<PAGE> 1
Registration Nos. 33-22132/811-5574
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No. / /
----------------
Post-Effective Amendment No. 10 /X/
---------------
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 11 /X/
---------------
(Check appropriate box or boxes.)
SAFECO Taxable Bond Trust
-------------------------
(Exact Name of Registrant as Specified in Charter)
SAFECO Plaza, Seattle, Washington 98185
--------------------------------- -----
(Address of Principal Executive Offices) Zip Code
Registrant's Telephone Number, including Area Code (206) 545-5269
Name and Address of Agent for Service
DAVID F. HILL
SAFECO Plaza
Seattle, Washington 98185
(206) 545-5269
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective
immediately upon filing pursuant to paragraph (b)
- ---
X on January 31, 1996 pursuant to paragraph (b)
- ---
60 days after filing pursuant to paragraph (a)
- ---
on pursuant to paragraph (a) of Rule 485
- ---- -------------------
================================================================================
Registrant is registering an indefinite number of its shares under the
Securities Act of 1993, by declaration made pursuant to Section 24(f) of the
Investment Company Act of 1940 (Act). Pursuant to Rule 24f-2 under the Act,
Registrant filed a Rule 24f-2 Notice on November 29, 1995.
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The Exhibit Index is at page .
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<PAGE> 3
SAFECO TAXABLE BOND TRUST
Registration Statement on Form N-1A
Cross Reference Sheet
Part A
<TABLE>
<CAPTION>
Location
Item No. in Prospectus
- -------- -------------
<S> <C> <C>
Item 1. Cover Page Cover Page
Item 2. Synopsis Introduction to the
Trust and the Funds;
Fund Expenses
Item 3. Condensed Financial Information Financial Highlights;
Performance
Information
Item 4. General Description of Registrant The Trust and Each
Fund's Investment
Policies; Information
about Share Ownership
and Companies that
Provide Services to the
Trust; Risk Factors;
Ratings Supplement
Item 5. Management of the Trust Information about Share
Ownership and Companies
that Provide Services
to the Trust; Portfolio
Managers; Fund Expenses
Item 6. Capital Stock and Other Securities Cover Page; Persons
Controlling the Funds;
Fund Distributions and
How They are Taxed;
Information About Share
Ownership and Companies
that Provide Services
to the Trust
Item 7. Purchase of Securities Being Offered How to Purchase Shares;
How to Exchange Shares
from One Fund to
Another; How to
Systematically Purchase
or Redeem Shares; Share
Price Calculation; Tax
Deferred Retirement
Plans; Account
Statements; Telephone
Transactions;
Transactions Through
Registered Investment
Advisers
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
Item 8. Redemption or Repurchase How to Redeem Shares;
How to Exchange Shares
from One Fund To
Another; How to
Systematically Purchase
or Redeem Shares;
Account Changes and
Signature Requirements;
Account Statements;
Telephone Transactions;
Transactions Through
Registered Investment
Advisers
Item 9. Pending Legal Proceedings Not applicable
</TABLE>
Part B
<TABLE>
<CAPTION>
Location in Statement
Item No. of Additional Information
- -------- -------------------------
<S> <C> <C>
Item 10. Cover page Cover page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History Not applicable
Item 13. Investment Objectives and Policies Description of Ratings
Investment Policies; Additional
Investment Information; Commercial
Paper
Item 14. Management of the Trust
Trustees and Officers
Item 15. Control Persons and Principal Principal Shareholders of
Holders of Securities the Funds
Item 16. Investment Advisory and Other Services Investment Advisory and
Other Services
Item 17. Brokerage Allocation and Other Brokerage Practices
Practices
Item 18. Capital Stock and Other Securities Not Applicable
Item 19. Purchase, Redemption and Pricing Additional Information
of Securities Being Offered on Calculation of Net
Asset Value Per Share;
Redemption in Kind
Item 20. Tax Status Additional Tax Information
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C>
Item 21. Underwriters Investment Advisory and Other
Services
Item 22. Calculation of Performance Data Additional Performance
Information
Item 23. Financial Statements Financial Statements
</TABLE>
Part C
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C of this Registration Statement.
<PAGE> 6
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SAFECO INTERMEDIATE-TERM U.S. TREASURY FUND
SAFECO GNMA FUND
SAFECO HIGH-YIELD BOND FUND
January 31, 1996
Each Fund described in this Prospectus is a series of the SAFECO Taxable Bond
Trust ("Trust"), an open-end, management investment company consisting of three
separate series.
There are market risks in all securities transactions. This Prospectus sets
forth the information an investor should know before investing. PLEASE READ AND
RETAIN THE PROSPECTUS FOR FUTURE REFERENCE. A Statement of Additional
Information, dated January 31, 1996, and incorporated herein by reference, has
been filed with the Securities and Exchange Commission and is available at no
charge upon request by calling one of the numbers listed on this page. The
Statement of Additional Information contains more information about most of the
topics in this Prospectus as well as information about the trustees and officers
of the Trust.
For additional assistance, please call or write:
NATIONWIDE 1-800-624-5711; SEATTLE 206-545-7319
TTY/TDD SERVICE 1-800-438-8718
SAFECO MUTUAL FUNDS
P.O. BOX 34890
SEATTLE, WA 98124-1890
ALL TELEPHONE CALLS ARE TAPE-RECORDED
FOR YOUR PROTECTION.
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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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-- 1 --
<PAGE> 7
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The SAFECO INTERMEDIATE-TERM U.S. TREASURY FUND has as its investment objective
to provide as high a level of current income as is consistent with the
preservation of capital. During normal market conditions, the Fund will invest
at least 65% of its total assets in direct obligations of the U.S. Treasury.
The SAFECO GNMA FUND has as its investment objective to provide as high a level
of current interest income as is consistent with the preservation of capital
through the purchase of U.S. Government securities. During normal market
conditions, the Fund will invest at least 65% of its total assets in Government
National Mortgage Association mortgage-backed securities.
The SAFECO HIGH-YIELD BOND FUND has as its investment objective to provide a
high level of current interest income through the purchase of high-yield,
fixed-income securities. During normal market conditions, the Fund will invest
at least 65% of its total assets in high-yield, fixed-income securities.
-- 2 --
<PAGE> 8
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TABLE OF CONTENTS
<TABLE>
<S> <C>
Introduction to the Trust and the Funds 4
Fund Expenses 5
Financial Highlights 7
The Trust and Each Fund's Investment Policies 10
Risk Factors 21
Portfolio Managers 24
Persons Controlling the Funds 25
Information about Share Ownership and Companies
that Provide Services to the Trust 25
Performance Information 28
Fund Distributions and How They Are Taxed 29
Tax-Deferred Retirement Plans 31
Account Statements 33
Account Changes and Signature Requirements 33
Share Price Calculation 34
How to Purchase Shares 34
How to Redeem Shares 37
How to Systematically Purchase or Redeem Shares 39
How to Exchange Shares from One Fund to Another 40
Telephone Transactions 42
Transactions Through Registered Investment Advisers 43
Debt Securities Held by SAFECO High-Yield Bond Fund 44
Description of Debt Ratings 45
</TABLE>
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<PAGE> 9
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INTRODUCTION TO THE TRUST AND THE FUNDS
The Trust is a series investment company that currently issues shares
representing three mutual funds: SAFECO Intermediate-Term U.S. Treasury Fund
("Intermediate Treasury Fund"), SAFECO GNMA Fund ("GNMA Fund") and SAFECO
High-Yield Bond Fund ("High-Yield Bond Fund") (collectively, the "Funds"). Each
Fund is a diversified series of the Trust, an open-end, management investment
company which continuously offers to sell and redeem (buy back) its shares at
the current net asset value per share without any sales or redemption charges or
12b-1 fees.
The Intermediate Treasury Fund has as its investment objective to provide as
high a level of current interest income as is consistent with the preservation
of capital.
The GNMA Fund has as its investment objective to provide as high a level of
current interest income as is consistent with the preservation of capital
through the purchase of U.S. Government securities.
The High-Yield Bond Fund has as its investment objective to provide a high level
of current interest income through the purchase of high-yield, fixed-income
securities.
There is, of course, no assurance that a Fund will achieve its investment
objective. See "The Trust and Each Fund's Investment Policies" for more
information.
There is a risk that the market value of a Fund's portfolio securities may
decrease and result in a decrease in the value of a shareholder's investment.
Also, the value of a Fund's portfolio will normally fluctuate inversely with
changes in interest rates. In addition, the High-Yield Bond Fund is subject to
special risks associated with securities of lower quality, sometimes referred to
as "junk" bonds, which it will purchase to pursue its investment objective. See
"The Trust and Each Fund's Investment Policies" for more information on the
investment policies and risks for each Fund.
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<PAGE> 10
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INTRODUCTION TO THE TRUST AND THE FUNDS (Continued)
Each Fund is managed by SAFECO Asset Management Company ("SAM"). SAM is
headquartered in Seattle, Washington, and manages over $2 billion in mutual fund
assets as of December 31, 1995. SAM has been an adviser to mutual funds and
other investment portfolios since 1973, and its predecessors have been such
advisers since 1932. See "Information about Share Ownership and Companies which
Provide Services to the Trust" for more information.
EACH FUND:
- - Is 100% no-load; there are no sales or redemption charges or 12b-1 fees.
- - Offers exchanges as well as easy access to your money through telephone
redemptions and wire transfers.
- - Pays dividends, if any, monthly.
- - Has a minimum initial investment of $1,000 for regular accounts and $250 for
IRAs.
FUND EXPENSES
A. SHAREHOLDER TRANSACTION EXPENSES FOR EACH FUND
<TABLE>
<CAPTION>
SALES
LOAD IMPOSED
SALES ON DEFERRED
LOAD IMPOSED REINVESTED SALES REDEMPTION EXCHANGE
ON PURCHASES DIVIDENDS LOAD FEES FEES
- ------------ ------------ ---------- ---------- --------
<S> <C> <C> <C> <C>
None None None None None
</TABLE>
SAFECO Services Corporation, the transfer agent for the Funds, charges a $10 fee
to wire redemption proceeds.
-- 5 --
<PAGE> 11
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FUND EXPENSES (Continued)
B. ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
TOTAL
12B-1 MANAGEMENT OTHER OPERATING
FUND FEES + FEE + EXPENSES = EXPENSES
- ---------------------- ----- ---------- -------- ---------
<S> <C> <C> <C> <C>
High-Yield Bond None .64% .37% 1.01%
GNMA None .63% .38% 1.01%
Intermediate Treasury None .54% .42% .96%
</TABLE>
The amounts shown are actual expenses paid by shareholders for the fiscal year
ended September 30, 1995. See "Information about Share Ownership and Companies
that Provide Services to the Trust" on page 25 for more information.
C. EXAMPLE OF EXPENSES
You would pay the following expenses on a $1,000 investment, assuming 5% annual
return. The example assumes that all dividends and other distributions are
reinvested and that the percentage amounts listed in "Annual Operating Expenses"
above remain the same in the years shown.
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
High-Yield Bond $10 $32 $56 $124
GNMA $10 $32 $56 $124
Intermediate
Treasury $10 $31 $53 $118
</TABLE>
The purpose of the tables is to assist you in understanding the various costs
and expenses that an investor in each Fund would bear, directly or indirectly.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. A FUND'S ACTUAL EXPENSES OR PERFORMANCE MAY BE GREATER OR LESS THAN
THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS REQUIRED BY SECURITIES AND EXCHANGE
COMMISSION REGULATIONS APPLICABLE TO ALL MUTUAL FUNDS, AND IT IS NOT A
PREDICTION OF, NOR DOES IT REPRESENT, PAST OR FUTURE EXPENSES OR THE PERFORMANCE
OF ANY FUND.
-- 6 --
<PAGE> 12
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FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO INTERMEDIATE-TERM U.S. TREASURY FUND
The supplemental financial information and performance data has been derived
from the Financial Statements and should be read in conjunction therewith.
<TABLE>
<CAPTION>
SEPTEMBER 7, 1988
(INITIAL PUBLIC
YEAR ENDED SEPTEMBER 30 OFFERING) TO
1995 1994 1993 1992 1991 1990 1989 SEPT. 30, 1988
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning
of period $9.74 $10.74 $10.69 $10.20 $9.83 $9.96 $9.95 $9.93
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income .55 .52 .60 .72 .75 .77 .77 .05
Net realized and
unrealized gain
(loss) on
investment
transactions .50 (1.00) .49 .54 .37 (.13) .01 .02
------ ------ ------ ------ ----- ----- ----- -----
Total from
investment
operations 1.05 (.48) 1.09 1.26 1.12 .64 .78 .07
------ ------ ------ ------ ----- ----- ----- -----
LESS DISTRIBUTIONS:
Dividends from net
investment income (.55) (.52) (.60) (.72) (.75) (.77) (.77) (.05)
Distributions from
capital gains -- -- (.44) (.05) -- -- -- --
------ ------ ------ ------ ----- ----- ----- -----
Total distributions (.55) (.52) (1.04) (.77) (.75) (.77) (.77) (.05)
------ ------ ------ ------ ----- ----- ----- -----
Net asset value at
end of period $10.24 $9.74 $10.74 $10.69 $10.20 $9.83 $9.96 $9.95
====== ====== ====== ====== ===== ===== ===== =====
Total return 11.07% -4.56% 10.51% 12.78% 11.80% 6.65% 8.20% .69%+
Net assets at end of
period
(000's omitted) $13,774 $13,367 $14,706 $12,205 $9,458 $6,916 $6,249 $5,007
Ratio of expenses to
average
net assets .96% .90% .99% .98% 1.00% 1.00% .96% 1.06%++
Ratio of net
investment income
to average net
assets 5.51% 5.08% 5.52% 6.89% 7.45% 7.76% 7.82% 7.46%++
Portfolio turnover
rate 124.9% 75.46% 104.94% 37.19% 9.51% 24.17% 4.36% None
</TABLE>
+ Not annualized.
++ Annualized.
More information about the Fund is contained in its Annual Report to
shareholders which may have accompanied this Prospectus or which may be obtained
without charge by calling the number on the Prospectus cover.
-- 7 --
<PAGE> 13
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FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO GNMA FUND
The supplemental financial information and performance data has been derived
from the Financial Statements and should be read in conjunction therewith.
<TABLE>
<CAPTION>
JULY 15, 1986
(INITIAL
PUBLIC
YEAR ENDED SEPTEMBER 30 OFFERING) TO
1995 1994 1993 1992 1991 1990 1989 1988 1987 SEPT. 30, 1986
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value
at beginning
of period $9.05 $10.03 $9.95 $9.68 $9.16 $9.23 $9.06 $9.13 $10.00 $9.95
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income .60 .60 .67 .73 .78 .76 .81 .87 .82 .18
Net realized
and unrealized
gain (loss) on
investment
transactions .40 (.98) .08 .27 .52 (.07) .17 (.07) (.87) .05
----- ------ ------ ----- ----- ----- ----- ----- ----- ------
Total from
investment
operations 1.00 (.38) .75 1.00 1.30 .69 .98 .80 (.05) .23
----- ------ ------ ----- ----- ----- ----- ----- ----- ------
LESS DISTRIBU-
TIONS:
Dividends from
net
investment
income (.60) (.60) (.67) (.73) (.78) (.76) (.81) (.87) (.82) (.18)
----- ------ ------ ----- ----- ----- ----- ----- ----- ------
Net asset value
at end
of period $9.45 $9.05 $10.03 $9.95 $9.68 $9.16 $9.23 $9.06 $9.13 $10.00
===== ====== ====== ===== ===== ===== ===== ===== ===== ======
Total return 11.49% -3.91% 7.81% 10.75% 14.72% 7.77% 11.25% 9.05% -.63% 1.71%+*
Net assets at
end of period
(000'S
omitted) $44,055 $46,176 $62,720 $56,474 $42,207 $28,587 $27,063 $27,724 $20,257 $8,057
Ratio of
expenses to
average net
assets 1.01% .95% .93% .94% .97% .99% 1.02% 1.06% 1.05% 1.25%++
Ratio of net
investment
income to
average
net assets 6.55% 6.26% 6.71% 7.49% 8.23% 8.28% 8.83% 9.51% 8.59% 8.01%++
Portfolio
turnover rate 131.24% 55.12% 70.96% 24.66% 43.80% 90.19% 77.39% 109.53% 100.96% 33.47%++
</TABLE>
* Unaudited.
+ Not annualized.
++ Annualized.
More information about the Fund is contained in its Annual Report to
shareholders which may have accompanied this Prospectus or which may be obtained
without charge by calling the number on the Prospectus cover.
-- 8 --
<PAGE> 14
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FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO HIGH-YIELD BOND FUND
The supplemental financial information and performance data has been derived
from the Financial Statements and should be read in conjunction therewith.
<TABLE>
<CAPTION>
SEPTEMBER 7, 1988
(INITIAL PUBLIC
YEAR ENDED SEPTEMBER 30 OFFERING) TO
1995 1994 1993 1992 1991 1990 1989 SEPT. 30, 1988
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value
at beginning
of period $8.55 $9.22 $8.92 $8.35 $7.94 $9.33 $9.86 $9.89
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income .79 .82 .91 .83 .93 1.04 1.11 .07
Net realized and
unrealized gain
(loss)
on investment
transactions .13 (.67) .30 .57 .41 (1.39) (.53) (.03)
------ ------ ------ ------ ------ ------ ------ ------
Total from
investment
operations .92 .15 1.21 1.40 1.34 (.35) .58 .04
------ ------ ------ ------ ------ ------ ------ ------
LESS
DISTRIBUTIONS:
Dividends from
net
investment
income (.79) (.82) (.91) (.83) (.93) (1.04) (1.11) (.07)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value
at end of period $8.68 $8.55 $9.22 $8.92 $8.35 $7.94 $9.33 $9.86
====== ====== ====== ====== ====== ====== ====== ======
Total return 11.43% 1.61% 14.29% 17.52% 18.18% -4.04% 6.10% .37%+
Net assets at end
of period
(000's omitted) $39,178 $27,212 $28,291 $19,672 $11,931 $7,786 $9,051 $5,204
Ratio of expenses
to
average net
assets 1.01% 1.03% 1.09% 1.05% 1.11% 1.15% 1.11% 1.25%++
Ratio of net
investment
income to
average
net assets 9.28% 9.26% 9.94% 9.66% 11.51% 11.90% 11.52% 10.27%++
Portfolio
turnover rate 38.03% 63.02% 50.27% 40.66% 32.46% 18.46% 12.57% None
</TABLE>
+ Not annualized.
++ Annualized.
More information about the Fund is contained in its Annual Report to
shareholders which may have accompanied this Prospectus or which may be obtained
without charge by calling the number on the Prospectus cover.
-- 9 --
<PAGE> 15
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THE TRUST AND EACH FUND'S INVESTMENT POLICIES
The Trust is a Delaware business trust established by a Trust Instrument dated
May 13, 1993. The Trust currently consists of three mutual funds: Intermediate
Treasury Fund, GNMA Fund and High-Yield Bond Fund, each of which is a
diversified series of the Trust.
The investment objective and investment policies for each Fund are described
below. The Trust's Board of Trustees may change a Fund's objective without
shareholder vote, but no such change will be made without 30 days' prior written
notice to shareholders of that Fund. In the event a Fund 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. Current holdings and recent
investment strategies are described in the Funds' financial reports, which are
sent to shareholders twice a year.
Each Fund has adopted a number of investment restrictions. If a Fund 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 a Fund complies with the applicable policy (except to the extent the
change may impact a Fund's borrowing limits or restrictions on its holding of
illiquid securities). Unless otherwise stated, the investment policies and
limitations described below under each Fund's description and "Common Investment
Practices" are non-fundamental and may be changed by the Board of Trustees
without shareholder vote.
INTERMEDIATE TREASURY FUND
The investment objective of the Intermediate Treasury Fund is to provide as high
a level of current income as is consistent with the preservation of capital. The
Intermediate Treasury Fund will seek to maintain a portfolio of U.S. Treasury
obligations with an average weighted maturity of between
-- 10 --
<PAGE> 16
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THE TRUST AND EACH FUND'S INVESTMENT POLICIES (Continued)
three and ten years. Although the average weighted maturity of the portfolio
will fall within a range of three to ten years, individual obligations held by
the Intermediate Treasury Fund may have maturities outside that range.
To pursue its objective, the Intermediate Treasury Fund:
1. WILL INVEST, DURING NORMAL MARKET CONDITIONS, AT LEAST 65% OF ITS TOTAL
ASSETS IN DIRECT OBLIGATIONS OF THE U.S. TREASURY SUCH AS U.S. TREASURY
BILLS, NOTES AND BONDS. These securities are supported by the full faith and
credit of the U.S. Government.
2. WILL INVEST UP TO 35% OF ITS TOTAL ASSETS IN:
- - OTHER U.S. GOVERNMENT SECURITIES, including (a) securities supported by the
full faith and credit of the U.S. Government but that are not direct
obligations of the U.S. Treasury, such as securities issued by the Government
National Mortgage Association, (b) securities that are not supported by the
full faith and credit of the U.S. Government but are supported by the
issuer's ability to borrow from the U.S. Treasury such as securities issued
by the Federal National Mortgage Association ("FNMA") and the Federal Home
Loan Mortgage Corporation ("FHLMC"), and (c) securities supported solely by
the creditworthiness of the issuer such as securities issued by the Tennessee
Valley Authority ("TVA"). While U.S. Government securities are considered to
be of the highest credit quality available, they are subject to the same
market risks as comparable debt securities.
- - CORPORATE DEBT SECURITIES which at the time of purchase are rated in the
top three grades (A or higher) by either Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Rating Group ("S&P"), or, if unrated,
determined by SAM to be of comparable quality to such rated debt securities.
In addition to reviewing ratings, SAM will analyze the quality of rated and
unrated corporate bonds for purchase by the Fund
-- 11 --
<PAGE> 17
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THE TRUST AND EACH FUND'S INVESTMENT POLICIES (Continued)
by evaluating various factors that may include the issuer's capital structure,
earnings power and quality of management. See "Description of Debt Ratings"
beginning on page 45.
3. MAY INVEST UP TO 5% OF ITS TOTAL ASSETS IN EACH OF THE FOLLOWING:
- - YANKEE SECTOR DEBT SECURITIES. The Yankee sector is made up of securities
issued and traded in the U.S. by foreign issuers. These bonds have investment
risks that are different from those of domestic issuers. SAM will attempt, to
the extent possible, to analyze potential investments in foreign issuers on
the same basis as the rating services analyze domestic issuers.
- - EURODOLLAR BONDS. Eurodollar bonds are bonds issued by either U.S. or
foreign issuers that are traded in European bond markets and denominated in
U.S. dollars. The Intermediate Treasury Fund will purchase Eurodollar bonds
through U.S. securities dealers and hold such bonds in the U.S.
- - MUNICIPAL SECURITIES. If, in the opinion of SAM, the potential for
appreciation is greater than and the yield is comparable to or greater than
similarly-rated taxable securities, the Intermediate Treasury Fund will
purchase municipal securities.
GNMA FUND
The investment objective of the GNMA Fund is to provide as high a level of
current interest income as is consistent with the preservation of capital
through the purchase of U.S. Government securities.
To pursue its objective, the GNMA Fund:
1. WILL INVEST, DURING NORMAL MARKET CONDITIONS, AT LEAST 65% OF ITS PORTFOLIO
IN MORTGAGE-BACKED SECURITIES ISSUED BY THE GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION
-- 12 --
<PAGE> 18
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THE TRUST AND EACH FUND'S INVESTMENT POLICIES (Continued)
("GNMA SECURITIES"). The GNMA securities in which the GNMA Fund will invest
represent ownership in a pool of mortgage loans or securities collateralized
by pools of mortgage loans. Each mortgage loan in the pool is either insured
by the Federal Housing Administration or Farmers Home Administration or
guaranteed by the Veterans Administration. Once approved by GNMA, the timely
payment of principal and interest by each mortgage pool is guaranteed by
GNMA. The GNMA guarantee represents a general obligation of the U.S.
Treasury.
GNMA securities in which the GNMA Fund will invest include "modified
pass-through" securities and collateralized mortgage obligations ("CMOs").
Modified pass-through securities "pass through" to their holders the
scheduled monthly interest and principal payments relating to mortgage loans
in the pool. CMOs are securities collateralized by a portfolio of mortgage
loans or mortgage-backed securities. CMOs are issued with a number of classes
or series which have different maturities and which may represent interests
in some or all of the interest or principal of the underlying collateral or a
combination thereof. One type of CMO that the GNMA Fund will purchase is
interests in real estate mortgage investment conduits ("REMICs") sponsored by
GNMA.
CMO classes may be specially structured in a manner that provides any of a
wide variety of investment characteristics, such as yield, effective maturity
and interest rate sensitivity. As market conditions change, however, and
particularly during periods of rapid or unanticipated changes in market
interest rates, the attractiveness of the CMO classes and the ability of the
structure to provide the anticipated investment characteristics may
significantly change. Such changes can result in volatility in the market
value, and in some instances reduced liquidity, of the CMO class.
-- 13 --
<PAGE> 19
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THE TRUST AND EACH FUND'S INVESTMENT POLICIES (Continued)
While prices of GNMA securities like conventional fixed-income securities are
inversely affected by changes in interest rate levels, because of the
likelihood of increased prepayments of mortgages in times of declining
interest rates, the GNMA securities held in the Fund's portfolio have less
potential for capital appreciation than comparable fixed-income securities
and may in fact decrease in value when interest rates fall.
While the market values of particular securities in which the GNMA Fund
invests may be volatile, or may become volatile under certain conditions, SAM
will seek to manage the Fund so that the volatility of the Fund's portfolio,
taken as a whole, is consistent with the Fund's investment objective. If SAM
incorrectly forecasts interest rate changes or other factors that may affect
the volatility of securities held by the Fund, the Fund's ability to meet its
investment objective may be reduced.
2. MAY INVEST UP TO 35% OF ITS TOTAL ASSETS IN:
- - OTHER U.S. GOVERNMENT SECURITIES, including (a) securities backed by the full
faith and credit of the U.S. Government, such as U.S. Treasury bills, notes
and bonds; (b) securities issued by U.S. Government agencies or
instrumentalities that are not backed by the full faith and credit of the
U.S. Government but are supported by the issuer's right to borrow from the
U.S. Treasury, such as securities issued by FNMA and FHLMC; and (c)
securities supported solely by the creditworthiness of the issuer, such as
securities issued by TVA. While U.S. Government securities are considered to
be of the highest credit quality available, they are subject to the same
market risks as comparable debt securities.
- - OTHER COLLATERALIZED MORTGAGE OBLIGATIONS issued by the U.S. Government or
one of its agencies or instrumentalities (such as FNMA or FHLMC) or by
private issuers which are collateralized by securities issued by the U.S.
-- 14 --
<PAGE> 20
- ------------------------------------------------------------------------
THE TRUST AND EACH FUND'S INVESTMENT POLICIES (Continued)
Government or one of its agencies or instrumentalities (such as FNMA or
FHLMC). CMOs are securities collateralized by a portfolio of mortgages or
mortgage-backed securities. The issuer's obligation to make interest and
principal payments on the CMO is secured by the underlying portfolio of
mortgages or mortgage-backed securities. CMOs are issued with a number of
classes or series that have different maturities and that may represent
interests in some or all of the interest or principal of the underlying
collateral or a combination thereof.
- - CORPORATE DEBT SECURITIES which are investment grade. Investment grade
corporate debt securities are rated in one of the four highest grades
assigned by Moody's or S&P or, if unrated, determined by SAM to be of
comparable quality to such rated debt securities. Moody's deems securities
rated in the fourth category (Baa) to have speculative characteristics. The
GNMA Fund may retain a debt security which is downgraded to below investment
grade after purchase. In the event that, due to a downgrade of one or more
debt securities, an amount in excess of 5% of the Fund's net assets is held
in securities rated below investment grade, SAM will engage in an orderly
disposition of such securities to the extent necessary to ensure that the
Fund's holdings of such securities do not exceed 5% of the Fund's net assets.
For an explanation of ratings, see "Description of Debt Ratings" on page 45.
HIGH-YIELD BOND FUND
The investment objective of the High-Yield Bond Fund is to provide a high level
of current interest income through the purchase of high-yield, fixed-income
bonds. The higher yields that the Fund seeks are usually available from
lower-rated or unrated securities sometimes referred to as "junk bonds." The
maturity of the debt obligations held by the Fund may range
-- 15 --
<PAGE> 21
- ------------------------------------------------------------------------
THE TRUST AND EACH FUND'S INVESTMENT POLICIES (Continued)
from 1 to 30 years. However, it is anticipated that the majority of debt
obligations will have maturities from 5 to 15 years.
To pursue its objective, the High-Yield Bond Fund:
1. WILL INVEST, DURING NORMAL MARKET CONDITIONS, AT LEAST 65% OF ITS PORTFOLIO
IN HIGH-YIELD, FIXED-INCOME SECURITIES. The High-Yield Bond Fund may purchase
debt and preferred stock issues (including convertible securities) which are
below investment grade, i.e., rated lower than the top four grades by S&P or
Moody's, or, if not rated by these agencies, in the opinion of SAM, have
credit characteristics comparable to such rated securities. Up to 25% of the
Fund's total assets may be invested in such unrated securities. SAM will
determine the quality of unrated obligations by evaluating the issuer's
capital structure, earnings power and quality of management. Unrated
securities may not be as attractive to as many investors as rated securities.
In addition, the Fund may invest up to 5% of its total assets in securities
which are in default. The Fund will purchase securities which are in default
only when SAM has determined that the potential for high yield outweighs the
risk.
While fixed-income securities rated lower than investment grade generally
lack characteristics of a desirable investment, they normally offer a current
yield or yield-to-maturity which is significantly higher than the yield
available from securities rated as investment grade. These securities are
speculative and involve greater investment risks due to the issuers' reduced
creditworthiness and increased likelihood of default and bankruptcy. In
addition, these securities are frequently subordinated to senior securities.
For further explanation of the special risks associated with investing in
lower-rated, fixed-income securities, see page 21.
For a description of ratings, see "Description of Debt Ratings" on page 45.
For a breakdown of the debt securities
-- 16 --
<PAGE> 22
- ------------------------------------------------------------------------
THE TRUST AND EACH FUND'S INVESTMENT POLICIES (Continued)
held by the High-Yield Bond Fund during the fiscal year ended September 30,
1995, see "Debt Securities Held by the SAFECO High-Yield Bond Fund" on page
44.
The High-Yield Bond Fund may retain an issue whose rating has been changed.
SAM uses S&P and Moody's ratings only as a preliminary indicator of
investment quality. SAM will periodically research and analyze each issue
(whether rated or unrated) and evaluate such factors as the issuer's interest
or dividend coverage, asset coverage, earnings prospects and managerial
strength. This analysis will help SAM to determine if the issuer has
sufficient cash flow and profits to meet required principal and interest
payments and to monitor the liquidity of the issue. Achievement of the Fund's
investment objective will be more dependent on SAM's credit analysis than
would be the case were the Fund to invest in higher quality debt securities.
2. MAY INVEST IN FIXED-INCOME SECURITIES WITH EQUITY FEATURES WHEN COMPARABLE IN
YIELD AND RISK TO FIXED-INCOME SECURITIES WITHOUT EQUITY FEATURES, BUT ONLY
WHEN ACQUIRED AS A RESULT OF UNIT OFFERINGS WHICH CARRY AN EQUITY ELEMENT
SUCH AS COMMON STOCK, RIGHTS OR OTHER EQUITY SECURITIES. The Fund will hold
these common stocks, rights or other equity securities until SAM determines
that, in its opinion, the optimal time for sale of the equity security has
been reached.
3. MAY INVEST UP TO 5% OF ITS TOTAL ASSETS IN RESTRICTED SECURITIES ELIGIBLE FOR
RESALE UNDER RULE 144A ("RULE 144A SECURITIES"), PROVIDED THAT SAM HAS
DETERMINED THAT SUCH SECURITIES ARE LIQUID UNDER GUIDELINES ADOPTED BY THE
BOARD OF TRUSTEES. Restricted securities may be sold only in offerings
registered under the Securities Act of 1933 ("1933 Act") or in transactions
exempt from the registration requirements under the 1933 Act. Rule 144A under
the 1933 Act provides an exemption for the resale of certain
-- 17 --
<PAGE> 23
- ------------------------------------------------------------------------
THE TRUST AND EACH FUND'S INVESTMENT POLICIES (Continued)
restricted securities to qualified institutional buyers. Investing in Rule
144A securities could have the effect of increasing the Fund's illiquidity to
the extent that qualified institutional buyers or other buyers are unwilling
to purchase the securities.
4. MAY INVEST UP TO 5% OF ITS TOTAL ASSETS IN MUNICIPAL SECURITIES WHICH ARE
RATED LOWER THAN THE TOP THREE GRADES ASSIGNED BY MOODY'S OR S&P OR ARE
UNRATED BUT COMPARABLE TO SUCH RATED SECURITIES IF, IN THE OPINION OF SAM,
THE POTENTIAL FOR APPRECIATION IS GREATER THAN, AND YIELD IS COMPARABLE TO OR
GREATER THAN, SIMILARLY-RATED TAXABLE SECURITIES. Investment in medium and
lower quality tax-exempt bonds, like taxable bonds of similar quality, is
speculative and involves greater investment risks due to the issuer's reduced
creditworthiness and increased risk of default and bankruptcy.
5. MAY INVEST IN OBLIGATIONS OF, OR GUARANTEED BY, THE U.S. GOVERNMENT, ITS
AGENCIES OR INSTRUMENTALITIES OR IN FIXED-INCOME SECURITIES WHICH ARE RATED
IN THE FOUR HIGHEST GRADES ASSIGNED BY MOODY'S OR S&P DURING MARKET
CONDITIONS WHICH, IN THE OPINION OF SAM, ARE UNFAVORABLE FOR SATISFACTORY
PERFORMANCE BY LOWER-RATED OR UNRATED FIXED-INCOME SECURITIES. The Fund may
invest in higher-rated securities when changing economic conditions or other
factors cause the difference in yield between lower-rated and higher-rated
securities to narrow and SAM believes that the risk of loss to principal may
be substantially reduced with only a small reduction in yield.
COMMON INVESTMENT PRACTICES
Each of the Funds may also follow the investment practices described below:
1. HOLD CASH OR INVEST TEMPORARILY IN HIGH-QUALITY COMMERCIAL PAPER,
CERTIFICATES OF DEPOSIT, SHARES OF NO-LOAD, OPEN-END
-- 18 --
<PAGE> 24
- ------------------------------------------------------------------------
THE TRUST AND EACH FUND'S INVESTMENT POLICIES (Continued)
MONEY MARKET FUNDS AND HIGH-QUALITY SHORT-TERM SECURITIES ISSUED BY AN AGENCY
OR INSTRUMENTALITY OF THE U.S. GOVERNMENT. A Fund may purchase these
short-term securities as a cash management technique under those
circumstances where it has cash to manage for a short time period, for
example, after receiving proceeds from the sale of securities, interest
payments from portfolio securities or cash from the sale of Fund shares to
investors. Interest earned from these short-term securities will be taxable
to investors as ordinary income when distributed. SAM will waive its advisory
fees for Fund assets invested in money market funds.
2. INVEST FOR SHORT-TERM PURPOSES WHEN SAM BELIEVES SUCH ACTION TO BE DESIRABLE
AND CONSISTENT WITH SOUND INVESTMENT PRACTICES. Each Fund, however, will not
engage primarily in trading for the purpose of short-term profits. A Fund may
dispose of its portfolio securities whenever SAM deems advisable, without
regard to the length of time the securities have been held.
3. PURCHASE OR SELL SECURITIES ON A "WHEN-ISSUED" OR "DELAYED-DELIVERY" BASIS.
Under this procedure, a Fund agrees to acquire or sell securities that are to
be delivered against payment in the future, normally 30 to 45 days. The
price, however, is fixed at the time of commitment. When a Fund purchases
when-issued or delayed-delivery securities, it will earmark liquid,
high-quality securities in an amount equal in value to the purchase price of
the security. Use of this technique may affect a Fund's share price in a
manner similar to leveraging.
Each Fund has adopted a number of investment restrictions. If a Fund follows a
percentage limitation at the time of investment, a later increase or decrease in
values, net assets or other circumstances will not be considered in determining
whether a Fund complies with the applicable policy. The
-- 19 --
<PAGE> 25
- ------------------------------------------------------------------------
THE TRUST AND EACH FUND'S INVESTMENT POLICIES (Continued)
following restrictions are fundamental policies which cannot be changed without
shareholder vote.
1. EACH FUND, WITH RESPECT TO 75% OF THE VALUE OF ITS TOTAL ASSETS, MAY NOT
INVEST MORE THAN 5% OF ITS TOTAL ASSETS IN THE SECURITIES OF ANY ONE ISSUER
(OTHER THAN U.S. GOVERNMENT SECURITIES).
2. EACH FUND, WITH RESPECT TO 100% OF THE VALUE OF ITS TOTAL ASSETS, MAY NOT
PURCHASE MORE THAN 10% OF THE OUTSTANDING VOTING SECURITIES OF ANY ONE ISSUER
(OTHER THAN U.S. GOVERNMENT SECURITIES).
3. EACH FUND MAY BORROW MONEY ONLY FOR TEMPORARY OR EMERGENCY PURPOSES FROM A
BANK OR SAFECO CORPORATION OR AFFILIATES OF SAFECO CORPORATION AT AN INTEREST
RATE NOT GREATER THAN THAT AVAILABLE FROM COMMERCIAL BANKS. A Fund will not
borrow amounts in excess of 20% of its total assets. A Fund will not purchase
securities if outstanding borrowings are equal to or greater than 5% of its
total assets. Each Fund intends to exercise its borrowing authority primarily
to meet shareholder redemptions under circumstances where redemption requests
exceed available cash.
4. EACH FUND MAY INVEST UP TO 10% (HIGH-YIELD BOND AND INTERMEDIATE TREASURY
FUNDS) AND 5% (GNMA FUND) 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, a Fund 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.
5. EACH FUND MAY INVEST UP TO 10% OF NET ASSETS IN REPURCHASE AGREEMENT
TRANSACTIONS. Repurchase agreements are transactions in which a Fund
purchases securities from
-- 20 --
<PAGE> 26
- ------------------------------------------------------------------------
THE TRUST AND EACH FUND'S INVESTMENT POLICIES (Continued)
a bank or recognized securities dealer and simultaneously commits to resell
the securities to the bank or dealer at an agreed-upon date and price
reflecting a market rate of interest unrelated to the coupon rate or maturity
of the purchased securities. Repurchase agreements carry certain risks not
associated with direct investments in securities, including possible declines
in the market value of the underlying securities and delays and costs to a
Fund if the other party to a repurchase agreement declares bankruptcy.
For more information, see the "Investment Policies" and "Additional Investment
Information" sections of the Trust's Statement of Additional Information.
RISK FACTORS
Various factors may cause the value of a shareholder's investment in a Fund to
fluctuate. The principal risk associated with an investment in a mutual fund
like any of the Funds is that the market value of the portfolio securities may
decrease resulting in a decrease in the value of a shareholder's investment. The
value of a Fund's portfolio will normally vary inversely with changes in market
interest rates. Generally, when market interest rates rise, the price of the
debt securities held by a Fund will fall, and when market interest rates fall,
the price of the debt securities will rise. Also, there is a risk that the
issuer of a security held in a Fund's portfolio will fail to make timely payment
of principal and interest to the Fund.
The High-Yield Bond Fund has special risks as described below.
-- 21 --
<PAGE> 27
- ------------------------------------------------------------------------
RISK FACTORS (Continued)
SPECIAL RISKS OF THE HIGH-YIELD BOND FUND
The High-Yield Bond Fund invests primarily in high-yield, fixed income
securities which are subject to the following risks:
SENSITIVITY TO ECONOMIC AND CORPORATE DEVELOPMENTS
Yields on high-yield, fixed-income securities will fluctuate over time. During
periods of economic uncertainty or change, the market prices of high-yield,
fixed-income securities may experience increased volatility which may in turn
cause the net asset value per share of the High-Yield Bond Fund to vary.
Lower-quality, fixed-income securities tend to reflect short-term economic and
corporate developments to a greater extent than higher-quality securities which
primarily react to fluctuations in interest rates. Economic downturns or
increases in interest rates can significantly affect the market for high-yield,
fixed-income securities and the ability of issuers to timely repay principal and
interest, increasing the likelihood of defaults. Lower-quality securities
include debt obligations issued as a part of capital restructurings, such as
corporate takeovers or buyouts. Capital restructurings generally involve the
issuance of additional debt on terms different from any current outstanding
debt. As a result, the issuer of the debt is more highly leveraged. During an
economic downturn or period of rising interest rates, a highly-leveraged issuer
may experience financial difficulties which adversely affect its ability to make
principal and interest payments, meet projected business goals and obtain
additional financing. In addition, the issuer will depend on its cash flow and
may depend, especially in the context of corporate takeovers, on a sale of its
assets to service debt. Failure to realize projected cash flows or asset sales
may seriously impair the issuer's ability to service this greater debt load
which in turn might cause the High-Yield Bond Fund to lose all or part of its
investment in that security. SAM will seek to minimize these additional risks
through diversification, careful assessment of the issuer's financial structure,
business plan and management
-- 22 --
<PAGE> 28
- ------------------------------------------------------------------------
RISK FACTORS (Continued)
team following any restructuring, and close monitoring of the issuer's progress
toward its financial goals.
ZERO-COUPON AND PAYMENT-IN-KIND SECURITIES
The High-Yield Bond Fund may hold "zero-coupon" and "payment-in-kind"
fixed-income securities. Zero coupon securities are purchased at a discount
without scheduled interest payments. Payment-in-kind securities receive interest
paid in additional securities rather than cash. The Fund accrues income on these
securities, but does not receive cash interest payments until maturity or
payment date. The Fund intends to distribute substantially all of its income to
its shareholders to be treated as a regulated investment company under current
tax law. As a result, if its cash position is depleted, the Fund may have to
sell portfolio securities under disadvantageous circumstances to obtain enough
cash to meet its distribution requirement. However, SAM does not expect non-cash
income to materially affect the Fund's operations. Zero-coupon and
payment-in-kind securities are generally subject to greater price fluctuations
due to changes in interest rates than those fixed-income securities paying cash
interest on a schedule until maturity.
LIQUIDITY AND VALUATION
The liquidity and price of high-yield, fixed-income securities can be affected
by a number of factors, including investor perceptions and adverse publicity
regarding major issuers, underwriters or dealers of lower-quality corporate
obligations. These effects can be particularly pronounced in a thinly-traded
market with few participants and may adversely impact the High-Yield Bond Fund's
ability to dispose of its portfolio securities as well as make valuation of
portfolio securities more difficult. Because there tend to be fewer investors in
lower-rated, fixed-income securities, it may be difficult for the Fund to sell
these securities at an optimum time. Consequently, lower-rated securities are
subject to more price changes, fluctuations in yield and risk to principal and
income
-- 23 --
<PAGE> 29
- ------------------------------------------------------------------------
RISK FACTORS (Continued)
than higher-rated securities of the same maturity. Judgment plays a greater role
in the valuation of thinly-traded securities.
CREDIT RATINGS
Rating agencies evaluate the likelihood that an issuer will make principal and
interest payments, but ratings may not reflect market value risks associated
with lower-rated, fixed-income securities. Also, rating agencies may not timely
revise ratings to reflect subsequent events affecting an issuer's ability to pay
principal and interest.
PORTFOLIO MANAGERS
INTERMEDIATE TREASURY FUND
The portfolio manager for the Intermediate Treasury Fund is Michael C. Knebel,
Vice President, SAM. Mr. Knebel began serving as portfolio manager for the Fund
in 1995. He has served as portfolio manager and/or co-portfolio manager for
other SAFECO funds since 1988.
HIGH-YIELD BOND FUND
The portfolio manager for the High-Yield Bond Fund is Kurt Havnaer, Assistant
Vice President, SAM. Mr. Havnaer began serving as portfolio manager for the Fund
in 1995. Since 1991, he has served as a fixed-income securities analyst for SAM.
He attended graduate school from 1990 to 1991.
GNMA FUND
The portfolio manager for the GNMA Fund is Paul A. Stevenson, Vice President,
SAM. Mr. Stevenson has served as portfolio manager for the Fund since 1988. He
also serves as portfolio manager for another SAFECO fund. In addition, he is an
Assistant Vice President of SAFECO Life Insurance Company.
Each portfolio manager and certain other persons related to SAM and the Funds
are subject to written policies and
-- 24 --
<PAGE> 30
- ------------------------------------------------------------------------
PORTFOLIO MANAGERS (Continued)
procedures designed to prevent abusive personal securities trading. Incorporated
within these policies and procedures are each of the recommendations made by the
Investment Company Institute (the trade group for the mutual fund industry) with
respect to personal securities trading by persons associated with mutual funds.
Those recommendations include preclearance procedures and blackout periods when
certain personnel may not trade in securities that are the same or related
securities being considered for purchase or sale by a Fund.
PERSONS CONTROLLING THE FUNDS
At December 31, 1995, SAFECO Insurance Company of America ("SAFECO Insurance")
controlled the Intermediate Treasury Fund. SAFECO Insurance is a Washington
Corporation and a wholly-owned subsidiary of SAFECO Corporation, which has its
principal place of business at SAFECO Plaza, Seattle, Washington 98185.
INFORMATION ABOUT SHARE
OWNERSHIP AND COMPANIES THAT
PROVIDE SERVICES TO THE TRUST
Each Fund is a series of SAFECO Taxable Bond 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 approval
of shareholders.
Shares of each Fund represent equal proportionate interests in the assets of
that Fund only and have identical voting, dividend, redemption, liquidation and
other rights. All shares issued are fully paid and non-assessable, and
shareholders have no preemptive or other right to subscribe to any additional
shares.
-- 25 --
<PAGE> 31
- ------------------------------------------------------------------------
INFORMATION ABOUT SHARE
OWNERSHIP AND COMPANIES THAT
PROVIDE SERVICES TO THE TRUST (Continued)
The Trust does not intend to hold annual meetings of shareholders of the Funds.
The Trustees will call a special meeting of shareholders of a Fund only if
required under the 1940 Act, in their discretion, or upon the written request of
holders of 10% or more of the outstanding shares of that Fund entitled to vote.
Under Delaware law, the shareholders of the Funds will not be personally liable
for the obligations of any Fund; 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
Fund contain a statement that such obligation may be enforced only against the
assets of the Trust or Fund and generally provides for indemnification out of
Trust or Fund property of any shareholder nevertheless held personally liable
for Trust or Fund obligations, respectively.
SAM is the investment adviser for each Fund under an agreement with the Trust.
Under the agreement, SAM is responsible for the overall management of the
Trust's and each Fund's business affairs. Each Fund pays SAM an annual
management fee based on a percentage of that Fund's net assets ascertained each
business day and paid monthly in accordance with the schedules below. A
reduction in the fees paid by a Fund occurs only when that Fund's net assets
reach
-- 26 --
<PAGE> 32
- ------------------------------------------------------------------------
INFORMATION ABOUT SHARE
OWNERSHIP AND COMPANIES THAT
PROVIDE SERVICES TO THE TRUST (Continued)
the dollar amounts of the break points and applies only to the assets that fall
within the specified range:
GNMA AND HIGH-YIELD BOND FUNDS
<TABLE>
<CAPTION>
NET ASSETS ANNUAL FEE
<S> <C>
$0 -- $250,000,000 .65 of 1%
$250,000,001 -- $500,000,000 .55 of 1%
$500,000,001 -- $750,000,000 .45 of 1%
Over $750,000,000 .35 of 1%
</TABLE>
INTERMEDIATE TREASURY FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL FEE
<S> <C>
$0 -- $250,000,000 .55 of 1%
$250,000,001 -- $500,000,000 .45 of 1%
$500,000,001 -- $750,000,000 .35 of 1%
Over $750,000,000 .25 of 1%
</TABLE>
For the fiscal year ended September 30, 1995, each Fund's total expenses and the
compensation paid by each Fund to SAM, expressed as a percentage of average net
assets, were as follows:
<TABLE>
<CAPTION>
RATIO OF RATIO OF
EXPENSES TO NET COMPENSATION
AVERAGE TO AVERAGE
NET ASSETS NET ASSETS
----------- ----------------
<S> <C> <C>
High-Yield Bond Fund 1.01% .64%
GNMA Fund 1.01% .63%
Intermediate Treasury Fund .96% .54%
</TABLE>
-- 27 --
<PAGE> 33
- ------------------------------------------------------------------------
INFORMATION ABOUT SHARE
OWNERSHIP AND COMPANIES THAT
PROVIDE SERVICES TO THE TRUST (Continued)
The distributor of each Fund'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 receives no compensation from the
Trust or the Funds for its services.
The transfer, dividend and distribution disbursement and shareholder servicing
agent for each Fund under an agreement with the Trust is SAFECO Services
Corporation ("SAFECO Services"). SAFECO Services receives a fee from a Fund for
each shareholder transaction processed for that Fund.
SAM, SAFECO Securities and SAFECO Services are wholly-owned subsidiaries of
SAFECO Corporation (a holding company whose primary subsidiaries are engaged in
the insurance and related financial services businesses) and are each located at
SAFECO Plaza, Seattle, Washington 98185.
While the use of this combined Prospectus and the Trust's combined Statement of
Additional Information subjects each Fund to possible liability as the result of
statements or omissions regarding another Fund, the Board of Trustees considers
the benefits to the respective Fund of using a combined Prospectus and combined
Statement of Additional Information to outweigh such risk.
PERFORMANCE INFORMATION
Each Fund's yield, total return and average annual total return may be quoted in
advertisements. Yield is the annualization on a 360-day basis of a Fund's net
income per share over a 30-day period divided by the Fund's net asset value per
share on the last day of the period. The formula for the yield calculation is
defined by regulation. Consequently, the rate of
-- 28 --
<PAGE> 34
- ------------------------------------------------------------------------
PERFORMANCE INFORMATION (Continued)
actual income distributions paid by the Funds may differ from quoted yield
figures. Total return is the total percentage change in an investment in a Fund,
assuming the reinvestment of dividends and capital gains distributions, over a
stated period of time. Average annual total return is the annual percentage
change in an investment in a Fund, assuming the reinvestment of dividends and
capital gains distributions, over a stated period of time.
From time to time, a Fund may advertise its ranking. Rankings are calculated by
independent companies that monitor mutual fund performance (e.g., CDA Investment
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.
Performance information and quoted rankings are indicative only of past
performance and are not intended to represent future investment results. Each
Fund's yield and share price will fluctuate and your shares, when redeemed, may
be worth more or less than you originally paid for them.
FUND DISTRIBUTIONS AND
HOW THEY ARE TAXED
DIVIDEND AND OTHER DISTRIBUTIONS
Each Fund declares dividends on each business day from its net investment income
(which includes accrued interest, earned discount, and other income earned on
portfolio securities less expenses) and such shares become entitled to
-- 29 --
<PAGE> 35
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FUND DISTRIBUTIONS AND HOW THEY ARE TAXED (Continued)
declared dividends on the next business day after shares are purchased in your
account. If you request redemption of all your shares at any time during a
month, you will receive all declared dividends through the date of redemption,
together with the proceeds of the redemption.
Your dividends and other distributions are reinvested in additional shares of
the distributing Fund at net asset value per share, generally determined as of
the close of business on the ex-distribution date, unless you elect in writing
to receive dividends and/or other distributions in cash and that election is
provided to SAFECO Services at the address on the Prospectus cover. The election
remains in effect until revoked by written notice in the same manner as the
distribution election. For retirement accounts, all dividends and other
distributions declared by a Fund must be invested in additional shares of that
Fund.
All states treat the pass-through of interest earned on U.S. Treasury securities
as tax-free income in the calculation of their state income tax. This treatment
may be dependent upon the maintenance of certain percentages of fund ownership
in these securities. The Intermediate Treasury Fund will invest primarily in
these securities while the GNMA Fund may occasionally invest a portion of its
portfolio in these securities.
Please remember that if you purchase shares shortly before a Fund pays a taxable
dividend or other distribution, you will pay the full price for the shares, then
receive part of the price back as a taxable distribution.
TAXES
Each Fund intends to continue to qualify for treatment as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended. By
so qualifying, a Fund will not be subject to federal income taxes to the extent
it distributes its net investment income and realized
-- 30 --
<PAGE> 36
- ------------------------------------------------------------------------
FUND DISTRIBUTIONS AND HOW THEY ARE TAXED (Continued)
capital gains to its shareholders. Each Fund will inform you as to the amount
and nature of dividends and other distributions to your account. Dividends and
other distributions declared in December, but received by shareholders in
January, are taxable to shareholders in the year in which declared.
TAX WITHHOLDING INFORMATION
You will be asked to certify on your account application or on a separate form
that the taxpayer identification number you provide is correct and that you are
not subject to, or are exempt from, backup withholding for previous
underreporting to the Internal Revenue Service.
Retirement plan distributions may be subject to federal income tax withholding.
However, you may elect not to have distributions withheld by checking the
appropriate box on the Redemption Request form or by instructing SAFECO Services
in writing at the address on the Prospectus cover.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting each Fund and its shareholders; see the
Trust's Statement of Additional Information for additional tax information.
There may be other federal, state or local tax considerations applicable to a
particular investor. You therefore are urged to consult your tax adviser.
TAX-DEFERRED RETIREMENT PLANS
SAFECO offers a variety of tax-deferred retirement plans for individuals,
businesses and non-profit organizations. An account may be established under one
of the following plans which allow you to defer investment income from federal
income tax while you save for retirement. Many of the SAFECO Funds may be used
as investment vehicles for these plans.
-- 31 --
<PAGE> 37
- ------------------------------------------------------------------------
TAX-DEFERRED RETIREMENT PLANS (Continued)
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS). IRAs are tax-deferred retirement accounts
for anyone under age 70 1/2 with earned income. The maximum annual contribution
is $2,000 per person ($2,250 for you and a non-working spouse). An annual
custodial fee will be charged for any part of a calendar year in which you have
an IRA investment in a Fund.
SIMPLIFIED EMPLOYEE PENSION IRAS (SEP-IRAS). SEP-IRAs are easily administered
retirement plans for small businesses and self-employed individuals. Annual
contributions of up to $30,000 may be made to SEP-IRA accounts. SEP-IRAs have
the same investment minimums and custodial fees as regular IRAs.
403(B) PLANS. 403(b) plans are retirement plans for tax-exempt organizations and
school systems to which employers and employees both may contribute. Minimum
investment amounts are negotiable.
401(K) PLANS. 401(k) plans allow employers and employees to make tax-deductible
contributions to a retirement account. SAFECO Services offers a low-cost
administration package that includes a prototype plan, recordkeeping, testing
and employee communications. Minimum investment amounts are negotiable.
PROFIT SHARING AND MONEY PURCHASE PENSION PLANS. These plans allow corporations,
partnerships and self-employed persons to make annual, tax-deductible
contributions to a retirement account for each person covered by a plan. A plan
may be adopted individually or paired with another plan to maximize
contributions. SAFECO Services offers an administration package for these plans.
Minimum investment amounts are negotiable.
For information about the above accounts and plans, please call 1-800-278-2985.
-- 32 --
<PAGE> 38
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ACCOUNT STATEMENTS
Periodically, you will receive an account statement indicating your current fund
holdings and transactions affecting your account. Confirmation statements will
be sent to you after every transaction that affects your account balance. Please
review the information on each confirmation statement for accuracy immediately
upon receipt. If you do not notify us within 30 days of any processing error,
SAFECO Services will consider the transactions listed on the confirmation
statement to be correct.
ACCOUNT CHANGES AND SIGNATURE
REQUIREMENTS
Changes to your account registration or the services you have selected must be
in writing and signed by the number of owners specified on your account
application as having authority to make these changes. Send written changes to
SAFECO Services at the address on the Prospectus cover. Certain changes to the
Automatic Investment Method and Systematic Withdrawal Plan can be made via
telephone request if you have previously selected single signature authorization
for your account.
You must specify on your account application the number of signatures required
to authorize redemptions and exchanges and to change account registration or the
services selected. Authorizing fewer than all account owners has important
implications. For example, one owner of a joint tenant account can redeem money
or change the account registration to single ownership without the co-owner's
signature. If you do not indicate otherwise on the application, the signatures
of all account owners will be required to effect a transaction. Your selection
of fewer than all account owner signatures may be revoked by any account owner
who writes to SAFECO Services at the address on the Prospectus cover.
SAFECO Services may require a signature guarantee for a signature which cannot
be verified by comparison to the
-- 33 --
<PAGE> 39
- ------------------------------------------------------------------------
ACCOUNT CHANGES AND SIGNATURE
REQUIREMENTS (Continued)
signature(s) on your account application. A signature guarantee may be obtained
from most financial institutions, including banks, savings and loans and
broker-dealers.
SHARE PRICE CALCULATION
Because each Fund is no-load, its share price is equal to its net asset value
per share ("NAV") which is computed as of the close of regular trading on the
New York Stock Exchange (normally 1:00 p.m. Pacific time) each day that Exchange
is open for trading. The NAV is calculated by subtracting a Fund's liabilities
from its assets and dividing the result by the number of outstanding shares.
The values of each Fund's portfolio securities are stated on the basis of
valuations provided by a pricing service approved by the Trust's Board of
Trustees, unless the Board determines such does not represent fair value. The
service uses information with respect to transactions in securities, quotations
from securities dealers, market transactions in comparable securities and
various relationships between securities to determine values. Other assets are
valued at their fair value pursuant to guidelines approved by the Trust's Board
of Trustees.
HOW TO PURCHASE SHARES
A completed and signed application must accompany payment for an initial
purchase by mail and in all cases is necessary before a redemption can be made.
Specific applications for retirement accounts must be completed and signed
before any retirement account can be set up.
The Funds only accept funds drawn in U.S. dollars and payable through a U.S.
bank. The Funds do not accept currency.
-- 34 --
<PAGE> 40
- ------------------------------------------------------------------------
HOW TO PURCHASE SHARES (Continued)
The Funds issue shares in uncertificated form. Certificates for whole shares
will be issued without charge only upon written request. You will be required to
post a bond to replace missing certificates.
THE FUNDS HAVE THE RIGHT TO REFUSE ANY INVESTMENT.
INITIAL PURCHASES
MINIMUM INITIAL INVESTMENT $1,000 (IRA $250).
Minimum initial investments are negotiable for retirement accounts other than
IRAs.
No minimum initial investment is required to establish the Automatic Investment
Method or Payroll Deduction Plan.
BY WRITTEN REQUEST
Send a check or money order made payable to the applicable Fund and a completed
and signed application to the address on the Prospectus cover.
BY WIRE
Call toll-free 1-800-624-5711 or, in Seattle, 545-7319 for instructions.
Not available for retirement accounts.
ADDITIONAL PURCHASES
MINIMUM ADDITIONAL INVESTMENT $100.
Minimum additional investments are negotiable for retirement plans other than
IRAs.
BY WRITTEN REQUEST
Send a check or money order payable to the applicable Fund to the address on the
Prospectus cover. Please specify your account number.
-- 35 --
<PAGE> 41
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HOW TO PURCHASE SHARES (Continued)
BY WIRE
Instruct your bank to send wires to U.S. Bank of Washington, N.A., Seattle,
Washington, ABA #1250-0010-5, Account #0017-086083.
To ensure timely credit to your account, ask your bank to include the following
information in its wire to U.S. Bank of Washington, N.A.:
- - SAFECO Fund name
- - SAFECO account number
- - Name of the registered owner(s) of the SAFECO account
Delays of purchases caused by inadequate wire instructions are not the
responsibility of the Funds or SAFECO Services.
Your bank may charge a fee for wire services.
BY TELEPHONE
Call 1-800-624-5711 or, in Seattle, 545-7319. You must have previously selected
this service on your account application or by written request. Not available to
open a new account or for retirement accounts.
Maximum purchase $100,000 per day, minimum purchase $100 per day.
Monies will be transferred from your predesignated bank account to your existing
Fund account. Your bank may charge a fee if monies are wired to your Fund
account.
Please allow fifteen business days after selecting this service for it to be
available for first use.
Telephone purchases may be unavailable from some bank accounts and non-bank
financial institutions.
PLEASE READ "TELEPHONE TRANSACTIONS" ON PAGE 42 FOR IMPORTANT INFORMATION.
-- 36 --
<PAGE> 42
- ------------------------------------------------------------------------
HOW TO PURCHASE SHARES (Continued)
THROUGH REGISTERED SECURITIES DEALERS
You may open your account and make additional investments through a registered
securities dealer who is responsible for the prompt forwarding of purchase
orders. A dealer may charge a transaction fee and may place more restrictive
conditions on a purchase than would apply if you purchased your shares directly
from a Fund.
THROUGH REGISTERED INVESTMENT ADVISERS
Please read "Transactions Through Registered Investment Advisers" on page 43 for
important information.
SHARE PURCHASE PRICE
You will buy full and fractional shares at the NAV next computed after your
check, money order or wire has been received. For telephone purchase orders, you
will receive the price per share calculated on the day monies are received from
your bank account. See "Share Price Calculation" on page 34 for more
information.
HOW TO REDEEM SHARES
BY WRITTEN REQUEST
Shares may be redeemed by sending a letter which specifies your account number,
the Fund's name and the number of shares or dollar amount you wish to redeem.
The request should be sent to the address on the Prospectus cover. The request
must be signed by the appropriate number of owners and in some cases a signature
guarantee may be required. In all cases, SAFECO Services must have a signed and
completed application on file before a redemption can be made. See "Account
Changes and Signature Requirements" on page 33 for more information.
Retirement account shareholders must specify whether or not they elect 10%
federal income tax withholding from a distribution.
-- 37 --
<PAGE> 43
- ------------------------------------------------------------------------
HOW TO REDEEM SHARES (Continued)
BY TELEPHONE
Call 1-800-624-5711 or, in Seattle, 545-7319. You must have previously selected
this service on your account application or by written request.
Not available for retirement accounts or shares issued in certificate form.
You may request that redemption proceeds be sent directly to your predesignated
bank or mailed to your account address of record.
PLEASE READ "TELEPHONE TRANSACTIONS" ON PAGE 42 FOR IMPORTANT INFORMATION.
THROUGH REGISTERED SECURITIES DEALERS
Requests for redemption of shares by wire or telephone will be accepted from
registered securities dealers under agreement with each Fund's principal
underwriter. The dealer may charge a transaction fee for any order processed for
you.
THROUGH REGISTERED INVESTMENT ADVISERS
Please read "Transactions Through Registered Investment Advisers" on page 43 for
important information.
PLEASE NOTE THE FOLLOWING:
If your shares were purchased by wire, redemption proceeds will be available
immediately. If shares were purchased by means other than wire, each Fund
reserves the right to hold the proceeds of your redemption for up to 15 business
days after investment or until such time as the Fund has received assurance that
your investment will be honored by the bank on which it was drawn, whichever
occurs first.
SAFECO Services charges a $10 fee to wire redemption proceeds. In addition, some
banks may charge a fee to receive wires.
If shares are issued in certificate form, the certificates must accompany a
redemption request and be duly endorsed.
-- 38 --
<PAGE> 44
- ------------------------------------------------------------------------
HOW TO REDEEM SHARES (Continued)
Under some circumstances (e.g., a change in corporate officer or death of an
owner), SAFECO Services may require certified copies of supporting documents
before a redemption can be made.
SHARE REDEMPTION PRICE AND PROCESSING
Your shares will be redeemed at the NAV next calculated after receipt of your
request which meets the redemption requirements of the Funds. The value of the
shares you redeem may be more or less than the dollar amount you purchased,
depending on the market value of the shares at the time of redemption. See
"Share Price Calculation," on page 34 for more information.
Redemption proceeds will normally be sent on the business day following receipt
of your redemption request. If your redemption request is received after the
close of trading on the New York Stock Exchange, proceeds will normally be sent
on the second business day following receipt. Each Fund, however, reserves the
right to postpone payment of redemption proceeds for up to seven days if making
immediate payment could adversely affect its portfolio. In addition, redemptions
may be suspended or payment dates postponed if the New York Stock Exchange is
closed, its trading is restricted or the Securities and Exchange Commission
declares an emergency.
Due to the high cost of maintaining small accounts, your account may be closed
upon 60 days' written notice if at the time of any redemption or exchange the
total value falls below $100. Your shares will be redeemed at the share price
calculated on the day your account is closed.
HOW TO SYSTEMATICALLY PURCHASE OR REDEEM SHARES
Call 1-800-426-6730 or 545-5530, in Seattle, for more information.
-- 39 --
<PAGE> 45
- ------------------------------------------------------------------------
HOW TO SYSTEMATICALLY PURCHASE OR REDEEM SHARES (Continued)
AUTOMATIC INVESTMENT METHOD (AIM)
AIM enables you to make regular monthly investments by authorizing SAFECO
Services to withdraw a specific amount (minimum of $100 per withdrawal per Fund)
from your bank account and invest the amount in any Fund.
PAYROLL DEDUCTION PLAN
An employer or other entity using group billing may establish a
self-administered payroll deduction plan in any Fund. Payroll deduction amounts
are negotiable.
SYSTEMATIC WITHDRAWAL PLAN
This plan enables you to receive a portion of your investment on a monthly
basis. A Fund automatically redeems shares in your account and sends you a
withdrawal check (minimum amount $50 per Fund) on or about the fifth business
day of every month.
HOW TO EXCHANGE SHARES FROM ONE FUND TO ANOTHER
An exchange is the redemption of shares of one SAFECO Fund and the purchase of
shares of another SAFECO Fund in accounts which are identically registered,
i.e., have the same registered owners and account number. For income tax
purposes, you may realize a capital gain or loss when you make an exchange.
You may purchase shares of a SAFECO Fund by exchange only if it is registered
for sale in the state where you reside. Before exchanging into a SAFECO Fund,
please read its Prospectus.
BY WRITTEN REQUEST
Shares may be exchanged by writing SAFECO Services at the address on the
Prospectus cover. Please designate the
-- 40 --
<PAGE> 46
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HOW TO EXCHANGE SHARES FROM ONE FUND TO ANOTHER (Continued)
SAFECO Funds you wish to exchange out of and into as well as your account
number. The request must be signed by the number of owners designated on your
account application and in some cases a signature guarantee may be required. See
"Account Changes and Signature Requirements" on page 33 for more information.
If the shares you want to exchange are evidenced by certificates, the
certificates must accompany the request and be duly endorsed. Under some
circumstances (e.g., a change in corporate officer or death of an owner), SAFECO
Services may require certified copies of supporting documents before an exchange
can be made.
BY TELEPHONE
Call 1-800-624-5711 or, in Seattle, 545-7319.
Exchanges by telephone must be in amounts of $1,000 or more.
Not available for shares issued in certificate form.
Please read "Telephone Transactions" on page 42 for important information.
THROUGH REGISTERED INVESTMENT ADVISERS
Please read "Transactions Through Registered Investment Advisers" on page 43 for
important information.
LIMITATIONS
The exchange privilege is not intended to provide a means for frequent trading
in response to short-term fluctuations in the market. Excessive exchange
transactions can be disadvantageous to other shareholders and the Funds.
Exchanges out of a Fund are therefore limited to four per calendar year. In
addition, each Fund reserves the right to refuse exchange purchases by any
person or group if, in SAM's judgment, the Fund would be unable to invest the
money effectively in
-- 41 --
<PAGE> 47
- ------------------------------------------------------------------------
HOW TO EXCHANGE SHARES FROM ONE FUND TO ANOTHER (Continued)
accordance with that Fund's investment objective and policies or would otherwise
potentially be adversely affected.
Although a Fund will attempt to give you prior notice whenever it is reasonably
able to do so, it may impose the restrictions described in this paragraph at any
time.
SHARE EXCHANGE PRICE AND PROCESSING
The shares of the SAFECO Fund you are exchanging from will be redeemed at the
price next computed after your exchange request is received. Normally the
purchase of the SAFECO Fund you are exchanging into is executed on the same day.
However, each Fund reserves the right to delay the payment of proceeds and,
hence, the purchase in an exchange for up to seven days if making immediate
payment could adversely affect the portfolio of the Fund whose shares are being
redeemed. The exchange privilege may be modified or terminated with respect to a
Fund at any time, upon at least 60 days' notice.
TELEPHONE TRANSACTIONS
To purchase, redeem or exchange shares by telephone, call 1-800-624-5711 or, in
Seattle, 545-7319 between 5:30 a.m. and 7:00 p.m. Pacific time, Monday through
Friday, except certain holidays. All telephone calls are tape-recorded for your
protection. During times of drastic or unusual market volatility, it may be
difficult for you to exercise the telephone transaction privileges.
To use the telephone purchase, redemption and exchange privileges, you must have
previously selected these services either on your account application or by
submitting a request in writing to SAFECO Services at the address on the
Prospectus cover. Purchasing, redeeming or exchanging shares by telephone allows
the Funds and SAFECO Services to accept telephone instructions from an account
owner or a person preauthorized in writing by an account owner.
-- 42 --
<PAGE> 48
- ------------------------------------------------------------------------
TELEPHONE TRANSACTIONS (Continued)
Each of the Funds and SAFECO Services reserve the right to refuse any telephone
transaction when a Fund or SAFECO Services in its sole discretion is unable to
confirm to its satisfaction that a caller is the account owner or a person
preauthorized by the account owner.
The Funds and SAFECO Services will not be liable for the authenticity of
instructions received by telephone which a Fund or SAFECO Services, in its
discretion, believes to be delivered by an account owner or preauthorized
person, provided that the Fund or SAFECO Services follows reasonable procedures
to identify the caller. The shareholder will bear the risk of any resulting
loss. The Funds and SAFECO Services will follow certain procedures designed to
make sure that telephone instructions are genuine. These procedures may include
requiring the account owner to select the telephone privilege in writing prior
to first use and to designate persons authorized to deliver telephone
instructions. SAFECO Services tape-records telephone transactions and may
request certain identifying information from the caller.
The telephone transaction privileges may be suspended, limited, modified or
terminated at any time without prior notice by the Funds or SAFECO Services.
TRANSACTIONS THROUGH
REGISTERED INVESTMENT ADVISERS
SAFECO Services may accept instructions for share transactions and account
information changes from investment advisers who are acting on behalf of
shareholders, provided that the adviser is registered under the Investment
Advisers Act of 1940, has a signed agreement with SAFECO Services and has an
executed power of attorney from the shareholder, in an acceptable form, on file
with SAFECO Services. Advisers may charge a fee to shareholders for their
services which the Trust, the Funds and SAFECO Services have no control over or
involvement with. Advisers are responsible for the prompt
-- 43 --
<PAGE> 49
- ------------------------------------------------------------------------
TRANSACTIONS THROUGH
REGISTERED INVESTMENT ADVISERS
(Continued)
forwarding of instructions on shareholders' accounts to SAFECO Services and are
bound by the terms of this Prospectus. The Trust, the Funds, SAFECO Services and
their affiliated companies will not be responsible to any shareholder for any
losses, liabilities, costs or expenses associated with any investment advice or
recommendation provided by the adviser to the shareholder or for accepting and
following any instructions from such adviser on the shareholder's account(s).
DEBT SECURITIES HELD BY THE SAFECO HIGH-YIELD BOND FUND
The weighted average ratings of all fixed-income securities, expressed as a
percentage of total investments held by the High-Yield Bond Fund during the
fiscal year ended September 30, 1995, are as follows:
<TABLE>
<CAPTION>
MOODY'S % S&P %
- --------------------- --- --------------------- ----
<S> <C> <C> <C>
INVESTMENT GRADE
- -------------------------------------------------------------
Aaa -- AAA --
Aa -- AA --
A -- A --
Baa 2% BBB 2%
</TABLE>
-- 44 --
<PAGE> 50
- ------------------------------------------------------------------------
DEBT SECURITIES HELD BY THE SAFECO HIGH-YIELD BOND FUND
(CONTINUED)
<TABLE>
<CAPTION>
MOODY'S % S&P %
- --------------------- --- --------------------- ----
<S> <C> <C> <C>
BELOW INVESTMENT GRADE
- -------------------------------------------------------------
Ba 17% BB 28%
B 69% B 60%
Caa 5% CCC 4%
Ca -- C --
D 1%
Not Rated, but Not Rated, but
determined to be determined to
investment grade -- be investment grade --
Not Rated, but Not Rated, but
determined to be determined to be
below investment below investment
grade 7% grade 5%
</TABLE>
DESCRIPTION OF DEBT RATINGS
Ratings by Moody's and S&P represent their respective opinions as to the
investment quality of the rated obligations. Investors should realize these
ratings do not constitute a guarantee that the principal and interest payable
under these obligations will be paid when due.
Excerpts from Moody's:
INVESTMENT GRADE:
AAA -- Judged to be of the best quality. They carry the smallest degree of
investment risk and are generally referred to as "gilt edge." Interest payments
are protected by a large or exceptionally stable margin and principal is secure.
AA -- Judged to be of high quality by all standards. Together with the Aaa group
they comprise what are generally known as high-grade bonds. These bonds have a
narrower margin of or greater fluctuations in protection than Aaa bonds which
somewhat increases long-term risks.
-- 45 --
<PAGE> 51
- ------------------------------------------------------------------------
DESCRIPTION OF DEBT RATINGS (Continued)
A -- Have many favorable investment attributes and are considered as upper
medium grade obligations. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a susceptibility
to impairment sometime in the future.
BAA -- Considered as medium grade obligations, i.e., they are neither highly
protected nor poorly secured. Interest payments and principal security appear
adequate for the present, but certain protective elements may be lacking or may
be characteristically unreliable over any great length of time.
BELOW INVESTMENT GRADE:
BA -- Judged to have speculative elements; their future cannot be considered as
well assured. Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during both good and bad times
over the future.
B -- Generally lack characteristics of a desirable investment. Assurance of
interest and principal payments over any long period of time may be uncertain.
CAA -- Have poor standing. Such issues may be in default or there may be present
elements of danger with respect to principal or interest.
CA -- Represent obligations which are speculative in a high degree. Such issues
are often in default or have other marked shortcomings.
C -- The lowest-rated class of bonds and issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Excerpts from S&P:
INVESTMENT GRADE:
AAA -- The highest rating assigned by S&P. Capacity to pay interest and repay
principal is extremely strong.
-- 46 --
<PAGE> 52
- ------------------------------------------------------------------------
DESCRIPTION OF DEBT RATINGS (Continued)
AA -- Very strong capacity to pay interest and repay principal and differs from
the highest-rated issues only in small degree.
A -- Strong capacity to pay interest and repay principal, although it is
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher-rated categories.
BBB -- Adequate capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories.
BELOW INVESTMENT GRADE:
BB, B, CCC, CC -- Predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation.
"BB" indicates the lowest degree of speculation and "CC" the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C -- Reserved for income bonds on which no interest is being paid.
D -- In default, and payment of interest and/or repayment of principal is in
arrears.
PLUS (+) OR MINUS (-): The ratings from "AA" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
-- 47 --
<PAGE> 53
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SAFECO FAMILY OF FUNDS
STABILITY OF PRINCIPAL
SAFECO Money Market Fund
SAFECO Tax-Free Money Market Fund
TAXABLE BOND INCOME
SAFECO Intermediate-Term U.S. Treasury Fund
SAFECO GNMA Fund
SAFECO High-Yield Bond Fund
TAX-FREE BOND INCOME
SAFECO Intermediate-Term Municipal Bond Fund
SAFECO Insured Municipal Bond Fund
SAFECO Municipal Bond Fund
SAFECO California Tax-Free Income Fund
SAFECO Washington State Municipal Bond Fund
HIGH CURRENT INCOME WITH LONG-TERM GROWTH
SAFECO Income Fund
LONG-TERM GROWTH
SAFECO Growth Fund
SAFECO Equity Fund
SAFECO Northwest Fund
SAFECO Balanced Fund
SAFECO International Stock Fund
SAFECO Small Company Stock Fund
FOR MORE COMPLETE INFORMATION ON ANY SAFECO MUTUAL FUND, INCLUDING MANAGEMENT
FEES AND EXPENSES, CALL OR WRITE FOR A FREE PROSPECTUS. PLEASE READ IT CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
-- 48 --
<PAGE> 54
SAFECO TAXABLE BOND TRUST:
SAFECO INTERMEDIATE-TERM U.S. TREASURY FUND
SAFECO GNMA FUND
SAFECO HIGH-YIELD BOND FUND
Statement of Additional Information
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Prospectus for the Funds. A copy of the Prospectus may
be obtained by writing SAFECO Mutual Funds, P.O. Box 34890, Seattle, Washington
98124-1890, or by calling TOLL FREE:
Nationwide
1-800-426-6730
Seattle Area
545-5530
Hearing Impaired TDD/TTY Service
1-800-438-8718
The date of the most current Prospectus of the Funds to which this Statement of
Additional Information relates is January 31, 1996.
The date of this Statement of Additional Information is January 31, 1996.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Investment Policies 2
Additional Investment Information 6
Principal Shareholders of the
Funds 8
Additional Tax Information 9
Additional Information On
Calculation of Net Asset Value
Per Share 9
Additional Performance
Information 10
Trustees and Officers 12
Investment Advisory and
Other Services 15
Brokerage Practices 17
Redemption in Kind 18
Financial Statements 18
Description of Commercial Paper
Ratings 18
</TABLE>
<PAGE> 55
INVESTMENT POLICIES
SAFECO Intermediate-Term U.S. Treasury Fund ("Intermediate Treasury Fund"),
SAFECO GNMA Fund ("GNMA Fund") and SAFECO High-Yield Bond Fund ("High-Yield Bond
Fund") (collectively the "Funds") are each a series of the SAFECO Taxable Bond
Trust ("Trust"). The investment policies of each Fund are described in the
Prospectus and this Statement of Additional Information. The policies state the
investment practices which the Funds will follow, in some cases limiting
investments to a certain percentage of assets, as well as those activities which
are prohibited. The types of securities a Fund may invest in is also disclosed
in the Prospectus. Before the Funds purchase a security which the following
policies permit but which is not currently described in the Prospectus, the
Prospectus will be amended or supplemented to describe the security. If a
policy's percentage limitation is adhered to immediately after and as a result
of the investment, a later increase or decrease in values, net assets or other
circumstances will not be considered in determining whether a Fund complies with
the applicable limitation.
FUNDAMENTAL INVESTMENT POLICIES
Each Fund's fundamental policies may not be changed without the approval of a
majority of its outstanding voting securities as defined in the Investment
Company Act of 1940 ("1940 Act"). For purposes of such approval, the vote of a
majority of the outstanding voting securities of a Fund means the vote, at a
meeting of the shareholders of such Fund duly called, (i) of 67% or more of the
voting securities present at such meeting if the holders of more than 50% of the
outstanding voting securities are present or represented by proxy, or (ii) of
more than 50% of the outstanding voting securities, whichever is less.
Under its fundamental policies, each Fund may NOT:
(1) Purchase the securities of any issuer (except the U.S. Government, its
agencies or instrumentalities) if as a result more than five percent
(5%) of the value of its total assets at the time of purchase would be
invested in the securities of such issuer, except that up to
twenty-five percent (25%) of the value of a Fund's assets (which
twenty-five percent (25%) shall not include securities issued by
another investment company) may be invested without regard to this five
percent (5%) limitation.
(2) Underwrite any issue of securities, except to the extent that the
purchase of permitted investments directly from the issuer in
accordance with the Fund's investment objective, policies and
restrictions and the subsequent disposition thereof may be deemed to be
underwriting or the later disposition of restricted securities acquired
within the limits imposed on the acquisition of such securities may be
deemed to be an underwriting.
(3) Purchase or sell real estate, but this shall not prevent the Fund from
investing in municipal obligations or other permitted investments
secured by real estate or interests therein.
(4) Purchase or retain for the Fund's portfolio the securities of any
issuer, if, to the Fund's knowledge, the officers or directors of the
Fund, or its investment adviser, who individually own more than
one-half (1/2) of one percent (1%) of the outstanding securities of
such an issuer, together own more than five percent (5%) of such
outstanding securities.
-2-
<PAGE> 56
(5) High-Yield and Intermediate Treasury Funds: Borrow money, except from a
bank or SAFECO Corporation or its affiliates at an interest rate not
greater than that available to the Fund from commercial banks, for
temporary or emergency purposes and not for investment purposes, and
then only in an amount not exceeding twenty percent (20%) of the value
of the Fund's total assets at the time of such borrowing.
GNMA Fund: Borrow money, except from a bank or affiliates of SAFECO
Corporation at an interest rate not greater than that available to the
GNMA Fund from commercial banks, for temporary or emergency purposes
and not for investment purposes, and then only in an amount not
exceeding twenty percent (20%) of its total assets (including
borrowings) less liabilities (other than borrowings) immediately after
such borrowing.
Each Fund will not purchase securities if borrowings in excess of five
percent (5%) of the Fund's total assets are outstanding.
(6) Pledge, mortgage or hypothecate its assets, except that to secure
borrowings permitted by subparagraph (5) above, it may pledge
securities having a market value at the time of pledge not exceeding
ten percent (10%) of the cost of the Fund's total assets.
(7) Purchase or sell commodities or commodity contracts, other than futures
contracts, or invest in oil, gas or other mineral exploration or
development programs or in arbitrage transactions.
(8) Make short sales of securities or purchase securities on margin, except
for margin deposits in connection with futures contracts and such
short-term credits as are necessary for the clearance of transactions.
(9) Participate on a joint or a joint-and-several basis in any trading
account in securities, except that the Fund may, for the purpose of
seeking better net results on portfolio transactions or lower brokerage
commission rates, join with other transactions executed by the
investment adviser or the investment adviser's parent company and any
subsidiary thereof.
(10) Purchase from or sell portfolio securities to any officer or director,
the Fund's investment adviser, principal underwriter or any affiliates
or subsidiaries thereof; provided, however, that this prohibition shall
not prohibit the Fund from purchasing with the up to $7,000,000 raised
through the sale of up to 700,000 shares of common stock to SAFECO Life
Insurance Company, portfolio securities from subsidiaries of SAFECO
Corporation prior to the effective date of the Fund's initial public
offering.
(11) Purchase securities (other than obligations issued or guaranteed by the
United States government, its agencies or instrumentalities), if as a
result twenty-five percent (25%) or more of the Fund's total assets
would be invested in one industry (governmental issues of securities
are not considered part of any one industry).
(12) Purchase shares of common stock, other than those issued by other
regulated investment companies (or, with respect to the High-Yield and
Intermediate Treasury Funds only, when the acquisition of such common
stocks, rights or other equity interests is consistent with the
High-Yield and Intermediate Treasury Fund's objective). Generally, the
High-Yield and Intermediate Treasury Funds will only hold such equity
securities as a
-3-
<PAGE> 57
result of purchases or unit offerings of fixed-income securities which
include such equity securities or in connection with an actual or
proposed conversion or exchange of fixed-income securities.
(13) Issue or sell any senior security, except that this restriction
shall not be construed to prohibit the Fund from borrowing funds
(i) on a temporary basis as permitted by Section 18(g) of the 1940
Act or (ii) from any bank provided, that immediately after such
borrowing, there is an asset coverage of at least three hundred
percent (300%) for all such borrowings and provided, further, that
in the event that such asset coverage shall at any time fall below
three hundred percent (300%), the Fund shall, within three (3)
days thereafter (not including Sundays and holidays), or such
longer period as the Securities and Exchange Commission may
prescribe by rules and regulations, reduce the amount of its
borrowings to an extent that the asset coverage of such borrowings
shall be at least three hundred percent (300%). For purposes of
this restriction, the terms "senior security" and "asset coverage"
shall be understood to have the meaning assigned to those terms in
Section 18 of the 1940 Act.
(14) Purchase securities of any issuer, if, as a result, more than ten
percent (10%) of any class of securities of such issuer would be
owned by the Fund.
(15) Purchase or otherwise acquire securities which are illiquid or
subject to legal or contractual restrictions on resale, if as a
result more than ten percent (10%) of the Fund's (five percent
(5%) of the GNMA Fund's) total assets would be invested in such
securities.
(16) Make loans, except through the purchase of a portion or all of an
issue of debt or money market securities in accordance with its
investment objective, policies and restrictions, or through
investments in qualified repurchase agreements (provided, however,
that a Fund shall not invest more than ten percent (10%) of its
total assets in qualified repurchase agreements maturing in more
than seven (7) days), or through qualified loan agreements (by
making secured loans of its portfolio securities which amount to
not more than five percent (5%) of its total assets) .
NON-FUNDAMENTAL INVESTMENT POLICIES
In addition to the policies described in the Prospectus, each Fund has adopted
the following non-fundamental investment policies which may be changed by the
Trust's Board of Trustees without shareholder approval:
(1) Each Fund will not invest more than five percent (5%) of its total
assets in securities of issuers, including their predecessors, which
have been in operation for less than three years.
(2) Each Fund will not issue long-term debt securities.
(3) Each Fund will not invest in securities with unlimited liability, e.g.,
securities the holder of which may be assessed for amounts in addition
to the subscription or other price paid for the security.
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<PAGE> 58
(4) Each Fund will not trade in foreign currency, except as may be
necessary to convert the proceeds of the sale of foreign securities in
the Funds' portfolio into U.S. dollars.
(5) Each Fund may purchase "when-issued" or "delayed-delivery" securities
or purchase or sell securities on a "forward commitment" basis.
(6) Each Fund will not invest in any security issued by a commercial bank
unless (a) the bank has total assets of at least $1 billion, or the
equivalent in other currencies, or, in the case of a United States bank
which does not have assets of at least $1 billion, the aggregate
investment made in any one such bank is limited to $100,000 and the
principal sum of each investment is insured in full by the Federal
Deposit Insurance Corporation ("FDIC"), (b) in the case of a U.S. bank,
it is a member of the FDIC, and (c) in the case of foreign bank, the
security is, in the opinion of the Fund's investment adviser, of an
investment quality comparable with other debt securities which may be
purchased by the Fund. These limitations do not prohibit investment in
securities issued by foreign branches of U.S. banks, provided the U.S.
banks meet the foregoing requirements.
(7) A Fund shall not engage primarily in trading for short-term profits,
but it may from time to time make investments for short-term purposes
when such action is believed to be desirable and consistent with sound
investment policy, and it may dispose of securities whenever its
investment adviser deems advisable without regard to the length of time
they have been held.
(8) The Intermediate Treasury Fund may invest up to five percent (5%) of
its total assets in Yankee Sector debt securities and up to five
percent (5%) of its total assets in Eurodollar bonds.
(9) The Intermediate Treasury Fund and High-Yield Bond Fund may each invest
up to five percent (5%) of its total assets in securities whose
interest, in the opinion of counsel for the issuer, is exempt from
federal income taxes. The GNMA Fund may not invest in such tax-exempt
securities.
ADDITIONAL INVESTMENT INFORMATION
1. RESTRICTED SECURITIES AND RULE 144A SECURITIES. Restricted securities
are securities that may be sold only in a public offering with respect
to which a registration statement is in effect under the 1933 Act or,
if they are unregistered, in a privately negotiated transaction or
pursuant to an exemption from registration. In recognition of the
increased size and liquidity of the institutional markets for
unregistered securities and the importance of institutional investors
in the formation of capital, the Securities and Exchange Commission
("SEC") has adopted Rule 144A under the 1933 Act, which is designed to
further facilitate efficient trading among institutional investors by
permitting the sale of Rule 144A securities to qualified institutional
buyers. To the extent privately placed securities held by institutional
market develops for those securities, the Fund likely will be able to
dispose of the securities without registering them under the 1933 Act.
SAM, acting under guidelines established by the Trust's Board of
Trustees, may determine that certain securities qualified for trading
under Rule 144A are liquid.
-5-
<PAGE> 59
Where registration is required, a Fund may be obligated to pay all or
part of the registration expenses, and a considerable period may elapse
between the decision to sell and the time the Fund may be permitted to
sell a security under an effective registration statement. If, during
such a period, adverse market conditions were to develop, the Fund
might obtain a less favorable price than prevailed when it decided to
sell. To the extent privately placed securities are illiquid, purchases
thereof will be subject to any limitations on investments in illiquid
securities. Restricted securities for which no market exists are priced
at fair value as determined in accordance with procedures approved and
periodically reviewed by the Trust's Board of Trustees.
2. REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which
a Fund purchases securities from a bank or recognized securities dealer
and simultaneously commits to resell the securities to the bank or
dealer at an agreed-upon date and price reflecting a market rate of
interest unrelated to the coupon rate or maturity of the purchased
securities. A Fund maintains custody of the underlying securities prior
to their repurchase; thus, the obligation of the bank or dealer to pay
the repurchase price on the date agreed to is, in effect, secured by
such securities. If the value of these securities is less than the
repurchase price, plus any agreed-upon additional amount, the other
party to the agreement must provide additional collateral so that at
all times the collateral is at least equal to the repurchase price,
plus any agreed-upon additional amount. Repurchase agreements carry
certain risks not associated with direct investments in securities,
including possible declines in the market value of the underlying
securities and delays and costs to a Fund if the other party to a
repurchase agreement becomes bankrupt. Each Fund intends to enter into
repurchase agreements only with banks and dealers in transactions
believed by SAM to present minimum credit risks in accordance with
guidelines established by the Trust's Board of Trustees. SAM will
review and monitor the creditworthiness of those institutions under the
general supervision of the Board of Trustees.
3. WHEN-ISSUED OR DELAYED-DELIVERY SECURITIES. Under this procedure, a
Fund agrees to acquire securities (whose terms and conditions,
including price, have been fixed by the issuer) that are to be issued
and delivered against payment in the future. Delivery of securities so
sold normally takes place 30 to 45 days (settlement date) after the
date of the commitment. No interest is earned by a Fund prior to the
settlement date. The value of securities sold on a when-issued or
delayed-delivery basis may fluctuate before the settlement date and the
Fund bears the risk of such fluctuation from the date of purchase. A
Fund may dispose of its interest in those securities before delivery.
A Fund will commit to purchase such securities only with the intent of
actually acquiring the securities when issued. Assets which are
short-term, high-quality obligations will be segregated in anticipation
of making payments for securities purchased on a when-issued basis.
4. YANKEE DEBT SECURITIES AND EURODOLLAR BONDS. Yankee debt securities are
securities issued in the U.S. by foreign issuers. These bonds involve
investment risks that are different from those of domestic issuers.
Such risks may include nationalization of the issuer, confiscatory
taxation by the foreign government, establishment of controls
-6-
<PAGE> 60
by the foreign government that would inhibit the remittance of amounts
due a Fund, lack of comparable publicly available information
concerning foreign issuers, lack of comparable accounting and auditing
practices in foreign countries and finally, difficulty in enforcing
claims against foreign issuers in the event of default.
SAM will make every effort to analyze potential investments in foreign
issuers on the same basis as the rating services analyze domestic
issuers. Because public information is not always comparable to that
available on domestic issuers, this may not be possible. Therefore,
while SAM will make every effort to select investment in foreign
securities on the same basis relative to quality and risk as its
investments in domestic securities, it may not always be able to do so.
Eurodollar bonds are denominated in U.S. dollars. A Fund will purchase
Eurodollar bonds through U.S. securities dealers and hold such bonds in
the U.S. The delivery of Eurodollar bonds to a Fund's custodian in the
U.S. may cause slight delays in settlement which are not anticipated to
affect the Fund in any material, adverse manner. Eurodollar bonds
issued by foreign issuers are subject to the same risks as Yankee
sector bonds.
5. MORTGAGE-BACKED SECURITIES. Unlike conventional bonds, the principal
with respect to GNMA securities is paid back over the life of the loan
rather than at maturity. Consequently, the GNMA Fund will receive
monthly scheduled payments of both principal and interest. In addition,
the GNMA Fund may receive unscheduled principal payments representing
unscheduled prepayments on the underlying mortgages. Since the GNMA
Fund must reinvest scheduled and unscheduled principal payments at
prevailing interest rates at the time of such investment and such
interest rates may be higher or lower than the current yield of the
GNMA Fund's portfolio, GNMA securities may not be an effective means to
lock in long-term interest rates. In addition, while prices of GNMA
securities, like conventional bonds, are inversely affected by changes
in interest rate levels, because of the likelihood of increased
prepayments of mortgages in times of declining interest rates, they
have less potential for capital appreciation than comparable
fixed-income securities and may in fact decrease in value when interest
rates fall.
The rate of interest payable on CMO classes may be set at levels that
are either above or below market rates at the time of issuance, so that
the securities will be sold at a substantial premium to, or at a
discount from, par value. If the mortgage assets underlying an CMO
experience greater than anticipated principal prepayments, an investor
may fail to recoup fully its initial investment even though the
security is government issued or guaranteed.
Some CMO classes are structured to pay interest at rates that are
adjusted in accordance with a formula, such as a multiple or fraction
of the change in a specified interest rate index, so as to pay at a
rate that will be attractive in certain interest rate environments but
not in others. For example, a CMO may be structured so that its yield
moves in the same direction as market interest rates - i.e., the yield
may increase as rates increase and decrease as rates decrease - but may
do so more rapidly or to a greater degree. Other CMO classes may be
structured to pay floating interest rates that either move in the same
direction or the opposite of
-7-
<PAGE> 61
short-term interest rates. The market value of such securities may be
more volatile than that of a fixed rate obligation. Such interest rate
formulas may be combined with other CMO characteristics. The GNMA Fund
will not invest in interest-only or principal-only classes -- such
investments are extremely sensitive to changes in interest rates.
6. ILLIQUID SECURITIES. Illiquid securities are securities that cannot be
sold within seven days in the ordinary course of business for
approximately the amount at which they are valued. Due to the absence
of an active trading market, a Fund 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.
PRINCIPAL SHAREHOLDERS OF THE FUNDS
At December 31, 1995 , SAFECO Insurance Company of America ("SAFECO
Insurance") owned 500,000 shares of the Intermediate Treasury Fund which
represented 37.2% of the outstanding shares of the Fund. SAFECO Insurance is a
Washington Corporation and a wholly-owned subsidiary of SAFECO Corporation,
which has its principal place of business at SAFECO Plaza, Seattle, Washington
98185.
At December 31, 1995 , SAFECO Corporation owned 500,000 shares of the
High-Yield Bond Fund which represented 11.1% of the Fund's outstanding shares.
SAFECO Corporation is a holding company whose primary subsidiaries are engaged
in the insurance and related financial services businesses. SAFECO Corporation
is a Washington corporation with its principal place of business at SAFECO
Plaza, Seattle, Washington 98185.
ADDITIONAL TAX INFORMATION
Each Fund intends to continue to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue Code of 1986 ("Code"). In order to
qualify for treatment as a regulated investment company under the Code, a Fund
must distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income (consisting generally of taxable net
investment income and net short-term capital gain). Each Fund intends to make
sufficient distributions to shareholders to relieve it from liability for
federal excise and income taxes.
Each Fund is treated as a separate corporation for federal income tax purposes.
The excess of net long-term capital gains over net short-term capital loss
realized by a Fund on portfolio transactions, when distributed by the Fund, is
subject to long-term capital gains treatment under the Code, regardless of how
long you have held the shares of the Fund. Distributions of net short-term
capital gains realized from portfolio transactions are treated as ordinary
income for federal income tax purposes. The tax consequences described above
apply whether distributions are taken in cash or in additional shares.
Redemptions and exchanges of shares of a Fund may result in a capital gain or
loss for federal income tax purposes.
If shares of a Fund are sold at a loss after being held for one year or less,
the loss will be treated as long-term, instead of short-term, capital loss to
the extent of any capital gain distributions received on those shares. Investors
also should be aware that if shares are purchased shortly before the
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<PAGE> 62
record date for any distribution, the shareholder will pay full price for the
shares and receive some portion of the purchase price back as a taxable dividend
or capital gain distribution.
Each Fund is required to withhold 31% of all taxable dividends, capital gain
distributions and redemption proceeds payable to individuals and certain other
noncorporate shareholders who do not furnish the Fund with a correct taxpayer
identification number. Withholding at that rate also is required from dividends
and those distributions for shareholders who otherwise are subject to backup
withholding.
These are tax requirements that all mutual funds must follow in order to avoid
federal taxation. The Funds may have to limit investment activity in some types
of securities in order to adhere to these requirements.
ADDITIONAL INFORMATION ON CALCULATION OF NET ASSET VALUE PER SHARE
Each Fund determines its net asset value per share ("NAV") by subtracting the
Fund's liabilities (including accrued expenses and dividends payable) from its
total assets (the market value of the securities the Fund holds plus cash and
other assets, including interest accrued but not yet received) and dividing the
result by the total number of shares outstanding. The NAV of each Fund is
calculated as of the close of regular trading on the New York Stock Exchange
("Exchange") every day that Exchange is open for trading. The Exchange is closed
on the following days: New Year's Day, President's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Each Fund has selected a pricing service to assist in computing the value of its
securities. There are a number of pricing services available and the decision as
to whether, or how, a pricing service should be used by a Fund will be subject
to review by the Trust's Board of Trustees.
Short-term securities held in a Fund's portfolio having a remaining maturity of
less than 60 days when purchased, and securities originally purchased with
maturities in excess of 60 days but which currently have maturities of 60 days
or less, may be valued at cost adjusted for amortization of premiums or accrual
of discounts or under such other methods as the Board of Trustees may from time
to time deem to be appropriate. The cost of those securities that had original
maturities in excess of 60 days shall be determined by their fair market value
as of the 61st day prior to maturity. All other securities and assets in the
portfolio will be appraised in accordance with those procedures established by
the Board of Trustees in good faith in computing the fair market value of those
assets.
ADDITIONAL PERFORMANCE INFORMATION
The yield and total return calculations set forth below are for the dates
indicated and are not a prediction of future results.
The yields for the Intermediate Treasury, GNMA and High-Yield Bond Funds for the
30-day period ended September 30, 1995 were 5.41%, 6.81% and 9.35% ,
respectively.
Yield is computed using the following formula:
a-b
Yield = 2[( ---- +1) 6-1]
cd
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<PAGE> 63
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of
reimbursements)
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = the maximum offering price per share on the last
day of the period
The total returns for each Fund for the 1 year, 5 year and since initial public
offering periods, ended September 30, 1995 , were as follows:
<TABLE>
<CAPTION>
Since Initial # of Date of Initial
1 Year 5 Year Public Offering Months Public Offering
------ ------ --------------- ------ ---------------
<S> <C> <C> <C> <C> <C>
Intermediate
Treasury 11.07% 47.70% 70.45% 84 September 7, 1988
High-Yield Bond 11.43% 79.73% 82.98% 84 September 7, 1988
GNMA Fund 11.49% 46.75% 93.95% 110 July 15, 1986
</TABLE>
The average annual returns for each Fund for the 1 year, 5 year and since
initial public offering periods ended September 30, 1995 were as follows:
<TABLE>
<CAPTION>
Since Initial # of Date of Initial
1 Year 5 Year Public Offering Months Public Offering
------ ------ --------------- ------ ---------------
<S> <C> <C> <C> <C> <C>
Intermediate
Treasury 11.07% 8.11% 7.92% 84 September 7, 1988
High-Yield Bond 11.43% 12.44% 9.01% 84 September 7, 1988
GNMA Fund 11.49% 7.98% 7.49% 110 July 15, 1986
</TABLE>
The total return is computed using the following formula:
ERV-P
T = ----- x 100
P
The average annual total return is computed using the following formula:
A = (n SquareRoot ERV/P - 1) x 100
Where: T = total return
A = average annual total return
n = number of years
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<PAGE> 64
Where: T = total return
A = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 investment
at the end of a specified period of time
P = a hypothetical initial investment of $1,000
In making the above calculation, all dividend and capital gains distributions
are assumed to be reinvested at the Fund's NAV on the reinvestment date.
In addition to performance figures, the Funds may advertise their rankings as
calculated by independent rating services which monitor mutual funds'
performance (e.g., CDA Investment Technologies, Lipper Analytical Services,
Inc., Morningstar, Inc. and Wiesenberger Investment Companies Service). These
rankings may be among mutual funds with similar objectives and/or size or with
mutual funds in general. In addition, the Funds may advertise rankings which are
in part based upon subjective criteria developed by independent rating services
to measure relative performance. Such criteria may include methods to account
for levels of risk and potential tax liability, sales commissions and expense
and turnover ratios. These rating services may also base the measure of relative
performance on time periods deemed by them to be representative of up and down
markets.
The Funds may occasionally reproduce articles or portions of articles about the
Funds written by independent third parties such as financial writers, financial
planners and financial analysts, which have appeared in financial publications
of general circulation or financial newsletters (including but not limited to
Barrons, Business Week, Forbes, Fortune, Investor's Business Daily, Kiplinger's,
Money Magazine, Newsweek, Pensions & Investments, Time Magazine, U.S. News and
World Report and The Wall Street Journal).
Each Fund may also present in its advertisements and sales literature (i) a
biography or the credentials of its portfolio manager (including but not limited
to educational degrees, professional designations, work experience, work
responsibilities and outside interests), (ii) descriptions, including quotations
attributable to the portfolio manager of the investment style used to manage a
Fund's portfolio, the research methodologies underlying securities selection and
a Fund's investment objective, (iii) current facts (including but not limited to
number of employees, number of shareholders, business characteristics) about the
Fund's investment adviser (SAM), the investment adviser's parent company (SAFECO
Corporation), or the SAFECO Family of Funds, and (iv) information about
particular securities held in a Fund's portfolio.
TRUSTEES AND OFFICERS
<TABLE>
<CAPTION>
Name and Address Position Held Principal Occupation
- ---------------- With the Trust During Past 5 Years
-------------- -------------------
<S> <C> <C>
Boh A. Dickey* Chairman Executive Vice President, Chief
SAFECO Plaza and Trustee Financial Officer and Director of
Seattle, Washington 98185 SAFECO Corporation. He has been an
(51) executive officer of SAFECO
Corporation subsidiaries since 1982.
</TABLE>
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<PAGE> 65
<TABLE>
<S> <C> <C>
See table under "Investment Advisory
and Other Services."
Barbara J. Dingfield Trustee Manager, Corporate Contributions and
Microsoft Corporation Community Programs for Microsoft
One Microsoft Way Corporation, Redmond, Washington, a
Redmond, Washington 98052 computer software company; Director
(50) and former Executive Vice President of
Wright Runstad & Co., Seattle,
Washington, a real estate development
company; Director of First SAFECO
National Life Insurance Company of New
York.
Richard W. Hubbard* Trustee Retired Vice President and Treasurer
1270 NW Blakely Ct. of the Trust and other SAFECO Trusts;
Seattle, WA 98177 retired Senior Vice President and
(66) Treasurer of SAFECO Corporation;
former President of SAFECO Asset
Management Company.
Richard E. Lundgren Trustee Director of Marketing and Customer
764 S. 293rd Street Relations, Building Materials
Federal Way, Washington 98032 Distribution, Weyerhaeuser Company,
(51) Tacoma, Washington; Director of First
SAFECO National Life Insurance Company
of New York.
L. D. McClean* Trustee Retired Assistant Secretary of SAFECO
7231 91st Avenue SE Corporation and its property and
Mercer Island, WA 98040 casualty and life insurance
(68) affiliates; Director of First SAFECO
National Life Insurance Company of New
York; former President of the SAFECO
Mutual Funds; former Director of
SAFECO Asset Management Company,
SAFECO Securities, Inc. and SAFECO
Services Corporation.
Larry L. Pinnt Trustee Retired Vice President and Chief
1600 Bell Plaza Financial Officer of U.S. WEST
Room 1802 Communications, Seattle, Washington;
Seattle, Washington 98191 Director of Key Bank of Washington,
(61) Seattle, Washington; Director of PREMERA
and its subsidiary Blue Cross of Washington
and Alaska; Director of University of Washington
Medical Center, Seattle, Washington;
Director of First SAFECO National Life
Insurance Company of New York;
Director of Cascade Natural Gas Corporation,
Seattle, Washington.
John W. Schneider Trustee President of Wallingford Group,
1808 N 41st St. Inc., Seattle, Washington; former
Seattle, Washington 98103 President of Coast Hotels, Inc.,
(54) Seattle, Washington; Director of
First SAFECO National Life Insurance
Company of New York.
</TABLE>
-12-
<PAGE> 66
<TABLE>
<S> <C> <C>
David F. Hill President President of SAFECO Securities, Inc.
SAFECO Plaza and SAFECO Services Corporation;
Seattle, Washington 98185 Senior Vice President of SAFECO Asset
(47) Management Company. See table under
"Investment Advisory and other
Services."
Neal A. Fuller Vice Vice President, Controller, Assistant
SAFECO Plaza President, Secretary and Treasurer of SAFECO
Seattle, Washington 98185 Controller, Securities, Inc. and SAFECO Services
(33) Assistant Corporation; Vice President,
Secretary Controller, Secretary and Treasurer of
SAFECO Asset Management Company;
former Chief Assistant Treasurer for
the State of Idaho. See table under
"Investment Advisory and Other
Services."
Ronald L. Spaulding Vice Vice Chairman of SAFECO Asset
SAFECO Plaza President Management Company; Vice President
Seattle, Washington 98185 Treasurer and Treasurer of SAFECO Corporation;
(52) Vice President of SAFECO Life
Insurance Company; former Senior
Portfolio Manager of SAFECO insurance
companies; former Portfolio Manager
for several SAFECO mutual funds. See
table under "Investment Advisory and
Other Services."
</TABLE>
* Trustees who are interested persons as defined by the 1940 Act.
At December 31, 1995, the Trustees and officers of the Trust as a group owned
less than 1% of the outstanding shares of each Fund.
-13-
<PAGE> 67
COMPENSATION TABLE
<TABLE>
<CAPTION>
Total
Pension or Compensation
Retirement From
Benefits Estimated Registrant and
Aggregate Accrued As Annual Fund Complex
Compensation Part of Fund Benefits Upon Paid to
Trustee from Registrant Expenses Retirement Trustees
------- --------------- ------------ ------------- --------------
<S> <C> <C> <C> <C>
Barbara J. Dingfield $2,360 $0 $0 $22,737
Richard E. Lungren $2,360 $0 $0 $22,737
L.D. McClean $2,118 $0 $0 $21,000
Larry L. Pinnt $2,360 $0 $0 $22,737
John W. Scneider $2,360 $0 $0 $22,737
Richard W Hubbard $2,568 $0 $0 $24,150
</TABLE>
Currently, there is no pension, retirement, or other plan or any arrangement
pursuant to which Trustees or officers of the Trust are compensated by the
Trust.
INVESTMENT ADVISORY AND OTHER SERVICES
SAM, SAFECO Securities, Inc. ("SAFECO Securities") and SAFECO Services
Corporation ("SAFECO Services") are wholly-owned subsidiaries of SAFECO
Corporation. SAFECO Securities is the principal underwriter of each Fund and
SAFECO Services is the transfer, dividend and distribution disbursement and
shareholder servicing agent of each Fund.
-14-
<PAGE> 68
The following individuals have the following positions and offices with the
Trust, SAM, SAFECO Securities and SAFECO Services:
<TABLE>
<CAPTION>
SAFECO SAFECO
Name Trust SAM Securities Services
- ---- ----- --- ---------- --------
<S> <C> <C> <C> <C>
B. A. Dickey Chairman Director Director
Trustee Chairman
D. F. Hill President Senior Vice President President
President Director Director
Director Secretary Secretary
N. A. Fuller Vice President Vice Vice Vice
Controller President President President
Assistant Controller Controller Controller
Secretary Secretary Assistant Assistant
Treasurer Secretary Secretary
Treasurer Treasurer
R.A. Spaulding Vice President Vice Director Director
Treasurer Chairman
Director
S.C. Bauer President
Director
</TABLE>
Mr. Dickey is Executive Vice President, Chief Financial Officer and a director
of SAFECO Corporation and Mr. Spaulding is Treasurer of SAFECO Corporation.
Mssrs. Dickey and Spaulding are also directors of other SAFECO Corporation
subsidiaries.
In connection with the investment advisory contract with the Trust, SAM
furnishes or pays for all facilities and services furnished or performed for or
on behalf of the Trust and each Fund, which include furnishing office
facilities, books, records and personnel to manage the Trust's and each Fund's
affairs and paying certain expenses.
For the services and facilities furnished by SAM, the Trust has agreed to pay an
annual fee for each Fund computed on the basis of the average market value of
the net assets of each Fund ascertained each business day and paid monthly in
accordance with the following schedules. The reduction in fees occurs only at
such time as the respective Fund's net assets reach the dollar amounts of the
breakpoints and applies only to those assets which fall within the specified
range:
-15-
<PAGE> 69
INTERMEDIATE TREASURY FUND
<TABLE>
<S> <C>
For assets up to and
including $250,000,000 .55 of 1%
For assets in excess of $250,000,000
and up to and including $500,000,000 .45 of 1%
For assets in excess of $500,000,000
and up to and including $750,000,000 .35 of 1%
For assets over $750,000,000 .25 of 1%
</TABLE>
GNMA AND HIGH-YIELD BOND FUNDS
<TABLE>
<S> <C>
For assets up to and
including $250,000,000 .65 of 1%
For assets in excess of $250,000,000
and up to and including $500,000,000 .55 of 1%
For assets in excess of $500,000,000
and up to and including $750,000,000 .45 of 1%
For assets over $750,000,000 .35 of 1%
</TABLE>
Each Fund bears all expenses of its operations not specifically assumed by SAM.
SAM shall, however, reimburse each Fund for the amount by which a Fund's
expenses in any full fiscal year (excluding interest expense, taxes, brokerage
expenses, and extraordinary expenses) exceed the limits prescribed by any state
in which the Fund's shares are qualified for sale. Presently, the most
restrictive expense ratio limitation imposed by any such state is 2.5% of the
first $30 million of the Fund's average daily net assets, 2.0% of the next $70
million of such assets, and 1.5% of the remaining net assets. For the purpose of
determining whether the Fund is entitled to reimbursement, the expenses of the
Fund are calculated on a monthly basis. If a Fund is entitled to a
reimbursement, that month's advisory fee will be reduced or postponed, with any
adjustment made after the end of the fiscal year.
The following table states the total amount of compensation paid by each Fund to
SAM for the past three fiscal years:
<TABLE>
<CAPTION>
Fiscal Years Ended
September 30 September 30 September 30
1995 1994 1993
------ ---- ----
<S> <C> <C> <C>
Intermediate Treasury $ 71,000 $ 77,000 $ 72,000
GNMA $276,000 $352,000 $386,000
High-Yield Bond $206,000 $202,000 $155,000
</TABLE>
-16-
<PAGE> 70
U.S. Bank of Washington, N.A., 1420 Fifth Avenue, Seattle, Washington 98101,
is the custodian of the securities and cash of each Fund under an agreement with
the Trust. Ernst & Young LLP, 999 Third Avenue, Suite 3500, Seattle, Washington
98104 is the independent auditor of each Fund's financial statements.
SAFECO Services, SAFECO Plaza, Seattle, Washington 98185 is the transfer,
dividend and distribution disbursement and shareholder servicing agent for each
Fund under an agreement with the Trust. SAFECO Services is responsible for all
required transfer agent activity, including maintenance of records for each
Fund's shareholders, records of transactions involving each Fund's shares, and
the compilation, distribution, or reinvestment of income dividends or capital
gains distributions. SAFECO Services is paid a fee of $3.10 per each shareholder
transaction. The following table states the total amount of compensation paid by
each Fund to SAFECO Services for the past three fiscal years:
<TABLE>
<CAPTION>
Fiscal Years Ended
September 30 September 30 September 30
1995 1994 1993
------ ---- ----
<S> <C> <C> <C>
Intermediate Treasury $ 33,000 $ 25,000 $ 23,000
GNMA $120,000 $115,000 $117,000
High-Yield Bond $ 78,000 $ 63,000 $ 47,000
</TABLE>
SAFECO Securities is the principal underwriter for each Fund and distributes
each Fund's shares on a continuous best efforts basis under an agreement with
the Trust. SAFECO Securities is not compensated by the Trust or the Funds for
underwriting, distribution or other activities.
BROKERAGE PRACTICES
SAM places orders for the purchase or sale of each Fund's portfolio securities.
In deciding which broker to use in a given transaction, SAM uses the following
criteria:
(1) Which broker gives the best execution (i.e., which broker is able to
trade the securities in the amounts and at the price desired and on a
timely basis);
(2) Whether the broker is known to SAM as being reputable; and
(3) All other things being equal, which broker has provided useful research
services to SAM.
Such research services as are furnished to SAM during the year (e.g., written
reports analyzing economic and financial characteristics of industries and
companies, telephone conversations between brokerage security analysts and
members of SAM's staff and personal visits by such analysts and brokerage
strategists and economists to SAM's office) are used by SAM to advise all of its
clients including the Funds, but not all such research services furnished to SAM
are used by it to advise the Funds. SAM does not pay excess commissions or
mark-ups to any broker or dealer for research services or for any other reason.
Purchases and sales of portfolio securities are transacted
-17-
<PAGE> 71
with the issuer or with a primary market maker, acting as principal for the
securities on a net basis, with no brokerage commission being paid by the Funds.
Transactions placed through dealers serving as primary market makers reflect the
spread between the bid and the asked prices. Occasionally, the Funds may make
purchases of underwritten issues at prices that include underwriting fees.
REDEMPTION IN KIND
If the Trust concludes that cash payment upon redemption to a shareholder would
be prejudicial to the best interest of the other shareholders of a Fund, a
portion of the payment may be made in kind. The Trust has elected to be governed
by Rule 18(f)(1) under the 1940 Act pursuant to which the Trust must redeem
shares tendered by a shareholder solely in cash up to the lesser of $250,000 or
1% of the net asset value of a Fund during any 90-day period. Any shares
tendered by the shareholder in excess of the above-mentioned limit may be
redeemed through distribution of a Fund's assets. Any securities or other
property so distributed in kind shall be valued by the same method as is used in
computing NAV. Distributions in kind will be made in readily marketable
securities, unless the investor elects otherwise. Investors may incur brokerage
costs in disposing of securities received in such a distribution in kind.
FINANCIAL STATEMENTS
The following financial statements of each of the Funds and the report thereon
of Ernst & Young LLP, independent auditors, are incorporated by reference to the
Trust's Annual Report for the year ended September 30, 1995:
Statement of Assets and Liabilities at September 30, 1995
Statement of Operations for the Year Ended September 30, 1995
Statement of Changes in Net Assets for the Years Ended September 30,
1995 and September 30, 1994
Portfolio of Investments at September 30, 1995
Notes to Financial Statements
A copy of the Trust's Annual Report accompanies this Statement of Additional
Information. Additional copies may be obtained by calling SAFECO Services at
1-800-426-6730 nationwide or 545-5530 in Seattle or by writing to the address on
the Prospectus cover.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
MOODY'S INVESTOR SERVICES, INC. ("MOODY'S")
Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually senior debt obligations with an original maturity not exceeding one
year.
Prime-1: Issuers (or supporting institutions) rated Prime-1 (P-1) have a
superior ability for repayment of senior short-term debt obligations. P-1
repayment ability will often be evidenced by many of the following
characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance on
debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.
-18-
<PAGE> 72
- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
Prime-2: Issuers (or supporting institutions) rated Prime-2 (P-2) have a strong
ability for repayment of senior short-term obligations. This will normally be
evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
STANDARD & POOR'S RATING GROUP ("S&P")
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1: This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
-19-
<PAGE> 73
SAFECO TAXABLE BOND TRUST
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) The following financial statements for each series of Registrant for
the fiscal year ended September 30, 1995 and the report thereon of
Ernst & Young LLP, independent auditors, are incorporated in the
Statement of Additional Information by reference to Registrant's Annual
Report which was filed with the SEC on November 30, 1995:
Portfolio of Investments as of September 30, 1995
Statements of Assets and Liabilities as of September 30, 1995
Statements of Operations for the Year Ended September 30, 1995
Statements of Changes in Net Assets for the Years Ended
September 30, 1995 and September 30, 1994
Notes to Financial Statements
Financial Statements from the Registrant's Annual Report are filed as
Exhibit 12.
(b) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description of Document Page
- ------- ----------------------- ----
<S> <C> <C>
(27.1-3) Financial Data Schedule
(99.1) Trust Instrument/Certificate of Trust
(99.2) Bylaws
(99.3) Inapplicable
(99.4) Form of Stock Certificate
(99.5) Investment Advisory and Management
Contract
(99.6) Distribution Agreement
(99.7) Inapplicable
(99.8) Custody Agreement with U.S. Bank
(99.9) Transfer Agent Agreement
(99.10) Opinion of Counsel
(99.11) Consent of Independent Auditors
(99.12) Registrant's Annual Report for the Year Ended
September 30, 1995+ including Financial
Statements
(99.13) Subscription Agreement
(99.14) Prototype 401(k)/Profit Sharing Plan
</TABLE>
<PAGE> 74
<TABLE>
<S> <C> <C>
(99.15) Inapplicable
(99.16) Calculation of Performance Information
</TABLE>
+Registrant's Annual Report was filed with the SEC on or about
November 30, 1995.
Item 25. Persons Controlled By or Under Common Control With Registrant
SAFECO Corporation, a Washington corporation, owns 100% of SAFECO Asset
Management Company (SAM), SAFECO Services Corporation (SAFECO Services) and
SAFECO Securities, Inc. (SAFECO Securities), each a Washington corporation. SAM
is the investment advisor, SAFECO Services is the transfer agent and SAFECO
Securities is the principal underwriter for each of the SAFECO mutual funds. The
SAFECO Mutual Funds consist of seven Delaware business trusts: SAFECO Common
Stock Trust, SAFECO Taxable Bond Trust, SAFECO Tax-Exempt Bond Trust, SAFECO
Advisor Series Trust, SAFECO Money Market Trust, SAFECO Institutional Series
Trust and SAFECO Resource Series Trust. The SAFECO Common Stock Trust consists
of seven mutual funds: SAFECO Growth Fund, SAFECO Equity Fund, SAFECO Income
Fund, SAFECO Northwest Fund, SAFECO International Stock Fund, SAFECO Balanced
Fund and SAFECO Small Company Stock Fund. The SAFECO Taxable Bond Trust consists
of three mutual funds: SAFECO Intermediate-Term U.S. Treasury Fund, SAFECO GNMA
Fund and SAFECO High-Yield Bond Fund. The SAFECO Tax-Exempt Bond Trust consists
of five mutual funds: SAFECO Intermediate-Term Municipal Bond Fund, SAFECO
Insured Municipal Bond Fund, SAFECO Municipal Bond Fund, SAFECO California
Tax-Free Income Fund and SAFECO Washington State Municipal Bond Fund. The SAFECO
Advisor Series Trust consists of eight mutual funds: Advisor Equity Fund,
Advisor Northwest Fund, Advisor Intermediate-Term Treasury Fund, Advisor GNMA
Fund, Advisor U.S. Government Fund, Advisor Municipal Bond Fund, Advisor
Intermediate-Term Municipal Bond Fund and Advisor Washington Municipal Bond
Fund. The SAFECO Money Market Fund consists of two mutual funds: SAFECO Money
Market Fund and SAFECO Tax-Free Money Market Fund. The SAFECO Institutional
Series Trust consists of one mutual fund: Fixed-Income Portfolio. The SAFECO
Resource Series Trust consists of five mutual funds: Equity Portfolio, Growth
Portfolio, Northwest Portfolio, Bond Portfolio and Money Market Portfolio.
SAFECO Corporation, a Washington Corporation, owns 100% of the following
Washington corporations: SAFECO Insurance Company of America, General Insurance
Company of America, First National Insurance Company of America, SAFECO Life
Insurance Company of America, SAFECO Assigned Benefits Service Company, SAFECO
Administrative Services, Inc., SAFECO Properties Inc., SAFECO Credit Company,
Inc., SAFECO Asset Management Company, SAFECO Securities, Inc., SAFECO Services
Corporation, SAFECO Trust Company and General America Corporation. SAFECO
Corporation owns 100% of SAFECO National Insurance Company, a Missouri
corporation, and SAFECO Insurance Company of Illinois, an Illinois corporation.
SAFECO Corporation owns 20% of Agena, Inc., a Washington corporation. SAFECO
Insurance Company of America owns 100% of SAFECO Management Corp., a New York
corporation, and SAFECO Surplus Lines Insurance Company, a Washington
corporation. SAFECO Life Insurance Company owns 100% of SAFECO National Life
Insurance Company, a Washington corporation, and First SAFECO National Life
Insurance Company of New York, a New York corporation. SAFECO Administrative
Services, Inc. owns 100% of Employee Benefit Claims of Wisconsin, Inc. and
Wisconsin Pension and Group Services, Inc., each a Wisconsin corporation.
General America Corporation owns 100% of COMAV Mangers, Inc., an Illinois
corporation, F.B. Beattie & Co., Inc., a
<PAGE> 75
Washington corporation, General America Corp. of Texas, a Texas corporation, S&T
Financial Corporation, a Washington corporation and Whitehall Insurance Brokers,
Inc., a California corporation. F.B. Beattie & Co., Inc. owns 100% of F.B.
Beattie Insurance Services, Inc., a California corporation. General America
Corp. of Texas is Attorney-in-fact for SAFECO Lloyds Insurance Company, a Texas
corporation. Talbot Financial Corporation owns 100% of PNMR Securities, Inc., a
Washington corporation, and 100% of Talbot Agency, Inc., a New Mexico
corporation. SAFECO Properties Inc. owns 100% of the following, each a
Washington corporation: RIA Development, Inc., SAFECARE Company, Inc. and Winmar
Company, Inc. SAFECARE Company, Inc. owns 100% of the following, each a
Washington corporation: S.C. Bellevue, Inc., S.C. Everett, Inc., S.C.
Marysville, Inc., S.C. Simi Valley, Inc. and S.C. Vancouver, Inc. SAFECARE
Company, Inc. owns 50% of Lifeguard Ventures, Inc., a California corporation.
S.C. Simi Valley, Inc. owns 100% of Simi Valley Hospital, Inc., a Washington
corporation. Winmar Company, Inc. owns 50% of C-W Properties, Inc., a Washington
corporation. Winmar Company, Inc. owns 100% of the following: Barton Street
Corp., Gem State Investors, Inc., Kitsap Mall, Inc., WNY Development, Inc.,
Winmar Cascade, Inc., Winmar Metro, Inc., Winmar Northwest, Inc., Winmar
Redmond, Inc. and Winmar of Kitsap, Inc., each a Washington corporation, and
Capitol Court Corp., a Wisconsin corporation, SAFECO Properties of Boise, Inc.,
an Idaho corporation, SCIT, Inc., a Massachusetts corporation, Valley Fair
Shopping Centers, Inc., a Delaware corporation, WDI Golf Club, Inc., a
California corporation, Winmar Oregon, Inc., an Oregon corporation, Winmar of
Texas, Inc., a Texas corporation, Winmar of Wisconsin, Inc., a Wisconsin
corporation, and Winmar of the Desert, Inc., a California corporation. Winmar
Oregon, Inc. owns 100% of the following, each an Oregon corporation: North Coast
Management, Inc., Pacific Surfside Corp., Winmar of Jantzen Beach, Inc. and W-P
Development, Inc., and 100% of the following, each a Washington corporation:
Washington Square, Inc. and Winmar Pacific, Inc.
Item 26. Number of Holders of Securities
At December 31, 1995, Registrant had 587, 2,198 and 1,560 shareholders of record
in its SAFECO Intermediate-Term U.S. Treasury Fund, SAFECO GNMA Fund and SAFECO
High-Yield Bond Fund, respectively.
Item 27. Indemnification
Under the Trust Instrument of the Registrant, Registrant's trustees, officers,
employees and agents are indemnified against certain liabilities, subject to
specified conditions and limitations.
Under the indemnification provisions in the Registrant's Trust Instrument and
subject to the limitations described in the paragraph below, every person who
is, or has been, a trustee, officer, employee or agent of the Registrant shall
be indemnified by the Registrant or the appropriate Series of the Registrant to
the fullest extent permitted by law against liability and against all expenses
reasonably incurred or paid by him or her in connection with any claim, action,
suit or proceeding in which he or she becomes involved as a party or otherwise
by virtue of his or her being, or having been, a trustee, officer, employee or
agent and against amounts paid or incurred by him or her in the settlement
thereof. As used in this paragraph, "claim," "action," "suit" or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil, criminal or
other, including appeals), actual or threatened, and the words "liability" and
"expenses" shall include, without limitation, attorneys' fees, costs,
judgements, amounts paid in settlement, fines, penalties and other liabilities.
<PAGE> 76
No indemnification will be provided to a trustee, officer, employee or agent:
(i) who shall have been adjudicated by a court or body before which the
proceeding was brought (a) to be liable to the Registrant or its shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office, or (b) not to have
acted in good faith in the reasonable belief that his or her action was in the
best interest of the Registrant; or (ii) in the event of settlement, unless
there has been a determination that such trustee, officer, employee or agent did
not engage in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office; (a) by the
court or other body approving the settlement, (b) by the vote of at least a
majority of a quorum of those trustees who are neither interested persons, as
that term is defined by the Investment Company Act of 1940, of the Registrant
nor are parties to the proceeding based upon a review of readily available facts
(as opposed to a full trial type inquiry), or (c) by written opinion of
independent legal counsel based upon a review of readily available facts (as
opposed to a full trial type inquiry).
To the maximum extent permitted by applicable law, expenses incurred in
connection with the preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described above may be paid by the
Registrant or applicable Series from time to time prior to final disposition
thereof upon receipt of an undertaking by or on behalf of such trustee, officer,
employee or agent that such amount will be paid over by him or her to the
Registrant or the applicable Series if it is ultimately determined that he or
she is not entitled to indemnification under the Trust Instrument; provided,
however, that either (i) such trustee, officer, employee or agent shall have
provided appropriate security for such undertaking, (ii) the Registrant is
insured against such losses arising out of such advance payments or (iii) either
a majority of the trustees who are neither interested persons, as that term is
defined by the Investment Company Act of 1940, of the Registrant nor parties to
the proceeding, or independent legal counsel in a written opinion, shall have
determined, based on a review of readily available facts (as opposed to a full
trial type inquiry), that there is reason to believe that such trustee, officer,
employee or agent, will not be disqualified from indemnification under
Registrant's Trust Instrument.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to trustees, officers, employees and agents of the
Registrant pursuant to such provisions of the Trust Instrument or statutes or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as ex
pressed in said Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer, employee or agent
of the Registrant in the successful defense of any such action, suit or
proceeding) is asserted by such trustee, officer, employee or agent in
connection with the shares of the Registrant, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in said Act and will
be governed by the final adjudication of such issue.
Under an agreement with its distributor ("Distribution Agreement"), Registrant
has agreed to indemnify, defend and hold the distributor, the distributor's
several directors, officers and employees, and any person who controls the
distributor within the meaning of Section 15 of the 1933 Act, free and harmless
from and against any and all claims, demands, liabilities and
<PAGE> 77
expenses (including the cost of investigating or defending such claims, demands
or liabilities and any counsel fees incurred in connection therewith) which the
distributor, its directors, officers or employees, or any such controlling
person may incur, under the 1933 Act or under common law or otherwise, arising
out of or based upon any alleged untrue statement of a material fact contained
in the Registration Statement or arising out of or based upon any alleged
omission to state a material fact required to be stated or necessary to make the
Registration Statement not misleading, provided that in no event shall anything
contained in the Distribution Agreement be construed so as to protect the
distributor against any liability to the Registrant or its shareholders to which
the distributor would otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties, or by reason of its
reckless disregard of its obligations and duties under the Distribution
Agreement, and further provided that the Registrant shall not indemnify the
distributor for conduct set forth in this subparagraph.
Under an agreement with its transfer agent, Registrant has agreed to indemnify
and hold the transfer agent harmless against any losses, claims, damages,
liabilities or expenses (including reasonable attorneys' fees and expenses)
resulting from: (1) any claim, demand, action or suit brought by any person
other than the Registrant, including by a shareholder which names the transfer
agent and/or the Registrant as a party, and is not based on and does not result
from the transfer agent's willful misfeasance, bad faith or negligence or
reckless disregard of duties, and arises out of or in connection with the
transfer agent's performance hereunder; or (2) any claim, demand, action or suit
(except to the extent contributed to by the transfer agent's willful
misfeasance, bad faith or negligence or reckless disregard of duties) which
results from the negligence of the Registrant, or from the transfer agent acting
upon any instruction(s) reasonably believed by it to have been executed or
communicated by any person duly authorized by the Registrant, or as a result of
the transfer agent acting in reliance upon advice reasonably believed by the
transfer agent to have been given by counsel for the Registrant, or as a result
of the transfer agent acting in reliance upon any instrument or stock
certificate reasonably believed by it to have been genuine and signed,
countersigned or executed by the proper person.
Item 28. Business and Other Connections of Investment Adviser
The investment adviser to Registrant, SAM, serves as an adviser to: (a) nineteen
series (portfolios) of six registered investment companies, (b) five series of
an investment company that serves as an investment vehicle for variable
insurance products and (c) a number of pension funds not affiliated with SAFECO
Corporation or its affiliates. The directors and officers of SAM serve in
similar capacities with SAFECO Corporation or its affiliates. The information
set forth under "Investment Advisory and Other Services" in the Registrant's
Statement of Additional Information is incorporated by reference.
Item 29. Principal Underwriters
(a) SAFECO Securities, Inc., the principal underwriter for Registrant, also
acts as the principal underwriter for each series of the SAFECO Common
Stock Trust, SAFECO Tax-Exempt Bond Trust, SAFECO Money Market Trust,
SAFECO Institutional Series Trust and SAFECO Advisor Series Trust. In
addition, SAFECO Securities is the principal underwriter for SAFECO
Separate Account C, SAFECO Variable Account B and SAFECO Separate
Account SL, all of which are variable insurance products.
<PAGE> 78
(b) The information set forth under "Investment Advisory and Other
Services" in the Statement of Additional Information is incorporated by
reference.
Item 30. Location of Accounts and Records
U.S. Bank of Washington, N.A., 1420 Fifth Avenue, Seattle, Washington 98101
maintains physical possession of the accounts, books and documents of the
Registrant relating to its activities as custodian of the Registrant. SAFECO
Asset Management Company, SAFECO Plaza, Seattle, Washington 98185, maintains
physical possession of all other accounts, books or documents of the Registrant
required to be maintained by Section 31(a) of the Investment Company Act of
1940 and the rules promulgated thereunder.
Item 31. Management Services
Inapplicable.
Item 32. Undertakings
Registrant undertakes to furnish each person to whom a prospectus is delivered
with a copy of the Registrant's latest annual report to shareholders, upon
request and without charge.
<PAGE> 79
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereto duly authorized,
in the City of Seattle, and State of Washington on the 31st day of January,
1996.
SAFECO TAXABLE BOND TRUST
By /s/ David F. Hill
---------------------------
David F. Hill, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
Name Title Date
---- ----- ----
/s/ David F. Hill President 1/31/96
- -------------------------- (Principal Executive Officer) ---------
David F. Hill
RONALD L. SPAULDING* Vice President
- -------------------------- Treasurer ---------
Ronald L. Spaulding
NEAL A. FULLER* (Principal Financial Officer)
- -------------------------- Vice President, ---------
Neal A. Fuller Controller and
Assistant Secretary
/s/ Boh A. Dickey Chairman and Trustee 1/31/96
- -------------------------- ---------
Boh A. Dickey
BARBARA J. DINGFIELD* Trustee
- -------------------------- ---------
Barbara J. Dingfield
RICHARD W. HUBBARD* Trustee
- -------------------------- ---------
Richard W. Hubbard
RICHARD E. LUNDGREN* Trustee
- -------------------------- ---------
Richard E. Lundgren
L. D. McCLEAN* Trustee
- -------------------------- ---------
L. D. McClean
LARRY L. PINNT* Trustee
- -------------------------- ---------
Larry L. Pinnt
JOHN W. SCHNEIDER* Trustee
- -------------------------- ---------
John W. Schneider
*By /s/ Boh A. Dickey
------------------------
Boh A. Dickey
Attorney-in-Fact
*By /s/ David F. Hill
------------------------
David F. Hill
Attorney-in-Fact
<PAGE> 80
Registration Nos. 33-22132/811-5574
================================================================================
EXHIBITS
to
FORM N-1A
REGISTRATION STATEMENT
POST-EFFECTIVE AMENDMENT NO. 10
Under
The Securities Act of 1933
and
AMENDMENT NO. 11
Under
The Investment Company Act of 1940
----------
SAFECO Taxable Bond Trust
(Exact Name of Registrant as Specified in Charter)
SAFECO Plaza
Seattle, Washington 98185
(Address of Principal Executive Offices)
206-545-5269
(Registrant's Telephone Number, including Area Code)
================================================================================
<PAGE> 81
SAFECO TAXABLE BOND TRUST
Form N-1A
Post-Effective Amendment No. 10
Exhibit Index
<TABLE>
<CAPTION>
Exhibit
Number Description of Document Page
- ------- ----------------------- ----
<S> <C> <C>
(27.1-3) Financial Data Schedule
(99.1) Trust Instrument/Certificate of Trust
(99.2) Bylaws
(99.4) Form of Stock Certificate
(99.5) Investment Advisory and Management Contract
(99.6) Distribution Agreement
(99.8) Custody Agreement with U.S. Bank
(99.9) Transfer Agent Agreement
(99.10) Opinion of Counsel
(99.11) Consent of Independent Auditors
(99.12) Registrant's Annual Report for the Year Ended
September 30, 1995+ including Financial Statements
(99.13) Subscription Agreement
(99.14) Prototype 401(k)/Profit Sharing Plan
(99.16) Calculation of Performance Information
</TABLE>
+Registrant's Annual Report was filed with the SEC on or about
November 30, 1995
<TABLE> <S> <C>
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<PAGE> 1
EXHIBIT 99.1
TRUST INSTRUMENT/CERTIFICATE OF TRUST
<PAGE> 2
CERTIFICATE OF TRUST
OF
SAFECO TAXABLE BOND TRUST
This Certificate of Trust ("Certificate") is filed in accordance with the
provisions of the Delaware Business Trust Act (12 Del. Code Ann. Tit. 12 Section
3801 et seq.) and sets forth the following:
1. The name of the trust is: SAFECO Taxable Bond Trust ("Trust").
2. The business address of the registered office of the Trust and of the
registered agent of the Trust is:
The Corporation Trust Company
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
3. This Certificate is effective upon filing.
4. The Trust is a Delaware business trust registered under the Investment
Company Act of 1940. Notice is hereby given that the Trust shall consist of one
or more series. The debts, liabilities, obligations and expenses incurred,
contracted for or otherwise existing with respect to a particular series of the
Trust shall be enforceable against the assets of such series only, and not
against the assets of the Trust generally or any other series.
IN WITNESS WHEREOF, the undersigned, being the initial Trustees, have
executed this Certificate on this ___ day of _______, 1993.
----------------------------
Boh A. Dickey, as
Trustee and not individually
----------------------------
Richard W. Hubbard, as
Trustee and not individually
<PAGE> 3
Address: SAFECO Plaza
Seattle, Washington 98185
STATE OF WASHINGTON ss
CITY OF SEATTLE
Before me this ___ day of _________, 1993, personally appeared the
above-named Boh A. Dickey and Richard W. Hubbard, known to me to be the persons
who executed the foregoing instrument and who acknowledged that they executed
the same.
----------------------------------
Notary Public
My Commission expires_______________________________.
<PAGE> 4
SAFECO TAXABLE BOND TRUST
TRUST INSTRUMENT
This TRUST INSTRUMENT is made on May 13, 1993, by the Trustees, to establish
a business trust for the investment and reinvestment of funds contributed to the
Trust by investors. The Trustees declare that all money and property contributed
to the Trust shall be held and managed in trust pursuant to this Trust
Instrument. The name of the Trust created by this Trust Instrument is SAFECO
Taxable Bond Trust.
ARTICLE I
DEFINITIONS
Unless otherwise provided or required by the context:
(a) "Bylaws" means the Bylaws of the Trust adopted by the Trustees, as
amended from time to time;
(b) "Class" means the class of Shares of a Series established pursuant to
Article IV;
(c) "Commission," "Interested Person," and "Principal Underwriter" have the
meanings provided in the 1940 Act;
(d) "Covered Person" means a person so defined in Article IX, Section 2;
(e) "Delaware Act" means Chapter 38 of Title 12 of the Delaware Code
entitled "Treatment of Delaware Business Trusts," as amended from time to time;
(f) "Majority Shareholder Vote" means "the vote of a majority of the
outstanding voting securities" as defined in the 1940 Act;
(g) "Net Asset Value" means the net asset value of each Series of the Trust,
determined as provided in Article V, Section 3;
(h) "Outstanding Shares" means Shares shown on the books of the Trust or its
transfer agent as then issued and outstanding, but does not include Shares which
have been repurchased by the Trust;
(i) "Series" means a series of Shares established pursuant to Article IV;
(j) "Shareholder" means a record owner of Outstanding Shares;
(k) "Shares" means the equal proportionate transferable units of interest
into which the beneficial interest of each Series or Class is divided from time
to time (including whole Shares and fractions of Shares);
(l) "Trust" means SAFECO Taxable Bond Trust established hereby, and
reference to the Trust, when applicable to one or more Series, refers to that
Series;
(m) "Trustees" means the persons who have signed this Trust Instrument, so
long as they shall continue in office in accordance with the terms hereof, and
all other persons who may from time to time be duly qualified and serving as
Trustees in accordance with Article II, in all cases in their capacities as
<PAGE> 5
Trustees hereunder;
(n) "Trust Property" means any and all property, real or personal, tangible
or intangible, which is owned or held by or for the Trust or any Series or the
Trustees on behalf of the Trust or any Series;
(o) The "1940 Act" means the Investment Company Act of 1940, as amended from
time to time.
ARTICLE II
TRUSTEES
Section 1. Management of the Trust. The business and affairs of the Trust
shall be managed by or under the direction of the Trustees, and they shall have
all powers necessary or desirable to carry out that responsibility. The Trustees
may execute all instruments and take all action they deem necessary or desirable
to promote the interests of the Trust. Any determination made by the Trustees in
good faith as to what is in the interests of the Trust shall be conclusive. The
Trustees, in their capacity as such, shall not be expected to devote their
entire time to the business and affairs of the Trust.
Section 2. Initial Trustees; Number, Election and Qualification of Trustees.
The initial Trustees shall be the persons initially signing this Trust
Instrument. The number of Trustees (other than the initial Trustees) shall be
fixed from time to time by a majority of the Trustees; provided, that there
shall be at least two (2) Trustees. The Shareholders shall elect the Trustees
(other than the initial Trustees) on such dates as the Trustees may fix from
time to time.
Section 3. Term of Office. Each Trustee shall hold office for life, or until
he or she reaches seventy-two (72) years of age, or until his or her successor
is elected, or the Trust terminates; except that (a) any Trustee may resign by
delivering to the Board of Trustees or to any Trust officer a written
resignation effective upon such delivery or a later date specified therein; (b)
any Trustee may be removed with or without cause at any time by a written
instrument signed by at least two-thirds of the other Trustees, specifying the
effective date of removal; (c) any Trustee who has become physically or mentally
incapacitated or is otherwise unable to serve, may be retired by a written
instrument signed by a majority of the other Trustees, specifying the effective
date of retirement; and (d) any Trustee may be removed at any meeting of the
Shareholders by a vote of at least two-thirds of the Outstanding Shares.
Section 4. Vacancies; Appointment of Trustees. Whenever a vacancy shall
exist in the Board of Trustees, regardless of the reason for such vacancy, the
remaining Trustees shall appoint any person as they determine in their sole
discretion to fill that vacancy, subject to Sections 10 and 16(a) of the 1940
Act. Such appointment shall be made by a written instrument signed by a majority
of the Trustees or by a resolution of the Trustees, duly adopted and recorded in
the records of the Trust, specifying the effective date of the appointment. The
Trustees may appoint a new Trustee as provided above in anticipation of a
vacancy expected to occur because of the retirement, resignation, or removal of
a Trustee, or an increase in number of Trustees, provided that such appointment
shall become effective only at or after the expected vacancy occurs. As soon as
any such Trustee has accepted his appointment in writing, the trust estate shall
vest in the new Trustee, together with the continuing Trustees, without any
further act or conveyance, and he shall be deemed a Trustee hereunder.
<PAGE> 6
Section 5. Chairman. The Trustees shall appoint one of their number to be
Chairman of the Board of Trustees. The Chairman shall preside at all meetings of
the Trustees and the Shareholders and shall perform such other powers and duties
as may from time to time be assigned by the Board of Trustees or prescribed by
the Bylaws.
Section 6. Action by the Trustees. The Trustees shall act by majority vote
at a meeting duly called (including at a telephonic meeting, unless the 1940 Act
requires that a particular action be taken only at a meeting of Trustees in
person) at which a quorum is present or by written consent of a majority of
Trustees (or such greater number as may be required by applicable law) without a
meeting. A majority of the Trustees shall constitute a quorum at any meeting.
Meetings of the Trustees may be called orally or in writing by the President of
the Trust, the Secretary of the Trust, the Chairman of the Board of Trustees, or
by any two other Trustees. Notice of the time, date and place of all Trustees
meetings shall be given to each Trustee in person or by telephone, telegram,
facsimile or other electronic mechanism sent to his or her home or business
address at least twenty-four hours in advance of the meeting or by written
notice mailed to his or her home or business address at least seventy-two hours
in advance of the meeting. Oral notice is deemed to be given upon communication.
Written notice is deemed to be given, if mailed, when deposited in the United
States mail, postage pre-paid, or if sent by telegram, facsimile or other
electronic transmission, when dispatched, to the address, telephone number or
other number of the Trustee as it appears on the records of the Trust. Notice
need not be given to any Trustee who attends the meeting without objecting to
the lack of notice or who signs a waiver of notice either before or after the
meeting. Subject to the requirements of the 1940 Act, the Trustees by majority
vote may delegate to any Trustee or Trustees authority to approve particular
matters or take particular actions on behalf of the Trust. Any written consent
or waiver may be provided and delivered to the Trust by facsimile or other
similar electronic mechanism.
Section 7. Ownership of Trust Property. The Trust Property of the Trust and
of each Series shall be held separate and apart from any assets now or hereafter
held in any capacity other than as Trustee hereunder by the Trustees or any
successor Trustees. All of the Trust Property and legal title thereto shall at
all times be considered as vested in the Trustees on behalf of the Trust, except
that the Trustees may cause legal title to any Trust Property to be held by or
in the name of the Trust, or in the name of any person as nominee. No
Shareholder shall be deemed to have a severable ownership in any individual
asset of the Trust or of any Series or any right of partition or possession
thereof, but each Shareholder shall have, as provided in Article IV, a
proportionate undivided beneficial interest in the Trust or Series represented
by Shares.
Section 8. Effect of Trustees Not Serving. The death, resignation,
retirement, removal, incapacity, or inability or refusal to serve of the
Trustees, or any one of them, shall not operate to annul the Trust or to revoke
any existing agency created pursuant to the terms of this Trust Instrument.
Section 9. Trustees, etc. as Shareholders. Subject to any restrictions in
the Bylaws, any Trustee, officer, agent or independent contractor of the Trust
may acquire, own and dispose of Shares to the same extent as any other
Shareholder; the Trustees may issue and sell Shares to and buy Shares from any
such person or any firm or company in which such person is interested, subject
only to any general limitations herein.
<PAGE> 7
ARTICLE III
POWERS OF THE TRUSTEES
Section 1. Powers. The Trustees in all instances shall act as principals,
free of the control of the Shareholders. The Trustees shall have full power and
authority to take or refrain from taking any action and to execute any contracts
and instruments that they may consider necessary or desirable in the management
of the Trust. The Trustees shall not in any way be bound or limited by current
or future laws or customs applicable to trust investments, but shall have full
power and authority to make any investments which they, in their discretion,
deem proper to accomplish the purposes of the Trust. The Trustees may exercise
all of their powers without recourse to any court or other authority. Subject to
any applicable limitation herein or in the Bylaws or resolutions of the Trust,
the Trustees shall have power and authority, without limitation:
(a) To invest and reinvest cash and other property, and to hold cash or
other property uninvested, without in any event being bound or limited by any
current or future law or custom concerning investments by trustees, and to sell,
exchange, lend, pledge, mortgage, hypothecate, write options on and lease any or
all of the Trust Property; to invest in obligations and securities of any kind,
and without regard to whether they may mature before the possible termination of
the Trust; and without limitation to invest all or any part of its cash and
other property in securities issued by a registered investment company or series
thereof, subject to the provisions of the 1940 Act;
(b) To operate as and carry on the business of a registered investment
company, and exercise all the powers necessary and proper to conduct such a
business;
(c) To adopt Bylaws not inconsistent with this Trust Instrument providing
for the conduct of the business of the Trust and to amend and repeal them to the
extent such right is not reserved to the Shareholders;
(d) To elect and remove such officers and appoint and terminate such agents
as they deem appropriate;
(e) To employ as custodian of any assets of the Trust, subject to any
provisions herein or in the Bylaws, one or more banks, trust companies or
companies that are members of a national securities exchange, or other entities
permitted by the Commission to serve as such;
(f) To retain one or more transfer agents and Shareholder servicing agents,
or both;
(g) To provide for the distribution of Shares either through a Principal
Underwriter as provided herein or by the Trust itself, or both, or pursuant to a
distribution plan of any kind;
(h) To set record dates in the manner provided for herein or in the Bylaws;
(i) To delegate such authority as they consider desirable to any officers of
the Trust and to any agent, independent contractor, manager, investment adviser,
custodian or underwriter;
(j) To sell or exchange any or all of the assets of the Trust, subject to
Article X, Section 4;
(k) To vote or give assent, or exercise any rights of ownership, with
respect to other securities or property; and to execute and deliver powers of
attorney delegating such power to other persons;
<PAGE> 8
(l) To exercise powers and rights of subscription or otherwise which in any
manner arise out of ownership of securities;
(m) To hold any security or other property (i) in a form not indicating any
trust, whether in bearer, book entry, unregistered or other negotiable form, or
(ii) either in the Trust's or Trustees' own name or in the name of a custodian
or a nominee or nominees, subject to safeguards according to the usual practice
of business trusts or investment companies;
(n) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes, and with
separate Shares representing beneficial interests in such Series, and to
establish separate Classes, all in accordance with the provisions of Article IV;
(o) To the full extent permitted by Section 3804 of the Delaware Act, to
allocate assets, liabilities and expenses of the Trust to a particular Series
and liabilities and expenses to a particular Class or to apportion the same
between or among two or more Series or Classes, provided that any liabilities or
expenses incurred by a particular Series or Class shall be payable solely out of
the assets belonging to that Series or Class as provided for in Article IV,
Section 4;
(p) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern whose securities are held
by the Trust; to consent to any contract, lease, mortgage, purchase, or sale of
property by such corporation or concern; and to pay calls or subscriptions with
respect to any security held in the Trust;
(q) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any matter in controversy including, but not limited to,
claims for taxes;
(r) To make distributions of income and of capital gains to Shareholders in
the manner hereinafter provided for;
(s) To borrow money;
(t) To establish, from time to time, a minimum total investment for
Shareholders, and to require the redemption of the Shares of any Shareholders
whose investment is less than such minimum upon giving notice to such
Shareholder;
(u) To establish committees for such purposes, with such membership, and
with such responsibilities as the Trustees may consider proper, including a
committee consisting of fewer than all of the Trustees then in office, which may
act for and bind the Trustees and the Trust with respect to the institution,
prosecution, dismissal, settlement, review or investigation of any legal action,
suit or proceeding, pending or threatened;
(v) To issue, sell, repurchase, redeem, cancel, retire, acquire, hold,
resell, reissue, dispose of and otherwise deal in Shares; to establish terms and
conditions regarding the issuance, sale, repurchase, redemption, cancellation,
retirement, acquisition, holding, resale, reissuance, disposition of or dealing
in Shares; and, subject to Articles IV and V, to apply to any such repurchase,
redemption, retirement, cancellation or acquisition of Shares any funds or
property of the Trust or of the particular Series with respect to which such
Shares are issued; and
(w) To carry on any other business in connection with or incidental to any
of the foregoing powers, to do everything necessary or desirable to accomplish
any purpose or to further any of the foregoing powers, and to take every other
<PAGE> 9
action incidental to the foregoing business or purposes, objects or powers.
The clauses above shall be construed as objects and powers, and the
enumeration of specific powers shall not limit in any way the general powers of
the Trustees. Any action by one or more of the Trustees in their capacity as
such hereunder shall be deemed an action on behalf of the Trust or the
applicable Series, and not an action in an individual capacity. No one dealing
with the Trustees shall be under any obligation to make any inquiry concerning
the authority of the Trustees, or to see to the application of any payments made
or property transferred to the Trustees or upon their order. In construing this
Trust Instrument, the presumption shall be in favor of a grant of power to the
Trustees.
Section 2. Certain Transactions. Except as prohibited by applicable law, the
Trustees may, on behalf of the Trust, buy any securities from or sell any
securities to, or lend any assets of the Trust to, any Trustee or officer of the
Trust or any firm of which any such Trustee or officer is a member acting as
principal, or have any such dealings with any investment adviser, administrator,
distributor or transfer agent for the Trust or with any Interested Person of
such person. The Trust may employ any such person or entity in which such person
is an Interested Person, as broker, legal counsel, registrar, investment
adviser, administrator, distributor, transfer agent, dividend disbursing agent,
custodian or in any other capacity upon customary terms.
ARTICLE IV
SERIES; CLASSES; SHARES
Section 1. Establishment of Series or Class. The Trust shall consist of one
or more Series. The Trustees hereby establish the Series listed in Exhibit A
attached hereto and made a part hereof. Each additional Series shall be
established by the adoption of a resolution of the Trustees. The Trustees may
designate the relative rights and preferences of the Shares of each Series. The
Trustees may divide the Shares of any Series into Classes. In such case each
Class of a Series shall represent interests in the assets of that Series and
have identical voting, dividend, liquidation and other rights and the same terms
and conditions, except that expenses allocated to a Class may be borne solely by
such Class as determined by the Trustees and a Class may have exclusive voting
rights with respect to matters affecting only that Class. The Trust shall
maintain separate and distinct records for each Series and hold and account for
the assets thereof separately from the other assets of the Trust or of any other
Series. A Series may issue any number of Shares and need not issue Shares. Each
Share of a Series shall represent an equal beneficial interest in the net assets
of such Series. Each holder of Shares of a Series shall be entitled to receive
his or her pro rata share of all distributions made with respect to such Series.
Upon redemption of his or her Shares, such Shareholder shall be paid solely out
of the funds and property of such Series. The Trustees may change the name of
any Series or Class without Shareholder approval.
Section 2. Shares. The beneficial interest in the Trust shall be divided
into Shares of one or more separate and distinct Series or Classes established
by the Trustees. The number of Shares of each Series and Class is unlimited and
each Share shall have a par value of $0.001 per Share. All Shares issued
hereunder shall be fully paid and nonassessable. Shareholders shall have no
preemptive or other right to subscribe to any additional Shares or other
securities issued by the Trust. The Trustees shall have full power and
authority, in their sole discretion and without obtaining Shareholder approval:
to issue original or additional Shares or fractional Shares at such times and on
such terms and conditions as they deem appropriate; to issue Shares which have
been repurchased by the Trust; to establish and to change in any manner Shares
of
<PAGE> 10
any Series or Classes with such preferences, terms of conversion, voting powers,
rights and privileges as the Trustees may determine (but the Trustees may not
change Outstanding Shares in a manner materially adverse to the Shareholders of
such Shares); to divide or combine the Shares of any Series or Classes into a
greater or lesser number; to classify or reclassify any unissued Shares of any
Series or Classes into one or more Series or Classes of Shares; to abolish any
one or more Series or Classes of Shares; to issue Shares to acquire other assets
(including assets subject to, and in connection with, the assumption of
liabilities) and businesses; and to take such other action with respect to the
Shares as the Trustees may deem desirable. Shares which have been repurchased by
the Trust and have not been reissued shall not confer any voting rights on the
Trustees and shall not be entitled to any dividends or other distributions
declared with respect to the Shares.
Section 3. Investment in the Trust. The Trustees shall accept investments in
any Series from such persons and on such terms as they may from time to time
authorize. At the Trustees' discretion, such investments, subject to applicable
law, may be in the form of cash or securities in which that Series is authorized
to invest, valued as provided in Article V, Section 3. Investments in a Series
shall be credited to each Shareholder's account in the form of full or
fractional Shares at the Net Asset Value per Share next determined after the
investment is received or accepted in good form as may be determined by the
Trustees; provided, however, that the Trustees may, in their sole discretion (a)
impose a sales charge upon investments in any Series or Class or (b) determine
the Net Asset Value per Share of the initial capital contribution. The Trustees
shall have the right to refuse to accept investments in any Series at any time
without any cause or reason therefor whatsoever.
Section 4. Assets and Liabilities of Series. All consideration received by
the Trust for the issue or sale of Shares of a particular Series, together with
all assets in which such consideration is invested or reinvested, all income,
earnings, profits, and proceeds thereof (including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments derived
from any reinvestment of such proceeds in whatever form the same may be), shall
be held and accounted for separately from the other assets of the Trust and
every other Series and are referred to as "assets belonging to" that Series. The
assets belonging to a Series shall belong only to that Series for all purposes,
and to no other Series, subject only to the rights of creditors of that Series.
Any assets, income, earnings, profits, and proceeds thereof, funds, or payments
which are not readily identifiable as belonging to any particular Series shall
be allocated by the Trustees between and among one or more Series as the
Trustees deem fair and equitable. Each such allocation shall be conclusive and
binding upon the Shareholders of all Series for all purposes, and such assets,
earnings, income, profits or funds, or payments and proceeds thereof shall be
referred to as assets belonging to that Series. The assets belonging to a Series
shall be so recorded upon the books of the Trust, and shall be held by the
Trustees in trust for the benefit of the Shareholders of that Series. The assets
belonging to a Series shall be charged with the liabilities of that Series and
all expenses, costs, charges and reserves attributable to that Series, except
that liabilities and expenses allocated solely to a particular Class shall be
borne by that Class. Any general liabilities, expenses, costs, charges or
reserves of the Trust which are not readily identifiable as belonging to any
particular Series or Class shall be allocated and charged by the Trustees
between or among any one or more of the Series or Classes in such manner as the
Trustees deem fair and equitable. Each such allocation shall be conclusive and
binding upon the Shareholders of all Series or Classes for all purposes.
Without limiting the foregoing, but subject to the right of the Trustees to
allocate general liabilities, expenses, costs, charges or reserves as herein
provided, the debts, liabilities, obligations and expenses incurred, contracted
for or otherwise existing with respect to a particular Series shall be
<PAGE> 11
enforceable against the assets of such Series only, and not against the assets
of the Trust generally or of any other Series. Notice of this contractual
limitation on liabilities among Series may, in the Trustees' discretion, be set
forth in the certificate of trust of the Trust (whether originally or by
amendment) as filed or to be filed in the Office of the Secretary of State of
the State of Delaware pursuant to the Delaware Act, and upon the giving of such
notice in the certificate of trust, the statutory provisions of Section 3804 of
the Delaware Act relating to limitations on liabilities among Series (and the
statutory effect under Section 3804 of setting forth such notice in the
certificate of trust) shall become applicable to the Trust and each Series. Any
person extending credit to, contracting with or having any claim against any
Series may look only to the assets of that Series to satisfy or enforce any
debt, with respect to that Series. No Shareholder or former Shareholder of any
Series shall have a claim on or any right to any assets allocated or belonging
to any other Series.
Section 5. Ownership and Transfer of Shares. The Trust shall maintain a
register containing the names and addresses of the Shareholders of each Series
and Class thereof, the number of Shares of each Series and Class held by such
Shareholders, and a record of all Share transfers. The register shall be
conclusive as to the identity of Shareholders of record and the number of Shares
held by them from time to time. The Trustees, in their sole discretion, may
authorize the issuance of certificates representing Shares and adopt rules
governing their use. The Trustees may make rules governing the transfer of
Shares, whether or not represented by certificates.
Section 6. Status of Shares; Limitation of Shareholder Liability. Shares
shall be deemed to be personal property giving Shareholders only the rights
provided in this Trust Instrument. Every Shareholder, by virtue of having
acquired a Share, shall be held expressly to have assented to and agreed to be
bound by the terms of this Trust Instrument and to have become a party hereto.
No Shareholder shall be personally liable for the debts, liabilities,
obligations and expenses incurred by, contracted for, or otherwise existing with
respect to, the Trust or any Series. Neither the Trust nor the Trustees shall
have any power to bind any Shareholder personally or to demand payment from any
Shareholder for anything, other than as agreed by the Shareholder. Shareholders
shall have the same limitation of personal liability as is extended to
shareholders of a private corporation for profit incorporated in the State of
Delaware. Every written obligation of the Trust or any Series shall contain a
statement to the effect that such obligation may only be enforced against the
assets of the Trust or such Series; however, the omission of such statement
shall not operate to bind or create personal liability for any Shareholder or
Trustee.
ARTICLE V
DISTRIBUTIONS AND REDEMPTIONS
Section 1. Distributions. The Trustees may declare and pay dividends and
other distributions, including dividends on Shares of a particular Series and
other distributions from the assets belonging to that Series. The amount and
payment of dividends or distributions and their form, whether they are in cash,
Shares or other Trust Property, shall be determined by the Trustees. Dividends
and other distributions may be paid pursuant to a standing resolution adopted
once or more often as the Trustees determine. All dividends and other
distributions on Shares of a particular Series shall be distributed pro rata to
the Shareholders of that Series in proportion to the number of Shares of that
Series they held on the record date established for such payment, except that
such dividends and distributions shall appropriately reflect expenses allocated
to a particular Class of such Series. The Trustees may adopt and offer to
Shareholders such dividend reinvestment plans, cash dividend payout plans or
<PAGE> 12
similar plans as the Trustees deem appropriate.
Section 2. Redemptions. Each Shareholder of a Series or Class shall have the
right at such times as may be permitted by the Trustees to require the Series to
redeem all or any part of his or her Shares at a redemption price per Share
equal to the Net Asset Value per Share at such time as the Trustees shall have
prescribed by resolution. In the absence of such resolution, the redemption
price per Share shall be the Net Asset Value next determined after receipt by
the Series of a request for redemption in proper form less such charges as are
determined by the Trustees and described in the Trust's Registration Statement
for that Series or Class under the Securities Act of 1933. The Trustees may
specify conditions, prices, and places of redemption, and may specify binding
requirements for the proper form or forms of requests for redemption. Payment of
the redemption price may be wholly or partly in securities or other assets at
the value of such securities or assets used in such determination of Net Asset
Value, or may be in cash. Upon redemption, Shares may be reissued from time to
time. The Trustees may require Shareholders to redeem Shares for any reason
under terms set by the Trustees, including the failure of a Shareholder to
supply a personal identification number if required to do so, or to have the
minimum investment required, or to pay when due for the purchase of Shares
issued to him. To the extent permitted by law, the Trustees may retain the
proceeds of any redemption of Shares required by them for payment of amounts due
and owing by a Shareholder to the Trust or any Series or Class. Notwithstanding
the foregoing, the Trustees may postpone payment of the redemption price and may
suspend the right of the Shareholders to require any Series or Class to redeem
Shares during any period of time when and to the extent permissible under the
1940 Act.
Section 3. Determination of Net Asset Value. The Trustees shall cause the
Net Asset Value of Shares of each Series or Class to be determined from time to
time in a manner consistent with applicable laws and regulations. The Trustees
may delegate the power and duty to determine Net Asset Value per Share to one or
more Trustees or officers of the Trust or to an investment adviser, custodian,
depository or other agent appointed for such purpose. The Net Asset Value of
Shares shall be determined separately for each Series or Class at such times as
may be prescribed by the Trustees or, in the absence of action by the Trustees,
as of the close of trading on the New York Stock Exchange on each day for all or
part of which such Exchange is open for unrestricted trading.
Section 4. Suspension of Right of Redemption. If, as referred to in Section
2 of this Article, the Trustees postpone payment of the redemption price and
suspend the right of Shareholders to redeem their Shares, such suspension shall
take effect at the time the Trustees shall specify, but not later than the close
of business on the business day next following the declaration of suspension.
Thereafter Shareholders shall have no right of redemption or payment until the
Trustees declare the end of the suspension. If the right of redemption is
suspended, a Shareholder may either withdraw his or her request for redemption
or receive payment based on the Net Asset Value per Share next determined after
the suspension terminates.
ARTICLE VI
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 1. Voting Powers. The Shareholders shall have power to vote only
with respect to (a) the election of Trustees as provided in Section 2 of this
Article; (b) the removal of Trustees as provided in Article II, Section 3(d);
(c) any investment advisory or management contract as provided in Article VII,
Section 1; (d) any termination of the Trust as provided in Article X, Section 4;
(e) the amendment of this Trust Instrument to the extent and as provided in
Article X, Section 8; and (f) such additional matters relating to the Trust as
may be required or authorized by law, this Trust Instrument, or the Bylaws or
any
<PAGE> 13
registration of the Trust with the Commission or any State, or as the Trustees
may consider desirable.
On any matter submitted to a vote of the Shareholders, all Shares shall be
voted by individual Series or Class, except (a) when required by the 1940 Act,
Shares shall be voted in the aggregate and not by individual Series or Class,
and (b) when the Trustees have determined that the matter affects the interests
of more than one Series or Class, then the Shareholders of all such Series or
Classes shall be entitled to vote thereon. Each whole Share shall be entitled to
one vote as to any matter on which it is entitled to vote, and each fractional
Share shall be entitled to a proportionate fractional vote. There shall be no
cumulative voting in the election of Trustees. Shares may be voted in person or
by proxy or in any manner provided for in the Bylaws. The Bylaws may provide
that proxies may be given by any electronic or telecommunications device or in
any other manner, but if a proposal by anyone other than the officers or
Trustees is submitted to a vote of the Shareholders of any Series or Class, or
if there is a proxy contest or proxy solicitation or proposal in opposition to
any proposal by the officers or Trustees, Shares may be voted only in person or
by written proxy. Until Shares of a Series are issued, as to that Series the
Trustees may exercise all rights of Shareholders and may take any action
required or permitted to be taken by Shareholders by law, this Trust Instrument
or the Bylaws.
Section 2. Meetings of Shareholders. The first Shareholders' meeting shall
be held to elect Trustees at such time and place as the Trustees designate.
There shall be no annual Shareholders' meetings except as required by law or set
forth in the Bylaws. Special meetings of the Shareholders of any Series or Class
may be called by the Trustees and shall be called by the Trustees upon the
written request of Shareholders owning at least ten percent of the Outstanding
Shares of such Series or Class entitled to vote. Special meetings of
Shareholders shall be held, notice of such meetings shall be delivered and
waiver of notice shall occur according to the provisions of the Trust's Bylaws.
Any action that may be taken at a meeting of Shareholders may be taken without a
meeting according to the procedures set forth in the Trust's Bylaws.
Section 3. Quorum; Required Vote. One-third of the Outstanding Shares of
each Series or Class, or one-third of the Outstanding Shares of the Trust,
entitled to vote in person or by proxy shall be a quorum for the transaction of
business at a Shareholders' meeting with respect to such Series or Class, or
with respect to the entire Trust, respectively. Any lesser number shall be
sufficient for adjournments. Any adjourned session of a Shareholders' meeting
may be held within a reasonable time without further notice. Except when a
larger vote is required by law, this Trust Instrument or the Bylaws, a majority
of the Outstanding Shares voted in person or by proxy shall decide any matters
to be voted upon with respect to the entire Trust and a plurality of such
Outstanding Shares shall elect a Trustee; provided, that if this Trust
Instrument or applicable law permits or requires that Shares be voted on any
matter by individual Series or Classes, then a majority of the Outstanding
Shares of that Series or Class (or, if required by law, a Majority Shareholder
Vote of that Series or Class) voted in person or by proxy voted on the matter
shall decide that matter insofar as that Series or Class is concerned.
Shareholders may act as to the Trust or any Series or Class by the written
consent of a majority (or such greater amount as may be required by applicable
law) of the Outstanding Shares of the Trust or of such Series or Class, as the
case may be.
ARTICLE VII
CONTRACTS WITH SERVICE PROVIDERS
Section 1. Investment Adviser. Subject to a Majority Shareholder Vote, the
Trustees may enter into one or more investment advisory contracts on behalf
<PAGE> 14
of the Trust or any Series, providing for investment advisory services,
statistical and research facilities and services, and other facilities and
services to be furnished to the Trust or Series on terms and conditions
acceptable to the Trustees. Any such contract may provide for the investment
adviser to effect purchases, sales or exchanges of portfolio securities or other
Trust Property on behalf of the Trustees or may authorize any officer or agent
of the Trust to effect such purchases, sales or exchanges pursuant to
recommendations of the investment adviser. The Trustees may authorize the
investment adviser to employ one or more sub-advisers.
Section 2. Principal Underwriter. The Trustees may enter into contracts on
behalf of the Trust or any Series or Class, providing for the distribution and
sale of Shares by the other party, either directly or as sales agent, on terms
and conditions acceptable to the Trustees. The Trustees may adopt a plan or
plans of distribution with respect to Shares of any Series or Class and enter
into any related agreements, whereby the Series or Class finances directly or
indirectly any activity that is primarily intended to result in sales of its
Shares, subject to the requirements of Section 12 of the 1940 Act, Rule 12b-1
thereunder, and other applicable rules and regulations.
Section 3. Transfer Agency, Shareholder Services, and Administration
Agreements. The Trustees, on behalf of the Trust or any Series or Class, may
enter into transfer agency agreements, Shareholder service agreements, and
administration and management agreements with any party or parties on terms and
conditions acceptable to the Trustees.
Section 4. Custodian. The Trustees shall at all times place and maintain the
cash, securities and other assets of the Trust and of each Series with a
custodian meeting the requirements of Section 17(f) of the 1940 Act and the
rules thereunder or such other entities permitted by Commission order. The
Trustees, on behalf of the Trust or any Series, may enter into an agreement with
a custodian on terms and conditions acceptable to the Trustees, providing for
the custodian, among other things, to (a) hold the securities owned by the Trust
or any Series and deliver the same upon written order or oral order confirmed in
writing, (b) to receive and receipt for any moneys due to the Trust or any
Series and deposit the same in its own banking department or elsewhere, (c) to
disburse such funds upon orders or vouchers, and (d) to employ one or more
sub-custodians.
Section 5. Parties to Contracts with Service Providers. The Trustees may
enter into any contract referred to in this Article with any entity, although
one or more of the Trustees or officers of the Trust may be an officer,
director, trustee, partner, shareholder, or member of such entity, and no such
contract shall be invalidated or rendered void or voidable because of such
relationship. No person having such a relationship shall be disqualified from
voting on or executing a contract in his or her capacity as Trustee and/or
Shareholder, or be liable merely by reason of such relationship for any loss or
expense to the Trust with respect to such a contract or accountable for any
profit realized directly or indirectly therefrom; provided, that the contract
was reasonable and fair and not inconsistent with this Trust Instrument or the
Bylaws.
Any contract referred to in Sections 1 and 2 of this Article shall be
consistent with and subject to the applicable requirements of Section 15 of the
1940 Act and the rules and orders thereunder with respect to its continuance in
effect, its termination, and the method of authorization and approval of such
contract or renewal. No amendment to a contract referred to in Section 1 of this
Article shall be effective unless assented to in a manner consistent with the
requirements of Section 15 of the 1940 Act, and the rules and orders thereunder.
<PAGE> 15
ARTICLE VIII
EXPENSES OF THE TRUST AND SERIES
Subject to Article IV, Section 4, the Trust or a particular Series shall
pay, or shall reimburse the Trustees from the Trust estate or the assets
belonging to the particular Series, for the expenses and disbursements of its
organization, operations and business (unless a third party has agreed to bear
such expenses and disbursements). Such expenses and disbursements may include,
but are not limited to, the following: fees, expenses and charges of certain
third parties which may include the Trust's investment advisers, distributors,
transfer agents, custodian, independent auditors, legal counsel and
administrators; expenses of the organization of the Trust or a particular
Series; expenses of the issue, redemption and transfer of Shares; brokers'
commissions and other charges; expenses of custody and accounting services;
expenses of maintaining and servicing Shareholder accounts; expenses of bonding
and insurance; all taxes or governmental fees; costs of membership in trade
associations; all charges and expenses for equipment or services used for
communication between the Trust or any Series and any third party providing
services to the Trust or any Series; fees and expenses of Trustees' meetings,
including the compensation of Trustees who are not Interested Persons of the
Trust; Commission registration fees and related expenses; state or foreign
securities laws registration fees and related expenses; expenses of Shareholder
meetings, including the printing and distribution of proxy materials and any
other costs associated with a proxy solicitation; costs of preparing, printing
and distributing Shareholder communications such as prospectuses, statements of
additional information, and financial reports; and non-recurring expenses which
may arise, including the costs of actions, suit or proceedings to which the
Trust or a Series (or a Trustee or officer of the Trust acting as such) is a
party, and the expenses the Trust or Series may incur as a result of its
obligation to provide indemnification to its Trustees, Officers, employees or
agents. The Trustees shall have a lien on the assets belonging to the
appropriate Series, or in the case of an expense allocable to more than one
Series, on the assets of each such Series, prior to any rights or interests of
the Shareholders thereto, for the reimbursement to them of such expenses,
disbursements, losses and liabilities.
ARTICLE IX
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 1. Limitation of Liability. All persons contracting with or having
any claim against the Trust or a particular Series shall look only to the assets
of the Trust or such Series for payment under such contract or claim; and
neither the Trustees nor any of the Trust's officers, employees or agents,
whether past, present or future, shall be personally liable therefor. Every
written instrument or obligation on behalf of the Trust or any Series shall
contain a statement to the foregoing effect, but the absence of such statement
shall not operate to make any Trustee or officer of the Trust liable thereunder.
Provided they have exercised reasonable care and have acted under the reasonable
belief that their actions are in the best interest of the Trust, the Trustees
and officers of the Trust shall not be responsible or liable for any act or
omission or for neglect or wrongdoing of them or any officer, agent, employee,
investment adviser or independent contractor of the Trust, but nothing contained
in this Trust Instrument or in the Delaware Act shall protect any Trustee or
officer of the Trust against liability to the Trust or to Shareholders to which
he would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office.
<PAGE> 16
Section 2. Indemnification. (a) Subject to the exceptions and limitations
contained in subsection (b) below:
(i) every person who is, or has been, a Trustee or an officer, employee
or agent of the Trust ("Covered Person") shall be indemnified by the
Trust or the appropriate Series to the fullest extent permitted by law
against liability and against all expenses reasonably incurred or paid
by him or her in connection with any claim, action, suit or proceeding
in which he or she becomes involved as a party or otherwise by virtue
of his or her being or having been a Covered Person and against amounts
paid or incurred by him or her in the settlement thereof;
(ii) as used herein, the words "claim," "action," "suit," or
"proceeding" shall apply to all claims, actions, suits or proceedings
(civil, criminal or other, including appeals), actual or threatened,
and the words "liability" and "expenses" shall include, without
limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before which the
proceeding was brought (A) to be liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of his or her office, or (B) not to have acted in good faith in the
reasonable belief that his or her action was in the best interest of
the Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Covered Person did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office; (A) by the court
or other body approving the settlement; (B) by the vote of at least a
majority of a quorum of those Trustees who are neither Interested
Persons of the Trust nor are parties to the proceeding based upon a
review of readily available facts (as opposed to a full trial-type
inquiry); or (C) by written opinion of independent legal counsel based
upon a review of readily available facts (as opposed to a full
trial-type inquiry).
(c) The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not be exclusive of
or affect any other rights to which any Covered Person may now or hereafter be
entitled, and shall inure to the benefit of the heirs, executors and
administrators of a Covered Person.
(d) To the maximum extent permitted by applicable law, expenses in
connection with the preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described in subsection (a) of this
Section may be paid by the Trust or applicable Series from time to time prior to
final disposition thereof upon receipt of an undertaking by or on behalf of such
Covered Person that such amount will be paid over by him or her to the Trust or
applicable Series if it is ultimately determined that he or she is not entitled
to indemnification under this Section; provided, however, that either (i) such
Covered Person shall have provided appropriate security for such undertaking,
(ii) the Trust is insured against losses arising out of any such advance
payments or (iii) either a majority of the Trustees who are neither Interested
Persons of the Trust nor parties to the proceeding, or independent legal counsel
in a written opinion, shall have determined, based upon a review
<PAGE> 17
of readily available facts (as opposed to a full trial-type inquiry) that there
is reason to believe that such Covered Person will not be disqualified from
indemnification under this Section.
(e) Any repeal or modification of this Article IX by the Shareholders of the
Trust, or adoption or modification of any other provision of the Trust
Instrument or Bylaws inconsistent with this Article, shall be prospective only,
to the extent that such repeal or modification would, if applied
retrospectively, adversely affect any limitation on the liability of any Covered
Person or indemnification available to any Covered Person with respect to any
act or omission which occurred prior to such repeal, modification or adoption.
Section 3. Indemnification of Shareholders. If any Shareholder or former
Shareholder of any Series shall be held personally liable solely by reason of
his or her being or having been a Shareholder and not because of his or her acts
or omissions or for some other reason, the Shareholder or former Shareholder (or
his or her heirs, executors, administrators or other legal representatives or in
the case of any entity, its general successor) shall be entitled out of the
assets belonging to the applicable Series to be held harmless from and
indemnified against all loss and expense arising from such liability. The Trust,
on behalf of the affected Series, shall, upon request by such Shareholder,
assume the defense of any claim made against such Shareholder for any act or
obligation of the Series and satisfy any judgment thereon from the assets of the
Series.
ARTICLE X
MISCELLANEOUS
Section 1. Trust Not a Partnership. This Trust Instrument creates a trust
and not a partnership. No Trustee shall have any power to bind personally either
the Trust's officers or any Shareholder.
Section 2. Trustee Action; Expert Advice; No Bond or Surety. The exercise by
the Trustees of their powers and discretion hereunder in good faith and with
reasonable care under the circumstances then prevailing shall be binding upon
everyone interested. Subject to the provisions of Article IX, the Trustees shall
not be liable for errors of judgment or mistakes of fact or law. The Trustees
may take advice of counsel or other experts with respect to the meaning and
operation of this Trust Instrument, and subject to the provisions of Article IX,
shall not be liable for any act or omission in accordance with such advice or
for failing to follow such advice. The Trustees shall not be required to give
any bond as such, nor any surety if a bond is obtained.
Section 3. Record Dates. The Trustees may fix in advance a date up to
seventy (70) days before the date of any Shareholders' meeting, or the date for
the payment of any dividends or other distributions, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
Shares shall go into effect as a record date for the determination of the
Shareholders entitled to notice of, and to vote at, any such meeting, or
entitled to receive payment of such dividend or other distribution, or to
receive any such allotment of rights, or to exercise such rights in respect of
any such change, conversion or exchange of Shares. Record dates for adjourned
Shareholders' meetings shall be set according to the Trust's Bylaws.
Section 4. Termination of the Trust. (a) This Trust shall have perpetual
existence. Subject to a Majority Shareholder Vote of the Trust or of each Series
to be affected, the Trustees may
<PAGE> 18
(i) sell and convey all or substantially all of the assets of the Trust
or any affected Series to another Series or to another entity which is
an open-end investment company as defined in the 1940 Act, or is a
series thereof, for adequate consideration, which may include the
assumption of all outstanding obligations, taxes and other liabilities,
accrued or contingent, of the Trust or any affected Series, and which
may include shares of or interests in such Series, entity, or series
thereof; or
(ii) at any time sell and convert into money all or substantially all
of the assets of the Trust or any affected Series.
Upon making reasonable provision for the payment of all known liabilities of the
Trust or any affected Series in either (i) or (ii), by such assumption or
otherwise, the Trustees shall distribute the remaining proceeds or assets (as
the case may be) ratably among the Shareholders of the Trust or any affected
Series; however, the payment to any particular Class of such Series may be
reduced by any fees, expenses or charges allocated to that Class.
(b) The Trustees may take any of the actions specified in subsection (a) (i)
and (ii) above without obtaining a Majority Shareholder Vote of the Trust or any
Series if a majority of the Trustees determines that the continuation of the
Trust or Series is not in the best interests of the Trust, such Series, or their
respective Shareholders as a result of factors or events adversely affecting the
ability of the Trust or such Series to conduct its business and operations in an
economically viable manner. Such factors and events may include the inability of
the Trust or a Series to maintain its assets at an appropriate size, changes in
laws or regulations governing the Trust or the Series or affecting assets of the
type in which the Trust or Series invests, or economic developments or trends
having a significant adverse impact on the business or operations of the Trust
or such Series.
(c) Upon completion of the distribution of the remaining proceeds or assets
pursuant to subsection (a), the Trust or affected Series shall terminate and the
Trustees and the Trust shall be discharged of any and all further liabilities
and duties hereunder with respect thereto and the right, title and interest of
all parties therein shall be canceled and discharged. Upon termination of the
Trust, following completion of winding up of its business, the Trustees shall
cause a certificate of cancellation of the Trust's certificate of trust to be
filed in accordance with the Delaware Act, which certificate of cancellation may
be signed by any one Trustee.
Section 5. Reorganization. Notwithstanding anything else herein, to change
the Trust's form of organization the Trustees may, without Shareholder approval,
(a) cause the Trust to merge or consolidate with or into one or more entities,
if the surviving or resulting entity is the Trust or another open-end management
investment company under the 1940 Act, or a series thereof, that will succeed to
or assume the Trust's registration under the 1940 Act, or (b) cause the Trust to
incorporate under the laws of Delaware. Any agreement of merger or consolidation
or certificate of merger may be signed by a majority of Trustees and facsimile
signatures conveyed by electronic or telecommunication means shall be valid.
Pursuant to and in accordance with the provisions of Section 3815(f) of the
Delaware Act, an agreement of merger or consolidation approved by the Trustees
in accordance with this Section 5 may effect any amendment to the Trust
Instrument or effect the adoption of a new trust instrument of the Trust if it
is the surviving or resulting trust in the merger or consolidation.
Section 6. Trust Instrument. The original or a copy of this Trust Instrument
and of each amendment hereto or Trust Instrument supplemental shall
<PAGE> 19
be kept at the office of the Trust where it may be inspected by any Shareholder.
Anyone dealing with the Trust may rely on a certificate by a Trustee or an
officer of the Trust as to the authenticity of the Trust Instrument or any such
amendments or supplements and as to any matters in connection with the Trust.
The masculine gender herein shall include the feminine and neuter genders.
Headings herein are for convenience only and shall not affect the construction
of this Trust Instrument. This Trust Instrument may be executed in any number of
counterparts, each of which shall be deemed an original.
Section 7. Applicable Law. This Trust Instrument and the Trust created
hereunder are governed by and construed and administered according to the
Delaware Act and the applicable laws of the State of Delaware; provided,
however, that there shall not be applicable to the Trust, the Trustees or this
Trust Instrument (a) the provisions of Section 3540 of Title 12 of the Delaware
Code, or (b) any provisions of the laws (statutory or common) of the State of
Delaware (other than the Delaware Act) pertaining to trusts which relate to or
regulate (i) the filing with any court or governmental body or agency of trustee
accounts or schedules of trustee fees and charges, (ii) affirmative requirements
to post bonds for trustees, officers, agents or employees of a trust, (iii) the
necessity for obtaining court or other governmental approval concerning the
acquisition, holding or disposition of real or personal property, (iv) fees or
other sums payable to trustees, officers, agents or employees of a trust, (v)
the allocation of receipts and expenditures to income or principal, (vi)
restrictions or limitations on the permissible nature, amount or concentration
of trust investments or requirements relating to the titling, storage or other
manner of holding of trust assets, or (vii) the establishment of fiduciary or
other standards of responsibilities or limitations on the acts or powers of
trustees, which are inconsistent with the limitations or liabilities or
authorities and powers of the Trustees set forth or referenced in this Trust
Instrument. The Trust shall be of the type commonly called a Delaware business
trust, and, without limiting the provisions hereof, the Trust may exercise all
powers which are ordinarily exercised by such a trust under Delaware law. The
Trust specifically reserves the right to exercise any of the powers or
privileges afforded to trusts or actions that may be engaged in by trusts under
the Delaware Act, and the absence of a specific reference herein to any such
power, privilege or action shall not imply that the Trust may not exercise such
power or privilege or take such actions.
Section 8. Amendments. The Trustees may, without any Shareholder vote, amend
or otherwise supplement this Trust Instrument by making an amendment, a Trust
Instrument supplemental hereto or an amended and restated trust instrument;
provided, that Shareholders shall have the right to vote on any amendment (a)
which would affect the voting rights of Shareholders granted in Article VI,
Section 1, (b) to this Section 8, (c) required to be approved by Shareholders by
law or by the Trust's registration statement(s) filed with the Commission, and
(d) submitted to them by the Trustees in their discretion. Any amendment
submitted to Shareholders which the Trustees determine would affect the
Shareholders of any Series shall be authorized by vote of the Shareholders of
such Series and no vote shall be required of Shareholders of a Series not
affected. Notwithstanding anything else herein, any amendment to Article IX
which would have the effect of reducing the indemnification and other rights
provided thereby to Trustees, officers, employees, and agents of the Trust or to
Shareholders or former Shareholders, and any repeal or amendment of this
sentence shall each require the affirmative vote of the holders of two-thirds of
the Outstanding Shares of the Trust entitled to vote thereon.
Section 9. Fiscal Year. The fiscal year of the Trust shall end on a
specified date as set forth in the Bylaws. The Trustees may change the fiscal
year of the Trust without Shareholder approval.
<PAGE> 20
Section 10. Severability. The provisions of this Trust Instrument are
severable. If the Trustees determine, with the advice of counsel, that any
provision hereof conflicts with the 1940 Act, the regulated investment company
provisions of the Internal Revenue Code or with other applicable laws and
regulations, the conflicting provision shall be deemed never to have constituted
a part of this Trust Instrument; provided, however, that such determination
shall not affect any of the remaining provisions of this Trust Instrument or
render invalid or improper any action taken or omitted prior to such
determination. If any provision hereof shall be held invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall attach only to such
provision only in such jurisdiction and shall not affect any other provision of
this Trust Instrument.
IN WITNESS WHEREOF, the undersigned, being the initial Trustees, have
executed this Trust Instrument as of the date first above written.
----------------------------
Boh A. Dickey, as
Trustee and not individually
----------------------------
Richard W. Hubbard, as
Trustee and not individually
Address: SAFECO Plaza
Seattle, Washington 98185
STATE OF WASHINGTON ss
CITY OF SEATTLE
Before me this ___ day of ________, 1993, personally appeared the
above-named __________________, and _____________, known to me to be the persons
who executed the foregoing instrument and who acknowledged that they executed
the same.
------------------------------------
Notary Public
My Commission expires
-------------------------------------.
<PAGE> 21
EXHIBIT A
SAFECO Intermediate-Term U.S. Treasury Fund
SAFECO U.S. Government Securities Fund
SAFECO High-Yield Bond Fund
<PAGE> 1
EXHIBIT 99.2
BYLAWS
<PAGE> 2
BYLAWS
SAFECO TAXABLE BOND TRUST
(A DELAWARE BUSINESS TRUST)
These Bylaws of SAFECO TAXABLE BOND TRUST (the "Trust"), a Delaware business
trust, are subject to the Trust Instrument of the Trust dated May 13, 1993, as
from time to time amended, supplemented or restated (the "Trust Instrument").
Capitalized terms used herein have the same meanings as in the Trust Instrument.
ARTICLE I
PRINCIPAL OFFICE AND SEAL
Section 1. Principal Office. The principal office of the Trust shall be located
in Seattle, Washington, or such other location as the Board of Trustees may from
time to time determine. The Trust may establish and maintain other offices and
places of business as the Board of Trustees may from time to time determine.
Section 2. Seal. The seal of the Trust shall consist of a flat-faced circular
die with the words "SAFECO Taxable Bond Trust", and with the words "Trust Seal,
1993" in the center, and with the word "Delaware" also being shown on the face
of the seal. Any Trustee or officer of the Trust shall have authority to affix
the seal to any document requiring the same.
ARTICLE II
MEETINGS OF BOARD OF TRUSTEES
Section 1. Meetings. Meetings of the Board of Trustees may be held at such
places and such times as the Trustees may from time to time determine as
provided in Article II, Section 7, of the Trust Instrument.
Section 2. Action Without a Meeting. Actions may be taken by the Board of
Trustees without a meeting or by a telephone meeting, as provided in Article II,
Section 7, of the Trust Instrument.
Section 3. Compensation of Trustees. No compensation for services as a Trustee
shall be paid to any Trustee who is at the time an employee of an investment
adviser of the Trust or any Series or Class thereof or of any entity affiliated
with the investment adviser. A Trustee who is not an employee of such investment
adviser or any of its affiliates may receive such compensation from the Trust
for his or her services and reimbursement for his or her expenses as may be
fixed from time to time by the Board of Trustees.
ARTICLE III
BOARD COMMITTEES
Section 1. Establishment. The Board of Trustees may designate one or more
committees and shall determine the number of members of each such committee and
its powers. Each committee member shall hold office at the pleasure of the Board
of Trustees. The Board of Trustees may abolish any such committee at any time in
its sole discretion. Any committee to which the Board of Trustees delegates any
of its powers shall maintain records of its meetings and shall report its
actions to the Board of Trustees. The Board of Trustees shall have the power to
rescind any action of any committee, but no such recision shall have retroactive
effect. The Board of Trustees shall have the power at any time to fill vacancies
in the committees. The Board of Trustees may delegate to any committee any of
its powers, except the power to declare a
<PAGE> 3
dividend or distribution on Shares, authorize the issuance of Shares, recommend
to Shareholders any action requiring Shareholders' approval, amend these Bylaws,
approve any merger or Share exchange, approve or terminate any contract with an
investment adviser or Principal Underwriter, or to take any other action
required by applicable law to be taken by the Board.
Section 2. Notice, Waiver, Consent, Quorum and Proceedings. In the absence of a
provision in these Bylaws or an appropriate resolution of the Trustees, each
committee may adopt such rules and regulations governing notice of its meetings
and waiver and consent to thereof, quorum and manner of acting as it shall deem
proper and desirable. In the event any member of any committee is absent from
any meeting, the members present at the meeting, whether or not they constitute
a quorum, may appoint another Trustee to act in the place of such absent member.
Section 3. Audit Committee.
(a) Membership. The members of the Audit Committee shall be those Trustees
who are not Interested Persons of the Trust.
(b) Responsibilities and Duties. The Audit Committee shall assist the Board
of Trustees to fulfill its responsibility to shareholders, potential
shareholders and the investment community relating to corporate accounting,
financial reporting practices of the Trust and the quality and integrity of the
financial reports of the Trust. In carrying out these responsibilities the Audit
Committee will:
(i) Review and recommend to the Board of Trustees the independent
accountants to be selected to audit the financial statements of the Trust;
(ii) Meet with the independent accountants and the officers of the
Trust to review the scope of the proposed audit for the current year and the
audit procedures to be utilized;
(iii) Meet with the independent accountants and the officers of the
Trust at the conclusion of each audit to review the audit, including a review of
any comments or recommendations of the independent accountants;
(iv) Review with the independent accountants and the officers of the
Trust the adequacy and effectiveness of the internal auditing, accounting and
financial controls of the Trust and elicit any recommendations from the
independent accountants and officers of the Trust for improvements in such
controls;
(v) Review the internal audit services provided to the Trust by the
Trust's investment adviser or its affiliates;
(vi) Review the planning and results of any internal audit
examinations;
(vii) Determine whether the independent accountants are satisfied with
the disclosure and content of the financial statements included in the annual
report to shareholders and review any change in accounting principles which
materially affect such financial statements;
(viii) Review the scope of and fees for consulting services provided by
the independent accountants;
(ix) Meet in separate executive sessions with the independent
accountants and management;
<PAGE> 4
(x) Report to the Board of Trustees following each meeting.
(c) Rules of Procedure. The Audit Committee shall adopt its own rules and
keep minutes of all of its meetings.
(d) Quorum. A quorum of the Audit Committee shall consist of at least two
members of the Committee.
(e) Action Without Meeting. Subject to the requirements of the 1940 Act, any
action that may be or is required to be taken at a meeting of the Audit
Committee may be conducted by telephone or taken without a meeting if a consent
in writing setting forth the action so taken shall be signed by all members of
the Audit Committee. Such consent shall have the same effect as a unanimous
vote.
<PAGE> 5
Section 4. Pricing Committee.
(a) Membership. The Board of Trustees may annually appoint a Pricing
Committee comprised of two or more Trustees, all of whom may be Interested
Persons of the Trust.
(b) Responsibilities and Duties. The purpose of the Pricing Committee shall
be to value, on behalf of the Board of Trustees between regularly scheduled
trustees' meetings, any security held by or to be purchased for the Trust or any
Series which cannot be otherwise valued under the Trust's guidelines for
valuation of portfolio securities, e.g., an unrestricted security for which
market quotes are not readily available or a restricted security ("Security").
(c) Rules of Procedure. In determining the fair value of a Security, the
Pricing Committee shall consider such factors and follow such procedures as may
be established under guidelines approved by the Trust's Board of Trustees. The
guidelines shall be periodically reviewed and approved by the Board as
frequently as the Board shall deem appropriate, but in no event less than
annually. Minutes shall be kept of each meeting of the Pricing Committee. At the
next regularly scheduled Board of Trustees' meeting following the Pricing
Committee's determination of a fair value for a Security, the Board of Trustees
shall ratify the Pricing Committee's action.
(d) Vote Required. The members of the Pricing Committee must unanimously
approve a fair value for the Security.
(e) Action Without Meeting. Any action that may be or is required to be
taken at a meeting of the Pricing Committee may be conducted by telephone or may
be taken without a meeting, if a consent in writing setting forth the action so
taken shall be signed by all members of the Pricing Committee. Such consent
shall have the same effect as a unanimous vote.
Section 5. Compensation of Committee Members. Each committee member who is not
an Interested Person of the Trust may receive such compensation from the Trust
for his or her services and reimbursement for his or her expenses as may be
fixed from time to time by the Trustees.
<PAGE> 6
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Trust shall be a President, a Treasurer,
a Secretary, and may include one or more Vice Presidents, Assistant Treasurers
or Assistant Secretaries, and such other officers as the Board of Trustees may
from time to time elect. The Board of Trustees may appoint any other officers or
agents and prescribe their respective rights, terms of office, authorities and
duties.
Section 2. Election, Tenure and Qualifications of Officers. The officers of the
Trust shall be elected annually by the Trustees. Each officer elected by the
Board of Trustees shall hold office until his or her successor shall have been
elected and qualified or his or her earlier resignation. Any person may hold one
or more offices of the Trust, except no one person may serve concurrently as
President and Secretary. A person who holds more than one office in the Trust
may not act in more than one capacity to execute, acknowledge, or verify an
instrument required by law to be executed, acknowledged, or verified by more
than one officer. No officer need be a Trustee or a Shareholder of the Trust.
Section 3. Vacancies and Newly Created Offices. Whenever a vacancy shall occur
in any office, regardless of the reason for such vacancy, or if any new office
shall be created, such vacancies or newly created offices may be filled by the
Trustees at any meeting.
Section 4. Removal and Resignation. The Board of Trustees may remove any officer
or agent from office, with or without cause, by the vote of a majority of the
Trustees. Any officer may resign from office at any time by delivering a written
resignation to the Trustees, the President, the Secretary, or any Assistant
Secretary. Unless otherwise specified therein, such resignation shall take
effect upon delivery.
Section 5. Chairman. The Chairman shall have the powers and responsibilities set
forth in Article II, section 6 of the Trust Instrument and shall exercise and
perform such other powers and duties as may from time to time be assigned by the
Board of Trustees or prescribed by these Bylaws.
Section 6. President. The President shall be the chief executive officer of the
Trust. Subject to the direction of the Trustees, the President shall have
general charge, supervision and control over the business affairs of the Trust
and shall be responsible for the management thereof. In the absence of the
Chairman, or if no Chairman of the Board of Trustees has been elected, the
President shall preside at all Shareholders' and Board of Trustees' meetings and
shall in general exercise the powers and perform the duties of the Chairman.
Except as the Board of Trustees may otherwise order, the President shall have
the power to grant, issue, execute or sign such powers of attorney, proxies,
agreements or other documents as may be deemed advisable or necessary. The
President also shall have the power to employ attorneys, accountants and other
advisers and agents for the Trust. The President shall exercise such other
powers and perform such other duties as the Board of Trustees may from time to
time assign to the President.
Section 7. Vice President. If the Board of Trustees elects one or more Vice
President(s), the Vice-President(s) shall have such powers and perform such
duties as may from time to time be assigned to them by the Board of Trustees or
the President. At the request or in the absence or disability of the President,
the Vice President (or, if there are two or more Vice Presidents, then the
senior of the Vice Presidents present and able to act) may perform all the
duties of the President and, when so acting, shall have all the powers
<PAGE> 7
of the President. The Board of Trustees may designate one (1) or more of the
Vice Presidents as an Executive Vice President or with such other designation or
title as the Board of Trustees deem appropriate for his or her position or
duties.
Section 8. Treasurer and Assistant Treasurers. The Treasurer shall be the
principal financial officer of the Trust and shall have general charge of the
finances and books of the Trust. The Treasurer shall be responsible for
delivering all funds and securities of the Trust to its custodian. The Treasurer
shall make annual reports to the Board of Trustees regarding the business and
financial condition of the Trust as soon as possible after the close of the
Trust's fiscal year. The Treasurer also shall furnish such other reports
concerning the business and financial condition of the Trust as the Board of
Trustees may from time to time require. The Treasurer shall perform all acts
incidental to the office of Treasurer, subject to the supervision of the Board
of Trustees, and shall perform such additional duties as the Board may from time
to time designate.
Any Assistant Treasurer may perform such duties of the Treasurer as the
Board of Trustees or the Treasurer may assign, and, in the absence of the
Treasurer, may perform all the duties of the Treasurer.
Section 9. Secretary and Assistant Secretaries. The Secretary shall record all
votes and proceedings of the meetings of Trustees and Shareholders in books to
be kept for that purpose. The Secretary shall be responsible for the giving and
serving of all notices of the Trust. The Secretary shall have custody of any
seal of the Trust. The Secretary shall be responsible for the records of the
Trust, including the Share register and such other books and papers as the
Trustees may direct and such books, reports, certificates and other documents
required by law. All of such records and documents shall at all reasonable times
be kept open by the Secretary for inspection by any Trustee. The Secretary shall
perform all acts incidental to the office of Secretary, subject to the
supervision of the Trustees, and shall perform such additional duties as the
Trustees may from time to time designate.
Any Assistant Secretary may perform such duties of the Secretary as the
Trustees or the Secretary may assign, and, in the absence of the Secretary, may
perform all the duties of the Secretary.
ARTICLE V
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meetings. There shall be no annual Shareholders' meetings.
Section 2. Special Meetings. Special meetings of Shareholders of the Trust or of
any Series or Class shall be called by the Chairman, President or Secretary
whenever ordered by the Trustees, and shall be held at such time and place as
may be stated in the notice of the meeting.
Special meetings of the Shareholders of the Trust or of any Series or Class
shall also be called by the Chairman, President or Secretary upon the written
request of Shareholders owning at least ten percent of the Outstanding Shares of
the Trust or such Series or Class entitled to vote at such meeting, provided
that (1) such request shall state the purposes of such meeting and the matters
proposed to be acted on, and (2) the Shareholders requesting such meeting shall
have paid to the Trust the reasonably estimated cost of preparing and mailing
the notice thereof, which the Secretary shall determine and specify to such
Shareholders. No special meeting shall be called upon the request of
Shareholders of the Trust or of any Series or Class to consider any matter which
is substantially the same as a matter voted upon at any special meeting of the
Shareholders held during the preceding twelve months, unless
<PAGE> 8
requested by the holders of a majority of all Outstanding Shares of the Trust or
the Series or Class entitled to be voted at such meeting.
If the Chairman, President or Secretary fails for more than thirty days to
call a special meeting when required to do so, the Trustees or the Shareholders
requesting such a meeting may, in the name of the Chairman, President or
Secretary, call the meeting by giving the required notice. If the meeting is a
meeting of Shareholders of any Series or Class, but not a meeting of all
Shareholders of the Trust, then only a special meeting of Shareholders of such
Series or Class shall be called and only Shareholders of such Series or Class
shall be entitled to notice of and to vote at such meeting.
<PAGE> 9
Section 3. Notice of Meetings; Waiver. The Chairman, President or Secretary
shall cause written notice of the place, date and time, and the purpose or
purposes for which the meeting is called. Notice shall be given at least ten
days before the date of the meeting. The written notice of any meeting may be
delivered or mailed, postage prepaid, to each Shareholder entitled to vote at
such meeting. If mailed, notice shall be deemed to be given when deposited in
the United States mail directed to the Shareholder at his or her address as it
appears on the records of the Trust. Notice of any Shareholders' meeting need
not be given to any Shareholder who is present at such meeting in person or by
proxy if a written waiver of notice, executed before or after such meeting, is
filed with the record of such meeting. Any irregularities in the notice of any
meeting or the nonreceipt of any such notice by any of the Shareholders shall
not invalidate any action otherwise properly taken at any such meeting.
Section 4. Adjourned Meetings. One or more adjournments of any Shareholders'
meetings may be taken by reason of failure of a quorum to attend a meeting or
for any other reason. Notice of adjournment of a Shareholders' meeting to
another time or place need not be given, if such time and place are announced at
the meeting at which the adjournment is taken, or reasonable notice is given to
persons present at the meeting, and the adjourned meeting is held within a
reasonable time after the date set for the original meeting. At the adjourned
meeting the Trust may transact any business which might have been transacted at
the original meeting. If after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to
Shareholders of record entitled to vote at such meeting.
Section 5. Validity of Proxies. Subject to the provisions of the Trust
Instrument, Shareholders entitled to vote may vote either in person or by proxy,
provided that either (1) a written instrument authorizing such proxy to act has
been signed and dated by the Shareholder or by his or her duly authorized
attorney, or (2) the Trustees adopt by resolution an electronic, telephonic,
computerized or other alternative to execution of a written instrument
authorizing the proxy to act, but if a proposal by anyone other than the
officers or Trustees is submitted to a vote of the Shareholders of the Trust or
of any Series or Class, or if there is a proxy contest or proxy solicitation or
proposal in opposition to any proposal by the officers or Trustees, Shares may
be voted only in person or by written proxy. Unless the proxy provides
otherwise, it shall not be valid for more than eleven months before the date of
the meeting. All proxies shall be delivered to the Secretary or other person
responsible for recording the proceedings before being voted. A proxy with
respect to Shares held in the name of two or more persons shall be valid if
executed by one of them unless at or prior to exercise of such proxy the Trust
receives a specific written notice to the contrary from any one of them. Unless
otherwise specifically limited by their terms, proxies shall entitle the
Shareholder to vote at any adjournment of a Shareholders' meeting. A proxy
purporting to be executed by or on behalf of a Shareholder shall be deemed valid
unless challenged at or prior to its exercise, and the burden of proving
invalidity shall rest on the challenger. At every meeting of Shareholders,
unless the voting is conducted by inspectors, all questions concerning the
qualifications of voters, the validity of proxies, and the acceptance or
rejection of votes, shall be decided by the chairman of the meeting. Subject to
the provisions of the Delaware Business Trust Act, the Trust Instrument or these
Bylaws, all matters concerning the giving, voting or validity of proxies shall
be governed by the General Corporation Law of the State of Delaware relating to
proxies, and judicial interpretations thereunder, as if the Trust were a
Delaware corporation and the Shareholders were shareholders of a Delaware
corporation.
Section 6. Quorum; Required Vote. The quorum and required vote for any
Shareholders' meeting shall be as specified in Article VI, section 3 of the
<PAGE> 10
Trust Instrument.
Section 7. Record Date. The Board of Trustees may fix in advance a date up to
seventy (70) days before the date of any Shareholders' meeting as a record date
for the determination of the Shareholders entitled to notice of, and to vote at,
any such meeting. The Shareholders of record entitled to vote at a Shareholders'
meeting shall be deemed the Shareholders of record at any meeting reconvened
after one or more adjournments, unless the Board of Trustees has fixed a new
record date. If the Shareholders' meeting is adjourned for more than one hundred
twenty (120) days after the original date, the Board of Trustees shall establish
a new record date.
Section 8. Place of Meeting. All special meetings of Shareholders shall be held
at the principal place of business of the Trust or at such other place as the
Board of Trustees may from time to time designate.
Section 9. Action Without a Meeting. Any action to be taken by Shareholders may
be taken without a meeting if a majority (or such other amount as may be
required by law) of the Outstanding Shares entitled to vote on the matter
consent to the action in writing and such written consents are filed with the
records of the Shareholders' meetings. Such written consent shall be treated for
all purposes as a vote at a meeting of the Shareholders held at the principal
place of business of the Trust.
<PAGE> 11
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
Section 1. Share Certificates. In lieu of issuing certificates representing
Shares, the Board of Trustees or the transfer agent or Shareholder servicing
agent may keep accounts upon the books of the Trust for record holders of such
Shares. The record holders shall be deemed, for all purposes, to be holders of
certificates for such Shares as if they accepted such certificates and shall be
held to have expressly consented to the terms thereof.
If the Board of Trustees authorizes the issuance of certificates pursuant to
Article V, Section 5 of the Trust Instrument, then such certificates shall be in
the form prescribed from time to time by the Board and shall be signed by the
President or a Vice President and by the Treasurer, Assistant Treasurer,
Secretary or Assistant Secretary of the Trust. Such signatures may be facsimile
if the certificate is signed by a transfer agent or Shareholder servicing agent
or by a registrar, other than a Trustee, officer or employee of the Trust. If
any officer who has signed any such certificate or whose facsimile signature has
been placed thereon shall have ceased to be such an officer before the
certificate is issued, then such certificate may be issued by the Trust with the
same effect as if he or she were such an officer at the date of issue. The
issuance of a certificate to one or more Shareholders shall not require the
issuance of certificates to all Shareholders. The Board of Trustees may at any
time discontinue the issuance of certificates and may, by written notice to each
Shareholder, require the surrender of certificates to the Trust for
cancellation. Such surrender and cancellation shall not affect the ownership of
Shares in the Trust.
Section 2. Transfer of Shares. The Shares of the Trust shall be transferable
only by a transfer recorded on the books of the Trust by the Shareholder of
record in person or by his or her duly authorized attorney or legal
representative. The Shares of the Trust may be freely transferred, and the Board
of Trustees may, from time to time, adopt rules and regulations regarding the
method of transfer of such Shares. Shares shall not be transferred on the books
of the Trust until all requirements of the Board, including the proper tender of
any outstanding certificates, if any, have been satisfied. The Trust shall be
entitled to treat the holder of record of any Share or Shares as the absolute
owner for all purposes, and shall not be bound to recognize any legal, equitable
or other claim or interest in such Share or Shares on the part of any other
person except as otherwise expressly provided by law.
Section 3. Lost, Stolen or Destroyed Certificates. If any Share certificate
should become lost, stolen or destroyed, a duplicate Share certificate may be
issued in place thereof, upon such terms and conditions as the Board of Trustees
may prescribe, including, but not limited to, requiring the owner of the lost,
stolen or destroyed certificate to give the Trust a bond or other indemnity, in
such form and in such amount as the Board of Trustees may direct and with such
surety or sureties as may be satisfactory to the Board sufficient to indemnify
the Trust against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate.
ARTICLE VII
CUSTODY OF SECURITIES
Section 1. Employment of a Custodian. The Trust shall at all times place and
maintain all cash, securities and other assets of the Trust and of each Series
in the custody of a custodian meeting the requirements set forth in Article VII,
section 4 of the Trust Instrument ("Custodian"). The Custodian shall be
<PAGE> 12
appointed from time to time by the Board of Trustees, who shall determine its
remuneration.
Section 2. Termination of Custodian Agreement. Upon termination of any Custodian
Agreement or the inability of the Custodian to continue to serve as custodian,
in either case with respect to the Trust or any Series, the Board of Trustees
shall (a) use its best efforts to obtain a successor Custodian; and (b) require
that the cash, securities and other assets owned by the Trust or any Series be
delivered directly to the successor Custodian.
Section 3. Other Arrangements. The Trust may make such other arrangements for
the custody of its assets (including deposit arrangements) as may be required by
any applicable law, rule or regulation.
ARTICLE VIII
FISCAL YEAR AND ACCOUNTANT
Section 1. Fiscal Year. The fiscal year of the Trust shall, unless otherwise
ordered by the Board of Trustees, be twelve calendar months ending on the 30th
day of September.
Section 2. Accountant. The Trust shall employ independent certified public
accountants as its Accountant to examine the accounts of the Trust and to sign
and certify financial statements filed by the Trust. The Accountant shall be
appointed in accordance with the requirements of Section 32(a) of the 1940 Act
and the rules thereunder. The Accountant's certificates and reports shall be
addressed both to the Board of Trustees and to the Shareholders.
<PAGE> 13
ARTICLE IX
AMENDMENTS
Section 1. General. Except as provided in Section 2 of this Article, all Bylaws
of the Trust shall be subject to amendment, alteration or repeal, and new Bylaws
may be made by the affirmative vote of a majority of either: (1) the Outstanding
Shares of the Trust entitled to vote at any meeting; or (2) the Trustees.
Section 2. By Shareholders Only. After the issue of any Shares of the Trust, no
amendment, alteration or repeal of this Article shall be made except by the
affirmative vote of the holders of either: (a) more than two-thirds of the
Trust's Outstanding Shares present at a meeting at which the holders of more
than fifty percent of the Outstanding Shares are present in person or by proxy,
or (b) more than fifty percent of the Trust's Outstanding Shares.
ARTICLE X
NET ASSET VALUE
Section 1. Determination of Net Asset Value. The term "Net Asset Value" of any
Series or Class shall mean that amount by which the assets belonging to that
Series or Class exceed its liabilities, all as determined by or under the
direction of the Board of Trustees. Such value per Share shall be determined
separately for each Series or Class and shall be determined on such days and at
such times as the Board of Trustees may determine. Such determination shall be
made with respect to securities for which market quotations are readily
available, at the market value of such securities; and with respect to other
securities and assets, at the fair value as determined in good faith by the
Board of Trustees, provided, however, that the Board, without Shareholder
approval, may alter the method of appraising portfolio securities insofar as
permitted under the 1940 Act and the rules, regulations and interpretations
thereof promulgated or issued by the Commission or insofar as permitted by any
order of the Commission applicable to a Series or Class. The Board of Trustees
may delegate any of its powers and duties under this Section 1 with respect to
appraisal of assets and liabilities. At any time the Board of Trustees may cause
the Net Asset Value per Share last determined to be determined again in a
similar manner and may fix the time when such redetermined values shall become
effective.
<PAGE> 14
ARTICLE XI
INVESTMENTS
Section 1. Investment Objectives, Policies and Restrictions. The Trust and/or
each Series shall adhere to the fundamental and non-fundamental investment
objectives, policies and restrictions applicable to the Trust and/or each Series
included in the Trust's current effective registration statement as filed with
the Commission. If a percentage limitation is adhered to at the time of an
investment, a later increase or decrease in the percentage resulting from a
change in the value of the assets of a Series shall not be a violation of such
investment restrictions.
Section 2. Amendment of Investment Objectives, Policies and Restrictions. Any
investment objectives, policies and restrictions of the Trust or any Series
which are deemed to be fundamental may not be changed without the approval of
the holders of a majority of the Outstanding Shares of the Trust or of the
Series affected which shall mean the lesser of (i) 67% of the Shares represented
at a meeting at which more than 50% of the Outstanding Shares are present or
represented by proxy or (ii) more than 50% of the Outstanding Shares. Any
investment objectives, policies or restrictions deemed non-fundamental may be
changed by vote of the Board of Trustees.
ARTICLE XII
MISCELLANEOUS
Section 1. Inspection of Books. The Board of Trustees shall from time to time
determine whether and to what extent, and at what times and places, and under
what conditions the accounts and books of the Trust or any Series or Class shall
be open to the inspection of Shareholders. No Shareholder shall have any right
to inspect any account or book or document of the Trust except as conferred by
law or otherwise by the Board of Trustees or by resolution of Shareholders.
Section 2. Severability. The provisions of these Bylaws are severable. If the
Board of Trustees determine, with the advice of counsel, that any provision
hereof conflicts with the 1940 Act, the regulated investment company provisions
of the Internal Revenue Code or with other applicable laws and regulations, the
conflicting provision shall be deemed never to have constituted a part of these
Bylaws; provided, however, that such determination shall not affect any of the
remaining provisions of these Bylaws or render invalid or improper any action
taken or omitted prior to such determination. If any provision hereof shall be
held invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision only in such jurisdiction
and shall not affect any other provision of these Bylaws.
Section 3. Headings. Headings are placed in these Bylaws for convenience of
reference only and in case of any conflict, the text of these Bylaws rather than
the headings shall control.
<PAGE> 1
EXHIBIT 99.4
FORM OF STOCK CERTIFICATE
<PAGE> 2
NUMBER SHARES
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
[NAME OF FUND]
A SERIES OF [NAME OF TRUST]
SEATTLE, WASHINGTON
CUSIP
This is to certify that,
is the owner of
of the fully paid and non-assessable shares of beneficial interest of the [NAME
OF FUND], a series of the [NAME OF TRUST], with a par value of $.001,
transferable on the books of the Trust in person or by duly authorized attorney
upon surrender of this certificate properly endorsed. This certificate and the
shares represented hereby are received and held subject to the provisions of the
Trust Instrument and the Bylaws of the Trust, as amended. In Witness Whereof,
[NAME OF THE TRUST] has caused this certificate to be signed by its duly
authorized officers. This certificate is not valid until countersigned by the
Transfer Agent.
Dated: [NAME OF TRUST]
NEAL A. FULLER, ASST. SECRETARY DAVID F. HILL, PRESIDENT
SAFECO SERVICES CORPORATION
BY
TRANSFER AGENT
AUTHORIZED SIGNATURE
<PAGE> 1
EXHIBIT 99.5
INVESTMENT ADVISORY AND MANAGEMENT CONTRACT
<PAGE> 2
INVESTMENT ADVISORY AND MANAGEMENT CONTRACT
THIS AGREEMENT is made and executed this 30th day of September, 1993, between
SAFECO TAXABLE BOND TRUST ("Trust"), a Delaware business trust and SAFECO ASSET
MANAGEMENT COMPANY ("Manager"), a Washington corporation.
WHEREAS, the Trust is registered with the Securities & Exchange Commission
as a series type, open-end, management investment company under the Investment
Company Act of 1940, as amended ("1940 Act"), and has caused its shares of
beneficial interest to be registered for sale to the public under the Securities
Act of 1933 (the "1933 Act") and various state securities laws; and
WHEREAS, the Trust intends to offer for public sale distinct series of
shares of beneficial interest ("Series"), each Series corresponding to a
distinct portfolio; and
WHEREAS, the Trust wishes to retain the Manager to provide investment
advisory, management, and administrative services to the Trust and each Series
as now exists and as hereafter may be established which are listed in Exhibit A
to this Agreement as amended from time to time; and
WHEREAS, the Manager is willing to furnish such services on the terms and
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the promises and mutual covenants
hereinafter contained, it is agreed as follows:
1. Appointment of Manager. The Trust hereby appoints the Manager as
investment adviser and manager of each Series to administer its affairs, subject
to the supervision of the Trust's Board of Trustees, for the period and on the
terms set forth in this Agreement. The Manager hereby accepts such appointment
and agrees to render the services required by this Agreement for the
compensation and upon such other terms and conditions as are set forth in this
Agreement. The Manager shall for all purposes herein be deemed an independent
contractor and, unless otherwise expressly provided or authorized, shall have no
authority to act for or represent the Trust in any way or otherwise be deemed an
agent of the Trust.
2. Duties of Series. Each Series shall at all times keep the Manager fully
informed with regard to the securities owned by it, its funds available or to
become available for investment, and generally as to the condition of its
affairs. It shall furnish the Manager with such other documents and information
with regard to its affairs as the Manager may from time to time reasonably
request.
3. Duties of Manager.
(a) General. The Manager shall furnish to the Trust space in the offices of
the Manager or in such other place as may be agreed upon from time to time and
all necessary office facilities, equipment and personnel for managing the
affairs and investments and keeping the books of the Trust. Subject to the
supervision of the Trust's Board of Trustees, the Manager shall regularly
provide each Series with investment research, advice, management and supervision
and shall furnish a continuous investment program for each Series' portfolio of
securities consistent with each Series' investment objectives and policies. The
Manager shall determine from time to time what securities will be purchased,
retained or sold by each Series, and shall implement those decisions, all
subject to the provisions of the Trust's Trust Instrument and Bylaws, the 1940
Act, the applicable rules and regulations of the Securities and Exchange
Commission, and other applicable federal and state law, as well
<PAGE> 3
as the investment objectives and policies of each Series. The Manager will place
orders pursuant to its investment determinations for each Series either directly
with the issuer or with any broker or dealer. In placing orders with brokers and
dealers the Manager will attempt to obtain the best net price and the most
favorable execution of its orders. The Manager shall also provide advice and
recommendations with respect to other aspects of the business and affairs of the
Trust and each Series, and shall perform such other functions of management and
supervision as may be directed by the Board of Trustees of the Trust.
(b) Reports and Records. The Manager, at its expense, shall supply the
Trust's Board of Trustees and officers with all statistical information and
reports reasonably requested by them and reasonably available to the Manager.
The Manager shall oversee the maintenance of all books and records with respect
to the Trust's and each Series' securities transactions and the keeping of the
Trust's and each Series' books of account in accordance with all applicable
federal and state laws and regulations. In compliance with the requirements of
Rule 31a-3 under the 1940 Act, the Manager hereby agrees that any records which
it maintains for the Trust or any Series are the property of the Trust, and
further agrees to surrender promptly to the Trust any of such records upon the
Trust's request. The Manager further agrees to arrange for the preservation of
the records required to be maintained by Rule 31a-1 under the 1940 Act for the
periods prescribed by Rule 31a-2 under the 1940 Act. The Manager shall authorize
and permit any of its directors, officers and employees, who may be elected as
directors or officers of the Trust, to serve in the capacities in which they are
elected.
4. Allocation of Expenses.
(a) (1) Manager shall pay the organizational expenses of the Trust, which
the Trust shall reimburse to Manager over a sixty-month period commencing after
the date of the Trust's initial public offering of its shares. If the Trust
shall not be obligated to reimburse the Manager for aggregate organizational
expenses of a Series in excess of a specified amount, such amount shall be set
forth in Exhibit A as amended from time to time. (2) The Manager shall be
responsible for the compensation (if any) paid to officers of the Trust for
serving in that capacity; the expenses of computing the net asset value per
share of the Trust and each Series; federal and state registration fees for the
Trust and each Series, other than the initial fees to be reimbursed pursuant to
Section 4(a)(1); all expenses of preparing, printing and distributing
advertising and sales literature for the Trust and each Series; and the cost of
fidelity bond and other insurance for the Trust and each Series.
(b) The Trust and each Series shall bear all expenses of their organization,
operations and business not specifically assumed or agreed to be paid by the
Manager as provided in this Agreement. In particular, but without limiting the
generality of the foregoing, the Trust and each Series shall pay:
(1) Custody and Accounting Services. All expenses of the transfer, receipt,
safekeeping, servicing and accounting for the cash, securities, and other
property of the Trust and each Series, including all charges of
depositories, custodians, and other agents, if any;
(2) Shareholder Servicing. All expenses of maintaining and servicing
shareholder accounts, including all charges of the transfer, shareholder
recordkeeping, dividend disbursing, redemption, and other agents of the
Trust and each Series, if any;
2
<PAGE> 4
(3) Shareholder Communications. All expenses of preparing, printing, and
distributing reports and certain other communications to shareholders of the
Trust and each Series;
(4) Shareholder Meetings. All expenses incidental to holding meetings of
shareholders of the Trust and each Series, including the printing of notices
and proxy materials and the expenses of any proxy solicitation;
(5) Prospectuses And Statements of Additional Information. All expenses of
preparing, printing and mailing to shareholders of annual or more frequent
revisions of the Prospectus and Statement of Additional Information for the
Trust and each Series;
(6) Communication Equipment. All charges for equipment or services used for
communication between the Manager, the Trust or each Series and the
custodian, transfer agent or any other agent selected by the Trust;
(7) Legal and Accounting Fees and Expenses. All charges for services and
expenses of the Trust's legal counsel and independent auditors;
(8) Trustees' Fees and Expenses. All compensation of trustees, other than
those affiliated with the Manager, and all expenses incurred in connection
with their service;
(9) Issue and Redemption of Fund Shares. All expenses incurred in connection
with the issue, redemption, and transfer of shares of the Trust and each
Series, including the expense of confirming all share transactions, and of
preparing and transmitting the Trust's stock certificates, if certificates
are issued;
(10) Brokerage Commissions. All brokers' commissions and other charges
incident to the purchase, sale, or lending of portfolio securities of the
Trust and Series;
(11) Taxes. All taxes or governmental fees payable by or with respect to the
Trust and each Series to federal, state, or other governmental agencies,
domestic or foreign, including stamp or other transfer taxes;
(12) Nonrecurring and Extraordinary Expenses. Such nonrecurring expenses as
may arise, including the costs of actions, suits, or proceedings to which
the Trust or any Series is a party and the expenses the Trust or any Series
may incur as a result of its legal obligation to provide indemnification to
its trustees, officers, and agents.
3
<PAGE> 5
5. Non-Exclusive Services. The services of the Manager to the Trust and each
Series hereunder are not to be deemed exclusive, and the Manager shall be free
to render similar services to others so long as its services hereunder are not
impaired thereby.
6. Compensation for Services.
(a) For the services and facilities to be furnished by the Manager, each
existing Series shall pay the Manager an annual fee computed on the basis of the
average net asset value of the Series as ascertained each business day and paid
monthly in accordance with the schedule set forth in Exhibit A to this
Agreement. For purposes of computing the annual fee, the net asset value of the
Series shall be equal to the difference between its total assets and its total
liabilities (excluding from such liabilities its capital stock and surplus) with
its assets and its liabilities to be valued in accordance with the procedures
set forth in the Trust's Registration Statement.
(b) For the services and facilities to be furnished by the Manager, any new
Series of the Trust which is issued on a future date will pay the Manager a fee
according to a Schedule which will be set forth in an amended Exhibit A to this
Agreement.
(c) If SAFECO Securities, Inc., receives portfolio brokerage commissions
resulting from transactions in the portfolio of any Series ("commissions"), any
management fee earned by Manager will be reduced by the amount of such
commissions so received by SAFECO Securities, Inc.
(d) The Trust and the Manager may mutually agree to reduce the fees payable
by any Series if the reduction is in the best long-range interest of the Trust
and the Manager.
(e) If the Manager shall serve for less than the whole of any month, the
monthly management fee payable by each Series shall be prorated.
7. Reimbursements by Manager. The Manager agrees to reimburse a Series for
the amount by which the Series' expenses in any full fiscal year (excluding
taxes and interest expense, brokerage expenses and extraordinary expenses)
exceed the limits prescribed by any state in which the Series shares are
qualified for sale. For the purpose of this calculation, the costs of acquiring
and disposing of portfolio securities shall be charged to the cost of or amount
realized from such securities and shall not be deemed expenses of the Series.
For purposes of determining whether the Series is entitled to reimbursement, the
expenses of the Series are calculated on a monthly basis. If a Series is
entitled to a reimbursement, that month's advisory fee will be reduced or
postponed, with any adjustments made at the end of the fiscal year.
8. Liability of Manager. The Manager assumes no responsibility under this
Agreement other than to render the services called for hereunder, in good faith,
and shall not be responsible for any action of the Trust's Board of Trustees in
following or declining to follow any advice or recommendations of the Manager;
provided, that nothing in this Agreement shall protect the Manager against any
liability to the Trust or its shareholders to which it would otherwise be
subject by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties hereunder.
4
<PAGE> 6
9. Books and Records. The Trust shall cause its books and accounts to be
audited at least once each year by a reputable, independent public accountant or
organization of public accountants who shall render a report to the Trust.
10. Affiliation.
(a) It is understood that trustees, officers, shareholders and agents of the
Trust and each Series are or may be interested in the Manager (or any successor
thereof) as directors, officers, shareholders or otherwise, and that the Manager
(or any such successor) is or may be interested in the Trust as a shareholder or
otherwise.
(b) No trustee, officer or employee of the Trust and each Series shall
receive from the Trust any salary or other compensation as such director,
officer or employee while he or she is at the same time a director, officer, or
employee of the Manager or any affiliated company of the Manager. This paragraph
shall not apply to directors or other persons who are not regular members of the
Manager's or any affiliated company's staff.
11. Unrestricted Activities. Nothing in this Agreement shall limit or
restrict the right of any director, officer, or employee of the Manager who may
also be a trustee, officer, or employee of the Trust or any Series, to engage in
any other business or to devote his or her time and attention in part to the
management or other aspects of any other business, whether of a similar nature
or a dissimilar nature, or limit or restrict the right of the Manager to engage
in any other business or to render services of any kind, including investment
advisory and management services, to any other corporation, firm, individual or
association.
12. Use of Name. In the event this Agreement is terminated by either party
or upon written notice from the Manager at any time, the Trust hereby agrees
that it will eliminate from its corporate name any reference to the name of
"SAFECO." The Trust shall have the non-exclusive use of the name "SAFECO" in
whole or in part only so long as this Agreement is effective or until such
notice is given. Notwithstanding the foregoing and in the event that this
Agreement is terminated by either party, the Manager may elect to permit the
Trust to continue to use the name "SAFECO" under such terms and conditions as
the Manager shall set forth in writing.
13. Effectiveness Date/Renewal. This Agreement will become effective with
respect to each Series on the date first written above or such later date as
indicated on Exhibit A, provided that it shall have been approved by the Trust's
Board of Trustees and by the shareholders of that Series in accordance with the
requirements of the 1940 Act and, unless sooner terminated as provided herein,
will continue in effect for two years from the above written date. Thereafter,
if not terminated, this Agreement shall continue in effect with respect to each
Series for successive annual periods ending on the same date of each year,
provided that such continuance is specifically approved at least annually (i) by
the Trust's Board of Trustees or (ii) with respect to any Series, by a vote of a
majority of the outstanding voting securities of that Series, provided that in
either event the continuance is also approved by a majority of the Trust's
trustees who are neither interested persons (as defined in the 1940 Act) of the
Trust or the Manager by vote cast at a meeting called for the purpose of voting
on such continuance.
14. Amendment. This Agreement may be amended by the parties only if the
terms of the amendment are approved by either (i) a majority of the Trust's
Board of Trustees or, (ii) with respect to any given Series, by a vote
5
<PAGE> 7
of a majority of the outstanding voting securities of that Series at a duly
called meeting of the shareholders. In either case, the majority of the
trustees, who are neither interested persons of the Trust or the Manager, must
approve the amendment.
15. Termination. This Agreement is terminable with respect to any Series or
in its entirety without penalty by the Trust's Board of Trustees, by vote of a
majority of the outstanding voting securities of each affected Series (as
defined in the 1940 Act), or by the Manager, on not less than 60 days' notice to
the other party and will be terminated upon the mutual written consent of the
Manager and the Trust. This Agreement shall terminate automatically in the event
of its assignment by the Manager and shall not be assignable by the Trust
without the consent of the Manager.
16. Limitation of Liability. Manager is hereby expressly put on notice of
(i) the limitation of shareholder, officer and trustee liability as set forth in
the Trust Instrument of the Trust and (ii) of the provisions in the Trust
Instrument permitting the establishment of separate Series and limiting the
liability of each Series to obligations of that Series. Manager hereby agrees
that obligations assumed by the Trust pursuant to this Agreement are in all
cases assumed on behalf of a particular Series and each such obligation shall be
limited in all cases to that Series and its assets. Manager agrees that it shall
not seek satisfaction of any such obligation from the shareholders or any
individual shareholder of the Trust nor from the officers or trustees of any
individual officer or trustee of the Trust.
17. Defined Terms. For the purpose of this Agreement, the terms "vote of a
majority of the outstanding voting securities," "assignment," and "interested
persons," shall have the respective meanings specified in the Investment Company
Act of 1940 when such terms are used in reference to the Trust and the Series.
18. Entire Agreement/Enforcement of Rights. This Agreement embodies the
entire agreement between the Manager and the Trust with respect to the services
to be provided by the Manager to the Trust and each Series and supersedes any
prior written or oral agreement between those parties. In the event that either
party should be required to take legal action in order to enforce its rights
under this Agreement, the prevailing party in any such action or proceeding
shall be entitled to recover from the other party costs and reasonable
attorneys' fees.
19. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed in counterparts, each of which taken together shall
constitute one and the same instrument. Manager understands that the rights and
obligations of each Series under the Trust Instrument are separate and distinct
from those of any and all other Series.
20. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington and, to the extent it
involves any United States statute, in accordance with the laws of the United
States.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized officers as of the day and year first above written.
6
<PAGE> 8
ATTEST: SAFECO TAXABLE BOND TRUST
________________________ By_________________________________
Elna A. Thomson David F. Hill
Secretary President
ATTEST: SAFECO ASSET MANAGEMENT COMPANY
________________________ By_________________________________
Elna A. Thomson Richard W. Hubbard
Secretary President
7
<PAGE> 9
EXHIBIT A
SAFECO TAXABLE BOND TRUST
SAFECO INTERMEDIATE-TERM U.S. TREASURY FUND
FEE SCHEDULE
<TABLE>
<CAPTION>
Net Assets Annual Fee
---------- ----------
<S> <C>
For assets up to and including $250,000,000 .55 of 1%
For assets in excess of $250,000,000 and
up to and including $500,000,000 .45 of 1%
For assets in excess of $500,000,000 and
up to and including $750,000,000 .35 of 1%
For assets over $750,000,000 .25 of 1%
</TABLE>
ORGANIZATIONAL EXPENSES
Not applicable.
SAFECO Asset Management Company SAFECO Taxable Bond Trust
on behalf of
SAFECO Intermediate-Term
U.S. Treasury Fund
By:_____________________________ By:_______________________
Its: President Its: President
Attest:_________________________ Attest:___________________
Secretary Secretary
As of 9-30-93
8
<PAGE> 10
EXHIBIT A
SAFECO TAXABLE BOND TRUST
SAFECO U.S. GOVERNMENT SECURITIES FUND
FEE SCHEDULE
<TABLE>
<CAPTION>
Net Assets Annual Fee
---------- ----------
<S> <C>
For assets up to and including $250,000,000 .65 of 1%
For assets in excess of $250,000,000 and
up to and including $500,000,000 .55 of 1%
For assets in excess of $500,000,000 and
up to and including $750,000,000 .45 of 1%
For assets over $750,000,000 .35 of 1%
</TABLE>
ORGANIZATIONAL EXPENSES
Not applicable.
SAFECO Asset Management Company SAFECO Taxable Bond Trust
on behalf of
SAFECO U.S. Government
Securities Fund
By:____________________________ By:_______________________
Its: President Its: President
Attest:________________________ Attest:___________________
Secretary Secretary
As of 9-30-93
9
<PAGE> 11
EXHIBIT A
SAFECO TAXABLE BOND TRUST
SAFECO HIGH YIELD BOND FUND
FEE SCHEDULE
<TABLE>
<CAPTION>
Net Assets Annual Fee
---------- ----------
<S> <C>
For assets up to and including $250,000,000 .65 of 1%
For assets in excess of $250,000,000 and
up to and including $500,000,000 .55 of 1%
For assets in excess of $500,000,000 and
up to and including $750,000,000 .45 of 1%
For assets over $750,000,000 .35 of 1%
</TABLE>
ORGANIZATIONAL EXPENSES
Not applicable.
SAFECO Asset Management Company SAFECO Taxable Bond Trust
on behalf of
SAFECO High Yield Bond Fund
By:_____________________________ By:_______________________
Its: President Its: President
Attest:_________________________ Attest:___________________
Secretary Secretary
10
<PAGE> 1
EXHIBIT 99.6
DISTRIBUTION AGREEMENT
<PAGE> 2
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT, made this 30th day of September, 1993, by and
between SAFECO TAXABLE BOND TRUST, a Delaware business trust ("Trust"), and
SAFECO SECURITIES, INC. a Washington corporation (the "Distributor").
WHEREAS, the Trust is registered with the Securities and Exchange Commission
as a series type open-end investment company under the Investment Company Act of
1940, as amended (the "1940 Act") and has caused its shares of beneficial
interest to be registered for sale to the public under the Securities Act of
1933 (the "1933 Act") and various state securities laws; and
WHEREAS, the Trust intends to offer for public sale distinct series of
shares of beneficial interest, each corresponding to a distinct portfolio
("Series"); and
WHEREAS, the Trust wishes to retain the Distributor as the principal
underwriter in connection with the offering and sale of the shares of beneficial
interest of each Series as now exists and as hereafter may be established which
are listed on Exhibit A to this Agreement as amended from time to time
("Shares") and to furnish certain other services to the Trust as specified in
this Agreement; and
WHEREAS, this Agreement has been approved by a vote of the Trust's Board of
Trustees, and certain trustees who are not interested persons in conformity with
Section 15(c) under the 1940 Act; and
WHEREAS, the Distributor is willing to act as principal underwriter and to
furnish such services on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed as follows:
1. Appointment of Distributor. The Trust hereby appoints the Distributor as
principal underwriter in connection with the offering and sale of Shares of each
Series. The Trust authorizes the Distributor, as exclusive agent for the Trust,
upon the commencement of operations of any Series and subject to applicable
federal and state law and the Trust Instrument and Bylaws of the Trust: (a) to
promote the Series; (b) to solicit orders for the purchase of the Shares of the
Series subject to such terms and conditions as the Trust may specify; and (c) to
accept orders for the purchase of the Shares of the Series on behalf of the
Trust. The Distributor shall comply with all applicable federal and state laws
and offer the Shares of each Series on an agency or "best efforts" basis under
which the Trust shall issue only such Shares as are actually sold. The
Distributor shall have the right to use any list of shareholders of the Trust or
any Series or any other list of investors which it obtains in connection with
its provision of services under this Agreement; provided, however, that the
Distributor shall not sell or knowingly provide such list or lists to any
unaffiliated person without the consent of the Trust's Board of Trustees.
2. Duties of Trust. The Trust agrees to register the Shares with the
Securities and Exchange Commission, state and other regulatory bodies, and to
prepare and file from time to time such Prospectuses, Statements of Additional
Information, amendments, reports and other documents as may be necessary to
maintain the Registration Statement. Each Series shall bear all expenses related
to preparing and typesetting such Prospectuses, Statements of Additional
Information and other materials required by law and such other expenses,
including printing and mailing expenses, related to such Series' communications
with persons who are shareholders of that Series.
<PAGE> 3
3. Duties of Distributor. The Distributor shall print and distribute to
prospective investors Prospectuses, and shall print and distribute, upon
request, to prospective investors Statements of Additional Information, and may
print and distribute such other sales literature, reports, forms and
advertisements in connection with the sale of the Shares as comply with the
applicable provisions of federal and state law. In connection with such sales
and offers of sale, the Distributor shall give only such information and make
only such statements or representations as are contained in the Prospectus,
Statement of Additional Information, or in information furnished in writing to
the Distributor by the Trust, and the Trust shall not be responsible in any way
for any other information, statements or representations given or made by the
Distributor or its representatives or agents. Except as specifically provided in
this Agreement, the Trust shall bear none of the expenses of the Distributor in
connection with its offer and sale of the Shares.
4. Other Broker Dealers. The Distributor may enter into dealer agreements
with registered and qualified securities dealers for the sale of the Shares. The
form of any such dealer agreement shall be mutually agreed upon and approved by
the Trust and the Distributor.
5. Public Offering Price. The public offering price of the Shares of each
Series shall be the net asset value per share (as determined by the Trust) of
the outstanding Shares of the Series, if any, as described in the Registration
Statement. The Trust shall furnish the Distributor with a statement of each
computation of public offering price and of the details entering into such
computation.
6. Repurchase of Shares. The Distributor may at its sole discretion
repurchase Shares offered for sale by the shareholders. Repurchase of Shares by
the Distributor shall be at the net asset value next determined after a
repurchase order has been received. The Distributor will receive no commission
or other remuneration for repurchasing Shares. At the end of each business day,
the Distributor shall notify by any appropriate means, the Trust and SAFECO
Services Corporation, the Trust's transfer agent, of the orders for repurchase
of Shares received by the Distributor since the last such report, the amount to
be paid for such Shares, and the identity of the shareholders offering Shares
for repurchase. Upon such notice, the Trust shall pay the Distributor such
amounts as are required by the Distributor for the repurchase of such Shares in
cash or in the form of a credit against moneys due the Trust from the
Distributor as proceeds from the sale of Shares. The Trust reserves the right to
suspend such repurchase right upon written notice to the Distributor. The
Distributor further agrees to act as agent for the Trust to receive and transmit
promptly to the Trust's transfer agent shareholder requests for redemption of
Shares.
7. Indemnification.
(a) The Distributor shall be entitled to receive and act on the advice of
counsel for the Trust which advice shall be at the expense of the Trust and
shall be without liability for any action taken, or things done, or omitted to
be done, pursuant to such advice.
(b) The Trust agrees to indemnify, defend and hold the Distributor, its
several directors, officers and employees, and any person who controls the
Distributor within the meaning of Section 15 of the 1933 Act, free and harmless
from and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which the
Distributor, its directors, officers or employees, or any such
<PAGE> 4
controlling person may incur, under the 1933 Act or under common law or
otherwise, arising out of or based upon any alleged untrue statement of a
material fact contained in the Registration Statement or arising out of or based
upon any alleged omission to state a material fact required to be stated or
necessary to make the Registration Statement not misleading, provided that in no
event shall anything contained in this Agreement be construed so as to protect
the Distributor against any liability to the Trust or its shareholders to which
the Distributor would otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties, or by reason of its
reckless disregard of its obligations and duties under this Agreement, and
further provided that the Trust shall not indemnify the Distributor for conduct
set forth in this subparagraph 7(b).
(c) The Distributor agrees to indemnify, defend and hold the Trust, its
several trustees, officers and employees and any person who controls the Trust
within the meaning of Section 15 of the 1933 Act, free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Trust, its trustees,
officers or employees or any such controlling person may incur, under the 1933
Act or under common law or otherwise, arising out of or based upon any alleged
untrue statement of a material fact contained in information furnished in
writing by the Distributor to the Trust for use in the Registration Statement or
arising out of or based upon any alleged omission to state a material fact in
connection with such information required to be stated in the Registration
Statement or necessary to make such information not misleading. As used in this
subparagraph 7(c), the term "employee" shall not include a corporate entity
under contract to provide services to the Trust or any Series, or any employee
of such a corporate entity, unless such person is otherwise an employee of the
Trust.
8. Certificates. The Trust shall not be required to issue certificates
representing Shares. If the Trust elects to issue certificates and a shareholder
request for certificates is transmitted through the Distributor, the Trust will
cause certificates evidencing the Shares owned to be issued in such names and
denominations as the Distributor shall from time to time direct, provided that
no certificates shall be issued for fractional Shares.
9. Withdrawal of Offering. The Trust reserves the right at any time to
withdraw all offerings of the Shares of any or all Series by written notice to
the Distributor at its principal office.
10. Independent Contractor Status. The Distributor is an independent
contractor and shall be agent for the Trust only in respect to the sale and
redemption of the Shares.
11. Non-Exclusive Services. The services of the Distributor to the Trust
under this Agreement are not to be deemed exclusive, and the Distributor shall
be free to render similar services or other services to others so long as its
services hereunder are not impaired thereby.
12. Use of Name. In the event this Agreement is terminated by either party
or upon written notice from the Distributor at any time, the Trust hereby agrees
that it will eliminate from its corporate name any reference to the name of
"SAFECO." The Trust shall have the non-exclusive use of the name "SAFECO" in
whole or in part only so long as this Agreement is effective or until such
notice is given. Notwithstanding this subparagraph and in the event this
Agreement is terminated by either party, the Distributor may elect to permit the
Trust to continue to use the name "SAFECO" under such terms and conditions as
the Distributor shall set forth in writing.
<PAGE> 5
13. Effective Date/Renewal. This Agreement will become effective with
respect to each Series on the date first written above or such later date as
indicated on Exhibit A and, unless sooner terminated as provided herein, will
continue in effect for two years from the above written date. Thereafter, if not
terminated, this Agreement shall continue in effect with respect to each Series
for successive annual periods ending on the same date of each year, provided
that such continuance is specifically approved at least annually (i) by the
Trust's Board of Trustees or (ii) with respect to any given Series, by a vote of
a majority of the outstanding voting securities of that Series (as defined in
the 1940 Act), provided that in either event the continuance is also approved by
majority of the Trust's trustees who are neither interested persons (as defined
in the 1940 Act) of the Trust or the Distributor by vote cast at a meeting
called for the purpose of voting on such continuance.
14. Amendment. This Agreement may be amended by the parties only if the
terms of the amendment are either (i) approved by the Trust's Board of Trustees
or, (ii) with respect to any given Series, by a vote of a majority of the
outstanding voting securities of that Series at a duly called meeting of the
shareholders. In either case, the majority of the trustees, who are neither
interested persons of the Trust or the Distributor, must approve the amendment.
15. Termination. This Agreement is terminable with respect to any Series or
in its entirety without penalty by the Trust's Board of Trustees, by vote of a
majority of the outstanding voting securities of each affected Series (as
defined in the 1940 Act), or by the Distributor, on not less than 60 days'
notice to the other party and will be terminated upon the mutual written consent
of the Distributor and the Trust. This Agreement will also automatically and
immediately terminate in the event of its assignment.
16. Limitation of Liability. Distributor is hereby expressly put on notice
of (i) the limitation of shareholder, officer and trustee liability as set forth
in the Trust Instrument of the Trust and (ii) of the provisions in the Trust
Instrument permitting the establishment of separate Series and limiting the
liability of each Series to obligations of that Series. Distributor hereby
agrees that obligations assumed by the Trust pursuant to this Agreement are in
all cases assumed on behalf of a particular Series and each such obligation
shall be limited in all cases to that Series and its assets. Distributor agrees
that it shall not seek satisfaction of any such obligation from the shareholders
or any individual shareholder of the Trust nor from the officers or trustees or
any individual officer or trustee of the Trust.
17. Definitions. As used in this Agreement, the term(s):
(a) "net assets" shall have the meaning ascribed to it in the Trust's Trust
Instrument;
(b) "assignment", "interested person", and "majority of the outstanding
voting securities" shall have the meanings given to them by Section 2(a) of the
1940 Act, subject to such exemptions as may be granted by the Securities and
Exchange Commission by any rule, regulation or order.
(c) "Registration Statement" shall mean the registration statement most
recently filed by the Trust with the Securities and Exchange Commission and
effective under the 1940 Act and 1933 Act, as such Registration Statement is
amended by any amendments thereto at the time in effect;
(d) "Prospectus" and "Statement of Additional Information" shall mean,
respectively, the form of prospectus and statement of additional information
with respect to each Series filed by the Trust as part of the Registration
<PAGE> 6
Statement.
18. Entire Agreement/Enforcement of Rights. This Agreement embodies the
entire Agreement between the Distributor and the Trust with respect to the
services to be provided by the Distributor to the Trust and each Series and
supersedes any prior written or oral agreement between those parties. In the
event that either party should be required to take legal action in order to
enforce its rights under this Agreement, the prevailing party in any such action
or proceeding shall be entitled to recover from the other party costs and
reasonable attorneys' fees.
19. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed in counterparts, each of which taken together shall
constitute one and the same instrument. Distributor understands that the rights
and obligations of each Series under the Trust Instrument are separate and
distinct from those of any and all other Series.
20. Governing Law. This Agreement shall be construed in accordance with and
governed by the laws of the State of Washington.
IN WITNESS WHEREOF, the parties hereto caused this Agreement to be executed
by their officers thereunto duly authorized.
Attest: SAFECO TAXABLE BOND TRUST
By:________________________ By:________________________________
Secretary President
Attest: SAFECO SECURITIES, INC.
By:________________________ By:________________________________
Secretary President
<PAGE> 7
EXHIBIT A
SAFECO TAXABLE BOND TRUST
The SAFECO Taxable Bond Trust consists of the following Series:
1. SAFECO Intermediate-Term U.S. Treasury Fund
2. SAFECO U.S. Government Securities Fund
3. SAFECO High Yield Bond Fund
<PAGE> 1
EXHIBIT 99.8
CUSTODY AGREEMENT WITH U.S. BANK
<PAGE> 2
CUSTODY AGREEMENT
THIS AGREEMENT is executed as of the ___th day of August, 1995, between
SAFECO TAXABLE BOND TRUST, a Delaware business trust ("Trust"), and U.S. BANK OF
WASHINGTON, N.A., a national banking association ("Bank");
WHEREAS, the Trust is registered with the Securities and Exchange Commission
as a series type open-end, management investment company under the Investment
Company Act of 1940, as amended ("1940 Act"), and has caused its shares of
beneficial interest to be registered for sale to the public under the Securities
Act of 1933, as amended ("1933 Act"), and various state securities laws;
WHEREAS, the Trust may, from time to time, organize one or more series of
shares, in addition to the series set forth in Exhibit A attached hereto, each
of which shall represent an interest in a separate portfolio of cash, securities
and other assets (all such existing and additional series now or hereafter
listed on Exhibit A are referred to herein individually, as a "Series" and
collectively, as "the Series,") and
WHEREAS, the Trust desires to appoint the Custodian as custodian on behalf
of the Series in accordance with the provisions of the 1940 Act and the rules
and regulations thereunder, under the terms and conditions set forth in this
Agreement, and the Custodian has agreed to act as custodian;
NOW, THEREFORE, it is agreed by and between the parties hereto as follows:
1. Appointment. The Trust on behalf of the Series hereby appoints the Bank
as custodian of all of the Series' cash, securities and other assets, and the
Bank hereby agrees to act as such upon the terms and conditions set forth in
this Agreement.
2. Delivery, Safe Keeping. The Trust will deliver or cause to be delivered
to the Bank from time to time all cash, securities and other assets acquired by
the Series from time to time during the term of this Agreement and shall specify
the Series to which such cash, securities and other assets are to be allocated.
The Bank shall keep safely such cash, securities and other assets as custodian
for the Series and shall deposit such cash, securities and other assets with the
Bank for the account of the Series.
3. Registration of Securities. The Bank will hold stocks and other
registerable portfolio securities (other than bearer securities) registered in
the name of the Series, or in the name of any nominee of the Trust on behalf of
the Series, or in the name of any nominee of the Bank, or in the name or nominee
name of any sub-custodian or agent appointed under paragraph 4 for whose
fidelity and liabilities the Bank shall be fully responsible, or in street
certificate form, so-called, with or without any indication of fiduciary
capacity. Unless otherwise instructed by the Trust, the Bank will register all
such portfolio securities in the name of its authorized nominee. In any event,
all such securities and other assets shall be held in an account of the Bank
containing only assets of a Series, or only assets held by the Bank as a
fiduciary or custodian for customers, and provided further, that the records of
the Bank shall indicate at all times the Series or other customers for which
such securities and other assets are held in such account and their respective
interests therein. The Trust agrees to hold the Bank and its nominee harmless
for any liability as a record holder of securities held in custody.
4. Custody of Moneys or Securities/Appointment of Sub-custodians and Agents.
Notwithstanding any other provisions of this Agreement, all or any of
<PAGE> 3
the cash, securities or other assets of a Series may be held in the Bank's
custody, provided, however, that the Bank may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust company
which is itself qualified under the 1940 Act to act as a sub-custodian or its
agent to carry out such of the provisions of this Agreement as the Bank may from
time to time direct. The appointment of any sub-custodian or agent shall not
relieve the Bank of its responsibilities or liabilities hereunder. Neither the
Bank nor any sub-custodian or agent shall be entitled to reimbursement by Trust
or the Series for any fees or expenses of any sub-custodian or agent.
5. Deposit of Trust Assets in Securities Systems. Upon order of the Trust
on behalf of any Series, the Bank may deposit and/or maintain securities owned
by a Series in a clearing agency registered with the Securities and Exchange
Commission ("SEC") under Section 17A of the Securities Exchange Act of 1934, as
amended, which acts as a securities depository (or other entities which may be
otherwise authorized by the SEC to serve in the capacity of depository or
clearing agent for the securities or other assets of investment companies), or
in the book-entry system authorized by the U.S. Department of the Treasury and
certain federal agencies, collectively referred to herein as "Securities
Systems" in accordance with applicable Federal Reserve Board and SEC rules and
regulations, if any, and subject to the following provisions:
(a) The Bank may keep securities of the Series in a Securities System
provided that such securities are represented in an account ("Account")
of the Bank in the Securities System which shall not include any assets
of the Bank other than assets held as a fiduciary, custodian or
otherwise for customers;
(b) The records of the Bank with respect to securities of the Series that
are maintained in a Securities System shall identify by book-entry those
securities belonging to the Series;
(c) The Bank shall pay for securities purchased for the account of the
Series upon (i) receipt of advice from the Securities System that such
securities have been transferred to the Account, and (ii) the making of
an entry on the records of the Bank to reflect such payment and transfer
for the account of the Series. The Bank shall transfer securities sold
for the account of the Series upon (i) receipt of advice from the
Securities System that payment for such securities has been transferred
to the Account, and (ii) the making of an entry on the records of the
Bank to reflect such transfer and payment for the account of the Series.
Copies of all advice from the Securities System of transfers of
securities for the account of the Series shall identify the Series, be
maintained for the Series by the Bank and be provided to the Trust at
its request. Upon request, the Bank shall furnish the Trust on behalf of
the Series confirmation of each transfer to or from the account of the
Series in the form of a written advice or notice and shall furnish to
the Trust on behalf of the Series copies of daily transaction sheets
reflecting each day's transactions in the Securities System for the
account of the Series;
(d) The Bank shall provide the Trust for the Series with any report obtained
by the Bank on the Securities System's accounting system, internal
accounting control and procedures for safeguarding securities deposited
in the Securities System;
(e) The Bank shall exercise reasonable care and diligence in the use of the
Securities System on behalf of the Trust and the Series. The Bank shall
be liable to the Trust for the benefit of the
<PAGE> 4
Series for any loss or damage to the Series resulting from use of the
Securities System by reason of any negligence, misfeasance or misconduct of
the Bank or any of its agents, or of any of the Bank's or any of its agent's
employees, or from failure of the Bank or any such agent to enforce
effectively such rights as it may have against the Securities System. At the
election of the Trust, it shall be entitled to be subrogated to the rights
of the Bank with respect to any claim against the Securities System or any
other person which the Bank may have as a consequence of any such loss or
damage if and to the extent that the Series has not been made whole for any
such loss or damage.
6. Segregated Account. The Bank shall upon order of the Trust on behalf of
each applicable Series establish and maintain a segregated account or accounts
for and on behalf of each such Series, into which account or accounts may be
transferred cash, securities, and/or other assets, including securities
maintained in an account by the Bank pursuant to paragraph 5 hereof, (i) for the
purposes of compliance by the Series with the procedures required by Investment
Company Act Release No. 10666, or any subsequent release or releases of the SEC
relating to the maintenance of segregated accounts by registered investment
companies and (ii) for other proper corporate purposes, but only, in the case of
clause (ii), upon receipt of, in addition to an order of the Trust on behalf of
the applicable Series, a writing signed by any two individuals whose names and
signatures are covered by the most recent letter provided to the Bank as
provided in paragraph 12 setting forth the purpose or purposes of such
segregated account and declaring such purposes to be proper corporate purposes.
7. Purchases of Securities. Upon the order of the Trust on behalf of the
Series, the Bank shall receive all securities purchased for the account of the
Trust and make payment according to the terms of the order insofar as funds are
available.
8. Sale and Delivery of Securities.
(a) Upon the order of the Trust on behalf of the Series, the Bank shall make
delivery of securities held by it as custodian or held in a Securities System
account of the Bank which have been sold by the Trust. Such delivery shall be
made upon payment in a manner satisfactory to the Bank of the amount specified
in said order. The Bank shall also deliver such securities as may be called,
redeemed, retired or otherwise become payable.
(b) Subparagraph (a) shall not prevent the Bank from making:
(i) Delivery of securities for examination to the broker selling the
same in accord with the "street" delivery custom whereby such
securities are delivered to such broker in exchange for a
delivery receipt exchanged on the same day for an uncertified
check of such broker to be presented on the same day for
certification;
(ii) Delivery of securities as collateral on borrowing effected by the
Trust or any Series; and
(iii) Delivery of securities owned by the Trust or any Series as a
redemption in kind of securities issued by the Trust or any
Series.
3
<PAGE> 5
9. Collections.
(a) On a timely basis, the Bank shall: (i) collect, receive and hold on
deposit for the account of the appropriate Series, all income and other payments
with respect to the securities held by it on behalf of a Series as custodian;
(ii) advise the Trust once each business day of such receipts; (iii) execute
ownership and other certificates and affidavits for all federal and state tax
purposes in connection with the collection of bond and note coupons; (iv)
present for payment all coupons and all other income items requiring
presentation, present for payment all securities which have become payable at
maturity, upon call for redemption or otherwise; (v) endorse for collection
checks, drafts or other negotiable instruments; and (vi) do all other things
which may be necessary or proper in connection with the receipt and collection
of any such item.
(b) The Bank shall not be under any obligation or duty to take action to
effect collection of any amount, if the securities upon which such amount is
payable are in default and payment is refused after due demand or presentation.
The Bank will, however, notify the Trust of such default and refusal to pay.
10. Disbursements.
(a) Notwithstanding anything contained elsewhere in this Agreement to the
contrary and subparagraphs (b) and (c) below, the Bank shall deliver funds of
the Trust only upon the purchase of securities by the Trust on behalf of the
Series.
(b) Upon the order of the Trust for the Series, the Bank shall make cash
disbursements for the account of the Trust and any Series insofar as funds are
available for such disbursements, for the payment of taxes, expenses and
liabilities including, without limitation:
(i) Management fees payable under any management agreement with
SAFECO Asset Management Company (or its successors) or any other
person selected to serve as an investment adviser to the Trust or
any Series.
(ii) Compensation payable by the Trust or any Series to any person,
firm or corporation, including compensation payable to the Bank
under this Agreement.
(iii) Cash dividends or distributions for any Series declared by the
Board of Trustees of the Trust.
(c) Without the order of the Trust, the Bank may make cash disbursements for
non-discretionary ministerial items, including but not limited to expenses in
handling securities, stamp taxes, reimbursement of the Bank for its
out-of-pocket expenses incurred in the performance of its duties hereunder and
other similar items in connection with its duties under this Agreement. The Bank
shall advise the Trust once each business day of disbursements so made.
11. Redemption and Repurchase of Shares of the Trust. From such funds as
may be available for the purpose but subject to the limitations of the Trust
Instrument and any applicable votes of the Trust's Board of Trustees pursuant to
the Trust Instrument, the Bank shall, upon receipt of instructions from a
Series' transfer agent, make funds available for payment to shareholders who
have delivered to the transfer agent a request for redemption
4
<PAGE> 6
or repurchase of their shares. If payment is to be made in kind, the
instructions must be accompanied by a certified copy of a resolution of the
Trust's Board of Trustees authorizing redemptions in kind. In connection with
the redemption or repurchase of shares of a Series, the Bank is authorized upon
receipt of instructions from the transfer agent to wire funds to or through a
commercial bank designated by the redeeming shareholders. In connection with the
redemption or repurchase of shares of any Series, the Bank shall honor checks
drawn on the Bank by a shareholder, which checks have been furnished by the
Trust to the shareholder, when presented to the Bank in accordance with such
procedures and controls as are mutually agreed upon from time to time between
the Trust and the Bank.
12. Orders of the Trust.
(a) Except in the case of non-discretionary ministerial acts, and as
otherwise specifically provided in this Agreement, all action to be taken by the
Bank as custodian shall be taken upon the order of the Trust on behalf of the
Series. An "order" of the Trust on behalf of the Series shall consist of written
instructions with respect to a specified transaction, or transactions, which
instructions shall be signed by any two individuals whose names and signatures
are covered by the most recent letter addressed to the Bank setting forth such
names and signatures and signed by the President or Treasurer and Secretary or
Assistant Secretary of the Trust. An "order" of the Trust may also consist of
trade affirmations entered on an institutional delivery system by
representatives on behalf of the Trust. Such representatives will not affirm
trades on this Institutional Delivery system unless the transactions have been
signed by two authorized signers. An "order" may also consist of oral
instructions in the case of purchases and sales of shares of registered
investment companies by any Series, but only if the Bank reasonably believes
such instructions to have been provided by a person authorized to give such
instructions for the transaction involved and if such instruction is transmitted
and received in accordance with any procedures acceptable to both the Fund and
the Bank. Oral instructions shall not be accepted by the Bank for any other type
of transaction.
(b) Notwithstanding anything to the contrary contained in the Agreement, no
person authorized to give an "order" as described in the preceding paragraph,
Trustee, officer, employee or agent of the Trust shall have physical access to
the assets of any Series held by the Bank nor shall the Bank deliver any assets
of a Series for delivery to an account of such person; provided, however, that
nothing in this sub-paragraph (b) shall prohibit the Trust's independent
certified public accountant from examining or reviewing the assets of the Series
held by the Bank.
13. Forwarding of Information and Proxies. The Bank will forward
promptly to the Trust for each Series all information or documents which it may
receive with respect to any securities held by a Series under this Agreement,
including all forms of proxy, proxy statements, notices, reports and other
financial information. Neither the Bank nor its nominee shall vote any of the
securities or authorize the voting of any securities or give any consent or take
any other action with respect thereto, except as otherwise provided herein,
unless directed to do so upon order of the Trust on behalf of any Series.
14. Reorganization or Liquidation, Etc. of the Trust. In the case of the
following transactions not in the ordinary course of business, namely, the
merger or consolidation of the Trust and another investment company, the sale by
the Trust of all, or substantially all, of its assets or the assets of a Series
to another investment company, or the liquidation or dissolution of the
5
<PAGE> 7
Trust or a Series and distribution of the assets, the Bank shall deliver the
securities held by it under this Agreement and disburse cash only upon the order
of the Trust and upon receipt of opinion of counsel satisfactory to the Bank
(who may be counsel for the Trust) to the effect that all necessary corporate
action therefore has been taken, or, concurrently with the Bank's action will be
taken.
15. Compensation. Each Series shall pay to the Bank compensation for its
services under this Agreement in accordance with the attached schedule of
charges set forth in Exhibit C which may be amended from time to time by mutual
agreement. In addition, each Series will reimburse the Bank for all
out-of-pocket expenses, including taxes and other charges required to be paid by
the Bank with respect to the property of each Series, incurred by the Bank in
the performance of its duties hereunder.
16. Responsibility.
(a) In the performance of its duties under this Agreement, the Bank shall
exercise reasonable care and diligence. The Bank shall be liable to the Trust
for the benefit of the Series for any loss or damage to the Series resulting
from any negligence, misfeasance or misconduct of the Bank or any of its
sub-custodians or agents, or of any of the Bank's or any agent's employees in
the performance of the Bank's duties under this Agreement.
(b) Except as otherwise provided herein, the Bank shall not incur liability
to anyone and shall be indemnified and held harmless by the Trust and the Series
from and against all liability, claims, demands, actions, suits, costs or
expenses (including the fees of its counsel) for anything done or suffered by
the Bank in good faith in accordance with an order of the Trust or pursuant to
the terms of this Agreement. The Bank may apply for and obtain the advice and
opinion of counsel to the Trust or its own counsel with respect to questions of
law and shall be fully protected with respect to anything done or omitted by it
in good faith in conformity with such advice or opinion. The Bank shall be
protected in any action taken or omitted by it in reliance upon any order,
notice, request, certificate or other instrument reasonably believed by it to be
genuine.
(c) The Bank shall be under no duty or obligation to inquire into and shall
not be liable for:
(i) The validity of the issue of any securities purchased by or for
the Trust or any Series, the legality of the purchases thereof or
the propriety of the amount paid therefor;
(ii) The legality of any sale of any securities by or for the Trust or
any Series or on the propriety of the amount for which the same
are sold;
(iii) The legality of an issue or sale of any shares of the Trust or
any Series or the sufficiency of the amount to be received
therefor;
(iv) The legality of the repurchase of any shares of the Trust or any
Series or the propriety of the amount to be paid therefor;
(v) The legality of the declaration of any dividend by the Trust or
any Series or the legality of the issue of
6
<PAGE> 8
any securities held by the Trust or any Series as a payment in
kind of such dividend;
(vi) Any property or moneys of the Trust or any Series unless and
until received by it, and any such property or moneys delivered
or paid by it pursuant to the terms hereof.
(d) The Bank shall not be under any duty or obligation to ascertain whether
any securities at any time delivered to or held by it for the account of a
Series are such as may properly be held by a Series under the provisions of the
Trust's Instrument or Bylaws, any federal or state statutes or any rule or
regulation of any governmental agency.
17. Liability for Payment in Advance of Receipt of Securities Purchased. In
any and every case where payment for purchase of securities for the account of a
Series is made by the Bank in advance of receipt of the securities purchased in
the absence of specific written instructions from the Trust on behalf of such
Series to so pay in advance, the Bank shall be absolutely liable to the Trust
for such securities to the same extent as if the securities had been received by
the Bank.
18. Records. The Bank shall with respect to each Series create and maintain
all records relating to its activities and obligations under this Agreement in
such manner as will meet the obligations of the Trust under the 1940 Act,
particularly Section 31 thereof and Rules 31a-1 and 31a-2 thereunder. All such
records shall be the property of the Trust and shall at all times during the
regular business hours of the Bank be open for inspection by duly authorized
officers, employees and agents of the Trust and employees and agents of the SEC.
The Bank shall, at the Trust's request, supply the Trust with a tabulation of
securities owned by each Series and held by the Bank and shall, when requested
to do so by the Trust and for such compensation as shall be agreed upon between
the Trust and the Bank, include certificate numbers in such tabulations.
19. Termination. This Agreement may be terminated at any time without
penalty with respect to one or more Series by execution of any amended Exhibit A
or in its entirety by written notice delivered by either party to the other. The
effective date of termination shall be as specified in such notice, except that
at the option of the Bank or the Trust, the effective date of the termination
may be postponed to a date not more than sixty (60) days from the date of the
delivery of such notice in order to give the Bank an opportunity to prepare for
the transfer of the Trust or any Series' assets or to give the Trust or any
Series an opportunity to make suitable arrangements for a successor custodian.
Upon termination of this Agreement, the Bank shall deliver at its office all
cash, securities and other assets held by it in accordance with paragraph 20.
20. Successor Custodian.
(a) If a successor custodian for the Trust or one or more of the Series
shall be appointed by the Trust's Board of Trustees, the Bank shall, upon
termination, deliver to such successor custodian at the office of the Bank all
cash and other assets of the Trust then held by it hereunder and, in the case of
securities, duly endorsed and in the form for transfer, all securities of each
applicable Series then held by it hereunder and shall transfer to an account of
the successor custodian all of the securities of each such Series held in a
Securities System. The Bank shall take all reasonable steps to assist in the
transfer of the cash, securities and other
7
<PAGE> 9
assets of the applicable Series to the successor custodian.
(b) If no such successor custodian shall be appointed, the Bank shall, in
like manner, upon receipt of a certified copy of a vote of the Trust's Board of
Trustees, deliver at the office of the Bank and transfer such cash, securities
and other assets in accordance with such vote.
(c) In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
the Bank on or before the date when such termination shall become effective,
then the Bank shall have the right to deliver to a bank or trust company of its
own selection (which is a "bank" as defined in the 1940 Act) doing business in
Seattle, Washington, and having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than the amounts
required by the 1940 Act, all cash, securities and other assets held by the Bank
on behalf of each applicable Series and all instruments held by the Bank
relative thereto and all other property held by it under this Agreement on
behalf of each applicable Series and to transfer to an account of such successor
custodian all the securities of each such Series held in any Securities System.
Thereafter, such bank or trust company shall be the successor of the Bank under
this Agreement.
(d) In the event that cash, securities and other assets remain in the
possession of the Bank after the date of termination hereof owing to failure of
the Trust to procure the certified copy of the vote referred to or of the Board
of Trustees to appoint a successor custodian, the Bank shall be entitled to fair
compensation for its services during such period as the Bank retains possession
of such cash, securities and other assets and the provisions of this Agreement
relating to the duties and obligations of the Bank shall remain in full force
and effect.
21. Notices. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto shall be
sufficiently given if addressed to such party and mailed (postage prepaid) or
delivered to it at its office at the address set forth below, namely:
In the case of the Trust:
SAFECO Taxable Bond Trust
Attn: David F. Hill, President
SAFECO Plaza
Seattle, Washington 98185
and
In the case of the Bank:
U.S. Bank of Washington, N.A.
Attn: Trust Operations Department
1414 Fourth Avenue
Seattle, Washington 98101
or at such other place as such party may from time to time designate in writing.
22. Bank representation. The Bank represents that it does meet, and will
continue to meet at all times that this Agreement is in effect, the requirements
of the rules and regulations promulgated pursuant to Section
8
<PAGE> 10
17(f) of the 1940 Act.
23. Limitation of Liability. The Bank is hereby expressly put on notice of
(i) the limitation of shareholder, officer and trustee liability as set forth in
the Trust Instrument of the Trust and (ii) of the provisions in the Trust
Instrument permitting the establishment of separate Series and limiting the
liability of each Series to obligations of that Series. The Bank hereby agrees
that obligations assumed by the Trust pursuant to this Agreement are in all
cases assumed on behalf of a particular Series and each such obligation shall be
limited in all cases to that Series and its assets. The Bank agrees that it
shall not seek satisfaction of any such obligation from the shareholders or any
individual shareholder of the Trust nor from the officers or trustees or any
individual officer or trustee of the Trust.
24. Entire Agreement. This Agreement embodies the entire Agreement between
the Bank and the Trust with respect to the services to be provided by the Bank
to the Trust and each Series and supersedes any prior written or oral agreement
between those parties.
25. Miscellaneous. This Agreement shall be binding on and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable by the Trust
without the written consent of the Bank or by the Bank without the written
consent of the Trust. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed in counterparts, each of which taken together shall
constitute one and the same instrument. Bank understands that the rights and
obligations of each Series under the Trust Instrument are separate and distinct
from those of any and all other Series.
26. Governing Law. This Agreement shall be construed in accordance with and
governed by the laws of the State of Washington.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized officers as of the day and year first above written.
Attest: U. S. BANK OF WASHINGTON, N.A.
By: ________________________ By: _______________________________
Its:________________________ Its:_______________________________
Attest: SAFECO TAXABLE BOND TRUST
___________________________ By: ________________________________
Neal A. Fuller David F. Hill
Assistant Secretary President
9
<PAGE> 11
EXHIBIT A
SAFECO TAXABLE BOND TRUST
The SAFECO Taxable Bond Trust consists of the following Series:
1 SAFECO Intermediate-Term U.S. Treasury Fund
2. SAFECO GNMA Fund
3. SAFECO High-Yield Bond Fund
As of 8/7/95
10
<PAGE> 12
EXHIBIT B
SAFECO TAXABLE BOND TRUST
ALL FUNDS
PROCEDURES FOR CONTROL
Securities Held by Nominee Puget & Co.
1. All securities held in safe keeping at U.S. Bank of Washington, N.A., main
office, will be in the name of the nominee, Puget & Co.
2. Instructions from the Trust on behalf of a Series or SAFECO Asset Management
Company, the investment adviser to the Trust, relative to the purchase and
sale of securities will be in written form on a "Transaction Advice" form.
3. All accounting documents, minutes, bank records, and instructions to brokers
will identify the real ownership of securities being bought or sold and of
interest and dividends received.
4. Certificates for shares of stock and par value of bonds will be in lots
which will permit the physical separation of the securities according to
their real ownership. U.S. Bank of Washington, N.A. will maintain such a
physical separation.
5. Proceeds on securities sold and dividends or interest received in the name
of Puget & Co. will be collected by U.S. Bank of Washington, N.A., main
office. On the business day of receipt of such proceeds the bank will credit
the custodial account of the Trust with the total amount of such proceeds,
dividends or interest and will specifically identify all collections on the
statement of the Trust's account.
6. Payments for securities purchased will be made from the Trust's custodial
account upon delivery of the securities.
As of 8/7/95
11
<PAGE> 13
EXHIBIT C
SAFECO TAXABLE BOND TRUST
ALL FUNDS
---------------
Schedule of Custodian Fees with U.S. Bank of Washington, N.A.
<TABLE>
<S> <C>
Annual Base Fee Per Fund $ 1,000
-------
Annual Holding Fee Per Security $ 75.00
-------
Security Transactions $ 20.00
-------
Incoming Wires $ 15.00
-------
Outgoing Wires $ 20.00
-------
Administration - if applicable $ 50.00 per hour
-------
Out of Pocket Expenses (Postage, As Incurred
insurance, long distance calls, mileage,
photocopying)
</TABLE>
As of 8/7/95
12
<PAGE> 1
EXHIBIT 99.9
TRANSFER AGENT AGREEMENT
<PAGE> 2
TRANSFER AGENT AGREEMENT
THIS AGREEMENT is made and entered into this 30th day of September, 1993,
between SAFECO TAXABLE BOND TRUST ("Trust"), a Delaware business trust, and
SAFECO SERVICES CORPORATION ("SAFECO Services"), a Washington corporation.
WHEREAS, the Trust is registered with the Securities and Exchange Commission
as a series type open-end, management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act") and has caused its shares of
beneficial interest ("Shares") to be registered for sale to the public under the
Securities Act of 1933 (the "1933 Act") and various state securities laws; and
WHEREAS, the Trust intends to offer for public sale distinct series of
Shares of beneficial interest, each corresponding to a distinct portfolio
(individually, "a Series" and collectively "the Series"), and
WHEREAS, the Trust wishes to retain SAFECO Services as its transfer agent,
dividend and distribution disbursement agent, and shareholder services agent on
behalf of each Series as now exists or as hereafter may be established which are
listed on Exhibit A to this Agreement as amended from time to time ("Shares")
WHEREAS, SAFECO Services is qualified and authorized to act in such
capacities;
NOW, THEREFORE, It is agreed by the parties hereto as follows:
1. Appointment. The Trust on behalf of the Series hereby appoints SAFECO
Services as the Series' transfer agent, dividend and distribution disbursement
agent and shareholder services agent, and SAFECO Services agrees to act as such
upon the terms and conditions herein set forth.
2. Documents. The Trust agrees to deliver to SAFECO Services the following
documents to enable SAFECO Services to exercise its functions under this
Agreement: (a) copies of all basic corporate documentation, including the
Trust's Trust Instrument and Bylaws; (b) evidence of creation and authorization
for issue and sale of the Trust's Shares; (c) evidence of the status of the
Trust's Shares under applicable laws, including copies of the current
registration statement or post-effective amendments to the registration
statement of the Trust's securities under the Securities Act of 1933, copies of
current prospectuses and evidence of compliance with all applicable state
securities laws. The Trust shall furnish promptly to SAFECO Services a copy of
any amendment or supplement to the above-mentioned documents. The Trust shall
furnish to SAFECO Services any additional documents requested by SAFECO Services
as necessary to perform the services required hereunder.
3. Duties of SAFECO Services. SAFECO Services shall perform as agent of the
Trust on behalf of the Series the following duties:
(a) Maintain a complete computerized record of each Series' shareholders,
including name(s) in which the Shares are registered, address, account number,
broker/dealer or registered representative number (if required), type of
account, number of Shares owned in certificate and non-certificate form, dates
and amounts of purchases and redemptions, dates and amounts of dividends and
capital gains distributed and reinvested, together with cost amounts.
<PAGE> 3
(b) With respect to requests for the purchase, repurchase, redemption or
transfer of the Series' Shares and the receipt or disbursement of monies,
maintain records of all such transactions and from these records furnish to the
Trust as heretofore agreed, the following for each Series:
(1) Number of Shares purchased and dollar net asset value per Share.
(2) Number of Shares repurchased or redeemed and dollar net asset value
per Share.
(3) Number of accumulated Shares outstanding.
(4) Number of opened and closed accounts.
(5) Current number of shareholder accounts.
(c) With respect to orders for the purchase of Shares of a Series received
by SAFECO Securities, Inc., principal underwriter of each Series' Shares, from
authorized broker/dealers or SAFECO registered representatives, and orders for
the repurchase of such Shares from authorized broker/dealers or SAFECO
registered representatives, SAFECO Services shall accept and execute such orders
at the prices per share next computed in accordance with Rule 22c-1 of the
Investment Company Act of 1940.
(d) Following receipt of payments, upon receipt of proper instructions,
SAFECO Services, as transfer agent, shall prepare computer input entries to
register each Series' Shares upon its books in such name or names as directed.
If the Trust elects to issue certificates representing Shares of a Series, such
certificates shall be issued, recorded and forwarded for delivery to proper
person(s) upon request. Whether or not certificates evidencing ownership are
issued, a confirmation showing the registration and listing the purchase
transaction shall be mailed to the Trust's shareholders.
Upon receipt of Shares for redemption or repurchase, in good delivery
form, SAFECO Services shall prepare computer input entries to clear the Shares
out of the shareholders' accounts and effect prompt payment to the authorized
broker/dealer or the shareholder.
(e) New investors or shareholders of the Trust may forward monies directly
to SAFECO Services for the purchase of shares under various plans as described
in the Trust's then current Prospectus.
With respect to such plans, SAFECO Services for each Series shall:
(1) Receive monies for the purchase of full and fractional Shares with
respect to any of the Plans. When purchase orders are received by SAFECO
Services in proper form, they shall be time-stamped and priced in accordance
with Rule 22c-1 of the Investment Company Act of 1940.
(2) Prepare computer input entries to effect the issuance of
confirmations, registration of Shares and recording of cost amounts in
shareholder accounts; record shares and net asset value amounts in the
Series' records; record shares and aggregate dollar amounts for updating
Blue Sky records, production reports, etc.
(3) Secure signed applications from each shareholder which shall include
details as to registration of Shares, social security number, birth date
(for accounts which require it), citizenship, type of
2
<PAGE> 4
account, broker/dealer, registered representative (if required) and
signature(s).
(4) Maintain signed applications, correspondence, etc. for individual
shareholders.
(5) With respect to the redemption of Shares of a Series tendered by
shareholders:
(i) Accept redemption orders as described in the Series' then
current Prospectus directly from shareholders, or their qualified
agents, upon tender of properly endorsed certificates which meet the
redemption requirements of the Trust. Shares not represented by
certificates tendered by the presentation of a written request signed by
the shareholder may be accepted without a signature guarantee provided a
signature is on file with SAFECO Services.
(ii) Pay proceeds for Shares so tendered at the net asset value per
share next computed after receipt of tender in accordance with Rule
22c-1 of the Investment Company Act of 1940 within the settlement period
required by the Securities Exchange Act of 1934.
(g) SAFECO Services shall perform all necessary details to complete any
transactions in connection with any exchange privileges as described in the
Series' then current Prospectus.
(h) SAFECO Services shall maintain a bank account in its own name with any
bank which qualifies under the Bylaws of the Trust, for deposit of funds
received in payment of Shares and for the withdrawal of funds in payment of
repurchases or redemptions of Shares, expenses and dividends and capital gains
distributions. After each computer run, written instructions, signed by
authorized officers or other authorized signatories, are to be forwarded to such
bank requesting the transfer of net balance to or from the Series' custodian
account with such bank.
(i) SAFECO Services shall perform all necessary details in connection with
any Withdrawal Plan, as described in the Series' then current Prospectus
including making the monthly or quarterly payments to the Plan participant, and
informing the Series with regard to Shares redeemed and total dollar amount
involved on each payment date.
Although a Withdrawal Plan terminates upon the death of the
shareholder, SAFECO Services shall not be responsible for any payments made or
other action taken in accordance with the provisions of the Plan until it has
knowledge of such death.
(j) With reference to the registration and transfer of Shares referred to in
Section (a) above, SAFECO Services shall be entitled to treat the person in
whose name any Shares are registered as the owner thereof for all purposes, and
shall not be bound to recognize any other person, whether or not SAFECO Services
shall have notice hereof, except as expressly provided under applicable state
law.
3
<PAGE> 5
(k) SAFECO Services shall use reasonable efforts to assure the accuracy of
the records it maintains under this Agreement and to issue certificates or
register Shares only to those persons or entities entitled thereto.
When a transfer of shares is demanded, SAFECO Services shall take
reasonable steps to ascertain whether or not a transfer of the Shares requested
is duly authorized. If SAFECO Services fails to take such reasonable steps, it
will be liable to any insured party for any damages incurred as a result. SAFECO
Services' transfer obligations shall run to the owners of beneficial interest in
the Shares as well as to the owners of record. SAFECO Services shall take
reasonable steps to ascertain the identity and authority of each assignor, where
he is acting in a representative capacity.
Before permitting a transfer of Shares, SAFECO Services shall make
reasonable efforts to insure that the transferee is properly described and that
the transfer instructions for the Shares are clear and not ambiguous or subject
to doubt.
(l) Upon receipt of proper instructions, SAFECO Services shall compile,
distribute or reinvest, authorized dividends and capital gains distributions to
Trust's shareholders. In this regard data shall be accumulated to enable SAFECO
Services to provide and process year-end income tax information for
shareholders, states and the Internal Revenue Service. Where required, taxes
shall be withheld from alien shareholders with foreign addresses and accumulated
for surrender to the Internal Revenue Service.
(m) Prior to each meeting of the Trust's or any Series' shareholders, SAFECO
Services shall address the Proxy Cards, prepare the Proxy Cards, Notice of
Meeting of Shareholders and Proxy Statement for mailing, and mail them to the
shareholders entitled to vote at such meeting. Upon their return by the
shareholders, SAFECO Services shall examine them and prepare a tabulation that
provides the following information for the Trust or Series as the case may be:
(1) Number of Shares outstanding and entitled to vote on the record
date for the meeting.
(2) Number of Shares voted by proxy.
(3) Number of Shares voting "for" each proposal.
(4) Number of Shares voting "against" each proposal.
(5) Number of Shares voting "abstain" for each proposal.
(6) Number of shareholders involved in each above instance.
SAFECO Services shall prepare a certified list of shareholders eligible to
vote at each meeting which shall be available on the day of the meeting. SAFECO
Services shall also prepare an "Affidavit of Mailing" to be available for
reading at each meeting stating that on the appropriate date a responsible,
named individual caused the Notice of Meeting, Proxy Card and
4
<PAGE> 6
Proxy Statement to be mailed by United States Mail, postage prepaid, to each and
every shareholder of the Shares entitled to vote at the meeting.
(n) Countersign all certificates to be issued to shareholders of the Trust
upon receipt of payments for the Shares and request of a certificate or
certificates representing the Shares being purchased.
(o) SAFECO Services in the performance of its duties may contract from time
to time with other persons to provide software or computer time. SAFECO Services
shall advise the Trust of any such arrangements.
4. Appointment of Agents. SAFECO Services may at any time or times in its
discretion appoint (and may at any time remove) one or more other parties as
Agent to perform any or all of the services specified hereunder and carry out
such provisions of this Agreement as SAFECO Services may from time to time
direct; provided, however, that the appointment of any such Agent shall not
relieve SAFECO Services of any of its responsibilities or liabilities hereunder.
5. Record Keeping and Other Information. SAFECO Services shall create and
maintain all records required by all applicable laws, rules and regulations
relating to the services to be performed under this Agreement, including but not
limited to records required by Section 31(a) of the Investment Company Act of
1940 and the Rules thereunder, as the same may be amended from time to time. All
records shall be the property of the Trust and shall be available for inspection
and use by the Trust at all times. Where applicable, such records shall be
maintained by SAFECO Services for the periods and in the places required by Rule
31a-2 under the Investment Company Act of 1940.
5
<PAGE> 7
6. Net Asset Value. Wherever used herein, the term "net asset value" shall mean
the "net asset value" as computed for each Series or Class in accordance with
the Trust's Trust Instrument and Bylaws. If any amendment is made to said Trust
Instrument or Bylaws that changes the method of said computation, the Trust
shall give SAFECO Services immediate notice of such amendment.
7. Proper Instructions. The term "proper instructions" used in this Agreement
shall be deemed to mean any written instructions signed by authorized persons or
any oral instructions delivered in accordance with Trust requirements.
8. Disbursement of Funds. Funds deposited in the bank account maintained by
SAFECO Services shall not be disbursed to any trustee, officer or employee of
the Trust. This provision shall not be deemed to apply to dividend payments to
any trustee, officer, or employee in his or her capacity as shareholder. Neither
shall this provision apply to the above individuals upon payments to them for
any shares redeemed for their personal accounts.
9. Compensation. SAFECO Services shall receive from each Series of the Trust a
fee in accordance with the arrangements described in Exhibit B hereto as such
Exhibit may be amended from time to time. Exhibit B may be amended or additional
Exhibits may be added, as deemed necessary from time to time by written
agreement between the Trust and SAFECO Services. Deletion of Exhibit B shall be
in accordance with the termination provisions in paragraph 16 of this Agreement.
Each Exhibit B and any amendments thereto shall be dated and signed by the
parties to this Agreement.
10. Certification of Officers/Reliance upon Certifications.
(a) The Secretary of the Trust shall be, and is hereby, directed to certify
to SAFECO Services the names of the officers of the Trust, and their respective
signatures, and in case of any change of any holder of any such office, the fact
of such change, and the name of such new officer and the office held by him or
her, together with specimens of his or her signature. SAFECO Services is hereby
authorized to honor any instructions given to SAFECO Services by any such new
officer in respect of whom it has received any such certificate with the same
force and effect (and not otherwise), as if such new officer were named in this
Agreement in the place of any person with the same title of office.
6
<PAGE> 8
(b) The Secretary of the Trust shall be, and is hereby, authorized and
directed to notify SAFECO Services promptly in writing of any change of officers
as above provided, and that until SAFECO Services has actually received and
accepted such notice of any such change, SAFECO Services is hereby authorized
and directed to act in pursuance of this Agreement and the latest certificates
theretofore received by it; and SAFECO Services shall be indemnified and saved
harmless from any loss suffered or liability incurred by it in so acting, even
though any such officer may have been changed.
11. Audits, Inspections and Visits. SAFECO Services shall make available during
regular business hours all records and other data created and maintained
pursuant to this Agreement for reasonable audit and inspection by the Trust, any
agent or person designated by the Trust, or any regulatory agency having
authority over the Trust. Upon reasonable notice by the Trust, SAFECO Services
shall make available during regular business hours its facilities and premises
employed in connection with its performance of this Agreement for reasonable
visits by the Trust, any agent or person designated by the Trust, or any
regulatory agency having authority over the Trust.
12. Acts of God, Etc. SAFECO Services shall not be liable for delays or errors
occurring by reason of circumstances beyond its control, including but not
limited to acts of civil or military authority, national emergencies, work
stoppages, fire, flood, catastrophe, acts of God, war, riot or failure of
communications equipment of common carriers or power supply. In the event of
equipment breakdowns beyond its control, SAFECO Services shall at no additional
expense to the Trust take reasonable steps to minimize service interruptions and
mitigate their effects but shall have no liability with respect thereto.
13. Liability and Indemnification.
(a) SAFECO Services shall use reasonable care in the performance of its
duties under this Agreement.
(b) SAFECO Services shall be entitled to receive and act on the advice of
counsel for the Trust which advice shall be at the expense of the Trust and
shall be without liability for any action taken, or things done, or omitted to
be done, pursuant to such advice.
7
<PAGE> 9
(c) SAFECO Services shall not be liable for, or considered to be, the
custodian of any money called for or represented by any check, draft, or other
instrument for the payment of money delivered to it, or on behalf of the Trust.
(d) The Trust shall indemnify and hold SAFECO Services harmless against any
losses, claims, damages, liabilities or expenses (including reasonable
attorneys' fees and expenses) resulting from:
(1) any claim, demand, action or suit brought by any person other than
the Trust, including by a shareholder, which names SAFECO Services
and/or the Trust as a party, and is not based on and does not
result from SAFECO Services' willful misfeasance, bad faith or
negligence or reckless disregard of duties, and arises out of or
in connection with SAFECO Services' performance hereunder; or
(2) any claim, demand, action or suit (except to the extent
contributed to by SAFECO Services' willful misfeasance, bad faith
or negligence or reckless disregard of duties) which results from
the negligence of the Trust, or from SAFECO Services acting upon
any instruction(s) reasonably believed by it to have been executed
or communicated by any person duly authorized by the Trust, or as
a result of SAFECO Services' acting in reliance upon advice
reasonably believed by SAFECO Services to have been given by
counsel for the Trust, or as a result of SAFECO Services acting in
reliance upon any instrument or stock certificate reasonably
believed by it to have been genuine and signed, countersigned or
executed by the proper person.
14. Effective Date/Renewal. This Agreement shall become effective with respect
to the Trust and each Series on the date first written above or such later date
as indicated on Exhibits A and\or B and, unless sooner terminated as provided
herein, will continue in effect for two years from the above written date.
Thereafter, if not terminated, this Agreement shall continue in effect with
respect to each Series for successive annual periods ending on the same date of
each year, provided that such continuance is specifically approved at least
annually by a vote of the Board of Trustees of the Trust, including the vote of
a majority of the trustees who are neither interested persons of SAFECO Services
nor of the Trust at a meeting called for the purpose of voting on such
continuance.
15. Amendment. This Agreement may be modified by written mutual consent, such
consent on the part of the Trust to be authorized by the vote of the Board of
Trustees.
16. Termination.
(a) Either party hereto may, at any time on no less than sixty (60) days
prior written notice to the other, terminate this Agreement with respect to the
Trust or any Series (by deleting such Series from Exhibits A and B), in any
case, without the payment of any penalty.
8
<PAGE> 10
(b) Upon termination each Series shall pay to SAFECO Services such
compensation as may be due as of the date of such termination and shall likewise
reimburse SAFECO Services for its costs, expenses and disbursements.
(c) If a successor transfer agent is appointed by the Board of Trustees of
the Trust, SAFECO Services shall, upon termination, deliver to such successor
transfer agent at the office of the transfer agent, all transfer records then
held hereunder and all funds or other properties of the Trust and deposited with
or held by it hereunder.
(d) If no successor transfer agent is appointed, SAFECO Services shall, in
like manner, at its office, upon receipt of a certified copy of a vote of the
Trust's Board of Trustees deliver such transfer records, funds and other
properties in accordance with such vote.
(e) In the event that no written order designating a successor transfer
agent or certified copy of a vote of the shareholders shall have been delivered
to SAFECO Services on or before the date when such termination shall become
effective, then SAFECO Services shall have the right to deliver to a bank or
trust company doing business in Seattle, Washington, of its own selection,
having proper qualifications, all transfer records, funds and other properties
held by SAFECO Services and all instruments held by it relative thereto and all
other property held by it under this Agreement. Thereafter such bank or trust
company shall be the successor of SAFECO Services under this Agreement.
(f) In the event that transfer records, funds and other properties remain in
the possession of SAFECO Services after the date of termination hereof owing to
failure of the Trust to procure the certified copy above referred to, or of the
trustees to appoint a successor transfer agent, SAFECO Services shall be
entitled to fair compensation for its services during such period and the
provisions of this Agreement relating to the duties and obligations of SAFECO
Services shall remain in full force and effect.
17. Limitation of Liability. SAFECO Services is hereby expressly put on notice
of (i) the limitation of shareholder, officer and trustee liability as set forth
in the Trust Instrument of the Trust and (ii) of the provisions in the Trust
Instrument permitting the establishment of separate Series and limiting the
liability of each Series to obligations of that Series. SAFECO Services hereby
agrees that obligations assumed by the Trust pursuant to this Agreement are in
all cases assumed on behalf of a particular Series and each such obligation
shall be limited in all cases to that Series and its assets. SAFECO Services
agrees that it shall not seek satisfaction of any such obligation from the
shareholders or any individual shareholder of the Trust nor from the officers or
trustees or any individual officer or trustee of the Trust.
18. Entire Agreement/Enforcement of Rights. This Agreement embodies the entire
agreement between SAFECO Services and the Trust with respect to the services to
be provided by SAFECO Services to the Trust and each Series and supersedes any
prior written or oral agreement between those parties. In the event that either
party should be required to take legal action in order to enforce its rights
under this Agreement, the prevailing party in any such action or proceeding
shall be entitled to recover from the other party costs and reasonable
attorneys' fees. In the event that either party should be
9
<PAGE> 11
required to take legal action in order to enforce its rights under this
Agreement, the prevailing party in any such action or proceeding shall be
entitled to recover from the other party costs and reasonable attorney's fees.
19. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect. This Agreement may be executed
in counterparts, each of which taken together shall constitute one and the same
instrument. SAFECO Services understands that the rights and obligations of each
Series under the Trust Instrument are separate and distinct from those of any
and all other Series.
20. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington and, to the extent it
involves any United States statute, in accordance with the laws of the United
States.
10
<PAGE> 12
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their proper officers as of the day and year first above written.
SAFECO TAXABLE BOND TRUST
By __________________________
David F. Hill, President
By __________________________
Elna A. Thomson, Secretary
SAFECO SERVICES CORPORATION
By __________________________
David F. Hill, President
By __________________________
Elna A. Thomson, Secretary
11
<PAGE> 13
EXHIBIT A
SAFECO TAXABLE BOND TRUST
The SAFECO Taxable Bond Trust consists of the following Series:
1. SAFECO Intermediate-Term U.S. Treasury Fund
2. SAFECO U.S. Government Securities Fund
3. SAFECO High Yield Bond Fund
As of 9-30-93
12
<PAGE> 14
EXHIBIT B
SAFECO TAXABLE BOND TRUST
ALL SERIES
FEE SCHEDULES
(a) SAFECO Services shall receive from each Series of the Trust a fee of
$3.10 for each transaction which amount shall be billed and paid monthly.
(b) For purposes of this Section transaction means:
(i) any event which results in a change in the number of outstanding
Shares of an account for which a confirmation is generated, except that
confirmations generated as a result of or to correct an error made by
SAFECO Services shall not be included;
(ii) any cash dividend or distribution;
(iii) any change in the form of registration, or changes in address.
SAFECO SERVICES CORPORATION SAFECO TAXABLE BOND TRUST
on behalf of each Series
By:________________________ By:______________________
Its: President Its: President
Attest:____________________ Attest:__________________
Secretary Secretary
As of 6-30-94
13
<PAGE> 1
EXHIBIT 99.10
OPINION OF COUNSEL
<PAGE> 2
January 27, 1994
Board of Trustees
SAFECO Taxable Bond Trust
SAFECO Plaza
Seattle, WA 98185
Gentlemen:
I have acted as counsel to the Registrant in connection with the filing with the
Securities and Exchange Commission of Post-Effective Amendment No. 7 to
Registration Statement No. 33-22132 on Form N-1A for the shares of the
Registrant. I have made such examination of law and have examined such records
and documents as in my opinion are necessary or appropriate to enable me to
render the following opinion:
1. The Registrant was established by a Trust Instrument dated May 13, 1993, and
filed with the Delaware Secretary of State on May 17, 1993. The Trust is at
the present time validly existing as a Delaware business trust under the
laws of the state of Delaware.
2. The Registrant is authorized to issue an unlimited number of shares of
beneficial interest with a par value of .001c. per share which currently
represent three series: SAFECO Intermediate-Term U.S. Treasury Fund, SAFECO
U.S. Government Securities Fund (SAFECO GNMA Fund effective January 31,
1994) and SAFECO High-Yield Bond Fund.
3. All of the prescribed procedures for the issuance of the shares have been
followed, and, when such shares are issued in accordance with the Prospectus
contained in the Registration Statement all state requirements relating to
such shares will have been complied with.
4. Upon the acceptance of payment for shares issued in accordance with the
Prospectus contained in the Registration Statement and upon compliance with
applicable law, such shares will be legally-issued, fully paid and
non-assessable shares of the Registrant.
You may use this letter, or a copy hereof, as an exhibit to the Registration
Statement.
Very truly yours,
Elna A. Thomson
Corporate Counsel
<PAGE> 1
EXHIBIT 99.11
CONSENT OF INDEPENDENT AUDITORS
<PAGE> 2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions, "Investment
Advisory and Other Services" and "Financial Statements" in Post-Effective
Amendment No. 10 to the Registration Statement (Form N-1A, No. 33-22132)
and related Prospectus of SAFECO Taxable Bond Trust dated January 31, 1996.
We also consent to the incorporation by reference therein of our report dated
October 26, 1995 with respect to the financial statements of SAFECO Taxable
Bond Trust included in the 1995 Annual Report filed with the Securities and
Exchange Commission.
/s/
______________________________
Seattle, WA
January 26, 1996
<PAGE> 1
EXHIBIT 99.13
SUBSCRIPTION AGREEMENT
<PAGE> 2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into this
_________ day of ______________, 19__, between __________________________, a
Washington corporation ("Fund"), and SAFECO Life Insurance Company, a Washington
corporation ("SAFECO Life"), which is a wholly-owned subsidiary of SAFECO
Corporation.
R E C I T A L S :
WHEREAS, The Fund is a recently organized corporation formed to engage in the
business of investing, reinvesting or trading securities, or in any other
business activity incidental to the business of an investment management
company, as such is defined in Section 4(3) of the Investment Company Act of
1940 ("1940 Act"), desires to raise $5,000,000 through the sale to SAFECO
Insurance of 500,000 shares of its Common Stock, par value $.10 per share
("Common Stock"), at a price of $10 per share, and plans, subsequent to the sale
of said shares under this Agreement, to register with the Securities and
Exchange Commission ("Commission") an indefinite number of shares of its Common
Stock for offering and sale under the Securities Act of 1933 ("1933 Act)'
WHEREAS, SAFECO Life is an affiliate of SAFECO Asset Management Company ("SAM")
which has been selected by the Fund to serve as its investment adviser and is
familiar with the advisory activities, management and experience of SAM, has
received and reviewed the Registration Statement on Form N-1A that the Fund
intends to file with the Commission with respect to the registration of an
indefinite number of shares of its Common Stock and the registration of the Fund
as an investment company under the 1940 Act, has had an opportunity to ask
questions of, and receive answers from, the Fund and SAM with respect to the
proposed activities of the Fund, and, upon the basis of the information
available to it, is willing to acquire from the Fund 500,000 of its shares of
Common Stock pursuant to the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual promises, covenants, and
warranties contained herein, the Fund and SAFECO Insurance agree as follows:
1. STOCK PURCHASE.
Subject to the terms and conditions of this Agreement, the Fund agrees to
sell to SAFECO Life, and SAFECO Life agrees to purchase from the Fund, 500,000
shares of the Fund's Common Stock ("Shares") at a purchase price of $10 per
share, for an aggregate consideration of $5,000,000.
Upon the execution of this Agreement by the parties and at the request of
the President of the Fund, SAFECO Life shall pay to the Fund $5,000,000 in coin
or currency of the United States of America which, at the time of payment, is
legal tender for the payment of public and private debts and the Fund shall
deliver, or cause to be delivered, to SAFECO Life a stock certificate
representing the Shares signed by duly authorized officers of the Fund and
countersigned by the Fund's transfer agent. It is hereby agreed that the stock
certificate shall bear a restrictive legend in substantially the form set forth
in paragraph 2 of this Agreement.
2. RESTRICTIONS UPON TRANSFER OF SHARES.
The Shares have not been registered by the Fund under the 1933 Act but are
being offered and will be sold to SAFECO Life pursuant to an exemption from the
registration requirements of that Act for transactions which do not involve a
public offering. The Fund does not plan, and is under no obligation to provide
for, any registration of the Shares in the future. SAFECO Life
<PAGE> 3
hereby covenants that it will not sell, pledge, hypothecate or otherwise
transfer any of the Shares, or any interest therein, whether or not for
consideration, unless it has previously notified the Fund of the proposed
transfer and delivered to the Fund in legal opinion, in form and substance
satisfactory to the Fund and its counsel, that such transfer is not in violation
of the 1933 Act and applicable state securities laws. Furthermore, the parties
hereby agree, that in view of the restrictions upon transfer, that the stock
certificate representing the Shares shall bear a restrictive legend that is in
substantially the following form:
"The securities represented by the stock certificate have been acquired
pursuant to an investment representation on the part of the purchaser
thereof and shall not be sold, pledged, hypothecated, donated or otherwise
transferred, whether or not for consideration, by the purchaser except upon
the issuance to the corporation of a favorable opinion of its counsel to the
effect that any such transfer shall not be in violation of the Securities
Act of 1933, as amended, and applicable state securities laws."
3. WARRANTIES AND REPRESENTATIONS OF FUND.
The Fund hereby represents and warrants as follows:
(a) The Fund has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of Washington and has
the corporate power and authority to carry on its business as presently
conducted and to perform its obligations under this Agreement.
(b) The execution, delivery and performance by the Fund of this Agreement
have been duly authorized by all necessary corporate action on the part of the
Fund.
(c) The issuance and sale of the Shares pursuant to this Agreement have been
duly authorized by all necessary corporate action on the part of the Fund and
the Shares have been duly issued and shall, upon receipt of the purchase price
specified in paragraph 1 above, by fully paid and non-assessable and shall
constitute valid and legal binding obligations of the Fund entitled to the
benefits granted to the Fund's shareholders under its Articles of Incorporation
and Bylaws.
(d) Neither the issuance nor sale of the Shares, nor the consummation of any
of the transactions contemplated by this Agreement, will conflict with, result
in a breach of, or constitute a default under, the terms of the Articles of
Incorporation or Bylaws of the Fund, or any indenture, mortgage agreement,
instrument or undertaking to which the Fund is a party or is bound, or any other
or regulation applicable to the Fund of any court, regulatory body,
administrative agency or governmental body having jurisdiction over the Fund.
(e) No consent, approval, authorization or order of any court or
governmental agency or body is required for the issuance and sale of the Shares
or the consummation of the Transactions contemplated by this Agreement.
4. WARRANTIES AND REPRESENTATIONS OF SAFECO INSURANCE.
SAFECO Life hereby represents and warrants as follows:
(a) SAFECO Life has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of Washington with full
power and authority to own its property and conduct its business and to perform
its obligations under this Agreement.
<PAGE> 4
(b) The execution, delivery and performance of this Agreement have been duly
authorized by all necessary corporate action on the part of SAFECO Life.
(c) Neither the execution, delivery, nor performance of this Agreement, nor
the acquisition of the Shares, will conflict with, result in a breach of, or
constitute a default under the terms of the Articles of Incorporation or Bylaws
of SAFECO Life or any indenture, mortgage agreement, instrument or undertaking
to which SAFECO is a party or bound, or any order or regulation applicable to
SAFECO Life of any court, regulatory body, administrative agency, or
governmental body having jurisdiction over SAFECO Life.
(d) No consent, approval, authorization or order of any court or
governmental agency or body is required by SAFECO Life for the acquisition of
the Shares pursuant to this Agreement, except such as has been obtained from the
Insurance Commissioner of the State of Washington.
(e) SAFECO Life is acquiring the Shares for its own account, for investment
purposes and not with a view to the subsequent offering, sale or distribution
thereof and SAFECO Life is not participating, directly or indirectly, in any
plan or scheme involving the resale or distribution of the Shares or any
interest therein.
(f) SAFECO Life has sufficient knowledge and experience in business matters
so as to enable it to evaluate the merits and risks of acquiring the Shares from
the Fund and has sufficient assets to bear the economic risk of losing part or
all of its investment in the Fund.
(g) SAFECO Life acknowledges that it has received and reviewed a copy of the
Registration Statement on Form N-1A that the Fund intends to file with the
Commission with respect to the registration of an indefinite number of shares of
its Common Stock under the 1933 Act and the registration of the Fund as an
investment company under the 1940 Act and that it has been afforded the
opportunity to ask questions of, and receive answers from, the Fund or SAM with
respect to the proposed operations of the Fund.
5. TRANSFER AGENT INSTRUCTIONS.
It is hereby acknowledged by the parties that the Fund's transfer agent will
be instructed not to transfer the Shares to any third party unless it has
received a copy of the legal opinion required by paragraph 2 above and written
consent to such transfer from the Fund.
6. DIVIDEND RETENTION.
SAFECO Life agrees to permit the Fund to hold all dividends accrued and
payable to it until such time as the first dividends are paid by the Fund to any
other shareholder.
7. MISCELLANEOUS.
This Agreement embodies the entire agreement and understanding between the
Fund and SAFECO Life with respect to the sale of the Shares and supersedes any
prior written or oral agreement between the parties. This Agreement shall be
governed by and construed in accordance with the laws of the State of
Washington.
<PAGE> 5
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized officers as of the date and year first above written.
_____________________________________
By
__________________________________
L.D. McClean
President
SAFECO LIFE INSURANCE COMPANY
By
__________________________________
R.H. Eigsti
Senior Vice President
STATE OF WASHINGTON )
) ss.
COUNTY OF K I N G )
On this day personally appeared before me L.D. McClean, to me know to be the
President of _______________________________, the corporation that executed the
foregoing instrument, and acknowledged the same instrument to be the free and
voluntary act and deed of said corporation for the uses and purposes therein
mentioned, and on oath stated that he is authorized to execute the said
instrument, and that the seal affixed (if any) is the corporate seal of said
corporation.
WITNESS MY HAND AND OFFICIAL SEAL HERETO AFFIXED this ________ day of
____________, 1995.
__________________________________
Notary Public in and for the State
of
Washington, residing at
__________________________________.
<PAGE> 1
EXHIBIT 99.14
PROTOTYPE 401(k)/PROFIT SHARING PLAN
<PAGE> 2
PROTOTYPE CASH OR DEFERRED PROFIT-SHARING PLAN
AND TRUST
SPONSORED BY
SAFECO SECURITIES, INC.
SEATTLE, WASHINGTON
BASIC PLAN DOCUMENT #01
FEBRUARY 1994
COPYRIGHT 1994 THE MCKAY HOCHMAN COMPANY, INC.
<PAGE> 3
THIS DOCUMENT IS COPYRIGHTED UNDER THE LAWS OF THE UNITED STATES. USE,
DUPLICATION OR REPRODUCTION, INCLUDING THE USE OF ELECTRONIC MEANS, IS
PROHIBITED BY LAW WITHOUT THE EXPRESS CONSENT OF THE AUTHOR.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PARAGRAPH PAGE
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<S> <C> <C>
ARTICLE I
DEFINITIONS
1.1 Actual Deferral Percentage 1
1.2 Adoption Agreement 1
1.3 Aggregate Limit 1
1.4 Annual Additions 2
1.5 Annuity Starting Date 2
1.6 Applicable Calendar Year 2
1.7 Applicable Life Expectancy 2
1.8 Average Contribution Percentage (ACP) 2
1.9 Average Deferral Percentage (ADP) 2
1.10 Break In Service 2
1.11 Code 2
1.12 Compensation 3
1.13 Contribution Percentage 4
1.14 Custodian 5
1.15 Defined Benefit Plan 5
1.16 Defined Benefit (Plan) Fraction 5
1.17 Defined Contribution Dollar Limitation 5
1.18 Defined Contribution Plan 5
1.19 Defined Contribution (Plan) Fraction 6
1.20 Designated Beneficiary 6
1.21 Disability 6
1.22 Distribution Calendar Year 6
1.23 Early Retirement Age 6
1.24 Earned Income 6
1.25 Effective Date 6
1.26 Election Period 6
1.27 Elective Deferral 7
1.28 Eligible Participant 7
1.29 Employee 7
1.30 Employer 7
1.31 Entry Date 7
1.32 Excess Aggregate Contributions 7
1.33 Excess Amount 7
1.34 Excess Contribution 8
1.35 Excess Elective Deferrals 8
1.36 Family Member 8
1.37 First Distribution Calendar Year 8
1.38 Fund 8
1.39 Hardship 8
1.40 Highest Average Compensation 8
1.41 Highly Compensated Employee 8
1.42 Hour Of Service 9
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
1.43 Key Employee 10
1.44 Leased Employee 10
1.45 Limitation Year 10
1.46 Master Or Prototype Plan 10
1.47 Matching Contribution 10
1.48 Maximum Permissible Amount 10
1.49 Net Profit 10
1.50 Normal Retirement Age 10
1.51 Owner-Employee 11
1.52 Paired Plans 11
1.53 Participant 11
1.54 Participant's Benefit 11
1.55 Permissive Aggregation Group 11
1.56 Plan 11
1.57 Plan Administrator 11
1.58 Plan Year 11
1.59 Present Value 11
1.60 Projected Annual Benefit 11
1.61 Qualified Deferred Compensation Plan 11
1.62 Qualified Domestic Relations Order 12
1.63 Qualified Early Retirement Age 12
1.64 Qualified Joint And Survivor Annuity 12
1.65 Qualified Matching Contribution 12
1.66 Qualified Non-Elective Contributions 12
1.67 Qualified Voluntary Contribution 12
1.68 Required Aggregation Group 12
1.69 Required Beginning Date 12
1.70 Rollover Contribution 13
1.71 Salary Savings Agreement 13
1.72 Self-Employed Individual 13
1.73 Service 13
1.74 Shareholder Employee 13
1.75 Simplified Employee Pension Plan 13
1.76 Sponsor 13
1.77 Spouse (Surviving Spouse) 13
1.78 Super Top-Heavy Plan 13
1.79 Taxable Wage Base 13
1.80 Top-Heavy Determination Date 14
1.81 Top-Heavy Plan 14
1.82 Top-Heavy Ratio 14
1.83 Top-Paid Group 15
1.84 Transfer Contribution 15
1.85 Trustee 15
1.86 Valuation Date 15
1.87 Vested Account Balance 16
1.88 Voluntary Contribution 16
1.89 Welfare Benefit Fund 16
1.90 Year Of Service 16
ARTICLE II
ELIGIBILITY REQUIREMENTS
2.1 Participation 17
2.2 Change In Classification Of Employment 17
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C>
2.3 Computation Period 17
2.4 Employment Rights 17
2.5 Service With Controlled Groups 17
2.6 Owner-Employees 17
2.7 Leased Employees 18
2.8 Thrift Plans 18
ARTICLE III
EMPLOYER CONTRIBUTIONS
3.1 Amount 19
3.2 Expenses And Fees 19
3.3 Responsibility For Contributions 19
3.4 Return Of Contributions 19
ARTICLE IV
EMPLOYEE CONTRIBUTIONS
4.1 Voluntary Contributions 20
4.2 Qualified Voluntary Contributions 20
4.3 Rollover Contribution 20
4.4 Transfer Contribution 21
4.5 Employer Approval Of Transfer Contributions 21
4.6 Elective Deferrals 21
4.7 Required Voluntary Contributions 22
4.8 Direct Rollover Of Benefits 22
ARTICLE V
PARTICIPANT ACCOUNTS
5.1 Separate Accounts 23
5.2 Adjustments To Participant Accounts 23
5.3 Allocating Employer Contributions 24
5.4 Allocating Investment Earnings And Losses 24
5.5 Participant Statements 24
ARTICLE VI
RETIREMENT BENEFITS AND DISTRIBUTIONS
6.1 Normal Retirement Benefits 25
6.2 Early Retirement Benefits 25
6.3 Benefits On Termination Of Employment 25
6.4 Restrictions On Immediate Distributions 26
6.5 Normal Form Of Payment 27
6.6 Commencement Of Benefits 27
6.7 Claims Procedures 28
6.8 In-Service Withdrawals 28
6.9 Hardship Withdrawal 29
ARTICLE VII
DISTRIBUTION REQUIREMENTS
7.1 Joint And Survivor Annuity Requirements 31
7.2 Minimum Distribution Requirements 31
7.3 Limits On Distribution Periods 31
</TABLE>
<PAGE> 6
<TABLE>
<S> <C> <C>
7.4 Required Distributions On Or After The
Required Beginning Date 31
7.5 Required Beginning Date 32
7.6 Transitional Rule 33
7.7 Designation Of Beneficiary For Death Benefit 34
7.8 Nonexistence Of Beneficiary 34
7.9 Distribution Beginning Before Death 34
7.10 Distribution Beginning After Death 34
7.11 Distribution Of Excess Elective Deferrals 35
7.12 Distributions Of Excess Contributions 35
7.13 Distribution Of Excess Aggregate Contributions 36
ARTICLE VIII
JOINT AND SURVIVOR ANNUITY REQUIREMENTS
8.1 Applicability Of Provisions 38
8.2 Payment Of Qualified Joint And Survivor
Annuity 38
8.3 Payment Of Qualified Pre-Retirement
Survivor Annuity 38
8.4 Qualified Election 38
8.5 Notice Requirements For Qualified Joint
And Survivor Annuity 39
8.6 Notice Requirements For Qualified Pre-
Retirement Survivor Annuity 39
8.7 Special Safe-Harbor Exception For
Certain Profit-Sharing Plans 39
8.8 Transitional Joint And Survivor
Annuity Rules 40
8.9 Automatic Joint And Survivor Annuity
And Early Survivor Annuity 40
8.10 Annuity Contracts 41
ARTICLE IX
VESTING
9.1 Employee Contributions 42
9.2 Employer Contributions 42
9.3 Computation Period 42
9.4 Requalification Prior To Five Consecutive
One-Year Breaks In Service 42
9.5 Requalification After Five Consecutive
One-Year Breaks In Service 42
9.6 Calculating Vested Interest 42
9.7 Forfeitures 43
9.8 Amendment Of Vesting Schedule 43
9.9 Service With Controlled Groups 43
ARTICLE X
LIMITATIONS ON ALLOCATIONS AND
ANTIDISCRIMINATION TESTING
10.1 Participation In This Plan Only 44
10.2 Disposition Of Excess Annual Additions 44
10.3 Participation In This Plan And Another
</TABLE>
<PAGE> 7
<TABLE>
<S> <C> <C>
Prototype Defined Contribution Plan,
Welfare Benefit Fund, Or Other Medical
Account Maintained By The Employer 45
10.4 Disposition Of Excess Annual Additions
Under Two Plans 45
10.5 Participation In This Plan And Another
Defined Contribution Plan Which Is Not
A Master Or Prototype Plan 46
10.6 Participation In This Plan And A Defined
Benefit Plan 46
10.7 Average Deferral Percentage (ADP) Test 46
10.8 Special Rules Relating To Application
Of ADP Test 46
10.9 Recharacterization 47
10.10 Average Contribution Percentage (ACP) Test 47
10.11 Special Rules Relating To Application
Of ACP Test 48
ARTICLE XI
ADMINISTRATION
11.1 Plan Administrator 50
11.2 Trustee 50
11.3 Administrative Fees And Expenses 51
11.4 Division Of Duties And Indemnification 51
ARTICLE XII
TRUST FUND
12.1 The Fund 53
12.2 Control Of Plan Assets 53
12.3 Exclusive Benefit Rules 53
12.4 Assignment And Alienation Of Benefits 53
12.5 Determination Of Qualified Domestic
Relations Order (QDRO) 53
ARTICLE XIII
INVESTMENTS
13.1 Fiduciary Standards 55
13.2 Funding Arrangement 55
13.3 Investment Alternatives Of The Trustee 55
13.4 Participant Loans 56
13.5 Insurance Policies 57
13.6 Employer Investment Direction 59
13.7 Employee Investment Direction 59
ARTICLE XIV
TOP-HEAVY PROVISIONS
14.1 Applicability Of Rules 61
14.2 Minimum Contribution 61
14.3 Minimum Vesting 61
14.4 Limitations On Allocations 62
</TABLE>
<PAGE> 8
<TABLE>
<S> <C> <C>
ARTICLE XV
AMENDMENT AND TERMINATION
15.1 Amendment By Sponsor 63
15.2 Amendment By Employer 63
15.3 Termination 63
15.4 Qualification Of Employer's Plan 63
15.5 Mergers And Consolidations 63
15.6 Resignation And Removal 64
15.7 Qualification Of Prototype 64
ARTICLE XVI
GOVERNING LAW 65
</TABLE>
<PAGE> 9
PROTOTYPE CASH OR DEFERRED PROFIT-SHARING PLAN AND TRUST
SPONSORED BY
SAFECO SECURITIES, INC.
The Sponsor hereby establishes the following Prototype Retirement Plan and Trust
for use by those of its customers who qualify and wish to adopt a qualified
retirement program. Any Plan and Trust established hereunder shall be
administered for the exclusive benefit of Participants and their beneficiaries
under the following terms and conditions:
ARTICLE I
DEFINITIONS
1.1 ACTUAL DEFERRAL PERCENTAGE The ratio (expressed as a percentage and
calculated separately for each Participant) of:
(a) the amount of Employer contributions [as defined at (c) and (d)]
actually paid over to the Fund on behalf of such Participant for the
Plan Year to
(b) the Participant's Compensation for such Plan Year.
Compensation will only include amounts for the period during which the Employee
was eligible to participate.
Employer contributions on behalf of any Participant shall include:
(c) any Elective Deferrals made pursuant to the Participant's deferral
election, including Excess Elective Deferrals, but excluding Elective
Deferrals that are either taken into account in the Contribution
Percentage test (provided the ADP test is satisfied both with and
without exclusion of these Elective Deferrals) or are returned as
excess Annual Additions; and
(d) at the election of the Employer, Qualified Non-Elective Contributions
and Qualified Matching Contributions.
For purposes of computing Actual Deferral Percentages, an Employee who would be
a Participant but for the failure to make Elective Deferrals shall be treated as
a Participant on whose behalf no Elective Deferrals are made.
1.2 ADOPTION AGREEMENT The document attached to this Plan by which an Employer
elects to establish a qualified retirement plan and trust/custodial account
under the terms of this Prototype Plan and Trust.
1.3 AGGREGATE LIMIT The sum of:
(a) 125 percent of the greater of the ADP of the non-Highly Compensated
Employees for the Plan Year or the ACP of non-Highly Compensated
Employees under the Plan subject to Code Section 401(m) for the Plan
Year beginning with or within the Plan Year of the cash or deferred
arrangement as described in Code Section 401(k) or Code Section
402(h)(1)(B), and
(b) the lesser of 200% or two percent plus the lesser of such ADP or ACP.
Alternatively, the aggregate limit can be determined by substituting "the lesser
of 200% or 2 percent plus" for "125% of" in (a) above, and substituting "125%
of" for "the lesser of 200% or 2 percent plus" in (b) above.
1.4 ANNUAL ADDITIONS The sum of the following amounts credited to a
Participant's account for the Limitation Year:
1
<PAGE> 10
(a) Employer Contributions,
(b) Employee Contributions (under Article IV),
(c) forfeitures,
(d) amounts allocated after March 31, 1984 to an individual medical
account, as defined in Code Section 415(l)(2), which is part of a
pension or annuity plan maintained by the Employer (these amounts are
treated as Annual Additions to a Defined Contribution Plan though they
arise under a Defined Benefit Plan), and
(e) amounts derived from contributions paid or accrued after 1985, in
taxable years ending after 1985, which are either attributable to
post-retirement medical benefits allocated to the account of a Key
Employee, or to a Welfare Benefit Fund maintained by the Employer, are
also treated as Annual Additions to a Defined Contribution Plan. For
purposes of this paragraph, an Employee is a Key Employee if he or she
meets the requirements of paragraph 1.43 at any time during the Plan
Year or any preceding Plan Year. Welfare Benefit Fund is defined at
paragraph 1.89.
Excess amounts applied in a Limitation Year to reduce Employer contributions
will be considered Annual Additions for such Limitation Year, pursuant to the
provisions of Article X.
1.5 ANNUITY STARTING DATE The first day of the first period for which an amount
is paid as an annuity or in any other form.
1.6 APPLICABLE CALENDAR YEAR The First Distribution Calendar Year, and in the
event of the recalculation of life expectancy, such succeeding calendar year. If
payments commence in accordance with paragraph 7.4(e) before the Required
Beginning Date, the Applicable Calendar Year is the year such payments commence.
If distribution is in the form of an immediate annuity purchased after the
Participant's death with the Participant's remaining interest, the Applicable
Calendar Year is the year of purchase.
1.7 APPLICABLE LIFE EXPECTANCY Used in determining the required minimum
distribution. The life expectancy (or joint and last survivor expectancy)
calculated using the attained age of the Participant (or Designated Beneficiary)
as of the Participant's (or Designated Beneficiary's) birthday in the Applicable
Calendar Year reduced by one for each calendar year which has elapsed since the
date life expectancy was first calculated. If life expectancy is being
recalculated, the Applicable Life Expectancy shall be the life expectancy as so
recalculated. The life expectancy of a non-Spouse Beneficiary may not be
recalculated.
1.8 AVERAGE CONTRIBUTION PERCENTAGE (ACP) The average of the Contribution
Percentages for each Highly Compensated Employee and for each non-Highly
Compensated Employee.
1.9 AVERAGE DEFERRAL PERCENTAGE (ADP) The average of the Actual Deferral
Percentages for each Highly Compensated Employee and for each non-Highly
Compensated Employee.
1.10 BREAK IN SERVICE A 12-consecutive month period during which an Employee
fails to complete more than 500 Hours of Service.
1.11 CODE The Internal Revenue Code of 1986, including any amendments.
1.12 COMPENSATION The Employer may select one of the following three safe-harbor
definitions of Compensation in the Adoption Agreement. Compensation shall only
include amounts earned while a Participant if Plan Year is chosen as the
determination period.
2
<PAGE> 11
(a) CODE SECTION 3401(A) WAGES. Compensation is defined as wages within the
meaning of Code Section 3401(a) for the purposes of Federal income tax
withholding at the source but determined without regard to any rules
that limit the remuneration included in wages based on the nature or
location of the employment or the services performed [such as the
exception for agricultural labor in Code Section 3401(a)(2)].
(b) CODE SECTION 6041 AND 6051 WAGES. Compensation is defined as wages as
defined in Code Section 3401(a) and all other payments of compensation
to an Employee by the Employer (in the course of the Employer's trade
or business) for which the Employer is required to furnish the employee
a written statement under Code Section 6041(d) and 6051(a)(3).
Compensation must be determined without regard to any rules under Code
Section 3401(a) that limit the remuneration included in wages based on
the nature or location of the employment or the services performed
[such as the exception for agricultural labor in Code Section
3401(a)(2)].
(c) CODE SECTION 415 COMPENSATION. For purposes of applying the limitations
of Article X and Top-Heavy Minimums, the definition of Compensation
shall be Code Section 415 Compensation defined as follows: a
Participant's Earned Income, wages, salaries, and fees for professional
services and other amounts received (without regard to whether or not
an amount is paid in cash) for personal services actually rendered in
the course of employment with the Employer maintaining the Plan to the
extent that the amounts are includible in gross income [including, but
not limited to, commissions paid salesmen, Compensation for services on
the basis of a percentage of profits, commissions on insurance
premiums, tips, bonuses, fringe benefits and reimbursements or other
expense allowances under a nonaccountable plan (as described in
Regulation 1.62-2(c)], and excluding the following:
1. Employer contributions to a plan of deferred compensation which are
not includible in the Employee's gross income for the taxable year
in which contributed, or Employer contributions under a Simplified
Employee Pension Plan or any distributions from a plan of deferred
compensation,
2. Amounts realized from the exercise of a non-qualified stock option,
or when restricted stock (or property) held by the Employee either
becomes freely transferable or is no longer subject to a
substantial risk of forfeiture,
3. Amounts realized from the sale, exchange or other disposition of
stock acquired under a qualified stock option; and
4. other amounts which received special tax benefits, or contributions
made by the Employer (whether or not under a salary reduction
agreement) towards the purchase of an annuity contract described in
Code Section 403(b) (whether or not the contributions are actually
excludible from the gross income of the Employee).
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For purposes of applying the limitations of Article X and Top-Heavy Minimums,
the definition of Compensation shall be Code Section 415 Compensation described
in this paragraph 1.12(c). Also, for purposes of applying the limitations of
Article X, Compensation for a Limitation Year is the Compensation actually paid
or made available during such Limitation Year. Notwithstanding the preceding
sentence, Compensation for a Participant in a defined contribution plan who is
permanently and totally disabled [as defined in Code Section 22(e)(3)] is the
Compensation such Participant would have received for the Limitation Year if the
Participant had been paid at the rate of Compensation paid immediately before
becoming permanently and totally disabled. Such imputed Compensation for the
disabled Participant may be taken into account only if the participant is not a
Highly Compensated Employee [as defined in Code Section 414(q)] and
contributions made on behalf of such Participant are nonforfeitable when made.
If the Employer fails to pick the determination period in the Adoption
Agreement, the Plan Year shall be used. Unless otherwise specified by the
Employer in the Adoption Agreement, Compensation shall be determined as provided
in Code Section 3401(a) [as defined in this paragraph 1.12(a)]. In
nonstandardized Adoption Agreement 002, the Employer may choose to eliminate or
exclude categories of Compensation which do not violate the provisions of Code
Sections 401(a)(4), 414(s) the regulations thereunder and Revenue Procedure
89-65.
Beginning with 1989 Plan Years, the annual Compensation of each Participant
which may be taken into account for determining all benefits provided under the
Plan (including benefits under Article XIV) for any year shall not exceed the
limitation as imposed by Code Section 401(a)(17) and as adjusted under Code
Section 415(d). In determining the Compensation of a Participant for purposes of
this limitation, the rules of Code Section 414(q)(6) shall apply, except in
applying such rules, the term "family" shall include only the Spouse of the
Participant and any lineal descendants of the Participant who have not attained
age 19 before the end of the Plan year. If, as a result of the application of
such rules the adjusted annual Compensation limitation, as imposed by Code
Section 401(a)(17), is exceeded, then (except for purposes of determining the
portion of Compensation up to the integration level if this Plan provides for
permitted disparity), the limitation shall be prorated among the affected
individuals in proportion to each such individual's Compensation as determined
under this section prior to the application of this limitation.
If a Plan has a Plan Year that contains fewer than 12 calendar months, then the
annual Compensation limit for that period is an amount equal to the limitation
as imposed by Code Section 401(a)(17) as adjusted for the calendar year in which
the Compensation period begins, multiplied by a fraction the numerator of which
is the number of full months in the Short Plan Year and the denominator of which
is 12. If Compensation for any prior Plan Year is taken into account in
determining an Employee's contributions or benefits for the current year, the
Compensation for such prior year is subject to the applicable annual
Compensation limit in effect for that prior year. For this purpose, for years
beginning before January 1, 1990, the applicable annual Compensation limit is
$200,000. For Plan Years beginning on or after January 1, 1994, the annual
Compensation of each Participant taken into account for determining all benefits
provided under the Plan for any Plan Year shall not exceed $150,000, as adjusted
for increases in the cost-of-living in accordance with Code Section 401(a)(17).
The cost-of-living adjustment in effect for a calendar year applies to any
determination period beginning in such calendar year.
Compensation shall not include deferred Compensation other than contributions
through a salary reduction agreement to a cash or deferred plan under Code
Section 401(k), a Simplified Employee Pension Plan under Code Section
402(h)(1)(B), a cafeteria plan under Code Section 125 or a tax-deferred annuity
under Code Section 403(b). Unless elected otherwise by the Employer in the
Adoption Agreement, these deferred amounts will be considered as Compensation
for Plan purposes. These deferred amounts are not counted as Compensation for
purposes of Articles X and XIV. When applicable to a Self-Employed Individual,
Compensation shall mean Earned Income.
1.13 CONTRIBUTION PERCENTAGE The ratio (expressed as a percentage and calculated
separately for each Participant) of:
(a) the Participant's Contribution Percentage Amounts [as defined at
(c)-(f)] for the Plan Year, to
(b) the Participant's Compensation for the Plan Year. Compensation will
only include amounts for the period during which the Employee was
eligible to participate.
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Contribution Percentage Amounts on behalf of any Participant shall include:
(c) the amount of Employee Voluntary Contributions, Matching
Contributions, and Qualified Matching Contributions (to the extent not
taken into account for purposes of the ADP test) made under the Plan
on behalf of the Participant for the Plan Year,
(d) forfeitures of Excess Aggregate Contributions or Matching
Contributions allocated to the Participant's account which shall be
taken into account in the year in which such forfeiture is allocated,
(e) at the election of the Employer, Qualified Non-Elective Contributions,
and
(f) the Employer also may elect to use Elective Deferrals in the
Contribution Percentage Amounts so long as the ADP test is met before
the Elective Deferrals are used in the ACP test and continues to be
met following the exclusion of those Elective Deferrals that are used
to meet the ACP test.
Contribution Percentage Amounts shall not include Matching Contributions,
whether or not Qualified, that are forfeited either to correct Excess Aggregate
Contributions, or because the contributions to which they relate are Excess
Deferrals, Excess Contributions, or Excess Aggregate Contributions.
1.14 CUSTODIAN The individual(s) or institution appointed by the Employer to
have custody of all or part of the Fund.
1.15 DEFINED BENEFIT PLAN A Plan under which a Participant's benefit is
determined by a formula contained in the Plan and no individual accounts are
maintained for Participants.
1.16 DEFINED BENEFIT (PLAN) FRACTION A fraction, the numerator of which is the
sum of the Participant's Projected Annual Benefits under all the Defined Benefit
Plans (whether or not terminated) maintained by the Employer, and the
denominator of which is the lesser of 125 percent of the dollar limitation
determined for the Limitation Year under Code Sections 415(b) and (d) or 140
percent of the Highest Average Compensation, including any adjustments under
Code Section 415(b).
Notwithstanding the above, if the Participant was a Participant as of the first
day of the first Limitation Year beginning after 1986, in one or more Defined
Benefit Plans maintained by the Employer which were in existence on May 6, 1986,
the denominator of this fraction will not be less than 125 percent of the sum of
the annual benefits under such plans which the Participant had accrued as of the
close of the last Limitation Year beginning before 1987, disregarding any
changes in the terms and conditions of the plan after May 5, 1986. The preceding
sentence applies only if the Defined Benefit Plans individually and in the
aggregate satisfied the requirements of Section 415 for all Limitation Years
beginning before 1987.
1.17 DEFINED CONTRIBUTION DOLLAR LIMITATION Thirty thousand dollars ($30,000) or
if greater, one-fourth of the defined benefit dollar limitation set forth in
Code Section 415(b)(1) as in effect for the Limitation Year.
1.18 DEFINED CONTRIBUTION PLAN A Plan under which individual accounts are
maintained for each Participant to which all contributions, forfeitures,
investment income and gains or losses, and expenses are credited or deducted. A
Participant's benefit under such Plan is based solely on the fair market value
of his or her account balance.
1.19 DEFINED CONTRIBUTION (PLAN) FRACTION A Fraction, the numerator of which is
the sum of the Annual Additions to the Participant's account under all the
Defined Contribution Plans (whether or not terminated) maintained by the
Employer for the current and all prior Limitation Years (including the Annual
Additions attributable to the Participant's nondeductible Employee contributions
to all Defined Benefit Plans, whether or not terminated, maintained by the
Employer, and the Annual Additions attributable to all Welfare Benefit Funds, as
defined in paragraph 1.89 and individual medical accounts, as defined in Code
Section 415(l)(2), maintained by the Employer), and the denominator of which is
the sum of the maximum aggregate
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amounts for the current and all prior Limitation Years of service with the
Employer (regardless of whether a Defined Contribution Plan was maintained by
the Employer). The maximum aggregate amount in the Limitation Year is the lesser
of 125 percent of the dollar limitation determined under Code Sections 415(b)
and (d) in effect under Code Section 415(c)(1)(A) or 35 percent of the
Participant's Compensation for such year.
If the Employee was a Participant as of the end of the first day of the first
Limitation Year beginning after 1986, in one or more Defined Contribution Plans
maintained by the Employer which were in existence on May 6, 1986, the numerator
of this fraction will be adjusted if the sum of this fraction and the Defined
Benefit Fraction would otherwise exceed 1.0 under the terms of this Plan. Under
the adjustment, an amount equal to the product of (1) the excess of the sum of
the fractions over 1.0 times (2) the denominator of this fraction will be
permanently subtracted from the numerator of this fraction. The adjustment is
calculated using the fractions as they would be computed as of the end of the
last Limitation Year beginning before 1987, and disregarding any changes in the
terms and conditions of the Plan made after May 6, 1986, but using the Section
415 limitation applicable to the first Limitation Year beginning on or after
January 1, 1987. The Annual Addition for any Limitation Year beginning before
1987, shall not be re-computed to treat all Employee Contributions as Annual
Additions.
1.20 DESIGNATED BENEFICIARY The individual who is designated as the beneficiary
under the Plan in accordance with Code Section 401(a)(9) and the regulations
thereunder.
1.21 DISABILITY An illness or injury of a potentially permanent nature, expected
to last for a continuous period of not less than 12 months, certified by a
physician selected by or satisfactory to the Employer, which prevents the
Employee from engaging in any occupation for wage or profit for which the
Employee is reasonably fitted by training, education or experience.
1.22 DISTRIBUTION CALENDAR YEAR A calendar year for which a minimum distribution
is required.
1.23 EARLY RETIREMENT AGE The age set by the Employer in the Adoption Agreement
(but not less than 55), which is the earliest age at which a Participant may
retire and receive his or her benefits under the Plan.
1.24 EARNED INCOME Net earnings from self-employment in the trade or business
with respect to which the Plan is established, determined without regard to
items not included in gross income and the deductions allocable to such items,
provided that personal services of the individual are a material
income-producing factor. Earned income shall be reduced by contributions made by
an Employer to a qualified plan to the extent deductible under Code Section 404.
For tax years beginning after 1989, net earnings shall be determined taking into
account the deduction for one-half of self-employment taxes allowed to the
Employer under Code Section 164(f) to the extent deductible.
1.25 EFFECTIVE DATE The date on which the Employer's retirement plan or
amendment to such plan becomes effective. For amendments reflecting statutory
and regulatory changes post Tax Reform Act of 1986, the Effective Date will be
the earlier of the date upon which such amendment is first administratively
applied or the first day of the Plan Year following the date of adoption of such
amendment.
1.26 ELECTION PERIOD The period which begins on the first day of the Plan Year
in which the Participant attains age 35 and ends on the date of the
Participant's death. If a Participant separates from service prior to the first
day of the Plan Year in which age 35 is attained, the Election Period shall
begin on the date of separation, with respect to the account balance as of the
date of separation.
1.27 ELECTIVE DEFERRAL Employer contributions made to the Plan at the election
of the Participant, in lieu of cash Compensation. Elective Deferrals shall also
include contributions made pursuant to a Salary Savings Agreement or other
deferral mechanism, such as a cash option contribution. With respect to any
taxable year, a Participant's Elective Deferral is the sum of all Employer
contributions made on behalf of such Participant pursuant to an election to
defer under any qualified cash or deferred arrangement as described in Code
Section 401(k), any simplified employee pension cash or deferred arrangement as
described in Code Section 402(h)(1)(B), any eligible deferred compensation plan
under Code Section 457, any plan as described under Code Section 501(c)(18), and
any Employer contributions made on the behalf of a Participant for the purchase
of an annuity contract under Code Section 403(b) pursuant to a Salary Savings
Agreement. Elective Deferrals shall not include any deferrals
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properly distributed as Excess Annual Additions.
1.28 ELIGIBLE PARTICIPANT Any Employee who is eligible to make a Voluntary
Contribution, or an Elective Deferral (if the Employer takes such contributions
into account in the calculation of the Contribution Percentage), or to receive a
Matching Contribution (including forfeitures) or a Qualified Matching
Contribution. If a Voluntary Contribution or Elective Deferral is required as a
condition of participation in the Plan, any Employee who would be a Participant
in the Plan if such Employee made such a contribution shall be treated as an
Eligible Participant even though no Voluntary Contributions or Elective
Deferrals are made.
1.29 EMPLOYEE Any person employed by the Employer (including Self-Employed
Individuals and partners), all Employees of a member of an affiliated service
group [as defined in Code Section 414(m)], Employees of a controlled group of
corporations [as defined in Code Section 414(b)], all Employees of any
incorporated or unincorporated trade or business which is under common control
[as defined in Code Section 414(c)], Leased Employees [as defined in Code
Section 414(n)] and any Employee required to be aggregated by Code Section
414(o). All such Employees shall be treated as employed by a single Employer.
1.30 EMPLOYER The Self-Employed Individual, partnership, corporation or other
organization which adopts this Plan including any firm that succeeds the
Employer and adopts this Plan. For purposes of Article X, Limitations on
Allocations, Employer shall mean the Employer that adopts this Plan, and all
members of a controlled group of corporations [as defined in Code Section 414(b)
as modified by Code Section 415(h)], all commonly controlled trades or
businesses [as defined in Code Section 414(c) as modified by Code Section
415(h)] or affiliated service groups [as defined in Code Section 414(m)] of
which the adopting Employer is a part, and any other entity required to be
aggregated with the Employer pursuant to regulations under Code Section 414(o).
1.31 ENTRY DATE The date on which an Employee commences participation in the
Plan as determined by the Employer in the Adoption Agreement.
1.32 EXCESS AGGREGATE CONTRIBUTIONS The excess, with respect to any Plan Year,
of:
(a) The aggregate Contribution Percentage Amounts taken into account in
computing the numerator of the Contribution Percentage actually made
on behalf of Highly Compensated Employees for such Plan Year, over
(b) The maximum Contribution Percentage Amounts permitted by the ACP test
(determined by reducing contributions made on behalf of Highly
Compensated Employees in order of their Contribution Percentages
beginning with the highest of such percentages).
Such determination shall be made after first determining Excess Elective
Deferrals pursuant to paragraph 1.35 and then determining Excess Contributions
pursuant to paragraph 1.34.
1.33 EXCESS AMOUNT The excess of the Participant's Annual Additions for the
Limitation Year over the Maximum Permissible Amount.
1.34 EXCESS CONTRIBUTION With respect to any Plan Year, the excess of:
(a) The aggregate amount of Employer contributions actually taken into
account in computing the ADP of Highly Compensated Employees for such
Plan Year, over
(b) The maximum amount of such contributions permitted by the ADP test
(determined by reducing contributions made on behalf of Highly
Compensated Employees in order of the ADPs, beginning with the highest
of such percentages).
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1.35 EXCESS ELECTIVE DEFERRALS Those Elective Deferrals that are includible in a
Participant's gross income under Code Section 402(g) to the extent such
Participant's Elective Deferrals for a taxable year exceed the dollar limitation
under such Code Section. Excess Elective Deferrals shall be treated as Annual
Additions under the Plan, unless such amounts are distributed no later than the
first April 15th following the close of the Participant's taxable year.
1.36 FAMILY MEMBER The Employee's Spouse, any lineal descendants and ascendants
and the Spouse of such lineal descendants and ascendants.
1.37 FIRST DISTRIBUTION CALENDAR YEAR For distributions beginning before the
Participant's death, the First Distribution Calendar Year is the calendar year
immediately preceding the calendar year which contains the Participant's
Required Beginning Date. For distributions beginning after the Participant's
death, the First Distribution Calendar Year is the calendar year in which
distributions are required to begin pursuant to paragraph 7.10.
1.38 FUND All contributions received by the Trustee under this Plan and Trust,
investments thereof and earnings and appreciation thereon.
1.39 HARDSHIP An immediate and heavy financial need of the Employee where such
Employee lacks other available resources.
1.40 HIGHEST AVERAGE COMPENSATION The average Compensation for the three
consecutive Years of Service with the Employer that produces the highest
average. A Year of Service with the Employer is the 12-consecutive month period
defined in the Adoption Agreement.
1.41 HIGHLY COMPENSATED EMPLOYEE Any Employee who performs service for the
Employer during the determination year and who, during the immediate prior year:
(a) received Compensation from the Employer in excess of $75,000 [as
adjusted pursuant to Code Section 415(d)]; or
(b) received Compensation from the Employer in excess of $50,000 [as
adjusted pursuant to Code Section 415(d)] and was a member of the
Top-Paid Group for such year; or
(c) was an officer of the Employer and received Compensation during such
year that is greater than 50 percent of the dollar limitation in
effect under Code Section 415(b)(1)(A).
Notwithstanding (a), (b) and (c), an Employee who was not Highly Compensated
during the preceding Plan Year shall not be treated as a Highly Compensated
Employee with respect to the current Plan Year unless such Employee is a member
of the 100 Employees paid the greatest Compensation during the year for which
such determination is being made.
(d) Employees who are five percent (5%) Owners at any time during the
immediate prior year or determination year.
Highly Compensated Employee includes Highly Compensated active Employees and
Highly Compensated former Employees.
1.42 HOUR OF SERVICE
(a) Each hour for which an Employee is paid, or entitled to payment, for
the performance of duties for the Employer. These hours shall be
credited to the Employee for the computation period in which the
duties are performed; and
(b) Each hour for which an Employee is paid, or entitled to payment, by
the Employer on account of a period of time during which no duties are
performed (irrespective of whether the
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employment relationship has terminated) due to vacation, holiday,
illness, incapacity (including disability), layoff, jury duty,
military duty or leave of absence. No more than 501 Hours of Service
shall be credited under this paragraph for any single continuous
period (whether or not such period occurs in a single computation
period). Hours under this paragraph shall be calculated and credited
pursuant to Section 2530.200b-2 of the Department of Labor Regulations
which are incorporated herein by this reference; and
(c) Each hour for which back pay, irrespective of mitigation of damages,
is either awarded or agreed to by the Employer. The same Hours of
Service shall not be credited both under paragraph (a) or paragraph
(b), as the case may be, and under this paragraph (c). These hours
shall be credited to the Employee for the computation period or
periods to which the award or agreement pertains rather than the
computation period in which the award, agreement or payment is made.
(d) Hours of Service shall be credited for employment with the Employer
and with other members of an affiliated service group [as defined in
Code Section 414(m)], a controlled group of corporations [as defined
in Code Section 414(b)], or a group of trades or businesses under
common control [as defined in Code Section 414(c)] of which the
adopting Employer is a member, and any other entity required to be
aggregated with the Employer pursuant to Code Section 414(o) and the
regulations thereunder. Hours of Service shall also be credited for
any individual considered an Employee for purposes of this Plan under
Code Section 414(n) or Code Section 414(o) and the regulations
thereunder.
(e) Solely for purposes of determining whether a Break in Service, as
defined in paragraph 1.10, for participation and vesting purposes has
occurred in a computation period, an individual who is absent from
work for maternity or paternity reasons shall receive credit for the
Hours of Service which would otherwise have been credited to such
individual but for such absence, or in any case in which such hours
cannot be determined, 8 Hours of Service per day of such absence. For
purposes of this paragraph, an absence from work for maternity or
paternity reasons means an absence by reason of the pregnancy of the
individual, by reason of a birth of a child of the individual, by
reason of the placement of a child with the individual in connection
with the adoption of such child by such individual, or for purposes of
caring for such child for a period beginning immediately following
such birth or placement. The Hours of Service credited under this
paragraph shall be credited in the computation period in which the
absence begins if the crediting is necessary to prevent a Break in
Service in that period, or in all other cases, in the following
computation period. No more than 501 hours will be credited under this
paragraph.
(f) Hours of Service shall be determined on the basis of the method
selected in the Adoption Agreement.
1.43 KEY EMPLOYEE Any Employee or former Employee (and the beneficiaries of such
employee) who at any time during the determination period was an officer of the
Employer if such individual's annual compensation exceeds 50% of the dollar
limitation under Code Section 415(b)(1)(A) (the defined benefit maximum annual
benefit), an owner (or considered an owner under Code Section 318) of one of the
ten largest interests in the employer if such individual's compensation exceeds
100% of the dollar limitation under Code Section 415(c)(1)(A), a 5% owner of the
Employer, or a 1% owner of the Employer who has an annual compensation of more
than $150,000. For purposes of determining who is a Key Employee, annual
compensation shall mean Compensation as defined for Article X, but including
amounts deferred through a salary reduction agreement to a cash or deferred plan
under Code Section 401(k), a Simplified Employee Pension Plan under Code Section
408(k), a cafeteria plan under Code Section 125 or a tax-deferred annuity under
Code Section 403(b). The determination period is the Plan Year containing the
Determination Date and the four preceding Plan Years. The determination of who
is a Key Employee will be made in accordance with Code Section 416(i)(1) and the
regulations thereunder.
1.44 LEASED EMPLOYEE Any person (other than an Employee of the recipient) who,
pursuant to an agreement between
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the recipient and any other person ("leasing organization"), has performed
services for the recipient [or for the recipient and re lated persons determined
in accordance with Code Section 414(n)(6)] on a substantially full-time basis
for a period of at least one year, and such services are of a type historically
performed by Employees in the business field of the recipient Employer.
1.45 LIMITATION YEAR The calendar year or such other 12-consecutive month period
designated by the Employer in the Adoption Agreement for purposes of determining
the maximum Annual Addition to a Participant's account. All qualified plans
maintained by the Employer must use the same Limitation Year. If the Limitation
Year is amended to a different 12- consecutive month period, the new Limitation
Year must begin on a date within the Limitation Year in which the amendment is
made.
1.46 MASTER OR PROTOTYPE PLAN A plan, the form of which is the subject of a
favorable opinion letter from the Internal Revenue Service.
1.47 MATCHING CONTRIBUTION An Employer contribution made to this or any other
defined contribution plan on behalf of a Participant on account of an Employee
Voluntary Contribution made by such Participant, or on account of a
Participant's Elective Deferral, under a Plan maintained by the Employer.
1.48 MAXIMUM PERMISSIBLE AMOUNT The maximum Annual Addition that may be
contributed or allocated to a Participant's account under the plan for any
Limitation Year shall not exceed the lesser of:
(a) the Defined Contribution Dollar Limitation, or
(b) 25% of the Participant's Compensation for the Limitation Year.
The compensation limitation referred to in (b) shall not apply to any
contribution for medical benefits [within the meaning of Code Section 401(h) or
Code Section 419A(f)(2)] which is otherwise treated as an Annual Addition under
Code Section 415(l)(1) or 419(d)(2). If a short Limitation Year is created
because of an amendment changing the Limitation Year to a different 12-
consecutive month period, the Maximum Permissible Amount will not exceed the
Defined Contribution Dollar Limitation multiplied by the following fraction:
Number of months in the short Limitation Year divided by 12.
1.49 NET PROFIT The current and accumulated operating earnings of the Employer
before Federal and State income taxes, excluding nonrecurring or unusual items
of income, and before contributions to this and any other qualified plan of the
Employer. Alternatively, the Employer may fix another definition in the Adoption
Agreement.
1.50 NORMAL RETIREMENT AGE The age, set by the Employer in the Adoption
Agreement, at which a Participant may retire and receive his or her benefits
under the Plan.
1.51 OWNER-EMPLOYEE A sole proprietor, or a partner owning more than 10% of
either the capital or profits interest of the partnership.
1.52 PAIRED PLANS Two or more Plans maintained by the Sponsor designed so that a
single or any combination of Plans adopted by an Employer will meet the
antidiscrimination rules, the contribution and benefit limitations, and the
Top-Heavy provi sions of the Code.
1.53 PARTICIPANT Any Employee who has met the eligibility requirements and is
participating in the Plan.
1.54 PARTICIPANT'S BENEFIT The account balance as of the last Valuation Date in
the calendar year immediately preceding the Distribution Calendar Year
(valuation calendar year) increased by the amount of any contributions or
forfeitures allocated to the account balance as of the dates in the valuation
calendar year after the Valuation Date and decreased by distributions made in
the valuation calendar year after the Valuation Date. A special exception exists
for the second distribution Calendar Year. For purposes of this paragraph, if
any portion of the minimum distribution for the First Distribution Calendar Year
is made in the second Distribution Calendar Year on or before the Required
Beginning Date, the amount of the minimum
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distribution made in the second distribution calendar year shall be treated as
if it had been made in the immediately preceding Distribution Calendar Year.
1.55 PERMISSIVE AGGREGATION GROUP Used for Top-Heavy testing purposes, it is the
Required Aggregation Group of plans plus any other plan or plans of the Employer
which, when considered as a group with the Required Aggregation Group, would
continue to satisfy the requirements of Code Sections 401(a)(4) and 410.
1.56 PLAN The Employer's retirement plan as embodied herein and in the Adoption
Agreement.
1.57 PLAN ADMINISTRATOR The Employer.
1.58 PLAN YEAR The 12-consecutive month period designated by the Employer in the
Adoption Agreement.
1.59 PRESENT VALUE Used for Top-Heavy test and determination purposes, when
determining the Present Value of accrued benefits, with respect to any Defined
Benefit Plan maintained by the Employer, interest and mortality rates shall be
determined in accordance with the provisions of the respective plan. If
applicable, interest and mortality assumptions will be specified in Section 11
of the Adoption Agreement.
1.60 PROJECTED ANNUAL BENEFIT Used to test the maximum benefit which may be
obtained from a combination of retirement plans, it is the annual retirement
benefit (adjusted to an actuarial equivalent straight life annuity if such
benefit is expressed in a form other than a straight life annuity or Qualified
Joint and Survivor Annuity) to which the Participant would be entitled under the
terms of a Defined Benefit Plan or plans, assuming:
(a) the Participant will continue employment until Normal Retirement Age
under the plan (or current age, if later), and
(b) the Participant's Compensation for the current Limitation Year and all
other relevant factors used to determine benefits under the plan will
remain constant for all future Limitation Years.
1.61 QUALIFIED DEFERRED COMPENSATION PLAN Any pension, profit-sharing, stock
bonus, or other plan which meets the requirements of Code Section 401 and
includes a trust exempt from tax under Code Section 501(a) or any annuity plan
described in Code Section 403(a).
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An Eligible Retirement Plan is an individual retirement account (IRA) as
described in Code Section 408(a), an individual retirement annuity (IRA) as
described in Code Section 408(b), an annuity plan as described in Code Section
403(a), or a qualified trust as described in Code Section 401(a), which accepts
Eligible Rollover Distributions. However in the case of an Eligible Rollover
Distribution to a Surviving Spouse, an Eligible Retirement Plan is an individual
retirement account or individual retirement annuity.
1.62 QUALIFIED DOMESTIC RELATIONS ORDER A QDRO is a signed Domestic Relations
Order issued by a State Court which creates, recognizes or assigns to an
alternate payee(s) the right to receive all or part of a Participant's Plan
benefit and which meets the requirements of Code Section 414(p). An alternate
payee is a Spouse, former Spouse, child, or other dependent who is treated as a
beneficiary under the Plan as a result of the QDRO.
1.63 QUALIFIED EARLY RETIREMENT AGE For purposes of paragraph 8.9, Qualified
Early Retirement Age is the latest of:
(a) the earliest date, under the Plan, on which the Participant may elect
to receive retirement benefits, or
(b) the first day of the 120th month beginning before the Participant
reaches Normal Retirement Age, or
(c) the date the Participant begins participation.
1.64 QUALIFIED JOINT AND SURVIVOR ANNUITY An immediate annuity for the life of
the Participant with a survivor annuity for the life of the Participant's Spouse
which is at least one-half of but not more than the amount of the annuity
payable during the joint lives of the Participant and the Participant's Spouse.
The exact amount of the Survivor Annuity is to be specified by the Employer in
the Adoption Agreement. If not designated by the Employer, the Survivor Annuity
will be 1/2 of the amount paid to the Participant during his or her lifetime.
The Qualified Joint and Survivor Annuity will be the amount of benefit which can
be provided by the Participant's Vested Account Balance.
1.65 QUALIFIED MATCHING CONTRIBUTION Matching Contributions which when made are
subject to the distribution and nonforfeitability requirements under Code
Section 401(k).
1.66 QUALIFIED NON-ELECTIVE CONTRIBUTIONS Contributions (other than Matching
Contributions or Qualified Matching Contributions) made by the Employer and
allocated to Participants' accounts that the Participants may not elect to
receive in cash until distributed from the Plan; that are nonforfeitable when
made; and that are distributable only in accordance with the distribution
provisions that are applicable to Elective Deferrals and Qualified Matching
Contributions.
1.67 QUALIFIED VOLUNTARY CONTRIBUTION A tax-deductible voluntary Employee
contribution. These contributions may no longer be made to the Plan.
1.68 REQUIRED AGGREGATION GROUP Used for Top-Heavy testing purposes, it consists
of:
(a) each qualified plan of the Employer in which at least one Key Employee
participates or participated at any time during the determination
period (regardless of whether the plan has terminated), and
(b) any other qualified plan of the Employer which enables a plan
described in (a) to meet the requirements of Code Sections 401(a)(4)
or 410.
1.69 REQUIRED BEGINNING DATE The date on which a Participant is required to take
his or her first minimum distribution under the Plan. The rules are set forth at
paragraph 7.5.
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1.70 ROLLOVER CONTRIBUTION A contribution made by a Participant of an amount
distributed to such Participant from another Qualified Deferred Compensation
Plan in accordance with Code Sections 402(a)(5), (6), and (7).
An Eligible Rollover Distribution is any distribution of all or any portion of
the balance to the credit of the Participant except that an Eligible Rollover
Distribution does not include:
(a) any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the
life (or life expectancy) of the Participant or the joint lives (or
joint life expectancies) of the Participant and the Participant's
Designated Beneficiary, or for a specified period of ten years or
more;
(b) any distribution to the extent such distribution is required under
Code Section 401(a)(9); and
(c) the portion of any distribution that is not includible in gross income
(determined without regard to the exclusion for net unrealized
appreciation with respect to Employer securities).
A Direct Rollover is a payment by the plan to the Eligible Retirement Plan
specified by the Participant.
1.71 SALARY SAVINGS AGREEMENT An agreement between the Employer and a
participating Employee where the Employee authorizes the Employer to withhold a
specified percentage of his or her Compensation for deposit to the Plan on
behalf of such Employee.
1.72 SELF-EMPLOYED INDIVIDUAL An individual who has Earned Income for the
taxable year from the trade or business for which the Plan is established
including an individual who would have had Earned Income but for the fact that
the trade or business had no Net Profit for the taxable year.
1.73 SERVICE The period of current or prior employment with the Employer. If the
Employer maintains a plan of a predecessor employer, Service for such
predecessor shall be treated as Service for the Employer.
1.74 SHAREHOLDER EMPLOYEE An Employee or Officer who owns [or is considered as
owning within the meaning of Code Section 318(a)(1)], on any day during the
taxable year of an electing small business corporation (S Corporation), more
than 5% of such corporation's outstanding stock.
1.75 SIMPLIFIED EMPLOYEE PENSION PLAN An individual retirement account which
meets the requirements of Code Section 408(k), and to which the Employer makes
contributions pursuant to a written formula. These plans are considered for
contribution limitation and Top-Heavy testing purposes.
1.76 SPONSOR SAFECO Securities, Inc., or any successor(s) or assign(s).
1.77 SPOUSE (SURVIVING SPOUSE) The Spouse or Surviving Spouse of the
Participant, provided that a former Spouse will be treated as the Spouse or
Surviving Spouse and a current Spouse will not be treated as the Spouse or
Surviving Spouse to the extent provided under a Qualified Domestic Relations
Order as described in Code Section 414(p).
1.78 SUPER TOP-HEAVY PLAN A Plan described at paragraph 1.81 under which the
Top-Heavy Ratio [as defined at paragraph 1.82] exceeds 90%.
1.79 TAXABLE WAGE BASE For plans with an allocation formula which takes into
account the Employer's contribution under the Federal Insurance Contributions
Act (FICA), the maximum amount of earnings which may be considered wages for
such Plan Year under the Social Security Act [Code Section 3121(a)(1)], or the
amount elected by the Employer in the Adoption Agreement.
1.80 TOP-HEAVY DETERMINATION DATE For any Plan Year subsequent to the first Plan
Year, the last day of the preceding
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Plan Year. For the first Plan Year of the Plan, the last day of that year.
1.81 TOP-HEAVY PLAN For any Plan Year beginning after 1983, the Employer's Plan
is top-heavy if any of the following conditions exist:
(a) If the Top-Heavy Ratio for the Employer's Plan exceeds 60% and this
Plan is not part of any required Aggregation Group or Permissive
Aggregation Group of Plans.
(b) If the Employer's plan is a part of a Required Aggregation Group of
plans but not part of a Permissive Aggregation Group and the Top-Heavy
Ratio for the group of plans exceeds 60%.
(c) If the Employer's plan is a part of a Required Aggregation Group and
part of a Permissive Aggregation Group of plans and the Top-Heavy
Ratio for the Permissive Aggregation Group exceeds 60%.
1.82 TOP-HEAVY RATIO
(a) If the Employer maintains one or more Defined Contribution plans
(including any Simplified Employee Pension Plan) and the Employer has
not maintained any Defined Benefit Plan which during the 5-year period
ending on the Determination Date(s) has or has had accrued benefits,
the Top-Heavy Ratio for this Plan alone, or for the Required or
Permissive Aggregation Group as appropriate, is a fraction,
(1) the numerator of which is the sum of the account balances of all
Key Employees as of the Determination Date(s) [including any part
of any account balance distributed in the 5-year period ending on
the Determination Date(s)], and
(2) the denominator of which is the sum of all account balances
[including any part of any account balance distributed in the
5-year period ending on the Determination Date(s)], both computed
in accordance with Code Section 416 and the regulations
thereunder.
Both the numerator and denominator of the Top-Heavy Ratio are
increased to reflect any contribution not actually made as of the
Determination Date, but which is required to be taken into account on
that date under Code Section 416 and the regulations thereunder.
(b) If the Employer maintains one or more Defined Contribution Plans
(including any Simplified Employee Pension Plan) and the Employer
maintains or has maintained one or more Defined Benefit Plans which
during the 5-year period ending on the Determination Date(s) has or
has had any accrued benefits, the Top-Heavy Ratio for any Required or
Permissive Aggregation Group as appropriate is a fraction, the
numerator of which is the sum of account balances under the aggregated
Defined Contribution Plan or Plans for all Key Employees, determined
in accordance with (a) above, and the Present Value of accrued
benefits under the aggregated Defined Benefit Plan or Plans for all
Key Employees as of the Determination Date(s), and the denominator of
which is the sum of the account balances under the aggregated Defined
Contribution Plan or Plans for all Participants, determined in
accordance with (a) above, and the Present Value of accrued benefits
under the Defined Benefit Plan or Plans for all Participants as of the
Determination Date(s), all determined in accordance with Code Section
416 and the regulations thereunder. The accrued benefits under a
Defined Benefit Plan in both the numerator and denominator of the
Top-Heavy Ratio are increased for any distribution of an accrued
benefit made in the 5-year period ending on the Determination Date.
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(c) For purposes of (a) and (b) above, the value of account balances and
the Present Value of accrued benefits will be determined as of the
most recent Valuation Date that falls within or ends with the 12-month
period ending on the Determination Date, except as provided in Code
Section 416 and the regulations thereunder for the first and second
plan years of a Defined Benefit Plan. The account balances and accrued
benefits of a participant (1) who is not a Key Employee but who was a
Key Employee in a prior year, or (2) who has not been credited with at
least one hour of service with any Employer maintaining the Plan at
any time during the 5-year period ending on the Determination Date,
will be disregarded. The calculation of the Top-Heavy Ratio, and the
extent to which distributions, rollovers, and transfers are taken into
account will be made in accordance with Code Section 416 and the
regulations thereunder. Qualified Voluntary Employee Contributions
will not be taken into account for purposes of computing the Top-Heavy
Ratio. When aggregating plans the value of account balances and
accrued benefits will be calculated with reference to the
Determination Dates that fall within the same calendar year. The
accrued benefit of a Participant other than a Key Employee shall be
determined under (1) the method, if any, that uniformly applies for
accrual purposes under all Defined Benefit Plans maintained by the
Employer, or (2) if there is no such method, as if such benefit
accrued not more rapidly than the slowest accrual rate permitted under
the fractional rule of Code Section 411(b)(1)(C).
1.83 TOP-PAID GROUP The group consisting of the top 20% of Employees when ranked
on the basis of Compensation paid during such year. For purposes of determining
the number of Employees in the group (but not who is in it), the following
Employees shall be excluded:
(a) Employees who have not completed 6 months of Service.
(b) Employees who normally work less than 17-1/2 hours per week.
(c) Employees who normally do not work more than 6 months during any year.
(d) Employees who have not attained age 21.
(e) Employees included in a collective bargaining unit, covered by an
agreement between employee representatives and the Employer, where
retirement benefits were the subject of good faith bargaining and
provided that 90% or more of the Employer's Employees are covered by
the agreement.
(f) Employees who are nonresident aliens and who receive no earned income
which constitutes income from sources within the United States.
1.84 TRANSFER CONTRIBUTION A non-taxable transfer of a Participant's benefit
directly from a Qualified Deferred Compensation Plan to this Plan.
1.85 TRUSTEE The individual(s) or institution appointed by the Employer to
invest the Fund.
1.86 VALUATION DATE The last day of the Plan Year or such other date as agreed
to by the Employer and the Trustee on which Participant accounts are revalued in
accordance with Article V hereof. For Top-Heavy purposes, the date selected by
the Employer as of which the Top-Heavy Ratio is calculated.
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1.87 VESTED ACCOUNT BALANCE The aggregate value of the Participant's Vested
Account Balances derived from Employer and Employee contributions (including
Rollovers), whether vested before or upon death, including the proceeds of
insurance contracts, if any, on the Participant's life. The provisions of
Article VIII shall apply to a Participant who is vested in amounts attributable
to Employer contributions, Employee contributions (or both) at the time of death
or distribution.
1.88 VOLUNTARY CONTRIBUTION An Employee contribution made to the Plan by or on
behalf of a Participant that is included in the Participant's gross income in
the year in which made and that is maintained under a separate account to which
earnings and losses are allocated.
1.89 WELFARE BENEFIT FUND Any fund that is part of a plan of the Employer, or
has the effect of a plan, through which the Employer provides welfare benefits
to Employees or their beneficiaries. For these purposes, Welfare Benefits means
any benefit other than those with respect to which Code Section 83(h) (relating
to transfers of property in connection with the performance of services), Code
Section 404 (relating to deductions for contributions to an Employee's trust or
annuity and Compensation under a deferred payment plan), Code Section 404A
(relating to certain foreign deferred compensation plans) apply. A "Fund" is any
social club, voluntary employee benefit association, supplemental unemployment
benefit trust or qualified group legal service organization described in Code
Section 501(c)(7), (9), (17) or (20); any trust, corporation, or other
organization not exempt from income tax, or to the extent provided in
regulations, any account held for an Employer by any person.
1.90 YEAR OF SERVICE A 12-consecutive month period during which an Employee is
credited with not less than 1,000 (or such lesser number as specified by the
Employer in the Adoption Agreement) Hours of Service.
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ARTICLE II
ELIGIBILITY REQUIREMENTS
2.1 PARTICIPATION Employees who meet the eligibility requirements in the
Adoption Agreement on the Effective Date of the Plan shall become Participants
as of the Effective Date of the Plan. If so elected in the Adoption Agreement,
all Employees employed on the Effective Date of the Plan may participate, even
if they have not satisfied the Plan's specified eligibility requirements. Other
Employees shall become Participants on the Entry Date coinciding with or
immediately following the date on which they meet the eligibility requirements.
The Employee must satisfy the eligibility requirements specified in the Adoption
Agreement and be employed on the Entry Date to become a Participant in the Plan.
In the event an Employee who is not a member of the eligible class of Employees
becomes a member of the eligible class, such Employee shall participate
immediately if such Employee has satisfied the minimum age and service
requirements and would have previously become a Participant had he or she been
in the eligible class. A former Participant shall again become a Participant
upon returning to the employ of the Employer at the next Entry Date or if
earlier, the next Valuation Date. For this purpose, Participant's Compensation
and Service shall be considered from date of rehire.
2.2 CHANGE IN CLASSIFICATION OF EMPLOYMENT In the event a Participant becomes
ineligible to participate because he or she is no longer a member of an eligible
class of Employees, such Employee shall participate upon his or her return to an
eligible class of Employees.
2.3 COMPUTATION PERIOD To determine Years of Service and Breaks in Service for
purposes of eligibility, the 12-consecutive month period shall commence on the
date on which an Employee first performs an Hour of Service for the Employer and
each anniversary thereof, such that the succeeding 12-consecutive month period
commences with the employee's first anniversary of employment and so on. If,
however, the period so specified is one year or less, the succeeding
12-consecutive month period shall commence on the first day of the Plan Year
prior to the anniversary of the date they first performed an Hour of Service
regardless of whether the Employee is entitled to be credited with 1,000 (or
such lesser number as specified by the Employer in the Adoption Agreement) Hours
of Service during their first employment year.
2.4 EMPLOYMENT RIGHTS Participation in the Plan shall not confer upon a
Participant any employment rights, nor shall it interfere with the Employer's
right to terminate the employment of any Employee at any time.
2.5 SERVICE WITH CONTROLLED GROUPS All Years of Service with other members of a
controlled group of corporations [as defined in Code Section 414(b)], trades or
businesses under common control [as defined in Code Section 414(c)], or members
of an affiliated service group [as defined in Code Section 414(m)] shall be
credited for purposes of determining an Employee's eligibility to participate.
2.6 OWNER-EMPLOYEES If this Plan provides contributions or benefits for one or
more Owner-Employees who control both the business for which this Plan is
established and one or more other trades or businesses, this Plan and the Plan
established for other trades or businesses must, when looked at as a single
Plan, satisfy Code Sections 401(a) and (d) for the Employees of this and all
other trades or businesses.
If the Plan provides contributions or benefits for one or more Owner-Employees
who control one or more other trades or businesses, the Employees of the other
trades or businesses must be included in a Plan which satisfies Code Sections
401(a) and (d) and which provides contributions and benefits not less favorable
than provided for Owner-Employees under this Plan.
If an individual is covered as an Owner-Employee under the plans of two or more
trades or businesses which are not controlled, and the individual controls a
trade or business, then the contributions or benefits of the Employees under the
plan of the trades or businesses which are controlled must be as favorable as
those provided for him or her under the most favorable plan of the trade or
business which is not controlled.
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For purposes of the preceding sentences, an Owner-Employee, or two or more
Owner-Employees, will be considered to control a trade or business if the
Owner-Employee, or two or more Owner-Employees together:
(a) own the entire interest in an unincorporated trade or business, or
(b) in the case of a partnership, own more than 50% of either the capital
interest or the profits interest in the partnership.
For purposes of the preceding sentence, an Owner-Employee, or two or more
Owner-Employees shall be treated as owning any interest in a partnership which
is owned, directly or indirectly, by a partnership which such Owner-Employee, or
such two or more Owner-Employees, are considered to control within the meaning
of the preceding sentence.
2.7 LEASED EMPLOYEES Any Leased Employee shall be treated as an Employee of the
recipient Employer; however, contributions or benefits provided by the leasing
organization which are attributable to services performed for the recipient
Employer shall be treated as provided by the recipient Employer. A Leased
Employee shall not be considered an Employee of the recipient if such Employee
is covered by a money purchase pension plan providing:
(a) a non-integrated Employer contribution rate of at least 10% of
Compensation, [as defined in Code Section 415(c)(3) but including
amounts contributed by the Employer pursuant to a salary reduction
agreement, which are excludable from the Employee's gross income under
a cafeteria plan covered by Code Section 125, a cash or deferred
profit-sharing plan under Section 401(k) of the Code, a Simplified
Employee Pension Plan under Code Section 402(h)(1)(B ) and a
tax-sheltered annuity under Code Section 403(b)],
(b) immediate participation, and
(c) full and immediate vesting.
This exclusion is only available if Leased Employees do not constitute more than
twenty percent (20%) of the recipient's non- highly compensated work force.
2.8 THRIFT PLANS If the Employer makes an election in the Adoption Agreement to
require Voluntary Contributions to participate in this Plan, the Employer shall
notify each eligible Employee in writing of his or her eligibility for
participation at least 30 days prior to the appropriate Entry Date. The Employee
shall indicate his or her intention to join the Plan by authorizing the Employer
to withhold a percentage of his or her Compensation as provided in the Plan.
Such authorization shall be returned to the Employer at least 10 days prior to
the Employee's Entry Date. The Employee may decline participation by so
indicating on the enrollment form or by failure to return the enrollment form to
the Employer prior to the Employee's Entry Date. If the Employee declines to
participate, such Employee shall be given the opportunity to join the Plan on
the next Entry Date. The taking of a Hardship Withdrawal under the provisions of
paragraph 6.9 will impact the Participant's ability to make these contributions.
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ARTICLE III
EMPLOYER CONTRIBUTIONS
3.1 AMOUNT The Employer intends to make periodic contributions to the Plan in
accordance with the formula or formulas selected in the Adoption Agreement.
However, the Employer's contribution for any Plan Year shall be subject to the
limitations on allocations contained in Article X.
3.2 EXPENSES AND FEES The Employer shall also be authorized to reimburse the
Fund for all expenses and fees incurred in the administration of the Plan or
Trust and paid out of the assets of the Fund. Such expenses shall include, but
shall not be limited to, fees for professional services, printing and postage.
Brokerage commissions may not be reimbursed.
3.3 RESPONSIBILITY FOR CONTRIBUTIONS Neither the Trustee nor the Sponsor shall
be required to determine if the Employer has made a contribution or if the
amount contributed is in accordance with the Adoption Agreement or the Code. The
Employer shall have sole responsibility in this regard. The Trustee shall be
accountable solely for contributions actually received by it, within the limits
of Article XI.
3.4 RETURN OF CONTRIBUTIONS Contributions made to the Fund by the Employer shall
be irrevocable except as provided below:
(a) Any contribution forwarded to the Trustee because of a mistake of fact,
provided that the contribution is returned to the Employer within one
year of the contribution.
(b) In the event that the Commissioner of Internal Revenue determines that
the Plan is not initially qualified under the Internal Revenue Code,
any contribution made incident to that initial qualification by the
Employer must be returned to the Employer within one year after the
date the initial qualification is denied, but only if the application
for the qualification is made by the time prescribed by law for filing
the Employer's return for the taxable year in which the Plan is
adopted, or such later date as the Secretary of the Treasury may
prescribe.
(c) Contributions forwarded to the Trustee are presumed to be deductible
and are conditioned on their deductibility. Contributions which are
determined to not be deductible will be returned to the Employer.
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ARTICLE IV
EMPLOYEE CONTRIBUTIONS
4.1 VOLUNTARY CONTRIBUTIONS An Employee may make Voluntary Contributions to the
Plan established hereunder if so authorized by the Employer in a uniform and
nondiscriminatory manner. Such contributions are subject to the limitations on
Annual Additions and are subject to antidiscrimination testing.
4.2 QUALIFIED VOLUNTARY CONTRIBUTIONS A Participant may no longer make Qualified
Voluntary Contributions to the Plan. Amounts already contributed may remain in
the Trust Fund until distributed to the Participant. Such amounts will be
maintained in a separate account which will be nonforfeitable at all times. The
account will share in the gains and losses of the Trust in the same manner as
described at paragraph 5.4 of the Plan. No part of the Qualified Voluntary
Contribution account will be used to purchase life insurance. Subject to Article
VIII, Joint and Survivor Annuity Requirements (if applicable), the Participant
may withdraw any part of the Qualified Voluntary Contribution account by making
a written application to the Plan Administrator.
4.3 ROLLOVER CONTRIBUTION Unless provided otherwise in the Adoption Agreement, a
Participant may make a Rollover Contribution to any Defined Contribution Plan
established hereunder of all or any part of an amount distributed or
distributable to him or her from a Qualified Deferred Compensation Plan
provided:
(a) the amount distributed to the Participant is deposited to the Plan no
later than the sixtieth day after such distribution was received by the
Participant,
(b) the amount distributed is not one of a series of substantially equal
periodic payments made for the life (or life expectancy) of the
Participant or the joint lives (or joint life expectancies) of the
Participant and the Participant's Designated Beneficiary, or for a
specified period of ten years or more;
(c) the amount distributed is not required under Code Section 401(a)(9);
(d) if the amount distributed included property such property is rolled
over, or if sold the proceeds of such property may be rolled over,
(e) the amount distributed is not includible in gross income (determined
without regard to the exclusion for net unrealized appreciation with
respect to employer securities).
In addition, if the Adoption Agreement allows Rollover Contributions, the Plan
will also accept any Eligible Rollover Distribution (as defined at paragraph
1.70) directly to the Plan.
Rollover Contributions, which relate to distributions prior to January 1, 1993,
must be made in accordance with paragraphs (a) through (e) and additionally meet
the requirements of paragraph (f):
(f) The distribution from the Qualified Deferred Compensation Plan
constituted the Participant's entire interest in such Plan and was
distributed within one taxable year to the Participant:
(1) on account of separation from Service, a Plan termination, or in
the case of a profit-sharing or stock bonus plan, a complete
discontinuance of contributions under such plan within the meaning
of Code Section 402(a)(6)(A), or
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(2) in one or more distributions which constitute a qualified lump sum
distribution within the meaning of Code Section 402(e)(4)(A),
determined without reference to subparagraphs (B) and (H).
Such Rollover Contribution may also be made through an individual retirement
account qualified under Code Section 408 where the IRA was used as a conduit
from the Qualified Deferred Compensation Plan, the Rollover Contribution is made
in accordance with the rules provided under paragraphs (a) through (e) and the
Rollover Contribution does not include any regular IRA contributions, or
earnings thereon, which the Participant may have made to the IRA. Rollover
Contributions, which relate to distributions prior to January 1, 1993, may be
made through an IRA in accordance with paragraphs (a) through (f) and additional
requirements as provided in the previous sentence. The Trustee shall not be held
responsible for determining the tax-free status of any Rollover Contribution
made under this Plan.
4.4 TRANSFER CONTRIBUTION Unless provided otherwise in the Adoption Agreement a
Participant may, subject to the provisions of paragraph 4.5, also arrange for
the direct transfer of his or her benefit from a Qualified Deferred Compensation
Plan to this Plan. For accounting and record keeping purposes, Transfer
Contributions shall be treated in the same manner as Rollover Contributions.
In the event the Employer accepts a Transfer Contribution from a Plan in which
the Employee was directing the investments of his or her account, the Employer
may continue to permit the Employee to direct his or her investments in
accordance with paragraph 13.7 with respect only to such Transfer Contribution.
Notwithstanding the above, the Employer may refuse to accept such Transfer
Contributions.
4.5 EMPLOYER APPROVAL OF TRANSFER CONTRIBUTIONS The Employer maintaining a
Safe-Harbor Profit-Sharing Plan in accordance with the provisions of paragraph
8.7, acting in a nondiscriminatory manner, may in its sole discretion refuse to
allow Transfer Contributions to its profit-sharing plan, if such contributions
are directly or indirectly being transferred from a defined benefit plan, a
money purchase pension plan (including a target benefit plan), a stock bonus
plan, or another profit-sharing plan which would otherwise provide for a life
annuity form of payment to the Participant.
4.6 ELECTIVE DEFERRALS A Participant may enter into a Salary Savings Agreement
with the Employer authorizing the Employer to withhold a portion of such
Participant's Compensation not to exceed $7,000 per calendar year as adjusted
under Code Section 415(d) or, if lesser, the percentage of Compensation
specified in the Adoption Agreement and to deposit such amount to the Plan. No
Participant shall be permitted to have Elective Deferrals made under this Plan
or any other qualified plan maintained by the Employer, during any taxable year,
in excess of the dollar limitation contained in Code Section 402(g) in effect at
the beginning of such taxable year. Thus, the $7,000 limit may be reduced if a
Participant contributes pre-tax contributions to qualified plans of this or
other Employers. Any such contribution shall be credited to the Employee's
Salary Savings Account. Unless otherwise specified in the Adoption Agreement, a
Participant may amend his or her Salary Savings Agreement to increase, decrease
or terminate the percentage upon 30 days written notice to the Employer. If a
Participant terminates his or her agreement, such Participant shall not be
permitted to put a new Salary Savings Agreement into effect until the first pay
period in the next Plan Year, unless otherwise stated in the Adoption Agreement.
The Employer may also amend or terminate said agreement on written notice to the
Participant. If a Participant has not authorized the Employer to withhold at the
maximum rate and desires to increase the total withheld for a Plan Year, such
Participant may authorize the Employer upon 30 days notice to withhold a
supplemental amount up to 100% of his or her Compensation for one or more pay
periods. In no event may the sum of the amounts withheld under the Salary
Savings Agreement plus the supplemental withholding exceed 25% of a
Participant's Compensation for a Plan Year. The Employer may also recharacterize
as after-tax Voluntary Contributions all or any portion of amounts previously
withheld under any Salary Savings Agreement within the Plan Year as provided for
at paragraph 10.9. This may be done to insure that the Plan will meet one of the
antidiscrimination tests under Code Section 401(k). Elective Deferrals shall be
deposited in the Trust within 30 days after being withheld from the
Participant's pay.
4.7 REQUIRED VOLUNTARY CONTRIBUTIONS If the Employer makes a thrift election in
the Adoption Agreement, each eligible Participant shall be required to make
Voluntary Contributions to the Plan for credit to his or her account as provided
in the Adoption Agreement. Such Voluntary Contributions shall be withheld from
the Employee's Compensation and shall be
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transmitted by the Employer to the Trustee as agreed between the Employer and
Trustee. A Participant may discontinue participation or change his or her
Voluntary Contribution percentage by so advising the Employer at least 10 days
prior to the date on which such discontinuance or change is to be effective. If
a Participant discontinues his or her Voluntary Contributions, such Participant
may not again authorize Voluntary Contributions for a period of one year from
the date of discontinuance. A Participant may voluntarily change his or her
Voluntary Contribution percentage once during any Plan Year and may also agree
to have a reduction in his or her contribution, if required to satisfy the
requirements of the ACP test.
4.8 DIRECT ROLLOVER OF BENEFITS Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a Participant's election under this
paragraph, for distributions made on or after January 1, 1993, a Participant may
elect, at the time and in the manner prescribed by the Plan Administrator, to
have any portion of an Eligible Rollover Distribution paid directly to an
Eligible Retirement Plan specified by the Participant in a Direct Rollover. Any
portion of a distribution which is not paid directly to an Eligible Retirement
Plan shall be distributed to the Participant. For purposes of this paragraph, a
Surviving Spouse or a Spouse or former Spouse who is an alternate payee under a
Qualified Domestic Relations Order as defined in Code Section 414(p), will be
permitted to elect to have any Eligible Rollover Distribution paid directly to
an individual retirement account (IRA) or an individual retirement annuity
(IRA).
The plan provisions otherwise applicable to distributions continue to apply to
Rollover and Transfer Contributions.
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ARTICLE V
PARTICIPANT ACCOUNTS
5.1 SEPARATE ACCOUNTS The Employer shall establish a separate bookkeeping
account for each Participant showing the total value of his or her interest in
the Fund. Each Participant's account shall be separated for bookkeeping purposes
into the following sub-accounts:
(a) Employer contributions.
(1) Matching Contributions.
(2) Qualified Matching Contributions.
(3) Qualified Non-Elective Contributions.
(4) Discretionary Contributions.
(5) Elective Deferrals.
(b) Voluntary Contributions (and additional amounts including required
contributions and, if applicable, either repayments of loans previously
defaulted on and treated as "deemed distribu tions" on which a tax
report has been issued, and amounts paid out upon a separation from
service which have been included in income and which are repaid after
being re-hired by the Employer).
(c) Qualified Voluntary Contributions (if the Plan previously accepted
these).
(d) Rollover Contributions and Transfer Contributions.
5.2 ADJUSTMENTS TO PARTICIPANT ACCOUNTS As of each Valuation Date of the Plan,
the Employer shall add to each account:
(a) the Participant's share of the Employer's contribution and forfeitures
as determined in the Adoption Agreement,
(b) any Elective Deferrals, Voluntary, Rollover or Transfer Contributions
made by the Participant,
(c) any repayment of amounts previously paid out to a Participant upon a
separation from Service and repaid by the Participant since the last
Valuation Date, and
(d) the Participant's proportionate share of any investment earnings and
increase in the fair market value of the Fund since the last Valuation
Date, as determined at paragraph 5.4.
The Employer shall deduct from each account:
(e) any withdrawals or payments made from the Participant's account since
the last Valuation Date, and
(f) the Participant's proportionate share of any decrease in the fair
market value of the Fund since the last Valuation Date, as determined
at paragraph 5.4.
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5.3 ALLOCATING EMPLOYER CONTRIBUTIONS The Employer's contribution shall be
allocated to Participants in accordance with the allocation formula selected by
the Employer in the Adoption Agreement, and the minimum contribution and
allocation requirements for Top-Heavy Plans. Beginning with the 1990 Plan Year
and thereafter, for plans on Standardized Adoption Agreement 001, Participants
who are credited with more than 500 Hours of Service or are employed on the last
day of the Plan Year must receive a full allocation of Employer contributions.
In Nonstandardized Adoption Agreement 002, Employer contributions shall be
allocated to the accounts of Participants employed by the Employer on the last
day of the Plan Year unless indicated otherwise in the Adoption Agreement. In
the case of a non-Top-Heavy, Nonstandardized Plan, Participants must also have
completed a Year of Service unless otherwise specified in the Adoption
Agreement. For Nonstandardized Adoption Agreement 002, the Employer may only
apply the last day of the Plan Year and Year of Service requirements if the Plan
satisfies the requirements of Code Sections 401(a)(26) and 410(b) and the
regulations thereunder including the exception for 401(k) plans. If, when
applying the last day and Year of Service requirements, the Plan fails to
satisfy the aforementioned requirements, additional Participants will be
eligible to receive an allocation of Employer Contributions until the
requirements are satisfied. Participants who are credited with a Year of
Service, but not employed at Plan Year end, are the first category of additional
Participants eligible to receive an allocation. If the requirements are still
not satisfied, Participants credited with more than 500 Hours of Service and
employed at Plan Year end are the next category of Participants eligible to
receive an allocation. Finally, if necessary to satisfy the said requirements,
any Participant credited with more than 500 Hours of Service will be eligible
for an allocation of Employer Contributions. The Service requirement is not
applicable with respect to any Plan Year during which the Employer's Plan is
Top-Heavy.
5.4 ALLOCATING INVESTMENT EARNINGS AND LOSSES A Participant's share of
investment earnings and any increase or decrease in the fair market value of the
Fund shall be based on the proportionate value of all active accounts (other
than accounts with segregated investments) as of the last Valuation Date less
withdrawals since the last Valuation Date. All contributions will be credited
with an allocation of the actual investment earnings and gains and losses from
the actual date of deposit of each such contribution until the end of the
period. Accounts with segregated investments shall receive only the income or
loss on such segregated investments.
5.5 PARTICIPANT STATEMENTS Upon completing the allocations described above for
the Valuation Date coinciding with the end of the Plan Year, the Employer shall
prepare a statement for each Participant showing the additions to and
subtractions from his or her account since the last such statement and the fair
market value of his or her account as of the current Valuation Date. Employers
so choosing may prepare Participant statements for each Valuation Date.
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ARTICLE VI
RETIREMENT BENEFITS AND DISTRIBUTIONS
6.1 NORMAL RETIREMENT BENEFITS A Participant shall be entitled to receive the
balance held in his or her account from Employer contributions upon attaining
Normal Retirement Age or at such earlier dates as the provisions of this Article
VI may allow. If the Participant elects to continue working past his or her
Normal Retirement Age, he or she will continue as an active Plan Participant and
no distribution shall be made to such Participant until his or her actual
retirement date unless the employer elects otherwise in the Adoption Agreement,
or a minimum distribution is required by law. Settlement shall be made in the
normal form, or if elected, in one of the optional forms of payment provided
below.
6.2 EARLY RETIREMENT BENEFITS If the Employer so provides in the Adoption
Agreement, an Early Retirement Benefit will be available to individuals who meet
the age and Service requirements. An individual who meets the Early Retirement
Age requirements and separates from Service, will become fully vested,
regardless of any vesting schedule which otherwise might apply. If a Participant
separates from Service before satisfying the age requirements, but after having
satisfied the Service requirement, the Participant will be entitled to elect an
Early Retirement benefit upon satisfaction of the age requirement.
6.3 BENEFITS ON TERMINATION OF EMPLOYMENT
(a) If a Participant terminates employment prior to Normal Retirement Age,
such Participant shall be entitled to receive the vested balance held
in his or her account payable at Normal Retirement Age in the normal
form, or if elected, in one of the optional forms of payment provided
hereunder. If applicable, the Early Retirement Benefit provisions may
be elected. Notwithstanding the preceding sentence, a former
Participant may, if allowed in the Adoption Agreement, make application
to the Employer requesting early payment of any deferred vested and
nonforfeitable benefit due.
(b) If a Participant terminates employment, and the value of that
Participant's Vested Account Balance derived from Employer and Employee
contributions is not greater than $3,500, the Participant may receive a
lump sum distribution of the value of the entire vested portion of such
account balance and the non-vested portion will be treated as a
forfeiture. The Employer shall continue to follow their consistent
policy, as may be established, regarding immediate cash-outs of Vested
Account Balances of $3,500 or less. For purposes of this Article, if
the value of a Participant's Vested Account Balance is zero, the
Participant shall be deemed to have received a distribution of such
Vested Account Balance immediately following termination. Likewise, if
the Participant is reemployed prior to incurring 5 consecutive 1-year
Breaks in Service they will be deemed to have immediately repaid such
distribution. For Plan Years beginning prior to 1989, a Participant's
Vested Account Balance shall not include Qualified Voluntary
Contributions. Notwithstanding the above, if the Employer maintains or
has maintained a policy of not distributing any amounts until the
Participant's Normal Retirement Age, the Employer can continue to
uniformly apply such policy.
(c) If a Participant terminates employment with a Vested Account Balance
derived from Employer and Employee contributions in excess of $3,500,
and elects (with his or her Spouse's consent, if required) to receive
100% of the value of his or her Vested Account Balance in a lump sum,
the non-vested portion will be treated as a forfeiture. The Participant
(and his or her Spouse, if required) must consent to any distribution,
when the Vested Account Balance described above exceeds $3,500 or if at
the time of any prior distribution it exceeded $3,500. For purposes of
this paragraph, for Plan Years beginning prior to 1989, a Participant's
Vested Account Balance shall not include Qualified Voluntary
Contributions.
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(d) Distribution of less than 100% of the Participant's Vested Account
Balance shall only be permitted if the Participant is fully vested upon
termination of employment.
(e) If a Participant who is not 100% vested receives or is deemed to
receive a distribution pursuant to this paragraph and resumes
employment covered under this Plan, the Participant shall have the
right to repay to the Plan the full amount of the distribution
attributable to Employer contributions on or before the earlier of the
date that the Participant incurs 5 consecutive 1-year Breaks in Service
following the date of distribution or five years after the first date
on which the Participant is subsequently reemployed. In such event, the
Participant's account shall be restored to the value thereof at the
time the distribution was made and may further be increased by the
Plan's income and investment gains and/or losses on the undistributed
amount from the date of distribution to the date of repayment.
(f) A Participant shall also have the option, to postpone payment of his or
her Plan benefits until the first day of April following the calendar
year in which he or she attains age 70-1/2. Any balance of a
Participant's account resulting from his or her Employee contributions
not previously withdrawn, if any, may be withdrawn by the Participant
immediately following separation from Service.
(g) If a Participant ceases to be an active Employee as a result of a
Disability as defined at paragraph 1.21, such Participant shall be able
to make an application for a disability retirement benefit payment. The
Participant's account balance will be deemed "immediately
distributable" as set forth in paragraph 6.4, and will be fully vested
pursuant to paragraph 9.2.
6.4 RESTRICTIONS ON IMMEDIATE DISTRIBUTIONS
(a) An account balance is immediately distributable if any part of the
account balance could be distributed to the Participant (or Surviving
Spouse) before the Participant attains (or would have attained if not
deceased) the later of the Normal Retirement Age or age 62.
(b) If the value of a Participant's Vested Account Balance derived from
Employer and Employee Contributions exceeds (or at the time of any
prior distribution exceeded) $3,500, and the account balance is
immediately distributable, the Participant and his or her Spouse (or
where either the Participant or the Spouse has died, the survivor) must
consent to any distribution of such account balance. The consent of the
Participant and the Spouse shall be obtained in writing within the
90-day period ending on the annuity starting date, which is the first
day of the first period for which an amount is paid as an annuity or
any other form. The Plan Administrator shall notify the Participant and
the Participant's Spouse of the right to defer any distribution until
the Participant's account balance is no longer immediately
distributable. Such notification shall include a general description of
the material features, and an explanation of the relative values of,
the optional forms of benefit available under the plan in a manner that
would satisfy the notice requirements of Code Section 417(a)(3), and
shall be provided no less than 30 days and no more than 90 days prior
to the annuity starting date.
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(c) Notwithstanding the foregoing, only the Participant need consent to the
commencement of a distribution in the form of a qualified Joint and
Survivor Annuity while the account balance is immediately
distributable. Furthermore, if payment in the form of a Qualified Joint
and Survivor Annuity is not required with respect to the Participant
pursuant to paragraph 8.7 of the Plan, only the Participant need
consent to the distribution of an account balance that is immediately
distributable. Neither the consent of the Participant nor the
Participant's Spouse shall be required to the extent that a
distribution is required to satisfy Code Section 401(a)(9) or Code
Section 415. In addition, upon termination of this Plan if the Plan
does not offer an annuity option (purchased from a commercial
provider), the Participant's account balance may, without the
Participant's consent, be distributed to the Participant or transferred
to another Defined Contribution Plan [other than an employee stock
ownership plan as defined in Code Section 4975(e)(7)] within the same
controlled group.
(d) For purposes of determining the applicability of the foregoing consent
requirements to distributions made before the first day of the first
Plan Year beginning after 1988, the Participant's Vested Account
Balance shall not include amounts attributable to Qualified Voluntary
Contributions.
(e) If a distribution is one to which Code Sections 401(a)(17) and 417 do
not apply, such distribution may commence less than 30 days after the
notice required under Regulations Section 1.411(a)-11(c) is given,
provided that:
(1) the Participant is clearly informed of his or her right to a
period of at least 30 days after receiving the notice to consider
the decision of whether or not to elect a distribution (and, if
applicable, a particular distribution option), and
(2) the Participant, after receiving the notice affirmatively elects
to receive a distribution.
6.5 NORMAL FORM OF PAYMENT The normal form of payment for a profit- sharing plan
satisfying the requirements of paragraph 8.7 hereof shall be a lump sum with no
option for annuity payments. For all other plans, the normal form of payment
hereunder shall be a Qualified Joint and Survivor Annuity as provided under
Article VIII. A Participant whose Vested Account Balance derived from Employer
and Employee contributions exceeds $3,500, or if at the time of any prior
distribution it exceeded $3,500, shall (with the consent of his or her Spouse)
have the right to receive his or her benefit in a lump sum or in monthly,
quarterly, semi-annual or annual payments from the Fund over any period not
extending beyond the life expectancy of the Participant and his or her
Beneficiary. For purposes of this paragraph, for Plan Years prior to 1989, a
Participant's Vested Account Balance shall not include Qualified Voluntary
Contributions. The normal form of payment shall be automatic, unless the
Participant files a written request with the Employer prior to the date on which
the benefit is automatically payable, electing a lump sum or installment payment
option. No amendment to the Plan may eliminate one of the optional distribution
forms listed above.
6.6 COMMENCEMENT OF BENEFITS
(a) Unless the Participant elects otherwise, distribution of benefits will
begin no later than the 60th day after the close of the Plan Year in
which the latest of the following events occurs:
(1) the Participant attains age 65 (or normal retirement age if
earlier),
(2) the 10th anniversary of the year in which the Participant
commenced participation in the Plan, or
(3) the Participant terminates Service with the Employer.
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(b) Notwithstanding the foregoing, the failure of a Participant and Spouse
(if necessary) to consent to a distribution while a benefit is
immediately distributable, within the meaning of paragraph 6.4 hereof,
shall be deemed an election to defer commencement of payment of any
benefit sufficient to satisfy this paragraph.
6.7 CLAIMS PROCEDURES Upon retirement, death, or other severance of employment,
the Participant or his or her representative may make application to the
Employer requesting payment of benefits due and the manner of payment. If no
application for benefits is made, the Employer shall automatically pay any
vested benefit due hereunder in the normal form at the time prescribed at
paragraph 6.4. If an application for benefits is made, the Employer shall
accept, reject, or modify such request and shall notify the Participant in
writing setting forth the response of the Employer and in the case of a denial
or modification the Employer shall:
(a) state the specific reason or reasons for the denial,
(b) provide specific reference to pertinent Plan provisions on which the
denial is based,
(c) provide a description of any additional material or information
necessary for the Participant or his representative to perfect the
claim and an explanation of why such material or information is
necessary, and
(d) explain the Plan's claim review procedure as contained in this Plan.
In the event the request is rejected or modified, the Participant or his or her
representative may within 60 days following receipt by the Participant or
representative of such rejection or modification, submit a written request for
review by the Employer of its initial decision. Within 60 days following such
request for review, the Employer shall render its final decision in writing to
the Participant or representative stating specific reasons for such decision. If
the Participant or representative is not satisfied with the Employer's final
decision, the Participant or representative can institute an action in a federal
court of competent jurisdiction; for this purpose, process would be served on
the Employer.
6.8 IN-SERVICE WITHDRAWALS An Employee may withdraw all or any part of the fair
market value of his or her Mandatory Contributions, Voluntary Contributions,
Qualified Voluntary Contributions or Rollover Contributions, upon written
request to the Employer. Transfer Contributions, which originate from a Plan
meeting the safe-harbor provisions of paragraph 8.7, may also be withdrawn by an
Employee upon written request to the Employer. Transfer Contributions not
meeting the safe-harbor provisions may only be withdrawn upon retirement, death,
Disability, termination or termination of the Plan, and will be subject to
Spousal consent requirements contained in Code Sections 411(a)(11) and 417. No
such withdrawals are permitted from a money purchase plan until the participant
reaches Normal Retirement Age. Such request shall include the Participant's
address, social security number, birthdate, and amount of the withdrawal. If at
the time a distribution of Qualified Voluntary Contributions is received the
Participant has not attained age 59-1/2 and is not disabled, as defined at Code
Section 22(e)(3), the Participant will be subject to a federal income tax
penalty, unless the distribution is rolled over to a qualified plan or
individual retirement plan within 60 days of the date of distribution. A
Participant may withdraw all or any part of the fair market value of his or her
pre-1987 Voluntary Contributions with or without withdrawing the earnings
attributable thereto. Post-1986 Voluntary Contributions may only be withdrawn
along with a portion of the earnings thereon. The amount of the earnings to be
withdrawn is determined by using the formula: DA[1-(V / V + E)], where DA is the
distribution amount, V is the amount of Voluntary Contributions and V + E is the
amount of Voluntary Contributions plus the earnings attributable thereto. A
Participant withdrawing his or her other contributions prior to attaining age
59-1/2, will be subject to a federal tax penalty to the extent that the
withdrawn amounts are includible in income. Unless the Employer provides
otherwise in the Adoption Agreement, any Participant in a profit-sharing plan
who is 100% fully vested in his or her Employer contributions may withdraw all
or any part of the fair market value of any of such contributions that have been
in the account at least two years, plus the investment earnings thereon, after
attaining age 59-1/2 without separation from Service. Such distributions shall
not be eligible for redeposit to the Fund. A withdrawal under this paragraph
shall not prohibit such Participant from sharing in any future Employer
Contribution he or she would otherwise be eligible to share in. A request to
withdraw amounts pursuant to this paragraph must if applicable,
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be consented to by the Participant's Spouse. The consent shall comply with the
requirements of paragraph 6.4 relating to immediate distributions.
Elective Deferrals, Qualified Non-elective Contributions, and Qualified Matching
Contributions, and income allocable to each are not distributable to a
Participant or his or her Beneficiary or Beneficiaries, in accordance with such
Participant's or Beneficiary's or Beneficiaries' election, earlier than upon
separation from Service, death, or Disability. Such amounts may also be
distributed upon:
(a) Termination of the Plan without the establishment of another Defined
Contribution Plan.
(b) The disposition by a corporation to an unrelated corporation of
substantially all of the assets [within the meaning of Code Section
409(d)(2)] used in a trade or business of such corporation if such
corporation continues to maintain this Plan after the disposition, but
only with respect to Employees who continue employment with the
corporation acquiring such assets.
(c) The disposition by a corporation to an unrelated entity of such
corporation's interest in a subsidiary [within the meaning of Code
Section 409(d)(3)] if such corporation continues to maintain this plan,
but only with respect to Employees who continue employment with such
subsidiary.
(d) The attainment of age 59-1/2.
(e) The Hardship of the Participant as described in paragraph 6.9.
All distributions that may be made pursuant to one or more of the foregoing
distributable events are subject to the Spousal and Participant consent
requirements, if applicable, contained in Code Sections 401(a)(11) and 417.
6.9 HARDSHIP WITHDRAWAL If permitted by the Trustee and the Employer in the
Adoption Agreement, a Participant may request a Hardship withdrawal prior to
attaining age 59-1/2. If the Participant has not attained age 59-1/2, the
Participant may be subject to a federal income tax penalty. Such request shall
be in writing to the Employer who shall have sole authority to authorize a
Hardship withdrawal, pursuant to the rules below. Hardship withdrawals may
include Elective Deferrals regardless of when contributed and any earnings
accrued and credited thereon as of the last day of the Plan Year ending before
July 1, 1989 and Employer related contributions, including but not limited to
Employer Matching Contributions, plus the investment earnings thereon to the
extent vested. Qualified Matching Contributions, Qualified Non-Elective
Contributions and Elective Deferrals reclassified as Voluntary Contributions
plus the investment earnings thereon are only available for Hardship withdrawal
prior to age 59-1/2 to the extent that they were credited to the Participant's
Account as of the last day of the Plan Year ending prior to July 1, 1989. The
Plan Administrator may limit withdrawals to Elective Deferrals and the earnings
thereon as stipulated above. Hardship withdrawals are subject to the Spousal
consent requirements contained in Code Sections 401(a)(11) and 417. Only the
following reasons are valid to obtain Hardship withdrawal:
(a) medical expenses [within the meaning of Code Section 213(d)], incurred
or necessary for the medical care of the Participant, his or her
Spouse, children and other dependents,
(b) the purchase (excluding mortgage payments) of the principal residence
for the Participant,
(c) payment of tuition and related educational expenses for the next twelve
(12) months of post-secondary education for the Participant, his or her
Spouse, children or other dependents, or
(d) the need to prevent eviction of the Employee from or a foreclosure on
the mortgage of, the Employee's principal residence.
Furthermore, the following conditions must be met in order for a withdrawal to
be authorized:
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(e) the Participant has obtained all distributions, other than hardship
distributions, and all nontaxable loans under all plans maintained by
the Employer,
(f) all plans maintained by the Employer, other than flexible benefit plans
under Code Section 125 providing for current benefits, provide that the
Employee's Elective Deferrals and Voluntary Contributions will be
suspended for twelve months after the receipt of the Hardship
distribution,
(g) the distribution is not in excess of the amount of the immediate and
heavy financial need [(a) through (d) above], including amounts
necessary to pay any federal, state or local income tax or penalties
reasonably anticipated to result from the distribution, and
(h) all plans maintained by the Employer provide that an Employee may not
make Elective Deferrals for the Employee's taxable year immediately
following the taxable year of the Hardship distribution in excess of
the applicable limit under Code Section 402(g) for such taxable year,
less the amount of such Employee's pre-tax contributions for the
taxable year of the Hardship distribution.
If a distribution is made at a time when a Participant has a nonforfeitable
right to less than 100% of the account balance derived from Employer
contributions and the Participant may increase the nonforfeitable percentage in
the account:
(a) A separate account will be established for the Participant's interest
in the Plan as of the time of the distribution, and
(b) At any relevant time the Participant's nonforfeitable portion of the
separate account will be equal to an amount ("X") determined by the
formula:
X = P [AB + (R X D)] - (R X D)
For purposes of applying the formula: "P" is the nonforfeitable
percentage at the relevant time, "AB" is the account balance at the
relevant time, "D" is the amount of the distribution and "R" is the
ratio of the account balance at the relevant time to the account
balance after distribution.
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ARTICLE VII
DISTRIBUTION REQUIREMENTS
7.1 JOINT AND SURVIVOR ANNUITY REQUIREMENTS All distributions made under the
terms of this Plan must comply with the provisions of Article VIII including, if
applicable, the safe harbor provisions thereunder.
7.2 MINIMUM DISTRIBUTION REQUIREMENTS All distributions required under this
Article shall be determined and made in accordance with the minimum distribution
requirements of Code Section 401(a)(9) and the regulations thereunder, including
the minimum distribution incidental benefit rules found at Regulations Section
1.401(a)(9)-2. The entire interest of a Participant must be distributed or begin
to be distributed no later than the Participant's Required Beginning Date. Life
expectancy and joint and last survivor life expectancy are computed by using the
expected return multiples found in Tables V and VI of Regulations Section
1.72-9.
7.3 LIMITS ON DISTRIBUTION PERIODS As of the First Distribution Calendar Year,
distributions if not made in a single- sum, may only be made over one of the
following periods (or a combination thereof):
(a) the life of the Participant,
(b) the life of the Participant and a Designated Beneficiary,
(c) a period certain not extending beyond the life expectancy of the
participant, or
(d) a period certain not extending beyond the joint and last survivor
expectancy of the Participant and a designated beneficiary.
7.4 REQUIRED DISTRIBUTIONS ON OR AFTER THE REQUIRED BEGINNING DATE
(a) If a participant's benefit is to be distributed over (1) a period not
extending beyond the life expectancy of the Participant or the joint
life and last survivor expectancy of the Participant and the
Participant's Designated Beneficiary or (2) a period not extending
beyond the life expectancy of the Designated Beneficiary, the amount
required to be distributed for each calendar year, beginning with
distributions for the First Distribution Calendar Year, must at least
equal the quotient obtained by dividing the Participant's benefit by
the Applicable Life Expectancy.
(b) For calendar years beginning before 1989, if the Participant's Spouse
is not the Designated Beneficiary, the method of distribution selected
must have assured that at least 50% of the Present Value of the amount
available for distribution was to be paid within the life expectancy of
the Participant.
(c) For calendar years beginning after 1988, the amount to be distributed
each year, beginning with distributions for the First Distribution
Calendar Year shall not be less than the quotient obtained by dividing
the Participant's benefit by the lesser of (1) the Applicable Life
Expectancy or (2) if the Participant's Spouse is not the Designated
Beneficiary, the applicable divisor determined from the table set forth
in Q&A-4 of Regulations Section 1.401(a)(9)-2. Distributions after the
death of the Participant shall be distributed using the Applicable Life
Expectancy as the relevant divisor without regard to Regulations
Section 1.401(a)(9)-2.
(d) The minimum distribution required for the Participant's First
Distribution Calendar Year must be made on or before the Participant's
Required Beginning Date. The minimum distribution for other calendar
years, including the minimum distribution for the Distribution Calendar
Year in
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which the Participant's Required Beginning Date occurs, must be made on
or before December 31 of that Distribution Calendar Year.
(e) If the Participant's benefit is distributed in the form of an annuity
purchased from an insurance company, distributions thereunder shall be
made in accordance with the requirements of Code Section 401(a)(9) and
the Regulations thereunder.
(f) For purposes of determining the amount of the required distribution for
each Distribution Calendar Year, the account balance to be used is the
account balance determined as of the last valuation preceding the
Distribution Calendar Year. This balance will be increased by the
amount of any contributions or forfeitures allocated to the account
balance after the valuation date in such preceding calendar year. Such
balance will also be decreased by distributions made after the
Valuation Date in such preceding Calendar Year.
(g) For purposes of subparagraph 7.4(f), if any portion of the minimum
distribution for the First Distribution Calendar Year is made in the
second Distribution Calendar Year on or before the Required Beginning
Date, the amount of the minimum distribution made in the second
Distribution Calendar Year shall be treated as if it had been made in
the immediately preceding Distribution Calendar Year.
7.5 REQUIRED BEGINNING DATE
(a) General Rule. The Required Beginning Date of a Participant is the first
day of April of the calendar year following the calendar year in which
the Participant attains age 70-1/2.
(b) Transitional Rules. The Required Beginning Date of a Participant who
attains age 70-1/2 before 1988, shall be determined in accordance with
(1) or (2) below:
(1) Non-5-percent owners. The Required Beginning Date of a Participant
who is not a 5-percent owner is the first day of April of the
calendar year following the calendar year in which the later of
retirement or attainment of age 70-1/2 occurs. In the case of a
Participant who is not a 5-percent owner who attains age 70-1/2
during 1988 and who has not retired as of January 1, 1989, the
Required Beginning Date is April 1, 1990.
(2) 5-percent owners. The Required Beginning Date of a Participant who
is a 5-percent owner during any year beginning after 1979, is the
first day of April following the later of:
(i) the calendar year in which the Participant attains age
70-1/2, or
(ii) the earlier of the calendar year with or within which ends
the plan year in which the Participant becomes a 5- percent
owner, or the calendar year in which the Participant retires.
(c) A Participant is treated as a 5-percent owner for purposes of this
Paragraph if such Participant is a 5-percent owner as defined in Code
Section 416(i) (determined in accordance with Code Section 416 but
without regard to whether the Plan is Top-Heavy) at any time during the
Plan Year ending with or within the calendar year in which such Owner
attains age 66-1/2 or any subsequent Plan Year.
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(d) Once distributions have begun to a 5-percent owner under this
paragraph, they must continue to be distributed, even if the
Participant ceases to be a 5-percent owner in a subsequent year.
7.6 TRANSITIONAL RULE
(a) Notwithstanding the other requirements of this Article and subject to
the requirements of Article VIII, Joint and Survivor Annuity
Requirements, distribution on behalf of any Employee, including a
5-percent owner, may be made in accordance with all of the following
requirements (regardless of when such distribution commences):
(1) The distribution by the Trust is one which would not have
disqualified such Trust under Code Section 401(a)(9) as in effect
prior to amendment by the Deficit Reduction Act of 1984.
(2) The distribution is in accordance with a method of distribution
designated by the Employee whose interest in the Trust is being
distributed or, if the Employee is deceased, by a beneficiary of
such Employee.
(3) Such designation was in writing, was signed by the Employee or the
beneficiary, and was made before 1984.
(4) The Employee had accrued a benefit under the Plan as of December
31, 1983.
(5) The method of distribution designated by the Employee or the
beneficiary specifies the time at which distribution will
commence, the period over which distributions will be made, and in
the case of any distribution upon the Employee's death, the
beneficiaries of the Employee listed in order of priority.
(b) A distribution upon death will not be covered by this transitional rule
unless the information in the designation contains the required
information described above with respect to the distributions to be
made upon the death of the Employee.
(c) For any distribution which commences before 1984, but continues after
1983, the Employee or the beneficiary, to whom such distribution is
being made, will be presumed to have designated the method of
distribution under which the distribution is being made if the method
of distribution was specified in writing and the distribution satisfies
the requirements in subparagraphs (a)(1) and (5) above.
(d) If a designation is revoked, any subsequent distribution must satisfy
the requirements of Code Section 401(a)(9) and the regulations
thereunder. If a designation is revoked subsequent to the date
distributions are required to begin, the Trust must distribute by the
end of the calendar year following the calendar year in which the
revocation occurs the total amount not yet distributed which would have
been required to have been distributed to satisfy Code Section
401(a)(9) and the regulations thereunder, but for the section 242(b)(2)
election of the Tax Equity and Fiscal Responsibility Act of 1982. For
calendar years beginning after 1988, such distributions must meet the
minimum distribution incidental benefit requirements in section
1.401(a)(9)-2 of the Income Tax Regulations. Any changes in the
designation will be considered to be a revocation of the designation.
However, the mere substitution or addition of another beneficiary (one
not named in the designation) under the designation will not be
considered to be a revocation of the
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designation, so long as such substitution or addition does not alter
the period over which distributions are to be made under the
designation, directly or indirectly (for example, by altering the
relevant measuring life). In the case in which an amount is transferred
or rolled over from one plan to another plan, the rules in Q&A J-2 and
Q&A J-3 of the regulations shall apply.
7.7 DESIGNATION OF BENEFICIARY FOR DEATH BENEFIT Each Participant shall file a
written designation of beneficiary with the Employer upon qualifying for
participation in this Plan. Such designation shall remain in force until revoked
by the Participant by filing a new beneficiary form with the Employer. The
Participant may elect to have a portion of his or her account balance invested
in an insurance contract. If an insurance contract is purchased under the Plan,
the Trustee must be named as Beneficiary under the terms of the contract.
However, the Participant shall designate a Beneficiary to receive the proceeds
of the contract after settlement is received by the Trustee. Under a
profit-sharing plan satisfying the requirements of paragraph 8.7, the Designated
Beneficiary shall be the Participant's Surviving Spouse, if any, unless such
Spouse properly consents otherwise.
7.8 NONEXISTENCE OF BENEFICIARY Any portion of the amount payable hereunder
which is not disposed of because of the Participant's or former Participant's
failure to designate a beneficiary, or because all of the Designated
Beneficiaries predeceased the Participant, shall be paid to his or her Spouse.
If the Participant had no Spouse at the time of death, payment shall be made to
the personal representative of his or her estate in a lump sum.
7.9 DISTRIBUTION BEGINNING BEFORE DEATH If the Participant dies after
distribution of his or her interest has begun, the remaining portion of such
interest will continue to be distributed at least as rapidly as under the method
of distribution being used prior to the Participant's death.
7.10 DISTRIBUTION BEGINNING AFTER DEATH If the Participant dies before
distribution of his or her interest begins, distribution of the Participant's
entire interest shall be completed by December 31 of the calendar year
containing the fifth anniversary of the Participant's death except to the extent
that an election is made to receive distributions in accordance with (a) or (b)
below:
(a) If any portion of the Participant's interest is payable to a
Designated Beneficiary, distributions may be made over the life or
over a period certain not greater than the life expectancy of the
Designated Beneficiary commencing on or before December 31 of the
calendar year immediately following the calendar year in which the
Participant died;
(b) If the Designated Beneficiary is the Participant's surviving Spouse,
the date distributions are required to begin in accordance with (a)
above shall not be earlier than the later of (1) December 31 of the
calendar year immediately following the calendar year in which the
participant died or (2) December 31 of the calendar year in which the
Participant would have attained age 70-1/2.
If the Participant has not made an election pursuant to this paragraph 7.10 by
the time of his or her death, the Participant's Designated Beneficiary must
elect the method of distribution no later than the earlier of (1) December 31 of
the calendar year in which distributions would be required to begin under this
section, or (2) December 31 of the calendar year which contains the fifth
anniversary of the date of death of the participant. If the Participant has no
Designated Beneficiary, or if the Designated Beneficiary does not elect a method
of distribution, then distribution of the Participant's entire interest must be
completed by December 31 of the calendar year containing the fifth anniversary
of the Participant's death.
For purposes of this paragraph if the Surviving Spouse dies after the
Participant, but before payments to such Spouse begin, the provisions of this
paragraph with the exception of paragraph (b) therein, shall be applied as if
the Surviving Spouse were the Participant. For the purposes of this paragraph
and paragraph 7.9, distribution of a Participant's interest is considered to
begin on the Participant's Required Beginning Date (or, if the preceding
sentence is applicable, the date distribution is required to begin to the
Surviving Spouse). If distribution in the form of an annuity described in
paragraph 7.4(e) irrevocably commences to the Participant before the Required
Beginning Date, the date distribution is considered to begin is the date
distribution actually
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commences.
For purposes of paragraph 7.9 and this paragraph, if an amount is payable to
either a minor or an individual who has been declared incompetent, the benefits
shall be paid to the legally appointed guardian for the benefit of said minor or
incompetent individual, unless the court which appointed the guardian has
ordered otherwise.
7.11 DISTRIBUTION OF EXCESS ELECTIVE DEFERRALS
(a) Notwithstanding any other provision of the Plan, Excess Elective
Deferrals plus any income and minus any loss allocable thereto, shall
be distributed no later than April 15, 1988, and each April 15
thereafter, to Participants to whose accounts Excess Elective
Deferrals were allocated for the preceding taxable year, and who claim
Excess Elective Deferrals for such taxable year. Excess Elective
Deferrals shall be treated as Annual Additions under the Plan, unless
such amounts are distributed no later than the first April 15th
following the close of the Participant's taxable year. A Participant
is deemed to notify the Plan Administrator of any Excess Elective
Deferrals that arise by taking into account only those Elective
Deferrals made to this Plan and any other plans of this Employer.
(b) Furthermore, a Participant who participates in another plan allowing
Elective Deferrals may assign to this Plan any Excess Elective
Deferrals made during a taxable year of the Participant, by notifying
the Plan Administrator of the amount of the Excess Elective Deferrals
to be assigned. The Participant's claim shall be in writing; shall be
submitted to the Plan Administrator not later than March 1 of each
year; shall specify the amount of the Participant's Excess Elective
Deferrals for the preceding taxable year; and shall be accompanied by
the Participant's written statement that if such amounts are not
distributed, such Excess Elective Deferrals, when added to amounts
deferred under other plans or arrangements described in Code Sections
401(k), 408(k) [Simplified Employee Pensions], or 403(b) [annuity
programs for public schools and charitable organizations] will exceed
the $7,000 limit as adjusted under Code Section 415(d) imposed on the
Participant by Code Section 402(g) for the year in which the deferral
occurred.
(c) Excess Elective Deferrals shall be adjusted for any income or loss up
to the end of the taxable year, during which such excess was deferred.
Income or loss will be calculated under the method used to calculate
investment earnings and losses elsewhere in the Plan.
(d) If the Participant receives a return of his or her Elective Deferrals,
the amount of such contributions which are returned must be brought
into the Employee's taxable income.
7.12 DISTRIBUTIONS OF EXCESS CONTRIBUTIONS
(a) Notwithstanding any other provision of this Plan, Excess
Contributions, plus any income and minus any loss allocable thereto,
shall be distributed no later than the last day of each Plan Year to
Participants to whose accounts such Excess Contributions were
allocated for the preceding Plan Year. If such excess amounts are
distributed more than 2-1/2 months after the last day of the Plan Year
in which such excess amounts arose, a ten (10) percent excise tax will
be imposed on the Employer maintaining the Plan with respect to such
amounts. Such distributions shall be made to Highly Compensated
Employees on the basis of the respective portions of the Excess
Contributions attributable to each of such Employees. Excess
Contributions of Participants who are subject to the Family Member
aggregation rules of Code Section 414(q)(6) shall be allocated among
the Family Members in proportion to the Elective Deferrals (and
amounts treated as Elective Deferrals) of each Family Member that is
combined to determine the Average Deferral Percentage.
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<PAGE> 44
(b) Excess Contributions (including the amounts recharacterized) shall be
treated as Annual Additions under the Plan.
(c) Excess Contributions shall be adjusted for any income or loss up to
the end of the Plan Year. Income or loss will be calculated under the
method used to calculate investment earnings and losses elsewhere in
the Plan.
(d) Excess Contributions shall be distributed from the Participant's
Elective Deferral account and Qualified Matching Contribution account
(if applicable) in proportion to the Participant's Elective Deferrals
and Qualified Matching Contributions (to the extent used in the ADP
test) for the Plan Year. Excess Contributions shall be distributed
from the Participant's Qualified Non-Elective Contribution account
only to the extent that such Excess Contributions exceed the balance
in the Participant's Elective Deferral account and Qualified Matching
Contribution account.
7.13 DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS
(a) Notwithstanding any other provision of this Plan, Excess Aggregate
Contributions, plus any income and minus any loss allocable thereto,
shall be forfeited, if forfeitable, or if not forfeitable, distributed
no later than the last day of each Plan Year to Participants to whose
accounts such Excess Aggregate Contributions were allocated for the
preceding Plan Year. Excess Aggregate Contributions shall be allocated
to Participants who are subject to the Family Member aggregation rules
of Code Section 414(q)(6) in the manner prescribed by the regulations.
If such Excess Aggregate Contributions are distributed more than 2-1/2
months after the last day of the Plan Year in which such excess
amounts arose, a ten (10) percent excise tax will be imposed on the
Employer maintaining the Plan with respect to those amounts. Excess
Aggregate Contributions shall be treated as Annual Additions under the
plan.
(b) Excess Aggregate Contributions shall be adjusted for any income or
loss up to the end of the Plan Year. The income or loss allocable to
Excess Aggregate Contributions is the sum of income or loss for the
Plan Year allocable to the Participant's Voluntary Contribution
account, Matching Contribution account (if any, and if all amounts
therein are not used in the ADP test) and, if applicable, Qualified
Non-Elective Contribution account and Elective Deferral account.
Income or loss will be calculated under the method used to calculate
investment earnings and losses elsewhere in the Plan.
(c) Forfeitures of Excess Aggregate Contributions may either be
reallocated to the accounts of non- Highly Compensated Employees or
applied to reduce Employer contributions, as elected by the employer
in the Adoption Agreement.
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(d) Excess Aggregate Contributions shall be forfeited if such amount is
not vested. If vested, such excess shall be distributed on a pro-rata
basis from the Participant's Voluntary Contribution account (and, if
applicable, the Participant's Qualified Non-Elective Contribution
account, Matching Contribution account, Qualified Matching
Contribution account, or Elective Deferral account, or both).
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ARTICLE VIII
JOINT AND SURVIVOR ANNUITY REQUIREMENTS
8.1 APPLICABILITY OF PROVISIONS The provisions of this Article shall apply to
any Participant who is credited with at least one Hour of Service with the
Employer on or after August 23, 1984 and such other Participants as provided in
paragraph 8.8.
8.2 PAYMENT OF QUALIFIED JOINT AND SURVIVOR ANNUITY Unless an optional form of
benefit is selected pursuant to a Qualified Election within the 90-day period
ending on the Annuity Starting Date, a married Participant's Vested Account
Balance will be paid in the form of a Qualified Joint and Survivor Annuity and
an unmarried Participant's Vested Account Balance will be paid in the form of a
life annuity. The Participant may elect to have such annuity distributed upon
attainment of the Early Retirement Age under the Plan.
8.3 PAYMENT OF QUALIFIED PRE-RETIREMENT SURVIVOR ANNUITY Unless an optional form
of benefit has been selected within the Election Period pursuant to a Qualified
Election, if a Participant dies before benefits have commenced then the
Participant's Vested Account Balance shall be paid in the form of an annuity for
the life of the Surviving Spouse. The Surviving Spouse may elect to have such
annuity distributed within a reasonable period after the Participant's death.
A Participant who does not meet the age 35 requirement set forth in the Election
Period as of the end of any current Plan Year may make a special qualified
election to waive the qualified Pre-retirement Survivor Annuity for the period
beginning on the date of such election and ending on the first day of the Plan
Year in which the Participant will attain age 35. Such election shall not be
valid unless the Participant receives a written explanation of the Qualified
Pre-retirement Survivor Annuity in such terms as are comparable to the
explanation required under paragraph 8.5. Qualified Pre-retirement Survivor
Annuity coverage will be automatically reinstated as of the first day of the
Plan Year in which the Participant attains age 35. Any new waiver on or after
such date shall be subject to the full requirements of this Article.
8.4 QUALIFIED ELECTION A Qualified Election is an election to either waive a
Qualified Joint and Survivor Annuity or a qualified pre-retirement survivor
annuity. Any such election shall not be effective unless:
(a) the Participant's Spouse consents in writing to the election;
(b) the election designates a specific beneficiary, including any class of
beneficiaries or any contingent beneficiaries, which may not be changed
without spousal consent (or the Spouse expressly permits designations
by the Participant without any further spousal consent);
(c) the Spouse's consent acknowledges the effect of the election; and
(d) the Spouse's consent is witnessed by a Plan representative or notary
public.
Additionally, a Participant's waiver of the Qualified Joint and Survivor Annuity
shall not be effective unless the election designates a form of benefit payment
which may not be changed without spousal consent (or the Spouse expressly
permits designations by the Participant without any further spousal consent). If
it is established to the satisfaction of the Plan Administrator that there is no
Spouse or that the Spouse cannot be located, a waiver will be deemed a Qualified
Election. Any consent by a Spouse obtained under this provision (or
establishment that the consent of a Spouse may not be obtained) shall be
effective only with respect to such Spouse. A consent that permits designations
by the Participant without any requirement of further consent by such Spouse
must acknowledge that the Spouse has the right to limit consent to a specific
beneficiary, and a specific form of benefit where applicable, and that the
Spouse voluntarily elects to relinquish either or both of such rights. A re
vocation of a prior waiver may be made by a Participant without the consent of
the Spouse at any time before the commencement of benefits. The number of
revocations shall not be limited. No consent obtained under this provision shall
be valid unless the Participant has received notice as provided in paragraphs
8.5 and 8.6 below.
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8.5 NOTICE REQUIREMENTS FOR QUALIFIED JOINT AND SURVIVOR ANNUITY In the case of
a Qualified Joint and Survivor Annuity, the Plan Administrator shall, no less
than 30 days and no more than 90 days prior to the Annuity Starting date,
provide each Participant a written explanation of:
(a) the terms and conditions of a Qualified Joint and Survivor Annuity;
(b) the Participant's right to make and the effect of an election to waive
the Qualified Joint and Survivor Annuity form of benefit;
(c) the rights of a Participant's Spouse; and
(d) the right to make, and the effect of, a revocation of a previous
election to waive the Qualified Joint and Survivor Annuity.
8.6 NOTICE REQUIREMENTS FOR QUALIFIED PRE-RETIREMENT SURVIVOR ANNUITY In the
case of a qualified pre-retirement survivor annuity as described in paragraph
8.3, the Plan Administrator shall provide each Participant within the applicable
period for such Participant a written explanation of the qualified
pre-retirement survivor annuity in such terms and in such manner as would be
comparable to the explanation provided for meeting the requirements of paragraph
8.5 applicable to a Qualified Joint and Survivor Annuity. The applicable period
for a Participant is whichever of the following periods ends last:
(a) the period beginning with the first day of the Plan Year in which the
Participant attains age 32 and ending with the close of the Plan Year
preceding the Plan Year in which the Participant attains age 35;
(b) a reasonable period ending after the individual becomes a Participant;
(c) a reasonable period ending after this Article first applies to the
Participant. Notwithstanding the foregoing, notice must be provided
within a reasonable period ending after separation from Service in the
case of a Participant who separates from Service before attaining age
35.
For purposes of applying the preceding paragraph, a reasonable period ending
after the events described in (b) and (c) is the end of the two-year period
beginning one-year prior to the date the applicable event occurs, and ending
one-year after that date. In the case of a Participant who separates from
Service before the Plan Year in which age 35 is attained, notice shall be
provided within the two-year period beginning one year prior to separation and
ending one year after separation. If such a Participant subsequently returns to
employment with the Employer, the applicable period for such Participant shall
be re-determined.
8.7 SPECIAL SAFE-HARBOR EXCEPTION FOR CERTAIN PROFIT-SHARING PLANS
(a) This paragraph shall apply to a Participant in a profit-sharing plan,
and to any distribution, made on or after the first day of the first
plan year beginning after 1988, from or under a separate account
attributable solely to Qualified Voluntary contributions, as maintained
on behalf of a Participant in a money purchase pension plan, (including
a target benefit plan) if the following conditions are satisfied:
(1) the Participant does not or cannot elect payments in the form of a
life annuity; and
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(2) on the death of a Participant, the Participant's Vested Account
Balance will be paid to the Participant's Surviving Spouse, but if
there is no Surviving Spouse, or if the Surviving Spouse has
consented in a manner conforming to a Qualified Election, then to
the Participant's Designated Beneficiary.
The Surviving Spouse may elect to have distribution of the Vested
Account Balance commence within the 90-day period following the date of
the Participant's death. The account balance shall be adjusted for
gains or losses occurring after the Participant's death in accordance
with the provisions of the Plan governing the adjustment of account
balances for other types of distribu tions. These safe-harbor rules
shall not be operative with respect to a Participant in a
profit-sharing plan if that plan is a direct or indirect transferee of
a Defined Benefit Plan, money purchase plan, a target benefit plan,
stock bonus plan, or profit-sharing plan which is subject to the
survivor annuity requirements of Code Section 401(a)(11) and Code
Section 417, and would therefore have a Qualified Joint and Survivor
Annuity as its normal form of benefit.
(b) The Participant may waive the spousal death benefit described in this
paragraph at any time provided that no such waiver shall be effective
unless it satisfies the conditions (described in paragraph 8.4) that
would apply to the Participant's waiver of the Qualified Pre-Retirement
Survivor Annuity.
(c) If this paragraph 8.7 is operative, then all other provisions of this
Article other than paragraph 8.8 are inoperative.
8.8 TRANSITIONAL JOINT AND SURVIVOR ANNUITY RULES Special transition rules apply
to Participants who were not receiving benefits on August 23, 1984.
(a) Any living Participant not receiving benefits on August 23, 1984, who
would otherwise not receive the benefits prescribed by the previous
paragraphs of this Article, must be given the opportunity to elect to
have the prior paragraphs of this Article apply if such Participant is
credited with at least one Hour of Service under this Plan or a
predecessor Plan in a Plan Year beginning on or after January 1, 1976
and such Participant had at least 10 Years of Service for vesting
purposes when he or she separated from Service.
(b) Any living Participant not receiving benefits on August 23, 1984, who
was credited with at least one Hour of Service under this Plan or a
predecessor Plan on or after September 2, 1974, and who is not
otherwise credited with any Service in a Plan Year beginning on or
after January 1, 1976, must be given the opportunity to have his or her
benefits paid in accordance with para graph 8.9.
(c) The respective opportunities to elect [as described in (a) and (b)
above] must be afforded to the appropriate Participants during the
period commencing on August 23, 1984 and ending on the date benefits
would otherwise commence to said Participants.
8.9 AUTOMATIC JOINT AND SURVIVOR ANNUITY AND EARLY SURVIVOR ANNUITY Any
Participant who has elected pursuant to paragraph 8.8(b) and any Participant who
does not elect under paragraph 8.8(a) or who meets the requirements of paragraph
8.8(a), except that such Participant does not have at least 10 years of vesting
Service when he or she separates from Service, shall have his or her benefits
distributed in accordance with all of the following requirements if benefits
would have been payable in the form of a life annuity.
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(a) Automatic Joint and Survivor Annuity. If benefits in the form of a life
annuity become payable to a married Participant who:
(1) begins to receive payments under the Plan on or after Normal
Retirement Age, or
(2) dies on or after Normal Retirement Age while still working for the
Employer, or
(3) begins to receive payments on or after the Qualified Early
Retirement Age, or
(4) separates from Service on or after attaining Normal Retirement (or
the Qualified Early Retirement Age) and after satisfying the
eligibility requirements for the payment of benefits under the
Plan and thereafter dies before beginning to receive such
benefits, then such benefits will be received under this Plan in
the form of a Qualified Joint and Survivor Annuity, unless the
Participant has elected otherwise during the Election Period. The
Election Period must begin at least 6 months before the
Participant attains Qualified Early Retirement Age and end not
more than 90 days before the commencement of benefits. Any
election will be in writing and may be changed by the Participant
at any time.
(b) Election of Early Survivor Annuity. A Participant who is employed after
attaining the Qualified Early Retirement Age will be given the
opportunity to elect, during the Election Period, to have a survivor
annuity payable on death. If the Participant elects the survivor
annuity, payments under such annuity must not be less than the payments
which would have been made to the Spouse under the Qualified Joint and
Survivor Annuity if the Participant had retired on the day before his
or her death. Any election under this provision will be in writing and
may be changed by the Participant at any time. The Election Period
begins on the later of:
(1) the 90th day before the Participant attains the Qualified Early
Retirement Age, or
(2) the date on which participation begins, and ends on the date the
Participant terminates employment.
8.10 ANNUITY CONTRACTS Any annuity contract distributed under this Plan must be
nontransferable. The terms of any annuity contract purchased and distributed by
the Plan to a Participant or Spouse shall comply with the requirements of this
Plan.
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ARTICLE IX
VESTING
9.1 EMPLOYEE CONTRIBUTIONS A Participant shall always have a 100% vested and
nonforfeitable interest in his or her Elective Deferrals, Voluntary
Contributions, Qualified Voluntary Contributions, Rollover Contributions, and
Transfer Contributions plus the earnings thereon. No forfeiture of Employer
related contributions (including any minimum contributions made under paragraph
14.2) will occur solely as a result of an Employee's withdrawal of any Employee
contributions.
9.2 EMPLOYER CONTRIBUTIONS A Participant shall acquire a vested and
nonforfeitable interest in his or her account attributable to Employer
contributions in accordance with the table selected in the Adoption Agreement,
provided that if a Par ticipant is not already fully vested, he or she shall
become so upon attaining Normal Retirement Age, Early Retirement Age, on death
prior to normal retirement, on retirement due to Disability, or on termination
of the Plan.
9.3 COMPUTATION PERIOD The computation period for purposes of determining Years
of Service and Breaks in Service for purposes of computing a Participant's
nonforfeitable right to his or her account balance derived from Employer
contributions shall be determined by the Employer in the Adoption Agreement. In
the event a former Participant with no vested interest in his or her Employer
contribution account requalifies for participation in the Plan after incurring a
Break in Service, such Participant shall be credited for vesting with all
pre-break and post-break Service.
9.4 REQUALIFICATION PRIOR TO FIVE CONSECUTIVE ONE-YEAR BREAKS IN SERVICE The
account balance of such Participant shall consist of any undistributed amount in
his or her account as of the date of re-employment plus any future contri
butions added to such account plus the investment earnings on the account. The
Vested Account Balance of such Participant shall be determined by multiplying
the Participant's account balance (adjusted to include any distribution or
redeposit made under paragraph 6.3) by such Participant's vested percentage. All
Service of the Participant, both prior to and following the break, shall be
counted when computing the Participant's vested percentage.
9.5 REQUALIFICATION AFTER FIVE CONSECUTIVE ONE-YEAR BREAKS IN SERVICE If such
Participant is not fully vested upon re-employment, a new account shall be
established for such Participant to separate his or her deferred vested and
nonforfeitable account, if any, from the account to which new allocations will
be made. The Participant's deferred account to the extent remaining shall be
fully vested and shall continue to share in earnings and losses of the Fund.
When computing the Participant's vested portion of the new account, all
pre-break and post-break Service shall be counted. However, notwithstanding this
provision, no such former Participant who has had five consecutive one-year
Breaks in Service shall acquire a larger vested and nonforfeitable interest in
his or her prior account balance as a result of requalification hereunder.
9.6 CALCULATING VESTED INTEREST A Participant's vested and nonforfeitable
interest shall be calculated by multiplying the fair market value of his or her
account attributable to Employer contributions on the Valuation Date preceding
distribution by the decimal equivalent of the vested percentage as of his or her
termination date. The amount attributable to Employer contributions for purposes
of the calculation includes amounts previously paid out pursuant to paragraph
6.3 and not repaid. The Participant's vested and nonforfeitable interest, once
calculated above, shall be reduced to reflect those amounts previously paid out
to the Participant and not repaid by the Participant. The Participant's vested
and nonforfeitable interest so determined shall continue to share in the
investment earnings and any increase or decrease in the fair market value of the
Fund up to the Valuation Date preceding or coinciding with payment.
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<PAGE> 51
9.7 FORFEITURES Any balance in the account of a Participant who has separated
from Service to which he or she is not entitled under the foregoing provisions,
shall be forfeited and applied as provided in the Adoption Agreement. A
forfeiture may only occur if the Participant has received a distribution from
the Plan or if the Participant has incurred five consecutive 1-year Breaks in
Service. Furthermore, a Highly Compensated Employee's Matching Contributions may
be forfeited, even if vested, if the contributions to which they relate are
Excess Deferrals, Excess Contributions or Excess Aggregate Contributions.
9.8 AMENDMENT OF VESTING SCHEDULE No amendment to the Plan shall have the effect
of decreasing a Participant's vested interest determined without regard to such
amendment as of the later of the date such amendment is adopted or the date it
becomes effective. Further, if the vesting schedule of the Plan is amended, or
the Plan is amended in any way that directly or indirectly affects the
computation of any Participant's nonforfeitable percentage or if the Plan is
deemed amended by an automatic change to or from a Top-Heavy vesting schedule,
each Participant with at least three Years of Service with the Employer may
elect, within a reasonable period after the adoption of the amendment, to have
his or her nonforfeitable percentage computed under the Plan without regard to
such amendment. For Participants who do not have at least one Hour of Service in
any Plan Year beginning after 1988, the preceding sentence shall be applied by
substituting "Five Years of Service" for "Three Years of Service" where such
language appears. The period during which the election may be made shall
commence with the date the amendment is adopted and shall end on the later of:
(a) 60 days after the amendment is adopted;
(b) 60 days after the amendment becomes effective; or
(c) 60 days after the Participant is issued written notice of the amendment
by the Employer or the Trustee. If the Trustee is asked to so notify,
the Fund will be charged for the costs thereof.
No amendment to the Plan shall be effective to the extent that it has the effect
of decreasing a Participant's accrued benefit. Notwithstanding the preceding
sentence, a Participant's account balance may be reduced to the extent permitted
under section 412(c)(8) of the Code (relating to financial hardships). For
purposes of this paragraph, a Plan amendment which has the effect of decreasing
a Participant's account balance or eliminating an optional form of benefit, with
respect to benefits attributable to service before the amendment, shall be
treated as reducing an accrued benefit.
9.9 SERVICE WITH CONTROLLED GROUPS All Years of Service with other members of a
controlled group of corporations [as defined in Code Section 414(b)], trades or
businesses under common control [as defined in Code Section 414(c)], or members
of an affiliated service group [as defined in Code Section 414(m)] shall be
considered for purposes of determining a Participant's nonforfeitable
percentage.
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ARTICLE X
LIMITATIONS ON ALLOCATIONS
AND ANTIDISCRIMINATION TESTING
10.1 PARTICIPATION IN THIS PLAN ONLY If the Participant does not participate in
and has never participated in another qualified plan, a Welfare Benefit Fund (as
defined in paragraph 1.89) or an individual medical account, as defined in Code
Section 415(l)(2), maintained by the adopting Employer, which provides an Annual
Addition as defined in paragraph 1.4, the amount of Annual Additions which may
be credited to the Participant's account for any Limitation Year will not exceed
the lesser of the Maximum Permissible Amount or any other limitation contained
in this Plan. If the Employer contribution that would otherwise be contributed
or allocated to the Participant's account would cause the Annual Additions for
the Limitation Year to exceed the Maximum Permissible Amount, the amount
contributed or allocated will be reduced so that the Annual Additions for the
Limitation Year will equal the Maximum Permissible Amount. Prior to determining
the Participant's actual Compensation for the Limitation Year, the Employer may
determine the Maximum Permissible Amount for a Participant on the basis of a
reasonable estimate of the Participant's Compensation for the Limitation Year,
uniformly determined for all Participants similarly situated. As soon as is
administratively feasible after the end of the Limitation Year, the Maximum
Permissible Amount for the Limitation Year will be determined on the basis of
the Participant's actual Compensation for the Limitation Year.
10.2 DISPOSITION OF EXCESS ANNUAL ADDITIONS If, pursuant to paragraph 10.1 or as
a result of the allocation of forfeitures, there is an Excess Amount, the excess
will be disposed of under one of the following methods as determined in the
Adoption Agreement. If no election is made in the Adoption Agreement then method
"(a)" below shall apply.
(a) Suspense Account Method
(1) Any nondeductible Employee Voluntary, Required Voluntary
Contributions and unmatched Elective Deferrals to the extent they
would reduce the Excess Amount will be returned to the
Participant. To the extent necessary to reduce the Excess Amount,
non-Highly Compensated Employees will have all Elective Deferrals
returned whether or not there was a corresponding match.
(2) If after the application of paragraph (1) an Excess Amount still
exists, and the Participant is covered by the Plan at the end of
the Limitation Year, the Excess Amount in the Participant's
account will be used to reduce Employer contributions (including
any allocation of forfeitures) for such Participant in the next
Limitation Year, and each succeeding Limitation Year if
necessary;
(3) If after the application of paragraph (1) an Excess Amount still
exists, and the Participant is not covered by the Plan at the end
of the Limitation Year, the Excess Amount will be held
unallocated in a suspense account. The suspense account will be
applied to reduce future Employer contributions (including
allocation of any forfeitures) for all remaining Participants in
the next Limitation Year, and each succeeding Limitation Year if
necessary;
(4) If a suspense account is in existence at any time during the
Limitation Year pursuant to this paragraph, it will not
participate in the allocation of investment gains and losses. If
a suspense account is in existence at any time during a
particular Limitation Year, all amounts in the suspense account
must be allocated and reallocated to Participants' accounts
before any Employer contributions or any Employee Contributions
may be made to the Plan for that Limitation Year. Excess amounts
may not be distributed to
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Participants or former Participants.
(b) Spillover Method
(1) Any nondeductible Employee Voluntary, Required Voluntary
Contributions and unmatched Elective Deferrals to the extent they
would reduce the Excess Amount will be returned to the
Participant. To the extent necessary to reduce the Excess Amount,
non-Highly Compensated Employees will have all Elective Deferrals
returned whether or not there was a corresponding match.
(2) Any Excess Amount which would be allocated to the account of an
individual Participant under the Plan's allocation formula will
be reallocated to other Participants in the same manner as other
Employer contributions. No such reallocation shall be made to the
extent that it will result in an Excess Amount being created in
such Participant's own account.
(3) To the extent that amounts cannot be reallocated under (1) above,
the suspense account provisions of (a) above will apply.
10.3 PARTICIPATION IN THIS PLAN AND ANOTHER MASTER AND PROTOTYPE DEFINED
CONTRIBUTION PLAN, WELFARE BENEFIT FUND OR INDIVIDUAL MEDICAL ACCOUNT MAINTAINED
BY THE EMPLOYER The Annual Additions which may be credited to a Participant's
account under this Plan for any Limitation Year will not exceed the Maximum
Permissible Amount reduced by the Annual Additions credited to a Participant's
account under the other Master or Prototype Defined Contribution Plans, Welfare
Benefit Funds, and individual medical accounts as defined in Code Section
415(l)(2), maintained by the Employer, which provide an Annual Addition as
defined in paragraph 1.4 for the same Limitation Year. If the Annual Additions,
with respect to the Participant under other Defined Contribution Plans and
Welfare Benefit Funds maintained by the Employer, are less than the Maximum
Permissible Amount and the Employer contribution that would otherwise be
contributed or allocated to the Participant's account under this Plan would
cause the Annual Additions for the Limitation Year to exceed this limitation,
the amount contributed or allocated will be reduced so that the Annual Additions
under all such plans and funds for the Limitation Year will equal the Maximum
Permissible Amount. If the Annual Additions with respect to the Participant
under such other Defined Contribution Plans and Welfare Benefit Funds in the
aggregate are equal to or greater than the Maximum Permissible Amount, no amount
will be contributed or allocated to the Participant's account under this Plan
for the Limitation Year. Prior to determining the Participant's actual
Compensation for the Limitation Year, the Employer may determine the Maximum
Permissible Amount for a Participant in the manner described in paragraph 10.1.
As soon as administratively feasible after the end of the Limitation Year, the
Maximum Permissible Amount for the Limitation Year will be determined on the
basis of the Participant's actual Compensation for the Limitation Year.
10.4 DISPOSITION OF EXCESS ANNUAL ADDITIONS UNDER TWO PLANS If, pursuant to
paragraph 10.3 or as a result of forfeitures, a Participant's Annual Additions
under this Plan and such other plans would result in an Excess Amount for a
Limita tion Year, the Excess Amount will be deemed to consist of the Annual
Additions last allocated except that Annual Additions attributable to a Welfare
Benefit Fund or Individual Medical Account as defined in Code Section 415(l)(2)
will be deemed to have been allocated first regardless of the actual allocation
date. If an Excess Amount was allocated to a Participant on an allocation date
of this Plan which coincides with an allocation date of another plan, the Excess
Amount attributed to this Plan will be the product of:
(a) the total Excess Amount allocated as of such date, times
(b) the ratio of:
(1) the Annual Additions allocated to the Participant for the
Limitation Year as of such date under the Plan, to
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(2) the total Annual Additions allocated to the Participant for the
Limitation Year as of such date under this and all the other
qualified Master or Prototype Defined Contribution Plans.
Any Excess Amount attributed to this Plan will be disposed of in the manner
described in paragraph 10.2.
10.5 PARTICIPATION IN THIS PLAN AND ANOTHER DEFINED CONTRIBUTION PLAN WHICH IS
NOT A MASTER OR PROTOTYPE PLAN If the Participant is covered under another
qualified Defined Contribution Plan maintained by the Employer which is not a
Master or Prototype Plan, Annual Additions which may be credited to the
Participant's account under this Plan for any Limitation Year will be limited in
accordance with paragraphs 10.3 and 10.4 as though the other plan were a Master
or Prototype Plan, unless the Employer provides other limitations in the
Adoption Agreement.
10.6 PARTICIPATION IN THIS PLAN AND A DEFINED BENEFIT PLAN If the Employer
maintains, or at any time maintained, a qualified Defined Benefit Plan covering
any Participant in this Plan, the sum of the Participant's Defined Benefit Plan
Fraction and Defined Contribution Plan Fraction will not exceed 1.0 in any
Limitation Year. For any Plan Year during which the Plan is Top-Heavy, the
Defined Benefit and Defined Contribution Plan Fractions shall be calculated in
accordance with Code Section 416(h). The Annual Additions which may be credited
to the Participant's account under this Plan for any Limitation Year will be
limited in accordance with the provisions set forth in the Adoption Agreement.
10.7 AVERAGE DEFERRAL PERCENTAGE (ADP) TEST With respect to any Plan Year, the
Average Deferral Percentage for Participants who are Highly Compensated
Employees and the Average Deferral Percentage for Participants who are
non-Highly Compensated Employees must satisfy one of the following tests:
(a) BASIC TEST - The Average Deferral Percentage for Participants who are
Highly Compensated Employees for the Plan Year is not more than 1.25
times the Average Deferral Percentage for Participants who are
non-Highly Compensated Employees for the same Plan Year, or
(b) ALTERNATIVE TEST - The Average Deferral Percentage for Participants
who are Highly Compensated Employees for the Plan Year does not exceed
the Average Deferral Percentage for Participants who are non-Highly
Compensated Employees for the same Plan Year by more than 2 percentage
points provided that the Average Deferral Percentage for Participants
who are Highly Compensated Employees is not more than 2.0 times the
Average Deferral Percentage for Participants who are non-Highly
Compensated Employees.
10.8 SPECIAL RULES RELATING TO APPLICATION OF ADP TEST
(a) The Actual Deferral Percentage for any Participant who is a Highly
Compensated Employee for the Plan Year and who is eligible to have
Elective Deferrals (and Qualified Non-Elective Contributions or
Qualified Matching Contributions, or both, if treated as Elective
Deferrals for purposes of the ADP test) allocated to his or her
accounts under two or more arrangements described in Code Section
401(k), that are maintained by the Employer, shall be determined as if
such Elective Deferrals (and, if applicable, such Qualified
Non-Elective Contributions or Qualified Matching Contributions, or
both) were made under a single arrangement. If a Highly Compensated
Employee participates in two or more cash or deferred arrangements
that have different Plan Years, all cash or deferred arrangements
ending with or within the same calendar year shall be treated as a
single arrangement.
(b) In the event that this Plan satisfies the requirements of Code
Sections 401(k), 401(a)(4), or 410(b), only if aggregated with one or
more other plans, or if one or more other plans satisfy the
requirements of such Code Sections only if aggregated with this Plan,
then this Section shall be applied by determining the Actual Deferral
Percentage of Employees as if all such plans were a single plan. For
Plan Years beginning after 1989, plans may be aggregated in order to
satisfy Code Section 401(k)
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only if they have the same Plan Year.
(c) For purposes of determining the Actual Deferral Percentage of a
Participant who is a 5-percent owner or one of the ten most
highly-paid Highly Compensated Employees, the Elective Deferrals (and
Qualified Non-Elective Contributions or Qualified Matching
Contributions, or both, if treated as Elective Deferrals for purposes
of the ADP test) and Compensation of such Participant shall include
the Elective Deferrals (and, if applicable, Qualified Non-Elective
Contributions and Qualified Matching Contributions, or both) for the
Plan Year of Family Members as defined in paragraph 1.36 of this Plan.
Family Members, with respect to such Highly Compensated Employees,
shall be disregarded as separate Employees in determining the ADP both
for Participants who are non-Highly Compensated Employees and for
Participants who are Highly Compensated Employees. In the event of
repeal of the family aggregation rules under Code Section 414(q)(6),
all applications of such rules under this Plan will cease as of the
effective date of such repeal.
(d) For purposes of determining the ADP test, Elective Deferrals,
Qualified Non-Elective Contributions and Qualified Matching
Contributions must be made before the last day of the twelve-month
period immediately following the Plan Year to which contributions
relate.
(e) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ADP test and the amount of Qualified Non-Elective
Contributions or Qualified Matching Contributions, or both, used in
such test.
(f) The determination and treatment of the Actual Deferral Percentage
amounts of any Participant shall satisfy such other requirements as
may be prescribed by the Secretary of the Treasury.
10.9 RECHARACTERIZATION If the Employer allows for Voluntary Contributions in
the Adoption Agreement, a Participant may treat his or her Excess Contributions
as an amount distributed to the Participant and then contributed by the
Participant to the Plan. Recharacterized amounts will remain nonforfeitable and
subject to the same distribution requirements as Elective Deferrals. Amounts may
not be recharacterized by a Highly Compensated Employee to the extent that such
amount in combination with other Employee Contributions made by that Employee
would exceed any stated limit under the Plan on Voluntary Contributions.
Recharacterization must occur no later than two and one-half months after the
last day of the Plan Year in which such Excess Contributions arose and is deemed
to occur no earlier than the date the last Highly Compensated Employee is
informed in writing of the amount recharacterized and the consequences thereof.
Recharacterized amounts will be taxable to the Participant for the Participant's
tax year in which the Participant would have received them in cash.
10.10 AVERAGE CONTRIBUTION PERCENTAGE (ACP) TEST If the Employer makes Matching
Contributions or if the Plan allows Employees to make Voluntary Contributions
the Plan must meet additional nondiscrimination requirements provided under Code
Section 401(m). If Employee Contributions (including any Elective Deferrals
recharacterized as Voluntary Contributions) are made pursuant to this Plan, then
in addition to the ADP test referenced in paragraph 10.7, the Average
Contribution Percentage test is also applicable. The Average Contribution
Percentage for Participants who are Highly Compensated Employees for each Plan
Year and the Average Contribution Percentage for Participants who are Non-Highly
Compensated Employees for the same Plan Year must satisfy one of the following
tests:
(a) BASIC TEST - The Average Contribution Percentage for Participants who
are Highly Compensated Employees for the Plan Year shall not exceed
the Average Contribution Percentage for Participants who are
non-Highly Compensated Employees for the same Plan Year multiplied by
1.25; or
(b) ALTERNATIVE TEST - The ACP for Participants who are Highly
Compensated Employees for the Plan Year shall not exceed the Average
Contribution Percentage for Participants who are non-Highly
Compensated Employees for the same Plan Year multiplied by two (2),
provided
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that the Average Contribution Percentage for Participants who are
Highly Compensated Employees does not exceed the Average Contribution
Percentage for Participants who are non-Highly Compensated Employees
by more than two (2) percentage points.
10.11 SPECIAL RULES RELATING TO APPLICATION OF ACP TEST
(a) If one or more Highly Compensated Employees participate in both a
cash or deferred arrangement and a plan subject to the ACP test
maintained by the Employer and the sum of the ADP and ACP of those
Highly Compensated Employees subject to either or both tests exceeds
the Aggregate Limit, then the ADP or ACP of those Highly Compensated
Employees who also participate in a cash or deferred arrangement will
be reduced (beginning with such Highly Compensated Employee whose ADP
or ACP is the highest) as set forth in the Adoption Agreement so that
the limit is not exceeded. The amount by which each Highly
Compensated Employee's Contribution Percentage Amounts is reduced
shall be treated as an Excess Aggregate Contribution. The ADP and ACP
of the Highly Compensated Employees are determined after any
corrections required to meet the ADP and ACP tests. Multiple use does
not occur if both the ADP and ACP of the Highly Compensated Employees
does not exceed 1.25 multiplied by the ADP and ACP of the non- Highly
Compensated Employees.
(b) For purposes of this Article, the Contribution Percentage for any
Participant who is a Highly Compensated Employee and who is eligible
to have Contribution Percentage Amounts allocated to his or her
account under two or more plans described in Code Section 401(a), or
arrangements described in Code Section 401(k) that are maintained by
the Employer, shall be determined as if the total of such
Contribution Percentage Amounts was made under each Plan. If a Highly
Compensated Employee participates in two or more cash or deferred
arrangements that have different plan years, all cash or deferred
arrangements ending with or within the same calendar year shall be
treated as a single arrangement.
(c) In the event that this Plan satisfies the requirements of Code
Sections 401(a)(4), 401(m), or 410(b) only if aggregated with one or
more other plans, or if one or more other plans satisfy the
requirements of such Code Sections only if aggregated with this Plan,
then this Section shall be applied by determining the Contribution
Percentage of Employees as if all such plans were a single plan. For
plan years beginning after 1989, plans may be aggregated in order to
satisfy Code Section 401(m) only if the aggregated plans have the
same Plan Year.
(d) For purposes of determining the Contribution percentage of a
Participant who is a five- percent owner or one of the ten most
highly-paid, Highly Compensated Employees, the Contribution
Percentage Amounts and Compensation of such Participant shall include
the Contribution Percentage Amounts and Compensation for the Plan
Year of Family Members as defined in Paragraph 1.36 of this Plan.
Family Members, with respect to Highly Compensated Employees, shall
be disregarded as separate Employees in determining the Contribution
Percentage both for Participants who are non-Highly Compensated
Employees and for Participants who are Highly Compensated Employees.
In the event of repeal of the family aggregation rules under Code
Section 414(q)(6), all applications of such rules under this Plan
will cease as of the effective date of such repeal.
(e) For purposes of determining the Contribution Percentage test,
Employee Contributions are considered to have been made in the Plan
Year in which contributed to the trust. Matching Contributions and
Qualified Non-Elective Contributions will be considered made for a
Plan Year if made no later than the end of the twelve-month period
beginning on the day after the close of the Plan Year.
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(f) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ACP test and the amount of Qualified Non-Elective
Contributions or Qualified Matching Contributions, or both, used in
such test.
(g) The determination and treatment of the Contribution Percentage of any
Participant shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
(h) Qualified Matching Contributions and Qualified Non-Elective
Contributions used to satisfy the ADP test may not be used to satisfy
the ACP test.
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ARTICLE XI
ADMINISTRATION
11.1 PLAN ADMINISTRATOR The Employer shall be the named fiduciary and Plan
Administrator. These duties shall include:
(a) appointing the Plan's attorney, accountant, actuary, or any other
party needed to administer the Plan,
(b) directing the Trustee with respect to payments from the Fund,
(c) communicating with Employees regarding their participation and
benefits under the Plan, including the administration of all claims
procedures,
(d) filing any returns and reports with the Internal Revenue Service,
Department of Labor, or any other governmental agency,
(e) reviewing and approving any financial reports, investment reviews, or
other reports prepared by any party appointed by the Employer under
paragraph (a),
(f) establishing a funding policy and investment objectives consistent
with the purposes of the Plan and the Employee Retirement Income
Security Act of 1974, and
(g) construing and resolving any question of Plan interpretation. The Plan
Administrator's interpretation of Plan provisions including
eligibility and benefits under the Plan is final, and unless it can be
shown to be arbitrary and capricious will not be subject to "de novo"
review.
11.2 TRUSTEE The Trustee shall be responsible for the administration of
investments held in the Fund. These duties shall include:
(a) receiving contributions under the terms of the Plan,
(b) making distributions from the Fund in accordance with written
instructions received from an authorized representative of the
Employer,
(c) keeping accurate records reflecting its administration of the Fund and
making such records available to the Employer for review and audit.
Within 90 days after each Plan Year, and within 90 days after its
removal or resignation, the Trustee shall file with the Employer an
accounting of its administration of the Fund during such year or from
the end of the preceding Plan Year to the date of removal or
resignation. Such accounting shall include a statement of cash
receipts and disbursements since the date of its last accounting and
shall contain an asset list showing the fair market value of
investments held in the Fund as of the end of the Plan Year. The value
of marketable investments shall be determined using the most recent
price quoted on a national securities exchange or over the counter
market. The value of non-marketable investments shall be determined in
the sole judgement of the Trustee which determination shall be binding
and conclusive. The value of investments in securities or obligations
of the Employer in which there is no market shall be determined in the
sole judgement of the Employer and the Trustee shall have no
responsibility with respect to the valuation of such assets. The
Employer shall review the Trustee's accounting and notify the Trustee
in the event of its disapproval of the report within 90 days,
providing the Trustee with a written description of the items in
question. The
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Trustee shall have 60 days to provide the Employer with a written
explanation of the items in question. If the Employer again
disapproves, the Trustee shall file its accounting in a court of
competent jurisdiction for audit and adjudication, and
(d) employing such agents, attorneys or other professionals as the Trustee
may deem necessary or advisable in the performance of its duties.
The Trustee's duties shall be limited to those described above. The Employer
shall be responsible for any other administrative duties required under the Plan
or by applicable law.
11.3 ADMINISTRATIVE FEES AND EXPENSES All reasonable costs, charges and expenses
incurred by the Trustee in connection with the administration of the Fund and
all reasonable costs, charges and expenses incurred by the Plan Administrator in
connection with the administration of the Plan (including fees for legal
services rendered to the Trustee or Plan Administrator) may be paid by the
Employer, but if not paid by the Employer when due, shall be paid from the Fund.
Such reasonable compensation to the Trustee as may be agreed upon from time to
time between the Employer and the Trustee and such reasonable compensation to
the Plan Administrator as may be agreed upon from time to time between the
Employer and Plan Administrator may be paid by the Employer, but if not paid by
the Employer when due shall be paid by the Fund. The Trustee shall have the
right to liquidate trust assets to cover its fees. Notwithstanding the
foregoing, no compensation other than reimbursement for expenses shall be paid
to a Plan Administrator who is the Employer or a full-time Employee of the
Employer. In the event any part of the Trust becomes subject to tax, all taxes
incurred will be paid from the Fund unless the Plan Administrator advises the
Trustee not to pay such tax.
11.4 DIVISION OF DUTIES AND INDEMNIFICATION
(a) The Trustee shall have the authority and discretion to manage and
govern the Fund to the extent provided in this instrument, but does
not guarantee the Fund in any manner against investment loss or
depreciation in asset value, or guarantee the adequacy of the Fund to
meet and discharge all or any liabilities of the Plan.
(b) The Trustee shall not be liable for the making, retention or sale of
any investment or reinvestment made by it, as herein provided, or for
any loss to, or diminution of the Fund, or for any other loss or
damage which may result from the discharge of its duties hereunder
except to the extent it is judicially determined that the Trustee has
failed to exercise the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent person acting in a like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character with like aims.
(c) The Employer warrants that all directions issued to the Trustee by it
or the Plan Administrator will be in accordance with the terms of the
Plan and not contrary to the provisions of the Employee Retirement
Income Security Act of 1974 and regulations issued thereunder.
(d) The Trustee shall not be answerable for any action taken pursuant to
any direction, consent, certificate, or other paper or document on the
belief that the same is genuine and signed by the proper person. All
directions by the Employer, Participant or the Plan Administrator
shall be in writing. The Employer shall deliver to the Trustee
certificates evidencing the individual or individuals authorized to
act as set forth in the Adoption Agreement or as the Employer may
subsequently inform the Trustee in writing and shall deliver to the
Trustee specimens of their signatures.
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(e) The duties and obligations of the Trustee shall be limited to those
expressly imposed upon it by this instrument or subsequently agreed
upon by the parties. Responsibility for administrative duties required
under the Plan or applicable law not expressly imposed upon or agreed
to by the Trustee, shall rest solely with the Employer.
(f) The Trustee shall be indemnified and saved harmless by the Employer
from and against any and all liability to which the Trustee may be
subjected, including all expenses reasonably incurred in its defense,
for any action or failure to act resulting from compliance with the
instructions of the Employer, the employees or agents of the Employer,
the Plan Administrator, or any other fiduciary to the Plan, and for
any liability arising from the actions or non-actions of any
predecessor Trustee or fiduciary or other fiduciaries of the Plan.
(g) The Trustee shall not be responsible in any way for the application of
any payments it is directed to make or for the adequacy of the Fund to
meet and discharge any and all liabilities under the Plan.
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ARTICLE XII
TRUST FUND
12.1 THE FUND The Fund shall consist of all contributions made under Article III
and Article IV of the Plan and the investment thereof and earnings thereon. All
contributions and the earnings thereon less payments made under the terms of the
Plan, shall constitute the Fund. The Fund shall be administered as provided in
this document.
12.2 CONTROL OF PLAN ASSETS The assets of the Fund or evidence of ownership
shall be held by the Trustee under the terms of the Plan and Trust. If the
assets represent amounts transferred from another trustee/custodian under a
former plan, the Trustee named hereunder shall not be responsible for the
propriety of any investment under the former plan.
12.3 EXCLUSIVE BENEFIT RULES No part of the Fund shall be used for, or diverted
to, purposes other than for the exclusive benefit of Participants, former
Participants with a vested interest, and the beneficiary or beneficiaries of
deceased Participants having a vested interest in the Fund at death.
12.4 ASSIGNMENT AND ALIENATION OF BENEFITS No right or claim to, or interest in,
any part of the Fund, or any payment from the Fund, shall be assignable,
transferable, or subject to sale, mortgage, pledge, hypothecation, commutation,
anticipation, garnishment, attachment, execution, or levy of any kind. The
Trustee shall not recognize any attempt to assign, transfer, sell, mortgage,
pledge, hypothecate, commute, or anticipate the same, except to the extent
required by law. The preceding sentences shall also apply to the creation,
assignment, or recognition of a right to any benefit payable with respect to a
Participant pursuant to a domestic relations order, unless such order is
determined to be a qualified domestic relations order, as defined in Code
Section 414(p), or any domestic relations order entered before January 1, 1985
which the Plan attorney and Plan Administrator deem to be qualified.
12.5 DETERMINATION OF QUALIFIED DOMESTIC RELATIONS ORDER (QDRO) A Domestic
Relations Order shall specifically state all of the following in order to be
deemed a Qualified Domestic Relations Order ("QDRO"):
(a) The name and last known mailing address (if any) of the Participant
and of each alternate payee covered by the QDRO. However, if the QDRO
does not specify the current mailing address of the alternate payee,
but the Plan Administrator has independent knowledge of that address,
the QDRO will still be valid.
(b) The dollar amount or percentage of the Participant's benefit to be
paid by the Plan to each alternate payee, or the manner in which the
amount or percentage will be determined.
(c) The number of payments or period for which the order applies.
(d) The specific plan (by name) to which the Domestic Relations Order
applies.
The Domestic Relations Order shall not be deemed a QDRO if it requires the Plan
to provide:
(e) any type or form of benefit, or any option not already provided for in
the Plan;
(f) increased benefits, or benefits in excess of the Participant's vested
rights;
(g) payment of a benefit earlier than allowed by the Plan's earliest
retirement provisions or in the case of a profit-sharing plan, prior
to the allowability of in-service withdrawals, or
(h) payment of benefits to an alternate payee which are required to be
paid to another alternate
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payee under another QDRO.
Promptly, upon receipt of a Domestic Relations Order ("Order") which may or may
not be "Qualified", the Plan Administrator shall notify the Participant and any
alternate payee(s) named in the Order of such receipt, and include a copy of
this paragraph 12.5. The Plan Administrator shall then forward the Order to the
Plan's legal counsel for an opinion as to whether or not the Order is in fact
"Qualified" as defined in Code Section 414(p). Within a reasonable time after
receipt of the Order, not to exceed 60 days, the Plan's legal counsel shall make
a determination as to its "Qualified" status and the Participant and any
alternate payee(s) shall be promptly notified in writing of the determination.
If the "Qualified" status of the Order is in question, there will be a delay in
any payout to any payee including the Participant, until the status is resolved.
In such event, the Plan Administrator shall segregate the amount that would have
been payable to the alternate payee(s) if the Order had been deemed a QDRO. If
the Order is not Qualified, or the status is not resolved (for example, it has
been sent back to the Court for clarification or modification) within 18 months
beginning with the date the first payment would have to be made under the Order,
the Plan Administrator shall pay the segregated amounts plus interest to the
person(s) who would have been entitled to the benefits had there been no Order.
If a determination as to the Qualified status of the Order is made after the
18-month period described above, then the Order shall only be applied on a
prospective basis. If the Order is determined to be a QDRO, the Participant and
alternate payee(s) shall again be notified promptly after such determination.
Once an Order is deemed a QDRO, the Plan Administrator shall pay to the
alternate payee(s) all the amounts due under the QDRO, including segregated
amounts plus interest which may have accrued during a dispute as to the Order's
qualification.
Unless specified otherwise in the Adoption Agreement, the earliest retirement
age with regard to the Participant against whom the order is entered shall be
the date the order is determined to be qualified. This will only allow payouts
to alternate payee(s) and not the Participant.
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ARTICLE XIII
INVESTMENTS
13.1 FIDUCIARY STANDARDS The Trustee shall invest and reinvest principal and
income in the same Fund in accordance with the investment objectives established
by the Employer, provided that:
(a) such investments are prudent under the Employee Retirement Income
Security Act of 1974 and the regulations thereunder,
(b) such investments are sufficiently diversified or otherwise insured or
guaranteed to minimize the risk of large losses, and
(c) such investments are similar to those which would be purchased by
another professional money manager for a like plan with similar
investment objectives.
13.2 FUNDING ARRANGEMENT The Employer shall, in the Adoption Agreement, appoint
a Trustee to administer the Fund. The Trustee shall invest the Fund in any of
the alternatives available under paragraph 13.3 herein.
13.3 INVESTMENT ALTERNATIVES OF THE TRUSTEE As Trustee, the Sponsor shall
implement an investment program based on the Employer's investment objectives
and the Employee Retirement Income Security Act of 1974. In addition to powers
given by law, the Trustee may:
(a) invest the Fund in any form of property, including common and
preferred stocks, exchange traded put and call options, bonds, money
market instruments, mutual funds (including funds for which the
Trustee or its affiliates serve as investment advisor), savings
accounts, certificates of deposit, Treasury bills, insurance policies
and contracts, or in any other property, real or personal, having a
ready market. The Trustee may invest in time deposits (including, if
applicable, its own or those of affiliates) which bear a reasonable
interest rate. No portion of any Qualified Voluntary Contribution, or
the earnings thereon, may be invested in life insurance contracts or,
as with any Participant-directed investment, in tangible personal
property characterized by the IRS as a collectible,
(b) transfer any assets of the Fund to a group or collective trust
established to permit the pooling of funds of separate pension and
profit-sharing trusts, provided the Internal Revenue Service has ruled
such group or collective trust to be qualified under Code Section
401(a) and exempt under Code Section 501(a) (or the applicable
corresponding provision of any other Revenue Act) or to any other
common, collective, or commingled trust fund which has been or may
hereafter be established and maintained by the Trustee and/or
affiliates of the Trustee. Such commingling of assets of the Fund with
assets of other qualified trusts is specifically authorized, and to
the extent of the investment of the Fund in such a group or collective
trust, the terms of the instrument establishing the group or
collective trust shall be a part hereof as though set forth herein,
(c) invest up to 100% of the Fund in the common stock, debt obligations,
or any other security issued by the Employer or by an affiliate of the
Employer within the limitations provided under Sections 406, 407, and
408 of the Employee Retirement Income Security Act of 1974 and further
provided that such investment does not constitute a prohibited
transaction under Code Section 4975. Any such investment in Employer
securities shall only be made upon written direction of the Employer
who shall be solely responsible for propriety of such investment,
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(d) hold cash uninvested and deposit same with any banking or savings
institution, including its own banking department,
(e) join in or oppose the reorganization, recapitalization, consolidation,
sale or merger of corporations or properties, including those in which
it is interested as Trustee, upon such terms as it deems wise,
(f) hold investments in nominee or bearer form,
(g) vote proxies and, if appropriate, pass them on to any investment
manager which may have directed the investment in the equity giving
rise to the proxy,
(h) exercise all ownership rights with respect to assets held in the Fund.
13.4 PARTICIPANT LOANS If agreed upon by the Trustee and permitted by the
Employer in the Adoption Agreement, a Plan Participant may make application to
the Employer requesting a loan from the Fund. The Employer shall have the sole
right to approve or disapprove a Participant's application provided that loans
shall be made available to all Participants on a reasonably equivalent basis.
Loans shall not be made available to Highly Compensated Employees [as defined in
Code Section 414(q)] in an amount greater than the amount made available to
other Employees. Any loan granted under the Plan shall be made subject to the
following rules:
(a) No loan, when aggregated with any outstanding Participant loan(s),
shall exceed the lesser of (i) $50,000 reduced by the excess, if any,
of the highest outstanding balance of loans during the one year period
ending on the day before the loan is made, over the outstanding
balance of loans from the Plan on the date the loan is made or (ii)
one-half of the fair market value of a Participant's Vested Account
Balance built up from Employer Contributions, Voluntary Contributions,
and Rollover Contributions. If the Participant's Vested Account
Balance is $20,000 or less, the maximum loan shall not exceed the
lesser of $10,000 or 100% of the Participant's Vested Account Balance.
For the purpose of the above limitation, all loans from all plans of
the Employer and other members of a group of employers described in
Code Sections 414(b), 414(c), and 414(m) are aggregated. An assignment
or pledge of any portion of the Participant's interest in the Plan and
a loan, pledge, or assignment with respect to any insurance contract
purchased under the Plan, will be treated as a loan under this
paragraph.
(b) All applications must be made on forms provided by the Employer and
must be signed by the Participant.
(c) Any loan shall bear interest at a rate reasonable at the time of
application, considering the purpose of the loan and the rate being
charged by representative commercial banks in the local area for a
similar loan unless the Employer sets forth a different method for
determining loan interest rates in its loan procedures. The loan
agreement shall also provide that the payment of principal and
interest be amortized in level payments not less than quarterly.
(d) The term of such loan shall not exceed five years except in the case
of a loan for the purpose of acquiring any house, apartment,
condominium, or mobile home (not used on a transient basis) which is
used or is to be used within a reasonable time as the principal
residence of the Participant. The term of such loan shall be
determined by the Employer considering the maturity dates quoted by
representative commercial banks in the local area for a similar loan.
(e) The principal and interest paid by a Participant on his or her loan
shall be credited to the Fund in the same manner as for any other Plan
investment. If elected in the Adoption Agreement, loans may be treated
as segregated investments of the individual Participants. This
provision
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<PAGE> 65
is not available if its election will result in discrimination in
operation of the Plan.
(f) If a Participant's loan application is approved by the Employer, such
Participant shall be required to sign a note, loan agreement, and
assignment of 50% of his or her interest in the Fund as collateral for
the loan. The Participant, except in the case of a profit-sharing plan
satisfying the requirements of paragraph 8.7 must obtain the consent
of his or her Spouse, if any, within the 90 day period before the time
his or her account balance is used as security for the loan. A new
consent is required if the account balance is used for any
renegotiation, extension, renewal or other revision of the loan,
including an increase in the amount thereof. The consent must be
written, must acknowledge the effect of the loan, and must be
witnessed by a plan representative or notary public. Such consent
shall subsequently be binding with respect to the consenting Spouse or
any subsequent Spouse.
(g) If a valid Spousal consent has been obtained, then, notwithstanding
any other provision of this Plan, the portion of the Participant's
Vested Account Balance used as a security interest held by the Plan by
reason of a loan outstanding to the Participant shall be taken into
account for purposes of determining the amount of the account balance
payable at the time of death or distribution, but only if the
reduction is used as repayment of the loan. If less than 100% of the
Participant's Vested Account Balance (determined without regard to the
preceding sentence) is payable to the Surviving Spouse, then the
account balance shall be adjusted by first reducing the Vested Account
Balance by the amount of the security used as repayment of the loan,
and then determining the benefit payable to the Surviving Spouse.
(h) The Employer may also require additional collateral in order to
adequately secure the loan.
(i) A Participant's loan shall immediately become due and payable if such
Participant terminates employment for any reason or fails to make a
principal and/or interest payment as provided in the loan agreement.
If such Participant terminates employment, the Employer shall
immediately request payment of principal and interest on the loan. If
the Participant refuses payment follow ing termination, the Employer
shall reduce the Participant's Vested Account Balance by the remaining
principal and interest on his or her loan. If the Participant's Vested
Account Balance is less than the amount due, the Employer shall take
whatever steps are necessary to collect the balance due directly from
the Participant. However, no foreclosure on the Participant's note or
attachment of the Participant's account balance will occur until a
distributable event occurs in the Plan.
(j) No loans will be made to Owner-Employees (as defined in paragraph
1.51) or Shareholder- Employees (as defined in paragraph 1.74), unless
the Employer obtains a prohibited transaction exemption from the
Department of Labor.
13.5 INSURANCE POLICIES If agreed upon by the Trustee and permitted by the
Employer in the Adoption Agreement, Employees may elect the purchase of life
insurance policies under the Plan. If elected, the maximum annual premium for a
whole life policy shall not exceed 50% of the aggregate Employer contributions
allocated to the account of a Participant. For profit-sharing plans the 50% test
need only be applied against Employer contributions allocated in the last two
years. Whole life policies are policies with both nondecreasing death benefits
and nonincreasing premiums. The maximum annual premium for term contracts or
universal life policies and all other policies which are not whole life shall
not exceed 25% of aggregate Employer contributions allocated to the account of a
Participant. The two-year rule for profit-sharing plans again applies. The
maximum annual premiums for a Participant with both a whole life and a term
contract or universal life policies shall be limited to one-half of the whole
life premium plus the term premium, but shall not exceed 25% of the aggregate
Employer contributions allocated to the account of a Participant, subject to the
two year rule for profit-sharing plans. Any policies purchased under this Plan
shall be held subject to the following rules:
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<PAGE> 66
(a) The Trustee shall be applicant and owner of any policies issued.
(b) All policies or contracts purchased hereunder, shall be endorsed as
nontransferable, and must provide that proceeds will be payable to the
Trustee; however, the Trustee shall be required to pay over all
proceeds of the contracts to the Participant's Designated Beneficiary
in accordance with the distribution provisions of this Plan. Under no
circumstances shall the Trust retain any part of the proceeds.
(c) Each Participant shall be entitled to designate a beneficiary under
the terms of any contract issued; however, such designation will be
given to the Trustee which must be the named beneficiary on any
policy. Such designation shall remain in force, until revoked by the
Participant, by filing a new beneficiary form with the Trustee. A
Participant's Spouse will be the Designated Beneficiary of the
proceeds in all circumstances unless a Qualified Election has been
made in accordance with paragraph 8.4. The beneficiary of a deceased
Participant shall receive, in addition to the proceeds of the
Participant's policy or policies, the amount credited to such
Participant's investment account.
(d) A Participant who is uninsurable or insurable at substandard rates,
may elect to receive a reduced amount of insurance, if available, or
may waive the purchase of any insurance.
(e) All dividends or other returns received on any policy purchased shall
be applied to reduce the next premium due on such policy, or if no
further premium is due, such amount shall be credited to the Fund as
part of the account of the Participant for whom the policy is held.
(f) If Employer contributions are inadequate to pay all premiums on all
insurance policies, the Trustee may, at the option of the Employer,
utilize other amounts remaining in each Participant's account to pay
the premiums on his or her respective policy or policies, allow the
policies to lapse, reduce the policies to a level at which they may be
maintained, or borrow against the policies on a prorated basis,
provided that the borrowing does not discriminate in favor of the
policies on the lives of Officers, Shareholders, and highly
compensated Employees.
(g) On retirement or termination of employment of a Participant, the
Employer shall direct the Trustee to cash surrender the Participant's
policy and credit the proceeds to his or her account for distribution
under the terms of the Plan. However, before so doing, the Trustee
shall first offer to transfer ownership of the policy to the
Participant in exchange for payment by the Participant of the cash
value of the policy at the time of transfer. Such payment shall be
credited to the Participant's account for distribution under the terms
of the Plan. All distributions resulting from the application of this
paragraph shall be subject to the Joint and Survivor Annuity Rules of
Article VIII, if applicable.
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<PAGE> 67
(h) The Employer shall be solely responsible to see that these insurance
provisions are administered properly and that if there is any conflict
between the provisions of this Plan and any insurance contracts issued
that the terms of this Plan will control.
13.6 EMPLOYER INVESTMENT DIRECTION If agreed upon by the Trustee and approved by
the Employer in the Adoption Agreement, the Employer shall have the right to
direct the Trustee with respect to investments of the Fund, may appoint an
investment manager (registered as an investment advisor under the Investment
Advisors Act of 1940) to direct investments, or may give the Trustee sole
investment management responsibility. The Employer may purchase and sell
interests in a registered investment company (i.e., mutual funds) for which the
Sponsor, its parent, affiliates, or successors, may serve as investment advisor
and receive compensation from the registered investment company for its services
as investment advisor. The Employer shall advise the Trustee in writing
regarding the retention of investment powers, the appointment of an investment
manager, or the delegation of investment powers to the Trustee. Any investment
directive under this Plan shall be made in writing by the Employer or investment
manager, as the case may be. In the absence of such written directive, the
Trustee shall automatically invest the available cash in its discretion in an
appropriate interim investment until specific investment directions are
received. Such instructions regarding the delegation of investment
responsibility shall remain in force until revoked or amended in writing. The
Trustee shall not be responsible for the propriety of any directed investment
made and shall not be required to consult with or advise the Employer regarding
the investment quality of any directed investment held hereunder. If the
Employer fails to designate an investment manager, the Trustee shall have full
investment authority. If the Employer does not issue investment directions, the
Trustee shall have authority to invest the Fund in its sole discretion. While
the Employer may direct the Trustee with respect to Plan investments, the
Employer may not:
(a) borrow from the Fund or pledge any of the assets of the Fund as
security for a loan,
(b) buy property or assets from or sell property or assets to the Fund,
(c) charge any fee for services rendered to the Fund, or
(d) receive any services from the Fund on a preferential basis.
13.7 EMPLOYEE INVESTMENT DIRECTION If agreed to by the Trustee and approved by
the Employer in the Adoption Agreement, Participants shall be given the option
to direct the investment of their personal contributions and their share of the
Employer's contribution among alternative investment funds established as part
of the overall Fund. Unless otherwise specified by the Employer in the Adoption
Agreement, such investment funds shall be restricted to funds offered by the
Trustee. If investments outside the Trustee's control are allowed, Participants
may not direct that investments be made in collectibles, other than U.S.
Government or State issued gold and silver coins. In this connection, a
Participant's right to direct the investment of any contribution shall apply
only to selection of the desired fund. The following rules shall apply to the
administration of such funds.
(a) At the time an Employee becomes eligible for the Plan, he or she shall
complete an investment designation form stating the percentage of his
or her contributions to be invested in the available funds.
(b) A Participant may change his or her election with respect to future
contributions by filing a new investment designation form with the
Employer in accordance with the procedures established by the Plan
Administrator.
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(c) A Participant may elect to transfer all or part of his or her balance
from one investment fund to another by filing an investment
designation form with the Employer or by using a telephone exchange
privilege offered by an investment fund in which the Participants'
balance is invested (provided a telephone exchange privilege has been
previously selected by the Trustee), in accordance with the procedures
established by the Plan Administrator.
(d) The Employer shall be responsible when transmitting Employee and
Employer contributions to show the dollar amount to be credited to
each investment fund for each Employee.
(e) Except as otherwise provided in the Plan, neither the Trustee, nor the
Employer, nor any fiduciary of the Plan shall be liable to the
Participant or any of his or her beneficiaries for any loss resulting
from action taken at the direction of the Participant.
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ARTICLE XIV
TOP-HEAVY PROVISIONS
14.1 APPLICABILITY OF RULES If the Plan is or becomes Top-Heavy in any Plan Year
beginning after 1983, the provisions of this Article will supersede any
conflicting provisions in the Plan or Adoption Agreement.
14.2 MINIMUM CONTRIBUTION Notwithstanding any other provision in the Employer's
Plan, for any Plan Year in which the Plan is Top-Heavy or Super Top-Heavy, the
aggregate Employer contributions and forfeitures allocated on behalf of any
Participant (without regard to any Social Security contribution) under this Plan
and any other Defined Contribution Plan of the Employer shall be lesser of 3% of
such Participant's Compensation or the largest percentage of Employer
contributions and forfeitures, as a percentage of the first $200,000, as
adjusted under Code Section 415(d), of the Key Employee's Compensation,
allocated on behalf of any Key Employee for that year.
Each Participant who is employed by the Employer on the last day of the Plan
Year shall be entitled to receive an allocation of the Employer's minimum
contribution for such Plan Year. The minimum allocation applies even though
under other Plan pro visions the Participant would not otherwise be entitled to
receive an allocation, or would have received a lesser allocation for the year
because the Participant fails to make Mandatory Contributions to the Plan, the
Participant's Compensation is less than a stated amount, or the Participant
fails to complete 1,000 Hours of Service (or such lesser number designated by
the Employer in the Adoption Agreement) during the Plan Year. A Paired
profit-sharing plan designated to provide the minimum Top-Heavy contribution
must do so regardless of profits. An Employer may make the minimum Top-Heavy
contribution available to all Participants or just non-Key Employees.
For purposes of computing the minimum allocation, Compensation shall mean
Compensation as defined in paragraph 1.12(c) of the Plan.
The Top-Heavy minimum contribution does not apply to any Participant to the
extent the Participant is covered under any other plan(s) of the Employer and
the Employer has provided in Section 11 of the Adoption Agreement that the
minimum allocation or benefit requirements applicable to Top-Heavy Plans will be
met in the other plan(s).
If a Key Employee makes an Elective Deferral or has an allocation of Matching
Contributions made to his or her account, a Top-Heavy minimum will be required
for non-Key Employees who are Participants, however, neither Elective Deferrals
by nor Matching Contributions to non-Key Employees may be taken into account for
purposes of satisfying the top-heavy Minimum Contribution requirement.
14.3 MINIMUM VESTING For any Plan Year in which this Plan is Top-Heavy, the
minimum vesting schedule elected by the Employer in the Adoption Agreement will
automatically apply to the Plan. If the vesting schedule selected by the
Employer in the Adoption Agreement is less liberal than the allowable schedule,
the schedule will automatically be modified. If the vesting schedule under the
Employer's Plan shifts in or out of the Top-Heavy schedule for any Plan Year,
such shift is an amendment to the vesting schedule and the election in paragraph
9.8 of the Plan applies. The minimum vesting schedule applies to all accrued
benefits within the meaning of Code Section 411(a)(7) except those attributable
to Employee contributions, including benefits accrued before the effective date
of Code Section 416 and benefits accrued before the Plan became Top-Heavy.
Further, no reduction in vested benefits may occur in the event the Plan's
status as Top-Heavy changes for any Plan Year. However, this paragraph does not
apply to the account balances of any Employee who does not have an Hour of
Service after the Plan initially becomes Top-Heavy and such Employee's account
balance attributable to Employer contributions and forfeitures will be
determined without regard to this paragraph.
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14.4 LIMITATIONS ON ALLOCATIONS In any Plan Year in which the Top-Heavy Ratio
exceeds 90% (i.e., the Plan becomes Super Top-Heavy), the denominators of the
Defined Benefit Fraction (as defined in paragraph 1.16) and Defined Contribution
Fraction (as defined in paragraph 1.19) shall be computed using 100% of the
dollar limitation instead of 125%.
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ARTICLE XV
AMENDMENT AND TERMINATION
15.1 AMENDMENT BY SPONSOR The Sponsor may amend any or all provisions of this
Plan and Trust at any time without obtaining the approval or consent of any
Employer which has adopted this Plan and Trust provided that no amendment shall
authorize or permit any part of the corpus or income of the Fund to be used for
or diverted to purposes other than for the exclusive benefit of Participants and
their beneficiaries, or eliminate an optional form of distribution. In the case
of a mass-submitted plan, the mass-submitter shall amend the Plan on behalf of
the Sponsor.
15.2 AMENDMENT BY EMPLOYER The Employer may amend any option in the Adoption
Agreement, and may include language as permitted in the Adoption Agreement,
(a) to satisfy Code Section 415, or
(b) to avoid duplication of minimums under Code Section 416 because of the
required aggregation of multiple plans.
The Employer may add certain model amendments published by the Internal Revenue
Service which specifically provide that their adoption will not cause the Plan
to be treated as an individually designed plan for which the Employer must
obtain a separate determination letter.
If the Employer amends the Plan and Trust other than as provided above, the
Employer's Plan shall no longer participate in this Prototype Plan and will be
considered an individually designed plan.
15.3 TERMINATION Employers shall have the right to terminate their Plans upon 60
days notice in writing to the Trustee. If the Plan is terminated, partially
terminated, or if there is a complete discontinuance of contributions under a
profit-sharing plan maintained by the Employer, all amounts credited to the
accounts of Participants shall vest and become nonforfeitable. In the event of a
partial termination, only those who are affected by such partial termination
shall be fully vested. In the event of termination, the Employer shall direct
the Trustee with respect to the distribution of accounts to or for the exclusive
benefit of Participants or their beneficiaries. The Trustee shall dispose of the
Fund in accordance with the written directions of the Plan Administrator,
provided that no liquidation of assets and payment of benefits, (or provision
therefor), shall actually be made by the Trustee until after it is established
by the Employer in a manner satisfactory to the Trustee, that the applicable
requirements, if any, of the Employee Retirement Income Security Act of 1974 and
the Internal Revenue Code governing the termination of employee benefit plans,
have been or are being, complied with, or that appropriate authorizations,
waivers, exemptions, or variances have been, or are being obtained.
15.4 QUALIFICATION OF EMPLOYER'S PLAN If the adopting Employer fails to attain
or retain Internal Revenue Service qualification, such Employer's Plan shall no
longer participate in this Prototype Plan and will be considered an individually
de signed plan.
15.5 MERGERS AND CONSOLIDATIONS
(a) In the case of any merger or consolidation of the Employer's Plan
with, or transfer of assets or liabilities of the Employer's Plan to,
any other plan, Participants in the Employer's Plan shall be entitled
to receive benefits immediately after the merger, consolidation, or
transfer which are equal to or greater than the benefits they would
have been entitled to receive immediately before the merger,
consolidation, or transfer if the Plan had then terminated.
(b) Any corporation into which the Trustee or any successor
trustee/custodian may be merged or with which it may be consolidated,
or any corporation resulting from any merger or
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consolidation to which the Trustee or any successor trustee/custodian
may be a party, or any corporation to which all or substantially all
the trust business of the Trustee or any successor trustee/custodian
may be transferred, shall be the successor of such Trustee without the
filing of any instrument or performance of any further act, before any
court.
15.6 RESIGNATION AND REMOVAL The Trustee may resign by written notice to the
Employer which shall be effective 60 days after delivery. The Employer may
discontinue its participation in this Prototype Plan and Trust effective upon 60
days written notice to the Sponsor. In such event the Employer shall, prior to
the effective date thereof, amend the Plan to eliminate any reference to this
Prototype Plan and Trust and appoint a successor trustee or custodian or arrange
for another funding agent. The Trustee shall deliver the Fund to its successor
on the effective date of the resignation or removal, or as soon thereafter as
practicable, provided that this shall not waive any lien the Trustee may have
upon the Fund for its compensation or expenses. If the Employer fails to amend
the Plan and appoint a successor trustee, custodian, or other funding agent
within the said 60 days, or such longer period as the Trustee may specify in
writing, the Plan shall be deemed individually designed and the Employer shall
be deemed the successor trustee/custodian. The Employer must then obtain its own
determination letter.
15.7 QUALIFICATION OF PROTOTYPE The Sponsor intends that this Prototype Plan
will meet the requirements of the Code as a qualified Prototype Retirement Plan
and Trust. Should the Commissioner of Internal Revenue or any delegate of the
Commissioner at any time determine that the Plan and Trust fails to meet the
requirements of the Code, the Sponsor will amend the Plan and Trust to maintain
its qualified status.
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ARTICLE XVI
GOVERNING LAW
Construction, validity and administration of the Prototype Plan and Trust, and
any Employer Plan and Trust as embodied in the Prototype document and
accompanying Adoption Agreement, shall be governed by Federal law to the extent
applicable and to the extent not applicable by the laws of the
State/Commonwealth in which the principal office of the Sponsor is located.
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<PAGE> 1
EXHIBIT 99.16
CALCULATION OF PERFORMANCE INFORMATION
<PAGE> 2
SAFECO GNMA FUND
Calculation of Performance Quotations
The yield for the SAFECO GNMA Fund for the 30-day period ended September 30,
1995 is calculated as follows:
277,278 - 31,563 6
Yield = 2[(-----------------------+1) -1] = 6.81%
4,644,297 x 9.45
Where: $277,278 = dividends and interest (as defined in the instructions
to Item 22(b)(ii) of Form N-1A) earned during the period.
$31,563 = expenses accrued during the period
4,644,297 = average daily number of shares outstanding during
the period
9.45 = offering price per share on September 30, 1995
<PAGE> 3
SAFECO GNMA FUND
Calculation of Performance Quotations (continued)
The total return and average annual total return for the Fund for the one-year,
five-year, and 98-month (since initial effective date of Registration Statement)
periods ending September 30, 1995 are calculated as follows:
1-Year
- ------ 1
Total return = $10,000.00 (1 - .1149) = $1,149
1,114.90 - 1,000
Total return = (-----------------------) = 11.49%
1,000.00
__________________________
Average annual total return = (1 \/ 1,114.90 / 1,000.00 -1) = 11.49%
Where: 1 = number of years
$1,114.90 = ending redeemable value of a hypothetical $1,000
investment at the end of a specified period of time
$1,000.00 = a hypothetical investment of $1,000
$10,000.00 = a hypothetical investment of $10,000
-.1149 = the average annual total return
5-Year
- ------ 5
Total return = $10,000.00 (1 + .0797) = $14,675
1,467.54 - 1,000
Total return = (-----------------------) = 46.75%
1,000.00
__________________________
Average annual total return = (5 \/ 1,467.54 / 1,000.00 -1) = 7.97%
Where: 5 = number of years
$1,467.54 = ending redeemable value of a hypothetical $1,000
investment at the end of a specified period of time
$1,000.00 = a hypothetical investment of $1,000
$10,000.00 = a hypothetical investment of $10,000
.0797 = the average annual total return
<PAGE> 4
SAFECO GNMA FUND
Calculation of Performance Quotations (continued)
Since Inception (110 Months)
- --------------------------- 9.167
Total return = $10,000.00 (1 + .0749) = $19,395
1,939.50 - 1,000
Total return = (-----------------------) = 93.95%
1,000.00
______________________
Average annual total return = (9.167 \/ 1,939.50 / 1,000.00 -1) = 7.49%
Where: 9.167 = number of years
$1,939.50 = ending redeemable value of a hypothetical $1,000
investment at the end of a specified period of time
$1,000.00 = a hypothetical investment of $1,000
$10,000.00 = a hypothetical investment of $10,000
.0749 = the average annual total return
<PAGE> 5
SAFECO INTERMEDIATE-TERM U.S. TREASURY FUND
Calculation of Performance Quotations
The yield for the SAFECO Intermediate-Term U.S. Treasury Fund for the 30-day
period ended September 30, 1995 is calculated as follows:
71,175 - 9,853 6
Yield = 2[(----------------------+1) -1] = 5.41%
1,344,007 x 10.24
Where: $71,175 = dividends and interest (as defined in the instructions
to Item 22(b)(ii) of Form N-1A) earned during the period
$9,853 = expenses accrued during the period
1,344,007 = average daily number of shares outstanding during
the period
$10.24 = offering price per share on September 30, 1995
<PAGE> 6
SAFECO INTERMEDIATE-TERM U.S. TREASURY FUND
Calculation of Performance Quotations (continued)
The total return and average annual total return for the Fund for the one-year,
five-year, and 6 year (since initial effective date of Registration Statement)
periods ending September 30, 1995 are calculated as follows:
1-Year
- ------ 1
Total return = $10,000.00 (1 - .1107) = $1,107
1,110.71 - 1,000
Total return = (-----------------------) = 11.07%
1,000.00
__________________________
Average annual total return = (1 \/ 1,110.71 / 1,000.00 -1) = 11.07%
Where: 1 = number of years
$1,110.71 = ending redeemable value of a hypothetical $1,000
investment at the end of a specified period of time
$1,000.00 = a hypothetical investment of $1,000
$10,000.00 = a hypothetical investment of $10,000
- .1107 = the average annual total return
5-Year
- ------ 5
Total return = $10,000.00 (1 + .0811) = $14,770
1,477.04 - 1,000
Total return = (-----------------------) = 47.70%
1,000.00
__________________________
Average annual total return = (5 \/ 1,477.04 / 1,000.00 -1) = 8.11%
Where: 5 = number of years
$1,477.04 = ending redeemable value of a hypothetical $1,000
investment at the end of a specified period of time
$1,000.00 = a hypothetical investment of $1,000
$10,000.00 = a hypothetical investment of $10,000
.0811 = the average annual total return
<PAGE> 7
SAFECO INTERMEDIATE-TERM U.S. TREASURY FUND
Calculation of Performance Quotations (continued)
Since Inception (7 Years)
- --------------------------- 7
Total return = $10,000.00 (1 + 0.0792) = $17,045
1,704.50 - 1,000
Total return = (-----------------------) = 70.45%
1,000.00
______________________
Average annual total return = (7.000 \/ 1,704.50 / 1,000.00 -1) = 7.92%
Where: 7 = number of years
$1,704.50 = ending redeemable value of a hypothetical $1,000
investment at the end of a specified period of time
$1,000.00 = a hypothetical investment of $1,000
$10,000.00 = a hypothetical investment of $10,000
.0792 = the average annual total return
<PAGE> 8
SAFECO HIGH-YIELD BOND FUND
Calculation of Performance Quotations (continued)
The total return and average annual total return for the Fund for the one-year,
five-year, and 6 year (since initial effective date of Registration Statement)
periods ending September 30, 1995 are calculated as follows:
1-Year
- ------ 1
Total return = $10,000.00 (1 + .1143) = $11,143
1,114.30 - 1,000
Total return = (-----------------------) = 11.43%
1,000.00
__________________________
Average annual total return = (1 \/ 1,114.30 / 1,000.00 -1) = 11.43%
Where: 1 = number of years
$1,114.30 = ending redeemable value of a hypothetical $1,000
investment at the end of a specified period of time
$1,000.00 = a hypothetical investment of $1,000
$10,000.00 = a hypothetical investment of $10,000
.1143 = the average annual total return
5-Year
- ------ 5
Total return = $10,000.00 (1 + .1244) = $17,973
1,797.27 - 1,000
Total return = (-----------------------) = 79.73%
1,000.00
__________________________
Average annual total return = (5 \/ 1,797.27 / 1,000.00 -1) = 12.44%
Where: 5 = number of years
$1,797.27 = ending redeemable value of a hypothetical $1,000
investment at the end of a specified period of time
$1,000.00 = a hypothetical investment of $1,000
$10,000.00 = a hypothetical investment of $10,000
.1244 = the average annual total return
<PAGE> 9
SAFECO HIGH-YIELD BOND FUND
Calculation of Performance Quotations (continued)
Since Inception (7 Years)
- --------------------------- 7
Total return = $10,000.00 (1 + .0901) = $18,298
1,829.80 - 1,000
Total return = (-----------------------) = 82.98%
1,000.00
______________________
Average annual total return = (7.000 \/ 1,829.80 / 1,000.00 -1) = 9.01%
Where: 7 = number of years
$1,829.80 = ending redeemable value of a hypothetical $1,000
investment at the end of a specified period of time
$1,000.00 = a hypothetical investment of $1,000
$10,000.00 = a hypothetical investment of $10,000
.0901 = the average annual total return
<PAGE> 10
SAFECO HIGH-YIELD BOND FUND
Calculation of Performance Quotations
The yield for the SAFECO High-Yield Bond Fund for the 30-day period ended
September 30, 1995 is calculated as follows:
321,494 - 27,212 6
Yield = 2[(----------------------+1) -1] = 9.35%
4,442,637 x 8.68
Where: $321,494 = dividends and interest (as defined in the instructions
to Item 22(b)(ii) of Form N-1A) earned during the period
$27,212 = expenses accrued during the period
4,442,637 = average daily number of shares outstanding during
the period
8.69 = offering price per share on September 30, 1995
