<PAGE> 1
Registration Nos. 33-47859/811-6667
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
---------
Post-Effective Amendment No. 4 /X/
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 /X/
Amendment No. 7 /X/
---------
(Check appropriate box or boxes.)
SAFECO INSTITUTIONAL SERIES TRUST
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(Exact Name of Registrant as Specified in Charter)
SAFECO Plaza, Seattle, Washington 98185
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(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 April 29, 1996 pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(1)
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on pursuant to paragraph (a)(1)
---- ------------------
75 days after filing pursuant to paragraph (a)(2)
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on pursuant to paragraph (a)(2) of Rule 485
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If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
===============================================================================
Registrant has registered an indefinite number of its shares under the
Securities Act of 1933 by declaration made pursuant to Section 24f of the
Investment Company Act of 1940 (Act). Pursuant to Rule 24f-2 under the Act,
Registrant's Rule 24f-2 Notice was filed on or about February 29, 1996.
===============================================================================
<PAGE> 2
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
TITLE OF AMOUNT OF PROPOSED PROPOSED AMOUNT OF
SECURITIES SHARES BEING MAXIMUM MAXIMUM REGISTRATION
BEING REGISTERED OFFERING AGGREGATE FEE
REGISTERED PRICE PER OFFERING
UNIT PRICE
<S> <C> <C> <C> <C>
Shares of 89,328 $8.38 $290,000 $100*
Common Stock,
Par Value
.001 Cent, of
the SAFECO
Institutional
Series Trust
</TABLE>
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* The fee for the above shares to be registered by this filing has been computed
on the basis of the price in effect on April 22, 1996.
Calculation of the proposed maximum aggregate offering price has been made
pursuant to Rule 24e-2 under the Investment Company Act of 1940. During its
fiscal year ended December 31, 1995, Registrant redeemed or repurchased 98,948
shares of common stock. During its current fiscal year, Registrant used 44,227
of the shares it redeemed or repurchased for a reduction pursuant to paragraph
(c) of Rule 24f-2 under the Investment Company Act of 1940. Registrant is filing
this post-effective amendment to register the remaining 54,722 shares redeemed
or repurchased during its fiscal year ended December 31, 1995 plus an additional
34,606 shares. During its current fiscal year Registrant has filed no other
post-effective amendments for the purpose of the reduction pursuant to paragraph
(a) of Rule 24e-2.
SAFECO INSTITUTIONAL SERIES TRUST
Registration Statement on Form N-1A
Cross Reference Sheet
Part A
<TABLE>
<CAPTION>
Item No. Location in Prospectus
-------- ----------------------
<S> <C> <C>
Item 1. Cover Page Cover page
Item 2. Synopsis Introduction to the Trust and Fixed-Income
Portfolio;
Fixed-Income Portfolio Expenses
Item 3. Condensed Financial Information Financial Highlights;
Performance Information
Item 4. General Description of Registrant Fixed-Income Portfolio Investment Policies;
Eligible Investors; Information about Share
Ownership and Companies that Provide
Services to the Trust; Investment Strategy;
Risk Factors; Description of Ratings
Item 5. Management of the Trust Information about Share Ownership and
Companies that Provide Services to the
Trust; Portfolio Managers; Fixed-Income
Portfolio Expenses
Item 6. Capital Stock and Other Cover Page; Portfolio Distributions and How
Securities They are Taxed; Information about Share
Ownership and Companies that Provide
Services to the Trust
Item 7. Purchase of Securities How to Purchase Shares; How to Exchange
Being Offered Shares from One Fund to Another; Share
Price Calculation; Account Statements;
Telephone Transactions; Information about
Share Ownership and Companies that Provide
Services to the Trust
Item 8. Redemption or Repurchase How to Redeem Shares; How to Exchange
Shares from One Fund to Another; Account
Changes and Signature Requirements;
Telephone Transactions
Item 9. Pending Legal Proceedings Not applicable
</TABLE>
<PAGE> 3
Part B
<TABLE>
<CAPTION>
Item No.
-------- Location in Statement
of Additional Information
-------------------------
<S> <C> <C>
Item 10. Cover Page Cover page
Item 11. Table of Contents Cover page
Item 12. General Information and History Not applicable
Item 13. Investment Objectives and Fixed-Income Portfolio Investment Policies;
Policies Additional Investment Information
Item 14. Management of the Trust Trustees and Officers
Item 15. Control Persons and Principal Not applicable
Holders of Securities
Item 16. Investment Advisory and Other Investment Advisory and
Services Other Services
Item 17. Brokerage Allocation and Other Brokerage Practices
Practices
Item 18. Capital Stock and Other Not applicable
Securities
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
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> 4
SAFECO INSTITUTIONAL SERIES TRUST April 29, 1996
FIXED-INCOME PORTFOLIO
______________________________________________________________________________
THE FIXED-INCOME PORTFOLIO DESCRIBED IN THIS PROSPECTUS IS A SERIES OF THE
SAFECO INSTITUTIONAL SERIES TRUST ("TRUST"), AN OPEN-END, MANAGEMENT INVESTMENT
COMPANY CONSISTING OF ONE PORTFOLIO.
The FIXED-INCOME PORTFOLIO has as its investment objective to provide as high a
level of total return as is consistent with the relative stability of capital
through the purchase of investment grade debt securities.
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 April 29, 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 GENERAL INFORMATION AND ASSISTANCE IN OPENING NEW ACCOUNTS, PLEASE CALL OR
WRITE:
<TABLE>
<S> <C> <C>
Nationwide/Seattle 1-800-574-0233 SAFECO Securities, Inc.
-Ext. 1 or 2 Attn: Leslie Eggerling
S-3 SAFECO Plaza
Seattle, WA 98185
</TABLE>
FOR EXISTING ACCOUNT INFORMATION, ADDITIONAL PURCHASES OR EXCHANGES, PLEASE
CALL OR WRITE:
<TABLE>
<S> <C> <C>
Nationwide 1-800-624-5711 SAFECO Mutual Funds
Seattle 545-7319 P.O. Box 34890
Seattle, WA 98124-1890
</TABLE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
No dealer, salesperson or other person has been authorized to give any
information or to make any representation, other than those contained in this
Prospectus, in connection with the offer made by this Prospectus, and, if given
or made, such other information or representations must not be relied upon as
having been authorized by the Trust or its distributor. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy by the
Trust or by the distributor in any state in which such offer to sell or
solicitation of any offer to buy may not lawfully be made.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<S> <C>
Introduction to the Trust and Fixed-Income Portfolio . . . . . . . .
Fixed-Income Portfolio Expenses . . . . . . . . . . . . . . . . . .
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . .
Eligible Investors . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed-Income Portfolio Investment Policies . . . . . . . . . . . . .
Investment Strategy . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Portfolio Managers . . . . . . . . . . . . . . . . . . . . . . . . .
Information about Share Ownership and Companies that
Provide Services to the Trust . . . . . . . . . . . . . . . . . . .
Persons Controlling the Trust . . . . . . . . . . . . . . . . . . .
Performance Information . . . . . . . . . . . . . . . . . . . . . .
Portfolio Distributions and How They are Taxed . . . . . . . . . . .
Account Statements . . . . . . . . . . . . . . . . . . . . . . . . .
Account Changes and Signature Requirements . . . . . . . . . . . . .
Share Price Calculation . . . . . . . . . . . . . . . . . . . . . .
How to Purchase Shares . . . . . . . . . . . . . . . . . . . . . . .
How to Redeem Shares . . . . . . . . . . . . . . . . . . . . . . . .
How to Exchange Shares from One Fund to Another . . . . . . . . . .
Telephone Transactions . . . . . . . . . . . . . . . . . . . . . . .
Description of Ratings . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
2
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INTRODUCTION TO THE TRUST AND FIXED-INCOME PORTFOLIO
- ----------------------------------------------------
The Trust is a series investment company that currently issues shares
representing one mutual fund: the Fixed-Income Portfolio ("Portfolio"). The
Portfolio is a diversified series of the Trust, an open-end, management
investment company which continuously offers to sell and to redeem (buy back)
its shares at the current net asset value per share without any sales or
redemption charges or 12b-1 fees.
The Trust is designed primarily for institutional investors as an investment
vehicle for assets held by the institutions on behalf of employees who
participate in their employee benefit or pension plans. The Trust may also be
appropriate for assets held by endowments and foundations and for assets held
in an institution's own account.
The Portfolio has as its investment objective to provide as high a level of
total return as is consistent with the relative stability of capital through
the purchase of investment grade debt securities. There is, of course, no
assurance that the Portfolio will achieve its investment objective. See
"Fixed-Income Portfolio Investment Policies" for more information.
There is a risk that the market value of the Portfolio's securities may
decrease and result in a decrease in the value of a shareholder's investment.
Also, the value of shares of the Portfolio will normally fluctuate inversely
with changes in interest rates. See "Fixed-Income Portfolio Investment
Policies" for more information.
The Portfolio 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 March 31, 1996. 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 that Provide
Services to the Trust" for more information.
The Portfolio:
o Is no-load; there are no sales or redemption charges or 12b-1 fees.
o Pays dividends, if any, monthly.
o Requires a minimum initial investment of $250,000 (minimum investment
is waived for investments by certain qualified retirement plans, see
"How to Purchase Shares)."
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FIXED-INCOME PORTFOLIO EXPENSES
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A. SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fees None
</TABLE>
SAFECO Services Corporation, the transfer agent for the Fixed-Income Portfolio,
charges a $10 fee to wire redemption proceeds.
B. ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<S> <C>
Management Fee 0.49%
12b-1 Fee None
Other Expenses 0.67%
Total Operating Expenses 1.16%
</TABLE>
The amounts shown are actual expenses paid by shareholders for the year ended
December 31, 1995. See "Information about Share Ownership and Companies that
Provide Services to the Trust" beginning on page ___ for more information.
C. EXAMPLE OF EXPENSES
A shareholder 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>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C>
$11.82 $36.85 $63.83 $140.90
</TABLE>
The purpose of the tables is to assist an investor in understanding the various
costs and expenses that an investor in the Portfolio will bear, directly or
indirectly. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. THE FIXED-INCOME PORTFOLIO'S ACTUAL EXPENSES OR PERFORMANCE
MAY BE GREATER OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
REQUIRED BY SECURITIES AND EXCHANGE COMMISSION REGULATIONS APPLICABLE TO ALL
MUTUAL FUNDS AND IT IS NOT A PREDICTION OF, NOR DOES IT REPRESENT, PAST OR
FUTURE EXPENSES OR THE PERFORMANCE OF THE PORTFOLIO.
4
<PAGE> 8
FINANCIAL HIGHLIGHTS
THE FIXED-INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO INSTITUTIONAL SERIES TRUST - FIXED-INCOME PORTFOLIO
The supplemental financial information and performance data has been derived
from the Financial Statements and should be read in conjunction therewith.
<TABLE>
<CAPTION>
February 28, 1994
For the Year Ended (Initial Public
December 31, Offering)
1995 To Dec. 31, 1994
------------------- ------------------
<S> <C> <C>
Net asset value at beginning of period.... $ 8.15 $ 8.68
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................. .44 .27
Net realized and unrealized gain (loss)
on investment transactions.......... .94 (.53)
Total from investment operations.......... 1.38 (.26)
----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income................. (.44) (.27)
Realized gains on investments ......... (.32) ---
----------- ----------
Total distributions....................... (.76) (.27)
----------- ----------
Net asset value at end of period.......... $8.77 $8.15
----------- ----------
Total return.............................. 17.35% -3.01%+
Net assets at end of period
(000's omitted)......................... $4,497 $4,627
Ratio of expenses to average net assets... 1.16% 1.28%++
Ratio of net investment income to
average net assets...................... 5.14% 3.88%++
Portfolio turnover rate................... 78.78% 132.26%++
</TABLE>
+ Not Annualized.
++ Annualized.
5
<PAGE> 9
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO INSTITUTIONAL SERIES TRUST - FIXED-INCOME PORTFOLIO
The supplemental financial information and performance data has been derived
from the Financial Statements and should be read in conjunction therewith.
<TABLE>
<CAPTION>
February 28, 1994
For the Year Ended (Initial Public
December 31, Offering)
1995 To Dec. 31, 1994
---------------------------------------
<S> <C> <C>
Net asset value at beginning of period..... $ 8.15 $ 8.68
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................... .44 .27
Net realized and unrealized gain (loss)
on investment transactions........... .94 (.53)
------------------ ------------------
Total from investment operations........... 1.38 (.26)
------------------ ------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income................... (.44) (.27)
Realized gains on investments .......... (.32) ---
------------------ ------------------
Total distributions........................ (.76) (.27)
------------------ ------------------
Net asset value at end of period........... $ 8.77 $ 8.15
================== ==================
Total return............................... 17.35% -3.01%+
Net assets at end of period
(000's omitted).......................... $4,497 $4,627
Ratio of expenses to average net assets.... 1.16% 1.28%++
Ratio of net investment income to
average net assets....................... 5.14% 3.88%++
Portfolio turnover rate.................... 78.78% 132.26%++
</TABLE>
+ Not Annualized.
++ Annualized.
<PAGE> 10
- ------------------
ELIGIBLE INVESTORS
- ------------------
The Trust is designed primarily for institutional investors as an investment
vehicle for assets held by the institutions on behalf of employees who
participate in their employee benefit or pension plans. It may also be
appropriate for assets held by endowments and foundations and assets held in
the institution's own account. Please note that SAFECO Services Corporation
("SAFECO Services"), the Trust's transfer agent may not be able to provide
participant sub-accounting services for all employee benefit or pension plans
that require such services.
- ------------------------------------------
FIXED-INCOME PORTFOLIO INVESTMENT POLICIES
- ------------------------------------------
The Trust is a Delaware business trust established by the Trust Instrument
dated May 13, 1993. The Trust currently consists of one mutual fund: the
Fixed-Income Portfolio, which is a diversified series of the Trust.
The investment objective and investment policies for the Portfolio are
described below. The Trust's Board of Trustees may change the Portfolio's
investment objective without a shareholder vote, but no change will be made
without 30 days' prior written notice to shareholders of the Portfolio. In the
event the Portfolio changes its investment objective, the new objective may not
meet the investment needs of every shareholder and may be different from the
objective a shareholder considered appropriate at the time of initial
investment.
Unless otherwise stated, the investment policies and limitations described
below are non-fundamental and may be changed by the Board of Trustees without
shareholder vote. If the Portfolio 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 the Portfolio
complies with the applicable policy (except to the extent the change may impact
the Portfolio's borrowing limits).
The investment objective of the Portfolio is to provide as high a level of
total return as is consistent with the relative stability of capital through
purchase of investment grade debt securities.
To pursue its objective, the Portfolio:
1. WILL INVEST AT LEAST 65% OF ITS TOTAL ASSETS IN FIXED INCOME
SECURITIES.
2. WILL INVEST PRIMARILY IN INVESTMENT GRADE DEBT SECURITIES; I.E.,
SECURITIES RATED IN THE TOP FOUR CATEGORIES BY EITHER STANDARD &
POOR'S RATINGS GROUP ("S&P") OR MOODY'S INVESTORS SERVICE, INC.
("MOODY'S") OR IF NOT RATED, SECURITIES WHICH, IN SAM'S OPINION, ARE
COMPARABLE IN
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QUALITY TO INVESTMENT GRADE DEBT SECURITIES. Included in investment
grade debt securities are securities of medium grade (rated Baa by
Moody's or BBB by S&P) which have speculative characteristics and are
more likely to have a weakened capacity to make principal and interest
payments under changing economic or other conditions than higher grade
securities. The Portfolio will limit investments in such medium grade
debt securities to no more than 10% of its total assets. Unrated
securities are not necessarily of lower quality than rated securities,
but may not be as attractive to investors.
The Portfolio may retain debt securities which are down-graded to
below investment grade (commonly referred to as "high yield" or "junk"
bonds) after purchase, but no more than 5% of its total assets will be
invested in such securities. In addition to reviewing ratings, SAM
may analyze the quality of rated and unrated debt securities purchased
for the Portfolio by evaluating the issuer's capital structure,
earnings power, quality of management and position within its
industry. For a description of ratings for debt securities, see
"Description of Ratings."
3. WILL INVEST AT LEAST 50% OF ITS TOTAL ASSETS IN OBLIGATIONS OF OR
GUARANTEED BY THE U.S. GOVERNMENT, ITS AGENCIES AND INSTRUMENTALITIES.
These obligations include (a) direct obligations of the U.S. Treasury,
such as U.S. Treasury notes, bills and bonds; (b) 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 ("GNMA"); (c) 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 (d) 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.
4. MAY INVEST UP TO 50% OF ITS TOTAL ASSETS IN CORPORATE DEBT SECURITIES
OR EURODOLLAR BONDS. Eurodollar bonds are bonds issued by either U.S.
or foreign issuers that are traded in the European bond markets and
denominated in U.S. dollars. The Portfolio will purchase Eurodollar
bonds through U.S. securities dealers and hold such bonds in the U.S.
The delivery of Eurodollar bonds to the Portfolio's custodian in the
U.S. may cause slight delays in settlement which are not anticipated
to affect the Portfolio in any material, adverse manner. Eurodollar
bonds issued by foreign issuers are subject to the same risks as
Yankee sector bonds discussed below.
5. MAY INVEST IN ASSET-BACKED SECURITIES, WHICH REPRESENT INTERESTS IN,
OR ARE SECURED BY AND PAYABLE FROM, POOLS OF ASSETS SUCH AS CONSUMER
LOANS, AUTOMOBILE RECEIVABLE SECURITIES, CREDIT CARD RECEIVABLE
SECURITIES, AND INSTALLMENT LOAN CONTRACTS. These securities may be
supported by credit enhancements such as letters of credit. Payment
of interest and principal
7
<PAGE> 12
ultimately depends upon borrowers paying the underlying loans. There
exists a risk of default by the underlying borrowers and recovery on
repossessed collateral may be unavailable or inadequate to support
payments on asset-backed securities. In addition, asset-backed
securities are subject to prepayment risks which may reduce the
overall return of the investment.
6. MAY INVEST UP TO 10% OF ITS TOTAL ASSETS IN YANKEE SECTOR DEBT
SECURITIES, which are securities issued and traded in the U.S. by
foreign issuers. These bonds have investment risks that are different
from those of domestic issuers. Such risks may include
nationalization of the issuer, confiscatory taxation by the foreign
government that would inhibit the remittance of amounts due the
Portfolio, 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.
Both S&P and Moody's rate Yankee sector debt obligations. If a debt
obligation is unrated, SAM will make every effort to analyze a
potential investment in the foreign issuer with respect to quality and
risk on the same basis as the rating services. 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 investments in foreign securities on the same
basis, and with comparable quantities and types of information, as its
investments in domestic securities, it may not always be able to do
so.
7. MAY PURCHASE OR SELL SECURITIES ON A WHEN-ISSUED OR DELAYED-DELIVERY
BASIS. Under this procedure, the Portfolio agrees to acquire
securities that are to be issued and delivered against payment in the
future, normally 30 to 45 days. The price, however, is fixed at the
time of commitment. When the Portfolio purchases when-issued or
delayed-delivery securities, it will segregate liquid, high quality
securities in an amount equal in value to the purchase price of the
security. Use of these techniques may affect the Portfolio's share
price in a manner similar to the use of leveraging.
8. MAY HOLD CASH OR INVEST TEMPORARILY IN HIGH QUALITY, SHORT-TERM
SECURITIES ISSUED BY AN AGENCY OR INSTRUMENTALITY OF THE U.S.
GOVERNMENT, HIGH QUALITY COMMERCIAL PAPER, CERTIFICATES OF DEPOSIT,
SHARES OF NO-LOAD, OPEN-END MONEY MARKET FUNDS OR REPURCHASE
AGREEMENTS. The Portfolio may purchase these short-term securities as
a cash management technique under those circumstances where it has
cash to manage for a short time period, for example, after receiving
proceeds from the sale of securities, dividend distributions from
portfolio securities or cash from the sale of Portfolio 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 Portfolio assets invested in money market
funds. With respect to repurchase agreements, the Portfolio will
invest no more than 5% of its total assets in repurchase
8
<PAGE> 13
agreements and will not purchase repurchase agreements which mature in
more than seven days.
9. MAY HOLD CASH AS A TEMPORARY DEFENSIVE MEASURE WHEN MARKET CONDITIONS
SO WARRANT.
10. MAY INVEST UP TO 5% OF ITS TOTAL ASSETS IN MUNICIPAL SECURITIES IF, IN
SAM'S OPINION, THE POTENTIAL FOR APPRECIATION IS GREATER THAN, AND
YIELD IS COMPARABLE TO OR GREATER THAN, SIMILARLY RATED TAXABLE
SECURITIES.
11. MAY INVEST FOR SHORT-TERM PURPOSES WHEN SAM BELIEVES SUCH ACTION TO BE
DESIRABLE AND CONSISTENT WITH SOUND INVESTMENT PRACTICES. The
Portfolio, however, will not engage primarily in trading for the
purpose of short-term profits. The Portfolio may dispose of its
portfolio securities whenever SAM deems advisable, without regard to
the length of time the securities have been held.
THE PORTFOLIO HAS ADOPTED A NUMBER OF INVESTMENT RESTRICTIONS. IF THE
PORTFOLIO 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 THE PORTFOLIO COMPLIES WITH THE APPLICABLE
POLICY. THE FOLLOWING RESTRICTIONS ARE FUNDAMENTAL POLICIES WHICH CANNOT BE
CHANGED WITHOUT SHAREHOLDER VOTE.
1. THE PORTFOLIO, 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. THE PORTFOLIO, 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. THE PORTFOLIO MAY BORROW MONEY FOR TEMPORARY OR EMERGENCY PURPOSES
ONLY FROM A BANK OR AFFILIATE OF SAFECO CORPORATION AT AN INTEREST
RATE NOT GREATER THAN THAT AVAILABLE FROM COMMERCIAL BANKS. The
Portfolio will not borrow amounts in excess of 20% of its total
assets. As a non-fundamental policy, the Portfolio will not purchase
securities if outstanding borrowings are equal to or greater than 5%
of its total assets. The Portfolio intends to exercise its borrowing
authority primarily to meet shareholder redemptions under
circumstances where redemptions exceed available cash.
For more information, see the "Fixed-Income Portfolio Investment Policies" and
"Additional Investment Information" sections of the Trust's Statement of
Additional Information.
9
<PAGE> 14
- -------------------
INVESTMENT STRATEGY
- -------------------
In pursuing the Portfolio's investment objective, SAM will seek to minimize the
effects of interest rate risks while pursuing total return by adjusting the
investment portfolio's average maturity in response to interest rate changes.
In general, the Portfolio will hold fixed-income securities with shorter
maturities as interest rates rise and with longer maturities as interest rates
fall. The fixed-income securities held by the Portfolio will have maturities
of 10 years or less from the date of purchase. SAM reserves the right to
modify the Portfolio's investment strategy in any respect at any time.
- ------------
RISK FACTORS
- ------------
Various factors may cause the value of a shareholder's investment to fluctuate.
The principal risk associated with an investment in a mutual fund like the
Portfolio 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 the Portfolio's investment 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 the Portfolio 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 by the Portfolio will fail
to make timely payment of principal and interest to the Portfolio.
- ------------------
PORTFOLIO MANAGERS
- ------------------
The manager for the Portfolio is Michael C. Knebel, Vice President, SAM. Mr.
Knebel has served as manager or co-manager for the Portfolio since 1994. He
has served as portfolio manager for other SAFECO mutual funds since 1989.
- --------------------------------------------
INFORMATION ABOUT SHARE OWNERSHIP AND
COMPANIES THAT PROVIDE SERVICES TO THE TRUST
- --------------------------------------------
The Portfolio is a series of the SAFECO Institutional Series Trust, a Delaware
business trust, which issues an unlimited number of shares of beneficial
interest. The Board of Trustees may establish additional series of shares of
the Trust without approval of shareholders.
Shares of the Portfolio represent equal proportionate interests in the assets
of the Portfolio and have identical voting, dividend, redemption, liquidation
and
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<PAGE> 15
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.
The Trust does not intend to hold annual meetings of shareholders of the
Portfolio. The Trustees will call special meetings of shareholders of the
Portfolio only if required under the Investment Company Act of 1940, in their
discretion or upon the written request of holders of 10% or more of the
outstanding shares of the Portfolio entitled to vote.
Under Delaware law, the shareholders of the Portfolio will not be personally
liable for the obligations of the Portfolio; a shareholder is entitled to the
same limitation of personal liability extended to shareholders of corporations.
To guard against the risk that Delaware law might not be applied in other
states, the Trust Instrument requires that every written obligation of the
Trust or Portfolio contain a statement that such obligation may be enforced
only against the assets of the Trust or Portfolio and generally provides for
indemnification out of Trust or Portfolio property of any shareholder
nevertheless held personally liable for Trust or Portfolio obligations,
respectively.
SAM is the investment adviser for the Portfolio under an agreement with the
Trust. Under the agreement, SAM is responsible for the overall management of
the Trust's and Portfolio's business affairs. SAM provides investment
research, advice, management and supervision to the Trust and the Portfolio.
Consistent with the Portfolio's investment objectives and policies, SAM
determines what securities will be purchased, retained or sold by the Portfolio
and implements those decisions. The Portfolio's turnover rate is set forth in
the "Financial Highlights" section on page ___. High turnover rates increase
transaction costs and may increase taxable gains. SAM considers these effects
when making investment decisions.
The Portfolio pays SAM an annual management fee based on a percentage of the
Portfolio's net assets ascertained each business day and paid monthly in
accordance with the schedule below. A reduction in the fees paid by the
Portfolio occurs only when the Portfolio's net assets reach the dollar amounts
of the break points and applies only to the assets that fall within the
specified range:
<TABLE>
<CAPTION>
NET ASSETS ANNUAL FEE
<S> <C>
$0 - $100,000,000 .50 of 1%
$100,000,001 - $250,000,000 .40 of 1%
Over $250,000,000 .35 of 1%
</TABLE>
For the year ended December 31, 1995, the Portfolio's total expenses and the net
compensation paid by the Portfolio to SAM, expressed as a percentage of average
net assets, were as follows:
11
<PAGE> 16
<TABLE>
<CAPTION>
Ratio of Expenses to Ratio of Net Compensation
Average Net Assets to Average Net Assets
------------------ ---------------------
<S> <C> <C>
Fixed-Income
Portfolio 1.16% 0.49%
</TABLE>
The distributor of the Portfolio's shares under an agreement with the Trust is
SAFECO Securities, Inc. ("SAFECO Securities"), a broker-dealer registered under
the Securities Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc. SAFECO Securities receives no compensation from the
Trust or the Portfolio for its services.
The transfer, dividend and distribution disbursement and shareholder servicing
agent for the Portfolio under an agreement with the Trust is SAFECO Services.
SAFECO Services receives a fee from the Portfolio for each shareholder
transaction processed for the Portfolio.
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.
- -----------------------------
PERSONS CONTROLLING THE TRUST
- -----------------------------
At March 31, 1996, Crown Packaging Corp. PS & P and Massman Construction Co.
PSRT controlled the Fixed-Income Portfolio. Crown Packaging Corp. PS & P's
address of record is 8514 Eager Road, St. Louis, MO 63144. Massman
Construction Co. PSRT's address of record is 8901 Stateline, Kansas City, MO
64114.
- -----------------------
PERFORMANCE INFORMATION
- -----------------------
The Portfolio's yield, total return and average annual total return may be
quoted in advertisements. Yield is the annualization on a 360-day basis of the
Portfolio's net income per share over a 30-day period divided by the
Portfolio's net asset value per share on the last day of the period. The
formula for the yield calculation is defined by regulation. Consequently, the
rate of actual income distributions paid by the Portfolio may differ from
quoted yield figures. Total return is the total percentage change in an
investment in the Portfolio, assuming the reinvestment of dividends and capital
gains distributions, over a stated period of time. Average annual total return
is the annual percentage change in an investment in the Portfolio, assuming the
reinvestment of dividends and capital gains distributions over a stated period
of time.
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<PAGE> 17
From time to time, the Portfolio may advertise its rankings. 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. The
Portfolio may also compare its performance to the percentage increases in
relevant indices.
Performance information and quoted rankings are indicative only of past
performance and are not intended to represent future investment results. The
Portfolio's yield and share price will fluctuate and shares, when redeemed, may
be worth more or less than a shareholder originally paid for them.
- ----------------------------------------------
PORTFOLIO DISTRIBUTIONS AND HOW THEY ARE TAXED
- ----------------------------------------------
DIVIDENDS AND OTHER DISTRIBUTIONS
The Portfolio 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 declared dividends on the next business day after shares are purchased in
the shareholder's account. If a shareholder requests redemption of all shares
at any time during a month, the shareholder will receive all declared dividends
through the date of redemption, together with the proceeds of the redemption.
A shareholder's dividends and other distributions are reinvested in additional
shares of the Portfolio at net asset value per share generally determined as of
the close of business on the ex-distribution date, unless the shareholder
elects 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 the Portfolio must be invested in
additional shares of the Portfolio.
Please remember that if an investor purchases shares shortly before the
Portfolio pays a taxable dividend or other distribution, the investor will pay
the full price for the shares, then receive part of the price back as a taxable
distribution.
TAXES
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<PAGE> 18
The Portfolio intends to continue to qualify for treatment as a regulated
investment company under Subchapter M of the Internal Revenue Code. By so
qualifying, the Portfolio will not be subject to federal income taxes to the
extent it distributes its net investment income and realized capital gains to
its shareholders. The Portfolio will inform each shareholder as to the amount
and nature of dividends and other distributions to that shareholder's 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
Investors will be asked to certify on their account application or on separate
forms that the tax identification number provided is correct and that the
investor is not subject to, or is exempt from, backup withholding for previous
under-reporting to the Internal Revenue Service.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting the Portfolio and its shareholders; see the
Trust's Statement of Additional Information for a further discussion. There
may be other federal, state or local tax considerations applicable to a
particular investor. Investors therefore are urged to consult a tax advisor.
- ------------------
ACCOUNT STATEMENTS
- ------------------
Periodically, shareholders will receive account statements indicating current
fund holdings and transactions affecting their accounts. Confirmation
statements will be sent after every transaction that affects the shareholder's
account balance. Please review the information on each confirmation statement
for accuracy immediately upon receipt. If we are not notified 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 an account registration or the services an account owner has
selected must be in writing and signed by the persons specified on the account
application as having authority to make these changes. Send written changes to
SAFECO Services at the address on the Prospectus cover. Certain changes can be
made via telephone request if single signature authorization for the account
has been previously selected.
An investor must specify on the 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
14
<PAGE> 19
redeem money or change the account registration to single ownership without the
co-owner's signature. If the investor does not indicate otherwise on the
application, the signatures of all account owners will be required to effect a
transaction. The 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 that cannot
be verified by comparison to the signature on the account application. A
signature guarantee may be obtained from most financial institutions, including
banks, savings and loans and broker-dealers.
- -----------------------
SHARE PRICE CALCULATION
- -----------------------
Because the Portfolio 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 the
Portfolio's liabilities from its assets and dividing the result by the number
of outstanding shares.
The values of the portfolio securities of the Portfolio 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 for
which a representative value cannot be established are valued at their fair
value as determined in good faith by or under the direction of the Trust's
Board of Trustees.
- ----------------------
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.
The Portfolio only accepts funds drawn in U.S. dollars and payable through a
U.S. bank. The Portfolio does not accept currency.
Certificates for shares will not be issued.
THE PORTFOLIO HAS THE RIGHT TO REFUSE ANY INVESTMENT.
INITIAL PURCHASES
Minimum initial investment $250,000, except that the minimum initial investment
will be waived with respect to investments by qualified plans defined under
15
<PAGE> 20
sections 401(a), 401(k), 403(b) or 457 of the Internal Revenue Code of 1986, as
amended.
BY WRITTEN REQUEST
Send a check or money order made payable to SAFECO Institutional Series Trust
Fixed-Income Portfolio and a completed and signed application to the address
for SAFECO Services on the Prospectus cover.
BY WIRE
Call toll-free 1-800-624-5711 or, in Seattle, 545-7319 for instructions.
ADDITIONAL PURCHASES
No minimum additional investment amount.
BY WRITTEN REQUEST
Send a check or money order payable to SAFECO Institutional Series Trust
Fixed-Income Portfolio to the address on the Prospectus cover. Please specify
the account number.
BY WIRE
Instruct the 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 a shareholder's account, ask the bank to include the
following information in its wire to U.S. Bank of Washington, N.A.:
o SAFECO Institutional Series Trust - Fixed-Income Portfolio
o SAFECO account number
o Name of the registered owner(s) of the SAFECO account
Delays of purchases caused by inadequate wire instructions are not the
responsibility of the Portfolio or SAFECO Services.
A bank may charge a fee for wire services.
BY TELEPHONE
Call 1-800-624-5711 or, in Seattle, 545-7319. This service must have been
previously selected on the account application or by written request. Not
available to open a new account.
Maximum purchase $1,000,000 per day.
Monies will be transferred from a predesignated bank account to an existing
Portfolio account. A bank may charge a fee if monies are wired to a
shareholder's Portfolio account.
16
<PAGE> 21
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 ___ for important information.
AUTOMATIC INVESTMENT METHOD (AIM)
Call 1-800-426-6730 for more information.
AIM enables a shareholder to make regular monthly investments by authorizing
SAFECO Services to withdraw a specific amount (minimum of $100 per withdrawal)
from the shareholder's bank account and invest it in the Portfolio.
SHARE PURCHASE PRICE
An investor will buy full and fractional shares at the NAV next computed after
a check, money order or wire has been received. For telephone purchase orders,
an investor will receive the price per share calculated on the day monies are
received from the investor's bank account. See "Share Price Calculation" on
page ___ for more information.
- --------------------
HOW TO REDEEM SHARES
- --------------------
SHARE REDEMPTION PRICE AND PROCESSING
Shares will be redeemed at the NAV next calculated after receipt of a request
which meets the redemption requirements of the Portfolio. The value of the
shares redeemed may be more or less than the dollar amount of shares purchased,
depending on the market value of the shares at the time of redemption. See
"Share Price Calculation," on page ___ for more information. Under some
circumstances (e.g., a change in corporate officer or authorized trustee),
SAFECO Services may require certified copies of supporting documents before a
redemption will be made.
Redemption proceeds will normally be sent on the business day following receipt
of a redemption request. If the 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. The Portfolio, however, reserves
the right to postpone payment of redemption proceeds for up to seven days if
making immediate payment could adversely affect the 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, the shareholder's account
may be closed upon 60 days written notice if at the time of any redemption or
17
<PAGE> 22
exchange the total value falls below $100. Shares will be redeemed at the
share price calculated on the day the account is closed.
BY WRITTEN REQUEST
Shares may be redeemed by sending a letter which specifies the account number,
the Portfolio's name and the number of shares or dollar amount an investor
wishes to redeem. The request should be sent to the address of SAFECO Services
on the Prospectus cover. The request must be signed by the appropriate persons
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 ___ for more information.
BY TELEPHONE
Call 1-800-624-5711 or, in Seattle, 545-7319. This service must have been
previously selected on the account application or by written request.
A shareholder may request that redemption proceeds be sent directly to a
predesignated bank or mailed to the account address of record.
Please read "Telephone Transactions" on page ___ for important information.
PLEASE NOTE THE FOLLOWING:
If shares were purchased by wire, redemption proceeds will be available
immediately. If shares were purchased by a means other than wire, the
Portfolio reserves the right to hold the proceeds of a redemption for up to 15
business days after investment or until such time as the Portfolio has received
assurance that an 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.
- -----------------------------------------------
HOW TO EXCHANGE SHARES FROM ONE FUND TO ANOTHER
- -----------------------------------------------
An exchange is the redemption of shares of one SAFECO Fund such as the
Portfolio and the purchase of shares of another SAFECO Fund in accounts that
are identically registered; i.e., have the same registered owners and account
number. Exchanges are not tax-free and may result in a shareholder realizing a
gain or loss, as the case may be, for tax purposes.
18
<PAGE> 23
Shares of a SAFECO Fund may be purchased by exchange only if that Fund is
registered for sale in the state where the shareholder resides. 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 SAFECO Funds to be exchanged out of and
into as well as the shareholder's account number. The request must be signed
by the number of persons designated on the shareholder's account application
and in some cases a signature guarantee may be required. See "Account Changes
and Signature Requirements" on page ___ for more information.
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 ___ for important information.
LIMITATIONS
The Portfolio reserves the right to refuse exchange purchases by any person or
group if, in SAM's judgment, the Portfolio would be unable to invest the money
effectively in accordance with that Portfolio's investment objective and
policies, or would otherwise potentially be adversely affected. The exchange
privilege is subject to termination and its terms are subject to change.
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 Portfolio. A
shareholder's exchanges may be restricted or refused if the Portfolio receives
or anticipates simultaneous orders affecting significant portions of the
Portfolio's assets, for example, a pattern of exchanges that coincides with a
"market-timing" strategy.
Although the Portfolio will attempt to give a shareholder prior notice whenever
it is reasonably able to do so, it may impose these restrictions at any time.
SHARE EXCHANGE PRICE AND PROCESSING
The shares of the Portfolio or other SAFECO fund the shareholder is exchanging
from will be redeemed at the price next computed after the exchange request is
19
<PAGE> 24
received. Normally the purchase of the SAFECO fund being exchanged 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 investment
portfolio of the Portfolio or the other SAFECO fund whose shares are redeemed.
The exchange privilege may be modified or terminated with respect to the
Portfolio at any time, upon at least 60 days' notice to shareholders.
- ----------------------
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
shareholders' protection. During times of drastic or unusual market
volatility, it may be difficult to exercise the telephone transaction
privileges.
To use the telephone purchase, redemption and exchange privileges, the
shareholder must have previously selected these services either on the
shareholder's 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 Portfolio and SAFECO Services to
accept telephone instructions from an account owner or a person preauthorized
in writing by an account owner.
The Portfolio and SAFECO Services reserve the right to refuse any telephone
transaction when the Portfolio 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 Portfolio and SAFECO Services will not be liable for the authenticity of
instructions received by telephone that the Portfolio or SAFECO Services, in
its discretion, believes to be delivered by an account owner or preauthorized
person, provided that the Portfolio or SAFECO Services follows reasonable
procedures to identify the caller. The shareholder will bear the risk of any
resulting loss. The Portfolio 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 Portfolio or SAFECO
Services.
- ----------------------
DESCRIPTION OF RATINGS
- ----------------------
20
<PAGE> 25
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Moody's. Issuers rated Prime-1 have a superior capacity, issuers rated Prime-2
have a strong capacity and issuers rated Prime-3 have an acceptable capacity
for the repayment of short-term promissory obligations.
S&P. Commercial paper issues rated A are the highest quality obligations.
Issues in this category are regarded as having the greatest capacity for timely
payment. For issues designated A-1 the degree of safety regarding timely
payment is very strong. Issuers designated A-2 also have a strong capacity for
timely payment but not as high as A-1 issuers. Issuers designated A-3 have a
satisfactory capacity for timely payment.
DESCRIPTION OF DEBT RATINGS
MOODY'S. Excerpts from Moody's description of its ratings:
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 by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such
changes as can be anticipated are most unlikely to impair the fundamentally
strong position of such issues.
Aa -- Judged to be of high quality by all standards. Together with the Aaa
group they comprise what are generally known as high grade bonds. They are
rated lower than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the long
term risks appear somewhat larger than in Aaa securities.
A -- Have many favorable investment attributes and are to be 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. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well.
Non-Investment Grade:
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<PAGE> 26
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 the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the
contract over any long period of time may be 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. Issues so rated have extremely poor
prospects of ever attaining any real investment standing.
S&P. Excerpts from S&P's description of its ratings:
Investment Grade:
AAA -- The highest rating assigned by Standard & Poor's. Capacity to pay
interest and repay principal is extremely strong.
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 -- Have an 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.
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.
Non-Investment Grade:
BB, B, CCC, CC -- Predominately 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.
22
<PAGE> 27
D -- In default, and payment of interest and/or repayment of principal is in
arrears.
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.
23
<PAGE> 28
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 International Stock Fund
SAFECO Balanced 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 INVESTING OR SENDING MONEY.
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<PAGE> 29
PROSPECTUS
TO REQUEST A PROSPECTUS: April 29, 1996
Nationwide/Seattle: SAFECO Institutional Series Trust
1-206-545-6475 Fixed-Income Portfolio
A No Load Fund
FOR 24-HOUR
PERFORMANCE FIGURES:
Nationwide: 1-800-835-4391
Seattle: 545-5113
FOR ACCOUNT INFORMATION
OR TELEPHONE TRANSACTIONS*:
Nationwide: 1-800-624-5711
Seattle: 545-7319
Hearing Impaired TTY/TDD
Service: 1-800-438-8718
* All telephone calls are tape-
recorded for investor protection.
Mailing Address:
SAFECO Mutual Funds
P.O. Box 34890
Seattle, Washington 98124-1890
Express/Overnight Mail:
SAFECO Mutual Funds
4333 Brooklyn Avenue N.E.
Seattle, Washington 98105
SAFECO Securities, Inc.
Distributor
25
<PAGE> 30
SAFECO INSTITUTIONAL SERIES TRUST
FIXED-INCOME PORTFOLIO
Statement of Additional Information
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Prospectus for the SAFECO Institutional Series Trust
("Trust"). A copy of the Prospectus may be obtained by writing SAFECO
Securities, Inc., Attn: Leslie Eggerling, S-3 SAFECO Plaza, Seattle, Washington
98185, or by calling 1-800-574-0233, Ext. 1 or 2.
The date of the most current Prospectus of the Trust to which this Statement
relates is April 29, 1996.
The date of this Statement of Additional Information is April 29, 1996.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Fixed-Income Portfolio Principal Shareholders of the
Investment Policies Portfolio
Additional Investment Information Trustees and Officers
Additional Tax Information Investment Advisory and
Other Services
Additional Information on
Calculation of Net Asset Brokerage Practices
Value Per Share
Redemption in Kind
Additional Performance
Information Financial Statements
</TABLE>
<PAGE> 31
FIXED-INCOME PORTFOLIO INVESTMENT POLICIES
The Fixed-Income Portfolio ("Portfolio") is a series of the SAFECO
Institutional Series Trust ("Trust"). The investment policies of the Portfolio
are described in the Prospectus and this Statement of Additional Information.
These policies state the investment practices that the Portfolio will follow,
in some cases limiting investments to a certain percentage of assets, as well
as those activities that are prohibited. The types of securities the Portfolio
may invest in is also disclosed in the Prospectus. Before the Portfolio
purchases a security that 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 the Portfolio complies with the applicable
limitation.
FUNDAMENTAL INVESTMENT POLICIES
The Portfolio's fundamental policies may not be changed without 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 the Portfolio means the vote,
at a meeting of the shareholders of the Portfolio 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, the Portfolio 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 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 the Portfolio'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. Purchase the securities of any issuer (other than obligations of or
guaranteed by the U.S. Government, its agencies and instrumentalities)
if, as a result, more than ten percent (10%) of any class of
securities of such issuer will be held by the Portfolio;
3. Purchase securities, if as a result, twenty-five percent (25%) or more
of the Portfolio's total assets would be invested in the securities of
issuers having their principal business activities in any one
industry. Securities of foreign banks and foreign branches of U.S.
banks are considered to be one industry. This limitation does not
apply to obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities or to certificates of deposits or
bankers' acceptances issued by domestic banks;
4. Purchase securities on margin, except for short-term credits necessary
for the clearance of transactions;
5. Make short sales of securities (sales of securities not presently
owned);
6. Make loans, except through the purchase of a portion or all of an
issue of
<PAGE> 32
debt securities in accordance with the Portfolio's investment
objective, policies and restrictions or through investments in
qualified repurchase agreements;
7. Borrow money, except from a bank or SAFECO Corporation or its
affiliates at an interest rate not greater than that available to the
Portfolio 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 Portfolio's total
assets (including borrowings) less liabilities (other than borrowings)
immediately after such borrowing;
8. Underwrite any issue of securities, except to the extent that the
purchase of permitted investments directly from the issuer in
accordance with the Portfolio'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;
9. Purchase or sell real estate or real estate limited partnerships
(unless acquired as a result of the ownership of securities or
instruments) but this shall not prevent the Portfolio from investing
in permitted investments secured by real estate or interests therein
or in real estate investment trusts;
10. Purchase or sell commodities, commodity contracts or futures
contracts;
11. Participate on a joint or joint-and-several basis in any trading
account in securities, except that the Portfolio may join with other
transactions executed by the investment adviser or the investment
adviser's parent company and any subsidiary thereof, for the purpose
of seeking better net results on portfolio transactions or lower
brokerage commission rates; or
12. Issue or sell any senior security, except as permitted under the 1940
Act.
NON-FUNDAMENTAL INVESTMENT POLICIES
In addition to the policies described in the Prospectus, the Portfolio has
adopted the following non-fundamental policies which may be changed by the
Trust's Board of Trustees without shareholder approval:
1. The Portfolio will not issue long-term debt securities.
2. The Portfolio will not invest in any security for the purpose of
acquiring or exercising control or management of the issuer.
3. The Portfolio will not invest in oil, gas or other mineral exploration
or development programs or leases.
4. The Portfolio will not invest in or sell (write) puts, calls,
straddles, spreads or any combinations thereof.
5. The Portfolio will not invest more than five percent (5%) of its total
assets in securities of issuers (including predecessor companies of
the
- 3 -
<PAGE> 33
issuer) having a record of less than three years continuous operation.
6. The Portfolio 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.
7. The Portfolio will not invest more than ten percent (10%) of its total
assets in qualified repurchase agreements and will not invest in
qualified repurchase agreements maturing in more than seven (7) days.
8. The Portfolio will not purchase the securities of any other investment
company, except by purchase in the open market where no commission or
profit to a broker or dealer results from such purchase other than the
customary broker's commissions, or except as part of a merger,
consolidation or acquisition. The Portfolio shall not invest more
than ten percent (10%) of its total assets in shares of other
investment companies, invest more than five percent (5%) of its total
assets in a single investment company nor purchase more than three
percent (3%) of the outstanding voting securities of a single
investment company.
9. The Portfolio will not purchase securities if borrowings equal to or
greater than five percent (5%) of the Portfolio's total assets are
outstanding.
10. The Portfolio will invest at least sixty-five percent (65%) of its
total assets in fixed income obligations.
11. The Portfolio will invest at least fifty percent (50%) of its total
assets in obligations of or guaranteed by the U.S. Government, its
agencies and instrumentalities.
12. The Portfolio may invest up to fifty percent (50%) of its total assets
in corporate debt securities or Eurodollar bonds.
13. The Portfolio may invest up to ten percent (10%) of its total assets
in Yankee Sector debt obligations.
14. The Portfolio may purchase on a when-issued or delayed-delivery basis
or may purchase or sell securities on a forward commitment basis.
15. The Portfolio may temporarily invest its cash in high quality
commercial paper, certificates of deposit, shares of no-load, open-end
money market funds (subject to the percentage limitations set forth in
subparagraph 8 above), repurchase agreements (subject to the
limitations set forth in subparagraph 7 above) or any other short-term
instrument the Portfolio's investment adviser deems appropriate.
16. The Portfolio may hold cash as a temporary defensive measure when
market conditions so warrant.
17. The Portfolio 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. The Portfolio may dispose of securities
whenever it deems advisable without regard to the length of time they
have been
- 4 -
<PAGE> 34
held.
18. The Portfolio may 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.
WHILE THE PORTFOLIO HAS THE AUTHORITY TO INVEST IN THE FOLLOWING TYPES OF
SECURITIES, IT HAS NO PRESENT INTENTION TO DO SO IN THE COMING YEAR. BEFORE
THE PORTFOLIO PURCHASES ANY OF THESE SECURITIES, THE PROSPECTUS WILL BE AMENDED
BY SUPPLEMENT TO DESCRIBE THE SECURITY:
19. The Portfolio may invest up to five percent (5%) of its total assets
in shares of real estate investment trusts.
20. The Portfolio may purchase securities subject to legal or contractual
restrictions on resale or illiquid securities, if no more than fifteen
percent (15%) of the Portfolio's total assets would be invested in
such securities.
21. The Portfolio may purchase foreign securities, provided that such
purchase, at the time thereof, would not cause more than ten percent
(10%) of the total assets of the Portfolio (taken at market value) to
be invested in foreign securities.
22. The Portfolio will not buy or sell foreign currency, except as may be
necessary to invest the proceeds of the sale of any foreign securities
held by the Portfolio in U.S. dollars.
ADDITIONAL INVESTMENT INFORMATION
The Portfolio may make the following investments, among others, although they
may not buy all of the types of securities that are described.
1. REPURCHASE AGREEMENTS. Repurchase agreements are transactions in
which the Portfolio 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. The Portfolio 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 the
Portfolio if the other party to a repurchase agreement becomes
bankrupt. The Portfolio 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
- 5 -
<PAGE> 35
general supervision of the Board of Trustees.
2. WHEN-ISSUED OR DELAYED-DELIVERY SECURITIES. Under this procedure, the
Portfolio 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 the Portfolio 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 Portfolio bears the risk of such fluctuation from the date of
purchase. The Portfolio may dispose of its interest in those
securities before delivery.
The Portfolio 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.
3. YANKEE DEBT SECURITIES AND EURODOLLAR BONDS. The 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 by the foreign government that would inhibit the
remittance of amounts due the Portfolio, 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. The Portfolio will
purchase Eurodollar bonds through U.S. securities dealers and hold
such bonds in the U.S. The delivery of Eurodollar bonds to the
Portfolio's custodian in the U.S. may cause slight delays in
settlement which are not anticipated to affect the Portfolio in any
material, adverse manner. Eurodollar bonds issued by foreign issuers
are subject to the same risks as Yankee sector bonds.
4. ASSET-BACKED SECURITIES. Asset-backed securities represent interests
in, or are secured by and payable from, pools of assets such as
consumer loans, automobile receivable securities, credit card
receivable securities, and installment loan contracts. The assets
underlying the securities are securitized through the use of trusts
and special purpose corporations. These securities may be supported
by credit enhancements such as letters of credit. Payment of interest
and principal ultimately depends upon borrowers paying the underlying
loans. There exists a risk of default by the underlying borrowers and
recovery on repossessed
- 6 -
<PAGE> 36
collateral may be unavailable or inadequate to support payments on
asset-backed securities. In addition, asset-backed securities are
subject to prepayment risks which may reduce the overall return of the
investment.
Automobile receivable securities represent undivided fractional
interests in a trust whose assets consist of a pool of automobile
retail installment sales contracts and security interests in vehicles
securing the contracts. Payments of principal and interest on the
certificates issued by the automobile receivable trust are passed
through periodically to certificate holders and are generally
guaranteed up to specified amounts by a letter of credit issued by a
financial institution. Certificate holders may experience delays in
payments or losses if the full amounts due on the underlying
installment sales contracts are not realized by the trust because of
factors such as unanticipated legal or administrative costs of
enforcing the contracts, or depreciation, damage or loss of the
vehicles securing the contracts.
Credit card receivable securities are backed by receivables from
revolving credit card accounts. Certificates issued by credit card
receivable trusts generally are pass-through securities. Competitive
and general economic factors and accelerated cardholder payment rate
can adversely affect the rate at which new receivables are credited to
an account, potentially shortening the expected weighted average life
of the credit card receivable security and reducing its yield. Credit
card accounts are unsecured obligations of the cardholder.
ADDITIONAL TAX INFORMATION
The Portfolio intends to continue to qualify for tax treatment 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, the Portfolio 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).
The Portfolio intends to make sufficient distributions to shareholders to
relieve it from liability for federal excise and income taxes.
If shares of the Portfolio are sold at a loss after being held for six months
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
record date for any distribution (other than an exempt-interest dividend), 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.
The Portfolio 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 Portfolio 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.
- 7 -
<PAGE> 37
ADDITIONAL INFORMATION ON CALCULATION OF NET ASSET VALUE PER SHARE
The Portfolio determines its net asset value per share ("NAV") by subtracting
its liabilities (including accrued expenses and dividends payable) from its
total assets (the market value of the securities the Portfolio holds plus cash
or other assets, including interest accrued but not yet received) and dividing
the result by the total number of shares outstanding. The NAV of the Portfolio
is calculated as of the close of regular trading on the New York Stock Exchange
("Exchange") every day the 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.
The Portfolio 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 the
Portfolio will be subject to review by the Trust's Board of Trustees.
Short-term securities held by the 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 held by 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 yield for the Fixed-Income Portfolio for the 30 day period ended December
31, 1995 was 4.78%.
Yield is computed using the following formula:
a-b
Yield = 2[( ---- +1)6-1]
cd
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 return for the Portfolio for the period from February 28, 1994
(initial public offering) through December 31, 1995, was as follows:
- 8 -
<PAGE> 38
<TABLE>
<CAPTION>
One Since Initial # of Date of Initial
Year Public Offering Months Public Offering
---- --------------- ------ ---------------
<S> <C> <C> <C> <C>
Fixed-Income
Portfolio 17.35% 13.82% 22 February 28, 1994
</TABLE>
The average annual return for the Portfolio for the period from February 28,
1994 (initial public offering) through December 31, 1995 was as follows:
<TABLE>
<CAPTION>
One Since Initial # of Date of Initial
Year Public Offering Months Public Offering
---- --------------- ------ ---------------
<S> <C> <C> <C> <C>
Fixed-Income
Portfolio 17.35% 7.32% 22 February 28, 1994
</TABLE>
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/ERV/P - 1) x 100
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 calculations, all dividend and capital gains distributions
are assumed to be reinvested at the Portfolio's NAV on the reinvestment date.
In addition to performance figures, the Portfolio may advertise its 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 Portfolio 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
- 9 -
<PAGE> 39
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 Portfolio may occasionally reproduce articles or portions of articles about
the Portfolio 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, Investors Business Daily,
Kiplinger's, Money Magazine, Newsweek, Pensions & Investments, Time Magazine,
U.S. News and World Report and The Wall Street Journal).
The Portfolio 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 the Portfolio, the research methodologies underlying securities
selection and the Portfolio's investment objective, (iii) current facts
(including but not limited to number of employees, number of shareholders,
business characteristics) about the Portfolio'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 the
Portfolio's investment portfolio.
PRINCIPAL SHAREHOLDERS OF THE PORTFOLIO
At March 31, 1996, Principal Shareholders of the Fixed-Income Portfolio were as
follows. Crista Ministries owned 89,481 shares, which represented 17.86% of
the Portfolio's outstanding shares. Crista Ministries' address of record is PO
Box 330303, Seattle, WA 98133. Massman Construction Co. PSRT owned 228,454
shares, which represented 45.59% of the Portfolio's outstanding shares.
Massman Construction Co. PSRT's address of record is 8901 Stateline, Kansas
City, MO 64114. Crown Packaging Corp. PS & P owned 167,419 shares, which
represented 33.41% of the Portfolio's outstanding shares. Crown Packaging
Corp. PS & P's address of record is 8514 Eager Road, St. Louis, MO 63144.
TRUSTEES AND OFFICERS
<TABLE>
<CAPTION>
POSITION HELD PRINCIPAL OCCUPATION
NAME, ADDRESS AND AGE WITH THE TRUST DURING PAST 5 YEARS
--------------------- -------------- --------------------
<S> <C> <C>
Boh A. Dickey * Chairman Executive Vice President
SAFECO Plaza and Chief Financial Officer and
Seattle, Washington 98185 Trustee Director of SAFECO Corporation;
(51) Director of First SAFECO
National Life Insurance
Company of New York.
He has been an executive officer
of SAFECO Corporation
subsidiaries since 1982.
See table under "Investment
Advisory and Other Services."
</TABLE>
- 10 -
<PAGE> 40
<TABLE>
<CAPTION>
POSITION HELD PRINCIPAL OCCUPATION
NAME, ADDRESS AND AGE WITH THE TRUST DURING PAST 5 YEARS
--------------------- -------------- --------------------
<S> <C> <C>
Barbara J. Dingfield Trustee Manager, Corporate Contributions and Community
Microsoft Corporation Programs for Microsoft Corporation, Redmond,
One Microsoft Way Washington, a computer software company; Director
Redmond, WA 98052 and former Executive Vice President of Wright
(50) 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 of the Trust
1270 N.W. Blakely Ct. and other SAFECO Trusts; retired Senior Vice
Seattle, WA 98177 President and Treasurer of SAFECO Corporation;
(67) former President of SAFECO Asset Management
Company; Director of First SAFECO National Life
Insurance Company of New York.
Richard E. Lundgren Trustee Director of Marketing and Customer Relations,
764 S. 293rd Street Building Materials Distribution, Weyerhaeuser
Federal Way, Washington 98032 Company, Tacoma, Washington; Director of First
(58) SAFECO National Life Insurance Company of New York.
L. D. McClean * Trustee Retired Assistant Secretary of SAFECO Corporation
7231 91st Avenue SE and its property and casualty and life insurance
Mercer Island, WA 98040 affiliates; Director of First SAFECO National Life
(69) 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 Financial
1600 Bell Plaza Officer of U.S. WEST Communications, Seattle,
Room 1802 Washington; Director of Key Bank of Washington,
Seattle, Washington 98191 Seattle, Washington; Director of University of
(61) Washington Medical Center, Seattle, Washington;
Director of First SAFECO National Life Insurance
Company of New York; Director of Cascade Natural
Gas Corporation, Seattle, Washington.
</TABLE>
- 11 -
<PAGE> 41
<TABLE>
<CAPTION>
POSITION HELD PRINCIPAL OCCUPATION
NAME, ADDRESS AND AGE WITH THE TRUST DURING PAST 5 YEARS
--------------------- -------------- --------------------
<S> <C> <C>
John W. Schneider Trustee President of Wallingford Group, Inc., Seattle,
1808 North 41st Washington; former President of Coast Hotels,
Seattle, Washington 98103 Inc.; Director of First SAFECO National Life
(54) Insurance Company of New York.
David F. Hill President President of SAFECO Securities, Inc. and SAFECO
SAFECO Plaza Services Corporation; Senior Vice President of
Seattle, Washington 98185 SAFECO Asset Management Company. See table under
(47) "Investment Advisory and Other Services."
Neal A. Fuller Vice President, Vice President, Controller, Assistant Secretary
SAFECO Plaza Controller and and Treasurer of SAFECO Securities, Inc. and
Seattle, Washington 98185 Assistant Secretary SAFECO Services Corporation; Vice President,
(33) Secretary and Treasurer of SAFECO Asset
Management. See table under "Investment Advisory
and Other Services."
Ronald L. Spaulding Vice President and Vice Chairman of SAFECO Asset Management Company;
SAFECO Plaza Treasurer Vice President and Treasurer of SAFECO
Seattle, Washington 98185 Corporation; Vice President and Director of
(51) SAFECO Life Insurance Company; former Senior
Portfolio Manager of SAFECO Insurance Companies'
taxable bond portfolios; 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.
For the fiscal year ended December 31, 1995, the Trustees of the Trust not
employed by SAFECO Corporation or its affiliates as a group received $5,153 for
their services as such. The officers of the Trust received no compensation for
their services as officers or, if applicable, as Trustees.
At March 31, 1996, the Trustees and officers of the Trust as a group owned none
of the outstanding shares of the Portfolio.
- 12 -
<PAGE> 42
COMPENSATION TABLE
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Benefits Estimated From Registrant
Aggregate Accrued Annual and Fund Complex
Compensation As Part of Fund Benefits Upon Paid to
Trustee from Registrant Expenses Retirement Trustees
------- --------------- -------- ---------- --------
<S> <C> <C> <C> <C>
Barbara J. Dingfield
$852 $0 $0 $23,875
Richard E. Lundgren
$852 $0 $0 $23,875
L.D. McClean
$785 $0 $0 $22,000
Larry L. Pinnt
$852 $0 $0 $23,875
John W. Schneider
Boh A. Dickey $852 $0 $0 $23,875
Richard W. Hubbard $0 $0 $0 $0
$960 $0 $0 $26,900
</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. Each Trustee also serves as Trustee for six other registered open-end,
management investment companies that have, in the aggregate, thirty series
companies managed by SAM.
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 the Portfolio
and SAFECO Services is the transfer, dividend and distribution disbursement and
shareholder servicing agent of the Portfolio.
- 13 -
<PAGE> 43
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 Chairman Director
Trustee Director
D. F. Hill President Senior Vice President President
President Director Director
Director Secretary Secretary
N. A. Fuller Vice President Vice President Vice Vice President
Controller Controller President Controller
Assistant Secretary Assistant Assistant
Secretary Treasurer Secretary Secretary
Controller Treasurer
Treasurer
R.A. Spaulding Vice President Vice Chairman Director Director
Treasurer 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 and a Vice President of
SAFECO Corporation. Messrs. 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 or the Portfolio which include furnishing office
facilities, books, records and personnel to manage the Trust's and the
Portfolio's affairs and paying certain expenses.
For the services and facilities furnished by SAM, the Trust has agreed to pay
an annual fee for the Portfolio computed on the basis of the average market
value of the net assets of the Portfolio ascertained each business day and paid
monthly in accordance with the following schedules. The reduction in fees
occurs only at such time as the Portfolio's net assets reach the dollar amounts
of the breakpoints and applies only to those assets which fall within the
specified range:
- 14 -
<PAGE> 44
<TABLE>
<CAPTION>
Net Assets Fee
---------- ---
<S> <C>
For assets up to and
including $100,000,000 .50 of 1%
For assets in excess of $100,000,000
and up to and including $250,000,000 .40 of 1%
For assets over $250,000,000 .35 of 1%
</TABLE>
The Portfolio bears all expenses of its operations not specifically assumed by
SAM. SAM shall, however, reimburse the Portfolio for the amount by which the
Portfolio's expenses in any full fiscal year (excluding interest expense,
taxes, brokerage expenses and extraordinary expenses) exceed the limits
prescribed by any such state in which the Portfolio'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 Portfolio'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 Portfolio is
entitled to reimbursement, the expenses of the Portfolio are calculated on a
monthly basis. If the Portfolio 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 the
Portfolio to SAM for the year ending December 31, 1995 and for the
period from February 28, 1994 (initial public offering) to December 31, 1994:
Fees Paid to SAM
<TABLE>
<CAPTION>
Period from February 28, 1994
Year Ended (Initial Public Offering) to
December 31, 1995 December 31, 1994
----------------- -----------------------------
<S> <C>
$22,720 $15,869
</TABLE>
U.S. Bank of Washington, N.A., 1420 Fifth Avenue, Seattle, Washington 98101, is
the custodian of the securities and cash of the Portfolio under an agreement
with the Trust. Ernst & Young LLP, 999 Third Avenue, Suite 3500, Seattle,
Washington, 98104 is the independent auditor that audits the financial
statements of the Trust.
SAFECO Services, SAFECO Plaza, Seattle, Washington 98185, is the transfer,
dividend and distribution disbursement and shareholder servicing agent for the
Portfolio under an agreement with the Trust. SAFECO Services is responsible
for all required transfer agent activity, including maintenance of records of
the Portfolio's shareholders, records of transactions involving the Portfolio'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
shareholder transaction. The following table states the total amount of
compensation paid by the Portfolio to SAFECO Services for the year
ending December 31, 1995 and for the period from February 28, 1994 (initial
public offering) to December 31, 1994:
- 15 -
<PAGE> 45
Fees Paid to SAFECO Services
<TABLE>
<CAPTION>
Period From February 28, 1994
Year Ending (Initial Public Offering) to
December 31, 1995 December 31, 1994
----------------- -----------------------------
<S> <C>
$309 $96
</TABLE>
SAFECO Securities is the principal underwriter for the Portfolio and
distributes the Portfolio's shares on a continuous best efforts basis under an
agreement with the Trust. SAFECO Securities is not compensated by the Trust or
the Portfolio for underwriting, distribution or other activities.
BROKERAGE PRACTICES
SAM places orders for the purchase or sale of the Portfolio's 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 the 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 Portfolio, but not all such research services
furnished to SAM are used by it to advise the Portfolio. SAM will 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 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 Portfolio. Transactions placed through dealers serving as primary market
makers reflect the spread between the bid and the asked prices. Occasionally,
the Portfolio 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 the Portfolio,
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 the Portfolio during any 90-day
period. Any shares tendered by the shareholder in excess of the
above-mentioned limit may be redeemed through distribution of the Portfolio'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
- 16 -
<PAGE> 46
securities received in such a distribution in kind.
FINANCIAL STATEMENTS
The following financial statements and the report thereon of Ernst & Young LLP,
independent auditors, are incorporated herein by reference to the Trust's
Annual Report for the year ended December 31, 1995:
Portfolio of Investments as of December 31, 1995
Statement of Assets and Liabilities as of December 31, 1995
Statement of Operations for the Year Ended December 31, 1995
Statement of Changes in Net Assets for the years ended
December 31, 1994 and December 31, 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 206-545-5530 in Seattle or by writing to the
address on the Prospectus cover.
- 17 -
<PAGE> 47
SAFECO INSTITUTIONAL SERIES TRUST
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) The following financial statements for Registrant's Fixed-Income
Portfolio for the year ended December 31, 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 February 29, 1996:
Portfolio of Investments as of December 31, 1995
Statement of Assets and Liabilities as of December 31, 1995
Statement of Operations for the Year Ended December 31, 1995
Statement of Changes in Net Assets for the years ended
December 31, 1994 and December 31, 1995
Notes to Financial Statements
(b) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description of Document Page
- ------ ----------------------- ----
<S> <C> <C>
(27.1) Financial Data Schedule
(1) Trust Investment/Certificate of Trust *
(2) Bylaws *
(5) Investment Advisory and Management Contract *
(6) Distribution Agreement *
(8) Custody Agreement *
(9) Transfer Agent Agreement *
(10) Opinion of Counsel *
(99.11) Consent of Independent Auditors
(12) Registrant's Annual Report for the year ended
December 31, 1995 including financial statements +
(13) (i) Stock Purchase Agreement *
(ii) Additional Share Purchase Agreement
(99.16) Calculation of Performance Information
</TABLE>
* Filed as an exhibit to Post-Effective Amendment No. 3 dated April 28,
1995 and filed with the SEC on April 28, 1995.
+ Registrant's Annual Report was filed with the Securities and Exchange
Commission on or about February 29, 1996. The Report contains the
<PAGE> 48
financial statements incorporated by reference in Registrant's Statement
of Additional Information.
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 and 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 Washington corporation, General
America Corp. of Texas, a Texas corporation, Talbot Financial Corporation, a
Washington
2
<PAGE> 49
corporation and SAFECO Select Insurance Services, 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 Talbot Agency, Inc., a New Mexico
corporation. Talbot Agency, Inc. owns 100% of PNMR Securities, Inc., a
Washington 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 the following: Lifeguard Ventures, Inc., a
California corporation, Mission Oaks Hospital, Inc., a California corporation,
S.C. River Oaks, Inc., a Washington corporation, Mississippi Health Services,
Inc., a Louisiana corporation, and Safecare Texas, Inc., a Texas 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 March 31, 1996, Registrant had 4 shareholders of record in its Fixed-Income
Portfolio.
Item 27. Indemnification
Under the Trust Instrument of the Registrant, the 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,
3
<PAGE> 50
amounts paid in settlement, fines, penalties and other liabilities.
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 the 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 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 expressed 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.
4
<PAGE> 51
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 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 the Registrant, SAM, serves as an adviser to: (a)
twenty-six series (portfolios) of six registered investment companies,
including one series of Registrant,(b) five series of an investment company
that serves as the 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
5
<PAGE> 52
(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 Taxable Bond Trust,
SAFECO Money Market Trust, SAFECO Resource 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.
(b) The information set forth under "Investment Advisory and Other Services"
of the Registrant's 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.
6
<PAGE> 53
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 ____ day of
April, 1996.
SAFECO INSTITUTIONAL SERIES 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 person in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/S/ DAVID F. HILL President
- ----------------------- (Principal Executive Officer) ---------------
David F. Hill
RONALD A. SPAULDING* Vice President and Treasurer
- ----------------------- ---------------
Ronald A. Spaulding
NEAL A. FULLER* Vice President
- ----------------------- Controller ---------------
Neal A. Fuller Assistant Secretary
(Principal Financial Officer)
/S/ BOH A. DICKEY Chairman and Trustee
- ----------------------- ---------------
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 *By /S/DAVID F. HILL
------------------- ------------------
Boh A. Dickey David F. Hill
Attorney-in-Fact Attorney-in-Fact
</TABLE>
7
<PAGE> 54
POWER OF ATTORNEY
SAFECO INSTITUTIONAL SERIES TRUST, a Delaware business trust (the "Trust"), and
each of its undersigned officers and trustees, hereby nominates, constitutes
and appoints Boh A. Dickey and David F. Hill (with full power to each of them
to act alone) its/his/her true and lawful attorney-in-fact and agent, for
it/him/her and on its/his/her behalf and in its/his/her name, place and stead
in any and all capacities, to make, execute and sign any and all amendments to
the Trust's registration statement on Form N-1A under the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as amended, as well
as any and all registration statements on Form N-4, and to file with the
Securities and Exchange Commission and any other regulatory authority having
jurisdiction over the offer and sale of shares of beneficial interest of the
Trust, any such amendment or registration statement and any and all supplements
thereto or to any prospectus or statement of additional information forming a
part of the registration statement, as well as any and all exhibits and other
documents necessary or desirable to the amendment or supplement process,
granting to such attorneys and each of them, full power and authority to do and
perform each and every act requisite and necessary and/or appropriate as fully
and with all intents and purposes as the Trust itself and the undersigned
officers and trustees themselves might or could do.
IN WITNESS WHEREOF, SAFECO INSTITUTIONAL SERIES TRUST has caused this power of
attorney to be executed in its name by its President and attested by its
Secretary, and the undersigned officers and trustees have each executed such
power of attorney, on this 15th day of January, 1995.
SAFECO INSTITUTIONAL SERIES TRUST
By: /S/DAVID F. HILL
-------------------
David F. Hill
President
ATTEST:
/S/NEAL A. FULLER
- --------------------
Neal A. Fuller
Assistant Secretary
(Signatures Continue on Next Page)
8
<PAGE> 55
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
/S/ DAVID F. HILL President
- ------------------------- Principal Executive Officer
David F. Hill
/S/ RONALD L. SPAULDING Vice President
- ------------------------- and Treasurer
Ronald L. Spaulding
/S/ NEAL A. FULLER Vice President
- ------------------------- Controller
Neal A. Fuller Assistant Secretary
(Principal Financial Officer)
/S/ BOH A. DICKEY Chairman and Trustee
- -------------------------
Boh A. Dickey
/S/ BARBARA J. DINGFIELD Trustee
- -------------------------
Barbara J. Dingfield
/S/ RICHARD W. HUBBARD Trustee
- -------------------------
Richard W. Hubbard
/S/ RICHARD E. LUNDGREN Trustee
- -------------------------
Richard E. Lundgren
/S/ L.D. MCCLEAN Trustee
- -------------------------
L.D. McClean
/S/ LARRY L. PINNT Trustee
- -------------------------
Larry L. Pinnt
/S/ JOHN W. SCHNEIDER Trustee
- -------------------------
John W. Schneider
</TABLE>
9
<PAGE> 56
Registration Nos. 33-47859
811-6667
=============================================================================
EXHIBITS
to
FORM N-1A
REGISTRATION STATEMENT
POST-EFFECTIVE AMENDMENT NO. 4
Under
The Securities Act of 1933
and
AMENDMENT NO. 7
under
The Investment Company Act of 1940
_______________
SAFECO Institutional Series 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)
==============================================================================
10
<PAGE> 57
SAFECO INSTITUTIONAL SERIES TRUST
Form N-1A
Post-Effective Amendment No. 4
Exhibit Index
<TABLE>
<CAPTION>
Exhibit
Number Description of Document Page
- ------ ----------------------- ----
<S> <C>
(27.1) Financial Data Schedule
(99.11) Consent of Independent Auditors
(99.12) Registrant's Annual Report for the year ended
December 31, 1995 including financial statements +
(99.16) Calculation of Performance Information
</TABLE>
+ Registrant's Annual Report was filed with the SEC on or about
February 28, 1996.
11
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000887437
<NAME> SAFECO INSTITUTIONAL SERIES TRUST
<SERIES>
<NUMBER> 1
<NAME> SAFECO 1ST--FIXED INCOME PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 4,266
<INVESTMENTS-AT-VALUE> 4,473
<RECEIVABLES> 43
<ASSETS-OTHER> 19
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,535
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 38
<TOTAL-LIABILITIES> 38
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,290
<SHARES-COMMON-STOCK> 513
<SHARES-COMMON-PRIOR> 568
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 207
<NET-ASSETS> 4,497
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 293
<OTHER-INCOME> 0
<EXPENSES-NET> 54
<NET-INVESTMENT-INCOME> 239
<REALIZED-GAINS-CURRENT> 167
<APPREC-INCREASE-CURRENT> 331
<NET-CHANGE-FROM-OPS> 737
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (239)
<DISTRIBUTIONS-OF-GAINS> (156)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> (99)
<SHARES-REINVESTED> 44
<NET-CHANGE-IN-ASSETS> (130)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 23
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 54
<AVERAGE-NET-ASSETS> 4,642
<PER-SHARE-NAV-BEGIN> 8.15
<PER-SHARE-NII> 0.44
<PER-SHARE-GAIN-APPREC> 0.94
<PER-SHARE-DIVIDEND> (0.44)
<PER-SHARE-DISTRIBUTIONS> (0.32)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.77
<EXPENSE-RATIO> 1.16
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<PAGE> 1
EXHIBIT NO. 99.11
CONSENT OF INDEPENDENT AUDITORS
13
<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. 4
to the Registration Statement (Form N-1A, No. 33-47859) and related Prospectus
of SAFECO Institutional Series Trust dated April 29, 1996.
We also consent to the incorporation by reference therein of our report dated
January 26, 1996 with respect to the financial statements of the SAFECO
Institutional Series Trust - Fixed-Income Portfolio as of and for the year ended
December 31, 1995 included in the 1995 Annual Report filed with the Securities
and Exchange Commission.
Seattle, Washington
April 25, 1996
<PAGE> 1
EXHIBIT NO. 99.16
CALCULATION OF PERFORMANCE INFORMATION
15
<PAGE> 2
SAFECO INSTITUTIONAL SERIES TRUST
Calculation of Performance Quotations
The yield for the SAFECO Institutional Series Trust Fixed Income
Portfolio for the 30-day period ended December 29, 1995 is calculated as
follows:
22,485 - 5,354 6
Yield = 2[(----------------- +1) -1] = 4.78%
495,739 x 8.77
Where: $22,485 = dividends and interest (as defined in the
instructions to Item 22(b)(ii) of Form N-1A)
earned during the period
$5,354 = expenses accrued during the period
495,739 = average daily number of shares outstanding during
the period
$8.77 = offering price per share on December 29, 1995
<PAGE> 3
SAFECO INSTITUTIONAL SERIES TRUST
Calculation of Performance Quotations (continued)
The total return and average annual total return for the Portfolio for
the one-year, five-year, and ten-year periods ending December 29, 1995 are
calculated as follows:
1-Year
- ------ 1
Total return = $10,000.00 (1+.1735) = $11,735
1,173.50 - 1,000
Total return = (---------------------) = 17.35%
1,000.00
______________________
Average Annual Total Return = (1 \/ 1,173.50 / 1,000.00 -1) = 17.35%
Where: 1 = number of years
$1,173.50 = ending redeemable value of a hypothetical $1,000
invest 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
.1735 = the average annual total return
Since Inception (22 Months)
- ------ 1.833
Total return = $10,000.00 (1 + .0732) = $11,382
<PAGE> 4
1,138.20 - 1,000
Total return = (---------------------) = 13.82%
1,000.00
___________________________
Average Annual Total Return = (1.833 \/ 1,138.20 / 1,000.00 -1) = 7.32%
Where: 1.833 = number of years
$1,138.20 = 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
.0732 = the average annual total return
<PAGE> 5
10-Year
- ------- 10
Total return = $10,000.00 (1 + .0000) = $0,0
0.00 - 1,000
Total return = (---------------------) = -100.00%
1,000.00
______________________
Average Annual Total Return = (10 \/ 0.00 / 1,000.00 -1) = -100.00%
Where: 10 = number of years
$0.00 = 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
.0000 = the average annual total return
