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Registration Nos. 33-53532
811-7300
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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. 5 /X/
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(Check appropriate box or boxes.)
SAFECO TAX-EXEMPT BOND 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) 545-5000
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Name and Address of Agent for Service
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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)
____ on __________________ pursuant to paragraph (b)
X 60 days after filing pursuant to paragraph (a)
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____ on __________________ pursuant to paragraph (a) of Rule 485
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Registrant has registered an indefinite number of its shares under the
Securities Act of 1933 by declaration made pursuant to Section 24(f) of the
Investment Company Act of 1940 (Act). Pursuant to Rule 24f-2 under the Act,
Registrant's Rule 24f-2 Notice was filed on __________, 1995.
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The Exhibit Index is at page __.
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SAFECO TAX-EXEMPT BOND TRUST
Registration Statement on Form N-1A
Cross Reference Sheet
Part A
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<TABLE>
<CAPTION>
Location
Item No. in Prospectus
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<S> <C> <C>
Item 1. Cover Page Cover Page
Item 2. Synopsis Introduction to the Trust and the Funds; Fund Expenses
Item 3. Condensed Financial Information Financial Highlights; Performance Information
Item 4. General Description of Registrant The Trust and Each Fund's Investment Policies; Information
about Share Ownership and Companies that Provide Services
to the Trust
Item 5. Management of the Trust Information about Share Ownership and Companies that Provide
Services to the Trust; Portfolio Manager; Fund Expenses
Item 6. Capital Stock and Other Securities Cover Page; Fund Distributions and How They are Taxed; Information
about Share Ownership and Companies that Provide Services to
the Trust; Person Controlling the Intermediate, Insured and
Washington Funds
Item 7. Purchase of Securities Being Offered How to Purchase Shares; How to Exchange Shares from One Fund to
Another; How to Systematically Purchase or Redeem Shares; Share
Price Calculation; Account Statements; Telephone Transactions;
Transactions Through Registered Investment Advisers
</TABLE>
2
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<TABLE>
<S> <C> <C>
Item 8. Redemption or Repurchase How to Redeem Shares; How to Exchange Shares from One Fund To
Another; How to Systematically Purchase or Redeem Shares; Account
Changes and Signature Requirements; Account Statements; Telephone
Transactions; Transactions Through Registered Investment Advisers
Item 9. Pending Legal Proceedings Not Applicable
</TABLE>
Part B
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<TABLE>
<CAPTION>
Location in Statement of
Item No. Additional Information
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<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 Policies Overview of Investment Policies; Additional Investment
Information; Investment Risks of Concentration in California
and Washington Issuers; Description of Ratings
Item 14. Management of Trust Trustees and Officers
Item 15. Control Persons and Principal Principal Shareholders
Holders of Securities
Item 16. Investment Advisory and Other Services Investment Advisory and Other Services
Item 17. Brokerage Allocation and Other Brokerage Practices
Practices
Item 18. Capital Stock and Other Securities Not Applicable
</TABLE>
3
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<TABLE>
<S> <C> <C>
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
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Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
4
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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 JULY 28, 1995
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Each Fund described in this Prospectus is a series of the SAFECO Tax-Exempt
Bond Trust ("Trust"), an open-end, management investment company consisting of
five separate series.
The SAFECO INTERMEDIATE-TERM MUNICIPAL BOND FUND, SAFECO INSURED MUNICIPAL BOND
FUND (FUND SHARES ARE NOT INSURED - SEE "THE FUNDS AND THEIR INVESTMENT
POLICIES" FOR THE NATURE AND LIMITATIONS OF INSURANCE) and SAFECO WASHINGTON
STATE MUNICIPAL BOND FUND each has as its investment objective to provide as
high a level of current interest income exempt from federal income tax as is
consistent with prudent investment risk.
The SAFECO MUNICIPAL BOND FUND has as its investment objective to provide as
high a level of current interest income exempt from federal income tax as is
consistent with the relative stability of capital.
The SAFECO CALIFORNIA TAX-FREE INCOME FUND has as its investment objective to
provide as high a level of current interest income exempt from federal income
tax and California state personal income tax as is consistent with the relative
stability of capital.
There are market risks in all securities transactions. This Prospectus
sets forth the information a prospective investor should know before investing.
PLEASE READ AND RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE. A Statement
of Additional Information, dated July 28, 1995, and incorporated herein by
reference, has been filed with the Securities and Exchange Commission and is
available at no charge upon request by calling one of the numbers listed on
this page. The Statement of Additional Information contains more information
about most of the topics in this Prospectus as well as information about the
trustees and officers of the Trust.
For additional assistance, please call or write:
<TABLE>
<S> <C> <C>
Nationwide 1-800-624-5711 SAFECO Mutual Funds
Seattle 206-545-7319 P.O. Box 34890
Seattle, WA 98124-1890
</TABLE>
Hearing Impaired TTY/TDD Service 1-800-438-8718
All telephone calls are tape-recorded for your protection.
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.
THE CALIFORNIA FUND IS OFFERED FOR SALE ONLY TO RESIDENTS IN THE STATES OF
ARIZONA, NEVADA, OREGON AND CALIFORNIA. THE WASHINGTON FUND IS OFFERED FOR
SALE ONLY TO RESIDENTS IN THE STATES OF WASHINGTON, CALIFORNIA AND ARIZONA.
THESE FUNDS ARE NOT PERMITTED TO OFFER OR SELL SHARES TO RESIDENTS OF OTHER
STATES.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
Introduction to the Trust and the Funds.....................
Fund Expenses...............................................
Financial Highlights........................................
The Trust and Each Fund's Investment Policies...............
Portfolio Manager...........................................
Information about Share Ownership and Companies
that Provide Services to the Trust...................
Person Controlling the Intermediate, Insured
and Washington Funds..................................
Performance Information...........................
Fund 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 Systematically Purchase or Redeem Shares.............
How to Exchange Shares From One Fund to Another.............
Telephone Transactions......................................
Transactions Through Registered Investment Advisers.........
</TABLE>
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INTRODUCTION TO THE TRUST AND THE FUNDS
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The Trust is a series investment company that currently issues shares
representing five mutual funds: SAFECO Intermediate-Term Municipal Bond Fund
("Intermediate Fund"), SAFECO Insured Municipal Bond Fund ("Insured Fund"),
SAFECO Municipal Bond Fund ("Municipal Fund"), SAFECO California Tax-Free
Income Fund ("California Fund") and SAFECO Washington State Municipal Bond Fund
("Washington Fund") (together, the "Funds"). Each Fund 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 INTERMEDIATE, INSURED AND WASHINGTON FUNDS each has as its investment
objective to provide as high a level of current interest income exempt from
federal income tax as is consistent with prudent investment risk.
The MUNICIPAL FUND has as its investment objective to provide as high a level
of current interest income exempt from federal income tax as is consistent with
the relative stability of capital.
The CALIFORNIA FUND has as its investment objective to provide as high a level
of current interest income exempt from federal income tax and California state
personal income tax as is consistent with the relative stability of capital.
During normal market conditions, each Fund will invest as a matter of
fundamental policy at least 80% of its net assets in securities, the interest
on which is exempt from federal income tax and, in the case of the California
Fund, from California state personal income tax. In addition, each Fund
during normal market conditions will invest at least 65% of its total assets in
investment grade municipal bonds having a maturity of over one year.
To pursue its objective, the INTERMEDIATE FUND will invest primarily in
municipal bonds whose interest is exempt from federal income tax and will
maintain a portfolio having an average weighted maturity of between three and
ten years.
To pursue its objective, the INSURED FUND will invest at least 95% of total
assets in municipal bonds whose interest is exempt from federal income tax and
are covered by insurance that guarantees the timely payment of both principal
and interest. INSURANCE DOES NOT GUARANTEE THE MARKET VALUE OF INSURED
MUNICIPAL BONDS NOR THE SHARE PRICE OF THE INSURED FUND.
To pursue its objective, the MUNICIPAL FUND will invest primarily in
investment grade municipal bonds whose interest is exempt from federal income
tax.
To pursue its objective, the CALIFORNIA FUND will invest primarily in
investment grade municipal bonds whose interest is exempt from both federal and
California personal income taxes.
To pursue its objective, the WASHINGTON FUND will invest primarily in
investment grade municipal bonds whose interest is exempt from federal income
tax and that are issued by the State of Washington or one of its political
subdivisions, municipalities, agencies, instrumentalities or public
authorities. The Washington Fund may not be suitable for every eligible
investor. Since the
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State of Washington currently has no personal income tax, there are no tax
benefits at the state level to an investor. An investor in the Washington Fund
will generally earn dividend income free from federal income taxes as does an
investor in the Intermediate, Insured, California and Municipal Funds.
There is, of course, no assurance that a Fund will achieve its investment
objective. See "The Trust and Each Fund's Investment Policies" for more
information.
There is a risk that the market value of each Fund's portfolio securities
may decrease and result in a decrease in the value of a shareholder's
investment. The value of each Fund's portfolio securities will normally
fluctuate inversely with changes in market interest rates. Because the
California Fund and Washington Fund each concentrates its investments in
single states, these Funds may be subject to special risks. Investors should
carefully consider the investment risks of such geographic concentration
before purchasing shares of these Funds. See "The Trust and Each Fund's
Investment Policies" beginning on page _____ and "Investment Risks of
Concentration in California and Washington Issuers" in the Statement of
Additional Information for further information.
Each Fund is managed by SAFECO Asset Management Company ("SAM"). SAM is
headquartered in Seattle, Washington and manages over $___ billion in mutual
fund assets as of June 30, 1995. SAM has been an adviser to mutual funds and
other investment portfolios since 1973 and its predecessors have been such
advisers since 1932. See "Information about Share Ownership and Companies
that Provide Services to the Trust" for more information.
Each Fund:
o Is 100% no-load; there are no sales or redemption charges or 12b-1 fees.
o Offers free exchanges as well as easy access to your money through telephone
redemptions and wire transfers.
o Pays dividends, if any, monthly. Dividend income is exempt from federal
income taxes and, for the California Fund, from California personal income
tax.
o Has a minimum initial investment of $1,000. No minimum initial investment
is required for the Automatic Investment Method ("AIM").
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FUND EXPENSES
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A. SHAREHOLDER TRANSACTION EXPENSES FOR EACH FUND
<TABLE>
<CAPTION>
SALES
SALES LOAD IMPOSED
LOAD IMPOSED ON REINVESTED DEFERRED REDEMPTION EXCHANGE
ON PURCHASES DIVIDENDS SALES LOAD FEES FEES
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None None None None None
</TABLE>
SAFECO Services Corporation, the transfer agent for the Funds, charges a $10
fee to wire redemption proceeds.
B. ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
TOTAL
MANAGEMENT OTHER OPERATING
FUND 12b-1 FEE + FEE + EXPENSES = EXPENSES
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<S> <C> <C> <C> <C>
Municipal None % % %
California None % % %
Intermediate None % % %
Insured None % % %
Washington None % % %
</TABLE>
The amounts shown are actual expenses paid by shareholders of each Fund for the
fiscal year ended March 31, 1995. See "Information About Share Ownership and
Companies that Provide Services to the Trust" on page ___ for more
information.
C. EXAMPLE OF EXPENSES
You would pay the following expenses on a $1,000 investment assuming 5% annual
return. The example assumes that all dividends and other distributions are
reinvested and that the percentage amounts listed in "Annual Operating
Expenses" above remain the same in the years shown.
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
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<S> <C> <C> <C> <C>
Municipal $ $ $ $
California $ $ $ $
Intermediate $ $ $ $
Insured $ $ $ $
Washington $ $ $ $
</TABLE>
The purpose of the tables is to assist you in understanding the various costs
and expenses that an investor in each Fund would bear, directly or indirectly.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. A FUND'S ACTUAL EXPENSES OR PERFORMANCE MAY BE GREATER OR LESS THAN
THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS REQUIRED BY SECURITIES AND
EXCHANGE COMMISSION REGULATIONS APPLICABLE TO ALL MUTUAL FUNDS AND IT IS NOT A
PREDICTION OF, NOR DOES IT REPRESENT, PAST OR FUTURE EXPENSES OR THE
PERFORMANCE OF ANY FUND.
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FINANCIAL HIGHLIGHTS
SAFECO Intermediate-Term Municipal Bond Fund
[To be filed by subsequent amendment]
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FINANCIAL HIGHLIGHTS
SAFECO Insured Municipal Bond Fund
[To be filed by subsequent amendment]
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FINANCIAL HIGHLIGHTS
SAFECO Municipal Bond Fund
[To be filed by subsequent amendment]
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FINANCIAL HIGHLIGHTS
SAFECO California Tax-Free Income Fund
[To be filed by subsequent amendment]
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FINANCIAL HIGHLIGHTS
SAFECO Washington State Municipal Bond Fund
[To be filed by subsequent amendment]
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THE TRUST AND EACH FUND'S INVESTMENT POLICIES
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The Trust is a Delaware business trust established by the Trust Instrument
dated May 13, 1993. The Trust currently consists of five mutual funds:
Intermediate Fund, Insured Fund, Municipal Fund, California Fund and Washington
Fund, each of which is a diversified series of the Trust.
The investment objective and investment policies for each Fund are described
below. The Trust's Board of Trustees may change a Fund's objective (except
for the California Fund) without shareholder vote, but no such change will
be made without 60 days' prior written notice to shareholders of that Fund.
The California Fund, which has an investment objective that is fundamental,
may not change its investment objective without a shareholder vote. In the
event a Fund changes its investment objective, the new objective may not meet
the investment needs of every shareholder and may be different from the
objective a shareholder considered appropriate at the time of an initial
investment. Current holdings and recent investment strategies are described in
the Funds' financial reports which are sent to shareholders twice a year.
Each Fund has adopted a number of investment restrictions. If a Fund follows a
percentage limitation at the time of investment, a later increase or decrease
in values, net assets or other circumstances will not be considered in
determining whether a Fund complies with the applicable policy. Unless
otherwise stated, all investment policies and limitations described below
under each Fund's description and under "Common Investment Practices" are
non-fundamental and may be changed by the Trust's Board of Trustees without
shareholder vote. The investment objective of the Intermediate, Insured and
Washington Funds is to seek as high a level of current interest income exempt
from federal income tax as is consistent with prudent investment risk. The
investment objective of the Municipal Bond Fund is to seek as high a level
of current interest income exempt from federal income tax as is consistent with
the relative stability of capital. The investment objective of the California
Fund is to seek as high a level of current interest income exempt from
federal income tax and California state personal income tax as is consistent
with the relative stability of capital.
To pursue its objective, each Fund:
1. Will, during normal market conditions, invest as a matter of
fundamental policy at least 80% of its net assets in securities, the
interest on which is exempt from federal income tax and, in the case
of the California Fund, exempt from California personal income tax.
The Funds do not currently intend to purchase taxable investments,
except as a temporary accommodation or in an emergency situation.
2. Will invest at least 65% of its total assets in municipal bonds having
a maturity in excess of one year that at the time acquired are
investment grade; i.e., rated in one of the four highest grades
assigned by Moody's Investors Service, Inc. ("Moody's") or Standard &
Poor's Rating Group ("S&P") or, if unrated, determined by SAM to be
of comparable quality. A Fund may invest up to 20% of its total
assets in unrated municipal bonds. Unrated securities are not
necessarily of lower quality than rated
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<PAGE> 16
securities, but may not be as attractive to as many investors as rated
securities. A Fund will invest no more than 33% of its total assets
in municipal bonds rated in the fourth highest grade or in comparable
unrated bonds. Such bonds are of medium grade, have speculative
characteristics and are more likely to have a weakened capacity to
make principal and interest payments under changing economic
conditions or upon deterioration in the financial condition of the
issuer.
In addition to reviewing ratings, SAM will analyze the quality of
rated and unrated municipal bonds for purchase by a Fund by evaluating
various factors which may include the issuer's or guarantor's
financial resources and liquidity, economic feasibility of revenue
bond project financing and general purpose borrowings, cash flow and
ability to meet anticipated debt service requirements, quality of
management, sensitivity to economic conditions, operating history and
any relevant political or regulatory matters. SAM may also evaluate
trends in the economy, in the financial markets or in specific
geographic areas in determining whether to purchase a bond. For a
description of municipal bond ratings, see the Trust's Statement of
Additional Information.
After purchase by a Fund, a municipal bond may be downgraded to below
investment grade or, if unrated, may cease to be comparable to a rated
investment grade security (such below investment grade securities are
commonly referred to as "high-yield" or "junk" bonds). Neither event
will require a Fund to dispose of that security, but SAM will take a
downgrade or loss of comparability into account in determining whether
the Fund should continue to hold the security in its portfolio. A Fund
will not hold more than 5% of its net assets in such below investment
grade securities.
The term "municipal bonds" as used in this Prospectus means those
obligations issued by or on behalf of states, territories or
possessions of the United States and the District of Columbia and
their political subdivisions, municipalities, agencies,
instrumentalities or public authorities, the interest on which in the
opinion of bond counsel is exempt from federal income tax and, in the
case of the California Fund, exempt from California personal income
tax.
3. May invest in any of the following types of municipal bonds:
o REVENUE BONDS, which are "limited obligation" bonds that
provide financing for specific projects or public facilities.
These bonds are backed by revenues generated by a particular
project or facility or by a special tax. A "resource recovery
bond" is a type of revenue bond issued to build waste
facilities or plants. An "industrial development bond" is a
type of revenue bond that is backed by the credit of a private
issuer, generally does not have access to the resources of a
municipality for payment and may involve greater risk. Each
Fund intends to invest primarily in revenue bonds that may
be issued to finance various types of projects, including but
not limited to education, hospitals, housing, waste and
utilities. Each Fund will not purchase private activity
bonds or any other type of revenue bonds, the interest on
which may be subject to the alternative minimum tax.
o GENERAL OBLIGATION BONDS, which are bonds that provide
general purpose financing for state and local governments and
are backed by
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the taxing power of the state and local government as the case
may be. The taxes or special assessments that can be levied
for the payment of principal and interest on general
obligation bonds may be limited or unlimited as to rate or
amount.
o VARIABLE AND FLOATING RATE OBLIGATIONS, which are municipal
obligations that carry variable or floating rates of
interest. Variable rate instruments bear interest at rates
that are readjusted at periodic intervals. Floating rate
instruments bear interest at rates that vary automatically
with changes in specified market rates or indexes, such as the
bank prime rate. Accordingly, as interest rates fluctuate,
the potential for capital appreciation or depreciation of
these obligations is less than for fixed rate obligations.
Floating and variable rate obligations carry demand features
that permit a Fund to tender (sell) them back to the issuer at
par prior to maturity and on short notice. A Fund's ability to
obtain payment from the issuer at par may be affected by
events occurring between the date the Fund elects to tender
the obligation to the issuer and the date redemption proceeds
are payable to the Fund. A Fund will purchase floating and
variable rate obligations only if at the time of purchase
there is a secondary market for such instruments. For
purposes of calculating average weighted maturity, the
Intermediate Fund will treat variable and floating rate
obligations as having a maturity equal to the period remaining
until the date the Fund can next exercise the demand feature
by selling the security back to the issuer.
o PUT BONDS, which are municipal bonds that give the
holder the unconditional right to sell the bond back to the
issuer at a specified price and exercise date and PUT BONDS
WITH DEMAND FEATURES. The obligation to purchase the bond on
the exercise date may be supported by a letter of credit or
other arrangement from a bank, insurance company or other
financial institution, the credit standing of which affects
the credit quality of the bond. A demand feature is a put
that entitles the Fund holding it to repayment of the
principal amount of the underlying security on no more than 30
days' notice at any time or at specified intervals.
o MUNICIPAL LEASE OBLIGATIONS, which are issued by or on behalf
of state or local government authorities to acquire land,
equipment or facilities and may be subject to annual budget
appropriations. These obligations themselves are not
normally backed by the credit of the municipality or the state
but are secured by rent payments made by the municipality or
by the state pursuant to a lease. If the lease is assigned,
the interest on the obligation may become taxable. The
leases underlying certain municipal lease obligations provide
that lease payments are subject to partial or full abatement
if, because of material damage or destruction of the lease
property, there is substantial interference with the lessee's
use or occupancy of such property. This "abatement risk" may
be reduced by the existence of insurance covering the leased
property, the maintenance by the lessee of reserve funds or
the provision of credit enhancements such as letters of
credit. Certain municipal lease obligations also contain
"non-appropriation" clauses that provide that the municipality
has no obligation to make lease or installment purchase
payments in future years unless money is appropriated for
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<PAGE> 18
such purpose on a yearly basis. Some municipal lease
obligations of this type are insured as to timely payment of
principal and interest, even in the event of a failure by the
municipality to appropriate sufficient funds to make payments
under the lease. However, in the case of an uninsured
municipal lease obligation, a Fund's ability to recover under
the lease in the event of a non-appropriation or default will
be limited solely to the repossession of leased property
without recourse to the general credit of the lessee, and
disposition of the property in the event of foreclosure might
prove difficult. If rent is abated because of damage to the
leased property or if the lease is terminated because monies
are not appropriated for the following year's lease payments,
the issuer may default on the obligation causing a loss to a
Fund.
o CERTIFICATES OF PARTICIPATION in municipal lease obligations,
which are certificates issued by state or local governments
that entitle the holder of the certificate to a
proportionate interest in the lease purchase payments made. A
Fund will only invest in municipal lease obligations
(including certificates of participation) that are, in the
opinion of SAM, liquid securities under guidelines adopted by
the Trust's Board of Trustees. Generally, municipal lease
obligations and certificates of participation will be
determined to be liquid if they have a readily available
market after an evaluation of all relevant factors.
o PARTICIPATION INTERESTS, which are interests in municipal
bonds and floating and variable rate obligations that are
owned by banks. These interests carry a demand feature that
permits a Fund holding an interest to tender (sell) it back to
the bank. Generally, the bank will accept tender of the
participation interest with same day notice, but may require
up to 5 days' notice. The demand feature is usually backed
by an irrevocable letter of credit or guarantee of the bank.
The credit rating of the bank may affect the credit quality of
the participation interest.
o MUNICIPAL NOTES, which are notes generally issued by an
issuer to provide for short-term capital needs and generally
have maturities of one year or less. A Fund may purchase
municipal notes as a medium for its short-term investments,
the interest on which will not be subject to federal income
tax when distributed to the Fund's shareholders. Notes
include tax anticipation, revenue anticipation and bond
anticipation notes and tax-exempt commercial paper. A Fund
will invest only in those municipal notes that at the time
of purchase are rated within one of the three highest grades
by Moody's or S&P or, if unrated by any of these agencies,
in the opinion of SAM, to be of comparable quality.
4. Will invest at least 95% of its total assets in municipal bonds that
are covered by insurance guaranteeing the timely payment of both
principal and interest (Insured Fund only). The Insured Fund will
invest primarily in bonds insured by new issue and secondary market
insurance policies and on occasion by portfolio insurance. INSURANCE
DOES NOT GUARANTEE THE MARKET VALUE OF INSURED MUNICIPAL BONDS NOR THE
SHARE PRICE OF THE INSURED FUND.
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<PAGE> 19
New issue insurance is a policy purchased by an issuer prior to
bringing a bond issue to market in an initial offering. By purchasing
the policy, the issuer obtains a higher credit rating for its bond
(usually Aaa by Moody's or AAA by S&P). Such insurance may
increase the purchase price as well as the resale value of the bond.
New issue insurance cannot be cancelled by the insurer and remains in
force as long as the bond issue is outstanding.
Secondary market insurance is purchased by an investor after the bonds
have been initially issued. These policies normally insure specific
bonds for the remainder of their term. Like new issue insurance, the
insurance cannot be cancelled by the insurer. The Insured Fund may
invest in bonds insured under a secondary market policy purchased by a
prior investor or may itself purchase secondary market insurance for
uninsured bonds it has purchased.
Portfolio insurance is a policy purchased by the Insured Fund to
guarantee specific bonds it has purchased for its portfolio for only
as long as the bonds are held by the Fund.
Premiums for new issue insurance are paid in advance by the issuer of
the bond. As a result, the Insured Fund may pay a higher purchase
price for a bond covered by such insurance. Premiums on secondary
market and portfolio insurance are paid directly by the Insured Fund
in accordance with applicable policy terms. Any premiums paid by the
Insured Fund to purchase secondary market or portfolio insurance
policies will be an Insured Fund expense. Such an expense may reduce
the Insured Fund's current yield. The Insured Fund will only purchase
insurance policies from insurance companies rated Aaa by Moody's, AAA
by S&P or AAA by Fitch. Generally an insurer may not withdraw or
cancel coverage on insured securities held by the Insured Fund other
than for non-payment of premium by the Fund.
The Insured Fund may retain any defaulted municipal bond covered by
portfolio insurance. The defaulted bond will be valued based on the
value of the insurance coverage. The insurance value is normally the
difference between the market value of the defaulted security and the
market value of similar non-defaulted securities.
The Insured Fund may invest up to 5% of its total assets in uninsured
municipal bonds.
5. Invest in shares of no-load, open-end investment companies that
invest in tax-exempt securities with remaining maturities of one year
or less. Such shares will only be purchased as a medium for a Fund's
short-term investments if SAM determines that they provide a better
combination of yield and liquidity than a direct investment in
short-term, tax-exempt securities. SAM will waive its advisory fees
for assets invested in other investment companies. A Fund will not
invest more than 10% of its total assets in shares issued by other
investment companies, will not invest more than 5% of its total
assets in a single investment company, and will not purchase more than
3% of the outstanding voting securities of a single investment
company.
-15-
<PAGE> 20
6. Invest for short-term purposes when SAM believes such action to be
desirable and consistent with sound investment practices. Each Fund,
however, will not engage primarily in trading for the purpose of
short-term profits. A Fund may dispose of its portfolio securities
whenever SAM deems advisable, without regard to the length of time
the securities have been held. The portfolio turnover rates for
each Fund is not expected to exceed 70%.
7. Purchase or sell securities on a "when-issued" or "delayed-delivery"
basis. Under this procedure, a Fund agrees to acquire or sell
securities that are to be delivered against payment in the future,
normally 30 to 45 days. The price, however, is fixed at the time of
commitment. When a Fund purchases when-issued or delayed-delivery
securities, it will earmark liquid, high quality securities in an
amount equal in value to the purchase price of the security. Use of
this technique may affect a Fund's share price in a manner similar to
leveraging.
8. 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 and
shares of no-load, open-end money market funds. A Fund may purchase
these short-term securities as a cash management technique under those
circumstances where it has cash to manage for a short time period, for
example, after receiving proceeds from the sale of securities,
dividend distributions from portfolio securities, or cash from the
sale of Fund shares to investors. Interest earned from these
short-term securities will be taxable to investors as ordinary income
when distributed. SAM will waive its advisory fees for Fund assets
invested in money market funds.
The following restrictions are fundamental policies and cannot be changed
without shareholder vote.
1. Each Fund, with respect to 75% of the value of its total assets, may
not invest more than 5% of its total assets in the securities of any
one issuer (other than U.S. Government securities).
2. Each Fund will not permit 25% or more of its total assets to be
invested in municipal obligations and other permitted investments, the
interest on which is payable from revenues on similar types of
projects such as: sports, convention or trade show facilities;
airports; mass transportation; sewage or solid waste disposal
facilities; or air or water pollution control projects.
3. The Intermediate, Insured and Municipal Funds will not permit 25% or
more of their total assets to be invested in securities whose issuers
are located in the same state.
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<PAGE> 21
4. Each Fund may borrow money only for temporary or emergency purposes
from a bank or affiliate of SAFECO Corporation at an interest rate not
greater than that available from commercial banks. A Fund will not
borrow amounts in excess of 20% of its total assets. As a non-
fundamental policy of the Intermediate, Insured and Washington Funds
and a fundamental policy of the California and Municipal Funds, a Fund
will not purchase securities if borrowings equal to or greater than 5%
of its total assets are outstanding. A Fund intends to primarily
exercise its borrowing authority to meet shareholder redemptions under
circumstances where redemptions exceed available cash.
For a further description of each Fund's investment policies and restrictions
as well as an explanation of ratings, see the "Investment Objectives and
Policies" and "Description of Ratings" sections of the Trust's Statement of
Additional Information.
RISK FACTORS
Various factors may cause the value of a shareholder's investment in a Fund to
fluctuate. The principal risk associated with an investment in a mutual fund
like any of the Funds is that the market value of the portfolio securities
may decrease and result in a decrease in the value of a shareholder's
investment. The value of each Fund's portfolio will normally fluctuate
inversely with changes in market interest rates. Generally, when market
interest rates rise, the price of municipal bonds will fall, and when market
interest rates fall, the price of these bonds will rise. Also, there is a risk
that the issuer of a municipal bond or other security will fail to make timely
payments of principal and interest to the Funds.
Because the California and Washington Funds each concentrate their investments
in a single state, there is a greater risk of fluctuation in the values of
their portfolio securities than with mutual funds whose investments are more
geographically diverse. Investors should carefully consider the investment
risks of such concentration. The share price of the California and Washington
Funds can be affected by political and economic developments within and by the
financial condition of the respective state, its public authorities and
political subdivisions. See the discussion below and "Investment Risks of
Concentration in California and Washington Issuers" in the Statement of
Additional Information for further information.
The information in the following discussion is drawn primarily from official
statements relating to state securities offerings which are dated prior to the
date of this Prospectus. The California and Washington Funds have not
independently verified any of the information in the discussion below.
Special Risks of the California Fund
The State of California is still experiencing the effects of the recent
economic recession, the most severe since the 1930s. Although economic
indicators show a steady recovery well underway in the State, full recovery to
pre-recession levels is not expected before late 1996. The State's long-term
credit ratings, reduced in 1992, were lowered again in 1994 and have not been
restored. Its ability to provide assistance to its public authorities and
political subdivisions has been impaired. Cutbacks in state aid adversely
affect the financial condition of many cities, counties and school districts
-17-
<PAGE> 22
which are already subject to fiscal constraints and are facing their own
reduced tax collections.
In the past, California voters have passed amendments to the California
Constitution and other measures that limit the taxing and spending authority of
California governmental entities. Future voter initiatives could result in
adverse consequences affecting obligations issued by the State. These factors,
among others, could reduce the credit standing of certain issuers of California
obligations.
On December 6, 1994, Orange County, California, together with its pooled
investment funds, filed for protection under Chapter 9 of the federal
Bankruptcy Code, after reports that the funds had suffered significant market
losses in their investments, causing a liquidity crisis for the funds and the
County. More than 180 other public entities, most of which, but not all, are
located in the County, were also depositors in the funds. As of mid-January,
1995, the County estimated the funds' loss at about $1.69 billion, or 22% of
their initial deposits of approximately $7.5 billion. Many of the entities
which deposited moneys in the funds, including the County, are facing cash flow
difficulties because of the bankruptcy filing and may be required to reduce
programs or capital projects. This may also affect their ability to meet their
outstanding obligations.
Special Risks of the Washington Fund
The State of Washington's economy consists of both export and local industries.
The State's leading export industries are aerospace, forest products,
agriculture and food processing. The State's manufacturing base includes
aircraft manufacture which comprised approximately 27.2% of total
manufacturing in 1994. The Boeing Company is the State's largest employer and
has a significant impact, in terms of overall production, employment and labor
earnings, on the State's economy. In February 1995, Boeing announced
production cuts and is expected to substantially trim jobs over the next
several years. Such cuts may have an adverse effect on the Washington economy.
Forest products rank second behind aerospace in value of total production.
Although productivity in the forest products industry has increased steadily in
recent years, declines in production are expected in the future.
Unemployment in the timber industry is anticipated in certain regions; however
the impact is not expected to affect the State's overall economic
performance. Growth in agriculture has been an important factor in the
State's economic growth over the past decade. The State is the home of many
technology firms of which approximately half are computer-related. Microsoft,
the world's largest microcomputer software company, is headquartered in
Redmond, Washington.
State law requires a balanced budget. The Governor has a statutory
responsibility to reduce expenditures across the board to avoid any cash
deficit at the end of a biennium. In addition, state law prohibits state tax
revenue growth from exceeding the growth rate of state personal income. To
date, Washington State tax revenue increases have remained substantially below
the applicable limit. At any given time, there are numerous lawsuits against
the state which could affect its revenues and expenditures.
- -----------------
PORTFOLIO MANAGER
- -----------------
-18-
<PAGE> 23
The portfolio manager for each Fund is Stephen C. Bauer, President, SAFECO
Asset Management Company. Mr. Bauer has served as portfolio manager for each
Fund since it commenced operations: 1981 for the Municipal Fund, 1983 for the
California Fund and 1992 for the Intermediate, Insured and Washington Funds.
Mr. Bauer has been a portfolio manager for other SAFECO municipal bond funds
since 1972.
- ---------------------------------------------
INFORMATION ABOUT SHARE OWNERSHIP AND
COMPANIES THAT PROVIDE SERVICES TO THE TRUST
- ---------------------------------------------
Each Fund is a series of SAFECO Tax-Exempt Bond Trust, a Delaware business
trust that issues an unlimited number of shares of beneficial interest. The
Board of Trustees may establish additional series of shares of the Trust
without approval of shareholders.
Shares of each Fund represent equal proportionate interests in the assets of
that Fund only and have identical voting, dividend, redemption, liquidation and
other rights. All shares issued are fully paid and non-assessable, and
shareholders have no preemptive or other right to subscribe to any additional
shares.
The Trust does not intend to hold annual meetings of shareholders of the
Funds. The Trustees will call a special meeting of shareholders of a Fund
only if required under the Investment Company Act of 1940 or in their
discretion or upon the written request of holders of 10% or more of the
outstanding shares of the Fund entitled to vote.
Under Delaware law, the shareholders of the Funds will not be personally liable
for the obligations of any Fund; a shareholder is entitled to the same
limitation of personal liability extended to shareholders of corporations. To
guard against the risk that Delaware law might not be applied in other states,
the Trust Instrument requires that every written obligation of the Trust or
Fund contain a statement that such obligation may be enforced only against
the assets of the Trust or Fund and generally provides for indemnification out
of Trust or Fund property of any shareholder nevertheless held personally
liable for Trust or Fund obligations, respectively.
SAM is the investment adviser for each Fund under an agreement with the Trust.
Under the agreement, SAM is responsible for the management of the Trust's and
-19-
<PAGE> 24
each Fund's business affairs. Each Fund pays SAM an annual management fee
based on a percentage of that Fund's net assets ascertained each business day
and paid monthly in accordance with the schedules below. A reduction in the
fees paid by a Fund occurs only when that Fund's net assets reach the dollar
amounts of the break points and applies only to the assets that fall within the
specified range:
INTERMEDIATE FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL FEE
<S> <C>
$0 - $250,000,000 .55 of 1%
$250,000,001 - $500,000,000 .45 of 1%
$500,000,001 - $750,000,000 .35 of 1%
Over $750,000,000 .25 of 1%
INSURED AND WASHINGTON FUNDS
NET ASSETS ANNUAL FEE
$0 - $250,000,000 .65 of 1%
$250,000,001 - $500,000,000 .55 of 1%
$500,000,001 - $750,000,000 .45 of 1%
Over $750,000,000 .35 of 1%
MUNICIPAL AND CALIFORNIA FUNDS
NET ASSETS ANNUAL FEE
$0 - $100,000,000 .55 of 1%
$100,000,001 - $250,000,000 .45 of 1%
$250,000,001 - $500,000,000 .35 of 1%
Over $500,000,000 .25 of 1%
</TABLE>
For the fiscal year ended March 31, 1995 the ratios of expenses to average
net assets for the Municipal, California, Intermediate, Insured and Washington
Funds were ___%, ___%, ___%, ____% and ____%, respectively, and the ratios of
the net compensation paid to SAM to average net assets of the Municipal,
California, Intermediate, Insured and Washington Funds were ___%, ___%, ___%,
___% and ___%, respectively.
-20-
<PAGE> 25
The distributor of each Fund's shares under an agreement with the Trust is
SAFECO Securities, Inc. ("SAFECO Securities"), a broker-dealer registered
under the Securities Exchange Act of 1934 and a member of the National
Association of Securities Dealers, Inc. SAFECO Securities receives no
compensation from the Trust or the Funds for its services.
The transfer, dividend and distribution disbursement and shareholder servicing
agent for each Fund under an agreement with the Trust is SAFECO Services
Corporation ("SAFECO Services"). SAFECO Services receives a fee from a Fund
for each shareholder transaction processed for that Fund.
SAM, SAFECO Securities and SAFECO Services are wholly-owned subsidiaries of
SAFECO Corporation (a holding company whose primary subsidiaries are engaged in
the insurance and related financial services businesses) and are each located
at SAFECO Plaza, Seattle, Washington 98185.
- -----------------------------------------------------------------
PERSON CONTROLLING THE INTERMEDIATE, INSURED AND WASHINGTON FUNDS
- -----------------------------------------------------------------
At June 30, 1995 SAFECO Insurance Company of America ("SAFECO Insurance"), a
Washington Corporation, controlled the Intermediate, Insured and Washington
Funds. SAFECO Insurance is a wholly-owned subsidiary of SAFECO Corporation,
a Washington corporation, having its principal place of business at SAFECO
Plaza, Seattle, Washington 98185.
The amount of any redemption of these shares by any holder thereof during the
60-month period beginning with the commencement of each Fund's operations will
be reduced by a pro rata proration of any then-unamortized organization
expenses. Such proration is to be calculated by dividing the number of
initial shares redeemed from a Fund by the number of initial shares of that
Fund outstanding on the date of redemption.
- -----------------------
PERFORMANCE INFORMATION
- -----------------------
Each Fund's yield, tax-equivalent yield, total return and average annual
total return may be quoted in advertisements.
Yield is the annualization on a 360-day basis of a Fund's net income per share
over a 30-day period divided by the Fund's net asset value per share on the
last day of the period. Tax-equivalent yield is, given an investor's tax
bracket, the taxable yield necessary to equal a Fund's non-taxable yield on an
after-tax basis over the same period of time. Total return is the total
percentage change in an investment in a Fund, assuming the reinvestment of
dividend and capital gains distributions, over a stated period of time.
Average annual total return is the annual percentage change in an investment in
a Fund, assuming the reinvestment of dividend and capital gains distributions,
over a stated period of time.
-21-
<PAGE> 26
From time to time, the Funds may advertise 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. Each Fund may also compare its performance to the
performances of relevant indices.
Performance information and quoted rankings are indicative only of past
performance and are not intended to represent future investment results. Each
Fund's yield and share price will fluctuate and your shares, when redeemed, may
be worth more or less than you originally paid for them.
- -----------------------------------------
FUND DISTRIBUTIONS AND HOW THEY ARE TAXED
- -----------------------------------------
DIVIDEND AND OTHER DISTRIBUTIONS
Each Fund declares an income dividend each business day based on net
investment income; i.e., all of its interest income earned on the securities
in its portfolio less all of its expenses. Income dividends are payable on
the last business day of each month. Your shares become entitled to declared
dividends on the next business day after shares are purchased in your account.
If you request redemption of all your shares at any time during the month, you
will receive all declared income 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 distributing Fund 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 by the shareholder in the same manner as the distribution
election.
Please remember that if you purchase shares shortly before a Fund pays a
taxable dividend or other distribution, you will pay the full price for the
shares, then receive part of the price back as a taxable distribution.
TAXES
Each Fund intends to continue to qualify for tax treatment as a "regulated
investment company" under Subchapter M of the Internal Revenue Code of 1986, as
amended ("Code"), so as to be able to pay dividends which are exempt from
federal personal income taxes. The portion of dividends representing net
short-term capital gains, however, is not exempt and will be treated as
taxable dividends for federal income tax purposes. In addition, income which
is derived from purchasing certain bonds below their issued price after April
30, 1993, will be treated as ordinary income for federal income tax purposes.
-22-
<PAGE> 27
A portion of a Fund's assets may from time to time be temporarily invested in
fixed-income obligations, the interest on which when distributed to the Fund's
shareholders will be subject to federal income taxes. As a matter of
non-fundamental investment policy, the Funds will not purchase so-called
"non-essential or private activity" bonds, the interest on which would
constitute a preference item for shareholders in determining their alternative
minimum tax.
The excess of net long-term capital gains realized by a Fund over net
short-term capital loss on portfolio transactions, when distributed by the
Fund, is subject to long-term capital gains treatment under the Code,
regardless of how long the shares of the Fund have been held. The tax
consequences described above apply whether distributions are taken in cash or
in additional shares. Redemptions and exchanges of shares of a Fund may result
in a capital gain or loss for federal income tax purposes.
The exemption of the tax-exempt interest component of dividends for federal
personal income tax purposes does not necessarily result in exemption under
other federal, state or local income taxes. Shareholders of each Fund should
bear in mind that they may be subject to other taxes.
If a shareholder buys shares of a Fund and sells them at a loss within six
months, such loss for federal income tax purposes will be disallowed to the
extent of the tax-exempt interest component of dividends received during such
six-month period.
If a shareholder buys shares of a Fund and sells them at a loss within six
months, to the extent not disallowed in the previous paragraph and to the
extent of any long-term capital gains distributions, the loss shall be treated
as a long-term capital loss for federal income tax purposes.
Individuals who receive Social Security benefits must use the amount of income
dividends received from each of the Funds in determining the amount of any
federal income tax due on such benefits.
Under the Code, the tax effect on individuals of receiving dividends from any
of the Funds is substantially different from the tax effect on other types of
shareholders.
Investors may want to consult their tax advisers with respect to investments in
shares of any of the Funds.
CALIFORNIA FUND
The California Fund intends to pay dividends which are exempt from California
state personal income taxes. This would not include taxable interest paid on
temporary investments, if any.
Generally, the tax treatment of capital gains under California law is the same
as under federal law. Capital gains distributions paid by the California Fund
are treated as long-term capital gains under California law regardless of how
long the shares have been held. Redemptions and exchanges of the California
Fund may result in a capital gain or loss for California income tax purposes.
Under California law, the dividend income from municipal bonds is tax-exempt to
individual shareholders but its tax treatment for corporate shareholders is
unclear. Therefore, the portion of the California Fund's income dividend
-23-
<PAGE> 28
attributable to these obligations and paid by it to corporate shareholders may
be taxable. Corporate shareholders may wish to consult their tax advisers
regarding this issue.
Shares of the California Fund will not be subject to the California property
tax.
WASHINGTON FUND
Currently the State of Washington has no state personal income tax. When and
if Washington State enacts a personal income tax, there can be no assurance
that income from the Washington Fund's portfolio securities which is
distributed to shareholders would be exempt from such a tax.
TAX WITHHOLDING INFORMATION
You will be asked to certify on your account application or on a separate
form that the taxpayer identification number you provide is correct and
that you are not subject to, or are exempt from, backup withholding for
previous underreporting to the Internal Revenue Service.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting each Fund and its shareholders. See the
Trust's Statement of Additional Information for additional tax information.
There may be other federal, state or local tax considerations applicable to a
particular investor. You therefore are urged to consult your tax adviser.
- ------------------
ACCOUNT STATEMENTS
- ------------------
Periodically, you will receive an account statement indicating your current
Fund holdings and transactions affecting the account. Confirmation statements
will be sent to you after each transaction that affects your account balance.
Please review the information on each confirmation statement for accuracy
immediately upon receipt. If you do not notify us within 30 days of any
processing error, SAFECO Services will consider the transactions listed on the
confirmation statement to be correct.
- ------------------------------------------
ACCOUNT CHANGES AND SIGNATURE REQUIREMENTS
- ------------------------------------------
Changes to your account registration or the services you have selected must
be in writing and signed by the number of owners specified on your account
application as having authority to make these changes. Send written changes to
SAFECO Services at the address on the Prospectus cover. Certain changes to
the Automatic Investment Method and Systematic Withdrawal Plan can be made via
telephone request if you have previously selected single signature
authorization for your account.
You must specify on your account application the number of signatures required
to authorize redemptions and exchanges and to change account registration or
the services selected. Authorizing fewer than all account owners has important
implications. For example, one owner of a joint-tenant account can redeem money
-24-
<PAGE> 29
or change the account registration to single ownership without the co-owner's
signature. If you do not indicate otherwise on the application, the signatures
of all account owners will be required to effect a transaction. Your selection
of fewer than all account owner signatures may be revoked by any account owner
who writes to SAFECO Services at the address on the Prospectus cover.
SAFECO Services may require a signature guarantee for a signature that cannot
be verified by comparison to the signature(s) on your account application. A
signature guarantee may be obtained from most financial institutions, including
banks, savings and loans and broker-dealers.
- -----------------------
SHARE PRICE CALCULATION
- -----------------------
The net asset value per share ("NAV") of each Fund is computed as of the
close of regular trading on the New York Stock Exchange (normally 1:00 p.m.
Pacific time) each day that Exchange is open for trading. The NAV is
calculated by subtracting a Fund's liabilities from its assets and dividing the
result by the number of outstanding shares.
Securities are valued based on consideration of information with respect to the
transactions in similar securities, quotations from dealers and various
relationships between securities. The value of each Fund's securities are
stated on the basis of valuations provided by a pricing service approved by the
Trust's Board of Trustees, unless the Board of Trustees determines that such
valuations do not represent fair value. The service uses information with
respect to transactions in securities, quotations from security dealers, market
transactions in comparable securities, and various relationships between
securities to determine values. Other assets (including securities for which
market quotations are unavailable and restricted securities) are valued at
their fair value as determined in good faith by the Trust's Board of Trustees.
- ----------------------
HOW TO PURCHASE SHARES
- ----------------------
A completed and signed application must accompany payment for an initial
purchase by mail and in all cases is necessary before a redemption can be made.
The Funds only accept funds drawn in U.S. dollars and payable through a U.S.
bank. The Funds do not accept currency. The Funds issue shares in
uncertificated form. Certificates for whole shares will be issued without
charge only upon written request. You will be required to post a bond to
replace missing certificates.
THE FUNDS HAVE THE RIGHT TO REFUSE ANY INVESTMENT.
INITIAL PURCHASES
MINIMUM INITIAL INVESTMENT $1,000.
No minimum initial investment is required to establish the Automatic
Investment Method or Payroll Deduction Plan.
BY WRITTEN REQUEST
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<PAGE> 30
Send a check or money order made payable to the applicable Fund and a completed
and signed application to the address on the Prospectus cover.
BY WIRE
Call toll-free 1-800-624-5711 or, in Seattle, 206-545-7319 for instructions.
ADDITIONAL PURCHASES
MINIMUM ADDITIONAL INVESTMENTS $100 (EXCEPT DIVIDEND REINVESTMENTS).
BY WRITTEN REQUEST
Send a check or money order payable to the applicable Fund to the address on
the Prospectus cover. Please specify your account number.
BY WIRE
Instruct your bank to send wires to U.S. Bank of Washington, N.A., Seattle,
Washington, ABA #1250-0010-5, Account #0017-086083.
To ensure timely credit to your account, ask your bank to include the following
information in its wire to U.S. Bank of Washington, N.A.:
. SAFECO Fund name
. SAFECO account number
. Name of the registered owner(s) of the SAFECO account
Delays of purchases caused by inadequate wire instructions are not the
responsibility of the Funds or SAFECO Services.
Your bank may charge a fee for wire services.
BY TELEPHONE
Call 1-800-624-5711 or, in Seattle, 206-545-7319. You must have previously
selected this service on your account application or by written request. Not
available to open a new account.
Maximum purchase $100,000 per day, minimum purchase $100 per day.
Monies will be transferred from your predesignated bank account to your
existing Fund account. Your bank may charge a fee if monies are wired to your
Fund account. Please allow 15 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.
THROUGH REGISTERED SECURITIES DEALERS
You may open your account and make additional investments through a registered
securities dealer who is responsible for the prompt forwarding of purchase
orders. A dealer may charge a transaction fee and may place more restrictive
conditions on a purchase than would apply if you purchased your shares directly
from a Fund.
-26-
<PAGE> 31
THROUGH REGISTERED INVESTMENT ADVISERS
Please read "Transactions Through Registered Investment Advisers" on page ___
for important information.
SHARE PURCHASE PRICE
You will buy full and fractional shares at the NAV next computed after your
check, money order or wire has been received. For telephone purchase orders,
you will receive the price per share calculated on the day monies are received
from your bank account. See "Share Price Calculation" on page___ for more
information.
- --------------------
HOW TO REDEEM SHARES
- --------------------
BY WRITTEN REQUEST
Shares may be redeemed by sending a letter which specifies your account number,
the Fund's name and the number of shares or dollar amount you wish to redeem.
The request should be sent to the address on the Prospectus cover. The request
must be signed by the appropriate number of owners and in some cases a
signature guarantee may be required. In all cases, SAFECO Services must have a
signed and completed application on file before a redemption will be made.
See "Account Changes and Signature Requirements" on page ___ for more
information.
BY TELEPHONE
Call 1-800-624-5711 or, in Seattle, 206-545-7319. You must have previously
selected this service on your account application or by written request.
Telephone redemptions are not available for shares issued in certificate
form.
You may request that redemption proceeds be sent directly to your predesignated
bank or mailed to your account address of record.
Please read "Telephone Transactions" on page ______ for important information.
THROUGH REGISTERED SECURITIES DEALERS
Requests for redemption of shares by wire or telephone will be accepted from
registered securities dealers under agreement with each Fund's principal
underwriter. The dealer may charge a transaction fee for any order processed
for you.
THROUGH REGISTERED INVESTMENT ADVISERS
Please read "Transactions Through Registered Investment Advisers" on page __
for important information.
PLEASE NOTE THE FOLLOWING:
If your shares were purchased by wire, redemption proceeds will be available
immediately. If shares were purchased by means other than wire, each Fund
reserves the right to hold the proceeds of your redemption for up to 15
business days after investment or until such time as the Fund has received
assurance that
-27-
<PAGE> 32
your investment will be honored by the bank on which it was drawn, whichever
occurs first.
SAFECO Services charges a $10 fee to wire redemption proceeds. In addition,
some banks may charge a fee to receive wires. If shares are issued in
certificate form, the certificates must accompany a redemption request and be
duly endorsed.
Under some circumstances (e.g., a change in corporate officer or death of an
owner), SAFECO Services may require certified copies of supporting documents
before a redemption can be made.
SHARE REDEMPTION PRICE AND PROCESSING
Your shares will be redeemed at the NAV next calculated after receipt of your
request that meets the redemption requirements of the Funds. The value of
the shares you redeem may be more or less than the dollar amount you purchased,
depending on the market value of the shares at the time of redemption.
Redemption proceeds will normally be sent on the business day following receipt
of your redemption request. If your redemption request is received after the
close of trading on the New York Stock Exchange (normally 1:00 p.m. Pacific
time), proceeds will normally be sent on the second business day following
receipt. Each Fund, however, reserves the right to postpone payment of
redemption proceeds for up to seven days if making immediate payment could
adversely affect its portfolio. In addition, redemptions may be suspended or
payment dates postponed if the New York Stock Exchange is closed, its trading
is restricted or the Securities and Exchange Commission declares an emergency.
Due to the high cost of maintaining small accounts, your account may be closed
upon 60 days' written notice if at the time of any redemption or exchange the
total value falls below $100. Your shares will be redeemed at the share price
calculated on the day your account is closed.
- -----------------------------------------------
HOW TO SYSTEMATICALLY PURCHASE OR REDEEM SHARES
- -----------------------------------------------
Call 1-800-426-6730 or 206-545-5530, in Seattle, for more information.
AUTOMATIC INVESTMENT METHOD (AIM)
AIM enables you to make regular monthly investments by authorizing SAFECO
Services to withdraw a specific amount (minimum of $100 per withdrawal per
Fund) from your bank account and invest the amount in any Fund.
PAYROLL DEDUCTION PLAN
An employer or other entity using group billing may establish a
self-administered payroll deduction plan in any Fund. Payroll deduction
amounts are negotiable.
SYSTEMATIC WITHDRAWAL PLAN
This plan enables you to receive a portion of your investment on a monthly
basis. A Fund automatically redeems shares in your account and sends you a
withdrawal check (minimum amount $50 per Fund) on or about the fifth business
day of every month.
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<PAGE> 33
- -----------------------------------------------
HOW TO EXCHANGE SHARES FROM ONE FUND TO ANOTHER
- -----------------------------------------------
An exchange is the redemption of shares of one SAFECO Fund and the purchase of
shares of another SAFECO Fund in accounts that are identically registered;
i.e., have the same registered owners and account number. For income tax
purposes, depending on the cost or other basis of the shares you exchange, you
may realize a capital gain or loss when you make an exchange. You may
purchase shares of a SAFECO Fund by exchange only if it is registered for sale
in the state where you reside. Before exchanging into a SAFECO Fund, please
read its Prospectus.
BY WRITTEN REQUEST
Shares may be exchanged by writing SAFECO Services at the address on the
Prospectus cover. Please designate the SAFECO Funds you wish to exchange out
of and into as well as your account number. The request must be signed by the
number of owners designated on your account application and in some cases a
signature guarantee may be required. See "Account Changes and Signature
Requirements" on page ___ for more information.
If the shares you want to exchange are evidenced by certificates, the
certificates must accompany the request and be duly endorsed.
Under some circumstances (e.g., a change in corporate officer or death of an
owner), SAFECO Services may require certified copies of supporting documents
before an exchange can be made.
BY TELEPHONE
Call 1-800-624-5711 or, in Seattle, 207-545-7319.
Exchanges by telephone must be in amounts of $1,000 or more. Telephone
exchanges are not available for shares issued in certificate form. Please
read "Telephone Transactions" on page ___ for important information.
THROUGH REGISTERED INVESTMENT ADVISERS
Please read "Transactions Through Registered Investment Advisers" on page __
for important information.
LIMITATIONS
Each Fund reserves the right to refuse exchange purchases by any person or
group if, in SAM's judgment, the Fund would be unable to invest the money
effectively in accordance with that Fund's investment objective and policies or
would otherwise potentially be adversely affected.
The exchange privilege is not intended to provide a means for frequent trading
in response to short-term fluctuations in the market. Excessive exchange
transactions can be disadvantageous to other shareholders and the Funds. Your
exchanges may be restricted or refused if a Fund receives or anticipates
simultaneous orders affecting significant portions of that Fund's assets, for
-29-
<PAGE> 34
example, a pattern of exchanges that coincides with a "market-timing" strategy.
Although a Fund will attempt to give you prior notice whenever it is reasonably
able to do so, it may impose the above restrictions at any time.
SHARE EXCHANGE PRICE AND PROCESSING
The shares of the SAFECO Fund you are exchanging from will be redeemed at the
price next computed after your exchange request is received. Normally the
purchase of the SAFECO Fund you are exchanging into is executed on the same
day. However, each Fund reserves the right to delay the payment of proceeds
and, hence, the purchase in an exchange for up to seven days if making
immediate payment could adversely affect the portfolio of the Fund whose shares
are redeemed. The exchange privilege may be modified or terminated with
respect to a Fund at anytime 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, 206-545-7319 between 6:00 a.m. and 5:00 p.m. Pacific time, Monday
through Friday, except certain holidays. All telephone calls are tape-recorded
for your protection. During times of drastic or unusual market volatility, it
may be difficult for you to exercise the telephone transaction privileges.
To use the telephone purchase, redemption and exchange privileges, you must
have previously selected these services either on your account application or
by having submitted a request in writing to SAFECO Services at the address on
the Prospectus cover. Purchasing, redeeming or exchanging shares by telephone
allows the Funds and SAFECO Services to accept telephone instructions from an
account owner or a person preauthorized in writing by an account owner.
Each Fund and SAFECO Services reserve the right to refuse any telephone
transaction when a Fund or SAFECO Services in its sole discretion is unable to
confirm to its satisfaction that a caller is the account owner or a person
preauthorized by the account owner.
The Funds and SAFECO Services will not be liable for the authenticity of
instructions received by telephone that a Fund or SAFECO Services, in its
discretion, believes to be delivered by an account owner or preauthorized
person, provided that the Fund or SAFECO Services follows reasonable procedures
to identify the caller. The shareholder will bear the risk of any resulting
loss. The Funds and SAFECO Services will follow certain procedures designed to
make sure that telephone instructions are genuine. These procedures may
include requiring the account owner to select the telephone privileges in
writing prior to first use and to designate persons authorized to deliver
telephone instructions. SAFECO Securities tape-records telephone transactions
and may request certain identifying information from the caller.
The telephone transaction privileges may be suspended, limited, modified or
terminated at any time without prior notice by the Funds or SAFECO Services.
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<PAGE> 35
- ---------------------------------------------------
TRANSACTIONS THROUGH REGISTERED INVESTMENT ADVISERS
- ---------------------------------------------------
SAFECO Services may accept instructions for share transactions and account
information changes from investment advisers who are acting on behalf of
shareholders, provided that the adviser is registered under the Investment
Advisers Act of 1940, has a signed agreement with SAFECO Services and has an
executed power of attorney from the shareholder, in an acceptable form, on file
with SAFECO Services. Advisers may charge a fee to shareholders for their
services that the Trust, the Funds and SAFECO Services have no control over
or involvement with. Advisers are responsible for the prompt forwarding of
instructions on shareholders' accounts to SAFECO Services and are bound by the
terms of this Prospectus. The Trust, the Funds, SAFECO Services and their
affiliated companies will not be responsible to any shareholder for any losses,
liabilities, costs or expenses associated with any investment advice or
recommendation provided by the adviser to the shareholder or for accepting and
following any instructions from such adviser on the shareholder's account(s).
-31-
<PAGE> 36
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
FOR MORE COMPLETE INFORMATION ON ANY SAFECO MUTUAL FUND, INCLUDING MANAGEMENT
FEES AND EXPENSES, CALL OR WRITE FOR A FREE PROSPECTUS. PLEASE READ IT
CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
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<PAGE> 37
TO REQUEST A PROSPECTUS:
Nationwide: 1-800-426-6730
Seattle: 206-545-5530
FOR 24-HOUR PERFORMANCE FIGURES:
Nationwide: 1-800-835-4391
Seattle: 206-545-5113
FOR ACCOUNT INFORMATION OR TELEPHONE
TRANSACTIONS*:
Nationwide: 1-800-624-5711
Seattle: 206-545-7319
Hearing Impaired TTY/TDD Service
1-800-438-8718
*ALL TELEPHONE CALLS ARE TAPE-
RECORDED FOR YOUR PROTECTION.
Mailing Address:
SAFECO MUTUAL FUNDS
P.O. Box 34890
Seattle, WA 98124-1890
SAFECO Securities, Inc.
Distributor
PROSPECTUS
July 28, 1995
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
No-Load Funds
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<PAGE> 38
SAFECO TAX-EXEMPT BOND TRUST:
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
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Prospectus for the Funds. A copy of the Prospectus may
be obtained by writing SAFECO Mutual Funds, P.O. Box 34890, Seattle, Washington
98124-1890, or by calling TOLL FREE:
Nationwide
1-800-426-6730
Seattle
206-545-5530
Hearing Impaired TDD/TTY Service
1-800-438-8718
The date of the most current Prospectus of the Funds to which this Statement of
Additional Information relates is July 28, 1995.
The date of this Statement of Additional Information is July 28, 1995.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Overview of Investment
Policies 2
Additional Investment Information 7
Investment Risks of Concentration
in California and Washington
Issuers 8
Additional Tax Information 17
Additional Information On
Calculation of Net Asset Value
Per Share 18
Trustees and Officers 21
Principal Shareholders 23
Investment Advisory and Other
Services 24
Brokerage Practices 26
Redemption in Kind 27
Financial Statements 27
</TABLE>
<PAGE> 39
<TABLE>
<S> <C>
Additional Performance Information 18
Description of Ratings 27
</TABLE>
OVERVIEW OF INVESTMENT POLICIES
SAFECO Intermediate-Term Municipal Bond Fund ("Intermediate Fund"), SAFECO
Insured Municipal Bond Fund ("Insured Fund"), SAFECO Municipal Bond Fund
("Municipal Fund"), SAFECO California Tax-Free Income Fund ("California Fund")
and SAFECO Washington State Municipal Bond Fund ("Washington Fund") (together,
the "Funds") are each a series of the SAFECO Tax-Exempt Bond Trust ("the
Trust"). The investment policies of each Fund are described in the
Prospectus and this Statement of Additional Information. These policies state
the investment practices that the Funds will follow, in some cases
limiting investments to a certain percentage of assets, as well as those
investment activities that are prohibited. The types of securities a Fund may
invest in are also disclosed in the Prospectus. Before a Fund 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 percentage beyond the specified limit resulting from a change in
values, net assets or other circumstances will not be considered in determining
whether a Fund complies with the applicable limitation.
Generally, the entity that has the ultimate responsibility for the payment of
interest and principal on a particular security is deemed to be its issuer for
purposes of any fundamental investment restrictions. The identification of the
issuer of a tax-exempt security for purposes of diversification depends on the
terms and conditions of the security. For example, when the assets and
revenues of an agency, authority, instrumentality or other political
subdivision are separate from those of the government creating the subdivision
and the security is backed only by the assets and revenues of the subdivision,
such subdivision would be deemed to be the sole issuer for diversification
purposes. Similarly, in the case of an industrial development bond, if that
bond is backed only by the assets and revenues of the non-governmental user,
then such non-governmental user would be deemed to be the sole issuer for
purposes of diversification. If, however, in either case, the creating
government or some other entity guarantees a security, such a guarantee would
be considered a separate security which must be valued and included in the five
percent (5%) limitation on investments in one issuer.
Each Fund's fundamental policies may not be changed without approval of a
majority of its outstanding voting securities. For purposes of such approval,
the vote of a majority of the outstanding voting securities of a Fund means the
vote, at an annual or special meeting of the shareholders of such Fund duly
called, (i) of sixty-seven percent (67%) or more of the voting securities
present at such meeting if the holders of more than fifty percent (50%) of the
outstanding voting securities are present or represented by proxy, or (ii) of
more than fifty percent (50%) of the outstanding voting securities, whichever
is less.
Non-fundamental investment policies may be changed by the Trust's Board of
Trustees without shareholder approval.
FUNDAMENTAL INVESTMENT POLICIES
<PAGE> 40
The Intermediate, Insured and Washington Funds have adopted the following
fundamental policies. Each Fund will 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 a Fund's total assets would be invested in the
securities of such issuer, except that up to twenty-five percent (25%)
of the value of a Fund's total assets (which twenty-five percent (25%)
shall not include securities issued by another investment company) may
be invested without regard to this five percent (5%) limitation;
2. Underwrite any issue of securities, except to the extent that the
purchase of municipal obligations or other permitted investments
directly from the issuer in accordance with a Fund's investment
objective, policies and restrictions and the later disposition thereof
may be deemed to be underwriting;
3. Purchase or sell real estate, unless acquired as a result of the
ownership of securities or instruments, but this shall not prevent a
Fund from investing in municipal obligations or other permitted
investments secured by real estate or interests therein;
4. Borrow money, except from a bank or affiliates of SAFECO Corporation at
an interest rate not greater than that available to a Fund from
commercial banks, for temporary or emergency purposes and not for
investment purposes, and then only in an amount not exceeding twenty
percent (20%) of its total assets (including borrowings) less
liabilities (other than borrowings) immediately after such borrowing;
5. Make loans, except through the purchase of a portion or all of an issue
of debt securities in accordance with a Fund's investment objective,
policies and restrictions and through investments in qualified
repurchase agreements;
6. Purchase or sell commodities, commodity contracts or futures;
7. Purchase securities, if as a result, twenty-five percent (25%) or more
of a Fund's total assets would be invested in the securities of issuers
having their principal business activities in any one industry
(governmental issuers of special or general tax-exempt securities are
not considered part of any one industry);
8. Issue or sell any senior security, except as permitted under the
Investment Company Act of 1940 ("1940 Act");
9. Permit twenty-five percent (25%) or more of a Fund's total assets to be
invested in municipal obligations and other permitted investments, the
interest of which is payable from revenues on similar types of projects.
As a matter of operating policy, similar types of projects may include
sports, convention or trade show facilities; airports or mass
transportation; sewage or solid waste disposal facilities; or air or
water pollution control projects;
-3-
<PAGE> 41
10. Permit twenty-five percent (25%) or more of a Fund's total assets to be
invested in securities whose issuers are located in the same state.
(NOTE: THIS FUNDAMENTAL POLICY DOES NOT APPLY TO THE WASHINGTON
FUND); or
11. During normal market conditions, invest less than eighty percent (80%)
of a Fund's net assets in obligations whose interest, in the opinion of
counsel for the issuer of the obligation, is exempt from federal income
tax.
The Municipal and California Funds have adopted the following fundamental
investment policies. Each Fund will 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 a Fund's total assets would be invested in the
securities of such issuer, except that up to twenty-five percent (25%)
of the value of a Fund's assets (which twenty-five percent (25%) shall
not include securities issued by another investment company) may be
invested without regard to this five percent (5%) limitation;
2. Underwrite any issue of securities, except to the extent that the
purchase of municipal obligations or other permitted investments
directly from the issuer in accordance with a Fund's investment
objective, policies and restrictions and the subsequent disposition
thereof may be deemed to be underwriting;
3. Purchase or sell real estate or real estate limited partnerships, but
this shall not prevent a Fund from investing in municipal obligations or
other permitted investments secured by real estate or interests therein;
4. Purchase or retain for a Fund's portfolio the securities of any issuer
if, to the Fund's knowledge, the officers or directors of the Fund, or
its investment adviser, who individually own more than one-half (1/2) of
one percent (1%) of the outstanding securities of such an issuer,
together own more than five percent (5%) of such outstanding securities;
5. Participate on a joint or a joint-and-several basis in any trading
account in securities, except that a Fund may, for the purpose of
seeking better net results on portfolio transactions or lower brokerage
commission rates, join with other transactions executed by the
investment adviser or the investment adviser's parent company and any
subsidiary thereof;
6. Purchase from, or sell portfolio securities to, any officer or director,
the Fund's investment adviser, principal underwriter or any affiliates
or subsidiaries thereof;
7. Borrow money, except from a bank or affiliates of SAFECO Corporation at
an interest rate not greater than that available to a Fund from
commercial banks, for temporary or emergency purposes and not for
investment purposes and then only in an amount not exceeding twenty
percent (20%) of its total assets (including borrowings) less
liabilities (other than borrowings immediately after such borrowing;
8. Pledge, mortgage or hypothecate its assets, except that, to secure
-4-
<PAGE> 42
borrowings permitted by subparagraph 7 above, a Fund may pledge
securities having a market value at the time of pledge not exceeding ten
percent (10%) of the cost of a Fund's total assets;
9. Make loans, except through the purchase of a portion or all of an issue
of debt securities in accordance with a Fund's investment objective,
policies and restrictions and through investments in qualified
repurchase agreements (provided, however, that a Fund will not invest
more than ten percent (10%) of its total assets in qualified repurchase
agreements maturing in more than seven (7) days);
10. Purchase or sell commodities, commodity contracts or futures or invest
in oil, gas or other mineral exploration or development programs or
leases;
11. Make short sales of securities or purchase securities on margin, except
for such short-term credits as are necessary for the clearance of
transactions, or purchase or sell any put or call options or
combinations thereof;
12. Knowingly purchase or otherwise acquire any securities that are
subject to legal or contractual restrictions on resale or for which
there is no readily available market;
13. Purchase securities (other than obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities), if as a result,
more than twenty-five percent (25%) of a Fund's total assets would be
invested in one industry (governmental issuers of special or general
tax-exempt securities are not considered part of any one industry);
14. Purchase an industrial development bond, if as a result of such
purchase, more than five percent (5%) of a Fund's total assets would be
invested in industrial revenue bonds where the payment of principal and
interest is the responsibility of a company with less than three years'
operating history;
15. Issue or sell any senior security, except that this restriction shall
not be construed to prohibit a Fund from borrowing funds (i) on a
temporary basis as permitted by Section 18(g) of the 1940 Act, or (ii)
from any bank provided, that immediately after such borrowing, there is
an "asset coverage" of at least three hundred percent (300%) for all
such borrowings and provided, further, that in the event that such
"asset coverage" shall at any time fall below three hundred percent
(300%), the Fund shall, within three (3) days thereafter (not including
Sundays and holidays) or such longer period as the Securities and
Exchange Commission may prescribe by rules and regulations, reduce the
amount of its borrowings to an extent that the asset coverage of such
borrowings shall be at least three hundred percent (300%) (for purposes
of this restriction, the terms "senior security" and "asset coverage"
shall be understood to have the meanings assigned to those terms in
Section 18 of the 1940 Act);
16. Permit more than twenty percent (20%) of a Fund's net assets to be
invested, during normal market conditions, in securities whose interest
is not, in its investment adviser's opinion, exempt from federal income
-5-
<PAGE> 43
tax, as long as the Fund has its investment objective to provide as high
a level of current interest income exempt from federal income tax as is
consistent with the relative stability of capital. As a matter of
operating policy, the Funds' investment adviser may base its opinion on
the opinion of counsel for the issuer of the security;
17. Permit twenty-five percent (25%) or more of a Fund's total assets to be
invested in municipal obligations and other permitted investments, the
interest of which is payable from revenues on similar types of projects
such as sports, convention or trade show facilities; airports or mass
transportation; sewage or solid waste disposal facilities; or air or
water pollution control projects;
18. MUNICIPAL FUND ONLY: Permit twenty-five percent (25%) or more of a
Fund's total assets to be invested in securities whose issuers are
located in the same state; or
19. During normal market conditions, invest less than eighty percent (80%)
of a Fund's net assets in obligations whose interest, in the opinion of
counsel for the issuer, is exempt from federal income tax (and, in the
case of the California Fund, also from California state personal income
tax).
NON-FUNDAMENTAL INVESTMENT POLICIES
Each Fund has adopted the following non-fundamental policies with respect
to its investment activities:
1. Each Fund may invest in any of the following types of short-term,
tax-exempt obligations: municipal notes of issuers rated, at the time of
purchase, within one of the three highest grades assigned by Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's Rating Group
("S&P") or Fitch Investors Services, Inc. ("Fitch"); unrated municipal
notes offered by issuers having outstanding municipal bonds rated within
one of the three highest grades assigned by Moody's, S&P or Fitch; notes
issued by or on behalf of municipal issuers which are guaranteed by the
U.S. Government; tax-exempt commercial paper assigned one of the two
highest grades by Moody's, S&P or Fitch; certificates of deposit issued
by banks with assets of $1,000,000,000 or more; and municipal
obligations which have a maturity of one year or less from the date of
purchase.
2. Each Fund may invest in obligations of the U.S. Government, its
agencies or instrumentalities or in qualified repurchase agreements, the
net interest on which is taxable.
3. Each Fund may invest in municipal notes including tax anticipation,
revenue anticipation and bond anticipation notes and tax-exempt
commercial paper.
4. Each Fund may invest in repurchase agreements for a period longer than
seven days.
5. Each Fund may permit twenty-five percent (25%) or more of its assets
to be
-6-
<PAGE> 44
invested in industrial development bonds.
6. Each Fund may purchase or sell securities on a "when-issued" or
"delayed-delivery" basis.
IN ADDITION, THE INTERMEDIATE, INSURED AND WASHINGTON FUNDS HAVE ADOPTED THE
FOLLOWING NON-FUNDAMENTAL POLICIES. EACH FUND:
1. May not make short sales of securities.
2. May not purchase securities on margin, except that a Fund may obtain
such short-term credits as are necessary for the clearance of
transactions.
3. May not purchase or sell any put or call options or combinations
thereof.
4. May not purchase any security, if as a result, more than fifteen percent
(15%) of its net assets would be invested in illiquid securities.
5. May not invest in oil, gas or other mineral exploration or development
programs or leases.
6. May not invest in real estate limited partnerships.
7. Each Fund will not purchase securities if borrowings equal to or greater
than five percent (5%) of its total assets are outstanding.
ADDITIONAL INVESTMENT INFORMATION
1. REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which
a Fund purchases securities from a bank or recognized securities dealer
and simultaneously commits to resell the securities to the bank or
dealer at an agreed-upon date and price reflecting a market rate of
interest unrelated to the coupon rate or maturity of the purchased
securities. No Fund currently intends to invest more than 5% of its net
assets in repurchase agreement transactions. A Fund maintains custody
of the underlying securities prior to their repurchase; thus, the
obligation of the bank or dealer to pay the repurchase price on the date
agreed to is, in effect, secured by such securities. If the value of
these securities is less than the repurchase price, plus any agreed-upon
additional amount, the other party to the agreement must provide
additional collateral so that at all times the collateral is at least
equal to the repurchase price, plus any agreed-upon additional amount.
Repurchase agreements carry certain risks not associated with direct
investments in securities, including possible declines in the market
value of the underlying securities and delays and costs to a Fund if the
other party to a repurchase agreement becomes bankrupt. Each Fund
intends to enter into repurchase agreements only with banks and dealers
in transactions believed by SAM to present minimum credit risks in
accordance with guidelines established by the Trust's board of
trustees. SAM will review and monitor the creditworthiness of those
institutions under the board's general supervision.
-7-
<PAGE> 45
2. WHEN-ISSUED OR DELAYED-DELIVERY SECURITIES. Under this procedure, a
Fund agrees to acquire securities (whose terms and conditions, including
price, have been fixed by the issuer) that are to be issued and
delivered against payment in the future. Delivery of securities so sold
normally takes place 30 to 45 days (settlement date) after the date of
the commitment. No interest is earned by a Fund prior to the settlement
date. The value of securities sold on a "when-issued" or
"delayed-delivery" basis may fluctuate before the settlement date and
the Fund bears the risk of such fluctuation from the date of purchase.
A Fund may dispose of its interest in those securities before delivery.
3. ILLIQUID SECURITIES. Illiquid securities are securities that cannot be
sold within seven days in the ordinary course of business for
approximately the amount at which they are valued. Due to the absence
of an active trading market, a Fund may experience difficulty in
valuing or disposing of illiquid securities. SAM determines the
liquidity of the securities under guidelines adopted by the Trust's
Board of Trustees.
INVESTMENT RISKS OF CONCENTRATION IN CALIFORNIA AND WASHINGTON ISSUERS
CALIFORNIA FUND
The following is a condensed and general description of the judicial,
legislative and electoral proceedings affecting the taxing ability and fiscal
condition of the State of California and its various political subdivisions
which have occurred since June 1978. All of these proceedings affect the
continuing ability of California political subdivisions to meet their debt
service obligations. Since during normal market conditions the Fund plans to
invest at least 80% of its net assets in bonds issued by California and its
political subdivisions, the investment risk of such concentration should be
carefully considered. The description below summarizes discussions contained
in official statements relating to various types of bonds issued by the State
of California and its political subdivisions. A more detailed description can
be found in such official statements. The California Fund has not
independently verified any of the information presented in this section.
The taxing powers of California public agencies are limited by Article XIII A
of the State Constitution, added by an initiative amendment approved by voters
on June 6, 1978, and commonly known as Proposition 13. Article XIII A limits
the maximum ad valorem tax on real property to one percent of "full cash value"
which is defined as "the County Assessor's valuation of real property as shown
on the fiscal year 1975-76 tax bill under 'full cash value' or, thereafter, the
appraised value of real property when purchased, newly constructed, or a change
in ownership has occurred after the 1975 assessment." The full cash value may
be adjusted annually to reflect inflation at a rate not to exceed two percent
per year, or reduction in the consumer price index or comparable local data, or
declining property value caused by damage, destruction, or other factors.
The tax rate limitation referred to above does not apply to ad valorem taxes to
pay the interest and redemption charges on any indebtedness approved by the
voters before July 1, 1978 or any bonded indebtedness for the acquisition or
improvement of real property approved by two-thirds of the votes cast by the
voters voting on the proposition. Article XIII A also requires a two-thirds
vote of the electors prior to the imposition of any special taxes and totally
precludes the imposition of any new ad valorem taxes on real property or sales
-8-
<PAGE> 46
or transaction taxes on the sales of real property. The validity of Article
XIII A has been upheld by both the California Supreme Court and the United
States Supreme Court.
Legislation adopted in 1979 exempts business inventories from taxation.
However, the same legislation provides a formula for reimbursement by
California to cities and counties, special districts and school districts for
the amount of tax revenues lost by reason of such exemption or adjusted for
changes in the population and the cost of living. Legislation adopted in 1980
provides for state reimbursements to redevelopment agencies to replace revenues
lost due to the exemption of business inventories from taxation. Such
legislation provides for restoration of business inventory tax revenues through
the annual addition of artificial assessed value, not actually existing in a
project are, to the tax rolls of redevelopment projects. These reimbursements
are adjusted for changes in the population and the cost of living. All such
reimbursements are subject to change or repeal by the Legislature, and they
have been changed since 1980. Furthermore, current law generally prohibits the
pledging of such reimbursement revenues to secure redevelopment agency bonds.
Redevelopment agencies in California have no power to levy and collect taxes;
hence, any decrease in property taxes or limitations in the amounts by which
property taxes may increase adversely affects such agencies, which lack the
inherent power to correct for such decreases or limitations.
State and local government agencies in California and the State itself are
subject to annual "appropriation limits" imposed by Article XIII B, an
initiative constitutional amendment approved by the voters on November 6, 1979,
which prohibits government agencies and the State from spending "appropriations
subject to limitation" in excess of the appropriations limit imposed.
"Appropriations subject to limitation" are authorizations to spend "proceeds of
taxes", which consist of tax revenues, certain State subventions and certain
other funds, including proceeds from regulatory licenses, user revenues,
certain State subventions and certain other funds to the extent that such
proceeds exceed "the cost reasonably born by such entity in providing the
regulation, product, or service." No limit is imposed on appropriation of
funds which are not "proceeds of taxes", on debt service or indebtedness
existing or authorized by January 1, 1979, or subsequently authorized by the
voters, or appropriations required to comply with mandates of courts or the
federal government, or user charges or fees that do not exceed the cost of
the service provided, nor on certain other non-tax funds.
By statute (which has been upheld by the California Court of Appeals), tax
revenues allocated to redevelopment agencies are not "proceeds of taxes" within
the meaning of Article XIII B, and the expenditure of such revenues is
therefore not subject to the limitations under Article XIII B.
Generally, revenues derived from most utility property assessed by the State
Board of Equalization are allocated as follows: (i) each jurisdiction,
including redevelopment project areas, receives up to 102 percent of its prior
year State-assessed revenue; and (ii) if countrywide revenues generated from
such utility property are less than the previous year's revenue or greater than
102 percent of the previous year's revenues, each jurisdiction shares the
burden of the shortfall or benefit from the excess revenues by a specified
formula. This provision applies to all utility property except railroads whose
valuation will continue to be allocated to individual tax rate areas. In a
1991 Superior Court
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ruling, the valuation method used by the State Board to value unitary utility
property was declared illegal and a new method was imposed, resulting in
significantly lower values and therefore significantly reduced property tax
revenues. One of the effects of the decision was to entitle the principal
utility plaintiff to a refund of $9 million. As a result of this case, the
State Board along with certain counties signed a settlement agreement with
several affected utilities providing for an orderly 10.5% phase-down of tax
assessments over a three-year period.
Lease-based financing, typically marketed in the form of certificates of
participation, has been extremely popular in California, since the courts have
long held that properly structured long-term leases do not create
"indebtedness" for purposes of constitutional and statutory debt limitations.
The obligation to pay rent thereunder is nevertheless enforceable, on an annual
basis, so long as the leased property is available for use and occupancy by the
government lessee. The risk of rent abatement (because of construction delays,
damage to structures and the like) is usually mitigated by funded reserves,
casualty insurance and rental interruption insurance.
Given the turbulent history of California electoral, judicial and legal
proceedings affecting taxation since 1978, it is impossible to predict what
proceedings might occur in the future that would affect the ability of
California and its political subdivisions to service their outstanding
indebtedness. In addition, there are both nuclear and non-nuclear electric
power authorities in California that are financed in whole or in part by
so-called "take or pay" or "hell or high water" contracts. Court decisions
outside of the State of California have called into question the enforceability
of such contracts.
The State of California most recently issued general obligation bonds in May,
1995. The Official Statement for that bond issue describes current economic
conditions in California as follows:
"From mid-1990 to late 1993, the State of California (the "State")
suffered a recession with the worst economic, fiscal, and budget
conditions since the 1930's. Construction, manufacturing (especially
aerospace), and financial services, among others, were all
severely affected. Job losses were the worst of any post-war
recession. Employment levels stabilized by late 1993 and steady
growth occurred in 1994 and is expected to continue in 1995, but
pre-recession job levels are not expected to be reached until late
1996. Economic indicators show a steady recovery underway in the State
since the start of 1994."
The Official Statement also discloses that the recession has seriously affected
State tax revenues, has caused increased expenditures for health and welfare
programs, and has caused a structural imbalance in the State's budget, with the
largest programs supported by the General Fund -- K-12 schools and community
colleges, health and welfare, and corrections -- growing at rates higher than
the growth rates for the principal revenue sources of the General Fund. As a
result, the State has experienced recurring budget deficits. Although the
State had an operating surplus of $1.1 billion in 1993-94, at June 30, 1994 ,
according to the Department of Finance, the State's Reserve for Economic
Uncertainties still had a deficit, on a budget basis, of approximately $1.5
billion.
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A further consequence of the large budget imbalances over the last three fiscal
years has been that the State depleted its available cash resources and has had
to use a series of external borrowings to meet its cash needs.
On December 6, 1994, Orange County, California, together with its pooled
investment funds, filed for protection under Chapter 9 of the federal
Bankruptcy Code, after reports that the funds had suffered significant market
losses in their investments, causing a liquidity crisis for the funds and the
County. More than 180 other public entities, most of which, but not all, are
located in the County, were also depositors in the funds. As of mid-January,
1995, the County estimated the funds' loss at about $1.69 billion, or 22% of
their initial deposits of approximately $7.5 billion. Many of the entities
which deposited moneys in the funds, including the County, are facing cash flow
difficulties because of the bankruptcy filing and may be required to reduce
programs or capital projects. This may also affect their ability to meet their
outstanding obligations.
The State has no existing obligation with respect to any out standing
obligations or securities of the County or any of the other participating
entities. However, in the event the County is unable to maintain county
administered State programs because of insufficient resources, it may be
necessary for the State to intervene. Under existing legal precedent, the
State is obligated to intervene when a school district's fiscal problems would
otherwise deny its students basic educational quality. It is not presently
possible to predict whether any school districts will face insolvency because
of their participation in the funds, and if so, the potential amount or form of
aid which the State may have to provide.
The Governor's budget proposal for 1995-96 released January 10, 1995,
projects General Fund revenues and transfers in the 1994-95 fiscal year of
$42.4 billion (an increase of approximately $461 million over the projection
contained in the original 1994-95 Budget Act) and expenditures of $41.7
billion (an increase of approximately $754 million over the amount shown in
the original 1994-95 Budget Act). The Governor's Budget for 1995-96
proposes General Fund revenues and transfers of $42.5 billion (including
$830 million from the federal government) and expenditures of $41.7 billion,
which would leave a balance of approximately $92 million in the budget
reserve, the Special Fund for Economic Uncertainties, at June 30, 1996 after
repayment of the accumulated budget deficits. A January 20, 1995 report of
the State's legislative analyst's office cautions, however, that the Proposed
Budget is subject to a number of major risks, including receipt of the expected
federal immigration aid and other federal actions to allow health and welfare
cuts, and the outcome of certain lawsuits concerning previous budget actions
which the State has lost at the trial court level, and which are under appeal.
As a result of the deterioration in the State's budget and cash situation in
fiscal years 1991-92 and 1992-93, rating agencies reduced the State's credit
ratings. Between November 1991 and October 1992 the rating on the State's
general obligation bonds was reduced by S&P from "AAA" to "A+" and by
Moody's from "Aaa" to "Aa". On July 15, 1994, based on the State's inability
to eliminate its accumulated deficit, the same three rating agencies further
lowered their ratings on the State's general obligation bonds to "A-plus", "A1"
and "A", respectively. The downgradings, which have not been restored, also
affect the ratings of the obligations of certain State agencies. It is not
possible to
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predict the future course of the State's credit ratings.
The Fund will attempt to achieve geographic diversification by investing in
obligations of issuers that are located in different areas within California
as well as obligations of the State of California itself. In addition, the
Fund will not invest more than 15% of its total assets in tax allocation bonds
issued by California redevelopment agencies. These are operating policies of
the Fund and may be changed without the approval of the Fund's shareholders.
WASHINGTON FUND
WASHINGTON STATE
A discussion of certain economic, financial and legal matters regarding the
State of Washington follows. Since, during normal market conditions, the
Washington Fund will under normal circumstances invest at least 80% of its
net assets in bonds issued by Washington and its political subdivisions,
municipalities, agencies, instrumentalities or public authorities, the
investment risk of such concentration should be carefully considered. The
information in the discussion is drawn primarily from official statements
relating to securities offerings of the State which are dated prior to the date
of this Statement of Additional Information. This information may be relevant
in evaluating the economic and financial position of the State, but is not
intended to provide all relevant data necessary for a complete evaluation of
the State's economic and financial position. Discussions regarding the
financial health of the State government may not be relevant to municipal
obligations issued by a political subdivision of the State. Furthermore,
general economic conditions discussed may or may not affect issuers of the
obligations of the State. The Washington Fund has not independently verified
any of the information presented in this section.
GENERAL INFORMATION
According to the U.S. Census Bureau's 1990 Census, Washington State's
population is ranked 18th of the 50 states. During the ten-year time period
from 1980-1990, the State's population increased at an average annual rate of
1.8%, while the U.S. population grew at an average annual rate of 1.1%. In
1993, the State's population continued its growth with an annualized rate of
1.8%
The State's largest city, Seattle, is part of a strong international trade,
manufacturing, high technology and business service corridor which extends
along Puget Sound from Everett to Tacoma. The State's Pacific Coast-Puget
Sound region includes 75% of its population, the major portion of its
industrial activity and the major part of the forests important to its timber
and paper industries. The remainder of the State has rich agricultural areas
primarily devoted to grain, fruit orchard and dairy operations.
The State's economy has recently diversified with employment in the trade and
service sectors representing an increasing portion of total employment relative
to the manufacturing sector. Both employment and personal income growth
compare favorably with the national averages despite the national recession.
The rate of economic growth as measured by employment in the State has slowed
from 2.0% in 1992 to 1.3% in 1993, 2.5% in 1994, and 2.6% projected for 1995.
Comparable rates for the U.S. were 0.3% in 1992, 1.8% in 1993, 2.6% in 1994,
and 2.6% projected in 1995. Nationwide, employment growth is expected to
decrease in 1996 and 1997 to 1.8% and 1.7% respectively. The State's economic
growth, hampered
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by reductions in aerospace, is expected to be 1.8% in 1996 and 2.6% in 1997.
The State operates on a July 1 to June 30 fiscal year and on a biennial budget
basis. Fiscal controls are exercised during the biennium through an allotment
process which requires each agency to submit a monthly expenditure plan. The
plan must be approved by the Office of Financial Management, which is the
Governor's budget agency. It provides the authority for agencies to spend funds
within statutory maximums specified in a legislatively adopted budget. State
law requires a balanced biennial budget. Whenever it appears that
disbursements will exceed the aggregate of estimated receipts plus beginning
cash surplus, the Governor is required to reduce allotments, thereby reducing
expenditures of appropriated funds.
As interpreted by the State Supreme Court, Washington's Constitution prohibits
the imposition of net income taxes.
The State's tax revenues are primarily comprised of excise and ad valorem
taxes. By constitutional provision, the aggregate of all regular (unvoted) tax
levies on real and personal property by state and local taxing districts cannot
exceed 1% of the true and fair value. Excess levies are subject to voter
approval. For the fiscal year ending June 30, 1994, nearly 77.3% of the
State's tax revenues came from general and selective sales and gross receipts
taxes, of which the retail sales tax and its companion use tax represented
46% of total collections. Business and occupation tax collections represented
about 16.3% and the motor vehicle fuel tax represented approximately 7.0%
of total State taxes for the year. Ad valorem taxes represented 10.6% of
State revenues for the fiscal year 1994.
State law prohibits State tax revenue growth from exceeding the growth rate of
State personal income averaged over a three-year period. State revenue
increases have remained substantially below the State revenue limit. In
addition, the State may not impose on local governments responsibility for new
programs or increased levels of service under existing programs without
providing the financing to pay for the added services. Expenditures of State
revenues are made in accordance with constitutional and statutory mandates.
STATE EXPENDITURE LIMITATION - INITIATIVE 601
Initiative 601, which was voted into law in November 1993, limits increases in
General Fund-State government expenditures to the average rate of population
and inflation growth. The new initiative will replace Initiative 62 effective
July 1, 1995, and sets forth a series of guidelines for limiting tax and
expenditure increases and stabilizing long range budget planning.
Provisions of Initiative 601 establish a procedure for computing a fiscal year
growth factor based on a lagged, three year average of population and inflation
growth. This growth factor is used to determine a state spending limit for
programs and expenditures supported by the state General Fund. The new
initiative creates two new reserve funds (the Emergency Reserve Fund and the
Education Construction Fund) for depositing revenues in excess of the spending
limit and abolishes the current Budget Stabilization Account. Like Initiative
62, restrictions are placed on the addition or transfer of functions to local
government unless there is reimbursement.
Most of Initiative 601, including the General Fund-State expenditure limit,
does
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not go into effect until July 1, 1995. Only two provisions of the initiative
are currently applicable: the requirement for legislative approval of fee
increases beyond the fiscal year growth factor, and a restriction on new taxes
being imposed without voter approval. At the beginning of Fiscal Year 1996,
the requirement for voter approval for new tax measures expires. Taxes can
then be enacted with a two-thirds majority of both houses of the State
Legislature if resulting General Fund-State expenditures do not exceed the
spending limit.
The State Constitution and enabling statutes authorize the incurrence of State
general obligation debt to the payment of which the State's full faith and
credit and taxing power are pledged. With certain exceptions, the amount of
State general obligation debt which may be incurred is limited by
constitutional and statutory restrictions. These limitations are imposed by
prohibiting the issuance of new debt if the new debt would cause the maximum
annual debt service on all thereafter outstanding general obligation debt to
exceed a specified percentage of the arithmetic mean of general State revenues
for the preceding three years. These limitations apply to the incurrence of
new debt and are not limitations on the amount of debt service which may be
paid by the State in future years.
The State Legislature is obligated to appropriate money for State debt service
requirements. Generally, on or before June 30 of each year, the State Finance
Committee certifies to the State Treasurer the amount required for bond payment
of interest and principal for the coming year. Some general obligation bond
statutes provide that the General Fund will be reimbursed from discrete
revenues which are not considered general State revenues. Other bonds are
limited obligation bonds not payable from the General Fund.
The State began the 1991-1993 Biennium with a $468 million surplus and $260
million in the Budget Stabilization Account. The 1991-93 Biennium Budget was
signed into law by the Governor on June 30, 1991 and reflected expected revenue
growth of 12.45%. However, weaker than expected revenue collections in the
first six months of 1992 prompted the State Economic and Revenue Forecast
Council to reduce projected revenue growth resulting in a forecast General
Fund cash deficit for the 1991-93 biennium. In addition, supplemental
operating budget adjustments for state and federally mandated funding of social
and health service programs, prisons and correctional facilities and K-12
education contributed to the projected shortfall.
In response to the forecast to fulfill his statutory duty to maintain a
balanced budget, the Governor issued an Executive Order to implement a 2.5%
across-the-board reduction in General Fund appropriations, effective December
1, 1991. In April 1992, a 1991-93 Biennium Supplemental Budget was adopted by
the State Legislature and signed by the Governor. The Supplemental Budget
added spending reductions, selected tax increases and use of a portion of the
Budget Stabilization Account. As a result, the projected General Fund-State
balance ended the 1991-93 Biennium with $234 million balance and $100 million
in the Budget Stabilization Account.
For most municipalities in the State, the fiscal year is the calendar year
except that school districts have a September 1 - August 31 fiscal year. All
municipalities must maintain balanced budgets. Depending on the type of
municipality, local revenues are derived from ad valorem taxes, excise and
gross receipts taxes, special assessments, fees, user charges and State and
federal grants.
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Municipalities incur debt by the issuance of general obligations or other
borrowings which are payable from taxes, though other revenue sources may be
used. Revenue obligations do not constitute debt under constitutional and
statutory limitations as long as taxes are not pledged or used to pay debt
service. Only non-tax revenue from the operation of a project or enterprise
financed by the revenue obligations (and sometimes special assessments on
property benefitted from the financed improvements) may be used to pay that
debt service. Usually, revenue bonds are secured by a reserve funded in an
amount based on a factor of debt service. Many municipalities may issue
improvement district obligations payable only from special assessments on
benefitted property, but some of those obligations also may be secured by a
special guaranty fund.
ECONOMIC OVERVIEW
Over the past few years, the State's economic performance has remained
relatively strong compared to the U.S. as a whole. From 1989-1992, preliminary
figures show that, after adjusting for inflation, growth in per capita income
has outperformed the national economy each year. This recent growth is broadly
based, having taken place throughout various segments of the State's economy.
The State's economic base includes manufacturing and service industries as well
as agricultural and timber production. During 1987-1993, the State experienced
growth in both the manufacturing and non-manufacturing industries. Growth in
employment in the durable and non-durable goods manufacturing, services and
government sectors have exceeded comparable figures for the U.S.
Washington's economy consists of both export and local industries. Leading
export industries are aerospace, forest products, agriculture and food
processing. The aerospace, timber and food processing industries together
employ approximately 9% of the State's non-farm workers. However, the
non-manufacturing sector has played an increasingly significant role in
contributing to the State's economy in recent years.
Below is a summary of key industry segments of the State's economy as well as
of selected economic and employment data.
Manufacturing. The Boeing Company ("Boeing"), which is the Seattle Metropolitan
Area's largest employer, has several facilities located throughout the area.
Boeing is the world's leading manufacturer of commercial airliners and as of
January 1995 employed approximately 82,000 people state-wide, primarily at
several locations in the area. While the primary activity of Boeing is the
manufacture of commercial aircraft, Boeing has played leading roles in the
aerospace and military missile programs of the U.S. and has undertaken a
broad program of diversification activities including Boeing Computer Services.
In 1994, Boeing had $21.924 billion in sales and net earnings of $856
million, and a backlog of orders totalling $66.3 billion.
In February 1995, Boeing announced that it will reduce production of its
737 and 767 model jetliners because of the continuing financial difficulties of
the airline industry which has resulted in order delays and cancellations.
Production of the 767 line in Everett, Snohomish County, will increase from
three to four planes per month in April, but will decline to 3.5 by year-end.
The 747 will continue to be built at a rate of two planes per month through
1995 and
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increase to three planes per month by the end of 1996. Model 777 orders
currently total 147, with production of three planes per month expected to
commence later in 1995. The company expects to deliver nineteen 777s in 1995.
In Renton, the 737 line will be reduced from 8.5 to seven planes per month and
the 757 production of four planes per month will continue. Associated with the
reduced production are job cutbacks equal to approximately 6% of the company's
total workforce of 117,331. It is anticipated that Boeing will layoff
approximately 7,000 employees in 1995, 6,500 of which be eliminated in
Washington.
Technology-Related Industries. The State ranks fourth among all states in the
percentage of its work force employed by technology-related industries. It
ranks third among the largest software development centers. The State is the
home of approximately 1000 advanced technology firms of which approximately
50% are computer-related. Microsoft, headquartered in Redmond, Washington, is
the largest microcomputer software company in the world. In addition, several
biotechnical firms located in the State have attained international acclaim for
their research and development.
Timber. Natural forests cover more than 40% of the State's land area and forest
products rank second behind aerospace in terms of total production. The
primary employer in the timber industry is The Weyerhaeuser Company.
Productivity in the State's forest products industry has been increasing
steadily in recent years. However, in 1991 production declined primarily
because of the recession. Overall production in the timber industry is
expected to decline over the next few years due to federally imposed
limitations on the harvest of old-growth timber and because it may be difficult
to maintain the recent record levels of production increases. Some unemployment
is anticipated in certain regions, but the impact is not expected to affect
materially the State's overall economic performance.
Agriculture and Food Processing. Agriculture and food processing is the State's
most important industry by most measures. Growth in agricultural products was
an integral factor in the State's economic growth in the late 1980s and early
1990s.
Finance, Insurance and Real Estate. Employment in finance, insurance and real
estate is estimated to represent 5.4% of the State's wage and salary employment
in 1993. Since 1987, annual growth in employment in this sector has averaged
2.3% compared to 1.3% for the U.S.
Trade. International trade plays an important role in the State's employment
base and one in six jobs is related to this area. During the past twenty years
the State has consistently ranked number one or number two in international
exports per capita. Seattle-Tacoma International Airport is the focus of the
region's air traffic and trade. The State, particularly the Puget Sound
Corridor, is a trade center for the Northwest and the State of Alaska. A
system of public ports, the largest of which are the Ports of Seattle and
Tacoma, handle waterborne trade primarily to and from the Far East. These two
Ports each rank among the top 20 ports in the world based on volume of
containerized cargo shipped. Approximately 70% of the cargo entering the
Ports of Seattle and Tacoma has an ultimate destination outside the Pacific
Northwest. Therefore, trade levels depend largely on national and world rather
than local economic conditions.
Trade employment experienced the third highest growth in the State between 1981
and 1991. Growth in retail sales in the State between 1990 and 1992 has
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consistently been higher than that in the U.S.
Services/Tourism. The highest employment growth between 1981 and the present
took place in the services sector although rate of growth has shown small but
consistent decline since 1990 from 7% to 3.5% forecast for 1994. Seattle is
the location for the Washington State Convention and Trade Center which opened
in June 1988. The State also has many tourist attractions such as the Olympic
and Cascade mountain ranges, ocean beaches and local wineries.
Construction. Employment in the construction sector in the Puget Sound area
increased 69.2% between 1981 and 1991. The increase in employment in the late
1980s was due in part to the affordability of housing compared to other areas
of the country. Construction employment growth flattened between 1991 and
1993, but showed a modest increase in 1994. Commercial building, while not
increasing at the pace of the 1980s, remains stable.
Federal, State and Local Government. Employment in the government sector
represents approximately 19% of all wage and salary employment in the State
on a combined basis. Seattle is the regional headquarters for a number of
federal government agencies and the State receives an above average share of
defense expenditures. Employment in the government sector has expanded in the
State since 1987 at a more rapid rate than in the U.S. as a whole. State and
local government employment has increased at a faster pace than employment by
the federal government.
LITIGATION
At any given time, including the present, there are numerous lawsuits pending
against the State of Washington which could affect the State's revenues and
expenditures. However, none of the lawsuits are expected to have a material
adverse impact on either State revenues or expenditures.
ADDITIONAL TAX INFORMATION
The tax-exempt interest portion of each daily dividend will be based upon the
ratio of a Fund's tax-exempt to taxable income for the entire fiscal year
(average annual method). As a result, the percentage of tax-exempt income for
any particular distribution may be substantially different from the percentage
of a Fund's income that was tax-exempt during the period covered by that
distribution. Each Fund will advise its shareholders of this ratio within 60
days after the close of its fiscal year (March 31).
Interest on indebtedness incurred or continued by a shareholder to purchase or
carry shares of a Fund is not deductible. In addition, entities or persons who
are "substantial users" (or related persons) of facilities financed by most
"private activity" bonds should consult their tax advisers before purchasing
shares of any of the Funds. "Substantial user" is generally defined to include
a "non-exempt person" who regularly uses in a trade or business a part of a
facility financed from the proceeds of most "private activity" bonds.
Each Fund may invest in municipal bonds that are purchased, generally not on
their original issue, with market discount (that is, at a price less than the
principal amount of the bond or, in the case of a bond that was issued with
original issue discount, at a price less than the amount of the issue price
plus accrued original issue discount) ("municipal market discount bonds").
Gain on
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the disposition of a municipal market discount bond (other than a bond with a
fixed maturity date within one year from its issuance), generally is treated as
ordinary (taxable) income, rather than capital gain, to the extent of the
bond's accrued market discount at the time of disposition. Market discount on
such a bond generally is accrued ratably, on a daily basis, over the period
from the acquisition date to the date of maturity. In lieu of treating the
disposition gain as above, a Fund may elect to include market discount in its
gross income currently, for each taxable year to which it is attributable.
Each Fund will be subject to a nondeductible 4% excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of its
ordinary income for that year and capital gain net income for the one-year
period ending on November 30 of that year, plus certain other amounts.
No portion of the dividends or other distributions paid by any Fund is eligible
for the dividends-received deduction allowed to corporations.
In the future, proposals may be introduced before Congress for the purpose of
further restricting or even eliminating the federal income tax exemption for
interest on all or certain types of municipal obligations. If such a proposal
were enacted, the availability of municipal obligations for investment by each
of the Funds and the value of each Fund's portfolio would be affected. In such
event, each Fund would review its investment objectives and policies.
ADDITIONAL INFORMATION ON CALCULATION OF NET ASSET VALUE PER SHARE
Each Fund 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 Fund 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 each Fund is
calculated as of the close of regular trading on the New York Stock Exchange
("Exchange") every day the Exchange is open for trading and at such other times
and/or on such other days as there is sufficient trading. The Exchange is
closed on the following days: New Year's Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Each Fund has selected a pricing service to assist in computing the value of
its portfolio securities. There are a number of pricing services available and
the decision as to whether, or how, a pricing service should be used by a Fund
will be left to the judgment of the Trust's Board of Trustees.
Short-term debt securities held in a Fund's portfolio having a remaining
maturity of less than 60 days when purchased and securities originally
purchased with maturities in excess of 60 days, but which currently have
maturities of 60 days or less, may be valued at cost adjusted for amortization
of premiums or accrual of discounts if in the judgment of the Board of Trustees
such methods of valuation are appropriate or under such other methods as the
Board of Trustees may from time to time deem to be appropriate. The cost of
those securities that had original maturities in excess of 60 days shall be
determined by their fair market value as of the 61st day prior to maturity.
All other securities and assets in the portfolio will be appraised in
accordance with those procedures established by the Board of Trustees in good
faith in computing the fair market value of those assets.
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ADDITIONAL PERFORMANCE INFORMATION
The yield and tax-equivalent yield for the 30-day period ending March 31, 1995
at the maximum federal tax rate of 39.6% for the Municipal, Intermediate,
Insured and Washington Funds are ____% and ____%, ____% and ____%, ____% and
____%, and ____% and ____%, respectively, and at the maximum combined federal
and California tax rates of 46.2% for the California Fund, are ____% and ____%,
respectively.
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
Tax-equivalent yield is computed using the following formula:
eg
Tax-equivalent yield = [ ------ ] + [e(1-g)]
(1-f)
Where: e = yield as calculated above
f = tax rate
g = percentage of "yield" which is tax-free
The total returns for the Municipal Fund for the one-year, five-year and
ten-year periods ending March 31, 1995 are ____%, ____% and ____%,
respectively.
The average annual total returns for the Municipal Fund for the one-year,
five-year and ten-year periods ending March 31, 1995 are ____%, ____% and
____%, respectively.
The total returns for the California Fund for the one-year, five-year and ten
year periods ending March 31, 1995 are ____%, ____% and ____%, respectively.
The average annual total returns for the California Fund for the one-year,
five-year and ten year periods ending March 31, 1995 are ____%, ____% and
____%, respectively.
The total returns for the Intermediate, Insured and Washington Funds for the
one year period (and since inception) ended March 31, 1995 are ____%, ____% and
____%, respectively.
The total return is computed using the following formula:
ERV-P
-19-
<PAGE> 57
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 calculation all dividends and capital gain distributions
are assumed to be reinvested at the Fund's NAV on the reinvestment date.
Each Fund may advertise its ranking as calculated by independent rating
services which monitor mutual funds' performance (e.g. CDA Investment
Technologies, Lipper Analytical Services, Inc. and Morningstar, Inc.). These
rankings may be among mutual funds with similar objectives and/or size or with
mutual funds in general and may be based on relative performance during periods
deemed by the rating services to be representative of up and down markets.
The Funds may upon occasion reproduce articles or portions of articles about
the Funds written by independent third parties such as financial writers,
financial planners and financial analysts, and appearing in financial
publications of general circulation or financial newsletters (including but not
limited to Barrons, Business Week, Forbes, Fortune, Investor's Business Daily,
Kiplinger's, Money Magazine, Newsweek, Pensions & Investments, Time Magazine,
U.S. News and World Report and The Wall Street Journal).
Each Fund may 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) current facts (including but
not limited to number of employees, number of shareholders, business
characteristics) about its investment adviser (SAM) the investment adviser's
parent company (SAFECO Corporation) or the SAFECO Family of Funds; (iii)
descriptions, including quotations attributable to the portfolio manager, of
the investment style used to manage a Fund's portfolio, the research
methodologies underlying securities selection and a Fund's investment
objective; and (iv) information about particular securities held in a Fund's
portfolio.
Performance information and quoted ratings are indicative only of past
performance and are not intended to represent future investment results.
-20-
<PAGE> 58
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 Trustee Chief Financial Officer and
Seattle, Washington 98185 director of SAFECO Corporation.
(50) He has been an executive officer of
SAFECO Corporation subsidiaries since
1982. See table under "Investment
Advisory and Other Services."
Barbara J. Dingfield Trustee Manager, Corporate Contributions and
Microsoft Corporation Community Programs for Microsoft
One Microsoft Way Corporation, Redmond, Washington, a
Redmond, Washington 98052 computer software company; Director and
(49) former Executive Vice President,
Wright, Runstad & Co., Seattle,
Washington, a real estate development
company; Director of First SAFECO
National Life Insurance Company of New
York.
Richard W. Hubbard* Trustee Retired Vice President and
1270 NW Blakely Ct. Treasurer of the Trust and other SAFECO
Seattle, Washington 98177 Trusts; retired Senior Vice President
(66) and Treasurer of SAFECO Corporation;
former President of SAFECO Asset
Management Company.
Richard E. Lundgren Trustee Director of Marketing and
764 S. 293rd Street Customer Relations, Building
Federal Way, Washington 98032 Materials Distribution,
(57) Weyerhaeuser Company, Tacoma,
Washington; Director of First SAFECO
National Life Insurance Company of New
York.
L. D. McClean* Trustee Retired Assistant Secretary of SAFECO
7231 91st Avenue SE Corporation and its property and
Mercer Island, WA 98040 casualty and life insurance
(68) affiliates; Director of First SAFECO
National Life Insurance Company of New
York; former President of the SAFECO
Mutual Funds; former Director of
SAFECO Asset Management Company,
SAFECO Securities, Inc. and SAFECO
Services Corporation.
-21-
</TABLE>
<PAGE> 59
<TABLE>
<S> <C> <C>
Larry L. Pinnt Trustee Retired Vice President and
1600 Bell Plaza Chief Financial Officer,
Room 1802 U S WEST Communications,
Seattle, Washington 98191 Seattle, Washington;
(60) Director of Key Bank of
Washington, Seattle,
Washington; Director of
PREMERA; Director of Blue
Cross of Washington and
Alaska; Director of First
SAFECO National Life
Insurance Company of New
York.
John W. Schneider Trustee President of Merit Hotel
1808 N. 41st Street Associates, Inc., Seattle,
Seattle, Washington 98103 Washington; former President
(53) of Coast Hotels, Inc.;
Director of First SAFECO
National Life Insurance
Company of New York.
David F. Hill President President of SAFECO
SAFECO Plaza Securities, Inc. and SAFECO
Seattle, Washington 98185 Services Corporation and
(46) Senior Vice President of
SAFECO Asset Management
Company. See table under
"Investment Advisory and
Other Services."
Neal A. Fuller Vice President, Vice President, Controller
SAFECO Plaza Controller, and Assistant Secretary of
Seattle, Washington 98185 Assistant SAFECO Securities Inc. and
(33) Secretary SAFECO Services Corporation;
Vice President, Controller,
Secretary and Treasurer of
SAFECO Asset Management
Company; former Chief
Assistant Treasurer for the
State of Idaho. See table
under "Investment Advisory
and Other Services."
Ronald L. Spaulding Vice President Vice Chairman of SAFECO
SAFECO Plaza Treasurer Asset Management Company;
Seattle, Washington 98185 Vice President and Treasurer
(51) of SAFECO Corporation; Vice
President of SAFECO Life
Insurance Company; former
Senior Portfolio Manager of
SAFECO Insurance Companies;
former Portfolio Manager for
several SAFECO mutual funds.
See table under "Investment
Advisory and Other
Services."
</TABLE>
* Trustees who are interested persons as defined by the Investment Company Act
of 1940.
-22-
<PAGE> 60
COMPENSATION TABLE
<TABLE>
<CAPTION>
Pension or
Retirement Total Compensation
Aggregate Benefits Accrued Estimated Annual From Registrant and
Compensation from As Part of Fund Benefits Upon Fund Complex Paid to
Trustee Registrant Expenses Retirement Trustees
------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Barbara J. Dingfield $ $ $ $
Richard E. Lundgren $ $ $ $
L.D. McClean $ $ $ $
Larry L. Pinnt $ $ $ $
John W. Schneider $ $ $ $
Boh A. Dickey $ $ $ $
Richard W. Hubbard $ $ $ $
</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, twenty-three
series companies managed by SAM.
For the fiscal year ended March 31, 1995 the Trustees of the Trust not employed
by SAFECO Corporation or its affiliates, as a group, received compensation of
$______ per Fund for their services as Trustees. The officers of the Trust
received no compensation for their services as officers or, if applicable,
trustees.
At June 30, 1995, the Trustees and officers of the Trust as a group owned
less than 1% of the outstanding shares of each Fund.
PRINCIPAL SHAREHOLDERS
As of June 30, 1995 SAFECO Insurance Company of America ("SAFECO"), a
Washington corporation, SAFECO Plaza, Seattle, Washington 98185, owned ____%
and _____% of the outstanding shares of the California and Intermediate Funds,
respectively. SAFECO is a wholly-owned subsidiary of SAFECO Corporation, a
Washington corporation, having its principal place of business at SAFECO Plaza,
Seattle, Washington 98185.
At June 30, 1995 Arthur and Madeline Mitchell, Seattle, Washington owned of
record approximately ____% of the outstanding shares of the Insured Fund.
-23-
<PAGE> 61
INVESTMENT ADVISORY AND OTHER SERVICES
SAFECO Asset Management Company ("SAM"), SAFECO Securities, Inc. ("SAFECO
Securities") and SAFECO Services Corporation ("SAFECO Services") are
wholly-owned subsidiaries of SAFECO Corporation. SAFECO Securities is the
principal underwriter of each Fund and SAFECO Services is the transfer,
dividend and distribution disbursement and shareholder servicing agent of each
Fund.
The following individuals have the following positions and offices with the
Trust, SAM, SAFECO Securities and SAFECO Services:
<TABLE>
<CAPTION>
SAFECO SAFECO
Name Trust SAM Securities Services
- ---- ----- --- ---------- --------
<S> <C> <C> <C> <C>
B. A. Dickey Chairman Director Director
Trustee
Senior
Vice Pres. President President
D. F. Hill President Director Director Director
Vice President Vice President Vice President
N. A. Fuller Vice President Controller Controller Controller
Controller Assistant Secretary Secretary Secretary
Secretary Treasurer Treasurer Treasurer
Vice President
R.L. Spaulding Treasurer President Director
S.C. Bauer
</TABLE>
Mr. Dickey is Chief Financial Officer, Executive Vice President and a
director of SAFECO Corporation and Mr. Spaulding is Assistant Treasurer and a
Vice President of SAFECO Corporation. Messrs. Dickey and Spaulding are
also directors of several other SAFECO Corporation subsidiaries.
In connection with its investment advisory contract with the Trust, SAM
furnishes or pays for all facilities and services furnished or performed for or
on behalf of the Trust and each Fund, which includes furnishing office
facilities, books, records and personnel to manage the Trust's and each Fund's
affairs and paying all expenses.
For the services and facilities furnished by SAM, each Fund has agreed to pay
an annual fee computed on the basis of the average market value of the net
assets of each Fund ascertained each business day and paid monthly in
accordance with the following schedules. The reduction in fees occurs only at
such time as the respective Fund's net assets reach the dollar amounts of the
break points and applies only to those assets that fall within the specified
range:
-24-
<PAGE> 62
<TABLE>
<CAPTION>
NET ASSETS FEE
<S> <C> <C>
INTERMEDIATE FUND
$0 - $250,000,000 .55 of 1%
$250,000,001 - $500,000,000 .45 of 1%
$500,000,001 - $750,000,000 .35 of 1%
Over $750,000,000 .25 of 1%
INSURED AND WASHINGTON FUNDS
$0 - $250,000,000 .65 of 1%
$250,000,001 - $500,000,000 .55 of 1%
$500,000,001 - $750,000,000 .45 of 1%
Over $750,000,000 .35 of 1%
MUNICIPAL AND CALIFORNIA FUNDS
$0 - $100,000,000 .55 of 1%
$100,000,001 - $250,000,000 .45 of 1%
$250,000,001 - $500,000,000 .35 of 1%
Over $500,000,000 .25 of 1%
</TABLE>
Each Fund bears all expenses of its operations not specifically assumed by SAM.
SAM has agreed to reimburse each Fund for the amount by which the Fund's
expenses in any full fiscal year (excluding interest expense, taxes,
brokerage expenses, and extraordinary expenses) exceed the limits prescribed by
any state in which a Fund's shares are qualified for sale. Presently, the
most restrictive expense ratio limitation imposed by any such state is 2.5% of
the first $30 million of the Fund's average daily net assets, 2.0% of the next
$70 million of such assets, and 1.5% of the remaining net assets. For the
purpose of determining whether a Fund is entitled to reimbursement, the
expenses of the Fund are calculated on a monthly basis. If a Fund is entitled
to a reimbursement, that month's advisory fee will be reduced or postponed,
with any adjustment made after the end of the fiscal year.
The following states the total amounts of compensation paid to SAM for the
past three fiscal years or periods for each Fund:
Year or Period Ended
<TABLE>
<CAPTION>
March 31, 1995 March 31, 1994 March 31, 1993
-------------- -------------- --------------
<S> <C> <C>
Municipal Fund $ $2,248,615 $2,019,701
California Fund $ $ 455,505 $ 413,781
Intermediate Fund $ $ 36,890 $ 2,410
Insured Washington $ $ 21,582 $ 2,088
Washington Fund $ $ 18,350 $ 2,539
</TABLE>
-25-
<PAGE> 63
U.S. Bank of Washington, N.A., 1420 Fifth Avenue, Seattle, Washington
98101, is the custodian of the securities, cash and other assets of each Fund
under an agreement with the Trust. Ernst & Young LLP, 999 Third Avenue, Suite
3500, Seattle, Washington 98104, is the independent auditor of each Fund's
financial statements.
SAFECO Services, SAFECO Plaza, Seattle, Washington 98185, is the transfer,
dividend and distribution disbursement and shareholder servicing agent for each
Fund under an agreement with the Trust. SAFECO Services is responsible for all
required transfer agent activity, including maintenance of records for each
Fund's shareholders, records of transactions involving each Fund's shares, and
the compilation, distribution, or reinvestment of income dividends or capital
gains distributions for a fee of $3.10 to a Fund for each shareholder
transaction processed. The following table shows the total fees paid to
SAFECO Services by each Fund as compensation for its services as transfer
agent for the past three fiscal years or periods:
Years or Periods Ended
<TABLE>
<CAPTION>
March 31, 1995 March 31, 1994 March 31, 1993
-------------- -------------- --------------
<S> <C> <C> <C>
Municipal Fund $ $557,561 $543,098
California Fund $ $ 66,667 $ 67,124
Intermediate Fund $ $ 11,109 $ 0
Insured Fund $ $ 3,617 $ 0
Washington Fund $ $ 2,801 $ 0
</TABLE>
SAFECO Securities is the principal underwriter for each Fund and distributes
each Fund's shares on a continuous best efforts basis under an agreement with
the Trust. SAFECO Securities is not compensated by the Trust or the Funds for
underwriting, distribution or other activities.
BROKERAGE PRACTICES
SAM places orders for the purchase or sale of each Fund's portfolio securities.
In deciding which broker to use in a given transaction SAM uses the following
criteria:
(1) Which broker gives the best execution (i.e., which broker is able to
trade the securities in the size and at the price desired on a
timely basis);
(2) Whether the broker is known to SAM as being reputable; and,
(3) All other things being equal, which broker has provided useful research
services to SAM.
Such research services as are furnished to SAM during the year (e.g., written
reports analyzing economic and financial characteristics of industries and
companies, telephone conversations between brokerage security analysts and
members of SAM's staff, and personal visits by such analysts and brokerage
strategists and economists to SAM's office) are used by SAM to advise all of
its clients including the Funds, but not all such research services furnished
to SAM are used by it to advise the Funds. SAM does not pay excess commissions
or mark-ups to any broker or dealer for research services or for any other
reason. Purchases and sales of portfolio securities are transacted with the
issuer or with a primary market maker acting as principal for the securities on
a net basis with no commission being paid by the Funds. Transactions placed
through
-26-
<PAGE> 64
dealers serving as primary market makers reflect the spread between the bid and
asked prices. Occasionally the Funds may make purchases of underwritten
issues at prices that include underwriting fees.
REDEMPTION IN KIND
If the Trust concludes that cash payment upon redemption to a shareholder of a
Fund would be prejudicial to the best interest of other shareholders of a
Fund, a portion of the payment may be made in kind. The Trust has elected to
be governed by Rule 18(f)(1) under the Investment Company Act of 1940,
pursuant to which the Trust must redeem shares tendered by a shareholder of a
Fund solely in cash up to the lesser of $250,000 or 1% of the net asset value
of a Fund during any 90-day period. Any shares tendered by the shareholder
in excess of the above-mentioned limit may be redeemed through distribution of
a Fund's assets. Any securities or other property so distributed in kind shall
be valued by the same method as is used in computing NAV. Distributions in
kind will be made in readily marketable securities, unless the investor elects
otherwise. Investors may incur brokerage costs in disposing of securities
received in such a distribution in kind.
FINANCIAL STATEMENTS
The following financial statements and the report thereon of Ernst & Young LLP,
independent auditor, are incorporated by reference to the Trust's Annual
Report for the year ended March 31, 1995:
Portfolios of Investments as of March 31, 1995
Statement of Assets and Liabilities as of March 31, 1995
Statement of Operations for the Year Ended March 31, 1995
Statement of Changes in Net Assets for the Years Ended March 31, 1995
and March 31, 1994
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.
DESCRIPTION OF RATINGS
Ratings by Moody's and S&P represent opinions of those organizations 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.
DESCRIPTION OF BOND RATINGS
MOODY'S
Investment Grade Descriptions:
AAA -- Bonds which are rated Aaa are 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
-27-
<PAGE> 65
principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA -- Bonds which are rated Aa are 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 -- Bonds which are rated A possess many favorable investment attributes and
are to be considered 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 -- Bonds which are rated Baa are considered 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
have speculative characteristics.
Below Investment Grade Descriptions:
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 small.
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 short-comings.
C -- The lowest-rated class of bonds. Issues so rated have extremely poor
prospects of ever attaining any real investment standing.
S&P
Investment Grade Descriptions:
AAA -- Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA -- Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in small degree.
A -- Debt rated "A" has 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.
<PAGE> 66
BBB -- Debt rated "BBB" is regarded as having 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 "BBB" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Below Investment Grade Descriptions:
BB, B, CCC, CC -- Predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation.
"BB" indicates the lowest degree of speculation and "CC" the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C -- Reserved for income bonds on which no interest is being paid.
D -- In default, and payment of interest and/or repayment of principal is in
arrears.
PLUS (+) OR MINUS (-): The ratings from "BB" to "D" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
DESCRIPTION OF RATINGS FOR SHORT-TERM OBLIGATIONS
(Municipal Notes, Commercial Paper, Certificates of Deposit)
MOODY'S
Municipal Notes and Other Short-Term Loans. Ratings for municipal notes and
other short-term loans are designated by Moody's Investment Grade ("MIG").
This distinction is in recognition of the differences between short-term credit
risk and long-term risk.
MIG-1. Loans bearing this designation are of the best quality, enjoying strong
protection via established cash flows of funds for their servicing or from
established and broad-based access to markets for refinancing, or both.
MIG-2. Loans bearing this designation are of high quality, with margins of
protection ample although not as large as in the preceding group.
MIG-3. Loans bearing this designation are of favorable quality, with all
security elements accounted for but lacking the undeniable strength of the
preceding grade. Market access for refinancing, in particular, is likely to be
less well established.
Commercial Paper. Issuers rated Prime-1 have a superior capacity and issuers
rated Prime-2 have a strong capacity for the repayment of short- term
promissory obligations.
S&P
Municipal Notes. Issues rated SP-1 have a very strong or strong capacity to
pay principal and interest. Those issues determined to possess overwhelming
safety characteristics will be given a plus (+) designation. Issues rated SP-2
have a satisfactory capacity to pay principal and interest. Issues rated SP-3
have a speculative capacity to pay principal and interest.
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
<PAGE> 67
designated A-1 the degree of safety regarding timely payment is very strong.
Issues designated A-2 also have a strong capacity for timely payment but not as
high as A-1 issues.
<PAGE> 68
SAFECO TAX-EXEMPT BOND TRUST
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) The following financial statements for each series of Registrant for
the fiscal year ended March 31, 1995 and the report thereon of
Ernst & YoungLLP, independent auditor, are incorporated in the
Statement of Additional Information by reference to pages ____ of
Registrant's Annual Report filed with the SEC on or about ______,
1995:
Portfolio of Investments as of March 31, 1995
Statement of Assets and Liabilities as of March 31, 1995
Statement of Operations for the Year Ended March 31, 1995
Statement of Changes in Net Assets for the Years Ended
March 31, 1995 and March 31, 1994
Notes to Financial Statements
Financial Statements from Registrant's Annual Report are filed as
Exhibit 12.
(b) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description of Document Page
- ------ ----------------------- -----
<S> <C> <C>
(27.1-5) Financial Data Schedules *
(99.1) Trust Instrument/Certificate of Trust
(99.2) Bylaws
(99.3) Inapplicable
(99.4) Stock Certificate
(99.5) Investment Advisory and Management Contract
(99.6) Distribution Agreement
(99.7) Inapplicable
(99.8) Custody Agreement
(99.9) Transfer Agent Agreement
(99.10) Opinion of Counsel
(99.11) Consent of Independent Auditors *
</TABLE>
1
<PAGE> 69
<TABLE>
<S> <C> <C>
(99.12) Registrant's Annual Report for the Year Ended March 31, 1995+ *
including Financial Statements
(99.13) Subscription Agreement
(99.14) Inapplicable
(99.15) Inapplicable
(99.16) Calculation of Performance Information *
</TABLE>
+ The Registrant's Annual Report was filed with the SEC on or about
______, 1995.
* To be filed by subsequent amendment.
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 four mutual funds: SAFECO Growth Fund, SAFECO Equity Fund, SAFECO
Income Fund and SAFECO Northwest 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
2
<PAGE> 70
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, S&T Financial Corporation, a
Washington corporation and Whitehall Insurance Brokers, Inc., a California
corporation. F.B. Beattie & Co., Inc. owns 100% of F.B. Beattie Insurance
Services, Inc., a California corporation. General America Corp. of Texas is
Attorney-in-fact for SAFECO Lloyds Insurance Company, a Texas corporation. S&T
Financial Corporation owns 100% of PNMR Securities, Inc., a Washington
corporation, and Talbot Financial Corporation, a Washington corporation which
owns 100% of Talbot Agency, Inc., a New Mexico corporation. SAFECO Properties
Inc. owns 100% of the following, each a Washington corporation: RIA
Development, Inc., SAFECARE Company, Inc. and Winmar Company, Inc. SAFECARE
Company, Inc. owns 100% of the following, each a Washington corporation: S.C.
Bellevue, Inc., S.C. Everett, Inc., S.C. Marysville, Inc., S.C. Simi Valley,
Inc. and S.C. Vancouver, Inc. SAFECARE Company, Inc. owns 50% of Lifeguard
Ventures, Inc., a California corporation. S.C. Simi Valley, Inc. owns 100% of
Simi Valley Hospital, Inc., a Washington corporation. Winmar Company, Inc.
owns 50% of C-W Properties, Inc., a Washington corporation. Winmar Company,
Inc. owns 100% of the following: Barton Street Corp., Gem State Investors,
Inc., Kitsap Mall, Inc., WNY Development, Inc., Winmar Cascade, Inc., Winmar
Metro, Inc., Winmar Northwest, Inc., Winmar Redmond, Inc. and Winmar of Kitsap,
Inc., each a Washington corporation, and Capitol Court Corp., a Wisconsin
corporation, SAFECO Properties of Boise, Inc., an Idaho corporation, SCIT,
Inc., a Massachusetts corporation, Valley Fair Shopping Centers, Inc., a
Delaware corporation, WDI Golf Club, Inc., a California corporation, Winmar
Oregon, Inc., an Oregon corporation, Winmar of Texas, Inc., a Texas
corporation, Winmar of Wisconsin, Inc., a Wisconsin corporation, and Winmar of
the Desert, Inc., a California corporation. Winmar Oregon, Inc. owns 100% of
the following, each an Oregon corporation: North Coast Management, Inc.,
Pacific Surfside Corp., Winmar of Jantzen Beach, Inc. and W-P Development,
Inc., and 100% of the following, each a Washington corporation: Washington
Square, Inc. and Winmar Pacific, Inc.
Item 26. Number of Holders of Securities
At June 30, 1995, Registrant had ___, ___, ___, ___ and ___ shareholders of
record in its 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, respectively.
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
3
<PAGE> 71
by virtue of his or her being, or having been, a trustee, officer, employee or
agent and against amounts paid or incurred by him or her in the settlement
thereof. As used in this paragraph, "claim," "action," "suit" or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil, criminal or
other, including appeals), actual or threatened, and the words "liability" and
"expenses" shall include, without limitation, attorneys' fees, costs,
judgements, amounts paid in settlement, fines, penalties and other liabilities.
No indemnification will be provided to a trustee, officer, employee or agent:
(i) who shall have been adjudicated by a court or body before which the
proceeding was brought (a) to be liable to the Registrant or its shareholders
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office, or (b)
not to have acted in good faith in the reasonable belief that his or her action
was in the best interest of the Registrant; or (ii) in the event of settlement,
unless there has been a determination that such trustee, officer, employee or
agent did not engage in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office;
(a) by the court or other body approving the settlement, (b) by the vote of at
least a majority of a quorum of those trustees who are neither interested
persons, as that term is defined by the Investment Company Act of 1940, of the
Registrant nor are parties to the proceeding based upon a review of readily
available facts (as opposed to a full trial type inquiry); or (c) by written
opinion of independent legal counsel based upon a review of readily available
facts (as opposed to a full trial type inquiry).
To the maximum extent permitted by applicable law, expenses incurred in
connection with the preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described above may be paid by the
Registrant or applicable Series from time to time prior to final disposition
thereof upon receipt of an undertaking by or on behalf of such trustee,
officer, employee or agent that such amount will be paid over by him or her to
the Registrant or the applicable Series if it is ultimately determined that he
or she is not entitled to indemnification under the Trust Instrument; provided,
however, that either (i) such trustee, officer, employee or agent shall have
provided appropriate security for such undertaking, (ii) the Registrant is
insured against such losses arising out of such advance payments or (iii)
either a majority of the trustees who are neither interested persons, as that
term is defined by the Investment Company Act of 1940, of the Registrant nor
parties to the proceeding, or independent legal counsel in a written opinion,
shall have determined, based on a review of readily available facts (as opposed
to a full trial type inquiry), that there is reason to believe that such
trustee, officer, employee or agent, will not be disqualified from
indemnification under Registrant's Trust Instrument.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to trustees, officers, employees and agents of the
Registrant pursuant to such provisions of the Trust Instrument or statutes or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as 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
4
<PAGE> 72
it is against public policy as expressed in said Act and will be governed by
the final adjudication of such issue.
Under an agreement with its distributor ("Distribution Agreement"), Registrant
has agreed to indemnify, defend and hold the distributor, the distributor's
several directors, officers and employees, and any person who controls the
distributor within the meaning of Section 15 of the 1933 Act, free and harmless
from and against any and all claims, demands, liabilities and 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 reasonable 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, SAFECO Asset Management Company,
serves as an adviser to: (a) twenty-eight series (portfolios) of seven
registered investment companies, including five series of an investment
company that serves as an investment vehicle for variable insurance products
and (b) 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 Statement of
Additional Information is incorporated by reference.
5
<PAGE> 73
Item 29. Principal Underwriters
(a) SAFECO Securities, Inc., the principal underwriter for each series of
the Registrant, also acts as the principal underwriter for each series
of the SAFECO Common Stock Trust, SAFECO Taxable Bond Trust, SAFECO
Money Market Trust, SAFECO Institutional Series 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" in the Statement of Additional Information is
incorporated by reference.
Item 30. Location of Accounts and Records
U.S. Bank of Washington, N.A., 1420 Fifth Avenue, Seattle, Washington 98101
maintains physical possession of the accounts, books and documents of the
Registrant relating to its activities as custodian of the Registrant. SAFECO
Asset Management Company, SAFECO Plaza, Seattle, Washington, 98185,
maintains physical possession of all other accounts, books or documents of
the Registrant required to be maintained by Section 31(a) of the Investment
Company Act of 1940 and the rules promulgated thereunder.
Item 31. Management Services
Inapplicable.
Item 32. Undertakings
Inapplicable.
6
<PAGE> 74
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant 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 26th day of
May, 1995.
SAFECO TAX-EXEMPT BOND TRUST
By /s/ DAVID F. HILL
-------------------------
David F. Hill, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ DAVID F. HILL President 5/26/95
- ----------------------------- Principal Executive Officer ----------
David F. Hill
RONALD L. SPAUDLING* Vice President
- ----------------------------- and Treasurer
Ronald L. Spaudling ----------
NEAL A FULLER* Vice President, Controller
- ----------------------------- and Assistant Secretary
Neal A. Fuller (Principal Financial Officer) ----------
/s/ BOH A. DICKEY
- ----------------------------- Chairman and Trustee 5/26/95
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> 75
SAFECO TAX-EXEMPT BOND TRUST
Form N-1A
Post-Effective Amendment No. 4
Exhibit Index
<TABLE>
<CAPTION>
Exhibit
Number Description of Document Page
- ------- ----------------------- ----
<S> <C>
(27.1-5) Financial Data Schedule *
(99.1) Trust Instrument/Certificate of Trust
(99.2) Bylaws
(99.4) Stock Certificate
(99.5) Investment Advisory and Management Contract
(99.6) Distribution Agreement
(99.8) Custody Agreement
(99.9) Transfer Agent Agreement
(99.10) Opinion of Counsel
(99.11) Consents of Independent Auditors - Ernst & Young *
(99.12) Registrant's Annual Report for the Year Ended *
March 31, 1995+ including Financial Statements
(99.13) Subscription Agreement
(99.16) Calculation of Performance Information *
</TABLE>
+ Filed with the SEC on or about _______, 1995.
* To be filed by subsequent amendment.
<PAGE> 1
EXHIBIT NO. 99.1
TRUST CERTIFICATE AND INSTRUMENT
<PAGE> 2
EXHIBIT 99.1
CERTIFICATE OF TRUST
OF
SAFECO TAX-EXEMPT BOND TRUST
This Certificate of Trust ("Certificate") is filed in accordance with
the provisions of the Delaware Business Trust Act (12 Del. Code Ann. Tit. 12
Section 3810 et seq.) and sets forth the following:
1. The name of the trust is: SAFECO Tax-Exempt Bond Trust
("Trust").
2. The business address of the registered office of the Trust and
of the registered agent of the Trust is:
The Corporation Trust Company
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
3. This Certificate is effective upon filing.
4. The Trust is a Delaware business trust registered under the
Investment Company Act of 1940. Notice is hereby given that the Trust shall
consist of one or more series. The debts, liabilities, obligations and
expenses incurred, contracted for or otherwise existing with respect to a
particular series of the Trust shall be enforceable against the assets of such
series only, and not against the assets of the Trust generally or any other
series.
IN WITNESS WHEREOF, the undersigned, being the initial Trustees, have
executed this Certificate on this 13th day of May, 1993.
/S/ BOH A. DICKEY
------------------------------------
Boh A. Dickey, as
Trustee and not individually
/S/ RICHARD W. HUBBARD
------------------------------------
Richard W. Hubbard, as
Trustee and not individually
<PAGE> 3
Address: SAFECO Plaza
Seattle, Washington 98185
STATE OF WASHINGTON
CITY OF SEATTLE
Before me this 13th day of May, 1993, personally appeared the above-named
Boh A. Dickey and Richard W. Hubbard, known to me to be the persons who
executed the foregoing instrument and who acknowledged that they executed the
same.
/S/ BETTY J. SCHOOLING
------------------------------------
Notary Public
My Commission Expires: August 4, 1993
<PAGE> 4
SAFECO TAX-EXEMPT BOND TRUST
TRUST INSTRUMENT
This TRUST INSTRUMENT is made on May 13, 1993, by the Trustees, to
establish a business trust for the investment and reinvestment of funds
contributed to the Trust by investors. The Trustees declare that all money and
property contributed to the Trust shall be held and managed in trust pursuant
to this Trust Instrument. The name of the Trust created by this Trust
Instrument is SAFECO Tax-Exempt Bond Trust.
ARTICLE I
DEFINITIONS
Unless otherwise provided or required by the context:
(a) "Bylaws" means the Bylaws of the Trust adopted by the Trustees,
as amended from time to time;
(b) "Class" means the class of Shares of a Series established
pursuant to Article IV;
(c) "Commission," "Interested Person," and "Principal Underwriter"
have the meanings provided in the 1940 Act;
(d) "Covered Person" means a person so defined in Article IX, Section
2;
(e) "Delaware Act" means Chapter 38 of Title 12 of the Delaware Code
entitled "Treatment of Delaware Business Trusts," as amended from time to time;
(f) "Majority Shareholder Vote" means "the vote of a majority of the
outstanding voting securities" as defined in the 1940 Act;
(g) "Net Asset Value" means the net asset value of each Series of the
Trust, determined as provided in Article V, Section 3;
<PAGE> 5
(h) "Outstanding Shares" means Shares shown on the books of the Trust
or its transfer agent as then issued and outstanding, but does not include
Shares which have been repurchased by the Trust;
(i) "Series" means a series of Shares established pursuant to Article
IV;
(j) "Shareholder" means a record owner of Outstanding Shares;
(k) "Shares" means the equal proportionate transferable units of
interest into which the beneficial interest of each Series or Class is divided
from time to time (including whole Shares and fractions of Shares);
(l) "Trust" means SAFECO Tax-Exempt Bond Trust established hereby,
and reference to the Trust, when applicable to one or more Series, refers to
that Series;
(m) "Trustees" means the persons who have signed this Trust
Instrument, so long as they shall continue in office in accordance with the
terms hereof, and all other persons who may from time to time be duly qualified
and serving as Trustees in accordance with Article II, in all cases in their
capacities as Trustees hereunder;
(n) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the Trust or any
Series or the Trustees on behalf of the Trust or any Series;
(o) The "1940 Act" means the Investment Company Act of 1940, as
amended from time to time.
ARTICLE II
TRUSTEES
Section 1. Management of the Trust. The business and affairs of the
Trust shall be managed by or under the direction of the Trustees, and they
shall have all powers necessary or desirable to carry out that responsibility.
The Trustees may execute all instruments and take all action they deem
necessary or desirable to promote the interests of the Trust. Any
determination made by the Trustees in good faith as to what is in the interests
of the Trust shall be conclusive. The Trustees, in their capacity as such,
shall not be expected to devote their entire time to the business and affairs
of the Trust.
Section 2. Initial Trustees; Number, Election and Qualification of
Trustees. The initial Trustees shall be the persons initially signing this
Trust Instrument. The number of Trustees (other than the initial Trustees)
shall be fixed from time
- 2 -
<PAGE> 6
to time by a majority of the Trustees; provided, that there shall be at least
two (2) Trustees. The Shareholders shall elect the Trustees (other than the
initial Trustees) on such dates as the Trustees may fix from time to time.
Section 3. Term of Office. Each Trustee shall hold office for life,
or until he or she reaches seventy-two (72) years of age, or until his or her
successor is elected, or the Trust terminates; except that (a) any Trustee may
resign by delivering to the Board of Trustees or to any Trust officer a written
resignation effective upon such delivery or a later date specified therein; (b)
any Trustee may be removed with or without cause at any time by a written
instrument signed by at least two-thirds of the other Trustees, specifying the
effective date of removal; (c) any Trustee who has become physically or
mentally incapacitated or is otherwise unable to serve, may be retired by a
written instrument signed by a majority of the other Trustees, specifying the
effective date of retirement; and (d) any Trustee may be removed at any meeting
of the Shareholders by a vote of at least two-thirds of the Outstanding Shares.
Section 4. Vacancies; Appointment of Trustees. Whenever a vacancy
shall exist in the Board of Trustees, regardless of the reason for such
vacancy, the remaining Trustees shall appoint any person as they determine in
their sole discretion to fill that vacancy, subject to Sections 10 and 16(a) of
the 1940 Act. Such appointment shall be made by a written instrument signed by
a majority of the Trustees or by a resolution of the Trustees, duly adopted and
recorded in the records of the Trust, specifying the effective date of the
appointment. The Trustees may appoint a new Trustee as provided above in
anticipation of a vacancy expected to occur because of the retirement,
resignation, or removal of a Trustee, or an increase in number of Trustees,
provided that such appointment shall become effective only at or after the
expected vacancy occurs. As soon as any such Trustee has accepted his
appointment in writing, the trust estate shall vest in the new Trustee,
together with the continuing Trustees, without any further act or conveyance,
and he shall be deemed a Trustee hereunder.
Section 5. Chairman. The Trustees shall appoint one of their number
to be Chairman of the Board of Trustees. The Chairman shall preside at all
meetings of the Trustees and the Shareholders and shall perform such other
powers and duties as may from time to time be assigned by the Board of Trustees
or prescribed by the Bylaws.
Section 6. Action by the Trustees. The Trustees shall act by majority
vote at a meeting duly called (including at a telephonic meeting, unless the
1940 Act requires that a particular action be taken only at a meeting of
Trustees in person) at which a quorum is present or by written consent of a
majority of Trustees (or such greater number as may be required by applicable
law) without a meeting. A majority of the Trustees shall constitute a quorum
at
- 3 -
<PAGE> 7
any meeting. Meetings of the Trustees may be called orally or in writing by
the President of the Trust, the Secretary of the Trust, the Chairman of the
Board of Trustees, or by any two other Trustees. Notice of the time, date and
place of all Trustees meetings shall be given to each Trustee in person or by
telephone, telegram, facsimile or other electronic mechanism sent to his or her
home or business address at least twenty-four hours in advance of the meeting
or by written notice mailed to his or her home or business address at least
seventy-two hours in advance of the meeting. Oral notice is deemed to be given
upon communication. Written notice is deemed to be given, if mailed, when
deposited in the United States mail, postage pre-paid, or if sent by telegram,
facsimile or other electronic transmission, when dispatched, to the address,
telephone number or other number of the Trustee as it appears on the records of
the Trust. Notice need not be given to any Trustee who attends the meeting
without objecting to the lack of notice or who signs a waiver of notice either
before or after the meeting. Subject to the requirements of the 1940 Act, the
Trustees by majority vote may delegate to any Trustee or Trustees authority to
approve particular matters or take particular actions on behalf of the Trust.
Any written consent or waiver may be provided and delivered to the Trust by
facsimile or other similar electronic mechanism.
Section 7. Ownership of Trust Property. The Trust Property of the
Trust and of each Series shall be held separate and apart from any assets now
or hereafter held in any capacity other than as Trustee hereunder by the
Trustees or any successor Trustees. All of the Trust Property and legal title
thereto shall at all times be considered as vested in the Trustees on behalf of
the Trust, except that the Trustees may cause legal title to any Trust
Property to be held by or in the name of the Trust, or in the name of any
person as nominee. No Shareholder shall be deemed to have a severable
ownership in any individual asset of the Trust or of any Series or any right of
partition or possession thereof, but each Shareholder shall have, as provided
in Article IV, a proportionate undivided beneficial interest in the Trust or
Series represented by Shares.
Section 8. Effect of Trustees Not Serving. The death, resignation,
retirement, removal, incapacity, or inability or refusal to serve of the
Trustees, or any one of them, shall not operate to annul the Trust or to revoke
any existing agency created pursuant to the terms of this Trust Instrument.
Section 9. Trustees, etc. as Shareholders. Subject to any
restrictions in the Bylaws, any Trustee, officer, agent or independent
contractor of the Trust may acquire, own and dispose of Shares to the same
extent as any other Shareholder; the Trustees may issue and sell Shares to and
buy Shares from any such person or any firm or company in which such person is
interested, subject only to any general limitations herein.
- 4 -
<PAGE> 8
ARTICLE III
POWERS OF THE TRUSTEES
Section 1. Powers. The Trustees in all instances shall act as
principals, free of the control of the Shareholders. The Trustees shall have
full power and authority to take or refrain from taking any action and to
execute any contracts and instruments that they may consider necessary or
desirable in the management of the Trust. The Trustees shall not in any way be
bound or limited by current or future laws or customs applicable to trust
investments, but shall have full power and authority to make any investments
which they, in their discretion, deem proper to accomplish the purposes of the
Trust. The Trustees may exercise all of their powers without recourse to any
court or other authority. Subject to any applicable limitation herein or in
the Bylaws or resolutions of the Trust, the Trustees shall have power and
authority, without limitation:
(a) To invest and reinvest cash and other property, and to hold cash
or other property uninvested, without in any event being bound or limited by
any current or future law or custom concerning investments by trustees, and to
sell, exchange, lend, pledge, mortgage, hypothecate, write options on and lease
any or all of the Trust Property; to invest in obligations and securities of
any kind, and without regard to whether they may mature before the possible
termination of the Trust; and without limitation to invest all or any part of
its cash and other property in securities issued by a registered investment
company or series thereof, subject to the provisions of the 1940 Act;
(b) To operate as and carry on the business of a registered investment
company, and exercise all the powers necessary and proper to conduct such a
business;
(c) To adopt Bylaws not inconsistent with this Trust Instrument
providing for the conduct of the business of the Trust and to amend and repeal
them to the extent such right is not reserved to the Shareholders;
(d) To elect and remove such officers and appoint and terminate such
agents as they deem appropriate;
(e) To employ as custodian of any assets of the Trust, subject to any
provisions herein or in the Bylaws, one or more banks, trust companies or
companies that are members of a national securities exchange, or other entities
permitted by the Commission to serve as such;
(f) To retain one or more transfer agents and Shareholder servicing
agents, or both;
- 5 -
<PAGE> 9
(g) To provide for the distribution of Shares either through a
Principal Underwriter as provided herein or by the Trust itself, or both, or
pursuant to a distribution plan of any kind;
(h) To set record dates in the manner provided for herein or in the
Bylaws;
(i) To delegate such authority as they consider desirable to any
officers of the Trust and to any agent, independent contractor, manager,
investment adviser, custodian or underwriter;
(j) To sell or exchange any or all of the assets of the Trust, subject
to Article X, Section 4;
(k) To vote or give assent, or exercise any rights of ownership, with
respect to other securities or property; and to execute and deliver powers of
attorney delegating such power to other persons;
(l) To exercise powers and rights of subscription or otherwise which
in any manner arise out of ownership of securities;
(m) To hold any security or other property (i) in a form not
indicating any trust, whether in bearer, book entry, unregistered or other
negotiable form, or (ii) either in the Trust's or Trustees' own name or in the
name of a custodian or a nominee or nominees, subject to safeguards according
to the usual practice of business trusts or investment companies;
(n) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes, and with
separate Shares representing beneficial interests in such Series, and to
establish separate Classes, all in accordance with the provisions of Article
IV;
(o) To the full extent permitted by Section 3804 of the Delaware Act,
to allocate assets, liabilities and expenses of the Trust to a particular
Series and liabilities and expenses to a particular Class or to apportion the
same between or among two or more Series or Classes, provided that any
liabilities or expenses incurred by a particular Series or Class shall be
payable solely out of the assets belonging to that Series or Class as provided
for in Article IV, Section 4;
(p) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern whose securities are held
by the Trust; to consent to any contract, lease, mortgage, purchase, or sale of
property by such corporation or concern; and to pay calls or subscriptions with
respect to any security held in the Trust;
- 6 -
<PAGE> 10
(q) To compromise, arbitrate, or otherwise adjust claims in favor of
or against the Trust or any matter in controversy including, but not limited
to, claims for taxes;
(r) To make distributions of income and of capital gains to
Shareholders in the manner hereinafter provided for;
(s) To borrow money;
(t) To establish, from time to time, a minimum total investment for
Shareholders, and to require the redemption of the Shares of any Shareholders
whose investment is less than such minimum upon giving notice to such
Shareholder;
(u) To establish committees for such purposes, with such membership,
and with such responsibilities as the Trustees may consider proper, including a
committee consisting of fewer than all of the Trustees then in office, which
may act for and bind the Trustees and the Trust with respect to the
institution, prosecution, dismissal, settlement, review or investigation of any
legal action, suit or proceeding, pending or threatened;
(v) To issue, sell, repurchase, redeem, cancel, retire, acquire, hold,
resell, reissue, dispose of and otherwise deal in Shares; to establish terms
and conditions regarding the issuance, sale, repurchase, redemption,
cancellation, retirement, acquisition, holding, resale, reissuance, disposition
of or dealing in Shares; and, subject to Articles IV and V, to apply to any
such repurchase, redemption, retirement, cancellation or acquisition of Shares
any funds or property of the Trust or of the particular Series with respect to
which such Shares are issued; and
(w) To carry on any other business in connection with or incidental to
any of the foregoing powers, to do everything necessary or desirable to
accomplish any purpose or to further any of the foregoing powers, and to take
every other action incidental to the foregoing business or purposes, objects or
powers.
The clauses above shall be construed as objects and powers, and the
enumeration of specific powers shall not limit in any way the general powers of
the Trustees. Any action by one or more of the Trustees in their capacity as
such hereunder shall be deemed an action on behalf of the Trust or the
applicable Series, and not an action in an individual capacity. No one dealing
with the Trustees shall be under any obligation to make any inquiry concerning
the authority of the Trustees, or to see to the application of any payments
made or property transferred to the Trustees or upon their order. In
construing this Trust Instrument, the presumption shall be in favor of a grant
of power to the Trustees.
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Section 2. Certain Transactions. Except as prohibited by applicable
law, the Trustees may, on behalf of the Trust, buy any securities from or sell
any securities to, or lend any assets of the Trust to, any Trustee or officer
of the Trust or any firm of which any such Trustee or officer is a member
acting as principal, or have any such dealings with any investment adviser,
administrator, distributor or transfer agent for the Trust or with any
Interested Person of such person. The Trust may employ any such person or
entity in which such person is an Interested Person, as broker, legal counsel,
registrar, investment adviser, administrator, distributor, transfer agent,
dividend disbursing agent, custodian or in any other capacity upon customary
terms.
ARTICLE IV
SERIES; CLASSES; SHARES
Section 1. Establishment of Series or Class. The Trust shall consist
of one or more Series. The Trustees hereby establish the Series listed in
Exhibit A attached hereto and made a part hereof. Each additional Series shall
be established by the adoption of a resolution of the Trustees. The Trustees
may designate the relative rights and preferences of the Shares of each Series.
The Trustees may divide the Shares of any Series into Classes. In such case
each Class of a Series shall represent interests in the assets of that Series
and have identical voting, dividend, liquidation and other rights and the same
terms and conditions, except that expenses allocated to a Class may be borne
solely by such Class as determined by the Trustees and a Class may have
exclusive voting rights with respect to matters affecting only that Class. The
Trust shall maintain separate and distinct records for each Series and hold and
account for the assets thereof separately from the other assets of the Trust or
of any other Series. A Series may issue any number of Shares and need not
issue Shares. Each Share of a Series shall represent an equal beneficial
interest in the net assets of such Series. Each holder of Shares of a Series
shall be entitled to receive his or her pro rata share of all distributions
made with respect to such Series. Upon redemption of his or her Shares, such
Shareholder shall be paid solely out of the funds and property of such Series.
The Trustees may change the name of any Series or Class without Shareholder
approval.
Section 2. Shares. The beneficial interest in the Trust shall be
divided into Shares of one or more separate and distinct Series or Classes
established by the Trustees. The number of Shares of each Series and Class is
unlimited and each Share shall have a par value of $0.001 per Share. All
Shares issued hereunder shall be fully paid and nonassessable. Shareholders
shall have no preemptive or other right to subscribe to any additional Shares
or other securities issued by the Trust. The Trustees shall have full power
and authority, in their sole discretion and without obtaining Shareholder
approval: to issue
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original or additional Shares or fractional Shares at such times and on such
terms and conditions as they deem appropriate; to issue Shares which have been
repurchased by the Trust; to establish and to change in any manner Shares of
any Series or Classes with such preferences, terms of conversion, voting
powers, rights and privileges as the Trustees may determine (but the Trustees
may not change Outstanding Shares in a manner materially adverse to the
Shareholders of such Shares); to divide or combine the Shares of any Series or
Classes into a greater or lesser number; to classify or reclassify any unissued
Shares of any Series or Classes into one or more Series or Classes of Shares;
to abolish any one or more Series or Classes of Shares; to issue Shares to
acquire other assets (including assets subject to, and in connection with, the
assumption of liabilities) and businesses; and to take such other action with
respect to the Shares as the Trustees may deem desirable. Shares which have
been repurchased by the Trust and have not been reissued shall not confer any
voting rights on the Trustees and shall not be entitled to any dividends or
other distributions declared with respect to the Shares.
Section 3. Investment in the Trust. The Trustees shall accept
investments in any Series from such persons and on such terms as they may from
time to time authorize. At the Trustees' discretion, such investments, subject
to applicable law, may be in the form of cash or securities in which that
Series is authorized to invest, valued as provided in Article V, Section 3.
Investments in a Series shall be credited to each Shareholder's account in the
form of full or fractional Shares at the Net Asset Value per Share next
determined after the investment is received or accepted in good form as may be
determined by the Trustees; provided, however, that the Trustees may, in their
sole discretion (a) impose a sales charge upon investments in any Series or
Class or (b) determine the Net Asset Value per Share of the initial capital
contribution. The Trustees shall have the right to refuse to accept
investments in any Series at any time without any cause or reason therefor
whatsoever.
Section 4. Assets and Liabilities of Series. All consideration
received by the Trust for the issue or sale of Shares of a particular Series,
together with all assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof (including any proceeds
derived from the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in whatever form the
same may be), shall be held and accounted for separately from the other assets
of the Trust and every other Series and are referred to as "assets belonging
to" that Series. The assets belonging to a Series shall belong only to that
Series for all purposes, and to no other Series, subject only to the rights of
creditors of that Series. Any assets, income, earnings, profits, and proceeds
thereof, funds, or payments which are not readily identifiable as belonging to
any particular Series shall be allocated by the Trustees between and among one
or more Series as the Trustees deem fair and equitable. Each such allocation
shall be conclusive and binding upon the Shareholders of all Series for all
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purposes, and such assets, earnings, income, profits or funds, or payments and
proceeds thereof shall be referred to as assets belonging to that Series. The
assets belonging to a Series shall be so recorded upon the books of the Trust,
and shall be held by the Trustees in trust for the benefit of the Shareholders
of that Series. The assets belonging to a Series shall be charged with the
liabilities of that Series and all expenses, costs, charges and reserves
attributable to that Series, except that liabilities and expenses allocated
solely to a particular Class shall be borne by that Class. Any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular Series or Class shall be
allocated and charged by the Trustees between or among any one or more of the
Series or Classes in such manner as the Trustees deem fair and equitable. Each
such allocation shall be conclusive and binding upon the Shareholders of all
Series or Classes for all purposes.
Without limiting the foregoing, but subject to the right of the
Trustees to allocate general liabilities, expenses, costs, charges or reserves
as herein provided, the debts, liabilities, obligations and expenses incurred,
contracted for or otherwise existing with respect to a particular Series shall
be enforceable against the assets of such Series only, and not against the
assets of the Trust generally or of any other Series. Notice of this
contractual limitation on liabilities among Series may, in the Trustees'
discretion, be set forth in the certificate of trust of the Trust (whether
originally or by amendment) as filed or to be filed in the Office of the
Secretary of State of the State of Delaware pursuant to the Delaware Act, and
upon the giving of such notice in the certificate of trust, the statutory
provisions of Section 3804 of the Delaware Act relating to limitations on
liabilities among Series (and the statutory effect under Section 3804 of
setting forth such notice in the certificate of trust) shall become applicable
to the Trust and each Series. Any person extending credit to, contracting with
or having any claim against any Series may look only to the assets of that
Series to satisfy or enforce any debt, with respect to that Series. No
Shareholder or former Shareholder of any Series shall have a claim on or any
right to any assets allocated or belonging to any other Series.
Section 5. Ownership and Transfer of Shares. The Trust shall maintain
a register containing the names and addresses of the Shareholders of each
Series and Class thereof, the number of Shares of each Series and Class held by
such Shareholders, and a record of all Share transfers. The register shall be
conclusive as to the identity of Shareholders of record and the number of
Shares held by them from time to time. The Trustees, in their sole discretion,
may authorize the issuance of certificates representing Shares and adopt rules
governing their use. The Trustees may make rules governing the transfer of
Shares, whether or not represented by certificates.
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Section 6. Status of Shares; Limitation of Shareholder Liability.
Shares shall be deemed to be personal property giving Shareholders only the
rights provided in this Trust Instrument. Every Shareholder, by virtue of
having acquired a Share, shall be held expressly to have assented to and agreed
to be bound by the terms of this Trust Instrument and to have become a party
hereto. No Shareholder shall be personally liable for the debts, liabilities,
obligations and expenses incurred by, contracted for, or otherwise existing
with respect to, the Trust or any Series. Neither the Trust nor the Trustees
shall have any power to bind any Shareholder personally or to demand payment
from any Shareholder for anything, other than as agreed by the Shareholder.
Shareholders shall have the same limitation of personal liability as is
extended to shareholders of a private corporation for profit incorporated in
the State of Delaware. Every written obligation of the Trust or any Series
shall contain a statement to the effect that such obligation may only be
enforced against the assets of the Trust or such Series; however, the omission
of such statement shall not operate to bind or create personal liability for
any Shareholder or Trustee.
ARTICLE V
DISTRIBUTIONS AND REDEMPTIONS
Section 1. Distributions. The Trustees may declare and pay dividends
and other distributions, including dividends on Shares of a particular Series
and other distributions from the assets belonging to that Series. The amount
and payment of dividends or distributions and their form, whether they are in
cash, Shares or other Trust Property, shall be determined by the Trustees.
Dividends and other distributions may be paid pursuant to a standing resolution
adopted once or more often as the Trustees determine. All dividends and other
distributions on Shares of a particular Series shall be distributed pro rata to
the Shareholders of that Series in proportion to the number of Shares of that
Series they held on the record date established for such payment, except that
such dividends and distributions shall appropriately reflect expenses allocated
to a particular Class of such Series. The Trustees may adopt and offer to
Shareholders such dividend reinvestment plans, cash dividend payout plans or
similar plans as the Trustees deem appropriate.
Section 2. Redemptions. Each Shareholder of a Series or Class shall
have the right at such times as may be permitted by the Trustees to require the
Series to redeem all or any part of his or her Shares at a redemption price per
Share equal to the Net Asset Value per Share at such time as the Trustees shall
have prescribed by resolution. In the absence of such resolution, the
redemption price per Share shall be the Net Asset Value next determined after
receipt by the Series of a request for redemption in proper form less such
charges as are determined by the Trustees and described in the Trust's
Registration
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Statement for that Series or Class under the Securities Act of 1933. The
Trustees may specify conditions, prices, and places of redemption, and may
specify binding requirements for the proper form or forms of requests for
redemption. Payment of the redemption price may be wholly or partly in
securities or other assets at the value of such securities or assets used in
such determination of Net Asset Value, or may be in cash. Upon redemption,
Shares may be reissued from time to time. The Trustees may require
Shareholders to redeem Shares for any reason under terms set by the Trustees,
including the failure of a Shareholder to supply a personal identification
number if required to do so, or to have the minimum investment required, or to
pay when due for the purchase of Shares issued to him. To the extent permitted
by law, the Trustees may retain the proceeds of any redemption of Shares
required by them for payment of amounts due and owing by a Shareholder to the
Trust or any Series or Class. Notwithstanding the foregoing, the Trustees may
postpone payment of the redemption price and may suspend the right of the
Shareholders to require any Series or Class to redeem Shares during any period
of time when and to the extent permissible under the 1940 Act.
Section 3. Determination of Net Asset Value. The Trustees shall cause
the Net Asset Value of Shares of each Series or Class to be determined from
time to time in a manner consistent with applicable laws and regulations. The
Trustees may delegate the power and duty to determine Net Asset Value per Share
to one or more Trustees or officers of the Trust or to an investment adviser,
custodian, depository or other agent appointed for such purpose. The Net Asset
Value of Shares shall be determined separately for each Series or Class at such
times as may be prescribed by the Trustees or, in the absence of action by the
Trustees, as of the close of trading on the New York Stock Exchange on each day
for all or part of which such Exchange is open for unrestricted trading.
Section 4. Suspension of Right of Redemption. If, as referred to in
Section 2 of this Article, the Trustees postpone payment of the redemption
price and suspend the right of Shareholders to redeem their Shares, such
suspension shall take effect at the time the Trustees shall specify, but not
later than the close of business on the business day next following the
declaration of suspension. Thereafter Shareholders shall have no right of
redemption or payment until the Trustees declare the end of the suspension. If
the right of redemption is suspended, a Shareholder may either withdraw his or
her request for redemption or receive payment based on the Net Asset Value per
Share next determined after the suspension terminates.
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ARTICLE VI
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 1. Voting Powers. The Shareholders shall have power to vote
only with respect to (a) the election of Trustees as provided in Section 2 of
this Article; (b) the removal of Trustees as provided in Article II, Section
3(d); (c) any investment advisory or management contract as provided in Article
VII, Section 1; (d) any termination of the Trust as provided in Article X,
Section 4; (e) the amendment of this Trust Instrument to the extent and as
provided in Article X, Section 8; and (f) such additional matters relating to
the Trust as may be required or authorized by law, this Trust Instrument, or
the Bylaws or any registration of the Trust with the Commission or any State,
or as the Trustees may consider desirable.
On any matter submitted to a vote of the Shareholders, all Shares
shall be voted by individual Series or Class, except (a) when required by the
1940 Act, Shares shall be voted in the aggregate and not by individual Series
or Class, and (b) when the Trustees have determined that the matter affects the
interests of more than one Series or Class, then the Shareholders of all such
Series or Classes shall be entitled to vote thereon. Each whole Share shall be
entitled to one vote as to any matter on which it is entitled to vote, and each
fractional Share shall be entitled to a proportionate fractional vote. There
shall be no cumulative voting in the election of Trustees. Shares may be voted
in person or by proxy or in any manner provided for in the Bylaws. The Bylaws
may provide that proxies may be given by any electronic or telecommunications
device or in any other manner, but if a proposal by anyone other than the
officers or Trustees is submitted to a vote of the Shareholders of any Series
or Class, or if there is a proxy contest or proxy solicitation or proposal in
opposition to any proposal by the officers or Trustees, Shares may be voted
only in person or by written proxy. Until Shares of a Series are issued, as to
that Series the Trustees may exercise all rights of Shareholders and may take
any action required or permitted to be taken by Shareholders by law, this Trust
Instrument or the Bylaws.
Section 2. Meetings of Shareholders. The first Shareholders' meeting
shall be held to elect Trustees at such time and place as the Trustees
designate. There shall be no annual Shareholders' meetings except as required
by law or set forth in the Bylaws. Special meetings of the Shareholders of any
Series or Class may be called by the Trustees and shall be called by the
Trustees upon the written request of Shareholders owning at least ten percent
of the Outstanding Shares of such Series or Class entitled to vote. Special
meetings of Shareholders shall be held, notice of such meetings shall be
delivered and waiver of notice shall occur according to the provisions of the
Trust's Bylaws. Any action that may be taken at a meeting of Shareholders may
be taken without a meeting according to the procedures set forth in the Trust's
Bylaws.
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Section 3. Quorum; Required Vote. One-third of the Outstanding Shares
of each Series or Class, or one-third of the Outstanding Shares of the Trust,
entitled to vote in person or by proxy shall be a quorum for the transaction of
business at a Shareholders' meeting with respect to such Series or Class, or
with respect to the entire Trust, respectively. Any lesser number shall be
sufficient for adjournments. Any adjourned session of a Shareholders' meeting
may be held within a reasonable time without further notice. Except when a
larger vote is required by law, this Trust Instrument or the Bylaws, a majority
of the Outstanding Shares voted in person or by proxy shall decide any matters
to be voted upon with respect to the entire Trust and a plurality of such
Outstanding Shares shall elect a Trustee; provided, that if this Trust
Instrument or applicable law permits or requires that Shares be voted on any
matter by individual Series or Classes, then a majority of the Outstanding
Shares of that Series or Class (or, if required by law, a Majority Shareholder
Vote of that Series or Class) voted in person or by proxy voted on the matter
shall decide that matter insofar as that Series or Class is concerned.
Shareholders may act as to the Trust or any Series or Class by the written
consent of a majority (or such greater amount as may be required by applicable
law) of the Outstanding Shares of the Trust or of such Series or Class, as the
case may be.
ARTICLE VII
CONTRACTS WITH SERVICE PROVIDERS
Section 1. Investment Adviser. Subject to a Majority Shareholder
Vote, the Trustees may enter into one or more investment advisory contracts on
behalf of the Trust or any Series, providing for investment advisory services,
statistical and research facilities and services, and other facilities and
services to be furnished to the Trust or Series on terms and conditions
acceptable to the Trustees. Any such contract may provide for the investment
adviser to effect purchases, sales or exchanges of portfolio securities or
other Trust Property on behalf of the Trustees or may authorize any officer or
agent of the Trust to effect such purchases, sales or exchanges pursuant to
recommendations of the investment adviser. The Trustees may authorize the
investment adviser to employ one or more sub-advisers.
Section 2. Principal Underwriter. The Trustees may enter into
contracts on behalf of the Trust or any Series or Class, providing for the
distribution and sale of Shares by the other party, either directly or as sales
agent, on terms and conditions acceptable to the Trustees. The Trustees may
adopt a plan or plans of distribution with respect to Shares of any Series or
Class and enter into any related agreements, whereby the Series or Class
finances directly or
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indirectly any activity that is primarily intended to result in sales of its
Shares, subject to the requirements of Section 12 of the 1940 Act, Rule 12b-1
thereunder, and other applicable rules and regulations.
Section 3. Transfer Agency, Shareholder Services, and Administration
Agreements. The Trustees, on behalf of the Trust or any Series or Class, may
enter into transfer agency agreements, Shareholder service agreements, and
administration and management agreements with any party or parties on terms and
conditions acceptable to the Trustees.
Section 4. Custodian. The Trustees shall at all times place and
maintain the cash, securities and other assets of the Trust and of each Series
with a custodian meeting the requirements of Section 17(f) of the 1940 Act and
the rules thereunder or such other entities permitted by Commission order. The
Trustees, on behalf of the Trust or any Series, may enter into an agreement
with a custodian on terms and conditions acceptable to the Trustees, providing
for the custodian, among other things, to (a) hold the securities owned by the
Trust or any Series and deliver the same upon written order or oral order
confirmed in writing, (b) to receive and receipt for any moneys due to the
Trust or any Series and deposit the same in its own banking department or
elsewhere, (c) to disburse such funds upon orders or vouchers, and (d) to
employ one or more sub-custodians.
Section 5. Parties to Contracts with Service Providers. The Trustees
may enter into any contract referred to in this Article with any entity,
although one or more of the Trustees or officers of the Trust may be an
officer, director, trustee, partner, shareholder, or member of such entity, and
no such contract shall be invalidated or rendered void or voidable because of
such relationship. No person having such a relationship shall be disqualified
from voting on or executing a contract in his or her capacity as Trustee and/or
Shareholder, or be liable merely by reason of such relationship for any loss or
expense to the Trust with respect to such a contract or accountable for any
profit realized directly or indirectly therefrom; provided, that the contract
was reasonable and fair and not inconsistent with this Trust Instrument or the
Bylaws.
Any contract referred to in Sections 1 and 2 of this Article shall be
consistent with and subject to the applicable requirements of Section 15 of the
1940 Act and the rules and orders thereunder with respect to its continuance in
effect, its termination, and the method of authorization and approval of such
contract or renewal. No amendment to a contract referred to in Section 1 of
this Article shall be effective unless assented to in a manner consistent with
the requirements of Section 15 of the 1940 Act, and the rules and orders
thereunder.
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ARTICLE VIII
EXPENSES OF THE TRUST AND SERIES
Subject to Article IV, Section 4, the Trust or a particular Series
shall pay, or shall reimburse the Trustees from the Trust estate or the assets
belonging to the particular Series, for the expenses and disbursements of its
organization, operations and business (unless a third party has agreed to bear
such expenses and disbursements). Such expenses and disbursements may include,
but are not limited to, the following: fees, expenses and charges of certain
third parties which may include the Trust's investment advisers, distributors,
transfer agents, custodian, independent auditors, legal counsel and
administrators; expenses of the organization of the Trust or a particular
Series; expenses of the issue, redemption and transfer of Shares; brokers'
commissions and other charges; expenses of custody and accounting services;
expenses of maintaining and servicing Shareholder accounts; expenses of
bonding and insurance; all taxes or governmental fees; costs of membership in
trade associations; all charges and expenses for equipment or services used for
communication between the Trust or any Series and any third party providing
services to the Trust or any Series; fees and expenses of Trustees' meetings,
including the compensation of Trustees who are not Interested Persons of the
Trust; Commission registration fees and related expenses; state or foreign
securities laws registration fees and related expenses; expenses of Shareholder
meetings, including the printing and distribution of proxy materials and any
other costs associated with a proxy solicitation; costs of preparing, printing
and distributing Shareholder communications such as prospectuses, statements of
additional information, and financial reports; and non-recurring expenses which
may arise, including the costs of actions, suit or proceedings to which the
Trust or a Series (or a Trustee or officer of the Trust acting as such) is a
party, and the expenses the Trust or Series may incur as a result of its
obligation to provide indemnification to its Trustees, Officers, employees or
agents. The Trustees shall have a lien on the assets belonging to the
appropriate Series, or in the case of an expense allocable to more than one
Series, on the assets of each such Series, prior to any rights or interests of
the Shareholders thereto, for the reimbursement to them of such expenses,
disbursements, losses and liabilities.
ARTICLE IX
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 1. Limitation of Liability. All persons contracting with or
having any claim against the Trust or a particular Series shall look only to
the assets of the Trust or such Series for payment under such contract or
claim; and neither the Trustees nor
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any of the Trust's officers, employees or agents, whether past, present or
future, shall be personally liable therefor. Every written instrument or
obligation on behalf of the Trust or any Series shall contain a statement to
the foregoing effect, but the absence of such statement shall not operate to
make any Trustee or officer of the Trust liable thereunder. Provided they have
exercised reasonable care and have acted under the reasonable belief that their
actions are in the best interest of the Trust, the Trustees and officers of the
Trust shall not be responsible or liable for any act or omission or for neglect
or wrongdoing of them or any officer, agent, employee, investment adviser or
independent contractor of the Trust, but nothing contained in this Trust
Instrument or in the Delaware Act shall protect any Trustee or officer of the
Trust against liability to the Trust or to Shareholders to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
or her office.
Section 2. Indemnification. (a) Subject to the exceptions and
limitations contained in subsection (b) below:
(i) every person who is, or has been, a Trustee or an officer,
employee or agent of the Trust ("Covered Person") shall be
indemnified by the Trust or the appropriate Series to the
fullest extent permitted by law against liability and against
all expenses reasonably incurred or paid by him or her in
connection with any claim, action, suit or proceeding in which
he or she becomes involved as a party or otherwise by virtue
of his or her being or having been a Covered Person and
against amounts paid or incurred by him or her in the
settlement thereof;
(ii) as used herein, the words "claim," "action," "suit," or
"proceeding" shall apply to all claims, actions, suits or
proceedings (civil, criminal or other, including appeals),
actual or threatened, and the words "liability" and "expenses"
shall include, without limitation, attorneys' fees, costs,
judgments, amounts paid in settlement, fines, penalties and
other liabilities.
(b) No indemnification shall be provided hereunder to a Covered
Person:
(i) who shall have been adjudicated by a court or body before
which the proceeding was brought (A) to be liable to the Trust
or its Shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office, or (B) not to
have acted in good faith in the reasonable belief that his or
her action was in the best interest of the Trust; or
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(ii) in the event of a settlement, unless there has been a
determination that such Covered Person did not engage in
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her
office; (A) by the court or other body approving the
settlement; (B) by the vote of at least a majority of a quorum
of those Trustees who are neither Interested Persons of the
Trust nor are parties to the proceeding based upon a review of
readily available facts (as opposed to a full trial-type
inquiry); or (C) by written opinion of independent legal
counsel based upon a review of readily available facts (as
opposed to a full trial-type inquiry).
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now or
hereafter be entitled, and shall inure to the benefit of the heirs, executors
and administrators of a Covered Person.
(d) To the maximum extent permitted by applicable law, expenses in
connection with the preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described in subsection (a) of this
Section may be paid by the Trust or applicable Series from time to time prior
to final disposition thereof upon receipt of an undertaking by or on behalf of
such Covered Person that such amount will be paid over by him or her to the
Trust or applicable Series if it is ultimately determined that he or she is not
entitled to indemnification under this Section; provided, however, that either
(i) such Covered Person shall have provided appropriate security for such
undertaking, (ii) the Trust is insured against losses arising out of any such
advance payments or (iii) either a majority of the Trustees who are neither
Interested Persons of the Trust nor parties to the proceeding, or independent
legal counsel in a written opinion, shall have determined, based upon a review
of readily available facts (as opposed to a full trial-type inquiry) that there
is reason to believe that such Covered Person will not be disqualified from
indemnification under this Section.
(e) Any repeal or modification of this Article IX by the Shareholders
of the Trust, or adoption or modification of any other provision of the Trust
Instrument or Bylaws inconsistent with this Article, shall be prospective only,
to the extent that such repeal or modification would, if applied
retrospectively, adversely affect any limitation on the liability of any
Covered Person or indemnification available to any Covered Person with respect
to any act or omission which occurred prior to such repeal, modification or
adoption.
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Section 3. Indemnification of Shareholders. If any Shareholder or
former Shareholder of any Series shall be held personally liable solely by
reason of his or her being or having been a Shareholder and not because of his
or her acts or omissions or for some other reason, the Shareholder or former
Shareholder (or his or her heirs, executors, administrators or other legal
representatives or in the case of any entity, its general successor) shall be
entitled out of the assets belonging to the applicable Series to be held
harmless from and indemnified against all loss and expense arising from such
liability. The Trust, on behalf of the affected Series, shall, upon request by
such Shareholder, assume the defense of any claim made against such Shareholder
for any act or obligation of the Series and satisfy any judgment thereon from
the assets of the Series.
ARTICLE X
MISCELLANEOUS
Section 1. Trust Not a Partnership. This Trust Instrument creates a
trust and not a partnership. No Trustee shall have any power to bind
personally either the Trust's officers or any Shareholder.
Section 2. Trustee Action; Expert Advice; No Bond or Surety. The
exercise by the Trustees of their powers and discretion hereunder in good faith
and with reasonable care under the circumstances then prevailing shall be
binding upon everyone interested. Subject to the provisions of Article IX, the
Trustees shall not be liable for errors of judgment or mistakes of fact or law.
The Trustees may take advice of counsel or other experts with respect to the
meaning and operation of this Trust Instrument, and subject to the provisions
of Article IX, shall not be liable for any act or omission in accordance with
such advice or for failing to follow such advice. The Trustees shall not be
required to give any bond as such, nor any surety if a bond is obtained.
Section 3. Record Dates. The Trustees may fix in advance a date up to
seventy (70) days before the date of any Shareholders' meeting, or the date for
the payment of any dividends or other distributions, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
Shares shall go into effect as a record date for the determination of the
Shareholders entitled to notice of, and to vote at, any such meeting, or
entitled to receive payment of such dividend or other distribution, or to
receive any such allotment of rights, or to exercise such rights in respect of
any such change, conversion or exchange of Shares. Record dates for adjourned
Shareholders' meetings shall be set according to the Trust's Bylaws.
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<PAGE> 23
Section 4. Termination of the Trust. (a) This Trust shall have
perpetual existence. Subject to a Majority Shareholder Vote of the Trust or of
each Series to be affected, the Trustees may
(i) sell and convey all or substantially all of the assets of
the Trust or any affected Series to another Series or to
another entity which is an open-end investment company as
defined in the 1940 Act, or is a series thereof, for adequate
consideration, which may include the assumption of all
outstanding obligations, taxes and other liabilities, accrued
or contingent, of the Trust or any affected Series, and which
may include shares of or interests in such Series, entity, or
series thereof; or
(ii) at any time sell and convert into money all or
substantially all of the assets of the Trust or any affected
Series.
Upon making reasonable provision for the payment of all known liabilities of
the Trust or any affected Series in either (i) or (ii), by such assumption or
otherwise, the Trustees shall distribute the remaining proceeds or assets (as
the case may be) ratably among the Shareholders of the Trust or any affected
Series; however, the payment to any particular Class of such Series may be
reduced by any fees, expenses or charges allocated to that Class.
(b) The Trustees may take any of the actions specified in subsection
(a) (i) and (ii) above without obtaining a Majority Shareholder Vote of the
Trust or any Series if a majority of the Trustees determines that the
continuation of the Trust or Series is not in the best interests of the Trust,
such Series, or their respective Shareholders as a result of factors or events
adversely affecting the ability of the Trust or such Series to conduct its
business and operations in an economically viable manner. Such factors and
events may include the inability of the Trust or a Series to maintain its
assets at an appropriate size, changes in laws or regulations governing the
Trust or the Series or affecting assets of the type in which the Trust or
Series invests, or economic developments or trends having a significant adverse
impact on the business or operations of the Trust or such Series.
(c) Upon completion of the distribution of the remaining proceeds or
assets pursuant to subsection (a), the Trust or affected Series shall terminate
and the Trustees and the Trust shall be discharged of any and all further
liabilities and duties hereunder with respect thereto and the right, title and
interest of all parties therein shall be canceled and discharged. Upon
termination of the Trust, following completion of winding up of its business,
the Trustees shall cause a certificate of cancellation of the Trust's
certificate of trust to be filed in accordance with the Delaware Act, which
certificate of cancellation may be signed by any one Trustee.
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<PAGE> 24
Section 5. Reorganization. Notwithstanding anything else herein, to
change the Trust's form of organization the Trustees may, without Shareholder
approval, (a) cause the Trust to merge or consolidate with or into one or more
entities, if the surviving or resulting entity is the Trust or another open-end
management investment company under the 1940 Act, or a series thereof, that
will succeed to or assume the Trust's registration under the 1940 Act, or (b)
cause the Trust to incorporate under the laws of Delaware. Any agreement of
merger or consolidation or certificate of merger may be signed by a majority of
Trustees and facsimile signatures conveyed by electronic or telecommunication
means shall be valid.
Pursuant to and in accordance with the provisions of Section 3815(f)
of the Delaware Act, an agreement of merger or consolidation approved by the
Trustees in accordance with this Section 5 may effect any amendment to the
Trust Instrument or effect the adoption of a new trust instrument of the Trust
if it is the surviving or resulting trust in the merger or consolidation.
Section 6. Trust Instrument. The original or a copy of this Trust
Instrument and of each amendment hereto or Trust Instrument supplemental shall
be kept at the office of the Trust where it may be inspected by any
Shareholder. Anyone dealing with the Trust may rely on a certificate by a
Trustee or an officer of the Trust as to the authenticity of the Trust
Instrument or any such amendments or supplements and as to any matters in
connection with the Trust. The masculine gender herein shall include the
feminine and neuter genders. Headings herein are for convenience only and
shall not affect the construction of this Trust Instrument. This Trust
Instrument may be executed in any number of counterparts, each of which shall
be deemed an original.
Section 7. Applicable Law. This Trust Instrument and the Trust
created hereunder are governed by and construed and administered according to
the Delaware Act and the applicable laws of the State of Delaware; provided,
however, that there shall not be applicable to the Trust, the Trustees or this
Trust Instrument (a) the provisions of Section 3540 of Title 12 of the Delaware
Code, or (b) any provisions of the laws (statutory or common) of the State of
Delaware (other than the Delaware Act) pertaining to trusts which relate to or
regulate (i) the filing with any court or governmental body or agency of
trustee accounts or schedules of trustee fees and charges, (ii) affirmative
requirements to post bonds for trustees, officers, agents or employees of a
trust, (iii) the necessity for obtaining court or other governmental approval
concerning the acquisition, holding or disposition of real or personal
property, (iv) fees or other sums payable to trustees, officers, agents or
employees of a trust, (v) the allocation of receipts and expenditures to income
or principal, (vi) restrictions or limitations on the permissible nature,
amount or concentration of trust investments or requirements relating to the
titling, storage
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<PAGE> 25
or other manner of holding of trust assets, or (vii) the establishment of
fiduciary or other standards of responsibilities or limitations on the acts or
powers of trustees, which are inconsistent with the limitations or liabilities
or authorities and powers of the Trustees set forth or referenced in this Trust
Instrument. The Trust shall be of the type commonly called a Delaware business
trust, and, without limiting the provisions hereof, the Trust may exercise all
powers which are ordinarily exercised by such a trust under Delaware law. The
Trust specifically reserves the right to exercise any of the powers or
privileges afforded to trusts or actions that may be engaged in by trusts under
the Delaware Act, and the absence of a specific reference herein to any such
power, privilege or action shall not imply that the Trust may not exercise such
power or privilege or take such actions.
Section 8. Amendments. The Trustees may, without any Shareholder
vote, amend or otherwise supplement this Trust Instrument by making an
amendment, a Trust Instrument supplemental hereto or an amended and restated
trust instrument; provided, that Shareholders shall have the right to vote on
any amendment (a) which would affect the voting rights of Shareholders granted
in Article VI, Section 1, (b) to this Section 8, (c) required to be approved by
Shareholders by law or by the Trust's registration statement(s) filed with the
Commission, and (d) submitted to them by the Trustees in their discretion. Any
amendment submitted to Shareholders which the Trustees determine would affect
the Shareholders of any Series shall be authorized by vote of the Shareholders
of such Series and no vote shall be required of Shareholders of a Series not
affected. Notwithstanding anything else herein, any amendment to Article IX
which would have the effect of reducing the indemnification and other rights
provided thereby to Trustees, officers, employees, and agents of the Trust or
to Shareholders or former Shareholders, and any repeal or amendment of this
sentence shall each require the affirmative vote of the holders of two-thirds
of the Outstanding Shares of the Trust entitled to vote thereon.
Section 9. Fiscal Year. The fiscal year of the Trust shall end on a
specified date as set forth in the Bylaws. The Trustees may change the fiscal
year of the Trust without Shareholder approval.
Section 10. Severability. The provisions of this Trust Instrument
are severable. If the Trustees determine, with the advice of counsel, that any
provision hereof conflicts with the 1940 Act, the regulated investment company
provisions of the Internal Revenue Code or with other applicable laws and
regulations, the conflicting provision shall be deemed never to have
constituted a part of this Trust Instrument; provided, however, that such
determination shall not affect any of the remaining provisions of this Trust
Instrument or render invalid or improper any action taken or omitted prior to
such determination. If any provision hereof
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<PAGE> 26
shall be held invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision only in such jurisdiction
and shall not affect any other provision of this Trust Instrument.
IN WITNESS WHEREOF, the undersigned, being the initial
Trustees, have executed this Trust Instrument as of the date first above
written.
/S/ BOH A. DICKEY
------------------------------------
Boh A. Dickey, as
Trustee and not individually
/S/ RICHARD W. HUBBARD
------------------------------------
Richard W. Hubbard, as
Trustee and not individually
Address: SAFECO Plaza
Seattle, Washington 98185
STATE OF WASHINGTON ss
CITY OF SEATTLE
Before me this 13th day of May, 1993, personally appeared the
above-named Boh A. Dickey, and Richard W. Hubbard, known to me to be the
persons who executed the foregoing instrument and who acknowledged that they
executed the same.
/S/ BETTY J. SCHOOLING
------------------------------------
Notary Public
My Commission expires August 4, 1993.
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<PAGE> 27
EXHIBIT A
SAFECO Municipal Bond Fund
SAFECO California Tax-Free Income Fund
SAFECO Washington State Municipal Bond Fund
SAFECO Intermediate-Term Municipal Bond Fund
SAFECO Insured Municipal Bond Fund
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<PAGE> 1
EXHIBIT NO. 99.2
BYLAWS
<PAGE> 2
EXHIBIT 99.2
BYLAWS
(As amended 2/2/95)
SAFECO TAX-EXEMPT BOND TRUST
(A DELAWARE BUSINESS TRUST)
These Bylaws of SAFECO TAX-EXEMPT BOND TRUST (the "Trust"), a Delaware
business trust, are subject to the Trust Instrument of the Trust dated May 13,
1993, as from time to time amended, supplemented or restated (the "Trust
Instrument"). Capitalized terms used herein have the same meanings as in the
Trust Instrument.
ARTICLE I
PRINCIPAL OFFICE AND SEAL
Section 1. Principal Office. The principal office of the Trust shall be
located in Seattle, Washington, or such other location as the Board of Trustees
may from time to time determine. The Trust may establish and maintain other
offices and places of business as the Board of Trustees may from time to time
determine.
Section 2. Seal. The seal of the Trust shall consist of a flat-faced circular
die with the words "SAFECO Tax-Exempt Bond Trust", and with the words "Trust
Seal, 1993" in the center, and with the word "Delaware" also being shown on the
face of the seal. Any Trustee or officer of the Trust shall have authority to
affix the seal to any document requiring the same.
ARTICLE II
MEETINGS OF BOARD OF TRUSTEES
Section 1. Meetings. Meetings of the Board of Trustees may be held at such
places and such times as the Trustees may from time to time determine as
provided in Article II, Section 7, of the Trust Instrument.
Section 2. Action Without a Meeting. Actions may be taken by the Board of
Trustees without a meeting or by a telephone meeting, as provided in Article
II, Section 7, of the Trust Instrument.
Section 3. Compensation of Trustees. No compensation for services as a
Trustee shall be paid to any Trustee who is at the time an employee of an
investment adviser of the Trust or any Series or Class thereof or of any entity
affiliated with the investment adviser. A Trustee who is not an employee of
such investment adviser or any of its affiliates may receive such compensation
from the Trust for his or her services and reimbursement for his or her
expenses as may be fixed from time to time by the Board of Trustees.
<PAGE> 3
ARTICLE III
BOARD COMMITTEES
Section 1. Establishment. The Board of Trustees may designate one or more
committees and shall determine the number of members of each such committee and
its powers. Each committee member shall hold office at the pleasure of the
Board of Trustees. The Board of Trustees may abolish any such committee at any
time in its sole discretion. Any committee to which the Board of Trustees
delegates any of its powers shall maintain records of its meetings and shall
report its actions to the Board of Trustees. The Board of Trustees shall have
the power to rescind any action of any committee, but no such recision shall
have retroactive effect. The Board of Trustees shall have the power at any
time to fill vacancies in the committees. The Board of Trustees may delegate
to any committee any of its powers, except the power to declare a dividend or
distribution on Shares, authorize the issuance of Shares, recommend to
Shareholders any action requiring Shareholders' approval, amend these Bylaws,
approve any merger or Share exchange, approve or terminate any contract with an
investment adviser or Principal Underwriter, or to take any other action
required by applicable law to be taken by the Board.
Section 2. Notice, Waiver, Consent, Quorum and Proceedings. In the absence of
a provision in these Bylaws or an appropriate resolution of the Trustees, each
committee may adopt such rules and regulations governing notice of its meetings
and waiver and consent to thereof, quorum and manner of acting as it shall deem
proper and desirable. In the event any member of any committee is absent from
any meeting, the members present at the meeting, whether or not they constitute
a quorum, may appoint another Trustee to act in the place of such absent
member.
Section 3. Audit Committee.
(a) Membership. The members of the Audit Committee shall be those
Trustees who are not Interested Persons of the Trust.
(b) Responsibilities and Duties. The Audit Committee shall assist
the Board of Trustees to fulfill its responsibility to shareholders, potential
shareholders and the investment community relating to corporate accounting,
financial reporting practices of the Trust and the quality and integrity of the
financial reports of the Trust. In carrying out these responsibilities the
Audit Committee will:
(i) Review and recommend to the Board of Trustees the
independent accountants to be selected to audit the financial statements of the
Trust;
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<PAGE> 4
(ii) Meet with the independent accountants and the
officers of the Trust to review the scope of the proposed audit for the current
year and the audit procedures to be utilized;
(iii) Meet with the independent accountants and the officers
of the Trust at the conclusion of each audit to review the audit, including a
review of any comments or recommendations of the independent accountants;
(iv) Review with the independent accountants and the
officers of the Trust the adequacy and effectiveness of the internal auditing,
accounting and financial controls of the Trust and elicit any recommendations
from the independent accountants and officers of the Trust for improvements in
such controls;
(v) Review the internal audit services provided to the
Trust by the Trust's investment adviser or its affiliates;
(vi) Review the planning and results of any internal audit
examinations;
(vii) Determine whether the independent accountants are
satisfied with the disclosure and content of the financial statements included
in the annual report to shareholders and review any change in accounting
principles which materially affect such financial statements;
(viii) Review the scope of and fees for consulting services
provided by the independent accountants;
(ix) Meet in separate executive sessions with the independent
accountants and management;
(x) Report to the Board of Trustees following each meeting.
(c) Rules of Procedure. The Audit Committee shall adopt its own
rules and keep minutes of all of its meetings.
(d) Quorum. A quorum of the Audit Committee shall consist of at
least two members of the Committee.
(e) Action Without Meeting. Subject to the requirements of the
1940 Act, any action that may be or is required to be taken at a meeting of the
Audit Committee may be conducted by telephone or taken without a meeting if a
consent in writing setting forth the action so taken shall be signed by all
members of the Audit Committee. Such consent shall have the same effect as a
unanimous vote.
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<PAGE> 5
Section 4. Pricing Committee.
(a) Membership. The Board of Trustees may annually appoint a
Pricing Committee comprised of two or more trustees or officers of SAFECO Asset
Management Company.
(b) Responsibilities and Duties. The purpose of the Pricing
Committee shall be to value, on behalf of the Board of Trustees between
regularly scheduled trustees' meetings, any security held by or to be purchased
for the Trust or any Series which cannot be otherwise valued under the Trust's
guidelines for valuation of portfolio securities, e.g., an unrestricted
security for which market quotes are not readily available or a restricted
security ("Security").
(c) Rules of Procedure. In determining the fair value of a
Security, the Pricing Committee shall consider such factors and follow such
procedures as may be established under guidelines approved by the Trust's Board
of Trustees. The guidelines shall be periodically reviewed and approved by the
Board as frequently as the Board shall deem appropriate, but in no event less
than annually. Minutes shall be kept of each meeting of the Pricing Committee.
At the next regularly scheduled Board of Trustees' meeting following the
Pricing Committee's determination of a fair value for a Security, the Board of
Trustees shall ratify the Pricing Committee's action.
(d) Vote Required. The members of the Pricing Committee must
unanimously approve a fair value for the Security.
(e) Action Without Meeting. Any action that may be or is required
to be taken at a meeting of the Pricing Committee may be conducted by telephone
or may be taken without a meeting, if a consent in writing setting forth the
action so taken shall be signed by all members of the Pricing Committee. Such
consent shall have the same effect as a unanimous vote.
Section 5. Compensation of Committee Members. Each committee member who is
not an Interested Person of the Trust may receive such compensation from the
Trust for his or her services and reimbursement for his or her expenses as may
be fixed from time to time by the Trustees.
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<PAGE> 6
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Trust shall be a President, a
Treasurer, a Secretary, and may include one or more Vice Presidents, Assistant
Treasurers or Assistant Secretaries, and such other officers as the Board of
Trustees may from time to time elect. The Board of Trustees may appoint any
other officers or agents and prescribe their respective rights, terms of
office, authorities and duties.
Section 2. Election, Tenure and Qualifications of Officers. The officers of
the Trust shall be elected annually by the Trustees. Each officer elected by
the Board of Trustees shall hold office until his or her successor shall have
been elected and qualified or his or her earlier resignation. Any person may
hold one or more offices of the Trust, except no one person may serve
concurrently as President and Secretary. A person who holds more than one
office in the Trust may not act in more than one capacity to execute,
acknowledge, or verify an instrument required by law to be executed,
acknowledged, or verified by more than one officer. No officer need be a
Trustee or a Shareholder of the Trust.
Section 3. Vacancies and Newly Created Offices. Whenever a vacancy shall
occur in any office, regardless of the reason for such vacancy, or if any new
office shall be created, such vacancies or newly created offices may be filled
by the Trustees at any meeting.
Section 4. Removal and Resignation. The Board of Trustees may remove any
officer or agent from office, with or without cause, by the vote of a majority
of the Trustees. Any officer may resign from office at any time by delivering a
written resignation to the Trustees, the President, the Secretary, or any
Assistant Secretary. Unless otherwise specified therein, such resignation
shall take effect upon delivery.
Section 5. Chairman. The Chairman shall have the powers and responsibilities
set forth in Article II, section 6 of the Trust Instrument and shall exercise
and perform such other powers and duties as may from time to time be assigned
by the Board of Trustees or prescribed by these Bylaws.
Section 6. President. The President shall be the chief executive officer of
the Trust. Subject to the direction of the Trustees, the President shall have
general charge, supervision and control over the business affairs of the Trust
and shall be responsible for the management thereof. In the absence of the
Chairman, or if no Chairman of the Board of Trustees has been elected, the
President shall preside at all Shareholders' and Board of Trustees' meetings
and shall in general exercise the powers and perform the duties of
- 5 -
<PAGE> 7
the Chairman. Except as the Board of Trustees may otherwise order, the
President shall have the power to grant, issue, execute or sign such powers of
attorney, proxies, agreements or other documents as may be deemed advisable or
necessary. The President also shall have the power to employ attorneys,
accountants and other advisers and agents for the Trust. The President shall
exercise such other powers and perform such other duties as the Board of
Trustees may from time to time assign to the President.
Section 7. Vice President. If the Board of Trustees elects one or more Vice
President(s), the Vice-President(s) shall have such powers and perform such
duties as may from time to time be assigned to them by the Board of Trustees or
the President. At the request or in the absence or disability of the
President, the Vice President (or, if there are two or more Vice Presidents,
then the senior of the Vice Presidents present and able to act) may perform all
the duties of the President and, when so acting, shall have all the powers of
the President. The Board of Trustees may designate one (1) or more of the Vice
Presidents as an Executive Vice President or with such other designation or
title as the Board of Trustees deem appropriate for his or her position or
duties.
Section 8. Treasurer and Assistant Treasurers. The Treasurer shall be the
principal financial officer of the Trust and shall have general charge of the
finances and books of the Trust. The Treasurer shall be responsible for
delivering all funds and securities of the Trust to its custodian. The
Treasurer shall make annual reports to the Board of Trustees regarding the
business and financial condition of the Trust as soon as possible after the
close of the Trust's fiscal year. The Treasurer also shall furnish such other
reports concerning the business and financial condition of the Trust as the
Board of Trustees may from time to time require. The Treasurer shall perform
all acts incidental to the office of Treasurer, subject to the supervision of
the Board of Trustees, and shall perform such additional duties as the Board
may from time to time designate.
Any Assistant Treasurer may perform such duties of the Treasurer as
the Board of Trustees or the Treasurer may assign, and, in the absence of the
Treasurer, may perform all the duties of the Treasurer.
Section 9. Secretary and Assistant Secretaries. The Secretary shall record
all votes and proceedings of the meetings of Trustees and Shareholders in books
to be kept for that purpose. The Secretary shall be responsible for the giving
and serving of all notices of the Trust. The Secretary shall have custody of
any seal of the Trust. The Secretary shall be responsible for the records of
the Trust, including the Share register and such other books and papers as the
Trustees may direct and such books, reports, certificates and other documents
required by law. All of such records and documents shall at all reasonable
times be kept open by
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<PAGE> 8
the Secretary for inspection by any Trustee. The Secretary shall perform all
acts incidental to the office of Secretary, subject to the supervision of the
Trustees, and shall perform such additional duties as the Trustees may from
time to time designate.
Any Assistant Secretary may perform such duties of the Secretary as
the Trustees or the Secretary may assign, and, in the absence of the Secretary,
may perform all the duties of the Secretary.
ARTICLE V
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meetings. There shall be no annual Shareholders' meetings.
Section 2. Special Meetings. Special meetings of Shareholders of the Trust or
of any Series or Class shall be called by the Chairman, President or Secretary
whenever ordered by the Trustees, and shall be held at such time and place as
may be stated in the notice of the meeting.
Special meetings of the Shareholders of the Trust or of any Series or
Class shall also be called by the Chairman, President or Secretary upon the
written request of Shareholders owning at least ten percent of the Outstanding
Shares of the Trust or such Series or Class entitled to vote at such meeting,
provided that (1) such request shall state the purposes of such meeting and the
matters proposed to be acted on, and (2) the Shareholders requesting such
meeting shall have paid to the Trust the reasonably estimated cost of preparing
and mailing the notice thereof, which the Secretary shall determine and specify
to such Shareholders. No special meeting shall be called upon the request of
Shareholders of the Trust or of any Series or Class to consider any matter
which is substantially the same as a matter voted upon at any special meeting
of the Shareholders held during the preceding twelve months, unless requested
by the holders of a majority of all Outstanding Shares of the Trust or the
Series or Class entitled to be voted at such meeting.
If the Chairman, President or Secretary fails for more than thirty
days to call a special meeting when required to do so, the Trustees or the
Shareholders requesting such a meeting may, in the name of the Chairman,
President or Secretary, call the meeting by giving the required notice. If the
meeting is a meeting of Shareholders of any Series or Class, but not a meeting
of all Shareholders of the Trust, then only a special meeting of Shareholders
of such Series or Class shall be called and only Shareholders of such Series or
Class shall be entitled to notice of and to vote at such meeting.
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<PAGE> 9
Section 3. Notice of Meetings; Waiver. The Chairman, President or Secretary
shall cause written notice of the place, date and time, and the purpose or
purposes for which the meeting is called. Notice shall be given at least ten
days before the date of the meeting. The written notice of any meeting may be
delivered or mailed, postage prepaid, to each Shareholder entitled to vote at
such meeting. If mailed, notice shall be deemed to be given when deposited in
the United States mail directed to the Shareholder at his or her address as it
appears on the records of the Trust. Notice of any Shareholders' meeting need
not be given to any Shareholder who is present at such meeting in person or by
proxy if a written waiver of notice, executed before or after such meeting, is
filed with the record of such meeting. Any irregularities in the notice of any
meeting or the nonreceipt of any such notice by any of the Shareholders shall
not invalidate any action otherwise properly taken at any such meeting.
Section 4. Adjourned Meetings. One or more adjournments of any Shareholders'
meetings may be taken by reason of failure of a quorum to attend a meeting or
for any other reason. Notice of adjournment of a Shareholders' meeting to
another time or place need not be given, if such time and place are announced
at the meeting at which the adjournment is taken, or reasonable notice is given
to persons present at the meeting, and the adjourned meeting is held within a
reasonable time after the date set for the original meeting. At the adjourned
meeting the Trust may transact any business which might have been transacted at
the original meeting. If after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to
Shareholders of record entitled to vote at such meeting.
Section 5. Validity of Proxies. Subject to the provisions of the Trust
Instrument, Shareholders entitled to vote may vote either in person or by
proxy, provided that either (1) a written instrument authorizing such proxy to
act has been signed and dated by the Shareholder or by his or her duly
authorized attorney, or (2) the Trustees adopt by resolution an electronic,
telephonic, computerized or other alternative to execution of a written
instrument authorizing the proxy to act, but if a proposal by anyone other than
the officers or Trustees is submitted to a vote of the Shareholders of the
Trust or of any Series or Class, or if there is a proxy contest or proxy
solicitation or proposal in opposition to any proposal by the officers or
Trustees, Shares may be voted only in person or by written proxy. Unless the
proxy provides otherwise, it shall not be valid for more than eleven months
before the date of the meeting. All proxies shall be delivered to the
Secretary or other person responsible for recording the proceedings before
being voted. A proxy with respect to Shares held in the name of two or more
persons shall be valid if executed by one of them unless at or prior to
exercise of such proxy the Trust receives a specific written notice to the
contrary
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<PAGE> 10
from any one of them. Unless otherwise specifically limited by their terms,
proxies shall entitle the Shareholder to vote at any adjournment of a
Shareholders' meeting. A proxy purporting to be executed by or on behalf of a
Shareholder shall be deemed valid unless challenged at or prior to its
exercise, and the burden of proving invalidity shall rest on the challenger.
At every meeting of Shareholders, unless the voting is conducted by inspectors,
all questions concerning the qualifications of voters, the validity of proxies,
and the acceptance or rejection of votes, shall be decided by the chairman of
the meeting. Subject to the provisions of the Delaware Business Trust Act, the
Trust Instrument or these Bylaws, all matters concerning the giving, voting or
validity of proxies shall be governed by the General Corporation Law of the
State of Delaware relating to proxies, and judicial interpretations thereunder,
as if the Trust were a Delaware corporation and the Shareholders were
shareholders of a Delaware corporation.
Section 6. Quorum; Required Vote. The quorum and required vote for any
Shareholders' meeting shall be as specified in Article VI, section 3 of the
Trust Instrument.
Section 7. Record Date. The Board of Trustees may fix in advance a date up to
seventy (70) days before the date of any Shareholders' meeting as a record date
for the determination of the Shareholders entitled to notice of, and to vote
at, any such meeting. The Shareholders of record entitled to vote at a
Shareholders' meeting shall be deemed the Shareholders of record at any meeting
reconvened after one or more adjournments, unless the Board of Trustees has
fixed a new record date. If the Shareholders' meeting is adjourned for more
than one hundred twenty (120) days after the original date, the Board of
Trustees shall establish a new record date.
Section 8. Place of Meeting. All special meetings of Shareholders shall
be held at the principal place of business of the Trust or at such other place
as the Board of Trustees may from time to time designate.
Section 9. Action Without a Meeting. Any action to be taken by Shareholders
may be taken without a meeting if a majority (or such other amount as may be
required by law) of the Outstanding Shares entitled to vote on the matter
consent to the action in writing and such written consents are filed with the
records of the Shareholders' meetings. Such written consent shall be treated
for all purposes as a vote at a meeting of the Shareholders held at the
principal place of business of the Trust.
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<PAGE> 11
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
Section 1. Share Certificates. In lieu of issuing certificates representing
Shares, the Board of Trustees or the transfer agent or Shareholder servicing
agent may keep accounts upon the books of the Trust for record holders of such
Shares. The record holders shall be deemed, for all purposes, to be holders of
certificates for such Shares as if they accepted such certificates and shall be
held to have expressly consented to the terms thereof.
If the Board of Trustees authorizes the issuance of certificates
pursuant to Article V, Section 5 of the Trust Instrument, then such
certificates shall be in the form prescribed from time to time by the Board and
shall be signed by the President or a Vice President and by the Treasurer,
Assistant Treasurer, Secretary or Assistant Secretary of the Trust. Such
signatures may be facsimile if the certificate is signed by a transfer agent or
Shareholder servicing agent or by a registrar, other than a Trustee, officer or
employee of the Trust. If any officer who has signed any such certificate or
whose facsimile signature has been placed thereon shall have ceased to be such
an officer before the certificate is issued, then such certificate may be
issued by the Trust with the same effect as if he or she were such an officer
at the date of issue. The issuance of a certificate to one or more
Shareholders shall not require the issuance of certificates to all
Shareholders. The Board of Trustees may at any time discontinue the issuance
of certificates and may, by written notice to each Shareholder, require the
surrender of certificates to the Trust for cancellation. Such surrender and
cancellation shall not affect the ownership of Shares in the Trust.
Section 2. Transfer of Shares. The Shares of the Trust shall be transferable
only by a transfer recorded on the books of the Trust by the Shareholder of
record in person or by his or her duly authorized attorney or legal
representative. The Shares of the Trust may be freely transferred, and the
Board of Trustees may, from time to time, adopt rules and regulations regarding
the method of transfer of such Shares. Shares shall not be transferred on the
books of the Trust until all requirements of the Board, including the proper
tender of any outstanding certificates, if any, have been satisfied. The Trust
shall be entitled to treat the holder of record of any Share or Shares as the
absolute owner for all purposes, and shall not be bound to recognize any legal,
equitable or other claim or interest in such Share or Shares on the part of any
other person except as otherwise expressly provided by law.
Section 3. Lost, Stolen or Destroyed Certificates. If any Share certificate
should become lost, stolen or destroyed, a duplicate Share certificate may be
issued in place thereof, upon such terms and conditions as the Board of
Trustees may prescribe, including,
- 10 -
<PAGE> 12
but not limited to, requiring the owner of the lost, stolen or destroyed
certificate to give the Trust a bond or other indemnity, in such form and in
such amount as the Board of Trustees may direct and with such surety or
sureties as may be satisfactory to the Board sufficient to indemnify the Trust
against any claim that may be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate.
ARTICLE VII
CUSTODY OF SECURITIES
Section 1. Employment of a Custodian. The Trust shall at all times place and
maintain all cash, securities and other assets of the Trust and of each Series
in the custody of a custodian meeting the requirements set forth in Article
VII, section 4 of the Trust Instrument ("Custodian"). The Custodian shall be
appointed from time to time by the Board of Trustees, who shall determine its
remuneration.
Section 2. Termination of Custodian Agreement. Upon termination of any
Custodian Agreement or the inability of the Custodian to continue to serve as
custodian, in either case with respect to the Trust or any Series, the Board of
Trustees shall (a) use its best efforts to obtain a successor Custodian; and
(b) require that the cash, securities and other assets owned by the Trust or
any Series be delivered directly to the successor Custodian.
Section 3. Other Arrangements. The Trust may make such other arrangements for
the custody of its assets (including deposit arrangements) as may be required
by any applicable law, rule or regulation.
ARTICLE VIII
FISCAL YEAR AND ACCOUNTANT
Section 1. Fiscal Year. The fiscal year of the Trust shall, unless otherwise
ordered by the Board of Trustees, be twelve calendar months ending on the 30th
day of September.
Section 2. Accountant. The Trust shall employ independent certified public
accountants as its Accountant to examine the accounts of the Trust and to sign
and certify financial statements filed by the Trust. The Accountant shall be
appointed in accordance with the requirements of Section 32(a) of the 1940 Act
and the rules thereunder. The Accountant's certificates and reports shall be
addressed both to the Board of Trustees and to the Shareholders.
- 11 -
<PAGE> 13
ARTICLE IX
AMENDMENTS
Section 1. General. Except as provided in Section 2 of this Article, all
Bylaws of the Trust shall be subject to amendment, alteration or repeal, and
new Bylaws may be made by the affirmative vote of a majority of either: (1)
the Outstanding Shares of the Trust entitled to vote at any meeting; or (2) the
Trustees.
Section 2. By Shareholders Only. After the issue of any Shares of the Trust,
no amendment, alteration or repeal of this Article shall be made except by the
affirmative vote of the holders of either: (a) more than two-thirds of the
Trust's Outstanding Shares present at a meeting at which the holders of more
than fifty percent of the Outstanding Shares are present in person or by proxy,
or (b) more than fifty percent of the Trust's Outstanding Shares.
ARTICLE X
NET ASSET VALUE
Section 1. Determination of Net Asset Value. The term "Net Asset Value" of
any Series or Class shall mean that amount by which the assets belonging to
that Series or Class exceed its liabilities, all as determined by or under the
direction of the Board of Trustees. Such value per Share shall be determined
separately for each Series or Class and shall be determined on such days and at
such times as the Board of Trustees may determine. Such determination shall be
made with respect to securities for which market quotations are readily
available, at the market value of such securities; and with respect to other
securities and assets, at the fair value as determined in good faith by the
Board of Trustees, provided, however, that the Board, without Shareholder
approval, may alter the method of appraising portfolio securities insofar as
permitted under the 1940 Act and the rules, regulations and interpretations
thereof promulgated or issued by the Commission or insofar as permitted by any
order of the Commission applicable to a Series or Class. The Board of Trustees
may delegate any of its powers and duties under this Section 1 with respect to
appraisal of assets and liabilities. At any time the Board of Trustees may
cause the Net Asset Value per Share last determined to be determined again in a
similar manner and may fix the time when such redetermined values shall become
effective.
- 12 -
<PAGE> 14
ARTICLE XI
INVESTMENTS
Section 1. Investment Objectives, Policies and Restrictions. The Trust and/or
each Series shall adhere to the fundamental and non-fundamental investment
objectives, policies and restrictions applicable to the Trust and/or each
Series included in the Trust's current effective registration statement as
filed with the Commission. If a percentage limitation is adhered to at the
time of an investment, a later increase or decrease in the percentage resulting
from a change in the value of the assets of a Series shall not be a violation
of such investment restrictions.
Section 2. Amendment of Investment Objectives, Policies and Restrictions. Any
investment objectives, policies and restrictions of the Trust or any Series
which are deemed to be fundamental may not be changed without the approval of
the holders of a majority of the Outstanding Shares of the Trust or of the
Series affected which shall mean the lesser of (i) 67% of the Shares
represented at a meeting at which more than 50% of the Outstanding Shares are
present or represented by proxy or (ii) more than 50% of the Outstanding
Shares. Any investment objectives, policies or restrictions deemed
non-fundamental may be changed by vote of the Board of Trustees.
ARTICLE XII
MISCELLANEOUS
Section 1. Inspection of Books. The Board of Trustees shall from time to
time determine whether and to what extent, and at what times and places, and
under what conditions the accounts and books of the Trust or any Series or
Class shall be open to the inspection of Shareholders. No Shareholder shall
have any right to inspect any account or book or document of the Trust except
as conferred by law or otherwise by the Board of Trustees or by resolution of
Shareholders.
Section 2. Severability. The provisions of these Bylaws are severable. If
the Board of Trustees determine, with the advice of counsel, that any provision
hereof conflicts with the 1940 Act, the regulated investment company provisions
of the Internal Revenue Code or with other applicable laws and regulations, the
conflicting provision shall be deemed never to have constituted a part of these
Bylaws; provided, however, that such determination shall not affect any of the
remaining provisions of these Bylaws or render invalid or improper any action
taken or omitted prior to such determination. If any provision hereof shall be
held invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision only in such jurisdiction
and shall not affect any other provision of these Bylaws.
- 13 -
<PAGE> 15
Section 3. Headings. Headings are placed in these Bylaws for convenience of
reference only and in case of any conflict, the text of these Bylaws rather
than the headings shall control.
- 14 -
<PAGE> 1
EXHIBIT NO. 99.4
STOCK CERTIFICATE
<PAGE> 2
EXHIBIT 99.4
[SAFECO Symbol]
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
SAFECO INSURED MUNICIPAL BOND FUND
A SERIES OF SAFECO TAX-EXEMPT BOND TRUST
SEATTLE, WASHINGTON
CUSIP
SEE REVERSE FOR
CERTAIN DEFINITIONS
This is to certify that,
is the owner of of the fully paid
and non-assessable shares of beneficial interest of the SAFECO Insured
Municipal Bond Fund, a series of the SAFECO Tax-Exempt Bond Trust, with par
value of $.001, transferable on the books of the Trust in person or by duly
authorized attorney upon surrender of this certificate properly endorsed. This
certificate and the shares represented hereby are received and held subject to
the provisions of the Trust Instrument and the Bylaws of the Trust, as amended.
In Witness Whereof, SAFECO TAX-EXEMPT BOND TRUST has caused this certificate to
be signed by its duly authorized officers. This certificate is not valid until
countersigned by the Transfer Agent.
Dated: SAFECO TAX-EXEMPT BOND TRUST
ELNA A. THOMSON, SECRETARY DAVID F. HILL, PRESIDENT
SAFECO SERVICES CORPORATION
BY
TRANSFER AGENT
- ----------------------------------------------
AUTHORIZED SIGNATURE
[Corporate Seal containing following language:
SAFECO TAX-EXEMPT BOND TRUST/DELAWARE/BUSINESS TRUST/1993/SEAL]
<PAGE> 3
DEFINITIONS
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as through they were written out on full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN Act -..........Custodian.......
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gift to Minors
survivorship and not as tenants Act............................
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For Value received - hereby sell, assign and transfer unto
______________________________________________________________________________
______________________________________________________________________________
(NAME AND ADDRESS OF TRANSFEREE SHOULD BE PRINTED OR TYPEWRITTEN)
______________________________________________________________________________
___________________________________________________________________ Shares of
the Beneficial Interest represented by the within Certificate and do hereby
irrevocably constitute and appoint _________________________________ Attorney
to transfer the said shares on the books of the within named Trust, with full
power of substitution in the premises.
Dated_____________________
_______________________ _________________________________________________
Signature(s) Guaranteed Notice: The signature to this assignment must
correspond with the name(s) as written upon the
face of the certificate in every particular,
without alteration or enlargement, or any change
whatever.
<PAGE> 4
[SAFECO Symbol]
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
SAFECO INTERMEDIATE-TERM MUNICIPAL BOND FUND
A SERIES OF SAFECO TAX-EXEMPT BOND TRUST
SEATTLE, WASHINGTON
CUSIP
SEE REVERSE FOR
CERTAIN DEFINITIONS
This is to certify that,
is the owner of of the fully paid and non-assessable
shares of beneficial interest of the SAFECO Intermediate-Term Municipal Bond
Fund, a series of the SAFECO Tax-Exempt Bond Trust, with par value of $.001,
transferable on the books of the Trust in person or by duly authorized attorney
upon surrender of this certificate properly endorsed. This certificate and the
shares represented hereby are received and held subject to the provisions of
the Trust Instrument and the Bylaws of the Trust, as amended. In Witness
Whereof, SAFECO TAX-EXEMPT BOND TRUST has caused this certificate to be signed
by its duly authorized officers. This certificate is not valid until
countersigned by the Transfer Agent.
Dated: SAFECO TAX-EXEMPT BOND TRUST
ELNA A. THOMSON, SECRETARY DAVID F. HILL, PRESIDENT
SAFECO SERVICES CORPORATION
BY
TRANSFER AGENT
- ----------------------------------------------
AUTHORIZED SIGNATURE
[Corporate Seal containing following language: SAFECO TAX-EXEMPT BOND
TRUST/DELAWARE/BUSINESS TRUST/1993/SEAL]
<PAGE> 5
DEFINITIONS
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as through they were written out on full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN Act -..........Custodian.......
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gift to Minors
survivorship and not as tenants Act............................
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For Value received - hereby sell, assign and transfer unto
______________________________________________________________________________
______________________________________________________________________________
(NAME AND ADDRESS OF TRANSFEREE SHOULD BE PRINTED OR TYPEWRITTEN)
______________________________________________________________________________
___________________________________________________________________ Shares of
the Beneficial Interest represented by the within Certificate and do hereby
irrevocably constitute and appoint _________________________________ Attorney
to transfer the said shares on the books of the within named Trust, with full
power of substitution in the premises.
Dated_____________________
_______________________ _________________________________________________
Signature(s) Guaranteed Notice: The signature to this assignment must
correspond with the name(s) as written upon the
face of the certificate in every particular,
without alteration or enlargement, or any change
whatever.
<PAGE> 6
[SAFECO Symbol]
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
SAFECO MUNICIPAL BOND FUND
A SERIES OF SAFECO TAX-EXEMPT BOND TRUST
SEATTLE, WASHINGTON
CUSIP
SEE REVERSE FOR
CERTAIN DEFINITIONS
This is to certify that,
is the owner of of the fully paid and non-assessable
shares of beneficial interest of the SAFECO Municipal Bond Fund, a series of
the SAFECO Tax-Exempt Bond Trust, with par value of $.001, transferable on the
books of the Trust in person or by duly authorized attorney upon surrender of
this certificate properly endorsed. This certificate and the shares
represented hereby are received and held subject to the provisions of the Trust
Instrument and the Bylaws of the Trust, as amended. In Witness Whereof, SAFECO
TAX-EXEMPT BOND TRUST has caused this certificate to be signed by its duly
authorized officers. This certificate is not valid until countersigned by the
Transfer Agent.
Dated: SAFECO TAX-EXEMPT BOND TRUST
ELNA A. THOMSON, SECRETARY DAVID F. HILL, PRESIDENT
SAFECO SERVICES CORPORATION
BY
TRANSFER AGENT
- ----------------------------------------------
AUTHORIZED SIGNATURE
[Corporate Seal containing following language: SAFECO TAX-EXEMPT BOND
TRUST/DELAWARE/BUSINESS TRUST/1993/SEAL]
<PAGE> 7
DEFINITIONS
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as through they were written out on full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN Act -..........Custodian.......
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gift to Minors
survivorship and not as tenants Act............................
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For Value received - hereby sell, assign and transfer unto
______________________________________________________________________________
______________________________________________________________________________
(NAME AND ADDRESS OF TRANSFEREE SHOULD BE PRINTED OR TYPEWRITTEN)
______________________________________________________________________________
___________________________________________________________________ Shares of
the Beneficial Interest represented by the within Certificate and do hereby
irrevocably constitute and appoint _________________________________ Attorney
to transfer the said shares on the books of the within named Trust, with full
power of substitution in the premises.
Dated_____________________
_______________________ _________________________________________________
Signature(s) Guaranteed Notice: The signature to this assignment must
correspond with the name(s) as written upon the
face of the certificate in every particular,
without alteration or enlargement, or any change
whatever.
<PAGE> 8
[SAFECO Symbol]
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
SAFECO WASHINGTON STATE MUNICIPAL BOND FUND
A SERIES OF SAFECO TAX-EXEMPT BOND TRUST
SEATTLE, WASHINGTON
CUSIP
SEE REVERSE FOR
CERTAIN DEFINITIONS
This is to certify that,
is the owner of of the fully paid and non-assessable
shares of beneficial interest of the SAFECO Washington State Municipal Bond
Fund, a series of the SAFECO Tax-Exempt Bond Trust, with par value of $.001,
transferable on the books of the Trust in person or by duly authorized attorney
upon surrender of this certificate properly endorsed. This certificate and the
shares represented hereby are received and held subject to the provisions of
the Trust Instrument and the Bylaws of the Trust, as amended. In Witness
Whereof, SAFECO TAX-EXEMPT BOND TRUST has caused this certificate to be signed
by its duly authorized officers. This certificate is not valid until
countersigned by the Transfer Agent.
Dated: SAFECO TAX-EXEMPT BOND TRUST
ELNA A. THOMSON, SECRETARY DAVID F. HILL, PRESIDENT
SAFECO SERVICES CORPORATION
BY
TRANSFER AGENT
- ----------------------------------------------
AUTHORIZED SIGNATURE
[Corporate Seal containing following language: SAFECO TAX-EXEMPT BOND
TRUST/DELAWARE/BUSINESS TRUST/1993/SEAL]
<PAGE> 9
DEFINITIONS
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as through they were written out on full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN Act -..........Custodian.......
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gift to Minors
survivorship and not as tenants Act............................
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For Value received - hereby sell, assign and transfer unto
______________________________________________________________________________
______________________________________________________________________________
(NAME AND ADDRESS OF TRANSFEREE SHOULD BE PRINTED OR TYPEWRITTEN)
______________________________________________________________________________
___________________________________________________________________ Shares of
the Beneficial Interest represented by the within Certificate and do hereby
irrevocably constitute and appoint _________________________________ Attorney
to transfer the said shares on the books of the within named Trust, with full
power of substitution in the premises.
Dated_____________________
_______________________ _________________________________________________
Signature(s) Guaranteed Notice: The signature to this assignment must
correspond with the name(s) as written upon the
face of the certificate in every particular,
without alteration or enlargement, or any change
whatever.
<PAGE> 10
[SAFECO Symbol]
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
SAFECO CALIFORNIA TAX-FREE INCOME FUND
A SERIES OF SAFECO TAX-EXEMPT BOND TRUST
SEATTLE, WASHINGTON
CUSIP
SEE REVERSE FOR
CERTAIN DEFINITIONS
This is to certify that,
is the owner of of the fully paid and non-assessable
shares of beneficial interest of the SAFECO California Tax-Free Income Fund, a
series of the SAFECO Tax-Exempt Bond Trust, with par value of $.001,
transferable on the books of the Trust in person or by duly authorized attorney
upon surrender of this certificate properly endorsed. This certificate and the
shares represented hereby are received and held subject to the provisions of
the Trust Instrument and the Bylaws of the Trust, as amended. In Witness
Whereof, SAFECO TAX-EXEMPT BOND TRUST has caused this certificate to be signed
by its duly authorized officers. This certificate is not valid until
countersigned by the Transfer Agent.
Dated: SAFECO TAX-EXEMPT BOND TRUST
ELNA A. THOMSON, SECRETARY DAVID F. HILL, PRESIDENT
SAFECO SERVICES CORPORATION
BY
TRANSFER AGENT
- ----------------------------------------------
AUTHORIZED SIGNATURE
[Corporate Seal containing following language: SAFECO TAX-EXEMPT BOND
TRUST/DELAWARE/BUSINESS TRUST/1993/SEAL]
<PAGE> 11
DEFINITIONS
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as through they were written out on full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN Act -..........Custodian.......
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gift to Minors
survivorship and not as tenants Act............................
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For Value received - hereby sell, assign and transfer unto
______________________________________________________________________________
______________________________________________________________________________
(NAME AND ADDRESS OF TRANSFEREE SHOULD BE PRINTED OR TYPEWRITTEN)
______________________________________________________________________________
___________________________________________________________________ Shares of
the Beneficial Interest represented by the within Certificate and do hereby
irrevocably constitute and appoint _________________________________ Attorney
to transfer the said shares on the books of the within named Trust, with full
power of substitution in the premises.
Dated_____________________
_______________________ _________________________________________________
Signature(s) Guaranteed Notice: The signature to this assignment must
correspond with the name(s) as written upon the
face of the certificatein every particular,
without alteration or enlargement, or any change
whatever.
<PAGE> 1
EXHIBIT NO. 99.5
INVESTMENT ADVISORY AND MANAGEMENT CONTRACT
<PAGE> 2
EXHIBIT 99.5
INVESTMENT ADVISORY AND MANAGEMENT CONTRACT
THIS AGREEMENT is made and executed this 30th day of September, 1993, between
SAFECO TAX-EXEMPT BOND TRUST ("Trust"), a Delaware business trust and SAFECO
ASSET MANAGEMENT COMPANY ("Manager"), a Washington corporation.
WHEREAS, the Trust is registered with the Securities & Exchange
Commission as a series type, open-end, management investment company under the
Investment Company Act of 1940, as amended ("1940 Act"), and has caused its
shares of beneficial interest to be registered for sale to the public under the
Securities Act of 1933 (the "1933 Act") and various state securities laws; and
WHEREAS, the Trust intends to offer for public sale distinct series
of shares of beneficial interest ("Series"), each Series corresponding to a
distinct portfolio; and
WHEREAS, the Trust wishes to retain the Manager to provide investment
advisory, management, and administrative services to the Trust and each Series
as now exists and as hereafter may be established which are listed in Exhibit A
to this Agreement as amended from time to time; and
WHEREAS, the Manager is willing to furnish such services on the terms
and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the promises and mutual covenants
hereinafter contained, it is agreed as follows:
1. Appointment of Manager. The Trust hereby appoints the Manager
as investment adviser and manager of each Series to administer its affairs,
subject to the supervision of the Trust's Board of Trustees, for the period and
on the terms set forth in this Agreement. The Manager hereby accepts such
appointment and agrees to render the services required by this Agreement for
the compensation and upon such other terms and conditions as are set forth in
this Agreement. The Manager shall for all purposes herein be deemed an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Trust in any way or
otherwise be deemed an agent of the Trust.
2. Duties of Series. Each Series shall at all times keep the
Manager fully informed with regard to the securities owned by it, its funds
available or to become available for investment,
<PAGE> 3
and generally as to the condition of its affairs. It shall furnish the Manager
with such other documents and information with regard to its affairs as the
Manager may from time to time reasonably request.
3. Duties of Manager.
(a) General. The Manager shall furnish to the Trust space in the
offices of the Manager or in such other place as may be agreed upon from time
to time and all necessary office facilities, equipment and personnel for
managing the affairs and investments and keeping the books of the Trust.
Subject to the supervision of the Trust's Board of Trustees, the Manager shall
regularly provide each Series with investment research, advice, management and
supervision and shall furnish a continuous investment program for each Series'
portfolio of securities consistent with each Series' investment objectives and
policies. The Manager shall determine from time to time what securities will
be purchased, retained or sold by each Series, and shall implement those
decisions, all subject to the provisions of the Trust's Trust Instrument and
Bylaws, the 1940 Act, the applicable rules and regulations of the Securities
and Exchange Commission, and other applicable federal and state law, as well as
the investment objectives and policies of each Series. The Manager will place
orders pursuant to its investment determinations for each Series either
directly with the issuer or with any broker or dealer. In placing orders with
brokers and dealers the Manager will attempt to obtain the best net price and
the most favorable execution of its orders. The Manager shall also provide
advice and recommendations with respect to other aspects of the business and
affairs of the Trust and each Series, and shall perform such other functions of
management and supervision as may be directed by the Board of Trustees of the
Trust.
(b) Reports and Records. The Manager, at its expense, shall supply
the Trust's Board of Trustees and officers with all statistical information and
reports reasonably requested by them and reasonably available to the Manager.
The Manager shall oversee the maintenance of all books and records with respect
to the Trust's and each Series' securities transactions and the keeping of the
Trust's and each Series' books of account in accordance with all applicable
federal and state laws and regulations. In compliance with the requirements of
Rule 31a-3 under the 1940 Act, the Manager hereby agrees that any records which
it maintains for the Trust or any Series are the property of the Trust, and
further agrees to surrender promptly to the Trust any of such records upon the
Trust's request. The Manager further agrees to arrange for the preservation of
the records required to be maintained by Rule 31a-1 under the 1940 Act for
2
<PAGE> 4
the periods prescribed by Rule 31a-2 under the 1940 Act. The Manager shall
authorize and permit any of its directors, officers and employees, who may be
elected as directors or officers of the Trust, to serve in the capacities in
which they are elected.
4. Allocation of Expenses.
(a) (1) Manager shall pay the organizational expenses of the
Trust, which the Trust shall reimburse to Manager over a sixty-month period
commencing after the date of the Trust's initial public offering of its shares.
If the Trust shall not be obligated to reimburse the Manager for aggregate
organizational expenses of a Series in excess of a specified amount, such
amount shall be set forth in Exhibit A as amended from time to time. (2) The
Manager shall be responsible for the compensation (if any) paid to officers of
the Trust for serving in that capacity; the expenses of computing the net asset
value per share of the Trust and each Series; federal and state registration
fees for the Trust and each Series, other than the initial fees to be
reimbursed pursuant to Section 4(a)(1); all expenses of preparing, printing and
distributing advertising and sales literature for the Trust and each Series;
and the cost of fidelity bond and other insurance for the Trust and each
Series.
(b) The Trust and each Series shall bear all expenses of their
organization, operations and business not specifically assumed or agreed to be
paid by the Manager as provided in this Agreement. In particular, but without
limiting the generality of the foregoing, the Trust and each Series shall pay:
(1) Custody and Accounting Services. All expenses of the
transfer, receipt, safekeeping, servicing and accounting for the cash,
securities, and other property of the Trust and each Series, including
all charges of depositories, custodians, and other agents, if any;
(2) Shareholder Servicing. All expenses of maintaining and
servicing shareholder accounts, including all charges of the transfer,
shareholder recordkeeping, dividend disbursing, redemption, and other
agents of the Trust and each Series, if any;
(3) Shareholder Communications. All expenses of preparing,
printing, and distributing reports and certain other communications to
shareholders of the Trust and each Series;
3
<PAGE> 5
(4) Shareholder Meetings. All expenses incidental to holding
meetings of shareholders of the Trust and each Series, including the
printing of notices and proxy materials and the expenses of any proxy
solicitation;
(5) Prospectuses And Statements of Additional Information. All
expenses of preparing, printing and mailing to shareholders of annual
or more frequent revisions of the Prospectus and Statement of
Additional Information for the Trust and each Series;
(6) Communication Equipment. All charges for equipment or
services used for communication between the Manager, the Trust or each
Series and the custodian, transfer agent or any other agent selected
by the Trust;
(7) Legal and Accounting Fees and Expenses. All charges for services
and expenses of the Trust's legal counsel and independent auditors;
(8) Trustees' Fees and Expenses. All compensation of trustees,
other than those affiliated with the Manager, and all expenses
incurred in connection with their service;
(9) Issue and Redemption of Fund Shares. All expenses incurred in
connection with the issue, redemption, and transfer of shares of the
Trust and each Series, including the expense of confirming all share
transactions, and of preparing and transmitting the Trust's stock
certificates, if certificates are issued;
(10) Brokerage Commissions. All brokers' commissions and other
charges incident to the purchase, sale, or lending of portfolio
securities of the Trust and Series;
(11) Taxes. All taxes or governmental fees payable by or with
respect to the Trust and each Series to federal, state, or other
governmental agencies, domestic or foreign, including stamp or other
transfer taxes;
(12) Nonrecurring and Extraordinary Expenses. Such nonrecurring
expenses as may arise, including the costs of actions, suits, or
proceedings to which the Trust or any Series is a party and the
expenses the Trust or any Series may incur as a result of its legal
obligation to provide indemnification to its trustees, officers, and
agents.
4
<PAGE> 6
5. Non-Exclusive Services. The services of the Manager to the
Trust and each Series hereunder are not to be deemed exclusive, and the Manager
shall be free to render similar services to others so long as its services
hereunder are not impaired thereby.
6. Compensation for Services.
(a) For the services and facilities to be furnished by the Manager,
each existing Series shall pay the Manager an annual fee computed on the basis
of the average net asset value of the Series as ascertained each business day
and paid monthly in accordance with the schedule set forth in Exhibit A to this
Agreement. For purposes of computing the annual fee, the net asset value of
the Series shall be equal to the difference between its total assets and its
total liabilities (excluding from such liabilities its capital stock and
surplus) with its assets and its liabilities to be valued in accordance with
the procedures set forth in the Trust's Registration Statement.
(b) For the services and facilities to be furnished by the
Manager, any new Series of the Trust which is issued on a future date will pay
the Manager a fee according to a Schedule which will be set forth in an amended
Exhibit A to this Agreement.
(c) If SAFECO Securities, Inc., receives portfolio brokerage
commissions resulting from transactions in the portfolio of any Series
("commissions"), any management fee earned by Manager will be reduced by the
amount of such commissions so received by SAFECO Securities, Inc.
(d) The Trust and the Manager may mutually agree to reduce the
fees payable by any Series if the reduction is in the best long- range interest
of the Trust and the Manager.
(e) If the Manager shall serve for less than the whole of any
month, the monthly management fee payable by each Series shall be prorated.
7. Reimbursements by Manager. The Manager agrees to reimburse a
Series for the amount by which the Series' expenses in any full fiscal year
(excluding taxes and interest expense, brokerage expenses and extraordinary
expenses) exceed the limits prescribed by any state in which the Series shares
are qualified for sale. For the purpose of this calculation, the costs of
acquiring and disposing of portfolio securities shall be charged to the cost of
or amount realized from such securities and shall not be deemed expenses of the
Series. For purposes of
5
<PAGE> 7
determining whether the Series is entitled to reimbursement, the expenses of
the Series are calculated on a monthly basis. If a Series is entitled to a
reimbursement, that month's advisory fee will be reduced or postponed, with any
adjustments made at the end of the fiscal year.
8. Liability of Manager. The Manager assumes no responsibility
under this Agreement other than to render the services called for hereunder, in
good faith, and shall not be responsible for any action of the Trust's Board of
Trustees in following or declining to follow any advice or recommendations of
the Manager; provided, that nothing in this Agreement shall protect the Manager
against any liability to the Trust or its shareholders to which it would
otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties hereunder.
9. Books and Records. The Trust shall cause its books and
accounts to be audited at least once each year by a reputable, independent
public accountant or organization of public accountants who shall render a
report to the Trust.
10. Affiliation.
(a) It is understood that trustees, officers, shareholders and agents
of the Trust and each Series are or may be interested in the Manager (or any
successor thereof) as directors, officers, shareholders or otherwise, and that
the Manager (or any such successor) is or may be interested in the Trust as a
shareholder or otherwise.
(b) No trustee, officer or employee of the Trust and each Series
shall receive from the Trust any salary or other compensation as such director,
officer or employee while he or she is at the same time a director, officer, or
employee of the Manager or any affiliated company of the Manager. This
paragraph shall not apply to directors or other persons who are not regular
members of the Manager's or any affiliated company's staff.
11. Unrestricted Activities. Nothing in this Agreement shall
limit or restrict the right of any director, officer, or employee of the
Manager who may also be a trustee, officer, or employee of the Trust or any
Series, to engage in any other business or to devote his or her time and
attention in part to the management or other aspects of any other business,
whether of a similar nature or a dissimilar nature, or limit or restrict the
right of the Manager to engage in any other business or to render services of
any kind, including investment advisory and
6
<PAGE> 8
management services, to any other corporation, firm, individual or association.
12. Use of Name. In the event this Agreement is terminated by
either party or upon written notice from the Manager at any time, the Trust
hereby agrees that it will eliminate from its corporate name any reference to
the name of "SAFECO." The Trust shall have the non- exclusive use of the name
"SAFECO" in whole or in part only so long as this Agreement is effective or
until such notice is given. Notwithstanding the foregoing and in the event
that this Agreement is terminated by either party, the Manager may elect to
permit the Trust to continue to use the name "SAFECO" under such terms and
conditions as the Manager shall set forth in writing.
13. Effectiveness Date/Renewal. This Agreement will become
effective with respect to each Series on the date first written above or such
later date as indicated on Exhibit A, provided that it shall have been approved
by the Trust's Board of Trustees and by the shareholders of that Series in
accordance with the requirements of the 1940 Act and, unless sooner terminated
as provided herein, will continue in effect for two years from the above
written date. Thereafter, if not terminated, this Agreement shall continue in
effect with respect to each Series for successive annual periods ending on the
same date of each year, provided that such continuance is specifically approved
at least annually (i) by the Trust's Board of Trustees or (ii) with respect to
any Series, by a vote of a majority of the outstanding voting securities of
that Series, provided that in either event the continuance is also approved by
a majority of the Trust's trustees who are neither interested persons (as
defined in the 1940 Act) of the Trust or the Manager by vote cast at a meeting
called for the purpose of voting on such continuance.
14. Amendment. This Agreement may be amended by the parties only
if the terms of the amendment are approved by either (i) a majority of the
Trust's Board of Trustees or, (ii) with respect to any given Series, by a vote
of a majority of the outstanding voting securities of that Series at a duly
called meeting of the shareholders. In either case, the majority of the
trustees, who are neither interested persons of the Trust or the Manager, must
approve the amendment.
15. Termination. This Agreement is terminable with respect to any
Series or in its entirety without penalty by the Trust's Board of Trustees, by
vote of a majority of the outstanding voting securities of each affected Series
(as defined in the 1940 Act), or by the Manager, on not less than 60 days'
notice to the other party and will be terminated upon the mutual
7
<PAGE> 9
written consent of the Manager and the Trust. This Agreement shall terminate
automatically in the event of its assignment by the Manager and shall not be
assignable by the Trust without the consent of the Manager.
16. Limitation of Liability. Manager is hereby expressly put on
notice of (i) the limitation of shareholder, officer and trustee liability as
set forth in the Trust Instrument of the Trust and (ii) of the provisions in
the Trust Instrument permitting the establishment of separate Series and
limiting the liability of each Series to obligations of that Series. Manager
hereby agrees that obligations assumed by the Trust pursuant to this Agreement
are in all cases assumed on behalf of a particular Series and each such
obligation shall be limited in all cases to that Series and its assets.
Manager agrees that it shall not seek satisfaction of any such obligation from
the shareholders or any individual shareholder of the Trust nor from the
officers or trustees of any individual officer or trustee of the Trust.
17. Defined Terms. For the purpose of this Agreement, the terms
"vote of a majority of the outstanding voting securities," "assignment," and
"interested persons," shall have the respective meanings specified in the
Investment Company Act of 1940 when such terms are used in reference to the
Trust and the Series.
18. Entire Agreement/Enforcement of Rights. This Agreement embodies
the entire agreement between the Manager and the Trust with respect to the
services to be provided by the Manager to the Trust and each Series and
supersedes any prior written or oral agreement between those parties. In the
event that either party should be required to take legal action in order to
enforce its rights under this Agreement, the prevailing party in any such
action or proceeding shall be entitled to recover from the other party costs
and reasonable attorneys' fees.
19. Miscellaneous. The captions in this Agreement are included
for convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed in counterparts, each of which taken together shall
constitute one and the same instrument. Manager understands that the rights
and obligations of each Series under the Trust Instrument are separate and
distinct from those of any and all other Series.
19. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Washington and, to the
extent it involves any United States statute, in accordance with the laws of
the United States.
8
<PAGE> 10
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
ATTEST: SAFECO TAX-EXEMPT BOND TRUST
/s/ ELNA A. THOMSON By /s/ DAVID F. HILL
- ------------------------------- -------------------------------
Elna A. Thomson David F. Hill
Secretary President
ATTEST: SAFECO ASSET MANAGEMENT COMPANY
/s/ ELNA A. THOMSON By /s/ RICHARD W. HUBBARD
- ------------------------------- -------------------------------
Elna A. Thomson Richard W. Hubbard
Secretary President
9
<PAGE> 11
EXHIBIT A
SAFECO TAX-EXEMPT BOND TRUST
SAFECO INTERMEDIATE-TERM MUNICIPAL BOND FUND
FEE SCHEDULE
<TABLE>
<CAPTION>
Net Assets Annual Fee
---------- ----------
<S> <C>
For assets up to and including $250,000,000 .55 of 1%
For assets in excess of $250,000,000 and
up to and including $500,000,000 .45 of 1%
For assets in excess of $500,000,000 and
up to and including $750,000,000 .35 of 1%
For assets over $750,000,000 .25 of 1%
</TABLE>
ORGANIZATIONAL EXPENSES
The Trust shall not be obligated to reimburse the Manager for aggregate
organizational expenses in excess of $20,000 for the SAFECO Intermediate-Term
Municipal Bond Fund.
SAFECO Asset Management Company SAFECO Tax-Exempt Bond Trust
on behalf of
SAFECO Intermediate-Term
Municipal Bond Fund
By: /s/ RICHARD W. HUBBARD By: /s/ DAVID F. HILL
--------------------------- ---------------------------
Its: President Its: President
Attest: /s/ ELNA A. THOMSON Attest: /s/ ELNA A. THOMSON
----------------------- -----------------------
Secretary Secretary
As of 9-30-93
10
<PAGE> 12
EXHIBIT A
SAFECO TAX-EXEMPT BOND TRUST
SAFECO INSURED MUNICIPAL BOND FUND
FEE SCHEDULE
<TABLE>
<CAPTION>
Net Assets Annual Fee
---------- ----------
<S> <C>
For assets up to and including $250,000,000 .65 of 1%
For assets in excess of $250,000,000 and
up to and including $500,000,000 .55 of 1%
For assets in excess of $500,000,000 and
up to and including $750,000,000 .45 of 1%
For assets over $750,000,000 .35 of 1%
</TABLE>
ORGANIZATIONAL EXPENSES
The Trust shall not be obligated to reimburse the Manager for aggregate
organizational expenses in excess of $20,000 for the SAFECO Insured Municipal
Bond Fund.
SAFECO Asset Management Company SAFECO Tax-Exempt Bond Trust
on behalf of
SAFECO Insured Municipal
Bond Fund
By: /s/ RICHARD W. HUBBARD By: /s/ DAVID F. HILL
--------------------------- ----------------------------
Its: President Its: President
Attest: /s/ ELNA A. THOMSON Attest: /s/ ELNA A. THOMSON
----------------------- ------------------------
Secretary Secretary
As of 9-30-93
11
<PAGE> 13
EXHIBIT A
SAFECO TAX-EXEMPT BOND TRUST
SAFECO MUNICIPAL BOND FUND
FEE SCHEDULE
<TABLE>
<CAPTION>
Net Assets Annual Fee
---------- ----------
<S> <C>
For assets up to and including $100,000,000 .55 of 1%
For assets in excess of $100,000,000 and
up to and including $250,000,000 .45 of 1%
For assets in excess of $250,000,000 and
up to and including $500,000,000 .35 of 1%
For assets over $500,000,000 .25 of 1%
</TABLE>
ORGANIZATIONAL EXPENSES
Not applicable.
SAFECO Asset Management Company SAFECO Tax-Exempt Bond Trust
on behalf of
SAFECO Municipal Bond Fund
By: /s/ RICHARD W. HUBBARD By: /s/ DAVID F. HILL
--------------------------- ---------------------------
Its: President Its: President
Attest: /s/ ELNA A. THOMSON Attest: /s/ ELNA A. THOMSON
----------------------- ------------------------
Secretary Secretary
As of 9-30-93
12
<PAGE> 14
EXHIBIT A
SAFECO TAX-EXEMPT BOND TRUST
SAFECO CALIFORNIA TAX-FREE INCOME FUND
FEE SCHEDULE
<TABLE>
<CAPTION>
Net Assets Annual Fee
---------- ----------
<S> <C>
For assets up to and including $100,000,000 .55 of 1%
For assets in excess of $100,000,000 and
up to and including $250,000,000 .45 of 1%
For assets in excess of $250,000,000 and
up to and including $500,000,000 .35 of 1%
For assets over $500,000,000 .25 of 1%
</TABLE>
ORGANIZATIONAL EXPENSES
Not applicable.
SAFECO Asset Management Company SAFECO Tax-Exempt Bond Trust
on behalf of
SAFECO California
Tax-Free Income Fund
By: /s/ RICHARD W. HUBBARD By: /s/ DAVID F. HILL
---------------------------- ---------------------------
Its: President Its: President
Attest: /s/ ELNA A. THOMSON Attest: /s/ ELNA A. THOMSON
----------------------- -----------------------
Secretary Secretary
As of 9-30-93
13
<PAGE> 15
EXHIBIT A
SAFECO TAX-EXEMPT BOND TRUST
SAFECO WASHINGTON STATE MUNICIPAL BOND FUND
FEE SCHEDULE
<TABLE>
<CAPTION>
Net Assets Annual Fee
---------- ----------
<S> <C>
For assets up to and including $250,000,000 .65 of 1%
For assets in excess of $250,000,000 and
up to and including $500,000,000 .55 of 1%
For assets in excess of $500,000,000 and
up to and including $750,000,000 .45 of 1%
For assets over $750,000,000 .35 of 1%
</TABLE>
ORGANIZATIONAL EXPENSES
The Trust shall not be obligated to reimburse the Manager for aggregate
organizational expenses in excess of $20,000 for the SAFECO Washington State
Municipal Bond Fund.
SAFECO Asset Management Company SAFECO Tax-Exempt Bond Trust
on behalf of
SAFECO Washington
Municipal Bond Fund
By: /s/ RICHARD W. HUBBARD By: /s/ DAVID F. HILL
---------------------------- ---------------------------
Its: President Its: President
Attest: /s/ ELNA A. THOMSON Attest: /s/ ELNA A. THOMSON
----------------------- -----------------------
Secretary Secretary
As of 9-30-93
14
<PAGE> 1
EXHIBIT NO. 99.6
DISTRIBUTION AGREEMENT
<PAGE> 2
EXHIBIT 99.6
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT, made this 30th day of September, 1993, by and
between SAFECO TAX-EXEMPT BOND TRUST, a Delaware business trust ("Trust"), and
SAFECO SECURITIES, INC. a Washington corporation (the "Distributor").
WHEREAS, the Trust is registered with the Securities and Exchange Commission
as a series type open-end investment company under the Investment Company Act
of 1940, as amended (the "1940 Act") and has caused its shares of beneficial
interest to be registered for sale to the public under the Securities Act of
1933 (the "1933 Act") and various state securities laws; and
WHEREAS, the Trust intends to offer for public sale distinct series of shares
of beneficial interest, each corresponding to a distinct portfolio ("Series");
and
WHEREAS, the Trust wishes to retain the Distributor as the principal
underwriter in connection with the offering and sale of the shares of
beneficial interest of each Series as now exists and as hereafter may be
established which are listed on Exhibit A to this Agreement as amended from
time to time ("Shares") and to furnish certain other services to the Trust as
specified in this Agreement; and
WHEREAS, this Agreement has been approved by a vote of the Trust's Board of
Trustees, and certain trustees who are not interested persons in conformity
with Section 15(c) under the 1940 Act; and
WHEREAS, the Distributor is willing to act as principal underwriter and to
furnish such services on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed as follows:
1. Appointment of Distributor. The Trust hereby appoints the Distributor as
principal underwriter in connection with the offering and sale of Shares of
each Series. The Trust authorizes the Distributor, as exclusive agent for the
Trust, upon the commencement of operations of any Series and subject to
applicable federal and state law and the Trust Instrument and Bylaws of the
Trust: (a) to promote the Series; (b) to solicit orders for the purchase of
the Shares of the Series subject to such terms and conditions as the Trust may
specify; and (c) to accept orders for the purchase of the Shares of the Series
on behalf of the Trust. The Distributor shall comply with all applicable
federal and state laws and offer the Shares of each Series on an agency or
"best efforts" basis under which the Trust shall issue only such Shares as are
actually sold. The Distributor shall have the right to use any list of
shareholders
<PAGE> 3
of the Trust or any Series or any other list of investors which it
obtains in connection with its provision of services under this Agreement;
provided, however, that the Distributor shall not sell or knowingly provide
such list or lists to any unaffiliated person without the consent of the
Trust's Board of Trustees.
2. Duties of Trust. The Trust agrees to register the Shares with the
Securities and Exchange Commission, state and other regulatory bodies, and to
prepare and file from time to time such Prospectuses, Statements of Additional
Information, amendments, reports and other documents as may be necessary to
maintain the Registration Statement. Each Series shall bear all expenses
related to preparing and typesetting such Prospectuses, Statements of
Additional Information and other materials required by law and such other
expenses, including printing and mailing expenses, related to such Series'
communications with persons who are shareholders of that Series.
3. Duties of Distributor. The Distributor shall print and distribute to
prospective investors Prospectuses, and shall print and distribute, upon
request, to prospective investors Statements of Additional Information, and may
print and distribute such other sales literature, reports, forms and
advertisements in connection with the sale of the Shares as comply with the
applicable provisions of federal and state law. In connection with such sales
and offers of sale, the Distributor shall give only such information and make
only such statements or representations as are contained in the Prospectus,
Statement of Additional Information, or in information furnished in writing to
the Distributor by the Trust, and the Trust shall not be responsible in any way
for any other information, statements or representations given or made by the
Distributor or its representatives or agents. Except as specifically provided
in this Agreement, the Trust shall bear none of the expenses of the Distributor
in connection with its offer and sale of the Shares.
4. Other Broker Dealers. The Distributor may enter into dealer agreements
with registered and qualified securities dealers for the sale of the Shares.
The form of any such dealer agreement shall be mutually agreed upon and
approved by the Trust and the Distributor.
5. Public Offering Price. The public offering price of the Shares of each
Series shall be the net asset value per share (as determined by the Trust) of
the outstanding Shares of the Series, if any, as described in the Registration
Statement. The Trust shall furnish the Distributor with a statement of each
computation of public offering price and of the details entering into such
computation.
- 2 -
<PAGE> 4
6. Repurchase of Shares. The Distributor may at its sole discretion
repurchase Shares offered for sale by the shareholders. Repurchase of Shares
by the Distributor shall be at the net asset value next determined after a
repurchase order has been received. The Distributor will receive no commission
or other remuneration for repurchasing Shares. At the end of each business
day, the Distributor shall notify by any appropriate means, the Trust and
SAFECO Services Corporation, the Trust's transfer agent, of the orders for
repurchase of Shares received by the Distributor since the last such report,
the amount to be paid for such Shares, and the identity of the shareholders
offering Shares for repurchase. Upon such notice, the Trust shall pay the
Distributor such amounts as are required by the Distributor for the repurchase
of such Shares in cash or in the form of a credit against moneys due the Trust
from the Distributor as proceeds from the sale of Shares. The Trust reserves
the right to suspend such repurchase right upon written notice to the
Distributor. The Distributor further agrees to act as agent for the Trust to
receive and transmit promptly to the Trust's transfer agent shareholder
requests for redemption of Shares.
7. Indemnification.
(a) The Distributor shall be entitled to receive and act on the advice of
counsel for the Trust which advice shall be at the expense of the Trust and
shall be without liability for any action taken, or things done, or omitted to
be done, pursuant to such advice.
(b) The Trust agrees to indemnify, defend and hold the Distributor, its
several directors, officers and employees, and any person who controls the
Distributor within the meaning of Section 15 of the 1933 Act, free and harmless
from and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which the
Distributor, its directors, officers or employees, or any such controlling
person may incur, under the 1933 Act or under common law or otherwise, arising
out of or based upon any alleged untrue statement of a material fact contained
in the Registration Statement or arising out of or based upon any alleged
omission to state a material fact required to be stated or necessary to make
the Registration Statement not misleading, provided that in no event shall
anything contained in this Agreement be construed so as to protect the
Distributor against any liability to the Trust or its shareholders to which the
Distributor would otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties, or by reason of
its reckless disregard of its obligations and duties under this Agreement, and
further provided
- 3 -
<PAGE> 5
that the Trust shall not indemnify the Distributor for conduct set forth in
this subparagraph 7(b).
(c) The Distributor agrees to indemnify, defend and hold the Trust, its
several trustees, officers and employees and any person who controls the Trust
within the meaning of Section 15 of the 1933 Act, free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Trust, its trustees,
officers or employees or any such controlling person may incur, under the 1933
Act or under common law or otherwise, arising out of or based upon any alleged
untrue statement of a material fact contained in information furnished in
writing by the Distributor to the Trust for use in the Registration Statement
or arising out of or based upon any alleged omission to state a material fact
in connection with such information required to be stated in the Registration
Statement or necessary to make such information not misleading. As used in
this subparagraph 7(c), the term "employee" shall not include a corporate
entity under contract to provide services to the Trust or any Series, or any
employee of such a corporate entity, unless such person is otherwise an
employee of the Trust.
8. Certificates. The Trust shall not be required to issue certificates
representing Shares. If the Trust elects to issue certificates and a
shareholder request for certificates is transmitted through the Distributor,
the Trust will cause certificates evidencing the Shares owned to be issued in
such names and denominations as the Distributor shall from time to time direct,
provided that no certificates shall be issued for fractional Shares.
9. Withdrawal of Offering. The Trust reserves the right at any time to
withdraw all offerings of the Shares of any or all Series by written notice to
the Distributor at its principal office.
10. Independent Contractor Status. The Distributor is an independent
contractor and shall be agent for the Trust only in respect to the sale and
redemption of the Shares.
11. Non-Exclusive Services. The services of the Distributor to the Trust
under this Agreement are not to be deemed exclusive, and the Distributor shall
be free to render similar services or other services to others so long as its
services hereunder are not impaired thereby.
12. Use of Name. In the event this Agreement is terminated by either party
or upon written notice from the Distributor at any time, the Trust hereby
agrees that it will eliminate from its corporate name any reference to the name
of "SAFECO." The Trust
- 4 -
<PAGE> 6
shall have the non-exclusive use of the name "SAFECO" in whole or in part only
so long as this Agreement is effective or until such notice is given.
Notwithstanding this subparagraph and in the event this Agreement is terminated
by either party, the Distributor may elect to permit the Trust to continue to
use the name "SAFECO" under such terms and conditions as the Distributor shall
set forth in writing.
13. Effective Date/Renewal. This Agreement will become effective with
respect to each Series on the date first written above or such later date as
indicated on Exhibit A and, unless sooner terminated as provided herein, will
continue in effect for two years from the above written date. Thereafter, if
not terminated, this Agreement shall continue in effect with respect to each
Series for successive annual periods ending on the same date of each year,
provided that such continuance is specifically approved at least annually (i)
by the Trust's Board of Trustees or (ii) with respect to any given Series, by a
vote of a majority of the outstanding voting securities of that Series (as
defined in the 1940 Act), provided that in either event the continuance is also
approved by majority of the Trust's trustees who are neither interested persons
(as defined in the 1940 Act) of the Trust or the Distributor by vote cast at a
meeting called for the purpose of voting on such continuance.
14. Amendment. This Agreement may be amended by the parties only if the
terms of the amendment are either (i) approved by the Trust's Board of Trustees
or, (ii) with respect to any given Series, by a vote of a majority of the
outstanding voting securities of that Series at a duly called meeting of the
shareholders. In either case, the majority of the trustees, who are neither
interested persons of the Trust or the Distributor, must approve the amendment.
15. Termination. This Agreement is terminable with respect to any Series or
in its entirety without penalty by the Trust's Board of Trustees, by vote of a
majority of the outstanding voting securities of each affected Series (as
defined in the 1940 Act), or by the Distributor, on not less than 60 days'
notice to the other party and will be terminated upon the mutual written
consent of the Distributor and the Trust. This Agreement will also
automatically and immediately terminate in the event of its assignment.
16. Limitation of Liability. Distributor is hereby expressly put on notice
of (i) the limitation of shareholder, officer and trustee liability as set
forth in the Trust Instrument of the Trust and (ii) of the provisions in the
Trust Instrument permitting the establishment of separate Series and limiting
the liability of each Series to obligations of that Series. Distributor hereby
agrees that obligations assumed by the Trust pursuant to this Agreement are in
all cases assumed on
- 5 -
<PAGE> 7
behalf of a particular Series and each such obligation shall be limited in all
cases to that Series and its assets. Distributor agrees that it shall not seek
satisfaction of any such obligation from the shareholders or any individual
shareholder of the Trust nor from the officers or trustees or any individual
officer or trustee of the Trust.
17. Definitions. As used in this Agreement, the term(s):
(a) "net assets" shall have the meaning ascribed to it in the Trust's Trust
Instrument;
(b) "assignment", "interested person", and "majority of the outstanding
voting securities" shall have the meanings given to them by Section 2(a) of the
1940 Act, subject to such exemptions as may be granted by the Securities and
Exchange Commission by any rule, regulation or order.
(c) "Registration Statement" shall mean the registration statement most
recently filed by the Trust with the Securities and Exchange Commission and
effective under the 1940 Act and 1933 Act, as such Registration Statement is
amended by any amendments thereto at the time in effect;
(d) "Prospectus" and "Statement of Additional Information" shall mean,
respectively, the form of prospectus and statement of additional information
with respect to each Series filed by the Trust as part of the Registration
Statement.
18. Entire Agreement/Enforcement of Rights. This Agreement embodies the
entire Agreement between the Distributor and the Trust with respect to the
services to be provided by the Distributor to the Trust and each Series and
supersedes any prior written or oral agreement between those parties. In the
event that either party should be required to take legal action in order to
enforce its rights under this Agreement, the prevailing party in any such
action or proceeding shall be entitled to recover from the other party costs
and reasonable attorneys' fees.
19. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed in counterparts, each of which taken together shall
constitute one and the same instrument. Distributor understands that the
rights and obligations of each Series under the Trust Instrument are separate
and distinct from those of any and all other Series.
20. Governing Law. This Agreement shall be construed in accordance with and
governed by the laws of the State of Washington.
- 6 -
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto caused this Agreement to be executed
by their officers thereunto duly authorized.
Attest: SAFECO TAX-EXEMPT BOND TRUST
By: /s/ ELNA A. THOMSON By: /s/ DAVID F. HILL
---------------------- --------------------
Secretary President
Attest: SAFECO SECURITIES, INC.
By: /s/ ELNA A. THOMSON By: /s/ DAVID F. HILL
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Secretary President
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EXHIBIT A
SAFECO TAX-EXEMPT BOND TRUST
The SAFECO Tax-Exempt Bond Trust consists of the following Series:
1. SAFECO Intermediate-Term Municipal Bond Fund
2. SAFECO Insured Municipal Bond Fund
3. SAFECO Municipal Bond Fund
4. SAFECO California Tax-Free Income Fund
5. SAFECO Washington State Municipal Bond Fund
As of 9-30-93
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<PAGE> 1
EXHIBIT NO. 99.8
CUSTODY AGREEMENT
<PAGE> 2
EXHIBIT 99.8
CUSTODY AGREEMENT
THIS AGREEMENT executed as of the 30th day of September, 1993, between SAFECO
TAX-EXEMPT BOND TRUST, a Delaware business trust, ("Trust"), and U. S. BANK OF
WASHINGTON, N.A., a national banking association ("Bank").
WHEREAS, the Trust is registered with the Securities and Exchange Commission
as a series type open-end, management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and has caused its shares of
beneficial interest to be registered for sale to the public under the
Securities Act of 1933 (the "1933 Act") and various state securities laws; and
WHEREAS, the Trust may, from time to time, organize one or more series of
shares, in addition to the series set forth in Exhibit A attached hereto, each
of which shall represent an interest in a separate portfolio of cash,
securities and other assets (all such existing and additional series now or
hereafter listed on Exhibit A are referred to herein individually, as a
"Series" and collectively, as "the Series," and
WHEREAS, the Trust desires to appoint the Custodian as custodian on behalf of
the Series in accordance with the provisions of the Investment Company Act of
1940 (the "1940 Act") and the rules and regulations thereunder, under the terms
and conditions set forth in this Agreement, and the Custodian has agreed to act
as custodian;
NOW, THEREFORE, it is agreed by and between the parties hereto as follows:
1. Appointment. The Trust on behalf of the Series hereby appoints the
Bank as custodian of all of the Series' cash, securities and other assets, and
the Bank hereby agrees to act as such upon the terms and conditions set forth
in this Agreement.
2. Delivery, Safe Keeping. The Trust will deliver or cause to be
delivered to the Bank from time to time all cash, securities and other assets
acquired by the Series from time to time during the term of this Agreement and
shall specify the Series to which such cash, securities and other assets are to
be allocated. The Bank shall keep safely such cash, securities and other
assets as custodian for the Series and shall deposit such cash, securities and
other assets with the Bank for the account of the Series.
3. Registration of Securities. Bank will hold stocks and other
registerable portfolio securities (other than bearer securities) registered in
the name of the Series, or in the name of any nominee of the Trust on behalf of
the Series, or in the name of any nominee of Bank, or in the name or nominee
name of any sub-custodian or agent appointed under paragraph 4 for whose
fidelity and liabilities Bank shall be fully responsible, or in street
<PAGE> 3
certificate form, so-called, with or without any indication of fiduciary
capacity. Unless otherwise instructed by the Trust, Bank will register all
such portfolio securities in the name of its authorized nominee. In any event,
all such securities and other assets shall be held in an account of the Bank
containing only assets of a Series, or only assets held by a Bank as a
fiduciary or custodian for customers, and provided further, that the records of
the Bank shall indicate at all times the Series or other customer for which
such securities and other assets are held in such account and their respective
interests therein. The Trust agrees to hold Bank and its nominee harmless for
any liability as a record holder of securities held in custody.
4. Custody of Moneys or Securities/Appointment of Agents. Notwithstanding
any other provisions of this Agreement, all or any of the cash, securities or
other assets of a Series may be held in Bank's custody, provided, however, that
the Bank may at any time or times in its discretion appoint (and may at any
time remove) any other bank or trust company which is itself qualified under
the 1940 Act to act as a sub- custodian or its agent to carry out such of the
provisions of this Agreement as the Bank may from time to time direct. The
appointment of any sub-custodian or agent shall not relieve the Bank of its
responsibilities or liabilities hereunder. Neither Bank nor any sub-custodian
or agent shall be entitled to reimbursement by Trust or the Series for any fees
or expenses of any sub-custodian or agent.
5. Deposit of Trust Assets in Securities Systems. Upon order of the Trust on
behalf of any Series, the Bank may deposit and/or maintain securities owned by
a Series in a clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934, which acts
as a securities depository, or in the book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies, collectively referred
to herein as "Securities Systems" in accordance with applicable Federal Reserve
Board and Securities and Exchange Commission rules and regulations, if any, and
subject to the following provisions:
(a) The Bank may keep securities of the Series in a Securities System
provided that such securities are represented in an account ("Account")
of the Bank in the Securities System which shall not include any assets
of the Bank other than assets held as a fiduciary, custodian or
otherwise for customers;
(b) The records of the Bank with respect to securities of the Series which
are maintained in a Securities System shall identify by book- entry
those securities belonging to the Series;
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(c) The Bank shall pay for securities purchased for the account of the
Series upon (i) receipt of advice from the Securities System that such
securities have been transferred to the Account, and (ii) the making of
an entry on the records of the Bank to reflect such payment and transfer
for the account of the Series. The Bank shall transfer securities sold
for the account of the Series upon (i) receipt of advice from the
Securities System that payment for such securities has been transferred
to the Account, and (ii) the making of an entry on the records of the
Bank to reflect such transfer and payment for the account of the Series.
Copies of all advice from the Securities System of transfers of
securities for the account of the Series shall identify the Series, be
maintained for the Series by the Bank and be provided to the Trust as
its request. Upon request, the Bank shall furnish the Trust on behalf
of the Series confirmation of each transfer to or from the account of
the Series in the form of a written advice or notice and shall furnish
to the Trust on behalf of the Series copies of daily transaction sheets
reflecting each day's transactions in the Securities System for the
account of the Series.
(d) The Bank shall provide the Trust for the Series with any report obtained
by the Bank on the Securities System's accounting system, internal
accounting control and procedures for safeguarding securities deposited
in the Securities System;
(e) The Bank shall exercise reasonable care and diligence in the use of the
Securities System on behalf of the Trust and the Series. The Bank shall
be liable to the Trust for the benefit of the Series for any loss or
damage to the Series resulting from use of the Securities System by
reason of any negligence or willful misconduct of the Bank or any of its
agents, or of any of the Bank's or any agent's employees, or from
failure of the Bank or any such agent to enforce effectively such rights
as it may have against the Securities System. At the election of the
Trust, it shall be entitled to be subrogated to the rights of the Bank
with respect to any claim against the Securities System or any other
person which the Bank may have as a consequence of any such loss or
damage if and to the extent that the Series has not been made whole for
any such loss or damage.
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6. Segregated Account. The Bank shall upon order of the Trust on behalf of
each applicable Series establish and maintain a segregated account or accounts
for and on behalf of each such Series, into which account or accounts may be
transferred cash and/or securities, including securities maintained in an
account by the Bank pursuant to paragraph 5 hereof, (i) for the purposes of
compliance by the Series with the procedures required by Investment Company Act
Release No. 10666, or any subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of segregated accounts by
registered investment companies and (ii) for other proper corporate purposes,
but only, in the case of clause (ii), upon receipt of, in addition to an order
of the Trust on behalf of the applicable Series, a writing signed by any two
individuals whose names and signatures are covered by the most recent letter
provided to the Bank as provided in paragraph 12 setting forth the purpose or
purposes of such segregated account and declaring such purposes to be proper
corporate purposes.
7. Purchases of Securities. Upon the order of the Trust on behalf of the
Series, the Bank shall receive all securities purchased for the account of the
Trust and make payment according to the terms of the order insofar as funds are
available.
8. Sale and Delivery of Securities.
(a) Upon the order of the Trust on behalf of the Series, the Bank shall make
delivery of securities held by it as custodian or held in a Securities System
account of the Bank which have been sold by the Trust. Such delivery shall be
made upon payment in a manner satisfactory to the Bank of the amount specified
in said order. The Bank shall also deliver such securities as may be called,
redeemed, retired or otherwise become payable.
(b) Subparagraph (a) shall not prevent the Bank from making:
(i) Delivery of securities for examination to the broker selling the
same in accord with the "street" delivery custom whereby such
securities are delivered to such broker in exchange for a
delivery receipt exchanged on the same day for an uncertified
check of such broker to be presented on the same day for
certification;
(ii) Delivery of securities as collateral on borrowing effected by
the Trust or any Series; and
(iii) Delivery of securities owned by the Trust or any Series as a
redemption in kind of securities issued by the Trust or any
Series.
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9. Collections.
(a) On a timely basis, the Bank shall: (i) collect, receive and hold on
deposit for the account of the appropriate Series, all income and other
payments with respect to the securities held by it on behalf of a Series as
custodian; (ii) advise the Trust once each business day of such receipts;
(iii) execute ownership and other certificates and affidavits for all federal
and state tax purposes in connection with the collection of bond and note
coupons; (iv) present for payment all coupons and all other income items
requiring presentation, present for payment all securities which have become
payable at maturity, upon call for redemption or otherwise; (v) endorse for
collection checks, drafts or other negotiable instruments; and (vi) do all
other things which may be necessary or proper in connection with the receipt
and collection of any such item.
(b) The Bank shall not be under any obligation or duty to take action
to effect collection of any amount, if the securities upon which such amount is
payable are in default and payment is refused after due demand or presentation.
The Bank will, however, notify the Trust of such default and refusal to pay.
10. Disbursements.
(a) Notwithstanding anything contained elsewhere in this Agreement to the
contrary and subparagraphs (b) and (c) below, the Bank shall deliver funds of
the Trust only upon the purchase of securities by the Trust on behalf of the
Series.
(b) Upon the order of the Trust for the Series, the Bank shall make cash
disbursements for the account of the Trust and any Series insofar as funds are
available for such disbursements, for the payment of taxes, expenses and
liabilities including, without limitation:
(i) Management fees payable under any management agreement with
SAFECO Asset Management Company (or its successors) or any
other person selected to serve as an investment advisor to
the Trust or any Series.
(ii) Compensation payable by the Trust or any Series to any person,
firm or corporation, including compensation payable to the
Bank under this Agreement.
(iii) Cash dividends or distributions for any Series declared by
the Board of Trustees of the Trust.
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(c) Without the order of the Trust, the Bank may make cash
disbursements for non-discretionary ministerial items, including but not
limited to expenses in handling securities, stamp taxes, reimbursement of the
Bank for its out-of-pocket expenses incurred in the performance of its duties
hereunder and other similar items in connection with its duties under this
Agreement. The Bank shall advise the Trust once each business day of
disbursements so made.
11. Redemption and Repurchase of Shares of the Trust. From such
funds as may be available for the purpose but subject to the limitations of the
Trust Instrument and any applicable votes of the Trust's Board of Trustees
pursuant to the Trust Instrument, the Bank shall, upon receipt of instructions
from the Trust's Transfer Agent, make funds available for payment to
shareholders who have delivered to the Transfer Agent a request for redemption
or repurchase of their shares. If payment is to be made in kind, the
instructions must be accompanied by a certified copy of a resolution of the
Trust's Board of Trustees. In connection with the redemption or repurchase of
shares of a Series, the Bank is authorized upon receipt of instructions from
the Transfer Agent to wire funds to or through a commercial bank designated by
the redeeming shareholders. In connection with the redemption or repurchase of
shares of any Series, the Bank shall honor checks drawn on the Bank by a
shareholder, which checks have been furnished by the Trust to the shareholder,
when presented to the Bank in accordance with such procedures and controls as
are mutually agreed upon from time to time between the Trust and the Bank.
12. Proper Instructions.
(a) Except in the case of non-discretionary ministerial acts, and as
otherwise specifically provided in this Agreement, all action to be taken by
the Bank as custodian shall be taken upon the order of the Trust on behalf of
the Series. An "order" of the Trust on behalf of the Series shall consist of
written instructions with respect to a specified transaction, or transactions,
which instructions shall be signed by any two individuals whose names and
signatures are covered by the most recent letter addressed to the Bank setting
forth such names and signatures and signed by the President or Treasurer and
Secretary of the Trust. An "order" may consist of oral instructions in the
case of purchases and sales of shares of registered investment companies by any
Series, but only if the Bank reasonably believes such instructions to have been
provided by a person authorized to give such instructions for the transaction
involved and if such instruction is transmitted and received in accordance with
any procedures acceptable to both the Fund and the Bank. Oral instructions
shall not be accepted by the Bank for any other type of transaction.
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(b) Notwithstanding anything to the contrary contained in the
Agreement, no person authorized to give an "order" as described in the
preceding paragraph, Trustee, officer, employee or agent of the Trust shall
have physical access to the assets of any Series held by the Bank nor shall the
Bank deliver any assets of a Series for delivery to an account of such person;
provided, however, that nothing in this sub- paragraph (b) shall prohibit the
Trust's independent certified public accountants from examining or reviewing
the assets of the Series held by the Bank.
13. Forwarding of Information and Proxies. The Bank will forward
promptly to the Trust for each Series all information or documents which it may
receive with respect to any securities held by a Series under this Agreement,
including all notices, reports and other financial information. Neither the
Bank, nor its nominee, shall vote any of the securities or authorize the voting
of any securities or give any consent or take any other action with respect
thereto, except as otherwise provided herein, unless directed to do so upon
order of the Trust on behalf of any Series.
14. Reorganization or Liquidation, Etc. of the Trust. In the case of the
following transactions, not in the ordinary course of business, namely, the
merger or consolidation of the Trust and another investment company, the sale
by the Trust of all, or substantially all, of its assets to another investment
company, or the liquidation or dissolution of the Trust and distribution of its
assets, the Bank shall deliver the securities held by it under this Agreement
and disburse cash only upon the order of the Trust and upon receipt of opinion
of counsel of the Trust (upon which opinion the Bank may rely without liability
to any party) to the effect that all necessary corporate action therefore has
been taken, or, concurrently with the Bank's action will be taken.
15. Compensation. Each Series shall pay to the Bank compensation for its
services under this Agreement in accordance with the attached schedule of
charges set forth in Exhibit D which may be amended from time to time by mutual
agreement. In addition, each Series will reimburse the Bank for all
out-of-pocket expenses, including taxes and other charges required to be paid
by the Bank with respect to the property of each Series, incurred by the Bank
in the performance of its duties hereunder.
16. Responsibility.
(a) In the performance of its duties under this Agreement, the Bank
shall exercise reasonable care and diligence. The Bank shall be liable to the
Trust for the benefit of the Series for any loss or damage to the Series
resulting from any negligence or willful misconduct of the Bank or any of its
agents, or of any of the Bank's or any agent's employees in the performance of
the Bank's duties under this Agreement.
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(b) Except as otherwise provided herein, the Bank shall not incur
liability to anyone and shall be indemnified and held harmless by the Trust and
the Series from and against all liability, claims, demands, actions, suits,
costs or expenses (including the fees of its counsel) for anything done or
suffered by the Bank in good faith in accordance with an order of the Trust or
pursuant to the terms of this Agreement. The Bank may apply for and obtain the
advice and opinion of counsel to the Trust or its own counsel with respect to
questions of law and shall be fully protected with respect to anything done or
omitted by it in good faith in conformity with such advice or opinion. The
Bank shall be protected in any action taken or omitted by it in reliance upon
any order, notice, request, certificate or other instrument reasonably believed
by it to be genuine.
(c) The Bank shall be under no duty or obligation to inquire into and
shall not be liable for:
(i) The validity of the issue of any securities
purchased by or for the Trust or any Series, the
legality of the purchases thereof or the propriety
of the amount paid therefor;
(ii) The legality of any sale of any securities by or for
the Trust or any Series or on the propriety of the
amount for which the same are sold;
(iii) The legality of an issue or sale of any shares of
the Trust or any Series or the sufficiency of the
amount to be received therefor;
(iv) The legality of the repurchase of any shares of the
Trust or any Series or the propriety of the amount
to be paid therefor;
(v) The legality of the declaration of any dividend by
the Trust or any Series or the legality of the issue
of any securities held by the Trust or any Series as
a payment in kind of such dividend;
(vi) Any property or moneys of the Trust or any Series
unless and until received by it, and any such
property or moneys delivered or paid by it pursuant
to the terms hereof.
(d) The Bank shall not be under any duty or obligation to ascertain
whether any securities at any time delivered to or held by it for the account
of a Series are such as may properly be held by a Series under the provisions
of the Trust's Instrument or Bylaws, any federal or state statutes or any rule
or regulation of any governmental agency.
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17. Liability for Payment in Advance of Receipt of Securities
Purchased. In any and every case where payment for purchase of securities for
the account of a Series is made by the Bank in advance of receipt of the
securities purchased in the absence of specific written instructions from the
Trust on behalf of such Series to so pay in advance, the Bank shall be
absolutely liable to the Trust for such securities to the same extent as if the
securities had been received by the Bank.
18. Records. The Bank shall with respect to each Series create and
maintain all records relating to its activities and obligations under this
Agreement in such manner as will meet the obligations of the Trust under the
1940 Act, particularly Section 31 thereof and Rules 31a-1 and 31a-2 thereunder.
All such records shall be the property of the Trust and shall at all times
during the regular business hours of the Bank be open for inspection by duly
authorized officers, employees and agents of the Trust and employees and agents
of the Securities and Exchange Commission. The Bank shall, at the Trust's
request, supply the Trust with a tabulation of securities owned by each Series
and held by the Bank and shall, when requested to do so by the Trust and for
such compensation as shall be agreed upon between the Trust and the Bank,
include certificate numbers in such tabulations.
19. Termination. This Agreement may be terminated at any time without
penalty with respect to one or more Series by execution of any amended Exhibit
A or in its entirety by written notice delivered by either party to the other.
The effective date of termination shall be as specified in such notice, except
that at the option of the Bank or the Trust, the effective date of the
termination may be postponed to a date not more than sixty (60) days from the
date of the delivery of such notice in order to give the Bank an opportunity to
prepare for the transfer of the Trust or any Series' assets or to give the
Trust or any Series an opportunity to make suitable arrangements for a
successor custodian. Upon termination of this Agreement, the Bank shall
deliver at its office all cash, securities and other assets held by it in
accordance with paragraph 20.
20. Successor Custodian.
(a) If a successor custodian for the Trust or one or more of the
Series shall be appointed by the Trust's Board of Trustees, the Bank shall,
upon termination, deliver to such successor custodian at the office of the Bank
all cash and other assets of the Trust then held by it hereunder and, in the
case of securities, duly endorsed and in the form for transfer, all securities
of each applicable Series then held by it hereunder and shall transfer to an
account of the successor custodian all of the securities of each
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such Series held in a Securities System. The Bank shall take all reasonable
steps to assist in the transfer of the cash, securities and other assets of the
applicable Series to the successor custodian.
(b) If no such successor custodian shall be appointed, the Bank
shall, in like manner, upon receipt of a certified copy of a vote of the
Trust's Board of Trustees, deliver at the office of the Bank and transfer such
cash, securities and other assets in accordance with such vote.
(c) In the event that no written order designating a successor
custodian or certified copy of a vote of the Board of Trustees shall have been
delivered to the Bank on or before the date when such termination shall become
effective, then the Bank shall have the right to deliver to a bank or trust
company of its own selection (which is a "bank" as defined in the 1940 Act)
doing business in Seattle, Washington, having an aggregate capital, surplus,
and undivided profits, as shown by its last published report, of not less than
the amounts required by the 1940 Act, all cash, securities and other assets
held by the Bank on behalf of each applicable Series and all instruments held
by the Bank relative thereto and all other property held by it under this
Agreement on behalf of each applicable Series and to transfer to an account of
such successor custodian all the securities of each such Series held in any
Securities System. Thereafter, such bank or trust company shall be the
successor of the Bank under this Agreement.
(d) In the event that cash, securities and other assets remain in
the possession of the Bank after the date of termination hereof owing to
failure of the Trust to procure the certified copy of the vote referred to or
of the Board of Trustees to appoint a successor custodian, the Bank shall be
entitled to fair compensation for its services during such period as the Bank
retains possession of such cash, securities and other assets and the provisions
of this Agreement relating to the duties and obligations of the Bank shall
remain in full force and effect.
21. Notices. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto shall be
sufficiently given if addressed to such party and mailed or delivered to it at
its office at the address set forth below, namely:
In the case of the Trust:
SAFECO Tax-Exempt Bond Trust
Attn: David F. Hill, President
SAFECO Plaza
Seattle, Washington 98185
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and
In the case of the Bank:
U. S. Bank of Washington, N.A.
Attn: Trust Operations Department
1414 Fourth Avenue
Seattle, Washington 98101
or at such other place as such party may from time to time designate in
writing.
22. Bank representation. Bank represents that it does meet, and
will continue to meet at all times that this Agreement is in effect, the
requirements of the rules and regulations promulgated pursuant to Section 17(f)
of the Investment Company Act of 1940.
23. Limitation of Liability. Bank is hereby expressly put on
notice of (i) the limitation of shareholder, officer and trustee liability as
set forth in the Trust Instrument of the Trust and (ii) of the provisions in
the Trust Instrument permitting the establishment of separate Series and
limiting the liability of each Series to obligations of that Series. Bank
hereby agrees that obligations assumed by the Trust pursuant to this Agreement
are in all cases assumed on behalf of a particular Series and each such
obligation shall be limited in all cases to that Series and its assets. Bank
agrees that it shall not seek satisfaction of any such obligation from the
shareholders or any individual shareholder of the Trust nor from the officers
or trustees or any individual officer or trustee of the Trust.
24. Entire Agreement. This Agreement embodies the entire
Agreement between the Bank and the Trust with respect to the services to be
provided by the Bank to the Trust and each Series and supersedes any prior
written or oral agreement between those parties.
25. Miscellaneous. This Agreement shall be binding on and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that this Agreement shall not be assignable by the
Trust without the written consent of the Bank or by the Bank without the
written consent of the Trust. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed in counterparts, each of which taken together shall
constitute one and the same instrument. Bank understands that the rights and
obligations of each Series under the Trust Instrument are separate and distinct
from those of any and all other Series.
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26. Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of Washington.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the day and year first above written.
Attest: U. S. BANK OF WASHINGTON, N.A.
By P. McCORMACK
- -------------------------- ----------------------------------
Its Assistant Vice President
-------------------------------
Attest: SAFECO TAX-EXEMPT BOND TRUST
/s/ ELNA A. THOMSON By /s/ DAVID F. HILL
- -------------------------- -------------------------------
Secretary Its: President
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EXHIBIT A
SAFECO TAX-EXEMPT BOND TRUST
The SAFECO Tax-Exempt Bond Trust consists of the following Series:
1. SAFECO Intermediate-Term Municipal Bond Fund
2. SAFECO Insured Municipal Bond Fund
3. SAFECO Municipal Bond Fund
4. SAFECO California Tax-Free Income Fund
5. SAFECO Washington State Municipal Bond Fund
As of 9-30-93
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EXHIBIT B
SAFECO TAX-EXEMPT BOND TRUST
ALL SERIES
PROCEDURES FOR CONTROL
Securities Held by Nominee Puget & Co.
1. All securities held in safe keeping at U.S. Bank of
Washington, N.A., main office, will be in the name of the nominee,
Puget & Co.
2. Instructions from the Trust on behalf of a Series or SAFECO Asset
Management Company, the investment adviser to the Trust, relative to
the purchase and sale of securities will be in written form on a
"Custodian of Securities Order." See Exhibit C attached.
3. All accounting documents, minutes, bank records, and
instructions to brokers will identify the real ownership of
securities being bought or sold and of interest and dividends
received.
4. Certificates for shares of stock and par value of bonds will be in
lots which will permit the physical separation of the securities
according to their real ownership. U.S. Bank of Washington, N.A.
will maintain such a physical separation.
5. Proceeds on securities sold and dividends or interest received in the
name of Puget & Co. will be collected by U.S. Bank of Washington,
N.A., main office. On the business day of receipt of such proceeds
the bank will credit the custodial account of the Trust with the
total amount of such proceeds, dividends or interest and will
specifically identify all collections on the statement of the
Trust's account.
6. Payments for securities purchased will be made from the Trust's
custodial account upon delivery of the securities.
As of 11/4/93
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EXHIBIT D
SAFECO TAX-EXEMPT BOND TRUST
ALL SERIES
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Schedule of Custodian Fees with U.S. Bank of Washington, N.A.
Gross Billing
Cash/Asset Statements $5.75 each
Cash Dividends, Registered Bonds and Savings/
Commercial Paper Interest $5.50 each transaction
Cash Disbursements $3.25 each transaction
Purchase/Sale Stocks and Bonds
and Commercial Paper $38.50 each transaction
Coupon Bond Interest $8.25 each transaction
Deposits/Withdrawals -
Master Notes/Money Funds $10.00 each transaction
Repurchase Agreements $22.00 each transaction
Stock Dividends, Splits,
Entering Assets, Exchanges and Transfers
of Registered Securities $14.00 each transaction
Collateral Receipt/Delivery $20.00 each transaction
Money Market Interest $2.00 each transaction
Administration - if applicable $45.00 per hour
Out of Pocket Expenses (Postage, insurance,
long distance calls, mileage, photocopying) As Incurred
As of 11-4-93
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EXHIBIT C
TRANSACTION ADVICE
TRANS NO.:
DATE:
TO: U.S. Bank - WA
1414 4th Avenue
Seattle, WA 98111
Attn: Account Representative
In accordance with the terms of our existing custody agreement, you are
authorized to settle the transaction set forth below:
ACCOUNT:
Account No.:
BROKER/DEALER:
CUSIP NO: TRADE DATE:
SETTLE DATE:
SECURITY DESCRIPTION SALE
-------------------------------
UNITS:
PRICE:
PRINCIPAL
ACCRUED INTEREST:
COMMISSION:
FEES ----------
CASH:
BK ACCT CURR:
SETTLEMENT METHOD:
MANAGER:
SPECIAL INSTRUCTIONS:
- ------------------------------ ------------------------------
Authorized Signature Authorized Signature
Date:
Time:
<PAGE> 1
EXHIBIT NO. 99.9
TRANSFER AGENT AGREEMENT
<PAGE> 2
EXHIBIT 99.9
TRANSFER AGENT AGREEMENT
THIS AGREEMENT is made and entered into this 30th day of September,
1993, between SAFECO TAX-EXEMPT BOND TRUST ("Trust"), a Delaware business
trust, and SAFECO SERVICES CORPORATION ("SAFECO Services"), a Washington
corporation.
WHEREAS, the Trust is registered with the Securities and Exchange
Commission as a series type open-end, management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act") and has caused its
shares of beneficial interest ("Shares") to be registered for sale to the
public under the Securities Act of 1933 (the "1933 Act") and various state
securities laws; and
WHEREAS, the Trust intends to offer for public sale distinct series of
Shares of beneficial interest, each corresponding to a distinct portfolio
(individually, "a Series" and collectively "the Series"), and
WHEREAS, the Trust wishes to retain SAFECO Services as its transfer
agent, dividend and distribution disbursement agent, and shareholder services
agent on behalf of each Series as now exists or as hereafter may be established
which are listed on Exhibit A to this Agreement as amended from time to time
("Shares")
WHEREAS, SAFECO Services is qualified and authorized to act in such
capacities;
NOW, THEREFORE, It is agreed by the parties hereto as follows:
1. Appointment. The Trust on behalf of the Series hereby appoints SAFECO
Services as the Series' transfer agent, dividend and distribution disbursement
agent and shareholder services agent, and SAFECO Services agrees to act as such
upon the terms and conditions herein set forth.
2. Documents. The Trust agrees to deliver to SAFECO Services the
following documents to enable SAFECO Services to exercise its functions under
this Agreement: (a) copies of all basic corporate documentation, including the
Trust's Trust Instrument and Bylaws; (b) evidence of creation and authorization
for issue and sale of the Trust's Shares; (c) evidence of the status of the
Trust's Shares under applicable laws, including copies of the current
registration statement or post-effective amendments to the registration
statement of the Trust's securities under the Securities Act of 1933, copies of
current prospectuses and evidence of compliance with all applicable state
securities laws. The Trust shall furnish promptly to SAFECO Services a copy of
any
<PAGE> 3
amendment or supplement to the above-mentioned documents. The Trust shall
furnish to SAFECO Services any additional documents requested by SAFECO
Services as necessary to perform the services required hereunder.
3. Duties of SAFECO Services. SAFECO Services shall perform as agent of
the Trust on behalf of the Series the following duties:
(a) Maintain a complete computerized record of each Series'
shareholders, including name(s) in which the Shares are registered, address,
account number, broker/dealer or registered representative number (if
required), type of account, number of Shares owned in certificate and
non-certificate form, dates and amounts of purchases and redemptions, dates and
amounts of dividends and capital gains distributed and reinvested, together
with cost amounts.
(b) With respect to requests for the purchase, repurchase,
redemption or transfer of the Series' Shares and the receipt or disbursement of
monies, maintain records of all such transactions and from these records
furnish to the Trust as heretofore agreed, the following for each Series:
(1) Number of Shares purchased and dollar net asset value
per Share.
(2) Number of Shares repurchased or redeemed and dollar
net asset value per Share.
(3) Number of accumulated Shares outstanding.
(4) Number of opened and closed accounts.
(5) Current number of shareholder accounts.
(c) With respect to orders for the purchase of Shares of a Series
received by SAFECO Securities, Inc., principal underwriter of each Series'
Shares, from authorized broker/dealers or SAFECO registered representatives,
and orders for the repurchase of such Shares from authorized broker/dealers or
SAFECO registered representatives, SAFECO Services shall accept and execute
such orders at the prices per share next computed in accordance with Rule 22c-1
of the Investment Company Act of 1940.
(d) Following receipt of payments, upon receipt of proper
instructions, SAFECO Services, as transfer agent, shall prepare computer input
entries to register each Series' Shares upon its books in such name or names as
directed. If the Trust elects to issue certificates representing Shares of a
Series, such
2
<PAGE> 4
certificates shall be issued, recorded and forwarded for delivery to proper
person(s) upon request. Whether or not certificates evidencing ownership are
issued, a confirmation showing the registration and listing the purchase
transaction shall be mailed to the Trust's shareholders.
Upon receipt of Shares for redemption or repurchase, in good
delivery form, SAFECO Services shall prepare computer input entries to clear
the Shares out of the shareholders' accounts and effect prompt payment to the
authorized broker/dealer or the shareholder.
(e) New investors or shareholders of the Trust may forward monies
directly to SAFECO Services for the purchase of shares under various plans as
described in the Trust's then current Prospectus.
With respect to such plans, SAFECO Services for each Series
shall:
(1) Receive monies for the purchase of full and
fractional Shares with respect to any of the Plans. When purchase
orders are received by SAFECO Services in proper form, they shall be
time-stamped and priced in accordance with Rule 22c-1 of the
Investment Company Act of 1940.
(2) Prepare computer input entries to effect the issuance
of confirmations, registration of Shares and recording of cost amounts
in shareholder accounts; record shares and net asset value amounts in
the Series' records; record shares and aggregate dollar amounts for
updating Blue Sky records, production reports, etc.
(3) Secure signed applications from each shareholder
which shall include details as to registration of Shares, social
security number, birth date (for accounts which require it),
citizenship, type of account, broker/dealer, registered representative
(if required) and signature(s).
(4) Maintain signed applications, correspondence, etc.
for individual shareholders.
(5) With respect to the redemption of Shares of a Series
tendered by shareholders:
(i) Accept redemption orders as described in the
Series' then current Prospectus directly from shareholders, or
their qualified agents, upon tender of properly endorsed
certificates which meet the
3
<PAGE> 5
redemption requirements of the Trust. Shares not represented
by certificates tendered by the presentation of a written
request signed by the shareholder may be accepted without a
signature guarantee provided a signature is on file with
SAFECO Services.
(ii) Pay proceeds for Shares so tendered at the
net asset value per share next computed after receipt of
tender in accordance with Rule 22c-1 of the Investment Company
Act of 1940 within the settlement period required by the
Securities Exchange Act of 1934.
(g) SAFECO Services shall perform all necessary details to
complete any transactions in connection with any exchange privileges as
described in the Series' then current Prospectus.
(h) SAFECO Services shall maintain a bank account in its own name
with any bank which qualifies under the Bylaws of the Trust, for deposit of
funds received in payment of Shares and for the withdrawal of funds in payment
of repurchases or redemptions of Shares, expenses and dividends and capital
gains distributions. After each computer run, written instructions, signed by
authorized officers or other authorized signatories, are to be forwarded to
such bank requesting the transfer of net balance to or from the Series'
custodian account with such bank.
(i) SAFECO Services shall perform all necessary details in
connection with any Withdrawal Plan, as described in the Series' then current
Prospectus including making the monthly or quarterly payments to the Plan
participant, and informing the Series with regard to Shares redeemed and total
dollar amount involved on each payment date.
Although a Withdrawal Plan terminates upon the death of the
shareholder, SAFECO Services shall not be responsible for any payments made or
other action taken in accordance with the provisions of the Plan until it has
knowledge of such death.
(j) With reference to the registration and transfer of Shares
referred to in Section (a) above, SAFECO Services shall be entitled to treat
the person in whose name any Shares are registered as the owner thereof for all
purposes, and shall not be bound to recognize any other person, whether or not
SAFECO Services shall have notice hereof, except as expressly provided under
applicable state law.
4
<PAGE> 6
(k) SAFECO Services shall use reasonable efforts to assure the
accuracy of the records it maintains under this Agreement and to issue
certificates or register Shares only to those persons or entities entitled
thereto.
When a transfer of shares is demanded, SAFECO Services shall
take reasonable steps to ascertain whether or not a transfer of the Shares
requested is duly authorized. If SAFECO Services fails to take such reasonable
steps, it will be liable to any insured party for any damages incurred as a
result. SAFECO Services' transfer obligations shall run to the owners of
beneficial interest in the Shares as well as to the owners of record. SAFECO
Services shall take reasonable steps to ascertain the identity and authority of
each assignor, where he is acting in a representative capacity.
Before permitting a transfer of Shares, SAFECO Services shall
make reasonable efforts to insure that the transferee is properly described and
that the transfer instructions for the Shares are clear and not ambiguous or
subject to doubt.
(l) Upon receipt of proper instructions, SAFECO Services shall
compile, distribute or reinvest, authorized dividends and capital gains
distributions to Trust's shareholders. In this regard data shall be
accumulated to enable SAFECO Services to provide and process year- end income
tax information for shareholders, states and the Internal Revenue Service.
Where required, taxes shall be withheld from alien shareholders with foreign
addresses and accumulated for surrender to the Internal Revenue Service.
(m) Prior to each meeting of the Trust's or any Series'
shareholders, SAFECO Services shall address the Proxy Cards, prepare the Proxy
Cards, Notice of Meeting of Shareholders and Proxy Statement for mailing, and
mail them to the shareholders entitled to vote at such meeting. Upon their
return by the shareholders, SAFECO Services shall examine them and prepare a
tabulation that provides the following information for the Trust or Series as
the case may be:
(1) Number of Shares outstanding and entitled to vote on
the record date for the meeting.
(2) Number of Shares voted by proxy.
(3) Number of Shares voting "for" each proposal.
(4) Number of Shares voting "against" each proposal.
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<PAGE> 7
(5) Number of Shares voting "abstain" for each proposal.
(6) Number of shareholders involved in each above
instance.
SAFECO Services shall prepare a certified list of shareholders
eligible to vote at each meeting which shall be available on the day of the
meeting. SAFECO Services shall also prepare an "Affidavit of Mailing" to be
available for reading at each meeting stating that on the appropriate date a
responsible, named individual caused the Notice of Meeting, Proxy Card and
Proxy Statement to be mailed by United States Mail, postage prepaid, to each
and every shareholder of the Shares entitled to vote at the meeting.
(n) Countersign all certificates to be issued to shareholders of
the Trust upon receipt of payments for the Shares and request of a certificate
or certificates representing the Shares being purchased.
(o) SAFECO Services in the performance of its duties may contract
from time to time with other persons to provide software or computer time.
SAFECO Services shall advise the Trust of any such arrangements.
4. Appointment of Agents. SAFECO Services may at any time or times in
its discretion appoint (and may at any time remove) one or more other parties
as Agent to perform any or all of the services specified hereunder and carry
out such provisions of this Agreement as SAFECO Services may from time to time
direct; provided, however, that the appointment of any such Agent shall not
relieve SAFECO Services of any of its responsibilities or liabilities
hereunder.
5. Record Keeping and Other Information. SAFECO Services shall create
and maintain all records required by all applicable laws, rules and regulations
relating to the services to be performed under this Agreement, including but
not limited to records required by Section 31(a) of the Investment Company Act
of 1940 and the Rules thereunder, as the same may be amended from time to time.
All records shall be the property of the Trust and shall be available for
inspection and use by the Trust at all times. Where applicable, such records
shall be maintained by SAFECO Services for the periods and in the places
required by Rule 31a-2 under the Investment Company Act of 1940.
6
<PAGE> 8
6. Net Asset Value. Wherever used herein, the term "net asset value"
shall mean the "net asset value" as computed for each Series or Class in
accordance with the Trust's Trust Instrument and Bylaws. If any amendment is
made to said Trust Instrument or Bylaws that changes the method of said
computation, the Trust shall give SAFECO Services immediate notice of such
amendment.
7. Proper Instructions. The term "proper instructions" used in this
Agreement shall be deemed to mean any written instructions signed by authorized
persons or any oral instructions delivered in accordance with Trust
requirements.
8. Disbursement of Funds. Funds deposited in the bank account maintained
by SAFECO Services shall not be disbursed to any trustee, officer or employee
of the Trust. This provision shall not be deemed to apply to dividend payments
to any trustee, officer, or employee in his or her capacity as shareholder.
Neither shall this provision apply to the above individuals upon payments to
them for any shares redeemed for their personal accounts.
9. Compensation. SAFECO Services shall receive from each Series of the
Trust a fee in accordance with the arrangements described in Exhibit B hereto
as such Exhibit may be amended from time to time. Exhibit B may be amended or
additional Exhibits may be added, as deemed necessary from time to time by
written agreement between the Trust and SAFECO Services. Deletion of Exhibit B
shall be in accordance with the termination provisions in paragraph 16 of this
Agreement. Each Exhibit B and any amendments thereto shall be dated and signed
by the parties to this Agreement.
10. Certification of Officers/Reliance upon Certifications.
(a) The Secretary of the Trust shall be, and is hereby, directed
to certify to SAFECO Services the names of the officers of the Trust, and their
respective signatures, and in case of any change of any holder of any such
office, the fact of such change, and the name of such new officer and the
office held by him or her, together with specimens of his or her signature.
SAFECO Services is hereby authorized to honor any instructions given to SAFECO
Services by any such new officer in respect of whom it has received any such
certificate with the same force and effect (and not otherwise), as if such new
officer were named in this Agreement in the place of any person with the same
title of office.
7
<PAGE> 9
(b) The Secretary of the Trust shall be, and is hereby, authorized
and directed to notify SAFECO Services promptly in writing of any change of
officers as above provided, and that until SAFECO Services has actually
received and accepted such notice of any such change, SAFECO Services is hereby
authorized and directed to act in pursuance of this Agreement and the latest
certificates theretofore received by it; and SAFECO Services shall be
indemnified and saved harmless from any loss suffered or liability incurred by
it in so acting, even though any such officer may have been changed.
11. Audits, Inspections and Visits. SAFECO Services shall make available
during regular business hours all records and other data created and maintained
pursuant to this Agreement for reasonable audit and inspection by the Trust,
any agent or person designated by the Trust, or any regulatory agency having
authority over the Trust. Upon reasonable notice by the Trust, SAFECO Services
shall make available during regular business hours its facilities and premises
employed in connection with its performance of this Agreement for reasonable
visits by the Trust, any agent or person designated by the Trust, or any
regulatory agency having authority over the Trust.
12. Acts of God, Etc. SAFECO Services shall not be liable for delays or
errors occurring by reason of circumstances beyond its control, including but
not limited to acts of civil or military authority, national emergencies, work
stoppages, fire, flood, catastrophe, acts of God, war, riot or failure of
communications equipment of common carriers or power supply. In the event of
equipment breakdowns beyond its control, SAFECO Services shall at no additional
expense to the Trust take reasonable steps to minimize service interruptions
and mitigate their effects but shall have no liability with respect thereto.
13. Liability and Indemnification.
(a) SAFECO Services shall use reasonable care in the performance
of its duties under this Agreement.
(b) SAFECO Services shall be entitled to receive and act on the
advice of counsel for the Trust which advice shall be at the expense of the
Trust and shall be without liability for any action taken, or things done, or
omitted to be done, pursuant to such advice.
8
<PAGE> 10
(c) SAFECO Services shall not be liable for, or considered to be,
the custodian of any money called for or represented by any check, draft, or
other instrument for the payment of money delivered to it, or on behalf of the
Trust.
(d) The Trust shall indemnify and hold SAFECO Services harmless
against any losses, claims, damages, liabilities or expenses (including
reasonable attorneys' fees and expenses) resulting from:
(1) any claim, demand, action or suit brought by any
person other than the Trust, including by a
shareholder, which names SAFECO Services and/or the
Trust as a party, and is not based on and does not
result from SAFECO Services' willful misfeasance, bad
faith or negligence or reckless disregard of duties,
and arises out of or in connection with SAFECO
Services' performance hereunder; or
(2) any claim, demand, action or suit (except to the
extent contributed to by SAFECO Services' willful
misfeasance, bad faith or negligence or reckless
disregard of duties) which results from the
negligence of the Trust, or from SAFECO Services
acting upon any instruction(s) reasonably believed by
it to have been executed or communicated by any
person duly authorized by the Trust, or as a result
of SAFECO Services' acting in reliance upon advice
reasonably believed by SAFECO Services to have been
given by counsel for the Trust, or as a result of
SAFECO Services acting in reliance upon any
instrument or stock certificate reasonably believed
by it to have been genuine and signed, countersigned
or executed by the proper person.
14. Effective Date/Renewal. This Agreement shall become effective with
respect to the Trust and each Series on the date first written above or such
later date as indicated on Exhibits A and\or B and, unless sooner terminated as
provided herein, will continue in effect for two years from the above written
date. Thereafter, if not terminated, this Agreement shall continue in effect
with respect to each Series for successive annual periods ending on the same
date of each year, provided that such continuance is specifically approved at
least annually by a vote of the Board of Trustees of the Trust, including the
vote of a majority of the trustees who are neither interested persons of SAFECO
Services nor of the Trust at a meeting called for the purpose of voting on such
continuance.
9
<PAGE> 11
15. Amendment. This Agreement may be modified by written mutual consent,
such consent on the part of the Trust to be authorized by the vote of the Board
of Trustees.
16. Termination.
(a) Either party hereto may, at any time on no less than sixty
(60) days prior written notice to the other, terminate this Agreement with
respect to the Trust or any Series (by deleting such Series from Exhibits A and
B), in any case, without the payment of any penalty.
(b) Upon termination each Series shall pay to SAFECO Services such
compensation as may be due as of the date of such termination and shall
likewise reimburse SAFECO Services for its costs, expenses and disbursements.
(c) If a successor transfer agent is appointed by the Board of
Trustees of the Trust, SAFECO Services shall, upon termination, deliver to such
successor transfer agent at the office of the transfer agent, all transfer
records then held hereunder and all funds or other properties of the Trust and
deposited with or held by it hereunder.
(d) If no successor transfer agent is appointed, SAFECO Services
shall, in like manner, at its office, upon receipt of a certified copy of a
vote of the Trust's Board of Trustees deliver such transfer records, funds and
other properties in accordance with such vote.
(e) In the event that no written order designating a successor
transfer agent or certified copy of a vote of the shareholders shall have been
delivered to SAFECO Services on or before the date when such termination shall
become effective, then SAFECO Services shall have the right to deliver to a
bank or trust company doing business in Seattle, Washington, of its own
selection, having proper qualifications, all transfer records, funds and other
properties held by SAFECO Services and all instruments held by it relative
thereto and all other property held by it under this Agreement. Thereafter
such bank or trust company shall be the successor of SAFECO Services under this
Agreement.
(f) In the event that transfer records, funds and other properties
remain in the possession of SAFECO Services after the date of termination
hereof owing to failure of the Trust to procure the certified copy above
referred to, or of the trustees to appoint a successor transfer agent, SAFECO
Services shall be entitled to fair compensation for its services during such
period
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<PAGE> 12
and the provisions of this Agreement relating to the duties and obligations of
SAFECO Services shall remain in full force and effect.
17. Limitation of Liability. SAFECO Services is hereby expressly put on
notice of (i) the limitation of shareholder, officer and trustee liability as
set forth in the Trust Instrument of the Trust and (ii) of the provisions in
the Trust Instrument permitting the establishment of separate Series and
limiting the liability of each Series to obligations of that Series. SAFECO
Services hereby agrees that obligations assumed by the Trust pursuant to this
Agreement are in all cases assumed on behalf of a particular Series and each
such obligation shall be limited in all cases to that Series and its assets.
SAFECO Services agrees that it shall not seek satisfaction of any such
obligation from the shareholders or any individual shareholder of the Trust nor
from the officers or trustees or any individual officer or trustee of the
Trust.
18. Entire Agreement/Enforcement of Rights. This Agreement embodies the
entire agreement between SAFECO Services and the Trust with respect to the
services to be provided by SAFECO Services to the Trust and each Series and
supersedes any prior written or oral agreement between those parties. In the
event that either party should be required to take legal action in order to
enforce its rights under this Agreement, the prevailing party in any such
action or proceeding shall be entitled to recover from the other party costs
and reasonable attorneys' fees. In the event that either party should be
required to take legal action in order to enforce its rights under this
Agreement, the prevailing party in any such action or proceeding shall be
entitled to recover from the other party costs and reasonable attorney's fees.
19. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed in counterparts, each of which taken together shall
constitute one and the same instrument. SAFECO Services understands that the
rights and obligations of each Series under the Trust Instrument are separate
and distinct from those of any and all other Series.
20. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington and, to the extent it
involves any United States statute, in accordance with the laws of the United
States.
11
<PAGE> 13
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their proper officers as of the day and year first above written.
SAFECO TAX-EXEMPT BOND TRUST
By /s/ DAVID F. HILL
------------------------------
David F. Hill, President
By /s/ ELNA A. THOMSON
------------------------------
Elna A. Thomson, Secretary
SAFECO SERVICES CORPORATION
By /s/ DAVID F. HILL
------------------------------
David F. Hill, President
By /s/ ELNA A. THOMSON
------------------------------
Elna A. Thomson, Secretary
12
<PAGE> 14
EXHIBIT A
SAFECO TAX-EXEMPT BOND TRUST
The SAFECO Tax-Exempt Bond Trust consists of the following Series:
1. SAFECO Intermediate-Term Municipal Bond Fund
2. SAFECO Insured Municipal Bond Fund
3. SAFECO Municipal Bond Fund
4. SAFECO California Tax-Free Income Fund
5. SAFECO Washington State Municipal Bond Fund
As of 9-30-93
13
<PAGE> 15
EXHIBIT B
SAFECO TAX-EXEMPT BOND TRUST
ALL SERIES
FEE SCHEDULES
(a) SAFECO Services shall receive from each Series of the Trust a
fee of $2.47 for each transaction which amount shall be billed and
paid monthly.
(b) For purposes of this Section transaction means:
(i) any event which results in a change in the number of
outstanding Shares of an account for which a confirmation is
generated, except that confirmations generated as a result of
or to correct an error made by SAFECO Services shall not be
included;
(ii) any cash dividend or distribution;
(iii) any change in the form of registration, or changes in
address.
SAFECO SERVICES CORPORATION SAFECO TAX-EXEMPT BOND TRUST
on behalf of each Series
By: /s/ DAVID F. HILL By: /s/ DAVID F. HILL
-------------------------------- ----------------------------------
Its: President Its: President
Attest: /s/ ELNA A THOMSON Attest: /s/ ELNA A. THOMSON
---------------------------- -----------------------------
Secretary Secretary
As of 9-30-93
14
<PAGE> 1
EXHIBIT NO. 99.10
OPINION OF COUNSEL
<PAGE> 2
EXHIBIT 99.10
July 21, 1994
Board of Directors
SAFECO Tax-Exempt Bond
SAFECO Plaza
Seattle, WA 98185
Gentlemen:
I have acted as counsel to the Registrant in connection with the filing with
the Securities and Exchange Commission of Post-Effective Amendment No. 3 to
Registration Statement No. 33-53532 on Form N-1A for the shares of the
Registrant. I have made such examination of law and have examined such records
and documents as in my opinion are necessary or appropriate to enable me to
render the following opinion:
1. The Registrant was established by a Trust Instrument dated May 13, 1993,
and filed with the Delaware Secretary of State on May 17, 1993. The
Trust is at the present time validly existing as a Delaware business
trust under the laws of the state of Delaware.
2. The Registrant is authorized to issue an unlimited number of shares of
beneficial interest with a par value of .001 cent per share which
currently represent five series: SAFECO Intermediate-Term Municipal Bond
Fund, SAFECO Insured Municiapl Bond, SAFECO Municipal Bond Fund, SAFECO
California Tax-Free Income Fund and SAFEOC Washington State Municipal
Bond Fund.
3. All of the prescribed procedures for the issuance of the shares have
been followed, and, when such shares are issued in accordance with the
Prospectus contained in the Registration Statement, all state
requirements relating to such shares will have been complied with.
4. Upon the acceptance of payment for shares issued in accordance with the
Prospectus contained in the Registration Statement and upon compliance
with applicable law, such shares will be legally-issued, fully paid and
non-assessable shares of the Registrant.
You may use this letter, or a copy hereof, as an exhibit to the Registration
Statement.
Very truly yours,
/s/ LIZBETH A. ENGLUND
Lizbeth A. Englund
Associate General Counsel
<PAGE> 1
EXHIBIT NO. 99.13
STOCK PURCHASE AGREEMENT
<PAGE> 2
EXHIBIT 99.13
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into this
_________ day of ______________, 19__, between __________________________, a
Washington corporation ("Fund"), and SAFECO Life Insurance Company, a
Washington corporation ("SAFECO Life"), which is a wholly-owned subsidiary of
SAFECO Corporation.
R E C I T A L S :
WHEREAS, The Fund is a recently organized corporation formed to engage in the
business of investing, reinvesting or trading securities, or in any other
business activity incidental to the business of an investment management
company, as such is defined in Section 4(3) of the Investment Company Act of
1940 ("1940 Act"), desires to raise $5,000,000 through the sale to SAFECO
Insurance of 500,000 shares of its Common Stock, par value $.10 per share
("Common Stock"), at a price of $10 per share, and plans, subsequent to the
sale of said shares under this Agreement, to register with the Securities and
Exchange Commission ("Commission") an indefinite number of shares of its Common
Stock for offering and sale under the Securities Act of 1933 ("1933 Act").
WHEREAS, SAFECO Life is an affiliate of SAFECO Asset Management Company ("SAM")
which has been selected by the Fund to serve as its investment adviser and is
familiar with the advisory activities, management and experience of SAM, has
received and reviewed the Registration Statement on Form N-1A that the Fund
intends to file with the Commission with respect to the registration of an
indefinite number of shares of its Common Stock and the registration of the
Fund as an investment company under the 1940 Act, has had an opportunity to ask
questions of, and receive answers from, the Fund and SAM with respect to the
proposed activities of the Fund, and, upon the basis of the information
available to it, is willing to acquire from the Fund 500,000 of its shares of
Common Stock pursuant to the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual promises, covenants, and
warranties contained herein, the Fund and SAFECO Insurance agree as follows:
1. STOCK PURCHASE.
Subject to the terms and conditions of this Agreement, the Fund agrees to
sell to SAFECO Life, and SAFECO Life agrees to purchase from the Fund, 500,000
shares of the Fund's Common Stock ("Shares") at a purchase price of $10 per
share, for an aggregate consideration of $5,000,000.
Upon the execution of this Agreement by the parties and at the request of the
President of the Fund, SAFECO Life shall pay to the Fund $5,000,000 in coin or
currency of the United States of America which, at the time of payment, is
legal tender
<PAGE> 3
for the payment of public and private debts and the Fund shall
deliver, or cause to be delivered, to SAFECO Life a stock certificate
representing the Shares signed by duly authorized officers of the Fund and
countersigned by the Fund's transfer agent. It is hereby agreed that the stock
certificate shall bear a restrictive legend in substantially the form set forth
in paragraph 2 of this Agreement.
2. RESTRICTIONS UPON TRANSFER OF SHARES.
The Shares have not been registered by the Fund under the 1933 Act but are
being offered and will be sold to SAFECO Life pursuant to an exemption from the
registration requirements of that Act for transactions which do not involve a
public offering. The Fund does not plan, and is under no obligation to provide
for, any registration of the Shares in the future. SAFECO Life hereby
covenants that it will not sell, pledge, hypothecate or otherwise transfer any
of the Shares, or any interest therein, whether or not for consideration,
unless it has previously notified the Fund of the proposed transfer and
delivered to the Fund in legal opinion, in form and substance satisfactory to
the Fund and its counsel, that such transfer is not in violation of the 1933
Act and applicable state securities laws. Furthermore, the parties hereby
agree, that in view of the restrictions upon transfer, that the stock
certificate representing the Shares shall bear a restrictive legend that is in
substantially the following form:
"The securities represented by the stock certificate have been acquired
pursuant to an investment representation on the part of the purchaser thereof
and shall not be sold, pledged, hypothecated, donated or otherwise
transferred, whether or not for consideration, by the purchaser except upon
the issuance to the corporation of a favorable opinion of its counsel to the
effect that any such transfer shall not be in violation of the Securities Act
of 1933, as amended, and applicable state securities laws."
3. WARRANTIES AND REPRESENTATIONS OF FUND.
The Fund hereby represents and warrants as follows:
(a) The Fund has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of Washington and has
the corporate power and authority to carry on its business as presently
conducted and to perform its obligations under this Agreement.
(b) The execution, delivery and performance by the Fund of this Agreement
have been duly authorized by all necessary corporate action on the part of the
Fund.
(c) The issuance and sale of the Shares pursuant to this Agreement have been
duly authorized by all necessary corporate action on the part of the Fund and
the Shares have been duly issued and shall, upon receipt of the purchase price
specified in paragraph 1 above, by fully paid and non-assessable and shall
constitute
<PAGE> 4
valid and legal binding obligations of the Fund entitled to the
benefits granted to the Fund's shareholders under its Articles of Incorporation
and Bylaws.
(d) Neither the issuance nor sale of the Shares, nor the consummation of any
of the transactions contemplated by this Agreement, will conflict with, result
in a breach of, or constitute a default under, the terms of the Articles of
Incorporation or Bylaws of the Fund, or any indenture, mortgage agreement,
instrument or undertaking to which the Fund is a party or is bound, or any
other or regulation applicable to the Fund of any court, regulatory body,
administrative agency or governmental body having jurisdiction over the Fund.
(e) No consent, approval, authorization or order of any court or
governmental agency or body is required for the issuance and sale of the Shares
or the consummation of the Transactions contemplated by this Agreement.
4. WARRANTIES AND REPRESENTATIONS OF SAFECO INSURANCE.
SAFECO Life hereby represents and warrants as follows:
(a) SAFECO Life has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of Washington with
full power and authority to own its property and conduct its business and to
perform its obligations under this Agreement.
(b) The execution, delivery and performance of this Agreement have been duly
authorized by all necessary corporate action on the part of SAFECO Life.
(c) Neither the execution, delivery, nor performance of this Agreement, nor
the acquisition of the Shares, will conflict with, result in a breach of, or
constitute a default under the terms of the Articles of Incorporation or Bylaws
of SAFECO Life or any indenture, mortgage agreement, instrument or undertaking
to which SAFECO is a party or bound, or any order or regulation applicable to
SAFECO Life of any court, regulatory body, administrative agency, or
governmental body having jurisdiction over SAFECO Life.
(d) No consent, approval, authorization or order of any court or
governmental agency or body is required by SAFECO Life for the acquisition of
the Shares pursuant to this Agreement, except such as has been obtained from
the Insurance Commissioner of the State of Washington.
(e) SAFECO Life is acquiring the Shares for its own account, for investment
purposes and not with a view to the subsequent offering, sale or distribution
thereof and SAFECO Life is not participating, directly or indirectly, in any
plan or scheme involving the resale or distribution of the Shares or any
interest therein.
<PAGE> 5
(f) SAFECO Life has sufficient knowledge and experience in business matters
so as to enable it to evaluate the merits and risks of acquiring the Shares
from the Fund and has sufficient assets to bear the economic risk of losing
part or all of its investment in the Fund.
(g) SAFECO Life acknowledges that it has received and reviewed a copy of the
Registration Statement on Form N-1A that the Fund intends to file with the
Commission with respect to the registration of an indefinite number of shares
of its Common Stock under the 1933 Act and the registration of the Fund as an
investment company under the 1940 Act and that it has been afforded the
opportunity to ask questions of, and receive answers from, the Fund or SAM with
respect to the proposed operations of the Fund.
5. TRANSFER AGENT INSTRUCTIONS.
It is hereby acknowledged by the parties that the Fund's transfer agent will
be instructed not to transfer the Shares to any third party unless it has
received a copy of the legal opinion required by paragraph 2 above and written
consent to such transfer from the Fund.
6. DIVIDEND RETENTION.
SAFECO Life agrees to permit the Fund to hold all dividends accrued and
payable to it until such time as the first dividends are paid by the Fund to
any other shareholder.
7. MISCELLANEOUS.
This Agreement embodies the entire agreement and understanding between the
Fund and SAFECO Life with respect to the sale of the Shares and supersedes any
prior written or oral agreement between the parties. This Agreement shall be
governed by and construed in accordance with the laws of the State of
Washington.
<PAGE> 6
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the date and year first above
written.
-------------------------------------
By
----------------------------------
L.D. McClean
President
SAFECO LIFE INSURANCE COMPANY
By
----------------------------------
R.H. Eigsti
Senior Vice President
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this day personally appeared before me L.D. McClean, to me know to be the
President of _______________________________, the corporation that executed the
foregoing instrument, and acknowledged the same instrument to be the free and
voluntary act and deed of said corporation for the uses and purposes therein
mentioned, and on oath stated that he is authorized to execute the said
instrument, and that the seal affixed (if any) is the corporate seal of said
corporation.
WITNESS MY HAND AND OFFICIAL SEAL HERETO AFFIXED this ________
day of ____________, 1995.
------------------------------------
Notary Public in and for the State of
Washington, residing at ____________.
