<PAGE> 1
811-8466
Registration Nos. 33-79978
------------------------------------------------------------------------------
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. 1 /X/
____________
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 2 /X/
____________
(Check appropriate box or boxes.)
SAFECO Advisor Series Trust
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
SAFECO Plaza, Seattle, Washington 98185
--------------------------------------------------
(Address of Principal Executive Offices) ZIP Code
Registrant's Telephone Number, including
Area Code (206) 545-5000
----------------------------
Name and Address of Agent for Service
DAVID F. HILL
SAFECO Plaza
Seattle, Washington 98185
(206) 545-5269
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective
X immediately upon filing pursuant to paragraph (b)
____ on _______________ pursuant to paragraph (b)
____ 60 days after filing pursuant to paragraph (a)
____ on March 31, 1995 pursuant to paragraph (a) of Rule 485
==============================================================================
Registrant is registering 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 filed a Rule 24f-2 Notice on ________________.
==============================================================================
The Exhibit Index is at page ____.
<PAGE> 2
SAFECO ADVISOR SERIES TRUST
Registration Statement on Form N-1A
Cross Reference Sheet
Part A
<TABLE>
<CAPTION>
Item No. Location in Prospectus
-------- ----------------------
<S> <C> <C>
Item 1. Cover Page Cover page
Item 2. Synopsis Introduction to the
Trust and the Funds; Fund Expenses
Item 3. Condensed Financial Information Financial Highlights; Performance Information
Item 4. General Description of Registrant Investment Policies, Risk Factors and
Portfolio Managers; General Fund Information
Item 5. Management of the Trust General Fund Information;
Portfolio Managers; Fund Expenses
Item 6. Capital Stock and Other Cover Page; Fund
Distributions and How They are
Taxed; General Fund Information;
Persons Controlling the Funds
Item 7. Purchase of Securities Alternative Purchase Arrangement;
Being Offered How to Purchase Shares;
How to Exchange Shares
From One Fund to Another;
How to Systematically
Purchase or Redeem Shares;
Share Valuation;
Tax-Deferred Retirement
Plans; Account Statements;
Telephone Transactions
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
Item 9. Pending Legal Proceedings Not applicable
</TABLE>
1
<PAGE> 3
Part B
<TABLE>
<CAPTION>
Location in Statement
Item No. of Additional Information
-------- -------------------------
<S> <C> <C>
Item 10. Cover Page Cover page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History Not applicable
Item 13. Investment Objectives and Policies Investment Policies; Additional
Investment Information;
Special Risks of Below Investment
Grade Bonds - Advisor Equity Fund;
Investment Risks of Concentration in
Washington Issuers
Item 14. Management of the Trust Trustees and Officers; Investment
Advisory and Other Services
Item 15. Control Persons and Principal Principal Shareholders of the Funds
Holders of Securities
Item 16. Investment Advisory and Other Investment Advisory and
Services Other Services
Item 17. Brokerage Allocation and Other Brokerage Practices
Practices
Item 18. Capital Stock and Other Additional Tax Information
Securities
Item 19. Purchase, Redemption and Pricing Conversion of Class B Shares;
of Securities Being Offered Additional Information 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. Calculations of Performance Data Additional Performance Information
Item 23. Financial Statements Financial Statements
</TABLE>
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
2
<PAGE> 4
PROSPECTUS
SAFECO ADVISOR EQUITY FUND
SAFECO ADVISOR NORTHWEST FUND
SAFECO ADVISOR INTERMEDIATE-TERM TREASURY FUND
SAFECO ADVISOR U.S. GOVERNMENT FUND
SAFECO ADVISOR GNMA FUND
SAFECO ADVISOR MUNICIPAL BOND FUND
SAFECO ADVISOR INTERMEDIATE-TERM MUNICIPAL BOND FUND
SAFECO ADVISOR WASHINGTON MUNICIPAL BOND FUND
March 31, 1995
Each of the funds described in this Prospectus is a series of the SAFECO Advisor
Series Trust ("Trust"), an open-end, management investment company consisting of
eight separate series.
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 THE PROSPECTUS FOR FUTURE REFERENCE. A Statement of
Additional Information, dated March 31, 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 the number 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 your investment professional or
SAFECO Securities, Inc. ("SAFECO Securities"):
Nationwide 1-800-463-8791
SAFECO Advisor Series Trust
P.O. Box 34680
Seattle, WA 98124-1680
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY,
THE U.S. GOVERNMENT OR ANY BANK, NOR ARE FUND SHARES FEDERALLY INSURED OR
OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
No dealer, salesperson or other person has been authorized to give any
information or to make any representation, other than those contained in this
Prospectus, and, if given or made, such other information or representations
must not be relied upon as having been authorized by the Trust or SAFECO
Securities. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy by the Trust or by SAFECO Securities in any
state in which such offer or solicitation may not lawfully be made.
- 1 -
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<S> <C>
INTRODUCTION TO THE TRUST AND THE FUNDS................................................. 3
The Funds..................................................................... 3
Risk Factors.................................................................. 3
Investment Adviser............................................................ 4
Alternative Purchase Arrangement.............................................. 4
FUND EXPENSES........................................................................... 4
FINANCIAL HIGHLIGHTS.................................................................... 6
INVESTMENT POLICIES, RISK FACTORS AND PORTFOLIO MANAGERS................................ 14
Advisor Equity Fund........................................................... 14
Advisor Northwest Fund........................................................ 15
Advisor Intermediate Treasury Fund............................................ 15
Advisor Government Fund....................................................... 16
Advisor GNMA Fund............................................................. 16
Advisor Municipal, Advisor Intermediate Municipal
and Advisor Washington Municipal Funds...................................... 17
Common Investment Practices................................................... 20
Risk Factors.................................................................. 20
Portfolio Managers............................................................ 21
INFORMATION ABOUT INVESTING IN FUND SHARES.............................................. 22
Alternative Purchase Arrangement.............................................. 22
How to Purchase Shares........................................................ 22
How to Exchange Shares from One Fund to Another............................... 26
How to Redeem Shares.......................................................... 26
How to Systematically Purchase or Redeem Shares............................... 27
Account Changes and Signature Requirements.................................... 28
Account Statements............................................................ 28
Telephone Transactions........................................................ 28
Share Valuation............................................................... 28
Fund Distributions and How They are Taxed..................................... 29
Performance Information....................................................... 30
INFORMATION ABOUT SHARE OWNERSHIP AND COMPANIES WHICH PROVIDE
SERVICES TO THE TRUST................................................................. 30
General Fund Information...................................................... 30
Tax-Deferred Retirement Plans................................................. 31
Distribution Plans............................................................ 31
Persons Controlling the Funds................................................. 32
RATINGS SUPPLEMENT...................................................................... 32
Description of Debt Ratings................................................... 32
</TABLE>
- 2 -
<PAGE> 6
INTRODUCTION TO THE TRUST AND THE FUNDS
The Trust is a series investment company that currently issues shares
representing eight mutual funds: SAFECO Advisor Equity Fund ("Advisor Equity
Fund"), SAFECO Advisor Northwest Fund ("Advisor Northwest Fund"), SAFECO Advisor
Intermediate-Term Treasury Fund ("Advisor Intermediate Treasury Fund"), SAFECO
Advisor U.S. Government Fund ("Advisor Government Fund"), SAFECO Advisor GNMA
Fund ("Advisor GNMA Fund"), SAFECO Advisor Municipal Bond Fund ("Advisor
Municipal Fund"), SAFECO Advisor Intermediate-Term Municipal Bond Fund ("Advisor
Intermediate Municipal Fund") and SAFECO Advisor Washington Municipal Bond Fund
("Advisor Washington Municipal Fund") (collectively the "Funds" or "SAFECO
Advisor 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.
THE FUNDS
The ADVISOR EQUITY FUND has as its investment objective to seek long-term growth
of capital and reasonable current income. To pursue its objective, the Fund
invests principally in common stocks selected for appreciation and/or dividend
potential and from a long-range investment standpoint.
The ADVISOR NORTHWEST FUND has as its investment objective to seek long-term
growth of capital through investing primarily in Northwest companies. To pursue
its objective, the Fund will invest at least 65% of its total assets in
securities issued by companies with their principal executive offices located in
Alaska, Idaho, Montana, Oregon or Washington ("Northwest").
The ADVISOR INTERMEDIATE TREASURY FUND, ADVISOR GOVERNMENT FUND and ADVISOR GNMA
FUND each has as its investment objective to seek as high a level of current
income as is consistent with the preservation of capital.
To pursue its objective, the ADVISOR INTERMEDIATE TREASURY FUND, during
normal market conditions, will invest at least 65% of its total assets in
direct obligations of the U.S. Treasury and will maintain a portfolio
having an average dollar-weighted maturity of between three and ten years.
To pursue its objective, the ADVISOR GOVERNMENT FUND, during normal market
conditions, will invest at least 65% of its total assets in U.S. Government
securities.
To pursue its objective, the ADVISOR GNMA FUND, during normal market
conditions, will invest at least 65% of its total assets in mortgage-backed
securities issued by the Government National Mortgage Association ("GNMA").
The ADVISOR MUNICIPAL FUND, ADVISOR INTERMEDIATE MUNICIPAL FUND and ADVISOR
WASHINGTON MUNICIPAL 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. During normal market conditions each
Fund will invest at least 80% of its net assets in municipal securities, the
interest on which is exempt from federal income tax, and 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 ADVISOR MUNICIPAL FUND will invest primarily
in investment grade municipal bonds whose interest is exempt from federal
income tax and seek to maintain a portfolio having an average
dollar-weighted maturity of between twenty and twenty-five years.
To pursue its objective, the ADVISOR INTERMEDIATE MUNICIPAL FUND will
invest primarily in investment grade municipal bonds whose interest is
exempt from federal income tax and will maintain a portfolio having an
average dollar-weighted maturity of between three and ten years.
To pursue its objective, the ADVISOR WASHINGTON MUNICIPAL 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 and seek to maintain a portfolio
having an average dollar-weighted maturity of between twenty and
twenty-five years.
There is, of course, no assurance that a Fund will achieve its investment
objective. See "Investment Policies, Risk Factors and Portfolio Managers" at
pages 14 to 21 for more information.
RISK FACTORS
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 Advisor Equity Fund may invest up to 15% of its total assets in
below-investment grade convertible corporate bonds. These bonds are subject to
greater fluctuations in value and risk of loss of income and principal than
investment grade or high quality securities. Because the Advisor Northwest Fund
concentrates its investments primarily in the Northwest and the Advisor
Washington Municipal Fund concentrates its investments in Washington State,
these Funds may each be subject to special risks. Investors should carefully
consider the
- 3 -
<PAGE> 7
investment risks of such geographic concentration before purchasing shares of
these Funds. See "Risk Factors" on page 20 for more information.
INVESTMENT ADVISER
Each Fund is managed by SAFECO Asset Management Company ("SAM"). SAM is
headquartered in Seattle, Washington and manages over $2.0 billion in mutual
fund assets as of February 28, 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 "General Fund Information" on page 30 for more
information.
ALTERNATIVE PURCHASE ARRANGEMENT
Each Fund issues three classes of shares. Class A shares are sold to investors
choosing the initial sales charge alternative with a service fee. Class B shares
are sold to investors choosing the contingent deferred sales charge alternative
with service and distribution fees and which convert automatically to Class A
shares approximately eight years after purchase. Class C shares are sold to
investors choosing the alternative with no initial or deferred sales charge, but
with service and distribution fees. See "Information About Investing in Fund
Shares" on page 22 for more information.
FUND EXPENSES
A. SHAREHOLDER TRANSACTION EXPENSES FOR EACH FUND
<TABLE>
<CAPTION>
ADVISOR GOVERNMENT, ADVISOR INTERMEDIATE
ADVISOR ADVISOR GNMA AND MUNICIPAL, ADVISOR
EQUITY AND ADVISOR ADVISOR INTERMEDIATE MUNICIPAL AND ADVISOR
NORTHWEST FUNDS TREASURY FUNDS WASHINGTON MUNICIPAL FUNDS
--------------------------- --------------------------- ---------------------------
Class A Class B Class C Class A Class B Class C Class A Class B Class C
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales 4.75% None None 4.75% None None 4.75% None None
Charge on
Purchases (As a
Percentage of
Offering Price)
Sales Charge on None None None None None None None None None
Reinvested Dividends
Maximum Contingent None 5.0% None None 5.0% None None 5.0% None
Deferred Sales Charge
(As a Percentage of
Redemption Proceeds)
Redemption Fee None None None None None None None None None
Exchange Fee None None None None None None None None None
</TABLE>
SAFECO Services, Inc., 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>
ADVISOR GOVERNMENT, ADVISOR INTERMEDIATE
ADVISOR ADVISOR GNMA AND MUNICIPAL, ADVISOR
EQUITY AND ADVISOR ADVISOR INTERMEDIATE MUNICIPAL AND ADVISOR
NORTHWEST FUNDS TREASURY FUNDS WASHINGTON MUNICIPAL FUNDS
--------------------------- --------------------------- ---------------------------
Class A Class B Class C Class A Class B Class C Class A Class B Class C
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fee .75% .75% .75% .60% .60% .60% .60% .60% .60%
12b-1 Fees .25% 1.00% 1.00% .25% 1.00% 1.00% .25% 1.00% 1.00%
Other Expenses (estimated) .40% .40% .40% .40% .40% .40% .40% .40% .40%
------- ------- ------- ------- ------- ------- ------- ------- -------
Total Operating 1.40% 2.15% 2.15% 1.25% 2.00% 2.00% 1.25% 2.00% 2.00%
Expenses..............
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
- 4 -
<PAGE> 8
The amounts shown are annualized expenses based on the maximum management and
12b-1 service and distribution fees and estimated "Other Expenses" and "Total
Operating Expenses" for the fiscal period ending December 31, 1994. See "General
Fund Information" on page 30 for more information. Sales charge waivers are
available for Class A and Class B shares and reduced sales charge purchase plans
are available for Class A shares. See "How to Purchase Shares" on page 22 for
more information. The maximum 5% contingent deferred sales charge on Class B
shares applies to redemptions during the first year after purchase, declining in
subsequent years, and reaching 0% after six years. Class B shares convert
automatically into Class A shares of the same Fund approximately eight years
after purchase. See "Purchasing Class B Shares" on page 25 for more information.
The management fees paid by the Advisor Equity Fund and the Advisor Northwest
Fund are higher than the management fees paid by most other investment
companies. 12b-1 fees have the following two components:
<TABLE>
<CAPTION>
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
12b-1 service fees 0.25% 0.25% 0.25%
12b-1 distribution fees 0.00% 0.75% 0.75%
</TABLE>
12b-1 distribution fees are asset-based sales charges. Long-term Class B and
Class C shareholders may pay more than the economic equivalent of the maximum
front-end sales charge permitted by the National Association of Securities
Dealers, Inc.
C. EXAMPLE OF EXPENSES
You would pay the following expenses on a $1,000 investment assuming a 5% annual
return. The example assumes that all dividends and other distributions are
reinvested and that the percentage amounts listed in "Annual Operating Expenses"
above remain the same in the years shown.
<TABLE>
<CAPTION>
1 Year 3 Years
------ -------
<S> <C> <C>
Advisor Equity and Northwest Funds
Class A Shares(1)................................................................. $ 61 $90
Class B Shares
Assuming shares are redeemed at the end of the period(2)....................... 72 97
Assuming no redemption at the end of the period................................ 22 67
Class C Shares.................................................................... 22 67
Advisor Intermediate Treasury, Government, and GNMA Funds
Class A Shares(1)................................................................. 60 85
Class B Shares
Assuming shares are redeemed at the end of the period(2)....................... 70 93
Assuming no redemption at the end of the period................................ 20 63
Class C Shares.................................................................... 20 63
Advisor Municipal, Intermediate Municipal and Washington Municipal Funds
Class A Shares(1)................................................................. 60 85
Class B Shares
Assuming shares are redeemed at the end of the period(2)....................... 70 93
Assuming no redemption at the end of the period................................ 20 63
Class C Shares.................................................................... 20 63
</TABLE>
(1)Includes deduction at the time of purchase of the maximum sales charge.
(2)Includes deduction at the time of redemption of the applicable contingent
deferred sales charge.
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 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, FUTURE PERFORMANCE OF ANY FUND.
- 5 -
<PAGE> 9
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO ADVISOR SERIES TRUST -- EQUITY FUND
The supplemental financial information and performance data has been derived
from the Financial Statements and should be read in conjunction therewith.
For the period September 30, 1994 (Commencement of Operations) through December
31, 1994
<TABLE>
<CAPTION>
SAFECO ADVISOR EQUITY FUND
-----------------------------------
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Net Asset Value at Beginning of Period.............................. $10.00 $10.00 $10.00
Income From Investment Operations
Net Investment Income (Loss)...................................... 0.03 0.01 0.01
Net Realized and Unrealized Loss on Investments................... (0.24) (0.24) (0.24)
------- ------- -------
Total from Investment Operations.................................. (0.21) (0.23) (0.23)
Less Distributions
Dividends from Net Investment Income.............................. (0.03) (0.01) (0.01)
Distributions from Capital Gains.................................. -- -- --
------- ------- -------
Total Distributions............................................... (0.03) (0.01) (0.01)
------- ------- -------
Net Asset Value at End of Period.................................. $ 9.76 $ 9.76 $ 9.76
======= ======= =======
Total Return(a)..................................................... -2.10%** -2.29%** -2.29%**
Net Assets at End of Period (000's)................................. $1,628 $1,629 $1,635
Ratio of Expenses to Average Net Assets............................. 2.57%* 3.31%* 3.32%*
Ratio of Net Investment Income (Loss) to Average Net Assets......... 1.18%* 0.44%* 0.44%*
Portfolio Turnover Rate............................................. 34.83%* 34.83%* 34.83%*
</TABLE>
(a) Total return excludes the effects of sales charges. If sales charges were
included, the total return for Class A and Class B shares would be lower.
** Not Annualized.
* Annualized.
- 6 -
<PAGE> 10
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO ADVISOR SERIES TRUST -- NORTHWEST FUND
The supplemental financial information and performance data has been derived
from the Financial Statements and should be read in conjunction therewith.
For the period September 30, 1994 (Commencement of Operations) through December
31, 1994
<TABLE>
<CAPTION>
SAFECO ADVISOR NORTHWEST FUND
-----------------------------------
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Net Asset Value at Beginning of Period.............................. $10.00 $10.00 $10.00
Income From Investment Operations
Net Investment Income (Loss)...................................... (0.01) (0.02) (0.02)
Net Realized and Unrealized Loss on Investments................... (0.24) (0.25) (0.25)
------- ------- -------
Total from Investment Operations.................................. (0.25) (0.27) (0.27)
------- ------- -------
Less Distributions
Dividends from Net Investment Income.............................. -- -- --
Distributions from Capital Gains.................................. -- -- --
------- ------- -------
Total Distributions............................................... 0.00 0.00 0.00
------- ------- -------
Net Asset Value at End of Period.................................. $ 9.75 $ 9.73 $ 9.73
======= ======= =======
Total Return(a)..................................................... -2.50%** -2.70%** -2.70%**
Net Assets at End of Period (000's)................................. $1,626 $1,622 $1,625
Ratio of Expenses to Average Net Assets............................. 2.28%* 3.03%* 3.03%*
Ratio of Net Investment Income (Loss) to Average Net Assets......... -0.20%* -0.95%* -0.95%*
Portfolio Turnover Rate............................................. None None None
</TABLE>
(a) Total return excludes the effects of sales charges. If sales charges were
included, the total return for Class A and Class B shares would be lower.
** Not Annualized.
* Annualized.
- 7 -
<PAGE> 11
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO ADVISOR SERIES TRUST -- INTERMEDIATE-TERM TREASURY FUND
The supplemental financial information and performance data has been derived
from the Financial Statements and should be read in conjunction therewith.
For the period September 30, 1994 (Commencement of Operations) through December
31, 1994
<TABLE>
<CAPTION>
SAFECO ADVISOR
INTERMEDIATE-TERM TREASURY FUND
--------------------------------------
Class A Class B Class C
-------- -------- --------
<S> <C> <C> <C>
Net Asset Value at Beginning of Period............................ $10.00 $10.00 $10.00
Income From Investment Operations
Net Investment Income (Loss).................................... 0.11 0.09 0.09
Net Realized and Unrealized Loss on Investments................. (0.07) (0.07) (0.07)
-------- -------- --------
Total from Investment Operations................................ 0.04 0.02 0.02
-------- -------- --------
Less Distributions
Dividends from Net Investment Income............................ (0.11) (0.09) (0.09)
Distributions from Capital Gains................................ -- -- --
-------- -------- --------
Total Distributions............................................. (0.11) (0.09) (0.09)
-------- -------- --------
Net Asset Value at End of Period................................ $ 9.93 $ 9.93 $ 9.93
======= ======= =======
Total Return(a)................................................... 0.41%** 0.22%** 0.22%**
Net Assets at End of Period (000's)............................... $1,655 $1,655 $1,664
Ratio of Expenses to Average Net Assets........................... 1.86%* 2.61%* 2.61%*
Ratio of Net Investment Income (Loss) to Average Net Assets....... 4.42%* 3.67%* 3.67%*
Portfolio Turnover Rate........................................... 346.43%* 346.43%* 346.43%*
</TABLE>
(a) Total return excludes the effects of sales charges. If sales charges were
included, the total return for Class A and Class B shares would be lower.
** Not Annualized.
* Annualized.
- 8 -
<PAGE> 12
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO ADVISOR SERIES TRUST -- U.S. GOVERNMENT FUND
The supplemental financial information and performance data has been derived
from the Financial Statements and should be read in conjunction therewith.
For the period September 30, 1994 (Commencement of Operations) through December
31, 1994
<TABLE>
<CAPTION>
SAFECO ADVISOR
U.S. GOVERNMENT FUND
-----------------------------------
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Net Asset Value at Beginning of Period............................ $10.00 $10.00 $10.00
Income From Investment Operations
Net Investment Income (Loss).................................... 0.11 0.09 0.09
Net Realized and Unrealized Loss on Investments................. (0.01) (0.01) (0.01)
------- ------- -------
Total from Investment Operations................................ 0.10 0.08 0.08
------- ------- -------
Less Distributions
Dividends from Net Investment Income............................ (0.11) (0.09) (0.09)
Distributions from Capital Gains................................ -- -- --
------- ------- -------
Total Distributions............................................. (0.11) (0.09) (0.09)
------- ------- -------
Net Asset Value at End of Period................................ $ 9.99 $ 9.99 $ 9.99
======= ======= =======
Total Return(a)................................................... 0.99%** 0.79%** 0.79%**
Net Assets at End of Period (000's)............................... $1,665 $1,664 $1,664
Ratio of Expenses to Average Net Assets........................... 1.85%* 2.60%* 2.60%*
Ratio of Net Investment Income (Loss) to Average Net Assets....... 4.29%* 3.54%* 3.54%*
Portfolio Turnover Rate........................................... 445.09%* 445.09%* 445.09%*
</TABLE>
(a) Total return excludes the effects of sales charges. If sales charges were
included, the total return for Class A and Class B shares would be lower.
** Not Annualized.
* Annualized.
- 9 -
<PAGE> 13
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO ADVISOR SERIES TRUST -- GNMA FUND
The supplemental financial information and performance data has been derived
from the Financial Statements and should be read in conjunction therewith.
For the period September 30, 1994 (Commencement of Operations) through December
31, 1994
<TABLE>
<CAPTION>
SAFECO ADVISOR GNMA FUND
-----------------------------------
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Net Asset Value at Beginning of Period.............................. $10.00 $10.00 $10.00
Income From Investment Operations
Net Investment Income (Loss)...................................... 0.13 0.11 0.11
Net Realized and Unrealized Loss on Investments................... (0.20) (0.20) (0.20)
------- ------- -------
Total from Investment Operations.................................. (0.07) (0.09) (0.09)
------- ------- -------
Less Distributions
Dividends from Net Investment Income.............................. (0.13) (0.11) (0.11)
Distributions from Capital Gains.................................. -- -- --
------- ------- -------
Total Distributions............................................... (0.13) (0.11) (0.11)
------- ------- -------
Net Asset Value at End of Period.................................. $ 9.80 $ 9.80 $ 9.80
======= ======= =======
Total Return(a)..................................................... -0.72%** -0.90%** -0.90%**
Net Assets at End of Period (000's)................................. $1,633 $1,633 $1,632
Ratio of Expenses to Average Net Assets............................. 1.98%* 2.73%* 2.73%*
Ratio of Net Investment Income (Loss) to Average Net Assets......... 5.11%* 4.36%* 4.36%*
Portfolio Turnover Rate............................................. 2.74%* 2.74%* 2.74%*
</TABLE>
(a) Total return excludes the effects of sales charges. If sales charges were
included, the total return for Class A and Class B shares would be lower.
** Not Annualized.
* Annualized.
- 10 -
<PAGE> 14
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO ADVISOR SERIES TRUST -- MUNICIPAL BOND FUND
The supplemental financial information and performance data has been derived
from the Financial Statements and should be read in conjunction therewith.
For the period September 30, 1994 (Commencement of Operations) through December
31, 1994
<TABLE>
<CAPTION>
SAFECO ADVISOR
MUNICIPAL BOND FUND
-----------------------------------
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Net Asset Value at Beginning of Period............................ $10.00 $10.00 $10.00
Income From Investment Operations
Net Investment Income (Loss).................................... 0.08 0.06 0.06
Net Realized and Unrealized Loss on Investments................. (0.10) (0.10) (0.10)
------- ------- -------
Total from Investment Operations................................ (0.02) (0.04) (0.04)
------- ------- -------
Less Distributions
Dividends from Net Investment Income............................ (0.08) (0.06) (0.06)
Distributions from Capital Gains................................ -- -- --
------- ------- -------
Total Distributions............................................. (0.08) (0.06) (0.06)
------- ------- -------
Net Asset Value at End of Period................................ $ 9.90 $ 9.90 $ 9.90
======= ======= =======
Total Return(a)................................................... -0.16%** -0.35%** -0.35%**
Net Assets at End of Period (000's)............................... $1,650 $1,650 $1,649
Ratio of Expenses to Average Net Assets........................... 1.92%* 2.67%* 2.67%*
Ratio of Net Investment Income (Loss) to Average Net Assets....... 3.33%* 2.59%* 2.59%*
Portfolio Turnover Rate........................................... 492.95%* 492.95%* 492.95%*
</TABLE>
(a) Total return excludes the effects of sales charges. If sales charges were
included, the total return for Class A and Class B shares would be lower.
** Not Annualized.
* Annualized.
- 11 -
<PAGE> 15
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO ADVISOR SERIES TRUST -- INTERMEDIATE-TERM
MUNICIPAL BOND FUND
The supplemental financial information and performance data has been derived
from the Financial Statements and should be read in conjunction therewith.
For the period September 30, 1994 (Commencement of Operations) through December
31, 1994
<TABLE>
<CAPTION>
SAFECO ADVISOR INTERMEDIATE-
TERM MUNICIPAL BOND FUND
-----------------------------------
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Net Asset Value at Beginning of Period.............................. $10.00 $10.00 $10.00
Income From Investment Operations
Net Investment Income (Loss)...................................... 0.07 0.05 0.05
Net Realized and Unrealized Loss On Investments................... (0.20) (0.20) (0.20)
------- ------- -------
Total from Investment Operations.................................. (0.13) (0.15) (0.15)
------- ------- -------
Less Distributions
Dividends from Net Investment Income.............................. (0.07) (0.05) (0.05)
Distributions from Capital Gains.................................. -- -- --
------- ------- -------
Total Distributions............................................... (0.07) (0.05) (0.05)
------- ------- -------
Net Asset Value at End of Period.................................. $ 9.80 $ 9.80 $ 9.80
======= ======= =======
Total Return(a)..................................................... -1.29%** -1.48%** -1.48%**
Net Assets at End of Period (000's)................................. $1,633 $1,633 $1,633
Ratio of Expenses to Average Net Assets............................. 1.87%* 2.62%* 2.62%*
Ratio of Net Investment Income (Loss) to Average Net Assets......... 2.85%* 2.10%* 2.10%*
Portfolio Turnover Rate............................................. 513.36%* 513.36%* 513.36%*
</TABLE>
(a) Total return excludes the effects of sales charges. If sales charges were
included, the total return for Class A and Class B shares would be lower.
** Not Annualized.
* Annualized.
- 12 -
<PAGE> 16
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO ADVISOR SERIES TRUST -- WASHINGTON MUNICIPAL BOND FUND
The supplemental financial information and performance data has been derived
from the Financial Statements and should be read in conjunction therewith.
For the period September 30, 1994 (Commencement of Operations) through December
31, 1994
<TABLE>
<CAPTION>
SAFECO ADVISOR WASHINGTON
MUNICIPAL BOND FUND
-----------------------------------
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Net Asset Value at Beginning of Period............................ $10.00 $10.00 $10.00
Income From Investment Operations
Net Investment Income (Loss).................................... 0.09 0.07 0.07
Net Realized and Unrealized Loss On Investments................. (0.18) (0.18) (0.18)
------- ------- -------
Total from Investment Operations................................ (0.09) (0.11) (0.11)
------- ------- -------
Less Distributions
Dividends from Net Investment Income............................ (0.09) (0.07) (0.07)
Distributions from Capital Gains................................ -- -- --
------- ------- -------
Total Distributions............................................. (0.09) (0.07) (0.07)
------- ------- -------
Net Asset Value at End of Period................................ $ 9.82 $ 9.82 $ 9.82
======= ======= =======
Total Return(a)................................................... -0.93%** -1.12%** -1.12%
Net Assets at End of Period (000's)............................... $1,636 $1,667 $1,694
Ratio of Expenses to Average Net Assets........................... 1.90%* 2.64%* 2.65%*
Ratio of Net Investment Income (Loss) to Average Net Assets....... 3.48%* 2.72%* 2.72%*
Portfolio Turnover Rate........................................... 510.18%* 510.18%* 510.18%*
</TABLE>
(a) Total return excludes the effects of sales charges. If sales charges were
included, the total return for Class A and Class B shares would be lower.
** Not Annualized.
* Annualized.
- 13 -
<PAGE> 17
INVESTMENT POLICIES, RISK FACTORS AND PORTFOLIO MANAGERS
The Trust is a Delaware business trust established by a Trust Instrument dated
March 31, 1994. The Trust currently consists of eight mutual funds: Advisor
Equity Fund, Advisor Northwest Fund, Advisor Intermediate Treasury Fund, Advisor
Government Fund, Advisor GNMA Fund, Advisor Municipal Fund, Advisor Intermediate
Municipal Fund and Advisor Washington Municipal 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 investment objective
without shareholder vote, but no such change will be made without 30 days' prior
written notice to shareholders of that Fund. In the event a Fund changes its
investment objective, the new objective may not meet the investment needs of
every shareholder and may be different from the objective a shareholder
considered appropriate at the time of initial investment.
Unless otherwise stated, the investment policies and limitations described below
under each Fund's description and "Common Investment Practices" are non-
fundamental and may be changed by the Board of Trustees without shareholder
vote.
ADVISOR EQUITY FUND
The investment objective of the Advisor Equity Fund is to seek long-term growth
of capital and reasonable current income. The Fund does not seek to achieve both
growth and income with every portfolio investment. Rather, the Fund attempts to
manage the portfolio as a whole so as to achieve a reasonable balance between
growth and income on an overall basis.
To pursue its objective, the Advisor Equity Fund:
1. WILL INVEST, DURING NORMAL MARKET CONDITIONS, AT LEAST 65% OF ITS TOTAL
ASSETS IN EQUITY SECURITIES (WHICH INCLUDE COMMON STOCKS, PREFERRED STOCKS
AND SECURITIES CONVERTIBLE INTO COMMON STOCKS).
2. WILL INVEST PRINCIPALLY IN COMMON STOCKS SELECTED BY SAM PRIMARILY FOR
APPRECIATION AND/OR DIVIDEND POTENTIAL AND FROM A LONG-RANGE INVESTMENT
STANDPOINT.
3. MAY INVEST UP TO 15% OF ITS TOTAL ASSETS IN SECURITIES CONVERTIBLE INTO
COMMON STOCK, E.G., CONVERTIBLE PREFERRED STOCK AND CONVERTIBLE CORPORATE
BONDS. Convertible securities are senior in rank to common stock in a
corporation's capital structure and, therefore, generally present less risk
than a corporation's common stock, although the extent of such a reduction in
risk is dependent on the credit quality of the issuer. SAM will purchase
convertible securities for the Fund if such securities offer a higher yield
than an issuer's common stock and provide reasonable potential for capital
appreciation. In periods of rising interest rates, a corporation's common
stock may increase in value more than its convertible securities because of
investors' demand to maintain the convertible securities yield with the
market.
The Advisor Equity Fund may invest up to 15% of its total assets in
convertible corporate bonds that are rated below investment grade (Ba or
below by Moody's Investors Service, Inc. ("Moody's") or BB and below by
Standard & Poor's Ratings Group ("S&P")) or in unrated bonds determined by
SAM to be of comparable quality to such rated bonds (commonly referred to as
high-yield or "junk" bonds). The Fund will not purchase a convertible
corporate bond rated below Ca by Moody's or CC by S&P or which is in default
on payment of principal and interest. Bonds rated Ca or CC are highly
speculative and have greater uncertainties or major risk exposures.
Below-investment grade bonds are speculative and involve greater investment
risks than investment grade bonds due to the issuer's reduced
creditworthiness and increased likelihood of default and bankruptcy. During
periods of economic uncertainty or change, the market prices of
below-investment grade bonds may experience increased volatility. Below-
investment grade bonds tend to reflect short-term economic and corporate
developments to a greater extent than higher quality bonds.
After purchase by the Advisor Equity Fund, a corporate bond may be downgraded
or, if unrated, may cease to be comparable to a rated security. Neither event
will require the 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. The Fund will not
hold more than 3% of its total assets in bonds that go into default on the
payment of principal and interest after purchase. In the event that an amount
in excess of 15% of the Fund's net assets is held in securities rated below-
investment grade due to a downgrade of one or more corporate bonds, SAM will
engage in an orderly disposition of such securities to the extent necessary
to ensure that the Fund's holdings of such securities do not exceed 15% of
the Fund's net assets.
SAM uses S&P and Moody's ratings only as a preliminary indicator of
investment quality. SAM will determine the quality of bonds by evaluating
such factors as the issuer's capital structure, earnings power and quality of
management. Unrated securities are not necessarily of lower quality than
rated securities, but may not be as attractive to as many
- 14 -
<PAGE> 18
investors. In addition, SAM will periodically monitor the issuer's
creditworthiness whether rated or not rated.
4. MAY INVEST UP TO 10% OF ITS TOTAL ASSETS IN REAL ESTATE INVESTMENT TRUSTS
("REITS"). REITs purchase real property, which is then leased, and make
mortgage investments. REITs are dependent upon the successful operation of
the properties owned and the financial condition of lessees and mortgagors.
The value of REIT shares will fluctuate depending on the underlying value of
the real property and mortgages owned and the amount of cash flow (net income
plus depreciation) generated and paid out. In addition, REITs typically
borrow to increase funds available for investment. Generally there is a
greater risk associated with highly leveraged REITs.
5. MAY INVEST IN AMERICAN DEPOSITARY RECEIPTS ("ADRS"), WHICH REPRESENT
SECURITIES ISSUED BY A FOREIGN ISSUER. THE ADVISOR EQUITY FUND ALSO MAY
INVEST UP TO 10% OF ITS TOTAL ASSETS IN FOREIGN SECURITIES. (THE 10%
LIMITATION DOES NOT APPLY TO FOREIGN SECURITIES DENOMINATED IN U.S. DOLLARS.)
Foreign securities and ADRs may be affected by political or economic
developments in foreign countries. Foreign companies may not be subject to
accounting standards or governmental supervision comparable to U.S.
companies, and there may be less public information about their operations.
In addition, foreign markets may be less liquid or more volatile than U.S.
markets and may offer less protection to investors. Investments in foreign
securities may also be subject to special risks, such as governmental
regulation of foreign exchange transactions and changes in rates of exchange
with the U.S. dollar.
6. MAY INVEST UP TO 5% OF ITS TOTAL ASSETS IN RESTRICTED SECURITIES ELIGIBLE FOR
RESALE UNDER RULE 144A ("RULE 144A SECURITIES"), PROVIDED THAT SAM HAS
DETERMINED THAT SUCH SECURITIES ARE LIQUID UNDER GUIDELINES ADOPTED BY THE
BOARD OF TRUSTEES. Restricted securities may be sold only in offerings
registered under the Securities Act of 1933 ("1933 Act") or in transactions
exempt from the registration requirements under the 1933 Act. Rule 144A
provides an exemption for the resale of certain restricted securities to
qualified institutional buyers. Investing in Rule 144A securities may
increase the Advisor Equity Fund's illiquidity to the extent that qualified
institutional buyers or other buyers are unwilling to purchase the
securities.
ADVISOR NORTHWEST FUND
The investment objective of the Advisor Northwest Fund is to seek long-term
growth of capital through investing primarily in Northwest companies. During
normal market conditions, the Fund will invest at least 65% of its total assets
in securities issued by companies whose principal executive offices are located
in the Northwest.
To pursue its objective, the Advisor Northwest Fund:
1. WILL ORDINARILY INVEST PRINCIPALLY IN COMMON STOCKS SELECTED BY SAM PRIMARILY
FOR POTENTIAL LONG-TERM APPRECIATION. In determining those common stocks
which have the potential for long-term appreciation, SAM will evaluate the
issuer's financial strength, quality of management and earnings power.
2. MAY INVEST IN SECURITIES CONVERTIBLE INTO COMMON STOCK WHEN, IN THE OPINION
OF SAM, THE EXPECTED TOTAL RETURN OF A CONVERTIBLE SECURITY EXCEEDS THE
EXPECTED TOTAL RETURN OF COMMON STOCK ELIGIBLE FOR PURCHASE BY THE FUND. The
Fund may purchase convertible bonds or convertible preferred stock which may
be exchanged for a stated number of shares of the issuer's common stock at a
certain price. The Fund will purchase those convertible securities which, in
SAM's opinion, have underlying common stock with potential for long-term
growth. The Fund will purchase convertible securities which are investment
grade, i.e., rated in the top four categories by either S&P or Moody's.
Moody's deems securities rated in the fourth category (Baa) to have
speculative characteristics. The Fund may retain a debt security that is
downgraded to below investment grade after purchase. In the event that an
amount in excess of 5% of the Fund's net assets is held in securities rated
below investment grade due to a downgrade of one or more convertible
securities, SAM will engage in an orderly disposition of such securities to
the extent necessary to ensure that the Fund's holdings of such securities do
not exceed 5% of the Fund's net assets. For a description of ratings, see
"Ratings Supplement" on page 32 and "Description of Preferred Stock Ratings"
in the Trust's Statement of Additional Information. The value of convertible
securities will normally vary with the value of the underlying common stock
and fluctuate inversely with interest rates.
ADVISOR INTERMEDIATE TREASURY FUND
The investment objective of the Advisor Intermediate Treasury Fund is to seek as
high a level of current income as is consistent with the preservation of
capital. The Fund will seek to maintain a portfolio of U.S. Treasury obligations
with an average dollar-weighted maturity of between three and ten years.
Although the average dollar-weighted maturity of the portfolio will fall within
a range of three to ten years, individual obligations held by the Fund may have
maturities outside that range.
- 15 -
<PAGE> 19
To pursue its objective, the Advisor Intermediate Treasury Fund:
1. WILL INVEST, DURING NORMAL MARKET CONDITIONS, AT LEAST 65% OF ITS TOTAL
ASSETS IN DIRECT OBLIGATIONS OF THE U.S. TREASURY, SUCH AS U.S. TREASURY
BILLS, NOTES AND BONDS. These securities are supported by the full faith and
credit of the U.S. Government.
2. MAY INVEST UP TO 35% OF ITS TOTAL ASSETS IN:
- OTHER U.S. GOVERNMENT SECURITIES, including (a) securities supported by the
full faith and credit of the U.S. Government but that are not direct
obligations of the U.S. Treasury, (b) securities that are not supported by
the full faith and credit of the U.S. Government but are supported by the
issuer's ability to borrow from the U.S. Treasury such as securities issued
by the Federal National Mortgage Association ("FNMA") and the Federal Home
Loan Mortgage Corporation ("FHLMC"), and (c) securities supported solely by
the creditworthiness of the issuer such as securities issued by the
Tennessee Valley Authority ("TVA"). While U.S. Government securities are
considered to be of the highest credit quality available, they are subject
to the same market risks as comparable debt securities.
- CORPORATE DEBT SECURITIES that at the time of purchase are rated in the top
three grades (A or higher) by either S&P or Moody's, or, if unrated,
determined by SAM to be of comparable quality to such rated debt
securities. In addition to reviewing ratings, SAM will analyze the quality
of rated and unrated corporate bonds for purchase by the Fund by evaluating
various factors that may include the issuer's capital structure, earnings
power and quality of management. See "Ratings Supplement" on page 32.
3. MAY INVEST UP TO 5% OF ITS TOTAL ASSETS IN EACH OF THE FOLLOWING:
- YANKEE SECTOR DEBT SECURITIES, which are securities issued and traded in
the U.S. by foreign issuers. These debt securities have investment risks
that are different from those of domestic issuers. SAM will attempt, to the
extent possible, to analyze potential investments in foreign issuers on the
same basis as the rating services analyze domestic issuers.
- EURODOLLAR BONDS, which are bonds issued by either U.S. or foreign issuers
that are traded in European bond markets and denominated in U.S. dollars.
The Fund will purchase Eurodollar bonds through U.S. securities dealers and
hold such bonds in the U.S.
- MUNICIPAL SECURITIES, if in the opinion of SAM, the potential for
appreciation or yield is comparable to or greater than similarly-rated
taxable securities.
ADVISOR GOVERNMENT FUND
The investment objective of the Advisor Government Fund is to seek as high a
level of current income as is consistent with the preservation of capital.
To pursue its objective, the Advisor Government Fund:
1. WILL INVEST, DURING NORMAL MARKET CONDITIONS, AT LEAST 65% OF ITS TOTAL
ASSETS IN U.S. GOVERNMENT SECURITIES.While U.S. Government securities are
considered to be of the highest credit quality available, they are subject to
the same market risks as comparable debt securities. Examples of U.S.
Government securities supported by the full faith and credit of the U.S.
Government that the Fund may purchase are U.S. Treasury bills, notes, and
bonds and GNMA mortgage-backed securities. Examples of U.S. Government
securities that the Fund may purchase that are not supported by the full
faith and credit of the U.S. Government but are supported by the issuer's
ability to borrow from the U.S. Treasury are securities issued by FNMA and
FHLMC. Examples of U.S. Government securities supported solely by the
creditworthiness of the issuer are securities issued by the TVA.
2. MAY INVEST UP TO 35% OF ITS TOTAL ASSETS IN MARKETABLE STRAIGHT-DEBT
CORPORATE SECURITIES WHICH ARE OF INVESTMENT GRADE.
ADVISOR GNMA FUND
The investment objective of the Advisor GNMA Fund is to seek as high a level of
current interest income as is consistent with the preservation of capital.
To pursue its objective, the Advisor GNMA Fund:
1. DURING NORMAL MARKET CONDITIONS, WILL INVEST AT LEAST 65% OF ITS TOTAL ASSETS
IN MORTGAGE-BACKED SECURITIES ISSUED BY GNMA INCLUDING COLLATERALIZED
MORTGAGE OBLIGATIONS ("CMOS"). The GNMA securities in which the Advisor GNMA
Fund will invest represent ownership in a pool of mortgage loans. Each
mortgage loan in the pool is either insured by the Federal Housing
Administration or Farmers Home Administration or guaranteed by the Veterans
Administration. Once approved by GNMA, the timely payment of principal and
interest by each mortgage pool is guaranteed by GNMA. The GNMA guarantee
represents a general obligation of the U.S. Treasury.
GNMA securities in which the Advisor GNMA Fund will invest will be "modified
pass-through" securities and CMOs, including interests in real estate
mortgage investment conduits. "Pass-through"
- 16 -
<PAGE> 20
means that the scheduled monthly interest and principal payments relating to
mortgages in the pool will be "passed through" to investors. (See the following
section for description of CMOs.) Unlike conventional bonds, the principal with
respect to GNMA securities is paid back over the life of the loan rather than
at maturity. Consequently, the Fund will receive monthly scheduled payments
of both principal and interest.
Since the Advisor GNMA Fund must reinvest scheduled and unscheduled principal
payments at prevailing interest rates at the time of such investment, and
such interest rates may be higher or lower than the current yield of the
Fund's portfolio, GNMA securities may not be an effective means to lock in
long-term interest rates. In addition, while prices of GNMA securities, like
conventional bonds, are inversely affected by changes in interest rate
levels, because of the likelihood of increased prepayments of mortgages in
times of declining interest rates, they have less potential for capital
appreciation than comparable fixed-income securities and may in fact decrease
in value when interest rates fall.
2. MAY INVEST UP TO 35% OF ITS TOTAL ASSETS IN:
- OTHER U.S. GOVERNMENT SECURITIES, including (a) securities backed by the
full faith and credit of the U.S. Government such as U.S. Treasury bills,
notes and bonds, and securities issued by the Farmers Home Administration;
(b) securities issued by U.S. Government agencies or instrumentalities that
are not backed by the full faith and credit of the U.S. Government but are
supported by the issuer's right to borrow from the U.S. Treasury, such as
securities issued by FNMA and FHLMC; and (c) securities supported solely by
the creditworthiness of the issuer, such as securities issued by the TVA.
While U.S. Government securities are considered to be of the highest credit
quality available, they are subject to the same market risks as comparable
debt securities.
- OTHER COLLATERALIZED MORTGAGE OBLIGATIONS issued by the U.S. Government or
one of its agencies or instrumentalities (such as FNMA or FHLMC) or by
private issuers which are collateralized by securities issued by the U.S.
Government or one of its agencies or instrumentalities (such as GNMA, FNMA
or FHLMC). CMOs issued by private issuers are not treated as U.S.
Government securities. CMOs are securities collateralized by a portfolio of
mortgages or mortgage-backed securities. The issuer's obligation to make
interest and principal payments on the CMO is secured by the underlying
portfolio of mortgages or mortgage-backed securities. CMOs are issued with
a number of classes or series that have different maturities and that may
represent interests in some or all of the interest or principal of the
underlying collateral or a combination thereof.
- CORPORATE DEBT SECURITIES that are of investment grade. Corporate debt
securities that are investment grade are rated in one of the four highest
grades assigned by Moody's or S&P or, if unrated, determined by SAM to be
of comparable quality to such rated debt securities. Moody's deems
securities rated in the fourth category (Baa) to have speculative
characteristics. The Advisor GNMA Fund may retain a debt security which is
downgraded to below investment grade after purchase. In the event that, due
to a downgrade of one or more debt securities, an amount in excess of 5% of
the Fund's net assets is held in securities rated below investment grade,
SAM will engage in an orderly disposition of such securities to the extent
necessary to ensure that the Fund's holdings of such securities do not
exceed 5% of the Fund's net assets. For an explanation of ratings, see
"Ratings Supplement" on page 32.
ADVISOR MUNICIPAL, ADVISOR
INTERMEDIATE MUNICIPAL AND ADVISOR
WASHINGTON MUNICIPAL FUNDS
The Advisor Municipal, Advisor Intermediate Municipal and Advisor Washington
Municipal Funds (together the "Municipal Bond 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.
To pursue its objective, each Municipal Bond Fund:
1. WILL INVEST, DURING NORMAL MARKET CONDITIONS, 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. Each Municipal Bond Fund will invest at least
65% of its total assets in municipal bonds having a maturity in excess of one
year which at the time acquired are investment grade, i.e., rated in one of
the four highest grades assigned by Moody's or S&P or, if unrated, determined
by SAM to be of comparable quality. The term "municipal bonds" as used in
this Prospectus means those debt obligations issued by or on behalf of
states, territories or possessions of the U.S. and the District of Columbia
or 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. A Fund may invest up to 20% of its total
assets in unrated municipal bonds determined by SAM to be of comparable
quality to bonds rated investment grade. A Fund will invest no more than 35%
of its total assets in municipal bonds rated in the fourth highest grade or
in comparable unrated
- 17 -
<PAGE> 21
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 Municipal Bond Fund by evaluating
various factors that 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, the
financial markets or specific geographic areas in determining whether to
purchase a bond. For a description of municipal bond ratings, see the
"Ratings Supplement" on page 32.
After purchase by a Municipal Bond 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 Municipal Bond 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 anticipated ranges of the average dollar-weighted maturities of the
investment portfolios of the Advisor Municipal Fund, Advisor Intermediate
Municipal Fund and the Advisor Washington Municipal Fund are, respectively,
20 to 25 years, 3 to 10 years, and 20 to 25 years. Individual bonds held in a
Fund's portfolio may have maturities that are longer or shorter than the
expected average dollar-weighted maturity of that Fund.
2.MAY INVEST IN ANY OF THE FOLLOWING TYPES OF MUNICIPAL BONDS:
- 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, which generally does
not have access to the resources or taxing authority of a municipality for
payment and may involve greater risk. If a Municipal Bond Fund invests in
revenue bonds, they will primarily be bonds issued to finance various
projects, including but not limited to education, hospital, housing, waste
treatment and utilities. Each Municipal Bond 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.
- GENERAL OBLIGATION BONDS, which are bonds that provide general purpose
financing for state and local governments and are backed by the taxing
power of the state or local government as the case may be. Payment of
principal and interest to a Municipal Bond Fund holding such a bond may be
dependent on an appropriation by the issuer's legislative body. The taxes
or special assessments that can be levied for the payment of principal and
interest on general obligation bonds may be either limited or unlimited as
to rate or amount.
- VARIABLE AND FLOATING RATE OBLIGATIONS, which are municipal obligations
that carry variable or floating rates of interest. Variable rate
instruments bear interest at rates which are readjusted at periodic
intervals. Floating rate instruments bear interest at rates which vary
automatically with changes in specified market rates or indices, such as
the bank prime rate. Accordingly, as interest rates fluctuate, the
potential for capital appreciation or depreciation of these obligations is
less than those 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, each Municipal Fund will treat
variable and floating rate obligations as having a maturity equal to the
period remaining until the date it can next exercise the demand feature by
selling the security back to the issuer.
- 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
- 18 -
<PAGE> 22
standing of which affects the credit quality of the bond. A demand feature
is a put that entitles the holder to repayment of the principal amount of
the underlying security on no more than 30 days' notice at any time or at
specified intervals.
- MUNICIPAL LEASE OBLIGATIONS, which are obligations 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 typically backed by the credit of the
municipality or the state but are secured by rent payments made by the
municipality or 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 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.
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. The Municipal Bond Funds will invest in only those 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. The
Municipal Bond Funds do not presently intend to purchase municipal lease
obligations that are not rated by Moody's or S&P.
- 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 Municipal Bond 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' advance notice. The demand feature is usually backed
by an irrevocable letter of credit or guarantee of the bank. The credit
rating of the bank affects the credit quality of the participation
interest.
- MUNICIPAL NOTES, which are notes generally issued 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. 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 these agencies,
determined by SAM, to be of comparable quality.
3. WILL INVEST, DURING NORMAL MARKET CONDITIONS, AT LEAST 65% OF ITS TOTAL
ASSETS IN MUNICIPAL BONDS ISSUED BY THE STATE OF WASHINGTON OR ONE OF ITS
POLITICAL SUBDIVISIONS, MUNICIPALITIES, AGENCIES, INSTRUMENTALITIES OR PUBLIC
AUTHORITIES. (Advisor Washington Municipal Fund only.) The Advisor Washington
Municipal Fund may not be suitable for every eligible investor. Since the
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 Advisor
Washington Municipal Fund will generally earn dividend income free from
federal income taxes as does an investor in the Advisor Municipal and Advisor
Intermediate Municipal Funds. However, an investment in the Advisor
Washington Municipal Fund may be subject to greater risks than an investment
in the Advisor Municipal and Advisor Intermediate Municipal Funds due to the
concentration of its portfolio investments in a single state. See "Risk
Factors" below for further information.
- 19 -
<PAGE> 23
COMMON INVESTMENT PRACTICES
Each of the Funds may follow the investment practices described below (unless
otherwise indicated):
1. 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.
2. INVEST FOR SHORT-TERM PURPOSES WHEN SAM BELIEVES SUCH ACTION TO BE DESIRABLE
AND CONSISTENT WITH SOUND INVESTMENT PRACTICES. Each Fund, however, will not
engage primarily in trading for the purpose of short-term profits. A Fund may
dispose of its portfolio securities whenever SAM deems advisable, without
regard to the length of time the securities have been held. The portfolio
turnover rates for each Fund is not expected to exceed 50%.
3. PURCHASE OR SELL SECURITIES ON A "WHEN-ISSUED" OR "DELAYED-DELIVERY" BASIS.
Under this procedure, a Fund agrees to acquire or sell securities that are to
be delivered against payment in the future, normally 30 to 45 days. The
price, however, is fixed at the time of commitment. When a Fund purchases
when-issued or delayed-delivery securities, it will earmark liquid, high
quality securities in an amount equal in value to the purchase price of the
security. Use of this technique may affect a Fund's share price in a manner
similar to leveraging.
4.INVEST UP TO 5% OF NET ASSETS IN REPURCHASE AGREEMENT TRANSACTIONS.
5. INVEST UP TO 5% OF NET ASSETS IN WARRANTS, BUT WILL LIMIT INVESTMENTS IN
WARRANTS WHICH ARE NOT LISTED ON THE NEW YORK OR AMERICAN STOCK EXCHANGE TO
NO MORE THAN 2% OF NET ASSETS. (Advisor Equity and Advisor Northwest Funds
only.)
6. INVEST UP TO 10% OF ITS NET ASSETS IN ILLIQUID SECURITIES, WHICH ARE
SECURITIES THAT CANNOT BE SOLD WITHIN SEVEN DAYS IN THE ORDINARY COURSE OF
BUSINESS FOR APPROXIMATELY THE AMOUNT AT WHICH THEY ARE VALUED. Due to the
absence of an active trading market, 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.
Each Fund has adopted a number of investment restrictions. If a Fund follows a
percentage limitation at the time of investment, a later increase or decrease in
values, net assets or other circumstances will not be considered in determining
whether a Fund complies with the applicable policy. The following restrictions
are fundamental policies which cannot be changed without shareholder vote.
1. EACH FUND, WITH RESPECT TO 75% OF THE VALUE OF ITS TOTAL ASSETS, MAY NOT
INVEST MORE THAN 5% OF ITS TOTAL ASSETS IN THE SECURITIES OF ANY ONE ISSUER
(OTHER THAN U.S. GOVERNMENT SECURITIES).
2. EACH FUND, WITH RESPECT TO 75% OF THE VALUE OF ITS TOTAL ASSETS, MAY NOT
PURCHASE MORE THAN 10% OF THE OUTSTANDING VOTING SECURITIES OF ANY ONE ISSUER
(OTHER THAN U.S. GOVERNMENT SECURITIES).
3. EACH FUND MAY BORROW MONEY ONLY FOR TEMPORARY OR EMERGENCY PURPOSES FROM A
BANK OR AFFILIATES OF SAFECO CORPORATION AT AN INTEREST RATE NOT GREATER THAN
THAT AVAILABLE FROM COMMERCIAL BANKS. A Fund will not borrow amounts in
excess of 20% of its total assets (including borrowings) less liabilities
(other than borrowings) immediately after such borrowings. As a
non-fundamental policy, a Fund will not purchase securities if outstanding
borrowings are equal to or greater than 5% of its total assets. Each Fund
intends to exercise its borrowing authority primarily to meet shareholder
redemptions under circumstances where redemption requests exceed available
cash.
For more information, see the "Investment Objectives and Policies" and
"Additional Investment Information" sections of the Trust's Statement of
Additional Information.
RISK FACTORS
Various factors may cause the value of a shareholder's investment in a Fund to
fluctuate. The principal risk factor associated with an investment in a mutual
fund like any of the Funds is that the market value of the portfolio securities
may decrease resulting in a decrease in the value of a shareholder's investment.
The value of the Advisor Intermediate Treasury, Advisor Government, Advisor
GNMA, Advisor Municipal, Advisor Intermediate Municipal and Advisor Washington
Municipal Funds' portfolios will normally fluctuate inversely with changes in
market interest rates. Generally, when market interest rates rise, the price of
bonds will fall, and when market interest rates fall, the price of bonds will
rise. Also, there is a risk that the issuer of
- 20 -
<PAGE> 24
a bond or other debt security will fail to make timely payments of principal and
interest to the Funds. For a description of the risks of investing in certain
types of instruments, see generally pages 14 to 21 herein.
ADVISOR NORTHWEST FUND
An investment in the Advisor Northwest Fund may be subject to different risks
than a mutual fund whose investments are more geographically diverse. Since the
Fund invests primarily in companies whose principal executive offices are
located in the Northwest, the number of issuers whose securities are eligible
for purchase is significantly less than for many other mutual funds. Also, some
companies whose securities are held in the Fund's portfolio may primarily
distribute products or provide services in a specific locale or in the Northwest
region. The long-term growth of these companies can be significantly affected by
business trends in and the economic health of those geographic areas. Other
companies whose securities are held by the Fund may have a predominately
national or partially international market for their products or services and
are more likely to be impacted by national or international trends. As a result,
the performance of the Fund may be influenced by business trends or economic
conditions not only in a specific locale or in the Northwest region but also on
a national or international level, depending on the companies whose securities
are held in its portfolio at any particular time.
ADVISOR WASHINGTON MUNICIPAL FUND
Because the Advisor Washington Municipal Fund concentrates its investments in a
single state, there is a greater risk of fluctuation in the values of its
portfolio securities than with mutual funds whose investments are more
geographically diverse. Investors should carefully consider the investment risks
of such concentration. The Fund's share price may be affected by political and
economic developments within Washington State and by the financial condition of
Washington State and its public authorities and political subdivisions. See
"Investment Risks of Concentration in Washington Issuers" in the Trust's
Statement of Additional Information for more 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 Advisor Washington Municipal Fund has not
independently verified any of the information in the discussion below.
The economy of the State of Washington consists of both export and local
industries. The State's leading export industries are aerospace, manufacturing,
timber and agriculture. The State's manufacturing base consists primarily of
aircraft manufacture. The Boeing Company, a major aerospace firm, is the largest
commercial employer in the State and has a significant impact on the State in
terms of production, employment and labor earnings. Financial performance of
Boeing has been strong in recent years as measured by increased sales, airplane
deliveries and backlogs or orders. In January, 1993, 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. Although unemployment in the timber
industry is anticipated in certain regions, 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 MANAGERS
ADVISOR EQUITY FUND
The portfolio manager for the Advisor Equity Fund is Richard D. Meagley, Vice
President, SAM. Mr. Meagley began serving as portfolio manager for the Fund in
January, 1995. He is also the portfolio manager for other SAFECO funds. Prior to
these positions, he served as a portfolio manager and analyst for Kennedy
Associates, Inc., an investment advisory firm located in Seattle, Washington,
from 1992 through 1994. He was an Assistant Vice President of SAM and the
portfolio manager of a SAFECO fund from 1991 to 1992. From 1983 to 1991, Mr.
Meagley was an investment portfolio manager and securities analyst for SAM.
ADVISOR NORTHWEST FUND
The portfolio manager for the Advisor Northwest Fund is Charles R. Driggs,
Assistant Vice President, SAM. Mr. Driggs has served as portfolio manager of a
similar mutual fund since 1992. From 1984 through 1992, Mr. Driggs was a
securities analyst for SAM specializing in the banking and insurance industries.
- 21 -
<PAGE> 25
ADVISOR INTERMEDIATE TREASURY AND ADVISOR GOVERNMENT FUNDS
The portfolio manager for the Advisor Intermediate Treasury and Advisor
Government Funds is Michael C. Knebel, Vice President, SAM. Mr. Knebel has
served as portfolio manager for various SAFECO funds since 1988.
ADVISOR GNMA FUND
The portfolio manager for the Advisor GNMA Fund is Paul A. Stevenson, Vice
President, SAM. Mr. Stevenson has served as portfolio manager for another SAFECO
fund since 1988. In addition, he is an Assistant Vice President of SAFECO Life
Insurance Company.
ADVISOR MUNICIPAL, ADVISOR INTERMEDIATE MUNICIPAL AND ADVISOR WASHINGTON
MUNICIPAL FUNDS
The portfolio manager for Advisor Municipal, Advisor Intermediate Municipal and
Advisor Washington Municipal Funds is Stephen C. Bauer, President, SAM. Mr.
Bauer has been a portfolio manager for other SAFECO municipal bond funds since
1972.
INFORMATION ABOUT INVESTING IN FUND SHARES
ALTERNATIVE PURCHASE ARRANGEMENT
Each Fund issues three classes of shares. Class A shares are sold to investors
choosing the initial sales charge alternative with a service fee. Class B shares
are sold to investors choosing the contingent deferred sales charge alternative
with service and distribution fees and which convert automatically to Class A
shares approximately eight years after purchase. Class C shares are sold to
investors choosing the alternative with no initial or deferred sales charge, but
with service and distribution fees.
The alternative purchase arrangement permits an investor to choose the method of
purchasing shares that is most beneficial given the amount of the purchase, the
length of time the investor expects to hold the shares, and other circumstances.
Investors should consider whether, during the anticipated life of their
investment in a Fund, the accumulated distribution and service fees and
contingent deferred sales charges on Class B shares prior to conversion, or the
accumulated distribution and service fees on Class C shares, would be less than
the initial sales charge and accumulated service fee on Class A shares purchased
at the same time.
Class A shares will normally be more beneficial than Class B or Class C shares
to investors who qualify for reduced initial sales charges or a sales load
waiver on Class A shares. Class A shares are subject to a service fee (but not a
distribution fee) and, accordingly, pay correspondingly higher dividends per
share than Class B shares or Class C shares. However, because initial sales
charges are deducted at the time of purchase, investors purchasing Class A
shares would not have all their funds invested initially and, therefore, would
initially own fewer shares.
Investors not qualifying for reduced initial sales charges who expect to
maintain their investment for an extended period of time might consider
purchasing Class B shares because Class B shares redeemed more than six years
after their purchase are not subject to a contingent deferred sales charge and a
shareholder's Class B shares automatically convert to Class A shares (which are
subject to lower continuing charges) approximately eight years after the date of
issuance. Class B shares, however, are subject to a contingent deferred sales
charge for an initial six-year period.
Other investors, especially those who do not qualify for a reduced sales charge
and who expect to maintain their investment for a shorter period of time than
six years, might determine that it would be more advantageous to purchase Class
C shares so that their funds will be fully invested from the date of purchase,
although those shares are subject to higher continuing distribution charges. For
example, based on current fees and expenses, an investor subject to the 4.75%
initial sales charge on Class A shares would have to hold his or her investment
approximately seven years for the Class C distribution and service fees to
exceed the initial sales charge plus the accumulated service fees of Class A
shares. This example does not take into account the time value of money which
further reduces the impact of the Class C distribution and service fees on the
investment or fluctuations in net asset value, which will affect the actual
amount of service and distribution fees paid.
HOW TO PURCHASE SHARES
When placing purchase orders, investors should specify whether the order is for
Class A, Class B or Class C shares of a Fund. All share purchase orders that
fail to specify a class will automatically be invested in Class A shares.
- 22 -
<PAGE> 26
The minimum initial investment is $1,000 (IRA $250). The minimum additional
investment is $100 (except dividend reinvestment plans). Minimum initial
investments are negotiable for retirement accounts other than IRAs. No minimum
initial investment is required to establish an Automatic Investment Plan.
Shares of the Funds are available for purchase through investment professionals
who work at broker-dealers, banks and other financial institutions with which
SAFECO Securities, the distributor of the shares of the Funds, has entered into
selling agreements. Orders received by such financial institutions before 1:00
p.m. Pacific Time on any day the New York Stock Exchange is open for regular
trading will be effected that day, provided that such order is transmitted to
SAFECO Services, Inc. ("SAFECO Services"), the transfer agent for the Funds,
prior to 2:00 p.m. Pacific Time on such day. Investment professionals will be
responsible for forwarding the investor's order to SAFECO Services so that it
will be received prior to such time.
Broker-dealers, banks and other financial institutions that do not have selling
agreements with SAFECO Securities also may offer to place orders for the
purchase of Fund shares. Purchases made through these investment firms will be
effected at the public offering price next determined after the order is
received by SAFECO Services. Such financial institutions may charge the investor
a transaction fee as determined by the financial institution. That fee will be
in addition to the sales charge payable by the investor with respect to Class A
shares, and may be avoided by purchasing shares through a broker-dealer, bank or
other financial institution that has a selling agreement with SAFECO Securities.
Broker-dealers, banks, financial institutions and any other person entitled to
receive compensation for selling or servicing Fund shares may receive different
levels of compensation with respect to one particular class of Fund shares over
another. Sales persons of broker-dealers, banks and other financial institutions
that sell Advisor Fund shares are eligible to receive merchandise, trips and
gift certificates, the amount of which varies depending on the amount of shares
sold.
The Funds reserve the right to refuse any offer to purchase shares of any class.
PURCHASING CLASS A SHARES
The public offering price of the Class A shares of each Fund is the next
determined net asset value per share (see "Share Valuation" on page 28 for
additional information) plus any sales charge which will vary with the size of
the purchase as shown in the following schedule:
<TABLE>
<CAPTION>
Sale Charge as Broker
Percentage of Reallowance as
Amount of Purchase --------------------- Percentage of
at the Public Offering Net the Offering
Offering Price Price Investment Price
-------------------- -------- ---------- --------------
<S> <C> <C> <C>
Less than $50,000 4.75% 4.99% 4.00%
$50,000 but less
than $100,000 4.25% 4.44% 3.50%
$100,000 but less
than $250,000 3.75% 3.90% 3.00%
$250,000 but less
than $500,000 3.00% 3.09% 2.25%
$500,000 but less
than $1,000,000 2.25% 2.30% 1.50%
$1,000,000 or more 1.00% 1.01% .50%
</TABLE>
From time to time, SAFECO Securities may reallow to broker-dealers, banks and
other financial institutions the full amount of the sales charge on Class A
shares. In some instances, SAFECO Securities may offer these reallowances only
to those financial institutions that have sold or may sell significant amounts
of Class A shares. These commissions also may be paid to financial institutions
that initiate purchases made pursuant to sales charge waivers (1) and (8),
described below under "Sales Charge Waivers -- Class A shares." To the extent
that SAFECO Securities reallows 90% or more of the sales charge to a financial
institution, such financial institution may be deemed to be an underwriter under
the 1933 Act.
The following describes purchases that may be aggregated for purposes of
determining the amount of purchase:
1. Individual purchases on behalf of a single purchaser and the purchaser's
spouse and their children under the age of 21 years. This includes shares
purchased in connection with an employee benefit plan(s) exclusively for the
benefit of such individual(s), such as an IRA, individual plans under Section
403(b) of the Internal Revenue Code of 1986, as amended ("Code"), or
single-participant Keogh-type plans. This also includes purchases made by a
company controlled by such individual(s);
2. Individual purchases by a trustee or other fiduciary purchasing shares for a
single trust estate or a single fiduciary account, including an employee
benefit plan (such as employer-sponsored pension, profit-sharing and stock
bonus plans, including plans under Code Section 401(k), and medical, life and
disability insurance trusts) other than a plan described in (1) above; or
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<PAGE> 27
3. Individual purchases by a trustee or other fiduciary purchasing shares
concurrently for two or more employee benefit plans of a single employer or
of employers affiliated with each other (excluding an employee benefit plan
described in (2) above).
SALES CHARGE WAIVERS -- CLASS A SHARES
Class A shares are sold at net asset value per share without imposition of sales
charges when investments are made by the following classes of investors:
1. Registered representatives or full-time employees of broker-dealers, banks
and other financial institutions that have entered into selling agreements
with SAFECO Securities, and the children, spouse and parents of such
representatives and employees, and employees of financial institutions that
directly, or through their affiliates, have entered into selling agreements
with SAFECO Securities;
2. Companies exchanging shares with or selling assets to one or more of the
Funds pursuant to a merger, acquisition or exchange offer;
3. Any of the companies affiliated with SAFECO Securities;
4. Purchases made through the automatic investment of dividends and
distributions paid by another SAFECO Advisor Fund;
5. Clients of administrators or consultants to tax-qualified employee benefit
plans which have entered into agreements with affiliates of SAFECO
Securities;
6. Retirement plan participants who borrow from their retirement accounts by
redeeming Fund shares and subsequently repay such loans via a purchase of
Fund shares;
7. Retirement plan participants who receive distributions from a tax-qualified
employer-sponsored retirement plan, which is invested in Fund shares, the
proceeds of which are reinvested in Fund shares;
8. Accounts as to which a broker-dealer, bank or other financial institution
charges an account management fee, provided the financial institution has
entered into an agreement with SAFECO Securities regarding such accounts; and
9. Current or retired officers, directors, trustees or employees of the Trust or
SAFECO Corporation or affiliated companies of SAFECO Corporation and the
children, spouse and parents of such persons.
REINSTATEMENT PRIVILEGE
Shareholders who redeem their Class A shares in a Fund have a one-time privilege
to reinstate their investment by investing the proceeds of the redemption at net
asset value per share without a sales charge in Class A shares of the Fund
and/or one or more of the other Funds. SAFECO Services must receive from the
investor or the investor's broker-dealer, bank or other financial institution
within 60 days after the date of the redemption both a written request for
reinvestment and a check not exceeding the amount of the redemption proceeds.
The reinstatement purchase will be effected at the net asset value per share
next determined after such receipt.
REDUCED SALES CHARGE PLANS -- CLASS A SHARES
Class A shares of the Funds may be purchased at reduced sales charges either
through the Right of Accumulation or under a Letter of Intent. For more details
on these plans, investors should contact their broker-dealer, bank or other
financial institution or SAFECO Services.
Pursuant to the RIGHT OF ACCUMULATION, investors are permitted to purchase Class
A shares of the Funds at the sales charge applicable to the total of (a) the
dollar amount then being purchased plus (b) the dollar amount equal to the total
purchase price of the investor's concurrent purchases of the other SAFECO
Advisor Funds plus (c) the dollar amount equal to the current public offering
price of all shares of SAFECO Advisor Funds already held by the investor. To
receive the Right of Accumulation, at the time of purchase investors must give
their broker-dealers, banks or other financial institutions sufficient
information to permit confirmation of qualification. THE FOREGOING RIGHT OF
ACCUMULATION APPLIES ONLY TO CLASS A SHARES OF THE FUNDS.
In executing a LETTER OF INTENT ("LOI"), an investor should indicate an
aggregate investment amount he or she intends to invest in Class A shares of
SAFECO Advisor Funds in the following thirteen months. The LOI is included as
part of the Account Application. The sales charge applicable to that aggregate
amount then becomes the applicable sales charge on all purchases made
concurrently with the execution of the LOI and in the thirteen months following
that execution. If an investor executes an LOI within 90 days of a prior
purchase of Class A shares, the prior purchase may be included under the LOI and
an appropriate adjustment, if any, with respect to the sales charges paid by the
investor in connection with the prior purchase will be made, based on the
then-current net asset value(s) of the pertinent Fund(s).
If at the end of the thirteen month period covered by the LOI, the total amount
of purchases does not equal the amount indicated, the investor will be required
to pay the difference between the sales charges paid at the
- 24 -
<PAGE> 28
reduced rate and the sales charges applicable to the purchases actually made.
Shares having a value equal to 5% of the amount specified in the LOI will be
held in escrow during the thirteen month period (while remaining registered in
the investor's name) and are subject to redemption to assure any necessary
payment to SAFECO Securities of a higher applicable sales charge.
AN LOI WILL APPLY ONLY TO CLASS A SHARES OF THE FUNDS. The value of Class B or
Class C shares of any SAFECO Advisor Fund will not be counted toward the
fulfillment of an LOI.
PURCHASING CLASS B SHARES
The public offering price of the Class B shares of each Fund is the next
determined net asset value per share. No initial sales charge is imposed.
However, a contingent deferred sales charge is imposed on certain redemptions of
Class B shares. Because the Class B shares are sold without an initial sales
charge, the investor receives Fund shares equal to the full amount of the
investment.
Class B shares of a Fund that are redeemed will not be subject to a contingent
deferred sales charge to the extent that the value of such shares represents:
(a) reinvestment of dividends or other distributions or (b) shares redeemed more
than six years after their purchase.
Redemptions of most other Class B shares will be subject to a contingent
deferred sales charge. See "Contingent Deferred Sales Charge Waivers." The
amount of any applicable contingent deferred sales charge will be calculated by
multiplying the lesser of the original purchase price or the net asset value of
such shares at the time of redemption by the applicable percentage shown in the
table below. Accordingly, no charge is imposed on increases in the net asset
value above the original purchase price:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF THE
LESSER OF NET ASSET
VALUE AT REDEMPTION
OR THE ORIGINAL
REDEMPTION DURING PURCHASE PRICE
-------------------------- ---------------------
<S> <C>
1st Year Since Purchase 5%
2nd Year Since Purchase 4%
3rd Year Since Purchase 3%
4th Year Since Purchase 3%
5th Year Since Purchase 2%
6th Year Since Purchase 1%
Thereafter 0%
</TABLE>
In determining whether a contingent deferred sales charge is applicable to a
redemption, the calculation will be made in a manner that results in the lowest
possible rate. It will be assumed that the redemption is made first of amounts
representing shares acquired pursuant to the reinvestment of dividends and
distributions; and then of amounts representing the cost of shares held for the
longest period of time.
For example, assume an investor purchased 100 shares at $10 per share at a cost
of $1,000. Subsequently, the shareholder acquired 15 additional shares through
dividend reinvestment. During the second year after the purchase, the investor
decided to redeem $500 of his or her investment. Assuming at the time of the
redemption a net asset value of $11 per share, the value of the investor's
shares would be $1,265 (115 shares at $11 per share). The contingent deferred
sales charge would not be applied to the value of the reinvested dividend
shares. Therefore, the 15 shares currently valued at $165.00 would be sold
without a contingent deferred sales charge. The number of shares needed to fund
the remaining $335.00 of the redemption would equal 30.455. Using the lower of
cost or market price to determine the contingent deferred sales charge, the
original purchase price of $10.00 per share would be used. The contingent
deferred sales charge calculation would therefore be 30.455 shares times $10.00
per share at a contingent deferred sales charge rate of 4% (the applicable rate
in the second year after purchase) for a total contingent deferred sales charge
of $12.18.
For federal income tax purposes, the amount of the contingent deferred sales
charge will reduce the gain or increase the loss, as the case may be, on the
amount recognized on the redemption of shares. The amount of any contingent
deferred sales charge will be paid to SAFECO Securities.
CONTINGENT DEFERRED SALES CHARGE WAIVERS
The contingent deferred sales charge will be waived in the following
circumstances: (a) total or partial redemptions made within one year following
the death or disability of a shareholder; (b) redemptions made pursuant to any
systematic withdrawal plan based on the shareholder's life expectancy including
substantially equal periodic payments prior to age 59 1/2 which are described in
Code section 72(t) and required minimum distributions after age 70 1/2 including
those required minimum distributions made in connection with customer accounts
under Section 403(b) of the Code and other retirement plans; (c) total or
partial redemption resulting from a distribution following retirement in the
case of a tax-qualified employer-sponsored retirement plan; (d) when a
redemption results from a tax-free return of an excess contribution pursuant to
Section 408(d)(4) or (5) of the Code; (e) reinvestment in Class B shares of the
Fund within 60 days of prior redemption; (f) redemptions pursuant to the Fund's
right to liquidate a shareholder's account involuntarily; and (g) redemptions
pursuant to distributions from a tax-qualified employer-sponsored retirement
plan, that
- 25 -
<PAGE> 29
are invested in SAFECO Advisor Funds and that are permitted to be made without
penalty pursuant to the Code (other than tax-free rollovers or transfers of
asset).
CONVERSION OF CLASS B SHARES
A shareholder's Class B shares will automatically convert to Class A shares in
the same Fund approximately eight years after the date of issuance, together
with a pro rata portion of all Class B shares representing dividends and other
distributions paid in additional Class B shares. The Class B shares so converted
will no longer be subject to the higher expenses borne by Class B shares. The
conversion will be effected at the relative net asset values per share of the
two classes on the first business day of the month in which the eighth
anniversary of the issuance of the Class B shares occurs. If a shareholder
effects one or more exchanges among Class B shares of the Funds during the
eight-year period, the holding periods for the shares so exchanged will be
counted toward the eight-year period. Because the net asset value per share of
the Class A shares may be higher than that of the Class B shares at the time of
conversion, a shareholder may receive fewer Class A shares than the number of
Class B shares converted, although the dollar value will be the same.
PURCHASING CLASS C SHARES
The public offering price of Class C shares of each Fund is the next determined
net asset value per share. Neither an initial sales charge on purchase nor a
contingent deferred sales charge on redemptions will be charged. Because the
Class C shares are sold without an initial sales charge, the investor receives
shares equal to the full amount of the investment. The Class C distribution and
service fees enable the Funds to sell Class C shares without either an initial
or contingent deferred sales charge. Class C shares do not convert to any other
class of shares of the Funds and incur higher combined ongoing distribution and
service fees than Class A shares. Such shares therefore have a higher expense
ratio and pay correspondingly lower dividends than Class A shares.
HOW TO EXCHANGE SHARES FROM ONE FUND TO ANOTHER
Shares of one class of a Fund may be exchanged for shares of the same class of
shares of any other Fund, based on their next-determined respective net asset
values, without imposition of any sales charges, provided that the shareholder
account registration remains identical. CLASS A SHARES MAY BE EXCHANGED ONLY FOR
CLASS A SHARES OF OTHER SAFECO ADVISOR FUNDS. CLASS B SHARES MAY BE EXCHANGED
ONLY FOR CLASS B SHARES OF OTHER SAFECO ADVISOR FUNDS. CLASS C SHARES MAY BE
EXCHANGED ONLY FOR CLASS C SHARES OF OTHER SAFECO ADVISOR FUNDS. The exchange of
Class B shares will not be subject to a contingent deferred sales charge. For
purposes of computing the contingent deferred sales charge, the length of time
of ownership of Class B shares will be measured from the date of original
purchase and will not be affected by the exchange. EXCHANGES ARE NOT TAX-FREE
AND MAY RESULT IN A SHAREHOLDER'S REALIZING A GAIN OR LOSS, AS THE CASE MAY BE,
FOR TAX PURPOSES. See "Fund Distributions and How They are Taxed" on page 29 for
more information. A shareholder may purchase shares of a SAFECO Advisor Fund by
exchanges only if it is registered for sale in the state where the shareholder
resides.
EXCHANGES BY TELEPHONE
A shareholder may give exchange instructions to the shareholder's broker-dealer,
bank or other financial institution or to SAFECO Services by telephone at the
appropriate toll-free number provided on the cover of this Prospectus. Exchange
orders will be accepted by telephone provided that the exchange involves only
uncertificated shares or certificated shares for which certificates previously
have been deposited in the shareholder's account. See "Telephone Transactions"
on page 28 for more information.
EXCHANGES BY MAIL
Exchange orders should be sent by mail to the investor's broker-dealer, bank or
other financial institution. If a shareholder has an account at SAFECO Services,
exchange orders may be sent to the address set forth on the cover of this
Prospectus.
SHARE EXCHANGE PRICE AND PROCESSING
The shares of the SAFECO Advisor 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 Advisor 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 offer may be modified or terminated with respect to a
Fund at anytime, upon at least 60 days' notice to shareholders.
HOW TO REDEEM SHARES
As described below, shares of the Funds may be redeemed at their next-determined
net asset value (subject to any applicable contingent deferred sales charge for
Class B shares) and redemption proceeds will be sent to shareholders within
seven days of the receipt of a redemption request. Shareholders who have
purchased shares through broker-dealers, banks or other financial institutions
that sell shares may redeem shares
- 26 -
<PAGE> 30
through such firms; if the shares are held in the "street name" of the
broker-dealer, bank or other financial institution, the redemption must be made
through such firm.
Please note the following:
- If your shares were purchased by wire, redemption proceeds will be
available immediately. If shares were purchased by other than wire, each
Fund reserves the right to hold the proceeds of your redemption for up to
15 business days after investment or until such time as the Fund has
received assurance that your investment will be honored by the bank on
which it was drawn, whichever occurs first.
- SAFECO Services charges a $10 fee to wire redemption proceeds. In
addition, some banks may charge a fee to receive wires.
- If shares are issued in certificate form, the certificates must accompany
a redemption request and be duly endorsed.
- 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.
REDEMPTIONS THROUGH BROKER-DEALERS, BANKS AND
OTHER FINANCIAL INSTITUTIONS
Shareholders with accounts at broker-dealers, banks and other financial
institutions that sell shares of the Funds may submit redemption requests to
such firms. Broker-dealers, banks or other financial institutions may honor a
redemption request either by repurchasing shares from a redeeming shareholder at
the shares' net asset value per share next computed after the firm receives the
request or by forwarding such requests to SAFECO Services. Redemption proceeds
(less any applicable contingent deferred sales charge for Class B shares)
normally will be paid by check. Broker-dealers, banks and other financial
institutions may impose a service charge for handling redemption transactions
placed through them and may impose other requirements concerning redemptions.
Accordingly, shareholders should contact the investment professional at their
broker-dealer, bank or other financial institution for details.
Redemption requests may also be transmitted to SAFECO Services by telephone (for
amounts of less than $100,000) or by mail.
SHARE REDEMPTION PRICE AND PROCESSING
Your shares will be redeemed at the net asset value per share (subject to any
applicable contingent deferred sales charge) next calculated after receipt of
your request which meets the redemption requirements of the Funds. The value of
the shares you redeem may be more or less than the dollar amount you purchased,
depending on the market value of the shares at the time of redemption. See
"Share Valuation" on page 28 for more information.
Redemption proceeds will normally be sent on the next business day following
receipt of your redemption request. If your redemption request is received after
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 or its
trading is restricted or if the SEC 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 net asset
value per share calculated on the day your account is closed and the proceeds
will be sent to you.
HOW TO SYSTEMATICALLY PURCHASE OR REDEEM SHARES
Call your investment professional or SAFECO Services at 1-800-463-8791 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. Because Class A shares are subject to sales charges,
shareholders should not concurrently purchase Class A shares with respect to an
account which is utilizing a systematic withdrawal plan. Class B shares are not
available for a systematic withdrawal plan.
- 27 -
<PAGE> 31
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
the broker-dealer, bank or other financial institution where your account is
maintained. (Changes made to accounts maintained at SAFECO Services should be
sent to the address on the Prospectus cover.) Certain changes to the Automatic
Investment Method and Systematic Withdrawal Plan can be made via telephone
request if you have previously selected single signature authorization for your
account.
You must specify on your account application the number of signatures required
to authorize redemptions and exchanges and to change account registration or the
services selected. Authorizing fewer than all account owners has important
implications. For example, one owner of a joint tenant account can redeem money
or change the account registration to single ownership without the co-owner's
signature. If you do not indicate otherwise on the application, the signatures
of all account owners will be required to effect a transaction. Your selection
of fewer than all account owner signatures may be revoked by any account owner
who writes to SAFECO Services or the financial institution where your account is
maintained.
The broker-dealer, bank or financial institution where your account is
maintained or SAFECO Services may require a signature guarantee for a signature
which 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.
ACCOUNT STATEMENTS
Periodically, you will receive an account statement indicating your current fund
holdings and transactions affecting your account. Confirmation statements will
be sent to you after every transaction (except reinvestments) 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.
TELEPHONE TRANSACTIONS
To redeem or exchange shares by telephone, call 1-800-463-8791 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 redemption and exchange privileges, you must have
previously selected these services either on your account application or by
submitting a request in writing to SAFECO Services at the address on the
Prospectus cover. 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 of the Funds and SAFECO Services reserve the right to refuse any telephone
transaction when a Fund or SAFECO Services, in its sole discretion, is unable to
confirm to its satisfaction that a caller is the account owner or a person
preauthorized by the account owner.
The Funds and SAFECO Services will not be liable for the authenticity of
instructions received by telephone which a Fund or SAFECO Services, in its
discretion, believes to be delivered by an account owner or preauthorized
person, provided that the Fund or SAFECO Services follows reasonable procedures
to identify the caller. The shareholder will bear the risk of any resulting
loss. The Funds and SAFECO Services will follow certain procedures designed to
make sure that telephone instructions are genuine. These procedures may include
requiring the account owner to select the telephone privilege in writing prior
to first use, and to designate persons authorized to deliver telephone
instructions. SAFECO Services tape-records telephone transactions and may
request certain identifying information from the caller.
The telephone transaction privileges may be suspended, limited, modified or
terminated at any time without prior notice by the Funds or SAFECO Services.
SHARE VALUATION
The net asset value per share ("NAV") of each class of each Fund is computed at
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. NAV is determined separately for each class of
shares of each Fund.
In general, portfolio securities are valued at the last reported sale price on
the national exchange on which the securities are primarily traded, unless there
are no transactions in which case they shall be valued at the last reported bid
price. Securities traded over-the-counter are valued at the last sale price,
unless there is no reported sale price in which case the last reported bid price
will be used. Portfolio securities that are traded on a stock exchange and
over-the-counter are
- 28 -
<PAGE> 32
valued according to the broadest and most representative market. Securities not
traded on a national exchange are valued based on consideration of information
with respect to transactions in similar securities, quotations from dealers and
various relationships between securities. Other assets for which a
representative value cannot be established are valued at their fair value as
determined in good faith by or under the direction of the Trust's Board of
Trustees. The values of certain portfolio securities may be computed on the
basis of valuations provided by a pricing service, unless the Board of Trustees
determine such valuations do not represent fair value.
The NAV of the Class B and Class C shares of each Fund will generally be lower
than that of its Class A shares because of the higher expenses borne by the
Class B and Class C shares. The NAVs of the three Classes of a Fund's shares
also may differ slightly due to differing allocations of Class-specific
expenses. The NAVs of the three Classes of each Fund's shares will tend to
converge, however, immediately after the payment of dividends.
Call 1-800-463-8794 for 24 hour price information.
FUND DISTRIBUTIONS AND HOW THEY
ARE TAXED
DIVIDENDS AND OTHER DISTRIBUTIONS
The Advisor Equity and Advisor Northwest Funds declare dividends on the last
business day of each calendar quarter, and each other Fund declares dividends on
the last business day of each month, from its net investment income (which
includes accrued interest, earned discount, and other income earned on portfolio
securities less expenses) and such shares become entitled to declared dividends
on the next business day after shares are purchased in your account. If you
request redemption of all your shares at any time during a month, you will
receive all declared dividends through the date of redemption, together with the
proceeds of the redemption.
Dividends paid by a Fund on its Class A, Class B and Class C shares are
calculated at the same time in the same manner. However, because of the higher
service and distribution charges associated with Class B and Class C shares, the
dividends paid by a Fund on its Class B and Class C shares will be lower than
those paid on that Fund's Class A shares.
A shareholder's dividends and other distributions are reinvested in additional
shares of the distributing Fund at NAV (without sales charge) 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 your broker-dealer, bank or other
financial institution or 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. For retirement
accounts, all dividends and other distributions declared by a Fund must be
invested in additional shares of that Fund.
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 qualify for treatment as a regulated investment company
under the Internal Revenue Code. By so qualifying, a Fund will not be subject to
federal income taxes to the extent it distributes its net investment income and
realized capital gains to its shareholders.
Each Fund will inform you as to the amount and nature of dividends and other
distributions to your account. Dividends and other distributions declared in
December, but received by shareholders in January, are taxable to shareholders
in the year in which declared. Special rules apply when you dispose of Class A
shares through a redemption or exchange within 90 days after your purchase
thereof and subsequently reacquire Class A shares of the same Fund or acquire
Class A shares of another Fund without paying a sales charge due to the exchange
privilege or reinstatement privilege. See "How to Purchase
Shares -- Reinstatement Privilege" on page 24 for more information. In these
cases, any gain on the disposition of the original Class A shares will be
increased, or any loss decreased, by the amount of the sales charge paid when
you acquired those shares, and that amount will increase the basis of the shares
subsequently acquired. In addition, if you purchase shares of a Fund (whether
pursuant to the reinstatement privilege or otherwise) within thirty days before
or after redeeming other shares of that Fund (regardless of class) at a loss,
all or part of that loss will not be deductible and will increase the basis of
the newly purchased shares.
ADVISOR MUNICIPAL, ADVISOR INTERMEDIATE MUNICIPAL AND ADVISOR WASHINGTON
MUNICIPAL FUNDS
A portion of a Municipal Bond 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 Municipal Bond 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.
- 29 -
<PAGE> 33
Substantially all dividends are expected to be exempt from federal income tax,
but may be subject to state or local taxes; however, distributions of net
realized capital gains are fully taxable. Shareholders may lose the tax-exempt
status on the accrued income of a municipal bond if they redeem their shares
before a dividend has been declared. Shareholders of each Municipal Bond Fund
may want to consult their tax advisers regarding their investments in a
Municipal Bond 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
distributions from the Advisor Washington Municipal Fund would be exempt from
such a tax.
ADVISOR INTERMEDIATE TREASURY AND ADVISOR GOVERNMENT FUNDS
All states treat the pass-through of interest earned on U.S. Treasury securities
as tax-free income in the calculation of their state income tax. This treatment
may be dependent upon the maintenance of certain percentages of Fund ownership
of these securities. The Advisor Intermediate Treasury Fund will invest
primarily in these securities while the Advisor Government Fund can but is not
obligated to primarily invest in those securities.
TAX WITHHOLDING INFORMATION
You will be asked to certify on your account application or on a separate form
that the taxpayer identification number you provide is correct and that you are
not subject to, or are exempt from, backup withholding for previous
underreporting to the Internal Revenue Service.
Retirement plan distributions may be subject to federal income tax withholding.
However, you may elect to not have any distributions withheld by checking the
appropriate box on the Redemption Request form or by instructing your
broker-dealer, bank or other financial institution or SAFECO Services in writing
at the address on the Prospectus cover.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting each Fund and its shareholders; see the
Trust's Statement of Additional Information for a further discussion. There may
be other federal, state or local tax considerations applicable to a particular
investor. You therefore are urged to consult your tax adviser.
PERFORMANCE INFORMATION
Each Fund's yield, tax-equivalent yield (for the Municipal Bond Funds), total
return and average annual total return may be quoted in advertisements.
From time to time, a Fund may advertise its ranking. Rankings are calculated by
independent companies that monitor mutual fund performance (e.g. CDA Investment
Technologies, Lipper Analytical Services, Inc. and Morningstar, Inc.) and are
reported periodically in national financial publications such as Barron's,
Business Week, Forbes, Investor's Business Daily, Money Magazine, and The Wall
Street Journal. In addition, non-standardized performance figures may accompany
the standardized figures described above. Non-standardized figures may be
calculated in a variety of ways including, but not necessarily limited to,
different time periods and different initial investment amounts. Non-
standardized return does not reflect initial or contingent sales charges and
would be lower if such charges were included. Each Fund may also compare its
performance to the percentage increase in the Standard & Poor's 500 or other
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.
INFORMATION ABOUT SHARE OWNERSHIP AND COMPANIES WHICH PROVIDE SERVICES TO THE
TRUST
GENERAL FUND INFORMATION
Each Fund is a series of SAFECO Advisor Series Trust, a Delaware business trust,
which issues an unlimited number of shares of beneficial interest. The Board of
Trustees may establish additional series of shares or classes of shares of the
Trust without approval of shareholders.
Shares of each Fund class represent equal proportionate interests in the assets
of that Fund class only and have identical voting, dividend, redemption,
liquidation and other rights. All shares issued are fully paid and
nonassessable, 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 1940 Act, in their discretion or upon the written request of
holders of 10% or more of the outstanding shares of the Fund entitled to vote.
- 30 -
<PAGE> 34
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 overall management of the
Trust's and each Fund's business affairs. SAM places orders for the purchase or
sale of each Fund's portfolio securities. 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 breakpoints and applies only to the assets that
fall within the specified range:
ADVISOR EQUITY AND ADVISOR NORTHWEST FUNDS
<TABLE>
<CAPTION>
NET ASSETS ANNUAL FEE
---------------------------------- ----------
<S> <C>
$0 - $500,000,000 .75 of 1%
$500,000,001 - $1,000,000,000 .65 of 1%
Over $1,000,000,000 .55 of 1%
</TABLE>
ADVISOR INTERMEDIATE TREASURY, ADVISOR GOVERNMENT,
ADVISOR GNMA, ADVISOR MUNICIPAL,
ADVISOR INTERMEDIATE MUNICIPAL AND
ADVISOR WASHINGTON MUNICIPAL FUNDS
<TABLE>
<CAPTION>
NET ASSETS ANNUAL FEE
---------------------------------- ----------
<S> <C>
$0 - $500,000,000 .60 of 1%
$500,000,001 - $1,000,000,000 .50 of 1%
Over $1,000,000,000 .40 of 1%
</TABLE>
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.
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").
SAM, SAFECO Securities and SAFECO Services are wholly-owned subsidiaries of
SAFECO Corporation (a holding company whose primary subsidiaries are engaged in
the insurance and related financial services businesses) and are each located at
SAFECO Plaza, Seattle, Washington 98185.
While the use of this combined Prospectus and the Trust's combined Statement of
Additional Information subjects each Fund to possible liability as the result of
statements or omissions regarding another Fund, the Trust's Board of Trustees
considers the benefits to the respective Fund of using a combined Prospectus and
a combined Statement of Additional Information to outweigh such risk.
TAX-DEFERRED RETIREMENT PLANS
SAFECO offers tax-deferred retirement plans for individuals and businesses. An
account may be established under one of the following plans which allow you to
defer investment income from federal income tax while you save for retirement.
The SAFECO Advisor Funds, with the exception of the Municipal Funds, may be used
as investment vehicles for these plans.
- INDIVIDUAL RETIREMENT ACCOUNTS (IRAS). IRAs are tax-deferred retirement
accounts for anyone under age 70 1/2 with earned income. The maximum annual
contribution is $2,000 per person ($2,250 for you and a non-working spouse).
An annual custodial fee will be charged for any part of a calendar year in
which you have an IRA investment in a Fund.
- SIMPLIFIED EMPLOYEE PENSION IRA (SEP-IRAS). SEP-IRAs are easily administered
retirement plans for small businesses and self-employed individuals. Annual
contributions up to $30,000 may be made to SEP-IRA accounts. SEP-IRAs have the
same investment minimums and custodial fees as regular IRAs.
For information about establishing a SAFECO IRA or SEP-IRA, please call your
investment professional.
DISTRIBUTION PLANS
The Trust on behalf of each Class has entered into a Distribution Services
Agreement (each an "Agreement") with SAFECO Securities. The Trust has also
adopted a plan pursuant to Rule 12b-1 under the Investment Company Act of 1940
with respect to each Class (the "Plans"). Pursuant to the Plans, each Class pays
SAFECO Securities a quarterly service fee, at the annual rate of 0.25% of the
aggregate average daily net assets of a Class. Class B and C shares each pay
SAFECO Securities a quarterly distribution fee at the annual rate of 0.75% of
the aggregate average daily net assets of a Class.
Under all three plans, SAFECO Securities will use the service fees primarily to
compensate persons selling shares of the Funds for the provision of personal
service and/or the maintenance of shareholder accounts.
SAFECO Securities will use the distribution fees under the Class B and Class C
Plans to offset the commissions it pays to broker-dealers, banks or other
financial institutions for selling the Funds' Class B and Class C
- 31 -
<PAGE> 35
shares. In addition, SAFECO Securities will use the distribution fees under the
Class B and Class C Plans to offset each Fund's marketing costs attributable to
such Classes, such as preparation of sales literature, advertising and printing
and distributing prospectuses and other shareholder materials to prospective
investors. SAFECO Securities also may use the distribution fees to pay other
costs allocated to SAFECO Securities' distribution activities, including acting
as shareholder of record, maintaining account records and other overhead
expenses.
SAFECO Securities will receive the proceeds of the initial sales charge paid
upon the purchase of Class A shares and the contingent deferred sales charge
paid upon applicable redemptions of Class B shares, and may use these proceeds
for any of the distribution expenses described above. The amount of sales charge
reallowed to broker-dealers, banks or other financial institutions who sell
Class A shares will equal the percentage of the amount invested in accordance
with the schedule set forth in "Purchasing Class A Shares" on page 23. SAFECO
Securities, out of its own resources, will pay a brokerage commission equal to
(i) 3.00% of the amount invested to broker-dealers, banks and other financial
institutions who sell Class B shares and (ii) 1.00% of the amount invested to
broker-dealers, banks and other financial institutions who sell Class C shares.
During the period they are in effect, the Plans and related Agreements obligate
the Funds to pay service and distribution fees to SAFECO Securities as
compensation for its service and distribution activities, not as reimbursement
for specific expenses incurred. Thus, even if SAFECO Securities' expenses exceed
its service or distribution fees for any Fund, the Fund will not be obligated to
pay more than those fees and, if SAFECO Securities' expenses are less than such
fees, it will retain its full fees and realize a profit. Each Fund will pay the
service and distribution fees to SAFECO Securities until either the applicable
Plan or Agreement is terminated or not renewed.
As interpreted by courts and administrative agencies, the Glass-Steagall Act and
other applicable laws and regulations limit the ability of a bank or other
depository institution to become an underwriter or distributor of securities.
However, in the opinion of the Trust's management, based on the advice of
counsel, these laws and regulations do not prohibit such depository institutions
from providing services for investment companies. The State of Texas requires
that shares of the Fund may be sold in that state only by dealers or other
financial institutions that are registered there as broker-dealers.
PERSONS CONTROLLING THE FUNDS
At March 31, 1995, SAFECO Corporation controlled the Advisor Equity Fund,
Advisor Northwest Fund, Advisor Intermediate Treasury Fund, Advisor Government
Fund and Advisor GNMA Fund. At March 31, 1995, SAM, a wholly-owned subsidiary of
SAFECO Corporation, controlled the Advisor Municipal Fund, Advisor Intermediate
Municipal Fund and Advisor Washington Municipal Fund. SAFECO Corporation and SAM
have their principal place of business at SAFECO Plaza, Seattle, Washington
98185.
RATINGS SUPPLEMENT
DESCRIPTION OF DEBT RATINGS
Ratings by Moody's and S&P represent their respective opinions as to the
investment quality of the rated obligations. Investors should realize these
ratings do not constitute a guarantee that the principal and interest payable
under these obligations will be paid when due.
Excerpts from Moody's description of its ratings:
INVESTMENT GRADE:
Aaa -- Judged to be of the best quality. They carry the smallest degree of
investment risk and are generally referred to as "gilt edge." Interest payments
are protected by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa -- Judged to be of high quality by all standards. Together with the Aaa
group, they comprise what are generally known as high grade bonds. They are
rated lower than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
A -- Have many favorable investment attributes and are to be considered as upper
medium grade obligations. Factors giving security to principal and interest are
considered adequate but elements may be present which suggest a susceptibility
to impairment sometime in the future.
Baa -- Considered as medium grade obligations, i.e., they are neither highly
protected nor poorly secured. Interest payments and principal security appear
ade-
- 32 -
<PAGE> 36
quate for the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well.
BELOW-INVESTMENT GRADE:
Ba -- Judged to have speculative elements; their future cannot be considered as
well assured. Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during both good and bad times
over the future.
B -- Generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of 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 shortcomings.
C -- The lowest rated class of bonds and issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Excerpts from S&P's description of its ratings:
INVESTMENT GRADE:
AAA -- The highest rating assigned by S&P. Capacity to pay interest and repay
principal is extremely strong.
AA -- Very strong capacity to pay interest and repay principal and differs from
the highest rated issues only in small degree.
A -- Strong capacity to pay interest and repay principal although it is somewhat
more susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB -- Have an adequate capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories.
BELOW-INVESTMENT GRADE:
BB, B, CCC, CC -- Predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation.
"BB" indicates the lowest degree of speculation and "CC" the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C -- Reserved for income bonds on which no interest is being paid.
D -- In default, and payment of interest and/or repayment of principal is in
arrears.
Plus (+) or Minus (-): The ratings from "AA" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
DESCRIPTION OF RATINGS OF STATE AND MUNICIPAL NOTES AND OTHER SHORT-TERM LOANS:
Excerpts from Moody's description of its ratings:
Moody's ratings for state and municipal notes and other short-term loans are
designated "Moody's Investment Grade" ("MIG" or, for variable or floating rate
obligations, "VMIG"). Such ratings recognize the differences between short-term
credit risk and long-term risk. Factors affecting the liquidity of the borrower
and short-term cyclical elements are critical in short-term ratings. Symbols
used will be as follows:
MIG-1/VMIG-1. This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
MIG-2/VMIG-2. This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG-3/VMIG-3. This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
MIG-4/VMIG-4. This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and although not
distinctly or predominantly speculative, there is specific risk.
Excerpts from S&P's description of its ratings:
Standard & Poor's tax-exempt note ratings are generally given to such notes that
mature in three years or less. The three rating categories are as follows:
SP-1. Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
(+) designation.
SP-2. Satisfactory capacity to pay principal and interest.
SP-3. Speculative capacity to pay principal and interest.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Excerpts from Moody's description of its ratings:
Commercial paper rated Prime-1 by Moody's are judged
by Moody's to be of the best quality. Their short-term debt
obligations carry the smallest degree of investment
risk. Margins of support for current indebtedness
- 33 -
<PAGE> 37
are large or stable with cash flow and asset protection well assured. Current
liquidity provides ample coverage of near-term liabilities and unused
alternative financing arrangements are generally available. While protective
elements may change over the intermediate or longer term, such changes are most
unlikely to impair the fundamentally strong position of short-term obligations.
Excerpts from S&P's description of its ratings:
Commercial paper rated A by S&P have the following characteristics. Liquidity
ratios are better than industry average. Long-term debt rating is A or better.
The issuer has access to at least two additional channels of borrowing. Basic
earnings and cash flow are in an upward trend. Typically, the issuer is a strong
company in a well-established industry and has superior management. Issuers
rated A are further refined by use of numbers 1, 2, and 3 to denote relative
strength within this highest classification. Those issues rated A-1 that are
determined by S&P to possess overwhelming safety characteristics are denoted
with a plus (+) sign designation.
- 34 -
<PAGE> 38
SAFECO Securities, Inc.
Distributor
PROSPECTUS
March 31, 1995
SAFECO Advisor Series Trust:
SAFECO Advisor Equity Fund
SAFECO Advisor Northwest Fund
SAFECO Advisor Intermediate-Term
Treasury Fund
SAFECO Advisor U.S. Government Fund
SAFECO Advisor GNMA Fund
SAFECO Advisor Municipal Bond Fund
SAFECO Advisor Intermediate-Term
Municipal Bond Fund
SAFECO Advisor Washington
Municipal Bond Fund
- 35 -
<PAGE> 39
[This page left blank intentionally]
- 36 -
<PAGE> 40
SAFECO ADVISOR SERIES TRUST:
SAFECO ADVISOR EQUITY FUND
SAFECO ADVISOR NORTHWEST FUND
SAFECO ADVISOR INTERMEDIATE-TERM TREASURY FUND
SAFECO ADVISOR U.S. GOVERNMENT FUND
SAFECO ADVISOR GNMA FUND
SAFECO ADVISOR MUNICIPAL BOND FUND
SAFECO ADVISOR INTERMEDIATE-TERM MUNICIPAL BOND FUND
SAFECO ADVISOR WASHINGTON MUNICIPAL BOND FUND
STATEMENT OF ADDITIONAL INFORMATION
This combined Statement of Additional Information is not a prospectus and
should be read in conjunction with the combined Prospectus for the Funds. A
copy of the Prospectus may be obtained by writing SAFECO Mutual Funds, P.O. Box
34890, Seattle, Washington 98124-1680, or by calling toll free 1-800-463-8791.
The date of the Prospectus of the Funds to which this Statement of Additional
Information relates is March 31, 1995.
The date of this Statement of Additional Information is March 31, 1995.
___________________________________________________________________________
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
Investment Policies 2 Additional Performance 15
Information
Additional Investment 5 Principal Shareholders of
Information the Funds 18
Special Risks of Below 7 Trustees and Officers 19
Investment Grade Bonds -
Advisor Equity Fund Investment Advisory and 22
Other Services
Investment Risks of 7
Concentration in Washington Brokerage Practices 27
Issuers
Redemption in Kind 28
Additional Tax Information 12
Financial Statements 28
Conversion of Class B Shares 14
Description of Preferred
Additional Information on 14 Stock Ratings 29
Calculation of Net Asset
Value Per Share
</TABLE>
<PAGE> 41
INVESTMENT POLICIES
SAFECO Advisor Equity Fund ("Advisor Equity Fund"), SAFECO Advisor Northwest
Fund ("Advisor Northwest Fund"), SAFECO Advisor Intermediate-Term Treasury Fund
("Advisor Intermediate Treasury Fund"), SAFECO Advisor U.S. Government Fund
("Advisor Government Fund"), SAFECO Advisor GNMA Fund ("Advisor GNMA Fund"),
SAFECO Advisor Municipal Bond Fund ("Advisor Municipal Fund"), SAFECO Advisor
Intermediate-Term Municipal Bond Fund ("Advisor Intermediate Municipal Fund")
and SAFECO Advisor Washington Municipal Bond Fund ("Advisor Washington
Municipal Fund") (collectively, the "Funds") are each a series of the SAFECO
Advisor Series Trust ("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 which are prohibited. The types of securities a
Fund may invest in are also disclosed in the Prospectus. Before a Fund
purchases a security which the following policies permit but which is not
currently described in the Prospectus, the Prospectus will be amended or
supplemented to describe the security. If a policy's percentage limitation is
adhered to immediately after and as a result of the investment, a later
increase or decrease in values, net assets or other circumstances will not be
considered in determining whether a Fund complies with the applicable
limitation.
FUNDAMENTAL INVESTMENT POLICIES
Each Fund's fundamental policies may not be changed without approval of a
majority of its outstanding voting securities as defined in the Investment
Company Act of 1940 ("1940 Act"). For purposes of such approval, the vote of a
majority of the outstanding voting securities of a Fund means the vote, at a
meeting of the shareholders of such Fund duly called, (i) of 67% or more of the
voting securities present at such meeting if the holders of more than 50% of
the outstanding voting securities are present or represented by proxy, or (ii)
of more than 50% of the outstanding voting securities, whichever is less.
1. BORROWING. No Fund may borrow money, except from banks or affiliates of
SAFECO Corporation at an interest rate not greater than that available to
the Fund from commercial banks for temporary or emergency purposes and in
amounts not in excess of twenty percent (20%) of its total assets (including
borrowings) less liabilities (other than borrowings) immediately after such
borrowing.
2. COMMODITIES. No Fund may purchase physical commodities or contracts thereon
unless acquired as a result of the ownership of securities or instruments,
but this restriction shall not prohibit a Fund from purchasing futures
contracts or options (including options on futures contracts, but excluding
options or futures contracts on physical commodities) or from investing in
securities of any kind.
3. DIVERSIFICATION. No Fund may, with respect to 75% of the value of its total
assets, purchase the securities of any issuer (other than U.S. Government
securities) if, as a result, (i) more than 5% of the value of the Fund's
total assets would be invested in the securities of that issuer or (ii) the
Fund would hold more than 10% of the outstanding voting securities of that
issuer.
4. INDUSTRY CONCENTRATION. No Fund may purchase any security if, as a result,
25% or more of its total assets (taken at current value) would be invested
in the securities of issuers having their principal business
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<PAGE> 42
activities in the same industry. This limitation does not apply to U.S.
Government securities.
5. LENDING. No Fund may lend any security or make any other loan if, as
result, more than 33-1/3% of its total assets (taken at current value) would
be lent to other parties, except in accordance with its investment
objective, policies, and limitations (i) through the purchase of a portion
of an issue of debt securities or (ii) by engaging in repurchase agreements.
6. REAL ESTATE. No Fund may purchase or sell real estate (but this restriction
shall not prevent a Fund from investing in securities issued by companies or
entities such as real estate investment trusts that own or deal in real
estate or interests therein, securities or participation interests in pools
of real estate mortgage loans, and securities or instruments secured by real
estate or interests therein.
7. SENIOR SECURITIES. No Fund may issue senior securities, except as permitted
under the 1940 Act.
8. UNDERWRITING. No Fund may underwrite securities of other issuers, except to
the extent that a Fund, in disposing of portfolio securities, may be deemed
to be an underwriter within the meaning of the Securities Act of 1933 ("1933
Act").
In addition to the foregoing fundamental investment policies, which apply to
each Fund, the following fundamental investment policies apply to the Advisor
Municipal, Advisor Intermediate Municipal and Advisor Washington Municipal
Funds:
1. PROJECTS. No Fund may purchase a security if, as a result, 25% or more of
its total assets (taken at current value) would be invested in obligations,
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, and air or water
pollution control projects.
2. STATE CONCENTRATION. No Fund may purchase a security if, as a result, 25%
or more of its total assets (taken at current value) would be invested in
securities whose issuers are located in the same state. (This limitation
does not apply to the Advisor Washington Municipal Fund.)
NON-FUNDAMENTAL INVESTMENT POLICIES
In addition to the policies described in the Prospectus, each Fund has adopted
the following non-fundamental investment policies which may be changed by the
Trust's Board of Trustees without shareholder approval:
1. BORROWING. A Fund may not purchase securities if outstanding borrowings
equal or exceed 5% of its total assets.
2. LENDING. A Fund may not make any loans except for the purchase of debt
securities and engaging in repurchase agreements.
3. INVESTMENTS IN OTHER INVESTMENT COMPANIES. No Fund may purchase securities
of other investment companies, except to the extent permitted by the 1940
Act and in the open market at no more than customary brokerage commission
rates. This limitation does not apply to securities received or acquired as
dividends, through offers of exchange, or as a result of a reorganization,
consolidation, or merger.
3
<PAGE> 43
4. MARGIN TRANSACTIONS. No Fund may purchase securities on margin from
brokers or other lenders, except that a Fund may obtain such short-term
credits as are necessary for the clearance of securities transactions.
Margin payments in connection with transactions in futures contracts and
options on futures contracts shall not constitute the purchase of
securities on margin and shall not be deemed to violate the foregoing
limitation.
5. SHORT SALES. No Fund may sell securities short, unless it owns or has
the right to obtain without payment of additional consideration securities
equivalent in kind and amount to the securities sold. Transactions in
futures contracts and options shall not constitute selling securities
short.
6. OWNERSHIP OF FUND SECURITIES BY OFFICERS AND TRUSTEES. No Fund may
purchase or retain the securities of any issuer if, to the knowledge of
the Fund's management, those officers and trustees of the Trust and
officers and directors of SAFECO Asset Management Company ("SAM"), the
investment adviser for each Fund, who each own individually more than 1/2
of 1% of the outstanding securities of such issuer, together own more than
5% of such securities.
7. UNSEASONED ISSUERS. No Fund may purchase the securities of any issuer
(other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than
5% of the Fund's total assets would be invested in the securities of
business enterprises that, including predecessors, have a record of less
than three years of continuous operation.
8. ILLIQUID SECURITIES. No Fund may purchase any security if, as a
result, more than 10% of its net assets would be invested in illiquid
securities. Illiquid securities include securities that cannot be sold
within seven days in the ordinary course of business for approximately the
amount at which the Fund has valued the securities, such as repurchase
agreements maturing in more than seven days.
9. FOREIGN SECURITIES. No Fund may invest more than 10% of the value of its
total assets in securities of foreign issuers, provided that this
limitation shall not apply to foreign securities denominated in U.S.
dollars.
10. OIL AND GAS PROGRAMS. No Fund may invest in participation or other direct
interests in oil, gas, or other mineral leases or exploration or
development programs, but each Fund may purchase securities of companies
that own interests in any of the foregoing.
11. REAL ESTATE. No Fund may purchase or sell interests in real estate
limited partnerships; and no Fund may purchase any security if, as a
result, more than 10% of its total assets would be invested in securities
of real estate investment trusts.
12. WARRANTS. No Fund may invest more than 5% of its net assets in warrants,
including warrants that are not listed on the New York or American Stock
Exchanges, or more than 2% of its net assets in unlisted warrants. For
purposes of this limitation, warrants are valued at the lower of cost or
market value and warrants acquired by a Fund in units or attached to
securities may be deemed to be without value.
13. COMMODITIES. No Fund currently intends to invest in commodities
(including future contracts or options thereon).
4
<PAGE> 44
14. OPTIONS. No Fund currently intends to purchase or write put or call
options or enter into straddles.
ADDITIONAL INVESTMENT INFORMATION
Each Fund may make the following investments, among others, although they may
not buy all of the types of securities that are described.
1. RESTRICTED SECURITIES AND RULE 144A SECURITIES. Restricted securities are
securities that may be sold only in a public offering with respect to which
a registration statement is in effect under the 1933 Act or, if they are
unregistered, in a privately negotiated transaction or pursuant to an
exemption from registration. In recognition of the increased size and
liquidity of the institutional markets for unregistered securities and the
importance of institutional investors in the formation of capital, the
Securities and Exchange Commission ("SEC") has adopted Rule 144A under the
1933 Act, which is designed to further facilitate efficient trading among
institutional investors by permitting the sale of Rule 144A securities to
qualified institutional buyers. To the extent privately placed securities
held by a Fund qualify under Rule 144A and an institutional market develops
for those securities, the Fund likely will be able to dispose of the
securities without registering them under the 1933 Act. SAM, acting under
guidelines established by the Trustees, may determine that certain
securities qualified for trading under Rule 144A are liquid.
Where registration is required, a Fund may be obligated to pay all or part
of the registration expenses, and a considerable period may elapse between
the decision to sell and the time the Fund may be permitted to sell a
security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, the Fund might obtain a
less favorable price than prevailed when it decided to sell. To the extent
privately placed securities are illiquid, purchases thereof will be subject
to any limitations on investments in illiquid securities. Restricted
securities for which no market exists are priced at fair value as determined
in accordance with procedures approved and periodically reviewed by the
Trustees.
2. WARRANTS. A warrant is an option issued by a corporation that gives the
holder the right to buy a stated number of shares of common stock of the
corporation at a specified price within a designated time period. Warrants
may be purchased and sold separately or attached to stocks or bonds as part
of a unit offering. The term of a warrant may run from two to five years
and in some cases the term may be longer. The exercise price carried by the
warrant is usually well above the prevailing market price of the underlying
common stock at the time the warrant is issued. The holder of a warrant has
no voting rights and receives no dividends. Warrants are freely
transferable and may trade on the major national exchanges.
Warrants may be speculative. Generally, the value of a warrant will
fluctuate by greater percentages than the value of the underlying common
stock. The primary risk associated with a warrant is that the term of the
warrant may expire before the exercise price of the common stock has been
reached. Under these circumstances, a Fund could lose all of its principal
investment in the warrant.
A Fund will invest in a warrant only if the Fund has the authority to hold
the underlying common stock. Additionally, if a warrant is part of a unit
offering, a Fund will purchase the warrant only if it is attached to a
security in which the Fund has authority to invest. In all cases, a Fund
5
<PAGE> 45
will purchase warrants only after SAM determines that the exercise price for
the underlying common stock is likely to be achieved within the required
time-frame and for which an actively traded market exists. SAM will make
this determination by analyzing the issuer's financial health, quality of
management and any other factors deemed to be relevant.
3. FOREIGN SECURITIES. Each Fund may invest in U.S. dollar-denominated
securities issued by foreign issuers (including governments and
quasi-governments) and foreign branches of U.S. banks, including negotiable
certificates of deposit ("CDs") and commercial paper. These investments are
subject to each Fund's quality standards. While investments in foreign
securities are intended to reduce risk by providing further diversification,
such investments involve sovereign and other risks, in addition to the
credit and market risks normally associated with domestic securities. These
additional risks include the possibility of adverse political and economic
developments (including political instability) and the potentially adverse
effects of unavailability of public information regarding issuers, reduced
governmental supervision regarding financial markets, reduced liquidity of
certain financial markets, and the lack of uniform accounting, auditing, and
financial standards or the application of standards that are different or
less stringent than those applied in the U.S.
Each Fund also may invest in equity, debt, or other income-producing
securities of issuers in countries whose governments are considered stable
by SAM that are denominated in or indexed to foreign currencies, including
(1) common and preferred stocks, (2) CDs, commercial paper, fixed time
deposits, and bankers' acceptances issued by foreign banks, (3) obligations
of other corporations, and (4) obligations of foreign governments, or their
subdivisions, agencies, and instrumentalities, international agencies, and
supranational entities. Investing in these securities includes the special
risks associated with investing in non-U.S. issuers described in the
preceding paragraph and the additional risks of (1) nationalization,
expropriation, or confiscatory taxation and (2) adverse changes in
investment or exchange control regulations (which could prevent cash from
being brought back to the U.S.). Additionally, dividends and interest
payable on foreign securities may be subject to foreign taxes, including
taxes withheld from those payments, and there are generally higher
commission rates on foreign fund transactions.
Foreign securities often trade with less frequency and volume than domestic
securities and therefore may exhibit greater price volatility. Additional
costs associated with an investment in foreign securities may include higher
custodian fees than apply to domestic custodial arrangements, and
transaction costs of foreign currency conversions. Changes in foreign
exchange rates may also affect the value of the foreign securities
denominated.
In order to limit the risk inherent in investing in foreign
currency-denominated securities, a Fund may not purchase any such security
if after such purchase more than 10% of its total assets (taken at market
value) would be invested in such securities. Within such limitation,
however, no Fund is restricted in the amount it may invest in securities
denominated in any one foreign currency.
4. 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
6
<PAGE> 46
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.
SPECIAL RISKS OF BELOW INVESTMENT GRADE BONDS - ADVISOR EQUITY FUND
Below investment grade bonds (commonly referred to as high-yield or "junk"
bonds) have certain additional risks associated with them. Yields on below
investment grade bonds will fluctuate over time. These bonds tend to reflect
short-term economic and corporate developments to a greater extent than higher
quality bonds which primarily react to fluctuations in interest rates. During
an economic downturn or period of rising interest rates, issuers of below
investment grade bonds may experience financial difficulties which adversely
affect their ability to make principal and interest payments, meet projected
business goals and obtain additional financing. In addition, issuers often
rely on cash flow to service debt. Failure to realize projected cash flows may
seriously impair the issuer's ability to service its debt load which in turn
might cause a Fund to lose all or part of its investment in that security. SAM
will seek to minimize these additional risks through diversification, careful
assessment of the issuer's financial structure, business plan and management
team and monitoring of the issuer's progress toward its financial goals.
The liquidity and price of below investment grade bonds can be affected by a
number of factors, including investor perceptions and adverse publicity
regarding major issues, underwriters or dealers of lower-quality corporate
obligations. These effects can be particularly pronounced in a thinly-traded
market with few participants and may adversely impact the Fund's ability to
dispose of the bonds as well as make valuation of the bonds more difficult.
Because there tend to be fewer investors in below investment grade bonds, it
may be difficult for the Fund to sell these securities at an optimum time.
Consequently, these bonds may be subject to more price changes, fluctuations in
yield and risk to principal and income than higher-rated bonds of the same
maturity.
Credit ratings evaluate the likelihood that an issuer will make principal and
interest payments, but may not reflect market value risks associated with
lower-rated bonds. Credit rating agencies may not timely revise ratings to
reflect subsequent events affecting an issuer's ability to pay principal and
interest.
INVESTMENT RISKS OF CONCENTRATION IN WASHINGTON ISSUERS
WASHINGTON STATE
A discussion of certain economic, financial and legal matters regarding the
State of Washington follows. Since, during normal market conditions, the
Advisor
7
<PAGE> 47
Washington Municipal Fund plans to 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 Advisor
Washington Municipal 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%.
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. The rate of economic growth
slowed as measured by employment in the State has slowed from 4.9% in 1990 to
1.2% in 1993.
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 personal 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 one percent of the true and fair value. Excess levies are subject to
voter approval. For the fiscal year ending June 30, 1993, nearly 77.4% 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 47%
of total collections. Business and occupation tax collections represented
about 15.1% and the motor vehicle fuel tax represented approximately 7.2% of
total State
8
<PAGE> 48
taxes for the year. Ad valorem taxes represented 10.5% of State revenues for
the year.
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 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 1992-1993 Biennium with a $468 million surplus and $260
million in the Budget Stabilization Account. The 1991-93 Biennium Budget was
9
<PAGE> 49
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 1991 prompted the State Economic and Revenue Forecast
Council to reduce projected revenue growth to a rate of 7.2%, 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 and 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 a $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.
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 nontax 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.
10
<PAGE> 50
Below is a summary of key industry segments of the State's economy as well as
of selected economic and employment data.
Manufacturing. The State's manufacturing base consists primarily of aircraft
manufacturing. The Boeing Company, a major aerospace firm, is the largest
commercial employer in the State and has a significant impact on the State in
terms of production, employment and labor earnings. Financial performance of
Boeing has been strong in recent years as measured by increased sales, airplane
deliveries and backlogs of orders. In January 1993, 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.
Exclusive of aerospace, manufacturing jobs have shown steady growth.
Technology-Related Industries. The State ranks fourth among 12 leading 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 productivity 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 materially affect 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 are related to this area. During the past 20 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 1985 and 1990 was 33.5%
compared to that of 24.4% in the U.S.
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<PAGE> 51
Services/Tourism. The highest employment growth between 1981 and 1991 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 through
1993, but is estimated to show a modest increase in 1994. Commercial building
while not increasing at the pace of the 1980s remains healthy.
Federal, State and Local Government. Employment in the government sector
represents approximately 18% 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
GENERAL
Each Fund is treated as a separate corporation for federal income tax purposes.
In order to qualify for treatment as a regulated investment company under the
Internal Revenue Code of 1986, as amended ("Code"), a Fund must distribute to
its shareholders for each taxable year at least 90% of its investment company
taxable income (consisting generally of taxable net investment income and net
short-term capital gain) plus, in the case of a Municipal Bond Fund, its net
interest income excludable from gross income under section 103(a) of the Code
and must meet several additional requirements.
If shares of a Fund are sold at a loss after being held for six months or less,
the loss will be treated as long-term, instead of short-term, capital loss to
the extent of any capital gain distributions received on those shares.
Investors also should be aware that if shares are purchased shortly before the
record date for any distribution (other than an "exempt-interest dividend," see
below), the shareholder will pay full price for the shares and receive some
portion of the purchase price back as a taxable dividend or capital gain
distribution.
Each Fund 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 October 31 of that year, plus certain other amounts.
Each Fund is required to withhold 31% of all taxable dividends, capital gain
distributions and redemption proceeds payable to individuals and certain other
noncorporate shareholders who do not furnish the Fund with a correct taxpayer
identification number. Withholding at that rate also is required from
dividends
12
<PAGE> 52
and those distributions for shareholders who otherwise are subject to backup
withholding.
MUNICIPAL BOND FUNDS
Dividends paid by a Municipal Bond Fund will qualify as exempt-interest
dividends as defined in the Prospectus, and thus will be excludable from gross
income by its shareholders, if the Fund satisfies the requirement that, at the
close of each quarter of its taxable year, at least 50% of the value of its
total assets consists of securities the interest on which is excludable from
gross income under section 103(a); each Municipal Bond Fund intends to satisfy
this requirement. The aggregate dividends excludable from shareholders' gross
income of such a Fund may not exceed the Fund's net tax-exempt income. The
shareholders' treatment of dividends from these Funds under local and state
income tax laws may differ from the treatment thereof under the Code.
Interest on indebtedness incurred or continued to purchase or carry shares of a
Municipal Bond Fund will not be deductible for federal income tax purposes to
the extent that Fund's distributions consist of exempt-interest dividends.
Each Municipal Bond Fund will not invest in private activity bonds the interest
on which is treated as a tax preference item for investors in determining their
liability for the alternative minimum tax.
Each Municipal Bond 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 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 Municipal Bond Fund may elect to
include market discount in its gross income currently, for each taxable year to
which it is attributable.
Proposals may be introduced before Congress for the purpose of restricting or
eliminating the federal income tax exemption for interest on municipal bonds.
If such a proposal were enacted, the availability of municipal bonds for
investment by each Municipal Bond Fund and the value of their portfolios would
be affected. In such event, each Municipal Bond Fund would reevaluate its
investment objective and policies.
If shares of a Municipal Bond Fund are sold at a loss after being held for six
months or less, the loss will be disallowed to the extent of any
exempt-interest dividends received on those shares.
Exempt-interest dividends received by a corporate shareholder also may be
indirectly subject to income tax without regard to whether a Municipal Bond
Fund's tax-exempt interest was attributable to those bonds.
Up to 85% of social security and railroad retirement benefits may be included
in taxable income for recipients whose adjusted gross income (including income
from tax-exempt sources such as a Municipal Bond Fund) plus 50% of their
benefits exceeds certain base amounts. Exempt-interest dividends still are
tax-exempt to
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<PAGE> 53
the extent described in the Prospectus; they are only included in the
calculation of whether a recipient's income exceeds the established amounts.
If a Municipal Bond Fund invests in any instruments that generate taxable
income, under the circumstances described in the Prospectus, distributions of
the interest earned thereon will be taxable to the Fund's shareholders as
ordinary income to the extent of the Fund's earnings and profits. Moreover, if
a Municipal Bond Fund realizes capital gain as a result of market transactions,
any distribution of that gain will be taxable to its shareholders. There also
may be collateral federal income tax consequences regarding the receipt of
exempt-interest dividends by shareholders such as S corporations, financial
institutions and property and casualty insurance companies. A shareholder
falling into any such category should consult its tax adviser concerning its
investment in shares of a Municipal Bond Fund.
CONVERSION OF CLASS B SHARES
Class B shares of each Fund will automatically convert to Class A shares, based
on the relative net asset values of each of the Classes, as of the close of
business on the first business day of the month in which the eighth anniversary
of the shareholder's purchase of such Class B shares of the Fund occurs. For
the purpose of calculating the holding period required for conversion of Class
B shares, the date of initial purchase shall mean (1) the date on which such
Class B shares were purchased, or (2) for Class B shares obtained through an
exchange, or a series of exchanges, the date on which the original Class B
shares were purchased. For purposes of conversion to Class A, Class B shares
purchased through the reinvestment of dividends and other distributions paid in
respect of Class B shares will be held in a separate sub-account. Each time
any Class B shares in the shareholder's regular account (other than those in
the sub-account) convert to Class A, a pro rata portion of the Class B shares
in the sub-account will also convert to Class A. The portion will be
determined by the ratio that the shareholder's Class B shares converting to
Class A bears to the shareholder's total Class B shares not acquired through
dividends and other distributions.
The availability of the conversion feature is subject to the continuing
applicability of a ruling of the Internal Revenue Service that (1) the
dividends and other distributions paid on Class A and Class B shares will not
result in "preferential dividends" under the Code and (2) the conversion of
shares does not constitute a taxable event. If the conversion feature ceased
to be available, the Class B shares of each Fund would not be converted and
would continue to be subject to the higher ongoing expenses of the Class B
shares beyond eight years from the date of purchase. SAM has no reason to
believe that these conditions for the availability of the conversion feature
will not continue to be met.
ADDITIONAL INFORMATION ON CALCULATION OF NET ASSET VALUE PER SHARE
Each Fund determines its net asset value per share ("NAV") by subtracting the
Fund's liabilities (including accrued expenses and dividends payable) from its
total assets (the market value of the securities the Fund holds plus cash and
other assets, including interest accrued but not yet received) and dividing the
result by the total number of shares outstanding. The NAV of each Fund is
calculated as of the close of regular trading on the New York Stock Exchange
("Exchange") every day the Exchange is open for trading. The Exchange is
closed on the following days: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Each Fund has selected a pricing service to assist in computing the value of
its securities. There are a number of pricing services available and the
decision as to whether, or how, a pricing service should be used by a Fund will
be subject to review by the Trust's Board of Trustees.
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<PAGE> 54
Short-term debt securities held by each Fund having a remaining maturity of
less than 60 days when purchased, and securities originally purchased with
maturities in excess of 60 days but which currently have maturities of 60 days
or less, may be valued at cost adjusted for amortization of premiums or accrual
of discounts, or under such other methods as the Board of Trustees may from
time to time deem to be appropriate. The cost of those securities that had
original maturities in excess of 60 days shall be determined by their fair
market value as of the 61st day prior to maturity. All other securities and
assets in the portfolios will be appraised in accordance with those procedures
established by the Board of Trustees in good faith in computing the fair market
value of those assets.
ADDITIONAL PERFORMANCE INFORMATION
The yield and total return calculations set forth below are for the dates
indicated and are not a prediction of future results.
The yields for the 30-day period ended December 31, 1994, for the Funds were as
follows:
<TABLE>
<CAPTION>
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Advisor Intermediate-Term
Treasury Fund 4.88% 4.37% 4.37%
Advisor U.S. Government Fund 4.76% 4.25% 4.25%
Advisor GNMA Fund 5.95% 5.49% 5.49%
Advisor Municipal Bond Fund 3.98% 3.43% 3.43%
Advisor Intermediate-Term
Municipal Bond Fund 3.28% 2.70% 2.70%
Advisor Washington Municipal
Bond Fund 3.94% 3.42% 3.46%
</TABLE>
"Yield" is computed using the following formula:
Yield = 2[(a-b +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
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<PAGE> 55
The tax equivalent yields for the 30 day period ended December 31, 1994, at the
maximum federal tax rate of 39.6% for the Funds were as follows:
<TABLE>
<CAPTION>
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Advisor Municipal Bond Fund 6.59% 5.68% 5.68%
Advisor Intermediate-Term
Municipal Bond Fund 5.43% 4.47% 4.47%
Advisor Washington Municipal
Bond Fund 6.52% 5.66% 5.73%
</TABLE>
"Tax-equivalent yield" is computed using the following formula:
Tax-equivalent yield = [ eg ] + [e(1-g)]
-------------------
(1-f)
Where: e = "yield" as calculated above
f = tax rate
g = percentage of "yield" which is tax-free
TOTAL RETURN
The total returns, expressed as a percentage, for the period from September 30,
1994 (commencement of operations) to December 31, 1994, for the Funds were as
follows:
<TABLE>
<CAPTION>
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Advisor Equity Fund -2.10% -2.29% -2.29%
Advisor Northwest Fund -2.50% -2.70% -2.70%
Advisor Intermediate-Term
Treasury Fund 0.41% 0.22% 0.22%
Advisor U.S. Government Fund 0.99% 0.79% 0.79%
Advisor GNMA Fund -0.72% -0.90% -0.90%
Advisor Municipal Bond Fund -0.16% -.35% -.35%
Advisor Intermediate-Term
Municipal Bond Fund -1.29% -1.48% -1.48%
Advisor Washington Municipal -0.93% -1.12% -1.12%
Bond Fund
</TABLE>
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<PAGE> 56
The total returns, expressed in dollars and assuming a $10,000 initial
investment, for the period from September 30, 1994 (commencement of operations)
to December 31, 1994, for the Funds were as follows:
<TABLE>
<CAPTION>
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Advisor Equity Fund $ 9,790 $ 9,771 $ 9,771
Advisor Northwest Fund $ 9,750 $ 9,730 $ 9,730
Advisor Intermediate-Term
Treasury Fund $10,041 $10,022 $10,022
Advisor U.S. Government Fund $10,099 $10,079 $10,079
Advisor GNMA Fund $ 9,928 $ 9,910 $ 9,910
Advisor Municipal Bond Fund $ 9,984 $ 9,965 $ 9,965
Advisor Intermediate-Term
Municipal Bond Fund $ 9,871 $ 9,852 $ 9,852
Advisor Washington Municipal
Bond Fund $ 9,907 $ 9,888 $ 9,888
</TABLE>
The total return is computed using the following formula:
T = ERV-P x 100
-----
P
In making the above calculations, all dividends and other distributions are
assumed to be reinvested at a Fund's NAV on the reinvestment date.
In addition to performance figures, the Funds may advertise their rankings as
calculated by independent rating services which monitor mutual funds'
performance (e.g. CDA Investment Technologies, Lipper Analytical Services,
Inc., Morningstar, Inc. and Wiesenberger Investment Companies Service). These
rankings may be among mutual funds with similar objectives and/or size or with
mutual funds in general. In addition, the Funds may advertise rankings which
are in part based upon subjective criteria developed by independent rating
services to measure relative performance. Such criteria may include methods to
account for levels of risk and potential tax liability, sales commissions and
expense and turnover ratios. These rating services may also base the measure
of relative performance on time periods deemed by them to be representative of
up and down markets.
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<PAGE> 57
The Funds may occasionally reproduce articles or portions of articles about the
Funds written by independent third parties such as financial writers, financial
planners and financial analysts, which have appeared in financial publications
of general circulation or financial newsletters (including but not limited to
Barrons, Business Week, Forbes, Fortune, Investor's Daily, Kiplinger's, Money
Magazine, Newsweek, Pensions & Investments, Time Magazine, U.S. News and World
Report and The Wall Street Journal).
Each Fund may also present in its advertisements and sales literature (i) a
biography or the credentials of its portfolio manager (including but not
limited to educational degrees, professional designations, work experience,
work responsibilities and outside interests), (ii) descriptions, including
quotations attributable to the portfolio manager, of the investment style used
to manage a Fund's portfolio, the research methodologies underlying securities
selection and a Fund's investment objective, (iii) current facts (including but
not limited to number of employees, number of shareholders, business
characteristics) about the Fund's investment adviser (SAM), the investment
adviser's parent company (SAFECO Corporation), or the SAFECO Family of Funds
and (iv) information about particular securities held in a Fund's portfolio.
PRINCIPAL SHAREHOLDERS OF THE FUNDS
At February 28, 1995, SAFECO Corporation owned 500,000 shares each of the
Advisor Equity Fund, Advisor Northwest Fund, Advisor Intermediate Treasury
Fund, Advisor Government Fund and the Advisor GNMA Fund, which represented 97%,
99%, 98%, 100% and 99%, respectively, of each Fund's outstanding shares.
SAFECO Corporation is a holding company whose primary subsidiaries are engaged
in the insurance and related financial services businesses. SAFECO Corporation
is a Washington corporation with its principal place of business at SAFECO
Plaza, Seattle, Washington 98185.
At February 28, 1995, SAM owned 500,000 shares each of the Advisor Municipal
Fund, Advisor Intermediate Municipal Fund and Advisor Washington Municipal
Fund, which represented 100%, 100% and 97%, respectively, of each Fund's
outstanding shares. SAM is the investment advisor of each Fund and a
wholly-owned subsidiary of SAFECO Corporation.
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<PAGE> 58
TRUSTEES AND OFFICERS
<TABLE>
<CAPTION>
Position Held with Principal Occupation
Name, Address and Age the Trust During Past 5 Years
--------------------- ----------------- --------------------
<S> <C> <C>
Boh A. Dickey* Chairman Executive Vice President, Chief Financial
SAFECO Plaza and Trustee Officer and Director of SAFECO
Seattle, Washington 98185 Corporation. He has been an executive officer
(51) of SAFECO Corporation and its 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
(50) former Executive Vice President of Wright
Runstad & Co., Seattle, Washington, a real
estate development company; Director of
First SAFECO National Life Insurance Company
of New York;
Richard W. Hubbard* Trustee Retired Vice President and Treasurer of
1270 NW Blakely Ct. the Trust and other SAFECO Trusts; retired
Seattle, Washington 98177 Senior Vice President and Treasurer of
(66) SAFECO Corporation; former President of
SAFECO Asset Management Company.
Richard E. Lundgren Trustee Director of Marketing and Customer
764 S. 293rd Street Relations, Building Materials
Federal Way, Washington 98032 Distribution, Weyerhaeuser Company,
(58) Tacoma, Washington; Director of First
SAFECO National Life Insurance Company of
New York.
</TABLE>
19
<PAGE> 59
TRUSTEES AND OFFICERS
<TABLE>
<CAPTION>
Position Held with Principal Occupation
Name, Address and Age the Trust During Past 5 Years
--------------------- ----------------- --------------------
<S> <C> <C>
L. D. McClean* Trustee Retired Assistant Secretary of SAFECO
7231 91st Avenue SE Corporation and its property and casualty
Mercer Island, WA 98040 and life insurance affiliates; Director of
(68) First SAFECO National Life Insurance
Company of New York; former President of
the SAFECO Mutual Funds; former Director
of SAFECO Asset Management Company, SAFECO
Securities, Inc. and SAFECO Services
Corporation.
Larry L. Pinnt Trustee Retired Vice President and Chief Financial
1600 Bell Plaza Officer of US WEST Communications,
Room 1802 Seattle, Washington; Director of Key Bank
Seattle, Washington of Washington; Director of PREMERA;
98191 Director of Blue Cross of Washington and
(61) Alaska; Director of First SAFECO National
Life Insurance Company of New York.
John W. Schneider Trustee President of Merit Hotel Associates, Inc.,
1808 N 41st St. Seattle, Washington; former President of
Seattle, Washington 98103 Coast Hotels, Inc.; Director of First
(54) SAFECO National Life Insurance Company of
New York.
David F. Hill President President of SAFECO Securities, Inc. and
SAFECO Plaza SAFECO Services Corporation; Senior Vice
Seattle, Washington 98185 President of SAFECO Asset Management
(47) Company. See table under "Investment
Advisory and Other Services."
</TABLE>
20
<PAGE> 60
TRUSTEES AND OFFICERS
<TABLE>
<CAPTION>
Position Held with Principal Occupation
Name, Address and Age the Trust During Past 5 Years
--------------------- ----------------- --------------------
<S> <C> <C>
Neal A. Fuller Vice President Vice President, Controller, Assistant
SAFECO Plaza Controller, Assistant Secretary and Treasurer of SAFECO
Seattle, Washington 98185 Secretary Securities, Inc. and SAFECO Services
(33) 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 Asset Management
SAFECO Plaza Treasurer Company; Vice President and Treasurer of
Seattle, WA 98185 SAFECO Corporation; Director and Vice
(51) President of SAFECO Life Insurance
Company; former Senior Portfolio Manager
of SAFECO insurance companies' taxable
bond portfolios; former Portfolio Manager
for several SAFECO mutual funds.
See Table under "Investment Advisory and
Other Services."
</TABLE>
* Trustees who are interested persons as defined by the 1940 Act.
For the fiscal period ended December 31, 1994, the Trustees of the Trust not
employed by SAFECO Corporation or its affiliates, as a group, received $1,780
per Fund for their services as Trustees. The officers received no compensation
for their services as officers or, if applicable, as Trustees.
At February 28, 1995, the Trustees and officers of the Trust as a group owned
less than 1% of the outstanding shares of each Fund.
21
<PAGE> 61
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
Trustee Registrant Expenses Retirement to Trustees
------- ---------- -------- ---------- -----------
<S> <C> <C> <C> <C>
Barbara J. Dingfield $1,800 N/A N/A $16,200
Richard E. Lundgren $1,800 N/A N/A $16,200
L.D. McClean $1,700 N/A N/A $14,900
Larry L. Pinnt $1,800 N/A N/A $16,200
John W. Schneider $1,800 N/A N/A $16,200
Boh A. Dickey $0 N/A N/A $0
Richard W. Hubbard $0 N/A N/A $0
</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 series
companies managed by SAM.
INVESTMENT ADVISORY AND OTHER SERVICES
ADVISORY SERVICES
SAM, SAFECO Securities, Inc. ("SAFECO Securities") and SAFECO Services
Corporation ("SAFECO Services") are wholly-owned subsidiaries of SAFECO
Corporation. SAFECO Securities is the principal underwriter of each Fund and
SAFECO Services is the transfer, dividend and distribution disbursement and
shareholder servicing agent of each Fund under agreements with the Trust.
22
<PAGE> 62
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
D. F. Hill President Senior Vice President President
President, Director Director
Director
N. A. Fuller Vice President Vice President Vice President Vice President
Controller Controller Controller Controller
Assistant Secretary Assistant Secretary Assistant Secretary
Secretary Treasurer Treasurer Treasurer
R.A. Spaulding Vice President Vice President Director
Treasurer
S.C. Bauer President
</TABLE>
Mr. Dickey is Executive Vice President, Chief Financial Officer and a director
of SAFECO Corporation and Mr. Spaulding is Assistant Treasurer of SAFECO
Corporation. Mssrs. Dickey and Spaulding are also directors of other SAFECO
Corporation subsidiaries.
In connection with its investment advisory contract with the Trust, SAM
provides, without cost, office space, equipment and facilities and personnel
necessary to perform executive, administrative, and clerical functions and pays
all salaries, expenses and fees of the officers, trustees and employees of the
Trust who are officers, directors and employees of SAM.
The Trust's Trust Instrument provides that the Trust will indemnify its
Trustees and its officers against liabilities and expenses reasonably incurred
in connection with litigation in which they may be involved because of their
offices with the Trust, unless it is adjudicated that they engaged in bad
faith, wilful misfeasance, gross negligence, or reckless disregard of the
duties involved in the conduct of their offices. In the case of settlement,
such indemnification will not be provided unless it has been determined -- by a
court or other body approving the settlement or other disposition, or by a
majority of disinterested Trustees, based upon a review of readily available
facts, or in a written opinion of independent counsel -- that such officers or
Trustees have not engaged in wilful misfeasance, bad faith, gross negligence,
or reckless disregard of their duties.
23
<PAGE> 63
SAM also serves as the investment adviser for other investment companies in
addition to the Funds. Several of these investment companies have investment
objectives similar to those of certain Funds. It is therefore possible that
the same securities will be purchased for both a Fund and another investment
company advised by SAM. When two or more funds advised by SAM are
simultaneously engaged in the purchase or sale of the same security, the prices
and amounts will be allocated in accordance with a formula considered by the
officers of the funds involved to be equitable to each fund. In some cases
this system could have a detrimental effect on the price or value of the
security as far as a Fund is concerned. In other cases, however, the ability
of a Fund to participate in volume transactions will produce better executions
and prices for the Fund.
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 which fall within the specified
range:
ADVISOR EQUITY AND ADVISOR NORTHWEST FUNDS
<TABLE>
<CAPTION>
NET ASSETS ANNUAL FEE
<S> <C>
For assets up to and including $500,000,000 .75 of 1%
For assets in excess of $500,000,000 and .65 of 1%
up to and including $1,000,000,000
For assets over $1,000,000,000 .55 of 1%
</TABLE>
ADVISOR INTERMEDIATE TREASURY, ADVISOR GOVERNMENT, ADVISOR GNMA,
ADVISOR MUNICIPAL, ADVISOR INTERMEDIATE MUNICIPAL AND
ADVISOR WASHINGTON MUNICIPAL FUNDS
<TABLE>
<CAPTION>
NET ASSETS ANNUAL FEE
<S> <C>
For assets up to and including $500,000,000 .60 of 1%
For assets in excess of $500,000,000 and .50 of 1%
up to and including $1,000,000,000
For assets over $1,000,000,000 .40 of 1%
</TABLE>
SAM shall reimburse each Fund for the amount by which a Fund's expenses in any
full fiscal year (excluding interest expense, taxes, brokerage expense,
distribution fees, certain expenses attributable to investing outside the
United States and extraordinary expenses) exceed the limits prescribed by any
24
<PAGE> 64
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 a 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 table states the total amount of compensation in the form of
advisory fees paid to SAM for the fiscal period ended December 31, 1994:
<TABLE>
<CAPTION>
Fees Paid to SAM
(000s omitted)
Fiscal Period Ended
Fund December 31, 1994
---- -----------------
<S> <C>
Advisor Equity Fund $9
Advisor Northwest Fund $9
Advisor Intermediate-Term
Treasury Fund $7
Advisor U.S. Government Fund $7
Advisor GNMA Fund $7
Advisor Municipal Bond Fund $5
Advisor Intermediate-Term
Municipal Bond Fund $5
Advisor Washington Municipal
Bond Fund $6
</TABLE>
DISTRIBUTION ARRANGEMENTS. SAFECO Securities is the principal underwriter for
each Fund and acts as the distributor of the Class A, Class B and Class C
shares of each Fund under a Distribution Services Agreement with the Trust
dated September 20, 1994 that requires SAFECO Securities to use its best
efforts, consistent with its other businesses, to sell shares of the Funds.
Shares of the Funds are offered continuously.
Under separate plans of distribution pertaining to the Class A, Class B and
Class C shares of each Fund adopted by the Trust in the manner prescribed under
Rule 12b-1 under the 1940 Act (each a "Plan"), each Class pays fees described
in the Prospectus.
25
<PAGE> 65
For the fiscal period ended December 31, 1994, (from the initial public
offering date of September 30, 1994) the Funds paid (or accrued) the following
fees to SAFECO Securities under the Plans (in thousands):
<TABLE>
<CAPTION>
SAFECO SAFECO
SAFECO SAFECO Advisor Advisor
Advisor Advisor Intermediate- U.S.
Equity Northwest Term Treasury Government
Fund Fund Fund Fund
-------- --------- -------------- ----------
<S> <C> <C> <C> <C>
Class A Service Fees 1 1 1 1
Class B Service Fees 1 1 1 1
Class B Distribution Fees 3 3 3 3
Class C Service Fees 1 1 1 1
Class C Distribution Fees 3 3 3 3
-------- --------- -------------- ----------
9 9 9 9
======== ========= ============== ==========
</TABLE>
<TABLE>
<CAPTION>
SAFECO SAFECO
SAFECO SAFECO Advisor Advisor
Advisor Advisor Intermediate- Washington
GNMA Municipal Term Municipal Municipal
Fund Bond Fund Bond Fund Bond Fund
-------- --------- -------------- ----------
<S> <C> <C> <C> <C>
Class A Service Fees 1 1 1 1
Class B Service Fees 1 1 1 1
Class B Distribution Fees 3 3 3 3
Class C Service Fees 1 1 1 1
Class C Distribution Fees 3 3 3 3
-------- --------- -------------- ----------
9 9 9 9
======== ========= ============== ==========
</TABLE>
SAFECO Securities estimates that it and its affiliate, SAM, incurred
the following shareholder service-related and distribution-related expenses
with respect to the Funds during the fiscal period ended December 31, 1994
(from initial public offering on September 30, 1994) (in thousands):
CLASS A
<TABLE>
<CAPTION>
SAFECO SAFECO
SAFECO SAFECO Advisor Advisor
Advisor Advisor Intermediate- U.S.
Equity Northwest Term Treasury Government
Fund Fund Fund Fund
-------- --------- -------------- ----------
<S> <C> <C> <C> <C>
Marketing and Advertising 4 4 4 4
Printing and Mailing of Prospectuses 2 2 2 2
Compensation to dealers:
Trail (Service Fees) 1 1 1 1
B and C Share Commissions
(Distribution Fees) -- -- -- --
-------- --------- -------------- ----------
7 7 7 7
======== ========= ============== ==========
</TABLE>
<TABLE>
<CAPTION>
SAFECO SAFECO
SAFECO SAFECO Advisor Advisor
Advisor Advisor Intermediate- Washington
GNMA Municipal Term Municipal Municipal
Fund Bond Fund Bond Fund Bond Fund
-------- --------- -------------- ----------
<S> <C> <C> <C> <C>
Marketing and Advertising 4 4 4 4
Printing and Mailing of Prospectuses 2 2 2 2
Compensation to dealers:
Trail (Service Fees) 1 1 1 1
B and C Share Commissions
(Distribution Fees) -- -- -- --
-------- --------- -------------- ----------
7 7 7 7
======== ========= ============== ==========
</TABLE>
CLASS B
<TABLE>
<CAPTION>
SAFECO SAFECO
SAFECO SAFECO Advisor Advisor
Advisor Advisor Intermediate- U.S.
Equity Northwest Term Treasury Government
Fund Fund Fund Fund
-------- --------- -------------- ----------
<S> <C> <C> <C> <C>
Marketing and Advertising 4 4 4 4
Printing and Mailing of Prospectuses 2 2 2 2
Compensation to dealers:
Trail (Service Fees) 1 1 1 1
B and C Share Commissions
(Distribution Fees) -- -- -- --
-------- --------- -------------- ----------
7 7 7 7
======== ========= ============== ==========
</TABLE>
<TABLE>
<CAPTION>
SAFECO SAFECO
SAFECO SAFECO Advisor Advisor
Advisor Advisor Intermediate- Washington
GNMA Municipal Term Municipal Municipal
Fund Bond Fund Bond Fund Bond Fund
-------- --------- -------------- ----------
<S> <C> <C> <C> <C>
Marketing and Advertising 4 4 4 4
Printing and Mailing of Prospectuses 2 2 2 2
Compensation to dealers:
Trail (Service Fees) 1 1 1 1
B and C Share Commissions
(Distribution Fees) -- -- -- 1
-------- --------- -------------- ----------
7 7 7 8
======== ========= ============== ==========
</TABLE>
CLASS C
<TABLE>
<CAPTION>
SAFECO SAFECO
SAFECO SAFECO Advisor Advisor
Advisor Advisor Intermediate- U.S.
Equity Northwest Term Treasury Government
Fund Fund Fund Fund
-------- --------- -------------- ----------
<S> <C> <C> <C> <C>
Marketing and Advertising 4 4 4 4
Printing and Mailing of Prospectuses 2 2 2 2
Compensation to dealers:
Trail (Service Fees) 1 1 1 1
B and C Share Commissions
(Distribution Fees) -- -- -- --
-------- --------- -------------- ----------
7 7 7 7
======== ========= ============== ==========
</TABLE>
<TABLE>
<CAPTION>
SAFECO SAFECO
SAFECO SAFECO Advisor Advisor
Advisor Advisor Intermediate- Washington
GNMA Municipal Term Municipal Municipal
Fund Bond Fund Bond Fund Bond Fund
-------- --------- -------------- ----------
<S> <C> <C> <C> <C>
Marketing and Advertising 4 4 4 4
Printing and Mailing of Prospectuses 2 2 2 2
Compensation to dealers:
Trail (Service Fees) 1 1 1 1
B and C Share Commissions
(Distribution Fees) -- -- -- 1
-------- --------- -------------- ----------
7 7 7 8
======== ========= ============== ==========
</TABLE>
Among other things, each Plan provides that (1) SAFECO Securities will submit
to the Trust's board of trustees at least quarterly, and the trustees will
review, reports regarding all amounts expended under the Plan and the purposes
for which such expenditures were made, (2) the Plan will continue in effect so
long as it is approved at least annually and any material amendment thereto is
approved, by the Trust's board of trustees, including those trustees who are
not "interested persons" of the Trust and who have no direct or indirect
financial interest in the operation of the Plan or any agreement related to the
Plan, acting in person at a meeting called for that purpose, (3) payments by a
Fund under the Plan shall not be materially increased without the affirmative
vote of the holders of a majority of the outstanding voting securities of the
relevant Class of that Fund and (4) while the Plan remains in effect, the
selection and nomination of trustees who are not "interested persons" of the
Trust shall be committed to the discretion of the trustees who are not
"interested persons" of the Trust.
In reporting amounts expended under the Plans to the trustees, SAFECO
Securities will allocate expenses attributable to the sale of each Class of
Fund shares to such Class based on the ratio of sales of shares of such Class
to the sales of all three Classes of shares. Expenses attributable to a
specific Class will be allocated to that Class.
In approving the adoption of each Plan, the Trustees determined that the
adoption was in the best interests of the Fund's shareholders. Each Plan also
was approved by SAFECO Corporation, the initial sole shareholder of the Advisor
Equity Fund and the Advisor Intermediate Treasury Fund, on September 27, 1994
and SAM, the initial sole shareholder of the Advisor Northwest Fund, the Advisor
Government Fund, the Advisor GNMA Fund, the Advisor Intermediate Municipal
Fund, and the Advisor Washington Municipal Fund on September 27, 1994.
In the event that a Plan is terminated or not continued with respect to the
Class A shares, Class B shares or Class C shares, (i) no fees would be owed by
a Fund to SAFECO Securities with respect to that class, and (ii) a Fund would
not be obligated to pay SAFECO Securities for any amounts expended under the
Plan not previously recovered by SAFECO Securities.
The Plans comply with rules of the National Association of Securities Dealers,
Inc. which limit the annual asset-based sales charges and service fees that a
mutual fund may impose on a class of shares to .75% and .25%, respectively, of
the average annual net assets attributable to that class. The rules also limit
the aggregate of all front-end, deferred and asset-based sales charges imposed
with respect to a class of shares by a mutual fund that also charges a service
26
<PAGE> 66
fee to 6.25% of cumulative gross sales of shares of that class, plus interest
at the prime rate plus 1% per annum.
CUSTODIAN AND INDEPENDENT AUDITORS
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 which audit the financial
statements of the Trust.
TRANSFER, DIVIDEND AND DISTRIBUTION DISBURSING AND SHAREHOLDER SERVICING AGENT
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 of each
Fund's shareholders, records of transactions involving each Fund's shares, and
the compilation, distribution, or reinvestment of income dividends or capital
gains distributions. SAFECO Services is paid a fee of $3.10 per each
shareholder transaction. The following table states the total amount of
compensation paid by each Fund to SAFECO Services for the fiscal period ended
December 31, 1994:
Fees Paid to SAFECO Services
<TABLE>
<CAPTION>
Fiscal Period Ended
Fund December 31, 1994
---- -----------------
<S> <C>
Advisor Equity $0
Advisor Northwest $0
Advisor Intermediate-
Term Treasury $0
Advisor Government $0
Advisor GNMA $0
Advisor Municipal $0
Advisor Intermediate
Municipal Bond $0
Advisor Washington
Municipal Bond $0
</TABLE>
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:
27
<PAGE> 67
(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 and on a
timely basis);
(2) Whether the broker is known to SAM as being reputable;
(3) Whether the broker has sold shares of the Funds; and
(4) 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 will not pay excess commissions
or mark-ups to any broker or dealer for research services or for any other
reason.
REDEMPTION IN KIND
If the Trust concludes that cash payment upon redemption to a shareholder would
be prejudicial to the best interest of the other shareholders of a Fund, a
portion of the payment may be made in kind. The Trust has elected to be
governed by Rule 18(f)(1) under the 1940 Act, pursuant to which the Trust must
redeem shares tendered by a shareholder solely in cash up to the lesser of
$250,000 or 1% of the net asset value of a Fund during any 90-day period. Any
shares tendered by the shareholder in excess of the above-mentioned limit may
be redeemed through distribution of a Fund's assets. Any securities or other
property so distributed in kind shall be valued by the same method as is used
in computing NAV. Distributions in kind will be made in readily marketable
securities unless the investor elects otherwise. Investors may incur brokerage
costs in disposing of securities received in such a distribution in kind.
FINANCIAL STATEMENTS
The following financial statement and the report thereon of Ernst & Young LLP,
independent auditors, are incorporated herein:
Portfolio of Investments as of December 31, 1994
Statement of Assets and Liabilities as of December 31, 1994
Statement of Operations for the Period September 30, 1994 (commencement of
operations) through December 31, 1994
Statement of Changes in Net Assets for the Period September 30, 1994
(commencement of operations) through December 31, 1994
Notes to the Financial Statements
28
<PAGE> 68
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 PREFERRED STOCK RATINGS
Generally, a preferred stock rating is an assessment of the capacity and
willingness of an issuer to pay preferred stock dividends. A preferred stock
rating differs from a bond rating since it is assigned to an equity issue which
is different from, and subordinated to, a debt issue.
Excerpts from the description by Moody's Investors Service, Inc. ("Moody's") of
its preferred stock ratings:
aaa - Top-quality preferred stock. This rating indicates good asset protection
and the least risk of dividend impairment within the universe of preferred
stocks.
aa - High-grade preferred stock. This rating indicates that there is a
reasonable assurance that earnings and asset protection will remain relatively
well maintained in the foreseeable future.
a - Upper-medium grade preferred stock. While risks are judged to be
somewhat greater than in the "aaa" and "aa" classifications, earnings and asset
protections are, nevertheless, expected to be maintained at adequate levels.
baa - Medium grade preferred stock, neither highly protected nor poorly
secured. Earnings and asset protection appear adequate at present but may be
questionable over any great length of time.
ba - Considered to have speculative elements and its future cannot be
considered well assured. Earnings and asset protection may be very moderate
and not well safeguarded during adverse periods. Uncertainty of position
characterizes preferred stocks in this class.
b - Generally lacks the characteristics of a desirable investment. Assurance
of dividend payments and maintenance of other terms of the issue over any long
period of time may be small.
caa - Likely to be in arrears on dividend payments. This rating designation
does not purport to indicate the future status of payments.
ca - Speculative in a high degree and is likely to be in arrears on dividends
with little likelihood of eventual payments.
c - Lowest rated class of preferred or preference stock. Issues so rated can
be regarded as having extremely poor prospects of ever attaining any real
investment standing.
29
<PAGE> 69
Excerpts from the description by Standard & Poor's Ratings Group ("S&P") of its
preferred stock ratings:
AAA - The highest rating that may be assigned by S&P to a preferred stock issue
and indicates an extremely strong capacity to pay the preferred stock
obligations.
AA - Qualifies as a high-quality fixed-income security. The capacity to pay
preferred stock obligations is very strong, although not as overwhelming as for
issues rated "AAA."
A - Backed by a sound capacity to pay the preferred stock obligations,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB - Backed by an adequate capacity to pay the preferred stock obligations.
Whereas it normally exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to make payments for a preferred stock in this category than for
issues in the "A" category.
BB, B, CCC - Preferred stock rated "BB", "B", and "CCC" are regarded, on
balance, as predominately speculative with respect to the issuer's capacity to
pay preferred stock obligations. "BB" indicates the lowest degree of
speculation and "CCC" the highest degree of speculation. While such issues
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse
conditions.
CC - The rating "CC" is reserved for a preferred stock issue in arrears on
dividends or sinking fund payments but that is currently paying.
C - A preferred stock rated "C" is a non-paying issue.
D - A preferred stock rated "D" is a non-paying issue with issuer in default on
debt instruments.
NR indicates that no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.
Plus (+) or Minus (-) To provide more detailed indications of preferred stock
quality, the ratings from "AA" to "CCC" may be modified by the addition of a
plus or minus sign to show relative standing within the major rating
categories.
30
<PAGE> 70
SAFECO ADVISOR SERIES TRUST
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) The following financial statements for each series of Registrant for
the fiscal period September 30, 1994 (commencement of operations)
through December 31, 1994 and the report thereon of Ernst & Young LLP,
independent auditors, are incorporated in the Statement of Additional
Information by reference of Registrant's Annual Report which was filed
with the SEC on March 6, 1995:
Portfolio of Investments as of December 31, 1994
Statement of Assets and Liabilities as of December 31, 1994
Statement of Operations for the Period September 30, 1994
(commencement of operations) through December 31, 1994
Statement of Changes in Net Assets for the Period September
30, 1994 (commencement of operations) through December
31, 1994
Notes to the Financial Statements
Financial Statements from the Registrant's Annual Report are filed as
Exhibit 12.
(b) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description Page
------- ----------- ----
<S> <C> <C>
(1) Trust Instrument/Certificate of Trust
(2) Bylaws
(3) Voting Trust Agreement None
(4) Form of Share Certificate
(5) Investment Advisory and Management
Contract
(6)(i) Distribution Agreement
(ii) Selling Agreement
(7) Bonus, profit sharing or pension plan None
(8) Custody Agreement
(9) Transfer Agent Agreement
(10) Opinion of Counsel
(11) Consent of Ernst & Young LLP,
Independent Auditors
(12) Registrants Annual Report for the
Fiscal Period Ended December 31, 1994+
including financial statements
</TABLE>
<PAGE> 71
<TABLE>
<S> <C>
(13) Share Purchase Agreement
(14) Prototype 401(k)/Profit Sharing Plan
(15) 12b-1 Plans
(16) Calculation of Performance
Information
</TABLE>
+ Registrant's Annual Report was filed with the SEC on or about March 6,
1995. The Report contains the Financial Statements incorporated by reference
in Registrant's Statement of Additional Information.
Item 25. Persons Controlled by or Under Common Control With Registrant
SAFECO Corporation, a Washington corporation, owns 100% of SAFECO Asset
Management Company (SAM), SAFECO Services Corporation (SAFECO Services) and
SAFECO Securities, Inc. (SAFECO Securities), each a Washington corporation.
SAM is the investment advisor, SAFECO Services is the transfer agent and SAFECO
Securities is the principal underwriter for each of the SAFECO Mutual Funds.
The SAFECO Mutual Funds consist of seven Delaware business trusts: SAFECO
Common Stock Trust, SAFECO Taxable Bond Trust, SAFECO Tax-Exempt Bond Trust,
SAFECO Advisor Series Trust, SAFECO Money Market Trust, SAFECO Institutional
Series Trust and SAFECO Resource Series Trust. The SAFECO Common Stock Trust
consists of 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
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 Managers, Inc., an Illinois
<PAGE> 72
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 December 31, 1994, Registrant had 7, 4, 3, 2, 4, 2, 2, and 4 shareholders
of record in its Advisor Equity Fund, Advisor Northwest Fund, Advisor
Intermediate-Term Treasury Fund, Advisor U.S. Government Fund, Advisor GNMA
Fund, Advisor Municipal Bond Fund, Advisor Intermediate-Term Municipal Bond
Fund and Advisor Washington 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
by virtue of his or her being, or having been, a trustee, officer, employee or
agent and against amounts paid or incurred by him or her in the settlement
thereof. As used in this paragraph, "claim," "action," "suit" or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil, criminal or
other, including appeals), actual or threatened, and the words, "liability" and
"expenses" shall include, without limitation, attorneys' fees, costs,
judgements, amounts paid in settlement, fines, penalties and other liabilities.
<PAGE> 73
No indemnification will be provided to a trustee, officer, employee or agent:
(i) who shall have been adjudicated by a court or body before which the
proceeding was brought (a) to be liable to the Registrant or its shareholders
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office, or (b)
not to have acted in good faith in the reasonable belief that his or her action
was in the best interest of the Registrant; or (ii) in the event of settlement,
unless there has been a determination that such trustee, officer, employee or
agent did not engage in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office,
(a) by the court or other body approving the settlement, (b) by the vote of at
least a majority of a quorum of those trustees who are neither interested
persons, as that term is defined by the Investment Company Act of 1940, of the
Registrant nor are the parties to the proceeding based upon a review of readily
available facts (as opposed to a full trial type inquiry), or (c) by written
opinion of independent legal counsel based upon a review of readily available
facts (as opposed to a full trial type inquiry).
To the maximum extent permitted by applicable law, expenses incurred in
connection with the preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described above may be paid by the
Registrant or applicable series from time to time prior to final disposition
thereof upon receipt of an undertaking by or on behalf of such trustee,
officer, employee or agent that such amount will be paid over by him or her to
the Registrant or the applicable Series if it is ultimately determined that he
or she is not entitled to indemnification under the Trust Instrument; provided,
however, that either (i) such trustee, officer, employee or agent shall have
provided appropriate security for such undertaking, (ii) the Registrant is
insured against such losses arising out of such advance payments or (iii)
either a majority of the trustees who are neither interested persons, as that
term is defined by the Investment Company Act of 1940, of the Registrant nor
parties to the proceeding, or independent legal counsel in a written opinion,
shall have determined, based on a review of readily available facts (as opposed
to full trial type inquiry), that there is reason to believe that such trustee,
officer, employee or agent, will not be disqualified from indemnification under
Registrant's Trust Instrument.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 ("1933 Act") 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 the 1933 Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a trustee, officer,
employee or agent of the Registrant in the successful defense of any such
action, suit or proceeding) is asserted by such trustee, officer, employee or
agent in connection with the shares of the Registrant, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in said Act
and will be governed by the final adjudication of such issue.
Under an agreement with its distributor ("Distribution Agreement"), Registrant
has agreed to indemnify, defend and hold the distributor, the distributor's
several directors, officers and employees, and any person who controls the
distributor within the meaning of Section 15 of the 1933 Act, free and harmless
from and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and
<PAGE> 74
any counsel fees incurred in connection therewith) which the distributor, its
directors, officers or employees, or any such controlling person may incur,
under the 1933 Act or under common law or otherwise, arising out of or based
upon any alleged untrue statement of a material fact contained in the
Registration Statement or arising out of or based upon any alleged omission to
state a material fact required to be stated or necessary to make the
Registration Statement not misleading, provided that in no event shall anything
contained in the Distribution Agreement be construed so as to protect the
distributor against any liability to the Registrant or its shareholders to
which the distributor would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of its duties,
or by reason of its reckless disregard of its obligations and duties under the
Distribution Agreement, and further provided that the Registrant shall not
indemnify the distributor for conduct set forth in this subparagraph.
Under an agreement with its transfer agent, Registrant has agreed to indemnify
and hold the transfer agent harmless against any losses, claims, damages,
liabilities or expenses (including reasonable attorneys' fees and expenses)
resulting from: (1) any claim, demand, action or suit brought by any person
other than the Registrant, including by a shareholder, which names the transfer
agent and/or the Registrant as a party, and is not based on and does not result
from the transfer agent's willful misfeasance, bad faith or negligence or
reckless disregard of duties, and arises out of or in connection with the
transfer agent's performance hereunder; or (2) any claim, demand, action or
suit (except to the extent contributed to by the transfer agent's willful
misfeasance, bad faith or negligence or reckless disregard of duties) which
results from the negligence of the Registrant, or from the transfer agent
acting upon any instruction(s) reasonably believed by it to have been executed
or communicated by any person duly authorized by the Registrant, or as a result
of the transfer agent acting in reliance upon advice reasonably believed by the
transfer agent to have been given by counsel for the Registrant, or as a result
of the transfer agent acting in reliance upon any instrument or stock
certificate reasonably believed by it to have been genuine and signed,
countersigned or executed by the proper person.
Item 28. Business and Other Connections of Investment Adviser
The investment adviser to the Registrant, SAM, serves as an adviser to: (a)
nineteen series (portfolios) of seven registered investment companies,
including five series of an investment company that serves as the 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 Registrant's Statement of Additional Information is
incorporated herein by reference.
Item 29. Principal Underwriters
(a) SAFECO Securities, Inc., the principal underwriter for Registrant,
acts also as the principal underwriter for each series of SAFECO
Common Stock Trust, SAFECO Tax-Exempt Bond Trust, and SAFECO Taxable
Bond Trust, SAFECO Money Market Trust, SAFECO Institutional Series
Trust and SAFECO Resource Series Trust. In addition SAFECO Securities
is the principal underwriter for SAFECO Separate Account C, SAFECO
Variable Account B and SAFECO Separate Account SL, all of which are
variable insurance products.
(b) The information set forth under "Investment Advisory and Other
Services" of the Registrant's Statement of Additional Information is
incorporated herein by reference.
<PAGE> 75
Item 30. Location of Accounts and Records
U.S. Bank of Washington, N.A., 1420 Fifth Avenue, Seattle, Washington 98101
will maintain 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, will
maintain 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.
<PAGE> 76
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereto duly
authorized, in the City of Seattle, and State of Washington on the 30th day of
March, 1995.
SAFECO ADVISOR SERIES TRUST
By /S/ DAVID F. HILL
---------------------------------
David F. Hill, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
President
/S/ DAVID F. HILL Principal Executive Officer March 30, 1995
-----------------
David F. Hill
Vice President
RONALD L. SPAULDING* and Treasurer March 30, 1995
-------------------
Ronald L. Spaulding
Vice President
Controller
NEAL A FULLER* Assistant Secretary March 30, 1995
-------------- (Principal Financial Officer)
Neal A. Fuller
/S/ BOH A. DICKEY Chairman and Trustee March 30, 1995
-----------------
Boh A. Dickey
BARBARA J. DINGFIELD* Trustee March 30, 1995
---------------------
Barbara J. Dingfield
RICHARD W. HUBBARD* Trustee March 30, 1995
-------------------
Richard W. Hubbard
RICHARD E. LUNDGREN* Trustee March 30, 1995
--------------------
Richard E. Lundgren
L.D. MCCLEAN* Trustee March 30, 1995
-------------
L.D. McClean
LARRY L. PINNT* Trustee March 30, 1995
---------------
Larry L. Pinnt
JOHN W. SCHNEIDER* Trustee March 30, 1995
------------------
John W. Schneider
*By /S/ BOH A. DICKEY
-----------------
Boh A. Dickey
Attorney-in-Fact
*By /S/ DAVID F. HILL
-----------------
David F. Hill
Attorney-in-Fact
</TABLE>
<PAGE> 77
POWER OF ATTORNEY
SAFECO ADVISOR SERIES TRUST, a Delaware business trust (the "Trust"), and each
of its undersigned officers and trustees, hereby nominates, constitutes and
appoints Boh A. Dickey and David F. Hill (with full power to each of them to
act alone) its/his/her true and lawful attorney-in-fact and agent, for
it/him/her and on its/his/her behalf and in its/his/her name, place and stead
in any and all capacities, to make, execute and sign any and all amendments to
the Trust's registration statement on Form N-1A under the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as amended, as well
as any and all registration statements on Form N-14, and to file with the
Securities and Exchange Commission and any other regulatory authority having
jurisdiction over the offer and sale of shares of beneficial interest of the
Trust, any such amendment or registration statement and any and all supplements
thereto or to any prospectus or statement of additional information forming a
part of the registration statement, as well as any and all exhibits and other
documents necessary or desirable to the amendment or supplement process,
granting to such attorneys and each of them, full power and authority to do and
perform each and every act requisite and necessary and/or appropriate as fully
and with all intents and purposes as the Trust itself and the undersigned
officers and trustees themselves might or could do.
IN WITNESS WHEREOF, SAFECO ADVISOR SERIES TRUST has caused this power of
attorney to be executed in its name by its President and attested by its
Assistant Secretary, and the undersigned officers and trustees have each
executed such power of attorney, on this 15th day of January, 1995.
SAFECO ADVISOR
SERIES TRUST
By: /S/ DAVID F. HILL
--------------------------------
David F. Hill
President
ATTEST:
/S/ NEAL A. FULLER
-------------------
Neal A. Fuller
Assistant Secretary
(Signatures Continue on Next Page)
<PAGE> 78
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
President
/S/ DAVID F. HILL Principal Executive Officer
-----------------
David F. Hill
Vice President
/S/ RONALD L. SPAULDING And Treasurer
-----------------------
Ronald L. Spaulding
Vice President
/S/ NEAL A. FULLER Controller
------------------ Assistant Secretary
Neal A. Fuller (Principal Financial Officer)
/S/ BOH A. DICKEY Chairman and Trustee
-----------------
Boh A. Dickey
/S/ BARBARA J. DINGFIELD Trustee
------------------------
Barbara J. Dingfield
/S/ RICHARD W. HUBBARD Trustee
----------------------
Richard W. Hubbard
/S/ RICHARD E. LUNDGREN Trustee
-----------------------
Richard E. Lundgren
/S/ L.D. MCCLEAN Trustee
----------------
L. D. McClean
/S/ LARRY L. PINNT Trustee
------------------
Larry L. Pinnt
/S/ JOHN W. SCHNEIDER Trustee
---------------------
John W. Schneider
</TABLE>
<PAGE> 79
SAFECO ADVISOR SERIES TRUST
Form N-1A
Registration Statement
Exhibit Index
<TABLE>
<CAPTION>
Exhibit
Number Description Page
------- ----------- ----
<S> <C>
(27.1 - 27.24) Financial Data Schedules
(99.1) Trust Instrument/Certificate of Trust
(99.2) Bylaws
(99.4) Form of Share Certificate
(99.5) Investment Advisory and Management Contract
(99.6)(i) Distribution Agreement
(ii) Selling Agreement
(99.8) Custody Agreement
(99.9) Transfer Agent Agreement
(99.10) Opinion of Counsel
(99.11) Consent of Ernst & Young LLP, Independent Auditors
(99.12) Registrant's Annual Report for the Year Ended
December 31, 1994+ including Financial Statements
(99.13) Share Purchase Agreement
(99.14) Prototype 401(k)/Profit Sharing Plan
(99.15) 12b-1 Plans
(99.16) Calculation of Performance Information
</TABLE>
+ Registrant's Annual Report was filed with the SEC
on or about March 6, 1995.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> SEP-30-1994
<PERIOD-END> DEC-30-1994
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 5,042
<INVESTMENTS-AT-VALUE> 4,923
<RECEIVABLES> 45
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 28
<TOTAL-ASSETS> 4,996
<PAYABLE-FOR-SECURITIES> 49
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 55
<TOTAL-LIABILITIES> 104
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,011
<SHARES-COMMON-STOCK> 501
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (119)
<NET-ASSETS> 4,892
<DIVIDEND-INCOME> 37
<INTEREST-INCOME> 10
<OTHER-INCOME> 0
<EXPENSES-NET> 38
<NET-INVESTMENT-INCOME> 9
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> (119)
<NET-CHANGE-FROM-OPS> (110)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 501
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 4,892
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 38
<AVERAGE-NET-ASSETS> 4,974
<PER-SHARE-NAV-BEGIN> 10
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> (0.24)
<PER-SHARE-DIVIDEND> (0.03)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.76
<EXPENSE-RATIO> 2.57
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> SEP-30-1994
<PERIOD-END> DEC-30-1994
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 5,042
<INVESTMENTS-AT-VALUE> 4,923
<RECEIVABLES> 45
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 28
<TOTAL-ASSETS> 4,996
<PAYABLE-FOR-SECURITIES> 49
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 55
<TOTAL-LIABILITIES> 104
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,011
<SHARES-COMMON-STOCK> 501
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (119)
<NET-ASSETS> 4,892
<DIVIDEND-INCOME> 37
<INTEREST-INCOME> 10
<OTHER-INCOME> 0
<EXPENSES-NET> 38
<NET-INVESTMENT-INCOME> 9
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> (119)
<NET-CHANGE-FROM-OPS> (110)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 501
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 4,892
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 38
<AVERAGE-NET-ASSETS> 4,974
<PER-SHARE-NAV-BEGIN> 10
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> (0.24)
<PER-SHARE-DIVIDEND> (0.01)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.76
<EXPENSE-RATIO> 3.31
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> SEP-30-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 5,042
<INVESTMENTS-AT-VALUE> 4,923
<RECEIVABLES> 45
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 28
<TOTAL-ASSETS> 4,996
<PAYABLE-FOR-SECURITIES> 49
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 55
<TOTAL-LIABILITIES> 104
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,011
<SHARES-COMMON-STOCK> 501
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (119)
<NET-ASSETS> 4,892
<DIVIDEND-INCOME> 37
<INTEREST-INCOME> 10
<OTHER-INCOME> 0
<EXPENSES-NET> 38
<NET-INVESTMENT-INCOME> 9
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> (119)
<NET-CHANGE-FROM-OPS> (110)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 501
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 4,892
<ACCUMULATED-NII-PRIOR> 0
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
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<CURRENCY> U.S. DOLLARS
<S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
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<NET-ASSETS> 4,949
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
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<NET-ASSETS> 4,949
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<PAGE> 1
EXHIBIT NO. 99.1
TRUST INSTRUMENT/CERTIFICATE OF TRUST
<PAGE> 2
Exhibit 99.1
SAFECO ADVISOR SERIES TRUST
TRUST INSTRUMENT
This TRUST INSTRUMENT is made on March 31, 1994, 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 Advisor Series 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> 3
(h) "Outstanding Shares" means Shares shown on the books of the Trust
or its transfer agent as then issued and outstanding, but does not include
Shares which have been repurchased by the Trust;
(i) "Series" means a series of Shares established pursuant to Article
IV;
(j) "Shareholder" means a record owner of Outstanding Shares;
(k) "Shares" means the equal proportionate transferable units of
interest into which the beneficial interest of each Series or Class is divided
from time to time (including whole Shares and fractions of Shares);
(l) "Trust" means SAFECO Advisor Series 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> 4
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> 5
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> 6
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> 7
(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> 8
(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.
- 7 -
<PAGE> 9
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
- 8 -
<PAGE> 10
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 or permitted by law,
regulation, Commission order, or no-action letter, 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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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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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
- 21 -
<PAGE> 23
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> 24
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 ___ day of ________, 1994, personally appeared the
above-named __________________, and _____________, known to me to be the
persons who executed the foregoing instrument and who acknowledged that they
executed the same.
________________________________
Notary Public
My Commission expires______________________________.
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<PAGE> 25
EXHIBIT A
SAFECO Advisor Equity Fund
SAFECO Advisor Northwest Fund
SAFECO Advisor Intermediate-Term Treasury Fund
SAFECO Advisor U.S. Government Fund
SAFECO Advisor GNMA Fund
SAFECO Advisor Municipal Bond Fund
SAFECO Advisor Intermediate-Term Municipal Bond Fund
SAFECO Advisor Washington Municipal Bond Fund
- 24 -
<PAGE> 26
Exhibit 1
CERTIFICATE OF TRUST
OF
SAFECO ADVISOR SERIES TRUST
This Certificate of Trust ("Certificate") is filed in accordance with
the provisions of the Delaware Business Trust Act (12 Del. Code Ann. Tit. 12
Section 3801 et seq.) and sets forth the following:
1. The name of the trust is: SAFECO Advisor Series 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 31st day of March, 1994.
/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> 27
Address: SAFECO Plaza
Seattle, Washington 98185
STATE OF WASHINGTON
CITY OF SEATTLE
Before me this 31st day of March, 1994, 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, 1997
------------------------------
<PAGE> 1
EXHIBIT NO. 99.2
BYLAWS
<PAGE> 2
Exhibit 99.2
BYLAWS
(As amended 2/2/95)
SAFECO ADVISOR SERIES TRUST
(A DELAWARE BUSINESS TRUST)
These Bylaws of SAFECO ADVISOR SERIES TRUST (the "Trust"), a Delaware
business trust, are subject to the Trust Instrument of the Trust dated March
31, 1994, 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 Advisor Series Trust", and with the words "Trust
Seal, 1994" 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,
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<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 31st
day of December.
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
FORM OF SHARE CERTIFICATE
<PAGE> 2
Exhibit 99.4
NUMBER SHARES
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
SAFECO ADVISOR EQUITY FUND
CLASS A
A SERIES OF SAFECO ADVISOR SERIES TRUST
SEATTLE, WASHINGTON
CUSIP
This is to certify that,
is the owner of
of the fully paid and non-assessable shares of beneficial interest of the
SAFECO ADVISOR EQUITY FUND CLASS A, a series of the SAFECO Advisor Series
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 Advisor Series
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 ADVISOR
SERIES TRUST
NEAL A. FULLER, ASST. SECRETARY DAVID F. HILL, PRESIDENT
SAFECO SERVICES CORPORATION
BY
TRANSFER AGENT
AUTHORIZED SIGNATURE
<PAGE> 3
NUMBER SHARES
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
SAFECO ADVISOR EQUITY FUND
CLASS B
A SERIES OF SAFECO ADVISOR SERIES TRUST
SEATTLE, WASHINGTON
CUSIP
This is to certify that,
is the owner of
of the fully paid and non-assessable shares of beneficial interest of the
SAFECO ADVISOR EQUITY FUND CLASS B, a series of the SAFECO Advisor Series
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 Advisor Series
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 ADVISOR
SERIES TRUST
NEAL A. FULLER, ASST. SECRETARY DAVID F. HILL, PRESIDENT
SAFECO SERVICES CORPORATION
BY
TRANSFER AGENT
AUTHORIZED SIGNATURE
<PAGE> 4
NUMBER SHARES
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
SAFECO ADVISOR EQUITY FUND
CLASS C
A SERIES OF SAFECO ADVISOR SERIES TRUST
SEATTLE, WASHINGTON
CUSIP
This is to certify that,
is the owner of
of the fully paid and non-assessable shares of beneficial interest of
the SAFECO ADVISOR EQUITY FUND CLASS C, a series of the SAFECO Advisor Series
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 Advisor Series
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 ADVISOR
SERIES TRUST
NEAL A. FULLER, ASST. SECRETARY DAVID F. HILL, PRESIDENT
SAFECO SERVICES CORPORATION
BY
TRANSFER AGENT
AUTHORIZED SIGNATURE
<PAGE> 5
NUMBER SHARES
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
SAFECO ADVISOR GNMA FUND
CLASS A
A SERIES OF SAFECO ADVISOR SERIES TRUST
SEATTLE, WASHINGTON
CUSIP
This is to certify that,
is the owner of
of the fully paid and non-assessable shares of beneficial interest of the
SAFECO ADVISOR GNMA FUND CLASS A, a series of the SAFECO Advisor Series 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 Advisor Series 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 ADVISOR
SERIES TRUST
NEAL A. FULLER, ASST. SECRETARY DAVID F. HILL, PRESIDENT
SAFECO SERVICES CORPORATION
BY
TRANSFER AGENT
AUTHORIZED SIGNATURE
<PAGE> 6
NUMBER SHARES
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
SAFECO ADVISOR GNMA FUND
CLASS B
A SERIES OF SAFECO ADVISOR SERIES TRUST
SEATTLE, WASHINGTON
CUSIP
This is to certify that,
is the owner of
of the fully paid and non-assessable shares of beneficial interest of the
SAFECO ADVISOR GNMA FUND CLASS B, a series of the SAFECO Advisor Series 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 Advisor Series 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 ADVISOR
SERIES TRUST
NEAL A. FULLER, ASST. SECRETARY DAVID F. HILL, PRESIDENT
SAFECO SERVICES CORPORATION
BY
TRANSFER AGENT
AUTHORIZED SIGNATURE
<PAGE> 7
NUMBER SHARES
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
SAFECO ADVISOR GNMA FUND
CLASS C
A SERIES OF SAFECO ADVISOR SERIES TRUST
SEATTLE, WASHINGTON
CUSIP
This is to certify that,
is the owner of
of the fully paid and non-assessable shares of beneficial interest of the
SAFECO ADVISOR GNMA FUND CLASS C, a series of the SAFECO Advisor Series 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 Advisor Series 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 ADVISOR
SERIES TRUST
NEAL A. FULLER, ASST. SECRETARY DAVID F. HILL, PRESIDENT
SAFECO SERVICES CORPORATION
BY
TRANSFER AGENT
AUTHORIZED SIGNATURE
<PAGE> 8
NUMBER SHARES
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
SAFECO ADVISOR U.S. GOVERNMENT FUND
CLASS A
A SERIES OF SAFECO ADVISOR SERIES TRUST
SEATTLE, WASHINGTON
CUSIP
This is to certify that,
is the owner of
of the fully paid and non-assessable shares of beneficial interest of the
SAFECO ADVISOR U.S. GOVERNMENT FUND CLASS A, a series of the SAFECO Advisor
Series 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 Advisor Series
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 ADVISOR
SERIES TRUST
NEAL A. FULLER, ASST. SECRETARY DAVID F. HILL, PRESIDENT
SAFECO SERVICES CORPORATION
BY
TRANSFER AGENT
AUTHORIZED SIGNATURE
<PAGE> 9
NUMBER SHARES
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
SAFECO ADVISOR U.S. GOVERNMENT FUND
CLASS B
A SERIES OF SAFECO ADVISOR SERIES TRUST
SEATTLE, WASHINGTON
CUSIP
This is to certify that,
is the owner of
of the fully paid and non-assessable shares of beneficial interest of the
SAFECO ADVISOR U.S. GOVERNMENT FUND CLASS B, a series of the SAFECO Advisor
Series 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 Advisor Series
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 ADVISOR
SERIES TRUST
NEAL A. FULLER, ASST. SECRETARY DAVID F. HILL, PRESIDENT
SAFECO SERVICES CORPORATION
BY
TRANSFER AGENT
AUTHORIZED SIGNATURE
<PAGE> 10
NUMBER SHARES
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
SAFECO ADVISOR U.S. GOVERNMENT FUND
CLASS C
A SERIES OF SAFECO ADVISOR SERIES TRUST
SEATTLE, WASHINGTON
CUSIP
This is to certify that,
is the owner of
of the fully paid and non-assessable shares of beneficial interest of the
SAFECO ADVISOR U.S. GOVERNMENT FUND CLASS C, a series of the SAFECO Advisor
Series 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 Advisor Series
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 ADVISOR
SERIES TRUST
NEAL A. FULLER, ASST. SECRETARY DAVID F. HILL, PRESIDENT
SAFECO SERVICES CORPORATION
BY
TRANSFER AGENT
AUTHORIZED SIGNATURE
<PAGE> 11
NUMBER SHARES
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
SAFECO ADVISOR INTERMEDIATE-TERM
MUNICIPAL BOND FUND CLASS A
A SERIES OF SAFECO ADVISOR SERIES TRUST
SEATTLE, WASHINGTON
CUSIP
This is to certify that,
is the owner of
of the fully paid and non-assessable shares of beneficial interest of the
SAFECO ADVISOR INTERMEDIATE-TERM MUNICIPAL BOND FUND CLASS A, a series of the
SAFECO Advisor Series 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 Advisor Series 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 ADVISOR
SERIES TRUST
NEAL A. FULLER, ASST. SECRETARY DAVID F. HILL, PRESIDENT
SAFECO SERVICES CORPORATION
BY
TRANSFER AGENT
AUTHORIZED SIGNATURE
<PAGE> 12
NUMBER SHARES
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
SAFECO ADVISOR INTERMEDIATE-TERM
MUNICIPAL BOND FUND CLASS B
A SERIES OF SAFECO ADVISOR SERIES TRUST
SEATTLE, WASHINGTON
CUSIP
This is to certify that,
is the owner of
of the fully paid and non-assessable shares of beneficial interest of the
SAFECO ADVISOR INTERMEDIATE-TERM MUNICIPAL BOND FUND CLASS B, a series of the
SAFECO Advisor Series 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 Advisor Series 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 ADVISOR
SERIES TRUST
NEAL A. FULLER, ASST. SECRETARY DAVID F. HILL, PRESIDENT
SAFECO SERVICES CORPORATION
BY
TRANSFER AGENT
AUTHORIZED SIGNATURE
<PAGE> 13
NUMBER SHARES
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
SAFECO ADVISOR INTERMEDIATE-TERM
MUNICIPAL BOND FUND CLASS C
A SERIES OF SAFECO ADVISOR SERIES TRUST
SEATTLE, WASHINGTON
CUSIP
This is to certify that,
is the owner of
of the fully paid and non-assessable shares of beneficial interest of the
SAFECO ADVISOR INTERMEDIATE-TERM MUNICIPAL BOND FUND CLASS C, a series of the
SAFECO Advisor Series 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 Advisor Series 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 ADVISOR
SERIES TRUST
NEAL A. FULLER, ASST. SECRETARY DAVID F. HILL, PRESIDENT
SAFECO SERVICES CORPORATION
BY
TRANSFER AGENT
AUTHORIZED SIGNATURE
<PAGE> 14
NUMBER SHARES
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
SAFECO ADVISOR INTERMEDIATE-TERM TREASURY FUND
CLASS A
A SERIES OF SAFECO ADVISOR SERIES TRUST
SEATTLE, WASHINGTON
CUSIP
This is to certify that,
is the owner of
of the fully paid and non-assessable shares of beneficial interest of the
SAFECO ADVISOR INTERMEDIATE-TERM TREASURY FUND CLASS A, a series of the SAFECO
Advisor Series 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 Advisor
Series 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 ADVISOR
SERIES TRUST
NEAL A. FULLER, ASST. SECRETARY DAVID F. HILL, PRESIDENT
SAFECO SERVICES CORPORATION
BY
TRANSFER AGENT
AUTHORIZED SIGNATURE
<PAGE> 15
NUMBER SHARES
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
SAFECO ADVISOR INTERMEDIATE-TERM TREASURY FUND
CLASS B
A SERIES OF SAFECO ADVISOR SERIES TRUST
SEATTLE, WASHINGTON
CUSIP
This is to certify that,
is the owner of
of the fully paid and non-assessable shares of beneficial interest of the
SAFECO ADVISOR INTERMEDIATE-TERM TREASURY FUND CLASS B, a series of the SAFECO
Advisor Series 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 Advisor
Series 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 ADVISOR
SERIES TRUST
NEAL A. FULLER, ASST. SECRETARY DAVID F. HILL, PRESIDENT
SAFECO SERVICES CORPORATION
BY
TRANSFER AGENT
AUTHORIZED SIGNATURE
<PAGE> 16
NUMBER SHARES
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
SAFECO ADVISOR INTERMEDIATE-TERM TREASURY FUND
CLASS C
A SERIES OF SAFECO ADVISOR SERIES TRUST
SEATTLE, WASHINGTON
CUSIP
This is to certify that,
is the owner of
of the fully paid and non-assessable shares of beneficial interest of the
SAFECO ADVISOR INTERMEDIATE-TERM TREASURY FUND CLASS C, a series of the SAFECO
Advisor Series 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 Advisor
Series 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 ADVISOR
SERIES TRUST
NEAL A. FULLER, ASST. SECRETARY DAVID F. HILL, PRESIDENT
SAFECO SERVICES CORPORATION
BY
TRANSFER AGENT
AUTHORIZED SIGNATURE
<PAGE> 17
NUMBER SHARES
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
SAFECO ADVISOR MUNICIPAL BOND FUND
CLASS A
A SERIES OF SAFECO ADVISOR SERIES TRUST
SEATTLE, WASHINGTON
CUSIP
This is to certify that,
is the owner of of the fully paid and non-assessable
shares of beneficial interest of the SAFECO ADVISOR MUNICIPAL BOND FUND CLASS
A, a series of the SAFECO Advisor Series 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 Advisor Series 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 ADVISOR
SERIES TRUST
NEAL A. FULLER, ASST. SECRETARY DAVID F. HILL, PRESIDENT
SAFECO SERVICES CORPORATION
BY
TRANSFER AGENT
AUTHORIZED SIGNATURE
<PAGE> 18
NUMBER SHARES
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
SAFECO ADVISOR MUNICIPAL BOND FUND
CLASS B
A SERIES OF SAFECO ADVISOR SERIES TRUST
SEATTLE, WASHINGTON
CUSIP
This is to certify that,
is the owner of of the fully paid and non-assessable
shares of beneficial interest of the SAFECO ADVISOR MUNICIPAL BOND FUND CLASS
B, a series of the SAFECO Advisor Series 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 Advisor Series 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 ADVISOR
SERIES TRUST
NEAL A. FULLER, ASST. SECRETARY DAVID F. HILL, PRESIDENT
SAFECO SERVICES CORPORATION
BY
TRANSFER AGENT
AUTHORIZED SIGNATURE
<PAGE> 19
NUMBER SHARES
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
SAFECO ADVISOR MUNICIPAL BOND FUND
CLASS C
A SERIES OF SAFECO ADVISOR SERIES TRUST
SEATTLE, WASHINGTON
CUSIP
This is to certify that,
is the owner of of the fully paid and non-assessable
shares of beneficial interest of the SAFECO ADVISOR MUNICIPAL BOND FUND CLASS
C, a series of the SAFECO Advisor Series 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 Advisor Series 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 ADVISOR
SERIES TRUST
NEAL A. FULLER, ASST. SECRETARY DAVID F. HILL, PRESIDENT
SAFECO SERVICES CORPORATION
BY
TRANSFER AGENT
AUTHORIZED SIGNATURE
<PAGE> 20
NUMBER SHARES
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
SAFECO ADVISOR NORTHWEST FUND
CLASS A
A SERIES OF SAFECO ADVISOR SERIES TRUST
SEATTLE, WASHINGTON
CUSIP
This is to certify that,
is the owner of of the fully paid and non-assessable
shares of beneficial interest of the SAFECO ADVISOR NORTHWEST FUND CLASS A, a
series of the SAFECO Advisor Series 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 Advisor Series 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 ADVISOR
SERIES TRUST
NEAL A. FULLER, ASST. SECRETARY DAVID F. HILL, PRESIDENT
SAFECO SERVICES CORPORATION
BY
TRANSFER AGENT
AUTHORIZED SIGNATURE
<PAGE> 21
NUMBER SHARES
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
SAFECO ADVISOR NORTHWEST FUND
CLASS B
A SERIES OF SAFECO ADVISOR SERIES TRUST
SEATTLE, WASHINGTON
CUSIP
This is to certify that,
is the owner of of the fully paid and non-assessable
shares of beneficial interest of the SAFECO ADVISOR NORTHWEST FUND CLASS B, a
series of the SAFECO Advisor Series 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 Advisor Series 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 ADVISOR
SERIES TRUST
NEAL A. FULLER, ASST. SECRETARY DAVID F. HILL, PRESIDENT
SAFECO SERVICES CORPORATION
BY
TRANSFER AGENT
AUTHORIZED SIGNATURE
<PAGE> 22
NUMBER SHARES
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
SAFECO ADVISOR NORTHWEST FUND
CLASS C
A SERIES OF SAFECO ADVISOR SERIES TRUST
SEATTLE, WASHINGTON
CUSIP
This is to certify that,
is the owner of of the fully paid and non-assessable
shares of beneficial interest of the SAFECO ADVISOR NORTHWEST FUND CLASS C, a
series of the SAFECO Advisor Series 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 Advisor Series 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 ADVISOR
SERIES TRUST
NEAL A. FULLER, ASST. SECRETARY DAVID F. HILL, PRESIDENT
SAFECO SERVICES CORPORATION
BY
TRANSFER AGENT
AUTHORIZED SIGNATURE
<PAGE> 23
NUMBER SHARES
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
SAFECO ADVISOR WASHINGTON MUNICIPAL BOND FUND
CLASS A
A SERIES OF SAFECO ADVISOR SERIES TRUST
SEATTLE, WASHINGTON
CUSIP
This is to certify that,
is the owner of of the fully paid and non-assessable
shares of beneficial interest of the SAFECO ADVISOR WASHINGTON MUNICIPAL BOND
FUND CLASS A, a series of the SAFECO Advisor Series 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 Advisor Series 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 ADVISOR
SERIES TRUST
NEAL A. FULLER, ASST. SECRETARY DAVID F. HILL, PRESIDENT
SAFECO SERVICES CORPORATION
BY
TRANSFER AGENT
AUTHORIZED SIGNATURE
<PAGE> 24
NUMBER SHARES
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
SAFECO ADVISOR WASHINGTON MUNICIPAL BOND FUND
CLASS B
A SERIES OF SAFECO ADVISOR SERIES TRUST
SEATTLE, WASHINGTON
CUSIP
This is to certify that,
is the owner of of the fully paid and non-assessable
shares of beneficial interest of the SAFECO ADVISOR WASHINGTON MUNICIPAL BOND
FUND CLASS B, a series of the SAFECO Advisor Series 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 Advisor Series 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 ADVISOR
SERIES TRUST
NEAL A. FULLER, ASST. SECRETARY DAVID F. HILL, PRESIDENT
SAFECO SERVICES CORPORATION
BY
TRANSFER AGENT
AUTHORIZED SIGNATURE
<PAGE> 25
NUMBER SHARES
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
SAFECO ADVISOR WASHINGTON MUNICIPAL BOND FUND
CLASS C
A SERIES OF SAFECO ADVISOR SERIES TRUST
SEATTLE, WASHINGTON
CUSIP
This is to certify that,
is the owner of of the fully paid and non-assessable
shares of beneficial interest of the SAFECO ADVISOR WASHINGTON MUNICIPAL BOND
FUND CLASS C, a series of the SAFECO Advisor Series 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 Advisor Series 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 ADVISOR
SERIES TRUST
NEAL A. FULLER, ASST. SECRETARY DAVID F. HILL, PRESIDENT
SAFECO SERVICES CORPORATION
BY
TRANSFER AGENT
AUTHORIZED SIGNATURE
<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 20th day of September, 1994, between
SAFECO ADVISOR SERIES 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.
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.
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 ADVISOR SERIES TRUST
/s/ NEAL A. FULLER By /s/ DAVID F. HILL
-------------------------- ----------------------------------
Assistant Secretary David F. Hill
President
ATTEST: SAFECO ASSET MANAGEMENT COMPANY
/s/ NEAL A. FULLER By /s/ RICHARD W. HUBBARD
-------------------------- ----------------------------------
Assistant Secretary Richard W. Hubbard
President
9
<PAGE> 11
EXHIBIT A
SAFECO ADVISOR SERIES TRUST
SAFECO ADVISOR EQUITY FUND
FEE SCHEDULE
<TABLE>
<CAPTION>
Net Assets Annual Fee
---------- ----------
<S> <C>
For assets up to and including $500,000,000 .75 of 1%
For assets in excess of $500,000,000 and
up to and including $1,000,000,000 .65 of 1%
For assets over $1,000,000,000 .55 of 1%
</TABLE>
ORGANIZATIONAL EXPENSES
The Trust shall not be obligated to reimburse the Manager for aggregate
organizational expenses in excess of $30,000 for the SAFECO Advisor Equity
Fund.
SAFECO Asset Management Company SAFECO Advisor Series Trust
on behalf of
SAFECO Advisor Equity Fund
By: /s/ RICHARD W. HUBBARD By: /s/ DAVID F. HILL
---------------------------- ----------------------------
Its: President Its: President
Attest: /s/ NEAL A. FULLER Attest: /s/ NEAL A. FULLER
------------------------ ------------------------
Assistant Secretary Assistant Secretary
As of 9-20-94
10
<PAGE> 12
EXHIBIT A
SAFECO ADVISOR SERIES TRUST
SAFECO ADVISOR NORTHWEST FUND
FEE SCHEDULE
<TABLE>
<CAPTION>
Net Assets Annual Fee
---------- ----------
<S> <C>
For assets up to and including $500,000,000 .75 of 1%
For assets in excess of $500,000,000 and
up to and including $1,000,000,000 .65 of 1%
For assets over $1,000,000,000 .55 of 1%
</TABLE>
ORGANIZATIONAL EXPENSES
The Trust shall not be obligated to reimburse the Manager for aggregate
organizational expenses in excess of $30,000 for the SAFECO Advisor Northwest
Fund.
SAFECO Asset Management Company SAFECO Advisor Series Trust
on behalf of
SAFECO Advisor Northwest Fund
By: /s/ RICHARD W. HUBBARD By: /s/ DAVID F. HILL
---------------------------- ----------------------------
Its: President Its: President
Attest: /s/ NEAL A. FULLER Attest: /s/ NEAL A. FULLER
------------------------ ------------------------
Assistant Secretary Assistant Secretary
As of 9-20-94
11
<PAGE> 13
EXHIBIT A
SAFECO ADVISOR SERIES TRUST
SAFECO ADVISOR WASHINGTON MUNICIPAL BOND FUND
FEE SCHEDULE
<TABLE>
<CAPTION>
Net Assets Annual Fee
---------- ----------
<S> <C>
For assets up to and including $500,000,000 .60 of 1%
For assets in excess of $500,000,000 and
up to and including $1,000,000,000 .50 of 1%
For assets over $1,000,000,000 .40 of 1%
</TABLE>
ORGANIZATIONAL EXPENSES
The Trust shall not be obligated to reimburse the Manager for aggregate
organizational expenses in excess of $30,000 for the SAFECO Advisor Washington
Municipal Bond Fund.
SAFECO Asset Management Company SAFECO Advisor Series Trust
on behalf of
SAFECO Advisor Washington
Municipal Bond Fund
By: /s/ RICHARD W. HUBBARD By: /s/ DAVID F. HILL
---------------------------- ----------------------------
Its: President Its: President
Attest: /s/ NEAL A. FULLER Attest: /s/ NEAL A. FULLER
------------------------ ------------------------
Assistant Secretary Assistant Secretary
As of 9-20-94
12
<PAGE> 14
EXHIBIT A
SAFECO ADVISOR SERIES TRUST
SAFECO ADVISOR INTERMEDIATE-TERM TREASURY FUND
FEE SCHEDULE
<TABLE>
<CAPTION>
Net Assets Annual Fee
---------- ----------
<S> <C>
For assets up to and including $500,000,000 .60 of 1%
For assets in excess of $500,000,000 and
up to and including $1,000,000,000 .50 of 1%
For assets over $1,000,000,000 .40 of 1%
</TABLE>
ORGANIZATIONAL EXPENSES
The Trust shall not be obligated to reimburse the Manager for aggregate
organizational expenses in excess of $30,000 for the SAFECO Advisor
Intermediate-Term Treasury Fund.
SAFECO Asset Management Company SAFECO Advisor Series Trust
on behalf of
SAFECO Advisor Intermediate-Term
Treasury Fund
By: /s/ RICHARD W. HUBBARD By: /s/ DAVID F. HILL
---------------------------- -----------------------
Its: President Its: President
Attest: /s/ NEAL A. FULLER Attest: /s/ NEAL A. FULLER
------------------------ -------------------
Assistant Secretary Assistant Secretary
As of 9-20-94
13
<PAGE> 15
EXHIBIT A
SAFECO ADVISOR SERIES TRUST
SAFECO ADVISOR U.S. GOVERNMENT FUND
FEE SCHEDULE
<TABLE>
<CAPTION>
Net Assets Annual Fee
---------- ----------
<S> <C>
For assets up to and including $500,000,000 .60 of 1%
For assets in excess of $500,000,000 and
up to and including $1,000,000,000 .50 of 1%
For assets over $1,000,000,000 .40 of 1%
</TABLE>
ORGANIZATIONAL EXPENSES
The Trust shall not be obligated to reimburse the Manager for aggregate
organizational expenses in excess of $30,000 for the SAFECO Advisor U.S.
Government Fund.
SAFECO Asset Management Company SAFECO Advisor Series Trust
on behalf of
SAFECO Advisor U.S. Government Fund
By: /s/ RICHARD W. HUBBARD By: /s/ DAVID F. HILL
---------------------------- -------------------------------
Its: President Its: President
Attest: /s/ NEAL A. FULLER Attest: /s/ NEAL A. FULLER
------------------------ ---------------------------
Assistant Secretary Assistant Secretary
As of 9-20-94
14
<PAGE> 16
EXHIBIT A
SAFECO ADVISOR SERIES TRUST
SAFECO ADVISOR GNMA FUND
FEE SCHEDULE
<TABLE>
<CAPTION>
Net Assets Annual Fee
---------- ----------
<S> <C>
For assets up to and including $500,000,000 .60 of 1%
For assets in excess of $500,000,000 and
up to and including $1,000,000,000 .50 of 1%
For assets over $1,000,000,000 .40 of 1%
</TABLE>
ORGANIZATIONAL EXPENSES
The Trust shall not be obligated to reimburse the Manager for aggregate
organizational expenses in excess of $30,000 for the SAFECO Advisor GNMA
Fund.
SAFECO Asset Management Company SAFECO Advisor Series Trust
on behalf of
SAFECO Advisor GNMA Fund
By: /s/ RICHARD W. HUBBARD By: /s/ DAVID F. HILL
---------------------------- -----------------------
Its: President Its: President
Attest: /s/ NEAL A. FULLER Attest: /s/ NEAL A. FULLER
------------------------ -------------------
Assistant Secretary Assistant Secretary
As of 9-20-94
15
<PAGE> 17
EXHIBIT A
SAFECO ADVISOR SERIES TRUST
SAFECO ADVISOR MUNICIPAL BOND FUND
FEE SCHEDULE
<TABLE>
<CAPTION>
Net Assets Annual Fee
---------- ----------
<S> <C>
For assets up to and including $500,000,000 .60 of 1%
For assets in excess of $500,000,000 and
up to and including $1,000,000,000 .50 of 1%
For assets over $1,000,000,000 .40 of 1%
</TABLE>
ORGANIZATIONAL EXPENSES
The Trust shall not be obligated to reimburse the Manager for aggregate
organizational expenses in excess of $30,000 for the SAFECO Advisor
Municipal Bond Fund.
SAFECO Asset Management Company SAFECO Advisor Series Trust
on behalf of
SAFECO Advisor Municipal Bond Fund
By: /s/ RICHARD W. HUBBARD By: /s/ DAVID F. HILL
---------------------------- ------------------------------
Its: President Its: President
Attest: /s/ NEAL A. FULLER Attest: /s/ NEAL A. FULLER
------------------------ --------------------------
Assistant Secretary Assistant Secretary
As of 9-20-94
16
<PAGE> 18
EXHIBIT A
SAFECO ADVISOR SERIES TRUST
SAFECO ADVISOR INTERMEDIATE-TERM MUNICIPAL BOND FUND
FEE SCHEDULE
<TABLE>
<CAPTION>
Net Assets Annual Fee
---------- ----------
<S> <C>
For assets up to and including $500,000,000 .60 of 1%
For assets in excess of $500,000,000 and
up to and including $1,000,000,000 .50 of 1%
For assets over $1,000,000,000 .40 of 1%
</TABLE>
ORGANIZATIONAL EXPENSES
The Trust shall not be obligated to reimburse the Manager for aggregate
organizational expenses in excess of $30,000 for the SAFECO Advisor
Intermediate-Term Municipal Bond Fund.
SAFECO Asset Management Company SAFECO Advisor Series Trust
on behalf of
SAFECO Advisor Intermediate-Term
Municipal Bond Fund
By: /s/ RICHARD W. HUBBARD By: /s/ DAVID F. HILL
---------------------------- ----------------------------
Its: President Its: President
Attest: /s/ NEAL A. FULLER Attest: /s/ NEAL A. FULLER
------------------------ ------------------------
Assistant Secretary Assistant Secretary
As of 9-20-94
17
<PAGE> 1
EXHIBIT NO. 99.6(i)
DISTRIBUTION AGREEMENT
<PAGE> 2
Exhibit 99.6(i)
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT, made this 20th day of September, 1994, by
and between SAFECO ADVISOR SERIES 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 ADVISOR SERIES TRUST
By: /s/ NEAL A. FULLER By: /s/ DAVID F. HILL
________________________ ________________________________
Neal A. Fuller David F. Hill
Assistant Secretary President
Attest: SAFECO SECURITIES, INC.
By: /s/ NEAL A. FULLER By: /s/ DAVID F. HILL
________________________ ________________________________
Neal A. Fuller David F. Hill
Assistant Secretary President
- 7 -
<PAGE> 9
EXHIBIT A
SAFECO ADVISOR SERIES TRUST
The SAFECO Advisor Series Trust consists of the following Series:
1. SAFECO Advisor Equity Fund
2. SAFECO Advisor Northwest Fund
3. SAFECO Advisor Intermediate-Term Treasury Fund
4. SAFECO Advisor U.S. Government Fund
5. SAFECO Advisor GNMA Fund
6. SAFECO Advisor Municipal Bond Fund
7. SAFECO Advisor Intermediate-Term Municipal Bond Fund
8. SAFECO Advisor Washington Municipal Bond Fund
As of 9-20-94
- 8 -
<PAGE> 1
EXHIBIT NO. 99.6(ii)
SELLING AGREEMENT
<PAGE> 2
Exhibit 99.6(ii)
SELLING DEALER AGREEMENT
This Selling Dealer Agreement ("Agreement") is entered into by and between
SAFECO Securities, Inc. ("Distributor") and the undersigned broker-dealer
("Broker-Dealer") effective as of the date written below.
WHEREAS, Distributor is a broker-dealer registered with the Securities and
Exchange Commission and the National Association of Securities Dealers, Inc.
("NASD") and is the general distributor and principal underwriter of the shares
("Shares") of the SAFECO Advisor Series Trust ("Trust") and the funds ("Funds")
that make up the Trust which are listed in Exhibit A (which Exhibit A may be
amended from time to time by Distributor without notice to Broker-Dealer);
WHEREAS, Distributor agrees to sell to Broker-Dealer Shares issued by each Fund
and any classes thereof that are purchased by Distributor from the Funds for
resale on a best efforts basis by Broker-Dealer as principal and Broker-Dealer
agrees to tender Shares directly to the Funds or their agent for redemption or
repurchase;
THEREFORE Distributor and Broker-Dealer agree as follows:
1. DISTRIBUTION OF SHARES. Broker-Dealer shall offer and sell Shares at the
public offering price next determined after the order is received, in
accordance with the terms of the then current Trust prospectus and statement of
additional information ("Prospectus").
2. COMPENSATION.
(a) Distributor shall provide Broker-Dealer with appropriate
compensation for selling the Shares, in accordance with the then current
schedule of dealer compensation which will be available from Distributor upon
request and be set forth in the then current Prospectus. Broker-Dealer will
not be entitled to any concession on the purchase of a Fund's Shares through
the reinvestment of any distributions made by such Fund. Such reinvestments
will be made at net asset value per share. Purchases of Shares made under a
cumulative purchase privilege shall be considered an individual transaction for
the purpose of determining the concession from the public offering price to
which Broker-Dealer is entitled. Nothing in this paragraph or Agreement shall
prevent Broker-Dealer from selling Shares to a customer at the applicable price
set forth in the then current Prospectus plus a fair commission or service
charge for handling the transaction.
(b) Where a Fund has adopted a plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (a "Plan"), Distributor may elect from time to
time to make payments to Broker-Dealer as provided under such Plan (in addition
to the compensation, if any,
<PAGE> 3
provided for in paragraph 2(a) of this Agreement) for providing distribution
and other related services. Such payments shall be made in the amount set
forth in the schedule of distribution payments and service payments issued by,
and available upon request from, Distributor. Broker-Dealer will not be paid
such fees until Distributor has received the service and distribution fees
described in the then current Prospectus for the period in which Broker-Dealer
provides the distribution and other related services. Broker-Dealer agrees to
provide to Distributor at least annually or as required by the Trust's Board of
Trustees a description of the services provided by Broker-Dealer pursuant to
this paragraph.
(c) Upon notice to Broker-Dealer, Distributor or any Fund may from
time to time change, amend or discontinue any discount, concession,
distribution payment or service payment schedule issued by Distributor from
time to time and may issue a new or replacement schedule. Broker-Dealer shall
have no vested interest in any type, amount or rate of discount, concession,
distribution or service payment. Broker-Dealer shall have no claim against
Distributor or any Fund by virtue of any change or diminution in the rate or
amount of, or discontinuance of, discount, concession, distribution or service
payment in connection with the sale of any Shares.
3. REDEMPTIONS-REPURCHASES.
(a) Shares presented to Distributor for redemption will be redeemed
at the net asset value of such Shares in accordance with the then current
Prospectus; provided that redemptions of Shares subject to the imposition of a
contingent deferred sales charge ("CDSC Shares") will be redeemed at the net
asset value of such Shares, less any applicable contingent deferred sales
charge, as set forth in the then current Prospectus.
(b) Repurchases of Shares will be made at the net asset value of such
Shares as set forth in the then current Prospectus; provided that repurchases
of CDSC Shares will be made at the net asset value of such Shares, less any
applicable contingent deferred sales charges, as set forth in the then current
Prospectus.
(c) Broker-Dealer shall be responsible for determining, in accordance
with the then current Prospectus, whether, and the extent to which, a
contingent deferred sales charge is applicable to a redemption of Shares from a
customer account; and Broker-Dealer agrees to present immediately to
Distributor any contingent deferred sales charge to which such redemption was
subject. If Broker-Dealer holds Shares subject to a contingent deferred sales
charge, it shall have the capability to track and account for such charges; and
Distributor reserves the right, at its discretion, to verify that capability
through inspection of Broker-Dealer's tracking and accounting system or
otherwise.
2
<PAGE> 4
4. DISTRIBUTION ACTIVITIES.
(a) No person is authorized to make any representations concerning
the Shares of the Funds and classes thereof for public use except those
contained in the then current Prospectus, and other printed sales literature
authorized and issued by Distributor or the Funds' investment manager, SAFECO
Asset Management Company ("SAM"). Broker-Dealer shall not use any sales
literature, supplemental sales literature or advertising material (including
material disseminated through radio, television or other electronic media) of
any kind without prior written approval of Distributor, unless it has been
furnished by Distributor for such purposes. Broker-Dealer agrees to indemnify
Distributor, the Funds, SAM and the Funds' transfer agent, SAFECO Services
Corporation ("Transfer Agent"), and all directors, trustees, officers,
employees and "control persons" within the meaning of the securities laws
("Control Persons") of each of them, for any loss, injury, damage, expense or
liability arising from or based upon any alleged or untrue statements or
representations made by Broker-Dealer, other than statements contained in the
then current Prospectus or authorized printed sales literature. Distributor
agrees to indemnify Broker-Dealer, and all directors, trustees, officers,
employees and Control Persons of each of them, for any loss, injury, damage,
expense or liability arising from or based upon any untrue or misleading
statements contained in the Prospectus or authorized printed sales literature
supplied to the Broker-Dealer by the Distributor or any of its affiliates.
(b) Distributor shall furnish Broker-Dealer, without charge and
upon request, reasonable quantities of the Prospectuses, periodic shareholder
reports and sales literature authorized by Distributor for public use.
Broker-Dealer shall not distribute or make available to investors any printed
information furnished by Distributor which is marked "FOR DEALER USE ONLY" or
which otherwise indicates that it is confidential or not intended to be
distributed to investors.
(c) Broker-Dealer agrees to distribute the then current
Prospectuses and shareholder reports to customers in compliance with applicable
regulatory requirements, except to the extent that Distributor or its
affiliates expressly undertake, in writing, to do so on Broker-Dealer's behalf.
In connection with sales and offers to sell Shares, Broker-Dealer will furnish
each person to whom any such sale or offer is made with a copy of the then
current Prospectus prior to or concurrently with the receipt of any order.
Broker-Dealer shall not be required to furnish a copy of the Trust's statement
of additional information, unless applicable state law so requires.
(d) Broker-Dealer shall not offer or sell Shares in any state where
the Shares are not qualified for sale under the state's blue
3
<PAGE> 5
sky laws or other regulations.
5. ORDERS.
(a) Distributor will treat all orders as not entitled to any reduced
sales charge beyond that accorded to the amount of the purchase order as
determined by the schedule set forth in the then current Prospectus, unless
Broker-Dealer advises Distributor otherwise in writing when placing the order.
(b) All orders are subject to acceptance and rejection by the
Distributor. Distributor reserves the right in its discretion to suspend sales
or to withdraw the offering of Shares of any Fund or classes thereof, in whole
or in part, or to make a limited offering of such Shares.
(c) Distributor shall not accept from Broker-Dealer any conditional
orders for Shares. Delivery of share certificates, if any, for Shares
purchased shall be made by the Funds only against receipt of the purchase
price. If payment for Shares purchased is not received within seven days, or
any lesser period as may be required by law, the sale may be cancelled
forthwith without any responsibility or liability on Distributor's or the
applicable Fund's part (in which case Broker-Dealer will be responsible for any
loss, including loss of profit, suffered by the Fund resulting from
Broker-Dealer's failure to make payment as aforesaid), or, at Distributor's
option, Distributor may sell the Shares ordered back to the Fund (in which case
Distributor may hold Broker-Dealer responsible for any loss including loss of
profit suffered by Distributor resulting from Broker-Dealer's failure to make
payment as aforesaid).
(d) If Broker-Dealer uses telephonic, telex, telegraphic or facsimile
means to transmit orders, exchanges or redemptions on behalf of customers for
Shares, Broker-Dealer hereby agrees to indemnify Distributor, the Funds, SAM,
the Transfer Agent and all directors, trustees, officers, and employees of
each, for any loss, injury, damage, expense or liability as a result of
Distributor's actions based on such telephonic, telex, telegraphic or facsimile
orders, exchanges or redemption requests if an order, exchange or redemption
request placed by Broker-Dealer was erroneous or not authentic and Distributor,
in good faith acts on such request, or if Distributor has refused to execute
such request for any reason.
(e) Broker-Dealer shall not withhold placing customers' orders for
any Shares so as to profit as a result of such withholding. Broker-Dealer
shall not purchase any Shares except for the purpose of covering purchase
orders already received by Broker-Dealer. Broker-Dealer shall not purchase
any Shares from Distributor other than for bona fide investment or for the
purpose of covering purchase orders already received. Neither Distributor nor
Broker-Dealer shall, as principal, purchase Shares from a
4
<PAGE> 6
record holder at a price lower than the bid price (net asset value per share
less any applicable contingent deferred sales charge) next quoted by or for the
issuing Fund.
6. OFFERING PRICES. Upon request, Distributor will furnish Broker-Dealer with
public offering prices for the Shares in accordance with the then current
Prospectus; and Broker-Dealer agrees to quote such prices subject to
confirmation by Distributor on any Shares offered by Broker-Dealer for sale.
7. STATUS. In all sales of Shares to the public, Broker-Dealer shall act in
the capacity of independent contractor as a dealer for Broker-Dealer's own
account and in no transaction shall Broker-Dealer have any authority to act or
hold itself out as agent for Distributor, the Trust or any Fund. Nothing in
this Agreement including the use of the words "discount," "concession" or
"payment" shall cause Broker-Dealer to be a partner, employee or agent of the
Distributor or give Broker-Dealer any authority to act for Distributor, the
Trust or any Fund. Neither Distributor, the Trust or any Fund nor any
affiliates, directors, officers, employees or agents of each shall be liable
for any obligation, act or omission of Broker-Dealer, its directors, officers,
registered representatives, employees or agents. Broker-Dealer is solely
responsible for training and supervising its Associated Persons as defined in
the Securities Exchange Act of 1934.
8. REFUNDS. If, within seven business days after confirmation by Distributor
of Broker-Dealer's original purchase order for Shares, such Shares are
repurchased by the issuing Fund or by Distributor for the account of such Fund
or are tendered for redemption by the customer, (i) Broker-Dealer shall
forthwith refund to Distributor the full discount retained by, or concession
paid to, Broker-Dealer on the original sale pursuant to paragraph 2(a) of this
Agreement and any distribution payments and service payments relating thereto
made to Broker-Dealer pursuant to paragraph 2(b) of this Agreement and (ii)
Distributor shall, as applicable, forthwith pay to such Fund Distributor's
share of the sales charge on the original sale by Distributor, and shall also
pay such Fund the refund received under clause (i). Broker-Dealer shall refund
to the Fund immediately upon receipt the amount of any dividends or
distributions paid to Broker-Dealer as nominee for Broker-Dealer's customers
with respect to redeemed or repurchased Shares to the extent that the proceeds
of such redemption or repurchase may include the dividends or distributions
payable on such Shares. In the case of certificated Shares, Broker-Dealer
shall be notified by Distributor of such repurchase or redemption within ten
days of the date on which a properly executed Share certificate and stock power
together with appropriate supporting papers is delivered to Distributor or to
such Fund; and in the case of uncertificated Shares, Broker-Dealer shall be
notified by Distributor of such repurchase or redemption within ten days of
such repurchase or redemption.
5
<PAGE> 7
9. MULTIPLE CLASSES. Broker-Dealer agrees in connection with any Fund that
offers multiple classes of Shares to (i) comply with policies regarding the
sale of classes of Shares as provided to Broker-Dealer from time to time by the
Distributor, and (ii) disclose to investors that are eligible to purchase the
other classes of such Funds (as set forth in the then current Prospectus) the
availability of such other classes.
10. REPRESENTATIONS. By signing this Agreement, Broker-Dealer represents
and warrants that it (i) is a registered broker-dealer under the Securities
Exchange Act of 1934, as amended; (ii) is qualified to act as a broker-dealer
in each jurisdiction and state in which it will offer Shares; (iii) is a member
in good standing of the NASD; and (iv) will maintain such registrations,
qualifications and memberships throughout the term of this Agreement. The
termination of Broker-Dealer's membership with the NASD will immediately and
automatically terminate this Agreement. Broker-Dealer shall comply with all
applicable federal laws, the laws of each jurisdiction and state in which it
will offer Shares and the rules and regulations of the NASD or any other
regulatory or self-regulatory organization now or hereafter in existence whose
rules and regulations govern the offer and sale of Shares.
11. INDEMNIFICATION.
(a) Broker-Dealer shall indemnify and hold harmless the Trust,
Distributor and its affiliates, directors, officers, employees, agents and
Control Persons of each in the event that Broker-Dealer, its directors,
officers, employees, registered representatives or agents violate any law, rule
or regulation, or any provision of this Agreement, which results in losses,
claims, damages, liabilities or expenses (including reasonable attorneys' fees
and expenses) to the Trust, Distributor and its affiliates, directors,
officers, employees, agents or Control Persons. Broker-Dealer shall also
indemnify and hold harmless the Trust, Distributor and its affiliates,
directors, officers, employees, agents and Control persons against all losses,
claims, damages, liabilities or expenses (including reasonable attorneys' fees
and expenses) resulting from (i) the willful, reckless or negligent violation
of any law, regulation, contract or any other arrangement by Broker-Dealer,
its directors, officers, employees, registered representatives or agents or
(ii) any allegation arising out of or in connection with any offers or sales of
Shares by Broker-Dealer, its registered representatives or agents.
(b) Distributor shall indemnify and hold harmless the Trust,
Broker-Dealer and its affiliates, directors, officers, employees, agents and
Control Persons of each in the event that Distributor, its directors, officers,
employees, registered representatives or agents violate any law, rule or
regulation, or any provision of this Agreement, which results in losses,
claims, damages, liabilities or expenses (including reasonable attorneys' fees
and
6
<PAGE> 8
expenses) to the Trust, Broker-Dealer and its affiliates, directors officers,
employees, agents or Control Persons. Distributor shall also indemnify and
hold harmless the Trust, Broker-Dealer and its affiliates, directors, officers,
employees, agents and Control persons against all losses, claims, damages,
liabilities or expenses (including reasonable attorneys' fees and expenses)
resulting from (i) the willful, reckless or negligent violation of any law,
regulation, contract or any other arrangement by Distributor, its directors,
officers, employees, registered representatives or agents or (ii) any
allegation arising out of or in connection with any offers or sales of Shares
by Distributor, its registered representatives or agents.
12. ENFORCEMENT OF RIGHTS. Any controversy or claim arising out of or
relating to this Agreement or the validity, interpretation or breach thereof,
which is not settled by agreement among the parties, shall be settled
exclusively by arbitration in Seattle, Washington, in accordance with the rules
then in effect for the NASD and-or the American Arbitration Association. The
arbitrators may allocate attorneys' fees and arbitration costs between the
parties. Judgement upon the award rendered in any such arbitration may be
enforced in any court having jurisdiction.
13. TERMINATION. Either party hereto may cancel this Agreement upon ten
(10) days' written notice to the other party. Upon termination of this
Agreement, all authorizations, rights and obligations hereunder shall cease
except:
(i) the provisions with respect to status of Broker-Dealer set
forth in Section 7;
(ii) the obligation to settle accounts set forth in
Section 8;
(iii) the provisions with respect to representations made by the
Broker-Dealer in Section 10;
(iv) the provisions with respect to indemnification set forth in
Section 11; and
(v) the provisions with respect to enforcement of rights set forth
in Section 12.
14. COMMUNICATIONS. All communications to Distributor should be sent to
SAFECO Securities, Inc., SAFECO Plaza, Seattle, WA 98185. Any notices to
Broker-Dealer shall be duly given if mailed, faxed or telegraphed to
Broker-Dealer at the address specified below.
15. GOVERNING LAW. This Agreement shall be binding upon receipt by the
Distributor in Seattle, Washington, of a counterpart hereof duly accepted and
signed by Broker-Dealer, and shall be construed in accordance with the laws of
the State of Washington.
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<PAGE> 9
16. ENTIRE AGREEMENT. This Agreement shall constitute the entire agreement
between the parties with respect to the matters addressed.
SAFECO SECURITIES, INC.
By:
-----------------------
David F. Hill
President
Accepted: ___________________________________
Broker-Dealer
___________________________________
Street Address
___________________________________
City State Zip Code
By: ___________________________________
Signature
___________________________________
Name and Title
___________________________________
Contact Person
___________________________________
Date
8
<PAGE> 10
EXHIBIT A
SAFECO ADVISOR EQUITY FUND
SAFECO ADVISOR NORTHWEST FUND
SAFECO ADVISOR INTERMEDIATE-TERM TREASURY FUND
SAFECO ADVISOR U.S. GOVERNMENT FUND
SAFECO ADVISOR GNMA FUND
SAFECO ADVISOR MUNICIPAL BOND FUND
SAFECO ADVISOR INTERMEDIATE-TERM MUNICIPAL BOND FUND
SAFECO ADVISOR WASHINGTON MUNICIPAL BOND FUND
9
<PAGE> 1
EXHIBIT NO. 99.8
CUSTODY AGREEMENT
<PAGE> 2
Exhibit 99.8
CUSTODY AGREEMENT
THIS AGREEMENT executed as of the 9th day of September, 1994,
between SAFECO ADVISOR SERIES 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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<PAGE> 4
(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,
misfeasance or 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.
3
<PAGE> 5
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.
4
<PAGE> 6
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.
5
<PAGE> 7
(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.
6
<PAGE> 8
(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 satisfactory to the Bank (who may be counsel for the Trust) to the
effect that all necessary corporate action therefore has been taken, or,
concurrently with the Bank's action will be taken.
15. Compensation. Each Series shall pay to the Bank compensation for
its services under this Agreement in accordance with the attached schedule of
charges set forth in Exhibit 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, misfeasance or 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.
7
<PAGE> 9
(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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<PAGE> 10
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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<PAGE> 11
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 Advisor Series Trust
Attn: David F. Hill, President
SAFECO Plaza
Seattle, Washington 98185
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<PAGE> 12
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.
11
<PAGE> 13
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.
/s/ RUTH TAYLOR By /s/
-------------------------- --------------------------------
Vice President Its Personal Trust Officer
Attest: SAFECO ADVISOR SERIES TRUST
/s/ NEAL A. FULLER By /s/ DAVID F. HILL
-------------------------- --------------------------------
Assistant Secretary Its: President
12
<PAGE> 14
EXHIBIT A
SAFECO ADVISOR SERIES TRUST
The SAFECO Advisor Series Trust consists of the following Series:
1. SAFECO Advisor Equity Fund
2. SAFECO Advisor Northwest Fund
3. SAFECO Advisor Intermediate-Term Treasury Fund
4. SAFECO Advisor U.S. Government Fund
5. SAFECO Advisor GNMA Fund
6. SAFECO Advisor Municipal Bond Fund
7. SAFECO Advisor Intermediate-Term Municipal Bond Fund
8. SAFECO Advisor Washington Municipal Bond Fund
As of 9-30-93
13
<PAGE> 15
EXHIBIT B
SAFECO ADVISOR SERIES TRUST
ALL FUNDS
PROCEDURES FOR CONTROL
Securities Held by Nominee Puget & Co.
1. All securities held in safe keeping at U.S. Bank of
Washington, N.A., main office, will be in the name of the nominee,
Puget & Co.
2. Instructions from the Trust on behalf of a Series or SAFECO Asset
Management Company, the investment adviser to the Trust, relative to
the purchase and sale of securities will be in written form on a
"Transaction Advice" form. 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 __/__/94
14
<PAGE> 16
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> 17
EXHIBIT D
SAFECO ADVISOR SERIES TRUST
ALL FUNDS
Schedule of Custodian Fees with U.S. Bank of Washington, N.A.
<TABLE>
<S> <C>
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
------------------------
Money Market Sweep Feature .30 of 1% on Balance in
Money Market Fund/Prime Fund
----------------------------
Administration - if applicable $45.00 per hour
------------------------
Out of Pocket Expenses (Postage,
insurance, long distance calls,
mileage, photocopying) As Incurred
</TABLE>
As of __/__/94
15
<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 20th day of September,
1994, between SAFECO ADVISOR SERIES 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
2
<PAGE> 4
issue certificates representing Shares of a Series, such certificates shall be
issued, recorded and forwarded for delivery to proper person(s) upon request.
Whether or not certificates evidencing ownership are issued, a confirmation
showing the registration and listing the purchase transaction shall be mailed
to the Trust's shareholders.
Upon receipt of Shares for redemption or repurchase, in good
delivery form, SAFECO Services shall prepare computer input entries to clear
the Shares out of the shareholders' accounts and effect prompt payment to the
authorized broker/dealer or the shareholder.
(e) New investors or shareholders of the Trust may forward monies
directly to SAFECO Services for the purchase of shares under various plans as
described in the Trust's then current Prospectus.
With respect to such plans, SAFECO Services for each Series
shall:
(1) Receive monies for the purchase of full and fractional
Shares with respect to any of the Plans. When purchase orders are
received by SAFECO Services in proper form, they shall be time-stamped
and priced in accordance with Rule 22c-1 of the Investment Company Act
of 1940.
(2) Prepare computer input entries to effect the issuance of
confirmations, registration of Shares and recording of cost amounts in
shareholder accounts; record shares and net asset value amounts in the
Series' records; record shares and aggregate dollar amounts for
updating Blue Sky records, production reports, etc.
(3) Secure signed applications from each shareholder which
shall include details as to registration of Shares, social security
number, birth date (for accounts which require it), citizenship, type
of 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
3
<PAGE> 5
properly endorsed certificates which meet the redemption
requirements of the Trust. Shares not represented by
certificates tendered by the presentation of a written request
signed by the shareholder may be accepted without a signature
guarantee provided a signature is on file with SAFECO
Services.
(ii) Pay proceeds for Shares so tendered at the net
asset value per share next computed after receipt of tender in
accordance with Rule 22c-1 of the Investment Company Act of
1940 within the settlement period required by the Securities
Exchange Act of 1934.
(g) SAFECO Services shall perform all necessary details to complete
any transactions in connection with any exchange privileges as described in the
Series' then current Prospectus.
(h) SAFECO Services shall maintain a bank account in its own name
with any bank which qualifies under the Bylaws of the Trust, for deposit of
funds received in payment of Shares and for the withdrawal of funds in payment
of repurchases or redemptions of Shares, expenses and dividends and capital
gains distributions. After each computer run, written instructions, signed by
authorized officers or other authorized signatories, are to be forwarded to
such bank requesting the transfer of net balance to or from the Series'
custodian account with such bank.
(i) SAFECO Services shall perform all necessary details in connection
with any Withdrawal Plan, as described in the Series' then current Prospectus
including making the monthly or quarterly payments to the Plan participant, and
informing the Series with regard to Shares redeemed and total dollar amount
involved on each payment date.
Although a Withdrawal Plan terminates upon the death of the
shareholder, SAFECO Services shall not be responsible for any payments made or
other action taken in accordance with the provisions of the Plan until it has
knowledge of such death.
(j) With reference to the registration and transfer of Shares
referred to in Section (a) above, SAFECO Services shall be entitled to treat
the person in whose name any Shares are registered as the owner thereof for all
purposes, and shall not be bound to recognize any other person, whether or not
SAFECO Services shall have notice hereof, except as expressly provided under
applicable state law.
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.
5
<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 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
10
<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 ADVISOR SERIES TRUST
By /s/ DAVID F. HILL
-----------------------------------
David F. Hill, President
Attest: /s/ NEAL A. FULLER
------------------------------
Assistant Secretary
SAFECO SERVICES CORPORATION
By /s/ DAVID F. HILL
-----------------------------------
David F. Hill, President
By /s/ NEAL A. FULLER
-----------------------------------
Assistant Secretary
12
<PAGE> 14
EXHIBIT A
SAFECO ADVISOR SERIES TRUST
The SAFECO Advisor Series Trust consists of the following Series and Classes:
SAFECO ADVISOR EQUITY FUND
Class A
Class B
Class C
SAFECO ADVISOR NORTHWEST FUND
Class A
Class B
Class C
SAFECO ADVISOR INTERMEDIATE-TERM TREASURY FUND
Class A
Class B
Class C
SAFECO ADVISOR U.S. GOVERNMENT FUND
Class A
Class B
Class C
SAFECO ADVISOR GNMA FUND
Class A
Class B
Class C
SAFECO ADVISOR MUNICIPAL BOND FUND
Class A
Class B
Class C
SAFECO ADVISOR INTERMEDIATE-TERM MUNICIPAL BOND FUND
Class A
Class B
Class C
SAFECO ADVISOR WASHINGTON STATE MUNICIPAL BOND FUND
Class A
Class B
Class C
As of September 20, 1994
13
<PAGE> 15
EXHIBIT B
SAFECO ADVISOR SERIES 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 Advisor Series Trust
on behalf of each Series
By: /s/ DAVID F. HILL By: /s/ DAVID F. HILL
--------------------------- ------------------------
Its: President Its: President
Attest: /s/ NEAL A. FULLER Attest: /s/ NEAL A. FULLER
----------------------- ---------------------
Assistant Secretary Assistant Secretary
As of 9-20-94
14
<PAGE> 1
EXHIBIT NO. 99.10
OPINION OF COUNSEL
<PAGE> 2
Exhibit 99.10
KIRKPATRICK & LOCKHART
SOUTH LOBBY - 9TH FLOOR
1800 M STREET, N.W. BOSTON, MA
WASHINGTON, D.C. 20036-5891 HARRISBURG, PA
-------
TELEPHONE (202) 778-9000 MIAMI, FL
TELEX 244859 NEW YORK, NY
DANA L. PLATT FACSIMILE (202) 778-9100 PITTSBURGH, PA
(202) 778-9221
September 13, 1994
SAFECO Advisor Series Trust
SAFECO Plaza
Seattle, WA
Ladies and Gentlemen:
You have requested our opinion regarding certain matters in connection
with the issuance by SAFECO Advisor Series Trust ("Trust") of an indefinite
number of Class A shares of beneficial interest ("Class A Shares"), an
indefinite number of Class B shares of beneficial interest ("Class B Shares"),
and an indefinite number of Class C shares of beneficial interest ("Class C
Shares") of each of the following series: SAFECO Advisor Equity Fund, SAFECO
Advisor Northwest Fund, SAFECO Advisor Intermediate-Term Treasury Fund, SAFECO
Advisor U.S. Government Fund, SAFECO Advisor GNMA Fund, SAFECO Advisor
Municipal Bond Fund, SAFECO Advisor Intermediate-Term Municipal Bond Fund, and
SAFECO Advisor Washington Municipal Bond Fund.
We have, as special counsel, participated in various business and
other matters related to the Trust. We have examined copies, either certified
or otherwise proved to be genuine, of the Trust Instrument and By-Laws of the
Trust, the written consents and other documents relating to the organization
and operation of the Trust, and we generally are familiar with its business
affairs. In addition, we have examined the resolutions adopted by the Trust's
Board of Trustees on September 8, 1994 relating to the establishment of the
Class A Shares, Class B Shares, and Class C Shares of each Fund. Based on the
foregoing, it is our opinion that the unlimited number of unissued Class A
Shares, Class B Shares, and Class C Shares of each Fund, which are currently
being registered under the Securities Act of 1933, may be legally and validly
issued from time to time in accordance with the Trust's Trust Instrument and
By-Laws and subject to compliance with the Securities Act of 1933, the
Investment Company Act of 1940, and applicable state laws regulating the offer
and sale of securities; and when so issued, the Class A Shares, Class B Shares,
and Class
<PAGE> 3
KIRKPATRICK & LOCKHART
SAFECO Advisory Series Trust
September 13, 1994
Page 2
C Shares of each Fund, will be legally issued, fully paid and nonassessable by
the Trust
The Trust is a business trust established pursuant to the Delaware
Business Trust Act ("Delaware Act"). The Delaware Act provides that a
shareholder of the trust is entitled to the same limitation of personal
liability extended to shareholders of for-profit corporations. To the extent
that the Trust or any of its shareholders become subject tot he jurisdiction of
courts in states which do not have statutory or other authority limiting the
liability of business trust shareholders, such courts might not apply the
Delaware Act and could subject Trust shareholders to liability.
To guard against this risk, the Trust Instrument: (i) requires that
every written obligation of the Trust contain a statement that such obligation
may only be enforced against the assets of the Trust; however, the omission of
such a disclaimer will not operate to create personal liability for any
shareholder; and (ii) provides for indemnification out of Trust property of any
shareholder held personally liable for the obligations of the Trust by reason
of his or her status as a shareholder. Thus, the risk of a Trust shareholder
incurring financial loss beyond his or her investment because of shareholder
liability is limited to circumstances in which: (i) a court refuses to apply
Delaware law; (ii) no contractual limitation of liability was in effect; and
(iii) the Trust itself would be unable to meet its obligations.
We hereby consent to the filing of this opinion in connection with the
Pre-Effective Amendment No. 1 to the Trust's Registration Statement on Form
N-1A (File No. 33-79978) to be filed with the Securities and Exchange
Commission.
Sincerely yours,
KIRKPATRICK & LOCKHART
By: /s/ DANA L. PLATT
______________________________
Dana L. Platt
<PAGE> 1
EXHIBIT NO. 99.11
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
<PAGE> 2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Investment Advisory
and Other Services" and "Financial Statements" in Post- Effective Amendment No.
1 to the Registration Statement (Form N-1A, No. 33-79978) and related
Prospectus of SAFECO Advisor Series Trust dated March 31, 1995.
We also consent to the incorporation by reference therein of our report dated
January 27, 1995 with respect to the financial statements of the SAFECO Advisor
Series Trust (comprising, respectively, the Equity, Northwest, Intermediate-
Term Treasury, U.S. Government, GNMA, Municipal Bond, Intermediate-Term
Municipal Bond and Washington Municipal Bond Funds) as of and for the period
from September 30, 1994 (commencement of operations) through December 31, 1994
included in the Annual Report, filed with the Securities and Exchange
Commission.
/S/ ERNST & YOUNG LLP
Seattle, Washington
March 26, 1995
<PAGE> 1
EXHIBIT NO. 99.12
ANNUAL REPORT/FINANCIAL STATEMENTS
<PAGE> 2
EXHIBIT 99.12
[LOGO]
1994
ANNUAL
REPORT
Stock Funds
ADVISOR EQUITY FUND
ADVISOR NORTHWEST FUND
Taxable Bond Funds
ADVISOR INTERMEDIATE-TERM TREASURY FUND
ADVISOR U.S. GOVERNMENT FUND
ADVISOR GNMA FUND
Tax-Exempt Bond Funds
ADVISOR MUNICIPAL BOND FUND
ADVISOR INTERMEDIATE-TERM MUNICIPAL BOND FUND
ADVISOR WASHINGTON MUNICIPAL BOND FUND
<PAGE> 3
Table of Contents
<TABLE>
<S> <C>
Equity Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-5
Northwest Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-8
Intermediate-Term Treasury Fund . . . . . . . . . . . . . . . . . . . 9-10
U.S. Government Fund . . . . . . . . . . . . . . . . . . . . . . . . 9-10
GNMA Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Municipal Bond Funds . . . . . . . . . . . . . . . . . . . . . . . . 12-17
Assets and Liabilities . . . . . . . . . . . . . . . . . . . . . . . 18-19
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20-21
Changes in Net Assets . . . . . . . . . . . . . . . . . . . . . . . . 22-23
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . 24-31
Auditor's Letter . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
S A F E C O A d v i s o r F u n d s
<PAGE> 4
[PHOTO OF DAVID F. HILL]
Dear Shareholder:
February 3, 1995
This is the inaugural report of the SAFECO Advisor Funds. Because the
Advisor Funds commenced operations on September 30, 1994, this report covers
investment performance for the quarter ended December 31, 1994 only. In the
future, the annual and semiannual reports you will receive will cover the prior
six-month periods.
As was the case for much of 1994, the financial markets exhibited
significant difficulty during the fourth quarter. Though the S&P 500 Index, a
barometer for the U.S. stock market traded within a narrow range, individual
stocks and industry sectors experienced broad swings in value. The S&P ended
the quarter down 0.02%, but finished the year up 1.32%. Bonds squeaked out
barely-positive returns in the fourth quarter, but were down for the year.
The markets' focus has been and continues to be centered around the Federal
Reserve Bank's efforts to control inflation. The Fed's primary
inflation-fighting tool is its ability to adjust short-term interest rates. And
while this raising of rates to subdue inflation can be constructive for the
long-term, it has been unsettling in the short-term.
In fact, the six fed-induced interest rate increases in 1994 resulted in one
of the worst years in history for bond investors: Bond values fell across all
maturities; the one-year Treasury Bill yield rose approximately 3-1/4%, the
five-year Treasury Note rose about 2-3/8 points, and the ten-year Treasury
ended 1994 up 1-7/8%.
The backdrop for the Fed's fight against inflation is a mixed picture of
economic growth and inflationary pressure. Gross Domestic Product (GDP) growth
accelerated in the fourth quarter of 1994 to an estimated 4.5% annual rate.
Employment growth remained strong and the unemployment rate dropped to its
lowest level in four years. Capacity utilization is quite high at 85%. Prices
of some raw materials and intermediate goods are up significantly, but haven't
yet found their way into the producer price or consumer price index. Oddly,
inflation as measured by these two indices is at its lowest level in eight
years and is well below average inflation rates of the past 30 years.
The Fed and many economists seem to believe that inflation inevitably
follows strong economic growth. However, there is no theoretical reason and
little historical evidence that inflation does indeed follow economic growth.
The Fed may be fighting a phantom.
Nonetheless, as evidenced by their February 2, 1995 move, the Fed seems
determined to lower economic growth to 2.5%. While market watchers anticipate
the Fed may make one more move, unless it sees evidence of a serious slowdown,
our thinking is that we are nearing the end of this interest-rate cycle; that
increases in short-term rates are likely, but, the worst is over, especially
for bonds with longer maturities.
Though uncertainty prevails in the markets, we remain cautiously optimistic
for both stocks and bonds. And despite all the unknowns, our dedication to
strive for superior investment performance and our unyielding commitment to
quality service remains steadfast.
/s/ David F. Hill
------------------------------
David F. Hill
President
<PAGE> 5
SAFECO Advisor Equity Fund
Manager's Letter
February 3, 1995
[PHOTO OF RICH MEAGLEY]
SAFECO Advisor Equity Fund completed its first quarter of operation December
31, 1994, posting a return of -2.10% for A shares and -2.29% for B and C
shares. The average growth and income fund ended the quarter down 1.57%
according to Lipper Analytical Services.
Clearly the Fund was launched in a difficult stock market. And so, the
stabilizing power of diversification became the foundation of this growth and
income portfolio. Stocks were selected for their potential, but no more than 2%
of net assets was committed to any one holding. Net assets are currently spread
among 58 holdings.
BLOCK DRUG, which produces dentures and sensitive tooth products appreciated
from an original investment of 2% to 2.6% of net assets over the quarter.
ROBERTS PHARMACEUTICAL also grew for us. Roberts was selected for its
product pipeline and current earnings strength. The company recently received
treatment investigation status from the FDA for one of its new drugs. Our other
drug company, GLAXO, received approval to sell its ulcer medicine, Zantac, over
the counter in the United Kingdom. The drug stocks were originally purchased
for their low prices, but this group also has great dividends and the potential
to cut costs and pass the gains on to shareholders.
The search for companies with great and potentially growing dividends led
the Fund to telephone utilities, financial services companies and Real Estate
Investment Trusts (REITs).
The Fund has a heavy weighting in (REITs), 10.1%. They were purchased for
their great dividends, and they widely outperformed the market during December.
Hurt by rising interest rates, telephone stocks (except CENTURY TELEPHONE)
reached new lows during 1994. With positions including GTE, U S WEST, and
CENTURY, telephone utilities comprise one of our largest industry sectors with
9.9% of net assets. I think this group has seen its lows and their dividends
are highly attractive.
Financial stocks were also bargains due to uncertainty about interest rates,
hence J.P. MORGAN and NATIONSBANK were added to our portfolio.
Computer software companies comprise 7.2% of net assets. This sector appears
to have growth potential for years to come.
The remainder of the portfolio is spread among companies that are positioned
to grow. Newspaper publisher KNIGHT-RIDDER typifies the type of company in the
Advisor Equity Fund. It's a quality company with a great product, a promising
future and its price is about as low as it has been in the last 52 weeks.
Another example is textile dye manufacturer CROMPTON & KNOWLES. After waning
most of 1994, its insiders began buying and the stock ended the fourth quarter
up 5.2%.
I assumed management of the portfolio January 13. Going forward I will
follow companies that I believe in and I will buy shares of those companies
when I believe they are priced at a discount relative to the value of the
company. And while I expect the overall stock market will be somewhat subdued
over the next several years, I also know there are companies that will beat the
market. Those are the companies I'll be looking for.
/s/ Rich Meagley
-----------------------------
Rich Meagley
Portfolio Manager
Rich Meagley, a 13-year veteran of the securities industry holds an M.B.A.
from the University of Washington. He is a vice president of SAFECO Asset
Management, a chartered financial analyst and an avid golfer.
2
<PAGE> 6
SAFECO Advisor Equity Fund
Highlights
As of December 31, 1994
<TABLE>
<CAPTION>
TOP TEN PERCENT OF
HOLDINGS NET ASSETS
-------------------------------------------------------------
<S> <C>
Block Drug Co., Inc. 2.6%
(Denture & Tooth Products)
Roberts Pharmaceutical Corp. 2.4%
(Pharmaceutical Company)
International Multifoods Corp. 2.3%
(Food Distributor)
Glaxo Holdings plc (ADR) 2.3%
(Pharmaceutical Company)
Airborne Freight Corp. 2.2%
(Air Freight)
NeoStar Retail Group, Inc. 2.2%
(Computer Software Retailer)
DIMAC Corp. 2.1%
(Direct Marketing Services Company)
Evans & Southerland Computer Corp. 2.1%
(Scientific & Engineering Computer Systems)
Crompton & Knowles Corp. 2.1%
(Textile Dye Manufacturer)
Century Telephone Enterprise Co. 2.1%
(Telephone Company)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PERCENT
PERFORMERS (SEPT. TO DEC.) RETURN
-------------------------------------------------------------
<S> <C>
Ortel Corp. 62.5%
(Fiberoptic Telecommunications Equipment)
Mentor Graphics Corp. 35.3%
(Electronic Design Software)
Block Drug Co., Inc. 25.2%
(Denture & Tooth Products)
Antec Corp. 16.7%
(Equipment for Cable Television Industry)
Roberts Pharmaceutical Corp. 16.5%
(Pharmaceutical Company)
</TABLE>
<TABLE>
<CAPTION>
BOTTOM FIVE PERCENT
PERFORMERS (SEPT. TO DEC.) RETURN
-------------------------------------------------------------
<S> <C>
Grupo Televisa, S.A. (GDS) -27.2%
(Spanish Language Media Company)
Telefonos de Mexico, S.A. (ADR) -26.8%
(Mexico's Telephone Company)
Church & Dwight Co., Inc. -26.3%
(Arm & Hammer Brand Products)
Comsat Corp. -23.3%
(Communication Satellite Networks)
Novacare, Inc. -23.3%
(Contract Rehabilitation Services)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PERCENT OF
INDUSTRIES NET ASSETS
-------------------------------------------------------------
<S> <C>
Real Estate Investment Trusts 10.1%
Food & Tobacco 10.1%
Utilities - Telephone 9.9%
Banking & Finance 8.1%
Computer Software 7.2%
</TABLE>
<TABLE>
<CAPTION>
NET ASSET
CAPITALIZATION WEIGHTINGS
(AS A PERCENT OF NET ASSETS)
-------------------------------------------------------------
<S> <C>
Large Cap: 43.0% ($1 Bil. and above)
Medium Cap: 10.5% ($500 Mil. - $1 Bil.)
Small Cap: 45.1% (Less than $500 Mil.)
Other Assets less Liabilities: 1.4%
</TABLE>
[PIE CHART]
<TABLE>
<S> <C>
Small Cap: 45.1%
Medium Cap: 10.5%
Cash & Other: 1.4%
</TABLE>
3
<PAGE> 7
SAFECO Advisor Equity Fund
Portfolio of Investments
As of December 31, 1994
<TABLE>
<CAPTION>
SHARES OR MARKET VALUE
PRINCIPAL AMOUNT (000'S)
--------------------------------------------------------------
<S> <C>
COMMON STOCKS - 98.6%
Aerospace - 1.1%
4,400 *Nichols Research Corp. . . . . . . . . $56
Banking & Finance - 8.1%
1,390 Federal National Mortgage Association . 101
6,800 Foothill Group, Inc. . . . . . . . . . . 102
1,650 Morgan, J.P. & Co., Inc. . . . . . . . . 92
2,200 NationsBank Corp. . . . . . . . . . . . 99
Broadcast Media - 3.8%
21,500 *Data Broadcasting Corp. . . . . . . . . 89
3,070 Grupo Televisa, S.A. (GDS) . . . . . . . 97
Chemicals - 6.1%
6,300 Crompton & Knowles Corp. . . . . . . . . 104
9,660 Ethyl Corp. . . . . . . . . . . . . . . 93
2,300 WD-40 Co. . . . . . . . . . . . . . . . 102
Computer Hardware - 2.1%
7,900 *Evans & Southerland Computer Corp. . . 105
Computer Software - 7.2%
7,500 *Information Resources, Inc. . . . . . . 103
8,700 MacNeal - Schwendler Corp. . . . . . . . 90
6,700 *Mentor Graphics Corp. . . . . . . . . . 102
900 *Microsoft Corp. . . . . . . . . . . . . 55
Cosmetics - 1.9%
5,200 Maybelline, Inc. . . . . . . . . . . . . 94
Drugs & Hospital Supplies - 4.7%
5,400 Glaxo Holdings plc (ADR) . . . . . . . . 110
3,700 *Roberts Pharmaceutical Corp. . . . . . 117
</TABLE>
<TABLE>
<CAPTION>
SHARES OR MARKET VALUE
PRINCIPAL AMOUNT (000'S)
------------------------------------------------------------
<S> <C>
Entertainment - 1.2%
6,200 *Video Lottery Technologies . . . . . . $59
Food & Tobacco - 10.1%
2,750 American Brands, Inc. . . . . . . . . . 103
4,100 Dole Food Co., Inc. . . . . . . . . . . 94
6,100 International Multifoods Corp. . . . . . 112
6,400 Smart & Final, Inc. . . . . . . . . . . 90
7,400 Tasty Baking Co. . . . . . . . . . . . . 97
Hospital Management - 1.0%
7,000 *Novacare, Inc. . . . . . . . . . . . . 51
Household Products - 2.6%
3,296 Block Drug Co., Inc. . . . . . . . . . . 125
Insurance - 4.0%
3,650 American General Corp. . . . . . . . . . 103
5,000 Equitable Cos., Inc. . . . . . . . . . . 91
Leisure Time - 2.0%
2,900 Callaway Golf Co. . . . . . . . . . . . 96
Machinery - 2.0%
6,500 Giddings & Lewis, Inc. . . . . . . . . . 96
Paper & Forest Products - 3.0%
3,610 Louisiana-Pacific Corp. . . . . . . . . 98
2,400 Paragon Trade Brands, Inc. . . . . . . . 32
1,000 Pope & Talbot, Inc. . . . . . . . . . . 16
Petroleum & Petroleum Services - 4.0%
5,000 Dresser Industries, Inc. . . . . . . . . 94
1,700 Texaco, Inc. . . . . . . . . . . . . . . 102
</TABLE>
See Notes to Financial Statements
4
<PAGE> 8
<TABLE>
<CAPTION>
SHARES OR MARKET VALUE
PRINCIPAL AMOUNT (000'S)
-------------------------------------------------------------
<S> <C>
Pollution Control - 1.0%
3,000 Landauer, Inc. . . . . . . . . . . . . . $50
Publishing - 6.0%
3,400 Deluxe Corp. . . . . . . . . . . . . . . 90
8,300 *DIMAC Corp. . . . . . . . . . . . . . . 105
2,000 Knight-Ridder, Inc. . . . . . . . . . . 101
Real Estate Investment Trusts - 10.1%
2,500 CBL & Associates Properties, Inc. . . . 52
3,700 Crown American Realty Corp. . . . . . . 50
2,500 Evans Withycombe Residential, Inc. . . . 53
2,500 FelCor Suite Hotels, Inc. . . . . . . . 49
3,100 Malan Realty Investors, Inc. . . . . . . 41
3,700 Mark Centers Trust Co. . . . . . . . . . 48
3,400 McArthur/Glen Realty Corp. . . . . . . . 56
2,000 Omega Health Care Investors . . . . . . 48
4,200 South West Property Trust . . . . . . . 51
2,500 Spieker Properties, Inc. . . . . . . . . 51
Retail - 2.2%
10,400 *NeoStar Retail Group, Inc. . . . . . . 107
Telecommunications - 2.3%
1,000 *Antec Corp. . . . . . . . . . . . . . . 18
4,900 Comsat Corp. . . . . . . . . . . . . . . 91
Transportation - 2.2%
5,200 Airborne Freight Corp. . . . . . . . . . 107
</TABLE>
<TABLE>
<CAPTION>
SHARES OR MARKET VALUE
PRINCIPAL AMOUNT (000'S)
--------------------------------------------------------------
<S> <C>
Utilities-Telephone - 9.9%
1,850 AT&T Corp. . . . . . . . . . . . . . . $93
3,500 Century Telephone Enterprise Co. . . . 103
3,250 GTE Corp. . . . . . . . . . . . . . . 99
2,400 Telefonos de Mexico, S.A. (ADR) . . . 98
2,550 U S WEST, Inc. . . . . . . . . . . . . 91
------
TOTAL COMMON STOCKS . . . . . . . . . . . . . . . . . 4,822
------
SHORT-TERM INVESTMENTS - 2.0%
Investment Companies:
$101,254 Short-Term Investments Co.
(Prime Portfolio) . . . . . . . . . . 101
------
TOTAL SHORT-TERM INVESTMENTS . . . . . . . . . . . . 101
------
TOTAL INVESTMENTS - 100.6% . . . . . . . . . . . . . 4,923
Liabilities, less Other Assets . . . . . . . . . . . (31)
------
NET ASSETS . . . . . . . . . . . . . . . . . . . $4,892
</TABLE> ======
*Non-income producing security.
See Notes to Financial Statements
5
<PAGE> 9
SAFECO Advisor Northwest Fund
Manager's Letter
February 3, 1995
The SAFECO Advisor Northwest Fund A shares returned -2.50% while B and C shares
returned -2.70% for the three months ended December 31, 1994.
The Composite Northwest 50 stock index experienced a -1.84% decline for the
quarter.
The best-performing sectors for the quarter were (non-grocer) retail trade
(13.2% of net assets) and computer software (6.9% of net assets). MICROSOFT
and MENTOR GRAPHICS were particularly strong.
Held hostage by interest rate pressure, regional bank stocks were down
slightly for the year and quarter ended December 31, 1994. Banks and savings
institutions comprise 17.7% of net assets. I expect this group to see increased
merger activity and increasing dividends in 1995. I think banks and S&Ls will
beat the market next year, even with a Feds Fund rate increase of up to 1%.
Grocers comprise 8.4% of net assets. QFC's stock rose on the news that it
had picked up Olsen's 12 Seattle-area stores and transformed its family-owned
business into a major chain. Meanwhile, ALBERTSON'S is off slightly, as it
remodels and remakes itself to compete in the new world of grocery "boutiques".
Other retailers account for 13.2% of net assets. And while the fourth
quarter of 1994 was generally good for retailers, 1995 could be difficult.
There are variables however: A tax cut could stimulate spending. In addition,
as the Northwest displaces California as world technology leader, increased
income and spending benefits the retailers operating within our region.
The job migration from the Silicon Valley to the Silicon Forest is already
helping the Northwest to outpace the U.S. economy. I expect the growth of
technology and service jobs to help offset cutbacks at Boeing's commercial
airplane division. Boeing received its first Chinese order and was up 7.9% for
the fourth quarter.
At quarter end, the fund had a cash position of 7-1/2%.
In my opinion, the U.S. stock market is currently valuing stocks based on
earnings.
And, overall, the Advisor Northwest Fund is structured on a discount
price/earnings basis. Most of our purchases have been made at 60% to 80% of
what we perceive as the stock's potential price based on earnings growth. (I
normally sell a stock when it reaches our projected price.)
The portfolio has a price/earnings ratio of 15.3, compared to the S&P 500's
average price of 16.4 times 1994 earnings. Based on 1995 estimated earnings,
the Fund's price/earnings ratio is 12.5, or 80.6% of the 15.5 projected for the
S&P 500. In other words, the stocks in the Fund are priced at a discount
compared to the broad market. And, in my view, because they are Northwest
stocks, they have greater growth potential than the broad market.
The economies of the five western states in which the Advisor Northwest Fund
invests are growing faster than the U.S., and they did not experience the last
U.S. recession to any great extent. I look for continued strength in our
region. Even if a Fed-induced mini recession slows the nation, I believe this
area could fly right through it.
/s/ Charles R. Driggs
-----------------------------
Charles R. Driggs
Charles Driggs has 27 years in securities analysis in the Northwest. He
joined SAFECO in 1984 as an equity analyst and became a fund manager in 1992.
Driggs holds a B.S. in Investments from Portland State University in Oregon.
6
<PAGE> 10
SAFECO Advisor Northwest Fund
Highlights
As of December 31, 1994
<TABLE>
<CAPTION>
TOP TEN PERCENT OF
HOLDINGS NET ASSETS
-------------------------------------------------------------
<S> <C>
Merix Corp. 4.8%
(Electronic Products Manufacturer)
Mentor Graphics Corp. 3.8%
(Electronic Design Software)
NIKE, Inc. 3.7%
(Athletic & Leisure Footware & Apparel)
Quality Food Centers, Inc. 3.2%
(Grocery Chain)
Boeing Co. 3.2%
(Aerospace)
Microsoft Corp. 3.1%
(Personal Computer Software)
Hollywood Entertainment Corp. 3.1%
(Video Rental)
Univar Corp. 3.1%
(Specialty Chemicals Distributor)
MK Rail Corp. 3.0%
(Locomotive Rebuilder)
Flir Systems, Inc. 3.0%
(Night Vision Systems)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PERCENT
PERFORMERS (SEPT TO DEC.) RETURN
-------------------------------------------------------------
<S> <C>
Merix Corp. 67.8%
(Electronic Products Manufacturer)
Mentor Graphics Corp. 35.6%
(Electronic Design Software)
NIKE, Inc. 27.2%
(Athletic & Leisure Footware & Apparel)
MK Rail Corp. 10.4%
(Locomotive Rebuilder)
Microsoft Corp. 9.6%
(Personal Computer Software)
</TABLE>
<TABLE>
<CAPTION>
BOTTOM FIVE PERCENT
PERFORMERS (SEPT. TO DEC.) RETURN
-------------------------------------------------------------
<S> <C>
Eagle Hardware & Garden, Inc. -27.6%
(Retail Home Improvement Centers)
Morrison Knudsen Corp. -23.0%
(Industrial General Contracting)
Paragon Trade Brands, Inc. -22.4%
(Disposable Diapers)
Wholesome and Hearty Foods, Inc. -22.0%
(Veggie Burgers)
Sterling Financial Corp. -20.7%
(Savings Bank)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PERCENT OF
INDUSTRIES NET ASSETS
-------------------------------------------------------------
<S> <C>
Retail - Other 13.2%
Banks 10.2%
Retail - Grocers 8.4%
Savings & Loans/Savings Banks 7.5%
Computer Software 6.9%
</TABLE>
<TABLE>
<CAPTION>
NET ASSET
CAPITALIZATION WEIGHTINGS
(AS A PERCENT OF NET ASSETS)
-------------------------------------------------------------
<S> <C>
Large Cap: 23.0% ($1 Bil. and above)
Medium Cap: 11.5% ($500 Mil. - $1 Bil.)
Small Cap: 58.2% ($500 Mil. - $1 Bil.)
Other Assets less Liabilities: 7.3%
</TABLE>
[PIE CHART]
<TABLE>
<S> <C>
Small Cap: 58.2%
Medium Cap: 11.5%
Cash & Other 7.3%
</TABLE>
7
<PAGE> 11
SAFECO Advisor Northwest Fund
Portfolio of Investments
As of December 31, 1994
<TABLE>
<CAPTION>
SHARES OR MARKET VALUE
PRINCIPAL AMOUNT (000'S)
------------------------------------------------------------
<S> <C>
COMMON STOCKS - 92.7%
Aerospace - 3.2%
3,300 Boeing Co. . . . . . . . . . . . . . . $154
Apparel Manufacturing - 3.7%
2,400 NIKE, Inc. . . . . . . . . . . . . . . 179
Autos - 2.8%
9,000 *Monaco Coach Corp. . . . . . . . . . 137
Banks - 10.2%
4,800 *Cascade Bancorp . . . . . . . . . . . 62
9,700 *Northrim Bank . . . . . . . . . . . . 63
5,400 US Bancorp . . . . . . . . . . . . . . 122
15,300 West Coast Bancorp, Inc. . . . . . . . 126
4,700 West One Bancorp . . . . . . . . . . . 125
Building Materials - 5.7%
10,000 BMC West Corp. . . . . . . . . . . . . 140
7,800 TJ International, Inc. . . . . . . . . 138
Computer Software - 6.9%
12,000 *Mentor Graphics Corp. . . . . . . . . 183
2,500 *Microsoft Corp. . . . . . . . . . . . 153
Electrical Equipment - 4.8%
9,300 *Merix Corp. . . . . . . . . . . . . . 236
Electronics - 3.0%
11,300 *Flir Systems, Inc. . . . . . . . . . 147
Engineering/Construction - 2.2%
8,500 Morrison Knudsen Corp. . . . . . . . . 108
Food - 2.2%
9,500 *Wholesome and Hearty Foods, Inc. . . 109
Health Care - 3.8%
6,000 Assisted Living Concepts, Inc. . . . . 51
6,200 *Hillhaven Corp. . . . . . . . . . . . 132
Industrial Products & Suppliers - 3.1%
11,000 Univar Corp. . . . . . . . . . . . . . 151
Paper & Forest Products - 4.7%
7,700 Longview Fibre Co. . . . . . . . . . . 121
8,000 Paragon Trade Brands, Inc. . . . . . . 106
</TABLE>
<TABLE>
<CAPTION>
SHARES OR MARKET VALUE
PRINCIPAL AMOUNT (000'S)
------------------------------------------------------------
<S> <C>
Restaurants - 1.7%
9,500 Macheezmo Mouse Restaurants, Inc. . . $83
Retail - Grocers - 8.4%
4,800 Albertson's, Inc. . . . . . . . . . . 139
18,000 *Carr-Gottstein Foods Co. . . . . . . 117
6,400 Quality Food Centers, Inc. . . . . . . 155
Retail - Other - 13.2%
13,000 *Eagle Hardware & Garden, Inc. . . . . 102
4,300 *Fred Meyer, Inc. . . . . . . . . . . 132
5,000 *Hollywood Entertainment Corp. . . . . 151
3,400 Nordstrom, Inc. . . . . . . . . . . . 143
8,800 *Price/Costco, Inc. . . . . . . . . . 113
Savings & Loans/Savings Banks - 7.5%
7,000 Security Bancorp . . . . . . . . . . . 135
11,000 *Sterling Financial Corp. . . . . . . 113
6,900 Washington Mutual Savings Bank . . . . 117
Transportation - 5.6%
28,000 *Arrow Transportation Co. . . . . . . 126
14,000 MK Rail Corp. . . . . . . . . . . . . 149
------
TOTAL COMMON STOCKS . . . . . . . . . . . . . . . . . 4,518
------
SHORT-TERM INVESTMENTS - 7.5%
Investment Companies:
$39,863 Short-Term Investments Co.
(Prime Portfolio) . . . . . . . . . . 40
Government Securities:
325,000 U.S. Treasury Bill
5.14%, due 1/12/95 . . . . . . . . . . 325
------
TOTAL SHORT-TERM INVESTMENTS . . . . . . . . . . . . 365
------
TOTAL INVESTMENTS - 100.2% . . . . . . . . . . . . . 4,883
Liabilities, less Other Assets . . . . . . . . . . . (10)
------
NET ASSETS . . . . . . . . . . . . . . . . . . . $4,873
</TABLE> ======
*Non-income producing security
See Notes to Financial Statements
8
<PAGE> 12
SAFECO Advisor
Intermediate-Term
Treasury Fund
Portfolio of Investments
As of December 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT MARKET VALUE
(000'S) (000'S)
-------------------------------------------------------------
<S> <C>
U.S. GOVERNMENT SECURITIES - 97.2%
U.S. Treasury Notes - 97.2%
$1,860 6.25%, due 2/15/03 . . . . . . . . . . $1,682
3,185 4.125%, due 5/31/95 . . . . . . . . . 3,155
------
TOTAL U.S. GOVERNMENT SECURITIES . . . . . . . . . . 4,837
------
SHORT-TERM INVESTMENTS - 2.3%
Investment Companies:
114 Short-Term Investments Co.
(Prime Portfolio) . . . . . . . . . . 114
------
TOTAL SHORT-TERM INVESTMENTS . . . . . . . . . . . . 114
------
TOTAL INVESTMENTS - 99.5% . . . . . . . . . . . . . . 4,951
Other Assets, less liabilities . . . . . . . . . . . 23
------
NET ASSETS . . . . . . . . . . . . . . . . . . . $4,974
======
</TABLE>
See Notes to Financial Statements
<TABLE>
<CAPTION>
SAFECO ADVISOR
INTERMEDIATE-TERM TREASURY FUND
-------------------------------------------------------------
<S> <C>
Weighted Average Maturity (in years) 3.1
</TABLE>
SAFECO Advisor
Intermediate-Term Treasury and
U.S. Government Funds
Manager's Letter
February 3, 1995
[PHOTO OF MICHAEL C. KNEBEL]
Despite a modestly positive fourth quarter for the bond market, 1994 was a
dismal year for bond investors. The market's total return, as measured by the
Lehman Brothers Government/Corporate Index, fell 3.51%, making 1994 one of the
most difficult years in decades for investors.
Bond values began their year-long slide last February, when the Federal
Reserve Board began raising short-term interest rates. (When interest rates
rise, bond values fall.) Only through the early summer months, did interest
rates hold fairly stable. They began to rise again in late August as the
Federal Reserve resumed raising short-term rates.
The Fed's action in November, marked the sixth increase in nine months.
The bond market's response was mixed: short rates climbed dramatically, long
rates actually fell slightly, creating a yield curve that is nearly flat beyond
the two-year mark. (The yield curve illustrates the difference in yields of
short and long-term U.S. Treasury issues.) The market responded similarly to
the Fed's most recent action, a .5% increase February 2, 1995.
Investors hope the Fed's actions will slow the economy and thwart inflation.
Meanwhile, economic signs are mixed. And as long as the signals remain mixed,
so remains the possibility that the Fed has not finished adjusting short-term
rates in hopes of exorcising inflation, the true enemy of bond investors.
We believe high quality, short duration portfolios will perform best in this
uncertain bond market. And so, until the market begins to improve in tone, we
will maintain short average maturities for both the SAFECO Advisor U.S.
Government and Intermediate-Term Funds. When it appears the battle against
inflation is won and the Federal Reserve takes a more passive role in the
financial markets, we will begin to cautiously lengthen average maturity and
duration.
And though we believe a cautious approach is warranted, we also believe the
darkest hour of this bond market correction is behind us. We're looking for
brighter days after an ugly year. Indeed, yielding over 7-1/2% at year end, the
two-year treasury and its brethren are starting to look attractive.
9
<PAGE> 13
SAFECO ADVISOR
INTERMEDIATE-TERM TREASURY FUND
The SAFECO Advisor Intermediate-Term Treasury Fund A shares returned .41%
while the B and C shares returned .22% for the Fund's first quarter of
operation, which ended December 31, 1994. Your Fund outperformed the average
intermediate-term treasury fund, which was down 0.01% according to Lipper
Analytical Services.
The SAFECO Advisor Intermediate-Term Treasury Fund is positioned to try to
capitalize on further increases in short-term interest rates while protecting
principal from further erosion. Ninety-seven percent of the portfolio is
invested in six-month Treasury bills and eight-year Treasury notes, with the
balance in cash. The fund currently has an average maturity of 3.1 years with a
duration (a measure of sensitivity to changes in interest rates) of 2.4
compared to 2.95 for the Lehman Brothers Intermediate-Term Treasury Index.
We will maintain the short average maturity of the portfolio until the
market improves in tone.
SAFECO ADVISOR U.S. GOVERNMENT FUND
During its first quarter of operations, the SAFECO Advisor U.S. Government
Fund outperformed the average U.S. Government fund which, according to Lipper,
returned 0.24% for the three months ending December 31, 1994. The Fund's A
shares returned 0.99%, while the B and C shares delivered 0.79%.
The SAFECO Advisor U.S. Government Fund was structured based on our view
that the yield curve will continue to flatten -- that short-term interest rates
will rise faster than long rates. The bulk of the fund, 92%, is invested in
six-month Treasury bills and 30-year Treasury bonds; 5% is in Agencies and 3%
cash. The Fund currently has an average maturity of 5.0 years with a duration
(a measure of sensitivity to changes in interest rates) of 2.6 compared to 4.8
for the Lehman Brothers Government/Corporate Index. In other words, the
portfolio has about half the interest-rate sensitivity of the overall bond
market.
We will begin to cautiously lengthen average maturity and duration when we
believe the fear of inflation has abated and the bond market has stabilized.
/s/ Michael C. Knebel
-----------------------------
Michael C. Knebel
Mike Knebel has managed bond portfolios for SAFECO since 1989. Before that
he managed municipal bond and money market funds for Lutheran Brotherhood. He
holds an M.B.A. in Finance from the University of Minnesota.
SAFECO Advisor
U.S. Government Fund
Portfolio of Investments
As of December 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT MARKET VALUE
(000'S) (000'S)
-------------------------------------------------------------
<S> <C>
U.S. GOVERNMENT AND AGENCY
SECURITIES - 97.0%
Federal National Mortgage Association (FNMA) - 4.5%
$250 5.23%, due 11/25/98 . . . . . . . . . $226
U.S. Treasury Notes - 92.5%
1,100 7.25%, due 5/15/16 . . . . . . . . . . 1,016
3,635 4.125%, due 5/31/95 . . . . . . . . . 3,601
-------
TOTAL U.S. GOVERNMENT AND
AGENCY SECURITIES . . . . . . . . . . . . . 4,843
-------
SHORT-TERM INVESTMENTS - 3.1%
Investment Companies:
157 Short-Term Investments Co.
(Prime Portfolio) . . . . . . . . . . 157
-------
TOTAL SHORT-TERM INVESTMENTS . . . . . . . . . . . . 157
-------
TOTAL INVESTMENTS - 100.1% . . . . . . . . . . . . . 5,000
Liabilities, less Other Assets . . . . . . . . . . . (7)
-------
NET ASSETS $4,993
=======
</TABLE>
See Notes to Financial Statements
<TABLE>
<CAPTION>
SAFECO ADVISOR
U.S. GOVERNMENT FUND
-------------------------------------------------------------
<S> <C>
Weighted Average Maturity (in years) . . . . . . . . 5.0
</TABLE>
10
<PAGE> 14
SAFECO Advisor
GNMA Fund
Manager's Letter
February 3, 1995
[PHOTO OF PAUL STEVENSON]
For the three months ended December 31, 1994, the total returns for the SAFECO
Advisor GNMA Fund were -0.72% for A shares and -0.90% for B and C shares. The
average return for all GNMA funds for the quarter was 0.25% according to Lipper
Analytical Services.
It's hard to say much that is positive about the bond markets in 1994,
including the fourth quarter during which operation of this fund commenced. The
bad news started in February, 1994 when the Federal Reserve began a restrictive
monetary course to slow the economy and nip inflationary pressures. What
followed were seven increases in the Federal Funds rate. The adjustment in
November fully dashed any hopes of positive returns for the year. (However,
the long end of the market rallied following the February 2, 1995 increase.)
At year end, the one-year Treasury Bill yield had risen approximately
3-1/4%, the five-year Treasury Note rose about 2-3/8% and the ten-year U.S.
Treasury Note ended 1994 up 1-7/8%. According to Ibbotson Associates, the rise
in interest rates generated the first negative returns for intermediate-term
U.S. Treasuries since 1969, and made 1994 the worst year for this sector since
recordkeeping began in 1926.
Within the mortgage-backed sector, the intermediate maturities were also
hardest hit. Adjustable-rate mortgages, 5 and 7-year balloons, and to a lesser
extent 15-year pass-through securities, all suffered. The longest securities
(40-year project notes and discount 30-year pass-throughs) turned in the best,
though barely positive, results. This fund underperformed other GNMA funds
because it was structured with a heavier weighting in the intermediate sectors.
Portfolios composed of a combination of very short and very long bonds (a
structure often called a "barbell") outperformed more traditional strategies in
which a portfolio is composed of a ladder of fixed-term/maturity bonds. I have
rebalanced this Fund's portfolio to resemble the more successful barbell
strategy. I believe this strategy, which worked so well last quarter, will
continue to outperform given the consensus interest rate outlook which called
for more Fed tightening and more pressure on the intermediate sectors of the
bond markets.
Following the February 2 tightening, the barbell strategy did outperform.
If our interest-rate outlook holds, then mortgage-market performance over
the next six months will be predominantly influenced by the following three
factors: First, the intermediate sectors will continue to suffer most while the
very-short securities (2 years and less) and the longer mortgage-sector
(discount and current coupon 30-year pass-throughs) will outperform. Second,
higher rates reduce prepayments of home mortgages, effectively lengthening the
average life of the high-coupon GNMAs, thus they may very well underperform.
Thirdly, as refinancings slow, supply will dwindle and that should help GNMAs
hold their value.
/s/ Paul Stevenson
-----------------------------
Paul Stevenson
Paul Stevenson joined SAFECO in 1986 as a mortgage securities analyst. He
became a fund manager in 1988. He is nearing completion of his M.B.A. and is a
Chartered Financial Analyst.
SAFECO Advisor
GNMA Fund
Portfolio of Investments
As of December 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT MARKET VALUE
(000'S) (000'S)
-------------------------------------------------------------
<S> <C>
U.S. GOVERNMENT AND AGENCY
SECURITIES - 97.7%
Government National Mortage
Association (GNMA) - 82.6%
$1,162 9.75%, due 8/15/05 . . . . . . . . . . $1,187
1,034 9.50%, due 8/20/19 . . . . . . . . . . 1,052
2,015 7.00%, due 10/15/23 . . . . . . . . . 1,808
U.S. Treasury Notes - 15.1%
750 6.875%, due 4/30/97 . . . . . . . . . . 736
------
TOTAL U.S. GOVERNMENT AND
AGENCY SECURITIES . . . . . . . . . . . . . 4,783
------
SHORT-TERM INVESTMENTS - 2.3%
Investment Companies:
115 Short-Term Investments Co.
(Prime Portfolio) . . . . . . . . . . . 115
------
TOTAL SHORT-TERM INVESTMENTS 115
------
TOTAL INVESTMENTS - 100 0% 4,898
------
NET ASSETS $4,898
======
</TABLE>
See Notes to Financial Statements
11
<PAGE> 15
SAFECO Advisor Municipal Bond Funds
Manager's Letter
February 3, 1995
It was a roller coaster fourth quarter in the tax-free markets. Disturbed by
continued selling by mutual funds during the late summer, Wall Street municipal
bond dealers backed away from the market in late October and prices fell
sharply. By Thanksgiving, yields on long-term revenue bonds had risen to nearly
92% of comparable Treasury bond yields. At this historical high ratio,
"crossover buyers" (so called because they normally buy taxable bonds, but
crossover to tax-exempts when they are cheap relative to taxables) came into
the market. This started a rally which dropped the tax-exempt/taxable ratio
back to 88% by year end and muni yields back to 6.90% from their late November
high of 7.375%.
The poor performance by the municipal bond market in 1994 was particularly
surprising since technical factors indicated otherwise. New issue volume in
1994 fell by 45% from 1993. This reduced supply should have made munis
relatively scarce and thus more valuable. Increased demand should have
increased their value as well: Bitten in April by higher Federal income tax
rates implemented in 1993, high-income investors should have been vying for
shelter.
The supply and demand factors were simply overwhelmed by fear of higher
inflation. As the U.S. economy improved, this fear colored every investment
decision and short and long-term interest rates skyrocketed. Interestingly
enough, a full year after the Federal Reserve Board first raised short-term
rates and started this bear market for bonds, inflation is not significantly
higher than it was.
It is the way of the financial markets to react not only to today's news,
but also to anticipate and react to what may be tomorrow's news. Many
forecasters now seem to believe that with the increases in short-term interest
rates of the last 12 months (plus those expected over the next three months),
the economy has been sufficiently dampened to forestall inflation. If this
scenario is correct, then long-term rates have probably seen their highs for
this interest-rate cycle. However, things seldom work out as expected.
Any news, economic or political, which seems outside the bounds of
expectations will be reflected, perhaps violently, in bond prices and yields.
While I think that the market has overreacted to the fear of inflation this
past year, that doesn't mean that the fear and all its dramatics won't
continue. The good news is that volatile markets present opportunities for
those willing to look to the long-term for results. I patiently await those
opportunities.
SAFECO ADVISOR
MUNICIPAL BOND FUND
[PHOTO OF STEPHEN C. BAUER]
Class A shares of the SAFECO Advisor Municipal Bond Fund returned -0.16% for
the quarter ended December 31, 1994. Class B and C shares returned -0.35%,
while the average municipal bond fund was down 1.64% according to Lipper
Analytical Services.
At year end the Fund was 94% invested in a portfolio with an average
maturity of 25 years. Fourteen different states were represented in the Fund.
Washington bonds comprise the largest state group at 13% of net assets. Eleven
different types of issues were held by the Fund. Electric utilities comprise
the largest sector at 18.7% of net assets and water revenue bonds are second at
14%.
Ten of the SAFECO Advisor Municipal Bond Fund's 21 issues were AAA-rated
because of insurance, five were AA-rated and six were rated A. I was able to
acquire several positions in normally-expensive bonds issued by high-tax states
at fire sale prices. As the year progresses, I hope to trade these bonds
advantageously.
SAFECO ADVISOR INTERMEDIATE-TERM
MUNICIPAL BOND FUND
For the quarter ended December 31, 1994, the SAFECO Advisor
Intermediate-Term Municipal Bond Fund A shares were down 1.29% while B and C
shares were off 1.48%. The Lipper average return for intermediate-term
municipal funds for the same period was -1.19%.
As of December 31, 1994 the Fund was 88% invested with an average maturity
of nine years. Eleven different states were represented in the Fund. Washington
dominated with 24% of net assets and Illinois with 20%. I tend to favor bonds
from Washington and Illinois. Because these states don't have an income tax to
increase their bonds' desirability, the bonds tend to trade at lower values,
which translate to higher yields.
Electric revenue bonds and general obligation bonds were the predominant
types of issuers held at year end.
12
<PAGE> 16
Quality is high as 10 of the 18 holdings are AAA rated because of insurance.
Even though the intermediate-sector took the brunt of the punishment that
1994 dealt the bond market -- it flattened the yield curve -- I believe that
the ten-year maturity range, while longer than the average intermediate fund,
currently has the best combination of yield and stability. I continually
monitor the bond market for ideas regarding quality and maturity and when a
better combination comes along I will act on it.
SAFECO ADVISOR WASHINGTON
MUNICIPAL BOND FUND
The SAFECO Advisor Washington Municipal Bond Fund topped its class for the
quarter ended December 31, 1994. The Fund's A shares posted returns of -0.93%,
the B and C shares posted -1.12%, while the average Washington Muni Fund was
down 1.75% according to Lipper.
At year end, the Fund was 83% invested in long-term bonds and had an average
maturity of 24 years. The 18 issues owned represented 10 different types of
bonds.
Electric utilities and hospital revenue bonds at 18% of net assets comprise
the largest industry sectors. Thirteen of the Fund's holdings were rated AAA
because of bond insurance and the rest were rated A or AA. Although initially
the Fund is heavily weighted toward issuers in the Puget Sound area, I expect
to diversify more widely throughout the state as opportunities arise. I
anticipate there will be reason to increase the yield of the Fund during coming
months by extending maturities and, if advantageous, to replace insured bonds
with uninsured bonds.
/s/ Stephen C. Bauer
-----------------------------
Stephen C. Bauer
Steve Bauer joined SAFECO in 1971 as a fixed-income analyst. He became a
fund manager in 1981 and president of SAFECO Asset Management in January 1995.
Bauer holds a B.S. in microbiology and an M.B.A. from the University of
Washington.
SAFECO Advisor
Municipal Bond Fund
Highlights
As of December 31, 1994
WEIGHTED AVERAGE MATURITY (IN YEARS) 24.9
<TABLE>
<CAPTION>
TOP FIVE PERCENT OF
HOLDINGS NET ASSETS
-------------------------------------------------------------
<S> <C>
Colorado River (TX) Municipal Water District 5.3%
Wisconsin Public Power, Inc. System 4.9%
San Antonio (TX) Electric and Gas Systems Revenue 4.9%
Everett (WA) School District #2 Snohomish County 4.9%
Metropolitan Pier and Exposition Authority (IL) 4.8%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PERCENT OF
STATES NET ASSETS
-------------------------------------------------------------
<S> <C>
Washington 13.3%
California 12.5%
Texas 10.1%
Illinois 9.5%
Florida 8.6%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PERCENT OF
TYPES OF BONDS NET ASSETS
-------------------------------------------------------------
<S> <C>
Electric Utilities - Combination 18.7%
Utilities - Water 13.7%
Local G.O. - Unlimited Tax 9.3%
Toll Road 8.7%
Utilities - Sewer 8.1%
</TABLE>
CREDIT RATING DISTRIBUTION (S&P RATING)
[PIE CHART]
<TABLE>
<S> <C>
AA: 20.9%
AAA: 45.9%
Cash & Other: 5.7%
</TABLE>
13
<PAGE> 17
SAFECO Advisor
Intermediate-Term
Municipal Bond Fund
Highlights
As of December 31, 1994
WEIGHTED AVERAGE MATURITY (IN YEARS) 9.4
<TABLE>
<CAPTION>
TOP FIVE PERCENT OF
HOLDINGS NET ASSET
-------------------------------------------------------------
<S> <C>
Cook County (IL) Community
Consolidated School District #21 5.0%
North Carolina Municipal Power Agency #1 5.0%
New Madrid (MO) Power Plant Revenue 5.0%
Pasco (WA) Water and Sewer Revenue 5.0%
Chicago (IL) General Obligation 5.0%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PERCENT OF
STATES NET ASSETS
-------------------------------------------------------------
<S> <C>
Washington 24.5%
Illinois 19.8%
North Carolina 5.0%
Missouri 5.0%
Texas 5.0%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PERCENT OF
TYPES OF BONDS NET ASSETS
-------------------------------------------------------------
<S> <C>
Local G.O. - Unlimited Tax 10.0%
Electric Utilities - Combination 9.9%
Local G.O. - Limited Tax 9.8%
Lease Rental 5.0%
Electric Utilities - Coal 5.0%
</TABLE>
CREDIT RATING DISTRIBUTION (S&P RATING)
[PIE CHART]
<TABLE>
<S> <C>
AA: 14.7%
AAA: 49.4%
Cash & Other: 12.0%
Not rated: 4.6%
</TABLE>
SAFECO Advisor
Washington State
Municipal Bond Fund
Highlights
As of December 31, 1994
WEIGHTED AVERAGE MATURITY (IN YEARS) 24.5
<TABLE>
<CAPTION>
TOP FIVE PERCENT OF
HOLDINGS NET ASSETS
-------------------------------------------------------------
<S> <C>
Port Angeles Water and
Wastewater Utility Revenue 5.2%
Spokane Public Facility District
Revenue (Arena Project) 4.9%
Renton Water and Sewer Improvement Revenue 4.8%
Everett School District #2 Snohomish County 4.8%
Snohomish County Public Utility District #1 4.7%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PERCENT OF
TYPES OF BONDS NET ASSETS
-------------------------------------------------------------
<S> <C>
Hospital 18.1%
Electric Utilities - Combination 13.4%
Utilities - Water and Sewer 10.1%
Local G.O. - Limited Tax 9.0%
Sales Tax 4.9%
</TABLE>
CREDIT RATING DISTRIBUTION (S&P RATING)
[PIE CHART]
<TABLE>
<S> <C>
A: 4.7%
AA: 13.4%
AAA: 59.7%
Not rated: 4.9%
Cash & Other: 17.3%
</TABLE>
14
<PAGE> 18
SAFECO Advisor Municipal Bond Fund
Portfolio of Investments
As of December 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT MARKET VALUE
(000'S) (000'S)
----------------------------------------------------------------------
<S> <C>
BONDS - 94.3%
Arizona - 4.7%
$300 Phoenix Civic Improvement Corp.
Wastewater System Lease Revenue
5.00%, due 7/01/18 [MBIA]* . . . . . . . . . . $232
California - 12.5%
250 East Bay Regional Park District
California General Obligation
5.75%, due 9/01/16 . . . . . . . . . . . . . . 219
300 Los Angeles Wastewater System Revenue
4.70%, due 11/01/19 [FGIC] . . . . . . . . . . 222
250 Sacramento County Sanitation District
Finance Authority
4.75%, due 12/01/23 . . . . . . . . . . . . . 180
Colorado - 4.8%
285 Denver School District #1 General Obligation
5.125%, due 12/01/12 . . . . . . . . . . . . . 236
Delaware - 4.5%
300 Delaware River and Bay Authority Revenue
4.75%, due 1/01/24 [MBIA] . . . . . . . . . . 223
Florida - 8.6%
250 Orange County Sales Tax Revenue
5.375%, due 1/01/24 . . . . . . . . . . . . . 206
250 Orlando and Orange County
Expressway Authority Junior Lien Revenue
5.95%, due 7/01/23 . . . . . . . . . . . . . . 220
Illinois - 9.5%
250 Illinois Civic Center Revenue
6.25%, due 12/15/20 [AMBAC] . . . . . . . . . 235
265 Metropolitan Pier and Exposition Authority
McCormick Place Expansion Project
6.00%, due 6/15/27 [MBIA] . . . . . . . . . . 237
Massachusetts - 4.7%
275 Massachusetts Water Resources Authority
General Revenue
5.50%, due 3/01/17 . . . . . . . . . . . . . . 231
Michigan - 3.8%
250 Detroit Water Supply System Revenue
4.75%, due 7/01/19 [FGIC] . . . . . . . . . . 187
Nebraska - 4.8%
300 Nebraska Public Power District
Power Supply System Revenue
5.00%, due 1/01/17 . . . . . . . . . . . . . . 236
New York - 4.3%
250 New York State Thruway Authority
General Revenue
5.50%, due 1/01/23 [FGIC] . . . . . . . . . . 212
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT MARKET VALUE
(000'S) (000'S)
----------------------------------------------------------------------
<S> <C>
Texas - 10.1%
$325 Colorado River Municipal Water District
Water System Revenue
5.15%, due 1/01/21 [AMBAC] . . . . . . . . . . $261
300 San Antonio Electric and
Gas Systems Revenue
5.00%, due 2/01/16 . . . . . . . . . . . . . . 240
Utah - 3.8%
250 Intermountain Power Agency
Power Supply Revenue
5.00%, due 7/01/21 . . . . . . . . . . . . . . 190
Washington - 13.3%
250 Everett School District #2 Snohomish County
Unlimited Tax General Obligation
6.20%, due 12/01/12 [MBIA] . . . . . . . . . . 240
250 Seattle Municipal Light and Power Revenue
5.375%, due 11/01/18 . . . . . . . . . . . . . 205
250 Washington Health Care Facilities Authority
Revenue (Group Health) [MBIA]
5.625%, due 11/01/19 . . . . . . . . . . . . . 211
Wisconsin - 4.9%
300 Wisconsin Public Power, Inc. System
Power Supply System Revenue
5.25%, due 7/01/21 [AMBAC] . . . . . . . . . . 242
------
TOTAL BONDS 4,665
------
SHORT-TERM INVESTMENTS - 4.3%
Investment Companies:
214 Aim Tax-Exempt Money
Market Fund, Inc. . . . . . . . . . . . . . . 214
------
TOTAL SHORT-TERM INVESTMENTS . . . . . . . . . . . . . . . . 214
------
TOTAL INVESTMENTS - 98.6% . . . . . . . . . . . . . . . . . . 4,879
Other Assets, less Liabilities. . . . . . . . . . . . . . . . 70
------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . $4,949
======
DIVERSIFICATION BY GUARANTOR (Percent
of Portfolio)
Municipal Bond Investors Assurance Corp. [MBIA] . . . . . . . 24.5%
AMBAC Indemnity Corp. [AMBAC] . . . . . . . . . . . . . . . . 15.8
Financial Guaranty Insurance Corp. [FGIC] . . . . . . . . . . 13.3
------
53.6%
</TABLE> ======
* The provider of the guarantee of timely payment of both principal and
interest is identified in the brackets at the end of each bond
description. The guarantors applicable to this portfolio are: AMBAC
-- AMBAC Indemnity Corp., FGIC -- Financial Guaranty Insurance Corp.,
and MBIA -- Municipal Bond Investors Assurance Corp.
See Notes to Financial Statements
15
<PAGE> 19
SAFECO Advisor Intermediate-Term Municipal
Bond Fund Portfolio of Investments
As of December 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT MARKET VALUE
(000'S) (000'S)
-------------------------------------------------------------
<S> <C>
BONDS - 88.0%
California - 4.9%
$250 California Housing Finance Agency
Housing Revenue
5.75%, due 8/01/03 [MBIA] * . . . . . $242
Illinois - 19.8%
240 Chicago General Obligation
6.20%, due 1/01/04 [AMBAC] . . . . . . . 244
250 Cook County Community Consolidated
School District #21 (Wheeling)
General Obligation Limited Tax
5.80%, due 12/01/04 [AMBAC] . . . . . . 247
240 Metropolitan Pier and Exposition Authority
5.90%, due 6/15/03 [MBIA] . . . . . . . 237
250 Will County School District #161 (Frankfort)
5.75%, due 1/01/05 [FGIC] . . . . . . . 242
Missouri - 5.0%
250 New Madrid Power Plant Revenue
5.65%, due 6/01/03 [AMBAC] . . . . . . . 245
Nevada - 4.9%
235 Clark County Limited Tax General
Obligation
(Flood Control)
6.30%, due 11/01/04 [AMBAC] . . . . . . 239
New Jersey - 4.9%
240 New Jersey Turnpike Authority Revenue
6.00%, due 1/01/05 . . . . . . . . . . . 239
North Carolina - 5.0%
250 North Carolina Municipal Power Agency #1
Catawba Electric Revenue
5.90%, due 1/01/03 . . . . . . . . . . . 247
South Carolina - 4.9%
245 Georgetown County, Pollution
Control Revenue
(International Paper Company Project)
6.25%, due 6/15/05 . . . . . . . . . . . 241
Texas - 5.0%
250 Texas General Obligation
Veterans' Housing Assistance Program
5.90%, due 6/01/04 . . . . . . . . . . . 244
Utah - 4.6%
240 Utah State Board of Regents
Student Loan Revenue
5.45%, due 5/01/05 . . . . . . . . . . . 225
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT MARKET VALUE
(000'S) (000'S)
--------------------------------------------------------------
<S> <C>
Washington - 24.5%
$250 Benton School District #17 (Kennewick)
General Obligation
5.70%, due 12/01/03 [AMBAC] . . . . . . $244
250 Conservation and Renewable Energy System
Conservation Project Revenue
5.85%, due 10/01/05 . . . . . . . . . . 238
250 Pasco Water and Sewer Revenue
5.65%, due 6/01/03 [MBIA] . . . . . . . 245
240 Seatac Local Option Transportation
Tax Revenue
5.75%, due 12/01/03 [MBIA] . . . . . . . 236
270 Washington Public Power Supply System
Nuclear Project #3 Revenue
4.90%, due 7/01/04 . . . . . . . . . . . 235
Wisconsin - 4.5%
200 Wisconsin Public Power, Inc. System
Power Supply System Revenue
7.50%, due 7/01/04 . . . . . . . . . . . 220
------
TOTAL BONDS . . . . . . . . . . . . . . . . . . . 4,310
------
SHORT-TERM INVESTMENTS - 11.6%
Investment Companies:
284 Aim Tax-Exempt Money
Market Fund, Inc. . . . . . . . . . . . 284
284 Nuveen Tax-Exempt Money
Market Fund, Inc. . . . . . . . . . . . 284
------
TOTAL SHORT-TERM INVESTMENTS . . . . . . . . . . . . . 568
------
TOTAL INVESTMENTS - 99.6% . . . . . . . . . . . . . . 4,878
Cash and Other Assets, less Liabilities . . . . . . . . . 21
------
NET ASSETS . . . . . . . . . . . . . . . . . . . $4,899
======
DIVERSIFICATION BY GUARANTOR
(Percent of Portfolio)
AMBAC Indemnity Corp. [AMBAC] . . . . . . . . . . . . 28.3%
Municipal Bond Investors Assurance Corp. [MBIA] . . . . 22.3
Financial Guaranty Insurance Corp. [FGIC] . . . . . . . 5.6
------
56.2%
======
</TABLE>
* The provider of the guarantee of timely payment of both principal and
interest is identified in the brackets at the end of each bond
description. The guarantors applicable to this portfolio are: AMBAC
-- AMBAC Indemnity Corp., FGIC -- Financial Guaranty Insurance Corp.,
and MBIA -- Municipal Bond Investors Assurance Corp.
See Notes to Financial Statements
16
<PAGE> 20
SAFECO Advisor Washington Municipal Bond Fund
Portfolio of Investments
As of December 31, 1994
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT MARKET VALUE
(000'S) (000'S)
--------------------------------------------------------------
<S> <C> <C>
BONDS - 82.7%
$250 Everett School District #2 Snohomish County
Unlimited Tax General Obligation
6.20%, due 12/01/12 [MBIA]* . . . . . . $239
250 Grant County Public Utility District #2
Wanapum Hydroelectric Revenue
6.375%, due 1/01/23 . . . . . . . . . . 236
320 King County Limited Tax General Obligation
4.50%, due 1/01/24 . . . . . . . . . . . 223
250 Marysville Limited Tax General Obligation
5.875%, due 12/01/12 . . . . . . . . . . 228
250 Municipality of Metropolitan
Seattle Sewer Revenue
6.30%, due 1/01/33 [MBIA] . . . . . . . 230
260 Port Angeles Water and
Wastewater Utility Revenue
6.75%, due 11/01/24 [MBIA] . . . . . . . 261
285 Renton Water and Sewer
Improvement Revenue
5.375%, due 4/01/13 . . . . . . . . . . 242
250 Seattle Municipal Light and Power Revenue
5.375%, due 11/01/18 . . . . . . . . . . 205
250 Seattle Water System Revenue
5.50%, due 6/01/18 . . . . . . . . . . . 213
285 Snohomish County Public Utility District #1
Generation System Revenue
5.50%, due 1/01/20 [FGIC] . . . . . . . 236
250 Spokane Public Facility District Revenue
(Arena Project)
6.50%, due 1/01/18 [AMBAC] . . . . . . . 243
250 Tacoma Electric System Revenue
5.50%, due 1/01/12 [AMBAC] . . . . . . . 220
250 Washington Certificates of Participation
(State Office Building Project)
6.00%, due 4/01/12 [MBIA] . . . . . . . 232
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT MARKET VALUE
(000'S) (000'S)
--------------------------------------------------------------
<S> <C> <C>
$250 Washington Health Care Facilities Authority
Revenue (Empire Health Service Spokane)
5.625%, due 11/01/19 [MBIA] . . . . . . $211
250 Washington Health Care Facilities Authority
Revenue (Group Health)
6.25%, due 12/01/21 [MBIA] . . . . . . . 231
290 Washington Health Care Facilities Authority
Revenue (Harrison Memorial
Hospital, Bremerton)
5.40%, due 8/15/23 [AMBAC] . . . . . . . 234
250 Washington Health Care Facilities Authority
Revenue (Swedish Hospital Medical Center)
6.30%, due 11/15/22 [AMBAC] . . . . . . 230
250 Washington Public Power Supply System
Nuclear Project #1 Revenue
5.70%, due 7/01/17 [MBIA] . . . . . . . 217
-----
TOTAL BONDS . . . . . . . . . . . . . . . . . . . . 4,131
-----
SHORT-TERM INVESTMENTS - 10.1%
Investment Companies:
253 Aim Tax-Exempt Money
Market Fund, Inc. . . . . . . . . . . . 253
253 Nuveen Tax-Exempt Money
Market Fund, Inc. . . . . . . . . . . . 253
------
TOTAL SHORT-TERM INVESTMENTS . . . . . . . . . . . . . 506
------
TOTAL INVESTMENTS - 92.8% . . . . . . . . . . . . . . . 4,637
Cash and Other Assets, less liabilities . . . . . . . . 360
------
NET ASSETS . . . . . . . . . . . . . . . . . . . $4,997
------
DIVERSIFICATION BY GUARANTOR
(Percent of Portfolio)
Municipal Bond Investors Assurance Corp. [MBIA] . . . . 39.2%
AMBAC Indemnity Corp. [AMBAC] . . . . . . . . . . . . . 22.4
Financial Guaranty Insurance Corp. [FGIC] . . . . . . . 5.7
67.3%
</TABLE>
* The provider of the guarantee of timely payment of both principal and
interest is identified in the brackets at the end of each bond
description. The guarantors applicable to this portfolio are: AMBAC
-- AMBAC Indemnity Corp., FGIC -- Financial Guaranty Insurance Corp.,
and MBIA -- Municipal Bond Investors Assurance Corp.
See Notes to Financial Statements
17
<PAGE> 21
Statements of Assets & Liabilities
As of December 31, 1994
<TABLE>
<CAPTION>
SAFECO ADVISOR SAFECO ADVISOR SAFECO ADVISOR
EQUITY NORTHWEST INTERMEDIATE-TERM
FUND FUND TREASURY FUND
-------------------------------------------------------------------------------------------------------------------
-- (IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS) --
<S> <C> <C> <C>
Assets
Investments, at Value
Common Stocks (Identified Cost $4,941 and
$4,640, respectively) $4,822 $4,518
U.S. Government and Agency Securities
(Identified Cost $4,871, $4,847 and
$4,885, respectively) $4,837
Municipal Bonds (Identified Cost $4,689,
$4,387 and $4,200, respectively)
Short-Term Investments 101 365 114
------ ------ ------
Total Investments 4,923 4,883 4,951
Cash -- -- --
Receivables
Investment Securities Sold 29 -- --
Dividends and Interest 16 7 55
Deferred Organization Expense (Note 4) 28 28 28
------ ------ ------
Total Assets 4,996 4,918 5,034
------ ------ ------
Liabilities
Payables
Investment Securities Purchased 49 -- --
Organization Expense 28 28 28
Dividends 9 -- 17
Investment Advisory Fees 3 3 2
Other 15 14 13
------ ------ ------
Total Liabilities 104 45 60
------ ------ ------
Net Assets $4,892 $4,873 $4,974
====== ====== ======
Class A:
Net Assets $1,628 1,626 $1,655
------ ------ ------
Shares Outstanding (Note 2) 167 167 167
------ ------ ------
Net Asset Value and Redemption Price Per Share $ 9.76 $ 9.75 $ 9.93
====== ====== ======
Maximum Offering Price Per Share (Net Asset
Value Plus Sales Charge of 4.75%) $10.25 $10.24 $10.43
====== ====== ======
Class B:
Net Assets $1,629 1,622 $1,655
------ ------ ------
Shares Outstanding (Note 2) 167 167 167
------ ------ ------
Net Asset Value and Offering Price Per Share $ 9.76 $ 9.73 $ 9.93
====== ====== ======
Class C:
Net Assets $1,635 1,625 $1,664
------ ------ ------
Shares Outstanding (Note 2) 167 167 167
------ ------ ------
Net Asset Value, Offering Price and
Redemption Price Per Share $ 9.76 $ 9.73 $ 9.93
====== ====== ======
</TABLE>
See Notes to Financial Statements
18
<PAGE> 22
<TABLE>
<CAPTION>
SAFECO ADVISOR SAFECO ADVISOR
SAFECO ADVISOR SAFECO ADVISOR SAFECO ADVISOR INTERMEDIATE-TERM WASHINGTON
U.S. GOVERNMENT GNMA MUNICIPAL MUNICIPAL BOND MUNICIPAL BOND
FUND FUND BOND FUND FUND FUND
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$4,843 $4,783
$4,665 $4,310 $4,131
157 115 214 568 506
------ ------ ------ ------ ------
5,000 4,898 4,879 4,878 4,637
-- -- -- 462 308
-- -- -- -- --
25 38 99 71 81
28 28 28 28 28
------ ------ ------ ------ ------
5,053 4,964 5,006 5,439 5,054
------ ------ ------ ------ ------
-- -- -- 486 --
28 28 28 28 28
17 23 13 11 13
2 2 2 2 2
13 13 14 13 14
------ ------ ------ ------ ------
60 66 57 540 57
------ ------ ------ ------ ------
$4,993 $4,898 $4,949 $4,899 $4,997
====== ====== ====== ====== ======
$1,665 $1,633 $1,650 $1,633 $1,636
------ ------ ------ ------ ------
167 167 167 167 167
------ ------ ------ ------ ------
$ 9.99 $ 9.80 $ 9.90 $ 9.80 $ 9.82
====== ====== ====== ====== ======
$10.49 $10.29 $10.39 $10.29 $10.31
====== ====== ====== ====== ======
$1,664 $1,633 $1,650 $1,633 $1,667
------ ------ ------ ------ ------
167 167 167 167 170
------ ------ ------ ------ ------
$ 9.99 $ 9.80 $ 9.90 $ 9.80 $ 9.82
====== ====== ====== ====== ======
$1,664 $1,632 $1,649 $1,633 $1,694
------ ------ ------ ------ ------
166 166 166 166 172
------ ------ ------ ------ ------
$ 9.99 $ 9.80 $ 9.90 $ 9.80 $ 9.82
====== ====== ====== ====== ======
</TABLE>
19
<PAGE> 23
Statements of Operations
For the Period September 30, 1994
(Commencement of Operations) to December 31, 1994
<TABLE>
<CAPTION>
SAFECO ADVISOR SAFECO ADVISOR SAFECO ADVISOR
EQUITY NORTHWEST INTERMEDIATE-TERM
FUND FUND TREASURY FUND
-------------------------------------------------------------------------------------------------------------------------
-- (IN THOUSANDS) --
<S> <C> <C> <C>
Investment Income
Dividends $ 37 $ 12 --
Interest 10 14 $ 79
----- ----- ----
Total Investment Income 47 26 79
----- ----- ----
Expenses
Legal and Auditing Fees 10 10 10
Investment Advisory Fees (Note 4) 9 9 7
Service Fees (Note 4) 3 3 3
Distribution Fees - Class B (Note 4) 3 3 3
Distribution Fees - Class C (Note 4) 3 3 3
Custodian Fees 7 4 1
Amortization of Organization Expenses 2 2 2
Trustees' Fees 1 1 1
----- ----- ----
Total Expenses 38 35 30
----- ----- ----
Net Investment Income 9 (9) 49
----- ----- ----
Net Realized and Unrealized Gain (Loss) on Investments
Net Realized Gain (Loss) on Investment Transactions -- -- (2)
Net Change in Unrealized Appreciation
(Depreciation) (Note 2) (119) (122) (34)
----- ----- ----
Net Loss on Investments (119) (122) (36)
----- ----- ----
Net Change in Net Assets Resulting from Operations $(110) $(131) $ 13
===== ===== ====
</TABLE>
See Notes to Financial Statements
20
<PAGE> 24
<TABLE>
<CAPTION>
SAFECO ADVISOR SAFECO ADVISOR
SAFECO ADVISOR SAFECO ADVISOR SAFECO ADVISOR INTERMEDIATE-TERM WASHINGTON
U.S. GOVERNMENT GNMA MUNICIPAL MUNICIPAL BOND MUNICIPAL BOND
FUND FUND BOND FUND FUND FUND
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
-- -- -- -- --
$78 $ 88 $ 65 $ 58 $ 67
--- ----- ---- ----- ----
78 88 65 58 67
--- ----- ---- ----- ----
10 10 10 10 10
7 7 5 5 6
3 3 3 3 3
3 3 3 3 3
3 3 3 3 3
1 2 3 2 2
2 2 2 2 2
1 1 1 1 1
--- ----- ---- ----- ----
30 31 30 29 30
--- ----- ---- ----- ----
48 57 35 29 37
--- ----- ---- ----- ----
(3) 1 (27) (24) (21)
(4) (102) (24) (77) (69)
--- ----- ---- ----- ----
(7) (101) (51) (101) (90)
--- ----- ---- ----- ----
$41 $ (44) $(16) $ (72) $(53)
=== ===== ==== ===== ====
</TABLE>
21
<PAGE> 25
Statements of Changes in Net Assets
For the Period September 30, 1994 (Commencement of Operations)
to December 31, 1994
<TABLE>
<CAPTION>
SAFECO ADVISOR SAFECO ADVISOR SAFECO ADVISOR
EQUITY NORTHWEST INTERMEDIATE-TERM
FUND FUND TREASURY FUND
------------------------------------------------------------------------------------------------------------------------------
-- (IN THOUSANDS) --
<S> <C> <C> <C>
Operations
Net Investment Income (Loss) $ 9 $ (9) $ 49
Net Realized Gain (Loss) on
Investments -- -- (2)
Net Change in Unrealized
Appreciation (Depreciation) (119) (122) (34)
------ ------ ------
Net Change in Net Assets
Resulting from Operations (110) (131) 13
Dividends to Shareholders from
Net Investment Income - Class A (5) -- (19)
Net Investment Income - Class B (2) -- (15)
Net Investment Income - Class C (2) -- (15)
Net Realized Gain on Investments - Class A -- -- --
Net Trust Share Transactions (Note 3) 5,011 5,004 5,010
------ ------ ------
Total Change in Net Assets 4,892 4,873 4,974
Net Assets at Beginning of Period -- -- --
------ ------ ------
Net Assets at End of Period $4,892 $4,873 $4,974
====== ====== ======
</TABLE>
See Notes to Financial Statements
22
<PAGE> 26
<TABLE>
<CAPTION>
SAFECO ADVISOR SAFECO ADVISOR
SAFECO ADVISOR SAFECO ADVISOR SAFECO ADVISOR INTERMEDIATE-TERM WASHINGTON
U.S. GOVERNMENT GNMA MUNICIPAL MUNICIPAL BOND MUNICIPAL BOND
FUND FUND BOND FUND FUND FUND
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 48 $ 57 $ 35 $ 29 $ 37
(3) 1 (27) (24) (21)
(4) (102) (24) (77) (69)
------ ------ ------ ------ ------
41 (44) (16) (72) (53)
(18) (21) (14) (12) (14)
(15) (18) (11) (9) (11)
(15) (18) (10) (8) (12)
-- (1) -- -- --
5,000 5,000 5,000 5,000 5,087
------ ------ ------ ------ ------
4,993 4,898 4,949 4,899 4,997
-- -- -- -- --
------ ------ ------ ------ ------
$4,993 $4,898 $4,949 $4,899 $4,997
====== ====== ====== ====== ======
</TABLE>
23
<PAGE> 27
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The SAFECO Advisor Series Trust ("Trust") is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The Trust consists of the SAFECO Advisor Equity Fund,
("Advisor Equity"), SAFECO Advisor Northwest Fund ("Advisor Northwest"), SAFECO
Advisor Intermediate-Term Treasury Fund, ("Advisor Intermediate Treasury"),
SAFECO Advisor U.S. Government Fund ("Advisor U.S. Government"), SAFECO Advisor
GNMA Fund ("Advisor GNMA"), SAFECO Advisor Municipal Bond Fund ("Advisor
Municipal") SAFECO Advisor Intermediate-Term Municipal Bond Fund ("Advisor
Intermediate Municipal"), SAFECO Advisor Washington Municipal Bond Fund
("Advisor Washington"), (together "the Advisor Funds" or "the Funds"). Prior to
commencement of operations on September 30, 1994, the Funds had no activities
other than organizational matters and registering the Funds to offer shares to
the public. Each Fund issues three classes of stock. Each class represents an
interest in the same assets of a fund and the classes are identical except for
differences in their sales charge structure and ongoing distribution charges.
Class B shares automatically convert to Class A shares approximately eight
years after initial issuance. All classes of shares have equal rights as to
earnings, assets and voting privileges, except that each class bears different
distribution charges and has exclusive voting rights with respect to its
distribution plan.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
SECURITY VALUATION. Investments in equity securities are valued at the last
reported sales price, unless there are no transactions, in which case they are
valued at the last reported bid price. Investments in bonds are stated on the
basis of valuations provided by a pricing service, which uses information with
respect to transactions in bonds, quotations from bond dealers, market
transactions in comparable securities and various relationships between
securities in determining value. Short-term investments purchased at par are
valued at cost. All other short-term investments are valued at amortized cost.
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
The cost of the portfolios is the same for financial statement and federal
income tax purposes. Realized gains and losses from security transactions are
determined using the identified cost basis.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS. Securities purchased on a
when-issued or delayed basis may be settled a month or more after the trade
date. The securities purchased are carried in the portfolio at market and are
subject to market fluctuation during this period. These securities begin
earning interest on the settlement date. As commitments to purchase when-issued
securities become fixed, the Fund establishes a segregated asset account equal
to the total obligation.
INCOME RECOGNITION. Dividend income less foreign taxes withheld (if any) is
recorded on the ex-dividend date. Interest is accrued on bonds and short-term
investments daily. Bond premiums, original issue discounts and market discounts
on taxable bonds are amortized to either call or maturity dates. Market
discount on municipal bonds purchased after April 30, 1993 is recorded as
taxable income at disposition.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. For the Advisor Equity and
Advisor Northwest Funds, net investment income is declared as a dividend to
shareholders as of the last business day (ex-dividend date) of March, June,
September and December. For all other Advisor Funds, net investment income is
declared as a dividend to shareholders of record as of the close of each
business day and payment is made as of the last business day of each month. For
all Advisor Funds, net gains realized from security transactions, if any, are
normally distributed to shareholders at the end of December.
FEDERAL INCOME AND EXCISE TAXES. The Funds intend to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies including distributing substantially all taxable income to their
shareholders in a manner which results in no tax to the Funds. Therefore, no
federal income or excise tax provision is required. In addition, the Advisor
Municipal, Advisor Intermediate Municipal, and Advisor Washington Funds intend
to satisfy conditions which will enable them to pay dividends which, for
shareholders, are exempt from Federal income taxes. Any 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 amortization on bonds purchased below their issued
price after April 30, 1993, will be treated as ordinary income for Federal
income tax purposes.
24
<PAGE> 28
2. INVESTMENT TRANSACTIONS
<TABLE>
<CAPTION>
SAFECO SAFECO
SAFECO SAFECO ADVISOR ADVISOR
ADVISOR ADVISOR INTERMEDIATE- U.S.
EQUITY NORTHWEST TERM GOVERNMENT
FUND FUND TREASURY FUND FUND
--------------------------------------------------------------------------------------------------------------------------
-- (IN THOUSANDS) --
<S> <C> <C> <C> <C>
Purchases for the Period September 30, 1994
(Commencement of Operations) to December 31, 1994
(including $0, $0, $8,036, and $8,917, respectively,
of U.S. Government securities) $5,265 $4,640 $8,036 $8,917
====== ====== ====== ======
Sales for the Period September 30, 1994
(Commencement of Operations) to December 31, 1994
(including $0, $0, $3,174, and $4,076, respectively,
of U.S. Government securities) $ 322 $ -- $3,174 $4,076
====== ====== ====== ======
Unrealized Appreciation (Depreciation) at
December 31, 1994
Aggregate Gross Unrealized Appreciation for
Investment Securities in Which There is an Excess
of Value Over Identified Cost $ 176 $ 272 $ -- $ 2
Aggregate Gross Unrealized Depreciation for
Investment Securities in Which There is an Excess
of Identified Cost Over Value (295) (394) (34) (6)
------ ------ ------ ------
Net Unrealized Depreciation $ (119) $ (122) $ (34) $ (4)
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
SAFECO ADVISOR SAFECO
SAFECO SAFECO INTERMEDIATE- ADVISOR
ADVISOR ADVISOR TERM WASHINGTON
GNMA MUNICIPAL MUNICIPAL MUNICIPAL
FUND BOND FUND BOND FUND BOND FUND
---------------------------------------------------------------------------------------------------------------------------
-- (IN THOUSANDS) --
<S> <C> <C> <C> <C>
Purchases for the Period September 30, 1994
(Commencement of Operations) to December 31, 1994
(including $4,910, $0, $0, and $0, respectively,
of U.S. Government securities) $4,910 $8,957 $8,671 $8,478
====== ====== ====== ======
Sales for the Period September 30, 1994
(Commencement of Operations) to December 31, 1994
(including $25, $0, $0, and $0, respectively,
of U.S. Government securities) $ 25 $4,235 $4,252 $4,251
====== ====== ====== ======
Unrealized Appreciation (Depreciation) at
December 31, 1994
Aggregate Gross Unrealized Appreciation for
Investment Securities in Which There is an Excess
of Value Over Identified Cost $ -- $ 37 $ 2 $ 20
Aggregate Gross Unrealized Depreciation for
Investment Securities in Which There is an Excess
of Identified Cost Over Value (102) (61) (79) (89)
------ ------ ------ ------
Net Unrealized Depreciation $ (102) $ (24) $ (77) $ (69)
====== ====== ====== ======
</TABLE>
25
<PAGE> 29
NOTES TO FINANCIAL STATEMENTS
3. TRUST SHARES
<TABLE>
<CAPTION>
For the Period September 30, 1994 (Commencement of Operations) to December 31, 1994
SAFECO ADVISOR EQUITY FUND SAFECO ADVISOR NORTHWEST FUND
-------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
--------- --------- --------- --------- --------- ---------
--(IN THOUSANDS, EXCEPT PER-SHARE AMOUNT)--
<S> <C> <C> <C> <C> <C> <C>
Shares
Sales 167* 167* 167* 167* 167* 167*
Reinvestments -- -- -- -- -- --
------ ------ ------ ------ ------ ------
167 167 167 167 167 167
Redemptions -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Net Change 167 167 167 167 167 167
====== ====== ====== ====== ====== ======
Amounts
Sales $1,668* $1,669* $1,674* $1,668* $1,667* $1,669*
Reinvestments -- -- -- -- -- --
------ ------ ------ ------ ------ ------
1,668 1,669 1,674 1,668 1,667 1,669
Redemptions -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Net Change $1,668 $1,669 $1,674 $1,668 $1,667 $1,669
====== ====== ====== ====== ====== ======
As of December 31, 1994
Shares Authorized Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited
Par Value Per Share $ .001 $ .001 $ .001 $ .001 $ .001 $ .001
Paid in Capital $1,668 $1,669 $1,674 $1,667 $1,663 $1,665
</TABLE>
<TABLE>
<CAPTION>
SAFECO ADVISOR GNMA FUND SAFECO ADVISOR MUNICIPAL BOND FUND
-------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
--------- --------- --------- --------- --------- ---------
--(IN THOUSANDS, EXCEPT PER-SHARE AMOUNT)--
<S> <C> <C> <C> <C> <C> <C>
Sales 167* 167* 166* 167** 167** 166**
Reinvestments -- -- -- -- -- --
------ ------ ------ ------ ------ ------
167 167 166 167 167 166
Redemptions -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Net Change 167 167 166 167 167 166
====== ====== ====== ====== ====== ======
Amounts
Sales $1,667* $1,667* $1,666* $1,667** $1,667** 1,666**
Reinvestments -- -- -- -- -- --
------ ------ ------ ------ ------ ------
1,667 1,667 1,666 1,667 1,667 1,666
Redemptions -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Net Change $1,667 1,667 $1,666 $1,667 $1,667 $1,666
====== ====== ====== ====== ====== ======
As of December 31, 1994
Shares Authorized Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited
Par Value Per Share $ .001 $ .001 $ .001 $ .001 $ .001 $ .001
Paid in Capital $1,667 $1,667 $1,666 $1,667 $1,667 $1,666
</TABLE>
* Includes 166,667 Class A, 166,667 Class B, and 166,666 Class C shares
purchased for $1,666,670, $1,666,670 and $1,666,660, respectively, by SAFECO
Corporation.
**Includes 166,667 Class A, 166,667 Class B, and 166,666 Class C shares
purchased for $1,666,670, $1,666,670 and $1,666,660, respectively, by SAFECO
Asset Management Company, the Fund's investment advisor.
26
<PAGE> 30
<TABLE>
<CAPTION>
SAFECO ADVISOR SAFECO ADVISOR
INTERMEDIATE-TERM TREASURY FUND U.S. GOVERNMENT FUND
------------------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
167* 166* 168* 167* 167* 166*
-- -- -- -- -- --
------ ------ ------ ------ ------ ------
167 166 168 167 167 166
-- -- -- -- -- --
------ ------ ------ ------ ------ ------
167 166 168 167 167 166
====== ====== ====== ====== ====== ======
$1,667* $1,667* $1,676* $1,667* $1,667* $1,666*
-- -- -- -- -- --
------ ------ ------ ------ ------ ------
1,667 1,667 1,676 1,667 1,667 1,666
-- -- -- -- -- --
------ ------ ------ ------ ------ ------
$1,667 $1,667 $1,676 $1,667 $1,667 $1,666
====== ====== ====== ====== ====== ======
Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited
$ .001 $ .001 $ .001 $ .001 $ .001 $ .001
$1,667 $1,667 $1,676 $1,667 $1,667 $1,666
</TABLE>
<TABLE>
<CAPTION>
SAFECO ADVISOR SAFECO ADVISOR
INTERMEDIATE-TERM MUNICIPAL BOND FUND WASHINGTON MUNICIPAL BOND FUND
------------------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
167** 167** 166** 167** 170** 172**
-- -- -- -- -- --
------ ------ ------ ------ ------ ------
167 167 166 167 170 172
-- -- -- -- -- --
------ ------ ------ ------ ------ ------
167 167 166 167 170 172
====== ====== ====== ====== ====== ======
$1,667** $ 1,667** $1,666** $1,667** $1,696** $1,724**
-- -- -- -- -- --
------ ------ ------ ------ ------ ------
1,667 1,667 1,666 1,667 1,696 1,724
-- -- -- -- -- --
------ ------ ------ ------ ------ ------
$1,667 $1,667 $1,666 $1,667 $1,696 $1,724
====== ====== ====== ====== ====== ======
Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited
$ .001 $ .001 $ .001 $ .001 $ .001 $ .001
$1,667 $1,667 $1,666 $1,667 $1,696 $1,724
</TABLE>
27
<PAGE> 31
NOTES TO FINANCIAL STATEMENTS
4. INVESTMENT ADVISORY FEES AND OTHER
TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEES. SAFECO Asset Management Company receives
investment advisory fees from the Funds. The fee is based on average daily net
assets at the annual rates shown below.
<TABLE>
<CAPTION>
ADVISOR INTERMEDIATE
TREASURY, ADVISOR U.S.
GOVERNMENT, ADVISOR
GNMA, ADVISOR
MUNICIPAL, ADVISOR
INTERMEDIATE
ADVISOR EQUITY AND MUNICIPAL, AND ADVISOR
ADVISOR NORTHWEST FUNDS WASHINGTON FUNDS
------------------------------------------------------------------------
<S> <C> <C> <C>
Net Assets Annual Fee Net Assets Annual Fee
$0-500,000,000 .75 of 1% $0-500,000,000 .60 of 1%
$500,000,001 - $500,000,001-
$1,000,000,000 .65 of 1% $1,000,000,000 .50 of 1%
Over Over
$1,000,000,000 .55 of 1% $1,000,000,000 .40 of 1%
</TABLE>
SHAREHOLDER SERVICING AND DISTRIBUTION FEES. SAFECO Services Corporation
receives shareholder servicing fees. No such charges were accrued in 1994.
SAFECO Securities, Inc. receives distribution and service fees. Pursuant to
Rule 12b-1 under the Investment Company Act of 1940, each Class of shares pays
SAFECO Securities, Inc. a service fee at the annual rate of 0.25% of the
aggregate average daily net assets of a Class. In addition to service fees,
Class B and Class C shares each pay SAFECO Securities, Inc. a distribution fee
at the annual rate of 0.75% of the aggregate average daily net assets of the
respective Class.
NOTES PAYABLE AND INTEREST EXPENSE. The Funds may borrow money for
temporary purposes from SAFECO Corporation or its affiliates.
AFFILIATE OWNERSHIP. At December 31, 1994, SAFECO Corporation owned 500,000
shares of the Advisor Equity, Advisor Northwest, Advisor Intermediate Treasury,
Advisor U.S. Government, and Advisor GNMA Funds. At December 31, 1994, SAFECO
Asset Management Company owned 500,000 shares of the Advisor Municipal, Advisor
Intermediate Municipal, and Advisor Washington Funds.
DEFERRED ORGANIZATION EXPENSE. Costs related to the organization of each of
the Advisor Funds have been deferred and are being amortized to operations over
a period of sixty months. These costs were advanced by the Investment Adviser
and are being reimbursed by the Funds over a period of not more than sixty
months. If any of the original seed money shares are redeemed by SAFECO
Corporation or SAFECO Asset Management Company prior to the end of the
amortization period, the redemption proceeds will be reduced by a pro rata
share of the unamortized organization expense as of the date of redemption.
5. NET INVESTMENT LOSS
The Advisor Northwest Fund had a net investment loss for the period ended
December 31, 1994 of $8,723. This amount has been permanently reclassified to
reduce paid in capital.
6. ACCUMULATED UNDISTRIBUTED
CAPITAL LOSS
The Funds had the following amounts of accumulated undistributed net
realized loss on investment transactions at December 31, 1994. For Federal
income tax purposes, these amounts represent capital loss carryforwards which
will expire in 2002:
<TABLE>
<S> <C>
Advisor Intermediate Treasury $ 2,135
Advisor U.S. Government 3,252
Advisor Municipal 26,680
Advisor Intermediate Municipal 23,680
Advisor Washington 21,412
</TABLE>
28
<PAGE> 32
7. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
For the Period September 30, 1994 (Commencement of Operations) to December
31, 1994
<TABLE>
<CAPTION>
SAFECO ADVISOR EQUITY FUND
-----------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------- ------- --------
<S> <C> <C> <C>
Net Asset Value at Beginning of Period $10.00 $10.00 $10.00
Income From Investment Operations
Net Investment Income (Loss) 0.03 0.01 0.01
Net Realized and Unrealized Loss on Investments (0.24) (0.24) (0.24)
------ ------ ------
Total from Investment Operations (0.21) (0.23) (0.23)
------ ------ ------
Less Distributions
Dividends from Net Investment Income (0.03) (0.01) (0.01)
Distributions from Capital Gains -- -- --
Total Distributions (0.03) (0.01) (0.01)
------ ------ ------
Net Asset Value at End of Period $ 9.76 $ 9.76 $ 9.76
====== ====== ======
Total Return (a) -2.10%** -2.29%** -2.29%**
Net Assets at End of Period (000's) $1,628 $1,629 $1,635
Ratio of Expenses to Average Net Assets 2.57%* 3.31%* 3.32%*
Ratio of Net Investment Income (Loss) to Average Net Assets 1.18%* 0.44%* 0.44%*
Portfolio Turnover Rate 34.83%* 34.83%* 34.83%*
</TABLE>
<TABLE>
<CAPTION>
SAFECO ADVISOR GNMA FUND
-----------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Net Asset Value at Beginning of Period $10.00 $10.00 $10.00
Income From Investment Operations
Net Investment Income (Loss) 0.13 0.11 0.11
Net Realized and Unrealized Loss on Investments (0.20) (0.20) (0.20)
------ ------ ------
Total from Investment Operations (0.07) (0.09) (0.09)
------ ------ ------
Less Distributions
Dividends from Net Investment Income (0.13) (0.11) (0.11)
Distributions from Capital Gains -- -- --
Total Distributions (0.13) (0.11) (0.11)
------ ------ ------
Net Asset Value at End of Period $ 9.80 $ 9.80 $ 9.80
====== ====== ======
Total Return (a) -0.72%** -0.90%** -0.90%**
Net Assets at End of Period (000's) $1,633 $1,633 $1,632
Ratio of Expenses to Average Net Assets 1.98%* 2.73%* 2.73%*
Ratio of Net Investment Income (Loss) to Average Net Assets 5.11%* 4.36%* 4.36%*
Portfolio Turnover Rate 2.74%* 2.74%* 2.74%*
</TABLE>
(a) Total return excludes the effects of sales charges. If sales charges
were included, the total return for Class A and Class B shares would
be lower.
** Not Annualized.
* Annualized.
29
<PAGE> 33
7. FINANCIAL HIGHLIGHTS (CONTINUED)
(For a Share Outstanding Throughout the Period)
<TABLE>
<CAPTION>
For the Period September 30, 1994 (Commencement of Operations) to December 31, 1994
SAFECO NORTHWEST FUND
-----------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Net Asset Value at Beginning of Period $10.00 $10.00 $10.00
Income From Investment Operations
Net Investment Income (Loss) (0.01) (0.02) (0.02)
Net Realized and Unrealized Loss on Investments (0.24) (0.25) (0.25)
------ ------ ------
Total from Investment Operations (0.25) (0.27) (0.27)
------ ------ ------
Less Distributions
Dividends from Net Investment Income -- -- --
Distributions from Capital Gains -- -- --
Total Distributions 0.00 0.00 0.00
------ ------ ------
Net Asset Value at End of Period $ 9.75 $ 9.73 $ 9.73
====== ====== ======
Total Return (a) -2.50%** -2.70%** -2.70%**
Net Assets at End of Period (000's) $1,626 $1,622 $1,625
Ratio of Expenses to Average Net Assets 2.28%* 3.03%* 3.03%*
Ratio of Net Investment Income (Loss) to Average Net Assets -0.20%* -0.95%* -0.95%*
Portfolio Turnover Rate None None None
</TABLE>
<TABLE>
<CAPTION>
SAFECO MUNICIPAL BOND FUND
----------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Net Asset Value at Beginning of Period $10.00 $10.00 $10.00
Income From Investment Operations
Net Investment Income (Loss) 0.08 0.06 0.06
Net Realized and Unrealized Loss on Investments (0.10) (0.10) (0.10)
------ ------ ------
Total from Investment Operations (0.02) (0.04) (0.04)
------ ------ ------
Less Distributions
Dividends from Net Investment Income (0.08) (0.06) (0.06)
Distributions from Capital Gains -- -- --
------ ------ ------
Total Distributions (0.08) (0.06) (0.06)
------ ------ ------
Net Asset Value at End of Period $ 9.90 $ 9.90 $ 9.90
====== ====== ======
Total Return (a) -0.16%** -0.35%** -0.35%**
Net Assets at End of Period (000's) $1,650 $1,650 $1,649
Ratio of Expenses to Average Net Assets 1.92%* 2.67%* 2.67%*
Ratio of Net Investment Income (Loss) to Average Net Assets 3.33%* 2.59%* 2.59%*
Portfolio Turnover Rate 492.95%* 492.95%* 492.95%*
</TABLE>
(a) Total return excludes the effects of sales charges. If sales charges were
included, the total return for Class A and Class B shares would be lower.
** Not Annualized.
* Annualized.
30
<PAGE> 34
<TABLE>
<CAPTION>
SAFECO ADVISOR SAFECO ADVISOR
INTERMEDIATE-TERM TREASURY FUND U.S. GOVERNMENT FUND
------------------------------- -------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$10.00 $10.00 $10.00 $10.00 $10.00 $10.00
0.11 0.09 0.09 0.11 0.09 0.09
(0.07) (0.07) (0.07) (0.01) (0.01) (0.01)
------ ------ ------ ------ ------ -----
0.04 0.02 0.02 0.10 0.08 0.08
------ ------ ------ ------ ------ -----
(0.11) (0.09) (0.09) (0.11) (0.09) (0.09)
-- -- -- -- -- --
------ ------ ------ ------ ------ -----
(0.11) (0.09) (0.09) (0.11) (0.09) (0.09)
$ 9.93 $ 9.93 $ 9.93 $ 9.99 $ 9.99 $ 9.99
====== ====== ====== ====== ====== ======
0.41%** 0.22%** 0.22%** 0.99%** 0.79%** 0.79%**
$1,655 $1,655 $1,664 $1,665 $1,664 $1,664
1.86%* 2.61%* 2.61%* 1.85%* 2.60% *2.60%*
4.42%* 3.67%* 3.67%* 4.29%* 3.54% *3.54%*
346.43%* 346.43%* 346.43%* 445.09%* 445.09%* 445.09%*
</TABLE>
<TABLE>
<CAPTION>
SAFECO ADVISOR SAFECO ADVISOR
INTERMEDIATE-TERM WASHINGTON
MUNICIPAL BOND FUND MUNICIPAL BOND FUND
------------------------------- -------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$10.00 $10.00 $10.00 $10.00 $10.00 $10.00
0.07 0.05 0.05 0.09 0.07 0.07
(0.20) (0.20) (0.20) (0.18) (0.18) (0.18)
------ ------ ------ ------ ------ -----
(0.13) (0.15) (0.15) (0.09) (0.11) (0.11)
------ ------ ------ ------ ------ -----
(0.07) (0.05) (0.05) (0.09) (0.07) (0.07)
-- -- -- -- -- --
------ ------ ------ ------ ------ -----
(0.07) (0.05) (0.05) (0.09) (0.07) (0.07)
------ ------ ------ ------ ------ -----
$ 9.80 $ 9.80 $ 9.80 $ 9.82 $ 9.82 $ 9.82
====== ====== ====== ====== ====== ======
-1.29%** -1.48%** -1.48%** -0.93%** -1.12%** -1.12%
$1,633 $1,633 $1,633 $1,636 $1,667 $1,694
1.87%* 2.62%* 2.62%* 1.90%* 2.64%* 2.65%*
2.85%* 2.10%* 2.10%* 3.48%* 2.72%* 2.72%*
513.36%* 513.36%* 513.36%* 510.18%* 510.18%* 510.18%*
</TABLE>
31
<PAGE> 35
Report of Ernst & Young LLP,
Independent Auditors
To the Board of Trustees and Shareholders of
SAFECO Advisor Series Trust:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of SAFECO Advisor Series Trust
(comprising, respectively, the Equity, Northwest, Intermediate-Term Treasury,
U.S. Government, GNMA, Municipal Bond, Intermediate-Term Municipal Bond, and
Washington Municipal Bond Funds), as of December 31, 1994, and the related
statement of operations, the statement of changes in net assets, and the
financial highlights for the period from September 30, 1994 (commencement of
operations) to December 31, 1994. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective funds constituting the SAFECO Advisor Series Trust at
December 31, 1994, the results of their operations, the changes in their net
assets, and the financial highlights for the period from September 30, 1994
(commencement of operations) through December 31, 1994, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
------------------
Seattle, Washington
January 27, 1995
32
<PAGE> 36
(This page left blank intentionally.)
33
<PAGE> 37
[SAFECO ADVISOR FUNDS LOGO]
SAFECO Securities, Inc.
P.O. Box 34680, Seattle, WA 98124-1580
34
<PAGE> 1
EXHIBIT NO. 99.13
SHARE PURCHASE AGREEMENT
<PAGE> 2
Exhibit 99.13
September 29, 1994
SAFECO Advisor Series Trust
SAFECO Advisor Equity Fund
SAFECO Plaza
Seattle, Washington 98185
Ladies and Gentlemen:
Please be advised that the 166,250 Class A shares, the 166,250 Class B
shares, and the 166,250 Class C shares of the SAFECO Advisor Equity Fund series
of SAFECO Advisor Series Trust which we have today purchased from you at a
price of $10.00 each were purchased for investment purposes only with no
present intention of redeeming or selling such shares and we do not have any
intention of redeeming or selling such shares.
Sincerely,
SAFECO CORPORATION
By: /s/ BOH A. DICKEY
-------------------------------
Boh A. Dickey
Executive Vice President and
Chief Financial Officer
<PAGE> 3
September 29, 1994
SAFECO Advisor Series Trust
SAFECO Advisor U.S. Government Fund
SAFECO Plaza
Seattle, Washington 98185
Ladies and Gentlemen:
Please be advised that the 166,250 Class A shares, the 166,250 Class B
shares, and the 166,250 Class C shares of the SAFECO Advisor U.S. Government
Fund series of the SAFECO Advisor Series Trust which we have today purchased
from you at a price of $10.00 each were purchased for investment purposes only
with no present intention of redeeming or selling such shares and we do not have
any intention of redeeming or selling such shares.
Sincerely,
SAFECO CORPORATION
By: /s/ BOH A. DICKEY
-------------------------------
Boh A. Dickey
Executive Vice President and
Chief Financial Officer
<PAGE> 4
September 29, 1994
SAFECO Advisor Series Trust
SAFECO Advisor Intermediate-Term Municipal Bond Fund
SAFECO Plaza
Seattle, Washington 98185
Ladies and Gentlemen:
Please be advised that the 166,250 Class A shares, the 166,250 Class B
shares, and the 166,250 Class C shares of the SAFECO Advisor Intermediate-Term
Municipal Bond Fund series of the SAFECO Advisor Series Trust which we have
today purchased from you at a price of $10.00 each were purchased for
investment purposes only with no present intention of redeeming or selling such
shares and we do not have any intention of redeeming or selling such shares.
Sincerely,
SAFECO ASSET MANAGEMENT COMPANY
By: /s/ NEAL A. FULLER
----------------------------
Neal A. Fuller
Vice President, Controller
and Treasurer
<PAGE> 5
September 29, 1994
SAFECO Advisor Series Trust
SAFECO Advisor Intermediate-Term Treasury Fund
SAFECO Plaza
Seattle, Washington 98185
Ladies and Gentlemen:
Please be advised that the 166,250 Class A shares, the 166,250 Class B
shares, and the 166,250 Class C shares of the SAFECO Advisor Intermediate-Term
Treasury Fund series of the SAFECO Advisor Series Trust which we have today
purchased from you at a price of $10.00 each were purchased for investment
purposes only with no present intention of redeeming or selling such shares and
we do not have any intention of redeeming or selling such shares.
Sincerely,
SAFECO CORPORATION
By: /s/ BOH A. DICKEY
------------------------------
Boh A. Dickey
Executive Vice President and
Chief Financial Officer
<PAGE> 6
September 29, 1994
SAFECO Advisor Series Trust
SAFECO Advisor Municipal Bond Fund
SAFECO Plaza
Seattle, Washington 98185
Ladies and Gentlemen:
Please be advised that the 166,250 Class A shares, the 166,250 Class B
shares, and the 166,250 Class C shares of the SAFECO Advisor Municipal Bond
Fund series of the SAFECO Advisor Series Trust which we have today purchased
from you at a price of $10.00 each were purchased for investment purposes only
with no present intention of redeeming or selling such shares and we do not have
any intention of redeeming or selling such shares.
Sincerely,
SAFECO ASSET MANAGEMENT COMPANY
By: /s/ NEAL A. FULLER
----------------------------
Neal A. Fuller
Vice President, Controller
and Treasurer
<PAGE> 7
September 29, 1994
SAFECO Advisor Series Trust
SAFECO Advisor Northwest Fund
SAFECO Plaza
Seattle, Washington 98185
Ladies and Gentlemen:
Please be advised that the 166,250 Class A shares, the 166,250 Class B
shares, and the 166,250 Class C shares of the SAFECO Advisor Northwest Fund
series of the SAFECO Advisor Series Trust which we have today purchased from
you at a price of $10.00 each were purchased for investment purposes only with
no present intention of redeeming or selling such shares and we do not have any
intention of redeeming or selling such shares.
Sincerely,
SAFECO CORPORATION
By: /s/ BOH A. DICKEY
------------------------------
Boh A. Dickey
Executive Vice President and
Chief Financial Officer
<PAGE> 8
September 29, 1994
SAFECO Advisor Series Trust
SAFECO Advisor Washington Municipal Bond Fund
SAFECO Plaza
Seattle, Washington 98185
Ladies and Gentlemen:
Please be advised that the 166,250 Class A shares, the 166,250 Class B
shares, and the 166,250 Class C shares of the SAFECO Advisor Washington
Municipal Bond Fund series of the SAFECO Advisor Series Trust which we have
today purchased from you at a price of $10.00 each were purchased for
investment purposes only with no present intention of redeeming or selling such
shares and we do not have any intention of redeeming or selling such shares.
Sincerely,
SAFECO ASSET MANAGEMENT COMPANY
By: /s/ NEAL A. FULLER
----------------------------
Neal A. Fuller
Vice President, Controller
and Treasurer
<PAGE> 1
EXHIBIT NO. 99.14
PROTOTYPE 401(K). PROFIT SHARING PLAN
<PAGE> 2
Exhibit 99.14
PROTOTYPE CASH OR DEFERRED PROFIT-SHARING PLAN
AND TRUST
SPONSORED BY
SAFECO SECURITIES, INC.
SEATTLE, WASHINGTON
BASIC PLAN DOCUMENT #01
FEBRUARY 1994
COPYRIGHT 1994 THE MCKAY HOCHMAN COMPANY, INC.
<PAGE> 3
THIS DOCUMENT IS COPYRIGHTED UNDER THE LAWS OF THE UNITED STATES. USE,
DUPLICATION OR REPRODUCTION, INCLUDING THE USE OF ELECTRONIC MEANS, IS
PROHIBITED BY LAW WITHOUT THE EXPRESS CONSENT OF THE AUTHOR.
TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS
1.1 Actual Deferral Percentage 1
1.2 Adoption Agreement 1
1.3 Aggregate Limit 1
1.4 Annual Additions 2
1.5 Annuity Starting Date 2
1.6 Applicable Calendar Year 2
1.7 Applicable Life Expectancy 2
1.8 Average Contribution Percentage (ACP) 2
1.9 Average Deferral Percentage (ADP) 2
1.10 Break In Service 2
1.11 Code 2
1.12 Compensation 3
1.13 Contribution Percentage 4
1.14 Custodian 5
1.15 Defined Benefit Plan 5
1.16 Defined Benefit (Plan) Fraction 5
1.17 Defined Contribution Dollar Limitation 5
1.18 Defined Contribution Plan 5
1.19 Defined Contribution (Plan) Fraction 6
1.20 Designated Beneficiary 6
1.21 Disability 6
1.22 Distribution Calendar Year 6
1.23 Early Retirement Age 6
1.24 Earned Income 6
1.25 Effective Date 6
1.26 Election Period 6
1.27 Elective Deferral 7
1.28 Eligible Participant 7
1.29 Employee 7
1.30 Employer 7
1.31 Entry Date 7
1.32 Excess Aggregate Contributions 7
1.33 Excess Amount 7
1.34 Excess Contribution 8
1.35 Excess Elective Deferrals 8
1.36 Family Member 8
1.37 First Distribution Calendar Year 8
1.38 Fund 8
1.39 Hardship 8
1.40 Highest Average Compensation 8
1.41 Highly Compensated Employee 8
1.42 Hour Of Service 9
1.43 Key Employee 10
1.44 Leased Employee 10
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1.45 Limitation Year 10
1.46 Master Or Prototype Plan 10
1.47 Matching Contribution 10
1.48 Maximum Permissible Amount 10
1.49 Net Profit 10
1.50 Normal Retirement Age 10
1.51 Owner-Employee 11
1.52 Paired Plans 11
1.53 Participant 11
1.54 Participant's Benefit 11
1.55 Permissive Aggregation Group 11
1.56 Plan 11
1.57 Plan Administrator 11
1.58 Plan Year 11
1.59 Present Value 11
1.60 Projected Annual Benefit 11
1.61 Qualified Deferred Compensation Plan 11
1.62 Qualified Domestic Relations Order 12
1.63 Qualified Early Retirement Age 12
1.64 Qualified Joint And Survivor Annuity 12
1.65 Qualified Matching Contribution 12
1.66 Qualified Non-Elective Contributions 12
1.67 Qualified Voluntary Contribution 12
1.68 Required Aggregation Group 12
1.69 Required Beginning Date 12
1.70 Rollover Contribution 13
1.71 Salary Savings Agreement 13
1.72 Self-Employed Individual 13
1.73 Service 13
1.74 Shareholder Employee 13
1.75 Simplified Employee Pension Plan 13
1.76 Sponsor 13
1.77 Spouse (Surviving Spouse) 13
1.78 Super Top-Heavy Plan 13
1.79 Taxable Wage Base 13
1.80 Top-Heavy Determination Date 14
1.81 Top-Heavy Plan 14
1.82 Top-Heavy Ratio 14
1.83 Top-Paid Group 15
1.84 Transfer Contribution 15
1.85 Trustee 15
1.86 Valuation Date 15
1.87 Vested Account Balance 16
1.88 Voluntary Contribution 16
1.89 Welfare Benefit Fund 16
1.90 Year Of Service 16
ARTICLE II
ELIGIBILITY REQUIREMENTS
2.1 Participation 17
2.2 Change In Classification Of Employment 17
2.3 Computation Period 17
2.4 Employment Rights 17
2.5 Service With Controlled Groups 17
2.6 Owner-Employees 17
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2.7 Leased Employees 18
2.8 Thrift Plans 18
ARTICLE III
EMPLOYER CONTRIBUTIONS
3.1 Amount 19
3.2 Expenses And Fees 19
3.3 Responsibility For Contributions 19
3.4 Return Of Contributions 19
ARTICLE IV
EMPLOYEE CONTRIBUTIONS
4.1 Voluntary Contributions 20
4.2 Qualified Voluntary Contributions 20
4.3 Rollover Contribution 20
4.4 Transfer Contribution 21
4.5 Employer Approval Of Transfer Contributions 21
4.6 Elective Deferrals 21
4.7 Required Voluntary Contributions 22
4.8 Direct Rollover Of Benefits 22
ARTICLE V
PARTICIPANT ACCOUNTS
5.1 Separate Accounts 23
5.2 Adjustments To Participant Accounts 23
5.3 Allocating Employer Contributions 24
5.4 Allocating Investment Earnings And Losses 24
5.5 Participant Statements 24
ARTICLE VI
RETIREMENT BENEFITS AND DISTRIBUTIONS
6.1 Normal Retirement Benefits 25
6.2 Early Retirement Benefits 25
6.3 Benefits On Termination Of Employment 25
6.4 Restrictions On Immediate Distributions 26
6.5 Normal Form Of Payment 27
6.6 Commencement Of Benefits 27
6.7 Claims Procedures 28
6.8 In-Service Withdrawals 28
6.9 Hardship Withdrawal 29
ARTICLE VII
DISTRIBUTION REQUIREMENTS
7.1 Joint And Survivor Annuity Requirements 31
7.2 Minimum Distribution Requirements 31
7.3 Limits On Distribution Periods 31
7.4 Required Distributions On Or After The
Required Beginning Date 31
7.5 Required Beginning Date 32
7.6 Transitional Rule 33
7.7 Designation Of Beneficiary For Death Benefit 34
7.8 Nonexistence Of Beneficiary 34
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7.9 Distribution Beginning Before Death 34
7.10 Distribution Beginning After Death 34
7.11 Distribution Of Excess Elective Deferrals 35
7.12 Distributions Of Excess Contributions 35
7.13 Distribution Of Excess Aggregate Contributions 36
ARTICLE VIII
JOINT AND SURVIVOR ANNUITY REQUIREMENTS
8.1 Applicability Of Provisions 38
8.2 Payment Of Qualified Joint And Survivor
Annuity 38
8.3 Payment Of Qualified Pre-Retirement
Survivor Annuity 38
8.4 Qualified Election 38
8.5 Notice Requirements For Qualified Joint
And Survivor Annuity 39
8.6 Notice Requirements For Qualified Pre-
Retirement Survivor Annuity 39
8.7 Special Safe-Harbor Exception For
Certain Profit-Sharing Plans 39
8.8 Transitional Joint And Survivor
Annuity Rules 40
8.9 Automatic Joint And Survivor Annuity
And Early Survivor Annuity 40
8.10 Annuity Contracts 41
ARTICLE IX
VESTING
9.1 Employee Contributions 42
9.2 Employer Contributions 42
9.3 Computation Period 42
9.4 Requalification Prior To Five Consecutive
One-Year Breaks In Service 42
9.5 Requalification After Five Consecutive
One-Year Breaks In Service 42
9.6 Calculating Vested Interest 42
9.7 Forfeitures 43
9.8 Amendment Of Vesting Schedule 43
9.9 Service With Controlled Groups 43
ARTICLE X
LIMITATIONS ON ALLOCATIONS AND
ANTIDISCRIMINATION TESTING
10.1 Participation In This Plan Only 44
10.2 Disposition Of Excess Annual Additions 44
10.3 Participation In This Plan And Another
Prototype Defined Contribution Plan,
Welfare Benefit Fund, Or Other Medical
Account Maintained By The Employer 45
10.4 Disposition Of Excess Annual Additions
Under Two Plans 45
10.5 Participation In This Plan And Another
Defined Contribution Plan Which Is Not
A Master Or Prototype Plan 46
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10.6 Participation In This Plan And A Defined
Benefit Plan 46
10.7 Average Deferral Percentage (ADP) Test 46
10.8 Special Rules Relating To Application
Of ADP Test 46
10.9 Recharacterization 47
10.10 Average Contribution Percentage (ACP) Test 47
10.11 Special Rules Relating To Application
Of ACP Test 48
ARTICLE XI
ADMINISTRATION
11.1 Plan Administrator 50
11.2 Trustee 50
11.3 Administrative Fees And Expenses 51
11.4 Division Of Duties And Indemnification 51
ARTICLE XII
TRUST FUND
12.1 The Fund 53
12.2 Control Of Plan Assets 53
12.3 Exclusive Benefit Rules 53
12.4 Assignment And Alienation Of Benefits 53
12.5 Determination Of Qualified Domestic
Relations Order (QDRO) 53
ARTICLE XIII
INVESTMENTS
13.1 Fiduciary Standards 55
13.2 Funding Arrangement 55
13.3 Investment Alternatives Of The Trustee 55
13.4 Participant Loans 56
13.5 Insurance Policies 57
13.6 Employer Investment Direction 59
13.7 Employee Investment Direction 59
ARTICLE XIV
TOP-HEAVY PROVISIONS
14.1 Applicability Of Rules 61
14.2 Minimum Contribution 61
14.3 Minimum Vesting 61
14.4 Limitations On Allocations 62
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ARTICLE XV
AMENDMENT AND TERMINATION
15.1 Amendment By Sponsor 63
15.2 Amendment By Employer 63
15.3 Termination 63
15.4 Qualification Of Employer's Plan 63
15.5 Mergers And Consolidations 63
15.6 Resignation And Removal 64
15.7 Qualification Of Prototype 64
ARTICLE XVI
GOVERNING LAW 65
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<PAGE> 9
PROTOTYPE CASH OR DEFERRED PROFIT-SHARING PLAN AND TRUST
SPONSORED BY
SAFECO SECURITIES, INC.
The Sponsor hereby establishes the following Prototype Retirement Plan and
Trust for use by those of its customers who qualify and wish to adopt a
qualified retirement program. Any Plan and Trust established hereunder shall
be administered for the exclusive benefit of Participants and their
beneficiaries under the following terms and conditions:
ARTICLE I
DEFINITIONS
1.1 ACTUAL DEFERRAL PERCENTAGE The ratio (expressed as a percentage
and calculated separately for each Participant) of:
(a) the amount of Employer contributions [as defined at (c)
and (d)] actually paid over to the Fund on behalf of such
Participant for the Plan Year to
(b) the Participant's Compensation for such Plan Year.
Compensation will only include amounts for the period during which the Employee
was eligible to participate.
Employer contributions on behalf of any Participant shall include:
(c) any Elective Deferrals made pursuant to the Participant's
deferral election, including Excess Elective Deferrals,
but excluding Elective Deferrals that are either taken
into account in the Contribution Percentage test (provided
the ADP test is satisfied both with and without exclusion
of these Elective Deferrals) or are returned as excess
Annual Additions; and
(d) at the election of the Employer, Qualified Non-Elective
Contributions and Qualified Matching Contributions.
For purposes of computing Actual Deferral Percentages, an Employee who would be
a Participant but for the failure to make Elective Deferrals shall be treated
as a Participant on whose behalf no Elective Deferrals are made.
1.2 ADOPTION AGREEMENT The document attached to this Plan by which an
Employer elects to establish a qualified retirement plan and trust/custodial
account under the terms of this Prototype Plan and Trust.
1.3 AGGREGATE LIMIT The sum of:
(a) 125 percent of the greater of the ADP of the non-Highly
Compensated Employees for the Plan Year or the ACP of
non-Highly Compensated Employees under the Plan subject to
Code Section 401(m) for the Plan Year beginning with or
within the Plan Year of the cash or deferred arrangement
as described in Code Section 401(k) or Code Section
402(h)(1)(B), and
(b) the lesser of 200% or two percent plus the lesser of such
ADP or ACP.
Alternatively, the aggregate limit can be determined by substituting "the
lesser of 200% or 2 percent plus" for
1
<PAGE> 10
"125% of" in (a) above, and substituting "125% of" for "the lesser of 200% or 2
percent plus" in (b) above.
1.4 ANNUAL ADDITIONS The sum of the following amounts credited to a
Participant's account for the Limitation Year:
(a) Employer Contributions,
(b) Employee Contributions (under Article IV),
(c) forfeitures,
(d) amounts allocated after March 31, 1984 to an individual
medical account, as defined in Code Section 415(l)(2),
which is part of a pension or annuity plan maintained by
the Employer (these amounts are treated as Annual
Additions to a Defined Contribution Plan though they arise
under a Defined Benefit Plan), and
(e) amounts derived from contributions paid or accrued after
1985, in taxable years ending after 1985, which are either
attributable to post-retirement medical benefits allocated
to the account of a Key Employee, or to a Welfare Benefit
Fund maintained by the Employer, are also treated as
Annual Additions to a Defined Contribution Plan. For
purposes of this paragraph, an Employee is a Key Employee
if he or she meets the requirements of paragraph 1.43 at
any time during the Plan Year or any preceding Plan Year.
Welfare Benefit Fund is defined at paragraph 1.89.
Excess amounts applied in a Limitation Year to reduce Employer contributions
will be considered Annual Additions for such Limitation Year, pursuant to the
provisions of Article X.
1.5 ANNUITY STARTING DATE The first day of the first period for which
an amount is paid as an annuity or in any other form.
1.6 APPLICABLE CALENDAR YEAR The First Distribution Calendar Year,
and in the event of the recalculation of life expectancy, such succeeding
calendar year. If payments commence in accordance with paragraph 7.4(e) before
the Required Beginning Date, the Applicable Calendar Year is the year such
payments commence. If distribution is in the form of an immediate annuity
purchased after the Participant's death with the Participant's remaining
interest, the Applicable Calendar Year is the year of purchase.
1.7 APPLICABLE LIFE EXPECTANCY Used in determining the required
minimum distribution. The life expectancy (or joint and last survivor
expectancy) calculated using the attained age of the Participant (or Designated
Beneficiary) as of the Participant's (or Designated Beneficiary's) birthday in
the Applicable Calendar Year reduced by one for each calendar year which has
elapsed since the date life expectancy was first calculated. If life
expectancy is being recalculated, the Applicable Life Expectancy shall be the
life expectancy as so recalculated. The life expectancy of a non-Spouse
Beneficiary may not be recalculated.
1.8 AVERAGE CONTRIBUTION PERCENTAGE (ACP) The average of the
Contribution Percentages for each Highly Compensated Employee and for each
non-Highly Compensated Employee.
1.9 AVERAGE DEFERRAL PERCENTAGE (ADP) The average of the Actual
Deferral Percentages for each Highly Compensated Employee and for each
non-Highly Compensated Employee.
1.10 BREAK IN SERVICE A 12-consecutive month period during which an
Employee fails to complete more than 500 Hours of Service.
1.11 CODE The Internal Revenue Code of 1986, including any amendments.
2
<PAGE> 11
1.12 COMPENSATION The Employer may select one of the following three
safe-harbor definitions of Compensation in the Adoption Agreement.
Compensation shall only include amounts earned while a Participant if Plan Year
is chosen as the determination period.
(a) CODE SECTION 3401(A) WAGES. Compensation is defined as
wages within the meaning of Code Section 3401(a) for the
purposes of Federal income tax withholding at the source
but determined without regard to any rules that limit the
remuneration included in wages based on the nature or
location of the employment or the services performed [such
as the exception for agricultural labor in Code Section
3401(a)(2)].
(b) CODE SECTION 6041 AND 6051 WAGES. Compensation is defined
as wages as defined in Code Section 3401(a) and all other
payments of compensation to an Employee by the Employer
(in the course of the Employer's trade or business) for
which the Employer is required to furnish the employee a
written statement under Code Section 6041(d) and
6051(a)(3). Compensation must be determined without
regard to any rules under Code Section 3401(a) that limit
the remuneration included in wages based on the nature or
location of the employment or the services performed [such
as the exception for agricultural labor in Code Section
3401(a)(2)].
(c) CODE SECTION 415 COMPENSATION. For purposes of applying
the limitations of Article X and Top-Heavy Minimums, the
definition of Compensation shall be Code Section 415
Compensation defined as follows: a Participant's Earned
Income, wages, salaries, and fees for professional
services and other amounts received (without regard to
whether or not an amount is paid in cash) for personal
services actually rendered in the course of employment
with the Employer maintaining the Plan to the extent that
the amounts are includible in gross income [including, but
not limited to, commissions paid salesmen, Compensation
for services on the basis of a percentage of profits,
commissions on insurance premiums, tips, bonuses, fringe
benefits and reimbursements or other expense allowances
under a nonaccountable plan (as described in Regulation
1.62-2(c)], and excluding the following:
1. Employer contributions to a plan of deferred
compensation which are not includible in the
Employee's gross income for the taxable year in
which contributed, or Employer contributions
under a Simplified Employee Pension Plan or any
distributions from a plan of deferred
compensation,
2. Amounts realized from the exercise of a
non-qualified stock option, or when restricted
stock (or property) held by the Employee either
becomes freely transferable or is no longer
subject to a substantial risk of forfeiture,
3. Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified
stock option; and
4. other amounts which received special tax
benefits, or contributions made by the Employer
(whether or not under a salary reduction
agreement) towards the purchase of an annuity
contract described in Code Section 403(b)
(whether or not the contributions are actually
excludible from the gross income of the
Employee).
3
<PAGE> 12
For purposes of applying the limitations of Article X and Top-Heavy Minimums,
the definition of Compensation shall be Code Section 415 Compensation described
in this paragraph 1.12(c). Also, for purposes of applying the limitations of
Article X, Compensation for a Limitation Year is the Compensation actually paid
or made available during such Limitation Year. Notwithstanding the preceding
sentence, Compensation for a Participant in a defined contribution plan who is
permanently and totally disabled [as defined in Code Section 22(e)(3)] is the
Compensation such Participant would have received for the Limitation Year if
the Participant had been paid at the rate of Compensation paid immediately
before becoming permanently and totally disabled. Such imputed Compensation
for the disabled Participant may be taken into account only if the participant
is not a Highly Compensated Employee [as defined in Code Section 414(q)] and
contributions made on behalf of such Participant are nonforfeitable when made.
If the Employer fails to pick the determination period in the Adoption
Agreement, the Plan Year shall be used. Unless otherwise specified by the
Employer in the Adoption Agreement, Compensation shall be determined as
provided in Code Section 3401(a) [as defined in this paragraph 1.12(a)]. In
nonstandardized Adoption Agreement 002, the Employer may choose to eliminate or
exclude categories of Compensation which do not violate the provisions of Code
Sections 401(a)(4), 414(s) the regulations thereunder and Revenue Procedure
89-65.
Beginning with 1989 Plan Years, the annual Compensation of each Participant
which may be taken into account for determining all benefits provided under the
Plan (including benefits under Article XIV) for any year shall not exceed the
limitation as imposed by Code Section 401(a)(17) and as adjusted under Code
Section 415(d). In determining the Compensation of a Participant for purposes
of this limitation, the rules of Code Section 414(q)(6) shall apply, except in
applying such rules, the term "family" shall include only the Spouse of the
Participant and any lineal descendants of the Participant who have not attained
age 19 before the end of the Plan year. If, as a result of the application of
such rules the adjusted annual Compensation limitation, as imposed by Code
Section 401(a)(17), is exceeded, then (except for purposes of determining the
portion of Compensation up to the integration level if this Plan provides for
permitted disparity), the limitation shall be prorated among the affected
individuals in proportion to each such individual's Compensation as determined
under this section prior to the application of this limitation.
If a Plan has a Plan Year that contains fewer than 12 calendar months, then the
annual Compensation limit for that period is an amount equal to the limitation
as imposed by Code Section 401(a)(17) as adjusted for the calendar year in
which the Compensation period begins, multiplied by a fraction the numerator of
which is the number of full months in the Short Plan Year and the denominator
of which is 12. If Compensation for any prior Plan Year is taken into account
in determining an Employee's contributions or benefits for the current year,
the Compensation for such prior year is subject to the applicable annual
Compensation limit in effect for that prior year. For this purpose, for years
beginning before January 1, 1990, the applicable annual Compensation limit is
$200,000. For Plan Years beginning on or after January 1, 1994, the annual
Compensation of each Participant taken into account for determining all
benefits provided under the Plan for any Plan Year shall not exceed $150,000,
as adjusted for increases in the cost-of-living in accordance with Code Section
401(a)(17). The cost-of-living adjustment in effect for a calendar year
applies to any determination period beginning in such calendar year.
Compensation shall not include deferred Compensation other than contributions
through a salary reduction agreement to a cash or deferred plan under Code
Section 401(k), a Simplified Employee Pension Plan under Code Section
402(h)(1)(B), a cafeteria plan under Code Section 125 or a tax-deferred annuity
under Code Section 403(b). Unless elected otherwise by the Employer in the
Adoption Agreement, these deferred amounts will be considered as Compensation
for Plan purposes. These deferred amounts are not counted as Compensation for
purposes of Articles X and XIV. When applicable to a Self-Employed Individual,
Compensation shall mean Earned Income.
1.13 CONTRIBUTION PERCENTAGE The ratio (expressed as a percentage and
calculated separately for each Participant) of:
(a) the Participant's Contribution Percentage Amounts [as
defined at (c)-(f)] for the Plan Year, to
4
<PAGE> 13
(b) the Participant's Compensation for the Plan Year.
Compensation will only include amounts for the period
during which the Employee was eligible to participate.
Contribution Percentage Amounts on behalf of any Participant shall include:
(c) the amount of Employee Voluntary Contributions, Matching
Contributions, and Qualified Matching Contributions (to
the extent not taken into account for purposes of the ADP
test) made under the Plan on behalf of the Participant for
the Plan Year,
(d) forfeitures of Excess Aggregate Contributions or Matching
Contributions allocated to the Participant's account which
shall be taken into account in the year in which such
forfeiture is allocated,
(e) at the election of the Employer, Qualified Non-Elective
Contributions, and
(f) the Employer also may elect to use Elective Deferrals in
the Contribution Percentage Amounts so long as the ADP
test is met before the Elective Deferrals are used in the
ACP test and continues to be met following the exclusion
of those Elective Deferrals that are used to meet the ACP
test.
Contribution Percentage Amounts shall not include Matching Contributions,
whether or not Qualified, that are forfeited either to correct Excess Aggregate
Contributions, or because the contributions to which they relate are Excess
Deferrals, Excess Contributions, or Excess Aggregate Contributions.
1.14 CUSTODIAN The individual(s) or institution appointed by the
Employer to have custody of all or part of the Fund.
1.15 DEFINED BENEFIT PLAN A Plan under which a Participant's benefit
is determined by a formula contained in the Plan and no individual accounts are
maintained for Participants.
1.16 DEFINED BENEFIT (PLAN) FRACTION A fraction, the numerator of
which is the sum of the Participant's Projected Annual Benefits under all the
Defined Benefit Plans (whether or not terminated) maintained by the Employer,
and the denominator of which is the lesser of 125 percent of the dollar
limitation determined for the Limitation Year under Code Sections 415(b) and
(d) or 140 percent of the Highest Average Compensation, including any
adjustments under Code Section 415(b).
Notwithstanding the above, if the Participant was a Participant as of the first
day of the first Limitation Year beginning after 1986, in one or more Defined
Benefit Plans maintained by the Employer which were in existence on May 6,
1986, the denominator of this fraction will not be less than 125 percent of the
sum of the annual benefits under such plans which the Participant had accrued
as of the close of the last Limitation Year beginning before 1987, disregarding
any changes in the terms and conditions of the plan after May 5, 1986. The
preceding sentence applies only if the Defined Benefit Plans individually and
in the aggregate satisfied the requirements of Section 415 for all Limitation
Years beginning before 1987.
1.17 DEFINED CONTRIBUTION DOLLAR LIMITATION Thirty thousand dollars
($30,000) or if greater, one-fourth of the defined benefit dollar limitation
set forth in Code Section 415(b)(1) as in effect for the Limitation Year.
1.18 DEFINED CONTRIBUTION PLAN A Plan under which individual accounts
are maintained for each Participant to which all contributions, forfeitures,
investment income and gains or losses, and expenses are credited or deducted.
A Participant's benefit under such Plan is based solely on the fair market
value of his or her account balance.
1.19 DEFINED CONTRIBUTION (PLAN) FRACTION A Fraction, the numerator of
which is the sum of the Annual Additions to the Participant's account under all
the Defined Contribution Plans (whether or not terminated) maintained by the
Employer for the current and all prior Limitation Years (including the Annual
Additions
5
<PAGE> 14
attributable to the Participant's nondeductible Employee contributions to all
Defined Benefit Plans, whether or not terminated, maintained by the Employer,
and the Annual Additions attributable to all Welfare Benefit Funds, as defined
in paragraph 1.89 and individual medical accounts, as defined in Code Section
415(l)(2), maintained by the Employer), and the denominator of which is the sum
of the maximum aggregate amounts for the current and all prior Limitation Years
of service with the Employer (regardless of whether a Defined Contribution Plan
was maintained by the Employer). The maximum aggregate amount in the
Limitation Year is the lesser of 125 percent of the dollar limitation
determined under Code Sections 415(b) and (d) in effect under Code Section
415(c)(1)(A) or 35 percent of the Participant's Compensation for such year.
If the Employee was a Participant as of the end of the first day of the first
Limitation Year beginning after 1986, in one or more Defined Contribution Plans
maintained by the Employer which were in existence on May 6, 1986, the
numerator of this fraction will be adjusted if the sum of this fraction and the
Defined Benefit Fraction would otherwise exceed 1.0 under the terms of this
Plan. Under the adjustment, an amount equal to the product of (1) the excess
of the sum of the fractions over 1.0 times (2) the denominator of this fraction
will be permanently subtracted from the numerator of this fraction. The
adjustment is calculated using the fractions as they would be computed as of
the end of the last Limitation Year beginning before 1987, and disregarding any
changes in the terms and conditions of the Plan made after May 6, 1986, but
using the Section 415 limitation applicable to the first Limitation Year
beginning on or after January 1, 1987. The Annual Addition for any Limitation
Year beginning before 1987, shall not be re-computed to treat all Employee
Contributions as Annual Additions.
1.20 DESIGNATED BENEFICIARY The individual who is designated as the
beneficiary under the Plan in accordance with Code Section 401(a)(9) and the
regulations thereunder.
1.21 DISABILITY An illness or injury of a potentially permanent
nature, expected to last for a continuous period of not less than 12 months,
certified by a physician selected by or satisfactory to the Employer, which
prevents the Employee from engaging in any occupation for wage or profit for
which the Employee is reasonably fitted by training, education or experience.
1.22 DISTRIBUTION CALENDAR YEAR A calendar year for which a minimum
distribution is required.
1.23 EARLY RETIREMENT AGE The age set by the Employer in the Adoption
Agreement (but not less than 55), which is the earliest age at which a
Participant may retire and receive his or her benefits under the Plan.
1.24 EARNED INCOME Net earnings from self-employment in the trade or
business with respect to which the Plan is established, determined without
regard to items not included in gross income and the deductions allocable to
such items, provided that personal services of the individual are a material
income-producing factor. Earned income shall be reduced by contributions made
by an Employer to a qualified plan to the extent deductible under Code Section
404. For tax years beginning after 1989, net earnings shall be determined
taking into account the deduction for one-half of self-employment taxes allowed
to the Employer under Code Section 164(f) to the extent deductible.
1.25 EFFECTIVE DATE The date on which the Employer's retirement plan
or amendment to such plan becomes effective. For amendments reflecting
statutory and regulatory changes post Tax Reform Act of 1986, the Effective
Date will be the earlier of the date upon which such amendment is first
administratively applied or the first day of the Plan Year following the date
of adoption of such amendment.
1.26 ELECTION PERIOD The period which begins on the first day of the
Plan Year in which the Participant attains age 35 and ends on the date of the
Participant's death. If a Participant separates from service prior to the
first day of the Plan Year in which age 35 is attained, the Election Period
shall begin on the date of separation, with respect to the account balance as
of the date of separation.
1.27 ELECTIVE DEFERRAL Employer contributions made to the Plan at the
election of the Participant, in lieu of cash Compensation. Elective Deferrals
shall also include contributions made pursuant to a Salary Savings Agreement or
other deferral mechanism, such as a cash option contribution. With respect to
any taxable year, a Participant's Elective Deferral is the sum of all Employer
contributions made on behalf of such Participant pursuant
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to an election to defer under any qualified cash or deferred arrangement as
described in Code Section 401(k), any simplified employee pension cash or
deferred arrangement as described in Code Section 402(h)(1)(B), any eligible
deferred compensation plan under Code Section 457, any plan as described under
Code Section 501(c)(18), and any Employer contributions made on the behalf of a
Participant for the purchase of an annuity contract under Code Section 403(b)
pursuant to a Salary Savings Agreement. Elective Deferrals shall not include
any deferrals properly distributed as Excess Annual Additions.
1.28 ELIGIBLE PARTICIPANT Any Employee who is eligible to make a
Voluntary Contribution, or an Elective Deferral (if the Employer takes such
contributions into account in the calculation of the Contribution Percentage),
or to receive a Matching Contribution (including forfeitures) or a Qualified
Matching Contribution. If a Voluntary Contribution or Elective Deferral is
required as a condition of participation in the Plan, any Employee who would be
a Participant in the Plan if such Employee made such a contribution shall be
treated as an Eligible Participant even though no Voluntary Contributions or
Elective Deferrals are made.
1.29 EMPLOYEE Any person employed by the Employer (including
Self-Employed Individuals and partners), all Employees of a member of an
affiliated service group [as defined in Code Section 414(m)], Employees of a
controlled group of corporations [as defined in Code Section 414(b)], all
Employees of any incorporated or unincorporated trade or business which is
under common control [as defined in Code Section 414(c)], Leased Employees [as
defined in Code Section 414(n)] and any Employee required to be aggregated by
Code Section 414(o). All such Employees shall be treated as employed by a
single Employer.
1.30 EMPLOYER The Self-Employed Individual, partnership, corporation
or other organization which adopts this Plan including any firm that succeeds
the Employer and adopts this Plan. For purposes of Article X, Limitations on
Allocations, Employer shall mean the Employer that adopts this Plan, and all
members of a controlled group of corporations [as defined in Code Section
414(b) as modified by Code Section 415(h)], all commonly controlled trades or
businesses [as defined in Code Section 414(c) as modified by Code Section
415(h)] or affiliated service groups [as defined in Code Section 414(m)] of
which the adopting Employer is a part, and any other entity required to be
aggregated with the Employer pursuant to regulations under Code Section 414(o).
1.31 ENTRY DATE The date on which an Employee commences participation
in the Plan as determined by the Employer in the Adoption Agreement.
1.32 EXCESS AGGREGATE CONTRIBUTIONS The excess, with respect to any
Plan Year, of:
(a) The aggregate Contribution Percentage Amounts taken into
account in computing the numerator of the Contribution
Percentage actually made on behalf of Highly Compensated
Employees for such Plan Year, over
(b) The maximum Contribution Percentage Amounts permitted by
the ACP test (determined by reducing contributions made on
behalf of Highly Compensated Employees in order of their
Contribution Percentages beginning with the highest of
such percentages).
Such determination shall be made after first determining Excess Elective
Deferrals pursuant to paragraph 1.35 and then determining Excess Contributions
pursuant to paragraph 1.34.
1.33 EXCESS AMOUNT The excess of the Participant's Annual Additions
for the Limitation Year over the Maximum Permissible Amount.
1.34 EXCESS CONTRIBUTION With respect to any Plan Year, the excess of:
(a) The aggregate amount of Employer contributions actually
taken into account in computing the ADP of Highly
Compensated Employees for such Plan Year, over
(b) The maximum amount of such contributions permitted by the
ADP test (determined by
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reducing contributions made on behalf of Highly
Compensated Employees in order of the ADPs, beginning with
the highest of such percentages).
1.35 EXCESS ELECTIVE DEFERRALS Those Elective Deferrals that are
includible in a Participant's gross income under Code Section 402(g) to the
extent such Participant's Elective Deferrals for a taxable year exceed the
dollar limitation under such Code Section. Excess Elective Deferrals shall be
treated as Annual Additions under the Plan, unless such amounts are distributed
no later than the first April 15th following the close of the Participant's
taxable year.
1.36 FAMILY MEMBER The Employee's Spouse, any lineal descendants and
ascendants and the Spouse of such lineal descendants and ascendants.
1.37 FIRST DISTRIBUTION CALENDAR YEAR For distributions beginning
before the Participant's death, the First Distribution Calendar Year is the
calendar year immediately preceding the calendar year which contains the
Participant's Required Beginning Date. For distributions beginning after the
Participant's death, the First Distribution Calendar Year is the calendar year
in which distributions are required to begin pursuant to paragraph 7.10.
1.38 FUND All contributions received by the Trustee under this Plan
and Trust, investments thereof and earnings and appreciation thereon.
1.39 HARDSHIP An immediate and heavy financial need of the Employee
where such Employee lacks other available resources.
1.40 HIGHEST AVERAGE COMPENSATION The average Compensation for the
three consecutive Years of Service with the Employer that produces the highest
average. A Year of Service with the Employer is the 12-consecutive month
period defined in the Adoption Agreement.
1.41 HIGHLY COMPENSATED EMPLOYEE Any Employee who performs service for
the Employer during the determination year and who, during the immediate prior
year:
(a) received Compensation from the Employer in excess of
$75,000 [as adjusted pursuant to Code Section 415(d)]; or
(b) received Compensation from the Employer in excess of
$50,000 [as adjusted pursuant to Code Section 415(d)] and
was a member of the Top-Paid Group for such year; or
(c) was an officer of the Employer and received Compensation
during such year that is greater than 50 percent of the
dollar limitation in effect under Code Section
415(b)(1)(A).
Notwithstanding (a), (b) and (c), an Employee who was not Highly Compensated
during the preceding Plan Year shall not be treated as a Highly Compensated
Employee with respect to the current Plan Year unless such Employee is a member
of the 100 Employees paid the greatest Compensation during the year for which
such determination is being made.
(d) Employees who are five percent (5%) Owners at any time
during the immediate prior year or determination year.
Highly Compensated Employee includes Highly Compensated active Employees and
Highly Compensated former Employees.
1.42 HOUR OF SERVICE
(a) Each hour for which an Employee is paid, or entitled to
payment, for the performance
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of duties for the Employer. These hours shall be credited
to the Employee for the computation period in which the
duties are performed; and
(b) Each hour for which an Employee is paid, or entitled to
payment, by the Employer on account of a period of time
during which no duties are performed (irrespective of
whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty or leave of
absence. No more than 501 Hours of Service shall be
credited under this paragraph for any single continuous
period (whether or not such period occurs in a single
computation period). Hours under this paragraph shall be
calculated and credited pursuant to Section 2530.200b-2 of
the Department of Labor Regulations which are incorporated
herein by this reference; and
(c) Each hour for which back pay, irrespective of mitigation
of damages, is either awarded or agreed to by the
Employer. The same Hours of Service shall not be credited
both under paragraph (a) or paragraph (b), as the case may
be, and under this paragraph (c). These hours shall be
credited to the Employee for the computation period or
periods to which the award or agreement pertains rather
than the computation period in which the award, agreement
or payment is made.
(d) Hours of Service shall be credited for employment with the
Employer and with other members of an affiliated service
group [as defined in Code Section 414(m)], a controlled
group of corporations [as defined in Code Section 414(b)],
or a group of trades or businesses under common control
[as defined in Code Section 414(c)] of which the adopting
Employer is a member, and any other entity required to be
aggregated with the Employer pursuant to Code Section
414(o) and the regulations thereunder. Hours of Service
shall also be credited for any individual considered an
Employee for purposes of this Plan under Code Section
414(n) or Code Section 414(o) and the regulations
thereunder.
(e) Solely for purposes of determining whether a Break in
Service, as defined in paragraph 1.10, for participation
and vesting purposes has occurred in a computation period,
an individual who is absent from work for maternity or
paternity reasons shall receive credit for the Hours of
Service which would otherwise have been credited to such
individual but for such absence, or in any case in which
such hours cannot be determined, 8 Hours of Service per
day of such absence. For purposes of this paragraph, an
absence from work for maternity or paternity reasons means
an absence by reason of the pregnancy of the individual,
by reason of a birth of a child of the individual, by
reason of the placement of a child with the individual in
connection with the adoption of such child by such
individual, or for purposes of caring for such child for a
period beginning immediately following such birth or
placement. The Hours of Service credited under this
paragraph shall be credited in the computation period in
which the absence begins if the crediting is necessary to
prevent a Break in Service in that period, or in all other
cases, in the following computation period. No more than
501 hours will be credited under this paragraph.
(f) Hours of Service shall be determined on the basis of the
method selected in the Adoption Agreement.
1.43 KEY EMPLOYEE Any Employee or former Employee (and the
beneficiaries of such employee) who at any time during the determination period
was an officer of the Employer if such individual's annual compensation exceeds
50% of the dollar limitation under Code Section 415(b)(1)(A) (the defined
benefit maximum annual benefit), an owner (or considered an owner under Code
Section 318) of one of the ten largest interests in the employer if such
individual's compensation exceeds 100% of the dollar limitation under Code
Section 415(c)(1)(A), a 5% owner of the Employer, or a 1% owner of the Employer
who has an annual compensation of more than $150,000. For
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purposes of determining who is a Key Employee, annual compensation shall mean
Compensation as defined for Article X, but including amounts deferred through a
salary reduction agreement to a cash or deferred plan under Code Section
401(k), a Simplified Employee Pension Plan under Code Section 408(k), a
cafeteria plan under Code Section 125 or a tax-deferred annuity under Code
Section 403(b). The determination period is the Plan Year containing the
Determination Date and the four preceding Plan Years. The determination of who
is a Key Employee will be made in accordance with Code Section 416(i)(1) and
the regulations thereunder.
1.44 LEASED EMPLOYEE Any person (other than an Employee of the
recipient) who, pursuant to an agreement between the recipient and any other
person ("leasing organization"), has performed services for the recipient [or
for the recipient and related persons determined in accordance with Code
Section 414(n)(6)] on a substantially full-time basis for a period of at least
one year, and such services are of a type historically performed by Employees
in the business field of the recipient Employer.
1.45 LIMITATION YEAR The calendar year or such other 12-consecutive
month period designated by the Employer in the Adoption Agreement for purposes
of determining the maximum Annual Addition to a Participant's account. All
qualified plans maintained by the Employer must use the same Limitation Year.
If the Limitation Year is amended to a different 12-consecutive month period,
the new Limitation Year must begin on a date within the Limitation Year in
which the amendment is made.
1.46 MASTER OR PROTOTYPE PLAN A plan, the form of which is the subject
of a favorable opinion letter from the Internal Revenue Service.
1.47 MATCHING CONTRIBUTION An Employer contribution made to this or
any other defined contribution plan on behalf of a Participant on account of an
Employee Voluntary Contribution made by such Participant, or on account of a
Participant's Elective Deferral, under a Plan maintained by the Employer.
1.48 MAXIMUM PERMISSIBLE AMOUNT The maximum Annual Addition that may
be contributed or allocated to a Participant's account under the plan for any
Limitation Year shall not exceed the lesser of:
(a) the Defined Contribution Dollar Limitation, or
(b) 25% of the Participant's Compensation for the Limitation
Year.
The compensation limitation referred to in (b) shall not apply to any
contribution for medical benefits [within the meaning of Code Section 401(h) or
Code Section 419A(f)(2)] which is otherwise treated as an Annual Addition under
Code Section 415(l)(1) or 419(d)(2). If a short Limitation Year is created
because of an amendment changing the Limitation Year to a different
12-consecutive month period, the Maximum Permissible Amount will not exceed the
Defined Contribution Dollar Limitation multiplied by the following fraction:
Number of months in the short Limitation Year divided by 12.
1.49 NET PROFIT The current and accumulated operating earnings of the
Employer before Federal and State income taxes, excluding nonrecurring or
unusual items of income, and before contributions to this and any other
qualified plan of the Employer. Alternatively, the Employer may fix another
definition in the Adoption Agreement.
1.50 NORMAL RETIREMENT AGE The age, set by the Employer in the
Adoption Agreement, at which a Participant may retire and receive his or her
benefits under the Plan.
1.51 OWNER-EMPLOYEE A sole proprietor, or a partner owning more than
10% of either the capital or profits interest of the partnership.
1.52 PAIRED PLANS Two or more Plans maintained by the Sponsor designed
so that a single or any combination of Plans adopted by an Employer will meet
the antidiscrimination rules, the contribution and benefit limitations, and the
Top-Heavy provisions of the Code.
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1.53 PARTICIPANT Any Employee who has met the eligibility requirements
and is participating in the Plan.
1.54 PARTICIPANT'S BENEFIT The account balance as of the last
Valuation Date in the calendar year immediately preceding the Distribution
Calendar Year (valuation calendar year) increased by the amount of any
contributions or forfeitures allocated to the account balance as of the dates
in the valuation calendar year after the Valuation Date and decreased by
distributions made in the valuation calendar year after the Valuation Date. A
special exception exists for the second distribution Calendar Year. For
purposes of this paragraph, if any portion of the minimum distribution for the
First Distribution Calendar Year is made in the second Distribution Calendar
Year on or before the Required Beginning Date, the amount of the minimum
distribution made in the second distribution calendar year shall be treated as
if it had been made in the immediately preceding Distribution Calendar Year.
1.55 PERMISSIVE AGGREGATION GROUP Used for Top-Heavy testing purposes,
it is the Required Aggregation Group of plans plus any other plan or plans of
the Employer which, when considered as a group with the Required Aggregation
Group, would continue to satisfy the requirements of Code Sections 401(a)(4)
and 410.
1.56 PLAN The Employer's retirement plan as embodied herein and in the
Adoption Agreement.
1.57 PLAN ADMINISTRATOR The Employer.
1.58 PLAN YEAR The 12-consecutive month period designated by the
Employer in the Adoption Agreement.
1.59 PRESENT VALUE Used for Top-Heavy test and determination purposes,
when determining the Present Value of accrued benefits, with respect to any
Defined Benefit Plan maintained by the Employer, interest and mortality rates
shall be determined in accordance with the provisions of the respective plan.
If applicable, interest and mortality assumptions will be specified in Section
11 of the Adoption Agreement.
1.60 PROJECTED ANNUAL BENEFIT Used to test the maximum benefit which
may be obtained from a combination of retirement plans, it is the annual
retirement benefit (adjusted to an actuarial equivalent straight life annuity
if such benefit is expressed in a form other than a straight life annuity or
Qualified Joint and Survivor Annuity) to which the Participant would be
entitled under the terms of a Defined Benefit Plan or plans, assuming:
(a) the Participant will continue employment until Normal
Retirement Age under the plan (or current age, if later),
and
(b) the Participant's Compensation for the current Limitation
Year and all other relevant factors used to determine
benefits under the plan will remain constant for all
future Limitation Years.
1.61 QUALIFIED DEFERRED COMPENSATION PLAN Any pension, profit-sharing,
stock bonus, or other plan which meets the requirements of Code Section 401 and
includes a trust exempt from tax under Code Section 501(a) or any annuity plan
described in Code Section 403(a).
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An Eligible Retirement Plan is an individual retirement account (IRA) as
described in Code Section 408(a), an individual retirement annuity (IRA) as
described in Code Section 408(b), an annuity plan as described in Code Section
403(a), or a qualified trust as described in Code Section 401(a), which accepts
Eligible Rollover Distributions. However in the case of an Eligible Rollover
Distribution to a Surviving Spouse, an Eligible Retirement Plan is an
individual retirement account or individual retirement annuity.
1.62 QUALIFIED DOMESTIC RELATIONS ORDER A QDRO is a signed Domestic
Relations Order issued by a State Court which creates, recognizes or assigns to
an alternate payee(s) the right to receive all or part of a Participant's Plan
benefit and which meets the requirements of Code Section 414(p). An alternate
payee is a Spouse, former Spouse, child, or other dependent who is treated as a
beneficiary under the Plan as a result of the QDRO.
1.63 QUALIFIED EARLY RETIREMENT AGE For purposes of paragraph 8.9,
Qualified Early Retirement Age is the latest of:
(a) the earliest date, under the Plan, on which the
Participant may elect to receive retirement benefits, or
(b) the first day of the 120th month beginning before the
Participant reaches Normal Retirement Age, or
(c) the date the Participant begins participation.
1.64 QUALIFIED JOINT AND SURVIVOR ANNUITY An immediate annuity for the
life of the Participant with a survivor annuity for the life of the
Participant's Spouse which is at least one-half of but not more than the amount
of the annuity payable during the joint lives of the Participant and the
Participant's Spouse. The exact amount of the Survivor Annuity is to be
specified by the Employer in the Adoption Agreement. If not designated by the
Employer, the Survivor Annuity will be 1/2 of the amount paid to the
Participant during his or her lifetime. The Qualified Joint and Survivor
Annuity will be the amount of benefit which can be provided by the
Participant's Vested Account Balance.
1.65 QUALIFIED MATCHING CONTRIBUTION Matching Contributions which when
made are subject to the distribution and nonforfeitability requirements under
Code Section 401(k).
1.66 QUALIFIED NON-ELECTIVE CONTRIBUTIONS Contributions (other than
Matching Contributions or Qualified Matching Contributions) made by the
Employer and allocated to Participants' accounts that the Participants may not
elect to receive in cash until distributed from the Plan; that are
nonforfeitable when made; and that are distributable only in accordance with
the distribution provisions that are applicable to Elective Deferrals and
Qualified Matching Contributions.
1.67 QUALIFIED VOLUNTARY CONTRIBUTION A tax-deductible voluntary
Employee contribution. These contributions may no longer be made to the Plan.
1.68 REQUIRED AGGREGATION GROUP Used for Top-Heavy testing purposes,
it consists of:
(a) each qualified plan of the Employer in which at least one
Key Employee participates or participated at any time
during the determination period (regardless of whether the
plan has terminated), and
(b) any other qualified plan of the Employer which enables a
plan described in (a) to meet the requirements of Code
Sections 401(a)(4) or 410.
1.69 REQUIRED BEGINNING DATE The date on which a Participant is
required to take his or her first minimum distribution under the Plan. The
rules are set forth at paragraph 7.5.
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1.70 ROLLOVER CONTRIBUTION A contribution made by a Participant of an
amount distributed to such Participant from another Qualified Deferred
Compensation Plan in accordance with Code Sections 402(a)(5), (6), and (7).
An Eligible Rollover Distribution is any distribution of all or any portion of
the balance to the credit of the Participant except that an Eligible Rollover
Distribution does not include:
(a) any distribution that is one of a series of substantially
equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the
Participant or the joint lives (or joint life
expectancies) of the Participant and the Participant's
Designated Beneficiary, or for a specified period of ten
years or more;
(b) any distribution to the extent such distribution is
required under Code Section 401(a)(9); and
(c) the portion of any distribution that is not includible in
gross income (determined without regard to the exclusion
for net unrealized appreciation with respect to Employer
securities).
A Direct Rollover is a payment by the plan to the Eligible Retirement Plan
specified by the Participant.
1.71 SALARY SAVINGS AGREEMENT An agreement between the Employer and a
participating Employee where the Employee authorizes the Employer to withhold a
specified percentage of his or her Compensation for deposit to the Plan on
behalf of such Employee.
1.72 SELF-EMPLOYED INDIVIDUAL An individual who has Earned Income for
the taxable year from the trade or business for which the Plan is established
including an individual who would have had Earned Income but for the fact that
the trade or business had no Net Profit for the taxable year.
1.73 SERVICE The period of current or prior employment with the
Employer. If the Employer maintains a plan of a predecessor employer, Service
for such predecessor shall be treated as Service for the Employer.
1.74 SHAREHOLDER EMPLOYEE An Employee or Officer who owns [or is
considered as owning within the meaning of Code Section 318(a)(1)], on any day
during the taxable year of an electing small business corporation (S
Corporation), more than 5% of such corporation's outstanding stock.
1.75 SIMPLIFIED EMPLOYEE PENSION PLAN An individual retirement account
which meets the requirements of Code Section 408(k), and to which the Employer
makes contributions pursuant to a written formula. These plans are considered
for contribution limitation and Top-Heavy testing purposes.
1.76 SPONSOR SAFECO Securities, Inc., or any successor(s) or assign(s).
1.77 SPOUSE (SURVIVING SPOUSE) The Spouse or Surviving Spouse of the
Participant, provided that a former Spouse will be treated as the Spouse or
Surviving Spouse and a current Spouse will not be treated as the Spouse or
Surviving Spouse to the extent provided under a Qualified Domestic Relations
Order as described in Code Section 414(p).
1.78 SUPER TOP-HEAVY PLAN A Plan described at paragraph 1.81 under
which the Top-Heavy Ratio [as defined at paragraph 1.82] exceeds 90%.
1.79 TAXABLE WAGE BASE For plans with an allocation formula which
takes into account the Employer's contribution under the Federal Insurance
Contributions Act (FICA), the maximum amount of earnings which may be
considered wages for such Plan Year under the Social Security Act [Code Section
3121(a)(1)], or the amount elected by the Employer in the Adoption Agreement.
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1.80 TOP-HEAVY DETERMINATION DATE For any Plan Year subsequent to the
first Plan Year, the last day of the preceding Plan Year. For the first Plan
Year of the Plan, the last day of that year.
1.81 TOP-HEAVY PLAN For any Plan Year beginning after 1983, the
Employer's Plan is top-heavy if any of the following conditions exist:
(a) If the Top-Heavy Ratio for the Employer's Plan exceeds
60% and this Plan is not part of any required Aggregation
Group or Permissive Aggregation Group of Plans.
(b) If the Employer's plan is a part of a Required Aggregation
Group of plans but not part of a Permissive Aggregation
Group and the Top-Heavy Ratio for the group of plans
exceeds 60%.
(c) If the Employer's plan is a part of a Required Aggregation
Group and part of a Permissive Aggregation Group of plans
and the Top-Heavy Ratio for the Permissive Aggregation
Group exceeds 60%.
1.82 TOP-HEAVY RATIO
(a) If the Employer maintains one or more Defined Contribution
plans (including any Simplified Employee Pension Plan) and
the Employer has not maintained any Defined Benefit Plan
which during the 5-year period ending on the Determination
Date(s) has or has had accrued benefits, the Top-Heavy
Ratio for this Plan alone, or for the Required or
Permissive Aggregation Group as appropriate, is a
fraction,
(1) the numerator of which is the sum of the account
balances of all Key Employees as of the
Determination Date(s) [including any part of any
account balance distributed in the 5-year period
ending on the Determination Date(s)], and
(2) the denominator of which is the sum of all
account balances [including any part of any
account balance distributed in the 5-year period
ending on the Determination Date(s)], both
computed in accordance with Code Section 416 and
the regulations thereunder.
Both the numerator and denominator of the Top-Heavy Ratio
are increased to reflect any contribution not actually
made as of the Determination Date, but which is required
to be taken into account on that date under Code Section
416 and the regulations thereunder.
(b) If the Employer maintains one or more Defined Contribution
Plans (including any Simplified Employee Pension Plan) and
the Employer maintains or has maintained one or more
Defined Benefit Plans which during the 5-year period
ending on the Determination Date(s) has or has had any
accrued benefits, the Top-Heavy Ratio for any Required or
Permissive Aggregation Group as appropriate is a fraction,
the numerator of which is the sum of account balances
under the aggregated Defined Contribution Plan or Plans
for all Key Employees, determined in accordance with (a)
above, and the Present Value of accrued benefits under the
aggregated Defined Benefit Plan or Plans for all Key
Employees as of the Determination Date(s), and the
denominator of which is the sum of the account balances
under the aggregated Defined Contribution Plan or Plans
for all Participants, determined in accordance with (a)
above, and the Present Value of accrued benefits under the
Defined Benefit Plan or Plans for all Participants as of
the Determination Date(s), all determined in accordance
with Code Section 416 and the regulations thereunder. The
accrued benefits under a Defined Benefit Plan in both the
numerator and denominator of the Top-Heavy Ratio are
increased for any distribution of
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an accrued benefit made in the 5-year period ending on the
Determination Date.
(c) For purposes of (a) and (b) above, the value of account
balances and the Present Value of accrued benefits will be
determined as of the most recent Valuation Date that falls
within or ends with the 12-month period ending on the
Determination Date, except as provided in Code Section 416
and the regulations thereunder for the first and second
plan years of a Defined Benefit Plan. The account
balances and accrued benefits of a participant (1) who is
not a Key Employee but who was a Key Employee in a prior
year, or (2) who has not been credited with at least one
hour of service with any Employer maintaining the Plan at
any time during the 5-year period ending on the
Determination Date, will be disregarded. The calculation
of the Top-Heavy Ratio, and the extent to which
distributions, rollovers, and transfers are taken into
account will be made in accordance with Code Section 416
and the regulations thereunder. Qualified Voluntary
Employee Contributions will not be taken into account for
purposes of computing the Top-Heavy Ratio. When
aggregating plans the value of account balances and
accrued benefits will be calculated with reference to the
Determination Dates that fall within the same calendar
year. The accrued benefit of a Participant other than a
Key Employee shall be determined under (1) the method, if
any, that uniformly applies for accrual purposes under all
Defined Benefit Plans maintained by the Employer, or (2)
if there is no such method, as if such benefit accrued not
more rapidly than the slowest accrual rate permitted under
the fractional rule of Code Section 411(b)(1)(C).
1.83 TOP-PAID GROUP The group consisting of the top 20% of Employees
when ranked on the basis of Compensation paid during such year. For purposes
of determining the number of Employees in the group (but not who is in it), the
following Employees shall be excluded:
(a) Employees who have not completed 6 months of Service.
(b) Employees who normally work less than 17-1/2 hours per
week.
(c) Employees who normally do not work more than 6 months
during any year.
(d) Employees who have not attained age 21.
(e) Employees included in a collective bargaining unit,
covered by an agreement between employee representatives
and the Employer, where retirement benefits were the
subject of good faith bargaining and provided that 90% or
more of the Employer's Employees are covered by the
agreement.
(f) Employees who are nonresident aliens and who receive no
earned income which constitutes income from sources within
the United States.
1.84 TRANSFER CONTRIBUTION A non-taxable transfer of a Participant's
benefit directly from a Qualified Deferred Compensation Plan to this Plan.
1.85 TRUSTEE The individual(s) or institution appointed by the
Employer to invest the Fund.
1.86 VALUATION DATE The last day of the Plan Year or such other date
as agreed to by the Employer and the Trustee on which Participant accounts are
revalued in accordance with Article V hereof. For Top-Heavy purposes, the date
selected by the Employer as of which the Top-Heavy Ratio is calculated.
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1.87 VESTED ACCOUNT BALANCE The aggregate value of the Participant's
Vested Account Balances derived from Employer and Employee contributions
(including Rollovers), whether vested before or upon death, including the
proceeds of insurance contracts, if any, on the Participant's life. The
provisions of Article VIII shall apply to a Participant who is vested in
amounts attributable to Employer contributions, Employee contributions (or
both) at the time of death or distribution.
1.88 VOLUNTARY CONTRIBUTION An Employee contribution made to the Plan
by or on behalf of a Participant that is included in the Participant's gross
income in the year in which made and that is maintained under a separate
account to which earnings and losses are allocated.
1.89 WELFARE BENEFIT FUND Any fund that is part of a plan of the
Employer, or has the effect of a plan, through which the Employer provides
welfare benefits to Employees or their beneficiaries. For these purposes,
Welfare Benefits means any benefit other than those with respect to which Code
Section 83(h) (relating to transfers of property in connection with the
performance of services), Code Section 404 (relating to deductions for
contributions to an Employee's trust or annuity and Compensation under a
deferred payment plan), Code Section 404A (relating to certain foreign deferred
compensation plans) apply. A "Fund" is any social club, voluntary employee
benefit association, supplemental unemployment benefit trust or qualified group
legal service organization described in Code Section 501(c)(7), (9), (17) or
(20); any trust, corporation, or other organization not exempt from income tax,
or to the extent provided in regulations, any account held for an Employer by
any person.
1.90 YEAR OF SERVICE A 12-consecutive month period during which an
Employee is credited with not less than 1,000 (or such lesser number as
specified by the Employer in the Adoption Agreement) Hours of Service.
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ARTICLE II
ELIGIBILITY REQUIREMENTS
2.1 PARTICIPATION Employees who meet the eligibility requirements in
the Adoption Agreement on the Effective Date of the Plan shall become
Participants as of the Effective Date of the Plan. If so elected in the
Adoption Agreement, all Employees employed on the Effective Date of the Plan
may participate, even if they have not satisfied the Plan's specified
eligibility requirements. Other Employees shall become Participants on the
Entry Date coinciding with or immediately following the date on which they meet
the eligibility requirements. The Employee must satisfy the eligibility
requirements specified in the Adoption Agreement and be employed on the Entry
Date to become a Participant in the Plan. In the event an Employee who is not
a member of the eligible class of Employees becomes a member of the eligible
class, such Employee shall participate immediately if such Employee has
satisfied the minimum age and service requirements and would have previously
become a Participant had he or she been in the eligible class. A former
Participant shall again become a Participant upon returning to the employ of
the Employer at the next Entry Date or if earlier, the next Valuation Date.
For this purpose, Participant's Compensation and Service shall be considered
from date of rehire.
2.2 CHANGE IN CLASSIFICATION OF EMPLOYMENT In the event a Participant
becomes ineligible to participate because he or she is no longer a member of an
eligible class of Employees, such Employee shall participate upon his or her
return to an eligible class of Employees.
2.3 COMPUTATION PERIOD To determine Years of Service and Breaks in
Service for purposes of eligibility, the 12-consecutive month period shall
commence on the date on which an Employee first performs an Hour of Service for
the Employer and each anniversary thereof, such that the succeeding
12-consecutive month period commences with the employee's first anniversary of
employment and so on. If, however, the period so specified is one year or
less, the succeeding 12-consecutive month period shall commence on the first
day of the Plan Year prior to the anniversary of the date they first performed
an Hour of Service regardless of whether the Employee is entitled to be
credited with 1,000 (or such lesser number as specified by the Employer in the
Adoption Agreement) Hours of Service during their first employment year.
2.4 EMPLOYMENT RIGHTS Participation in the Plan shall not confer upon
a Participant any employment rights, nor shall it interfere with the Employer's
right to terminate the employment of any Employee at any time.
2.5 SERVICE WITH CONTROLLED GROUPS All Years of Service with other
members of a controlled group of corporations [as defined in Code Section
414(b)], trades or businesses under common control [as defined in Code Section
414(c)], or members of an affiliated service group [as defined in Code Section
414(m)] shall be credited for purposes of determining an Employee's eligibility
to participate.
2.6 OWNER-EMPLOYEES If this Plan provides contributions or benefits
for one or more Owner-Employees who control both the business for which this
Plan is established and one or more other trades or businesses, this Plan and
the Plan established for other trades or businesses must, when looked at as a
single Plan, satisfy Code Sections 401(a) and (d) for the Employees of this and
all other trades or businesses.
If the Plan provides contributions or benefits for one or more Owner-Employees
who control one or more other trades or businesses, the Employees of the other
trades or businesses must be included in a Plan which satisfies Code Sections
401(a) and (d) and which provides contributions and benefits not less favorable
than provided for Owner-Employees under this Plan.
If an individual is covered as an Owner-Employee under the plans of two or more
trades or businesses which are not controlled, and the individual controls a
trade or business, then the contributions or benefits of the Employees under
the plan of the trades or businesses which are controlled must be as favorable
as those provided for him or her under the most favorable plan of the trade or
business which is not controlled.
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For purposes of the preceding sentences, an Owner-Employee, or two or more
Owner-Employees, will be considered to control a trade or business if the
Owner-Employee, or two or more Owner-Employees together:
(a) own the entire interest in an unincorporated trade or
business, or
(b) in the case of a partnership, own more than 50% of either
the capital interest or the profits interest in the
partnership.
For purposes of the preceding sentence, an Owner-Employee, or two or more
Owner-Employees shall be treated as owning any interest in a partnership which
is owned, directly or indirectly, by a partnership which such Owner-Employee,
or such two or more Owner-Employees, are considered to control within the
meaning of the preceding sentence.
2.7 LEASED EMPLOYEES Any Leased Employee shall be treated as an
Employee of the recipient Employer; however, contributions or benefits provided
by the leasing organization which are attributable to services performed for
the recipient Employer shall be treated as provided by the recipient Employer.
A Leased Employee shall not be considered an Employee of the recipient if such
Employee is covered by a money purchase pension plan providing:
(a) a non-integrated Employer contribution rate of at least
10% of Compensation, [as defined in Code Section 415(c)(3)
but including amounts contributed by the Employer pursuant
to a salary reduction agreement, which are excludable from
the Employee's gross income under a cafeteria plan covered
by Code Section 125, a cash or deferred profit-sharing
plan under Section 401(k) of the Code, a Simplified
Employee Pension Plan under Code Section 402(h)(1)(B ) and
a tax-sheltered annuity under Code Section 403(b)],
(b) immediate participation, and
(c) full and immediate vesting.
This exclusion is only available if Leased Employees do not constitute more
than twenty percent (20%) of the recipient's non-highly compensated work force.
2.8 THRIFT PLANS If the Employer makes an election in the Adoption
Agreement to require Voluntary Contributions to participate in this Plan, the
Employer shall notify each eligible Employee in writing of his or her
eligibility for participation at least 30 days prior to the appropriate Entry
Date. The Employee shall indicate his or her intention to join the Plan by
authorizing the Employer to withhold a percentage of his or her Compensation as
provided in the Plan. Such authorization shall be returned to the Employer at
least 10 days prior to the Employee's Entry Date. The Employee may decline
participation by so indicating on the enrollment form or by failure to return
the enrollment form to the Employer prior to the Employee's Entry Date. If the
Employee declines to participate, such Employee shall be given the opportunity
to join the Plan on the next Entry Date. The taking of a Hardship Withdrawal
under the provisions of paragraph 6.9 will impact the Participant's ability to
make these contributions.
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ARTICLE III
EMPLOYER CONTRIBUTIONS
3.1 AMOUNT The Employer intends to make periodic contributions to the
Plan in accordance with the formula or formulas selected in the Adoption
Agreement. However, the Employer's contribution for any Plan Year shall be
subject to the limitations on allocations contained in Article X.
3.2 EXPENSES AND FEES The Employer shall also be authorized to
reimburse the Fund for all expenses and fees incurred in the administration of
the Plan or Trust and paid out of the assets of the Fund. Such expenses shall
include, but shall not be limited to, fees for professional services, printing
and postage. Brokerage commissions may not be reimbursed.
3.3 RESPONSIBILITY FOR CONTRIBUTIONS Neither the Trustee nor the
Sponsor shall be required to determine if the Employer has made a contribution
or if the amount contributed is in accordance with the Adoption Agreement or
the Code. The Employer shall have sole responsibility in this regard. The
Trustee shall be accountable solely for contributions actually received by it,
within the limits of Article XI.
3.4 RETURN OF CONTRIBUTIONS Contributions made to the Fund by the
Employer shall be irrevocable except as provided below:
(a) Any contribution forwarded to the Trustee because of a
mistake of fact, provided that the contribution is
returned to the Employer within one year of the
contribution.
(b) In the event that the Commissioner of Internal Revenue
determines that the Plan is not initially qualified under
the Internal Revenue Code, any contribution made incident
to that initial qualification by the Employer must be
returned to the Employer within one year after the date
the initial qualification is denied, but only if the
application for the qualification is made by the time
prescribed by law for filing the Employer's return for the
taxable year in which the Plan is adopted, or such later
date as the Secretary of the Treasury may prescribe.
(c) Contributions forwarded to the Trustee are presumed to be
deductible and are conditioned on their deductibility.
Contributions which are determined to not be deductible
will be returned to the Employer.
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ARTICLE IV
EMPLOYEE CONTRIBUTIONS
4.1 VOLUNTARY CONTRIBUTIONS An Employee may make Voluntary
Contributions to the Plan established hereunder if so authorized by the
Employer in a uniform and nondiscriminatory manner. Such contributions are
subject to the limitations on Annual Additions and are subject to
antidiscrimination testing.
4.2 QUALIFIED VOLUNTARY CONTRIBUTIONS A Participant may no longer
make Qualified Voluntary Contributions to the Plan. Amounts already
contributed may remain in the Trust Fund until distributed to the Participant.
Such amounts will be maintained in a separate account which will be
nonforfeitable at all times. The account will share in the gains and losses of
the Trust in the same manner as described at paragraph 5.4 of the Plan. No
part of the Qualified Voluntary Contribution account will be used to purchase
life insurance. Subject to Article VIII, Joint and Survivor Annuity
Requirements (if applicable), the Participant may withdraw any part of the
Qualified Voluntary Contribution account by making a written application to the
Plan Administrator.
4.3 ROLLOVER CONTRIBUTION Unless provided otherwise in the Adoption
Agreement, a Participant may make a Rollover Contribution to any Defined
Contribution Plan established hereunder of all or any part of an amount
distributed or distributable to him or her from a Qualified Deferred
Compensation Plan provided:
(a) the amount distributed to the Participant is deposited to
the Plan no later than the sixtieth day after such
distribution was received by the Participant,
(b) the amount distributed is not one of a series of
substantially equal periodic payments made for the life
(or life expectancy) of the Participant or the joint lives
(or joint life expectancies) of the Participant and the
Participant's Designated Beneficiary, or for a specified
period of ten years or more;
(c) the amount distributed is not required under Code Section
401(a)(9);
(d) if the amount distributed included property such property
is rolled over, or if sold the proceeds of such property
may be rolled over,
(e) the amount distributed is not includible in gross income
(determined without regard to the exclusion for net
unrealized appreciation with respect to employer
securities).
In addition, if the Adoption Agreement allows Rollover Contributions, the Plan
will also accept any Eligible Rollover Distribution (as defined at paragraph
1.70) directly to the Plan.
Rollover Contributions, which relate to distributions prior to January 1, 1993,
must be made in accordance with paragraphs (a) through (e) and additionally
meet the requirements of paragraph (f):
(f) The distribution from the Qualified Deferred Compensation
Plan constituted the Participant's entire interest in such
Plan and was distributed within one taxable year to the
Participant:
(1) on account of separation from Service, a Plan
termination, or in the case of a profit-sharing
or stock bonus plan, a complete discontinuance of
contributions under such plan within the meaning
of Code Section 402(a)(6)(A), or
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(2) in one or more distributions which constitute a
qualified lump sum distribution within the
meaning of Code Section 402(e)(4)(A), determined
without reference to subparagraphs (B) and (H).
Such Rollover Contribution may also be made through an individual retirement
account qualified under Code Section 408 where the IRA was used as a conduit
from the Qualified Deferred Compensation Plan, the Rollover Contribution is
made in accordance with the rules provided under paragraphs (a) through (e) and
the Rollover Contribution does not include any regular IRA contributions, or
earnings thereon, which the Participant may have made to the IRA. Rollover
Contributions, which relate to distributions prior to January 1, 1993, may be
made through an IRA in accordance with paragraphs (a) through (f) and
additional requirements as provided in the previous sentence. The Trustee
shall not be held responsible for determining the tax-free status of any
Rollover Contribution made under this Plan.
4.4 TRANSFER CONTRIBUTION Unless provided otherwise in the Adoption
Agreement a Participant may, subject to the provisions of paragraph 4.5, also
arrange for the direct transfer of his or her benefit from a Qualified Deferred
Compensation Plan to this Plan. For accounting and record keeping purposes,
Transfer Contributions shall be treated in the same manner as Rollover
Contributions.
In the event the Employer accepts a Transfer Contribution from a Plan in which
the Employee was directing the investments of his or her account, the Employer
may continue to permit the Employee to direct his or her investments in
accordance with paragraph 13.7 with respect only to such Transfer Contribution.
Notwithstanding the above, the Employer may refuse to accept such Transfer
Contributions.
4.5 EMPLOYER APPROVAL OF TRANSFER CONTRIBUTIONS The Employer
maintaining a Safe-Harbor Profit-Sharing Plan in accordance with the provisions
of paragraph 8.7, acting in a nondiscriminatory manner, may in its sole
discretion refuse to allow Transfer Contributions to its profit-sharing plan,
if such contributions are directly or indirectly being transferred from a
defined benefit plan, a money purchase pension plan (including a target benefit
plan), a stock bonus plan, or another profit-sharing plan which would otherwise
provide for a life annuity form of payment to the Participant.
4.6 ELECTIVE DEFERRALS A Participant may enter into a Salary Savings
Agreement with the Employer authorizing the Employer to withhold a portion of
such Participant's Compensation not to exceed $7,000 per calendar year as
adjusted under Code Section 415(d) or, if lesser, the percentage of
Compensation specified in the Adoption Agreement and to deposit such amount to
the Plan. No Participant shall be permitted to have Elective Deferrals made
under this Plan or any other qualified plan maintained by the Employer, during
any taxable year, in excess of the dollar limitation contained in Code Section
402(g) in effect at the beginning of such taxable year. Thus, the $7,000 limit
may be reduced if a Participant contributes pre-tax contributions to qualified
plans of this or other Employers. Any such contribution shall be credited to
the Employee's Salary Savings Account. Unless otherwise specified in the
Adoption Agreement, a Participant may amend his or her Salary Savings Agreement
to increase, decrease or terminate the percentage upon 30 days written notice
to the Employer. If a Participant terminates his or her agreement, such
Participant shall not be permitted to put a new Salary Savings Agreement into
effect until the first pay period in the next Plan Year, unless otherwise
stated in the Adoption Agreement. The Employer may also amend or terminate
said agreement on written notice to the Participant. If a Participant has not
authorized the Employer to withhold at the maximum rate and desires to increase
the total withheld for a Plan Year, such Participant may authorize the Employer
upon 30 days notice to withhold a supplemental amount up to 100% of his or her
Compensation for one or more pay periods. In no event may the sum of the
amounts withheld under the Salary Savings Agreement plus the supplemental
withholding exceed 25% of a Participant's Compensation for a Plan Year. The
Employer may also recharacterize as after-tax Voluntary Contributions all or
any portion of amounts previously withheld under any Salary Savings Agreement
within the Plan Year as provided for at paragraph 10.9. This may be done to
insure that the Plan will meet one of the antidiscrimination tests under Code
Section 401(k). Elective Deferrals shall be deposited in the Trust within 30
days after being withheld from the Participant's pay.
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4.7 REQUIRED VOLUNTARY CONTRIBUTIONS If the Employer makes a thrift
election in the Adoption Agreement, each eligible Participant shall be required
to make Voluntary Contributions to the Plan for credit to his or her account as
provided in the Adoption Agreement. Such Voluntary Contributions shall be
withheld from the Employee's Compensation and shall be transmitted by the
Employer to the Trustee as agreed between the Employer and Trustee. A
Participant may discontinue participation or change his or her Voluntary
Contribution percentage by so advising the Employer at least 10 days prior to
the date on which such discontinuance or change is to be effective. If a
Participant discontinues his or her Voluntary Contributions, such Participant
may not again authorize Voluntary Contributions for a period of one year from
the date of discontinuance. A Participant may voluntarily change his or her
Voluntary Contribution percentage once during any Plan Year and may also agree
to have a reduction in his or her contribution, if required to satisfy the
requirements of the ACP test.
4.8 DIRECT ROLLOVER OF BENEFITS Notwithstanding any provision of the
Plan to the contrary that would otherwise limit a Participant's election under
this paragraph, for distributions made on or after January 1, 1993, a
Participant may elect, at the time and in the manner prescribed by the Plan
Administrator, to have any portion of an Eligible Rollover Distribution paid
directly to an Eligible Retirement Plan specified by the Participant in a
Direct Rollover. Any portion of a distribution which is not paid directly to
an Eligible Retirement Plan shall be distributed to the Participant. For
purposes of this paragraph, a Surviving Spouse or a Spouse or former Spouse who
is an alternate payee under a Qualified Domestic Relations Order as defined in
Code Section 414(p), will be permitted to elect to have any Eligible Rollover
Distribution paid directly to an individual retirement account (IRA) or an
individual retirement annuity (IRA).
The plan provisions otherwise applicable to distributions continue to apply to
Rollover and Transfer Contributions.
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ARTICLE V
PARTICIPANT ACCOUNTS
5.1 SEPARATE ACCOUNTS The Employer shall establish a separate
bookkeeping account for each Participant showing the total value of his or her
interest in the Fund. Each Participant's account shall be separated for
bookkeeping purposes into the following sub-accounts:
(a) Employer contributions.
(1) Matching Contributions.
(2) Qualified Matching Contributions.
(3) Qualified Non-Elective Contributions.
(4) Discretionary Contributions.
(5) Elective Deferrals.
(b) Voluntary Contributions (and additional amounts including
required contributions and, if applicable, either
repayments of loans previously defaulted on and treated as
"deemed distributions" on which a tax report has been
issued, and amounts paid out upon a separation from
service which have been included in income and which are
repaid after being re-hired by the Employer).
(c) Qualified Voluntary Contributions (if the Plan previously
accepted these).
(d) Rollover Contributions and Transfer Contributions.
5.2 ADJUSTMENTS TO PARTICIPANT ACCOUNTS As of each Valuation Date of
the Plan, the Employer shall add to each account:
(a) the Participant's share of the Employer's contribution and
forfeitures as determined in the Adoption Agreement,
(b) any Elective Deferrals, Voluntary, Rollover or Transfer
Contributions made by the Participant,
(c) any repayment of amounts previously paid out to a
Participant upon a separation from Service and repaid by
the Participant since the last Valuation Date, and
(d) the Participant's proportionate share of any investment
earnings and increase in the fair market value of the Fund
since the last Valuation Date, as determined at paragraph
5.4.
The Employer shall deduct from each account:
(e) any withdrawals or payments made from the Participant's
account since the last Valuation Date, and
(f) the Participant's proportionate share of any decrease in
the fair market value of the Fund since the last Valuation
Date, as determined at paragraph 5.4.
5.3 ALLOCATING EMPLOYER CONTRIBUTIONS The Employer's contribution
shall be allocated to Participants in
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<PAGE> 32
accordance with the allocation formula selected by the Employer in the Adoption
Agreement, and the minimum contribution and allocation requirements for
Top-Heavy Plans. Beginning with the 1990 Plan Year and thereafter, for plans
on Standardized Adoption Agreement 001, Participants who are credited with more
than 500 Hours of Service or are employed on the last day of the Plan Year must
receive a full allocation of Employer contributions. In Nonstandardized
Adoption Agreement 002, Employer contributions shall be allocated to the
accounts of Participants employed by the Employer on the last day of the Plan
Year unless indicated otherwise in the Adoption Agreement. In the case of a
non-Top-Heavy, Nonstandardized Plan, Participants must also have completed a
Year of Service unless otherwise specified in the Adoption Agreement. For
Nonstandardized Adoption Agreement 002, the Employer may only apply the last
day of the Plan Year and Year of Service requirements if the Plan satisfies the
requirements of Code Sections 401(a)(26) and 410(b) and the regulations
thereunder including the exception for 401(k) plans. If, when applying the
last day and Year of Service requirements, the Plan fails to satisfy the
aforementioned requirements, additional Participants will be eligible to
receive an allocation of Employer Contributions until the requirements are
satisfied. Participants who are credited with a Year of Service, but not
employed at Plan Year end, are the first category of additional Participants
eligible to receive an allocation. If the requirements are still not
satisfied, Participants credited with more than 500 Hours of Service and
employed at Plan Year end are the next category of Participants eligible to
receive an allocation. Finally, if necessary to satisfy the said requirements,
any Participant credited with more than 500 Hours of Service will be eligible
for an allocation of Employer Contributions. The Service requirement is not
applicable with respect to any Plan Year during which the Employer's Plan is
Top-Heavy.
5.4 ALLOCATING INVESTMENT EARNINGS AND LOSSES A Participant's share
of investment earnings and any increase or decrease in the fair market value of
the Fund shall be based on the proportionate value of all active accounts
(other than accounts with segregated investments) as of the last Valuation Date
less withdrawals since the last Valuation Date. All contributions will be
credited with an allocation of the actual investment earnings and gains and
losses from the actual date of deposit of each such contribution until the end
of the period. Accounts with segregated investments shall receive only the
income or loss on such segregated investments.
5.5 PARTICIPANT STATEMENTS Upon completing the allocations described
above for the Valuation Date coinciding with the end of the Plan Year, the
Employer shall prepare a statement for each Participant showing the additions
to and subtractions from his or her account since the last such statement and
the fair market value of his or her account as of the current Valuation Date.
Employers so choosing may prepare Participant statements for each Valuation
Date.
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ARTICLE VI
RETIREMENT BENEFITS AND DISTRIBUTIONS
6.1 NORMAL RETIREMENT BENEFITS A Participant shall be entitled to
receive the balance held in his or her account from Employer contributions upon
attaining Normal Retirement Age or at such earlier dates as the provisions of
this Article VI may allow. If the Participant elects to continue working past
his or her Normal Retirement Age, he or she will continue as an active Plan
Participant and no distribution shall be made to such Participant until his or
her actual retirement date unless the employer elects otherwise in the Adoption
Agreement, or a minimum distribution is required by law. Settlement shall be
made in the normal form, or if elected, in one of the optional forms of payment
provided below.
6.2 EARLY RETIREMENT BENEFITS If the Employer so provides in the
Adoption Agreement, an Early Retirement Benefit will be available to
individuals who meet the age and Service requirements. An individual who meets
the Early Retirement Age requirements and separates from Service, will become
fully vested, regardless of any vesting schedule which otherwise might apply.
If a Participant separates from Service before satisfying the age requirements,
but after having satisfied the Service requirement, the Participant will be
entitled to elect an Early Retirement benefit upon satisfaction of the age
requirement.
6.3 BENEFITS ON TERMINATION OF EMPLOYMENT
(a) If a Participant terminates employment prior to Normal
Retirement Age, such Participant shall be entitled to
receive the vested balance held in his or her account
payable at Normal Retirement Age in the normal form, or if
elected, in one of the optional forms of payment provided
hereunder. If applicable, the Early Retirement Benefit
provisions may be elected. Notwithstanding the preceding
sentence, a former Participant may, if allowed in the
Adoption Agreement, make application to the Employer
requesting early payment of any deferred vested and
nonforfeitable benefit due.
(b) If a Participant terminates employment, and the value of
that Participant's Vested Account Balance derived from
Employer and Employee contributions is not greater than
$3,500, the Participant may receive a lump sum
distribution of the value of the entire vested portion of
such account balance and the non-vested portion will be
treated as a forfeiture. The Employer shall continue to
follow their consistent policy, as may be established,
regarding immediate cash-outs of Vested Account Balances
of $3,500 or less. For purposes of this Article, if the
value of a Participant's Vested Account Balance is zero,
the Participant shall be deemed to have received a
distribution of such Vested Account Balance immediately
following termination. Likewise, if the Participant is
reemployed prior to incurring 5 consecutive 1-year Breaks
in Service they will be deemed to have immediately repaid
such distribution. For Plan Years beginning prior to
1989, a Participant's Vested Account Balance shall not
include Qualified Voluntary Contributions.
Notwithstanding the above, if the Employer maintains or
has maintained a policy of not distributing any amounts
until the Participant's Normal Retirement Age, the
Employer can continue to uniformly apply such policy.
(c) If a Participant terminates employment with a Vested
Account Balance derived from Employer and Employee
contributions in excess of $3,500, and elects (with his or
her Spouse's consent, if required) to receive 100% of the
value of his or her Vested Account Balance in a lump sum,
the non-vested portion will be treated as a forfeiture.
The Participant (and his or her Spouse, if required) must
consent to any distribution, when the Vested Account
Balance described above exceeds $3,500 or if at the time
of any prior distribution it exceeded $3,500. For
purposes of this paragraph, for Plan Years
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beginning prior to 1989, a Participant's Vested Account
Balance shall not include Qualified Voluntary
Contributions.
(d) Distribution of less than 100% of the Participant's Vested
Account Balance shall only be permitted if the Participant
is fully vested upon termination of employment.
(e) If a Participant who is not 100% vested receives or is
deemed to receive a distribution pursuant to this
paragraph and resumes employment covered under this Plan,
the Participant shall have the right to repay to the Plan
the full amount of the distribution attributable to
Employer contributions on or before the earlier of the
date that the Participant incurs 5 consecutive 1-year
Breaks in Service following the date of distribution or
five years after the first date on which the Participant
is subsequently reemployed. In such event, the
Participant's account shall be restored to the value
thereof at the time the distribution was made and may
further be increased by the Plan's income and investment
gains and/or losses on the undistributed amount from the
date of distribution to the date of repayment.
(f) A Participant shall also have the option, to postpone
payment of his or her Plan benefits until the first day of
April following the calendar year in which he or she
attains age 70-1/2. Any balance of a Participant's account
resulting from his or her Employee contributions not
previously withdrawn, if any, may be withdrawn by the
Participant immediately following separation from Service.
(g) If a Participant ceases to be an active Employee as a
result of a Disability as defined at paragraph 1.21, such
Participant shall be able to make an application for a
disability retirement benefit payment. The Participant's
account balance will be deemed "immediately
distributable" as set forth in paragraph 6.4, and will be
fully vested pursuant to paragraph 9.2.
6.4 RESTRICTIONS ON IMMEDIATE DISTRIBUTIONS
(a) An account balance is immediately distributable if any
part of the account balance could be distributed to the
Participant (or Surviving Spouse) before the Participant
attains (or would have attained if not deceased) the later
of the Normal Retirement Age or age 62.
(b) If the value of a Participant's Vested Account Balance
derived from Employer and Employee Contributions exceeds
(or at the time of any prior distribution exceeded)
$3,500, and the account balance is immediately
distributable, the Participant and his or her Spouse (or
where either the Participant or the Spouse has died, the
survivor) must consent to any distribution of such account
balance. The consent of the Participant and the Spouse
shall be obtained in writing within the 90-day period
ending on the annuity starting date, which is the first
day of the first period for which an amount is paid as an
annuity or any other form. The Plan Administrator shall
notify the Participant and the Participant's Spouse of the
right to defer any distribution until the Participant's
account balance is no longer immediately distributable.
Such notification shall include a general description of
the material features, and an explanation of the relative
values of, the optional forms of benefit available under
the plan in a manner that would satisfy the notice
requirements of Code Section 417(a)(3), and shall be
provided no less than 30 days and no more than 90 days
prior to the annuity starting date.
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<PAGE> 35
(c) Notwithstanding the foregoing, only the Participant need
consent to the commencement of a distribution in the form
of a qualified Joint and Survivor Annuity while the
account balance is immediately distributable.
Furthermore, if payment in the form of a Qualified Joint
and Survivor Annuity is not required with respect to the
Participant pursuant to paragraph 8.7 of the Plan, only
the Participant need consent to the distribution of an
account balance that is immediately distributable.
Neither the consent of the Participant nor the
Participant's Spouse shall be required to the extent that
a distribution is required to satisfy Code Section
401(a)(9) or Code Section 415. In addition, upon
termination of this Plan if the Plan does not offer an
annuity option (purchased from a commercial provider), the
Participant's account balance may, without the
Participant's consent, be distributed to the Participant
or transferred to another Defined Contribution Plan [other
than an employee stock ownership plan as defined in Code
Section 4975(e)(7)] within the same controlled group.
(d) For purposes of determining the applicability of the
foregoing consent requirements to distributions made
before the first day of the first Plan Year beginning
after 1988, the Participant's Vested Account Balance shall
not include amounts attributable to Qualified Voluntary
Contributions.
(e) If a distribution is one to which Code Sections 401(a)(17)
and 417 do not apply, such distribution may commence less
than 30 days after the notice required under Regulations
Section 1.411(a)-11(c) is given, provided that:
(1) the Participant is clearly informed of his or her
right to a period of at least 30 days after
receiving the notice to consider the decision of
whether or not to elect a distribution (and, if
applicable, a particular distribution option),
and
(2) the Participant, after receiving the notice
affirmatively elects to receive a distribution.
6.5 NORMAL FORM OF PAYMENT The normal form of payment for a profit-
sharing plan satisfying the requirements of paragraph 8.7 hereof shall be a
lump sum with no option for annuity payments. For all other plans, the normal
form of payment hereunder shall be a Qualified Joint and Survivor Annuity as
provided under Article VIII. A Participant whose Vested Account Balance
derived from Employer and Employee contributions exceeds $3,500, or if at the
time of any prior distribution it exceeded $3,500, shall (with the consent of
his or her Spouse) have the right to receive his or her benefit in a lump sum
or in monthly, quarterly, semi-annual or annual payments from the Fund over any
period not extending beyond the life expectancy of the Participant and his or
her Beneficiary. For purposes of this paragraph, for Plan Years prior to 1989,
a Participant's Vested Account Balance shall not include Qualified Voluntary
Contributions. The normal form of payment shall be automatic, unless the
Participant files a written request with the Employer prior to the date on
which the benefit is automatically payable, electing a lump sum or installment
payment option. No amendment to the Plan may eliminate one of the optional
distribution forms listed above.
6.6 COMMENCEMENT OF BENEFITS
(a) Unless the Participant elects otherwise, distribution of
benefits will begin no later than the 60th day after the
close of the Plan Year in which the latest of the
following events occurs:
(1) the Participant attains age 65 (or normal
retirement age if earlier),
(2) the 10th anniversary of the year in which the
Participant commenced participation in the Plan,
or
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<PAGE> 36
(3) the Participant terminates Service with the
Employer.
(b) Notwithstanding the foregoing, the failure of a
Participant and Spouse (if necessary) to consent to a
distribution while a benefit is immediately distributable,
within the meaning of paragraph 6.4 hereof, shall be
deemed an election to defer commencement of payment of any
benefit sufficient to satisfy this paragraph.
6.7 CLAIMS PROCEDURES Upon retirement, death, or other severance of
employment, the Participant or his or her representative may make application
to the Employer requesting payment of benefits due and the manner of payment.
If no application for benefits is made, the Employer shall automatically pay
any vested benefit due hereunder in the normal form at the time prescribed at
paragraph 6.4. If an application for benefits is made, the Employer shall
accept, reject, or modify such request and shall notify the Participant in
writing setting forth the response of the Employer and in the case of a denial
or modification the Employer shall:
(a) state the specific reason or reasons for the denial,
(b) provide specific reference to pertinent Plan provisions on
which the denial is based,
(c) provide a description of any additional material or
information necessary for the Participant or his
representative to perfect the claim and an explanation of
why such material or information is necessary, and
(d) explain the Plan's claim review procedure as contained in
this Plan.
In the event the request is rejected or modified, the Participant or his or her
representative may within 60 days following receipt by the Participant or
representative of such rejection or modification, submit a written request for
review by the Employer of its initial decision. Within 60 days following such
request for review, the Employer shall render its final decision in writing to
the Participant or representative stating specific reasons for such decision.
If the Participant or representative is not satisfied with the Employer's final
decision, the Participant or representative can institute an action in a
federal court of competent jurisdiction; for this purpose, process would be
served on the Employer.
6.8 IN-SERVICE WITHDRAWALS An Employee may withdraw all or any part of the
fair market value of his or her Mandatory Contributions, Voluntary
Contributions, Qualified Voluntary Contributions or Rollover Contributions,
upon written request to the Employer. Transfer Contributions, which
originate from a Plan meeting the safe-harbor provisions of paragraph 8.7, may
also be withdrawn by an Employee upon written request to the Employer.
Transfer Contributions not meeting the safe-harbor provisions may only be
withdrawn upon retirement, death, Disability, termination or termination of the
Plan, and will be subject to Spousal consent requirements contained in Code
Sections 411(a)(11) and 417. No such withdrawals are permitted from a money
purchase plan until the participant reaches Normal Retirement Age. Such
request shall include the Participant's address, social security number,
birthdate, and amount of the withdrawal. If at the time a distribution of
Qualified Voluntary Contributions is received the Participant has not attained
age 59-1/2 and is not disabled, as defined at Code Section 22(e)(3), the
Participant will be subject to a federal income tax penalty, unless the
distribution is rolled over to a qualified plan or individual retirement plan
within 60 days of the date of distribution. A Participant may withdraw all or
any part of the fair market value of his or her pre-1987 Voluntary
Contributions with or without withdrawing the earnings attributable thereto.
Post-1986 Voluntary Contributions may only be withdrawn along with a portion of
the earnings thereon. The amount of the earnings to be withdrawn is determined
by using the formula: DA[1- (V / V + E)], where DA is the distribution amount,
V is the amount of Voluntary Contributions and V + E is the amount of Voluntary
Contributions plus the earnings attributable thereto. A Participant
withdrawing his or her other contributions prior to attaining age 59-1/2, will
be subject to a federal tax penalty to the extent that the withdrawn amounts
are includible in income. Unless the Employer provides otherwise in the
Adoption Agreement, any Participant in a profit-sharing plan who is 100% fully
vested in his or her Employer contributions may withdraw all or any part of the
fair market value of any of such contributions that have been in the account at
least two years, plus the investment earnings thereon, after attaining age
59-1/2 without separation from Service. Such distributions
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<PAGE> 37
shall not be eligible for redeposit to the Fund. A withdrawal under this
paragraph shall not prohibit such Participant from sharing in any future
Employer Contribution he or she would otherwise be eligible to share in. A
request to withdraw amounts pursuant to this paragraph must if applicable, be
consented to by the Participant's Spouse. The consent shall comply with the
requirements of paragraph 6.4 relating to immediate distributions.
Elective Deferrals, Qualified Non-elective Contributions, and Qualified
Matching Contributions, and income allocable to each are not distributable to a
Participant or his or her Beneficiary or Beneficiaries, in accordance with such
Participant's or Beneficiary's or Beneficiaries' election, earlier than upon
separation from Service, death, or Disability. Such amounts may also be
distributed upon:
(a) Termination of the Plan without the establishment of
another Defined Contribution Plan.
(b) The disposition by a corporation to an unrelated
corporation of substantially all of the assets [within the
meaning of Code Section 409(d)(2)] used in a trade or
business of such corporation if such corporation continues
to maintain this Plan after the disposition, but only with
respect to Employees who continue employment with the
corporation acquiring such assets.
(c) The disposition by a corporation to an unrelated entity of
such corporation's interest in a subsidiary [within the
meaning of Code Section 409(d)(3)] if such corporation
continues to maintain this plan, but only with respect to
Employees who continue employment with such subsidiary.
(d) The attainment of age 59-1/2.
(e) The Hardship of the Participant as described in paragraph
6.9.
All distributions that may be made pursuant to one or more of the foregoing
distributable events are subject to the Spousal and Participant consent
requirements, if applicable, contained in Code Sections 401(a)(11) and 417.
6.9 HARDSHIP WITHDRAWAL If permitted by the Trustee and the Employer
in the Adoption Agreement, a Participant may request a Hardship withdrawal
prior to attaining age 59-1/2. If the Participant has not attained age 59-1/2,
the Participant may be subject to a federal income tax penalty. Such request
shall be in writing to the Employer who shall have sole authority to authorize
a Hardship withdrawal, pursuant to the rules below. Hardship withdrawals may
include Elective Deferrals regardless of when contributed and any earnings
accrued and credited thereon as of the last day of the Plan Year ending before
July 1, 1989 and Employer related contributions, including but not limited to
Employer Matching Contributions, plus the investment earnings thereon to the
extent vested. Qualified Matching Contributions, Qualified Non- Elective
Contributions and Elective Deferrals reclassified as Voluntary Contributions
plus the investment earnings thereon are only available for Hardship withdrawal
prior to age 59-1/2 to the extent that they were credited to the Participant's
Account as of the last day of the Plan Year ending prior to July 1, 1989. The
Plan Administrator may limit withdrawals to Elective Deferrals and the earnings
thereon as stipulated above. Hardship withdrawals are subject to the Spousal
consent requirements contained in Code Sections 401(a)(11) and 417. Only the
following reasons are valid to obtain Hardship withdrawal:
(a) medical expenses [within the meaning of Code Section
213(d)], incurred or necessary for the medical care of
the Participant, his or her Spouse, children and other
dependents,
(b) the purchase (excluding mortgage payments) of the
principal residence for the Participant,
(c) payment of tuition and related educational expenses for
the next twelve (12) months of post-secondary education
for the Participant, his or her Spouse, children or other
dependents, or
(d) the need to prevent eviction of the Employee from or a
foreclosure on the mortgage of,
29
<PAGE> 38
the Employee's principal residence.
Furthermore, the following conditions must be met in order for a withdrawal to
be authorized:
(e) the Participant has obtained all distributions, other than
hardship distributions, and all nontaxable loans under all
plans maintained by the Employer,
(f) all plans maintained by the Employer, other than flexible
benefit plans under Code Section 125 providing for current
benefits, provide that the Employee's Elective Deferrals
and Voluntary Contributions will be suspended for twelve
months after the receipt of the Hardship distribution,
(g) the distribution is not in excess of the amount of the
immediate and heavy financial need [(a) through (d)
above], including amounts necessary to pay any federal,
state or local income tax or penalties reasonably
anticipated to result from the distribution, and
(h) all plans maintained by the Employer provide that an
Employee may not make Elective Deferrals for the
Employee's taxable year immediately following the taxable
year of the Hardship distribution in excess of the
applicable limit under Code Section 402(g) for such
taxable year, less the amount of such Employee's pre-tax
contributions for the taxable year of the Hardship
distribution.
If a distribution is made at a time when a Participant has a nonforfeitable
right to less than 100% of the account balance derived from Employer
contributions and the Participant may increase the nonforfeitable
percentage in the account:
(a) A separate account will be established for the
Participant's interest in the Plan as of the time of the
distribution, and
(b) At any relevant time the Participant's nonforfeitable
portion of the separate account will be equal to an amount
("X") determined by the formula:
X = P [AB + (R X D)] - (R X D)
For purposes of applying the formula: "P" is the
nonforfeitable percentage at the relevant time, "AB" is
the account balance at the relevant time, "D" is the
amount of the distribution and "R" is the ratio of the
account balance at the relevant time to the account
balance after distribution.
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<PAGE> 39
ARTICLE VII
DISTRIBUTION REQUIREMENTS
7.1 JOINT AND SURVIVOR ANNUITY REQUIREMENTS All distributions made
under the terms of this Plan must comply with the provisions of Article VIII
including, if applicable, the safe harbor provisions thereunder.
7.2 MINIMUM DISTRIBUTION REQUIREMENTS All distributions required
under this Article shall be determined and made in accordance with the minimum
distribution requirements of Code Section 401(a)(9) and the regulations
thereunder, including the minimum distribution incidental benefit rules found
at Regulations Section 1.401(a)(9)-2. The entire interest of a Participant
must be distributed or begin to be distributed no later than the Participant's
Required Beginning Date. Life expectancy and joint and last survivor life
expectancy are computed by using the expected return multiples found in Tables
V and VI of Regulations Section 1.72-9.
7.3 LIMITS ON DISTRIBUTION PERIODS As of the First Distribution
Calendar Year, distributions if not made in a single-sum, may only be made over
one of the following periods (or a combination thereof):
(a) the life of the Participant,
(b) the life of the Participant and a Designated Beneficiary,
(c) a period certain not extending beyond the life expectancy
of the participant, or
(d) a period certain not extending beyond the joint and last
survivor expectancy of the Participant and a designated
beneficiary.
7.4 REQUIRED DISTRIBUTIONS ON OR AFTER THE REQUIRED BEGINNING DATE
(a) If a participant's benefit is to be distributed over (1) a
period not extending beyond the life expectancy of the
Participant or the joint life and last survivor expectancy
of the Participant and the Participant's Designated
Beneficiary or (2) a period not extending beyond the life
expectancy of the Designated Beneficiary, the amount
required to be distributed for each calendar year,
beginning with distributions for the First Distribution
Calendar Year, must at least equal the quotient obtained
by dividing the Participant's benefit by the Applicable
Life Expectancy.
(b) For calendar years beginning before 1989, if the
Participant's Spouse is not the Designated Beneficiary,
the method of distribution selected must have assured that
at least 50% of the Present Value of the amount available
for distribution was to be paid within the life expectancy
of the Participant.
(c) For calendar years beginning after 1988, the amount to be
distributed each year, beginning with distributions for
the First Distribution Calendar Year shall not be less
than the quotient obtained by dividing the Participant's
benefit by the lesser of (1) the Applicable Life
Expectancy or (2) if the Participant's Spouse is not the
Designated Beneficiary, the applicable divisor determined
from the table set forth in Q&A-4 of Regulations Section
1.401(a)(9)-2. Distributions after the death of the
Participant shall be distributed using the Applicable Life
Expectancy as the relevant divisor without regard to
Regulations Section 1.401(a)(9)-2.
(d) The minimum distribution required for the Participant's
First Distribution Calendar Year must be made on or before
the Participant's Required Beginning Date. The minimum
distribution for other calendar years, including the
minimum distribution for the
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<PAGE> 40
Distribution Calendar Year in which the Participant's
Required Beginning Date occurs, must be made on or before
December 31 of that Distribution Calendar Year.
(e) If the Participant's benefit is distributed in the form of
an annuity purchased from an insurance company,
distributions thereunder shall be made in accordance with
the requirements of Code Section 401(a)(9) and the
Regulations thereunder.
(f) For purposes of determining the amount of the required
distribution for each Distribution Calendar Year, the
account balance to be used is the account balance
determined as of the last valuation preceding the
Distribution Calendar Year. This balance will be
increased by the amount of any contributions or
forfeitures allocated to the account balance after the
valuation date in such preceding calendar year. Such
balance will also be decreased by distributions made after
the Valuation Date in such preceding Calendar Year.
(g) For purposes of subparagraph 7.4(f), if any portion of the
minimum distribution for the First Distribution Calendar
Year is made in the second Distribution Calendar Year on
or before the Required Beginning Date, the amount of the
minimum distribution made in the second Distribution
Calendar Year shall be treated as if it had been made in
the immediately preceding Distribution Calendar Year.
7.5 REQUIRED BEGINNING DATE
(a) General Rule. The Required Beginning Date of a
Participant is the first day of April of the calendar year
following the calendar year in which the Participant
attains age 70-1/2.
(b) Transitional Rules. The Required Beginning Date of a
Participant who attains age 70-1/2 before 1988, shall be
determined in accordance with (1) or (2) below:
(1) Non-5-percent owners. The Required Beginning
Date of a Participant who is not a 5-percent
owner is the first day of April of the calendar
year following the calendar year in which the
later of retirement or attainment of age 70-1/2
occurs. In the case of a Participant who is not
a 5-percent owner who attains age 70-1/2 during
1988 and who has not retired as of January 1,
1989, the Required Beginning Date is April 1,
1990.
(2) 5-percent owners. The Required Beginning Date of
a Participant who is a 5-percent owner during any
year beginning after 1979, is the first day of
April following the later of:
(i) the calendar year in which the
Participant attains age 70-1/2, or
(ii) the earlier of the calendar year with or
within which ends the plan year in which
the Participant becomes a 5-percent
owner, or the calendar year in which the
Participant retires.
(c) A Participant is treated as a 5-percent owner for purposes
of this Paragraph if such Participant is a 5-percent owner
as defined in Code Section 416(i) (determined in
accordance with Code Section 416 but without regard to
whether the Plan is Top-Heavy) at any time during the Plan
Year ending with or within the calendar year in which such
32
<PAGE> 41
Owner attains age 66-1/2 or any subsequent Plan Year.
(d) Once distributions have begun to a 5-percent owner under
this paragraph, they must continue to be distributed, even
if the Participant ceases to be a 5-percent owner in a
subsequent year.
7.6 TRANSITIONAL RULE
(a) Notwithstanding the other requirements of this Article and
subject to the requirements of Article VIII, Joint and
Survivor Annuity Requirements, distribution on behalf of
any Employee, including a 5-percent owner, may be made in
accordance with all of the following requirements
(regardless of when such distribution commences):
(1) The distribution by the Trust is one which would
not have disqualified such Trust under Code
Section 401(a)(9) as in effect prior to amendment
by the Deficit Reduction Act of 1984.
(2) The distribution is in accordance with a method
of distribution designated by the Employee whose
interest in the Trust is being distributed or, if
the Employee is deceased, by a beneficiary of
such Employee.
(3) Such designation was in writing, was signed by
the Employee or the beneficiary, and was made
before 1984.
(4) The Employee had accrued a benefit under the Plan
as of December 31, 1983.
(5) The method of distribution designated by the
Employee or the beneficiary specifies the time at
which distribution will commence, the period over
which distributions will be made, and in the case
of any distribution upon the Employee's death,
the beneficiaries of the Employee listed in order
of priority.
(b) A distribution upon death will not be covered by this
transitional rule unless the information in the
designation contains the required information described
above with respect to the distributions to be made upon
the death of the Employee.
(c) For any distribution which commences before 1984, but
continues after 1983, the Employee or the beneficiary, to
whom such distribution is being made, will be presumed to
have designated the method of distribution under which the
distribution is being made if the method of distribution
was specified in writing and the distribution satisfies
the requirements in subparagraphs (a)(1) and (5) above.
(d) If a designation is revoked, any subsequent distribution
must satisfy the requirements of Code Section 401(a)(9)
and the regulations thereunder. If a designation is
revoked subsequent to the date distributions are required
to begin, the Trust must distribute by the end of the
calendar year following the calendar year in which the
revocation occurs the total amount not yet distributed
which would have been required to have been distributed to
satisfy Code Section 401(a)(9) and the regulations
thereunder, but for the section 242(b)(2) election of the
Tax Equity and Fiscal Responsibility Act of 1982. For
calendar years beginning after 1988, such distributions
must meet the minimum distribution incidental benefit
requirements in section 1.401(a)(9)-2 of the Income Tax
Regulations. Any changes in the designation will be
considered to be a revocation of the designation.
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<PAGE> 42
However, the mere substitution or addition of another
beneficiary (one not named in the designation) under the
designation will not be considered to be a revocation of
the designation, so long as such substitution or addition
does not alter the period over which distributions are to
be made under the designation, directly or indirectly (for
example, by altering the relevant measuring life). In the
case in which an amount is transferred or rolled over from
one plan to another plan, the rules in Q&A J-2 and Q&A J-3
of the regulations shall apply.
7.7 DESIGNATION OF BENEFICIARY FOR DEATH BENEFIT Each Participant
shall file a written designation of beneficiary with the Employer upon
qualifying for participation in this Plan. Such designation shall remain in
force until revoked by the Participant by filing a new beneficiary form with
the Employer. The Participant may elect to have a portion of his or her
account balance invested in an insurance contract. If an insurance contract is
purchased under the Plan, the Trustee must be named as Beneficiary under the
terms of the contract. However, the Participant shall designate a Beneficiary
to receive the proceeds of the contract after settlement is received by the
Trustee. Under a profit-sharing plan satisfying the requirements of paragraph
8.7, the Designated Beneficiary shall be the Participant's Surviving Spouse, if
any, unless such Spouse properly consents otherwise.
7.8 NONEXISTENCE OF BENEFICIARY Any portion of the amount payable
hereunder which is not disposed of because of the Participant's or former
Participant's failure to designate a beneficiary, or because all of the
Designated Beneficiaries predeceased the Participant, shall be paid to his or
her Spouse. If the Participant had no Spouse at the time of death, payment
shall be made to the personal representative of his or her estate in a lump
sum.
7.9 DISTRIBUTION BEGINNING BEFORE DEATH If the Participant dies after
distribution of his or her interest has begun, the remaining portion of such
interest will continue to be distributed at least as rapidly as under the
method of distribution being used prior to the Participant's death.
7.10 DISTRIBUTION BEGINNING AFTER DEATH If the Participant dies before
distribution of his or her interest begins, distribution of the Participant's
entire interest shall be completed by December 31 of the calendar year
containing the fifth anniversary of the Participant's death except to the
extent that an election is made to receive distributions in accordance with (a)
or (b) below:
(a) If any portion of the Participant's interest is payable to
a Designated Beneficiary, distributions may be made over
the life or over a period certain not greater than the
life expectancy of the Designated Beneficiary commencing
on or before December 31 of the calendar year immediately
following the calendar year in which the Participant died;
(b) If the Designated Beneficiary is the Participant's
surviving Spouse, the date distributions are required to
begin in accordance with (a) above shall not be earlier
than the later of (1) December 31 of the calendar year
immediately following the calendar year in which the
participant died or (2) December 31 of the calendar year
in which the Participant would have attained age 70-1/2.
If the Participant has not made an election pursuant to this paragraph 7.10 by
the time of his or her death, the Participant's Designated Beneficiary must
elect the method of distribution no later than the earlier of (1) December 31
of the calendar year in which distributions would be required to begin under
this section, or (2) December 31 of the calendar year which contains the fifth
anniversary of the date of death of the participant. If the Participant has no
Designated Beneficiary, or if the Designated Beneficiary does not elect a
method of distribution, then distribution of the Participant's entire interest
must be completed by December 31 of the calendar year containing the fifth
anniversary of the Participant's death.
For purposes of this paragraph if the Surviving Spouse dies after the
Participant, but before payments to such Spouse begin, the provisions of this
paragraph with the exception of paragraph (b) therein, shall be applied as if
the Surviving Spouse were the Participant. For the purposes of this paragraph
and paragraph 7.9, distribution of
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<PAGE> 43
a Participant's interest is considered to begin on the Participant's Required
Beginning Date (or, if the preceding sentence is applicable, the date
distribution is required to begin to the Surviving Spouse). If distribution in
the form of an annuity described in paragraph 7.4(e) irrevocably commences to
the Participant before the Required Beginning Date, the date distribution is
considered to begin is the date distribution actually commences.
For purposes of paragraph 7.9 and this paragraph, if an amount is payable to
either a minor or an individual who has been declared incompetent, the benefits
shall be paid to the legally appointed guardian for the benefit of said minor
or incompetent individual, unless the court which appointed the guardian has
ordered otherwise.
7.11 DISTRIBUTION OF EXCESS ELECTIVE DEFERRALS
(a) Notwithstanding any other provision of the Plan, Excess
Elective Deferrals plus any income and minus any loss
allocable thereto, shall be distributed no later than
April 15, 1988, and each April 15 thereafter, to
Participants to whose accounts Excess Elective Deferrals
were allocated for the preceding taxable year, and who
claim Excess Elective Deferrals for such taxable year.
Excess Elective Deferrals shall be treated as Annual
Additions under the Plan, unless such amounts are
distributed no later than the first April 15th following
the close of the Participant's taxable year. A
Participant is deemed to notify the Plan Administrator of
any Excess Elective Deferrals that arise by taking into
account only those Elective Deferrals made to this Plan
and any other plans of this Employer.
(b) Furthermore, a Participant who participates in another
plan allowing Elective Deferrals may assign to this Plan
any Excess Elective Deferrals made during a taxable year
of the Participant, by notifying the Plan Administrator of
the amount of the Excess Elective Deferrals to be
assigned. The Participant's claim shall be in writing;
shall be submitted to the Plan Administrator not later
than March 1 of each year; shall specify the amount of the
Participant's Excess Elective Deferrals for the preceding
taxable year; and shall be accompanied by the
Participant's written statement that if such amounts are
not distributed, such Excess Elective Deferrals, when
added to amounts deferred under other plans or
arrangements described in Code Sections 401(k), 408(k)
[Simplified Employee Pensions], or 403(b) [annuity
programs for public schools and charitable organizations]
will exceed the $7,000 limit as adjusted under Code
Section 415(d) imposed on the Participant by Code Section
402(g) for the year in which the deferral occurred.
(c) Excess Elective Deferrals shall be adjusted for any income
or loss up to the end of the taxable year, during which
such excess was deferred. Income or loss will be
calculated under the method used to calculate investment
earnings and losses elsewhere in the Plan.
(d) If the Participant receives a return of his or her
Elective Deferrals, the amount of such contributions which
are returned must be brought into the Employee's taxable
income.
7.12 DISTRIBUTIONS OF EXCESS CONTRIBUTIONS
(a) Notwithstanding any other provision of this Plan, Excess
Contributions, plus any income and minus any loss
allocable thereto, shall be distributed no later than the
last day of each Plan Year to Participants to whose
accounts such Excess Contributions were allocated for the
preceding Plan Year. If such excess amounts are
distributed more than 2-1/2 months after the last day of
the Plan Year in which such excess amounts arose, a ten
(10) percent excise tax will be imposed on the Employer
maintaining the Plan with respect to such amounts. Such
distributions shall be made to Highly Compensated
Employees on the basis of the respective portions of the
Excess Contributions attributable to each of such
Employees. Excess Contributions of Participants who are
subject to the Family Member aggregation rules of Code
Section 414(q)(6) shall be allocated among the Family
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<PAGE> 44
Members in proportion to the Elective Deferrals (and
amounts treated as Elective Deferrals) of each Family
Member that is combined to determine the Average Deferral
Percentage.
(b) Excess Contributions (including the amounts
recharacterized) shall be treated as Annual Additions
under the Plan.
(c) Excess Contributions shall be adjusted for any income or
loss up to the end of the Plan Year. Income or loss will
be calculated under the method used to calculate
investment earnings and losses elsewhere in the Plan.
(d) Excess Contributions shall be distributed from the
Participant's Elective Deferral account and Qualified
Matching Contribution account (if applicable) in
proportion to the Participant's Elective Deferrals and
Qualified Matching Contributions (to the extent used in
the ADP test) for the Plan Year. Excess Contributions
shall be distributed from the Participant's Qualified
Non-Elective Contribution account only to the extent that
such Excess Contributions exceed the balance in the
Participant's Elective Deferral account and Qualified
Matching Contribution account.
7.13 DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS
(a) Notwithstanding any other provision of this Plan, Excess
Aggregate Contributions, plus any income and minus any
loss allocable thereto, shall be forfeited, if
forfeitable, or if not forfeitable, distributed no later
than the last day of each Plan Year to Participants to
whose accounts such Excess Aggregate Contributions were
allocated for the preceding Plan Year. Excess Aggregate
Contributions shall be allocated to Participants who are
subject to the Family Member aggregation rules of Code
Section 414(q)(6) in the manner prescribed by the
regulations. If such Excess Aggregate Contributions are
distributed more than 2-1/2 months after the last day of
the Plan Year in which such excess amounts arose, a ten
(10) percent excise tax will be imposed on the Employer
maintaining the Plan with respect to those amounts.
Excess Aggregate Contributions shall be treated as Annual
Additions under the plan.
(b) Excess Aggregate Contributions shall be adjusted for any
income or loss up to the end of the Plan Year. The income
or loss allocable to Excess Aggregate Contributions is the
sum of income or loss for the Plan Year allocable to the
Participant's Voluntary Contribution account, Matching
Contribution account (if any, and if all amounts therein
are not used in the ADP test) and, if applicable,
Qualified Non-Elective Contribution account and Elective
Deferral account. Income or loss will be calculated under
the method used to calculate investment earnings and
losses elsewhere in the Plan.
(c) Forfeitures of Excess Aggregate Contributions may either
be reallocated to the accounts of non-Highly Compensated
Employees or applied to reduce Employer contributions, as
elected by the employer in the Adoption Agreement.
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(d) Excess Aggregate Contributions shall be forfeited if such
amount is not vested. If vested, such excess shall be
distributed on a pro-rata basis from the Participant's
Voluntary Contribution account (and, if applicable, the
Participant's Qualified Non-Elective Contribution account,
Matching Contribution account, Qualified Matching
Contribution account, or Elective Deferral account, or
both).
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ARTICLE VIII
JOINT AND SURVIVOR ANNUITY REQUIREMENTS
8.1 APPLICABILITY OF PROVISIONS The provisions of this Article shall
apply to any Participant who is credited with at least one Hour of Service with
the Employer on or after August 23, 1984 and such other Participants as
provided in paragraph 8.8.
8.2 PAYMENT OF QUALIFIED JOINT AND SURVIVOR ANNUITY Unless an
optional form of benefit is selected pursuant to a Qualified Election within
the 90-day period ending on the Annuity Starting Date, a married Participant's
Vested Account Balance will be paid in the form of a Qualified Joint and
Survivor Annuity and an unmarried Participant's Vested Account Balance will be
paid in the form of a life annuity. The Participant may elect to have such
annuity distributed upon attainment of the Early Retirement Age under the Plan.
8.3 PAYMENT OF QUALIFIED PRE-RETIREMENT SURVIVOR ANNUITY Unless an
optional form of benefit has been selected within the Election Period pursuant
to a Qualified Election, if a Participant dies before benefits have commenced
then the Participant's Vested Account Balance shall be paid in the form of an
annuity for the life of the Surviving Spouse. The Surviving Spouse may elect
to have such annuity distributed within a reasonable period after the
Participant's death.
A Participant who does not meet the age 35 requirement set forth in the
Election Period as of the end of any current Plan Year may make a special
qualified election to waive the qualified Pre-retirement Survivor Annuity for
the period beginning on the date of such election and ending on the first day
of the Plan Year in which the Participant will attain age 35. Such election
shall not be valid unless the Participant receives a written explanation of the
Qualified Pre-retirement Survivor Annuity in such terms as are comparable to
the explanation required under paragraph 8.5. Qualified Pre-retirement
Survivor Annuity coverage will be automatically reinstated as of the first day
of the Plan Year in which the Participant attains age 35. Any new waiver on or
after such date shall be subject to the full requirements of this Article.
8.4 QUALIFIED ELECTION A Qualified Election is an election to either
waive a Qualified Joint and Survivor Annuity or a qualified pre- retirement
survivor annuity. Any such election shall not be effective unless:
(a) the Participant's Spouse consents in writing to the
election;
(b) the election designates a specific beneficiary, including
any class of beneficiaries or any contingent
beneficiaries, which may not be changed without spousal
consent (or the Spouse expressly permits designations by
the Participant without any further spousal consent);
(c) the Spouse's consent acknowledges the effect of the
election; and
(d) the Spouse's consent is witnessed by a Plan representative
or notary public.
Additionally, a Participant's waiver of the Qualified Joint and Survivor
Annuity shall not be effective unless the election designates a form of benefit
payment which may not be changed without spousal consent (or the Spouse
expressly permits designations by the Participant without any further spousal
consent). If it is established to the satisfaction of the Plan Administrator
that there is no Spouse or that the Spouse cannot be located, a waiver will be
deemed a Qualified Election. Any consent by a Spouse obtained under this
provision (or establishment that the consent of a Spouse may not be obtained)
shall be effective only with respect to such Spouse. A consent that permits
designations by the Participant without any requirement of further consent by
such Spouse must acknowledge that the Spouse has the right to limit consent to
a specific beneficiary, and a specific form of benefit where applicable, and
that the Spouse voluntarily elects to relinquish either or both of such rights.
A revocation of a prior waiver may be made by a Participant without the
consent of the Spouse at any time before the commencement of
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benefits. The number of revocations shall not be limited. No consent
obtained under this provision shall be valid unless the Participant has
received notice as provided in paragraphs 8.5 and 8.6 below.
8.5 NOTICE REQUIREMENTS FOR QUALIFIED JOINT AND SURVIVOR ANNUITY In
the case of a Qualified Joint and Survivor Annuity, the Plan Administrator
shall, no less than 30 days and no more than 90 days prior to the Annuity
Starting date, provide each Participant a written explanation of:
(a) the terms and conditions of a Qualified Joint and Survivor
Annuity;
(b) the Participant's right to make and the effect of an
election to waive the Qualified Joint and Survivor Annuity
form of benefit;
(c) the rights of a Participant's Spouse; and
(d) the right to make, and the effect of, a revocation of a
previous election to waive the Qualified Joint and
Survivor Annuity.
8.6 NOTICE REQUIREMENTS FOR QUALIFIED PRE-RETIREMENT SURVIVOR ANNUITY
In the case of a qualified pre-retirement survivor annuity as described in
paragraph 8.3, the Plan Administrator shall provide each Participant within the
applicable period for such Participant a written explanation of the qualified
pre-retirement survivor annuity in such terms and in such manner as would be
comparable to the explanation provided for meeting the requirements of
paragraph 8.5 applicable to a Qualified Joint and Survivor Annuity. The
applicable period for a Participant is whichever of the following periods ends
last:
(a) the period beginning with the first day of the Plan Year
in which the Participant attains age 32 and ending with
the close of the Plan Year preceding the Plan Year in
which the Participant attains age 35;
(b) a reasonable period ending after the individual becomes a
Participant;
(c) a reasonable period ending after this Article first
applies to the Participant. Notwithstanding the
foregoing, notice must be provided within a reasonable
period ending after separation from Service in the case of
a Participant who separates from Service before attaining
age 35.
For purposes of applying the preceding paragraph, a reasonable period ending
after the events described in (b) and (c) is the end of the two- year period
beginning one-year prior to the date the applicable event occurs, and ending
one-year after that date. In the case of a Participant who separates from
Service before the Plan Year in which age 35 is attained, notice shall be
provided within the two-year period beginning one year prior to separation and
ending one year after separation. If such a Participant subsequently returns
to employment with the Employer, the applicable period for such Participant
shall be re-determined.
8.7 SPECIAL SAFE-HARBOR EXCEPTION FOR CERTAIN PROFIT-SHARING PLANS
(a) This paragraph shall apply to a Participant in a
profit-sharing plan, and to any distribution, made on or
after the first day of the first plan year beginning after
1988, from or under a separate account attributable solely
to Qualified Voluntary contributions, as maintained on
behalf of a Participant in a money purchase pension plan,
(including a target benefit plan) if the following
conditions are satisfied:
(1) the Participant does not or cannot elect payments
in the form of a life annuity; and
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(2) on the death of a Participant, the Participant's
Vested Account Balance will be paid to the
Participant's Surviving Spouse, but if there is no
Surviving Spouse, or if the Surviving Spouse has
consented in a manner conforming to a Qualified
Election, then to the Participant's Designated
Beneficiary.
The Surviving Spouse may elect to have distribution of the
Vested Account Balance commence within the 90-day period
following the date of the Participant's death. The
account balance shall be adjusted for gains or losses
occurring after the Participant's death in accordance with
the provisions of the Plan governing the adjustment of
account balances for other types of distributions. These
safe-harbor rules shall not be operative with respect to a
Participant in a profit- sharing plan if that plan is a
direct or indirect transferee of a Defined Benefit Plan,
money purchase plan, a target benefit plan, stock bonus
plan, or profit-sharing plan which is subject to the
survivor annuity requirements of Code Section 401(a)(11)
and Code Section 417, and would therefore have a Qualified
Joint and Survivor Annuity as its normal form of benefit.
(b) The Participant may waive the spousal death benefit
described in this paragraph at any time provided that no
such waiver shall be effective unless it satisfies the
conditions (described in paragraph 8.4) that would apply
to the Participant's waiver of the Qualified
Pre-Retirement Survivor Annuity.
(c) If this paragraph 8.7 is operative, then all other
provisions of this Article other than paragraph 8.8 are
inoperative.
8.8 TRANSITIONAL JOINT AND SURVIVOR ANNUITY RULES Special transition
rules apply to Participants who were not receiving benefits on August 23, 1984.
(a) Any living Participant not receiving benefits on August
23, 1984, who would otherwise not receive the benefits
prescribed by the previous paragraphs of this Article,
must be given the opportunity to elect to have the prior
paragraphs of this Article apply if such Participant is
credited with at least one Hour of Service under this Plan
or a predecessor Plan in a Plan Year beginning on or after
January 1, 1976 and such Participant had at least 10 Years
of Service for vesting purposes when he or she separated
from Service.
(b) Any living Participant not receiving benefits on August
23, 1984, who was credited with at least one Hour of
Service under this Plan or a predecessor Plan on or after
September 2, 1974, and who is not otherwise credited with
any Service in a Plan Year beginning on or after January
1, 1976, must be given the opportunity to have his or her
benefits paid in accordance with paragraph 8.9.
(c) The respective opportunities to elect [as described in (a)
and (b) above] must be afforded to the appropriate
Participants during the period commencing on August 23,
1984 and ending on the date benefits would otherwise
commence to said Participants.
8.9 AUTOMATIC JOINT AND SURVIVOR ANNUITY AND EARLY SURVIVOR ANNUITY
Any Participant who has elected pursuant to paragraph 8.8(b) and any
Participant who does not elect under paragraph 8.8(a) or who meets the
requirements of paragraph 8.8(a), except that such Participant does not have at
least 10 years of vesting Service when he or she separates from Service, shall
have his or her benefits distributed in accordance with all of the following
requirements if benefits would have been payable in the form of a life annuity.
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(a) Automatic Joint and Survivor Annuity. If benefits in the
form of a life annuity become payable to a married
Participant who:
(1) begins to receive payments under the Plan on or
after Normal Retirement Age, or
(2) dies on or after Normal Retirement Age while still
working for the Employer, or
(3) begins to receive payments on or after the
Qualified Early Retirement Age, or
(4) separates from Service on or after attaining
Normal Retirement (or the Qualified Early
Retirement Age) and after satisfying the
eligibility requirements for the payment of
benefits under the Plan and thereafter dies
before beginning to receive such benefits, then
such benefits will be received under this Plan in
the form of a Qualified Joint and Survivor
Annuity, unless the Participant has elected
otherwise during the Election Period. The
Election Period must begin at least 6 months
before the Participant attains Qualified Early
Retirement Age and end not more than 90 days
before the commencement of benefits. Any
election will be in writing and may be changed by
the Participant at any time.
(b) Election of Early Survivor Annuity. A Participant who is
employed after attaining the Qualified Early Retirement
Age will be given the opportunity to elect, during the
Election Period, to have a survivor annuity payable on
death. If the Participant elects the survivor annuity,
payments under such annuity must not be less than the
payments which would have been made to the Spouse under
the Qualified Joint and Survivor Annuity if the
Participant had retired on the day before his or her
death. Any election under this provision will be in
writing and may be changed by the Participant at any time.
The Election Period begins on the later of:
(1) the 90th day before the Participant attains the
Qualified Early Retirement Age, or
(2) the date on which participation begins, and ends
on the date the Participant terminates
employment.
8.10 ANNUITY CONTRACTS Any annuity contract distributed under this
Plan must be nontransferable. The terms of any annuity contract purchased and
distributed by the Plan to a Participant or Spouse shall comply with the
requirements of this Plan.
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ARTICLE IX
VESTING
9.1 EMPLOYEE CONTRIBUTIONS A Participant shall always have a 100%
vested and nonforfeitable interest in his or her Elective Deferrals, Voluntary
Contributions, Qualified Voluntary Contributions, Rollover Contributions, and
Transfer Contributions plus the earnings thereon. No forfeiture of Employer
related contributions (including any minimum contributions made under paragraph
14.2) will occur solely as a result of an Employee's withdrawal of any Employee
contributions.
9.2 EMPLOYER CONTRIBUTIONS A Participant shall acquire a vested and
nonforfeitable interest in his or her account attributable to Employer
contributions in accordance with the table selected in the Adoption Agreement,
provided that if a Participant is not already fully vested, he or she shall
become so upon attaining Normal Retirement Age, Early Retirement Age, on death
prior to normal retirement, on retirement due to Disability, or on termination
of the Plan.
9.3 COMPUTATION PERIOD The computation period for purposes of
determining Years of Service and Breaks in Service for purposes of computing a
Participant's nonforfeitable right to his or her account balance derived from
Employer contributions shall be determined by the Employer in the Adoption
Agreement. In the event a former Participant with no vested interest in his or
her Employer contribution account requalifies for participation in the Plan
after incurring a Break in Service, such Participant shall be credited for
vesting with all pre-break and post-break Service.
9.4 REQUALIFICATION PRIOR TO FIVE CONSECUTIVE ONE-YEAR BREAKS IN
SERVICE The account balance of such Participant shall consist of any
undistributed amount in his or her account as of the date of re-employment plus
any future contributions added to such account plus the investment earnings on
the account. The Vested Account Balance of such Participant shall be
determined by multiplying the Participant's account balance (adjusted to
include any distribution or redeposit made under paragraph 6.3) by such
Participant's vested percentage. All Service of the Participant, both prior to
and following the break, shall be counted when computing the Participant's
vested percentage.
9.5 REQUALIFICATION AFTER FIVE CONSECUTIVE ONE-YEAR BREAKS IN SERVICE
If such Participant is not fully vested upon re-employment, a new account shall
be established for such Participant to separate his or her deferred vested and
nonforfeitable account, if any, from the account to which new allocations will
be made. The Participant's deferred account to the extent remaining shall be
fully vested and shall continue to share in earnings and losses of the Fund.
When computing the Participant's vested portion of the new account, all
pre-break and post-break Service shall be counted. However, notwithstanding
this provision, no such former Participant who has had five consecutive
one-year Breaks in Service shall acquire a larger vested and nonforfeitable
interest in his or her prior account balance as a result of requalification
hereunder.
9.6 CALCULATING VESTED INTEREST A Participant's vested and
nonforfeitable interest shall be calculated by multiplying the fair market
value of his or her account attributable to Employer contributions on the
Valuation Date preceding distribution by the decimal equivalent of the vested
percentage as of his or her termination date. The amount attributable to
Employer contributions for purposes of the calculation includes amounts
previously paid out pursuant to paragraph 6.3 and not repaid. The
Participant's vested and nonforfeitable interest, once calculated above, shall
be reduced to reflect those amounts previously paid out to the Participant and
not repaid by the Participant. The Participant's vested and nonforfeitable
interest so determined shall continue to share in the investment earnings and
any increase or decrease in the fair market value of the Fund up to the
Valuation Date preceding or coinciding with payment.
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9.7 FORFEITURES Any balance in the account of a Participant who has
separated from Service to which he or she is not entitled under the foregoing
provisions, shall be forfeited and applied as provided in the Adoption
Agreement. A forfeiture may only occur if the Participant has received a
distribution from the Plan or if the Participant has incurred five consecutive
1-year Breaks in Service. Furthermore, a Highly Compensated Employee's
Matching Contributions may be forfeited, even if vested, if the contributions
to which they relate are Excess Deferrals, Excess Contributions or Excess
Aggregate Contributions.
9.8 AMENDMENT OF VESTING SCHEDULE No amendment to the Plan shall have
the effect of decreasing a Participant's vested interest determined without
regard to such amendment as of the later of the date such amendment is adopted
or the date it becomes effective. Further, if the vesting schedule of the Plan
is amended, or the Plan is amended in any way that directly or indirectly
affects the computation of any Participant's nonforfeitable percentage or if
the Plan is deemed amended by an automatic change to or from a Top-Heavy
vesting schedule, each Participant with at least three Years of Service with
the Employer may elect, within a reasonable period after the adoption of the
amendment, to have his or her nonforfeitable percentage computed under the Plan
without regard to such amendment. For Participants who do not have at least
one Hour of Service in any Plan Year beginning after 1988, the preceding
sentence shall be applied by substituting "Five Years of Service" for "Three
Years of Service" where such language appears. The period during which the
election may be made shall commence with the date the amendment is adopted and
shall end on the later of:
(a) 60 days after the amendment is adopted;
(b) 60 days after the amendment becomes effective; or
(c) 60 days after the Participant is issued written notice of
the amendment by the Employer or the Trustee. If the
Trustee is asked to so notify, the Fund will be charged
for the costs thereof.
No amendment to the Plan shall be effective to the extent that it has the
effect of decreasing a Participant's accrued benefit. Notwithstanding the
preceding sentence, a Participant's account balance may be reduced to the
extent permitted under section 412(c)(8) of the Code (relating to financial
hardships). For purposes of this paragraph, a Plan amendment which has the
effect of decreasing a Participant's account balance or eliminating an optional
form of benefit, with respect to benefits attributable to service before the
amendment, shall be treated as reducing an accrued benefit.
9.9 SERVICE WITH CONTROLLED GROUPS All Years of Service with other
members of a controlled group of corporations [as defined in Code Section
414(b)], trades or businesses under common control [as defined in Code Section
414(c)], or members of an affiliated service group [as defined in Code Section
414(m)] shall be considered for purposes of determining a Participant's
nonforfeitable percentage.
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ARTICLE X
LIMITATIONS ON ALLOCATIONS
AND ANTIDISCRIMINATION TESTING
10.1 PARTICIPATION IN THIS PLAN ONLY If the Participant does not
participate in and has never participated in another qualified plan, a Welfare
Benefit Fund (as defined in paragraph 1.89) or an individual medical account,
as defined in Code Section 415(l)(2), maintained by the adopting Employer,
which provides an Annual Addition as defined in paragraph 1.4, the amount of
Annual Additions which may be credited to the Participant's account for any
Limitation Year will not exceed the lesser of the Maximum Permissible Amount or
any other limitation contained in this Plan. If the Employer contribution that
would otherwise be contributed or allocated to the Participant's account would
cause the Annual Additions for the Limitation Year to exceed the Maximum
Permissible Amount, the amount contributed or allocated will be reduced so that
the Annual Additions for the Limitation Year will equal the Maximum Permissible
Amount. Prior to determining the Participant's actual Compensation for the
Limitation Year, the Employer may determine the Maximum Permissible Amount for
a Participant on the basis of a reasonable estimate of the Participant's
Compensation for the Limitation Year, uniformly determined for all Participants
similarly situated. As soon as is administratively feasible after the end of
the Limitation Year, the Maximum Permissible Amount for the Limitation Year
will be determined on the basis of the Participant's actual Compensation for
the Limitation Year.
10.2 DISPOSITION OF EXCESS ANNUAL ADDITIONS If, pursuant to paragraph
10.1 or as a result of the allocation of forfeitures, there is an Excess
Amount, the excess will be disposed of under one of the following methods as
determined in the Adoption Agreement. If no election is made in the Adoption
Agreement then method "(a)" below shall apply.
(a) Suspense Account Method
(1) Any nondeductible Employee Voluntary, Required
Voluntary Contributions and unmatched Elective
Deferrals to the extent they would reduce the
Excess Amount will be returned to the
Participant. To the extent necessary to reduce
the Excess Amount, non-Highly Compensated
Employees will have all Elective Deferrals
returned whether or not there was a corresponding
match.
(2) If after the application of paragraph (1) an
Excess Amount still exists, and the Participant
is covered by the Plan at the end of the
Limitation Year, the Excess Amount in the
Participant's account will be used to reduce
Employer contributions (including any allocation
of forfeitures) for such Participant in the next
Limitation Year, and each succeeding Limitation
Year if necessary;
(3) If after the application of paragraph (1) an
Excess Amount still exists, and the Participant
is not covered by the Plan at the end of the
Limitation Year, the Excess Amount will be held
unallocated in a suspense account. The suspense
account will be applied to reduce future Employer
contributions (including allocation of any
forfeitures) for all remaining Participants in
the next Limitation Year, and each succeeding
Limitation Year if necessary;
(4) If a suspense account is in existence at any time
during the Limitation Year pursuant to this
paragraph, it will not participate in the
allocation of investment gains and losses. If a
suspense account is in existence at any time
during a particular Limitation Year, all amounts
in the
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suspense account must be allocated and
reallocated to Participants' accounts before any
Employer contributions or any Employee
Contributions may be made to the Plan for that
Limitation Year. Excess amounts may not be
distributed to Participants or former
Participants.
(b) Spillover Method
(1) Any nondeductible Employee Voluntary, Required
Voluntary Contributions and unmatched Elective
Deferrals to the extent they would reduce the
Excess Amount will be returned to the
Participant. To the extent necessary to reduce
the Excess Amount, non-Highly Compensated
Employees will have all Elective Deferrals
returned whether or not there was a corresponding
match.
(2) Any Excess Amount which would be allocated to the
account of an individual Participant under the
Plan's allocation formula will be reallocated to
other Participants in the same manner as other
Employer contributions. No such reallocation
shall be made to the extent that it will result
in an Excess Amount being created in such
Participant's own account.
(3) To the extent that amounts cannot be reallocated
under (1) above, the suspense account provisions
of (a) above will apply.
10.3 PARTICIPATION IN THIS PLAN AND ANOTHER MASTER AND PROTOTYPE
DEFINED CONTRIBUTION PLAN, WELFARE BENEFIT FUND OR INDIVIDUAL MEDICAL ACCOUNT
MAINTAINED BY THE EMPLOYER The Annual Additions which may be credited to a
Participant's account under this Plan for any Limitation Year will not exceed
the Maximum Permissible Amount reduced by the Annual Additions credited to a
Participant's account under the other Master or Prototype Defined Contribution
Plans, Welfare Benefit Funds, and individual medical accounts as defined in
Code Section 415(l)(2), maintained by the Employer, which provide an Annual
Addition as defined in paragraph 1.4 for the same Limitation Year. If the
Annual Additions, with respect to the Participant under other Defined
Contribution Plans and Welfare Benefit Funds maintained by the Employer, are
less than the Maximum Permissible Amount and the Employer contribution that
would otherwise be contributed or allocated to the Participant's account under
this Plan would cause the Annual Additions for the Limitation Year to exceed
this limitation, the amount contributed or allocated will be reduced so that
the Annual Additions under all such plans and funds for the Limitation Year
will equal the Maximum Permissible Amount. If the Annual Additions with
respect to the Participant under such other Defined Contribution Plans and
Welfare Benefit Funds in the aggregate are equal to or greater than the Maximum
Permissible Amount, no amount will be contributed or allocated to the
Participant's account under this Plan for the Limitation Year. Prior to
determining the Participant's actual Compensation for the Limitation Year, the
Employer may determine the Maximum Permissible Amount for a Participant in the
manner described in paragraph 10.1. As soon as administratively feasible after
the end of the Limitation Year, the Maximum Permissible Amount for the
Limitation Year will be determined on the basis of the Participant's actual
Compensation for the Limitation Year.
10.4 DISPOSITION OF EXCESS ANNUAL ADDITIONS UNDER TWO PLANS If,
pursuant to paragraph 10.3 or as a result of forfeitures, a Participant's
Annual Additions under this Plan and such other plans would result in an Excess
Amount for a Limitation Year, the Excess Amount will be deemed to consist of
the Annual Additions last allocated except that Annual Additions attributable
to a Welfare Benefit Fund or Individual Medical Account as defined in Code
Section 415(l)(2) will be deemed to have been allocated first regardless of the
actual allocation date. If an Excess Amount was allocated to a Participant on
an allocation date of this Plan which coincides with an allocation date of
another plan, the Excess Amount attributed to this Plan will be the product of:
(a) the total Excess Amount allocated as of such date, times
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(b) the ratio of:
(1) the Annual Additions allocated to the Participant
for the Limitation Year as of such date under the
Plan, to
(2) the total Annual Additions allocated to the
Participant for the Limitation Year as of such
date under this and all the other qualified
Master or Prototype Defined Contribution Plans.
Any Excess Amount attributed to this Plan will be disposed of in the manner
described in paragraph 10.2.
10.5 PARTICIPATION IN THIS PLAN AND ANOTHER DEFINED CONTRIBUTION PLAN
WHICH IS NOT A MASTER OR PROTOTYPE PLAN If the Participant is covered under
another qualified Defined Contribution Plan maintained by the Employer which is
not a Master or Prototype Plan, Annual Additions which may be credited to the
Participant's account under this Plan for any Limitation Year will be limited
in accordance with paragraphs 10.3 and 10.4 as though the other plan were a
Master or Prototype Plan, unless the Employer provides other limitations in the
Adoption Agreement.
10.6 PARTICIPATION IN THIS PLAN AND A DEFINED BENEFIT PLAN If the
Employer maintains, or at any time maintained, a qualified Defined Benefit Plan
covering any Participant in this Plan, the sum of the Participant's Defined
Benefit Plan Fraction and Defined Contribution Plan Fraction will not exceed
1.0 in any Limitation Year. For any Plan Year during which the Plan is
Top-Heavy, the Defined Benefit and Defined Contribution Plan Fractions shall be
calculated in accordance with Code Section 416(h). The Annual Additions which
may be credited to the Participant's account under this Plan for any Limitation
Year will be limited in accordance with the provisions set forth in the
Adoption Agreement.
10.7 AVERAGE DEFERRAL PERCENTAGE (ADP) TEST With respect to any Plan
Year, the Average Deferral Percentage for Participants who are Highly
Compensated Employees and the Average Deferral Percentage for Participants who
are non-Highly Compensated Employees must satisfy one of the following tests:
(a) BASIC TEST - The Average Deferral Percentage for
Participants who are Highly Compensated Employees for the
Plan Year is not more than 1.25 times the Average Deferral
Percentage for Participants who are non-Highly Compensated
Employees for the same Plan Year, or
(b) ALTERNATIVE TEST - The Average Deferral Percentage for
Participants who are Highly Compensated Employees for the
Plan Year does not exceed the Average Deferral Percentage
for Participants who are non-Highly Compensated Employees
for the same Plan Year by more than 2 percentage points
provided that the Average Deferral Percentage for
Participants who are Highly Compensated Employees is not
more than 2.0 times the Average Deferral Percentage for
Participants who are non-Highly Compensated Employees.
10.8 SPECIAL RULES RELATING TO APPLICATION OF ADP TEST
(a) The Actual Deferral Percentage for any Participant who is
a Highly Compensated Employee for the Plan Year and who is
eligible to have Elective Deferrals (and Qualified
Non-Elective Contributions or Qualified Matching
Contributions, or both, if treated as Elective Deferrals
for purposes of the ADP test) allocated to his or her
accounts under two or more arrangements described in Code
Section 401(k), that are maintained by the Employer, shall
be determined as if such Elective Deferrals (and, if
applicable, such Qualified Non-Elective Contributions or
Qualified Matching Contributions, or both) were made under
a single arrangement. If a Highly Compensated Employee
participates in two or more cash or deferred arrangements
that
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have different Plan Years, all cash or deferred
arrangements ending with or within the same calendar year
shall be treated as a single arrangement.
(b) In the event that this Plan satisfies the requirements of
Code Sections 401(k), 401(a)(4), or 410(b), only if
aggregated with one or more other plans, or if one or more
other plans satisfy the requirements of such Code Sections
only if aggregated with this Plan, then this Section shall
be applied by determining the Actual Deferral Percentage
of Employees as if all such plans were a single plan. For
Plan Years beginning after 1989, plans may be aggregated
in order to satisfy Code Section 401(k) only if they have
the same Plan Year.
(c) For purposes of determining the Actual Deferral Percentage
of a Participant who is a 5-percent owner or one of the
ten most highly-paid Highly Compensated Employees, the
Elective Deferrals (and Qualified Non-Elective
Contributions or Qualified Matching Contributions, or
both, if treated as Elective Deferrals for purposes of the
ADP test) and Compensation of such Participant shall
include the Elective Deferrals (and, if applicable,
Qualified Non-Elective Contributions and Qualified
Matching Contributions, or both) for the Plan Year of
Family Members as defined in paragraph 1.36 of this Plan.
Family Members, with respect to such Highly Compensated
Employees, shall be disregarded as separate Employees in
determining the ADP both for Participants who are
non-Highly Compensated Employees and for Participants who
are Highly Compensated Employees. In the event of repeal
of the family aggregation rules under Code Section
414(q)(6), all applications of such rules under this Plan
will cease as of the effective date of such repeal.
(d) For purposes of determining the ADP test, Elective
Deferrals, Qualified Non-Elective Contributions and
Qualified Matching Contributions must be made before the
last day of the twelve-month period immediately following
the Plan Year to which contributions relate.
(e) The Employer shall maintain records sufficient to
demonstrate satisfaction of the ADP test and the amount of
Qualified Non-Elective Contributions or Qualified Matching
Contributions, or both, used in such test.
(f) The determination and treatment of the Actual Deferral
Percentage amounts of any Participant shall satisfy such
other requirements as may be prescribed by the Secretary
of the Treasury.
10.9 RECHARACTERIZATION If the Employer allows for Voluntary
Contributions in the Adoption Agreement, a Participant may treat his or her
Excess Contributions as an amount distributed to the Participant and then
contributed by the Participant to the Plan. Recharacterized amounts will
remain nonforfeitable and subject to the same distribution requirements as
Elective Deferrals. Amounts may not be recharacterized by a Highly Compensated
Employee to the extent that such amount in combination with other Employee
Contributions made by that Employee would exceed any stated limit under the
Plan on Voluntary Contributions. Recharacterization must occur no later than
two and one-half months after the last day of the Plan Year in which such
Excess Contributions arose and is deemed to occur no earlier than the date the
last Highly Compensated Employee is informed in writing of the amount
recharacterized and the consequences thereof. Recharacterized amounts will be
taxable to the Participant for the Participant's tax year in which the
Participant would have received them in cash.
10.10 AVERAGE CONTRIBUTION PERCENTAGE (ACP) TEST If the Employer makes
Matching Contributions or if the Plan allows Employees to make Voluntary
Contributions the Plan must meet additional nondiscrimination requirements
provided under Code Section 401(m). If Employee Contributions (including any
Elective Deferrals recharacterized as Voluntary Contributions) are made
pursuant to this Plan, then in addition to the ADP test referenced in paragraph
10.7, the Average Contribution Percentage test is also applicable. The Average
Contribution Percentage for Participants who are Highly Compensated Employees
for each Plan Year and the Average Contribution Percentage for Participants who
are Non- Highly Compensated Employees for the same Plan Year must satisfy one
of the following tests:
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(a) BASIC TEST - The Average Contribution Percentage for
Participants who are Highly Compensated Employees for the
Plan Year shall not exceed the Average Contribution
Percentage for Participants who are non-Highly Compensated
Employees for the same Plan Year multiplied by 1.25; or
(b) ALTERNATIVE TEST - The ACP for Participants who are Highly
Compensated Employees for the Plan Year shall not exceed
the Average Contribution Percentage for Participants who
are non-Highly Compensated Employees for the same Plan
Year multiplied by two (2), provided that the Average
Contribution Percentage for Participants who are Highly
Compensated Employees does not exceed the Average
Contribution Percentage for Participants who are
non-Highly Compensated Employees by more than two (2)
percentage points.
10.11 SPECIAL RULES RELATING TO APPLICATION OF ACP TEST
(a) If one or more Highly Compensated Employees participate in
both a cash or deferred arrangement and a plan subject to
the ACP test maintained by the Employer and the sum of the
ADP and ACP of those Highly Compensated Employees subject
to either or both tests exceeds the Aggregate Limit, then
the ADP or ACP of those Highly Compensated Employees who
also participate in a cash or deferred arrangement will be
reduced (beginning with such Highly Compensated Employee
whose ADP or ACP is the highest) as set forth in the
Adoption Agreement so that the limit is not exceeded. The
amount by which each Highly Compensated Employee's
Contribution Percentage Amounts is reduced shall be
treated as an Excess Aggregate Contribution. The ADP and
ACP of the Highly Compensated Employees are determined
after any corrections required to meet the ADP and ACP
tests. Multiple use does not occur if both the ADP and
ACP of the Highly Compensated Employees does not exceed
1.25 multiplied by the ADP and ACP of the non-Highly
Compensated Employees.
(b) For purposes of this Article, the Contribution Percentage
for any Participant who is a Highly Compensated Employee
and who is eligible to have Contribution Percentage
Amounts allocated to his or her account under two or more
plans described in Code Section 401(a), or arrangements
described in Code Section 401(k) that are maintained by
the Employer, shall be determined as if the total of such
Contribution Percentage Amounts was made under each Plan.
If a Highly Compensated Employee participates in two or
more cash or deferred arrangements that have different
plan years, all cash or deferred arrangements ending with
or within the same calendar year shall be treated as a
single arrangement.
(c) In the event that this Plan satisfies the requirements of
Code Sections 401(a)(4), 401(m), or 410(b) only if
aggregated with one or more other plans, or if one or more
other plans satisfy the requirements of such Code Sections
only if aggregated with this Plan, then this Section shall
be applied by determining the Contribution Percentage of
Employees as if all such plans were a single plan. For
plan years beginning after 1989, plans may be aggregated
in order to satisfy Code Section 401(m) only if the
aggregated plans have the same Plan Year.
(d) For purposes of determining the Contribution percentage of
a Participant who is a five-percent owner or one of the
ten most highly-paid, Highly Compensated Employees, the
Contribution Percentage Amounts and Compensation of such
Participant shall include the Contribution Percentage
Amounts and Compensation for the Plan Year of Family
Members as defined in Paragraph 1.36 of this Plan. Family
Members, with respect to Highly Compensated Employees,
shall be disregarded as separate Employees in determining
the Contribution Percentage both for Participants
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<PAGE> 57
who are non-Highly Compensated Employees and for
Participants who are Highly Compensated Employees. In the
event of repeal of the family aggregation rules under Code
Section 414(q)(6), all applications of such rules under
this Plan will cease as of the effective date of such
repeal.
(e) For purposes of determining the Contribution Percentage
test, Employee Contributions are considered to have been
made in the Plan Year in which contributed to the trust.
Matching Contributions and Qualified Non-Elective
Contributions will be considered made for a Plan Year if
made no later than the end of the twelve-month period
beginning on the day after the close of the Plan Year.
(f) The Employer shall maintain records sufficient to
demonstrate satisfaction of the ACP test and the amount of
Qualified Non-Elective Contributions or Qualified Matching
Contributions, or both, used in such test.
(g) The determination and treatment of the Contribution
Percentage of any Participant shall satisfy such other
requirements as may be prescribed by the Secretary of the
Treasury.
(h) Qualified Matching Contributions and Qualified
Non-Elective Contributions used to satisfy the ADP test
may not be used to satisfy the ACP test.
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ARTICLE XI
ADMINISTRATION
11.1 PLAN ADMINISTRATOR The Employer shall be the named fiduciary and
Plan Administrator. These duties shall include:
(a) appointing the Plan's attorney, accountant, actuary, or
any other party needed to administer the Plan,
(b) directing the Trustee with respect to payments from the
Fund,
(c) communicating with Employees regarding their participation
and benefits under the Plan, including the administration
of all claims procedures,
(d) filing any returns and reports with the Internal Revenue
Service, Department of Labor, or any other governmental
agency,
(e) reviewing and approving any financial reports, investment
reviews, or other reports prepared by any party appointed
by the Employer under paragraph (a),
(f) establishing a funding policy and investment objectives
consistent with the purposes of the Plan and the Employee
Retirement Income Security Act of 1974, and
(g) construing and resolving any question of Plan
interpretation. The Plan Administrator's interpretation
of Plan provisions including eligibility and benefits
under the Plan is final, and unless it can be shown to be
arbitrary and capricious will not be subject to "de novo"
review.
11.2 TRUSTEE The Trustee shall be responsible for the administration
of investments held in the Fund. These duties shall include:
(a) receiving contributions under the terms of the Plan,
(b) making distributions from the Fund in accordance with
written instructions received from an authorized
representative of the Employer,
(c) keeping accurate records reflecting its administration of
the Fund and making such records available to the Employer
for review and audit. Within 90 days after each Plan Year,
and within 90 days after its removal or resignation, the
Trustee shall file with the Employer an accounting of its
administration of the Fund during such year or from the
end of the preceding Plan Year to the date of removal or
resignation. Such accounting shall include a statement of
cash receipts and disbursements since the date of its last
accounting and shall contain an asset list showing the
fair market value of investments held in the Fund as of
the end of the Plan Year. The value of marketable
investments shall be determined using the most recent
price quoted on a national securities exchange or over the
counter market. The value of non- marketable investments
shall be determined in the sole judgement of the Trustee
which determination shall be binding and conclusive. The
value of investments in securities or obligations of the
Employer in which there is no market shall be determined
in the sole judgement of the Employer and the Trustee
shall have no responsibility with respect to the valuation
of such assets. The Employer shall review the Trustee's
accounting and notify the Trustee in the event of its
disapproval of the report within 90 days, providing the
Trustee with a written description
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of the items in question. The Trustee shall have 60 days
to provide the Employer with a written explanation of the
items in question. If the Employer again disapproves, the
Trustee shall file its accounting in a court of competent
jurisdiction for audit and adjudication, and
(d) employing such agents, attorneys or other professionals as
the Trustee may deem necessary or advisable in the
performance of its duties.
The Trustee's duties shall be limited to those described above. The Employer
shall be responsible for any other administrative duties required under the
Plan or by applicable law.
11.3 ADMINISTRATIVE FEES AND EXPENSES All reasonable costs, charges
and expenses incurred by the Trustee in connection with the administration of
the Fund and all reasonable costs, charges and expenses incurred by the Plan
Administrator in connection with the administration of the Plan (including fees
for legal services rendered to the Trustee or Plan Administrator) may be paid
by the Employer, but if not paid by the Employer when due, shall be paid from
the Fund. Such reasonable compensation to the Trustee as may be agreed upon
from time to time between the Employer and the Trustee and such reasonable
compensation to the Plan Administrator as may be agreed upon from time to time
between the Employer and Plan Administrator may be paid by the Employer, but if
not paid by the Employer when due shall be paid by the Fund. The Trustee shall
have the right to liquidate trust assets to cover its fees. Notwithstanding
the foregoing, no compensation other than reimbursement for expenses shall be
paid to a Plan Administrator who is the Employer or a full-time Employee of the
Employer. In the event any part of the Trust becomes subject to tax, all taxes
incurred will be paid from the Fund unless the Plan Administrator advises the
Trustee not to pay such tax.
11.4 DIVISION OF DUTIES AND INDEMNIFICATION
(a) The Trustee shall have the authority and discretion to
manage and govern the Fund to the extent provided in this
instrument, but does not guarantee the Fund in any manner
against investment loss or depreciation in asset value, or
guarantee the adequacy of the Fund to meet and discharge
all or any liabilities of the Plan.
(b) The Trustee shall not be liable for the making, retention
or sale of any investment or reinvestment made by it, as
herein provided, or for any loss to, or diminution of the
Fund, or for any other loss or damage which may result
from the discharge of its duties hereunder except to the
extent it is judicially determined that the Trustee has
failed to exercise the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent
person acting in a like capacity and familiar with such
matters would use in the conduct of an enterprise of a
like character with like aims.
(c) The Employer warrants that all directions issued to the
Trustee by it or the Plan Administrator will be in
accordance with the terms of the Plan and not contrary to
the provisions of the Employee Retirement Income Security
Act of 1974 and regulations issued thereunder.
(d) The Trustee shall not be answerable for any action taken
pursuant to any direction, consent, certificate, or other
paper or document on the belief that the same is genuine
and signed by the proper person. All directions by the
Employer, Participant or the Plan Administrator shall be
in writing. The Employer shall deliver to the Trustee
certificates evidencing the individual or individuals
authorized to act as set forth in the Adoption Agreement
or as the Employer may subsequently inform the Trustee in
writing and shall deliver to the Trustee specimens of
their signatures.
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(e) The duties and obligations of the Trustee shall be limited
to those expressly imposed upon it by this instrument or
subsequently agreed upon by the parties. Responsibility
for administrative duties required under the Plan or
applicable law not expressly imposed upon or agreed to by
the Trustee, shall rest solely with the Employer.
(f) The Trustee shall be indemnified and saved harmless by the
Employer from and against any and all liability to which
the Trustee may be subjected, including all expenses
reasonably incurred in its defense, for any action or
failure to act resulting from compliance with the
instructions of the Employer, the employees or agents of
the Employer, the Plan Administrator, or any other
fiduciary to the Plan, and for any liability arising from
the actions or non-actions of any predecessor Trustee or
fiduciary or other fiduciaries of the Plan.
(g) The Trustee shall not be responsible in any way for the
application of any payments it is directed to make or for
the adequacy of the Fund to meet and discharge any and all
liabilities under the Plan.
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ARTICLE XII
TRUST FUND
12.1 THE FUND The Fund shall consist of all contributions made under
Article III and Article IV of the Plan and the investment thereof and earnings
thereon. All contributions and the earnings thereon less payments made under
the terms of the Plan, shall constitute the Fund. The Fund shall be
administered as provided in this document.
12.2 CONTROL OF PLAN ASSETS The assets of the Fund or evidence of
ownership shall be held by the Trustee under the terms of the Plan and Trust.
If the assets represent amounts transferred from another trustee/custodian
under a former plan, the Trustee named hereunder shall not be responsible for
the propriety of any investment under the former plan.
12.3 EXCLUSIVE BENEFIT RULES No part of the Fund shall be used for, or
diverted to, purposes other than for the exclusive benefit of Participants,
former Participants with a vested interest, and the beneficiary or
beneficiaries of deceased Participants having a vested interest in the Fund at
death.
12.4 ASSIGNMENT AND ALIENATION OF BENEFITS No right or claim to, or
interest in, any part of the Fund, or any payment from the Fund, shall be
assignable, transferable, or subject to sale, mortgage, pledge, hypothecation,
commutation, anticipation, garnishment, attachment, execution, or levy of any
kind. The Trustee shall not recognize any attempt to assign, transfer, sell,
mortgage, pledge, hypothecate, commute, or anticipate the same, except to the
extent required by law. The preceding sentences shall also apply to the
creation, assignment, or recognition of a right to any benefit payable with
respect to a Participant pursuant to a domestic relations order, unless such
order is determined to be a qualified domestic relations order, as defined in
Code Section 414(p), or any domestic relations order entered before January 1,
1985 which the Plan attorney and Plan Administrator deem to be qualified.
12.5 DETERMINATION OF QUALIFIED DOMESTIC RELATIONS ORDER (QDRO) A
Domestic Relations Order shall specifically state all of the following in order
to be deemed a Qualified Domestic Relations Order ("QDRO"):
(a) The name and last known mailing address (if any) of the
Participant and of each alternate payee covered by the
QDRO. However, if the QDRO does not specify the current
mailing address of the alternate payee, but the Plan
Administrator has independent knowledge of that address,
the QDRO will still be valid.
(b) The dollar amount or percentage of the Participant's
benefit to be paid by the Plan to each alternate payee,
or the manner in which the amount or percentage will be
determined.
(c) The number of payments or period for which the order
applies.
(d) The specific plan (by name) to which the Domestic
Relations Order applies.
The Domestic Relations Order shall not be deemed a QDRO if it requires the Plan
to provide:
(e) any type or form of benefit, or any option not already
provided for in the Plan;
(f) increased benefits, or benefits in excess of the
Participant's vested rights;
(g) payment of a benefit earlier than allowed by the Plan's
earliest retirement provisions or in the case of a
profit-sharing plan, prior to the allowability of
in-service withdrawals, or
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(h) payment of benefits to an alternate payee which are
required to be paid to another alternate payee under
another QDRO.
Promptly, upon receipt of a Domestic Relations Order ("Order") which may or may
not be "Qualified", the Plan Administrator shall notify the Participant and any
alternate payee(s) named in the Order of such receipt, and include a copy of
this paragraph 12.5. The Plan Administrator shall then forward the Order to
the Plan's legal counsel for an opinion as to whether or not the Order is in
fact "Qualified" as defined in Code Section 414(p). Within a reasonable time
after receipt of the Order, not to exceed 60 days, the Plan's legal counsel
shall make a determination as to its "Qualified" status and the Participant and
any alternate payee(s) shall be promptly notified in writing of the
determination.
If the "Qualified" status of the Order is in question, there will be a delay in
any payout to any payee including the Participant, until the status is
resolved. In such event, the Plan Administrator shall segregate the amount
that would have been payable to the alternate payee(s) if the Order had been
deemed a QDRO. If the Order is not Qualified, or the status is not resolved
(for example, it has been sent back to the Court for clarification or
modification) within 18 months beginning with the date the first payment would
have to be made under the Order, the Plan Administrator shall pay the
segregated amounts plus interest to the person(s) who would have been entitled
to the benefits had there been no Order. If a determination as to the
Qualified status of the Order is made after the 18-month period described
above, then the Order shall only be applied on a prospective basis. If the
Order is determined to be a QDRO, the Participant and alternate payee(s) shall
again be notified promptly after such determination. Once an Order is deemed a
QDRO, the Plan Administrator shall pay to the alternate payee(s) all the
amounts due under the QDRO, including segregated amounts plus interest which
may have accrued during a dispute as to the Order's qualification.
Unless specified otherwise in the Adoption Agreement, the earliest retirement
age with regard to the Participant against whom the order is entered shall be
the date the order is determined to be qualified. This will only allow payouts
to alternate payee(s) and not the Participant.
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ARTICLE XIII
INVESTMENTS
13.1 FIDUCIARY STANDARDS The Trustee shall invest and reinvest
principal and income in the same Fund in accordance with the investment
objectives established by the Employer, provided that:
(a) such investments are prudent under the Employee Retirement
Income Security Act of 1974 and the regulations
thereunder,
(b) such investments are sufficiently diversified or otherwise
insured or guaranteed to minimize the risk of large
losses, and
(c) such investments are similar to those which would be
purchased by another professional money manager for a like
plan with similar investment objectives.
13.2 FUNDING ARRANGEMENT The Employer shall, in the Adoption
Agreement, appoint a Trustee to administer the Fund. The Trustee shall invest
the Fund in any of the alternatives available under paragraph 13.3 herein.
13.3 INVESTMENT ALTERNATIVES OF THE TRUSTEE As Trustee, the Sponsor
shall implement an investment program based on the Employer's investment
objectives and the Employee Retirement Income Security Act of 1974. In
addition to powers given by law, the Trustee may:
(a) invest the Fund in any form of property, including common
and preferred stocks, exchange traded put and call
options, bonds, money market instruments, mutual funds
(including funds for which the Trustee or its affiliates
serve as investment advisor), savings accounts,
certificates of deposit, Treasury bills, insurance
policies and contracts, or in any other property, real or
personal, having a ready market. The Trustee may invest
in time deposits (including, if applicable, its own or
those of affiliates) which bear a reasonable interest
rate. No portion of any Qualified Voluntary Contribution,
or the earnings thereon, may be invested in life insurance
contracts or, as with any Participant-directed investment,
in tangible personal property characterized by the IRS as
a collectible,
(b) transfer any assets of the Fund to a group or collective
trust established to permit the pooling of funds of
separate pension and profit-sharing trusts, provided the
Internal Revenue Service has ruled such group or
collective trust to be qualified under Code Section 401(a)
and exempt under Code Section 501(a) (or the applicable
corresponding provision of any other Revenue Act) or to
any other common, collective, or commingled trust fund
which has been or may hereafter be established and
maintained by the Trustee and/or affiliates of the
Trustee. Such commingling of assets of the Fund with
assets of other qualified trusts is specifically
authorized, and to the extent of the investment of the
Fund in such a group or collective trust, the terms of the
instrument establishing the group or collective trust
shall be a part hereof as though set forth herein,
(c) invest up to 100% of the Fund in the common stock, debt
obligations, or any other security issued by the Employer
or by an affiliate of the Employer within the limitations
provided under Sections 406, 407, and 408 of the Employee
Retirement Income Security Act of 1974 and further
provided that such investment does not constitute a
prohibited transaction under Code Section 4975. Any such
investment in Employer securities shall only be made upon
written direction of the Employer who shall be solely
responsible for propriety of such investment,
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(d) hold cash uninvested and deposit same with any banking or
savings institution, including its own banking department,
(e) join in or oppose the reorganization, recapitalization,
consolidation, sale or merger of corporations or
properties, including those in which it is interested as
Trustee, upon such terms as it deems wise,
(f) hold investments in nominee or bearer form,
(g) vote proxies and, if appropriate, pass them on to any
investment manager which may have directed the investment
in the equity giving rise to the proxy,
(h) exercise all ownership rights with respect to assets held
in the Fund.
13.4 PARTICIPANT LOANS If agreed upon by the Trustee and permitted by
the Employer in the Adoption Agreement, a Plan Participant may make application
to the Employer requesting a loan from the Fund. The Employer shall have the
sole right to approve or disapprove a Participant's application provided that
loans shall be made available to all Participants on a reasonably equivalent
basis. Loans shall not be made available to Highly Compensated Employees [as
defined in Code Section 414(q)] in an amount greater than the amount made
available to other Employees. Any loan granted under the Plan shall be made
subject to the following rules:
(a) No loan, when aggregated with any outstanding Participant
loan(s), shall exceed the lesser of (i) $50,000 reduced by
the excess, if any, of the highest outstanding balance of
loans during the one year period ending on the day before
the loan is made, over the outstanding balance of loans
from the Plan on the date the loan is made or (ii)
one-half of the fair market value of a Participant's
Vested Account Balance built up from Employer
Contributions, Voluntary Contributions, and Rollover
Contributions. If the Participant's Vested Account
Balance is $20,000 or less, the maximum loan shall not
exceed the lesser of $10,000 or 100% of the Participant's
Vested Account Balance. For the purpose of the above
limitation, all loans from all plans of the Employer and
other members of a group of employers described in Code
Sections 414(b), 414(c), and 414(m) are aggregated. An
assignment or pledge of any portion of the Participant's
interest in the Plan and a loan, pledge, or assignment
with respect to any insurance contract purchased under the
Plan, will be treated as a loan under this paragraph.
(b) All applications must be made on forms provided by the
Employer and must be signed by the Participant.
(c) Any loan shall bear interest at a rate reasonable at the
time of application, considering the purpose of the loan
and the rate being charged by representative commercial
banks in the local area for a similar loan unless the
Employer sets forth a different method for determining
loan interest rates in its loan procedures. The loan
agreement shall also provide that the payment of principal
and interest be amortized in level payments not less than
quarterly.
(d) The term of such loan shall not exceed five years except
in the case of a loan for the purpose of acquiring any
house, apartment, condominium, or mobile home (not used on
a transient basis) which is used or is to be used within a
reasonable time as the principal residence of the
Participant. The term of such loan shall be determined by
the Employer considering the maturity dates quoted by
representative commercial banks in the local area for a
similar loan.
(e) The principal and interest paid by a Participant on his or
her loan shall be credited to the
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Fund in the same manner as for any other Plan investment.
If elected in the Adoption Agreement, loans may be treated
as segregated investments of the individual Participants.
This provision is not available if its election will
result in discrimination in operation of the Plan.
(f) If a Participant's loan application is approved by the
Employer, such Participant shall be required to sign a
note, loan agreement, and assignment of 50% of his or her
interest in the Fund as collateral for the loan. The
Participant, except in the case of a profit-sharing plan
satisfying the requirements of paragraph 8.7 must obtain
the consent of his or her Spouse, if any, within the 90
day period before the time his or her account balance is
used as security for the loan. A new consent is required
if the account balance is used for any renegotiation,
extension, renewal or other revision of the loan,
including an increase in the amount thereof. The consent
must be written, must acknowledge the effect of the loan,
and must be witnessed by a plan representative or notary
public. Such consent shall subsequently be binding with
respect to the consenting Spouse or any subsequent Spouse.
(g) If a valid Spousal consent has been obtained, then,
notwithstanding any other provision of this Plan, the
portion of the Participant's Vested Account Balance used
as a security interest held by the Plan by reason of a
loan outstanding to the Participant shall be taken into
account for purposes of determining the amount of the
account balance payable at the time of death or
distribution, but only if the reduction is used as
repayment of the loan. If less than 100% of the
Participant's Vested Account Balance (determined without
regard to the preceding sentence) is payable to the
Surviving Spouse, then the account balance shall be
adjusted by first reducing the Vested Account Balance by
the amount of the security used as repayment of the loan,
and then determining the benefit payable to the Surviving
Spouse.
(h) The Employer may also require additional collateral in
order to adequately secure the loan.
(i) A Participant's loan shall immediately become due and
payable if such Participant terminates employment for any
reason or fails to make a principal and/or interest
payment as provided in the loan agreement. If such
Participant terminates employment, the Employer shall
immediately request payment of principal and interest on
the loan. If the Participant refuses payment following
termination, the Employer shall reduce the Participant's
Vested Account Balance by the remaining principal and
interest on his or her loan. If the Participant's Vested
Account Balance is less than the amount due, the Employer
shall take whatever steps are necessary to collect the
balance due directly from the Participant. However, no
foreclosure on the Participant's note or attachment of the
Participant's account balance will occur until a
distributable event occurs in the Plan.
(j) No loans will be made to Owner-Employees (as defined in
paragraph 1.51) or Shareholder-Employees (as defined in
paragraph 1.74), unless the Employer obtains a prohibited
transaction exemption from the Department of Labor.
13.5 INSURANCE POLICIES If agreed upon by the Trustee and permitted by
the Employer in the Adoption Agreement, Employees may elect the purchase of
life insurance policies under the Plan. If elected, the maximum annual premium
for a whole life policy shall not exceed 50% of the aggregate Employer
contributions allocated to the account of a Participant. For profit-sharing
plans the 50% test need only be applied against Employer contributions
allocated in the last two years. Whole life policies are policies with both
nondecreasing death benefits and nonincreasing premiums. The maximum annual
premium for term contracts or universal life policies and all other policies
which are not whole life shall not exceed 25% of aggregate Employer
contributions allocated to the account of a Participant. The two-year rule for
profit-sharing plans again applies. The maximum annual premiums
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for a Participant with both a whole life and a term contract or universal life
policies shall be limited to one-half of the whole life premium plus the term
premium, but shall not exceed 25% of the aggregate Employer contributions
allocated to the account of a Participant, subject to the two year rule for
profit-sharing plans. Any policies purchased under this Plan shall be held
subject to the following rules:
(a) The Trustee shall be applicant and owner of any policies
issued.
(b) All policies or contracts purchased hereunder, shall be
endorsed as nontransferable, and must provide that
proceeds will be payable to the Trustee; however, the
Trustee shall be required to pay over all proceeds of the
contracts to the Participant's Designated Beneficiary in
accordance with the distribution provisions of this Plan.
Under no circumstances shall the Trust retain any part of
the proceeds.
(c) Each Participant shall be entitled to designate a
beneficiary under the terms of any contract issued;
however, such designation will be given to the Trustee
which must be the named beneficiary on any policy. Such
designation shall remain in force, until revoked by the
Participant, by filing a new beneficiary form with the
Trustee. A Participant's Spouse will be the Designated
Beneficiary of the proceeds in all circumstances unless a
Qualified Election has been made in accordance with
paragraph 8.4. The beneficiary of a deceased Participant
shall receive, in addition to the proceeds of the
Participant's policy or policies, the amount credited to
such Participant's investment account.
(d) A Participant who is uninsurable or insurable at
substandard rates, may elect to receive a reduced amount
of insurance, if available, or may waive the purchase of
any insurance.
(e) All dividends or other returns received on any policy
purchased shall be applied to reduce the next premium due
on such policy, or if no further premium is due, such
amount shall be credited to the Fund as part of the
account of the Participant for whom the policy is held.
(f) If Employer contributions are inadequate to pay all
premiums on all insurance policies, the Trustee may, at
the option of the Employer, utilize other amounts
remaining in each Participant's account to pay the
premiums on his or her respective policy or policies,
allow the policies to lapse, reduce the policies to a
level at which they may be maintained, or borrow against
the policies on a prorated basis, provided that the
borrowing does not discriminate in favor of the policies
on the lives of Officers, Shareholders, and highly
compensated Employees.
(g) On retirement or termination of employment of a
Participant, the Employer shall direct the Trustee to cash
surrender the Participant's policy and credit the
proceeds to his or her account for distribution under the
terms of the Plan. However, before so doing, the Trustee
shall first offer to transfer ownership of the policy to
the Participant in exchange for payment by the Participant
of the cash value of the policy at the time of transfer.
Such payment shall be credited to the Participant's
account for distribution under the terms of the Plan. All
distributions resulting from the application of this
paragraph shall be subject to the Joint and Survivor
Annuity Rules of Article VIII, if applicable.
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(h) The Employer shall be solely responsible to see that these
insurance provisions are administered properly and that if
there is any conflict between the provisions of this Plan
and any insurance contracts issued that the terms of this
Plan will control.
13.6 EMPLOYER INVESTMENT DIRECTION If agreed upon by the Trustee and
approved by the Employer in the Adoption Agreement, the Employer shall have the
right to direct the Trustee with respect to investments of the Fund, may
appoint an investment manager (registered as an investment advisor under the
Investment Advisors Act of 1940) to direct investments, or may give the Trustee
sole investment management responsibility. The Employer may purchase and sell
interests in a registered investment company (i.e., mutual funds) for which the
Sponsor, its parent, affiliates, or successors, may serve as investment advisor
and receive compensation from the registered investment company for its
services as investment advisor. The Employer shall advise the Trustee in
writing regarding the retention of investment powers, the appointment of an
investment manager, or the delegation of investment powers to the Trustee. Any
investment directive under this Plan shall be made in writing by the Employer
or investment manager, as the case may be. In the absence of such written
directive, the Trustee shall automatically invest the available cash in its
discretion in an appropriate interim investment until specific investment
directions are received. Such instructions regarding the delegation of
investment responsibility shall remain in force until revoked or amended in
writing. The Trustee shall not be responsible for the propriety of any
directed investment made and shall not be required to consult with or advise
the Employer regarding the investment quality of any directed investment held
hereunder. If the Employer fails to designate an investment manager, the
Trustee shall have full investment authority. If the Employer does not issue
investment directions, the Trustee shall have authority to invest the Fund in
its sole discretion. While the Employer may direct the Trustee with respect to
Plan investments, the Employer may not:
(a) borrow from the Fund or pledge any of the assets of the
Fund as security for a loan,
(b) buy property or assets from or sell property or assets to
the Fund,
(c) charge any fee for services rendered to the Fund, or
(d) receive any services from the Fund on a preferential
basis.
13.7 EMPLOYEE INVESTMENT DIRECTION If agreed to by the Trustee and
approved by the Employer in the Adoption Agreement, Participants shall be given
the option to direct the investment of their personal contributions and their
share of the Employer's contribution among alternative investment funds
established as part of the overall Fund. Unless otherwise specified by the
Employer in the Adoption Agreement, such investment funds shall be restricted
to funds offered by the Trustee. If investments outside the Trustee's control
are allowed, Participants may not direct that investments be made in
collectibles, other than U.S. Government or State issued gold and silver coins.
In this connection, a Participant's right to direct the investment of any
contribution shall apply only to selection of the desired fund. The following
rules shall apply to the administration of such funds.
(a) At the time an Employee becomes eligible for the Plan, he
or she shall complete an investment designation form
stating the percentage of his or her contributions to be
invested in the available funds.
(b) A Participant may change his or her election with respect
to future contributions by filing a new investment
designation form with the Employer in accordance with the
procedures established by the Plan Administrator.
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(c) A Participant may elect to transfer all or part of his or
her balance from one investment fund to another by filing
an investment designation form with the Employer or by
using a telephone exchange privilege offered by an
investment fund in which the Participants' balance is
invested (provided a telephone exchange privilege has been
previously selected by the Trustee), in accordance with
the procedures established by the Plan Administrator.
(d) The Employer shall be responsible when transmitting
Employee and Employer contributions to show the dollar
amount to be credited to each investment fund for each
Employee.
(e) Except as otherwise provided in the Plan, neither the
Trustee, nor the Employer, nor any fiduciary of the Plan
shall be liable to the Participant or any of his or her
beneficiaries for any loss resulting from action taken at
the direction of the Participant.
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ARTICLE XIV
TOP-HEAVY PROVISIONS
14.1 APPLICABILITY OF RULES If the Plan is or becomes Top-Heavy in any
Plan Year beginning after 1983, the provisions of this Article will supersede
any conflicting provisions in the Plan or Adoption Agreement.
14.2 MINIMUM CONTRIBUTION Notwithstanding any other provision in the
Employer's Plan, for any Plan Year in which the Plan is Top-Heavy or Super
Top-Heavy, the aggregate Employer contributions and forfeitures allocated on
behalf of any Participant (without regard to any Social Security contribution)
under this Plan and any other Defined Contribution Plan of the Employer shall
be lesser of 3% of such Participant's Compensation or the largest percentage of
Employer contributions and forfeitures, as a percentage of the first $200,000,
as adjusted under Code Section 415(d), of the Key Employee's Compensation,
allocated on behalf of any Key Employee for that year.
Each Participant who is employed by the Employer on the last day of the Plan
Year shall be entitled to receive an allocation of the Employer's minimum
contribution for such Plan Year. The minimum allocation applies even though
under other Plan provisions the Participant would not otherwise be entitled to
receive an allocation, or would have received a lesser allocation for the year
because the Participant fails to make Mandatory Contributions to the Plan, the
Participant's Compensation is less than a stated amount, or the Participant
fails to complete 1,000 Hours of Service (or such lesser number designated by
the Employer in the Adoption Agreement) during the Plan Year. A Paired
profit-sharing plan designated to provide the minimum Top-Heavy contribution
must do so regardless of profits. An Employer may make the minimum Top-Heavy
contribution available to all Participants or just non-Key Employees.
For purposes of computing the minimum allocation, Compensation shall mean
Compensation as defined in paragraph 1.12(c) of the Plan.
The Top-Heavy minimum contribution does not apply to any Participant to the
extent the Participant is covered under any other plan(s) of the Employer and
the Employer has provided in Section 11 of the Adoption Agreement that the
minimum allocation or benefit requirements applicable to Top-Heavy Plans will
be met in the other plan(s).
If a Key Employee makes an Elective Deferral or has an allocation of Matching
Contributions made to his or her account, a Top-Heavy minimum will be required
for non-Key Employees who are Participants, however, neither Elective Deferrals
by nor Matching Contributions to non-Key Employees may be taken into account
for purposes of satisfying the top-heavy Minimum Contribution requirement.
14.3 MINIMUM VESTING For any Plan Year in which this Plan is
Top-Heavy, the minimum vesting schedule elected by the Employer in the Adoption
Agreement will automatically apply to the Plan. If the vesting schedule
selected by the Employer in the Adoption Agreement is less liberal than the
allowable schedule, the schedule will automatically be modified. If the
vesting schedule under the Employer's Plan shifts in or out of the Top-Heavy
schedule for any Plan Year, such shift is an amendment to the vesting schedule
and the election in paragraph 9.8 of the Plan applies. The minimum vesting
schedule applies to all accrued benefits within the meaning of Code Section
411(a)(7) except those attributable to Employee contributions, including
benefits accrued before the effective date of Code Section 416 and benefits
accrued before the Plan became Top-Heavy. Further, no reduction in vested
benefits may occur in the event the Plan's status as Top-Heavy changes for any
Plan Year. However, this paragraph does not apply to the account balances of
any Employee who does not have an Hour of Service after the Plan initially
becomes Top-Heavy and such Employee's account balance attributable to Employer
contributions and forfeitures will be determined without regard to this
paragraph.
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14.4 LIMITATIONS ON ALLOCATIONS In any Plan Year in which the
Top-Heavy Ratio exceeds 90% (i.e., the Plan becomes Super Top-Heavy), the
denominators of the Defined Benefit Fraction (as defined in paragraph 1.16) and
Defined Contribution Fraction (as defined in paragraph 1.19) shall be computed
using 100% of the dollar limitation instead of 125%.
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ARTICLE XV
AMENDMENT AND TERMINATION
15.1 AMENDMENT BY SPONSOR The Sponsor may amend any or all provisions
of this Plan and Trust at any time without obtaining the approval or consent of
any Employer which has adopted this Plan and Trust provided that no amendment
shall authorize or permit any part of the corpus or income of the Fund to be
used for or diverted to purposes other than for the exclusive benefit of
Participants and their beneficiaries, or eliminate an optional form of
distribution. In the case of a mass-submitted plan, the mass-submitter shall
amend the Plan on behalf of the Sponsor.
15.2 AMENDMENT BY EMPLOYER The Employer may amend any option in the
Adoption Agreement, and may include language as permitted in the Adoption
Agreement,
(a) to satisfy Code Section 415, or
(b) to avoid duplication of minimums under Code Section 416
because of the required aggregation of multiple plans.
The Employer may add certain model amendments published by the Internal Revenue
Service which specifically provide that their adoption will not cause the Plan
to be treated as an individually designed plan for which the Employer must
obtain a separate determination letter.
If the Employer amends the Plan and Trust other than as provided above, the
Employer's Plan shall no longer participate in this Prototype Plan and will be
considered an individually designed plan.
15.3 TERMINATION Employers shall have the right to terminate their
Plans upon 60 days notice in writing to the Trustee. If the Plan is
terminated, partially terminated, or if there is a complete discontinuance of
contributions under a profit-sharing plan maintained by the Employer, all
amounts credited to the accounts of Participants shall vest and become
nonforfeitable. In the event of a partial termination, only those who are
affected by such partial termination shall be fully vested. In the event of
termination, the Employer shall direct the Trustee with respect to the
distribution of accounts to or for the exclusive benefit of Participants or
their beneficiaries. The Trustee shall dispose of the Fund in accordance with
the written directions of the Plan Administrator, provided that no liquidation
of assets and payment of benefits, (or provision therefor), shall actually be
made by the Trustee until after it is established by the Employer in a manner
satisfactory to the Trustee, that the applicable requirements, if any, of the
Employee Retirement Income Security Act of 1974 and the Internal Revenue Code
governing the termination of employee benefit plans, have been or are being,
complied with, or that appropriate authorizations, waivers, exemptions, or
variances have been, or are being obtained.
15.4 QUALIFICATION OF EMPLOYER'S PLAN If the adopting Employer fails
to attain or retain Internal Revenue Service qualification, such Employer's
Plan shall no longer participate in this Prototype Plan and will be considered
an individually designed plan.
15.5 MERGERS AND CONSOLIDATIONS
(a) In the case of any merger or consolidation of the
Employer's Plan with, or transfer of assets or liabilities
of the Employer's Plan to, any other plan, Participants in
the Employer's Plan shall be entitled to receive benefits
immediately after the merger, consolidation, or transfer
which are equal to or greater than the benefits they would
have been entitled to receive immediately before the
merger, consolidation, or transfer if the Plan had then
terminated.
(b) Any corporation into which the Trustee or any successor
trustee/custodian may be
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merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to
which the Trustee or any successor trustee/custodian may
be a party, or any corporation to which all or
substantially all the trust business of the Trustee or any
successor trustee/custodian may be transferred, shall be
the successor of such Trustee without the filing of any
instrument or performance of any further act, before any
court.
15.6 RESIGNATION AND REMOVAL The Trustee may resign by written notice
to the Employer which shall be effective 60 days after delivery. The Employer
may discontinue its participation in this Prototype Plan and Trust effective
upon 60 days written notice to the Sponsor. In such event the Employer shall,
prior to the effective date thereof, amend the Plan to eliminate any reference
to this Prototype Plan and Trust and appoint a successor trustee or custodian
or arrange for another funding agent. The Trustee shall deliver the Fund to
its successor on the effective date of the resignation or removal, or as soon
thereafter as practicable, provided that this shall not waive any lien the
Trustee may have upon the Fund for its compensation or expenses. If the
Employer fails to amend the Plan and appoint a successor trustee, custodian, or
other funding agent within the said 60 days, or such longer period as the
Trustee may specify in writing, the Plan shall be deemed individually designed
and the Employer shall be deemed the successor trustee/custodian. The Employer
must then obtain its own determination letter.
15.7 QUALIFICATION OF PROTOTYPE The Sponsor intends that this
Prototype Plan will meet the requirements of the Code as a qualified Prototype
Retirement Plan and Trust. Should the Commissioner of Internal Revenue or any
delegate of the Commissioner at any time determine that the Plan and Trust
fails to meet the requirements of the Code, the Sponsor will amend the Plan and
Trust to maintain its qualified status.
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ARTICLE XVI
GOVERNING LAW
Construction, validity and administration of the Prototype Plan and Trust, and
any Employer Plan and Trust as embodied in the Prototype document and
accompanying Adoption Agreement, shall be governed by Federal law to the extent
applicable and to the extent not applicable by the laws of the
State/Commonwealth in which the principal office of the Sponsor is located.
65
<PAGE> 1
EXHIBIT NO. 99.15
12B-1 PLANS
<PAGE> 2
Exhibit 99.15
SAFECO ADVISOR SERIES TRUST--CLASS A SHARES
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
UNDER THE INVESTMENT COMPANY ACT OF 1940
WHEREAS, SAFECO Advisor Series Trust ("Trust") is registered under the
Investment Company Act of 1940, as amended ("1940 Act"), as an open-end
management investment company, and has caused its shares of beneficial interest
to be registered for sale to the public under the Securities Act of 1933, as
amended ("1933 Act"), and various state securities laws;
WHEREAS, the Trust intends to offer for public sale distinct series of
shares of beneficial interest, each corresponding to a distinct portfolio as
set forth in Exhibit A hereto (collectively, "Series");
WHEREAS, the Trust desires to adopt a Plan of Distribution ("Plan")
pursuant to Rule 12b-1 under the 1940 Act with respect to the Class A shares of
the above-referenced Series and of such other Series as may hereafter be
designated by the Trust's board of trustees ("Board"); and
WHEREAS, the Trust has entered into a Distribution Agreement
("Distribution Agreement") with SAFECO Securities, Inc. ("SAFECO Securities")
pursuant to which SAFECO Securities has agreed to serve as the distributor of
the Class A shares of each such Series;
NOW, THEREFORE, the Trust hereby adopts this Plan with respect to the
Class A shares of each Series in accordance with Rule 12b-1 under the 1940 Act.
1. A. As compensation for service activities provided
pursuant to this Plan, SAFECO Securities will be paid a service fee at the rate
of 0.25% on an annualized basis of the average daily net assets of the Class A
shares of each Series set forth in Exhibit A. Such fee shall be calculated and
accrued daily and paid quarterly or at such other intervals as the Board shall
determine. Any payment to SAFECO Securities in accordance with this plan will
be made pursuant to the Distribution Agreement entered into by the Trust and
SAFECO Securities.
B. Any Series may pay a service fee to SAFECO Securities
at a lesser rate than the fee specified in paragraph 1A of this Plan, as agreed
upon by the Board and SAFECO
<PAGE> 3
Securities and as approved in the manner specified in paragraph 4 of this Plan.
2. As distributor of the Class A shares of each Series, SAFECO
Securities may spend such amounts as it deems appropriate on any activities or
expenses primarily intended to result in the sale of the Series' Class A shares
or the servicing and maintenance of shareholder accounts, including, but not
limited to, compensation to employees of SAFECO Securities; compensation to and
expenses, including overhead and telephone and other communication expenses, of
SAFECO Securities, broker-dealers and other financial institutions who engage
in or support the distribution of shares or who service shareholder accounts;
the printing of prospectuses, statements of additional information, and reports
for other than existing shareholders; and the preparation, printing and
distribution of sales literature and advertising materials.
3. This Plan shall not take effect with respect to the Class A
shares of any Series unless it first has been approved by a vote of the then
sole shareholder of the Class A shares of the Series.
4. This Plan shall not take effect with respect to the Class A
shares of any Series unless it first has been approved together with any
related agreements, by votes of a majority of (a) the Trust's Board of
Trustees, cast in person at a meeting called for the purpose of voting on the
Plan and (b) the Trustees who are not interested persons of the Trust within
the meaning of Section 2(a)(19) of the 1940 Act and who have no direct or
indirect financial interest in the operation of the Plan or any agreements
related thereto ("Independent Trustees"), cast in person at a meeting (or
meetings) called for the purpose of voting on such Plan or agreements.
5. After approval as set forth in paragraphs 3 and 4, this Plan
shall continue in full force and effect with respect to the Class A shares of
such Series for so long as such continuance is specifically approved at least
annually in the manner provided for approval of this Plan in paragraph 4.
6. SAFECO Securities shall provide to the Board and the Board
shall review, at least quarterly, a written report of the amounts expended with
respect to the Class A shares of each Series by SAFECO Securities under this
Plan and the Distribution Agreement and the purposes for which such
expenditures were made. For purposes of this Plan, "service activities" shall
mean activities covered by the definition of "service fee" contained in Section
26(b) of the Rules of Fair Practice of the National Association of Securities
Dealers, Inc. including the provision by SAFECO Securities and other
broker-dealers of personal,
- 2 -
<PAGE> 4
continuing services to investors in the Class A shares of the Series. Overhead
and other expenses of SAFECO Securities related to its "service activities,"
including telephone and other communications expenses, may be included in the
information regarding amounts expended for such activities.
7. This Plan may be terminated with respect to the Class A shares
of any Series at any time by vote of a majority of the Independent Trustees of
the Trust, or by vote of a majority of the outstanding voting securities of the
Class A shares of that Series.
8. This Plan may not be amended to increase materially the amount
of service fee provided for in paragraph 1A hereof with respect to the Class A
shares of any Series unless such amendment is approved by a vote of a majority
of the outstanding voting securities of the Class A shares of that Series, and
no material amendment to the Plan shall be made unless approved in the manner
provided for in paragraph 4 hereof.
9. The amount of the service fee payable by any Series to SAFECO
Securities under paragraph 1A hereof and the Distribution Agreement is not
related directly to expenses incurred by SAFECO Securities on behalf of such
Series in serving as distributor of the Class A shares, and paragraph 2 hereof
and the Distribution Agreement do not obligate the Series to reimburse SAFECO
Securities for such expenses. The service fees set forth in paragraph 1A
hereof will be paid by the Series to SAFECO Securities until either the Plan or
the Distribution Agreement is terminated or not renewed. If either the Plan or
the Distribution Agreement is terminated or not renewed with respect to the
Class A shares of any Series, any distribution expenses incurred by SAFECO
Securities on behalf of the Series in excess of payments of the service fee
specified in paragraph 1A hereof and the Distribution Agreement which SAFECO
Securities has received or accrued through the termination date are the sole
responsibility and liability of SAFECO Securities, and are not obligations of
the Series.
10. While this Plan is in effect, the selection and nomination of
the Trustees who are not interested persons of the Trust shall be committed to
the discretion of the Independent Trustees of the Trust then in office.
11. SAFECO Securities or any other person asserting any right or
claim under this Plan 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) the provisions in the Trust Instrument
permitting the establishment of separate Series and limiting the liability of
each Series to obligations of that Series. Obligations assumed
- 3 -
<PAGE> 5
by the Trust pursuant to this Plan 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 Securities or any other person asserting
any right or claim under this Plan shall not seek satisfaction of any
obligation, right or claim 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.
IN WITNESS WHEREOF, the Trust has executed this Plan of Distribution
on the day and year set forth below in Seattle, Washington.
Date: September 20, 1994
SAFECO ADVISOR SERIES TRUST
Attest: /s/ NEAL A. FULLER By: /s/ DAVID F. HILL
--------------------- --------------------------
Neal A. Fuller David F. Hill
Assistant Secretary President
- 4 -
<PAGE> 6
EXHIBIT A
SAFECO ADVISOR SERIES TRUST
The SAFECO Advisor Series Trust consists of the following Series:
1. SAFECO Advisor Equity Fund
2. SAFECO Advisor Northwest Fund
3. SAFECO Advisor Intermediate-Term Treasury Fund
4. SAFECO Advisor U.S. Government Fund
5. SAFECO Advisor GNMA Fund
6. SAFECO Advisor Municipal Bond Fund
7. SAFECO Advisor Intermediate-Term Municipal Bond Fund
8. SAFECO Advisor Washington Municipal Bond Fund
As of September 20, 1994
- 5 -
<PAGE> 7
SAFECO ADVISOR SERIES TRUST--CLASS B SHARES
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
UNDER THE INVESTMENT COMPANY ACT OF 1940
WHEREAS, SAFECO Advisor Series Trust ("Trust") is registered under the
Investment Company Act of 1940, as amended ("1940 Act"), as an open-end
management investment company, and has caused its shares of beneficial interest
to be registered for sale to the public under the Securities Act of 1933 ("1933
Act") and various state securities laws;
WHEREAS, the Trust intends to offer for public sale distinct series of
shares of beneficial interest, each corresponding to a distinct portfolio as
set forth in Exhibit A hereto (collectively, "Series");
WHEREAS, the Trust desires to adopt a Plan of Distribution ("Plan")
pursuant to Rule 12b-1 under the 1940 Act with respect to the Class B shares of
the above-referenced Series and of such other Series as may hereafter be
designated by the Trust's board of trustees ("Board"); and
WHEREAS, the Trust has entered into a Distribution Agreement
("Distribution Agreement") with SAFECO Securities, Inc. ("SAFECO Securities")
pursuant to which SAFECO Securities has agreed to serve as the distributor of
the Class B shares of each such Series;
NOW, THEREFORE, the Trust hereby adopts this Plan with respect to the
Class B shares of each Series in accordance with Rule 12b-1 under the 1940 Act.
1. A. As compensation for service activities provided
pursuant to this Plan, SAFECO Securities will be paid a service fee at the rate
of 0.25% on an annualized basis of the average daily net assets of the Class B
shares of each Series set forth in Exhibit A. As compensation for distribution
activities provided pursuant to this Plan, SAFECO Securities will be paid a
distribution fee at the rate of 0.75% on an annualized basis of the average
daily net assets of the Class B shares of each Series set forth in Exhibit A.
Such fees shall be calculated and accrued daily and paid quarterly or at such
other intervals as the Board shall determine. Any payment to SAFECO Securities
in accordance with this plan will be made pursuant to the Distribution
Agreement entered into by the Trust and SAFECO Securities.
B. Any Series may pay a distribution or service fee to
SAFECO Securities at a lesser rate than the fees specified in paragraph 1A of
this Plan as agreed upon by the Board and SAFECO
<PAGE> 8
Securities and as approved in the manner specified in paragraph 4 of this Plan.
2. As distributor of the Class B shares of each Series, SAFECO
Securities may spend such amounts as it deems appropriate on any activities or
expenses primarily intended to result in the sale of the Series' Class B shares
or the servicing and maintenance of shareholder accounts, including, but not
limited to, compensation to employees of SAFECO Securities; compensation to and
expenses, including overhead and telephone and other communication expenses, of
SAFECO Securities, broker-dealers and other financial institutions who engage
in or support the distribution of shares or who service shareholder accounts;
the printing of prospectuses, statements of additional information, and reports
for other than existing shareholders; and the preparation, printing and
distribution of sales literature and advertising materials.
3. This Plan shall not take effect with respect to the Class B
shares of any Series unless it first has been approved by a vote of the then
sole shareholder of the Class B shares of the Series.
4. This Plan shall not take effect with respect to the Class B
shares of any Series unless it first has been approved, together with any
related agreements, by votes of a majority of (a) the Trust's Board of
Trustees, cast in person at a meeting called for the purpose of voting on the
Plan and (b) the Trustees who are not interested persons of the Trust within
the meaning of Section 2(a)(19) of the 1940 Act and who have no direct or
indirect financial interest in the operation of the Plan or any agreements
related thereto ("Independent Trustees"), cast in person at a meeting (or
meetings) called for the purpose of voting on such Plan or agreements.
5. After approval as set forth in paragraphs 3 and 4, this Plan
shall continue in full force and effect with respect to the Class B shares of
such Series for so long as such continuance is specifically approved at least
annually in the manner provided for approval of this Plan in paragraph 4.
6. SAFECO Securities shall provide to the Board and the Board
shall review, at least quarterly, a written report of the amounts expended with
respect to the Class B shares of each Series by SAFECO Securities under this
Plan and the Distribution Agreement and the purposes for which such
expenditures were made. "Distribution activities" shall mean any activities in
connection with SAFECO Securities' performance of its obligations under this
Plan or the Distribution Agreement that are not deemed "service activities."
For purposes of this Plan, "service activities" shall mean activities covered
by the definition of "service fee" contained in Section 26(b) of the Rules of
Fair Practice of the
2
<PAGE> 9
National Association of Securities Dealers, Inc. including the provision by
SAFECO Securities and other broker-dealers of personal, continuing services to
investors in the Class B shares of the Series. Overhead and other expenses of
SAFECO Securities related to their "distribution activities" or "service
activities," including telephone and other communications expenses, may be
included in the information regarding amounts expended for such activities.
7. This Plan may be terminated with respect to the Class B
shares of any Series at any time by vote of a majority of the Independent
Trustees of the Trust or by vote of a majority of the outstanding voting
securities of the Class B shares of that Series.
8. This Plan may not be amended to increase materially the amount
of distribution fee or service fee provided for in paragraph 1A hereof with
respect to the Class B shares of any Series unless such amendment is approved
by a vote of a majority of the outstanding voting securities of the Class B
shares of that Series, and no material amendment to the Plan shall be made
unless approved in the manner provided for in paragraph 4 hereof.
9. The amount of the distribution and service fees payable by the
Series to SAFECO Securities under paragraph 1A hereof and the Distribution
Agreement is not related directly to expenses incurred by SAFECO Securities on
behalf of such Series in serving as distributor of the Class B shares, and
paragraph 2 hereof and the Distribution Agreement do not obligate the Series to
reimburse SAFECO Securities for such expenses. The distribution and service
fees set forth in paragraph 1A hereof will be paid by the Series to SAFECO
Securities until either the Plan or the Distribution Agreement is terminated or
not renewed. If either the Plan or the Distribution Agreement is terminated or
not renewed with respect to the Class B shares of any Series, any distribution
expenses incurred by SAFECO Securities on behalf of the Class B shares of the
Series in excess of payments of the distribution and service fees specified in
paragraph 1A hereof and the Distribution Agreement which SAFECO Securities has
received or accrued through the termination date are the sole responsibility
and liability of SAFECO Securities, and are not obligations of the Series.
10. While this Plan is in effect, the selection and nomination of
the Trustees who are not interested persons of the Trust shall be committed to
the discretion of the Trustees who are Independent Trustees of the Trust then
in office.
11. SAFECO Securities or any other person asserting any right or
claim under this Plan is hereby expressly put on notice
3
<PAGE> 10
of (i) the limitation of shareholder, officer and trustee liability as set
forth in the Trust Instrument of the Trust and (ii) the provisions in the Trust
Instrument permitting the establishment of separate Series and limiting the
liability of each Series to obligations of that Series. Obligations assumed by
the Trust pursuant to this Plan 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 Securities or any other person asserting
any right or claim under this Plan shall not seek satisfaction of any
obligation, right or claim 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.
IN WITNESS WHEREOF, the Trust has executed this Plan of Distribution
on the day and year set forth below in Seattle, Washington.
Date: September 20, 1994
SAFECO ADVISOR SERIES TRUST
Attest: /s/ NEAL A. FULLER By: /s/ DAVID F. HILL
-------------------- -------------------------
Neal A. Fuller David F. Hill
Assistant Secretary President
4
<PAGE> 11
EXHIBIT A
SAFECO ADVISOR SERIES TRUST
The SAFECO Advisor Series Trust consists of the following Series:
1. SAFECO Advisor Equity Fund
2. SAFECO Advisor Northwest Fund
3. SAFECO Advisor Intermediate-Term Treasury Fund
4. SAFECO Advisor U.S. Government Fund
5. SAFECO Advisor GNMA Fund
6. SAFECO Advisor Municipal Bond Fund
7. SAFECO Advisor Intermediate-Term Municipal Bond Fund
8. SAFECO Advisor Washington Municipal Bond Fund
As of September 20, 1994
5
<PAGE> 12
SAFECO ADVISOR SERIES TRUST--CLASS C SHARES
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
UNDER THE INVESTMENT COMPANY ACT OF 1940
WHEREAS, SAFECO Advisor Series Trust ("Trust") is registered under the
Investment Company Act of 1940, as amended ("1940 Act"), as an open-end
management investment company, and has caused its shares of beneficial interest
to be registered for sale to the public under the Securities Act of 1933 ("1933
Act") and various state securities laws;
WHEREAS, the Trust intends to offer for public sale distinct series of
shares of beneficial interest, each corresponding to a distinct portfolio as
set forth in Exhibit A hereto (collectively, "Series");
WHEREAS, the Trust desires to adopt a Plan of Distribution ("Plan")
pursuant to Rule 12b-1 under the 1940 Act with respect to the Class C shares of
the above-referenced Series and of such other Series as may hereafter be
designated by the Trust's board of trustees ("Board"); and
WHEREAS, the Trust has entered into a Distribution Agreement
("Distribution Agreement") with SAFECO Securities, Inc. ("SAFECO Securities")
pursuant to which SAFECO Securities has agreed to serve as the distributor of
the Class C shares of each such Series;
NOW, THEREFORE, the Trust hereby adopts this Plan with respect to the
Class C shares of each Series in accordance with Rule 12b-1 under the 1940 Act.
1. A. As compensation for service activities provided
pursuant to this Plan, SAFECO Securities will be paid a service fee at the rate
of 0.25% on an annualized basis of the average daily net assets of the Class C
shares of each Series set forth on Exhibit A. As compensation for distribution
activities provided pursuant to this Plan, SAFECO Securities will be paid a
distribution fee at the rate of 0.75% on an annualized basis of the average
daily net assets of the Class C shares of each Series set forth on Exhibit A.
Such fees shall be calculated and accrued daily and paid quarterly or at such
other intervals as the Board shall determine. Any payment to SAFECO Securities
in accordance with this plan will be made pursuant to the
<PAGE> 13
Distribution Agreement entered into by the Trust and SAFECO Securities.
B. Any Series may pay a distribution or service fee to
SAFECO Securities at a lesser rate than the fees specified in paragraph 1A of
this Plan as agreed upon by the Board and SAFECO Securities and as approved in
the manner specified in paragraph 4 of this Plan.
2. As distributor of the Class C shares of each Series, SAFECO
Securities may spend such amounts as it deems appropriate on any activities or
expenses primarily intended to result in the sale of the Series' Class C shares
or the servicing and maintenance of shareholder accounts, including, but not
limited to, compensation to employees of SAFECO Securities; compensation to and
expenses, including overhead and telephone and other communication expenses, of
SAFECO Securities, broker-dealers and other financial institutions who engage
in or support the distribution of shares or who service shareholder accounts;
the printing of prospectuses, statements of additional information, and reports
for other than existing shareholders; and the preparation, printing and
distribution of sales literature and advertising materials.
3. This Plan shall not take effect with respect to the Class C
shares of any Series unless it first has been approved by a vote of the then
sole shareholder of the Class C shares of the Series.
4. This Plan shall take effect with respect to the Class C shares
of any Series unless it first has been approved, together with any related
agreements, by votes of a majority of (a) the Trust's Board of Trustees, cast
in person at a meeting called for the purpose of voting on the Plan and (b) the
Trustees who are not interested persons of the Trust within the meaning of
Section 2(a)(19) of the 1940 Act and who have no direct or indirect financial
interest in the operation of the Plan or any agreements related thereto
("Independent Trustees"), cast in person at a meeting (or meetings) called for
the purpose of voting on such Plan or agreements.
5. After approval as set forth in paragraphs 3 and 4, this Plan
shall continue in full force and effect with respect to the Class C shares of
such Series for so long as such continuance is specifically approved at least
annually in the manner provided for approval of this Plan in paragraph 4.
6. SAFECO Securities shall provide to the Board and the Board
shall review, at least quarterly, a written report of the amounts expended with
respect to the Class C shares of each Series by SAFECO Securities under this
Plan and the Distribution Agreement and the purposes for which such
expenditures were made. For purposes of this Plan, "distribution activities"
shall mean any activities in connection with SAFECO Securities' performance
<PAGE> 14
of its obligations under this Plan or the Distribution Agreement that are not
deemed "service activities." For purposes of this Plan, "Service activities"
shall mean activities covered by the definition of "service fee" contained in
Section 26(b) of the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. including the provision by SAFECO Securities and other
broker-dealers of personal, continuing services to investors in the Class C
shares of the Series. Overhead and other expenses of SAFECO Securities related
to their "distribution activities" or "service activities," including telephone
and other communications expenses, may be included in the information regarding
amounts expended for such activities.
7. This Plan may be terminated with respect to the Class C
shares of any Series at any time by vote of a majority of the Independent
Trustees or by vote of a majority of the outstanding voting securities of the
Class C shares of that Series.
8. This Plan may not be amended to increase materially the amount
of distribution fee or service fee provided for in paragraph 1A hereof with
respect to the Class C shares of any Series unless such amendment is approved
by a vote of a majority of the outstanding voting securities of the Class C
shares of that Series, and no material amendment to the Plan shall be made
unless approved in the manner provided for in paragraph 4 hereof.
9. The amount of the distribution and service fees payable by the
Series to SAFECO Securities under paragraph 1 hereof and the Distribution
Agreement is not related directly to expenses incurred by SAFECO Securities on
behalf of such Series in serving as distributor of the Class C shares, and
paragraph 2 hereof and the Distribution Agreement do not obligate the Series to
reimburse SAFECO Securities for such expenses. The distribution and service
fees set forth in paragraph 1A hereof will be paid by the Series to SAFECO
Securities until either the Plan or the Distribution Agreement is terminated or
not renewed. If either the Plan or the Distribution Agreement is terminated or
not renewed with respect to the Class C shares of any Series, any distribution
expenses incurred by SAFECO Securities on behalf of the Class C shares of the
Series in excess of payments of the distribution and service fees specified in
paragraph 1A hereof and the Distribution Agreement which SAFECO Securities has
received or accrued through the termination date are the sole responsibility
and liability of SAFECO Securities, and are not obligations of the Series.
10. While this Plan is in effect, the selection and nomination of
the Trustees who are not interested persons of the Trust shall be committed to
the discretion of the Trustees who are Independent Trustees of the Trust.
11. SAFECO Securities or any other person asserting any right or
claim under this Plan is hereby expressly put on notice of (i) the limitation
of shareholder, officer and trustee
<PAGE> 15
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.
Obligations assumed by the Trust pursuant to this Plan 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 Securities or any other person
asserting any right or claim under this Plan shall not seek satisfaction of any
obligation, right or claim 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.
IN WITNESS WHEREOF, the Trust has executed this Plan of Distribution
on the day and year set forth below in Seattle, Washington.
Date: September 20, 1994
ATTEST: SAFECO ADVISOR SERIES TRUST
Attest: /s/ NEAL A. FULLER By: /s/ DAVID F. HILL
-------------------- -------------------------
Neal A. Fuller David F. Hill
Assistant Secretary President
<PAGE> 16
EXHIBIT A
SAFECO ADVISOR SERIES TRUST
The SAFECO Advisor Series Trust consists of the following Series:
1. SAFECO Advisor Equity Fund
2. SAFECO Advisor Northwest Fund
3. SAFECO Advisor Intermediate-Term Treasury Fund
4. SAFECO Advisor U.S. Government Fund
5. SAFECO Advisor GNMA Fund
6. SAFECO Advisor Municipal Bond Fund
7. SAFECO Advisor Intermediate-Term Municipal Bond Fund
8. SAFECO Advisor Washington Municipal Bond Fund
As of September 20, 1994
<PAGE> 1
EXHIBIT NO. 99.16
CALCULATION OF
PERFORMANCE INFORMATION
<PAGE> 2
EXHIBIT 99.16
SAFECO ADVISOR GNMA FUND - CLASS A SHARES
Calculation of Performance Quotations
The yield for the SAFECO Advisor GNMA Fund - Class A Shares for the 30-day
period ended December 31, 1994 is calculated as follows:
11,393 - 2,999 6
Yield = 2[(---------------- ------------- +1) -1] = 5.95%
166,667 10.29
Where: $11,393= dividends and interest (as defined in the
instructions to Item 22(b)(ii) of Form N-1A)
earned during the period
$2,999= expenses accrued during the period
166,667= average daily number of shares outstanding
during the period
$10.29= offering price per share on December 31,
1994
<PAGE> 3
SAFECO ADVISOR GNMA FUND - CLASS A SHARES
Calculation of Performance Quotations (continued)
The total return for the SAFECO Advisor GNMA Fund - Class A Shares from
September 30, 1994, (initial effective date of Registration Statement) to
December 31, 1994 is calculated as follows:
Since Inception - 3 Months
.25
Total return =$10,000.00 (1 -.0285) = $9,928
992.80 - 1,000.00
Total return = (-------------- - -------------) = -0.72%
1,000.00
____________________________
Average Annual Total Return = (.25 \/ 992.80 / 1,000.00 -1) = -2.85%
Where: 0.25 number of years
$992.80 ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
$1,000.00 a hypothetical investment of $1,000
$10,000.00 a hypothetical investment of $10,000
-.0285 the average annual total return
<PAGE> 4
SAFECO ADVISOR GNMA FUND - CLASS B SHARES
Calculation of Performance Quotations
The yield for the SAFECO Advisor GNMA Fund - Class B Shares for the 30-day
period ended December 31, 1994 is calculated as follows:
11,393 - 4,005 6
Yield = 2[(-------------- ------------- +1) -1] = 5.49%
166,667 9.80
Where: $11,393= dividends and interest (as defined in the
instructions to Item 22(b)(ii) of Form N-1A)
earned during the period
$4,005= expenses accrued during the period
166,667= average daily number of shares outstanding
during the period
$9.80= offering price per share on December 31,
1994
<PAGE> 5
SAFECO ADVISOR GNMA FUND - CLASS B SHARES
Calculation of Performance Quotations (continued)
The total return for the SAFECO Advisor GNMA Fund - Class B Shares from
September 30, 1994, (initial effective date of Registration Statement) to
December 31, 1994 is calculated as follows:
Since Inception - 3 Months
.25
Total return =$0.00 (1 -.0355) = $9,910
991.00 - 1,000.00
Total return = (-------------- - -------------) = -0.90%
1,000.00
_____________________________
Average Annual Total Return = (.25 \/ 991.00 / 1,000.00 -1) = -3.55%
Where: 0.25 number of years
$991.00 ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
$1,000.00 a hypothetical investment of $1,000
$10,000.00 a hypothetical investment of $10,000
-.0355 the average annual total return
<PAGE> 6
SAFECO ADVISOR GNMA FUND - CLASS C SHARES
Calculation of Performance Quotations
The yield for the SAFECO Advisor GNMA Fund - Class C Shares for the 30-day
period ended December 31, 1994 is calculated as follows:
11,393 - 4,005 6
Yield = 2[(-------------- ------------- +1) -1] = 5.49%
166,667 9.80
Where: $11,393= dividends and interest (as defined in the
instructions to Item 22(b)(ii) of Form N-1A)
earned during the period
$4,005= expenses accrued during the period
166,667= average daily number of shares outstanding
during the period
$9.80= offering price per share on December 31,
1994
<PAGE> 7
SAFECO ADVISOR GNMA FUND - CLASS C SHARES
Calculation of Performance Quotations (continued)
The total return for the SAFECO Advisor GNMA Fund - Class C Shares from
September 30, 1994, (initial effective date of Registration Statement) to
December 31, 1994 is calculated as follows:
Since Inception - 3 Months
.25
Total return =$0.00 (1 -.0355) = $9,910
991.00 - 1,000.00
Total return = (-------------- - -------------) = -0.90%
1,000.00
_____________________________
Average Annual Total Return = (.25 \/ 991.00 / 1,000.00 -1) = -3.55%
Where: 0.25 number of years
$991.00 ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
$1,000.00 a hypothetical investment of $1,000
$10,000.00 a hypothetical investment of $10,000
-.0355 the average annual total return
<PAGE> 8
SAFECO ADVISOR INTERMEDIATE-TERM TREASURY FUND - CLASS A SHARES
Calculation of Performance Quotations
The yield for the SAFECO Advisor Intermediate-Term Treasury Fund - Class A
Shares for the 30-day period ended December 31, 1994 is calculated as follows:
9,555 - 2,557 6
Yield = 2[(-------------- ------------- +1) -1] = 4.88%
166,667 10.43
Where: $9,555= dividends and interest (as defined in the
instructions to Item 22(b)(ii) of Form N-1A)
earned during the period
$2,557= expenses accrued during the period
166,667= average daily number of shares outstanding
during the period
$10.43= offering price per share on December 31,
1994
<PAGE> 9
SAFECO ADVISOR INTERMEDIATE-TERM TREASURY FUND - CLASS A SHARES
Calculation of Performance Quotations (continued)
The total return for the SAFECO Advisor Intermediate-Term Treasury Fund - Class
A Shares from September 30, 1994, (initial effective date of Registration
Statement) to December 31, 1994 is calculated as follows:
Since Inception - 3 Months
.25
Total return =$10,000.00 (1 +.0165) = $10,041
1,004.10 - 1,000.00
Total return = (-------------- - -------------) = 0.41%
1,000.00
_________________________
Average Annual Total Return = (.25 \/ 1,004.10 / 1,000.00 -1) = 1.65%
Where: 0.25 number of years
$1,004.10 ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
$1,000.00 a hypothetical investment of $1,000
$10,000.00 a hypothetical investment of $10,000
.0165 the average annual total return
<PAGE> 10
SAFECO ADVISOR INTERMEDIATE-TERM TREASURY FUND - CLASS B SHARES
Calculation of Performance Quotations
The yield for the SAFECO Advisor Intermediate-Term Treasury Fund - Class B
Shares for the 30-day period ended December 31, 1994 is calculated as follows:
9,555 - 3,577 6
Yield = 2[(-------------- ------------- +1) -1] = 4.37%
166,667 9.93
Where: $9,555= dividends and interest (as defined in the
instructions to Item 22(b)(ii) of Form N-1A)
earned during the period
$3,577= expenses accrued during the period
166,667= average daily number of shares outstanding
during the period
$9.93= offering price per share on December 31,
1994
<PAGE> 11
SAFECO ADVISOR INTERMEDIATE-TERM TREASURY FUND - CLASS B SHARES
Calculation of Performance Quotations (continued)
The total return for the SAFECO Advisor Intermediate-Term Treasury Fund - Class
B Shares from September 30, 1994, (initial effective date of Registration
Statement) to December 31, 1994 is calculated as follows:
Since Inception - 3 Months
.25
Total return =$0.00 (1 +.0088) = $10,022
1,002.20 - 1,000.00
Total return = (-------------- - -------------) = 0.22%
1,000.00
_______________________________
Average Annual Total Return = (.25 \/ 1,002.20 / 1,000.00 -1) = 0.88%
Where: 0.25 number of years
$1,002.20 ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
$1,000.00 a hypothetical investment of $1,000
$10,000.00 a hypothetical investment of $10,000
.0088 the average annual total return
<PAGE> 12
SAFECO ADVISOR INTERMEDIATE-TERM TREASURY FUND - CLASS C SHARES
Calculation of Performance Quotations
The yield for the SAFECO Advisor Intermediate-Term Treasury Fund - Class C
Shares for the 30-day period ended December 31, 1994 is calculated as follows:
9,611 - 3,598 6
Yield = 2[(-------------- ------------- +1) -1] = 4.37%
167,653 9.93
Where: $9,611= dividends and interest (as defined in the
instructions to Item 22(b)(ii) of Form N-1A)
earned during the period
$3,598= expenses accrued during the period
167,653= average daily number of shares outstanding
during the period
$9.93= offering price per share on December 31,
1994
<PAGE> 13
SAFECO ADVISOR INTERMEDIATE-TERM TREASURY FUND - CLASS C SHARES
Calculation of Performance Quotations (continued)
The total return for the SAFECO Advisor Intermediate-Term Treasury Fund - Class
C Shares from September 30, 1994, (initial effective date of Registration
Statement) to December 31, 1994 is calculated as follows:
Since Inception - 3 Months
.25
Total return =$0.00 (1 +.0088) = $10,022
1,002.20 - 1,000.00
Total return = (-------------- - -------------) = 0.22%
1,000.00
______________________________
Average Annual Total Return = (.25 \/ 1,002.20 / 1,000.00 -1) = 0.88%
Where: 0.25 number of years
$1,002.20 ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
$1,000.00 a hypothetical investment of $1,000
$10,000.00 a hypothetical investment of $10,000
.0088 the average annual total return
<PAGE> 14
SAFECO ADVISOR MUNICIPAL BOND FUND - CLASS A SHARES
Calculation of Performance Quotations
The yield for the SAFECO Advisor Municipal Bond Fund - Class A Shares for the
30-day period ended December 31, 1994 is calculated as follows:
8,898 - 3,201 6
Yield = 2[(-------------- ------------- +1) -1] = 3.98%
166,667 10.39
Where: $8,898= dividends and interest (as defined in the
instructions to Item 22(b)(ii) of Form N-1A)
earned during the period
$3,201= expenses accrued during the period
166,667= average daily number of shares outstanding
during the period
$10.39= offering price per share on December 31,
1994
<PAGE> 15
SAFECO ADVISOR MUNICIPAL BOND FUND - CLASS A SHARES
Calculation of Performance Quotations (continued)
The total return for the SAFECO Advisor Municipal Bond Fund - Class A Shares
from September 30, 1994, (initial effective date of Registration Statement) to
December 31, 1994 is calculated as follows:
Since Inception - 3 Months
.25
Total return =$10,000.00 (1 -.0064) = $9,984
998.40 - 1,000.00
Total return = (-------------- - -------------) = -0.16%
1,000.00
_____________________________
Average Annual Total Return = (.25 \/ 998.40 / 1,000.00 -1) = -0.64%
Where: 0.25 number of years
$998.40 ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
$1,000.00 a hypothetical investment of $1,000
$10,000.00 a hypothetical investment of $10,000
-.0064 the average annual total return
<PAGE> 16
SAFECO ADVISOR MUNICIPAL BOND FUND - CLASS B SHARES
Calculation of Performance Quotations
The yield for the SAFECO Advisor Municipal Bond Fund - Class B Shares for the
30-day period ended December 31, 1994 is calculated as follows:
8,898 - 4,210 6
Yield = 2[(-------------- ------------- +1) -1] = 3.43%
166,667 9.90
Where: $8,898= dividends and interest (as defined in the
instructions to Item 22(b)(ii) of Form N-1A)
earned during the period
$4,210= expenses accrued during the period
166,667= average daily number of shares outstanding
during the period
$9.90= offering price per share on December 31,
1994
<PAGE> 17
SAFECO ADVISOR MUNICIPAL BOND FUND - CLASS B SHARES
Calculation of Performance Quotations (continued)
The total return for the SAFECO Advisor Municipal Bond Fund - Class B Shares
from September 30, 1994, (initial effective date of Registration Statement) to
December 31, 1994 is calculated as follows:
Since Inception - 3 Months
.25
Total return =$0.00 (1 -.0139) = $9,965
996.50 - 1,000.00
Total return = (-------------- - -------------) = -0.35%
1,000.00
_____________________________
Average Annual Total Return = (.25 \/ 996.50 / 1,000.00 -1) = -1.39%
Where: 0.25 number of years
$996.50 ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
$1,000.00 a hypothetical investment of $1,000
$10,000.00 a hypothetical investment of $10,000
-.0139 the average annual total return
<PAGE> 18
SAFECO ADVISOR MUNICIPAL BOND FUND - CLASS C SHARES
Calculation of Performance Quotations
The yield for the SAFECO Advisor Municipal Bond Fund - Class C Shares for the
30-day period ended December 31, 1994 is calculated as follows:
8,898 - 4,210 6
Yield = 2[(-------------- ------------- +1) -1] = 3.43%
166,667 9.90
Where: $8,898= dividends and interest (as defined in the
instructions to Item 22(b)(ii) of Form N-1A)
earned during the period
$4,210= expenses accrued during the period
166,667= average daily number of shares outstanding
during the period
$9.90= offering price per share on December 31,
1994
<PAGE> 19
SAFECO ADVISOR MUNICIPAL BOND FUND - CLASS C SHARES
Calculation of Performance Quotations (continued)
The total return for the SAFECO Advisor Municipal Bond Fund - Class C Shares
from September 30, 1994, (initial effective date of Registration Statement) to
December 31, 1994 is calculated as follows:
Since Inception - 3 Months
.25
Total return =$0.00 (1 -.0139) = $9,965
996.50 - 1,000.00
Total return = (-------------- - -------------) = -0.35%
1,000.00
_____________________________
Average Annual Total Return = (.25 \/ 996.50 / 1,000.00 -1) = -1.39%
Where: 0.25 number of years
$996.50 ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
$1,000.00 a hypothetical investment of $1,000
$10,000.00 a hypothetical investment of $10,000
-.0139 the average annual total return
<PAGE> 20
SAFECO ADVISOR U.S. GOVERNMENT FUND - CLASS A SHARES
Calculation of Performance Quotations
The yield for the SAFECO Advisor U.S. Government Fund - Class A Shares for the
30-day period ended December 31, 1994 is calculated as follows:
9,425 - 2,557 6
Yield = 2[(-------------- ------------- +1) -1] = 4.76%
166,667 10.49
Where: $9,425= dividends and interest (as defined in the
instructions to Item 22(b)(ii) of Form N-1A)
earned during the period
$2,557= expenses accrued during the period
166,667= average daily number of shares outstanding
during the period
$10.49= offering price per share on December 31,
1994
<PAGE> 21
SAFECO ADVISOR U.S. GOVERNMENT FUND - CLASS A SHARES
Calculation of Performance Quotations (continued)
The total return for the SAFECO Advisor U.S. Government Fund - Class A Shares
from September 30, 1994, (initial effective date of Registration Statement) to
December 31, 1994 is calculated as follows:
Since Inception - 3 Months
.25
Total return =$10,000 (1 +.0402) = $10,099
1,009.90 - 1,000.00
Total return = (-------------- - -------------) = 0.99%
1,000.00
_______________________________
Average Annual Total Return = (.25 \/ 1,009.90 / 1,000.00 -1) = 4.02%
Where: 0.25 number of years
$1,009.90 ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
$1,000.00 a hypothetical investment of $1,000
$10,000.00 a hypothetical investment of $10,000
.0402 the average annual total return
<PAGE> 22
SAFECO ADVISOR U.S. GOVERNMENT FUND - CLASS B SHARES
Calculation of Performance Quotations
The yield for the SAFECO Advisor U.S. Government Fund - Class B Shares for the
30-day period ended December 31, 1994 is calculated as follows:
9,425 - 3,583 6
Yield = 2[(-------------- ------------- +1) -1] = 4.25%
166,667 9.99
Where: $9,425= dividends and interest (as defined in the
instructions to Item 22(b)(ii) of Form N-1A)
earned during the period
$3,583= expenses accrued during the period
166,667= average daily number of shares outstanding
during the period
$9.99= offering price per share on December 31,
1994
<PAGE> 23
SAFECO ADVISOR U.S. GOVERNMENT FUND - CLASS B SHARES
Calculation of Performance Quotations (continued)
The total return for the SAFECO Advisor U.S. Government Fund - Class B Shares
from September 30, 1994, (initial effective date of Registration Statement) to
December 31, 1994 is calculated as follows:
Since Inception - 3 Months
.25
Total return =$0.00 (1 +.0320) = $10,079
1,007.90 - 1,000.00
Total return = (-------------- - -------------) = 0.79%
1,000.00
_______________________________
Average Annual Total Return = (.25 \/ 1,007.90 / 1,000.00 -1) = 3.20%
Where: 0.25 number of years
$1,007.90 ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
$1,000.00 a hypothetical investment of $1,000
$10,000.00 a hypothetical investment of $10,000
.0320 the average annual total return
<PAGE> 24
SAFECO ADVISOR U.S. GOVERNMENT FUND - CLASS C SHARES
Calculation of Performance Quotations
The yield for the SAFECO Advisor U.S. Government Fund - Class C Shares for the
30-day period ended December 31, 1994 is calculated as follows:
9,425 - 3,583 6
Yield = 2[(-------------- ------------- +1) -1] = 4.25%
166,666 9.99
Where: $9,425= dividends and interest (as defined in the
instructions to Item 22(b)(ii) of Form N-1A)
earned during the period
$3,583= expenses accrued during the period
166,666= average daily number of shares outstanding
during the period
$9.99= offering price per share on December 31,
1994
<PAGE> 25
SAFECO ADVISOR U.S. GOVERNMENT FUND - CLASS C SHARES
Calculation of Performance Quotations (continued)
The total return for the SAFECO Advisor U.S. Government Fund - Class C Shares
from September 30, 1994, (initial effective date of Registration Statement) to
December 31, 1994 is calculated as follows:
Since Inception - 3 Months
.25
Total return =$0.00 (1 +.0320) = $10,079
1,007.90 - 1,000.00
Total return = (-------------- - -------------) = 0.79%
1,000.00
_______________________________
Average Annual Total Return = (.25 \/ 1,007.90 / 1,000.00 -1) = 3.20%
Where: 0.25 number of years
$1,007.90 ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
$1,000.00 a hypothetical investment of $1,000
$10,000.00 a hypothetical investment of $10,000
+.0320 the average annual total return
<PAGE> 26
SAFECO ADVISOR INTERMEDIATE-TERM MUNICIPAL BOND FUND - CLASS A SHARES
Calculation of Performance Quotations
The yield for the SAFECO Advisor Intermediate-Term Municipal Bond Fund - Class
A Shares for the 30-day period ended December 31, 1994 is calculated as
follows:
7,669 - 3,012 6
Yield = 2[(-------------- ------------- +1) -1] = 3.28%
166,667 10.29
Where: $7,669= dividends and interest (as defined in the
instructions to Item 22(b)(ii) of Form N-1A)
earned during the period
$3,012= expenses accrued during the period
166,667= average daily number of shares outstanding
during the period
$10.29= offering price per share on December 31,
1994
<PAGE> 27
SAFECO ADVISOR INTERMEDIATE-TERM MUNICIPAL BOND FUND - CLASS A SHARES
Calculation of Performance Quotations (continued)
The total return for the SAFECO Advisor Intermediate-Term Municipal Bond Fund -
Class A Shares from September 30, 1994, (initial effective date of Registration
Statement) to December 31, 1994 is calculated as follows:
Since Inception - 3 Months
.25
Total return =$10,000.00 (1 -.0506) = $9,871
987.10 - 1,000.00
Total return = (-------------- - -------------) = -1.29%
1,000.00
_____________________________
Average Annual Total Return = (.25 \/ 987.10 / 1,000.00 -1) = -5.06%
Where: 0.25 number of years
$987.10 ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
$1,000.00 a hypothetical investment of $1,000
$10,000.00 a hypothetical investment of $10,000
-.0506 the average annual total return
<PAGE> 28
SAFECO ADVISOR INTERMEDIATE-TERM MUNICIPAL BOND FUND - CLASS B SHARES
Calculation of Performance Quotations
The yield for the SAFECO Advisor Intermediate-Term Municipal Bond Fund - Class
B Shares for the 30-day period ended December 31, 1994 is calculated as
follows:
7,669 - 4,016 6
Yield = 2[(-------------- ------------- +1) -1] = 2.70%
166,667 9.80
Where: $7,669= dividends and interest (as defined in the
instructions to Item 22(b)(ii) of Form N-1A)
earned during the period
$4,016= expenses accrued during the period
166,667= average daily number of shares outstanding
during the period
$9.80= offering price per share on December 31,
1994
<PAGE> 29
SAFECO ADVISOR INTERMEDIATE-TERM MUNICIPAL BOND FUND - CLASS B SHARES
Calculation of Performance Quotations (continued)
The total return for the SAFECO Advisor Intermediate-Term Municipal Bond Fund -
Class B Shares from September 30, 1994, (initial effective date of Registration
Statement) to December 31, 1994 is calculated as follows:
Since Inception - 3 Months
.25
Total return =$0.00 (1 -.0579) = $9,852
985.20 - 1,000.00
Total return = (-------------- - -------------) = -1.48%
1,000.00
____________________________
Average Annual Total Return = (.25 \/ 985.20 / 1,000.00 -1) = -5.79%
Where: 0.25 number of years
$985.20 ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
$1,000.00 a hypothetical investment of $1,000
$10,000.00 a hypothetical investment of $10,000
-.0579 the average annual total return
<PAGE> 30
SAFECO ADVISOR INTERMEDIATE-TERM MUNICIPAL BOND FUND - CLASS C SHARES
Calculation of Performance Quotations
The yield for the SAFECO Advisor Intermediate-Term Municipal Bond Fund - Class
C Shares for the 30-day period ended December 31, 1994 is calculated as
follows:
7,669 - 4,016 6
Yield = 2[(-------------- ------------- +1) -1] = 2.70%
166,667 9.80
Where: $7,669= dividends and interest (as defined in the
instructions to Item 22(b)(ii) of Form N-1A)
earned during the period
$4,016= expenses accrued during the period
166,667= average daily number of shares outstanding
during the period
$9.80= offering price per share on December 31,
1994
<PAGE> 31
SAFECO ADVISOR INTERMEDIATE-TERM MUNICIPAL BOND FUND - CLASS C SHARES
Calculation of Performance Quotations (continued)
The total return for the SAFECO Advisor Intermediate-Term Municipal Bond Fund -
Class C Shares from September 30, 1994, (initial effective date of Registration
Statement) to December 31, 1994 is calculated as follows:
Since Inception - 3 Months
.25
Total return =$0.00 (1 -.0579) = $9,852
985.20 - 1,000.00
Total return = (-------------- - -------------) = -1.48%
1,000.00
_____________________________
Average Annual Total Return = (.25 \/ 985.20 / 1,000.00 -1) = -5.79%
Where: 0.25 number of years
$985.20 ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
$1,000.00 a hypothetical investment of $1,000
$10,000.00 a hypothetical investment of $10,000
-.0579 the average annual total return
<PAGE> 32
SAFECO ADVISOR WASHINGTON MUNICIPAL BOND FUND - CLASS A SHARES
Calculation of Performance Quotations
The yield for the SAFECO Advisor Washington Municipal Bond Fund - Class A
Shares for the 30-day period ended December 31, 1994 is calculated as follows:
8,654 - 3,056 6
Yield = 2[(-------------- ------------- +1) -1] = 3.94%
166,667 10.31
Where: $8,654= dividends and interest (as defined in the
instructions to Item 22(b)(ii) of Form N-1A)
earned during the period
$3,056= expenses accrued during the period
166,667= average daily number of shares outstanding
during the period
$10.31= offering price per share on December 31,
1994
<PAGE> 33
SAFECO ADVISOR WASHINGTON MUNICIPAL BOND FUND - CLASS A SHARES
Calculation of Performance Quotations (continued)
The total return for the SAFECO Advisor Washington Municipal Bond Fund - Class
A Shares from September 30, 1994, (initial effective date of Registration
Statement) to December 31, 1994 is calculated as follows:
Since Inception - 3 Months
.25
Total return =$10,000 (1 -.0367) = $9,907
990.70 - 1,000.00
Total return = (-------------- - -------------) = -0.93%
1,000.00
_____________________________
Average Annual Total Return = (.25 \/ 990.70 / 1,000.00 -1) = -3.67%
Where: 0.25 number of years
$990.70 ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
$1,000.00 a hypothetical investment of $1,000
$10,000.00 a hypothetical investment of $10,000
-.0367 the average annual total return
<PAGE> 34
SAFECO ADVISOR WASHINGTON MUNICIPAL BOND FUND - CLASS B SHARES
Calculation of Performance Quotations
The yield for the SAFECO Advisor Washington Municipal Bond Fund - Class B
Shares for the 30-day period ended December 31, 1994 is calculated as follows:
8,815 - 4,126 6
Yield = 2[(-------------- ------------- +1) -1] = 3.42%
168,523 9.82
Where: $8,815= dividends and interest (as defined in the
instructions to Item 22(b)(ii) of Form N-1A)
earned during the period
$4,126= expenses accrued during the period
168,523= average daily number of shares outstanding
during the period
$9.82= offering price per share on December 31,
1994
<PAGE> 35
SAFECO ADVISOR WASHINGTON MUNICIPAL BOND FUND - CLASS B SHARES
Calculation of Performance Quotations (continued)
The total return for the SAFECO Advisor Washington Municipal Bond Fund - Class
B Shares from September 30, 1994, (initial effective date of Registration
Statement) to December 31, 1994 is calculated as follows:
Since Inception - 3 Months
.25
Total return =$0.00 (1 -.0441) = $9,888
988.80 - 1,000.00
Total return = (-------------- - -------------) = -1.12%
1,000.00
____________________________
Average Annual Total Return = (.25 \/ 988.80 / 1,000.00 -1) = -4.41%
Where: 0.25 number of years
$988.80 ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
$1,000.00 a hypothetical investment of $1,000
$10,000.00 a hypothetical investment of $10,000
-.0441 the average annual total return
<PAGE> 36
SAFECO ADVISOR WASHINGTON MUNICIPAL BOND FUND - CLASS C SHARES
Calculation of Performance Quotations
The yield for the SAFECO Advisor Washington Municipal Bond Fund - Class C
Shares for the 30-day period ended December 31, 1994 is calculated as follows:
8,958 - 4,176 6
Yield = 2[(-------------- ------------- +1) -1] = 3.46%
169,989 9.82
Where: $8,958= dividends and interest (as defined in the
instructions to Item 22(b)(ii) of Form N-1A)
earned during the period
$4,176= expenses accrued during the period
169,989= average daily number of shares outstanding
during the period
$9.82= offering price per share on December 31,
1994
<PAGE> 37
SAFECO ADVISOR WASHINGTON MUNICIPAL BOND FUND - CLASS C SHARES
Calculation of Performance Quotations (continued)
The total return for the SAFECO Advisor Washington Municipal Bond Fund - Class
C Shares from September 30, 1994, (initial effective date of Registration
Statement) to December 31, 1994 is calculated as follows:
Since Inception - 3 Months
.25
Total return =$0.00 (1 -.0441) = $9,888
988.80 - 1,000.00
Total return = (-------------- - -------------) = -1.12%
1,000.00
_____________________________
Average Annual Total Return = (.25 \/ 988.80 / 1,000.00 -1) = -4.41%
Where: 0.25 number of years
$988.80 ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
$1,000.00 a hypothetical investment of $1,000
$10,000.00 a hypothetical investment of $10,000
-.0441 the average annual total return
<PAGE> 38
SAFECO ADVISOR NORTHWEST FUND - CLASS A SHARES
Calculation of Performance Quotations (continued)
The total return for the SAFECO Advisor Northwest Fund - Class A Shares from
September 30, 1994, (initial effective date of Registration Statement) to
December 31, 1994 is calculated as follows:
Since Inception - 3 Months
.25
Total return =$10,000.00 (1 -.0963) = $9,750
975.00 - 1,000.00
Total return = (-------------- - -------------) = -2.50%
1,000.00
_____________________________
Average Annual Total Return = (.25 \/ 975.00 / 1,000.00 -1) = -9.63%
Where: 0.25 number of years
$975.00 ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
$1,000.00 a hypothetical investment of $1,000
$10,000.00 a hypothetical investment of $10,000
-.0963 the average annual total return
<PAGE> 39
SAFECO ADVISOR NORTHWEST FUND - CLASS B SHARES
Calculation of Performance Quotations (continued)
The total return for the SAFECO Advisor Northwest Fund - Class B Shares from
September 30, 1994, (initial effective date of Registration Statement) to
December 31, 1994 is calculated as follows:
Since Inception - 3 Months
.25
Total return =$0.00 (1 -.1037) = $9,730
973.00 - 1,000.00
Total return = (-------------- - -------------) = -2.70%
1,000.00
_____________________________
Average Annual Total Return = (.25 \/ 973.00 / 1,000.00 -1) = -10.37%
Where: 0.25 number of years
$973.00 ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
$1,000.00 a hypothetical investment of $1,000
$10,000.00 a hypothetical investment of $10,000
-.1037 the average annual total return
<PAGE> 40
SAFECO ADVISOR NORTHWEST FUND - CLASS C SHARES
Calculation of Performance Quotations (continued)
The total return for the SAFECO Advisor Northwest Fund - Class C Shares from
September 30, 1994, (initial effective date of Registration Statement) to
December 31, 1994 is calculated as follows:
Since Inception - 3 Months
.25
Total return =$0.00 (1 -.1037) = $9,730
973.00 - 1,000.00
Total return = (-------------- - -------------) = -2.70%
1,000.00
_____________________________
Average Annual Total Return = (.25 \/ 973.00 / 1,000.00 -1) = -10.37%
Where: 0.25 number of years
$973.00 ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
$1,000.00 a hypothetical investment of $1,000
$10,000.00 a hypothetical investment of $10,000
-.1037 the average annual total return
<PAGE> 41
SAFECO ADVISOR EQUITY FUND - CLASS A SHARES
Calculation of Performance Quotations (continued)
The total return for the SAFECO Advisor Equity Fund - Class A Shares from
September 30, 1994, (initial effective date of Registration Statement) to
December 31, 1994 is calculated as follows:
Since Inception - 3 Months
.25
Total return =$10,000 (1 -.0814) = $9,790
979.00 - 1,000.00
Total return = (-------------- - -------------) = -2.10%
1,000.00
_____________________________
Average Annual Total Return = (.25 \/ 979.00 / 1,000.00 -1) = -8.14%
Where: 0.25 number of years
$979.00 ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
$1,000.00 a hypothetical investment of $1,000
$10,000.00 a hypothetical investment of $10,000
-.0814 the average annual total return
<PAGE> 42
SAFECO ADVISOR EQUITY FUND - CLASS B SHARES
Calculation of Performance Quotations (continued)
The total return for the SAFECO Advisor Equity Fund - Class B Shares from
September 30, 1994, (initial effective date of Registration Statement) to
December 31, 1994 is calculated as follows:
Since Inception - 3 Months
.25
Total return =$0.00 (1 -.0885) = $9,771
977.10 - 1,000.00
Total return = (-------------- - -------------) = -2.29%
1,000.00
_____________________________
Average Annual Total Return = (.25 \/ 977.10 / 1,000.00 -1) = -8.85%
Where: 0.25 number of years
$977.10 ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
$1,000.00 a hypothetical investment of $1,000
$10,000.00 a hypothetical investment of $10,000
-.0885 the average annual total return
<PAGE> 43
SAFECO ADVISOR EQUITY FUND - CLASS C SHARES
Calculation of Performance Quotations (continued)
The total return for the SAFECO Advisor Equity Fund - Class C Shares from
September 30, 1994, (initial effective date of Registration Statement) to
December 31, 1994 is calculated as follows:
Since Inception - 3 Months
.25
Total return =$0.00 (1 -.0885) = $9,771
977.10 - 1,000.00
Total return = (-------------- - -------------) = -2.29%
1,000.00
_____________________________
Average Annual Total Return = (.25 \/ 977.10 / 1,000.00 -1) = -8.85%
Where: 0.25 number of years
$977.10 ending redeemable value of a hypothetical
$1,000 investment at the end of a specified
period of time
$1,000.00 a hypothetical investment of $1,000
$10,000.00 a hypothetical investment of $10,000
-.0885 the average annual total return
