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SAFECO RESOURCE SERIES TRUST PROSPECTUS
SAFECO Plaza
Seattle, Washington 98185 APRIL 30, 1997
The Growth 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 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.
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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 Growth 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 Growth 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. . . . . . . . . . . . . . . . . . . . . . . .
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INTRODUCTION TO THE TRUST AND THE PORTFOLIO
- -------------------------------------------
The Trust is a series investment company that currently issues shares
representing six mutual funds (the "Trust Portfolios"), only one of which,
the Growth Portfolio, is offered through this Prospectus. The Growth
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.
The Growth Portfolio invests in small-sized companies, which involve greater
risks than investments in larger, more established issuers, and their
securities can be subject to more abrupt and erratic movements in price. See
"The Trust and the Growth 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
Management Other Operating
Portfolio 12b-1 Fees Fee Expenses Expenses
- --------- ---------- --- ------------- -------------
Growth None .72% .07% .79%
The amounts shown are actual expenses incurred by the Growth
Portfolio for the fiscal year ended December 31, 1996.
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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" above remain the same in the years shown.
Portfolio 1 Year 3 Years 5 Years 10 Years
- --------- ------ ------- ------- --------
Growth $ 8 $ 25 $ 44 $ 98
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 -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)
1996 1995 1994 To December 31, 1993
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<S> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $15.88 $12.98 $12.16 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (.03) .06 -- .01
Net realized and unrealized gain (loss) on
investments 5.12 5.26 1.45 3.60
-------- -------- ------- --------
Total from investment operations 5.09 5.32 1.45 3.61
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LESS DISTRIBUTIONS:
Dividends from net investment income -- (.06) -- (.01)
Distributions from capital gains (1.71) (2.36) (.63) (1.44)
-------- -------- ------- --------
Total distributions (1.71) (2.42) (.63) (1.45)
-------- -------- ------- --------
NET ASSET VALUE AT END OF PERIOD $19.26 $15.88 $12.98 $12.16
-------- -------- ------- --------
-------- -------- ------- --------
Total Return 32.06% 41% 11.92% 34.73%+
Net assets at end of period (000's omitted) $109,491 $44,458 $16,156 $4,850
Ratio of expenses to average net assets .79% .79% .71% .72%++
Ratio of expenses to average net assets
before expense reimbursements N/A .84% .96% --
Ratio of net investment income
to average net assets (.28%) .55% (.05%) .08%++
Portfolio turnover ratio 75.58% 111.70% 41.24% 108.67%++
Average Commission Rate Paid $.053 -- -- --
</TABLE>
+ Not annualized
++ Annualized
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THE TRUST AND THE GROWTH 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 Growth 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.)
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INVESTMENT OBJECTIVE AND POLICIES
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:
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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.
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.
In pursuing its investment objective, the Growth Portfolio may invest a
significant portion of its assets in securities issued by smaller companies.
Companies with small market capitalizations involve more risks than
investments in larger companies. Such companies may include newly formed
companies which have limited product lines, markets or financial resources
and may lack management depth. Therefore, investments in small or newly
formed companies involve greater risks than investments in larger, more
established issuers. Such securities may have limited marketability and can
be subject to more abrupt and erratic movements in price than securities of
larger more established companies. Such volatility in price may in turn
cause the Growth Portfolio's share prices to be volatile.
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ADDITONAL 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 become unwilling, for a time, 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 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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PORTFOLIO MANAGER
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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.
For more information, see the "Investment Policies" and "Additional Investment
Information" sections of the Trust's Statment of Additional Information.
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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 generally 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 each
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.
- -----------------------------
PERSONS CONTROLLING THE TRUST
- -----------------------------
As of the date of this prospectus, SAFECO Life Insurance Company ("SAFECO
Life") controlled the Growth, 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.
- -----------------------------
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
- -----------------------
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 Growth 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 or 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
- -------------------------------------------
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 Growth
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.
