<PAGE>
[LETTERHEAD]
May 1, 1998
VIA ELECTRONIC FILING
Securities & Exchange Commission
450 Fifth Street NW
Washington, DC 20549
Re: SAFECO Resource Series Trust
1933 Act File No. 33-06547
1940 Act File No. 811-4717
Ladies and Gentlemen:
The enclosed filing of the above-referenced Registrant's Money Market Portfolio
Prospectus dated April 30, 1998 is made pursuant to Rule 497(c) of the
Securities Act of 1933, as amended.
If you have any comments or questions concerning the filing, please call me at
(206) 548-7075.
Sincerely,
/s/ Margaret E. DiDonna
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Margaret E. DiDonna
Counsel
<PAGE>
SAFECO RESOURCE SERIES TRUST PROSPECTUS
SAFECO Plaza
Seattle, Washington 98185 April 30, 1998
The Money Market 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, 1998 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 many of the topics in this Prospectus as well as information
about the trustees and officers of the Trust.
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. 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. There is no assurance
that the Portfolio will achieve its investment objective. See "The Trust and the
Portfolio's Investment Policies" for more information.
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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.
- ---------------------------------------------------------
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<PAGE>
PORTFOLIO SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, THE U.S. GOVERNMENT OR ANY BANK, NOR ARE PORTFOLIO SHARES FEDERALLY INSURED
OR OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY, AND PORTFOLIO SHARES ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
- ---------------------------------------------------------
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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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Introduction to the Trust and the Portfolio 4
Fund Expenses 5
Financial Highlights 7
The Trust and the Portfolio's Investment Policies 9
Portfolio Manager 15
Information about Share Ownership and Companies that Provide Services to
the Trust 16
Persons Controlling the Trust 18
Sale and Redemption of Shares 19
Performance Information 19
Portfolio Distributions and Tax Information 20
Share Price Calculation 21
</TABLE>
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<PAGE>
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
Money Market Portfolio, is offered through this Prospectus. The Money Market
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 $4.3 billion in mutual
fund assets as of December 31, 1997. SAM has been an advisor to mutual funds and
other investment portfolios since 1973 and its predecessors
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<PAGE>
INTRODUCTION TO THE TRUST AND
THE PORTFOLIO (Continued)
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 that the market value of the Portfolios securities may decrease
and result in a decrease in the value of a shareholder's investment. The
principal risk associated with money market funds is that they 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. See "The Trust and the Portfolio's
Investment Policies" for more information.
FUND EXPENSES
A. SHAREHOLDER TRANSACTION EXPENSES FOR THE PORTFOLIO
<TABLE>
<CAPTION>
Sales Load
Sales Load Imposed on
Imposed on Reinvested Deferred Redemption Exchange
Purchases Dividends Sales Load Fees 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 Annual
Other Expenses Operating
Management After Expenses After
Portfolio 12b-1 Fees + Fee + Reimbursement = Reimbursement
- ----------------- ----------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Money Market NONE 0.64% 0.00% 0.64%
</TABLE>
During the year ended December 31, 1997, SAFECO Life Insurance Company ("SAFECO
Life") paid for or reimbursed all of the Other Expenses of the Money Market
Portfolio. Expenses before such reimbursement as a percentage of average net
assets were 0.81%.
SAFECO Life Insurance Company will continue to pay all Other Expenses of the
Money Market Portfolio until its assets exceed $20 million. Once the
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<PAGE>
FUND EXPENSES (Continued)
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.)
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>
Money Market $ 7 $ 20 $ 36 $ 80
</TABLE>
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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<PAGE>
FINANCIAL HIGHLIGHTS
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 first page of this Prospectus.
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<PAGE>
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO RESOURCE SERIES TRUST -- MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995 1994 1993 1992 1991
---------------------------------------------------------------------------
<S> <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
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .05 .05 .05 .04 .03 .03 .06
LESS DISTRIBUTIONS:
Dividends from net investment income (.05) (.05) (.05) (.04) (.03) (.03) (.06)
--------- --------- --------- --------- --------- --------- ---------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Total return 5.08% 4.94% 5.56% 3.65% 2.61% 3.26% 5.67%
Net assets at end of period (000's omitted) $ 17,757 $ 12,493 $ 8,719 $ 9,315 $ 6,327 $ 5,399 $ 4,534
Ratio of expenses to average net assets .64% .62% .62% .63% .64% .68% .74%
Ratio of expenses to average net assets
before expense reimbursements .81% .90% .87% .87% -- -- --
Ratio of net investment income to average net
assets 4.97% 4.86% 5.32% 3.63% 2.61% 3.23% 5.54%
<CAPTION>
1990 1989 1988
<S> <C> <C> <C>
Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .08 .08 .07
LESS DISTRIBUTIONS:
Dividends from net investment income (.08) (.08) (.07)
--------- --------- ---------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00
--------- --------- ---------
--------- --------- ---------
Total return 7.86% 8.96% 7.11%
Net assets at end of period (000's omitted) $ 4,284 $ 3,275 $ 2,908
Ratio of expenses to average net assets .73% .73% .74%
Ratio of expenses to average net assets
before expense reimbursements -- -- --
Ratio of net investment income to average net
assets 7.60% 8.55% 7.00%
</TABLE>
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<PAGE>
THE TRUST AND THE 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 six series, each of which,
including the Money Market 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" 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 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.
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. The Portfolio
complies with industry-standard guidelines on the quality and maturity of
its investments, which are designed to help maintain a stable $1.00 share
price. The Portfolio invests in instruments with remaining maturities of 397
days or less (determined in
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<PAGE>
THE TRUST AND THE PORTFOLIO'S INVESTMENT
POLICIES (Continued)
accordance with Rule 2a-7 under the Investment Company Act of 1940 (the "1940
Act")) and maintains a dollar-weighted average portfolio maturity of not
more than 90 days.
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
obligations 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 obligations only if in SAM's opinion the obligation is of an
investment quality comparable to other obligations which may be
purchased by the Money Market Portfolio;
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<PAGE>
THE TRUST AND THE PORTFOLIO'S INVESTMENT
POLICIES (Continued)
(b) Negotiable and non-negotiable time deposits and certificates of deposit,
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);
(c) Dollar-denominated securities issued by foreign banks (including foreign
branches of U.S. banks) provided that in SAM's opinion the security is of
an investment quality comparable to other obligations which may be
purchased by the Money Market Portfolio; and
(d) Corporate obligations such as publicly traded bonds, debentures and notes.
Bonds and other debt securities are used by issuers to borrow money from
investors. The issuer pays the investor a fixed rate of interest, and must
repay the amount borrowed at maturity. The value of bonds and other debt
securities will normally vary inversely with interest rates. In general,
bond prices rise when interest rates fall, and bond prices fall when
interest rates rise.
3. 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 the Federal National Mortgage
Association and Federal Home Loan Mortgage Corporation; and (c) securities
supported solely by the creditworthiness of the issuer, such as securities
issued by the Tennessee Valley Authority. 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.
4. May invest in variable and floating rate instruments. Issuers of floating or
variable rate notes include, but are not limited to,
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<PAGE>
THE TRUST AND THE PORTFOLIO'S INVESTMENT
POLICIES (Continued)
corporations, partnerships, the U.S. Government, its agencies and
instrumentalities, and municipalities. The interest rates on variable rate
instruments reset periodically on specified dates so as to cause the
instruments' market value to approximate their par value. The interest rates
on floating rate instruments change whenever there is a change in a
designated benchmark rate. Variable and floating rate instruments may have
optional or mandatory put features. In the case of a mandatory put, the
Portfolio would be required to act to keep the instrument.
5. May invest in repurchase agreements. In a repurchase agreement, the
Portfolio buys securities at one price and simultaneously agrees to sell
them back at a higher price. Delays or losses could result if the
counterparty to the agreement defaults or becomes insolvent. The Portfolio
will invest no more than 10% of net assets in repurchase agreements that
mature in more than seven days.
6. 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, for a time,
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.
7. May invest in mortgage- and asset-backed securities. Mortgage-backed
securities represent interests in pools of mortgage loans and include, but
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<PAGE>
THE TRUST AND THE PORTFOLIO'S INVESTMENT
POLICIES (Continued)
are not limited to, securities issued by the U.S. Government or one of its
agencies or instrumentalities such as GNMA, FNMA or FHLMC. Principal is paid
back to the Portfolio as payments are made on the underlying mortgages in
the pool. Accordingly, the Portfolio receives scheduled monthly principal
and interest payments as well as any unscheduled principal prepayments on
the underlying mortgages. Unscheduled principal prepayments could lower the
overall return of the investment. Like other fixed income securities, when
interest rates rise, the value of mortgage-backed securities generally will
decline. However, when interest rates fall, mortgage-backed securities have
less potential for capital appreciation than comparable fixed income
securities and may in fact decrease in value due to the likelihood of
increased prepayments of mortgages in times of declining interest rates.
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. These securities may be pass-through certificates, which are
similar to mortgage-backed securities, or they may be asset-backed
commercial paper, which is issued by a special purpose entity organized
solely to issue the commercial paper and to purchase interests in the
assets. There is the risk that one or more of the underlying borrowers may
default and that recovery on the repossessed collateral may be unavailable
or inadequate to support payments on the defaulted securities. Like
mortgage-backed securities, asset-backed securities are subject to
prepayment risks, which may reduce the overall return on the investment. The
credit quality of these securities depends upon the quality of the
underlying assets and the level of credit enhancements, such as letters of
credit, provided.
8. May purchase or sell securities on a "when-issued" or "delayed-delivery"
basis. Under this procedure, the Portfolio agrees to acquire or sell
securities that are to be issued and delivered against payment in the
future, normally 30 to 45 days. The price, however, is fixed at the time of
commitment. When the Portfolio purchases when-issued or delayed-delivery
securities, it will earmark liquid, high-quality securities in an
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<PAGE>
THE TRUST AND THE PORTFOLIO'S INVESTMENT
POLICIES (Continued)
amount equal in value to the purchase price of the security. Use of these
techniques may affect the Portfolio's share price in a manner similar to the
use of leveraging.
9. May invest up to 10% of its net assets in illiquid securities, which 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, the Portfolio may experience difficulty
in valuing or disposing of illiquid securities. SAM determines the liquidity
of the securities under guidelines adopted by the Trust's Board of Trustees.
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.
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, except that up to 100% of the Portfolio's 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 purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or
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<PAGE>
THE TRUST AND THE PORTFOLIO'S INVESTMENT
POLICIES (Continued)
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.
For more information, see the "Investment Policies" and "Additional Investment
Information" sections of the Trust's Statement of Additional Information.
PORTFOLIO MANAGER
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 1994. 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.
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
-- 15 --
<PAGE>
PORTFOLIO MANAGER (Continued)
(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.
INFORMATION ABOUT SHARE OWNERSHIP AND COMPANIES
THAT PROVIDE SERVICES TO THE TRUST
Shares of the Portfolio represent equal proportionate interests in the assets of
the Portfolio 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 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 Income 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. 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 shares of 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
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<PAGE>
INFORMATION ABOUT SHARE OWNERSHIP AND COMPANIES
THAT PROVIDE SERVICES TO THE TRUST (Continued)
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 the Trust's or the
Trust Portfolio's property of any shareholder nevertheless held personally
liable for the Trust's 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 an annual management fee of
.65% 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.
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<PAGE>
INFORMATION ABOUT SHARE OWNERSHIP AND COMPANIES
THAT PROVIDE SERVICES TO THE TRUST (Continued)
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.
YEAR 2000
Like other mutual funds, financial and business organizations and individuals
around the world, the Portfolio could be adversely affected if the computer
systems used by its investment adviser or other companies that provide services
to the Trust do not properly process and calculate date-related information from
and after January 1, 2000. This is commonly called the "Year 2000 problem." SAM,
SAFECO Services and SAFECO Securities, Inc. are taking steps they believe are
reasonably designed to address the Year 2000 problem with respect to the
computer systems that each of them uses and to obtain satisfactory assurances
that comparable steps are being taken by each of the Portfolio's other, major
service providers. It is not anticipated that the Portfolio will incur any
charges or that there will be any difficulties in accurate and timely reporting
resulting in the change in year from 1999 to 2000.
PERSONS CONTROLLING THE TRUST
As of February 3, 1998, SAFECO Life Insurance Company ("SAFECO Life") controlled
the Money Market 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, SAFECO Securities and SAFECO Services have
their principal place of business at SAFECO Plaza, Seattle, Washington 98185.
SAM has its principal place of business at Two Union Square, Seattle, Washington
98101.
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<PAGE>
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 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.
PERFORMANCE INFORMATION
The Portfolio's yield and effective yield may be quoted in advertisements.
Performance figures are indicative only of past performance and are not intended
to represent future investment results. While the Money Market Portfolio will
attempt to maintain a stable net asset value of $1.00 per share, there can be no
assurance that it will do so. The yield of the Money Market Portfolio will
fluctuate.
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, the Portfolio may advertise its rankings. Rankings are
calculated by independent companies that monitor mutual fund performance
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<PAGE>
PERFORMANCE INFORMATION (Continued)
(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. The Portfolio
may also compare its performance to the performance of 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 performance information.
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
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<PAGE>
PORTFOLIO DISTRIBUTIONS AND TAX INFORMATION (Continued)
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.
SHARE PRICE CALCULATION
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 (normally 1:00 P.M. Pacific Time) each
day that the Exchange is open for trading.
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
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<PAGE>
SHARE PRICE CALCULATION (Continued)
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.
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