serve as an
investment vehicle for the Variable Contracts. Each Variable Contract provides
for the allocation of net amounts received by the Company to an Account for
investment in the shares of one or more specified open-end investment companies
available through that Account as underlying investment media. Selection of a
particular underlying investment and changes in such selection from time to
time may be made by the person covered under the Variable Contract
("Participant") or Variable Contract owner, as applicable under the particular
Variable Contract.
(b) The Trust and SAM represent and warrant that the investments
of the Portfolios will at all times be adequately diversified within the
meaning of Section 817(h) of the Internal Revenue Service Code of 1986, as
amended (the "Code"), and the regulations promulgated thereunder (the
"Regulations"), and that at all times while this Agreement is in effect (i) all
beneficial interests in the Portfolios will be owned by one or more insurance
companies or qualified plans, or by any other party permitted under Section
1.817-5(f)(3) of the Regulations, and (ii) no shares of any Portfolio will be
sold to the general public.
2. Marketing and Promotion.
(a) The Company agrees to make every reasonable effort to market
its Variable Contracts, whether directly or through its affiliates. It will
use its best efforts to cause equal emphasis and promotion to be given to
shares of the Portfolios relative to other investment media available through
the Accounts. In marketing and administering the
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Variable Contracts, the Company and its affiliates will comply with all
applicable State and Federal laws.
(b) SAM agrees to provide the Company with monthly and/or
quarterly performance information with respect to the Portfolios, and such
other information as the parties deem appropriate for the promotion of the
Portfolios, within five business days of the end of each month for monthly
information and within ten days of the end of each calendar quarter for
quarterly information.
3. Pricing Information; Orders; Settlement.
(a) SAM will make shares of the Portfolios available to be
purchased by the Company, and will accept redemption orders from the Company,
on behalf of each Account at the net asset value applicable to each order.
Portfolio shares shall be purchased and redeemed in such quantity and at such
time determined by the Company to be necessary to meet the requirements of
those Variable Contracts for which the Portfolios serve as underlying
investment media.
(b) SAM will provide to the Company closing net asset value
dividend and capital gain information at the close of trading each day that the
New York Stock Exchange (the "Exchange") is open (each such day, a "business
day"). The Company will send via facsimile transmission to SAM, or to such
other agent as the Trust may specify, orders to purchase and/or redeem
Portfolio shares by 1:00 p.m., Pacific Time the following business day.
Payment for net purchases will be wired by the Company to a custodial account
designated by the Trust to coincide with the order for shares of the
Portfolios.
(c) Orders from Variable Contract owners or Participants received
by the Company which are sent by the Company prior to the close of the Exchange
on any given business day via facsimile transmission to SAM or such other agent
as the Trust may specify by 1:00 p.m., Pacific Time, the following business
day will be executed by SAM or such agent at the net asset value determined as
of the close of the Exchange on such prior business day. Any orders received by
the Company after the close of the Exchange on such prior business day (or not
meeting the foregoing sentence's requirements) will be executed by SAM at the
net asset value determined as of the close of the Exchange on the next business
day following the day such order was received.
(d) Payments for net redemptions of shares of the Portfolios will
be wired from the Trust's custodial account to an account designated by the
Company.
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(e) Each party has the right to rely on information or
confirmations provided by the other party (or by any affiliate of the other
party), and shall not be liable in the event that an error is a result of any
misinformation supplied by the other party or any such affiliate. If a mistake
is caused in supplying such information or confirmations, which results in a
reconciliation with incorrect information, the amount required to make a
Variable Contract owner's or a Participant's Account whole shall be borne by
the party providing the incorrect information.
4. Expenses.
(a) Except as otherwise provided in this Agreement, all expenses
incident to the performance by the Trust or SAM under this Agreement shall be
paid by SAM, including the cost of registration of the Trust and shares of its
Portfolios with the Securities and Exchange Commission (the "SEC") and in
states where required.
(b) SAM shall distribute to the Company proxy material with
respect to the Trust, periodic reports to shareholders and other material that
are required by law to be sent to Variable Contract owners. In addition, SAM
shall provide the Company with a sufficient quantity of prospectuses for the
Trust to be used in connection with the offerings and transactions contemplated
by this Agreement. Subject to subsection (c) below, the cost of preparing and
printing such materials shall be paid by SAM or its affiliates, and the cost of
distributing such materials shall be paid by the Company. However, if the Trust
makes changes to its prospectus for its own benefit or the benefit of someone
other than the Company resulting in the need to print and distribute one or
more supplements to Variable Contract holders, all costs associated with
printing and distributing any such supplement shall be borne by SAM.
(c) In lieu of SAM providing printed copies of prospectuses and
periodic fund reports to shareholders, the Company shall have the right to
request that SAM provide a copy of such materials in an electronic format,
which the Company may use to have such materials printed together with similar
materials of other Account funding media that the Company or any distributor
will distribute to existing or prospective Variable Contract owners or
Participants.
(d) The Trust currently does not make and does not intend to make
any payments to finance distribution expenses pursuant to Rule 12b-1 under the
1940 Act or otherwise, although it may make such payments in the future. To
the extent that it decides to finance distribution expenses pursuant to Rule
12b-1, the Trust undertakes to have its
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board of trustees, a majority of whom are not interested persons of the Trust,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
5. Representations.
(a) The Company agrees that it and its agents shall not, without
the written consent of SAM, make representations concerning the Trust or the
Portfolio shares except those contained in the then current prospectuses and in
current printed sales literature of the Trust.
(b) The Company represents and warrants that interests in certain
Variable Contracts are or will be registered under the Securities Act of 1933
("1933 Act") or are exempt from registration thereunder, that the Variable
Contracts will be issued and sold in compliance in all material respects with
all applicable federal and state laws and that the sale of the Variable
Contracts shall comply in all material respects with state insurance
suitability requirements. The Company further represents and warrants that it
is an insurance company duly organized and in good standing under applicable
law and that it has legally and validly established each Account prior to any
issuance or sale thereof as a segregated asset account and that each Account is
or will be registered as a unit investment trust in accordance with the
provisions of the 1940 Act to serve as a segregated investment account for the
Variable Contracts or is exempt from registration thereunder.
(c) The Company represents that the Variable Contracts are
currently treated as annuity and/or life insurance contracts under applicable
provisions of the Code and that it will make every effort to maintain such
treatment and that it will notify SAM and the Trust immediately upon having a
reasonable basis for believing that the Variable Contracts have ceased to be so
treated or that they might not be so treated in the future.
(d) The Company represents and warrants that its directors,
officers, and employees, if any, dealing with the money and/or securities of
the Trust are and shall continue to be at all times covered by a blanket
fidelity bond or similar coverage for the benefit of the Portfolios in an
amount not less than $2 million. The aforesaid bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable bonding company.
(e) SAM and the Trust make no representation as to whether any
aspect of the Trust's operations (including, but not limited to, fees and
expenses and investment policies) complies with the insurance laws or
regulations of the various states.
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(f) SAM represents that shares of the Portfolios will be sold and
distributed in accordance with all applicable federal and state securities
laws, including without limitation, the 1933 Act, the Securities Exchange Act
of 1934, and the 1940 Act.
(g) The Trust represents that it is currently qualified as a
regulated investment company under Subchapter M of the Code and that it will
make every effort to maintain such qualification (under Subchapter M or any
successor or similar provision) and that it will notify the Company immediately
upon having a reasonable basis for believing that it has ceased to so qualify
or might not so qualify in the future. The Trust and SAM acknowledge that any
failure of the Trust to qualify as a regulated investment company under
Subchapter M of the Code would constitute a breach of their representations and
warranties under Item 1(b) of this Agreement.
(h) The Trust and SAM represent and warrant that the shares of the
Portfolios sold pursuant to this Agreement shall be registered under the 1933
Act, duly authorized for issuance and sold in compliance with the laws of the
State of Washington and all applicable federal and state securities laws and
that the Portfolios are and shall remain registered under the 1940 Act. The
Trust shall amend the registration statement for such shares under the 1933 Act
and 1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Trust shall also register and qualify its shares
for sale in accordance with the laws of the various states only if and to the
extent deemed advisable by the Trust or SAM.
(i) The Trust represents that it is lawfully organized and validly
existing under the laws of its state of domicile and that it is and will comply
in all material respects with the 1940 Act.
(j) SAM represents and warrants that it is duly organized under
the laws of its state of domicile, and is and shall remain duly registered in
all material respects under any applicable federal and state securities laws,
and further that it shall perform its obligations for the Trust and the
Portfolios in compliance in all material respects with applicable federal and
state securities laws.
(k) The Trust and SAM represent and warrant that all of their
respective directors, officers, and employees dealing with the money and/or
securities of the Trust are and shall continue to be at all times covered by a
blanket fidelity bond or similar coverage for the benefit of the Trust and its
Portfolios in an amount not less than the minimal coverage as required
currently by Rule 17g-(1) of the 1940 Act or related provisions as may be
promulgated from time to time. The aforesaid bond shall include
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coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
6. Administration of Accounts.
(a) Administrative services to Variable Contract owners and
Participants shall be the responsibility of the Company and shall not be the
responsibility of the Trust or SAM. SAM recognizes the Company as the sole
shareholder of fund shares issued under this Agreement. From time to time, SAM
may pay amounts from its past profits to the Company for providing certain
administrative services for the Trust or its Portfolios, or for providing
Variable Contract owners with other services that relate to the Trust. These
services may include, among other things, sub-accounting services, answering
inquiries of Variable Contract owners regarding the Portfolios, transmitting,
on behalf of the Trust, proxy statements, annual reports, updated prospectus
and other communications to Variable Contract owners regarding the Trust and
its Portfolios and such other related services as the Trust or a Variable
Contract holder may request. In consideration of the savings resulting from
such arrangement, and to compensate the Company for its costs, SAM agrees to
pay to the Company an amount equal to __ basis points (0.__%) per annum of the
average aggregate amount invested by the Company in the Portfolios under this
Agreement. Payment of such amounts by SAM will not increase the fees paid by
the Trust, the Portfolios or their shareholders.
(b) The parties agree that SAM's payments to the Company are for
administrative services only and do not constitute payment in any manner for
investment advisory services or for costs of distribution.
(c) For the purposes of computing the administrative fee
reimbursement contemplated by this Section 6, the average aggregate amount
invested by the Company over a one month period shall be computed by totaling
the Company's aggregate investment (share net asset value multiplied by total
number of shares held by the Company) on each business day during the month and
dividing by the total number of business days during each month.
(d) SAM will calculate the reimbursement of administrative
expenses at the end of each calendar quarter and will make such reimbursement
to the Company within 30 days thereafter. The reimbursement check will be
accompanied by a statement showing the calculation of the monthly amounts
payable by SAM and such other supporting data as may be reasonably requested by
the Company.
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7. Termination.
(a) This agreement shall terminate as to the sale and issuance of
new Variable Contracts:
(i) at the option of either the Company or the Trust, upon
six months advance written notice to the other;
(ii) at the option of the Company, upon one week advance
written notice to the Trust if shares of the Portfolios are not available for
any reason to meet the requirement of Variable Contracts as determined by the
Company;
(iii) at the option of either the Company or the Trust,
immediately upon institution of formal proceedings against the broker-dealer or
broker-dealers marketing the Variable Contracts, the Accounts, the Company, the
Trust, or SAM by the National Association of Securities Dealers, Inc. (the
"NASD"), the SEC or any other regulatory body having jurisdiction over the
operations of such entities;
(iv) upon the requisite vote of Variable Contract owners or
Participants having an interest in the Portfolios, to substitute for shares of
the Portfolios the shares of another investment company in accordance with the
terms of the applicable Variable Contracts. The Company will give 60 days
written notice to SAM of any proposed vote to replace the Portfolio's shares;
(v) upon assignment of this Agreement, unless made with the
written consent of all other parties hereto;
(vi) if the shares of the Portfolios are not registered,
issued or sold in conformance with Federal law or such law precludes the use of
the Portfolios' shares as underlying investment media for Variable Contracts
issued or to be issued by the Company. Prompt notice shall be given by either
party should such situation occur.
(b) If the need for substitution of the shares of another
investment company, pursuant to Section 20(b) of the 1940 Act, arises out of
the failure of the Portfolio shares to be registered, issued or sold in
conformance with federal law, or such law precludes the use of shares of the
Portfolios as underlying investment media for Variable Contracts issued or to
be issued by the Company, the expenses of obtaining such order shall be
reimbursed by SAM. SAM shall cooperate with the Company in connection with such
application.
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8. Continuation of Agreement. Termination as the result of any cause listed
in Section 7 shall not affect the obligation of the Trust to furnish shares of
the Portfolios to Variable Contracts then in force for which such shares serve
or may serve as the underlying media unless such further sale of shares of the
Portfolios is proscribed by law or the SEC or other regulatory body.
9. Advertising Materials; Filed Documents.
(a) Advertising and sales literature with respect to the
Portfolios prepared by the Company or its agents for use in marketing its
Variable Contracts will be submitted to SAM for review before such material is
submitted to any regulatory body for review, and in no event less than 15
business days prior to its use. The Company shall not use any such material if
SAM or the Trust objects to such use within 15 business days after receipt.
(b) SAM will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional
information, annual and semiannual reports, proxy statements and all amendments
or supplements to any of the above that relate to the Trust and its Portfolios
promptly after the filing of such document with the SEC or other regulatory
authorities. The Trust's prospectus shall state that the statement of
additional information for the Trust is available from the Trust or its
designated agent, and such statement shall be provided free of charge to the
Company and to any Variable Contract owner or Participant who requests a copy.
(c) The Company will provide to SAM at least one complete copy of
all registration statements, prospectuses, statements of additional
information, annual and semi-annual reports, proxy statements, and all
amendments or supplements to any of the above that relate to each Account
promptly after the filing of such document with the SEC or other regulatory
authority.
10. Proxy Voting.
(a) The Company shall provide pass-through voting privileges on
shares of the Portfolios to all Variable Contract owners and Participants to
the extent the SEC continues to interpret the 1940 Act as requiring such
privileges. If shares are held in any other separate account not required to
be registered under the 1940 Act, those shares will be voted in the Company's
sole discretion.
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(b) The Company will distribute to Variable Contract owners and
Participants, as appropriate, all proxy material furnished by SAM and will vote
shares of the Portfolios in accordance with instructions received from Variable
Contract owners and Participants. The Company, with respect to each Variable
Contract and each Account, shall vote Portfolio shares for which no
instructions have been received in the same proportion as shares for which such
instructions have been received. The Company and its agents shall not oppose
or interfere with the solicitation of proxies for Portfolio shares held for
such Variable Contract owners and Participants.
11. Indemnification
(a) The Company agrees to indemnify and hold harmless the Trust and
its Portfolios, SAM, and each of their respective directors, officers,
employees, agents and each person, if any, who controls the Trust, its
underwriter or investment adviser within the meaning of the Securities Act of
1933 (the "1933 Act") against any losses, claims, damages or liabilities to
which the Trust, the Portfolios, SAM, or any such director, officer employee,
agent, or controlling person may become subject, under the 1933 Act or
otherwise, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, prospectus or sales literature of the Company, or arise out of or
are based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements or
representations (other than statements or representations contained in the
prospectuses or sales literature of the Trust) of the Company or its agents,
with respect to the sale and distribution of Variable Contracts for which
shares of any Portfolio are the underlying investment. The Company will
reimburse any legal or other expenses reasonable incurred by the indemnified
parties in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or omission or
alleged omission made in such Registration Statement or prospectus in
conformity with written materials furnished to the Company by the Trust, the
Portfolios or SAM specifically for use therein. This indemnity agreement will
be in addition to any liability which the Company may otherwise have.
(b) The Company shall not be liable under this Section 11 with respect
to any losses, claims, damages or liabilities (or actions in respect thereof)
incurred or assessed against any such indemnified party to the extent such may
arise from such party's willful
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misfeasance, bad faith, or negligence in the performance of such party's duties
or by reason of such party's reckless disregard of obligations or duties under
this Agreement.
(c) The Trust and SAM agree to indemnify and hold harmless the Company
and its directors, officers, employees, agents and each person, if any, who
controls the Company within the meaning of the 1933 Act, against any losses,
claims, damages or liabilities to which the Company or any such director,
officer, employee, agent or controlling person may become subject under the
1933 Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon:
(i) Any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, prospectuses or sales
literature of the Trust, or the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading. SAM will reimburse any legal or other
expenses reasonably incurred by the Company or any such director, officer,
employee, agent, or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action; provided however,
that neither SAM, the Trust nor any Portfolio will be liable in any such case
to the extent that any such loss, claim, damage or liability rises out of or is
based upon a Registration Statement or prospectuses which are in conformity
with written materials furnished to the Trust or SAM by the Company
specifically for use therein. This indemnity agreement will be in addition to
any liability which SAM or the Trust may otherwise have.
(ii) The breach of any representation or warranty in this
Agreement by SAM or the Trust, including but not limited to a finding or claim
that the Portfolios are not adequately diversified within the meaning of
Section 817(h) of the Code and/or that while this Agreement is in effect, all
beneficial interests will be owned by one or more insurance companies or by any
other party permitted under Section 1.817-5(f)(3) of the Regulations
promulgated under the Code.
(d) Neither SAM, the Trust nor any Portfolio will be liable under this
Section 11 to the Company or other parties covered under Section 11(c) with
respect to any losses, claims, damages or liabilities (or actions in respect
thereof) incurred or assessed against any such party (including the Company) as
such may arise from such party's willful misfeasance, bad faith, or negligence
in the performance of such party's duties or by reason of such party's reckless
disregard of obligations or duties under this Agreement.
10
<PAGE> 12
(e) Promptly after receipt by an indemnified party hereunder of notice
of the commencement of action, such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party of the commencement of such action; but the omission so
to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party otherwise than under this Section 11. In
case any such action is brought against any indemnified party, and it notifies
the indemnifying party of the commencement of such action, the indemnifying
party will be entitled to participate in such action and, to the extent that it
may wish to, assume the defense thereof, with counsel reasonably satisfactory
to such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 11 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation.
12. Potential Conflicts
(a) The Company has received a copy of an application for exemptive
relief, as amended, filed by Trust and certain affiliates on July 10, 1995 with
the SEC and the order issued by the SEC on January 17, 1996, in response
thereto (the "Shared Funding Exemptive Order"). The Company has reviewed the
conditions to the requested relief set forth in such application for exemptive
relief. As set forth in such application, the Board of Trustees of the Trust
(the "Board") will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the Variable Contract holders
of all separate accounts ("Participating Companies") investing in the
Portfolios. An irreconcilable material conflict may arise for a variety of
reasons, including (i) a state insurance regulatory action; (ii) a change in
applicable federal or state insurance, tax, or securities laws or regulations,
or a public ruling, private letter ruling, no-action or interpretative letter,
or any similar action by insurance, tax or securities regulatory authorities;
(iii) an administrative or judicial decision in any relevant proceeding; (iv)
the manner in which the investments of a Portfolio are being managed; (v) a
difference among voting instructions given by Variable Contract
owners/Participants; or (vi) a decision by a Participating Company to disregard
the voting instructions of Variable Contract owners or Participants. The Board
shall promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications of such conflict.
(b) The Company will report any potential or existing conflicts of
which it becomes aware to the Board. The Company will assist the Board in
carrying out its
11
<PAGE> 13
responsibilities under the Shared Funding Exemptive Order by providing the
Board with all information reasonable necessary for the Board to consider any
issues raised. This assistance shall include, but is not limited to, an
obligation by the Company (i) to inform the Board whenever the voting
instructions of Variable Contract owners or Participants are disregarded, and
(ii) to submit to the Board such reports, materials or data as the Board may
reasonably request so that the Board may fully carry out the obligations
imposed upon it by the Shared Funding Order, and such reports, materials and
data shall be submitted more frequently if deemed appropriate by the Board.
The Company will carry out its responsibility under this subsection (b) with a
view only to the interests of the Variable Contract owners and Participants.
(c) If a majority of the Board, or a majority of the disinterested
trustees of the Board ("Independent Trustees"), determine that a material
irreconcilable conflict exists with regard to Variable Contract owner or
Participant investments in the Portfolios, the Board shall give prompt notice
to all Participating Companies. If the Trust or SAM is responsible for causing
or creating such conflict, SAM shall at its sole cost and expense, and to the
extent reasonably practicable (as determined by a majority of the Independent
Trustees), take such action as is necessary to remedy or eliminate the
irreconcilable material conflict. If a majority of the Board or a majority of
the Independent Trustees determine that the Company is responsible for causing
or creating such conflict, the Company shall at its sole cost and expense, and
to the extent reasonably practicable (as determined by a majority of the
Independent Trustees), take whatever steps are necessary to remedy or eliminate
the irreconcilable material conflict. Such necessary action may include but
shall not be limited to:
(i) withdrawing the assets allocable to the Accounts from the
Portfolios and reinvesting those assets in a different investment medium or
submitting the question of whether such segregation should be implemented to a
vote of all affected Variable Contract owners and Participants, and, as
appropriate, segregating the assets of any appropriate group (i.e., annuity
contract owners, life insurance contract owners, or Variable Contract owners of
one or more Participating Companies) that votes in favor of such segregation,
or offering to the affected Variable Contract owners or Participants the option
of making such a change; and/or
(ii) establishing a new registered management investment
company or managed separate account.
(d) If a material irreconcilable conflict arises as a result of a
decision by the Company to disregard the voting instructions of its Variable
Contract owners or
12
<PAGE> 14
Participants, and that decision represents a minority position or would
preclude a majority vote, the Company at its sole cost, may be required, to
withdraw an Account's investment in the affected Portfolio; provided, however,
that such withdrawal and termination shall be limited to the extent required to
remedy the foregoing material irreconcilable conflict as determined by a
majority of the Independent Trustees. The Company's responsibility under this
subsection (d) shall be carried out with a view only to the interests of the
Variable Contract owners and Participants.
(e) For the purpose of this Section 12, a majority of the Independent
Trustees shall determine whether or not any proposed action adequately remedies
any irreconcilable material conflict, but in no event will the Trust or SAM be
required to establish a new funding medium for any Variable Contract. The
Company shall not be required by this Section 12 to establish a new funding
medium for any Variable Contract if an offer to do so has been declined by vote
of a majority of the Variable Contract owners or Participants materially
affected by the irreconcilable material conflict.
(f) All reports received by the Board regarding potential or
existing conflicts, and all action of the Board with respect to determining the
existence of a conflict, notifying Participating Companies of a conflict, and
determining whether any proposed action adequately remedies a conflict, will be
properly recorded in the minutes or other appropriate records of the Trust.
13. Miscellaneous.
(a) Amendment and Waiver. Neither this Agreement, nor any provision
hereof, may be amended, waived, discharged or terminated orally, but only by an
instrument in writing signed by all parties hereto.
(b) Notices. All notices and other communications hereunder shall be
given or made in writing and shall be delivered personally, or sent by telex,
telecopier or registered or certified mail, postage prepaid, return receipt
requested, to the party or parties to whom they are directed at the following
addresses, or at such other addresses as may be designated by notice from such
party to all other parties.
To the Company:
13
<PAGE> 15
To SAM: SAFECO Asset Management Co.
4333 Brooklyn Avenue N.E.
Seattle, Washington 98185
Attention: Institutional Division
To the Trust: SAFECO Resource Series Trust
4333 Brooklyn Avenue N.E.
Seattle, Washington 98185
Attention: Controller
Any notice, demand or other communication given in a manner prescribed in this
subsection (b) shall be deemed to have been delivered on receipt.
(c) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective permitted
successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and
any party hereto may execute this Agreement by signing any such counterpart.
(e) Severability. In case any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
(f) Entire Agreement. This Agreement constitutes the entire agreement
and understanding among the parties hereto and supersedes all prior agreements
and understandings relating to the subject matter hereof.
(g) Governing Law. This Agreement shall be governed and interpreted in
accordance with the laws of the State of Washington.
14. Limitation on Liability of Trustees. This Agreement has been executed on
behalf of the Trust by the undersigned officer of the Trust in his/her capacity
as an officer of the Trust. The obligations of this Agreement that pertain to
the Trust shall be binding only upon the assets and property of the Trust and
shall not be binding upon any individual trustee, officer or shareholder of the
Trust or its Portfolios. This provision shall not affect the obligations or
liabilities of SAM under this Agreement.
14
<PAGE> 16
IN WITNESS WHEREOF, the undersigned have executed this Agreement by
their duly authorized officers as of this ____ day of __________________,
19______.
SAFECO RESOURCE SERIES TRUST
By ______________________________
Name: Neal A. Fuller
Title: Vice President and Controller
SAFECO Asset Management Company
By _____________________________
Name: Leslie Eggerling
Title: Vice President
[COMPANY]
By __________________________________
Name:
Title:
15
<PAGE> 1
EXHIBIT 99.10
OPINION AND CONSENT OF COUNSEL
<PAGE> 2
April 22, 1994
Board of Directors
SAFECO Resource Series Trust
SAFECO Plaza
Seattle, WA 98185
Gentlemen:
I have acted as counsel to the Trust in connection with the filing with the
Securities and Exchange Commission of Post-Effective Amendment No. 13 to a
Registration Statement on Form N-1A for the shares of the Trust. I have made
such examination of law and have examined such records and documents as in my
judgment are necessary or appropriate to enable me to render the following
opinion:
1. The Trust was duly established under the laws of the State of Delaware
under a Trust Instrument dated May 13, 1993, and filed with the
Delaware Secretary of State on May 17, 1993. The Trust is at the
present time validly existing as a business trust under the laws of
the State of Delaware.
2. The Trust is authorized to issue an unlimited number of shares which
have been divided into five series: Equity Portfolio, Money Market
Portfolio, Bond Portfolio, Growth Portfolio and Northwest Portfolio.
3. All of the prescribed procedures for the issuance of the shares have
been followed, and, when such shares are issued in accordance with the
Prospectus contained in the Registration Statement and upon compliance
with applicable law, such shares will have a legally-issued, fully
paid, non-assessable shares of the Trust.
You may use this letter, or a copy hereof, as an exhibit to the Registration
Statement.
Very truly yours,
Leslie A. Harrison
Counsel
<PAGE> 1
EXHIBIT 99.11
CONSENT OF INDEPENDENT AUDITORS
<PAGE> 2
Consent of Independent Auditors
We consent to the references to our firm under the caption "Investment Advisory
and Other Services" and "Financial Statements" in Post-Effective Amendment No.
16 to the Registration Statement (Form N-1A, No. 33-06547) and related
Prospectus of SAFECO Resource Series Trust dated April 29, 1996.
We also consent to the incorporation by reference therein of our report dated
January 26, 1996 with respect to the financial statements of the SAFECO
Resource Series Trust (comprising, respectively, the Equity, Growth, Northwest,
Bond and Money Market Portfolios) as of and for the year ended December 31,
1995 included in the 1995 Annual Report filed with the Securities and Exchange
Commission.
Seattle, Washington
April 25, 1996
<PAGE> 1
EXHIBIT 99.13
AGREEMENT GOVERNING CONTRIBUTION TO SAFECO RESOURCE SERIES TRUST
BY SAFECO LIFE INSURANCE COMPANY DATED JUNE 23, 1986
<PAGE> 2
AGREEMENT GOVERNING CONTRIBUTION
TO
SAFECO RESOURCE SERIES TRUST
BY
SAFECO LIFE INSURANCE COMPANY
THIS AGREEMENT is made by and between SAFECO Resource Series Trust
("Trust"), a Massachusetts business trust and SAFECO Life Insurance Company
("Insurance Company") on behalf of SAFECO Resource Variable Account B (the
"Separate Account"), a separate account of Insurance Company.
WHEREAS, Insurance Company has established the Separate Account and
proposes to contribute to it the sum of at least $100,000; and
WHEREAS, the Insurance Company on behalf of the Separate Account
proposes to contribute at least $100,000 ("Contribution") to the Trust in the
manner hereinafter described; and
WHEREAS, it is necessary and desirable that the terms under which said
Contribution is made and the respective rights of the Insurance Company and the
Trust with respect thereto be determined; and
NOW, THEREFORE, it is hereby agreed between Insurance Company on
behalf of the Separate Account and the Trust as follows:
I
Insurance Company will provide for the contribution to the Trust by
the Separate Account the sum of at least $100,000 prior to the effective date
of the Registration Statement to be filed by the Trust. Insurance Company
hereby represents and agrees that such Contribution is for investment purposes
and not for the purpose of redeeming or disposing of any interest in the Trust
resulting from such Contribution.
II
In consideration for such Contribution and without deduction of any
sales or charges, the Trust shall credit the Separate Account with shares of
which the Separate Account shall be the owner. Such shares shall share pro
rata in the investment performance of the Trust and shall be subject to the
same valuation procedures and the same periodic charges as are other shares of
the Trust.
III
Insurance Company hereby acknowledges that by the making of such
Contribution by Separate Account, Separate Account is not
<PAGE> 3
and shall not be regarded as a creditor of the Trust and that the relationship
of debtor-creditor between the Trust and the Separate Account does not exist
with respect to the amount so contributed. Insurance Company agrees that the
making of such Contribution by Separate Account, Separate Account is not now
and shall not in the future be, or be deemed to be, the holder of any interest
other than as provided in Section II of this Agreement. Insurance Company
agrees that the Separate Account's interest in the Trust as a result of such
Contribution shall be neither senior to nor subordinate to the interests of
owners of variable annuity contracts issued with respect to the Separate
Account and that, in the event of liquidation of the Trust or the Separate
Account, however occurring, the Separate Account shall have no preferential
rights of any kind over such contract owner's but shall share ratably with
them.
IV
All commitments of the Separate Account hereunder shall be forever
binding upon its successor or successors.
V
Insurance Company hereby agrees that the Separate Account shall not
surrender the shares acquired pursuant to this Agreement until such time as
Trust has received additional funds from variable annuity contracts in an equal
or greater amount than $100,000. Insurance Company also agrees to give Trust
ten days prior notice before making such a surrender request.
VI
The Trust hereby accepts such Contribution subject to the terms of the
Agreement.
Executed this 23rd day of June, 1986.
SAFECO RESOURCE VARIABLE ACCOUNT B
By: SAFECO LIFE INSURANCE COMPANY
By: /s/
-------------------------------------
Richard E. Zunker, President
ATTEST: /s/
-----------------------------
Boh A. Dickey
SAFECO RESOURCE SERIES TRUST
By: /s/
-------------------------------------
R.H. Eigsti, Trustee
<PAGE> 1
EXHIBIT 99.16
CALCULATION OF PERFORMANCE INFORMATION
<PAGE> 2
SAFECO RST-Northwest Portfolio
Calculation of Performance Quotations
The yield for the Northwest Portfolio for the 30-day period
ended December 31, 1995 is calculated as follows:
9,397.32 - 3,561.04 6
Yield = 2[(---------------------- +1) -1] = 1.12%
568,514 x 11.00
Where: $9,397.32 = dividends and interest (as defined in the
instructions to Item 22(b)(ii) of Form N-1A)
earned during the period
$3,561.04 = expenses accrued during the period
568,514 = average daily number of shares outstanding
during the period
$11.00 = offering price per share on December 31, 1995
before reinvestment of dividends
<PAGE> 3
SAFECO RST-Northwest Portfolio
Calculation of Performance Quotations (continued)
The total return and average annual total return for the Fund for the
1 Year and 23 Month period ended December 31, 1995 (from the initial public
offering date of Registration Statement on January 7, 1993) is calculated
as follows:
1-Year
- ------
1,074.20 - 1,000
Total return = (-----------------------) = 7.42%
1,000.00
__________________________
Average Annual Total Return = (1 \/ 1,074.20 / 1,000.00 -1) = 7.42%
Where: 1 = number of years
$1,074.20 = ending redeemable value of a hypothetical $1,000 investment
at the end of a specified period of time
$1,000.00 = a hypothetical investment of $1,000
Since Inception (35 Months)
- ---------------------------
1,107.40 - 1,000
Total return = (---------- -- -----------) = 10.74%
1,000.00
______________________
Average Annual Total Return = 2.9167\/ 1,107.40 / 1,000.00 -1) = 3.56%
Where: 2.9167 = number of years
<PAGE> 4
$1,107.40 = ending redeemable value of a hypothetical $1,000
investment at the end of a specified period of time
$1,000.00 = a hypothetical investment of $1,000
Since Inception (77 Months)
- ---------------------------
0.00 - 1,000
Total return = (-----------------------) = 0.00%
1,000.00
______________________
Average Annual Total Return = (6.417 \/ 0.00 / 1,000.00 -1) = 0.00%
Where: 7.417 = number of years
$0.00 = ending redeemable value of a hypothetical $1,000
investment at the end of a specified period of time
$1,000.00 = a hypothetical investment of $1,000
<PAGE> 5
SAFECO RESOURCE SERIES TRUST - BOND PORTFOLIO
Calculation of Performance Quotations
The yield for the Bond Portfolio for the 30-day period ended December 31,
1995 is calculated as follows:
84,179.69 - 8,363.48 6
Yield = 2[(- -------------------- +1) -1] = 6.53%
1,174,437 x 12.02
Where: $84,179.69 = dividends and interest (as defined in the
instructions to Item 22(b)(ii) of Form
N-1A) earned during the period
$8,363.48 = expenses accrued during the period
1,174,437 = average daily number of shares outstanding
during the period
$12.02 = offering price per share on December 31,
1995 before reinvestment of dividends
<PAGE> 6
SAFECO RESOURCE SERIES TRUST-Bond Portfolio
Calculation of Performance Quotations (continued)
The total return and average annual total return for the Fund for the one-year
and five-year period ended December 31, 1995 and for the 89-month period ended
December 31, 1995 (from the initial public offering date of the Registration
Statement on July 21, 1987) is calculated as follows:
1-Year
- ------
1,178.70 - 1,000
Total return = (-----------------------) = 17.87%
1,000.00
____________________
Average Annual Total Return = (1 \/ 1,178.70 / 1,000.00 -1) = 17.87%
Where: 1 = number of years
$1,178.70 = ending redeemable value of a hypothetical $1,000 investment
at the end of a specified period of time
$1,000.00 = a hypothetical investment of $1,000
5-Year
- ------
1,540.10 - 1,000
Total return = (-----------------------) = 54.01%
1,000.00
____________________
Average Annual Total Return = (5 \/ 1,540.10 / 1,000.00 -1) = 9.02%
Where: 5 = number of years
<PAGE> 7
$1,540.10 = ending redeemable value of a hypothetical $1,000 investment
at the end of a specified period of time
$1,000.00 = a hypothetical investment of $1,000
Since Inception (101 Months)
- ---------------------------------
2,011.80 - 1,000
Total return = (-----------------------) = 101.18%
1,000.00
____________________
Average Annual Total Return = 8.417 \/ 2,011.80 / 1,000.00 -1) = 8.66%
Where: 8.417 = number of years
$2,011.80 = ending redeemable value of a hypothetical $1,000 investment
at the end of a specified period of time
$1,000.00 = a hypothetical investment of $1,000
<PAGE> 8
SAFECO RST-Equity Portfolio
Calculation of Performance Quotations
The yield for the Equity Portfolio for the 30-day period ended December 31, 1995
is calculated as follows:
287,835.81 - 93,924.53 6
Yield = 2[(- ---------------------- +1) -1] = 1.39%
7,735,185 x 21.65
Where: $287,835.81 = dividends and interest (as defined in the instructions to
Item 22(b)(ii) of Form N-1A) earned during the period
$93,924.53 = expenses accrued during the period
7,735,185 = average daily number of shares outstanding during the
period
$21.65 = offering price per share on December 31, 1995 before
reinvestment of dividends
<PAGE> 9
SAFECO RST-Equity Portfolio
Calculation of Performance Quotations (continued)
The total return and average annual total return for the Fund for the one-year
and five-year period ended December 31, 1995 and for the 89-month period ended
December 31, 1995 (from the initial public offering date of the Registration
Statement on July 21, 1987) is calculated as follows:
1-Year
- -----
1,286.30 - 1,000
Total return = (-----------------------) = 28.63%
1,000.00
__________________________
Average Annual Total Return = (1 \/ 1,286.30 / 1,000.00 -1) = 28.63%
Where: 1 = number of years
$1,286.30 = ending redeemable value of a hypothetical $1,000 investment
at the end of a specified period of time
$1,000.00 = a hypothetical investment of $1,000
5-Year
- -----
2,456.80 - 1,000
Total return = (-----------------------) = 145.68%
1,000.00
__________________________
Average Annual Total Return = (5 \/ 2,456.80 / 1,000.00 -1) = 19.69%
Where: 5 = number of years
<PAGE> 10
$2,456.80 = ending redeemable value of a hypothetical $1,000 investment
at the end of a specified period of time
$1,000.00 = a hypothetical investment of $1,000
Since Inception (101 Months)
2,867.40 - 1,000
Total return = (-----------------------) = 186.74%
1,000.00
____________________
Average Annual Total Return = 8.417 \/ 2,867.40 / 1,000.00 -1) = 13.33%
Where: 8.417 = number of years
$2,867.40 = ending redeemable value of a hypothetical $1,000 investment
at the end of a specified period of time
$1,000.00 = a hypothetical investment of $1,000
<PAGE> 11
SAFECO RST-Growth Portfolio
Calculation of Performance Quotations
The yield for the Growth Portfolio for the 30-day period ended December
31, 1995 is calculated as follows:
55,217.53 -31,718.63 6
Yield = 2[(- -------------------- +1) -1] = 0.65%
2,370,431 x 18.30
Where: $55,217.53 = dividends and interest (as defined in the instructions to
Item 22(b)(ii) of Form N-1A) earned during the period
$31,718.63 = expenses accrued during the period
2,370,431 = average daily number of shares outstanding
during the period
$18.30 = offering price per share on December 31, 1995 before
reinvestment of dividends
<PAGE> 12
SAFECO RST-Growth Portfolio
Calculation of Performance Quotations (continued)
The total return and average annual total return for the Fund for the 1 Year
and 11 Month period ended December 31, 1995 (from the initial public offering
date of Registration Statement on January 7, 1993) is calculated as follows:
1-Year
- ------
1,410.00 - 1,000
Total return = (-----------------------) = 41.00%
1,000.00
--------------------
Average Annual Total Return = (1 \/ 1,410.00 / 1,000.00 -1) = 41.00%
Where: 1 = number of years
$1,410.00 = ending redeemable value of a hypothetical $1,000 investment
at the end of a specified period of time
$1,000.00 = a hypothetical investment of $1,000
Since Inception (35 Months)
- ---------------------------
2,126.10 - 1,000
Total return = (-----------------------) = 112.61%
1,000.00
--------------------
Average Annual Total Return = 2.9167\/ 2,126.10 / 1,000.00 -1) = 29.51%
Where: 2.9167 = number of years
<PAGE> 13
$2,126.10 = ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
$1,000.00 = a hypothetical investment of $1,000
Since Inception (77 Months)
- ---------------------------
0.00 - 1,000
Total return = (-----------------------) = -100.00%
1,000.00
----------------
Average Annual Total Return = (6.417 \/ 0.00 / 1,000.00 -1) = -100.00%
Where: 6.417 = number of years
$0.00 = ending redeemable value of a hypothetical $1,000
investment at the end of a specified period of time
$1,000.00 = a hypothetical investment of $1,000
<PAGE> 14
SAFECO RESOURCE SERIES TRUST-Money Market Portfolio
Calculation of Performance Quotations
The yield and effective yield for the Money Market Portfolio for the 7-day
period ended December 31, 1995 is calculated as follows:
(1.000714 - 1.00) - 0 365
Yield = [------------------------- ] = Base Period Return X ----- = 3.73%
1.00 7
365/7
Effective Yield = [(0.000714427+ 1) ] - 1 = 3.79%
Where: $1.000714427 = value of one share at the end of a 7-day period (as
defined in the instructions to Item 22(b)(ii) of Form
N-1A)
$1.00 = value of one share at the beginning of a 7-day period
$0.00 = capital changes during the period, if any.
$0.000714427 = Base Period Return
<PAGE> 15
SAFECO RESOURCE SERIES TRUST-Money Market Portfolio
Calculation of Performance Quotations (continued)
The total return and average annual total return for the Fund for the one-year
period ended December 31, 1995 is calculated as follows:
1-Year
- ------
1,055.60 - 1,000
Total return = (-----------------------) = 5.56%
1,000.00
____________________
Average Annual Total Return = (1 \/ 1,055.60 / 1,000.00 -1) = 5.56%
Where: 1 = number of years
$1,055.60 = ending redeemable value of a hypothetical $1,000 investment
at the end of a specified period of time
$1,000.00 = a hypothetical investment of $1,000
