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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
[Amendment No. ______]
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a11(c) or Section 240.14a-12
SAFECO RESOURCE SERIES TRUST
----------------------------
(Name of Registrant as Specified in Its Charter)
N/A
---
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No payment required
[ ] $125 per Exchange Act Rule O-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a(6)(i)(4) and O-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously by written preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
O-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount previously paid:
2) Form Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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[LOGO OF SAFECO]
SAFECO Resource Series Trust
10865 Willows Road NE
Redmond, WA 98052
---------------------
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
To Be Held on March 7, 2000
---------------------
To Our Shareholders:
A Special Meeting of Shareholders of SAFECO Resource Series Trust ("Trust")
will be held on March 7, 2000, at 8:00 a.m. at SAFECO Plaza, 4333 Brooklyn Ave.
NE, Seattle, Washington 98185, for the following purposes, as set forth in the
Proxy Statement:
1. To elect a Board of seven (7) Trustees to serve until their respective
successors are elected and qualified.
2. To ratify the selection of Ernst & Young LLP as independent auditors for the
Trust's current fiscal year.
3. To approve changes to the fundamental investment restrictions of designated
series of the Trust (each, a "Portfolio," and collectively, the
"Portfolios"), to be effective April 29, 2000.
4. To consider and act upon such other business as may properly come before the
meeting.
The Board of Trustees established the close of business on January 14, 2000, as
the record date for the determination of Portfolio shareholders entitled to
receive notice of and to vote at the Special Meeting and any adjournments
thereof.
Your vote is very important. Please complete, sign and return the enclosed
proxy card promptly.
[SIGNATURE OF BOH A. DICKEY]
Boh A. Dickey, Chairman
Redmond, Washington
January 27, 2000
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SAFECO Resource Series Trust
10865 Willows Road NE
Redmond, WA 98052
---------------------
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 7, 2000
---------------------
The Board of Trustees of SAFECO Resource Series Trust ("Trust") is soliciting
your proxy to be voted at a Special Meeting of Shareholders of each series of
the Trust (each, a "Portfolio" and collectively, the "Portfolios") to be held
on March 7, 2000 at 8:00 a.m. at SAFECO Plaza, 4333 Brooklyn Ave. NE, Seattle,
Washington 98185 or any adjournments of the meeting (the "Meeting").
Shares of the Portfolios are offered for investment exclusively to separate
accounts ("Separate Accounts") that fund benefits under variable annuity
contracts and variable life insurance contracts (collectively, "Variable
Contracts") offered by certain life insurance companies ("Participating
Insurance Companies"). In accordance with current interpretations of applicable
law, the Participating Insurance Companies will solicit voting instructions
from the owners of the Variable Contracts relating to each Portfolio ("Contract
Owners") with respect to the matters set forth in this Proxy Statement. In
connection with the solicitation of voting instructions, the Participating
Insurance Companies will furnish a copy of this Proxy Statement to all Contract
Owners.
Set forth below opposite each Portfolio's name is a list of the proposals
applicable to that Portfolio.
<TABLE>
<CAPTION>
Portfolio Name Proposals Applicable to Portfolio
-------------- ---------------------------------
<S> <C>
Growth Portfolio 1, 2, 3A-3M
Equity Portfolio 1, 2, 3A-3M
Northwest Portfolio 1, 2, 3A-3M
Small Company Stock Portfolio 1, 2, 3A-3G
Bond Portfolio 1, 2, 3A-3M
Money Market Portfolio 1, 2, 3A-3M
</TABLE>
<PAGE>
General Voting Information
All properly executed proxy cards received in time for the Meeting will be
voted according to the instructions marked thereon. The persons designated as
proxies will also be authorized to vote at their discretion on any other
matters that may come before the Meeting.
If a Participating Insurance Company signs and returns a proxy card with
respect to the shares held in its Separate Accounts, it may still vote its
shares in person at the Meeting. Participating Insurance Companies may also
revoke their proxy before the Meeting: (1) by notifying SAFECO Mutual Funds in
writing; or (2) by submitting a superseding proxy.
Each Participating Insurance Company whose Separate Account holds shares of the
Portfolios has one vote for each share and a partial vote for each partial
share held on January 14, 2000, the record date. Exhibit A shows the number of
shares of each Portfolio of the Trust that were outstanding on January 14,
2000. This Proxy Statement and the accompanying card(s) will be mailed to
Participating Insurance Company shareholders of record on or about January 27,
2000. The Participating Insurance Companies will furnish a copy of this Proxy
Statement to each of their Contract Owners to solicit voting instructions.
Contract Owners are indirectly invested in one or more Portfolios through their
Variable Contracts and have the right to instruct their Participating Insurance
Companies how to vote shares of these Portfolios on all matters requiring a
vote of shareholders. Contract Owners indirectly invested in a Portfolio at the
close of business on January 14, 2000, the record date, will be entitled to
notice of the Meeting and to instruct their Participating Insurance Companies
how to vote the number of shares of the Portfolio attributable to their
Variable Contracts at the Meeting.
Contract Owners may use the voting instruction form included with this Proxy
Statement to instruct their Participating Insurance Companies how to vote those
shares attributable to their Variable Contracts as of the record date.
Participating Insurance Companies will vote the shares held in their respective
Separate Accounts at the Meeting in accordance with their respective Contract
Owners' instructions. If a Contract Owner merely signs and returns the form,
and does not either give a specific voting instruction or withhold authority to
vote, his or her Participating Insurance Company may vote those shares in favor
of the applicable proposals and sub-proposals. If a Contract Owner does not
return the form, his or her Participating Insurance Company will vote those
shares in the same proportion as shares for which instructions were received
from other Contract Owners indirectly invested in the same Portfolio(s). All
shares for which voting instruction forms are timely received will be voted as
described above.
If you are a Contract Owner with assets invested in more than one Portfolio,
you will receive a separate form of voting instructions for each Portfolio, and
you should complete and return each form of voting instructions you receive.
This proxy solicitation is being made primarily by mail, but may also be made
by officers or employees of the Trust, its investment manager or affiliates, by
telephone, facsimile or other method.
The Board of Trustees urges you to vote, no matter how many shares you own,
whether or not you intend to be present at the Meeting. For your convenience
you can vote by completing and mailing the enclosed form(s) in the enclosed
postage-paid envelope.
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Votes Required to Approve Each Proposal or Sub-Proposal
Certain proposals within this Proxy Statement affect the entire Trust. All
shareholders of the Trust may vote on these proposals. Other proposals or sub-
proposals affect only certain Portfolios. Only shareholders of the affected
Portfolios may vote on those proposals or sub-proposals. The number of votes
needed to approve each proposal or sub-proposal may vary. Voting requirements
are described in each proposal.
Abstentions will be included for purposes of determining whether a quorum is
present at the Meeting. They will be treated as votes present but not cast.
Thus, they have the same effect as a vote "WITHHOLD" on each proposal. The
Participating Insurance Companies may be reimbursed for their reasonable
expenses in forwarding proxy solicitation materials to their Contract Owners.
Proposal One: To Elect the Board of Trustees
The Board of Trustees will be elected at the Meeting to hold office until their
successors are elected and qualified.
The persons named in the accompanying form of proxy intend to vote the proxies
for the election of the nominees below, if authority to vote is not withheld.
Required Vote: Election of each nominee requires a plurality of all the votes
cast at the Meeting.
NOMINEES
All nominees are currently Trustees of the Trust. Each nominee's principal
occupation over the past five years is described below.
Boh A. Dickey*, 55, is Chairman of the Trust, and President, Chief Operating
Officer, and a Director of SAFECO Corporation, Seattle, Washington, a holding
company for insurance and financial services companies. Previously, he was
Executive Vice President and Chief Financial Officer of SAFECO Corporation. He
has been an executive officer of SAFECO Corporation subsidiaries since 1982.
Mr. Dickey first became a Trustee of the Trust on May 4, 1989.
Barbara J. Dingfield, 54, is the former Director of Community Affairs for
Microsoft Corporation, Redmond, Washington, a computer software company, from
1994 to 1999. Previously, she was a Director and Executive Vice President of
Wright Runstad & Co., Seattle, Washington, a real estate development company.
She is also a Director of First SAFECO National Life Insurance Company of New
York**, Board Chair of United Way of King County and is on the Board of
Managers of Swarthmore College. Ms. Dingfield first became a Trustee of the
Trust on May 3, 1990.
David F. Hill*, 51, is President of the Trust, SAFECO Securities, Inc. and
SAFECO Services Corporation, Seattle, Washington. He is also Senior Vice
President of SAFECO Asset Management Company, Seattle, Washington. Mr. Hill
first became a Trustee of the Trust on August 8, 1996.
Richard W. Hubbard*, 70, is a retired Vice President and Treasurer of the Trust
and other SAFECO Trusts. He is also a retired Senior Vice President and
Treasurer of SAFECO Corporation and a former President of SAFECO Asset
Management Company. Mr. Hubbard is a Director of First SAFECO National Life
Insurance Company of New York** and a member of Diocese of Olympia Investment
Committee. Mr. Hubbard first became a Trustee of the Trust on November 5, 1986.
Richard E. Lundgren, 62, is the Director of Marketing and Customer Relations,
Building Materials Distribution, Weyerhaeuser Company, Tacoma, Washington, a
forest products company. Mr. Lundgren is a Director of First SAFECO National
Life Insurance Company of New York.** Mr. Lundgren first became a Trustee of
the Trust on November 5, 1986.
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Larry L. Pinnt, 65, is a retired Vice President and Chief Financial Officer of
U.S. WEST Communications, Seattle, Washington, a telephone company. Mr. Pinnt
is Chairman of the University of Washington Medical Center Board, Seattle,
Washington, a Director of Cascade Natural Gas Corporation, Seattle, Washington,
a Director of First SAFECO National Life Insurance Company of New York**, and
the Treasurer of Cancer Care Alliance, Seattle, Washington. Mr. Pinnt first
became a Trustee of the Trust on November 5, 1986.
John W. Schneider, 58, is President and sole owner of Wallingford Group, Inc.,
Seattle, Washington, a company consulting on the acquisition/disposition and
development of real estate. He is a former President of Emerald Development
Group, Inc., Seattle, Washington. Mr. Schneider is also a Director of First
SAFECO National Life Insurance Company of New York.** Mr. Schneider first
became a Trustee of the Trust on November 5, 1986.
*Each of these individuals is an "interested person" of the Trust as defined by
the Investment Company Act of 1940 ("1940 Act") because of his affiliations
with SAFECO Corporation and its subsidiaries.
** First SAFECO National Life Insurance Company of New York is a corporation
that issues variable insurance contracts and fixed annuities.
If for any reason any of the nominees shall become unavailable for election,
the persons named in the enclosed proxy shall vote for such nominees as are
selected by the Trust's management.
Proposal Two: To Ratify the Selection of Auditors
Ernst & Young LLP, an international accounting firm, has been selected by the
Board to be the Trust's independent auditors for the Trust's fiscal year ending
December 31, 2000. The Board has directed the submission of this selection to
the shareholders for ratification.
Representatives of Ernst & Young LLP will be present at the Meeting and will be
available should any matter arise requiring their attention.
Required Vote: The ratification of the selection of Ernst & Young LLP requires
the affirmative vote of a majority of the votes cast thereon at the Meeting.
The Trustees unanimously recommend that you vote FOR Proposal 2.
Proposal Three: To Approve Changes to the Fundamental Investment Restrictions
for Designated Portfolios.
(This Proposal involves separate votes on Sub-Proposals 3A through 3M and
applies to designated Portfolios. The changes will be effective April 29,
2000.)
Overview
The 1940 Act requires each Portfolio to adopt fundamental investment
restrictions regarding certain investment practices, such as a Portfolio's
ability to borrow or to make loans. Thus, although each Portfolio's investment
objectives, investment policies and asset size may differ, fundamental
investment restrictions can often be uniform because they are based on the
legal and regulatory authority applying to all Portfolios. The Trustees,
together with Portfolio management, are recommending that shareholders vote to:
(1) standardize certain fundamental investment restrictions for each Portfolio;
(2) reclassify from fundamental to non-fundamental certain restrictions that
are not required to be fundamental; and (3) eliminate certain other fundamental
restrictions.
Under the proposed fundamental investment restrictions the Portfolios will
continue to comply with all current regulatory requirements. However, they will
be able to more effectively manage assets and compete with
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investment companies that have up-to-date investment restrictions. Management
believes the proposed restrictions will increase the portfolio managers'
flexibility to respond to changes in market, industry or regulatory conditions.
Standardized restrictions will also make it easier to monitor the Portfolios'
compliance.
Background
Since the Trust was established in 1986, legal and regulatory requirements
applicable to investment companies have changed. Certain restrictions imposed
by state laws and regulations were preempted by the National Securities Markets
Improvement Act of 1996 ("NSMIA") and no longer apply. As a result, some of the
Portfolios are subject to fundamental restrictions that are no longer required
to be fundamental. Others are subject to fundamental restrictions that are no
longer required at all. Finally, over the course of years, substantially
similar fundamental restrictions have been phrased in different ways for
different Portfolios, often to reflect regulatory changes.
The 1940 Act (which was adopted and written to protect investment company
shareholders) mandates that certain investment restrictions limiting the
investment activities of a Portfolio's investment adviser be "fundamental"
which means that they can be changed only by a shareholder vote. The chart that
follows briefly describes the differences between fundamental restrictions and
non-fundamental restrictions.
<TABLE>
<CAPTION>
Non-Fundamental
Fundamental Restrictions Restrictions
---------------------------- ----------------------------
<S> <C> <C>
Who must approve changes in Board of Trustees and Board of Trustees
the restriction? shareholders
How quickly can a change in Fairly slowly, since a vote Fairly quickly, because the
restriction be made? of shareholders is required Board of Trustees can take
action at any meeting
What is the relative cost to Costly to change because a Less costly to change
change a restriction? shareholder vote requires because a change can be
holding a Special Meeting of approved at a regularly
shareholders scheduled quarterly meeting
of the Board of Trustees
</TABLE>
The proposed standardized fundamental investment restrictions cover those areas
for which the 1940 Act requires a Portfolio to have a fundamental restriction.
They satisfy current regulatory requirements and are written to provide
flexibility to respond to future legal, regulatory, market or technical
changes, without incurring additional proxy solicitation expenses. The proposed
changes will not affect any Portfolio's investment objectives. Although the
proposed changes in fundamental restrictions will allow the Portfolios greater
flexibility to respond to future investment opportunities, the Board of
Trustees does not anticipate that the changes, individually or in the
aggregate, will result at this time in a material change in the level of
investment risk associated with investment in any Portfolio. Nor does the Board
of Trustees anticipate that the proposed changes in fundamental investment
restrictions will, individually or in the aggregate, materially change the
manner in which any Portfolio is managed.
By reducing to a minimum those restrictions that can be changed only by a
shareholder vote, each Portfolio will be able to avoid the costs and delays
associated with a shareholder meeting if the Board of Trustees decides to make
future changes to such Portfolio's investment policies.
Description of Proposed Changes
The following is the text and a summary description of the proposed changes to
the Portfolios' fundamental investment restrictions. In addition, Exhibit B
lists the current fundamental investment restrictions for each Portfolio and
indicates which will be modified, which will be reclassified as non-
fundamental, and which will be eliminated. Any non-fundamental restriction may
be modified or eliminated by the Trustees at any future
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date without any further approval of shareholders. Note that for some
Portfolios certain of the fundamental restrictions that are treated separately
below currently are combined within a single existing fundamental restriction.
Currently, if a Portfolio adheres to a fundamental or non-fundamental
percentage restriction at the time of an investment or transaction, a later
increase or decrease in the percentage resulting from a change in the value of
the Portfolio's portfolio securities or the amount of its total assets is not
considered a violation of the restriction. This policy will continue to apply
for any of the proposed changes that are approved.
Sub-Proposal 3A:
To amend the fundamental investment restriction concerning the concentration of
a Portfolio's investments in the securities of companies in the same industry
Portfolios to which this change applies: All Portfolios
Under the 1940 Act, a Portfolio's policy relating to the concentration of its
investments in securities of companies in a single industry must be
fundamental. The Securities and Exchange Commission ("SEC") staff considers an
investment company to "concentrate" its investments if 25% or more of its total
assets are invested in a particular industry (not counting U.S. government
securities, bank instruments issued by domestic banks and tax-exempt
securities).
Each Portfolio currently has a fundamental investment restriction prohibiting
it from concentrating its investments in a single industry. However, this
investment restriction is described somewhat differently for various
Portfolios.
Proposed Concentration Restriction: The Portfolio will not make
investments that will result in the concentration (as that term may be
defined in the 1940 Act, any rule or order thereunder, or SEC staff
interpretation thereof) of its investments in the securities of issuers
primarily engaged in the same industry, provided that this restriction does
not limit the Portfolio from investing in obligations issued or guaranteed
by the U.S. government, its agencies or instrumentalities.
The Board also has approved a related non-fundamental policy for each
applicable Portfolio, which will be adopted if the new fundamental restriction
is approved and which provides that in applying the concentration restriction:
(1) utility companies will be divided according to their services, for example,
gas, gas transmission, electric and telephone will each be considered a
separate industry; (2) financial service companies will be classified according
to the end users of their services, for example, automobile finance, bank
finance and diversified finance will each be considered a separate industry;
and (3) asset-backed securities will be classified according to the underlying
assets securing such securities.
Sub-Proposal 3B:
To amend the fundamental investment restriction concerning borrowing money and
issuing senior securities
Portfolios to which this change applies: All Portfolios
The 1940 Act requires a Portfolio to have a fundamental investment restriction
limiting its ability to borrow money or issue senior securities. In general,
the limitations are designed to protect shareholders and their investments by
restricting a Portfolio's ability to subject its assets to any claims of
creditors or senior security holders who would be entitled to dividends or
rights on liquidation of the Portfolio prior to the rights of shareholders.
The current investment restrictions concerning borrowing and senior securities
vary among certain Portfolios. Shareholders of each Portfolio are being asked
to approve a new standardized fundamental restriction for borrowing and the
issuance of senior securities designed to reflect all current regulatory
requirements. The
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proposed restriction would permit a Portfolio to borrow or issue senior
securities, only within the limits established under the 1940 Act or under any
SEC rule, regulation or staff interpretation thereof.
Senior Securities--Generally. A "senior security" is an obligation of a
Portfolio with respect to its earnings or assets that takes precedence over the
claims of the Portfolio's shareholders with respect to the same earnings or
assets. The 1940 Act generally prohibits a Portfolio from issuing senior
securities, in order to limit the use of leverage. In general, a Portfolio uses
leverage when it enters into securities transactions without being required to
make payment until a later time. SEC staff interpretations allow a Portfolio to
engage in a number of types of transactions which might otherwise be considered
creating "senior securities" or "leverage," so long as the Portfolio meets
certain collateral requirements designed to protect shareholders. For example,
some transactions that may create senior security concerns include short sales,
certain options and futures transactions, reverse repurchase agreements and
securities transactions that obligate a Portfolio to pay money at a future date
(such as when-issued, forward commitment or delayed delivery transactions). A
Portfolio that engages in such transactions must set aside money or securities
to meet the SEC staff's collateralization requirements. This procedure
effectively restricts a Portfolio's ability to engage in leverage for these
types of transactions.
Borrowing--Generally. Under the 1940 Act, a Portfolio is permitted to borrow up
to 5% of its total assets for temporary purposes. A Portfolio also may borrow
from banks, provided that if borrowings exceed 5%, the Portfolio must have
assets totaling at least 300% of the borrowing when the amount of the borrowing
is added to the Portfolio's other assets. The effect of this provision is to
allow a Portfolio to borrow from banks amounts up to one-third (33 1/3%) of its
total assets (including the amount borrowed). Portfolios typically borrow money
to meet unexpected redemption levels, thus avoiding a forced, unplanned sale of
portfolio securities. This technique allows a Portfolio greater flexibility to
buy and sell portfolio securities for investment or tax considerations, rather
than for cash flow considerations. The costs of borrowing, however, can also
reduce a Portfolio's total return.
The Small Company Stock Portfolio has senior security restrictions that provide
similar restrictions as the one proposed. The other Portfolios, however, have
fundamental restrictions that prohibit such Portfolios from issuing senior
securities, even if to do so would be consistent with SEC staff positions. The
fundamental restrictions of these Portfolios preclude them from participating
in many of the types of activities that an investment manager and a Portfolio's
Board may deem appropriate. Since the proposed investment restriction would
provide greater flexibility for some Portfolios to engage in senior security
transactions, if the greater flexibility were exercised, such Portfolios could
experience increased risks due to the effects of leveraging. The SEC staff's
collateralization requirements are designed to mitigate such risks.
The investment restrictions of the Small Company Stock Portfolio permit
borrowing for temporary and emergency purposes in an amount up to 33 1/3% of
its total assets (including the amount borrowed) less liabilities (other than
borrowings). The borrowing restrictions of the other Portfolios limit borrowing
to 5% of each such Portfolio's assets. Furthermore, such Portfolios permit
borrowing only "for temporary or emergency purposes and not for investment
purposes." The proposed investment restriction would provide greater
flexibility.
Proposed Borrowing and Senior Securities Restriction: The Portfolio may not
borrow money or issue senior securities, except as the 1940 Act, any rule
or order thereunder, or SEC staff interpretation thereof, may permit.
Sub-Proposal 3C:
To amend the fundamental restriction concerning underwriting
Portfolios to which this change applies: All Portfolios
Under the 1940 Act, a Portfolio's policy or restriction relating to
underwriting is required to be fundamental. Each Portfolio currently is subject
to a fundamental investment restriction prohibiting it from acting as an
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underwriter of the securities of other issuers. A person or company generally
is considered an underwriter under the federal securities laws if it
participates in the public distribution of securities of other issuers, usually
by purchasing the securities from the issuer and re-selling the securities to
the public. From time to time, an investment company may purchase a security
for investment purposes which it later sells or redistributes to institutional
investors or others under circumstances where the Portfolio could possibly be
considered to be an underwriter under the technical definition of underwriter
contained in the securities laws. The current underwriting restriction for the
Portfolios specifically permits such re-sales.
The current investment restriction prohibiting underwriting activities is
described differently in the Small Company Stock Portfolio's offering documents
than it is described in the offering documents of the other Portfolios. The
proposed restriction would standardize the language of the restriction among
the various Portfolios.
Proposed Underwriting Restriction: The Portfolio may not underwrite the
securities of other issuers, except that the Portfolio may engage in
transactions involving the acquisition, disposition or resale of its
portfolio securities, under circumstances where it may be considered to be
an underwriter under the Securities Act of 1933.
Sub-Proposal 3D:
To amend the fundamental restriction concerning investments in real estate
Portfolios to which this change applies: All Portfolios
Under the 1940 Act, a Portfolio's policy or restriction concerning investments
in real estate must be fundamental. Each Portfolio currently has a fundamental
investment restriction prohibiting the purchase or sale of real estate. The
current restriction, however, allows most of the Portfolios to invest in
companies that deal in real estate, or to invest in securities that are secured
by real estate.
The proposed fundamental investment restriction will not permit the Portfolios
to purchase real estate directly, but will permit the purchase of securities
whose payments of interest or principal are secured by mortgages or other
rights to real estate in the event of default. The investment restriction will
also enable the Portfolios to invest in companies within the real estate
industry, provided such investments are consistent with the Portfolios'
investment objectives and policies.
Proposed Real Estate Restriction: The Portfolio may not purchase or sell
real estate unless acquired as a result of ownership of securities or other
instruments and provided that this restriction does not prevent the
Portfolio from investing in issuers which invest, deal, or otherwise engage
in transactions in real estate or interests therein, or investing in
securities that are secured by real estate or interests therein, or
exercising rights under agreements relating to such securities, including
the right to enforce security interests and to hold real estate acquired by
reason of such enforcement until that real estate can be liquidated in an
orderly manner.
Sub-Proposal 3E:
To amend the fundamental restriction concerning investments in commodities
Portfolios to which this change applies: All Portfolios
Under the 1940 Act, a Portfolio's policy concerning investments in commodities
must be fundamental. Each Portfolio is currently subject to a fundamental
restriction prohibiting the purchase or sale of commodities or commodity
contracts. Historically, the most common types of commodities have been
physical commodities such as wheat, cotton, rice and corn. However, under
federal law, futures contracts are considered to be commodities and, therefore,
financial futures contracts, such as futures contracts related to currencies,
stock indices or interest rates are considered to be commodities. Financial
futures contracts enable a Portfolio to buy
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(or sell) the right to receive the cash difference between the contract price
for an underlying asset or index and the future market price, if the market
price is higher. If the future price is lower, the Portfolio is obligated to
pay (or, if the Portfolio sold the contract, the Portfolio receives) the amount
of the decrease. Portfolios may desire to invest in financial futures contracts
and options related to such contracts for hedging or other investment reasons.
The proposed restriction would standardize the language of the commodities
restriction among the various Portfolios and provide appropriate flexibility
for all Portfolios to invest in financial futures contracts and related
options. As proposed, the restriction is broad enough to permit investment in
financial futures instruments for either investment or hedging purposes, which
is broader than many of the Portfolios' current restrictions. Using financial
futures instruments can involve substantial risks, and would be utilized only
if the investment manager determined that such investments are advisable and
such practices were affirmatively authorized by the Board and disclosed in the
Portfolios' prospectuses or statements of additional information.
Proposed Commodities Restriction: The Portfolio may not purchase or sell
physical commodities, unless acquired as a result of ownership of
securities or other instruments and provided that this restriction does not
prevent the Portfolio from engaging in transactions involving futures
contracts and options, forward currency contracts, swap transactions and
other financial contracts or investing in securities that are secured by
physical commodities.
Sub-Proposal 3F:
To amend the fundamental restriction concerning lending by the Portfolios
Portfolios to which this change applies: All Portfolios
Under the 1940 Act, a Portfolio's policy concerning lending must be
fundamental. Each Portfolio currently is subject to a fundamental investment
restriction limiting its ability to make loans. In order to ensure that the
Portfolios may invest in certain debt securities or repurchase agreements,
which could technically be characterized as the making of loans, the
Portfolios' current fundamental restrictions specifically permit such
investments. In addition, the Small Company Stock Portfolio's fundamental
restrictions permit it to lend its portfolio securities to others, within
certain limits. Securities lending is a practice that has become common in the
investment company industry and involves the temporary loan of portfolio
securities to parties who use the securities for the settlement of securities
transactions. The collateral delivered to the Portfolio in connection with such
a transaction is then invested to provide the Portfolio with additional income
it might not otherwise have.
Securities lending involves certain risks if the borrower fails to return the
securities. However, management believes that with appropriate controls, such
as 100% or greater collateralization of the loan and regular monitoring of the
creditworthiness of the counterparty, the ability to engage in securities
lending does not materially increase the risks to which the Portfolios
currently are subject. In addition, securities on loan cannot generally be sold
until the term of the loan is over.
Proposed Lending Restriction: The Portfolio may not make loans, provided
that this restriction does not prevent the Portfolio from purchasing debt
obligations, entering into repurchase agreements, loaning its assets to
broker/dealers or institutional investors and investing in loans, including
assignments and participation interests.
Sub-Proposal 3G:
To amend the fundamental restriction concerning diversification
Portfolios to which this change applies: All Portfolios
Under the 1940 Act, a Portfolio's policy relating to the diversification of its
investments in securities of any one issuer must be fundamental. The 1940 Act
prohibits a "diversified" investment company from purchasing
9
<PAGE>
securities of any one issuer if, at the time of purchase, more than 5% of the
Portfolio's total assets would be invested in securities of that issuer or the
Portfolio would own or hold more than 10% of the outstanding voting securities
of that issuer, except that up to 25% of the fund's total assets may be
invested without regard to this limitation. This limitation does not apply to
securities issued by or guaranteed by the U.S. government, its agencies or
instrumentalities or to securities issued by other open-end investment
companies.
Each Portfolio currently has a fundamental investment restriction concerning
diversification. There are, however, a number of variations in the way that
this investment restriction is described in the Portfolios' offering documents.
Proposed Diversification Restriction: The Portfolio will not purchase
securities of any one issuer if, as a result, more than 5% of the
Portfolio's total assets would be invested in securities of that issuer or
the Portfolio would own or hold more than 10% of the outstanding voting
securities of that issuer, except that up to 25% of the Portfolio's total
assets may be invested without regard to these limitations, and except that
these limitations do not apply to securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities or to securities issued
by other open-end investment companies.
The Money Market Portfolio is governed by Rule 2a-7 under the 1940 Act. This
rule imposes stricter diversification requirements on money market funds. As a
result of these requirements, the Money Market Portfolio is subject to a non-
fundamental policy which limits the Portfolio to investing no more than 5% of
its total assets in the securities of any issuer.
Sub-Proposal 3H:
To replace the fundamental restriction on margin transactions with a non-
fundamental restriction on margin transactions, and for the Money Market
Portfolio to eliminate the restriction
Portfolios to which this change applies: Growth Portfolio, Equity Portfolio,
Northwest Portfolio, Bond Portfolio and Money Market Portfolio
The Portfolios are not required to have a fundamental restriction on margin
transactions. Accordingly, it is proposed that the existing fundamental
restriction on margin transactions of the above-referenced Portfolios (other
than the Money Market Portfolio) be replaced with a non-fundamental restriction
and that the existing fundamental restriction on margin transactions of the
Money Market Portfolio be eliminated. The proposed non-fundamental restriction
makes minor changes in wording from the existing fundamental restriction and
expands the list of margin transactions excepted from the prohibition to
include margin deposits in connection with financial options and futures,
forward and spot currency contracts, swap transactions and other financial
contracts or derivative instruments.
Upon the approval of the elimination of the existing fundamental restriction on
engaging in margin transactions, each of the above-referenced Portfolios (other
than the Money Market Portfolio) would become subject to the following non-
fundamental restriction:
Proposed Non-Fundamental Margin Restriction: The Portfolio will not
purchase securities on margin, provided that the Portfolio may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, and further provided that the Portfolio may make
margin deposits in connection with its use of financial options and
futures, forward and spot currency contracts, swap transactions and other
financial contracts or derivative instruments.
10
<PAGE>
Sub-Proposal 3I:
To eliminate the fundamental restriction on purchasing securities of issuers in
which officers and board members of the Trust and its affiliates own securities
Portfolios to which this change applies: Growth Portfolio, Equity Portfolio,
Northwest Portfolio, Bond Portfolio and Money Market Portfolio
There is no legal requirement that the Portfolios have this fundamental
restriction. This restriction was imposed by state laws and was preempted by
NSMIA. Moreover, the Board and the investment adviser to the Portfolios do not
believe this restriction provides any safeguards against conflicts of interest
that are not already effectively covered under the Portfolios' Code of Ethics.
Accordingly, the Board believes this restriction should be eliminated.
Upon the approval of Sub-Proposal 3I, the existing fundamental restriction on
purchasing securities of issuers in which affiliates of the Trust own
securities for each of the above-referenced Portfolios would be eliminated.
Sub-Proposal 3J:
To eliminate the fundamental restriction on investing in securities of
companies that have been in operation for less than three years
Portfolios to which this change applies: Growth Portfolio, Equity Portfolio,
Northwest Portfolio, Bond Portfolio and Money Market Portfolio
No Portfolio is required to have a fundamental restriction with respect to
investing in securities of companies that have been in operation for less than
three years. To maximize each Portfolio's investment flexibility, the Board
believes that each Portfolio's restriction on investments in such companies
should be eliminated. This limitation was imposed by state laws and NSMIA
preempts that requirement.
Upon the approval of Sub-Proposal 3J, the existing fundamental restriction on
investing in securities of companies that have been in operation for less than
three years for each of the above-referenced Portfolios would be eliminated.
Sub-Proposal 3K:
To eliminate the fundamental restriction on selling securities short
Portfolios to which this change applies: Growth Portfolio, Equity Portfolio,
Northwest Portfolio, Bond Portfolio and Money Market Portfolio
No Portfolio is required to have a fundamental restriction with respect to
short sales of securities. To maximize the Portfolios' flexibility in this
area, the Board believes that each Portfolio's restriction on short sales of
securities should be eliminated. This restriction was imposed by state laws and
NSMIA preempts that requirement. Notwithstanding the elimination of this
fundamental restriction, each Portfolio expects to continue not to engage in
short sales of securities, except to the extent that the Portfolio
contemporaneously owns or has the right to acquire at no additional cost
securities identical to, or convertible into or exchangeable for, those sold
short. Moreover, the Money Market Portfolio, as a money market fund, is subject
to substantive regulation pursuant to Rule 2a-7 under the 1940 Act, that has
the effect of precluding the Portfolio from selling securities short.
Upon the approval of Sub-Proposal 3K, the existing fundamental restriction on
selling securities short for the above-referenced Portfolios would be
eliminated.
11
<PAGE>
Sub-Proposal 3L:
To eliminate the fundamental restriction on purchasing securities of an issuer
if more than 10% of any class of securities of that issuer would be held by the
Portfolio
Portfolios to which this change applies: Growth Portfolio, Equity Portfolio,
Northwest Portfolio, Bond Portfolio, and Money Market Portfolio
The Portfolios are not required to have a fundamental restriction with respect
to purchasing securities of an issuer if more than 10% of any class of
securities of that issuer would be held by the Portfolio. This restriction was
imposed by state laws and NSMIA preempts that requirement. Further, each
Portfolio is a "diversified" Portfolio. As such, its ability to invest in the
voting securities of an issuer is separately restricted. (See Sub-Proposal 3G).
Upon the approval of Sub-Proposal 3L, the existing fundamental restriction on
purchasing securities of an issuer if more than 10% of any class of securities
of that issuer would be held by the Portfolio would be eliminated.
Sub-Proposal 3M:
To eliminate the fundamental restriction on purchasing from or selling
portfolio securities to any officer, director, the adviser of the Portfolio,
the principal underwriter of the Portfolio or any affiliates or subsidiaries
thereof
Portfolios to which this change applies: Growth Portfolio, Equity Portfolio,
Northwest Portfolio, Bond Portfolio, and Money Market Portfolio
The Portfolios are not required to have a fundamental restriction on purchasing
from, or selling portfolio securities to, any officer, director, the adviser of
the Portfolio, the principal underwriter of the Portfolio or any affiliates or
subsidiaries thereof. Because such activity already is regulated by the 1940
Act, the Portfolios do not need a fundamental restriction addressing this
matter. Accordingly, it is proposed that the Portfolios' existing fundamental
restriction be eliminated.
Upon the approval of Sub-Proposal 3M, the existing fundamental restriction on
purchasing from, or selling portfolio securities to, any officer, director, the
adviser of the Portfolio, the principal underwriter of the Portfolio or any
affiliates or subsidiaries thereof for each of the above-referenced Portfolios
would be eliminated.
Required Vote: Approval of each sub-proposal requires a "majority of the
outstanding voting securities" of the Portfolio, which means the vote of: (1)
more than 50% of the outstanding voting securities of the Portfolio; or (2) 67%
or more of the voting securities of the Portfolio present at the Meeting, if
the holders of more than 50% of the outstanding voting securities are present
or represented by proxy at the Meeting, whichever is less.
Approval of one sub-proposal is not contingent on the approval of any other
sub-proposal.
The Trustees have voted to adopt each of the proposed standardized fundamental
investment restrictions for the Portfolios, as well as to approve reclassifying
certain existing fundamental investment restrictions as non-fundamental and
eliminating certain other fundamental investment restrictions. The Trustees
unanimously recommend that you vote FOR Sub-Proposals 3A through 3M as they
apply to your Portfolio(s).
12
<PAGE>
INFORMATION REGARDING SAFECO ASSET MANAGEMENT COMPANY
SAFECO Asset Management Company ("SAM") serves as investment manager for each
Portfolio. SAM is headquartered in Seattle, Washington and managed over $5
billion in assets as of December 31, 1999. SAM has been an investment adviser
to mutual funds and other investment portfolios since 1973 and its predecessors
have been investment advisers since 1932.
SAM, SAFECO Securities, Inc. ("SAFECO Securities") and SAFECO Services
Corporation ("SAFECO Services") are wholly owned subsidiaries of SAFECO
Corporation. SAFECO Securities is the principal underwriter of each Portfolio
and SAFECO Services is the transfer, dividend and distribution disbursement and
shareholder servicing agent of each Portfolio.
Management and Control of SAM
The names and principal occupations of the directors and executive officers of
SAM are:
<TABLE>
<CAPTION>
Name Position(s) Held with SAM
---- -------------------------
<S> <C>
Ronald L. Spaulding.............................. Chairman
Director
Stephen C. Bauer................................. President
Director
David F. Hill.................................... Senior Vice President
Director
Neal A. Fuller................................... Vice President
Controller
Secretary
Treasurer
David H. Longhurst............................... Assistant Controller
Stephen D. Collier............................... Assistant Secretary
</TABLE>
Several directors and officers own shares of SAFECO Corporation, SAM's parent
company. The combined ownership of such directors and officers is less than one
percent of SAFECO Corporation's common stock.
The address of Messrs. Spaulding and Bauer is Two Union Square, 601 Union
Street, Seattle, WA 98101, which is also the address of SAM. The address of
Messrs. Hill, Fuller, and Longhurst is 10865 Willows Road NE, Redmond, WA
98052. Mr. Collier's address is SAFECO Plaza, Seattle, Washington 98185.
Contracts with Affiliates of SAM
Distribution Arrangements. SAFECO Securities is the principal underwriter for
each Portfolio and distributes shares of each Portfolio under a Distribution
Agreement with the Trust that requires SAFECO Securities to use its best
efforts, consistent with its other businesses, to sell shares of the
Portfolios. Shares of the Portfolios are offered continuously. SAFECO
Securities is not compensated by the Trust for underwriting, distribution or
other activities.
Transfer Agent. SAFECO Services, SAFECO Plaza, Seattle, Washington 98185, is
the transfer, dividend and distribution disbursement and shareholder servicing
agent for the Portfolios under an agreement with the Trust. SAFECO Services
provides, or through subcontracts makes provision for, all required transfer
agent activity, including maintenance of records of each Portfolio's
shareholders, records of transactions involving each Portfolio's shares, and
the compilation, distribution, or reinvestment of income dividends or capital
gains distributions. SAFECO Services is not compensated by the Trust for these
services.
13
<PAGE>
EXECUTIVE OFFICERS, TRUSTEE REMUNERATION
AND OWNERSHIP OF THE TRUST'S SECURITIES
Executive Officers
Executive officers of the Trust are elected by the Board of Trustees each
August to serve a term of one year. The officers receive no compensation from
the Trust for their services as such. The following persons are executive
officers of the Trust:
<TABLE>
<CAPTION>
Name, Address and Age Position(s) Held with the Trust
--------------------- -------------------------------
<S> <C>
David F. Hill.............................. President
10865 Willows Road NE Trustee
Redmond, WA 98052
(51)
Neal A. Fuller............................. Vice President
10865 Willows Road NE Controller
Redmond, WA 98052 Assistant Secretary
(37)
Ronald L. Spaulding........................ Vice President
Two Union Square Treasurer
601 Union Street
Seattle, WA 98101
(56)
David H. Longhurst......................... Assistant Controller
10865 Willows Road NE
Redmond, WA 98052
(42)
Stephen D. Collier......................... Assistant Secretary
SAFECO Plaza
4333 Brooklyn Avenue N.E.
Seattle, WA 98185
(47)
</TABLE>
Trustee Remuneration
Trustees who are not affiliated persons of the Adviser as defined by the 1940
Act receive an annual retainer (on a fund complex wide basis for 25
funds/portfolios) of $20,000 and fees of $2,500 for each Board Meeting attended
and $500 for each Audit Committee meeting attended. In addition, for the fiscal
year ended December 31, 1999, First SAFECO National Life Insurance Company of
New York paid aggregate directors' fees of $4,900.
14
<PAGE>
COMPENSATION TABLE FOR CURRENT TRUSTEES
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Aggregate Benefits Accrued Estimated Annual from Registrant
Compensation As Part of Portfolio Benefits upon and Fund Complex
Trustee from Trust Expenses Retirement Paid to Trustees
------- ------------ -------------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Boh A.
Dickey N/A N/A N/A N/A
Barbara J.
Dingfield $8,337 N/A N/A $35,500
David F.
Hill N/A N/A N/A N/A
Richard W.
Hubbard $7,750 N/A N/A $33,000
Richard E.
Lundgren $8,337 N/A N/A $35,500
Larry L.
Pinnt $8,337 N/A N/A $35,500
John W.
Schneider $8,337 N/A N/A $35,500
</TABLE>
Mr. Dickey and Mr. Hill are officers of various SAFECO companies and are not
compensated by the Trust. Similarly, the officers of the Trust receive no
compensation for their service as officers.
Currently, there is no pension, retirement, or other plan or any arrangement
pursuant to which Trustees or officers of the Trust are compensated by the
Trust.
Ownership of the Trust's Securities
At December 31, 1999, none of the Trustees or officers of the Trust owned
shares of any series portfolio of the Trust.
15
<PAGE>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
Control Persons and Principal Shareholders of Certain Portfolios
At December 31, 1999 SAFECO Life Insurance Company ("SAFECO Life") controlled
each of the Portfolios. At such date it owned of record the following
percentages of the outstanding shares of the Portfolios listed:
<TABLE>
<S> <C>
Equity Portfolio 88.63%
Growth Portfolio 76.40%
Northwest Portfolio 40.53%
Bond Portfolio 100.00%
Money Market Portfolio 88.21%
Small Company Stock Portfolio 100.00%
</TABLE>
At December 31, 1999, SAM owned 9.47% of the Northwest Portfolio's outstanding
shares. At December 31, 1999, SAFECO Corporation owned 11.79% of the Money
Market Portfolio's outstanding shares.
SAFECO Life and SAM are Washington corporations and wholly owned subsidiaries
of SAFECO Corporation. SAFECO Corporation is also a Washington corporation and
has its principal place of business at SAFECO Plaza, Seattle, WA 98185. SAFECO
Life has its principal place of business at 5069 154th Place NE, Redmond, WA
98052. SAM has its principal place of business at Two Union Square, 601 Union
Street, 25th Floor, Seattle, WA 98101.
Principal shareholders of a Portfolio may control the outcome of a shareholder
vote. However, on each proposal or sub-proposal, SAM, SAFECO Life or other
companies under common control with these entities will vote shares of each
Portfolio that it owns pro rata in accordance with the voting instructions
given by Contract Owners who are indirectly invested in shares of the
applicable Portfolio. SAFECO Life, like other Participating Insurance Companies
that own shares of a Portfolio, will solicit voting instructions from its
Contract Owners with respect to any matters that are presented to a vote of
shareholders. To the extent Contract Owners do not provide voting instructions
with respect to any such matter, SAFECO Life will vote shares in the same
proportion as shares for which instructions have been provided.
Security Ownership of Certain Beneficial Owners and Management
The following information was provided to the Portfolios or was contained in
filings with the SEC regarding the beneficial ownership of shares of each
Portfolio as of December 31, 1999 by each person who is known by each Portfolio
to own beneficially, or exercise control or direction over, 5% or more of the
outstanding shares of each Portfolio.
At December 31, 1999, AUL Group Retirement Annuity Separate Account II, whose
address of record is P.O. Box 1995, Indianapolis, IN 46206, owned of record
9.93% of the Growth Portfolio's outstanding shares, and IL Annuity, whose
address of record is 2960 N. Meridian Street, Indianapolis, IN 46208, owned of
record 5.31% of the Growth Portfolio's outstanding shares. AUL Group Retirement
Annuity Separate Account II is controlled by American United Life, and IL
Annuity is controlled by Indianapolis Life Annuity and Insurance Company.
16
<PAGE>
MEETINGS OF THE BOARD AND AUDIT COMMITTEE
The Board of Trustees has a standing Audit Committee whose members are Larry L.
Pinnt, Richard E. Lundgren, Barbara J. Dingfield and John W. Schneider. The
Audit Committee recommends the selection of auditors and reviews the plan for
and results of the audit of the Trust. The Board of Trustees met four times
during the Trust's fiscal year ended December 31, 1999 and the Audit Committee
met four times during such period. On October 13, 1999, the Board established a
Nominating and Compensation Committee. That Committee did not meet during the
Trust's fiscal year ended December 31, 1999. No Board member missed any regular
or committee meetings during 1999.
FUTURE MEETINGS OF SHAREHOLDERS
The Trust is not required to hold Annual Meetings of Shareholders and does not
plan to do so. Accordingly, no anticipated date of the next shareholder meeting
can be provided at this time. The Trustees may call a Special Meeting of
Shareholders for action by shareholder vote as may be required by the 1940 Act
or the Declaration of Trust. Shareholders wishing to submit proposals for
inclusion in a proxy statement for a subsequent shareholder meeting should send
their written request to the Secretary of the Trust.
ANNUAL REPORT
The annual report to shareholders for fiscal year 1999 will be mailed to
shareholders on or about February 28, 2000. The Trust will also furnish,
without charge, a copy of the most recent annual report and a copy of the most
recent semi-annual report following such annual report of any Portfolio.
Requests for such reports may be made by calling (800) 624-5711 or by writing
SAFECO Securities, Inc., 10865 Willows Road NE, Redmond, WA 98052.
OTHER MATTERS
The Board is not aware that any other matters are to be presented for action at
the Meeting. If any other matters come before the Meeting, the persons named in
the enclosed proxy will vote in accordance with their best judgment.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY AND THAT YOUR SHARES BE
REPRESENTED. PLEASE VOTE, SIGN AND RETURN THE ACCOMPANYING FORM OF PROXY IN THE
ENCLOSED ENVELOPE.
17
<PAGE>
Exhibit A
NUMBER OF SHARES OF EACH PORTFOLIO THAT WERE
OUTSTANDING ON JANUARY 14, 2000
<TABLE>
<CAPTION>
Portfolio Outstanding Shares Net Assets
- --------- ------------------ ----------
<S> <C> <C>
Growth Portfolio................................. $
Equity Portfolio.................................
Northwest Portfolio..............................
Small Company Stock Portfolio....................
Bond Portfolio...................................
Money Market Portfolio...........................
----------- ----------
Total..........................................
=========== ==========
</TABLE>
A-1
<PAGE>
Exhibit B
FUNDAMENTAL INVESTMENT POLICIES
The following chart lists the current fundamental investment policies of each
Portfolio except the Small Company Stock Portfolio and indicates how each
policy will be affected by Proposal 3.
<TABLE>
<CAPTION>
Fundamental Policy Proposed Action
------------------------------------------- -------------------------------------------
<C> <S>
Concentration Sub-Proposal 3A: Adopt the modified
fundamental policy below.
Growth, Equity, Northwest and Money Market Growth, Equity, Northwest and Bond
Portfolios: The Portfolio will not Portfolios: The Portfolio will not make
concentrate its investments in particular investments that will result in the
industries and in no event will the concentration (as that term may be defined
Portfolio invest twenty-five (25%) or more in the 1940 Act, any rule or order
of its assets in any one industry. thereunder, or SEC staff interpretation
Securities of foreign banks and foreign thereof) of its investments in the
branches of U.S. banks are considered to be securities of issuers primarily engaged in
one industry. This limitation does not the same industry, provided that this
apply to obligations issued or guaranteed restriction does not limit the Portfolio
by the U.S. Government, its agencies or from investing in obligations issued or
instrumentalities or to certificates of guaranteed by the U.S. government, its
deposit or bankers' acceptances issued by agencies or instrumentalities.
domestic banks.
Bond Portfolio: The Portfolio will not Money Market Portfolio: The Portfolio will
invest more than twenty-five percent (25%) not make investments that will result in
of its assets in securities of issuers in the concentration (as that term may be
the same industry. This restriction does defined in the 1940 Act, any rule or order
not apply to mortgage-related securities or thereunder, or SEC staff interpretation
to obligations issued or guaranteed by the thereof) of its investments in the
U.S. Government, its agencies or securities of issuers primarily engaged in
instrumentalities the same industry, provided that this
restriction does not limit the Portfolio
from investing in obligations issued or
guaranteed by the U.S. government, its
agencies or instrumentalities, or certain
bank instruments issued by domestic banks.
Borrowing Sub-Proposal 3B: Adopt the modified
fundamental policy below.
The Portfolio will not borrow money, except The Portfolio may not borrow money or issue
from banks or affiliates of SAFECO senior securities, except as the 1940 Act,
Corporation at an interest rate not greater any rule or order thereunder, or SEC staff
than that available to the Portfolio from interpretation thereof, may permit.
commercial banks, and then only for
temporary or emergency purposes and not for
investment purposes, and in an amount not
exceeding five percent (5%) of the
Portfolio's assets at the time of
borrowing.
Issuance of Senior Securities
The Portfolio will not issue or sell any
senior security.
</TABLE>
B-1
<PAGE>
<TABLE>
<CAPTION>
Fundamental Policy Proposed Action
- ------------------------------------------- -------------------------------------------
<S> <C>
Underwriting Sub-Proposal 3C: Adopt the modified
fundamental policy below.
The Portfolio will not underwrite The Portfolio may not underwrite the
securities issued by others, except to the securities of other issuers, except that
extent that the Trust may be deemed to be the Portfolio may engage in transactions
an underwriter under the federal securities involving the acquisition, disposition or
laws in connection with the disposition of resale of its portfolio securities, under
portfolio securities. circumstances where it may be considered to
be an underwriter under the Securities Act
of 1933.
Real Estate & Commodities Sub-Proposals 3D and 3E: Adopt the modified
fundamental policies below.
The Portfolio will not invest in The Portfolio may not purchase or sell real
commodities or commodity futures contracts estate unless acquired as a result of
or in real estate, except the Trust may ownership of securities or other
invest in securities which are secured by instruments and provided that this
real estate and securities which are of restriction does not prevent the Portfolio
issuers which invest in or deal in real from investing in issuers which invest,
estate. deal, or otherwise engage in transactions
in real estate or interests therein, or
investing in securities that are secured by
real estate or interests therein, or
exercising rights under agreements relating
to such securities, including the right to
enforce security interests and to hold real
estate acquired by reason of such
enforcement until that real estate can be
liquidated in an orderly manner.
The Portfolio may not purchase or sell
physical commodities, unless acquired as a
result of ownership of securities or other
instruments and provided that this
restriction does not prevent the Portfolio
from engaging in transactions involving
futures contracts and options, forward
currency contracts, swap transactions and
other financial contracts or investing in
securities that are secured by physical
commodities.
Lending Sub-Proposal 3F: Adopt the modified
fundamental policy below.
The Portfolio will not make loans to The Portfolio may not make loans, provided
others, except through the purchase of that this restriction does not prevent the
publicly-distributed debt obligations or Portfolio from purchasing debt obligations,
repurchase agreements. entering into repurchase agreements,
loaning its assets to broker/dealers or
institutional investors and investing in
loans, including assignments and
participation interests.
</TABLE>
B-2
<PAGE>
<TABLE>
<CAPTION>
Fundamental Policy Proposed Action
------------------------------------------- -------------------------------------------
<C> <S>
Portfolio Diversification Sub-Proposal 3G: Adopt the modified
fundamental policy below.
<CAPTION>
-------------------------------------------
<C>
Growth, Equity and Northwest Portfolios: The Portfolio will not purchase securities
The Portfolio will not invest more than of any one issuer if, as a result, more
five percent (5%) of the Portfolio's total than 5% of the Portfolio's total assets
assets in the securities of any one issuer would be invested in securities of that
(other than securities issued by the U.S. issuer or the Portfolio would own or hold
Government, its agencies and more than 10% of the outstanding voting
instrumentalities), except up to twenty- securities of that issuer, except that up
five percent (25%) of the value of the to 25% of the Portfolio's total assets may
Portfolio's assets (not including be invested without regard to these
securities issued by another investment limitations, and except that these
company) may be invested without regard to limitations do not apply to securities
this limit. issued or guaranteed by the U.S.
government, its agencies or
Money Market and Bond Portfolios: The instrumentalities or to securities issued
Portfolio will not invest more than five by other open-end investment companies.
percent (5%) of the Portfolio's total
assets in the securities of any one issuer
(other than securities issued by the U.S.
Government, its agencies and
instrumentalities), except (i) up to
twenty-five percent (25%) of the value the
Portfolio's assets (not including
securities issued by another investment
company) may be invested without regard to
this limit and (ii) up to one hundred
percent (100%) of total assets may be
invested in obligations of or guaranteed by
the U.S. Government, its agencies or
instrumentalities.
Margin and Short Sales Sub-Proposal 3H: Growth, Equity, Northwest
and Bond Portfolios: Replace with the
modified non-fundamental policy below.
The Portfolio will not make short sales The Portfolio will not purchase securities
(sales of securities not presently owned) on margin, provided that the Portfolio may
or purchase securities on margin, except obtain short-term credits as may be
where the Trust has at the time of the sale necessary for the clearance of purchases
by virtue of its ownership in other and sales of securities, and further
securities the right to obtain securities provided that the Portfolio may make margin
equivalent in kind and amount to the deposits in connection with its use of
securities sold and except for such short- financial options and futures, forward and
term credits as are necessary for the spot currency contracts, swap transactions
clearance of transactions, respectively. and other financial contracts or derivative
instruments.
Money Market Portfolio: Eliminate policy on
margin transactions.
Sub-Proposal 3K: Eliminate policy on short
sales.
Officer/Trustee Ownership of Portfolio
Securities Sub-Proposal 3I: Eliminate policy.
The Portfolio will not purchase or retain
the securities of any issuer any of whose
officers, directors or security holders is
an officer or trustee of the Trust if, or
so long as, any such officer or trustee
owns beneficially more than one-half (1/2)
of one percent (1%) of such securities and
the officers or trustees of the Trust,
together own beneficially more than five
percent (5%) of such securities.
</TABLE>
B-3
<PAGE>
<TABLE>
<CAPTION>
Fundamental Policy Proposed Action
------------------------------------------- -------------------------------------------
<C> <S>
Newly Established Issuers Sub-Proposal 3J: Eliminate policy.
The Portfolio will not invest more than
five percent (5%) of the total assets of
the Portfolio in securities of issuers
which with their predecessors have a record
of less than three years continuous
operation.
Classes of an Issuer Sub-Proposal 3L: Eliminate policy.
The Portfolio will not purchase securities
of any issuer (other than obligations of,
or guaranteed by, the U.S. Government, its
agencies and instrumentalities) if such
purchase would cause more than ten percent
(10%) of any class of securities of such
issuer to be held by the Portfolio.
Purchases or Sales from Affiliates Sub-Proposal 3M: Eliminate policy.
The Portfolio will not purchase from or
sell portfolio securities to any officer or
director, the Trust's investment advisor,
principal underwriter or any affiliates or
subsidiaries thereof.
</TABLE>
B-4
<PAGE>
The following chart lists the current fundamental investment policies of the
Small Company Stock Portfolio ("Small Company Portfolio") and indicates how
each policy will be affected by Proposal 3.
<TABLE>
<CAPTION>
Fundamental Policy Proposed Action
------------------------------------------- -------------------------------------------
<C> <S>
Concentration Sub-Proposal 3A: Adopt the modified
fundamental policy below.
The Portfolio will not purchase the The Portfolio will not make investments
securities of any issuer (except the U.S. that will result in the concentration (as
Government, its agencies or that term may be defined in the 1940 Act,
instrumentalities) if, as a result, more any rule or order thereunder, or SEC staff
than 25% of the Small Company Portfolio's interpretation thereof) of its investments
total assets would be invested in in the securities of issuers primarily
securities of companies whose principal engaged in the same industry, provided that
business activities are in the same this restriction does not limit the
industry. Portfolio from investing in obligations
issued or guaranteed by the U.S.
government, its agencies or
instrumentalities.
Borrowing Sub-Proposal 3B: Adopt the modified
fundamental policy below.
The Portfolio will not borrow money, except The Portfolio may not borrow money or issue
the Small Company Portfolio may borrow senior securities, except as the 1940 Act,
money for temporary and emergency purposes any rule or order thereunder, or SEC staff
(not for leveraging or investment purposes) interpretation thereof, may permit.
in an amount not exceeding 33 1/3% of its
total assets (including the amount
borrowed) less liabilities (other than
borrowings). Any borrowings by the Small
Company Portfolio that come to exceed this
amount shall be reduced within three
business days to the extent necessary to
comply with the 33 1/3% limit. "Business
Day" means any day the New York Stock
Exchange is open for trading.
Issuance of Senior Securities
The Portfolio will not issue senior
securities, except as permitted under the
1940 Act, the rules or regulations
promulgated thereunder or pursuant to a no-
action letter or an exemptive order issued
by the Securities and Exchange Commission.
Underwriting Sub-Proposal 3C: Adopt the modified
fundamental policy below.
The Portfolio will not act as underwriter The Portfolio may not underwrite the
of securities issued by any other person, securities of other issuers, except that
firm or corporation; except to the extent the Portfolio may engage in transactions
that, in connection with the disposition of involving the acquisition, disposition or
portfolio securities, the Small Company resale of its portfolio securities, under
Portfolio may be deemed an underwriter circumstances where it may be considered to
under federal securities laws. be an underwriter under the Securities Act
of 1933.
</TABLE>
B-5
<PAGE>
<TABLE>
<CAPTION>
Fundamental Policy Proposed Action
------------------------------------------- -------------------------------------------
<C> <S>
Real Estate Sub-Proposal 3D: Adopt the modified
fundamental policy below.
The Portfolio will not purchase or sell The Portfolio may not purchase or sell real
real estate, except real estate investment estate unless acquired as a result of
trusts. ownership of securities or other
instruments and provided that this
restriction does not prevent the Portfolio
from investing in issuers which invest,
deal, or otherwise engage in transactions
in real estate or interests therein, or
investing in securities that are secured by
real estate or interests therein, or
exercising rights under agreements relating
to such securities, including the right to
enforce security interests and to hold real
estate acquired by reason of such
enforcement until that real estate can be
liquidated in an orderly manner.
Commodities Sub-Proposal 3E: Adopt the modified
fundamental policy below.
The Portfolio will not purchase or sell The Portfolio may not purchase or sell
physical commodities unless acquired as a physical commodities, unless acquired as a
result of ownership of securities or other result of ownership of securities or other
instruments; however, the Small Company instruments and provided that this
Portfolio may purchase or sell options or restriction does not prevent the Portfolio
futures contracts and invest in securities from engaging in transactions involving
or other instruments backed by physical futures contracts and options, forward
commodities. currency contracts, swap transactions and
other financial contracts or investing in
securities that are secured by physical
commodities.
Lending Sub-Proposal 3F: Adopt the modified
fundamental policy below.
The Portfolio will not lend any security or The Portfolio may not make loans, provided
make any loan if, as a result, more than 33 that this restriction does not prevent the
1/3% of its total assets would be lent to Portfolio from purchasing debt obligations,
other parties; however, this limit does not entering into repurchase agreements,
apply to purchases of debt securities or to loaning its assets to broker/dealers or
repurchase agreements. institutional investors and investing in
loans, including assignments and
participation interests.
Portfolio Diversification Sub-Proposal 3G: Adopt the modified
fundamental policy below.
The Portfolio will not purchase the The Portfolio will not purchase securities
securities of any issuer (except the U.S. of any one issuer if, as a result, more
Government, its agencies or than 5% of the Portfolio's total assets
instrumentalities) if as a result more than would be invested in securities of that
5% of the value of the Small Company issuer or the Portfolio would own or hold
Portfolio's total assets would be invested more than 10% of the outstanding voting
in the securities of such issuer or the securities of that issuer, except that up
Small Company Portfolio would own or hold to 25% of the Portfolio's total assets may
more than 10% of the outstanding voting be invested without regard to these
securities of such issuer, except that up limitations, and except that these
to 25% of the value of such assets (which limitations do not apply to securities
25% shall not include securities issued by issued or guaranteed by the U.S.
another investment company) may be invested government, its agencies or
without regard to these limits. instrumentalities or to securities issued
by other open-end investment companies.
</TABLE>
B-6
<PAGE>
SAFECO RESOURCE SERIES TRUST
P.O. BOX 9135
HINGHAM, MA 02043-9135
YOUR VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN ALL VOTING INSTRUCTION CARDS RECEIVED IN THE
ENCLOSED POSTAGE PAID ENVELOPE.
Please fold and detach card at perforation before mailing.
INSURANCE COMPANY NAME PRINTS HERE
PORTFOLIO NAME PRINTS HERE
THIS VOTING INSTRUCTION CARD IS SOLICITED ON BEHALF OF THE BOARD OF YOUR
PORTFOLIO
Special Meeting of Shareholders - March 7, 2000
The undersigned, revoking previous proxies, hereby instructs the above-
referenced Insurance Company (the Company) to vote all shares of the above-
referenced Portfolio, which are held in the account of the undersigned in the
Separate Account, at the Special Meeting of Shareholders of the SAFECO Resource
Series Trust to be held at the offices of SAFECO Corporation, SAFECO Plaza, 4333
Brooklyn Avenue NE, Seattle, Washington, on Tuesday, March 7, 2000 at 8:00 a.m.,
Pacific time, and at any adjournments thereof. The Company is hereby instructed
to vote on the proposals described in the Proxy Statement as specified on the
reverse side. The shares represented by this voting instruction will be voted
"FOR" all proposals, with discretionary power to vote upon such other business
as may properly come before the meeting, unless instructions to the contrary are
given on the reverse. The undersigned acknowledges receipt of the Trust's Notice
of Special Meeting and Proxy Statement dated January 27, 2000.
PLEASE SIGN AND RETURN PROMPTLY IN ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED.
Dated ______________, 2000
Please sign exactly as your name or names appear. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title as
such.
[ ]
Signature(s) of Shareholder(s) SAFECO
<PAGE>
NOTE: YOUR VOTING INSTRUCTION FORM IS NOT VALID UNLESS IT IS SIGNED.
Please vote by filling in the appropriate boxes below in blue or black ink.
Please fold and detach at perforation. Return bottom portion only.
1. To elect the nominees listed below as Trustees. (01) Boh A. Dickey, (02)
Barbara J. Dingfield, (03) David F. Hill, (04) Richard W. Hubbard, (05)
Richard E. Lundgren, (06) Larry Pinnt and (07) John W. Schneider
FOR WITHHOLD FOR ALL EXCEPT
[ ] [ ] [ ]
To withhold authority to vote for any individual nominee, check the "For All
Except" box and print that nominee's name on the line below.
- --------------------------------------------------------------------------------
2. To ratify the selection of Ernst & Young LLP to act as the Trust's
independent auditors.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To make changes to the following fundamental investment restrictions for
designated portfolios of the Trust.
FOR ALL PORTFOLIOS FOR ALL PORTFOLIOS EXCEPT
SMALL COMPANY STOCK
A. Concentration H. Margin transactions
B. Borrowing I. Securities of issuers owned by
officers/trustees
C. Underwriting J. Newly established issuers
D. Real Estate K. Short Sales
E. Commodities L. 10% limit on classes
F. Lending M. Purchases/sales from affiliates
G. Diversification
FOR ALL AGAINST ALL ABSTAIN ALL
(except as
marked to
the contrary
at left)
[ ] [ ] [ ]
To vote against a particular proposed change, check the "For all (except as
marked...)" box and write the sub-proposal letter(s) on the line below.
- --------------------------------------------------------------------------------
4. To transact such other business as may properly come before the meeting.
SAFECO
<PAGE>
Please fold and detach card at perforation before mailing.
PORTFOLIO NAME PRINTS HERE
PROXY SOLICITED ON BEHALF OF THE BOARD OF YOUR PORTFOLIO
SAFECO RESOURCE SERIES TRUST
Special Meeting of Shareholders - March 7, 2000
The undersigned shareholder of the above-referenced Portfolio, a series of
SAFECO Resource Series Trust, hereby votes all the shares of the Portfolio which
the undersigned is entitled to vote as of January 14, 2000, the record date, at
the Special Meeting of Shareholders of the SAFECO Resource Series Trust to be
held at the offices of SAFECO Corporation, SAFECO Plaza, 4333 Brooklyn Avenue
NE, Seattle, Washington, on Tuesday, March 7, 2000 at 8:00 a.m., Pacific time,
and at any adjournments thereof.
PLEASE SIGN AND RETURN PROMPTLY IN ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED.
Dated ______________, 2000
Please sign exactly as your name or names appear. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title as
such.
[ ]
Signature(s) of Shareholder(s) SAFECO
<PAGE>
Please vote by filling in the appropriate boxes below in blue or black ink.
Please fold and detach at perforation. Return bottom portion only.
1. To elect the nominees listed below as Trustees. (01) Boh A. Dickey, (02)
Barbara J. Dingfield, (03) David F. Hill, (04) Richard W. Hubbard, (05)
Richard E. Lundgren, (06) Larry Pinnt and (07) John W. Schneider
FOR WITHHOLD FOR ALL EXCEPT
[ ] [ ] [ ]
To withhold authority to vote for any individual nominee, check the "For All
Except" box and print that nominee's name on the line below.
- --------------------------------------------------------------------------------
2. To ratify the selection of Ernst & Young LLP to act as the Trust's
independent auditors.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To make changes to the following fundamental investment restrictions for
designated portfolios of the Trust.
FOR ALL PORTFOLIOS FOR ALL PORTFOLIOS EXCEPT
SMALL COMPANY STOCK
A. Concentration H. Margin transactions
B. Borrowing I. Securities of issuers owned by
officers/trustees
C. Underwriting J. Newly established issuers
D. Real Estate K. Short Sales
E. Commodities L. 10% limit on classes
F. Lending M. Purchases/sales from affiliates
G. Diversification
FOR ALL AGAINST ALL ABSTAIN ALL
(except as
marked to
the contrary
at left)
[ ] [ ] [ ]
To vote against a particular proposed change, check the "FOR ALL (except as
marked...)" box and write the sub-proposal letter(s) on the line below.
- --------------------------------------------------------------------------------
4. To transact such other business as may properly come before the meeting.
SAFECO
