SAFECO MONEY MARKET TRUSTS, 497, 1996-08-08

SAFECO MONEY MARKET TRUSTS
497, 1996-08-08

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<PAGE> 1

PROSPECTUS

- --------------------------------------------------------------------------------

SUBJECT TO COMPLETION, DATED JULY 30, 1996

SAFECO GROWTH FUND
SAFECO EQUITY FUND
SAFECO INCOME FUND
SAFECO NORTHWEST FUND
SAFECO BALANCED FUND
SAFECO INTERNATIONAL STOCK FUND
SAFECO SMALL COMPANY STOCK FUND
SAFECO INTERMEDIATE-TERM U.S. TREASURY FUND
SAFECO MANAGED BOND FUND
SAFECO MUNICIPAL BOND FUND
SAFECO CALIFORNIA TAX-FREE INCOME FUND
SAFECO WASHINGTON STATE MUNICIPAL BOND FUND
SAFECO MONEY MARKET FUND

Advisor Class A
Advisor Class B September 30, 1996
- --------------------------------------------------------------------------------

This Prospectus sets forth the information a prospective investor should know
before investing. PLEASE READ AND RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE.
Statements of Additional Information relating to the Advisor Class A ("Class A")
and Advisor Class B ("Class B") shares (collectively "Advisor Classes"), dated
September 30, 1996 and incorporated herein by this reference, have been filed
with the Securities and Exchange Commission and are available at no charge upon
request by calling the telephone number listed on this page. The Statements of
Additional Information contain more information about many of the topics in this
Prospectus as well as information about the trustees and officers of the Trusts.

For additional assistance, please contact your investment professional, or call
or write:

<TABLE>
<S> <C>
NATIONWIDE 1-800-463-8791 SAFECO MUTUAL FUNDS
ADVISOR CLASS SHARES
P.O. BOX 34680
SEATTLE, WA 98124-1680
</TABLE>

All telephone calls are tape-recorded for your protection.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

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, AND FUND SHARES ARE SUBJECT TO INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. THERE CAN BE NO
ASSURANCE THAT THE SAFECO MONEY MARKET FUND WILL MAINTAIN A STABLE $1.00 SHARE
PRICE.

THE SAFECO CALIFORNIA TAX-FREE INCOME FUND IS OFFERED FOR SALE ONLY TO RESIDENTS
OF THE STATE OF CALIFORNIA. THE SAFECO WASHINGTON STATE MUNICIPAL BOND FUND IS
OFFERED FOR SALE ONLY TO RESIDENTS OF THE STATE OF WASHINGTON. THESE FUNDS ARE
NOT PERMITTED TO OFFER OR SELL SHARES TO RESIDENTS OF OTHER STATES.
- --------------------------------------------------------------------------------

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
<PAGE> 2

- --------------------------------------------------------------------------------

Each fund named below ("Fund") is a series of one of the following trusts (each
a "Trust"): the SAFECO Common Stock Trust ("Common Stock Trust"), the SAFECO
Taxable Bond Trust ("Taxable Bond Trust"), the SAFECO Managed Bond Trust
("Managed Bond Trust"), the SAFECO Tax-Exempt Bond Trust ("Tax-Exempt Bond
Trust") or the SAFECO Money Market Trust ("Money Market Trust"). The investment
objective for each Fund appears below.

SAFECO GROWTH FUND ("Growth Fund") has as its investment objective to seek
growth of capital and the increased income that ordinarily follows from such
growth. The Growth Fund ordinarily invests a preponderance of its assets in
common stock selected primarily for potential appreciation.

SAFECO EQUITY FUND ("Equity Fund") has as its investment objective to seek
long-term growth of capital and reasonable current income. The Equity Fund
invests principally in common stock selected for appreciation and/or dividend
potential and from a long-range investment standpoint.

SAFECO INCOME FUND ("Income Fund") has as its investment objective to seek high
current income and, when consistent with its objective, the long-term growth of
capital. The Income Fund invests primarily in common and preferred stock and in
convertible bonds selected for dividend potential.

SAFECO NORTHWEST FUND ("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").

SAFECO BALANCED FUND ("Balanced Fund") has as its investment objective to seek
growth and income consistent with the preservation of capital. To pursue its
objective, the Balanced Fund will invest primarily in equity and fixed income
securities.

SAFECO INTERNATIONAL STOCK FUND ("International Fund") has as its investment
objective to seek maximum long-term total return (capital appreciation and
income) by investing primarily in common stock of established non-U.S.
companies. To pursue its objective, the International Fund, under normal market
conditions, will invest at least 65% of its total assets in the securities of
companies domiciled in at least five countries, not including the United States.

-- 2 --
<PAGE> 3

- --------------------------------------------------------------------------------

SAFECO SMALL COMPANY STOCK FUND ("Small Company Fund") has as its investment
objective to seek long-term growth of capital through investing primarily in
small-sized companies. To pursue its objective, the Small Company Fund will
invest primarily in companies with total market capitalization of less than $1
billion.

SAFECO INTERMEDIATE-TERM U.S. TREASURY FUND ("Intermediate Treasury Fund") has
as its investment objective to provide as high a level of current interest
income as is consistent with the preservation of capital. During normal market
conditions, the Fund will invest at least 65% of its total assets in direct
obligations of the U.S. Treasury.

SAFECO MANAGED BOND FUND ("Managed Bond Fund") has as its investment objective
to provide as high a level of total return as is consistent with the relative
stability of capital through the purchase of investment grade debt securities.

SAFECO MUNICIPAL BOND FUND ("Municipal Bond Fund") has as its investment
objective to provide as high a level of current interest income exempt from
federal income tax as is consistent with the relative stability of capital.

SAFECO CALIFORNIA TAX-FREE INCOME FUND ("California Fund") has as its investment
objective to provide as high a level of current interest income exempt from
federal income tax and California state personal income tax as is consistent
with the relative stability of capital.

SAFECO WASHINGTON STATE MUNICIPAL BOND FUND ("Washington Fund") has as its
investment objective to provide as high a level of current interest income
exempt from federal income tax as is consistent with prudent investment risk.

SAFECO MONEY MARKET FUND ("Money Market Fund") has as its investment objective
to seek as high a level of current income as is consistent with the preservation
of capital and liquidity through investment in high-quality money market
instruments maturing in thirteen months or less.

There is no assurance that a Fund will achieve its investment objective.

-- 3 --
<PAGE> 4

- --------------------------------------------------------------------------------

TABLE OF CONTENTS

<TABLE>
<S> <C>
Introduction to the Trusts and the Funds 5
Expenses 7
Financial Highlights 11
Sub-Adviser Information for the International Fund 22
Alternative Purchase Arrangement 22
Each Fund's Investment Objective and Policies 24
Risk Factors 44
Portfolio Managers 47
How to Purchase Shares 49
How to Redeem Shares 54
How to Systematically Purchase or Redeem Shares 56
How to Exchange Shares From One Fund to Another 56
Telephone Transactions 57
Share Price Calculation 58
Information About Share Ownership and Companies
that Provide Services to the Trusts 60
Distribution Plans 64
Persons Controlling Certain Funds 65
Performance Information 65
Fund Distributions and How They are Taxed 66
Tax-Deferred Retirement Plans 70
Account Statements 71
Account Changes and Signature Requirements 71
Description of Stocks, Bonds and Convertible Securities 71
Ratings Supplement 72
</TABLE>

-- 4 --
<PAGE> 5

- --------------------------------------------------------------------------------

INTRODUCTION TO THE TRUSTS AND THE FUNDS

Each Trust is an open-end management investment company that issues shares
representing one or more series. This Prospectus offers shares of the stock,
fixed-income, tax-exempt income and money market Funds listed below. The stock
Funds offered are the Growth Fund, the Equity Fund, the Income Fund, the
Northwest Fund, the Balanced Fund, the International Fund and the Small Company
Fund (collectively, the "Stock Funds"). Each of the Stock Funds is a diversified
series of the Common Stock Trust.

The fixed-income Funds offered are the Intermediate Treasury Fund and the
Managed Bond Fund (collectively, the "Taxable Fixed-Income Funds"). The
Intermediate Treasury Fund and the Managed Bond Fund are diversified series of
the Taxable Bond Trust and the Managed Bond Trust, respectively. Prior to
September 30, 1996, the name of the Managed Bond Fund was the SAFECO
Fixed-Income Portfolio and the name of the Managed Bond Trust was the SAFECO
Institutional Series Trust.

The tax-exempt income Funds offered are the Municipal Bond Fund, the California
Fund and the Washington Fund (collectively, the "Tax-Exempt Income Funds"). Each
of the Tax-Exempt Income Funds is a diversified series of the Tax-Exempt Bond
Trust.

This Prospectus also offers the Money Market Fund, which is a diversified series
of the Money Market Trust.

The Funds' investment objectives appear on pages 2 and 3.

THE FUNDS

Each Fund offers multiple classes of shares. The Advisor Classes of shares are
offered to investors who engage the services of an investment professional
through this Prospectus. For each Fund (except the Money Market Fund), Class A
shares are subject to a front-end sales charge and pay a Rule 12b-1 fee. Class B
shares are not subject to a front-end sales charge, but may be subject to a
contingent deferred sales charge ("CDSC") and pay a higher Rule 12b-1 fee.

For the Money Market Fund, Class A shares are sold at net asset value with no
front-end sales charge. A front-end sales charge may apply when you exchange
your Class A Money Market Fund shares for Class A shares of other Funds. Money
Market Fund Class B Shares are sold at net asset value and are not subject to a
CDSC upon redemption, provided that the shareholder has remained solely invested
in Money Market Fund Class B shares. A CDSC may apply upon redemption of Money
Market Fund Class B shares that have been exchanged at any time during the
investors ownership for Class B shares of other Funds. Money Market Fund Class A
and Class B shares do not currently pay Rule 12b-1 fees.

EACH FUND:

- --Offers easy access to your money through telephone redemptions and wire
transfers.

- --Has a minimum initial investment of $1,000 for regular accounts and $250 for
individual retirement accounts ("IRAs"). No minimum initial investment is
required to establish the Automatic Investment Method ("AIM") or Payroll
Deduction Plan.

-- 5 --
<PAGE> 6

- --------------------------------------------------------------------------------

INTRODUCTION TO THE TRUSTS AND THE FUNDS (Continued)

RISK FACTORS

There is, of course, no assurance that a Fund will achieve its investment
objective. See "Each Fund's Investment Objective and Policies" for more
information.

There is a risk that the market value of each Fund's portfolio of securities may
decrease and result in a decrease in the value of a shareholder's investment.
Because the Northwest, California and Washington Funds concentrate their
investments in geographic regions, they may be subject to special risks.
Investors should carefully consider the investment risks of such geographic
concentration before purchasing shares of those Funds. Because the International
Fund invests primarily in foreign securities, it is subject to various risks in
addition to those associated with U.S. investments. For example, the value of
the International Fund depends in part upon currency values, the political and
regulatory environments, and overall economic factors in the countries in which
the Fund invests. The Small Company Fund invests in small-sized companies, which
involves greater risks than investments in larger, more established issuers and
their securities can be subject to more abrupt and erratic movements in price.
The value of the Intermediate Treasury Fund, Managed Bond Fund, Municipal Bond
Fund, California Fund and Washington Fund will normally fluctuate inversely with
changes in market interest rates. The principal risk associated with money
market funds is that they may experience a delay or failure in principal or
interest payments at maturity of one or more of the portfolio securities. The
Money Market Fund's yield will fluctuate with general money market interest
rates. See "Each Fund's Investment Objective and Policies" for more information.

INVESTMENT ADVISER; SUB-ADVISER OF INTERNATIONAL FUND

Each Fund is managed by SAFECO Asset Management Company ("SAM"). SAM is
headquartered in Seattle, Washington and managed over $2 billion in mutual fund
assets as of June 30, 1996. SAM has been an adviser to mutual funds and other
investment portfolios since 1973 and its predecessors have been advisers since
1932. The Bank of Ireland Asset Management (U.S.) Limited (the "Sub-Adviser")
acts as a sub-adviser to the International Fund. The Sub-Adviser is a direct,
wholly owned subsidiary of Bank of Ireland Asset Management Limited (an
investment advisory firm), which is headquartered in Dublin, Ireland, and an
indirect, wholly owned subsidiary of the Bank of Ireland, which is also
headquartered in Dublin, Ireland. See "Information about Share Ownership and
Companies that Provide Services to the Trusts" for more information.

-- 6 --
<PAGE> 7

- --------------------------------------------------------------------------------

EXPENSES

A. SHAREHOLDER TRANSACTION EXPENSES FOR CLASS A AND CLASS B OF EACH FUND

<TABLE>
<CAPTION>
CLASS A CLASS B
------- -------
<S> <C> <C>
Maximum Sales Charge on Purchases 4.50%* NONE
(As a Percentage of Offering Price)
Sales Charge on Reinvested Dividends NONE NONE
Maximum Contingent Deferred Sales Charge (CDSC) NONE* 5.00%**
Redemption Fees NONE NONE
Exchange Fees NONE NONE
</TABLE>

* Except for initial purchases of the Money Market Fund. In addition, purchases
of $1,000,000 or more of Class A shares are not subject to a front-end sales
charge, but a 1% CDSC will apply to redemptions made in the first year. See
"How to Purchase Shares" on page 49 for more information.

** Except for initial purchases of the Money Market Fund. A CDSC may apply to
redemptions from the Money Market Fund that follow exchanges from Class B
shares of another Fund. See "How to Purchase Shares" on page 49 for more
information.

Sales charge waivers and reduced sales charge purchase plans are available for
Class A shares. See "How to Purchase Shares" on page 49 for more information.
The maximum 5% CDSC on Class B shares applies to redemptions during the first
year after purchase, declining to 0% after six years. Class B shares of a Fund
convert automatically into Class A shares of that Fund six years after purchase.
Money Market Fund Class B shareholders who subsequently exchange into Class B of
another Fund do not receive credit for the initial time invested in the Money
Market Fund for purposes of calculating any CDSC due upon redemption or the
conversion to Class A Shares. See "Purchasing Advisor Class B Shares" on page 52
for more information.

SAFECO Services Corporation ("SAFECO Services"), 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>
GROWTH FUND EQUITY FUND INCOME FUND
------------------- ------------------- -------------------
ADVISOR ADVISOR ADVISOR ADVISOR ADVISOR ADVISOR
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Management Fee .67% .67% .61% .61% .68% .68%
Rule 12b-1 Fees .25% 1.00% .25% 1.00% .25% 1.00%
Other Expenses .31% .31% .23% .23% .18% .18%
----- ----- ----- ----- ----- -----
Total Operating
Expenses (estimated) 1.23% 1.98% 1.09% 1.84% 1.11% 1.86%
</TABLE>

<TABLE>
<CAPTION>
NORTHWEST FUND BALANCED FUND INTERNATIONAL FUND
------------------- ------------------- -------------------
ADVISOR ADVISOR ADVISOR ADVISOR ADVISOR ADVISOR
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Management Fee .73% .73% .75% .75% 1.10% 1.10%
Rule 12b-1 Fees .25% 1.00% .25% 1.00% .25% 1.00%
Other Expenses .36% .36% .24% .24% .23% .23%
----- ----- ----- ----- ----- -----
Total Operating
Expenses (estimated) 1.34% 2.09% 1.24% 1.99% 1.58% 2.33%
</TABLE>

-- 7 --
<PAGE> 8

- --------------------------------------------------------------------------------

EXPENSES (Continued)

<TABLE>
<CAPTION>
SMALL COMPANY INTERMEDIATE MANAGED BOND FUND
FUND TREASURY FUND
------------------- ------------------- -------------------
ADVISOR ADVISOR ADVISOR ADVISOR ADVISOR ADVISOR
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Management Fee .85% .85% .54% .54% .49% .49%
Rule 12b-1 Fees .25% 1.00% .25% 1.00% .25% 1.00%
Other Expenses .23% .23% .42% .42% .67% .67%
----- ----- ----- ----- ----- -----
Total Operating
Expenses (estimated) 1.33% 2.08% 1.21% 1.96% 1.41% 2.16%
</TABLE>

<TABLE>
<CAPTION>
MONEY MARKET FUND MUNICIPAL BOND FUND
CALIFORNIA FUND
------------------- ------------------- -------------------
ADVISOR ADVISOR ADVISOR ADVISOR ADVISOR ADVISOR
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Management Fee .50% .50% .41% .41% .53% .53%
Rule 12b-1 Fees .00%* .00%* .25% 1.00% .25% 1.00%
Other Expenses .28% .28% .13% .13% .15% .15%
----- ----- ----- ----- ----- -----
Total Operating
Expenses (estimated) .78% .78% .79% 1.54% .93% 1.68%
</TABLE>

<TABLE>
<CAPTION>
WASHINGTON FUND
-------------------
ADVISOR ADVISOR
CLASS A CLASS B
------- -------
<S> <C> <C> <C> <C> <C> <C>
Management Fee .64% .64%
Rule 12b-1 Fees .25% 1.00%
Other Expenses .43% .43%
----- -----
Total Operating
Expenses (estimated) 1.32% 2.07%
</TABLE>

* The Money Market Fund does not have a Rule 12b-1 fee at this time.
Shareholders will be notified in advance by a supplement to this Prospectus
in the event that the Money Market Fund establishes a Rule 12b-1 fee under
its Rule 12b-1 Plan.

Effective September 30, 1996, all of the then-existing shares of each Fund were
redesignated as No-Load Class shares and each Fund commenced offering Class A
and Class B shares. Because Class A and Class B shares have not previously been
offered, expenses do not reflect actual Class A or Class B expenses. The amounts
shown for the Growth, Equity, Income, Northwest, and Intermediate Treasury Funds
are estimated expenses for the Advisor Classes based on the actual expenses paid
by shareholders of the Funds' other class for the fiscal year ended September
30, 1995, restated as applicable to reflect fees borne by Class A or Class B
shares. The amounts shown for the Money Market, Municipal Bond, California, and
Washington Funds are estimated expenses for the Advisor Classes based on the
actual expenses paid by shareholders of the Funds' other class for the fiscal
year ended March 31, 1996, restated as applicable to reflect fees borne by Class
A or Class B shares. The amounts shown for the Managed Bond Fund are estimated
expenses for the Advisor Classes based on the actual expenses paid by
shareholders of the Fund's other class for the fiscal year ended December 31,
1995, restated as applicable to reflect fees borne by Class A or Class B shares.
The amounts shown for the Balanced, International and Small Company Funds are
annualized expenses for Class A or Class B shares based on the maximum
management fee and estimated "other expenses" for the fiscal period ended
September 30, 1996. The management fees paid by the International and Small
Company Funds are higher than the management fees paid by

-- 8 --
<PAGE> 9

- --------------------------------------------------------------------------------

EXPENSES (Continued)

most other investment companies. See "Information about Share Ownership and
Companies that Provide Services to the Trusts" on page 60 for more information.

Rule 12b-1 fees have the following two components:

<TABLE>
<CAPTION>
ADVISOR CLASS A ADVISOR CLASS B
--------------- ---------------
<S> <C> <C> <C>
Rule 12b-1 service fees 0.25% 0.25%
Rule 12b-1 distribution fees 0.00% 0.75%
</TABLE>

Rule 12b-1 distribution fees are asset-based sales charges. Long-term Class A
and Class B 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 and redemption at the end of each time period. The example also assumes
that all dividends and other distributions are reinvested and that the
percentage amounts listed in each Fund's "Annual Operating Expenses" above
remain the same in the years shown.

<TABLE>
<CAPTION>
3 5 10
FUND 1 YEAR YEARS YEARS YEARS
- -------------------------------------------------------- ------ ------ ------ -------
<S> <C> <C> <C> <C>
Growth
Advisor Class A(1) $ 57 $ 82 $110 $ 187
Advisor Class B
Assuming redemption at end of period(2)(3) $ 70 $ 92 $127 $ 193
Assuming no redemption at end of period(3) $ 20 $ 62 $107 $ 193
Equity
Advisor Class A(1) $ 56 $ 78 $102 $ 172
Advisor Class B
Assuming redemption at end of period(2)(3) $ 69 $ 88 $120 $ 178
Assuming no redemption at end of period(3) $ 19 $ 58 $100 $ 178
Income
Advisor Class A(1) $ 56 $ 79 $104 $ 175
Advisor Class B
Assuming redemption at end of period(2)(3) $ 69 $ 89 $121 $ 181
Assuming no redemption at end of period(3) $ 19 $ 59 $101 $ 181
Northwest
Advisor Class A(1) $ 58 $ 86 $115 $ 199
Advisor Class B
Assuming redemption at end of period(2)(3) $ 71 $ 95 $132 $ 205
Assuming no redemption at end of period(3) $ 21 $ 65 $112 $ 205
Balanced
Advisor Class A(1) $ 57 $ 83
Advisor Class B
Assuming redemption at end of period(2) $ 70 $ 92
Assuming no redemption at end of period $ 20 $ 62
International
Advisor Class A(1) $ 60 $ 93
Advisor Class B
Assuming redemption at end of period(2) $ 74 $103
Assuming no redemption at end of period $ 24 $ 73
</TABLE>

-- 9 --
<PAGE> 10

- --------------------------------------------------------------------------------

EXPENSES (Continued)

<TABLE>
<CAPTION>
3 5 10
FUND 1 YEAR YEARS YEARS YEARS
- -------------------------------------------------------- ------ ------ ------ -------
<S> <C> <C> <C> <C>
Small Company
Advisor Class A(1) $ 58 $ 85
Advisor Class B
Assuming redemption at end of period(2) $ 71 $ 95
Assuming no redemption at end of period $ 21 $ 65
Intermediate Treasury
Advisor Class A(1) $ 57 $ 82 $109 $ 185
Advisor Class B
Assuming redemption at end of period(2)(3) $ 70 $ 92 $126 $ 191
Assuming no redemption at end of period(3) $ 20 $ 62 $106 $ 191
Managed Bond
Advisor Class A(1) $ 59 $ 88 $119 $ 206
Advisor Class B
Assuming redemption at end of period(2)(3) $ 72 $ 98 $136 $ 213
Assuming no redemption at end of period(3) $ 22 $ 68 $116 $ 213
Municipal Bond
Advisor Class A(1) $ 53 $ 69 $ 87 $ 138
Advisor Class B
Assuming redemption at end of period(2)(3) $ 66 $ 79 $104 $ 145
Assuming no redemption at end of period(3) $ 16 $ 49 $ 84 $ 145
California
Advisor Class A(1) $ 54 $ 73 $ 94 $ 154
Advisor Class B
Assuming redemption at end of period(2)(3) $ 67 $ 83 $111 $ 160
Assuming no redemption at end of period(3) $ 17 $ 53 $ 91 $ 160
Washington
Advisor Class A(1) $ 58 $ 85 $114 $ 197
Advisor Class B
Assuming redemption at end of period(2)(3) $ 71 $ 95 $131 $ 203
Assuming redemption at end of period(3) $ 21 $ 65 $111 $ 203
Money Market(4)
Advisor Class A $ 8 $ 25 $ 43 $ 97
Advisor Class B $ 8 $ 25 $ 43 $ 97
</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 CDSC.

(3) Ten-year figures assume conversion of Class B shares to Class A shares at
the end of the sixth year.

(4) Figures for the Money Market Fund assume that the investor purchased Money
Market Fund Shares as an initial investment and made no subsequent
exchanges.

The purpose of the table is to assist you in understanding the various costs and
expenses that an investor in Class A and Class B shares of each Fund would bear,
directly or indirectly. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES. A FUND'S ACTUAL EXPENSES OR PERFORMANCE MAY BE GREATER
OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS REQUIRED BY SECURITIES
AND EXCHANGE COMMISSION REGULATIONS APPLICABLE TO ALL MUTUAL FUNDS AND IT IS NOT
A PREDICTION OF, NOR DOES IT REPRESENT, PAST OR FUTURE EXPENSES OR THE
PERFORMANCE OF ANY FUND.

-- 10 --
<PAGE> 11

- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS

The amounts shown for each Fund in the Financial Highlights tables that follow
are based upon a single No-Load Class share outstanding throughout the period
indicated and do not reflect Rule 12b-1 fees. Except for the six-month period
ended March 31, 1996, the following selected data for the Growth, Equity,
Income, Northwest, Intermediate Treasury, Managed Bond, Money Market, Municipal
Bond, California and Washington Funds are derived from financial statements that
have been audited by Ernst & Young LLP, independent auditors. The data should be
read in conjunction with the financial statements, related notes and other
financial information incorporated by this reference to each Trust's Annual
Report and Statement of Additional Information, which may be obtained by calling
the number on the front page of this Prospectus. The following selected data for
the Balanced, International and Small Company Funds, each of which commenced
operations on January 31, 1996, have been derived from unaudited financial
statements for the period ended March 31, 1996, and are included in their
Trust's Semi-Annual Report and are incorporated by reference in their Trust's
Statement of Additional Information, which may be obtained by calling the number
on the front page of this Prospectus.

SAFECO GROWTH FUND

<TABLE>
<CAPTION>
FOR THE
SIX MONTH
PERIOD ENDED
MARCH 31,
1996 YEAR ENDED SEPTEMBER 30
(UNAUDITED) 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net
asset
value
at
beginning
of
period $15.83 $17.37 $19.20 $13.98 $17.95 $11.14 $17.22 $14.95 $18.13 $15.40 $16.86

INCOME
(LOSS)
FROM
INVESTMENT
OPERATIONS

Net
investment
(loss)
income -- .07 (.02) (.02) (.01) .05 .14 .53 .35 .24 .31

Net
realized
and
unrealized
gain
(loss) on
investments 1.50 4.07 .78 5.39 (3.15) 7.77 (4.20) 3.17 (.99) 4.31 1.62
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total
from
investment
operations 1.50 4.14 .76 5.37 (3.16) 7.82 (4.06) 3.70 (.64) 4.55 1.93
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
LESS
DISTRIBUTIONS

Dividends
from
net
investment
income -- (.07) -- -- -- (.05) (.14) (.53) (.48) (.23) (.42)

Distributions
from
capital
gains (0.17) (5.61) (2.59) (.15) (.81) (.96) (1.88) (.90) (2.06) (1.59) (2.97)
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total
distributions (0.17) (5.68) (2.59) (.15) (.81) (1.01) (2.02) (1.43) (2.54) (1.82) (3.39)
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net
asset
value
at end
of
period $17.16 $15.83 $17.37 $19.20 $13.98 $17.95 $11.14 $17.22 $14.95 $18.13 $15.40
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total
return** 9.58%+ 23.93% 3.88% 38.43% -17.83% 70.22% -23.67% 25.23% -1.47% 32.68% 13.29%*

Net
assets
at end
of
period
(000's
omitted) $193,167 $176,483 $156,108 $158,723 $127,897 $155,429 $59,164 $81,472 $74,324 $82,703 $68,375

Ratio of
expenses
to
average
net
assets 0.99%++ .98% .95% .91% .91% .90% 1.01% .94% .98% .92% .85%

Ratio of
net
investment
Income
(loss)
to
average
net
assets 0.05%++ .34% -.12% -.10% -.10% .36% .88% 3.27% 2.37% 1.46% 1.90%

Portfolio
turnover
rate 137.98%++ 110.44% 71.18% 57.19% 85.38% 49.86% 90.48% 11.38% 19.31% 23.61% 46.04%

Avg.
Commission
rate paid $0.0572 -- -- -- -- -- -- -- -- -- --
</TABLE>

+ Not annualized.
++ Annualized.
* Unaudited.
** Total return information does not reflect sales loads.

-- 11 --
<PAGE> 12

- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS (CONTINUED)

SAFECO EQUITY FUND

<TABLE>
<CAPTION>
FOR THE
SIX MONTH
PERIOD ENDED
MARCH 31,
1996 YEAR ENDED SEPTEMBER 30
(UNAUDITED) 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset
value
at
beginning
of
period $15.31 $13.89 $12.54 $9.53 $10.38 $8.43 $10.10 $8.51 $12.23 $11.44 $10.25

INCOME
FROM
INVESTMENT
OPERATIONS:

Net
investment
income .14 .34 .23 .17 .15 .17 .22 .39 .18 .21 .29

Net
realized
and
unrealized
gain
(loss)
on
investments .99 2.59 1.83 3.79 (.09) 2.37 (1.28) 2.26 (1.82) 2.83 2.46
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from
investment
operations 1.13 2.93 2.06 3.96 .06 2.54 (1.06) 2.65 (1.64) 3.04 2.75
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
LESS
DISTRIBUTIONS
Dividends
from
net
investment
income (.14) (.34) (.23) (.17) (.15) (.17) (.22) (.39) (.23) (.22) (.34)

Distributions
from
capital
gains (.32) (1.17) (.48) (.78) (.76) (.42) (.39) (.67) (1.85) (2.03) (1.22)
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total
distributions (.46) (1.51) (.71) (.95) (.91) (.59) (.61) (1.06) (2.08) (2.25) (1.56)
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset
value
at end
of
period $15.98 $15.31 $13.89 $12.54 $9.53 $10.38 $8.43 $10.10 $8.51 $12.23 $11.44
===== ===== ===== ===== ==== ===== ==== ===== ==== ===== =====
Total
return** 7.50%+ 21.59% 16.51% 41.77% .41% 30.39% -10.73% 32.12% -9.93% 31.75% 29.61%*

Net assets
at end
of
period
(000's
omitted) $636,885 $598,582 $412,805 $148,894 $74,383 $71,586 $51,603 $53,892 $45,625 $64,668 $46,740

Ratio of
expenses
to
average
net
assets .79%++ .84% .85% .94% .96% .98% .97% .96% 1.00% .97% .88%

Ratio of
net
investment
income
to
average
net
assets 1.82%++ 2.38% 1.72% 1.50% 1.34% 1.70% 2.19% 4.13% 2.16% 1.92% 2.55%

Portfolio
turnover
rate 86.93%++ 56.14% 33.33% 37.74% 39.88% 45.21% 51.01% 63.62% 88.19% 85.11% 86.39%

Avg.
Commission
rate
paid $0.0600 -- -- -- -- -- -- -- -- -- --
</TABLE>

+ Not annualized.
++ Annualized.
* Unaudited.
** Total return information does not reflect sales loads.

-- 12 --
<PAGE> 13

- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS (CONTINUED)

SAFECO INCOME FUND

<TABLE>
<CAPTION>
FOR THE
SIX MONTH
PERIOD ENDED
MARCH 31,
1996 YEAR ENDED SEPTEMBER 30
(UNAUDITED) 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net
asset
value
at
beginning
of period $19.11 $17.25 $17.79 $16.27 $15.35 $12.89 $16.44 $14.32 $17.16 $15.52 $12.96

INCOME
FROM
INVESTMENT
OPERATIONS
Net
investment
income .36 .82 .81 .78 .80 .81 .85 .81 .78 .78 .78

Net
realized
and
unrealized
gain
(loss)
on
investment 1.42 2.71 (.30) 1.52 .96 2.53 (3.39) 2.12 (1.80) 2.37 3.13
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total
from
investment
operations 1.78 3.53 .51 2.30 1.76 3.34 (2.54) 2.93 (1.02) 3.15 3.91
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
LESS
DISTRIBUTIONS
Dividends
from
net
investment
income (.36) (.82) (.81) (.78) (.80) (.83) (.83) (.81) (.98) (.78) (.79)
Distributions
from
capital
gains (.06) (.85) (.24) -- (.04) (.05) (.18) -- (.84) (.73)# (.56)
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total
distributions (.42) (1.67) (1.05) (.78) (.84) (.88) (1.01) (.81) (1.82) (1.51) (1.35)
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net
asset
value
at
end
of
period $20.47 $19.11 $17.25 $17.79 $16.27 $15.35 $12.89 $16.44 $14.32 $17.16 $15.52
===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total
return** 9.37%+ 21.04% 2.98% 14.35% 11.75% 26.43% -16.06% 21.00% -4.61% 21.41% 31.76%*

Net
assets
at
end
of
period
(000's
omitted) $235,395 217,870 $190,610 $203,019 $181,582 $181,265 $170,153 $232,812 $231,724 $313,308 $102,254

Ratio
of
expenses
to
average
net
assets .85%++ .87% .86% .90% .90% .93% .92% .92% .97% .94% .95%

Ratio
of
net
investment
income
to
average
net
assets 3.59%++ 4.55% 4.59% 4.55% 5.06% 5.58% 5.59% 5.28% 5.58% 4.53% 5.08%

Portfolio
turnover
rate 24.82%++ 31.12% 19.30% 20.74% 20.35% 22.25% 19.37% 16.38% 34.13% 33.08% 28.90%

Avg.
Commission
rate
paid $0.0600 -- -- -- -- -- -- -- -- -- --
</TABLE>

+ Not annualized.
++ Annualized.
* Unaudited.
** Total return information does not reflect sales loads.
# Distributions include $.04 of additional gain arising from investment
transactions of securities acquired in a non-taxable exchange.

-- 13 --
<PAGE> 14

- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS (CONTINUED)

SAFECO NORTHWEST FUND

<TABLE>
<CAPTION>
FOR THE FOR THE PERIOD
SIX MONTH FOR THE FROM FEBRUARY 7,
PERIOD ENDED NINE MONTH 1991 (INITIAL
MARCH 31, YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED PUBLIC
1996 SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, OFFERING) TO
(UNAUDITED) 1995 1994 1993 1992 DECEMBER 31, 1991
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of
period $14.41 $12.59 $12.34 $12.59 $11.37 $10.06
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income .01 .04 .04 .02 .06 .13
Net realized and
unrealized gain
(loss) on
investments 1.01 2.35 .59 (.25) 1.53 1.44
-------- --------- --------- --------- -------- -----------
Total from
investment
operations 1.02 2.39 .63 (.23) 1.59 1.57
-------- --------- --------- --------- -------- -----------
LESS DISTRIBUTIONS:
Dividends from
net investment
income (.01) (.04) (.04) (.02) (.06) (.19)
Distributions from
capital gains (.35) (.53) (.34) -- (.31) (.07)
-------- --------- --------- --------- -------- -----------
Total distributions (.36) (.57) (.38) (.02) (.37) (.26)
-------- --------- --------- --------- -------- -----------
Net asset value at
end of period $15.07 $14.41 $12.59 $12.34 $12.59 $11.37
======== ========= ========= ========= ======== ===========
Total return** 7.33%+ 19.01% 5.19% -1.86%+ 14.08% 14.93%+
Net assets at end of
period (000's
omitted) $43,228 $40,140 $36,383 $39,631 $40,402 $26,434
Ratio of expenses to
average net
assets 1.11%++ 1.09% 1.06% 1.11%++ 1.11% 1.27%++
Ratio of net
investment income
to average net
assets .14%++ .31% .33% .18%++ .55% 1.14%++
Portfolio turnover
rate 45.32%++ 19.59% 18.46% 14.05%++ 33.34% 27.71%++
Avg. Commission rate
paid $0.0583 -- -- -- -- --
</TABLE>

** Total return information does not reflect sales loads.
+ Not annualized.
++ Annualized.

-- 14 --
<PAGE> 15

- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS (CONTINUED)

SAFECO BALANCED FUND, INTERNATIONAL FUND, AND SMALL COMPANY FUND (Continued)

<TABLE>
<CAPTION>
FOR THE PERIOD FROM JANUARY 31, 1996
(INITIAL PUBLIC OFFERING) TO MARCH 31, 1996
---------------------------------------------
SAFECO
SAFECO SAFECO SMALL
BALANCED INTERNATIONAL COMPANY
FUND STOCK FUND STOCK FUND
(UNAUDITED) (UNAUDITED) (UNAUDITED)
---------------------------------------------
<S> <C> <C> <C>
Net Asset Value at Beginning of Period $10.00 $10.00 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income .05 .03 .01
Net Realized and Unrealized Gain (Loss) on Investment and
Foreign Currency Transactions (.03) .01 .48
----- ------ ------
Total from Investment Operations .02 .04 .49
----- ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income (.05) -- --
Distributions from Realized Gains -- -- --
----- ------ ------
Total Distributions (.05) -- --
----- ------ ------
Net Asset Value at End of Period $9.97 $10.04 $10.49
===== ====== ======
Total Return** .17%+ .40%+ 4.90%+
Net Assets at End of Period (000's omitted) $6,353 $6,461 $6,406
Ratio of Expenses to Average Net Assets 1.69%++ 2.53%++ 1.82%++
Ratio of Net Investment Income (Loss) to Average Net Assets 3.10%++ 1.87%++ .89%++
Portfolio Turnover Rate 351.35%++ 3.97%++ 22.28%++
Average Commission Rate Paid $.0552 $.0250 $.0538
</TABLE>

+ Not Annualized.

++ Annualized.

** Total return information does not reflect sales loads.

The information listed above is based on a two month operating history and may
not be indicative of longer-term results. More information about the Fund is
contained in its Semi-Annual Report to Shareholders which may be obtained
without charge by calling the number on the first page of this Prospectus.

-- 15 --
<PAGE> 16

- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS (CONTINUED)

SAFECO INTERMEDIATE-TERM U.S. TREASURY FUND

<TABLE>
<CAPTION>
FOR THE
FOR THE PERIOD FROM
SIX MONTH SEPTEMBER 7,
PERIOD 1988 (INITIAL
ENDED PUBLIC
MARCH 31, OFFERING) TO
1996 FOR THE YEAR ENDED MARCH 31, SEPTEMBER 30,
(UNAUDITED) 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------
Net asset value at
beginning of period $10.24 $9.74 $10.74 $10.69 $10.20 $9.83 $9.96 $9.95 $9.93
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.25 .55 .52 .60 .72 .75 .77 .77 .05
Net realized and
unrealized gain (loss)
on investments (0.04) .50 (1.00) .49 .54 .37 (.13) (.01) .02
----- ----- ----- ----- ----- ----- ----- ----- ------
Total from investment
operations 0.21 1.05 (.48) 1.09 1.26 1.12 .64 .78 .07
----- ----- ----- ----- ----- ----- ----- ----- ------
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.25) (.55) (.52) (.60) (.72) (.75) (.77) (.77) (.05)
Distributions from
capital gains -- -- -- (.44) (.05) -- -- --
----- ----- ----- ----- ----- ----- ----- ----- ------
Total distributions (0.25) (.55) (.52) (1.04) (.77) (.75) (.77) (.77) (.05)
----- ----- ----- ----- ----- ----- ----- ----- ------
Net asset value at end
of period $10.20 $10.24 $9.74 $10.74 $10.69 $10.20 $9.83 $9.96 $9.95
===== ===== ===== ===== ===== ===== ===== ===== ======
Total return** 2.03%+ 11.07% --4.56% 10.51% 12.78% 11.80% 6.65% 8.20% .69%+
Net assets at end of
period (000's omitted) $14,255 $13,774 $13,367 $14,706 $12,205 $9,458 $6,916 $6,249 $5,007
Ratio of expenses to
average net assets 1.06%++ .96% .90% .99% .98% 1.00% 1.00% .96% 1.06%++
Ratio of net investment
income to average net
assets 4.83%++ 5.51% 5.08% 5.52% 6.89% 7.45% 7.76% 7.82% 7.46%++
Portfolio turnover rate 228.20%++ 124.9% 75.46% 104.94% 37.19% 9.51% 24.17% 4.36% None
</TABLE>

** Total return information does not reflect sales loads.
+ Not annualized.
++ Annualized.

-- 16 --
<PAGE> 17

- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS (CONTINUED)

SAFECO MANAGED BOND FUND

<TABLE>
<CAPTION>
FOR THE PERIOD
FROM FEBRUARY 28,
1994 (INITIAL
FOR THE YEAR PUBLIC OFFERING)
ENDED TO DECEMBER 31,
DECEMBER 31, 1995 1994
---------------------------------------
<S> <C> <C>
Net asset value at beginning of period $8.15 $8.68
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .44 .27
Net realized and unrealized gain (loss) on investments .94 (.53)
----- -----
Total from investment operations 1.38 (.26)
----- -----
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (.44) (.27)
Realized gains on investments (.32) --
----- -----
Total distributions (.76) (.27)
----- -----
Net asset value at end of period $8.77 $8.15
===== =====
Total return* 17.35% -3.01%+
Net assets at end of period (000's omitted) $4,497 $4,627
Ratio of expenses to average net assets 1.16% 1.28%++
Ratio of net investment income to average net assets 5.14% 3.88%++
Portfolio turnover rate 78.78% 132.26%++
</TABLE>

* Total return information does not reflect sales loads.
+ Not annualized.
++ Annualized.

-- 17 --
<PAGE> 18

- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS (CONTINUED)

SAFECO MONEY MARKET FUND

* Total return information does not reflect a CDSC that may apply to certain
shares.

+ Unaudited.

-- 18 --
<PAGE> 19

- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS (CONTINUED)

SAFECO MUNICIPAL FUND

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at beginning
of period $13.36 $13.27 $14.13 $13.37 $12.95 $12.73 $12.92 $12.85 $14.16 $13.74
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .76 .77 .78 .81 .86 .86 .88 .94 .96 .99
Net realized and unrealized
gain (loss) on investments .33 .12 (.55) .94 .48 .26 .25 .36 (.91) .63
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations 1.09 .89 .23 1.75 1.34 1.12 1.13 1.30 .05 1.62
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Dividends from net
investment income (.76) (.77) (.78) (.81) (.86) (.86) (.88) (.94) (.96) (.99)
Distributions from realized
gains -- (.03) (.31) (.18) (.06) (.04) (.44) (.29) (.40) (.21)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions (.76) (.80) (1.09) (.99) (.92) (.90) (1.32) (1.23) (1.36) (1.20)
Net asset value at end of
period $13.69 $13.36 $13.27 $14.13 $13.37 $12.95 $12.73 $12.92 $12.85 $14.16
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return* 8.23% 7.10% 1.30% 13.60% 10.57% 9.13% 9.05% 10.49% .93% 12.49%+
Net assets at end of period
(000's omitted) $480,643 $472,569 $507,453 $541,515 $427,638 $331,647 $286,303 $231,911 $183,642 $214,745
Ratio of expenses to average
net assets .54% .56% .52% .53% .54% .56% .57% .60% .61% .59%
Ratio of net investment
income to average net
assets 5.47% 5.96% 5.49% 5.91% 6.37% 6.68% 6.76% 7.23% 7.42% 7.20%
Portfolio turnover rate 12.60% 26.96% 22.07% 31.66% 25.18% 38.55% 65.80% 135.60% 71.91% 23.09%
</TABLE>

* Total return information does not reflect sales loads.
+ Unaudited.

-- 19 --
<PAGE> 20

- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS (CONTINUED)

SAFECO CALIFORNIA TAX-FREE INCOME FUND

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $11.54 $11.51 $12.23 $11.60 $11.24 $11.07 $11.02 $10.72 $12.14 $11.68
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .62 .63 .66 .68 .71 .71 .72 .75 .76 .80
Net realized and unrealized gain (loss)
on investments .40 .13 (.38) .76 .44 .23 .23 .30 (.99) .57
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment operations 1.02 .76 .28 1.44 1.15 .94 .95 1.05 (.23) 1.37
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Dividends from net investment income (.62) (.63) (.66) (.68) (.71) (.71) (.72) (.75) (.76) (.80)
Distributions from realized gains (.08) (.10) (.34) (.13) (.08) (.06) (.18) -- (.43)++ (.11)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions (.70) (.73) (1.00) (.81) (.79) (.77) (.90) (.75) (1.19) (.91)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value at end of period $11.86 $11.54 $11.51 $12.23 $11.60 $11.24 $11.07 $11.02 $10.72 $12.14
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return* 8.87% 7.01% 1.97% 12.88% 10.43% 8.78% 8.87% 10.09% -1.39% 12.25%+
Net assets at end of period (000's
omitted) $70,546 $64,058 $77,056 $79,872 $71,480 $57,066 $47,867 $36,930 $28,790 $34,792
Ratio of expenses to average net assets .68% .70% .68% .66% .67% .67% .68% .71% .72% .70%
Ratio of net investment income average
net assets 5.12% 5.65% 5.31% 5.71% 6.13% 6.32% 6.42% 6.86% 6.99% 6.71%
Portfolio turnover rate 16.25% 44.10% 32.58% 23.18% 39.55% 22.92% 71.37% 76.95% 66.72% 44.61%
</TABLE>

* Total return information does not reflect sales loads.
+ Unaudited.
++ Distribution includes $.05 per share attributable to the December 31, 1987,
capital gain distribution paid in order to avoid any excise tax due under the
Tax Reform Act of 1986.

-- 20 --
<PAGE> 21

- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS (CONTINUED)

SAFECO WASHINGTON STATE MUNICIPAL BOND FUND

<TABLE>
<CAPTION>
FOR THE PERIOD FROM
MARCH 18, 1993
(INITIAL PUBLIC
YEAR ENDED YEAR ENDED YEAR ENDED OFFERING) TO
MARCH 31, 1996 MARCH 31, 1995 MARCH 31, 1994 MARCH 31, 1993
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at
beginning of period $10.10 $9.91 $10.27 $10.32
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .50 0.49 0.44 0.02
Net realized and unrealized gain (loss) on
investments .27 0.19 (0.35) (0.05)
---------- ---------- ---------- ------------
Total from investment operations .77 0.68 0.09 (0.03)
---------- ---------- ---------- ------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.50) (0.49) (0.44) (0.02)
Distribution from realized gains (.03) -- (0.01) --
---------- ---------- ---------- ------------
Total distributions (.53) (0.49) (0.45) (0.02)
---------- ---------- ---------- ------------
Net asset value at end of period $10.34 $10.10 $9.91 $10.27
========== ========== ========== ============
Total return* 7.73% 7.13% .68% -31%+
Net assets at end of period (000's omitted) $6,489 $5,953 $2,908 $2,163
Ratio of expenses to average net assets 1.07% 1.09% 1.44% 1.04%++
Ratio of net investment income to average
net assets 4.78% 5.06% 4.17% 4.47%++
Portfolio turnover rate 20.86% 9.23% 17.26% None
</TABLE>

* Total return information does not reflect sales loads.
+ Not annualized.
++ Annualized.

-- 21 --
<PAGE> 22

- --------------------------------------------------------------------------------

SUB-ADVISER INFORMATION FOR THE INTERNATIONAL FUND

The International Fund's sub-adviser, Bank of Ireland Asset Management (U.S.)
Limited ("BIAM"), has been managing separate accounts for institutional clients
in the United States for six years. BIAM's past performance in advising these
accounts was a key factor in its selection as the Fund's sub-adviser. The
performance illustrated in the table that follows is based on the return
achieved on BIAM's fully discretionary international equity composite of
accounts ("Composite") and is prepared and presented in accordance with
Association of Investment Management and Research ("AIMR") standards. These
returns reflect the time-weighted total returns achieved by the Composite's
constituent accounts, weighted by reference to their sizes.

<TABLE>
<CAPTION>
FOR THE PERIODS ENDED DECEMBER 31, 1995
<S> <C> <C> <C> <C>
ONE YEAR THREE YEARS FIVE YEARS SIX YEARS
-----------------------------------------------
BIAM Composite 19.24% 16.25% 14.49% 11.25%
Morgan Stanley Europe, Australia and Far East
Index ("EAFE Index") 11.56% 17.02% 9.71% 3.38%
</TABLE>

The past performance of the Composite is shown after reduction by the
International Fund's maximum investment management and estimated administrative
expenses. The EAFE Index is used for comparison purposes only. The EAFE Index is
an unmanaged index of representative international stocks that has no management
or expense charges. Performance is based on historical earnings and is not
intended to indicate future performance of the Composite or the International
Fund.

Please keep in mind that the International Fund's performance may differ from
the Composite performance. The International Fund's expenses, timing of
purchases and sales of portfolio securities, availability of cash flows,
brokerage commissions and diversification of the portfolio are all reasons that
might cause the performance of the International Fund to vary from that of the
Composite. In addition, the performance of the Composite does not reflect sales
charges imposed on certain purchases or redemptions of the International Fund's
Class A and Class B shares. There are a number of ways to calculate performance,
and it is possible that if a different method were used the result would have
varied. Finally, the past performance of the Composite is no guarantee of the
future results of the International Fund.

ALTERNATIVE PURCHASE ARRANGEMENT

This Prospectus offers two classes of shares for each Fund. For each Fund except
the Money Market Fund, Class A shares are sold at net asset value plus an
initial sales charge of up to 4.5%. Class A shares also pay an annual Rule 12b-1
service fee of 0.25% of the average daily net assets of the Class A shares. For
each Fund except the Money Market Fund, Class B shares are sold at net asset
value with no initial sales charge, but a CDSC of up to 5% applies to
redemptions made within six years of purchase. Class B shares also pay an annual
Rule 12b-1 service fee of 0.25% of the average daily net assets of the Class B
shares and an annual Rule 12b-1 distribution fee of 0.75% of the average daily
net assets of the Class B shares. Class B shares convert to Class A shares at
the end of the sixth year after purchase. The maximum investment amount in Class
B shares is $500,000.

Class A and B shares of the Money Market Fund are sold at net asset value, are
not subject to sales charges, and do not currently pay Rule 12b-1 fees. Money
Market Fund Class A and Class B shares

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ALTERNATIVE PURCHASE ARRANGEMENT (Continued)

may be subject to sales charges if an investor exchanges into Class A or Class B
Shares of another Fund. See "Purchasing Advisor Class A or Class B Shares."

For shareholders of each Fund, except the Money Market Fund, 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 CDSCs on Class B shares
prior to conversion 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 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. 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. The CDSC imposed on the redemption of Class B shares
decreases and is completely eliminated with respect to such shares redeemed more
than six years after their purchase. Class B shares automatically convert to
Class A shares (which are subject to lower continuing charges) six years after
the date of issuance.

For more information about each Fund's shares, see "How to Purchase Shares"
beginning on page 49.

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EACH FUND'S INVESTMENT OBJECTIVE AND POLICIES

The investment objective and investment policies for each Fund are described
below. A Trust's Board of Trustees may change a Fund's (except the California
Fund's) objective without a shareholder vote, but no such change will be made
without prior written notice to shareholders of that Fund (60 days' in the case
of the Money Market, Municipal Bond and Washington Funds and 30 days' in the
case of the other Funds). The California Fund has a fundamental investment
objective that may not be changed without a shareholder vote. In the event a
Fund changes its investment objective, the new objective may not meet the
investment needs of every shareholder and may be different from the objective a
shareholder considered appropriate at the time of initial investment.

Each Fund has adopted a number of investment restrictions. If a Fund satisfies a
percentage limitation at the time of investment, a later increase or decrease in
value, assets or other circumstances will not be considered in determining
whether the Fund complies with the applicable policy (except to the extent the
change may impact the Fund's borrowing limits). 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 applicable Trust's Board of Trustees without a shareholder vote.

INVESTMENT OBJECTIVES AND POLICIES OF THE STOCK FUNDS

GROWTH FUND
The Growth Fund has as its investment objective to seek growth of capital and
the increased income that ordinarily follows from such growth. The Growth Fund
ordinarily invests a preponderance of its assets in common stock selected
primarily for potential appreciation. Such investments may cause its share price
to be more volatile than the Equity and Income Funds.

To pursue its investment objective, the Growth Fund:

1. WILL INVEST A PREPONDERANCE OF ITS ASSETS IN COMMON STOCKS SELECTED PRIMARILY
FOR POTENTIAL APPRECIATION. To determine those common stocks which have the
potential for long-term growth, SAM will evaluate the issuer's financial
strength, quality of management and earnings power.

2. MAY INVEST IN SECURITIES CONVERTIBLE INTO COMMON STOCK (INCLUDING CORPORATE
BONDS AND PREFERRED STOCK THAT CONVERT TO COMMON STOCK, EITHER AUTOMATICALLY
AFTER A SPECIFIED PERIOD OF TIME OR AT THE OPTION OF THE ISSUER). The Fund
will purchase convertible securities if such securities offer a higher yield
than an issuer's common stock and provide reasonable potential for capital
appreciation.

3. MAY INVEST UP TO 5% OF NET ASSETS IN CONTINGENT VALUE RIGHTS. A contingent
value right is a right issued by a corporation that takes on a preestablished
value if the underlying common stock does not attain a target price by a
specified date.

For a brief description of common stocks, preferred stocks, convertible
securities, and bonds and other debt securities, see "Description of Stocks,
Bonds and Convertible Securities" on page 71.

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INVESTMENT OBJECTIVES AND POLICIES OF THE STOCK FUNDS (Continued)

EQUITY FUND
The Equity Fund has as its investment objective to seek long-term growth of
capital and reasonable current income. The Equity Fund invests principally in
common stock selected for appreciation and/or dividend potential and from a
long-range investment standpoint. The Equity Fund does not seek to achieve both
growth and income with every portfolio security investment. Rather, it attempts
to achieve a reasonable balance between growth and income on an overall basis.

To pursue its investment objective, the Equity Fund:

1. WILL INVEST, DURING NORMAL MARKET CONDITIONS, AT LEAST 65% OF ITS TOTAL
ASSETS IN EQUITY SECURITIES (WHICH INCLUDE COMMON STOCKS AND PREFERRED
STOCKS). The Fund will invest principally in common stocks selected by SAM
primarily for appreciation and/or dividend potential and from a long-range
investment standpoint.

2. MAY INVEST IN SECURITIES CONVERTIBLE INTO COMMON STOCK (INCLUDING CORPORATE
BONDS AND PREFERRED STOCK THAT CONVERT TO COMMON STOCK, WHETHER AUTOMATICALLY
AFTER A SPECIFIED PERIOD OF TIME OR AT THE OPTION OF THE ISSUER), EXCEPT THAT
LESS THAN 35% OF ITS TOTAL ASSETS WILL BE INVESTED IN SUCH SECURITIES. The
Equity Fund may invest in convertible corporate bonds that are rated below
investment grade (commonly referred to as "high-yield" or "junk" bonds) or in
comparable, unrated bonds, but less than 35% of the Equity Fund's total
assets will be invested in such securities. The Equity Fund will not purchase
a below investment grade bond rated below Ca by Moody's Investors Service,
Inc. ("Moody's") or CC by Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies ("S&P") or which is in default on the payment of
principal and interest. Bonds rated Ca or CC are highly speculative and have
large uncertainties or major risk exposures. See "Risk Factors" on page 44
for more information.

For a brief description of common stocks, preferred stocks, convertible
securities, and bonds and other debt securities, see "Description of Stocks,
Bonds and Convertible Securities" on page 71.

INCOME FUND
The Income Fund has as its investment objective to seek high current income and,
when consistent with its objective, the long-term growth of capital. The Income
Fund invests primarily in common and preferred stock and in convertible bonds
selected for dividend potential. SAM will select securities primarily for
current income, but also with a view toward capital growth when this can be
accomplished without conflicting with the Fund's investment objective.

To pursue its investment objective, the Income Fund:

1. WILL INVEST PRIMARILY IN COMMON STOCK AND ALSO IN CONVERTIBLE AND
NON-CONVERTIBLE CORPORATE BONDS AND PREFERRED STOCK (INCLUDING CORPORATE
BONDS AND PREFERRED STOCK THAT CONVERT TO COMMON STOCK EITHER AUTOMATICALLY
AFTER A SPECIFIED PERIOD OF TIME OR AT THE OPTION OF THE ISSUER).

The Fund will purchase convertible securities if such securities offer a
higher yield than an issuer's common stock and provide reasonable potential
for capital appreciation. The Income Fund may invest in convertible corporate
bonds that are rated below investment grade (commonly referred to as
"high-yield" or "junk" bonds) or in comparable, unrated bonds, but less than
35% of the Income Fund's total assets will be invested in such securities.
Bonds rated

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INVESTMENT OBJECTIVES AND POLICIES OF THE STOCK FUNDS (Continued)

Ca by Moody's or CC by S&P are highly speculative and have large
uncertainties or major risk exposures. See "Risk Factors" on page 44 for more
information.

2. MAY INVEST UP TO 10% OF TOTAL ASSETS IN EURODOLLAR BONDS WHICH ARE ISSUED BY
U.S. ISSUERS. Eurodollar bonds are traded in the European bond market and are
denominated in U.S. dollars. The Fund will purchase Eurodollar bonds through
U.S. securities dealers and hold such bonds in the United States. The
delivery of Eurodollar bonds to the Fund's custodian in the United States may
cause slight delays in settlement which are not anticipated to affect the
Fund in any material, adverse manner.

For a brief description of common stocks, preferred stocks, convertible
securities, and bonds and other debt securities, see "Description of Stocks,
Bonds and Convertible Securities" on page 71.

NORTHWEST FUND
The 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.

To pursue its investment objective, the Northwest Fund:

1. WILL ORDINARILY INVEST ITS ASSETS IN SHARES OF COMMON STOCKS AND PREFERRED
STOCKS OF COMPANIES LOCATED IN THE NORTHWEST SELECTED PRIMARILY FOR POTENTIAL
LONG-TERM APPRECIATION. To determine those common and preferred stocks which
have the potential for long-term growth, SAM will evaluate the issuer's
financial strength, quality of management and earnings power. The Fund
generally invests a portion of its assets in smaller companies. See "Risk
Factors" for more information about the risks of investing primarily in
companies located in the Northwest.

2. MAY OCCASIONALLY 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 corporate bonds and preferred stock that
convert to common stock either automatically after a specified period of time
or at the option of the issuer. 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. For a
description of ratings, see the "Ratings Supplement" attached to this
Prospectus.

For a brief description of common stocks, preferred stocks, convertible
securities, and bonds and other debt securities, see "Description of Stocks,
Bonds and Convertible Securities" on page 71.

BALANCED FUND
The Balanced Fund has as its investment objective to seek growth and income
consistent with the preservation of capital. To pursue its objective, the
Balanced Fund will invest primarily in equity and fixed-income securities and
will occasionally alter the mix of its equity and fixed income securities. Such
action will be taken in response to economic conditions and generally in small

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INVESTMENT OBJECTIVES AND POLICIES OF THE STOCK FUNDS (Continued)

increments. The Balanced Fund will not make significant changes in its asset mix
in an attempt to "time the market."

To pursue its investment objective, the Balanced Fund:

1. WILL ORDINARILY INVEST FROM 50% TO 70% OF ITS TOTAL ASSETS IN EQUITY
SECURITIES, WHICH INCLUDE COMMON STOCKS, PREFERRED STOCK AND SECURITIES
CONVERTIBLE INTO COMMON STOCK. The Fund will invest principally in common
stocks selected by SAM primarily for appreciation and/or dividend potential
and from a long-range investment standpoint. The Fund may purchase corporate
bonds and preferred stock that convert to common stock either automatically
after a specified period of time or at the option of the issuer.

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. For a description of
ratings, see the "Ratings Supplement" attached to this Prospectus.

2. WILL INVEST AT LEAST 25% OF ITS TOTAL ASSETS IN FIXED-INCOME SENIOR
SECURITIES. Fixed-income senior securities are used by issuers to borrow
money from investors. The issuer pays the investor a fixed or variable rate
of interest, and must repay the amount borrowed at maturity. In general, bond
prices rise when interest rates fall, and bond prices fall when interest
rates rise. Debt securities have varying degrees of quality and varying
levels of sensitivity to changes in interest rates. Long-term bonds are
generally more sensitive to interest rate changes than short-term bonds.

The Fund will purchase only those U.S. Government and investment grade debt
obligations or non-rated debt obligations which in SAM's view contain the
credit characteristics of investment grade debt obligations. Investment grade
obligations (rated between Aaa - Baa by Moody's and AAA-BBB by S&P) are from
high to medium quality. Medium obligations possess speculative
characteristics and may be more sensitive to economic changes and changes to
the financial condition of issuers.

For a brief description of common stocks, preferred stocks, convertible
securities, and bonds and other debt securities, see "Description of Stocks,
Bonds and Convertible Securities" on page 71.

INTERNATIONAL FUND
The investment objective of the International Fund is to seek maximum long-term
total return (capital appreciation and income) by investing primarily in common
stock of established non-U.S. companies. To pursue its objective, the
International Fund, under normal market conditions, will invest at least 65% of
its total assets in the securities of companies domiciled in at least five
countries, not including the United States.

To pursue its investment objective, the International Fund:

1. WILL INVEST PRIMARILY IN COMMON STOCKS OF NON-U.S. COMPANIES. Common stock
issued by foreign companies is subject to various risks in addition to those
associated with U.S. investments. For example, the value of the common stock
depends in part upon currency values,

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INVESTMENT OBJECTIVES AND POLICIES OF THE STOCK FUNDS (Continued)

the political and regulatory environments, and overall economic factors in
the countries in which the common stock is issued.

2. MAY INVEST IN PREFERRED STOCKS AND CONVERTIBLE SECURITIES ISSUED BY FOREIGN
COMPANIES.

3. MAY INVEST IN DEBT SECURITIES ISSUED BY FOREIGN COMPANIES AND GOVERNMENTS.
The Fund will make such investments primarily for defensive purposes, but may
also do so where anticipated interest rate movements, or other factors
affecting the degree of risk inherent in a fixed income security, are
expected to change significantly so as to produce appreciation in the
security consistent with the objective of the Fund. The Fund may purchase
sovereign debt instruments issued or guaranteed by foreign governments or
their agencies. Sovereign debt may be in the form of conventional securities
or other types of debt instruments such as loans or loan participations.
Governments or governmental entities responsible for repayment of the debt
may be unable or unwilling to repay principal and interest when due, and may
require renegotiation or rescheduling of debt payments. Repayment of
principal and interest may depend also upon political and economic factors.

4. MAY INVEST IN PASSIVE FOREIGN INVESTMENT COMPANIES ("PFICS"), WHICH INCLUDE
FUNDS OR TRUSTS ORGANIZED AS INVESTMENT VEHICLES TO INVEST IN COMPANIES OF
CERTAIN FOREIGN COUNTRIES. Investors in PFICs bear their proportionate share
of the PFIC's management fees and other expenses. See "Additional Tax
Information" in the Common Stock Trust's Statement of Additional Information.

5. MAY PURCHASE AND SELL PUT AND CALL OPTIONS ON SECURITIES, FINANCIAL INDICES
AND FOREIGN CURRENCIES, MAY PURCHASE AND SELL THE FOLLOWING NON-LEVERAGED
DERIVATIVE SECURITIES: FUTURES CONTRACTS AND RELATED OPTIONS WITH RESPECT TO
SECURITIES, FINANCIAL INDICES AND FOREIGN CURRENCIES, AND MAY ENTER INTO
FOREIGN CURRENCY TRANSACTIONS SUCH AS FORWARD CONTRACTS. The Fund may employ
certain strategies and techniques utilizing these instruments to mitigate its
exposure to changing currency exchange rates, security prices, interest rates
and other factors that affect security values. There is no guarantee that
these strategies and techniques will work.

An option gives an owner the right to buy or sell securities at a
predetermined exercise price for a given period of time. The writer of an
option is obligated to purchase or sell (depending upon the nature of the
option) the underlying securities if the option is exercised during the
specified period of time. A futures contract is an agreement in which the
seller of the contract agrees to deliver to the buyer an amount of cash equal
to a specific dollar amount times the difference between the value of a
security at the close of the last trading day of the contract and the price
at which the agreement is made. A forward currency contract is an agreement
to purchase or sell a foreign currency at some future time for a fixed amount
of U.S. dollars.

The Fund, under normal conditions, will not sell a put or call option if, as
a result thereof, the aggregate value of the assets underlying all such
options (determined as of the date such options are written) would exceed 25%
of the Fund's net assets. The Fund will not purchase a put or call option or
option on a futures contract if, as a result thereof, the aggregate premiums
paid on all options or options on futures contracts held by the Fund would
exceed 20% of its net assets. In addition, the Fund will not enter into any
futures contract or option on a futures contract if, as a result thereof, the
aggregate margin deposits and premiums required on all such instruments

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INVESTMENT OBJECTIVES AND POLICIES OF THE STOCK FUNDS (Continued)

would exceed 5% of its net assets. See "Risk Factors" for more information
about the risks inherent in the purchase and sale of options, futures and
forward contracts.

See "Risk Factors" for more information about the risks inherent in securities
issued by foreign issuers. For a brief description of common stocks, preferred
stocks, convertible securities, and bonds and other debt securities, see
"Description of Stocks, Bonds and Convertible Securities" on page 71.

SMALL COMPANY FUND
The Small Company Fund has as its investment objective to seek long-term growth
of capital through investing primarily in small-sized companies. To pursue its
objective, the Small Company Fund will invest primarily in companies with total
market capitalization of less than $1 billion.

To pursue its investment objective, the Small Company Fund:

1. WILL INVEST AT LEAST 65% OF ITS TOTAL ASSETS IN COMMON STOCK AND PREFERRED
STOCK OF SMALL-SIZED COMPANIES WITH TOTAL MARKET CAPITALIZATION OF LESS THAN
$1 BILLION. Companies whose capitalization falls outside this range after
purchase continue to be considered small-capitalized for purposes of the 65%
policy. The Fund will invest principally in common stocks selected by SAM
primarily for appreciation and/or dividend potential and from a long-range
investment standpoint. In determining those common and preferred stocks which
have the potential for long-term growth, SAM will evaluate the issuer's
financial strength, quality of management and earnings power. Investments in
small or newly formed companies involve greater risks than investments in
larger, more established issuers and their securities can be subject to more
abrupt and erratic movements in price. See "Risk Factors" for more
information about the risks inherent in securities issued by small companies.

2. MAY INVEST IN SECURITIES CONVERTIBLE INTO COMMON STOCK WHEN, IN SAM'S
OPINION, THE EXPECTED TOTAL RETURN OF A CONVERTIBLE SECURITY EXCEEDS THE
EXPECTED TOTAL RETURN OF COMMON STOCK ELIGIBLE FOR PURCHASE BY THE FUND. The
Fund will purchase convertible securities if such securities offer a higher
yield than an issuer's common stock and provide reasonable potential for
capital appreciation. The Fund may invest in convertible corporate bonds that
are rated below investment grade (commonly referred to as "high-yield" or
"junk" bonds) or in comparable, unrated bonds, but less than 35% of the
Fund's total assets will be invested in such securities. Bonds rated Ca by
Moody's or CC by S&P are highly speculative and have large uncertainties or
major risk exposures. See "Risk Factors" on page 44 for more information.

For a brief description of common stocks, preferred stocks, convertible
securities, and bonds and other debt securities, see "Description of Stocks,
Bonds and Convertible Securities" on page 71.

COMMON INVESTMENT PRACTICES OF THE STOCK FUNDS
Each of the Stock Funds may also follow the investment practices described
below:

1. MAY INVEST IN BONDS AND OTHER DEBT SECURITIES.

Each Fund may invest in bonds and other debt securities that are rated
investment grade by Moody's or S&P, or unrated bonds determined by SAM to be
of comparable quality to such rated bonds. Bonds rated in the lowest category
of investment grade (Baa by Moody's and BBB by

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INVESTMENT OBJECTIVES AND POLICIES OF THE STOCK FUNDS (Continued)

S&P) and comparable unrated bonds 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.

After purchase by a Stock Fund, a corporate bond may be downgraded or, if
unrated, may cease to be comparable to a rated security. Neither event will
require a Stock 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 Equity Fund
will not hold more than 3% of its total assets and the Income Fund will not
hold more than 1% of its total assets in bonds that go into default on the
payment of principal and interest after purchase. In the event that 35% or
more of a Stock 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 remain below 35% of the
Fund's net assets.

2. MAY INVEST IN WARRANTS. Warrants are options to buy a stated number of shares
of common stock at a specified price any time during the life of the warrant.
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 Stock Fund
could lose all of its principal investment in the warrant.

3. MAY HOLD CASH OR INVEST TEMPORARILY IN HIGH QUALITY, SHORT-TERM SECURITIES
ISSUED BY AN AGENCY OR INSTRUMENTALITY OF THE U.S. GOVERNMENT, HIGH QUALITY
COMMERCIAL PAPER, CERTIFICATES OF DEPOSIT, SHARES OF NO-LOAD, OPEN-END MONEY
MARKET FUNDS (EXCEPT THE EQUITY FUND) OR REPURCHASE AGREEMENTS. The Stock
Funds 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. SAM will waive its advisory fees for any Growth,
Income, Northwest, Balanced, International or Small Company Fund assets
invested in money market funds. With respect to repurchase agreements, each
Stock Fund will invest no more than 5% of its total assets in repurchase
agreements and will not purchase repurchase agreements that mature in more
than seven days. Counterparties of foreign repurchase agreements may be less
creditworthy than U.S. counterparties.

4. MAY PURCHASE SECURITIES ON A "WHEN-ISSUED" OR "DELAYED-DELIVERY" BASIS OR
PURCHASE OR SELL SECURITIES ON A "FORWARD COMMITMENT" BASIS. Under this
procedure, a Stock Fund agrees to acquire securities that are to be issued
and delivered against payment in the future. The price, however, is fixed at
the time of commitment. When a Stock Fund purchases when-issued or
delayed-delivery securities, its custodian bank will maintain in a temporary
holding account cash, U.S. Government securities or other high-grade debt
obligations having a value equal to or greater than such commitments. On
delivery dates for such transactions, the Fund will meet its obligations from
maturities or sales of the securities held in the temporary holding account
or from thenavailable cash flow. If a Stock Fund chooses to dispose of the
right to acquire a when-issued or delayed delivery security prior to its
acquisition, it could incur a gain or loss due to

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INVESTMENT OBJECTIVES AND POLICIES OF THE STOCK FUNDS (Continued)

market fluctuations. Use of these techniques may affect a Fund's share price
in a manner similar to leveraging.

5. MAY INVEST IN AMERICAN DEPOSITARY RECEIPTS ("ADRS"). ADRs are registered
receipts evidencing ownership of an underlying foreign security. They
typically are issued in the United States by a bank or trust company. In
addition to the risks of foreign investment applicable to the underlying
securities, ADRs may also be subject to the risks that the foreign issuer may
not be obligated to cooperate with the U.S. bank or trust company, or that
information available to the U.S. market may not be current. ADRs which are
structured without sponsorship of the issuer of the underlying foreign
security may also be subject to the risk that the foreign issuer may not
provide financial and other material information to the U.S. bank or trust
company issuer. The International Fund may utilize European Depositary
Receipts ("EDRs"), which are similar instruments. EDRs may be in bearer form
and are designed for use in the European securities markets.

6. MAY INVEST UP TO 10% OF ITS TOTAL ASSETS IN FOREIGN SECURITIES, EXCEPT THE
INTERNATIONAL FUND, WHICH MAY INVEST 100% OF ITS ASSETS IN FOREIGN
SECURITIES. FOREIGN SECURITIES ARE SUBJECT TO RISKS IN ADDITION TO THOSE
INHERENT IN INVESTMENTS IN DOMESTIC SECURITIES. See "Risk Factors" on page 44
for more information about the risks associated with investments in foreign
securities.

7. MAY INVEST UP TO 10% OF ITS TOTAL ASSETS IN SHARES OF REAL ESTATE INVESTMENT
TRUSTS ("REITS"). REITs purchase real property, which is then leased, and
make mortgage investments. For federal income tax purposes, REITs attempt to
qualify for beneficial "modified pass-through" tax treatment by annually
distributing at least 95% of their taxable income. If a REIT were unable to
qualify for such tax treatment, it would be taxed as a corporation and the
distributions made to its shareholders would not be deductible by it in
computing its taxable income. REITs are dependent upon the successful
operation of properties owned and the financial condition of lessees and
mortgagors. The value of REIT units fluctuates 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 REITs that are highly leveraged.

8. MAY INVEST UP TO 10% OF ITS TOTAL ASSETS IN RESTRICTED SECURITIES, PROVIDED
THAT SAM HAS DETERMINED THAT SUCH SECURITIES ARE LIQUID UNDER GUIDELINES
ADOPTED BY THE COMMON STOCK TRUST'S BOARD OF TRUSTEES. Restricted securities
may be sold only in offerings registered under the Securities Act of 1933, as
amended ("1933 Act"), or in transactions exempt from the registration
requirements under the 1933 Act. Rule 144A under the 1933 Act provides an
exemption for the resale of certain restricted securities to qualified
institutional buyers. Investing in restricted securities may increase the
Stock Funds' illiquidity to the extent that qualified institutional buyers or
other buyers are unwilling to purchase the securities. As a result, a Stock
Fund may not be able to sell these securities when its investment adviser or
sub-investment adviser deems it advisable to sell, or may have to sell them
at less than fair value. In addition, market quotations are sometimes less
readily available for restricted securities. Therefore, judgment may at times
play a greater role in valuing these securities than in the case of
unrestricted securities.

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INVESTMENT OBJECTIVES AND POLICIES OF THE STOCK FUNDS (Continued)

9. MAY INVEST IN SECURITIES WHOSE PERFORMANCE AND PRINCIPAL AMOUNT AT MATURITY
ARE LINKED TO A SPECIFIED EQUITY SECURITY OR SECURITIES INDEX. The value of
an indexed security is determined by reference to a specific equity
instrument or statistic. The performance of indexed securities depends
largely on the performance of the securities or indices to which they are
indexed, but such securities are also subject to credit risks associated with
the issuer of the security. Indexed securities may also be more volatile than
their underlying instruments.

10. MAY INVEST UP TO 5% OF ITS TOTAL ASSETS IN SECURITIES OF UNSEASONED ISSUERS.
Unseasoned issuers are those companies which, together with any
predecessors, have been in operation for less than three years.

The following restrictions are fundamental policies of the Stock Funds that
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. THE GROWTH, INCOME AND NORTHWEST FUNDS, WITH RESPECT TO 100% OF THE VALUE OF
THEIR TOTAL ASSETS, MAY NOT PURCHASE MORE THAN 10% OF ANY CLASS OF SECURITIES
OF ANY ONE ISSUER.

3. EACH FUND, WITH RESPECT TO 100% OF THE VALUE OF ITS TOTAL ASSETS, MAY NOT
PURCHASE MORE THAN 10% OF THE OUTSTANDING VOTING SECURITIES OF ANY ONE ISSUER
(OTHER THAN U.S. GOVERNMENT SECURITIES IN THE CASE OF THE GROWTH, INCOME,
NORTHWEST, BALANCED, INTERNATIONAL AND SMALL COMPANY FUNDS).

4. EACH STOCK FUND MAY BORROW MONEY ONLY FOR TEMPORARY OR EMERGENCY PURPOSES,
AND THE GROWTH FUND ONLY FOR EXTRAORDINARY OR EMERGENCY PURPOSES, FROM A BANK
OR AFFILIATE OF SAFECO CORPORATION AT AN INTEREST RATE NOT GREATER THAN THAT
AVAILABLE FROM COMMERCIAL BANKS. The Growth, Income and Northwest Funds will
not borrow amounts in excess of 20%, and the Equity, Balanced, International
and Small Company Funds will not borrow amounts in excess of 33%, of total
assets. A Stock Fund will not purchase securities if borrowings equal to or
greater than 5% of total assets are outstanding for that Fund.

For more information, see the "Investment Policies" and "Additional Investment
Information" sections of the Common Stock Trust's Statement of Additional
Information.

INVESTMENT POLICIES OF THE INTERMEDIATE
TREASURY FUND

The investment objective of the Intermediate Treasury Fund is to provide as high
a level of current income as is consistent with the preservation of capital. The
Intermediate Treasury Fund will seek to maintain a portfolio of U.S. Treasury
obligations with an average weighted maturity of between three and ten years.
Although the average weighted maturity of the portfolio will fall within a range
of three to ten years, individual obligations held by the Intermediate Treasury
Fund may have maturities outside that range.

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INVESTMENT POLICIES OF THE INTERMEDIATE
TREASURY FUND (Continued)

To pursue its investment objective, the Intermediate Treasury Fund:

1. WILL INVEST, DURING NORMAL MARKET CONDITIONS, AT LEAST 65% OF ITS TOTAL
ASSETS IN DIRECT OBLIGATIONS OF THE U.S. TREASURY SUCH AS U.S. TREASURY
BILLS, NOTES AND BONDS. These securities are supported by the full faith and
credit of the U.S. Government.

2. WILL INVEST UP TO 35% OF ITS TOTAL ASSETS IN:

OTHER U.S. GOVERNMENT SECURITIES, including (a) securities supported by the
full faith and credit of the U.S. Government but that are not direct
obligations of the U.S. Treasury, such as securities issued by the Government
National Mortgage Association ("GNMA"), (b) securities that are not supported
by the full faith and credit of the U.S. Government but are supported by the
issuer's ability to borrow from the U.S. Treasury, such as securities issued
by the Federal National Mortgage Association ("FNMA") and the Federal Home
Loan Mortgage Corporation ("FHLMC"), and (c) securities supported solely by
the creditworthiness of the issuer, such as securities issued by the
Tennessee Valley Authority ("TVA"). While U.S. Government securities are
considered to be of the highest credit quality available, they are subject to
the same market risks as comparable debt securities.

CORPORATE DEBT SECURITIES which at the time of purchase are rated in the top
three grades (A or higher) by either Moody's or S&P, or, if unrated,
determined by SAM to be of comparable quality to such rated debt securities.
In addition to reviewing ratings, SAM will analyze the quality of rated and
unrated corporate bonds for purchase by the Fund by evaluating various
factors that may include the issuer's capital structure, earnings power and
quality of management. See "Ratings Supplement" beginning on page 72.

3. MAY INVEST UP TO 5% OF ITS TOTAL ASSETS IN YANKEE SECTOR DEBT SECURITIES,
EURODOLLAR BONDS AND MUNICIPAL SECURITIES. See Taxable Bond Trust's Statement
of Additional Information for more information about these securities.

4. MAY HOLD CASH OR INVEST TEMPORARILY IN HIGH-QUALITY COMMERCIAL PAPER,
CERTIFICATES OF DEPOSIT, SHARES OF NO-LOAD, OPEN-END MONEY MARKET FUNDS AND
HIGH-QUALITY SHORT-TERM SECURITIES ISSUED BY AN AGENCY OR INSTRUMENTALITY OF
THE U.S. GOVERNMENT. The Fund may purchase these short-term securities as a
cash management technique under those circumstances where it has cash to
manage for a short time period, for example, after receiving proceeds from
the sale of securities, interest payments from portfolio securities or cash
from the sale of Fund shares to investors. Interest earned from these
short-term securities will be taxable to investors as ordinary income when
distributed. SAM will waive its advisory fees for Fund assets invested in
money market funds.

5. MAY INVEST FOR SHORT-TERM PURPOSES WHEN SAM BELIEVES SUCH ACTION TO BE
DESIRABLE AND CONSISTENT WITH SOUND INVESTMENT PRACTICES. The Intermediate
Treasury Fund, however, will not engage primarily in trading for the purpose
of short-term profits. The Intermediate Treasury Fund may dispose of its
portfolio securities whenever SAM deems advisable, without regard to the
length of time the securities have been held.

6. MAY PURCHASE OR SELL SECURITIES ON A "WHEN-ISSUED" OR "DELAYED-DELIVERY"
BASIS. Under this procedure, the Intermediate Treasury Fund agrees to acquire
or sell securities that are to be

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INVESTMENT POLICIES OF THE INTERMEDIATE
TREASURY FUND (Continued)

delivered against payment in the future, normally 30 to 45 days. The price,
however, is fixed at the time of commitment. When the 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 the Fund's share price in a
manner similar to leveraging.

The following restrictions are fundamental policies of the Intermediate Treasury
Fund which cannot be changed without shareholder vote.

1. THE 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. THE FUND, WITH RESPECT TO 100% OF THE VALUE OF ITS TOTAL ASSETS, MAY NOT
PURCHASE MORE THAN 10% OF ANY CLASS OF SECURITIES OF ANY ONE ISSUER.

3. THE FUND, WITH RESPECT TO 100% OF THE VALUE OF ITS TOTAL ASSETS, MAY NOT
PURCHASE MORE THAN 10% OF THE OUTSTANDING VOTING SECURITIES OF ANY ONE ISSUER
(OTHER THAN U.S. GOVERNMENT SECURITIES).

4. THE FUND MAY BORROW MONEY ONLY FOR TEMPORARY OR EMERGENCY PURPOSES FROM A
BANK OR SAFECO CORPORATION OR AFFILIATES OF SAFECO CORPORATION AT AN INTEREST
RATE NOT GREATER THAN THAT AVAILABLE FROM COMMERCIAL BANKS. The Fund will not
borrow amounts in excess of 20% of its total assets. The Fund will not
purchase securities if outstanding borrowings are equal to or greater than 5%
of its total assets. The Fund intends to exercise its borrowing authority
primarily to meet shareholder redemption under circumstances where redemption
requests exceed available cash.

5. THE FUND MAY 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, the Fund may experience difficulty in
valuing or disposing of illiquid securities. SAM determines the liquidity of
the securities under guidelines adopted by the Taxable Bond Trust's Board of
Trustees.

6. THE FUND MAY INVEST UP TO 10% OF NET ASSETS IN REPURCHASE AGREEMENT
TRANSACTIONS. 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. Repurchase
agreements carry certain risks not associated with direct investments in
securities, including the risk that the Intermediate Treasury Fund will be
unable to dispose of the security during the term of the repurchase agreement
if the security's market value declines, and delays and costs to a Fund if
the other party to the repurchase agreement declares bankruptcy.

For more information see the "Investment Policies" and "Additional Investment
Information" sections of the Taxable Bond Trust's Statement of Additional
Information.

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INVESTMENT POLICIES OF THE MANAGED BOND FUND

The investment objective of the Managed Bond Fund is to provide as high a level
of total return as is consistent with the relative stability of capital through
purchase of investment grade debt securities.

In pursuing the Managed Bond Fund's investment objective, SAM will seek to
minimize the effects of interest rate risks while pursuing total return by
adjusting the investment portfolio's average maturity in response to interest
rate changes. In general, the Managed Bond Fund's strategy will be to hold
fixed-income securities with shorter maturities as interest rates rise and with
longer maturities as interest rates fall. The fixed-income securities held by
the Managed Bond Fund will have maturities of 10 years or less from the date of
purchase. SAM reserves the right to modify the Managed Bond Fund's investment
strategy in any respect at any time.

To pursue its investment objective, the Managed Bond Fund:

1.WILL INVEST AT LEAST 65% OF ITS TOTAL ASSETS IN FIXED-INCOME SECURITIES.

2. WILL INVEST PRIMARILY IN INVESTMENT GRADE DEBT SECURITIES; I.E., SECURITIES
RATED IN THE TOP FOUR CATEGORIES BY EITHER S&P OR MOODY'S OR IF NOT RATED,
SECURITIES WHICH, IN SAM'S OPINION, ARE COMPARABLE IN QUALITY TO INVESTMENT
GRADE DEBT SECURITIES. Included in investment grade are securities of medium
grade (rated Baa by Moody's or BBB by S&P) which have speculative
characteristics and are more likely to have a weakened capacity to make
principal and interest payments under changing economic or other conditions
than higher grade securities. The Managed Bond Fund will limit investments in
such medium grade debt securities to no more than 10% of its total assets.
Unrated securities are not necessarily of lower quality than rated
securities, but may not be as attractive to investors.

The Managed Bond Fund may retain debt securities which are downgraded to
below investment grade (commonly referred to as "high-yield" or "junk" bonds)
after purchase, but no more than 5% of its total assets will be invested in
such securities. In addition to reviewing ratings, SAM may analyze the
quality of rated and unrated debt securities purchased for the Managed Bond
Fund by evaluating the issuer's capital structure, earnings power, quality of
management and position within its industry. For a description of ratings for
debt securities, see "Ratings Supplement" on page 72.

3. WILL INVEST AT LEAST 50% OF ITS TOTAL ASSETS IN OBLIGATIONS OF OR GUARANTEED
BY THE U.S. GOVERNMENT, ITS AGENCIES AND INSTRUMENTALITIES. These obligations
include (a) direct obligations of the U.S. Treasury, such as U.S. Treasury
notes, bills and bonds; (b) securities supported by the full faith and credit
of the U.S. Government but that are not direct obligations of the U.S.
Treasury, such as securities issued by the GNMA; (c) securities that are not
supported by the full faith and credit of the U.S. Government but are
supported by the issuer's ability to borrow from the U.S. Treasury, such as
securities issued by the FNMA and the FHLMC; and (d) 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.

4. MAY INVEST UP TO 50% OF ITS TOTAL ASSETS IN CORPORATE DEBT SECURITIES OR
EURODOLLAR BONDS. Eurodollar bonds are bonds issued by either U.S. or foreign
issuers that are traded in the European bond markets and denominated in U.S.
dollars. The Managed Bond Fund will purchase Eurodollar bonds through U.S.
securities dealers and hold such bonds in the United States. The

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INVESTMENT POLICIES OF THE MANAGED BOND FUND
(Continued)

delivery of Eurodollar bonds to the Managed Bond Fund's custodian in the
United States may cause slight delays in settlement which are not anticipated
to affect the Managed Bond Fund in any material, adverse manner. Eurodollar
bonds issued by foreign issuers are subject to the same risks as Yankee
sector bonds discussed below.

5. MAY INVEST IN ASSET-BACKED SECURITIES, WHICH REPRESENT INTERESTS IN, OR ARE
SECURED BY AND PAYABLE FROM, POOLS OF ASSETS SUCH AS CONSUMER LOANS,
AUTOMOBILE RECEIVABLE SECURITIES, CREDIT CARD RECEIVABLE SECURITIES, AND
INSTALLMENT LOAN CONTRACTS. These securities may be supported by credit
enhancements such as letters of credit. Payment of interest and principal
ultimately depends upon borrowers paying the underlying loans. There is a
risk that one or more of the underlying borrowers may default and that
recovery on repossessed collateral may be unavailable or inadequate to
support payments on the defaulted asset-backed securities. In addition,
asset-backed securities are subject to prepayment risks which may reduce the
overall return of the investment.

6. MAY INVEST UP TO 10% OF ITS TOTAL ASSETS IN YANKEE SECTOR DEBT SECURITIES,
WHICH ARE SECURITIES ISSUED AND TRADED IN THE UNITED STATES BY FOREIGN
ISSUERS. These bonds have investment risks that are different from those of
domestic issuers. Such risks may include nationalization of the issuer,
confiscatory taxation by the foreign government that would inhibit the
ability of the issuer to make principal and interest payments to the Managed
Bond Fund, lack of comparable publicly available information concerning
foreign issuers, lack of comparable accounting and auditing practices in
foreign countries and, finally, difficulty in enforcing claims against
foreign issuers in the event of default.

Both S&P and Moody's rate Yankee sector debt obligations. If a debt
obligation is unrated, SAM will make every effort to analyze a potential
investment in the foreign issuer with respect to quality and risk on the same
basis as the rating services. Because public information is not always
comparable to that available on domestic issuers, this may not be possible.
Therefore, while SAM will make every effort to select investments in foreign
securities on the same basis, and with comparable quantities and types of
information, as its investments in domestic securities, that may not always
be possible.

7. MAY PURCHASE OR SELL SECURITIES ON A WHEN-ISSUED OR DELAYED-DELIVERY BASIS.
Under this procedure, the Managed Bond Fund agrees to acquire securities that
are to be issued and delivered against payment in the future, normally 30 to
45 days. The price, however, is fixed at the time of commitment. When the
Managed Bond Fund purchases when-issued or delayed-delivery securities, it
will segregate liquid, high quality securities in an amount equal in value to
the purchase price of the security. Use of these techniques may affect the
Managed Bond Fund's share price in a manner similar to the use of leveraging.

8. MAY HOLD CASH OR INVEST TEMPORARILY IN HIGH QUALITY, SHORT-TERM SECURITIES
ISSUED BY AN AGENCY OR INSTRUMENTALITY OF THE U.S. GOVERNMENT, HIGH QUALITY
COMMERCIAL PAPER, CERTIFICATES OF DEPOSIT, SHARES OF NO-LOAD, OPEN-END MONEY
MARKET FUNDS OR REPURCHASE AGREEMENTS. The Managed Bond 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

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INVESTMENT POLICIES OF THE MANAGED BOND FUND
(Continued)

securities or cash from the sale of Managed Bond 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
Managed Bond Fund assets invested in money market funds. With respect to
repurchase agreements, the Managed Bond Fund will invest no more than 5% of
its total assets in repurchase agreements, and will not purchase repurchase
agreements which mature in more than seven days.

9. MAY HOLD CASH AS A TEMPORARY DEFENSIVE MEASURE WHEN MARKET CONDITIONS SO
WARRANT.

10. MAY INVEST UP TO 5% OF ITS TOTAL ASSETS IN MUNICIPAL SECURITIES IF, IN SAM'S
OPINION, THE POTENTIAL FOR APPRECIATION IS GREATER THAN, AND YIELD IS
COMPARABLE TO OR GREATER THAN, SIMILARLY RATED TAXABLE SECURITIES.

11. MAY INVEST FOR SHORT-TERM PURPOSES WHEN SAM BELIEVES SUCH ACTION TO BE
DESIRABLE AND CONSISTENT WITH SOUND INVESTMENT PRACTICES. The Managed Bond
Fund, however, will not engage primarily in trading for the purpose of
short-term profits. The Managed Bond Fund may dispose of its portfolio
securities whenever SAM deems advisable, without regard to the length of
time the securities have been held.

The following restrictions are fundamental policies of the Managed Bond Fund
which cannot be changed without shareholder vote.

1. THE 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. THE FUND, WITH RESPECT TO 100% OF THE VALUE OF ITS TOTAL ASSETS, MAY NOT
PURCHASE MORE THAN 10% OF ANY CLASS OF SECURITIES OF ANY ONE ISSUER.

3. THE FUND, WITH RESPECT TO 100% OF THE VALUE OF ITS TOTAL ASSETS, MAY NOT
PURCHASE MORE THAN 10% OF THE OUTSTANDING VOTING SECURITIES OF ANY ONE ISSUER
(OTHER THAN U.S. GOVERNMENT SECURITIES).

4. THE FUND MAY BORROW MONEY FOR TEMPORARY OR EMERGENCY PURPOSES ONLY FROM A
BANK OR AFFILIATES OF SAFECO CORPORATION AT AN INTEREST RATE NOT GREATER THAN
THAT AVAILABLE FROM COMMERCIAL BANKS. The Fund will not borrow amounts in
excess of 20% of its total assets. As a non-fundamental policy, the Fund will
not purchase securities if outstanding borrowings are equal to or greater
than 5% of its total assets. The Fund intends to exercise its borrowing
authority primarily to meet shareholder redemptions under circumstances where
redemptions exceed available cash.

For more information, see the "Investment Policies" and "Additional Investment
Information" sections of the Managed Bond Trust's Statement of Additional
Information.

INVESTMENT POLICIES OF THE TAX-EXEMPT INCOME FUNDS

The investment objective of the Municipal Bond Fund is to seek as high a level
of current interest income exempt from federal income tax as is consistent with
the relative stability of capital. The investment objective of the California
Fund is to seek as high a level of current interest income exempt from federal
income tax and California state personal income tax as is consistent with the

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INVESTMENT POLICIES OF THE TAX-EXEMPT INCOME FUNDS
(Continued)

relative stability of capital. The investment objective of the Washington Fund
is to seek as high a level of current interest income exempt from federal income
tax as is consistent with prudent investment risk.

To pursue its investment objective, each of the Tax-Exempt Income Funds:

1. WILL, DURING NORMAL MARKET CONDITIONS, INVEST AS A MATTER OF FUNDAMENTAL
POLICY AT LEAST 80% OF ITS NET ASSETS IN SECURITIES THE INTEREST ON WHICH IS
EXEMPT FROM FEDERAL INCOME TAX AND, IN THE CASE OF THE CALIFORNIA FUND,
EXEMPT FROM CALIFORNIA PERSONAL INCOME TAX. The Tax-Exempt Income Funds do
not currently intend to purchase taxable investments, except as a temporary
accommodation or in an emergency situation.

2. WILL INVEST AT LEAST 65% OF ITS TOTAL ASSETS IN MUNICIPAL BONDS HAVING A
MATURITY IN EXCESS OF ONE YEAR THAT AT THE TIME OF ACQUISITION 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. Each
Tax-Exempt Income Fund may invest up to 20% of its total assets in unrated
municipal bonds. Unrated securities are not necessarily lower in quality than
rated securities, but may not be as attractive to as many investors as rated
securities. Each Tax-Exempt Income Fund will invest no more than 35% of its
total assets in municipal bonds rated in the fourth highest grade or in
comparable unrated bonds. Such bonds are of medium grade, have speculative
characteristics and are more likely to have a weakened capacity to make
principal and interest payments under changing economic conditions or upon
deterioration in the financial condition of the issuer.

In addition to reviewing ratings, SAM will analyze the quality of rated and
unrated municipal bonds for purchase by each Tax-Exempt Income 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
Tax-Exempt Bond Trust's Statement of Additional Information.

After purchase by a Fund, a municipal bond may be downgraded to below investment
grade or, if unrated, may cease to be comparable to a rated investment grade
security (such below investment grade securities are commonly referred to as
"high-yield" or "junk" bonds). Neither event will require a Fund to dispose of
that security, but SAM will take a downgrade or loss of comparability into
account in determining whether the Fund should continue to hold the security in
its portfolio. Each Tax-Exempt Income Fund will not hold more than 5% of its net
assets in such below investment grade securities.

The term "municipal bonds" as used in this Prospectus means those obligations
issued by or on behalf of states, territories or possessions of the United
States and the District of Columbia and their political subdivisions,
municipalities, agencies, instrumentalities or public authorities, the interest
on which in the opinion of bond counsel is exempt from federal income tax and,
in the case of the California Fund, exempt from California personal income tax.

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INVESTMENT POLICIES OF THE TAX-EXEMPT INCOME FUNDS
(Continued)

3. 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" ("IDB") is a type of
revenue bond that is backed by the credit of a private issuer, generally does
not have access to the resources of a municipality for payment and may
involve greater risk. Each Tax-Exempt Income Fund intends to invest primarily
in revenue bonds that may be issued to finance various types of projects,
including but not limited to education, hospitals, housing, waste facilities
and utilities. Each Tax-Exempt Income Fund will not purchase private activity
bonds ("PABs") or any other type of revenue bonds, the interest on which is a
tax preference item for purposes of 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 and local government, as the case may be. The taxes or special
assessments that can be levied for the payment of principal and interest on
general obligation bonds may be limited or unlimited as to rate or amount.

VARIABLE AND FLOATING RATE OBLIGATIONS, which are municipal obligations that
carry variable or floating rates of interest. Variable rate instruments bear
interest at rates that are readjusted at periodic intervals. Floating rate
instruments bear interest at rates that vary automatically with changes in
specified market rates or indexes, such as the bank prime rate. Accordingly,
as interest rates fluctuate, the potential for capital appreciation or
depreciation of these obligations is less than for fixed rate obligations.
Floating and variable rate obligations carry demand features that permit a
Fund to tender (sell) them back to the issuer at par prior to maturity and on
short notice. A Fund's ability to obtain payment from the issuer at par may
be affected by events occurring between the date the Fund elects to tender
the obligation to the issuer and the date redemption proceeds are payable to
the Fund. Each Tax-Exempt Income Fund will purchase floating and variable
rate obligations only if at the time of purchase there is a secondary market
for such instruments.

PUT BONDS, which are municipal bonds that give the holder the unconditional
right to sell the bond back to the issuer at a specified price and exercise
date and PUT BONDS WITH DEMAND FEATURES. The obligation to purchase the bond
on the exercise date may be supported by a letter of credit or other
arrangement from a bank, insurance company or other financial institution,
the credit standing of which affects the credit quality of the bond. A demand
feature is a put that entitles the Fund holding it to repayment of the
principal amount of the underlying security on no more than 30 days' notice
at any time or at specified intervals.

MUNICIPAL LEASE OBLIGATIONS, which are issued by or on behalf of state or
local government authorities to acquire land, equipment or facilities and may
be subject to annual budget appropriations. These obligations themselves are
not normally backed by the credit of the municipality or the state but are
secured by rent payments made by the municipality or by the state pursuant to
a lease. If the lease is assigned, the interest on the obligation may become
taxable. The leases underlying certain municipal lease obligations provide
that lease payments

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INVESTMENT POLICIES OF THE TAX-EXEMPT INCOME FUNDS
(Continued)

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. Each Tax-Exempt Income
Fund will only invest in municipal lease obligations that are, in the opinion
of SAM, liquid securities under guidelines adopted by the Tax-Exempt Bond
Trust's Board of Trustees. Generally, municipal lease obligations will be
determined to be liquid if they have a readily available market after an
evaluation of all relevant factors.

CERTIFICATES OF PARTICIPATION in municipal lease obligations ("COPs"), 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. Each Tax-Exempt Income Fund will only invest in COPs that are, in the
opinion of SAM, liquid securities under guidelines adopted by the Tax-Exempt
Bond Trust's Board of Trustees. Generally, COPs will be determined to be
liquid if they have a readily available market after an evaluation of all
relevant factors.

PARTICIPATION INTERESTS, which are interests in municipal bonds and floating
and variable rate obligations that are owned by banks. These interests carry
a demand feature that permits a Fund holding an interest to tender (sell) it
back to the bank. Generally, the bank will accept tender of the participation
interest with same day notice, but may require up to five days' notice. The
demand feature is usually backed by an irrevocable letter of credit or
guarantee of the bank. The credit rating of the bank may affect the credit
quality of the participation interest.

MUNICIPAL NOTES, which are notes generally issued by an issuer to provide for
short-term capital needs and generally have maturities of one year or less.
Each Tax-Exempt Income Fund may purchase municipal notes as a medium for its
short-term investments. Municipal Notes include tax anticipation, revenue
anticipation and bond anticipation notes and tax-exempt commercial paper.
Each Tax-Exempt Income Fund will invest only in those municipal notes that at
the time of purchase are rated within one of the three highest grades by
Moody's or S&P or, if unrated by any of these agencies, in the opinion of
SAM, are of comparable quality.

4. MAY INVEST IN SHARES OF NO-LOAD, OPEN-END INVESTMENT COMPANIES THAT INVEST IN
TAX-EXEMPT SECURITIES WITH REMAINING MATURITIES OF ONE YEAR OR LESS. Such
shares will only be purchased as a medium for a Fund's shortterm investments
if SAM determines that they provide a better

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INVESTMENT POLICIES OF THE TAX-EXEMPT INCOME FUNDS
(Continued)

combination of yield and liquidity than a direct investment in short-term,
tax-exempt securities. SAM will waive its advisory fees for assets invested
in other investment companies. Each Tax-Exempt Income Fund will not invest
more than 10% of its total assets in shares issued by other investment
companies, will not invest more than 5% of its total assets in a single
investment company, and will not purchase more than 3% of the outstanding
voting securities of a single investment company.

5. MAY INVEST FOR SHORT-TERM PURPOSES WHEN SAM BELIEVES SUCH ACTION TO BE
DESIRABLE AND CONSISTENT WITH SOUND INVESTMENT PRACTICES. Each Tax-Exempt
Income 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.

6. MAY PURCHASE OR SELL SECURITIES ON A "WHEN-ISSUED" OR "DELAYED-DELIVERY"
BASIS. Under this procedure, a Tax-Exempt Income 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.

7. MAY HOLD CASH OR INVEST TEMPORARILY IN HIGH QUALITY, SHORT-TERM SECURITIES
ISSUED BY AN AGENCY OR INSTRUMENTALITY OF THE U.S. GOVERNMENT, HIGH QUALITY
COMMERCIAL PAPER, CERTIFICATES OF DEPOSIT AND SHARES OF NO-LOAD, OPEN-END
MONEY MARKET FUNDS. A Tax-Exempt Income Fund may purchase these short-term
securities as a cash management technique under those circumstances where it
has cash to manage for a short time period, for example, after receiving
proceeds from the sale of securities, dividend distributions from portfolio
securities, or cash from the sale of Fund shares to investors. Interest
earned from these short-term securities will be taxable to investors as
ordinary income when distributed. SAM will waive its advisory fees for Fund
assets invested in money market funds.

The following restrictions are fundamental policies of the Tax-Exempt Income
Funds and cannot be changed without shareholder vote.

1. EACH FUND, WITH RESPECT TO 75% OF THE VALUE OF ITS TOTAL ASSETS, WILL NOT
INVEST MORE THAN 5% OF ITS TOTAL ASSETS IN THE SECURITIES OF ANY ONE ISSUER
(OTHER THAN U.S. GOVERNMENT SECURITIES).

2. EACH FUND WILL NOT INVEST 25% OR MORE OF ITS TOTAL ASSETS IN MUNICIPAL
OBLIGATIONS AND OTHER PERMITTED INVESTMENTS, THE INTEREST ON WHICH IS PAYABLE
FROM REVENUES ON SIMILAR TYPES OF PROJECTS SUCH AS: SPORTS, CONVENTION OR
TRADE SHOW FACILITIES; AIRPORTS; MASS TRANSPORTATION; SEWAGE OR SOLID WASTE
DISPOSAL FACILITIES; OR AIR OR WATER POLLUTION CONTROL PROJECTS.

3. THE MUNICIPAL BOND FUND WILL NOT INVEST 25% OR MORE OF ITS TOTAL ASSETS IN
SECURITIES WHOSE ISSUERS ARE LOCATED IN THE SAME STATE.

4. EACH FUND MAY BORROW MONEY ONLY FOR TEMPORARY OR EMERGENCY PURPOSES FROM A
BANK OR AFFILIATE OF SAFECO CORPORATION AT AN INTEREST RATE NOT GREATER THAN
THAT AVAILABLE FROM COMMERCIAL BANKS. A Tax-Exempt Income Fund will not
borrow amounts in excess of 20% of its total assets. As a non-fundamental
policy of the Washington Fund and a fundamental policy of

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- --------------------------------------------------------------------------------

INVESTMENT POLICIES OF THE TAX-EXEMPT INCOME FUNDS
(Continued)

the California and Municipal Bond Funds, a Fund will not purchase securities
if borrowings equal to or greater than 5% of its total assets are
outstanding. Each Tax-Exempt Income Fund intends to primarily exercise its
borrowing authority to meet shareholder redemptions under circumstances where
redemptions exceed available cash.

For a further description of each Fund's investment policies and restrictions as
well as an explanation of ratings, see the "Investment Objectives and Policies"
and "Description of Ratings" sections of the Tax-Exempt Bond Trust's Statement
of Additional Information.

INVESTMENT POLICIES OF THE MONEY MARKET FUND

The investment objective of the Money Market Fund is to seek as high a level of
current income as is consistent with the preservation of capital and liquidity
through investment in high-quality money market instruments maturing in thirteen
months or less.

To pursue its investment objective, the Money Market Fund:

1. WILL PURCHASE ONLY HIGH-QUALITY SECURITIES THAT, IN THE OPINION OF SAM
OPERATING UNDER GUIDELINES ESTABLISHED BY THE MONEY MARKET TRUST'S BOARD OF
TRUSTEES, PRESENT MINIMAL CREDIT RISKS AFTER AN EVALUATION OF THE CREDIT
QUALITY OF AN ISSUER OR OF ANY ENTITY PROVIDING A CREDIT ENHANCEMENT FOR THE
SECURITY. The Fund complies with industry-standard guidelines on the quality
and maturity of its investments, which are designed to help maintain a stable
$1.00 share price. The Fund invests in instruments with remaining maturities
of 397 days or less and maintains a dollar-weighted average portfolio
maturity of not more than 90 days.

MAY INVEST IN COMMERCIAL PAPER OBLIGATIONS. Commercial paper is a short-term
instrument issued by corporations, financial institutions, governmental
entities and other entities. The principal risk associated with commercial
paper is the potential insolvency of the issuer. In addition to commercial
paper obligations of domestic corporations, the Fund may also purchase
dollar-denominated commercial paper issued in the United States by foreign
entities. 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 of 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 United States.
The Fund will only purchase such securities, if, in the opinion of SAM, the
security is of an investment quality comparable to other obligations that may
be purchased by the Fund.

2. MAY INVEST IN NEGOTIABLE AND NON-NEGOTIABLE DEPOSITS, BANKERS' ACCEPTANCES
AND OTHER SHORT-TERM OBLIGATIONS OF U.S. BANKS. Companies in the financial
services industry are subject to various risks related to that industry, such
as government regulation, changes in interest rates, and exposure on loans,
including loans to foreign borrowers. The Fund may also invest in dollar-
denominated securities issued by foreign banks (including foreign branches of
U.S. banks) provided that, in the opinion of SAM, the security is of an
investment quality comparable to

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INVESTMENT POLICIES OF THE MONEY MARKET FUND (Continued)

other obligations which may be purchased by the Fund. Foreign banks may not
be subject to accounting standards or governmental supervision comparable to
U.S. banks, and there may be less public information available about their
operations. In addition, foreign securities may be subject to risks relating
to the political and economic conditions of the foreign country involved,
which could affect the payment of principal and interest.

3. MAY INVEST IN U.S. GOVERNMENT SECURITIES. U.S. Government securities include
(a) direct obligations of the U.S. Treasury, (b) securities supported by the
full faith and credit of the U.S. Government but that are not direct
obligations of the U.S. Treasury, (c) securities that are not supported by
the full faith and credit of the U.S. Government but are supported by the
issuer's ability to borrow from the U.S. Treasury such as securities issued
by the FNMA and the FHLMC, and (d) securities supported solely by the
creditworthiness of the issuer such as securities issued by the TVA. While
these securities are considered to be of the highest credit quality
available, they are subject to the same market risks as comparable debt
securities.

4. MAY INVEST IN EURODOLLAR AND YANKEE BANK OBLIGATIONS. Eurodollar bank
obligations are dollar-denominated certificates of deposit and time deposits
issued outside the U.S. capital markets by foreign branches of U.S. banks and
by foreign banks. Yankee bank obligations are dollar-denominated obligations
issued in the United States capital markets by foreign banks.

Eurodollar and Yankee obligations are subject to the same risks that pertain
to domestic issues, notably credit risk, market risk and liquidity risk.
Additionally, Eurodollar (and to a lesser extent, Yankee) obligations are
subject to certain sovereign risks. One such risk is the possibility that a
foreign government might prevent dollar-denominated funds from flowing across
its borders. Other risks include: adverse political and economic developments
in a foreign country; the extent and quality of government regulation of
financial markets and institutions; the imposition of foreign withholding
taxes; and expropriation or nationalization of foreign issuers. Eurodollar
and Yankee obligations will undergo the same credit analysis as domestic
issues in which the Fund invests, and foreign issuers will be required to
meet the same tests of financial strength as the domestic issuers approved
for the Fund.

5. MAY INVEST IN REPURCHASE AGREEMENTS. In a repurchase agreement, the Fund buys
securities at one price and simultaneously agrees to sell them back at a
higher price. Delays or losses could result if the counterparty to the
agreement defaults or becomes insolvent. The Fund will invest no more than
10% of total assets in repurchase agreements and will not purchase repurchase
agreements that mature in more than seven days.

6. MAY INVEST IN VARIABLE AND FLOATING RATE INSTRUMENTS. The interest rates on
variable rate instruments reset periodically on specified dates so as to
cause the instruments' market value to approximate their par value. The
interest rates on floating rate instruments change whenever there is a change
in a designated benchmark rate. Variable and floating rate instruments may
have put features. These instruments may have optional put features. Puts may
also be mandatory, in which case the Fund would be required to act to keep
the instrument.

7. MAY INVEST UP TO 5% OF ITS TOTAL ASSETS IN RESTRICTED SECURITIES ELIGIBLE FOR
RESALE UNDER RULE 144A UNDER THE 1933 ACT ("RULE 144A SECURITIES") AND
COMMERCIAL PAPER SOLD PURSUANT TO SECTION 4(2) OF THE 1933 ACT ("SECTION 4(2)
PAPER"), PROVIDED THAT SAM HAS DETERMINED THAT SUCH SECURITIES ARE LIQUID
UNDER GUIDELINES ADOPTED BY THE MONEY MARKET TRUST'S BOARD OF

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- --------------------------------------------------------------------------------

INVESTMENT POLICIES OF THE MONEY MARKET FUND (Continued)

TRUSTEES. Restricted securities may be sold only in offerings registered
under the 1933 Act or in transactions exempt from the registration
requirements under the 1933 Act. Rule 144A under the 1933 Act provides an
exemption for the resale of certain restricted securities to qualified
institutional buyers. Investing in such 144A Securities could have the effect
of increasing the Fund's illiquidity to the extent that qualified
institutional buyers or other buyers are unwilling to purchase the
securities. Section 4(2) of the 1933 Act exempts securities sold by the
issuer in private transactions from the 1933 Act's registration requirements.
Because Section 4(2) paper is a restricted security, investing in Section
4(2) paper could have the effect of increasing the Fund's illiquidity to the
extent that buyers are unwilling to purchase the securities.

The following restrictions are fundamental policies of the Money Market Fund and
cannot be changed without shareholder vote. The Money Market Fund:

1. MAY INVEST UP TO 5% OF ITS ASSETS IN THE SECURITIES OF ANY ONE ISSUER OTHER
THAN U.S. GOVERNMENT SECURITIES.

2. MAY INVEST UP TO 25% OF ITS TOTAL ASSETS IN ANY ONE INDUSTRY (INCLUDING
SECURITIES ISSUED BY FOREIGN BANKS AND FOREIGN BRANCHES OF U.S. BANKS),
PROVIDED, HOWEVER, THAT THIS LIMITATION DOES NOT APPLY TO U.S. GOVERNMENT
SECURITIES, OR TO CERTIFICATES OF DEPOSIT OR BANKERS' ACCEPTANCES ISSUED BY
DOMESTIC BANKS.

3. MAY BORROW MONEY FOR TEMPORARY OR EMERGENCY PURPOSES (BUT NOT FOR INVESTMENT
PURPOSES) FROM A BANK OR AFFILIATES OF SAFECO CORPORATION AT AN INTEREST RATE
NOT GREATER THAN THAT AVAILABLE FROM COMMERCIAL BANKS. The Fund will not
borrow amounts in excess of 20% of total assets and will not purchase
securities if borrowings equal to or greater than 5% of total assets are
outstanding. The Fund intends to primarily exercise its borrowing authority
to meet shareholder redemptions under the circumstances where redemptions
exceed available cash.

For more information, see the "Investment Policies" and "Additional Investment
Information" sections of the Money Market Trust's Statement of Additional
Information.

RISK FACTORS

There are market risks in all securities transactions. 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.

RISK FACTORS OF THE STOCK FUNDS
The Growth Fund currently has an aggressive investment approach to seeking
capital appreciation through investing primarily in securities issued by smaller
companies. As a result, short-term movements in the securities market may cause
the Fund's share price to be volatile.

An investment in the Northwest Fund may be subject to different risks than a
mutual fund whose investments are more geographically diverse. Since the
Northwest Fund invests primarily in companies with their principal executive
offices located in the Northwest, the number of issuers whose securities are
eligible for purchase is significantly less than many other mutual funds. Also,
some companies whose securities are held in the Northwest Fund's portfolio may
primarily

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<PAGE> 45

- --------------------------------------------------------------------------------

RISK FACTORS (Continued)

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 areas. Other companies whose
securities are held by the Northwest 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 Northwest 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.

The Equity, Income and Small Company Funds may invest in below investment grade
bonds, which 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.

Because the International Fund primarily invests, and the other Stock Funds may
invest, in foreign securities, each Stock Fund is subject to risks in addition
to those associated with U.S. investments. Foreign investments involve sovereign
risk, which includes the possibility of adverse local political or economic
developments, expropriation or nationalization of assets, imposition of
withholding taxes on dividend or interest payments and currency blockage (which
would prevent currency from being sold). Foreign investments may be affected
favorably or unfavorably by changes in currency rates and exchange control
regulations. There is generally less publicly available information about
issuers of foreign securities as compared to U.S. issuers. Many foreign
companies are not subject to accounting, auditing and financial reporting
standards and requirements comparable to those applicable to U.S. companies.
Securities of some foreign issuers are less liquid and more volatile than
securities of U.S. issuers. Financial markets on which foreign securities trade
are generally subject to less governmental regulation as compared to U.S.
markets. Foreign brokerage commissions and custodian fees are generally higher
than those in the United States.

In addition, the International Fund may purchase and sell put and call options,
futures contracts and forward contracts. Risks inherent in the use of futures,
options and forward contracts include: the risk that interest rates, security
prices and currency markets will not move in the directions anticipated;
imperfect correlation between the price of the future, option or forward
contract and the price of the security, interest rate or currency being hedged;
the risk that potential losses may exceed the amount invested in the contracts
themselves; the possible absence of a liquid secondary market for any particular
instrument at any time; the possible need to defer closing out certain hedged
positions to avoid adverse tax consequences; and the reduction or elimination of
the opportunity to profit from increases in the value of the security, interest
rate or currency being hedged.

The Small Company Fund invests in companies with small market capitalizations
which involve more risks than investments in larger companies. The Small Company
Fund may invest to a large extent in newly formed companies which have limited
product lines, markets or financial resources and may lack management depth. The
securities of small or newly formed companies may have limited marketability and
may be subject to more abrupt and erratic movements in price than securities of
larger, more established companies, or equity securities in general. The Small

-- 45 --
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- --------------------------------------------------------------------------------

RISK FACTORS (Continued)

Company Fund will not invest more than 5% of its total assets in the securities
of issuers which together with any predecessors have a record of less than three
years continuous operation.

RISK FACTORS OF THE INTERMEDIATE TREASURY, MANAGED BOND, MUNICIPAL BOND,
CALIFORNIA, WASHINGTON AND MONEY MARKET FUNDS (THE "FIXED-INCOME FUNDS")

The value of each Fixed-Income Fund (except the Money Market Fund) will normally
fluctuate inversely with changes in market interest rates. Generally, when
market interest rates rise, the price of debt securities held by a Fund will
fall, and when market interest rates fall, the price of the debt securities will
rise. Also, there is a risk that the issuer of a bond or other security held in
a Fund's portfolio will fail to make timely payments of principal and interest
to the Fixed-Income Funds.

The Money Market Fund seeks to maintain a stable $1.00 share price. Of course,
there is no guarantee that the Money Market Fund will maintain a stable $1.00
share price. It is possible that a major change in interest rates or a default
on the Money Market Fund's investments could cause its share price (and the
value of your investment) to fall. The Money Market Fund's yield will fluctuate
with general interest rates.

Because the California and Washington Funds each concentrate their investments
in a single state, there is a greater risk of fluctuation in the values of their
portfolio securities than with mutual funds whose investments are more
geographically diverse. Investors should carefully consider the investment risks
of such concentration. The share price of the California and Washington Funds
can be affected by political and economic developments within and by the
financial condition of the respective state, its public authorities and
political subdivisions. See the discussion below and "Investment Risks of
Concentration in California and Washington Issuers" in the Tax-Exempt Bond
Trust's Statement of Additional Information for further information.

The information in the following discussion is drawn primarily from official
statements relating to state securities offerings which are dated prior to the
date of this Prospectus. The California and Washington Funds have not
independently verified any of the information in the discussion below.

SPECIAL RISKS OF THE CALIFORNIA FUND
After suffering through a severe recession, California's economy has been on a
steady recovery since the start of 1994. Nevertheless, the State's budget
problems in recent years have also been caused by the increasing costs of
education, health, welfare and corrections, driven by California's rapid
population growth. These pressures on the State's General Fund are expected to
continue. The State's long-term credit ratings, reduced in 1992, were lowered
again in 1994 and have not been fully restored. Its ability to provide
assistance to its public authorities and political subdivisions has been
impaired. Cutbacks in state aid adversely affect the financial condition of many
cities, counties and school districts which are already subject to fiscal
constraints and are facing their own reduced tax collections.

In the past, California voters have passed amendments to the California
Constitution and other measures that limit the taxing and spending authority of
California governmental entities. Future voter initiatives could result in
adverse consequences affecting obligations issued by the State. These factors,
among others, could reduce the credit standing of certain issuers of California
Obligations.

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- --------------------------------------------------------------------------------

RISK FACTORS (Continued)

SPECIAL RISKS OF THE WASHINGTON FUND
The State of Washington's economy consists of both export and local industries.
The State's leading export industries are aerospace, forest products,
agriculture and food processing. The State's manufacturing base includes
aircraft manufacture which comprised approximately 25% of total manufacturing in
1995. The Boeing Company is the State's largest employer and has a significant
impact, in terms of overall production, employment and labor earnings, on the
State's economy. Boeing anticipates increasing employment in the State by
approximately 4,500 jobs by the end of 1996. The commercial airline industry is
cyclical in nature and future job cuts could have an adverse effect on the
Washington economy. Forest products rank second behind aerospace in value of
total production. Although productivity in the forest products industry has
increased steadily in recent years, declines in production are expected in the
future. Unemployment in the timber industry is anticipated in certain regions;
however the impact is not expected to affect the State's overall economic
performance. Growth in agriculture has been an important factor in the State's
economic growth over the past decade. The State is the home of many technology
firms of which approximately half are computer-related. Microsoft, the world's
largest microcomputer software company, is headquartered in Redmond, Washington.

State law requires a balanced budget. The Governor has a statutory
responsibility to reduce expenditures across the board to avoid any cash deficit
at the end of a biennium. In addition, state law prohibits state tax revenue
growth from exceeding the growth rate of state personal income. To date,
Washington State tax revenue increases have remained substantially below the
applicable limit. At any given time, there are numerous lawsuits against the
State which could affect its revenues and expenditures.

PORTFOLIO MANAGERS

GROWTH FUND
The portfolio manager for the Growth Fund is Thomas M. Maguire, Vice President,
SAM. Mr. Maguire has served as portfolio manager for the Fund since 1989.

EQUITY FUND
The portfolio manager for the Equity Fund is Richard D. Meagley, Vice President,
SAM. Mr. Meagley began serving as portfolio manager for the Fund in 1995. He is
also the portfolio manager for certain other SAFECO Funds. Prior to these
positions, he served as portfolio manager and analyst from 1992 to 1994 for
Kennedy Associates, Inc., an investment advisory firm located in Seattle,
Washington. He was an Assistant Vice President of SAM and the fund manager of
the SAFECO Northwest Fund from 1991 to 1992.

INCOME FUND
The portfolio manager for the Income Fund is Thomas E. Rath, Assistant Vice
President of SAM. Mr. Rath has been a portfolio manager and securities analyst
for SAFECO Corporation since 1994. From 1992 to 1994, Mr. Rath was a principal
and portfolio manager for Meridian Capital Management, Inc., located in Seattle,
Washington. From 1987 to 1992, he was a portfolio manager and securities analyst
for First Interstate Bank, located in Seattle, Washington, and from 1983 to
1987, he was a securities analyst for SAFECO Corporation.

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PORTFOLIO MANAGERS (Continued)

NORTHWEST FUND
The portfolio manager for the Northwest Fund is Charles R. Driggs, Vice
President, SAM. Mr. Driggs has served as portfolio manager for the Fund since
1992. From 1984 through 1992, Mr. Driggs was a securities analyst for SAM
specializing in banks, savings and loan institutions and the insurance industry.

BALANCED FUND
The portfolio managers for the Balanced Fund are Rex L. Bentley, Vice President,
SAM, and Michael C. Knebel, Vice President, SAM. Mr. Bentley was Vice President
and Investment Counsel at the investment advisory firm of Badgley, Phelps and
Bell Investment Counsel, Inc., from 1990 to 1995. He was a securities analyst
for SAFECO Corporation from 1975 to 1983. Mr. Knebel has served as portfolio
manager for certain other SAFECO mutual funds since 1989.

INTERNATIONAL FUND
The International Fund is managed by a committee of portfolio managers employed
and supervised by the Sub-Adviser, Bank of Ireland Asset Management (U.S.)
Limited, an investment adviser registered with the SEC. All investment decisions
are made by this committee and no single person is primarily responsible for
making recommendations to that committee.

SMALL COMPANY FUND
The portfolio manager for the Small Company Fund is Greg Eisen. Mr. Eisen has
served as an investment analyst for SAM since 1992. From 1986 to 1992, Mr. Eisen
was engaged by the SAFECO Insurance Companies as a financial analyst.

INTERMEDIATE TREASURY AND MANAGED BOND FUNDS
The portfolio manager for the Intermediate Treasury and Managed Bond Funds is
Michael C. Knebel, Vice President, SAM. Mr. Knebel has served as portfolio
manager or co-manager for the Managed Bond Fund since 1994. He has served as
portfolio manager for the Intermediate Treasury Fund since 1995. Mr. Knebel has
served as portfolio manager and/or co-portfolio manager for other SAFECO Mutual
Funds since 1989.

MUNICIPAL BOND AND CALIFORNIA FUNDS
The portfolio manager for the Municipal Bond and California Funds is Stephen C.
Bauer, President, SAM. Mr. Bauer has served as portfolio manager for each Fund
since it commenced operations: 1981 for the Municipal Bond Fund and 1983 for the
California Fund. Mr. Bauer is the portfolio manager for certain other SAFECO
municipal bond funds, and also serves as a Director of SAM.

WASHINGTON FUND
The portfolio manager for the Washington Fund is Beverly Denny. Ms. Denny was
the Marketing Director for the SAFECO Mutual Funds from 1991 to 1993, and has
been employed as an investment analyst with SAFECO Asset Management since 1993.

Each portfolio manager and certain other persons related to SAM, the Sub-Adviser
and the Funds are subject to written policies and procedures designed to prevent
abusive personal securities trading. Incorporated within these policies and
procedures are each of the recommendations made by the Investment Company
Institute (the trade group for the mutual fund industry) with respect

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PORTFOLIO MANAGERS (Continued)

to personal securities trading by persons associated with mutual funds. Those
recommendations include preclearance procedures and blackout periods when
certain adviser personnel may not trade in securities that are the same or
related securities being considered for purchase or sale by a Fund.

HOW TO PURCHASE SHARES

When placing purchase orders, investors should specify whether the order is for
Class A or Class B shares of a Fund. All share purchase orders that fail to
specify a class will automatically be invested in Class A shares.

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 or
Payroll Deduction Plan.

Shares of each Fund are available for purchase through investment professionals
who work at broker-dealers, banks and other financial institutions which have
entered into selling agreements with SAFECO Securities, the distributor of the
Funds. Orders received by such financial institutions before 1:00 p.m. Pacific
Time on any day the New York Stock Exchange ("NYSE") is open for regular trading
will be effected that day, provided that such order is transmitted to 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.

Money Market Fund shares will be purchased for your account on the day payments
are received by wire. Payments by means other than wire will purchase shares the
next business day if received prior to 1:00 p.m. Seattle time and on the second
business day if received after 1:00 p.m. Seattle 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 each Fund's 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. The 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 each Fund's 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 each Fund's shares are eligible to receive special
compensation, 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.

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HOW TO PURCHASE SHARES (Continued)

PURCHASING ADVISOR CLASS A SHARES
The public offering price of Class A shares of each Fund (except the Money
Market Fund) is the next determined net asset value per share (see "Share Price
Calculation" on page 58 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 4.50% 4.71% 4.00%
$50,000 but less than $100,000 4.00% 4.17% 3.50%
$100,000 but less than $250,000 3.50% 3.63% 3.00%
$250,000 but less than $500,000 2.50% 2.56% 2.00%
$500,000 but less than $1,000,000 1.50% 1.52% 1.00%
$1,000,000 or more NONE* NONE**
</TABLE>

* Purchases of $1,000,000 or more of Class A shares are not subject to a
front-end sales charge, but a 1% CDSC will apply to redemptions made in the
first year.
** See discussion below for a description of the commissions payable on sales of
Class A shares of $1 million or more.

Class A shares of the Money Market Fund are offered at the next determined net
asset value per share (see "Share Price Calculation" on page 58 for additional
information) with no initial sales charge. A sales charge will apply to the
first exchange from Class A shares of the Money Market Fund to Class A shares of
another Fund.

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.

Except as stated below, broker-dealers of record will be paid commissions on
sales of Class A shares of $1 million or more based on an investor's cumulative
purchases during the one-year period beginning with the date of the initial
purchase at net asset value. Each subsequent one-year measuring period for these
purposes begins with the first net asset value purchase following the end of the
prior period. Such commissions are paid at the rate of up to .50% except for
sales to participant-directed qualified plans (including a plan sponsored by an
employer with 200 or more eligible employees). Commissions for such plans will
be paid at a rate of up to 1.00%.

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 plan(s) under
Section 403(b) of the Internal Revenue Code of 1986, as amended

-- 50 --
<PAGE> 51

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HOW TO PURCHASE SHARES (Continued)

("Code"), or single-participant Keogh-type plan(s). 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

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 for the following investments:

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 direct or indirect affiliates of SAFECO Securities;

4. Purchases made through the automatic investment of dividends and
distributions paid by another 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;

9. Current or retired officers, directors, trustees or employees of any Trusts
or SAFECO Corporation or its affiliates and the children, spouse and parents
of such persons;

10. Investments made with redemption proceeds from mutual funds having a similar
investment objective with respect to which the investor paid a front-end
sales charge; and

11. Investments made on or before October 31, 1996 with the redemption proceeds
from Class A and Class C shares of any Fund in the Adviser Series Trust.

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<PAGE> 52

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HOW TO PURCHASE SHARES (Continued)

REINSTATEMENT PRIVILEGE
Shareholders who paid an initial sales charge and 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 that 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 Class A shares of other
SAFECO Mutual Funds plus (c) the dollar amount equal to the current public
offering price of all Class A shares of 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.

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
Funds in the following thirteen months. The LOI is included as part of the
Account Application. The Class A sales charge applicable to that aggregate
amount then becomes the applicable sales charge on all purchases of Class A
shares 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 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.

PURCHASING ADVISOR 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 CDSC is imposed on certain redemptions of Class B shares. Because
Class B shares are sold without an initial sales charge, the investor receives
Fund shares equal to the full amount of the investment. The maximum investment
amount in Class B shares is $500,000.

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<PAGE> 53

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HOW TO PURCHASE SHARES (Continued)

Class B shares of a Fund that are redeemed will not be subject to a CDSC 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. Former Class B shareholders of the SAFECO Advisor Series Trust who
invest in Class B shares of any Fund may include the length of time of ownership
of the former Class B shares for purposes of calculating any CDSC due upon
redemption.

Initial investments in Class B shares of the Money Market Fund are sold with no
initial sales charge and are not subject to a CDSC upon redemption, provided
that the investor has remained invested exclusively in Class B shares of the
Money Market Fund and has not exchanged into Class B Shares of another Fund in
the interim. Money Market Fund Class B shareholders will become subject to a
CDSC calculated in accordance with the table below if they exchange into Class B
shares of another SAFECO Fund and then redeem those shares. The CDSC will also
apply to any Class B shares of the Money Market Fund subsequently acquired by
exchange. Shareholders who initially purchase Money Market Fund Class B shares
do not receive credit for the time initially invested in the Money Market Fund
for purposes of calculating any CDSC due upon redemption of Class B shares of
another SAFECO Fund.

Redemptions of most other Class B shares will be subject to a CDSC. (See
"Contingent Deferred Sales Charge Waivers.") The amount of any applicable CDSC
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>
CDSC 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>

* Automatically converts to Class A shares at the end of year six.

In determining whether a CDSC 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 other 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 CDSC would not be
applied to the value of the reinvested dividend shares. Therefore, the 15 shares
currently valued at $165.00

-- 53 --
<PAGE> 54

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HOW TO PURCHASE SHARES (Continued)

would be redeemed without a CDSC. 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 CDSC, the original purchase price of $10.00 per
share would be used. The CDSC calculation would therefore be 30.455 shares times
$10.00 per share at a CDSC rate of 4% (the applicable rate in the second year
after purchase) for a total CDSC of $12.18.

Except for the time period during which a shareholder is initially invested in
Money Market Fund Class B shares, if a shareholder effects one or more exchanges
among Class B shares of the Funds during the six-year period, the holding
periods for the shares so exchanged will be counted toward the six-year period.

For federal income tax purposes, the amount of the CDSC will reduce the gain or
increase the loss, as the case may be, recognized on the redemption of shares.
The amount of any CDSC will be paid to SAFECO Securities.

CONTINGENT DEFERRED SALES CHARGE WAIVERS
The CDSC 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 a Fund within 60 days
of a prior redemption; (f) redemptions pursuant to a 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 are
invested in Funds and 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 of a Fund will automatically convert to Class A
shares in the same Fund six years after the date of purchase, together with a
pro rata portion of all Class B shares representing dividends and other
distributions paid in additional Class B shares. 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 sixth
anniversary of the issuance of Class B shares occurs. Because the net asset
value per share of Class A shares may be higher than that of 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.

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 CDSC) and redemption proceeds will be
sent to shareholders within

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<PAGE> 55

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HOW TO REDEEM SHARES (Continued)

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 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 other than by 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 will 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 CDSC) 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 CDSC) next calculated after receipt of your request that meets the
redemption requirements of the Funds. Except for the Money Market Fund, the
value of the shares you redeem may be more or less than the dollar amount you
purchased, depending on the market value of the shares at the time of
redemption. See "Share Price Calculation" on page 58 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
the close of trading on the NYSE (normally 1:00 p.m. Pacific Time), proceeds
will normally be sent on the second business day following receipt. Each Fund,
however, reserves the right to postpone payment of redemption

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<PAGE> 56

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HOW TO REDEEM SHARES (Continued)

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 NYSE is closed, its trading is restricted or the Securities and
Exchange Commission declares an emergency.

Due to the high cost of maintaining small accounts, your account may be closed
upon 60 days' written notice if at the time of any redemption or exchange the
total value falls below $100. Your shares will be redeemed at the 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 shares with respect to an account
which is utilizing a systematic withdrawal plan. Class B shares may not be
suitable for a systematic withdrawal plan, except in appropriate cases where the
CDSC is being waived. Please see "Contingent Deferred Sales Charge Waivers" on
page 54 for more information.

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
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 THE OTHER FUNDS LISTED ON THE FIRST PAGE OF THIS PROSPECTUS. CLASS B
SHARES MAY BE EXCHANGED ONLY FOR CLASS B SHARES OF THE OTHER FUNDS LISTED ON THE
FIRST PAGE OF THIS PROSPECTUS. The exchange of Class B shares will not be
subject to a contingent deferred sales charge. For purposes of computing the
CDSC, except for the time period during which a shareholder is initially
invested in Class B shares of the Money Market Fund, 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 86 for more
information. You may purchase shares of a Fund by exchange only if it is
registered for sale in the state where you reside. Before exchanging into an

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<PAGE> 57

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HOW TO EXCHANGE SHARES FROM ONE FUND TO ANOTHER (Continued)

Advisor class of another Fund, please be familiar with the Fund's investment
objective and policies as described in "Each Fund's Investment Objective and
Policies" beginning on page 24 of this Prospectus.

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.

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"
for more information.

EXCHANGE LIMITATIONS
The exchange privilege is not intended to provide a means for frequent trading
in response to short-term fluctuations in the market. Excessive exchange
transactions can be disadvantageous to other shareholders and the Funds.
Exchanges out of a Fund are therefore limited to four per calendar year. In
addition, each Fund reserves the right to refuse exchange purchases by any
person or group if, in SAM's judgment, the Fund would be unable to invest the
money effectively in accordance with that Fund's investment objective and
policies or would otherwise potentially be adversely affected. Although a Fund
will attempt to give you prior notice whenever it is reasonably able to do so,
it may impose the restrictions described in this paragraph at any time.

SHARE EXCHANGE PRICE AND PROCESSING
The shares of the Fund you are exchanging from will be redeemed at the price
next computed after your exchange request is received. Normally the purchase of
the Fund you are exchanging into is executed on the same day. However, each Fund
reserves the right to delay the payment of proceeds and, hence, the purchase in
an exchange for up to seven days if making immediate payment could adversely
affect the portfolio of the Fund whose shares are being redeemed. The exchange
offer may be modified or terminated with respect to a Fund at anytime, upon at
least 60 days' notice to shareholders.

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 privilege.

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<PAGE> 58

- --------------------------------------------------------------------------------

TELEPHONE TRANSACTIONS (Continued)

To use the telephone redemption and exchange privileges, you must have
previously selected these services either on your account application or by
having submitted a request in writing to SAFECO Services at the address on the
Prospectus cover. 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 that a Fund or SAFECO Services, in its
discretion, believes to be delivered by an account owner or preauthorized
person, provided that the Fund or SAFECO Services follows reasonable procedures
to identify the caller. The shareholder will bear the risk of any resulting
loss. The Funds and SAFECO Services will follow certain procedures designed to
make sure that telephone instructions are genuine. These procedures may include
requiring the account owner to select the telephone 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 privilege may be suspended, limited, modified or
terminated at any time without prior notice by the Funds or SAFECO Services.

SHARE PRICE CALCULATION

The net asset value per share ("NAV") of each class of each Fund is computed at
the close of regular trading on the NYSE (normally 1:00 p.m. Pacific time) each
day that the NYSE is open for trading. NAV is determined separately for each
class of shares of each Fund. The NAV of a Fund is calculated by subtracting a
Fund's liabilities from its assets and dividing the result by the number of
outstanding shares.

PORTFOLIO VALUATION FOR THE STOCK FUNDS
The Stock Funds generally value their portfolio securities 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 trade on a stock
exchange and over-the-counter are 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 market quotations are unavailable are valued
at their fair value pursuant to guidelines approved by the Trust's Board of
Trustees. Foreign portfolio securities are valued on the basis of quotations
from the primary market in which they trade. The value of foreign securities are
translated from the local currency into U.S. dollars using current exchange
rates.

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<PAGE> 59

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SHARE PRICE CALCULATION (Continued)

The values of certain of the Stock Funds' portfolio securities are stated on the
basis of valuations provided by a pricing service approved by the Common Stock
Trust's Board of Trustees, unless the Board determines such does not represent
fair value. The service uses information with respect to transactions in
securities, quotations from securities dealers, market transactions in
comparable securities and various relationships between securities to determine
values.

INTERNATIONAL FUND
Options that are traded on national securities exchanges are valued at their
last sale price as of the close of option trading on such exchange. Futures
contracts will be marked to market daily, and options thereon are valued at
their last sale price, as of the close of the applicable commodities exchange.
Forward contracts are valued at the current cost of covering or offsetting such
contracts.

Trading in foreign securities, as well as corporate bonds, U.S. Government
securities and money market instruments, will generally be substantially
completed each day at various times prior to the close of the NYSE. The values
of any such securities are determined as of such times for purposes of computing
the International Fund's net asset value. Foreign currency exchange rates are
also generally determined prior to the close of the NYSE. If quotations are not
readily available, or if values have been materially affected by events
occurring after the close of a foreign market, the security will be valued at
fair value as determined in good faith by SAM or BIAM under procedures
established by and under general supervision of the Common Stock Trust's Board
of Trustees.

PORTFOLIO VALUATION FOR THE FIXED-INCOME FUNDS
For each of the Fixed-Income Funds except the Money Market Fund, securities are
valued based on consideration of information with respect to transactions in
similar securities, quotations from dealers and various relationships between
securities. The value of each Fixed-Income Fund's securities are stated on the
basis of valuations provided by a pricing service approved by its respective
Trust's Board of Trustees, unless the Board of Trustees determines that such
valuations do not represent fair value. The service uses information with
respect to transactions in securities, quotations from security dealers, market
transactions in comparable securities, and various relationships between
securities to determine values. Other assets (including securities for which
market quotations are unavailable and restricted securities) are valued at their
fair value as determined in good faith by each Fixed-Income Fund's respective
Trust's Board of Trustees.

Like most money market funds, the Money Market Fund values the securities it
owns on the basis of amortized cost. The Money Market Fund may use amortized
cost valuation as long as the Money Market Trust's Board of Trustees determines
that it fairly reflects market value. Amortized cost valuation involves valuing
a security at its cost and adding or subtracting, ratably to maturity, any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the security. This method minimizes the effect of changes in
a security's market value and helps the Money Market Fund maintain a stable
$1.00 share price.

The NAV of the Class B shares of each Fund will generally be lower than the NAV
of Class A shares of the same Fund because of the higher expenses borne by the
Class B shares. The NAVs of the Advisor Classes of a Fund's shares also may
differ slightly due to differing allocations of class-specific expenses. The
NAVs of the Advisor Classes of each Fund's shares will tend to converge,
however, immediately after the payment of dividends.

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<PAGE> 60

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SHARE PRICE CALCULATION (Continued)

Call 1-800-463-8791 for 24-hour price information.

INFORMATION ABOUT SHARE OWNERSHIP AND COMPANIES THAT PROVIDE SERVICES TO THE
TRUSTS

Each Trust is a Delaware business trust established by a Trust Instrument dated
May 13, 1993, and is authorized to issue an unlimited number of shares of
beneficial interest. The Board of Trustees of each Trust may establish
additional series or classes of shares of the Trust without approval of
shareholders.

In addition to Class A and Class B shares, each Fund also offers No-Load Class
shares through a separate prospectus to investors who purchase shares directly
from SAFECO Securities. No-Load Class shares are sold without a front-end sales
charge or CDSC and are not subject to Rule 12b-1 fees. Accordingly, the
performance of No-Load Class shares will differ from that of Class A or Class B
shares. For more information about No-Load Class shares of each Fund, please
call 1-800-624-5711.

Each share of a Fund is entitled to participate equally in dividends and other
distributions and the proceeds of any liquidation except that, due to the
differing expenses borne by the three classes, dividends and liquidation
proceeds for each class of shares will likely differ. All shares issued are
fully paid and non-assessable, and shareholders have no preemptive or other
right to subscribe to any additional shares.

The Trusts do not intend to hold annual meetings of shareholders of the Funds.
The Trustees of a Trust will call a special meeting of shareholders of a Fund of
that Trust only if required under the Investment Company Act of 1940 ("1940
Act"), in their discretion, or upon the written request of holders of 10% or
more of the outstanding shares of a Fund or a class entitled to vote. Separate
votes are taken by each class of shares, a Fund, or a Trust if a matter affects
only that class of shares, Fund, or Trust, respectively.

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,
each Trust Instrument requires that every written obligation of the Trust or a
Fund thereof contain a statement that such obligation may be enforced only
against the assets of that Trust or Fund and generally provides for
indemnification out of property of that Trust or Fund of any shareholder
nevertheless held personally liable for Trust or Fund obligations, respectively.

Because the Trusts use a combined Prospectus, it is possible that a Fund might
become liable for a misstatement about the series of another Trust contained in
this Prospectus. The Boards of Trustees have considered this factor in approving
the use of a single combined Prospectus.

SAM is the investment adviser for each Fund under an agreement with each Trust.
Under each agreement, SAM is responsible for the overall management of each
Trust's and each Fund's business affairs. SAM provides investment research,
advice, management and supervision to each Trust and each Fund, and, consistent
with each Fund's investment objectives and policies, SAM determines what
securities will be purchased, retained or sold by each Fund and implements those
decisions. Each Fund pays SAM an annual management fee based on a percentage of
that Fund's net assets

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INFORMATION ABOUT SHARE OWNERSHIP AND COMPANIES THAT PROVIDE SERVICES TO THE
TRUSTS (Continued)

ascertained each business day and paid monthly in accordance with the schedules
below. A reduction in the fees paid by a Fund occurs only when that Fund's net
assets reach the dollar amounts of the break points and applies only to the
assets that fall within the specified range:

GROWTH, EQUITY AND INCOME FUNDS

<TABLE>
<CAPTION>
NET ASSETS ANNUAL FEE
<S> <C>
$0 -- $100,000,000 .75 of 1%
$100,000,001 -- $250,000,000 .65 of 1%
$250,000,001 -- $500,000,000 .55 of 1%
Over $500,000,000 .45 of 1%
</TABLE>

NORTHWEST FUND

<TABLE>
<CAPTION>
NET ASSETS ANNUAL FEE
<S> <C>
$0 -- $250,000,000 .75 of 1%
$250,000,001 -- $500,000,000 .65 of 1%
$500,000,001 -- $750,000,000 .55 of 1%
Over $750,000,000 .45 of 1%
</TABLE>

BALANCED FUND

<TABLE>
<CAPTION>
NET ASSETS ANNUAL FEE
<S> <C>
$0 -- $250,000,000 .75 of 1%
$250,000,001 -- $500,000,000 .65 of 1%
Over $500,000,000 .55 of 1%
</TABLE>

INTERNATIONAL FUND

<TABLE>
<CAPTION>
NET ASSETS ANNUAL FEE
<S> <C>
$0 -- $250,000,000 1.10 of
1%
$250,000,001 -- $500,000,000 1.00 of
1%
Over $500,000,000 .90 of 1%
</TABLE>

SMALL COMPANY FUND

<TABLE>
<CAPTION>
NET ASSETS ANNUAL FEE
<S> <C>
$0 -- $250,000,000 .85 of 1%
$250,000,001 -- $500,000,000 .75 of 1%
Over $500,000,000 .65 of 1%
</TABLE>

-- 61 --
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INFORMATION ABOUT SHARE OWNERSHIP AND COMPANIES THAT PROVIDE SERVICES TO THE
TRUSTS (Continued)
INTERMEDIATE TREASURY FUND

<TABLE>
<CAPTION>
NET ASSETS ANNUAL FEE
<S> <C>
$0 -- $250,000,000 .55 of 1%
$250,000,001 -- $500,000,000 .45 of 1%
$500,000,001 -- $750,000,000 .35 of 1%
Over $750,000,000 .25 of 1%
</TABLE>

MANAGED BOND FUND

<TABLE>
<CAPTION>
NET ASSETS ANNUAL FEE
<S> <C>
$0 -- $100,000,000 .50 of 1%
$100,000,001 -- $250,000,000 .40 of 1%
Over $250,000,000 .35 of 1%
</TABLE>

MONEY MARKET FUND

<TABLE>
<CAPTION>
NET ASSETS ANNUAL FEE
<S> <C>
$0 -- $250,000,000 .50 of 1%
$250,000,001 -- $500,000,000 .40 of 1%
$500,000,001 -- $750,000,000 .30 of 1%
Over $750,000,000 .25 of 1%
</TABLE>

MUNICIPAL AND CALIFORNIA FUNDS

<TABLE>
<CAPTION>
NET ASSETS ANNUAL FEE
<S> <C>
$0 -- $100,000,000 .55 of 1%
$100,000,001 -- $250,000,000 .45 of 1%
$250,000,001 -- $500,000,000 .35 of 1%
Over $500,000,000 .25 of 1%
</TABLE>

WASHINGTON FUND

<TABLE>
<CAPTION>
NET ASSETS ANNUAL FEE
<S> <C>
$0 -- $250,000,000 .65 of 1%
$250,000,001 -- $500,000,000 .55 of 1%
$500,000,001 -- $750,000,000 .45 of 1%
Over $750,000,000 .35 of 1%
</TABLE>

A Trust and each Fund thereof will bear all expenses of their organization,
operations and business not specifically assumed by SAM under each Fund's
management contract. Such expenses may include, among others, custody and
accounting expenses, transfer agency and related expenses, distribution and
shareholder servicing expenses, expenses related to preparing, printing and
delivering prospectuses and shareholder reports, the expenses of holding
shareholders' meetings, legal fees, the compensation of non-interested trustees
of the Trusts, brokerage, taxes and extraordinary expenses.

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INFORMATION ABOUT SHARE OWNERSHIP AND COMPANIES THAT PROVIDE SERVICES TO THE
TRUSTS (Continued)

With respect to the International Fund, SAM has a sub-advisory agreement with
the Sub-Adviser. The Sub-Adviser is a direct, wholly owned subsidiary of the
Bank of Ireland Asset Management Limited and is an indirect, wholly owned
subsidiary of Bank of Ireland. The Sub-Adviser has its headquarters at 26
Fitzwilliam Place, Dublin, Ireland, and its U.S. office at 2 Greenwich Plaza,
Greenwich, Connecticut. The Sub-Adviser was established in 1987 and manages over
$3 billion in assets. Because the Sub-Adviser is doing business from a location
within the United States, investors will be able to effect service of legal
process within the United States upon the Sub-Adviser, facilitating the
enforcement of judgments against the Sub-Adviser under federal securities laws
in United States courts. However, the Sub-Adviser is a foreign organization and
maintains a substantial portion of its assets outside the United States.
Therefore, the ability of investors to enforce judgments against the Sub-Adviser
may be affected by the willingness of foreign courts to enforce judgments of U.S
courts.

Under the agreement, the Sub-Adviser is responsible for providing investment
research and advice used to manage the investment portfolio of the International
Fund. In return, SAM (and not the International Fund) pays the Sub-Adviser a fee
in accordance with the schedule below:

<TABLE>
<CAPTION>
NET ASSETS ANNUAL FEE
<S> <C>
$0 -- $50,000,000 .60 of 1%
$50,000,001 -- $100,000,000 .50 of 1%
Over $100,000,000 .40 of 1%
</TABLE>

The parent company of the Sub-Adviser, Bank of Ireland Asset Management Limited,
is a direct, wholly owned subsidiary of the Bank of Ireland, which engages in
the investment advisory business and is located at 26 Fitzwilliam Street,
Dublin, Ireland. The Bank of Ireland is a holding company whose primary
subsidiaries are engaged in banking, insurance, securities and related financial
services, and is located at Lower Baggot Street, Dublin, Ireland.

The distributor of the Advisor Classes of each Fund's shares under an agreement
with each Trust is 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 other distribution) disbursement and shareholder
servicing agent for the Advisor Classes of each Fund under an agreement with
each Trust is SAFECO Services. SAFECO Services receives a fee from each Fund for
every shareholder account held in the Fund. SAFECO Services may enter into
subcontracts with registered broker-dealers, third party administrators and
other qualified service providers that generally perform shareholder,
administrative, and/or accounting services which would otherwise be provided by
SAFECO Services. Fees incurred by a Fund for these services will not exceed the
transfer agency fee payable to SAFECO Services. Any distribution expenses
associated with these arrangements will be borne by SAM.

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.

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

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INFORMATION ABOUT SHARE OWNERSHIP AND COMPANIES THAT PROVIDE SERVICES TO THE
TRUSTS (Continued)

underwriter or distributor of securities. However, in the opinion of each
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.

DISTRIBUTION PLANS

Each Trust, on behalf of the Advisor Classes of each Fund, has entered into a
Distribution Agreement (each an "Agreement") with SAFECO Securities. Each Trust
has also adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect
to the Advisor Classes of each Fund (the "Plans"). Pursuant to the Plans, each
Advisor class pays SAFECO Securities a quarterly service fee, at the annual rate
of 0.25% of the aggregate average daily net assets of the Advisor class. Class B
shares also pay SAFECO Securities a quarterly distribution fee at the annual
rate of 0.75% of the aggregate average daily net assets of the Class B shares.
Although the Money Market Trust has adopted Plans with respect to the Advisor
Classes of the Money Market Fund, the Money Market Trust's Board of Trustees and
SAFECO Securities have agreed not to implement the Plans at this time. Thus, the
Advisor Classes of the Money Market Fund do not currently pay service or
distribution fees to SAFECO Securities under the Money Market Fund Plans. The
Money Market Fund Plans will not be implemented unless authorized by the Money
Market Trust's Board of Trustees.

Under the 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 Plan to
offset the commissions it pays to broker-dealers, banks or other financial
institutions for selling each Fund's Class B shares. In addition, SAFECO
Securities will use the distribution fees under the Class B Plan to offset each
Fund's marketing costs attributable to the Class B shares, 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 fee 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 charges paid
upon the purchase of Class A shares and the CDSCs 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 charges 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 Advisor Class A Shares" on page 50. SAFECO Securities,
out of its own resources, will pay a brokerage commission equal to 4.00% of the
amount invested to broker-dealers, banks and other financial institutions who
sell Class B shares. Broker-dealers, banks and other financial institutions who
sell Class B shares of the Money Market Fund will receive the 4.00% brokerage
commission at the time the shareholder exchanges his or her Class B Money Market
Fund shares for Class B shares of another Fund.

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- --------------------------------------------------------------------------------

DISTRIBUTION PLANS (Continued)

During the period they are in effect, the Plans and related Agreements obligate
the Advisor Classes of the Funds to which they relate 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's expenses exceed its service or distribution
fees for any class, the class 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 which has implemented a Rule 12b-1
Plan will pay the service and distribution fees to SAFECO Securities until
either the applicable Plan or Agreement is terminated or not renewed.

PERSONS CONTROLLING CERTAIN FUNDS

At June 30, 1996, SAM, a wholly owned subsidiary of SAFECO Corporation,
controlled the International and Balanced Funds. At June 30, 1996, SAFECO
Corporation controlled the Small Company Fund. SAFECO Corporation and SAM have
their principal place of business at SAFECO Plaza, Seattle, Washington 98185.

At June 30, 1996, SAFECO Insurance Company of America ("SAFECO Insurance")
controlled the Intermediate Treasury and Washington Funds. SAFECO Insurance is a
Washington Corporation and a wholly owned subsidiary of SAFECO Corporation,
which has its principal place of business at SAFECO Plaza, Seattle, Washington
98185.

At June 30, 1996, Crown Packaging Corp. PS & P and Massman Construction Co. PSRT
controlled the Managed Bond Fund. Crown Packaging Corp. PS & P's address of
record is 8514 Eager Road, St. Louis, Mo. 63144. Massman Construction Co. PSRT's
address of record is 8901 Stateline, Kansas City, Mo. 64114.

PERFORMANCE INFORMATION

The yield, total return and average annual total return of each class of a Fund
may be quoted in advertisements. For each Fund except the Money Market Fund,
yield is the annualization on a 360-day basis of a class's net income per share
over a 30-day period divided by the class's net asset value per share on the
last day of the period. The formula for the yield calculation is defined by
regulation. Consequently, the rate of actual income distributions paid by the
Funds may differ from quoted yield figures. Total return is the total percentage
change in an investment in a class of a Fund, assuming the reinvestment of
dividend and capital gain distributions, over a stated period of time. Average
annual total return is the annual percentage change in an investment in a class
of a Fund, assuming the reinvestment of dividends and capital gain
distributions, over a stated period of time. Performance quotations are
calculated separately for each class of a Fund. Standardized returns for Class A
shares reflect deduction of the Fund's maximum initial sales charge at the time
of purchase, and standardized returns for Class B shares reflect deduction of
the applicable CDSC imposed on a redemption of shares held for the period.

For the Money Market Fund, yield is the annualization on a 365-day basis of the
Fund's net income over a 7-day period. Effective yield is the annualization, on
a 365-day basis, of the Money Market Fund's net income over a 7-day period with
dividends reinvested. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment.

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PERFORMANCE INFORMATION (Continued)

From time to time, a Fund may advertise rankings. Rankings are calculated by
independent companies that monitor mutual fund performance (e.g., CDA Investment
Technologies, Lipper Analytical Services, Inc., and Morningstar, Inc.) and are
reported periodically in national financial publications such as Barron's,
Business Week, Forbes, Investor's Business Daily, Money Magazine, and The Wall
Street Journal. In addition, non-standardized performance figures may accompany
the standardized figures described above. Non-standardized figures may be
calculated in a variety of ways, including but not necessarily limited to,
different time periods and different initial investment amounts. Each Fund may
also compare its performance to the performances of relevant indices.

Performance information and quoted rankings are indicative only of past
performance and are not intended to represent future investment results. Except
for the Money Market Fund, the yield and share price of each class of a Fund
will fluctuate and your shares, when redeemed, may be worth more or less than
what you originally paid for them.

FUND DISTRIBUTIONS AND HOW THEY ARE TAXED

DIVIDENDS AND OTHER DISTRIBUTIONS
The Fixed-Income Funds declare dividends on each business day and pay them on
the last business day of each month; the Growth, Equity, Income, Northwest and
Balanced Funds declare and pay dividends on the last business day of each
calendar quarter; and the International and Small Company Funds declare and pay
dividends annually. Those dividends are declared and paid from net investment
income (which includes accrued dividends and interest, earned discount, and
other income earned on portfolio securities less expenses). Shares of each Fund
become entitled to receive dividends on the next business day after they are
purchased in your account. Each Fund also distributes annually substantially all
of its net short-term capital gain, net capital gain (the excess of net
long-term capital gain over net short-term capital loss) and net gains from
foreign currency transactions, if any. Each Fund may make additional
distributions, if necessary, to avoid a 4% excise tax on certain undistributed
income and capital gain.

Dividends and other distributions paid by a Fund on each class of its shares are
calculated at the same time in the same manner. However, except for the Money
Market Fund, because of the higher Rule 12b-1 service and distribution fees
associated with Class B shares, the dividends paid by a Fund on its Class B
shares will be lower than those paid on its Class A shares.

Your dividends and other distributions from a Fund are reinvested in additional
shares of the distributing class at their NAV (without any sales charge)
generally determined as of the close of business on the ex-distribution date,
unless you elect in writing to receive dividends or other distributions in cash
and that election is provided to SAFECO Services at the address on the first
page of the Prospectus. The election will remain in effect until you revoke it
by written notice in the same manner as the 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.

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FUND DISTRIBUTIONS AND HOW THEY ARE TAXED (Continued)

TAXES
Each Fund intends to qualify for treatment as a regulated investment company
under Subchapter M of the Code. By so qualifying, a Fund will not be subject to
federal income tax to the extent it distributes to its shareholders its
investment company taxable income (generally consisting of taxable net
investment income, net short-term capital gains and any net gains from certain
foreign currency transactions) and net capital gain.

Dividends from each Fund's investment company taxable income (whether paid in
cash or additional shares) are generally taxable to you as ordinary income.
Distributions of each Fund's net capital gain (whether paid in cash or
additional shares) are taxable to you as a long-term capital gain, regardless of
how long you have held your Fund shares. Shareholders who are not subject to tax
on their income generally will not be required to pay tax on distributions. Each
Fund will inform you after the end of each calendar year as to the amount and
nature of dividends and other distributions to your account. Dividends and other
distributions declared in December, but received by you in January, generally
are taxable to you in the year in which declared.

When you sell (redeem) shares, it may result in a taxable gain or loss. This
depends upon whether you receive more or less than your adjusted basis for the
shares (which normally takes into account any initial sales charge paid on Class
A shares). An exchange of any Fund's shares for shares of another Fund generally
will have similar tax consequences.

Special rules apply when you dispose of Class A shares of a Fund (except the
Money Market Fund) through a redemption or exchange within 60 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 52 and "How to Exchange Shares from One Fund to
Another" on page 56 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.

SPECIAL CONSIDERATIONS FOR THE INTERMEDIATE TREASURY FUND
States generally treat Fund dividends attributable to interest earned on U.S.
Treasury securities and other direct obligations of the U.S. Government as
tax-free income for state income tax purposes. This treatment may depend on the
maintenance of certain minimum percentages of Fund ownership of these
securities. The Intermediate Treasury Fund will invest primarily in these
securities.

SPECIAL CONSIDERATIONS FOR THE TAX-EXEMPT INCOME FUNDS
Distributions by a Tax-Exempt Income Fund that are designated by it as
"exempt-interest dividends" generally may be excluded by you from your gross
income 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) of the Code; each Tax-Exempt Income Fund intends to continue to satisfy
this

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FUND DISTRIBUTIONS AND HOW THEY ARE TAXED (Continued)

requirement. The aggregate dividends excludable from a Tax-Exempt Income Fund's
shareholders' gross income may not exceed that Fund's net tax-exempt income.
Your treatment of dividends from a Tax-Exempt Income Fund for state and local
income tax purposes may differ from the treatment thereof under the Code.
Shareholders of each Tax-Exempt Income Fund should keep in mind that they may be
subject to those taxes.

Interest on indebtedness incurred or continued to purchase or carry shares of a
Tax-Exempt Income Fund will not be deductible for federal income tax purposes to
the extent that Fund's distributions consist of exempt-interest dividends.

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 Tax-Exempt Income Fund) plus 50% of their benefits
exceeds certain base amounts. Exempt-interest dividends from a Tax-Exempt Income
Fund still are tax-exempt to the extent described above; they are only included
in the calculation of whether a recipient's income exceeds the established
amounts.

Entities or persons who are "substantial users" (or persons related to
"substantial users") of facilities financed by PAB or IDBs should consult their
tax advisers before purchasing shares of a Tax-Exempt Income Fund because, for
users of certain of these facilities, the interest on those bonds is not exempt
from federal income tax. For these purposes, the term "substantial user" is
defined generally to include a "non-exempt person" who regularly uses in trade
or business a part of a facility financed from the proceeds of PABs or IDBs.

If you buy shares of a Tax-Exempt Income Fund and sell them at a loss within six
months, the loss will be disallowed to the extent of the exempt-interest
dividends you received on those shares, and any loss that is not disallowed will
be treated as a long-term capital loss to the extent of any distributions of net
capital gain on those shares.

A portion of a Tax-Exempt Income Fund's assets may from time to time be
temporarily invested in fixed-income obligations, the interest on which when
distributed to you will be subject to federal income tax. Moreover, if a
Tax-Exempt Income Fund realizes capital gain as a result of market transactions,
any distribution of that gain will be taxable to its shareholders.

Tax-exempt interest attributable to certain PABs (including, in the case of a
Fund receiving interest on those bonds, a proportionate part of the
exempt-interest dividends paid by that Fund) is an item of tax preference for
purposes of the alternative minimum tax. Exempt-interest dividends received by a
corporate shareholder also may be indirectly subject to that tax without regard
to whether a Tax-Exempt Income Fund's tax-exempt interest is attributable to
those bonds. As a matter of non-fundamental investment policy, the Tax-Exempt
Income Funds will not purchase such PABs.

Proposals may be introduced before Congress for the purpose of restricting or
eliminating the federal income tax exemption for interest on municipal
securities. If such a proposal were enacted, the availability of municipal
securities for investment by the Tax-Exempt Income Funds and the value of their
portfolios would be affected. In such event, each Tax-Exempt Income Fund would
reevaluate its investment objective and policies.

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FUND DISTRIBUTIONS AND HOW THEY ARE TAXED (Continued)

SPECIAL CONSIDERATIONS FOR THE CALIFORNIA FUND
The California Fund intends to pay dividends that are exempt from California
state personal income taxes. This would not include taxable interest earned on
temporary investments, if any.

Generally, the tax treatment of capital gain under California law is the same as
under federal law. Capital gain distributions paid by the California Fund are
treated as long-term capital gains under California law regardless of how long
the shares have been held. Redemptions and exchanges of shares of the California
Fund may result in a capital gain or loss for California income tax purposes.

Under California law, the dividend income from municipal bonds is tax-exempt to
individual shareholders, but its tax treatment for corporate shareholders is
unclear. Therefore, the portion of the California Fund's income dividends
attributable to these obligations and paid by it to corporate shareholders may
be taxable. Corporate shareholders may wish to consult their tax advisers
regarding this issue.

Shares of the California Fund will not be subject to the California property
tax.

SPECIAL CONSIDERATION FOR THE WASHINGTON FUND
Currently the State of Washington has no state personal income tax. When and if
Washington State enacts a personal income tax, there can be no assurance that
income from the Washington Fund's portfolio securities that is distributed to
its shareholders would be exempt from such a tax.

TAX WITHHOLDING INFORMATION
Each Fund is required to withhold 31% of all dividends, capital gain
distributions and redemption proceeds payable to individuals and certain other
non-corporate shareholders who do not provide the Fund with a correct taxpayer
identification number. Withholding at that rate also is required from dividends
and capital gain distributions payable to shareholders who otherwise are subject
to backup withholding.

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.
In general, if you are entitled to receive an "eligible rollover distribution"
from a qualified employer-sponsored retirement plan, you may establish an IRA
and have the distributed amount, other than employee after-tax contributions,
rolled over directly into the IRA. If an eligible rollover distribution is not
directly rolled over to an IRA (or certain qualified plan), withholding at the
rate of 20% will be required for federal income tax purposes. A distribution
from a qualified plan that is not an "eligible rollover distribution," including
a distribution that is one of a series of substantially equal periodic payments,
generally is subject to regular wage withholding or withholding at the rate of
10% (depending on the type and amount of the distribution). However, you may
elect not to have withholding apply to any of the latter (i.e., not "eligible
rollover") distributions by checking the appropriate box on the Redemption
Request form or by instructing SAFECO Services in writing at the address on the
Prospectus cover. Please consult your plan administrator or tax adviser for
further information.

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FUND DISTRIBUTIONS AND HOW THEY ARE TAXED (Continued)

The foregoing is only a summary of some of the important federal income tax
considerations generally affecting each Fund and its shareholders; see the
Trusts' Statements of Additional Information for further discussions. There may
be other federal, state or local tax considerations applicable to a particular
investor. You therefore are urged to consult your tax adviser.

TAX-DEFERRED RETIREMENT PLANS

SAFECO Services offers a variety of tax-deferred retirement plans for
individuals, businesses and non-profit organizations. An account may be
established under one of the following plans which allow you to defer investment
income from federal income tax while you save for retirement. Many of the Funds
(other than the Tax-Exempt Income 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
generally is $2,000 per person ($2,250 for you and a non-working spouse). Under
certain circumstances your contribution will be deductible for income tax
purposes. An annual custodial fee will be charged for any part of a calendar
year in which you have an IRA investment in a Fund.

SIMPLIFIED EMPLOYEE PENSION IRAS (SEP-IRAS). SEP-IRAs are easily administered
retirement plans for small businesses and self-employed individuals. Annual
contributions up to $22,500 may be made to SEP-IRA accounts; the annual
contribution limit is subject to change. SEP-IRAs have the same investment
minimums and custodial fees as regular IRAs.

403(B) PLANS. 403(b) plans are retirement plans for tax-exempt organizations and
school systems to which employers and employees both may contribute. Minimum
investment amounts are negotiable.

401(K) PLANS. 401(k) plans allow employers and employees to make tax-advantaged
contributions to a retirement account. SAFECO Services offers a low-cost
administration package that includes a prototype plan, recordkeeping, testing
and employee communications. Minimum investment amounts are negotiable.

PROFIT SHARING AND MONEY PURCHASE PENSION PLANS. Each plan allows corporations,
partnerships and self-employed persons to make annual, tax-deductible
contributions to a retirement account for each person covered by the plan. A
plan may be adopted individually or paired with another plan to maximize
contributions. SAFECO Services offers an administration package for these plans.
Minimum investment amounts are negotiable.

For information about the above accounts and plans, please contact your
investment professional, or call 1-800-278-1985. For a description of federal
income tax withholding on distributions from these accounts and plans, see "Fund
Distributions and How They Are Taxed -- Tax Withholding Information" on page 69.

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ACCOUNT STATEMENTS

Periodically, you will receive an account statement indicating your current Fund
holdings and transactions affecting your account. Confirmation statements will
be sent to you after each transaction that affects your account balance. Please
review the information on each confirmation statement for accuracy immediately
upon receipt. If you do not notify us within 30 days of any processing error,
SAFECO Services will consider the transactions listed on the confirmation
statement to be correct.

ACCOUNT CHANGES AND SIGNATURE REQUIREMENTS

Changes to your account registration or the services you have selected must be
in writing and signed by the number of owners specified on your account
application as having authority to make these changes. Send written changes to
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 by 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
that cannot be verified by comparison to the signature(s) on your account
application. A signature guarantee may be obtained from most financial
institutions including banks, savings and loans and broker-dealers.

DESCRIPTION OF STOCKS, BONDS AND CONVERTIBLE SECURITIES

COMMON STOCKS represent equity interest in a corporation. Although common stocks
have a history of long-term growth in value, their prices fluctuate based on
changes in a company's financial condition and overall market and economic
conditions. Smaller companies are especially sensitive to these factors.

PREFERRED STOCKS are equity securities whose owners have a claim on a company's
earnings and assets before holders of common stock, but after debt holders. The
risk characteristics of preferred stocks are similar to those of common stocks,
except that preferred stocks are generally subject to less risk than common
stocks.

BONDS AND OTHER DEBT SECURITIES are used by issuers to borrow money from
investors. The issuer pays the investor a fixed or variable rate of interest,
and must repay the amount borrowed at maturity. The value of bonds and other
debt securities will normally vary inversely with interest

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DESCRIPTION OF STOCKS, BONDS AND CONVERTIBLE SECURITIES (Continued)

rates. In general, bond prices rise when interest rates fall, and bond prices
fall when interest rates rise. Debt securities have varying degrees of quality
and varying levels of sensitivity to changes in interest rates. Long-term bonds
are generally more sensitive to interest rate changes than short-term bonds.

CONVERTIBLE SECURITIES are debt or preferred stock which are convertible into or
exchangeable for common stock. The value of convertible corporate bonds will
normally vary inversely with interest rates and the value of convertible
corporate bonds and convertible preferred stock will normally vary with the
value of the underlying common stock.

RATINGS SUPPLEMENT

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.

DESCRIPTION OF COMMERCIAL PAPER RATINGS
MOODY'S. Issuers rated Prime-1 have a superior capacity, issuers rated Prime-2
have a strong capacity and issuers rated Prime-3 have an acceptable capacity for
the repayment of short-term promissory obligations.

S&P. Commercial Paper issues rated A are the highest quality obligations. Issues
in this category are regarded as having the greatest capacity for timely
payment. For issues designated A-1 the degree of safety regarding timely payment
is very strong. Issuers designated A-2 also have a strong capacity for timely
payment but not as high as A-1 issuers. Issuers designated A-3 have a
satisfactory capacity for timely payment.

DESCRIPTION OF DEBT RATINGS
Excerpts from Moody's description of its ratings:

Investment Grade:

Aaa -- Judged to be of the best quality. They carry the smallest degree of
investment risk and are generally referred to as "gilt edge." Interest payments
are protected by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such changes
as can be anticipated are most unlikely to impair the fundamentally strong
position of such issues.

Aa -- Judged to be of high quality by all standards. Together with the Aaa group
they comprise what are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.

A -- Have many favorable investment attributes and are to be considered as upper
medium grade obligations. Factors giving security to principal and interest are
considered adequate but elements may be present which suggest a susceptibility
to impairment sometime in the future.

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RATINGS SUPPLEMENT (Continued)

Baa -- Considered as medium grade obligations, i.e., they are neither highly
protected nor poorly secured. Interest payments and principal security appear
adequate for the present but certain protective elements may be lacking or may
be characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well.

Below Investment Grade:

Ba -- Judged to have speculative elements; their future cannot be considered as
well assured. Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during both good and bad times
over the future.

B -- Generally lack characteristics of a desirable investment. Assurance of
interest and principal payments over any long period of time may be uncertain.

Caa -- Have poor standing. Such issues may be in default or there may be present
elements of danger with respect to principal or interest.

Ca -- Represent obligations which are speculative in a high degree. Such issues
are often in default or have other marked shortcomings.

C -- The lowest rated class of bonds and issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment standing.

Excerpts from S&P'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.

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.

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.

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RATINGS SUPPLEMENT (Continued)

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.

The weighted average ratings of all debt securities held by the Income Fund,
expressed as a percentage of total investments held during the fiscal year ended
September 30, 1995, were as follows:

<TABLE>
<CAPTION>
MOODY'S % S&P %
<S> <C> <C> <C>
INVESTMENT GRADE
Aaa -- AAA --
Aa -- AA --
A 3.0 A 1.0
Baa 2.6 BBB 4.6
BELOW INVESTMENT GRADE
Ba 4.0 BB 4.7
B 4.9 B 3.0
Caa -- CCC .6
Ca -- CC --
Not Rated, but determined to Not Rated, but determined to
be investment grade -- be investment grade --
Not Rated, but determined to Not Rated, but determined to
be below investment grade 3.7 be below investment grade 4.3
</TABLE>

The Equity Fund did not hold any convertible debt securities during the fiscal
year ended September 30, 1995.

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SAFECO FAMILY OF FUNDS

STABILITY OF PRINCIPAL
SAFECO Money Market Fund

BOND INCOME
SAFECO Intermediate-Term U.S. Treasury Fund
SAFECO Managed Bond Fund

TAX-FREE BOND INCOME
SAFECO Municipal Bond Fund
SAFECO California Tax-Free Income Fund
SAFECO Washington State Municipal Bond Fund

HIGH CURRENT INCOME WITH LONG-TERM GROWTH
SAFECO Income Fund

LONG-TERM GROWTH
SAFECO Growth Fund
SAFECO Equity Fund
SAFECO Northwest Fund
SAFECO Balanced Fund
SAFECO International Stock Fund
SAFECO Small Company Stock Fund

FOR MORE COMPLETE INFORMATION ON ADVISOR CLASS SHARES OF ANY SAFECO MUTUAL FUND,
INCLUDING MANAGEMENT FEES AND EXPENSES, PLEASE CONTACT YOUR INVESTMENT
PROFESSIONAL.

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<TABLE>
<S> <C>
TELEPHONE NUMBERS: PROSPECTUS
DEALER SERVICES September 30, 1996
Nationwide: (800) 528-6501
Seattle: (206) 545-6409 SAFECO Growth Fund

LITERATURE ORDER: SAFECO Equity Fund
Nationwide: (800) 463-8792
Seattle: (206) 545-6227 SAFECO Income Fund

SHAREHOLDER SERVICES/ SAFECO Northwest Fund
TELEPHONE EXCHANGE:
Monday through Friday, SAFECO Balanced Fund
6:00 a.m. to 5:00 p.m. Pacific Time
Nationwide: (800) 463-8791 SAFECO International Stock Fund
Seattle: (206) 545-6283 SAFECO Small Company Stock Fund

24-HOUR PRICE AND YIELD INFORMATION
Nationwide: (800) 463-8794 SAFECO Intermediate-Term
Seattle: (206) 545-6295 U.S. Treasury Fund

MAILING ADDRESS: SAFECO Managed Bond Fund
SAFECO MUTUAL FUNDS SAFECO Money Market Fund
Advisor Class Shares
P.O. Box 34890 SAFECO Municipal Bond Fund
Seattle, WA 98124-1890 SAFECO California Tax-Free

EXPRESS/OVERNIGHT MAIL: Income Fund
SAFECO Mutual Funds
Advisor Class Shares SAFECO Washington State
4333 Brooklyn Avenue N.E. Municipal
Seattle, WA 98105 Bond Fund

DISTRIBUTOR: Advisor Class A
SAFECO Securities, Inc. Advisor Class B
P.O. Box 34890
Seattle, WA 98124-1890
</TABLE>

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 ANY TRUST, ANY SERIES OF
ANY TRUST, OR BY SAFECO SECURITIES, INC. ("SAFECO SECURITIES"). THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY BY ANY
TRUST, ANY SERIES OF ANY TRUST, OR BY SAFECO SECURITIES IN ANY STATE IN WHICH
SUCH OFFER OR SOLICITATION MAY NOT LAWFULLY BE MADE.

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