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SAFECO RESOURCE SERIES TRUST PROSPECTUS
SAFECO Plaza
Seattle, Washington 98185 APRIL 30, 1997
The Northwest Portfolio (or the "Portfolio") described in this Prospectus is a
series of the SAFECO Resource Series Trust ("Trust"), an open-end, management
investment company consisting of six 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").
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 30, 1997 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 and other information about the Portfolio
is also available on the Securities and Exchange Commission website at
http://www.sec.gov. 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.
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").
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There are market risks in all securities transactions. There is no assurance
that the Portfolio will achieve its investment objective. See "The Trust and
the Northwest Portfolio's Investment Policies" for more information.
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.
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TABLE OF CONTENTS
Page
----
Introduction to the Trust and the Portfolio . . . . . . . . . . . . .
Fund Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . .
The Trust and the Northwest Portfolio's Investment Policies. . . . . .
Portfolio Manager . . . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . .
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INTRODUCTION TO THE TRUST AND THE PORTFOLIO
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The Trust is a series investment company that currently issues shares
representing six mutual funds (the "Trust Portfolios"), only one of which, the
Northwest Portfolio, is offered through this Prospectus. The Norhtwest 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 the 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 of the Trust Portfolios
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 of the Trust
Portfolios to any separate account or Qualified Plan or terminate the offering
of shares of any of the Trust Portfolios if such action is required by law or
regulatory authority or is in the best interests of the shareholders of any
Trust Portfolio.
The Portfolio is managed by SAFECO Asset Management Company ("SAM"). SAM is
headquartered in Seattle, Washington and managed over $2.5 billion in mutual
fund assets as of December 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.
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There is a risk that the market value of the Portfolio's securities may
decrease and result in a decrease in the value of a shareholder's investment.
Because the Northwest Portfolio concentrates its investments in geographic
regions, it may be subject to special risks. Investors should carefully
consider the investment risks of such geographic concentration before purchasing
shares of the Portfolio. See "The Trust and the Northwest Portfolio's Investment
Policies" for more information.
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FUND EXPENSES
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A. SHAREHOLDER TRANSACTION EXPENSES FOR THE PORTFOLIO
Sales Load
Sales Load Imposed on
Imposed on Reinvested Deferred Redemption
Purchases Dividends Sales Load Fees Exchange Fees
- --------- --------- ---------- ----- -------------
None None None None None
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B. ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Total Annual
Other Operating
Management Expenses Expenses
Portfolio 12b-1 Fees Fee After Reimbursement After Reimbursement
- --------- ---------- --- ------------------- -------------------
Northwest None .70% 0.00% .70%
During the year ended December 31, 1996, SAFECO Life Insurance Company
("SAFECO Life") paid for or reimbursed all of the Other Expenses of the
Northwest Portfolio. Expenses before such reimbursement as a percentage
of average net assets were 1.11%.
SAFECO Life will continue to pay all Other Expenses of the Northwest
Portfolio until the Portfolio's assets exceed $20 million. Once the
Portfolio's net assets exceed $20 million, all of the Other Expenses of
the Portfolio will be paid by the Portfolio. (See "Persons Controlling
the Trust" for more information.)
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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.
Portfolio 1 Year 3 Years 5 Years 10 Years
- --------- ------ ------- ------- --------
Northwest $ 7 $ 22 $ 39 $ 87
The purpose of the table is to assist you in understanding the various costs and
expenses that an investor in the Portfolio would bear, directly or indirectly.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. THE 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 THE PORTFOLIO.
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FINANCIAL HIGHLIGHTS
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The amounts shown for the Portfolio in the Financial Highlights table that
follows are based upon a single share outstanding throughout the period
indicated. The following selected data has been derived from financial
statements that have been audited by Ernst & Young LLP. The data should be
read in conjunction with the financial statements, related notes and other
financial information included in the Trust's annual report to shareholders
and incorporated by reference in the Trust's Statement of Additional
Information. A copy of the Trust's Statement of Additional Information may
be obtained by calling the number on the front page of this Prospectus.
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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)
1996 1995 1994 To December 31, 1993
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<S> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $10.85 $10.24 $9.94 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .08 .08 .06 .09
Net realized and unrealized gain (loss) on
investments 1.27 .68 .30 (.06)
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Total from investment operations 1.35 .76 .36 .03
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LESS DISTRIBUTIONS:
Dividends from net investment income (.08) (.08) (.06) (.09)
Distributions from capital gains -- (.07) -- --
-------- -------- ------- --------
Total distributions (.08) (.15) (.06) (.09)
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NET ASSET VALUE AT END OF PERIOD $12.12 $10.85 $10.24 $9.94
-------- -------- ------- --------
-------- -------- ------- --------
Total Return 12.44% 7.42% 3.65% (.55%)+
Net assets at end of period (000's omitted) $9,541 $6,312 $4,564 $3,183
Ratio of expenses to average net assets .70% .71% .71% .72%++
Ratio of expenses to average net assets
before expense reimbursements 1.11% 1.18% 1.23% -
Ratio of net investment income
to average net assets .78% .81% .72% 1.06%++
Portfolio turnover ratio 52.20% 21.30% 7.29% 3.93%++
Average Commission Rate Paid $.0467 -- -- --
</TABLE>
+ Not annualized
++ Annualized
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THE TRUST AND THE NORTHWEST PORTFOLIO'S INVESTMENT POLICIES
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The Trust is a Delaware business trust established by a Trust Instrument dated
May 13, 1993. The Trust currently consists of six series, each of which,
including the Northwest Portfolio, is a diversified series of the Trust.
The investment objective and investment policies for the Portfolio are
described below. The Trust's Board of Trustees may change the Portfolio's
objective without shareholder vote, but no such change will be made without 30
days' prior written notice to shareholders of the Portfolio. In the event the
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 "Investment Objective and Policies" and "Additional Investment
Practices" are non-fundamental and may be changed without shareholder vote. If
the Portfolio follows a percentage limitation at the time of investment, a later
increase or decrease in values, assets or other circumstances will not be
considered in determining whether the Portfolio complies with the applicable
policy (except to the extent the change may impact the Portfolio's borrowing
limits.)
INVESTMENT OBJECTIVE AND POLICIES
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.
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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
Standard & Poor's Corporation or Moody's Investors Service, Inc.
("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. 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.
ADDITIONAL INVESTMENT PRACTICES
The Portfolio 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. The 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. With respect to repurchase agreements, the 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.
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2. MAY INVEST FOR SHORT-TERM PURPOSES WHEN SAM BELIEVES SUCH ACTION TO BE
DESIRABLE AND CONSISTENT WITH SOUND INVESTMENT PROCEDURES. The
Portfolio, however, will not engage primarily in trading for the purpose
of short-term profits. The 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. Warrants are options to
buy a stated number of shares of common stock at a specified price any time
during the life of the warrant.
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, as amended ("1933 Act"), or in
transactions exempt from the registration requirements under the 1933 Act.
Rule 144A under the 1933 Act provides an exemption for the resale of
certain restricted securities to qualified institutional buyers. Investing
in restricted securities may increase the Portfolio's illiquidity to the
extent that qualified institutional buyers or other buyers are unwilling
to purchase the securities. As a result, the Portfolio may not be able to
sell these securities when its investment adviser deems it advisable to
sell, or may have to sell them at less than fair value. In addition,
market quotations are sometimes less readily available for restricted
securities. Therefore, judgment may at times play a greater role in
valuing these securities than in the case of unrestricted securities.
5. MAY INVEST IN AMERICAN DEPOSITARY RECEIPTS ("ADRS"), WHICH REPRESENT
SECURITIES ISSUED BY A FOREIGN ISSUER. ADRs are registered receipts
evidencing ownership of an underlying foreign security. They are typically
issued in the United States by a bank or trust company. 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 and there may be less public or less current information about
their operations. In addition to the risks of foreign investment
applicable to the underlying securities, ADRs may also be subject to the
risks that the foreign issuer may not be obligated to cooperate with the
U.S. bank or trust company, or that such information in the U.S. market may
not be current. ADRs which are structured without sponsorship of the
issuer of the underlying foreign security may also be subject
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to the risk that the foreign issuer may not provide financial and other
material information to the U.S. bank or trust company issuer.
FUNDAMENTAL POLICIES
The Portfolio 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 THAT UP TO 25% OF THE VALUE OF
THE PORTFOLIO'S ASSETS (NOT INCLUDING SECURITIES ISSUED BY ANOTHER
INVESTMENT COMPANY) MAY BE INVESTED WITHOUT REGARD TO THIS LIMIT;
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 PURCHASE SECURITIES OF ANY ISSUER (OTHER THAN OBLIGATIONS OF, OR
GUARANTEED BY, THE U.S. GOVERNMENT, ITS AGENCIES OR INSTRUMENTALITIES) IF
SUCH PURCHASE WOULD CAUSE MORE THAN TEN PERCENT (10%) OF ANY CLASS OF
SECURITIES OF SUCH ISSUER TO BE HELD BY THE PORTFOLIO;
4. 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 Northwest Portfolio will not
concentrate its assets in particular industries. 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; and
5. 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. The Portfolio will not borrow amounts in
excess of 5% of its total assets. The Portfolio intends to exercise its
borrowing authority primarily to meet shareholder redemptions under
circumstances where redemptions exceed available cash.
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For more information, see the "Investment Policies" and "Additional
Investment Information" sections of the Trust's Statement of Additional
Information.
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PORTFOLIO MANAGER
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The manager for the Northwest Portfolio is Bill Whitlow. Mr. Whitlow began
serving as portfolio manager for the Portfolio in April 1997. From 1990 to
April 1997, he was a principal and Manager of Pacific Northwest Research for
the brokerage firm of Pacific Crest Securities, located in Seattle,
Washington.
The portfolio manager and certain other persons related to SAM and the
Portfolio are subject to written policies and procedures designed to prevent
abusive personal securities trading. Incorporated within these policies and
procedures are recommendations made by the Investment Company 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 the Portfolio.
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INFORMATION ABOUT SHARE OWNERSHIP AND COMPANIES THAT PROVIDE SERVICES
TO THE TRUST
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Shares of the Portfolio represent equal proportionate interests in the assets
of the 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
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"Introduction to the Trust and the Portfolio"). 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 Trust
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 Trust Portfolio shall be entitled
to one vote for each full share and a fractional vote for each fractional
share. Shares of one Trust Portfolio may not bear the same economic
relationship to the Trust as another Trust Portfolio.
The Trust does not intend to hold annual meetings of shareholders of the
Trust Portfolios. The Trustees will call a special meeting of shareholders of a
Trust 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 Trust Portfolio entitled to vote.
Under Delaware law, the shareholders of the Trust Portfolios will not be
personally liable for the obligations of any Trust 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 a Trust Portfolio contain a
statement that such obligation may only be enforced against the assets of the
Trust or the Trust Portfolio and provides for indemnification out of Trust or
the Trust Portfolio's property of any shareholder nevertheless held
personally liable for Trust or a Trust Portfolio's obligations, respectively.
SAM is the investment adviser for the Portfolio under an agreement with the
Trust. Under the agreement, SAM is responsible for the overall management of
the Trust's and the Portfolio's business affairs. SAM provides investment
research, advice, management and supervision to the Trust and the Portfolio.
Consistent with the Portfolio's investment objectives and policies, SAM
determines what securities will be purchased, retained or sold by the
Portfolio, and implements those decisions. The Portfolio's turnover rate
is set forth in the "Financial Highlights" section. The Portfolio's turnover
rate will vary from year to year. A high portfolio turnover rate involves
correspondingly higher transaction costs in the form of broker commissions,
dealer spreads and other costs that the Portfolio will bear directly. The
Portfolio pays SAM
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an annual management fee of .74% of the Portfolio's net assets
ascertained each business day and paid monthly.
The distributor of the 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
the Portfolio for these services.
The transfer, dividend and distribution disbursement and shareholder servicing
agent for the Portfolio under an agreement with the Trust is SAFECO Services
Corporation ("SAFECO Services"). SAFECO Services is not compensated by the
Trust or the Portfolio for these services.
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PERSONS CONTROLLING THE TRUST
- -----------------------------
As of the date of this prospectus, SAFECO Life Insurance Company ("SAFECO
Life") and SAM controlled the Northwest 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 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.
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SALE AND REDEMPTION OF SHARES
- -----------------------------
The 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 the 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
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respect to acquisition or redemption of shares. The Board of Trustees of the
Trust may refuse to sell shares of the Portfolio to any person, or may suspend
or terminate the offering of shares of the 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 the Portfolio.
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PERFORMANCE INFORMATION
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The 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 Northwest Portfolio will fluctuate and your
shares, when redeemed, may be worth more or less than you originally paid for
them.
Yield is the annualization on a 360-day basis of the 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
an investment in the 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 the Portfolio,
assuming the reinvestment of dividends and capital gains distributions, over a
stated period of time.
RANKINGS
From time to time, the 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
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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. The Portfolio may also compare its performance to
the performance of the Standard & Poor's 500 Index and other relevant indices.
Performance information and quoted rankings are indicative only of past
performance and are not intended to represent future investment results.
OTHER CHARGES
The Portfolio does not impose a sales charge. However, other charges payable
by all shareholders include investment advisory fees. These charges affect the
Portfolio's calculation of yield, effective yield, total return and average
annual total return.
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PORTFOLIO DISTRIBUTIONS AND TAX INFORMATION
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The 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.
The Portfolio is treated as a separate entity for federal income tax purposes
and, therefore, the investments and results of the Trust 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 Portfolio
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 Portfolio to Qualified Plans are not taxable to the
Qualified Plans or to the participants thereunder.
In addition to the diversification requirements in Subchapter M, the 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 Contract 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
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The net asset value per share of the 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
Portfolio 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 Northwest
Portfolio, 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.
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RATINGS SUPPLEMENT
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Ratings by Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's
Ratings Services, a division of the McGraw-Hill Companies ("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 edged." 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 visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa -- Judged to be of high quality by all standards. 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 -- Possess 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, in
fact, 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.
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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 small.
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.
C -- The lowest-rated class of bonds, and issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
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 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.
Non-Investment Grade:
BB, B, CCC, CC, and C -- Regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal.
"BB" indicates the least degree of speculation and "C" the highest. While
such debt will likely have some quality and protective characteristics, these
are
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outweighed by large uncertainties or major exposures to adverse conditions.
C1 -- Reserved for income bonds on which no interest is being paid.
D -- In payment default. The D rating category is used when interest
payments or principal payments are not made on the date due, even if the
applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period.
PLUS (+) OR MINUS (-): Ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
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