<PAGE>
-------------- --------------
SAFECO Mutual Funds
Fixed-Income Funds
No-Load Class
<TABLE>
<S> <C>
Taxable Bond Funds
High-Yield Bond Fund................................................ 2
Intermediate-Term U.S. Treasury Fund................................ 7
GNMA Fund........................................................... 9
Managed Bond Fund................................................... 11
Tax-Exempt Bond Funds
Municipal Bond Market Overview...................................... 15
California Tax-Free Income Fund..................................... 16
Municipal Bond Fund................................................. 20
Intermediate-Term Municipal Bond Fund............................... 26
Insured Municipal Bond Fund......................................... 30
Money Market Funds
Money Market Fund................................................... 34
Tax-Free Money Market Fund.......................................... 37
</TABLE>
Semiannual Report
June 30, 2000
--------------------------------------------------------------------------------
[LOGO OF SAFECO]
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO High-Yield Bond Fund
June 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PHOTO]
ROBERT The weakness experienced in the high-yield market during the
KERN first quarter of 2000 persisted into the second. As prices fell,
yields climbed. However, the current very generous yields of
this asset class were insufficient to overcome the continued
price deterioration on the underlying bonds, and the high-yield
market produced a negative return for the six months ended June
30. Cash flowing out of high-yield mutual funds slowed, and
turned positive, toward the end of the period. New issuance
remained fairly light.
Despite a very-strong finish, the Fund underperformed the
Lipper Inc. average for high-yield funds and the Merrill Lynch
High-Yield Index for the six-month reporting period. (However, without fees and
expenses of 1.05%, the Fund outperformed the index, which has no fees or
expenses, over the six months.)
The Fund widely outperformed both measures in the second quarter of 2000 on
two positive credit stories and the very thing that had handicapped it in the
first quarter--its high percentage of high-quality single B-rated paper.
Returning 1.4%, the single Bs turned in the best second quarter performance of
the high-yield sector, while the first quarter's winners, the CCCs, returned--
5.2%. At June 30, the Fund held 70% in single Bs, versus the index's 56%
allocation.
The positive credit stories were Tekni-Plex and Verio. Tekni-Plex, a
specialty packaging manufacturer, was re-capitalized and its bonds were
tendered at a significant premium. Verio, a provider of web-hosting services,
climbed 15 points on news it would be acquired by NTT Corp.
Having struggled for some time, Stage Stores deteriorated rapidly and the
Fund was unable to sell the bonds before the retailer filed bankruptcy. Given
that experience and operational concerns developing at Ames Department Stores,
I opted to exit that position. Our remaining retailer, Big 5 Sporting Goods,
continues to turn in good performance.
The Fund purchased a new bond issue, Exodus Communications, priced to yield
11.625%. This company like, Verio, provides web-hosting, design and
maintenance. With an $18 billion market cap, it's the largest independent in
the business.
Mohegan Tribal Gaming's BB rated bond was added for its stable underlying
credit quality and good yield. The Mohegan's run the very profitable Mohegan
Sun Casino, serving New York and Connecticut.
The Fund's position in BB-rated names is being increased to strengthen the
Fund's underlying credit quality. Bonds with large coupons, and shorter
durations (sensitivity to changes in interest rates) will also be added for
their defensive qualities.
While I expect volatility to remain with us, the high-yield market still
appears to be relatively cheap on a historic basis.
Robert Kern
--------------------------------------------------------------------------------
Robert Kern joined SAFECO in 1988 with BS degrees in business and accounting
from the University of Washington and University of Puget Sound, respectively.
Kern is a Certified Public Accountant and a Chartered Financial Analyst.
- 2 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PERFORMANCE GRAPH]
PERFORMANCE OVERVIEW - No Load Class
Average Annual Total Return
for the period ended June 30, 2000 Six-Month* 1 Year 5-Year 10-Year
-------------------------------------------------------------------------------
SAFECO High-Yield Bond Fund (1.84)% 0.75% 6.93% 8.86%
Merrill Lynch High-Yield master II Index (1.00)% (0.97)% 7.03% 10.83%
Lipper, Inc. (High Current Yield Funds) (1.67)% (0.79)% 6.49% 9.78%
* Not Annualized
Merrill Lynch
SAFECO High Yield
High-Yield Master II
Bond Fund Index
---------- -------------
6/30/90 10,000 10,000
7/31/90 10,229 10,251
8/31/90 9,916 9,783
9/30/90 9,546 9,380
10/31/90 9,239 9,105
11/30/90 9,341 9,201
12/31/90 9,436 9,341
1/31/91 9,386 9,532
2/28/91 9,773 10,359
3/31/91 10,118 10,872
4/30/91 10,427 11,248
5/31/91 10,552 11,291
6/30/91 10,666 11,548
7/31/91 10,902 11,858
8/31/91 11,114 12,131
9/30/91 11,281 12,302
10/31/91 11,542 12,719
11/30/91 11,686 12,856
12/31/91 11,728 13,000
1/31/92 12,054 13,439
2/29/92 12,263 13,778
3/31/92 12,395 13,972
4/30/92 12,388 14,045
5/31/92 12,555 14,252
6/30/92 12,717 14,417
7/31/92 12,936 14,697
8/31/92 13,096 14,884
9/30/92 13,258 15,042
10/31/92 12,997 14,848
11/30/92 13,217 15,076
12/31/92 13,355 15,267
1/31/93 13,720 15,632
2/28/93 13,992 15,911
3/31/93 14,230 16,181
4/30/93 14,333 16,292
5/31/93 14,550 16,504
6/30/93 14,825 16,812
7/31/93 14,999 16,981
8/31/93 15,101 17,136
9/30/93 15,152 17,212
10/31/93 15,367 17,540
11/30/93 15,485 17,631
12/31/93 15,613 17,817
1/31/94 15,908 18,201
2/28/94 15,830 18,075
1/31/94 15,908 18,201
2/28/94 15,830 18,075
3/31/94 15,270 17,491
4/30/94 15,147 17,273
5/31/94 15,285 17,236
6/30/94 15,352 17,314
7/31/94 15,346 17,428
8/31/94 15,403 17,557
9/30/94 15,397 17,554
10/31/94 15,335 17,599
11/30/94 15,134 17,448
12/31/94 15,262 17,632
1/31/95 15,441 17,879
2/28/95 15,766 18,452
3/31/95 15,910 18,702
4/30/95 16,211 19,186
5/31/95 16,636 19,777
6/30/95 16,720 19,911
7/31/95 16,942 20,170
8/31/95 16,950 20,276
9/30/95 17,157 20,516
10/31/95 17,394 20,685
11/30/95 17,423 20,890
12/31/95 17,649 21,240
1/31/96 17,871 21,595
2/29/96 18,043 21,661
3/31/96 17,984 21,572
4/30/96 18,020 21,603
5/31/96 18,133 21,758
6/30/96 18,179 21,855
7/31/96 18,369 21,988
8/31/96 18,629 22,262
9/30/96 19,007 22,780
10/31/96 19,080 22,977
11/30/96 19,363 23,439
12/31/96 19,482 23,633
1/31/97 19,645 23,811
2/28/97 20,006 24,178
3/31/97 19,588 23,845
4/30/97 19,738 24,151
5/31/97 20,277 24,659
6/30/97 20,587 25,040
7/31/97 21,118 25,704
8/31/97 21,129 25,673
9/30/97 21,494 26,135
10/31/97 21,479 26,268
11/30/97 21,679 26,514
12/31/97 21,975 26,769
1/31/98 22,438 27,195
2/28/98 22,538 27,306
3/31/98 22,808 27,565
4/30/98 22,733 27,684
5/31/98 22,836 27,850
6/30/98 22,934 27,994
7/31/98 23,233 28,172
8/31/98 21,810 26,750
9/30/98 22,173 26,820
10/31/98 21,920 26,247
11/30/98 22,866 27,609
12/31/98 22,953 27,559
1/31/99 23,244 27,931
2/28/99 23,265 27,741
3/31/99 23,580 28,064
4/30/99 24,037 28,577
5/31/99 23,405 28,315
6/30/99 23,202 28,245
7/31/99 23,218 28,283
8/31/99 23,103 27,984
9/30/99 23,012 27,872
10/31/99 23,097 27,720
11/30/99 23,515 28,082
12/31/99 23,801 28,252
1/31/00 23,482 28,143
2/29/00 23,392 28,203
3/31/00 22,936 27,789
4/30/00 23,097 27,790
5/31/00 22,799 27,440
6/30/00 23,374 27,970
The performance graph compares a hypothetical $10,000 investment in the Fund to
a hypothetical investment in a relevant market index. The index is unmanaged and
includes no operating expenses or transaction costs. Past performance is not
predictive of future results. Principal value may fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
-------------------------------------------------------------------------------
HIGHLIGHTS
-------------------------------------------------------------------------------
<TABLE>
<S> <C>
Current Yield (30-day).... 10.16%
Weighted Average Maturity. 6.5 years
</TABLE>
<TABLE>
<CAPTION>
Percent of
TOP FIVE HOLDINGS Net Assets
--------------------------------------------------------------------------------
<S> <C>
American Axle & Manufacturing Holdings, Inc................................ 2.9%
(Auto Parts & Equipment)
Verio, Inc. ............................................................... 2.7
(Services - Computer Systems)
The Scotts Co. (144A) ..................................................... 2.4
(Agricultural Products)
Metromedia Fiber Network, Inc.............................................. 2.3
(Telephone)
Perkins Family Restaurants................................................. 2.3
(Restaurants)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES Cost
For the period ended June 30, 2000 (000's)
--------------------------------------------------------------------------------
<S> <C>
Lennar Corp. (144A)..................................................... $1,385
Level 3 Communications, Inc. ........................................... 1,066
Spectrasite Holdings, Inc. ............................................. 1,053
Crown Castle International Corp......................................... 1,021
Tenet Healthcare Corp. (144A)........................................... 1,009
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SALES Proceeds
For the Period Ended June 30, 2000 (000's)
--------------------------------------------------------------------------------
<S> <C>
Vintage Petroleum Corp. ................................................ $1,809
Tekni-Plex, Inc......................................................... 1,702
Allied Waste Industries................................................. 1,635
Bresnan Communication Group, Inc........................................ 1,604
Criimi Mae Commercial Mortgage Trust.................................... 1,502
</TABLE>
<TABLE>
<CAPTION>
Percent of
TOP FIVE INDUSTRIES Net Assets
--------------------------------------------------------------------------------
<S> <C>
Telephone.................................................................. 16%
Broadcasting (TV, Radio & Cable)........................................... 15
Telecommunications (Long Distance)......................................... 7
Auto Parts and Equipment................................................... 4
Agricultural Products...................................................... 4
</TABLE>
Credit Rating Distribution
As a Percent of Net Assets
--------------------------------------------------------------------------------
[PIE CHART]
1 Not Rated: 1%
2 Preferred Stock: 7%
3 Cash & Other: 8%
4 BB: 13%
--------------------------------------------------------------------------------
- 3 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO High-Yield Bond Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
-----------------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS - 84.6%
Agricultural Products - 3.9%
$1,000 Sun World International, Inc. $ 951
11.25%, due 4/15/04
1,600 # The Scotts Company 1,536
(Class A) (144A) 8.625%, due 1/15/09 (acquired 1/14/99)
Air Freight - 2.3%
1,500 Atlas Air, Inc. 1,440
9.375%, due 11/15/06
Airlines - 1.5%
1,000 Northwest Airlines, Inc. 950
8.52%, due 4/07/04
Aluminum - 1.5%
1,000 Commonwealth Aluminum Corp. 960
10.75%, due 10/01/06
Auto Parts & Equipment - 4.2%
2,000 American Axle & Manufacturing Holdings, Inc. 1,865
9.75%, due 3/01/09
1,000 Hayes Lemmerz International, Inc. 845
8.25%, due 12/15/08
Broadcasting (TV, Radio & Cable) - 11.6%
1,000 Adelphia Communications Corp. 972
9.875%, due 3/01/05
319 AMFM Operating, Inc. 373
12.625%, due 10/31/06
1,000 # Callahan Nordrhien Westfalen 462
(144A) 16.00%, beg. 7/15/05 Step Bond due 7/15/10
(acquired 6/29/00)
1,000 Chancellor Media Corp. 1,030
9.00%, due 10/01/08
1,000 Charter Communications Holdings 879
8.625%, due 4/01/09
250 Classic Cable, Inc. 218
9.375%, due 8/01/09
500 Echostar DBS Corp. 486
9.25%, due 2/01/06
500 Echostar DBS Corp. 480
9.375%, due 2/01/09
2,000 # Spectrasite Holdings, Inc. 1,090
12.875%, beg. 3/15/05 Step Bond due 3/15/10 (144A)
(acquired 5/01/00)
500 Telewest Communications, plc 474
11.00%, beg. 10/01/00 Step Bond due 10/01/07
1,000 Young Broadcasting, Inc. 940
9.00%, due 1/15/06
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
Communication Equipment - 2.7%
$1,500 National Equipment Services, Inc. $ 1,245
(Series B) 10.00%, due 11/30/04
500 National Equipment Services, Inc. 415
(Series D) 10.00%, due 11/30/04
Computers (Software & Services) - 2.2%
1,500 PSINet, Inc. 1,387
11.00%, due 8/01/09
Containers & Packaging (Paper) - 1.5%
500 Packaging Corporation of America 496
9.625%, due 4/01/09
500 Printpak, Inc. 465
10.625%, due 8/15/06
Entertainment - 2.7%
500 Cinemark USA, Inc. 260
(Series B) 9.625%, due 8/01/08
500 Cinemark USA, Inc. 260
260 (Series D) 9.625%, due 8/01/08
1,250 Premier Parks, Inc. 1,175
9.25%, due 4/01/06
Gaming, Lottery & Parimutuel Companies - 2.3%
1,000 Mohegan Tribal Gaming Authority 950
8.75%, due 1/01/09
500 # Station Casinos, Inc. 501
9.875%, due 7/01/10 (144A) (acquired 06/29/00)
Health Care (Hospital Management) - 1.6%
1,000# Tenet Healthcare Corp. 1,007
(144A) 9.25%, due 9/01/10 (acquired 06/27/00)
Household Furnishings & Appliances - 1.1%
1,000 Holmes Products Corp. 700
9.875%, due 11/15/07
Manufacturing (Diversified) - 2.8%
1,000 Nortek, Inc. 905
8.875%, due 8/01/08
1,000 Tenneco, Inc. 890
11.625%, due 10/15/09
Manufacturing (Specialized) - 2.2%
1,500 Flextronics International, Ltd. 1,417
8.75%, due 10/15/07
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 4 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO High-Yield Bond Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
Oil & Gas (Drilling & Equipment) - 2.1%
$1,500 Newpark Resources, Inc. $ 1,309
8.625%, due 12/15/07
Oil & Gas (Exploration & Production) - 2.3%
1,000 Ocean Energy, Inc. 970
8.375%, due 7/01/08
500 Vintage Petroleum Corp. 509
9.75%, due 6/30/09
Power Producers (Independent) - 1.6%
1,000 AES Corp. 980
9.50%, due 6/01/09
Restaurants - 2.3%
1,500 Perkins Family Restaurants 1,440
10.125%, due 12/15/07
Retail (Department Stores) - 0.0%
1,440 Specialty Retailers, Inc. 18
9.00%, due 7/15/07
Retail (Specialty) - 1.8%
1,250 Big 5 Corp. 1,148
10.875%, due 11/15/07
Services (Advertising/Marketing) - 1.6%
1,000 Lamar Advertising Co. 1,005
9.625%, due 12/01/06
Services (Commercial & Consumer) - 2.8%
1,000 Bally Total Fitness Holdings 905
9.875%, due 10/15/07
1,000 United Rentals, Inc. 902
(Series B) 9.25%, due 1/15/09
Services (Computer Systems) - 2.7%
1,500 Verio, Inc. 1,684
11.25%, due 12/01/08
Telecommunications (Cellular/Wireless) - 1.1%
500 Crown Castle International Corp 507
10.75%, due 8/01/11
250 # VoiceStream Wireless Corp. 168
(144A) 11.875%, beg. 11/15/04 Step Bond due 11/15/09
(acquired 11/04/99)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
Telecommunications (Long Distance) - 6.7%
$ 500 Exodus Communications, Inc. $ 495
11.25%, due 7/01/08
1,000 # Exodus Communications, Inc. 1,002
11.625%, due 07/15/10 (144A) (acquired 06/28/00)
1,000 KPNQwest BV 940
8.125%, due 6/01/09
1,000 RCN Corp. 833
10.125%, due 1/15/10
1,000 Williams Communication Group, Inc. 978
10.875%, due 10/01/09
Telephone - 14.2%
1,250 GCI, Inc. 1,163
9.75%, due 8/01/07
1,000 Intermedia Communications, Inc. 785
11.25%, beg. 7/15/02 Step Bond due 7/15/07
1,000 Level 3 Communications, Inc. 608
10.50%, beg. 12/01/03 Step Bond due 12/01/08
2,000 Level 3 Communications, Inc. 1,095
12.875%, beg. 3/15/05 Step Bond due 3/15/10
1,000 McLeodUSA, Inc. 820
10.50%, due 3/01/07
1,000 McLeodUSA, Inc. 978
9.50%, due 11/01/08
1,500 Metromedia Fiber Network, Inc. 1,477
10.00%, due 11/15/08
500 Metromedia Fiber Network, Inc. 493
10.00%, due 12/15/09
1,000 NEXTLINK Communications, Inc. 985
10.75%, due 11/15/08
1,000 NEXTLINK Communications, Inc. 610
9.45%, beg. 4/15/03 Step Bond due 4/15/08
Textiles (Specialty) - 1.3%
1,000 Polymer Group, Inc. 850
9.00%, due 7/01/07
-------
TOTAL CORPORATE BONDS 53,681
-------
PREFERRED STOCKS - 6.9%
Broadcasting (TV, Radio & Cable) - 3.7%
18 CSC Holdings, Inc. 1,906
11.125%, due 4/01/08
5 Sinclair Broadcast Group, Inc. 453
11.625%, due 3/15/09
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 5 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO High-Yield Bond Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
-------------------------------------------------------------------------------
Telecommunications (Cellular/Wireless) -
1.7%
$ 1 Crown Castle International Corp. $ 1,042
12.75%, due 12/15/10
Telephone - 1.5%
10 Global Crossing Holdings, Ltd. 965
10.50%, due 12/01/08
-------
TOTAL PREFERRED STOCKS 4,366
-------
COMMERCIAL PAPER - 9.9%
Entertainment - 4.7%
3,000 Harrahs Operating Co., Inc. 3,000
6.95%, due 7/03/00
Financial (Diversified) - 5.2%
3,300 PHH Corporation 3,300
7.25%, due 7/03/00
-------
TOTAL COMMERCIAL PAPER 6,300
-------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
-------------------------------------------------------------------------------
CASH EQUIVALENTS - 0.6%
Investment Companies
$ 349 AIM Short-Term Investments Co. Liquid Assets Money Market $ 349
Portfolio (Institutional Shares)
-------
TOTAL CASH EQUIVALENTS 349
-------
TOTAL INVESTMENTS - 102.0% 64,696
Other Assets, less Liabilities (1,261)
-------
NET ASSETS $63,435
=======
-------------------------------------------------------------------------------
</TABLE>
# Securities are exempt from registration and restricted as to resale only to
dealers, or through a dealer to an "accredited investor" or a "qualified
institutional buyer." The total cost of such securities is $5,766,345 and the
total value is 9.1% of net assets.
SEE NOTES TO FINANCIAL STATEMENTS
- 6 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO Intermediate-Term U.S. Treasury Fund
June 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PHOTO]
NAOMI The Intermediate-Term U.S. Treasury Fund underperformed its
URATA index and Lipper peer group for the six and twelve months ending
June 30, 2000.
The Fund underperformed because I was caught short. I had
shortened the Fund's duration (sensitivity to interest rates)
below the index in anticipation of the Fed tightening. As
economic data began to indicate a slowdown and the market
rallied, our Fund's gains lagged. Since then, I have extended
the duration of the portfolio and am keeping pace with my peers.
Interest rates traded in a range during the second quarter, ending close to
where they started. The hump the yield curve developed in the first quarter,
softened as the yields at the highest point, the two-year mark, came down. Two-
year yields fell from 6.49% at March 31, 2000 to 6.36% at June 30, 2000. (A
yield curve is a graphic representation of yields for different maturities.)
At the short-end of the curve rates remain high, as the Federal Reserve
Board raised the federal fund rates to 6.5% in the second quarter. At the long-
end, rates remained low and the curve inverted as the U.S. Treasury announced
that the size of the federal budget surplus is greater than anticipated. The
market expects Treasury buyback of 30-year bonds to be strong through the rest
of the year, this increase in demand translates to lower yields.
Prices of government agency securities have climbed as the agencies have cut
back on issuance. At June 30, fund assets consisted of approximately 78%
Treasuries, 20% agencies and 2% cash.
The Fed held rates steady at its June meeting, but what will happen to
short-term rates remains unclear. At the long end, rates could stay low due to
further government buybacks. Given this environment, I have maintained a
barbell approach with two and ten year Treasuries and agencies between five and
eight years. I will continue to monitor the factors affecting the bond market
and strive to provide the best return for the Fund no matter what shape the
yield curve takes.
--------------------------------------------------------------------------------
Naomi Urata joined SAFECO in 1993 as a fixed-income analyst and began managing
the SAFECO Intermediate-Term U.S. Treasury Fund in 1999. She holds an MBA from
Yale University and is a Chartered Financial Analyst.
--------------------------------------------------------------------------------
HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Current Yield (30-day).... 5.88%
Weighted Average Maturity. 4.8 years
</TABLE>
- 7 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PERFORMANCE GRAPH]
PERFORMANCE OVERVIEW - No Load Class
Average Annual Total Return
for the period ended June 30, 2000 Six-Month* 1 Year 5-Year 10-Year
--------------------------------------------------------------------------------
SAFECO Intermediate-Term U.S.
Treasury Fund 3.23% 3.54% 5.22% 6.64%
Merrill Lynch Intermediate-Term
Treasury Index 3.60% 4.73% 5.88% 7.18%
Lipper, Inc. (Intermediate U.S.
Treasury Funds) 4.08% 3.95% 5.47% 6.82%
* Not Annualized
SAFECO Intermediate- Merrill Lynch
Term U.S. Treasury Intermediate-Term
Fund Treasury Index
-------------------- -----------------
6/30/90 10,000 10,000
7/31/90 10,134 10,143
8/31/90 10,098 10,099
9/30/90 10,137 10,192
10/31/90 10,218 10,334
11/30/90 10,324 10,488
12/31/90 10,453 10,636
1/31/91 10,500 10,744
2/28/91 10,582 10,800
3/31/91 10,657 10,859
4/30/91 10,776 10,971
5/31/91 10,832 11,034
6/30/91 10,845 11,046
7/31/91 10,980 11,165
8/31/91 11,165 11,373
9/30/91 11,333 11,567
10/31/91 11,455 11,697
11/30/91 11,573 11,835
12/31/91 11,867 12,123
1/31/92 11,731 12,001
2/29/92 11,745 12,047
3/31/92 11,703 11,998
4/30/92 11,792 12,107
5/31/92 11,962 12,280
6/30/92 12,149 12,458
7/31/92 12,451 12,689
8/31/92 12,549 12,836
9/30/92 12,782 13,013
10/31/92 12,548 12,853
11/30/92 12,470 12,796
12/31/92 12,646 12,965
1/31/93 12,971 13,207
2/28/93 13,258 13,405
3/31/93 13,312 13,455
4/30/93 13,407 13,562
5/31/93 13,363 13,521
6/30/93 13,687 13,715
7/31/93 13,708 13,744
8/31/93 14,046 13,954
9/30/93 14,125 14,014
10/31/93 14,156 14,038
11/30/93 13,929 13,971
12/31/93 14,016 14,025
1/31/94 14,198 14,165
2/28/94 13,823 13,964
3/31/94 13,532 13,768
4/30/94 13,436 13,675
5/31/94 13,441 13,689
6/30/94 13,416 13,699
7/31/94 13,594 13,868
8/31/94 13,629 13,912
9/30/94 13,480 13,800
10/31/94 13,485 13,803
11/30/94 13,458 13,734
12/31/94 13,510 13,786
1/31/95 13,665 14,015
2/28/95 13,869 14,283
3/31/95 13,940 14,361
4/30/95 14,111 14,526
5/31/95 14,651 14,941
6/30/95 14,749 15,039
7/31/95 14,634 15,049
8/31/95 14,809 15,173
9/30/95 14,973 15,274
10/31/95 15,200 15,446
11/30/95 15,509 15,639
12/31/95 15,773 15,798
1/31/96 15,824 15,933
2/29/96 15,438 15,755
3/31/96 15,276 15,679
4/30/96 15,245 15,630
5/31/96 15,242 15,621
6/30/96 15,352 15,774
7/31/96 15,400 15,823
8/31/96 15,399 15,840
9/30/96 15,571 16,041
10/31/96 15,763 16,302
11/30/96 15,965 16,502
12/31/96 15,833 16,413
1/31/97 15,882 16,474
2/28/97 15,841 16,493
3/31/97 15,648 16,408
4/30/97 15,867 16,592
5/31/97 15,990 16,719
6/30/97 16,149 16,863
7/31/97 16,614 17,180
8/31/97 16,414 17,107
9/30/97 16,661 17,296
10/31/97 16,953 17,497
11/30/97 16,961 17,537
12/31/97 17,146 17,686
1/31/98 17,422 17,924
2/28/98 17,363 17,900
3/31/98 17,396 17,960
4/30/98 17,459 18,040
5/31/98 17,607 18,162
6/30/98 17,754 18,288
7/31/98 17,791 18,360
8/31/98 18,228 18,727
9/30/98 18,858 19,169
10/31/98 18,768 19,212
11/30/98 18,704 19,141
12/31/98 18,793 19,212
1/31/99 18,795 19,304
2/28/99 18,497 19,007
3/31/99 18,577 19,147
4/30/99 18,607 19,205
5/31/99 18,393 19,077
6/30/99 18,367 19,110
7/31/99 18,341 19,131
8/31/99 18,350 19,168
9/30/99 18,508 19,321
10/31/99 18,523 19,350
11/30/99 18,496 19,362
12/31/99 18,416 19,317
1/31/00 18,336 19,260
2/29/00 18,492 19,411
3/31/00 18,820 19,653
4/30/00 18,736 19,651
5/31/00 18,776 19,730
6/30/00 19,017 20,013
The performance graph compares a hypothetical $10,000 investment in the Fund to
a hypothetical investment in a relevant market index. The index is unmanaged and
includes no operating expenses or transaction costs. Past performance is not
predictive of future results. Principal value may fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
PORTFOLIO OF INVESTMENTS
SAFECO Intermediate-Term U.S. Treasury Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS - 97.8%
U.S. Federal Agency Notes - 19.6%
$ 500 5.75%, due 2/15/08 $ 460
500 5.785%, due 4/14/08 459
1,500 6.26%, due 9/24/04 1,457
1,500 6.875%, due 11/22/06 1,452
U.S. Treasury Bills/Strips - 5.6%
2,000 0.00%, due 5/15/10 1,089
U.S. Treasury Notes - 72.6%
3,600 5.75%, due 11/15/00 3,592
5,300 6.00%, due 8/15/09 5,257
5,300 6.50%, due 3/31/02 5,302
-------
TOTAL U.S. GOVERNMENT OBLIGATIONS 19,068
-------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
CASH EQUIVALENTS - 1.2%
Investment Companies
$ 243 AIM Short-Term Investments Co.
Liquid Assets Money Market
Portfolio (Institutional Shares) $ 243
-------
TOTAL CASH EQUIVALENTS 243
-------
TOTAL INVESTMENTS - 99.0% 19,311
Other Assets, less Liabilities 179
-------
NET ASSETS $19,490
=======
</TABLE>
- 8 -
<PAGE>
REPORT FROM THE FUND MANAGERS
SAFECO GNMA Fund
June 30, 2000
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
[PHOTO] Nearly all the SAFECO GNMA Fund's year-to-date
JOE underperformance has been due to the type of securities and
CHRISTENSEN markets we concentrated in, or our "sector selection".
For example, we bought a long U.S. Treasury market to take
advantage of the government's buyback program in that sector,
but our timing was poor. The market declined and we suffered
some losses. Being overweighted in another sector, premium 8.5%
coupons, also hurt performance as these bonds underperformed
over the last six months.
One bright spot was the performance of the FNMA and FHLMC
sectors. We were buyers of Fannies and Freddies as they became
cheap to the GNMAs and the Fund benefited as they outperformed
in the second quarter. For better, and for worse, such is the
power of sector selection in portfolio management.
We believe that the fixed income markets will continue to be
characterized by uncertainty and high volatility and have re-
positioned the fund accordingly.
[PHOTO]
PAUL
STEVENSON
We extended our duration (sensitivity to interest rates) from
modestly defensive to neutral and we adjusted the portfolio to
more closely approximate the entire mortgage market. As a result, our coupons
are spread across the yield spectrum, rather than clustered in a barbell of
long and short maturities. We moved to this "waterfall" to spread our exposure
across the entire yield curve.
Given our reluctance to make an interest rate bet, we are choosing to focus
on sector rotation and on finding good value in the marketplace.
Going forward we will look to improve results as we pursue ways to add
value to our investors.
Joe Christensen
Paul Stevenson
-------------------------------------------------------------------------------
Joe Christensen joined Paul Stevenson as co-manager of SAFECO GNMA Fund in May
2000. This increases the resources dedicated to managing the Fund and brings
additional perspective to the decision-making process. While the overall
philosophy of the SAFECO GNMA Fund remains unchanged, the intensity of the
analytical effort has doubled.
Paul Stevenson joined SAFECO in 1986 as a mortgage securities analyst. He
became the GNMA Fund manager in 1988. Stevenson has a Bachelor of Arts in
finance from Washington State University, an MBA from the University of
Washington, and is a Chartered Financial Analyst.
--------------------------------------------------------------------------------
HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Current Yield (30-day).... 6.6%
Weighted Average Maturity. 7.4 years
</TABLE>
- 9 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PERFORMANCE GRAPH]
PERFORMANCE OVERVIEW - No-Load Class
Average Annual Total Return for the
period ended June 30, 2000 Six Month* 1 Year 5 Year 10 Year
--------------------------------------------------------------------------------
SAFECO GNMA Fund 2.84% 3.68% 5.63% 6.73%
Merrill Lynch GNMA Index 4.23% 5.72% 6.83% 8.11%
Lipper, Inc. (GNMA Funds) 3.72% 4.45% 5.67% 7.09%
*Not Annualized
Merrill Lynch
SAFECO GNMA Fund GNMA Index
---------------- -------------
6/30/90 10,000 10,000
7/31/90 10,183 10,169
8/31/90 10,092 10,088
9/30/90 10,159 10,179
10/31/90 10,245 10,303
11/30/90 10,472 10,533
12/31/90 10,611 10,707
1/31/91 10,761 10,861
2/28/91 10,823 10,937
3/31/91 10,880 11,020
4/30/91 10,998 11,130
5/31/91 11,085 11,219
6/30/91 11,098 11,236
7/31/91 11,274 11,425
8/31/91 11,455 11,639
9/30/91 11,654 11,849
10/31/91 11,826 12,037
11/30/91 11,886 12,119
12/31/91 12,182 12,419
1/31/92 12,012 12,269
2/29/92 12,111 12,391
3/31/92 12,040 12,313
4/30/92 12,130 12,444
5/31/92 12,365 12,674
6/30/92 12,496 12,871
7/31/92 12,674 12,947
8/31/92 12,804 13,137
9/30/92 12,907 13,235
10/31/92 12,774 13,132
11/30/92 12,829 13,200
12/31/92 12,998 13,362
1/31/93 13,189 13,539
2/28/93 13,334 13,663
3/31/93 13,387 13,748
4/30/93 13,433 13,823
5/31/93 13,473 13,896
6/30/93 13,700 14,028
7/31/93 13,756 14,095
8/31/93 13,901 14,123
9/30/93 13,916 14,129
10/31/93 13,939 14,173
11/30/93 13,807 14,178
12/31/93 13,918 14,318
1/31/94 14,073 14,431
2/28/94 13,860 14,363
3/31/94 13,420 13,990
4/30/94 13,303 13,887
5/31/94 13,349 13,916
6/30/94 13,289 13,887
7/31/94 13,545 14,161
8/31/94 13,576 14,199
9/30/94 13,372 14,040
10/31/94 13,337 14,030
11/30/94 13,221 13,995
12/31/94 13,324 14,144
1/31/95 13,597 14,450
2/28/95 13,915 14,837
3/31/95 13,962 14,909
4/30/95 14,141 15,122
5/31/95 14,531 15,573
6/30/95 14,592 15,675
7/31/95 14,609 15,714
8/31/95 14,767 15,882
9/30/95 14,909 16,046
10/31/95 15,024 16,180
11/30/95 15,200 16,356
12/31/95 15,386 16,565
1/31/96 15,488 16,692
2/29/96 15,279 16,559
3/31/96 15,189 16,537
4/30/96 15,128 16,484
5/31/96 15,095 16,421
6/30/96 15,302 16,608
7/31/96 15,325 16,682
8/31/96 15,322 16,706
9/30/96 15,577 16,975
10/31/96 15,864 17,316
11/30/96 16,099 17,581
12/31/96 15,999 17,488
1/31/97 16,103 17,611
2/28/97 16,139 17,677
3/31/97 15,967 17,512
4/30/97 16,230 17,791
5/31/97 16,369 17,978
6/30/97 16,568 18,189
7/31/97 16,922 18,516
8/31/97 16,861 18,493
9/30/97 17,063 18,732
10/31/97 17,241 18,922
11/30/97 17,269 18,971
12/31/97 17,435 19,157
1/31/98 17,611 19,342
2/28/98 17,646 19,408
3/31/98 17,682 19,493
4/30/98 17,790 19,621
5/31/98 17,913 19,768
6/30/98 18,016 19,821
7/31/98 18,091 19,932
8/31/98 18,343 20,092
9/30/98 18,545 20,341
10/31/98 18,465 20,319
11/30/98 18,551 20,448
12/31/98 18,627 20,536
1/31/99 18,726 20,670
2/28/99 18,582 20,611
3/31/99 18,729 20,741
4/30/99 18,805 20,838
5/31/99 18,632 20,721
6/30/99 18,505 20,634
7/31/99 18,377 20,510
8/31/99 18,370 20,508
9/30/99 18,669 20,849
10/31/99 18,704 20,971
11/30/99 18,739 20,991
12/31/99 18,651 20,928
1/31/00 18,503 20,782
2/29/00 18,686 21,045
3/31/00 18,912 21,363
4/30/00 18,868 21,331
5/31/00 18,866 21,429
6/30/00 19,187 21,814
The performance graph compares a hypothetical $10,000 investment in the Fund to
a hypothetical investment in a relevant market index. The index is unmanaged and
includes no operating expenses or transaction costs. Past performance is not
predictive of future results. Principal value may fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
PORTFOLIO OF INVESTMENTS
SAFECO GNMA Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
-------------------------------------------------------------------------------
ASSET BACKED SECURITIES - 100.2%
Collateral Mortgage Obligation (CMO) - 13.3%
$2,000 6.50%, due 12/16/24 $ 1,895
2,500 7.50%, due 7/16/29 2,483
545 9.50%, due 4/15/21 571
Federal Home Loan Mortgage Corp. (FHLMC) - 6.8%
2,664 6.50%, due 4/01/29 2,513
Federal National Mortgage Association (FNMA) - 24.8%
3,895 7.00%, due 1/01/29 3,760
2,192 8.00%, due 4/01/20 2,211
2,500 8.50%, due 6/01/30 2,544
642 9.00%, due 11/01/22 662
Government National Mortgage Association (GNMA) - 55.3%
1,498 6.50%, due 1/20/24 1,422
482 6.50%, due 5/15/29 458
380 6.50%, due 5/15/29 360
460 6.50%, due 6/15/29 436
119 6.50%, due 6/15/29 113
116 6.50%, due 6/15/29 110
394 6.50%, due 7/15/29 374
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
-------------------------------------------------------------------------------
Government National Mortgage Association (GNMA) - 55.3% (continued)
$ 250 6.50%, due 8/15/29 $ 237
678 7.00%, due 1/20/27 657
2,970 7.00%, due 2/20/27 2,878
3,276 7.00%, due 5/15/28 3,186
1,097 7.50%, due 1/20/30 1,084
3,939 7.50%, due 6/20/26 3,895
2,653 8.00%, due 3/20/30 2,669
2,568 8.25%, due 5/15/20 2,629
-------
TOTAL ASSET BACKED SECURITIES 37,147
-------
CASH EQUIVALENTS - 0.0%
Investment Companies
1 AIM Short-Term Investments Co. Liquid Assets Money Market 1
Portfolio (Institutional Shares)
-------
TOTAL CASH EQUIVALENTS 1
-------
TOTAL INVESTMENTS - 100.2% 37,148
Other Assets, less Liabilities (52)
-------
NET ASSETS $37,096
=======
</TABLE>
- 10 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO Managed Bond Fund
June 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PHOTO]
MICHAEL The SAFECO Managed Bond Fund's conservative philosophy served
HUGHES it well through the first half of 2000. The Fund has
outperformed the Lipper averages for Intermediate Investment-
Grade Bond Funds for the six and twelve months ended June 30.
The Lehman Brothers Government/Corporate Bond Index--which
incurs no fees or expenses--returned 4.18% and 4.32% for same
periods. Before its fees and expenses of 0.95%, the Managed Bond
Fund outperformed it as well.
In general, bonds have had a good year so far. However,
changes in interest rates and sector returns were quite uneven.
In the first quarter, long-term
treasuries stole the show. In the latest quarter mortgage-backed securities
were the best performing sector, followed by asset-backed securities, U.S.
Agencies, U.S. Treasuries, and lastly, Corporate Bonds. The underperformance in
corporates is largely due to individual issuers missing their earnings
forecasts.
In the first quarter we benefited by our underweighting in non-Treasury
securities. During the second quarter, we increased our allocation to the high-
quality, intermediate-term spread sectors of the markets, namely asset and
mortgage-backed credits, which were historically cheap. As they recovered, the
Fund outperformed. Along the way, our research team did an outstanding job
helping me guide the portfolio through this year's minefield of corporate
credits.
Yield premiums on non-Treasury securities remain extremely generous and I
believe these sectors will outperform treasuries over the second half of the
year. I will continue to over-weight in mortgage- and asset-backed securities
because of their minimal credit risk, while limiting our corporate exposure to
top quality issuers.
The market is pricing as though the Federal Reserve's yearlong rate increase
campaign has ended. I think it is too early to claim victory in the Fed's war
against economic growth. While, the economy has shown signs of moderation,
inflation is increasing. It would not surprise me to see the Fed raise another
0.50% to 0.75%.
Michael Hughes
--------------------------------------------------------------------------------
Michael Hughes joined SAFECO as a portfolio manager in January 1997. He began
his investment career in 1993. He graduated magna cum laude with a BS in
finance from the University of Colorado in Boulder and holds an MBA from the
University of Southern California in Los Angeles. He is a Chartered Financial
Analyst.
- 11 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PERFORMANCE GRAPH]
PERFORMANCE OVERVIEW - No-Load Class
Average Annual Total Return for the
period ended June 30, 2000 Six-Month* 1 Year 5 Year Since Inception**
--------------------------------------------------------------------------------
SAFECO Managed Bond Fund 3.90% 3.85% 4.69% 4.67%
Lehman Brothers Gov't/Corp.
Bond Index 4.18% 4.32% 6.10% 6.16%
Lipper, Inc. (Intermediate
Investment-Grade Bond Funds) 3.06% 3.42% 5.36% N/A
* Not Annualized
** The Fund's inception was June 25, 1992. Graph and averge annual return
comparison begins February 28, 1994.
Lehman Brothers
SAFECO Managed Gov't/Corp.
Bond Fund Bond Index
-------------- ---------------
2/28/94 10,000 10,000
3/31/94 9,666 9,755
4/30/94 9,657 9,675
5/31/94 9,666 9,657
6/30/94 9,653 9,634
7/31/94 9,757 9,827
8/31/94 9,780 9,831
9/30/94 9,703 9,682
10/31/94 9,709 9,671
11/30/94 9,680 9,654
12/31/94 9,699 9,717
1/31/95 9,828 9,904
2/28/95 9,991 10,134
3/31/95 10,038 10,202
4/30/95 10,167 10,344
5/31/95 10,533 10,777
6/30/95 10,615 10,864
7/31/95 10,541 10,822
8/31/95 10,674 10,960
9/30/95 10,791 11,072
10/31/95 10,962 11,234
11/30/95 11,178 11,419
12/31/95 11,382 11,587
1/31/96 11,400 11,659
2/29/96 11,127 11,412
3/31/96 11,010 11,316
4/30/96 11,004 11,239
5/31/96 11,009 11,220
6/30/96 11,092 11,369
7/31/96 11,127 11,396
8/31/96 11,148 11,368
9/30/96 11,239 11,570
10/31/96 11,357 11,840
11/30/96 11,486 12,058
12/31/96 11,384 11,924
1/31/97 11,407 11,938
2/28/97 11,383 11,963
3/31/97 11,236 11,821
4/30/97 11,380 11,994
5/31/97 11,469 12,106
6/30/97 11,601 12,251
7/31/97 11,942 12,626
8/31/97 11,777 12,484
9/30/97 11,968 12,680
10/31/97 12,161 12,883
11/30/97 12,180 12,951
12/31/97 12,321 13,087
1/31/98 12,528 13,272
2/28/98 12,477 13,245
3/31/98 12,502 13,285
4/30/98 12,553 13,352
5/31/98 12,691 13,496
6/30/98 12,811 13,633
7/31/98 12,822 13,644
8/31/98 13,109 13,911
9/30/98 13,444 14,308
10/31/98 13,288 14,207
11/30/98 13,321 14,292
12/31/98 13,359 14,327
1/31/99 13,437 14,429
2/28/99 13,067 14,086
3/31/99 13,119 14,156
4/30/99 13,143 14,191
5/31/99 12,943 14,044
6/30/99 12,856 14,001
7/31/99 12,801 13,962
8/31/99 12,778 13,951
9/30/99 12,914 14,076
10/31/99 12,940 14,113
11/30/99 12,932 14,105
12/31/99 12,846 14,019
1/31/00 12,825 14,015
2/29/00 12,984 14,191
3/31/00 13,162 14,396
4/30/00 13,127 14,326
5/31/00 13,095 14,313
6/30/00 13,351 14,605
The performance graph compares a hypothetical $10,000 investment in the Fund to
a hypothetical investment in a relevant market index. The index is unmanaged and
includes no operating expenses or transaction costs. Past performance is not
predictive of future results. Principal value may fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
-------------------------------------------------------------------------------
HIGHLIGHTS
-------------------------------------------------------------------------------
<TABLE>
<S> <C>
Current Yield (30-day).... 6.52%
Weighted Average Maturity. 7.1 years
</TABLE>
BONDS BY TYPE Percent of Net Assets
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
U.S. Government Obligations................................................ 26%
Asset Backed Securities.................................................... 11
Mortgage Backed Securities................................................. 34
Corporate Bonds............................................................ 27
Cash & Other............................................................... 2
---
100%
</TABLE>
Credit Rating Distribution
As a Percent of Net Assets
--------------------------------------------------------------------------------
[PIE CHART]
1 AAA: 71%
2 AA: 6%
3 A: 21%
4 Cash & Other: 2%
- 12 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Managed Bond Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
--------------------------------------------------------------------------------
ASSET BACKED SECURITIES - 11.1%
Electric Companies - 1.5%
$ 125 ComEd Transitional Funding Trust
5.63%, due 6/25/09 $ 115
Financial (Diversified) - 9.1%
6 Chevy Chase Auto Receivables Trust (Class A)
6.60%, due 12/15/02 6
230 Citicorp Mortgage Securities, Inc.
6.50%, due 6/25/29 208
100 CNH Equipment Trust
7.34%, due 2/16/07 100
165 Fleet Credit Card Master
6.90%, due 4/16/07 164
235 Providian Master Trust
7.49%, due 8/17/09 237
Manufacturing (Specialized) - 0.5%
42 Harley-Davidson Eagle
6.20%, due 1/15/03 42
------
TOTAL ASSET BACKED SECURITIES 872
------
CORPORATE BONDS - 26.6%
Banks (Money Center) - 2.0%
160 Bank of America Corp.
7.80%, due 2/15/10 159
Beverages (Alcoholic) - 1.7%
135 Anheuser-Busch Cos., Inc.
7.50%, due 3/15/12 135
Electric Companies - 1.8%
145 Central Power & Light Co.
7.50%, due 12/01/02 145
Financial (Diversified) - 7.0%
145 Ford Motor Credit Co.
7.375%, due 10/28/09 140
150 General Motors Acceptance Corp.
5.95%, due 3/14/03 144
135 Hertz Corp. 7.00%,
due 7/01/04 132
140 Newcourt Credit Group, Inc.
6.875%, due 2/16/05 134
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
--------------------------------------------------------------------------------
Investment Banking & Brokerage - 2.1%
$ 160 Morgan Stanley Dean Witter Co.
8.00%, due 6/15/10 $ 162
Manufacturing (Diversified) - 2.3%
190 Tyco International Group SA
6.375%, due 6/15/05 180
Publishing (Newspapers) - 2.5%
195 Times-Mirror Co.
6.65%, due 10/15/01 194
Retail (General Merchandise) - 3.1%
65 Sears Roebuck & Co.
6.25%, due 1/15/04 63
185 Wal-Mart Stores, Inc.
6.15%, due 8/10/01 183
Telecommunications (Cellular/Wireless) - 4.1%
115 TCI Communications, Inc.
8.00%, due 8/01/05 118
205 Worldcom, Inc.
8.00%, due 5/15/06 207
------
TOTAL CORPORATE BONDS 2,096
------
MORTGAGE BACKED SECURITIES - 34.2%
Federal Home Loan Mortgage Corp. (FHLMC) - 2.2%
176 7.50%, due 10/01/29 173
Federal National Mortgage Association (FNMA) - 23.8%
56 6.00%, due 1/01/29 51
120 6.00%, due 6/01/30 110
142 6.50%, due 1/01/15 137
180 7.00%, due 3/01/12 177
156 8.00%, due 12/01/29 157
274 8.00%, due 2/01/30 276
223 8.00%, due 2/01/30 224
165 8.00%, due 2/15/29 166
63 8.00%, due 4/01/08 63
214 8.00%, due 4/01/20 216
299 8.00%, due 4/01/30 300
Government National Mortgage Association (GNMA) - 8.1%
23 6.00%, due 4/15/14 22
120 6.00%, due 8/15/13 115
215 7.00%, due 4/15/28 210
176 7.00%, due 8/15/28 171
122 7.75%, due 10/15/29 122
------
TOTAL MORTGAGE BACKED SECURITIES 2,690
------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 13 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Managed Bond Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
--------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS - 25.8%
U.S. Federal Agency Notes - 10.1%
$ 845 5.125%, due 2/13/04 $ 794
U.S. Treasury Notes - 15.7%
1,095 7.50%, due 11/15/16 1,233
------
TOTAL U.S. GOVERNMENT OBLIGATIONS 2,027
------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
------------------------------------------------------------------------------
CASH EQUIVALENTS - 1.9%
Investment Companies
$ 153 AIM Short-Term Investments Co. Liquid Assets Money Market
Portfolio (Institutional Shares) $ 153
------
TOTAL CASH EQUIVALENTS 153
------
TOTAL INVESTMENTS - 99.6% 7,838
Other Assets, less Liabilities 32
------
NET ASSETS $7,870
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 14 -
<PAGE>
Municipal Bond Market Overview
June 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PHOTO]
STEPHEN C. While municipal yields are up significantly for the six
BAUER months ending June 30, the gains were made early in the year.
The first quarter of 2000 featured two solid months of improving
prices. Yields fell from 6.32% to 5.90% according to the Bond
Buyer Municipal Index and it looked as though the long bear
market of 1999 was over. Then, early in the second quarter, the
market reversed direction. It gave back nearly all its hard-
earned gains. With significant undulation in between, long-term
municipal bond yields ended the second quarter of 2000 just
about where they started it. At June 30, long municipal yields
were at 5.91% and the market felt firm but cautious.
Individual retail buyers continue to be the only significant source of
demand for tax-free bonds. (Insurance companies and mutual funds remain on the
sidelines, when they are not active sellers.) This lack of buying however has
been balanced by the continuing dearth of new issue supply, which seems
destined to continue indefinitely.
The Federal Reserve's "no action" at their June meeting was widely
anticipated by the street and had little effect on the market. However, most
market participants believe the market could react dramatically during what are
traditionally sleepy summer doldrums, should any key economic indicators
diverge sharply from the preferred scenario of a slowing economy with modest
inflation.
Stephen C. Bauer
--------------------------------------------------------------------------------
Stephen C. Bauer joined SAFECO in 1971 as a fixed-income analyst. He became a
fund manager with the inception of the SAFECO Municipal Bond Fund in 1981, and
is President of SAFECO Asset Management Company. Bauer holds a BS in
microbiology and an MBA from the University of Washington.
- 15 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO California Tax-Free Income Fund
June 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PHOTO]
STEPHEN C. Because of technical reasons related to strong demand and
BAUER light supply, California bonds were the best performing in the
country so far this year, and the SAFECO California Tax-Free
Income Fund performed better than the average California Fund,
according to Lipper.
The Fund finished the latest six months well ahead of the
Long Muni Index's returns as well. It narrowly underperformed
the index's 0.89% for the year, but this is standard. It's
nearly impossible for a fund to beat a bond index because it has
no expenses, no cash and no call features.
The Fund's strong performance was due to long, discount coupon bonds and
staying fully invested.
This year I have followed two themes: swapping similar securities to realize
losses for tax purposes, and buying medium-grade hospital revenue bonds for
their higher yields. Both were easier done in the first quarter than the
second. None-the-less, the California Tax-Free Income Fund has a tax loss to
carry forward, which gives us flexibility to sell bonds with large capital
gains without impact on shareholders.
In the second quarter I was able to add $1 million to the Cal Health for
Cedars Sinai position I had initiated in the first quarter. Unfortunately, the
additional yield for this purchase was only 34 basis points (1 basis point is
1/100%). Hospital bonds currently represent 13.3% of net assets in the Fund. I
would like to increase that allocation as yields here are attractive, but the
prospects of doing so appear slim.
Stephen C. Bauer
--------------------------------------------------------------------------------
Stephen C. Bauer joined SAFECO in 1971 as a fixed-income analyst. He became a
fund manager with the inception of the SAFECO Municipal Bond Fund in 1981, and
is President of SAFECO Asset Management Company. Bauer holds a BS in
microbiology and an MBA from the University of Washington.
- 16 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PERFORMANCE GRAPH]
PERFORMANCE OVERVIEW - No Load Class
Average Annual Total Return for the
period ended June 30, 2000 Six-Month* 1 Year 5 Year 10 Year
--------------------------------------------------------------------------------
SAFECO California Tax-Free Income Fund 7.51% 0.73% 5.82% 6.92%
Lehman Brothers Long Municipal Bond Index 6.28% 0.89% 6.20% 7.55%
Lipper, Inc. (California Municipal
Bond Funds) 4.95% 1.35% 5.12% 6.40%
* Not Annualized
SAFECO California Lehman Brothers
Tax-Free Income Long Municipal
Fund Bond Index
----------------- ---------------
6/30/90 10,000 10,000
7/31/90 10,190 10,177
8/31/90 9,936 9,934
9/30/90 9,922 9,919
10/31/90 10,173 10,129
11/30/90 10,411 10,386
12/31/90 10,448 10,431
1/31/91 10,607 10,572
2/28/91 10,640 10,646
3/31/91 10,616 10,671
4/30/91 10,780 10,836
5/31/91 10,886 10,964
6/30/91 10,833 10,943
7/31/91 10,999 11,112
8/31/91 11,151 11,272
9/30/91 11,354 11,436
10/31/91 11,476 11,555
11/30/91 11,412 11,569
12/31/91 11,760 11,845
1/31/92 11,719 11,838
2/29/92 11,722 11,856
3/31/92 11,723 11,886
4/30/92 11,809 12,000
5/31/92 11,987 12,175
6/30/92 12,223 12,411
7/31/92 12,636 12,866
8/31/92 12,394 12,693
9/30/92 12,483 12,749
10/31/92 12,136 12,536
11/30/92 12,534 12,890
12/31/92 12,700 13,057
1/31/93 12,832 13,180
2/28/93 13,414 13,793
3/31/93 13,233 13,627
4/30/93 13,427 13,813
5/31/93 13,483 13,927
6/30/93 13,734 14,189
7/31/93 13,717 14,204
8/31/93 14,102 14,567
9/30/93 14,273 14,770
10/31/93 14,274 14,797
11/30/93 14,052 14,619
12/31/93 14,380 14,996
1/31/94 14,595 15,173
2/28/94 14,211 14,670
3/31/94 13,494 13,795
4/30/94 13,446 13,901
5/31/94 13,571 14,063
6/30/94 13,441 13,895
7/31/94 13,752 14,252
8/31/94 13,748 14,282
9/30/94 13,399 13,951
10/31/94 13,075 13,522
11/30/94 12,833 13,165
12/31/94 13,058 13,632
1/31/95 13,657 14,232
2/28/95 14,324 14,812
3/31/95 14,440 14,990
4/30/95 14,376 14,983
5/31/95 15,187 15,621
6/30/95 14,722 15,333
7/31/95 14,788 15,411
8/31/95 15,021 15,629
9/30/95 15,137 15,751
10/31/95 15,540 16,132
11/30/95 16,110 16,549
12/31/95 16,471 16,806
1/31/96 16,411 16,878
2/29/96 16,202 16,673
3/31/96 15,721 16,368
4/30/96 15,581 16,302
5/31/96 15,596 16,310
6/30/96 15,901 16,561
7/31/96 16,083 16,725
8/31/96 16,044 16,704
9/30/96 16,428 17,075
10/31/96 16,634 17,283
11/30/96 17,071 17,654
12/31/96 16,888 17,548
1/31/97 16,709 17,513
2/28/97 16,891 17,702
3/31/97 16,530 17,396
4/30/97 16,784 17,602
5/31/97 17,107 17,943
6/30/97 17,365 18,173
7/31/97 18,273 18,834
8/31/97 17,871 18,584
9/30/97 18,119 18,851
10/31/97 18,274 19,014
11/30/97 18,455 19,183
12/31/97 18,839 19,534
1/31/98 19,041 19,743
2/28/98 19,004 19,733
3/31/98 18,986 19,760
4/30/98 18,764 19,654
5/31/98 19,236 20,039
6/30/98 19,307 20,125
7/31/98 19,324 20,171
8/31/98 19,705 20,534
9/30/98 20,016 20,819
10/31/98 19,894 20,752
11/30/98 20,057 20,857
12/31/98 20,006 20,878
1/31/99 20,261 21,082
2/28/99 20,115 20,994
3/31/99 20,109 21,055
4/30/99 20,094 21,074
5/31/99 19,861 20,908
6/30/99 19,392 20,526
7/31/99 19,323 20,516
8/31/99 18,930 20,094
9/30/99 18,812 19,989
10/31/99 18,321 19,521
11/30/99 18,512 19,794
12/31/99 18,164 19,485
1/31/00 17,962 19,275
2/29/00 18,423 19,686
3/31/00 19,184 20,404
4/30/00 18,810 20,163
5/31/00 18,725 19,976
6/30/00 19,534 20,708
The performance graph compares a hypothetical $10,000 investment in the Fund to
a hypothetical investment in a relevant market index. The index is unmanaged and
includes no operating expenses or transaction costs. Past performance is not
predictive of future results. Principal value may fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
--------------------------------------------------------------------------------
HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Current Yield (30-day)... 5.29%
Weighted Average
Maturity................ 24.8 years
</TABLE>
Percent of
TOP FIVE TYPE OF BONDS Net Assets
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Lease Rental............................................................. 20%
Local General Obligation (Limited Tax)................................... 16
Hospital................................................................. 13
Utilities (Sewer)........................................................ 8
Utilities (Water)........................................................ 7
</TABLE>
Percent of
TOP FIVE HOLDINGS Net Assets
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
State of California General Obligation Bonds............................. 5.3%
Airports Commission City and County of San Francisco International
Airport Revenue......................................................... 5.1
California Educational Facilities Authority Revenue (Institute of
Technology)............................................................. 5.1
California Health Facilities Revenue..................................... 5.1
San Joaquin Hills Transportation Revenue................................. 4.8
</TABLE>
Credit Rating Distribution
As a Percent of Net Assets
--------------------------------------------------------------------------------
[PIE CHART]
1 AAA: 54%
2 AA: 9%
3 A: 17%
4 BBB: 14%
5 Cash & Other 6%
- 17 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO California Tax-Free Income Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
-----------------------------------------------------------------------------
MUNICIPAL BONDS* - 94.0%
California - 94.0%
$5,000 Airports Commission City and County of San Francisco
International Airport Revenue
4.90%, due 5/01/19 [MBIA] $ 4,549
2,200 Alameda Corridor Transportation Authority Revenue
4.75%, due 10/01/25 [MBIA] 1,906
5,500 California Educational Facilities Authority Revenue
(Institute of Technology)
4.50%, due 10/01/28 4,523
2,250 California Health Facilities Financing Authority Insured
Health Facility Revenue (Catholic Health Care West)
4.75%, due 7/01/19 [MBIA] 1,975
4,500 California Health Facilities Financing Authority Health
Facility Revenue (Cedars Sinai Medical Center)
6.25%, due 12/01/34 4,521
3,715 California Statewide Communities Development Authority
Certificates of Participation (Childrens Hospital of Los
Angeles)
4.75%, due 6/01/21 [MBIA] 3,229
2,645 Capistrano Beach Water District Wastewater Enterprise
Capital
4.75%, due 12/01/28 [MBIA] 2,264
1,475 Capistrano Beach Water District Wastewater Enterprise
Capital
4.75%, due 12/01/28 [MBIA] 1,262
20 Concord Redevelopment Agency Tax Allocation Central
Concord Redevelopment Project
8.00%, due 7/01/18 [BIG] 20
3,750 Culver City Redevelopment Financing Authority Tax
Allocation Revenue
4.60%, due 11/01/20 [AMBAC] 3,224
5,000 Duarte California Certificates of Participation City of
Hope Medical Center
5.25%, due 4/01/31 4,054
2,100 Fresno Joint Powers Financing Authority Lease Revenue
Exhibition Hall Expansion Project
4.75%, due 9/01/28 [AMBAC] 1,801
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
------------------------------------------------------------------------------
$4,600 Long Beach Financing Authority Lease Revenue
5.00%, due 10/01/27 [MBIA] $ 4,142
2,400 Los Angeles California Wastewater System Revenue (Series
A)
5.00%, due 6/01/23 [FGIC] 2,184
1,200 + Los Angeles Convention and Exhibition Center Authority
Certificates of Participation
9.00%, due 12/01/20
(Prerefunded 12/01/05 @ 100) 1,464
3,000 Los Angeles County California Certificates of
Participation (Disney Parking Refund Project)
4.75%, due 3/01/23 [AMBAC] 2,612
3,450 Los Angeles Department of Water and Power Waterworks
Revenue
4.25%, due 10/15/34 [MBIA] 2,623
3,585 Metropolitan Water District of Southern California
Waterworks Revenue
5.00%, due 7/01/37 3,161
2,350 Palomar Pomerado Health System California Insured Revenue
4.75%, due 11/01/23 [MBIA] 2,018
4,435 Pittsburg Redevelopment Agency Los Medanos Community
Development Project Tax Allocation
4.625%, due 8/01/21 [AMBAC] 3,805
4,900 Redding Joint Powers Financing Authority Solid Waste and
Corporation Yard Revenue
5.00%, due 1/01/23 4,192
2,500 San Bernardino County Certificates of Participation
(Medical Center Financing Project)
5.50%, due 8/01/24 2,280
4,000 San Gabriel Valley School Finance Authority Revenue
(Pomona Unified School District)
5.50%, due 2/01/24 3,740
5,000 San Joaquin Hills Transportation Corridor Agency Senior
Lien Toll Road Revenue
5.00%, due 1/01/33 4,220
4,000 San Jose Redevelopment Agency (Merged Area Redevelopment
Project Tax Allocation)
4.75%, due 8/01/22 3,366
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 18 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO California Tax-Free Income Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
-----------------------------------------------------------------------------
$1,335 Southern California Public Power Authority Power Project
Revenue (Multiple Projects)
5.50%, due 7/01/20 $ 1,305
5,500 State of California General Obligation Bonds
4.75%, due 4/01/29 4,696
4,635 Thousand Oaks Certificate of Participation Wastewater
System Revenue
4.875%, due 10/01/23 [FSA] 4,107
-------
TOTAL MUNICIPAL BONDS 83,243
-------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
-----------------------------------------------------------------------------
CASH EQUIVALENTS - 4.7%
$4,126 SEI Tax Exempt Institutional Tax-Free Portfolio $ 4,126
-------
TOTAL CASH EQUIVALENTS 4,126
-------
TOTAL INVESTMENTS - 98.7% 87,369
Other Assets, less Liabilities 1,148
-------
NET ASSETS $88,517
=======
-----------------------------------------------------------------------------
</TABLE>
+ Prerefunded bonds are collateralized by securities (generally U.S. Treasury
securities) held in an irrevocable trust in an amount sufficient to pay
interest and principal.
* The provider of the guarantee of timely payment of both principal and
interest is identified in the brackets at the end of each bond description.
The guarantors applicable to this portfolio and the percentage of the
portfolio they guarantee at the period end are as follows:
<TABLE>
<S> <C>
Municipal Bond Investors
Assurance Corp. [MBIA] 28.8%
Financial Guaranty Insurance
Corp. [FGIC] 2.6
AMBAC Indemnity Corp. [AMBAC] 13.7
Financial Security Assurance,
Inc. [FSA] 4.9
----
50.0%
====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 19 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO Municipal Bond Fund
June 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PHOTO]
STEPHEN C. The performance of the SAFECO Municipal Bond Fund in 2000 has
BAUER been a vast improvement over 1999. For the six months and year
ending June 30, the Fund outperformed its Lipper peers.
The Fund outperformed the Lehman Brothers Long Municipal Bond
Index for the year as well due to its long maturities and
concentration in discount bonds.
This year I have followed two themes: swapping similar
securities to realize losses for tax purposes, and buying
medium-grade hospital revenue bonds.
Credit ratings in the hospital sector declined due to changes in Medicare
reimbursement policies, and that caused their yields to rise. To add yield to
the Fund, I bought hospital issues. In the first quarter we bought Altru which
has an 82% share of the Grand Forks, North Dakota market. Its bonds, due in
2024 yield 7.20% are rated Baa-1 by Moodys. We also added Palmetto Health
Alliance, which has 62% of the Columbia, South Carolina market. These bonds
came to market at 7.55% and are rated Baa-1 by Moodys and BBB by S&P.
In the second quarter we purchased University of Maryland Medical System.
These bonds yielded 6.90% when I bought them on April 5. (The Bond Buyer Muni
Bond Index was yielding 5.92% on that date.) They are rated Baa-1 by Moodys and
BBB+ by Fitch. On June 8, I bought A2-rated West Virginia bonds at a yield of
6.95%. (The Muni Bond Index was yielding 6.02% at the time.) I also bought $7.5
million Dormitory Authority of the State of New York for Mt Sinai NYU Health
Group at a yield of 6.64% and sold them three weeks later as they traded up to
a premium on the original offering price.
Hospital bonds now represent 13.5% of the net assets of the Fund, second
only to electric utilities at 14.3%. I hope to increase the hospital positions,
and subsequently the Fund's yield during the rest of this year.
Stephen C. Bauer
--------------------------------------------------------------------------------
Stephen C. Bauer joined SAFECO in 1971 as a fixed-income analyst. He became a
fund manager with the inception of the SAFECO Municipal Bond Fund in 1981, and
is President of SAFECO Asset Management Company. Bauer holds a BS in
microbiology and an MBA from the University of Washington.
- 20 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PERFORMANCE GRAPH]
PERFORMANCE OVERVIEW - No-Load Class
Average Annual Total Return for the
period ended June 30, 2000 Six-Month* 1 Year 5 Year 10 Year
--------------------------------------------------------------------------------
SAFECO Municipal Bond Fund 5.68% 1.04% 5.62% 6.90%
Lehman Brothers Long
Municipal bond Index 6.28% 0.89% 6.20% 7.55%
Lipper, Inc. (General
Municipal bond Funds) 3.95% 0.98% 4.76% 6.41%
*Not Annualized
Lehman Brothers
SAFECO Municipal Long Municipal
Bond Fund Bond Index
---------------- ---------------
6/30/90 10,000 10,000
7/31/90 10,192 10,177
8/31/90 9,926 9,934
9/30/90 9,907 9,919
10/31/90 10,096 10,129
11/30/90 10,377 10,386
12/31/90 10,420 10,431
1/31/91 10,585 10,572
2/28/91 10,631 10,646
3/31/91 10,644 10,671
4/30/91 10,822 10,836
5/31/91 10,932 10,964
6/30/91 10,894 10,943
7/31/91 11,067 11,112
8/31/91 11,235 11,272
9/30/91 11,415 11,436
10/31/91 11,537 11,555
11/30/91 11,500 11,569
12/31/91 11,856 11,845
1/31/92 11,753 11,838
2/29/92 11,784 11,856
3/31/92 11,769 11,886
4/30/92 11,880 12,000
5/31/92 12,081 12,175
6/30/92 12,342 12,411
7/31/92 12,817 12,866
8/31/92 12,554 12,693
9/30/92 12,578 12,749
10/31/92 12,304 12,536
11/30/92 12,681 12,890
12/31/92 12,894 13,057
1/31/93 13,019 13,180
2/28/93 13,582 13,793
3/31/93 13,369 13,627
4/30/93 13,553 13,813
5/31/93 13,630 13,927
6/30/93 13,910 14,189
7/31/93 13,856 14,204
8/31/93 14,225 14,567
9/30/93 14,384 14,770
10/31/93 14,423 14,797
11/30/93 14,241 14,619
12/31/93 14,526 14,996
1/31/94 14,702 15,173
2/28/94 14,267 14,670
3/31/94 13,543 13,795
4/30/94 13,555 13,901
5/31/94 13,718 14,063
6/30/94 13,566 13,895
7/31/94 13,879 14,252
8/31/94 13,889 14,282
9/30/94 13,546 13,951
10/31/94 13,256 13,522
11/30/94 12,984 13,165
12/31/94 13,328 13,632
1/31/95 13,818 14,232
2/28/95 14,399 14,812
3/31/95 14,504 14,990
4/30/95 14,482 14,983
5/31/95 15,156 15,621
6/30/95 14,831 15,333
7/31/95 14,902 15,411
8/31/95 15,095 15,629
9/30/95 15,207 15,751
10/31/95 15,525 16,132
11/30/95 15,956 16,549
12/31/95 16,190 16,806
1/31/96 16,243 16,878
2/29/96 16,064 16,673
3/31/96 15,697 16,368
4/30/96 15,579 16,302
5/31/96 15,605 16,310
6/30/96 15,834 16,561
7/31/96 16,029 16,725
8/31/96 15,972 16,704
9/30/96 16,294 17,075
10/31/96 16,486 17,283
11/30/96 16,854 17,654
12/31/96 16,705 17,548
1/31/97 16,625 17,513
2/28/97 16,797 17,702
3/31/97 16,510 17,396
4/30/97 16,719 17,602
5/31/97 17,000 17,943
6/30/97 17,213 18,173
7/31/97 17,914 18,834
8/31/97 17,606 18,584
9/30/97 17,849 18,851
10/31/97 17,989 19,014
11/30/97 18,123 19,183
12/31/97 18,490 19,534
1/31/98 18,680 19,743
2/28/98 18,670 19,733
3/31/98 18,674 19,760
4/30/98 18,507 19,654
5/31/98 18,908 20,039
6/30/98 19,026 20,125
7/31/98 19,057 20,171
8/31/98 19,393 20,534
9/30/98 19,657 20,819
10/31/98 19,553 20,752
11/30/98 19,643 20,857
12/31/98 19,664 20,878
1/31/99 19,887 21,082
2/28/99 19,750 20,994
3/31/99 19,749 21,055
4/30/99 19,822 21,074
5/31/99 19,661 20,908
6/30/99 19,296 20,526
7/31/99 19,265 20,516
8/31/99 18,925 20,094
9/30/99 18,809 19,989
10/31/99 18,481 19,521
11/30/99 18,661 19,794
12/31/99 18,443 19,485
1/31/00 18,297 19,275
2/29/00 18,656 19,686
3/31/00 19,189 20,404
4/30/00 18,997
--------------------------------------------------------------------------------
HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Current Yield (30-day)... 5.4%
Weighted Average
Maturity................ 24.1 years
</TABLE>
Percent of
TOP FIVE HOLDINGS Net Assets
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
San Joaquin Hills Transportation Corridor Agency
Senior Lien Toll Road Revenue............................................ 4.5%
Illinois Educational Facilities Authority Adjustable
Demand Revenue (University of Chicago)................................... 3.9
Massachusetts State Housing Finance Agency (Series B)..................... 3.9
Alaska Housing Finance Corp. (General Housing Purpose).................... 3.3
West Virginia State Hospital Finance Authority
(Charleston Area Medical Center) Series A................................. 3.2
</TABLE>
Percent of
TOP FIVE STATES Net Assets
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
California................................................................. 14%
Massachusetts.............................................................. 12
Texas...................................................................... 9
Indiana.................................................................... 9
New York................................................................... 8
</TABLE>
Credit Rating Distribution
As a Percent of Net Assets
--------------------------------------------------------------------------------
[PIE CHART]
1 AAA: 45%
2 AA: 13%
3 A: 19%
4 BBB: 18%
5 BB: 1%
6 Not Rated: 2%
7 Cash & Other: 2%
- 21 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Municipal Bond Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
------------------------------------------------------------------------------
MUNICIPAL BONDS* - 98.5%
Alaska - 3.3%
$17,000 Alaska Housing Finance Corp. (General Housing Purpose)
5.00%, due 12/01/18 $ 15,224
105 Alaska Housing Finance Corp. Collateralized (Veterans
Mortgage Program)
6.50%, due 6/01/31 105
Arizona - 1.8%
9,800 Phoenix Civic Improvement Corp. Wastewater System Lease
Revenue
4.75%, due 7/01/23 8,369
California - 13.8%
5,000 Los Angeles Wastewater System Revenue
4.70%, due 11/01/19 [FGIC] 4,378
3,550 + Northern California Power Agency Geothermal Project
Revenue
5.00%, due 7/01/09
(Prerefunded 7/01/08 @ 100) 3,615
6,400 Pittsburg Redevelopment Agency Los Medanos Community
Development Project Tax Allocation
4.625%, due 8/01/21 [AMBAC] 5,492
11,995 Pittsburg Redevelopment Agency Los Medanos Community
Development Project Tax Allocation
5.80%, due 8/01/34 [FSA] 12,075
2,000 Redding Joint Powers Financing Authority Solid Waste and
Corporation Yard Revenue
5.00%, due 1/01/23 1,711
6,690 Sacramento County Sanitation District Finance Authority
Revenue
4.75%, due 12/01/23 6,049
8,010 San Joaquin County Public Facilities Financing Corp.
Certificates of Participation Capital Facilities Project
4.75%, due 11/15/19 [MBIA] 7,089
25,000 San Joaquin Hills Transportation Corridor Agency Senior
Lien Toll Road Revenue
5.00%, due 1/01/33 21,101
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
-------------------------------------------------------------------------------
$ 3,165 Southern California Public Power Authority Power Project
Revenue (Multiple Projects)
5.50%, due 7/01/20 $ 3,094
Colorado - 0.2%
1,000 Colorado Housing Finance Authority Multi-Family Mortgage
Revenue
8.30%, due 10/01/23 1,073
Florida - 0.6%
2,750 Mid-Bay Bridge Authority Revenue
6.05%, due 10/01/22 2,609
Georgia - 2.6%
6,750 + Atlanta Water and Sewage Revenue
4.50%, due 1/01/18
(Prerefunded 1/01/04 @ 100) 6,664
5,000 Municipal Electric Authority Project One Special
Obligation Fourth Crossover Series
6.50%, due 1/01/20 5,430
Illinois - 6.5%
2,000 Chicago Illinois Sales Tax Revenue
5.375%, due 1/01/27 [FGIC] 1,865
17,500 + Illinois Educational Facilities Authority Adjustable
Demand Revenue (University of Chicago)
5.70%, due 12/01/25
(Prerefunded 12/01/03 @ 102) 18,294
5,000 + Metropolitan Pier and Exposition Authority Mccormick
Place Convention Complex Hospitality Facilities Revenue
7.00%, due 7/01/26
(Escrowed to Maturity) 5,782
4,770 University of Illinois Auxiliary Facilities System
Revenue
5.75%, due 4/01/22 4,734
Indiana - 8.6%
200 Beech Grove Economic Development Revenue (Westvaco Corp.)
8.75%, due 7/01/10 204
11,000 + East Chicago Elementary School Building Corp. First
Mortgage
7.00%, due 1/15/16
(Prerefunded 1/15/03 @ 102) 11,770
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 22 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Municipal Bond Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
-------------------------------------------------------------------------------
$ 7,715 Hammond Multi-School Building Corp. First Mortgage
Revenue
6.20%, due 7/10/15 $ 7,838
17,550 Indiana State Development Finance Authority Environmental
Revenue
5.60%, due 12/10/32 14,766
6,450 + Indianapolis Gas Utility System Revenue
4.00%, due 6/01/11 [FGIC]
(Escrowed to Maturity) 5,752
Maryland - 2.8%
5,125 Baltimore Project and Revenue (Water Projects)
5.00%, due 7/01/24 [FGIC] 4,653
5,000 Maryland Health and Higher Educational Facilities
Authority Revenue (University of Maryland Medical System)
4.75%, due 7/01/23 [FGIC] 4,292
4,000 MHHEA Facilities Revenue
6.75%, due 7/01/30 4,028
Massachusetts - 11.5%
5,750 Massachusetts Bay Transportation Authority System Revenue
4.50%, due 3/01/26 [MBIA] 4,672
5,140 Massachusetts Housing Finance Agency Housing Revenue
6.20%, due 7/01/38 [AMBAC] 5,153
20,000 Massachusetts State Housing Finance Agency (Series B)
5.40%, due 12/01/28 [MBIA] 18,270
8,000 Massachusetts State Turnpike Authority Metropolitan
Highway System Revenue (Series A)
5.00%, due 1/01/37 [MBIA] 6,905
10,000 Massachusetts State Turnpike Authority Metropolitan
Highway System Revenue (Series A)
5.125%, due 1/01/23 [MBIA] 8,875
8,985 Massachusetts State Turnpike Authority Metropolitan
Highway System Revenue (Series B)
5.125%, due 1/01/37 [MBIA] 7,935
2,500 Massachusetts Water Resources Authority Revenue
4.75%, due 12/01/23 2,107
Michigan - 1.0%
5,250 Detroit Water Supply System Revenue
4.75%, due 7/01/19 [FGIC] 4,549
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
-------------------------------------------------------------------------------
Mississippi - 0.9%
$ 5,000 Harrison County Wastewater Management and Solid Waste
Revenue
4.75%, due 2/01/27 [FGIC] $ 4,215
Missouri - 0.9%
4,000 Missouri Health and Education Facilities Authority
Educational Facilities Revenue
4.75%, due 11/15/37 3,223
1,000 Missouri Health and Education Facilities Authority
Educational Facilities Revenue
5.00%, due 11/15/37 849
New Jersey - 0.2%
840 + New Jersey Turnpike Authority Revenue
10.375%, due 1/01/03
(Escrowed to Maturity) 910
New Mexico - 0.5%
2,350 Farmington Collateralized Pollution Control Revenue
(Tucson Gas and Electric Co.)
6.10%, due 1/01/08 2,261
New York - 7.8%
2,570 Metropolitan Transportation Authority New York Dedicated
Tax Fund
4.75%, due 4/01/28 [FGIC] 2,168
2,100 New York City Municipal Water Finance Authority Water and
Sewer System Revenue
5.00%, due 6/15/17 [FGIC] 1,935
1,500 New York Dormitory Authority State University Educational
Facilities Revenue
5.00%, due 7/01/15 1,440
5,500 New York Dormitory Authority State University Educational
Facilities Revenue
5.25%, due 5/15/15 5,422
4,400 New York Dormitory Authority State University Educational
Facilities Revenue
7.50%, due 5/15/11 5,042
5,250 New York Dormitory Authority State University Educational
Facilities Revenue
7.50%, due 5/15/13 6,258
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 23 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Municipal Bond Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
-------------------------------------------------------------------------------
$10,500 Port Authority New York & New Jersey Consolidated Revenue
4.375%, due 10/01/33 [FGIC] $ 8,140
6,500 Urban Development Corp. Correctional Facilities Revenue
5.375%, due 1/01/25 5,982
North Carolina - 5.2%
11,000 North Carolina Eastern Municipal Power Agency Power
System Revenue
6.00%, due 1/01/22 10,307
10,885 North Carolina Medical Care Commission Health Care
Facilities Revenue (Duke University Health System)
4.75%, due 6/01/28 [MBIA] 9,085
3,720 North Carolina Medical Care Commission Hospital Revenue
4.75%, due 12/01/28 [MBIA] 3,099
2,280 North Carolina Medical Care Commission Hospital Revenue
4.75%, due 12/01/28 [MBIA] 1,899
North Dakota - 0.6%
3,000 Grand Forks North Dakota Health Care System Revenue
(Altru Health System)
7.125%, due 8/15/24 2,964
Oklahoma - 1.2%
5,590 McGee Creek Authority Water Revenue
6.00%, due 1/01/23 [MBIA] 5,839
Pennsylvania - 1.8%
5,000 Southeastern Pennsylvania Transportation Authority
(Series A)
4.75%, due 3/01/29 [FGIC] 4,191
5,000 University Area Joint Authority Sewer Revenue
4.75%, due 11/01/20 [MBIA] 4,329
South Carolina - 5.5%
755 Charleston County Pollution Control Facilities Revenue
5.90%, due 8/01/03 755
5,500 Pickens and Richland Counties Hospital Facilities Revenue
5.75%, due 8/01/21 [AMBAC] 5,394
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
------------------------------------------------------------------------------
$15,000 Piedmont Municipal Power Agency South Carolina Electric
Revenue
5.25%, due 1/01/21 [MBIA] $ 12,249
7,500 South Carolina Jobs--Economic Development Authority
Hospital Facilities Revenue (Palmetto Health Alliance)
7.375%, due 12/15/21 7,613
Texas - 9.3%
7,000 Austin Combined Utility Revenue
4.25%, due 5/15/28 [MBIA] 5,353
10,000 Austin Combined Utility System Revenue
12.50%, due 11/15/07 [MBIA] 14,513
1,545 Austin Water, Sewer and Electric Revenue
14.00%, due 11/15/01 1,664
255 + Austin Water, Sewer and Electric Revenue
14.00%, due 11/15/01
(Escrowed to Maturity) 275
15 + Austin Water, Sewer and Electric Revenue
14.00%, due 11/15/01
(Prerefunded Various Dates/Prices) 16
14,300 Hurst-Euless-Bedford Texas Independent School District
General Obligation Unlimited Tax Refund
4.50%, due 8/15/25 [PSF] 11,597
5,350 North East Texas School District General Obligation
4.50%, due 10/01/28 [PSF] 4,279
4,500 San Antonio Electric & Gas Revenue
4.50%, due 2/01/21 3,740
2,260 Texas Municipal Power Agency Revenue
5.50%, due 9/01/13 [FGIC] 2,260
Utah - 1.0%
5,635 Weber County Utah Hospital Revenue (IHC Health Services)
5.00%, due 8/15/30 [AMBAC] 4,819
Virginia - 0.8%
1,250 Loudoun County Sanitation Authority Water and Sewer
Revenue
4.75%, due 1/01/30 [MBIA] 1,049
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 24 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Municipal Bond Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
-------------------------------------------------------------------------------
$ 3,240 Prince William County Authority Water and Sewer Systems
Revenue
4.75%, due 7/01/29 [FGIC] $ 2,722
Washington - 6.9%
5,055 Douglas County Public Utility District #1 Wells
Hydroelectric Revenue
8.75%, due 9/01/18 6,176
2,200 + Douglas County Public Utility District #1 Wells
Hydroelectric Revenue
8.75%, due 9/01/18
(Prerefunded 9/01/06 @ 106) 2,748
2,500 King County Housing Authority Pooled Housing Revenue
6.80%, due 3/01/26 2,555
1,650 King County Limited Tax General Obligation (Various
Purposes)
4.75%, due 1/01/19 1,435
2,255 King County Public Hospital District #1 Hospital
Facilities Revenue (Valley Medical Center)
5.50%, due 9/01/17 [AMBAC] 2,191
2,800 Lewis County Public Utility District #1 Cowlitz Falls
Hydroelectric Project Revenue
6.00%, due 10/01/24 2,806
3,172 Seattle Housing Authority Low Income Housing Revenue (Mt.
Zion Project)
6.60%, due 8/20/38 3,290
6,290 Vancouver Washington Housing Authority Revenue
(Springbrook Square)
5.65%, due 3/01/31 5,320
3,000 Washington Health Care Facilities Authority Revenue (Fred
Hutchinson Cancer Research Center)
7.375%, due 1/01/18 3,094
2,610 Washington Public Power Supply System Nuclear Project #3
Revenue
5.50%, due 7/01/18 [AMBAC] 2,523
West Virginia - 3.2%
15,000 West Virginia State Hospital Finance Authority
(Charleston Area Medical Center) Series A
6.75%, due 9/01/30 14,941
--------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
-------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS $461,457
--------
CASH EQUIVALENTS - 0.2%
$ 982 Federated Tax-Exempt Money Market Fund, Inc. 982
--------
TOTAL CASH EQUIVALENTS 982
--------
TOTAL INVESTMENTS - 98.7% 462,439
Other Assets, less Liabilities 6,128
--------
NET ASSETS $468,567
========
-------------------------------------------------------------------------------
</TABLE>
+ Prerefunded bonds are collateralized by securities (generally U.S. Treasury
securities) held in an irrevocable trust in an amount sufficient to pay
interest and principal.
* The provider of the guarantee of timely payment of both principal and
interest is identified in the brackets at the end of each bond description.
The guarantors applicable to this portfolio and the percentage of the
portfolio they guarantee at the period end are as follows:
<TABLE>
<S> <C>
Municipal Bond Investors
Assurance Corp. [MBIA] 24.1%
Financial Guaranty Insurance
Corp. [FGIC] 11.1
AMBAC Indemnity Corp. [AMBAC] 5.5
Financial Security Assurance,
Inc. [FSA] 2.6
Texas Permanent School Fund
[PSF] 3.4
----
46.7%
====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 25 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO Intermediate-Term Municipal Bond Fund
June 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PHOTO]
MARY V. The SAFECO Intermediate-Term Municipal Bond Fund's second
METASTASIO quarter performance was better than its peer intermediate-term
municipal bond funds, but not enough to overcome the Fund's poor
performance in the first quarter. Our shorter duration caused
the Fund to lag and continues to affect our six month results.
For the year ending June 30th, the Fund once again outperformed
its Lipper peer group.
For the six and twelve-month periods, expenses held the peer
group and Fund behind the Lehman 7-year Municipal Bond Index,
which has no expenses or cash flow.
During the second quarter of 2000, the intermediate market, and indeed the
municipal market in general, gave back what it had gained during the first
quarter, and more, and then turned around. All of this happened with very
little actual activity, as issuance continues to be low and relatively few
bonds have been trading.
In keeping with the minimalism that now defines the municipal market, I have
made few trades year to date. Early in the second quarter, I sold a position
maturing in 2004, raising cash to cover a first quarter purchase of some bonds
maturing in 2012. This was done as part of our continuing effort to lengthen
our average maturity. However, low issuance and general lack of activity in the
municipal market are making it extremely difficult to do this. We are finding
that when there are buyers for what we have to sell, there is not much for us
to buy to replace it, and when there are interesting bonds for us to buy, there
is no market for what we have to sell.
We will continue, however slowly we must, to add some longer (ten- to
twelve-year) positions to the Fund, and to sell some of our positions maturing
within the next five years.
Mary V. Metastasio
--------------------------------------------------------------------------------
Mary V. Metastasio joined SAFECO's investment department in 1985 as a
securities analyst and began managing the SAFECO Intermediate-Term Municipal
Bond Fund in 1996. She holds a BA in Dramatic Art from Whitman College and an
MBA from the University of Washington. Metastasio is a past chairman of the
National Federation of Municipal Analysts.
- 26 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PERFORMANCE GRAPH]
PERFORMANCE OVERVIEW - No-Load Class
Average Annual Total Return for the
period ended June 30, 2000 Six-Month* 1 Year 5 Year Since Inception**
--------------------------------------------------------------------------------
SAFECO Intermediate-Term
Municipal Bond Fund 2.49% 2.83% 4.70% 4.64%
Lehman Brothers 7-Year
Municipal Bond Index 3.23% 3.99% 5.36% 5.38%
Lipper, Inc. (Intermediate
Municipal Bond Funds) 2.91% 2.50% 4.68% N/A
* Not Annualized
** The Fund's inception was March 18, 1993. Graph and average annual return
comparison begins March 31, 1993.
SAFECO Intermediate- Lehman Brothers
Term Municipal 7-Year Municipal
Bond Fund Bond Index
-------------------- ----------------
3/18/93 10,000
3/31/93 9,977 10,000
4/30/93 10,044 10,062
5/31/93 10,062 10,093
6/30/93 10,222 10,277
7/31/93 10,204 10,278
8/31/93 10,414 10,461
9/30/93 10,575 10,575
10/31/93 10,627 10,602
11/30/93 10,535 10,508
12/31/93 10,719 10,702
1/31/94 10,846 10,816
2/28/94 10,576 10,581
3/31/94 10,240 10,299
4/30/94 10,285 10,375
5/31/94 10,363 10,427
6/30/94 10,327 10,408
7/31/94 10,454 10,555
8/31/94 10,527 10,610
9/30/94 10,339 10,509
10/31/94 10,152 10,403
11/30/94 9,932 10,251
12/31/94 10,117 10,407
1/31/95 10,347 10,602
2/28/95 10,625 10,840
3/31/95 10,749 10,953
4/30/95 10,797 10,982
5/31/95 11,105 11,274
6/30/95 11,060 11,264
7/31/95 11,186 11,408
8/31/95 11,301 11,543
9/30/95 11,341 11,587
10/31/95 11,470 11,688
11/30/95 11,587 11,817
12/31/95 11,656 11,879
1/31/96 11,776 11,994
2/29/96 11,762 11,954
3/31/96 11,570 11,838
4/30/96 11,548 11,816
5/31/96 11,513 11,799
6/30/96 11,563 11,889
7/31/96 11,709 11,988
8/31/96 11,728 11,994
9/30/96 11,817 12,102
10/31/96 11,951 12,233
11/30/96 12,140 12,437
12/31/96 12,093 12,400
1/31/97 12,114 12,444
2/28/97 12,216 12,548
3/31/97 12,065 12,386
4/30/97 12,098 12,450
5/31/97 12,268 12,607
6/30/97 12,396 12,728
7/31/97 12,687 13,024
8/31/97 12,566 12,931
9/30/97 12,720 13,068
10/31/97 12,778 13,145
11/30/97 12,821 13,191
12/31/97 13,000 13,354
1/31/98 13,092 13,493
2/28/98 13,092 13,505
3/31/98 13,091 13,505
4/30/98 13,005 13,428
5/31/98 13,196 13,624
6/30/98 13,229 13,663
7/31/98 13,266 13,708
8/31/98 13,457 13,918
9/30/98 13,602 14,097
10/31/98 13,626 14,117
11/30/98 13,635 14,156
12/31/98 13,693 14,186
1/31/99 13,835 14,393
2/28/99 13,784 14,311
3/31/99 13,769 14,306
4/30/99 13,795 14,340
5/31/99 13,725 14,269
6/30/99 13,532 14,063
7/31/99 13,617 14,158
8/31/99 13,601 14,126
9/30/99 13,612 14,178
10/31/99 13,531 14,118
11/30/99 13,618 14,221
12/31/99 13,574 14,165
1/31/00 13,519 14,131
2/29/00 13,594 14,189
3/31/00 13,735 14,390
4/30/00 13,680 14,336
5/31/00 13,637 14,304
6/30/00 13,915 14,623
The performance graph compares a hypothetical $10,000 investment in the Fund to
a hypothetical investment in a relevant market index. The index is unmanaged and
includes no operating expenses or transaction costs. Past performance is not
predictive of future results. Principal value may fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
--------------------------------------------------------------------------------
HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Current Yield (30-day).... 4.45%
Weighted Average Maturity. 5.7 years
</TABLE>
Percent of
TOP FIVE HOLDINGS Net Assets
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
North Carolina Municipal Power Agency #1 Catawba Electric Revenue........ 5.6%
New York State Housing Finance Agency Health Facilities Revenue.......... 5.4
Mississippi Hospital Equipment and Facilities Authority Revenue
(Mississippi Baptist Medical Center).................................... 4.5
Trinity River Authority Revenue (Tarrant County Water Project)........... 4.5
Joliet Waterworks and Sewage Revenue..................................... 4.0
</TABLE>
Percent of
TOP FIVE STATES Net Assets
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Illinois................................................................. 17%
Washington............................................................... 14
New York................................................................. 11
Texas.................................................................... 11
North Carolina........................................................... 6
</TABLE>
Credit Rating Distribution
As a Percent of Net Assets
--------------------------------------------------------------------------------
[PIE CHART]
1 AAA: 60%
2 AA: 11%
3 A: 21%
4 BBB: 6%
5 Cash & Other: 2%
- 27 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Intermediate-Term Municipal Bond Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
-------------------------------------------------------------------------------
MUNICIPAL BONDS* - 98.0%
Alabama - 3.7%
$ 500 Southeast Alabama Gas District System Revenue
5.30%, due 6/01/12 [AMBAC] $ 498
California - 4.4%
220 Pleasanton Joint Powers Financing Authority Reassessment
Revenue
5.80%, due 9/02/02 225
360 + Sacramento Municipal Utility District Electric Revenue
5.50%, due 2/01/11
(Escrowed to Maturity) 370
Connecticut - 3.9%
100 Connecticut Housing Finance Authority Housing Mortgage
Finance Program
5.40%, due 5/15/03 101
400 East Haven Connecticut General Obligation
6.50%, due 9/01/05 [FGIC] 431
District of Columbia - 3.4%
155 District of Columbia General Obligation
5.30%, due 6/01/03 156
145 + District of Columbia General Obligation
5.30%, due 6/01/03
(Escrowed to Maturity) 147
75 District of Columbia General Obligation
5.75%, due 6/01/03 76
75 + District of Columbia General Obligation
5.75%, due 6/01/03
(Escrowed to Maturity) 77
Georgia - 0.7%
100 Georgia Municipal Electric Authority General Power Revenue
5.75%, due 1/01/03 102
Illinois - 17.4%
500 Chicago Illinois Project Series A
5.25%, due 1/01/10 [FGIC] 502
300 Illinois Health Facilities Authorities Revenue (Masonic
Medical Center)
5.20%, due 10/01/03 294
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
-------------------------------------------------------------------------------
$ 500 Joliet Waterworks and Sewage Revenue
7.00%, due 1/01/05 [FGIC] $ 543
235 + Metro Pier & Exposition Authority Dedicated State Tax
Prerefunded (Series A)
5.50%, due 6/15/03 [MBIA] 238
40 + Metro Pier & Exposition Authority Dedicated State Tax
Prerefunded (Series A)
5.90%, due 6/15/03
(Escrowed to Maturity) 41
265 Metro Pier & Exposition Authority Dedicated State Tax
Unrefunded (Series A)
5.50%, due 6/15/03 [MBIA] 270
25 Metro Pier & Exposition Authority Dedicated State Tax
Unrefunded (Series A)
5.90%, due 6/15/03 26
35 + Metropolitan Pier and Exposition Authority McCormick
Place Expansion Project
5.90%, due 6/15/03
(Escrowed to Maturity) 36
400 Peoria General Obligation
5.00%, due 1/01/06 [FGIC] 402
Indiana - 1.5%
100 Indiana Bond Bank State Revolving Fund Program
5.90%, due 2/01/03 103
100 Indianapolis Local Public Improvement Bond Bank
Transportation Revenue
5.80%, due 7/01/03 103
Kentucky - 3.8%
500 Kentucky State Property and Buildings Commission Revenue
5.50%, due 9/01/04 513
Louisiana - 0.6%
85 Louisiana Public Facilities Authority Student Loan Revenue
6.20%, due 3/01/01 86
Maine - 2.2%
300 Maine Municipal Bond Bank
5.00%, due 11/01/09 [FSA] 299
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 28 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Intermediate-Term Municipal Bond Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
------------------------------------------------------------------------------
Massachusetts - 3.0%
$ 400 Massachusetts Water Resources Authority General Revenue
5.25%, due 12/01/08 $ 407
Mississippi - 4.5%
600 Mississippi Hospital Equipment and Facilities Authority
Revenue (Mississippi Baptist Medical Center)
5.40%, due 5/01/04 [MBIA] 610
New Jersey - 0.5%
65 New Jersey Housing and Mortgage Finance Agency Housing
Revenue
6.00%, due 11/01/02 66
New York - 11.4%
100 Metropolitan Transportation Authority Transit Facilities
Service Contract Revenue
5.375%, due 7/01/02 101
10 New York City Water & Sewer Systems Revenue (Series B)
5.00%, due 6/15/03 10
390 New York City Water & Sewer Systems Revenue (Series B)
5.00%, due 6/15/03 393
700 New York State Housing Finance Agency Health Facilities
Revenue
6.375%, due 11/01/04 733
300 Port Authority New York & New Jersey Consolidated Revenue
5.00%, due 10/01/09 [FGIC] 299
North Carolina - 5.6%
800 North Carolina Municipal Power Agency #1 Catawba Electric
Revenue
4.10%, due 1/01/05 [AMBAC] 760
Oklahoma - 3.2%
430 + Oklahoma Industries Authority Health Facilities Revenue
(Sisters of Mercy Health System, St. Louis, Inc.)
5.20%, due 6/01/05
(Escrowed to Maturity) 429
Pennsylvania - 3.6%
500 Philadelphia Parking Authority Airport Parking Revenue
4.875%, due 9/01/09 [FSA] 489
Texas - 10.6%
250 Austin Combined Utility Systems Revenue
5.25%, due 11/15/06 260
100 + Coastal Bend Health Facility Development Corp. Health
Services Revenue (Incarnate Word)
5.70%, due 1/01/03 [AMBAC] (Escrowed to Maturity) 102
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
------------------------------------------------------------------------------
$ 100 Houston Water and Sewer System Junior Lien Revenue
5.75%, due 12/01/02 $ 102
350 Socorro Independent School District Unlimited Tax General
Obligation
5.80%, due 2/15/11 [PSF] 361
600 + Trinity River Authority Revenue (Tarrant County Water
Project)
5.25%, due 2/01/05 [AMBAC] (Partially Prerefunded 2/01/03
@ 100) 606
Washington - 14.0%
400 Clark County Public Utility District #1 Generating System
Revenue
6.00%, due 1/01/07 [FGIC] 423
360 King County Housing Authority Pooled Housing Revenue
4.70%, due 7/01/08 340
500 Seattle Library Facilities
5.375%, due 12/01/10 510
500 Tacoma Electric System Revenue
5.80%, due 1/01/04 [FGIC] 516
100 Washington Health Care Facilities Authority Revenue
(Empire Health Service, Spokane)
5.50%, due 11/01/03 [MBIA] 102
-------
TOTAL MUNICIPAL BONDS 13,258
-------
CASH EQUIVALENTS - 1.0%
129 Federated Tax-Exempt Money Market Fund, Inc. 129
-------
TOTAL CASH EQUIVALENTS 129
-------
Other Assets, less Liabilities 143
-------
TOTAL INVESTMENTS - 99.0% 13,387
NET ASSETS $13,530
=======
------------------------------------------------------------------------------
</TABLE>
+ Prerefunded bonds are collateralized by securities (generally U.S. Treasury
securities) held in an irrevocable trust in an amount sufficient to pay
interest and principal.
* The provider of the guarantee of timely payment of both principal and
interest is identified in the brackets at the end of each bond description.
The guarantors applicable to this portfolio and the percentage of the
portfolio they guarantee at the period end are as follows:
<TABLE>
<S> <C>
Municipal Bond Investors
Assurance Corp. [MBIA] 9.2%
Financial Guaranty Insurance
Corp. [FGIC] 23.6
AMBAC Indemnity Corp. [AMBAC] 14.8
Financial Security Assurance,
Inc. [FSA] 5.9
Texas Permanent School Fund
[PSF] 2.7
----
56.2%
====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 29 -
<PAGE>
REPORT FROM THE FUND MANAGERS
SAFECO Insured Municipal Bond Fund
June 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PHOTO]
STEPHEN C. As the market rallied during the first half of 2000, the
BAUER Insured Municipal Bond Fund nearly matched the Lehman Long-
Insured Index, which delivered 6.82%, and handily beat its
[PHOTO] Lipper peer group of insured funds for the six-month period. As
BEVERLY R. yields decline, as they did, this Fund tends to do relatively
DENNY well because of its long average maturity and low coupon bonds.
During the first quarter, we took a number of tax losses,
which provides us flexibility to use in taking gains. The only
transactions in the Fund during second quarter were for cash
management.
New issue volume has dropped even more in the insured sector
than it has in the broad muni market, which has experienced
drastic declines. During 2000, bond insurers have backed away
from the hospital revenue bond market, which has been one of the
larger issuers this year. Nevertheless, there will be some
selection in the world of insured bonds and I am certain Beverly
Denny, who assumed management of the SAFECO Insured Municipal
Bond Fund on May 1, will find ways to add value in the years
ahead.
Stephen C. Bauer
Beverly R. Denny
--------------------------------------------------------------------------------
Stephen C. Bauer joined SAFECO in 1971 as a fixed-income analyst. He became a
fund manager with the inception of the SAFECO Municipal Bond Fund in 1981, and
is President of SAFECO Asset Management Company. Bauer holds a BS in
microbiology and an MBA from the University of Washington.
Beverly R. Denny came to SAFECO in 1991. She holds an MBA from the University
of Virginia and a BS in finance/economics from Babson College. She is a
Chartered Financial Analyst.
- 30 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PERFORMANCE GRAPH]
PERFORMANCE OVERVIEW - No-Load Class
Average Annual Total Return for the
period ended June 30, 2000 Six-Month* 1 Year 5 Year Since Inception**
--------------------------------------------------------------------------------
SAFECO Insured Municipal Bond Fund 6.77% 1.00% 5.49% 4.90%
Lehman Brothers Long Insured
Municipal Bond Index 6.82% 0.92% 6.05% 5.80%
Lipper, Inc. (Insured Municipal
Bond Funds) 4.34% 1.52% 4.71% N/A
* Not Annualized
** The Fund's inception was March 18, 1993. Graph and average annual return
comparison begins March 31, 1993.
Lehman Brothers
SAFECO Insured Long Insured
Municipal Bond Fund Municipal Bond Index
------------------- --------------------
3/18/93 10,000
3/31/93 9,918 10,000
4/30/93 10,039 10,146
5/31/93 10,080 10,239
6/30/93 10,311 10,431
7/31/93 10,217 10,439
8/31/93 10,556 10,710
9/30/93 10,716 10,849
10/31/93 10,720 10,861
11/30/93 10,482 10,719
12/31/93 10,764 10,993
1/31/94 10,908 11,117
2/28/94 10,453 10,726
3/31/94 9,780 10,062
4/30/94 9,826 10,152
5/31/94 9,946 10,276
6/30/94 9,781 10,153
7/31/94 10,133 10,431
8/31/94 10,086 10,434
9/30/94 9,769 10,183
10/31/94 9,482 9,872
11/30/94 9,287 9,647
12/31/94 9,642 9,984
1/31/95 10,042 10,431
2/28/95 10,564 10,851
3/31/95 10,619 10,977
4/30/95 10,543 10,973
5/31/95 11,163 11,441
6/30/95 10,845 11,220
7/31/95 10,878 11,269
8/31/95 11,039 11,424
9/30/95 11,115 11,507
10/31/95 11,420 11,800
11/30/95 11,800 12,109
12/31/95 11,992 12,302
1/31/96 11,994 12,366
2/29/96 11,850 12,194
3/31/96 11,568 11,950
4/30/96 11,470 11,891
5/31/96 11,481 11,894
6/30/96 11,645 12,078
7/31/96 11,795 12,200
8/31/96 11,750 12,182
9/30/96 12,046 12,461
10/31/96 12,138 12,611
11/30/96 12,456 12,894
12/31/96 12,299 12,804
1/31/97 12,152 12,759
2/28/97 12,280 12,893
3/31/97 12,051 12,650
4/30/97 12,262 12,800
5/31/97 12,484 13,056
6/30/97 12,663 13,211
7/31/97 13,227 13,716
8/31/97 12,967 13,502
9/30/97 13,136 13,695
10/31/97 13,242 13,787
11/30/97 13,336 13,875
12/31/97 13,614 14,226
1/31/98 13,733 14,390
2/28/98 13,698 14,363
3/31/98 13,689 14,381
4/30/98 13,557 14,281
5/31/98 13,886 14,589
6/30/98 13,947 14,652
7/31/98 13,976 14,678
8/31/98 14,256 14,972
9/30/98 14,491 15,197
10/31/98 14,369 15,146
11/30/98 14,442 15,231
12/31/98 14,418 15,231
1/31/99 14,630 15,379
2/28/99 14,503 15,296
3/31/99 14,490 15,349
4/30/99 14,481 15,344
5/31/99 14,323 15,201
6/30/99 14,024 14,911
7/31/99 13,970 14,894
8/31/99 13,669 14,552
9/30/99 13,527 14,456
10/31/99 13,318 14,109
11/30/99 13,450 14,327
12/31/99 13,262 14,087
1/31/00 13,142 13,945
2/29/00 13,478 14,273
3/31/00 13,990 14,828
4/30/00 13,735 14,621
5/31/00 13,629 14,463
6/30/00 14,164 15,048
The performance graph compares a hypothetical $10,000 investment in the Fund to
a hypothetical investment in a relevant market index. The index is unmanaged and
includes no operating expenses or transaction costs. Past performance is not
predictive of future results. Principal value may fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
--------------------------------------------------------------------------------
HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Current Yield (30-day)... 5.1%
Weighted Average
Maturity................ 24.6 years
</TABLE>
TOP FIVE HOLDINGS Percent of Net Assets
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Metropolitan Transportation Authority
New York Dedicated Tax Fund....................................... 5.4%
Loudoun County Sanitation Authority Water and Sewer Revenue........ 5.4
Port Authority of New York & New Jersey Consolidated Revenue....... 5.2
Massachusetts State Turnpike Authority
Metro Highway System Rev. (Series B).............................. 4.6
Gulf Environment Services, Inc.
Water and Sewer Revenue........................................... 4.6
</TABLE>
TOP FIVE STATES Percent of Net Assets
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Washington......................................................... 17%
New York........................................................... 15
Pennsylvania....................................................... 9
Utah............................................................... 9
North Carolina..................................................... 9
</TABLE>
Credit Rating Distribution
As a Percent of Net Assets
--------------------------------------------------------------------------------
[PIE CHART]
1 AAA: 96%
2 Cash & Other: 4%
- 31 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Insured Municipal Bond Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
-------------------------------------------------------------------------------
MUNICIPAL BONDS* - 95.7%
California - 5.9%
$ 600 Los Angeles County Sanitation District Financing Authority
Revenue (Capital Projects)
5.25%, due 10/01/19 [MBIA] $ 577
650 Los Angeles Wastewater System Revenue
4.70%, due 11/01/19 [FGIC] 569
Florida - 4.5%
1,000 Gulf Environment Services, Inc. Water and Sewer Revenue
5.00%, due 10/01/27 [MBIA] 881
Indiana - 2.9%
250 Indiana State Office Building Commission Capital Complex
Revenue
5.25%, due 7/01/15 [AMBAC] 237
350 Indianapolis Gas Utility Revenue
5.375%, due 6/01/21 [FGIC] 330
Iowa - 1.2%
250 Marshalltown Pollution Control Revenue (Iowa Electric
Light and Power Co. Project)
5.50%, due 11/01/23 [MBIA] 235
Massachusetts - 7.7%
600 Massachusetts Housing Finance Agency Housing Revenue
6.20%, due 7/01/38 [AMBAC] 602
1,000 Massachusetts State Turnpike Authority Metropolitan
Highway System Revenue (Series B)
5.125%, due 1/01/37 [MBIA] 883
Minnesota - 1.6%
350 Minneapolis and St. Paul Housing and Redevelopment
Authority Health Care System Revenue (HealthSpan)
4.75%, due 11/15/18 [AMBAC] 306
New York - 14.8%
900 Long Island Power Authority Electric System Revenue
5.125%, due 12/01/22 [FSA] 818
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
------------------------------------------------------------------------------
$1,250 Metropolitan Transportation Authority New York Dedicated
Tax Fund
4.75%, due 4/01/28 [FGIC] $ 1,054
1,300 Port Authority New York & New Jersey Consolidated Revenue
4.375%, due 10/01/33 [FGIC] 1,008
North Carolina - 8.6%
1,000 North Carolina Medical Care Commission Health Care
Facilities Revenue (Duke University Health System)
4.75%, due 6/01/28 [MBIA] 835
1,000 North Carolina Medical Care Commission Hospital Revenue
4.75%, due 12/01/28 [MBIA] 833
Pennsylvania - 9.3%
1,000 Allegheny County Hospital Development Authority Revenue
(Catholic Health East)
4.875%, due 11/15/26 [AMBAC] 835
650 Pittsburgh Water and Sewer Authority Revenue
4.75%, due 9/01/16 [FGIC] 579
445 University Area Joint Authority Sewer Revenue
4.75%, due 11/01/20 [MBIA] 385
Tennessee - 3.1%
600 Metropolitan Nashville Airport Authority Special
Facilities Revenue (Series A)
4.55%, due 10/01/12
(Var. Rate Demand Obligation) 600
Texas - 4.8%
750 Austin Combined Utility Revenue
4.25%, due 5/15/28 [MBIA] 573
250 Harris County Toll Road Unlimited Tax Revenue
5.50%, due 8/15/21 [FGIC] 241
10 + Lower Colorado River Authority Junior Lien Revenue
5.625%, due 1/01/17 [FSA]
(Prerefunded 1/01/15 @ 100) 10
95 Sabine River Authority Pollution Control Revenue (Texas
Utilities Electric Co. Project)
6.55%, due 10/01/22 [FGIC] 98
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 32 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Insured Municipal Bond Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
-----------------------------------------------------------------------------
Utah - 8.8%
$1,000 Murray City Hospital Revenue (IHC Health Service, Inc.)
4.75%, due 5/15/20 [MBIA] $ 846
1,000 Weber County Utah Hospital Revenue (IHC Health Services)
5.00%, due 8/15/30 [AMBAC] 855
Virginia - 5.4%
1,250 Loudoun County Sanitation Authority Water and Sewer
Revenue
4.75%, due 1/01/30 [MBIA] 1,049
Washington - 17.1%
700 CDP-King County III Lease Revenue (King Street Center
Project)
5.25%, due 6/01/26 [MBIA] 643
1,000 Central Puget Sound Regional Transportation Authority
Motor Vehicle Tax
4.75%, due 2/01/28 [FGIC] 838
250 + Richland Water and Sewer Improvement Revenue
5.625%, due 4/01/12 [MBIA] (Prerefunded 4/01/03 @ 101) 258
530 Snohomish County Public Utility District #1 Electric
Revenue
5.50%, due 1/01/20 [FGIC] 509
900 Washington Health Care Facilities Authority Revenue
(Swedish Hospital System)
5.25%, due 11/15/26 [AMBAC] 813
250 Yakima-Tieton Irrigation District Revenue
6.20%, due 6/01/19 [FSA] 256
-------
TOTAL MUNICIPAL BONDS 18,556
-------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
-----------------------------------------------------------------------------
CASH EQUIVALENTS - 3.5%
$ 672 Federated Tax-Exempt Money Market Fund, Inc. $ 672
-------
TOTAL CASH EQUIVALENTS 672
-------
TOTAL INVESTMENTS - 99.2% 19,228
Other Assets, less Liabilities 163
-------
NET ASSETS $19,391
=======
-----------------------------------------------------------------------------
</TABLE>
+ Prerefunded bonds are collateralized by securities (generally U.S. Treasury
securities) held in an irrevocable trust in an amount sufficient to pay
interest and principal.
* The provider of the guarantee of timely payment of both principal and
interest is identified in the brackets at the end of each bond description.
The guarantors applicable to this portfolio and the percentage of the
portfolio they guarantee at the period end are as follows:
<TABLE>
<S> <C>
Municipal Bond Investors
Assurance Corp. [MBIA] 43.1%
Financial Guaranty Insurance
Corp. [FGIC] 28.2
AMBAC Indemnity Corp. [AMBAC] 19.7
Financial Security Assurance,
Inc. [FSA] 5.8
----
96.8%
====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 33 -
<PAGE>
REPORT FROM THE FUND MANAGERS
SAFECO Money Market Fund
June 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PHOTO] The returns on the SAFECO Money Market Fund exceeded the
LESLIE FOX Lipper average for taxable money market funds for the six and
twelve months ended June 30. The Fund's 12-month return was
higher than the 3.7% year-over-year increase in the Consumer
[PHOTO] Price Index.
NAOMI
URATA The portfolio continues to outperform its peers for three
reasons. One, our short average maturity (46 days at June 30)
allows us to take advantage of increasing short-term rates. Two,
we have a high percentage of floating rate notes which reset
with higher interest rates. (At June 30, the portfolio held
44.3% floating rate notes, 19.3% of which are taxable municipal
securities.) And, three, we purchase some higher-yielding tier-1
eligible paper that has some tier-2 ratings. (All securities
purchased for the Fund have at least two ratings in the top
category giving the Fund a Tier-one status.)
The portfolio currently has a "barbell" structure. Most of
the cash is invested in short-term securities or floating rate
notes under 60 days. About 10% of the portfolio is invested in
issues maturing in greater than 180 days, locking in higher
yields there. This has proved to be an effective strategy
because short-term rates have risen rapidly; and because the
market anticipates higher rates, thus paying the investor well
for locking in yields up to 13 months.
The average maturity of the Fund was no longer than 90 days at any point
during the period and no individual investment had a maturity longer than 397
days. Assets were diversified among different industries so that no more than
25% of assets were invested in any one sector.
The Fed raised overnight interest rates from 6.00% to 6.50% at its May
meeting but held steady in June. Although there is increasing uncertainty about
the Fed's future actions, currently high one-year interest rates indicate that
the market anticipates some rate increases. We will manage the fund
accordingly.
Lesley Fox
Naomi Urata
--------------------------------------------------------------------------------
Lesley Fox joined SAFECO Asset Management in April 2000 as a portfolio manager.
She spent the previous five years managing $3.5 billion in short-term funds for
King County. Ms. Fox earned her MBA, Finance, at George Washington University.
Naomi Urata joined SAFECO in 1993 as a fixed-income analyst and began managing
the SAFECO Money Market Fund in August of 1994. She holds an MBA from Yale
University and is a Chartered Financial Analyst.
--------------------------------------------------------------------------------
HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Weighted Average Maturity... 46 Days
</TABLE>
PERFORMANCE OVERVIEW CHART
Performance Overview -- No-Load Class
Average Annual Total Return
for the period ended
June 30, 2000 Six-Month* 1 Year 5 Year 10 Year
-----------------------------------------------------------------------------
SAFECO Money Market Fund 2.77% 5.32% 4.96% 4.64%
Lipper, Inc. (Money Market Funds) 2.66% 5.06% 4.92% 4.69%
* Not Annualized
- 34 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Money Market Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
-------------------------------------------------------------------------------
COMMERCIAL PAPER - 43.0%
Asset Backed Securities - 9.7%
$11,000 Apreco, Inc.
6.60%, due 7/24/00 $ 10,950
6,000 Apreco, Inc.
6.56%, due 7/31/00 5,969
5,000 Apreco, Inc.
6.60%, due 7/24/00 4,981
6,000 Moat Funding LLC
6.18%, due 7/17/00 5,986
5,000 Moat Funding LLC
6.56%, due 7/28/00 4,977
Consumer Finance - 4.1%
6,000 Countrywide Funding Corp.
6.55%, due 7/05/00 5,998
3,300 Countrywide Funding Corp.
6.90%, due 7/07/00 3,297
Financial (Diversified) - 14.6%
6,000 Associates First Capital BV
6.58%, due 7/06/00 5,997
5,700 Associates First Capital BV
6.58%, due 7/13/00 5,690
5,000 Cafco
6.62%, due 8/04/00 4,971
5,000 Island Finance
6.60%, due 7/10/00 4,994
1,600 PHH Corporation
6.73%, due 7/07/00 1,599
6,000 PHH Corporation
6.77%, due 7/20/00 5,981
3,700 PHH Corporation
6.77%, due 7/21/00 3,687
Investment Banking & Brokerage - 6.1%
3,500 Goldman Sachs Group, LP
6.53%, due 7/11/00 3,495
4,200 Lehman Brothers Holdings, Inc.
6.19%, due 9/07/00 4,152
6,000 Salomon Smith Barney
6.52%, due 7/03/00 6,000
Photography/Imaging - 5.0%
5,000 Xerox Corp.
6.76%, due 7/05/00 4,998
6,380 Xerox Corp.
7.20%, due 7/05/00 6,377
Trucks & Parts - 3.5%
2,000 Cooperative Association of Tractor Dealers
6.57%, due 7/07/00 (MBIA) 1,998
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
-------------------------------------------------------------------------------
$ 6,000 Cooperative Association of Tractor Dealers
6.57%, due 7/14/00 [MBIA] $ 5,988
--------
TOTAL COMMERCIAL PAPER 97,135
--------
CORPORATE BONDS - 37.5%
Banks (Major Regional) - 5.7%
5,000 First Union Corp.
5.625%, due 2/12/01 4,970
3,000 MBNA Corp.
7.22%, due 2/09/01 3,004
5,000 MBNA Corp.
7.425%, due 9/01/00
Put Date 9/01/00 5,001
Banks (Regional) - 4.8%
10,635 PNC Funding Corp.
9.875 %, due 3/01/01 10,820
Consumer Finance - 0.9%
1,630 Countrywide Funding Corp.
5.62%, due 10/16/00 1,626
500 Countrywide Funding Corp.
7.32%, due 8/15/00 501
Financial (Diversified) - 1.2%
2,625 Heller Financial, Inc.
5.875%, due 11/01/00 2,620
Health Care (Specialized Services) - 3.2%
7,300 Everett Clinic
6.72%, due 12/01/21
Put Date 7/06/00 7,300
Homebuilding - 3.1%
6,933 Summer Station Apartments, LLC
6.67%, due 6/01/19
Put Date 7/05/00 6,933
Insurance (Life & Health) - 4.9%
11,000 First Allamerica Financial
6.68%, due 8/05/04
Put Date 8/05/00 11,000
Investment Banking & Brokerage - 10.7%
8,000 # Goldman Sachs Group, Inc. (144A)
6.935%, due 7/13/01 8,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 35 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Money Market Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
-------------------------------------------------------------------------------
$8,000 Lehman Brothers Holdings, Inc.
6.775%, due 5/23/01
Put Date 9/07/00 $ 8,000
8,100 Morgan Stanley Dean Witter Co.
6.90%, due 3/13/01
Put Date 12/12/00 8,100
Telecommunications (Equipment) - 3.0%
6,870 AT&T Capital Corp.
6.25%, due 5/15/01 6,839
--------
TOTAL CORPORATE BONDS 84,714
--------
MUNICIPAL BONDS - 19.3%
Health Care (Diversified) - 3.7%
100 Bell County Health Facilities Development Revenue
7.05%, due 7/01/00
Put Date 7/06/00 100
150 Maury County Health and Educational Facilities Board
Healthcare Revenue
7.05%, due 12/01/00
Put Date 7/06/00 150
8,100 New Hampshire Business Finance Authority Revenue
7.50%, due 6/01/28
Put Date 7/06/00 8,100
Health Care (Long-Term Care) - 7.7%
3,150 Bowie Assisted Living
7.05%, due 7/01/23
Put Date 7/05/00 3,150
2,950 Maryland Health and Higher Education Facilities Authority
Revenue (University of Maryland Medical System)
7.00%, due 7/01/29
Put Date 7/05/00 2,950
6,185 Maryland Health and Higher Education Facilities Authority
Revenue
7.00%, due 1/01/28
Put Date 7/05/00 6,185
200 Maryland Health and Higher Education Facilities Authority
Revenue
7.00%, due 7/01/27
Put Date 7/06/00 200
4,900 Village Green Finance Co.
6.67%, due 11/01/22
Put Date 7/05/00 4,900
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
--------------------------------------------------------------------------------
Homebuilding - 3.0%
$1,000 Breckenridge Terrace LLC Tax Revenue
6.73438%, due 5/01/39
Put Date 7/06/00 $ 1,000
2,000 Eagle County Colorado Housing Facilities Revenue
6.734%, due 5/01/39
Put Date 7/06/00 2,000
3,885 Tenderfoot Seasonal Housing Facilities Revenue
6.734%, due 7/01/35
Put Date 7/06/00 3,885
Muni's (Municipalities) - 0.5%
1,025 Allentown General Obligation Unlimited
5.80%, due 11/15/00 1,022
Retail (General Merchandise) - 3.5%
8,000 Racetrac Capital, LLC
6.67%, due 4/01/18
Put Date 7/05/00 8,000
Services (Commercial & Consumer) - 0.9%
2,000 Wake Forest University
6.67%, due 7/01/17
Put Date 7/05/00 2,000
--------
TOTAL MUNICIPAL BONDS 43,642
--------
CASH EQUIVALENTS - 0.3%
Investment Companies
625 AIM Short-Term Investments Co. Liquid Assets Money
Market Portfolio (Institutional Shares) 625
--------
TOTAL CASH EQUIVALENTS 625
--------
TOTAL INVESTMENTS - 100.1% 226,116
Other Assets, less Liabilities (70)
--------
NET ASSETS $226,046
========
--------------------------------------------------------------------------------
</TABLE>
If a Put date is indicated, the Fund has a right to sell a specified underlying
security at an exercise price equal to the amortized cost of the underlying
security plus interest, if any, as of that date.
Securities with a maturity of more than thirteen months have variable rates
and/or demand features which qualify them as short-term securities. Rates shown
are those in effect on 6/30/00. These rates change periodically based on
specified market rate or indices.
# Securities are exempt from registration and restricted as to resale only to
dealers, or through a dealer to an "accredited investor" or a "qualified
institutional buyer." The total cost of such securities is $8,000,000 and the
total value is 3.5% of net assets.
SEE NOTES TO FINANCIAL STATEMENTS
- 36 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO Tax-Free Money Market Fund
June 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PHOTO]
MARY V. The SAFECO Tax-Free Money Market Fund outranked the Lipper
METASTASIO averages for like funds for the six and twelve months ending
June 30, 2000. The Fund remains nicely ahead of its peers for
the three-, five- and ten-year periods as well.
Issuance, which has been slow since the beginning of the
year, continued in that vein throughout the second quarter. Our
robust economy has reduced short-term borrowing needs. The
reduced supply has kept a lid on the upward trend of tax-free
money market rates.
Assets in all tax-free money market funds peaked early in the
quarter (right before the April 15th tax deadline) at $220
billion, and then fell as drafts sent to the IRS cleared. Tax-
free money funds ended the quarter at $210 billion.
We have continued to use a barbell in the SAFECO Tax-Free Money Market Fund.
This strategy of clustering assets at the long and short ends of our spectrum
has contributed to the Fund's success. At June 30, 71% of the Fund was invested
in very short Variable Rate Demand Options (VRDOs), and 25% was invested in put
bonds, our vehicle of choice for longer assets. The remaining 4% are in
municipal notes. This allocation is almost identical to the first quarter of
2000, the only difference being a 1% increase in VRDOs, and a corresponding
decrease in put bonds. By comparison, the average general purpose tax-free
money market fund, according to iMoneyNet, Inc., had 65% of its assets invested
in VRDOs, with only 5% in put bonds. Seventeen percent of the average fund's
assets were in notes and 11% were in commercial paper.
It has been our desire to reduce our VRDO holdings to about two-thirds of
the Fund, however, we continue to be stymied by a lack of put bonds to replace
them with. Other than some possible minor tweaking, we will do what we have
done in the past--stick to the barbell and be consistent.
Mary V. Metastasio
--------------------------------------------------------------------------------
Mary V. Metastasio joined SAFECO's investment department in 1985 as a
securities analyst and began managing the SAFECO Tax-Free Money Market Fund in
1987. She holds a BA in Dramatic Art from Whitman College and an MBA from the
University of Washington. Metastasio is a past chairman of the National
Federation of Municipal Analysts.
--------------------------------------------------------------------------------
HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Weighted Average Maturity... 42 Days
</TABLE>
* Represents the SAFECO Tax-Free Money Market Fund actual yield on June 30,
2000, and related tax-equivalent yields assuming various shareholder tax
brackets. Tax-equivalent yield comparisons may vary with market conditions.
** Represents the Three-Month Treasury Bill yield on June 30, 2000.
PERFORMANCE OVERVIEW -- NO-LOAD CLASS
Average Annual Total Return for the
period ended June 30, 2000 Six-Month* 1 Year 5 Year 10 Year
--------------------------------------------------------------------------------
SAFECO Tax-Free Money Market Fund 1.69% 3.14% 3.10% 3.16%
Lipper, Ince. (Tax-Exempt Money
Market Funds) 1.66% 3.09% 3.01% 3.06%
*Not Annualized
[GRAPH]
SAFECO Tax-Free Money Market Fund*
Tax Brackets
---------------------------------------
39.6% 36% 31% 28% 15%
Actual Yield 3.86
Tax-Equivalent Yield 4.54
Tax-Equivalent Yield 5.36
Tax-Equivalent Yield 5.59
Tax-Equivalent Yield 6.03
Tax-Equivalent Yield 6.39
Three-Month Treasury Bill**
Taxable Yield 5.92
- 37 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Tax-Free Money Market Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
-------------------------------------------------------------------------------
MUNICIPAL BONDS - 99.9%
Alaska - 3.3%
$2,385 Alaska Industrial Development and Export Authority Revenue
5.30%, due 7/01/01
Put Date 7/05/00 $ 2,385
Arizona - 3.8%
1,000 Apache County Industrial Development Revenue (Tucson
Electric Power Co.)
4.85%, due 12/15/18
Put Date 7/05/00 1,000
800 Pima County Industrial Development Authority Revenue
(Tucson Electric Power Co.)
4.85%, due 12/01/22
Put Date 7/05/00 800
1,000 Tucson Industrial Development Authority Revenue (Tuscon
City Center Parking)
4.925%, due 6/01/15
Put Date 7/06/00 1,000
California - 1.1%
800 Regional Airports Improvement Revenue (American Airlines,
Inc.)
4.55%, due 12/01/25
Put Date 7/01/00 800
District of Columbia - 2.8%
1,000 District of Columbia Revenue (George Washington
University) Series B
5.10%, due 9/15/29
Put Date 7/05/00 1,000
1,000 District of Columbia Revenue Supplemental Student Loan
4.75%, due 7/01/04
Put Date 7/01/00 1,000
Florida - 1.4%
1,000 Putnam County Development Authority Pollution Control
Revenue
4.35%, due 12/15/09
Put Date 12/15/00 1,000
Georgia - 4.1%
3,000 Marietta Housing Authority Multifamily Revenue
4.35%, due 1/15/09
Put Date 1/15/01 3,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
-----------------------------------------------------------------------------
Illinois - 19.8%
$3,020 Chicago O'Hare International Airport Revenue Series A
4.95%, due 1/01/15
Put Date 7/05/00 $ 3,020
770 Chicago O'Hare International Airport Revenue Series B
4.95%, due 1/01/15
Put Date 7/05/00 770
3,000 Illinois Development Finance Authority Revenue (Sinai
Community Institute Project)
4.78%, due 3/01/22
Put Date 7/05/00 3,000
1,170 Illinois Development Finance Authority Revenue
(Countryside Montessori Schools)
4.76%, due 6/01/17
Put Date 7/06/00 1,170
3,800 Illinois Health Facilities Authority Revenue (Swedish
Covenant Hospital)
5.00%, due 8/01/25
Put Date 7/05/00 3,800
2,700 Jackson-Union Regional Port District Revenue
5.15%, due 4/01/24
Put Date 7/05/00 2,700
Iowa - 5.8%
2,000 Iowa School Corporations Warrant Certificates (Series A)
5.50%, due 6/22/01 [FSA] 2,019
1,000 Iowa School Corporations Warrant Certificates
4.75%, due 2/01/01 [FSA] 1,004
1,225 Polk County Hospital Equipment and Improvement Revenue
4.80%, due 12/01/05
Put Date 7/05/00 1,225
Kentucky - 2.8%
2,000 Clark County Kentucky Pollution Control Revenue
4.15%, due 10/15/14
Put Date 10/15/00 2,000
Louisiana - 2.8%
2,000 Louisiana Public Facilities Authority Revenue
4.80%, due 12/01/13
Put Date 7/06/00 2,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 38 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Tax-Free Money Market Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
------------------------------------------------------------------------------
Maryland - 5.6%
$3,805 Maryland Health and Higher Education Facilities Authority
Revenue (Mercy Ridge)
4.80%, due 4/01/31
Put Date 7/06/00 $ 3,805
300 Montgomery County Industrial Development Revenue
(Information Systems and Networks)
4.55%, due 4/01/14
Put Date 7/01/00 300
Missouri - 2.9%
2,100 Kansas City Industrial Development Authority Multifamily
Housing Revenue (Coach House II Project)
4.65%, due 12/01/15
Put Date 7/01/00 2,100
Montana - 2.1%
1,535 Havre Industrial Development Revenue (Safeway, Inc.
Projects)
4.75%, due 6/01/06
Put Date 12/01/00 1,535
Oklahoma - 2.7%
1,000 Oklahoma Water Resources Revenue Board State Loan Program
4.10%, due 9/01/32
Put Date 9/01/00 1,000
1,000 Oklahoma Water Resources Revenue Board State Loan Program
Series A
4.05%, due 9/01/23
Put Date 9/01/00 1,000
Pennsylvania - 2.8%
2,080 Washington County Authority Lease Revenue (Higher
Education Pooled Equipment Leasing Project)
4.85%, due 11/01/05
Put Date 7/05/00 2,080
South Carolina - 4.1%
3,000 York County Pollution Control Revenue
4.05%, due 9/15/14
Put Date 9/15/00 3,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
------------------------------------------------------------------------------
Tennessee - 4.6%
$3,400 Hamilton County Industrial Development Revenue (Komatsu
American Manufacturing Corp.)
5.25%, due 11/01/05
Put Date 7/05/00 $ 3,400
Texas - 13.1%
3,500 ABN AMRO Munitops Certificates Trust
4.82%, due 3/07/07
Put Date 7/05/00 3,500
800 Grapevine Industrial Development Corporation Revenue
(Series B4)
4.55%, due 12/01/24
Put Date 7/01/00 800
300 Grapevine Industrial Development Revenue (American
Airlines, Inc.) Series B2
4.55%, due 12/01/24
Put Date 7/01/00 300
1,000 Harris County Housing Finance Corp. Multifamily Housing
Revenue (Arbor II, Ltd. Project)
4.00%, due 10/01/05
Put Date 10/01/00 1,000
200 Lone Star Airport Improvement Authority Revenue (American
Airlines, Inc.) Series B4
4.55%, due 12/01/14
Put Date 7/01/00 200
700 Lone Star Airport Improvement Authority Revenue Series A1
4.55%, due 12/01/14
Put Date 7/01/00 700
200 Lone Star Airport Improvement Authority Revenue Series A3
4.55%, due 12/01/14
Put Date 7/01/00 200
2,000 Sabine River Industrial Development Authority
4.00%, due 8/15/14
Put Date 8/15/00 2,000
905 Texas Higher Education Authority (Series B)
4.80%, due 12/01/25
Put Date 7/05/00 [FGIC] 905
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 39 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Tax-Free Money Market Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
-------------------------------------------------------------------------------
Washington - 11.8%
$3,520 Richland Golf Enterprise Revenue
4.60%, due 12/01/21
Put Date 7/06/00 $ 3,520
1,765 Washington State Housing Finance Commission Housing
Revenue (Pioneer Human Services)
4.75%, due 7/01/11
Put Date 7/06/00 1,765
1,260 Washington State Housing Finance Commission Revenue (YMCA
of Greater Seattle)
4.70%, due 7/01/11
Put Date 7/01/00 1,260
2,120 Washington State Housing Finance Commission Revenue (YMCA
Snohomish County)
5.00%, due 8/01/19
Put Date 7/01/00 2,120
Wyoming - 2.5%
1,850 Rock Springs Industrial Development Revenue (Safeway, Inc.
Project)
4.30%, due 3/01/02
Put Date 9/01/00 1,850
-------
TOTAL MUNICIPAL BONDS 73,033
-------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
-------------------------------------------------------------------------------
CASH EQUIVALENTS - 0.0%
$ 1 Federated Tax-Exempt Money Market Fund, Inc. $ 1
-------
TOTAL CASH EQUIVALENTS 1
-------
TOTAL INVESTMENTS - 99.9% 73,034
Other Assets, less Liabilities 106
-------
NET ASSETS $73,140
=======
-------------------------------------------------------------------------------
</TABLE>
If a Put date is indicated, the Fund has a right to sell a specified underlying
security at an exercise price equal to the amortized cost of the underlying
security plus interest, if any, as of that date.
Securities with a maturity of more than thirteen months have variable rates
and/or demand features which qualify them as short-term securities. Rates shown
are those in effect on 6/30/2000. These rates change periodically based on
specified market rate or indices.
SEE NOTES TO FINANCIAL STATEMENTS
- 40 -
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
- 41 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Statements of Assets and Liabilities
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
SAFECO
INTERMEDIATE- SAFECO
SAFECO TERM SAFECO MANAGED
(In Thousands, HIGH-YIELD U.S. TREASURY GNMA BOND
Except Per-Share Amounts) BOND FUND FUND FUND FUND
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Investments, at Cost $69,659 $19,310 $37,539 $7,932
======= ======= ======= ======
Investments, at Value $64,696 $19,311 $37,148 $7,838
Receivables
Trust Shares Sold 1 -- -- --
Interest 1,271 293 263 88
Receivable From Advisor 5 5 4 4
------- ------- ------- ------
Total Assets 65,973 19,609 37,415 7,930
Liabilities
Payables
Investment Securities Purchased 1,960 -- -- --
Notes Payable -- -- 65 --
Dividends 508 89 214 41
Investment Advisory Fees 35 9 18 3
Transfer Agent Fees 13 5 6 2
Other 22 16 16 14
------- ------- ------- ------
Total Liabilities 2,538 119 319 60
------- ------- ------- ------
Net Assets $63,435 $19,490 $37,096 $7,870
======= ======= ======= ======
No-Load Class:
Net Assets $61,056 $17,860 $36,894 $6,655
Trust Shares Outstanding 7,758 1,780 4,072 835
------- ------- ------- ------
Net Asset Value, Offering Price, and
Redemption Price Per Share $ 7.87 $ 10.03 $ 9.06 $ 7.97
======= ======= ======= ======
Class A:
Net Assets $ 1,220 $ 962 101 $ 511
Trust Shares Outstanding 155 96 11 64
------- ------- ------- ------
Net Asset Value and Redemption Price
Per Share $ 7.87 $ 10.04 $ 9.07 $ 7.97
======= ======= ======= ======
Maximum Offering Price Per Share
(Net Asset Value Plus Sales Charge
of 4.5%) $ 8.24 $ 10.51 $ 9.50 $ 8.35
======= ======= ======= ======
Class B:
Net Assets $ 1,059 $ 668 $ 101 $ 704
Trust Shares Outstanding 134 67 11 88
------- ------- ------- ------
Net Asset Value and Offering Price
Per Share* $ 7.87 $ 10.04 $ 9.07 $ 7.96
======= ======= ======= ======
Class C:
Net Assets $ 100 -- -- --
Trust Shares Outstanding 13
-------
Net Asset Value and Offering Price
Per Share* $ 7.87
=======
</TABLE>
--------------------------------------------------------------------------------
* For Class B and Class C shares, the redemption price per share may be lower
as a result of applying contingent deferred sales charges.
SEE NOTES TO FINANCIAL STATEMENTS
- 42 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO
CALIFORNIA INTERMEDIATE- SAFECO SAFECO TAX-FREE
TAX-FREE SAFECO TERM INSURED MONEY MONEY
INCOME MUNICIPAL MUNICIPAL MUNICIPAL MARKET MARKET
FUND BOND FUND BOND FUND BOND FUND FUND FUND
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$87,022 $440,578 $13,259 $19,216 $226,116 $73,034
======= ======== ======= ======= ======== =======
$87,369 $462,439 $13,387 $19,228 $226,116 $73,034
200 -- -- -- -- --
1,381 8,556 211 267 1,292 513
-- -- 1 -- 38 --
------- -------- ------- ------- -------- -------
88,950 470,995 13,599 19,495 227,446 73,547
-- -- -- -- -- --
-- -- -- -- -- 130
375 2,179 51 82 1,192 231
37 194 6 8 100 32
6 24 1 1 61 5
15 31 11 13 47 9
------- -------- ------- ------- -------- -------
433 2,428 69 104 1,400 407
------- -------- ------- ------- -------- -------
$88,517 $468,567 $13,530 $19,391 $226,046 $73,140
======= ======== ======= ======= ======== =======
$86,790 $467,114 $13,530 $19,391 $222,031 $73,140
7,503 35,225 1,289 1,867 222,031 73,140
------- -------- ------- ------- -------- -------
$ 11.57 $ 13.26 $ 10.49 $ 10.39 $ 1.00 $ 1.00
======= ======== ======= ======= ======== =======
$ 693 $ 700 -- -- $ 3,104 --
60 53 3,104
------- -------- --------
$ 11.58 $ 13.27 $ 1.00
======= ======== ========
$ 12.13 $ 13.90 --
======= ======== ========
$ 1,034 $ 753 -- -- $ 811 --
89 57 811
------- -------- --------
$ 11.57 $ 13.24 $ 1.00
======= ======== ========
-- -- -- -- $ 100 --
100
--------
$ 1.00
========
</TABLE>
--------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
- 43 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Statements of Operations
For the Six-Month Period Ended June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
SAFECO
INTERMEDIATE- SAFECO
SAFECO TERM SAFECO MANAGED
HIGH-YIELD U.S. TREASURY GNMA BOND
(In Thousands) BOND FUND FUND FUND FUND
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income
Interest $ 3,076 $ 638 $1,401 $ 269
Dividends 137 -- -- --
------- ----- ------ -----
Total Investment Income 3,213 638 1,401 269
Expenses
Investment Advisory 211 54 103 19
Transfer Agent 75 27 38 9
Fund Accounting and
Administration 29 9 17 3
Shareholder Service--Class A 2 1 -- 1
--Class B 2 1 -- 1
Distribution--Class B 5 3 -- 3
Legal and Auditing 10 9 11 9
Custodian 4 1 3 2
Registration 16 12 10 13
Reports to Shareholders 10 3 4 1
Trustees 3 3 3 3
Interest 2 -- -- --
Other 3 2 1 1
------- ----- ------ -----
Total Expenses Before
Reimbursement 372 125 190 65
Expense Reimbursement (21) (28) (11) (25)
------- ----- ------ -----
Total Expenses After
Reimbursement 351 97 179 40
------- ----- ------ -----
Net Investment Income 2,862 541 1,222 229
Net Realized and Unrealized
Gain (Loss) on Investments
Net Realized Gain (Loss) on
Investments (1,949) (477) (737) (174)
Net Change in Unrealized
Appreciation (Depreciation) (2,286) 553 556 244
------- ----- ------ -----
Net Gain (Loss) on Investments (4,235) 76 (181) 70
------- ----- ------ -----
Net Change in Net Assets
Resulting from Operations $(1,373) $ 617 $1,041 $ 299
======= ===== ====== =====
---------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 44 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO
CALIFORNIA INTERMEDIATE- SAFECO SAFECO TAX-FREE
TAX-FREE SAFECO TERM INSURED MONEY MONEY
INCOME MUNICIPAL MUNICIPAL MUNICIPAL MARKET MARKET
FUND BOND FUND BOND FUND BOND FUND FUND FUND
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 2,476 $13,967 $364 $ 581 $7,507 $1,541
-- -- -- -- -- --
------- ------- ---- ------ ------ ------
2,476 13,967 364 581 7,507 1,541
211 1,102 35 50 598 189
35 142 5 7 364 26
38 116 6 9 94 34
1 1 -- -- -- --
1 1 -- -- -- --
3 3 -- -- -- --
10 13 9 9 11 10
4 14 1 2 10 3
3 21 6 6 43 8
5 16 1 1 32 3
3 4 3 3 4 3
-- 2 -- 2 4 --
4 19 -- 1 13 4
------- ------- ---- ------ ------ ------
318 1,454 66 90 1,173 280
-- -- (3) -- (211) (15)
------- ------- ---- ------ ------ ------
318 1,454 63 90 962 265
------- ------- ---- ------ ------ ------
2,158 12,513 301 491 6,545 1,276
(1,609) (1,664) 34 (727) -- --
5,463 14,706 2 1,565 -- --
------- ------- ---- ------ ------ ------
3,854 13,042 36 838 -- --
------- ------- ---- ------ ------ ------
$ 6,012 $25,555 $337 $1,329 $6,545 $1,276
======= ======= ==== ====== ====== ======
------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 45 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Statements of Changes in Net Assets
(Unaudited)
<TABLE>
<CAPTION>
SAFECO
SAFECO INTERMEDIATE-TERM SAFECO
HIGH-YIELD U.S. TREASURY SAFECO MANAGED
BOND FUND FUND GNMA FUND BOND FUND
---------------------- ---------------------- ---------------------- ----------------------
Six-Month Six-Month Six-Month Six-Month
Period Period Period Period
Ended Year Ended Ended Year Ended Ended Year Ended Ended Year Ended
June 30 December 31 June 30 December 31 June 30 December 31 June 30 December 31
(In Thousands) 2000 1999 2000 1999 2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operations
Net Investment Income $ 2,862 $ 6,781 $ 541 $ 1,157 $ 1,222 $ 2,513 $ 229 $ 397
Net Realized Gain
(Loss) on Investments (1,949) (1,769) (477) (33) (737) (857) (174) (274)
Net Change in
Unrealized
Appreciation
(Depreciation) (2,286) (2,107) 553 (1,619) 556 (1,604) 244 (441)
-------- ------- ------- ------- ------- ------- ------ ------
Net Change in Net
Assets Resulting from
Operations (1,373) 2,905 617 (495) 1,041 52 299 (318)
Dividends to
Shareholders from
Net Investment Income
No-Load Class (2,754) (6,470) (499) (1,077) (1,220) (2,513) (194) (346)
Class A (56) (178) (26) (44) (1) -- (15) (19)
Class B (51) (133) (16) (36) (1) -- (20) (32)
Class C (1) -- -- -- -- -- -- --
Net Realized Gain on
Investments
No-Load Class -- -- -- -- -- -- -- --
Class A -- -- -- -- -- -- -- --
Class B -- -- -- -- -- -- -- --
Class C -- -- -- -- -- -- -- --
-------- ------- ------- ------- ------- ------- ------ ------
Total (2,862) (6,781) (541) (1,157) (1,222) (2,513) (229) (397)
Net Trust Share
Transactions
No-Load Class (7,889) (3,042) (1,302) (3,442) (2,372) (235) (184) 637
Class A (276) (1,269) -- 188 100 -- (65) 311
Class B (451) 332 (120) 60 100 -- (229) 470
Class C 100 -- -- -- -- -- -- --
-------- ------- ------- ------- ------- ------- ------ ------
Total (8,516) (3,979) (1,422) (3,194) (2,172) (235) (478) 1,418
-------- ------- ------- ------- ------- ------- ------ ------
Total Change in Net
Assets (12,751) (7,855) (1,346) (4,846) (2,353) (2,696) (408) 703
Net Assets at Beginning
of Period 76,186 84,041 20,836 25,682 39,449 42,145 8,278 7,575
-------- ------- ------- ------- ------- ------- ------ ------
Net Assets at End of
Period $ 63,435 $76,186 $19,490 $20,836 $37,096 $39,449 $7,870 $8,278
======== ======= ======= ======= ======= ======= ====== ======
------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 46 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO
CALIFORNIA SAFECO INTERMEDIATE-TERM INSURED
TAX-FREE MUNICIPAL MUNICIPAL MUNICIPAL SAFECO MONEY
INCOME FUND BOND FUND BOND FUND BOND FUND MARKET FUND
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Six-Month Six-Month Six-Month Six-Month Six-Month
Period Period Period Period Period
Ended Year Ended Ended Year Ended Ended Year Ended Ended Year Ended Ended Year Ended
June 30 December 31 June 30 December 31 June 30 December 31 June 30 December 31 June 30 December 31
2000 1999 2000 1999 2000 1999 2000 1999 2000 1999
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 2,158 $ 5,037 $ 12,513 $ 26,435 $ 301 $ 621 $ 491 $ 1,030 $ 6,545 $ 10,637
(1,609) (1,041) (1,664) (1,564) 34 28 (727) 1 -- --
5,463 (14,076) 14,706 (57,414) 2 (777) 1,565 (2,928) -- --
------- -------- -------- -------- ------- ------- ------- ------- -------- --------
6,012 (10,080) 25,555 (32,543) 337 (128) 1,329 (1,897) 6,545 10,637
(2,124) (4,966) (12,473) (26,332) (301) (621) (491) (1,030) (6,434) (10,421)
(17) (38) (20) (46) -- -- -- -- (88) (168)
(17) (33) (20) (57) -- -- -- -- (22) (48)
-- -- -- -- -- -- -- -- (1) --
-- -- -- -- -- (28) -- -- -- --
-- -- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- -- --
------- -------- -------- -------- ------- ------- ------- ------- -------- --------
(2,158) (5,037) (12,513) (26,435) (301) (649) (491) (1,030) (6,545) (10,637)
(2,775) (11,817) (16,150) (10,899) (1,113) (103) (3,811) 293 (13,894) 11,453
(79) 189 (252) 96 -- -- -- -- (450) 1,368
196 4 (591) 118 -- -- -- -- (169) 309
-- -- -- -- -- -- -- -- 100 --
------- -------- -------- -------- ------- ------- ------- ------- -------- --------
(2,658) (11,624) (16,993) (10,685) (1,113) (103) (3,811) 293 (14,413) 13,130
------- -------- -------- -------- ------- ------- ------- ------- -------- --------
1,196 (26,741) (3,951) (69,663) (1,077) (880) (2,973) (2,634) (14,413) 13,130
87,321 114,062 472,518 542,181 14,607 15,487 22,364 24,998 240,459 227,329
------- -------- -------- -------- ------- ------- ------- ------- -------- --------
$88,517 $ 87,321 $468,567 $472,518 $13,530 $14,607 $19,391 $22,364 $226,046 $240,459
======= ======== ======== ======== ======= ======= ======= ======= ======== ========
-----------------------------------------------------------------------------------------------------------------------
<CAPTION>
SAFECO
TAX-FREE MONEY
MARKET FUND
-----------------------
Six-Month
Period
Ended Year Ended
June 30 December 31
2000 1999
------------------------------------------------------------------------------------------------------------
<S> <C>
$ 1,276 $ 2,153
-- --
-- --
---------- ------------
1,276 2,153
(1,276) (2,153)
-- --
-- --
-- --
-- --
-- --
-- --
-- --
---------- ------------
(1,276) (2,153)
(4,183) (134)
-- --
-- --
-- --
---------- ------------
(4,183) (134)
---------- ------------
(4,183) (134)
77,323 77,457
---------- ------------
$73,140 $77,323
========== ============
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 47 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO High-Yield Bond Fund
No-Load Class
<TABLE>
<CAPTION>
Six-Month Three-Month For the
Period Ended For the Year Ended Period Ended Year Ended
June 30 December 31 December 31 September 30
---------------------------------------------------------------------
2000 1999 1998 1997 1996 1996
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value at
Beginning of Period $ 8.38 $ 8.78 $ 9.13 $ 8.82 $ 8.79 $ 8.68
Income from Investment
Operations
Net Investment Income 0.35 0.71 0.74 0.77 0.19 0.78
Net Realized and
Unrealized Gain (Loss)
on Investments (0.51) (0.40) (0.35) 0.31 0.03 0.11
------- ------- ------- ------- ------- -------
Total from Investment
Operations (0.16) 0.31 0.39 1.08 0.22 0.89
Less Distributions
Dividends from Net
Investment Income (0.35) (0.71) (0.74) (0.77) (0.19) (0.78)
------- ------- ------- ------- ------- -------
Net Asset Value at End
of Period $ 7.87 $ 8.38 $ 8.78 $ 9.13 $ 8.82 $ 8.79
======= ======= ======= ======= ======= =======
Total Return (1.84%)* 3.74% 4.45% 12.79% 2.50%* 10.79%
Net Assets at End of
Period (000's) $61,056 $73,004 $79,696 $71,058 $50,298 $47,880
Ratio of Gross Expenses
to Average Net Assets 1.11%** 0.99% 0.92% 0.91% 0.90%** 0.94%
Ratio of Net Expenses to
Average Net Assets 1.05%** 0.95% 0.92% 0.91% 0.90%** 0.94%
Ratio of Net Investment
Income to Average Net
Assets 8.94%** 8.31% 8.26% 8.58% 8.56%** 8.99%
Portfolio Turnover Rate 49.57%** 70.65% 64.22% 85.06% 35.01%** 92.65%
------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
- 48 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Intermediate-Term U.S. Treasury Fund
No-Load Class
<TABLE>
<CAPTION>
Six-Month Three-Month For the
Period Ended Period Ended Year Ended
June 30 For the Year Ended December 31 December 31 September 30
------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1996
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value at
Beginning of Period $ 9.99 $ 10.74 $ 10.34 $ 10.11 $ 10.10 $ 10.24
Income from Investment
Operations
Net Investment Income 0.28 0.54 0.57 0.58 0.16 0.54
Net Realized and
Unrealized Gain (Loss)
on Investments 0.04 (0.75) 0.40 0.23 0.01 (0.14)
------- ---------- ---------- ---------- ------- -------
Total from Investment
Operations 0.32 (0.21) 0.97 0.81 0.17 0.40
Less Distributions
Dividends from Net
Investment Income (0.28) (0.54) (0.57) (0.58) (0.16) (0.54)
------- ---------- ---------- ---------- ------- -------
Net Asset Value at End
of Period $ 10.03 $ 9.99 $ 10.74 $ 10.34 $ 10.11 $ 10.10
======= ========== ========== ========== ======= =======
Total Return 3.23%* (1.98%) 9.61% 8.29% 1.68%* 4.00%
Net Assets at End of
Period (000's) $17,860 $ 19,092 $ 24,061 $ 15,698 $14,679 $14,668
Ratio of Gross Expenses
to Average Net Assets 1.22%** 1.10% 0.90% 0.92% 1.07%** 1.01%
Ratio of Net Expenses to
Average Net Assets 0.95%** 0.93% 0.90% 0.92% 0.85%** 1.01%
Ratio of Net Investment
Income to Average Net
Assets 5.64%** 5.22% 5.38% 5.74% 6.30%** 5.30%
Portfolio Turnover Rate 217.51%** 13.93% 2.83% 82.36% 125.42%** 294.25%
---------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
- 49 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO GNMA Fund
No-Load Class
<TABLE>
<CAPTION>
Six-Month Three-Month For the
Period Ended For the Year Ended Period Ended Year Ended
June 30 December 31 December 31 September 30
---------------------------------------------------------------------
2000 1999 1998 1997 1996 1996
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value at
Beginning of Period $ 9.10 $ 9.64 $ 9.57 $ 9.36 $ 9.26 $ 9.45
Income from Investment
Operations
Net Investment Income 0.30 0.55 0.57 0.60 0.15 0.60
Net Realized and
Unrealized Gain (Loss)
on Investments (0.04) (0.54) 0.07 0.21 0.10 (0.19)
------- ------- ------- ------- ------- -------
Total from Investment
Operations 0.26 0.01 0.64 0.81 0.25 0.41
Less Distributions
Dividends from Net
Investment Income (0.30) (0.55) (0.57) (0.60) (0.15) (0.60)
------- ------- ------- ------- ------- -------
Net Asset Value at End
of Period $ 9.06 $ 9.10 $ 9.64 $ 9.57 $ 9.36 $ 9.26
======= ======= ======= ======= ======= =======
Total Return 2.84%* 0.16% 6.84% 8.97% 2.71%* 4.48%
Net Assets at End of
Period (000's) $36,894 $39,449 $42,145 $38,172 $39,543 $39,703
Ratio of Gross Expenses
to Average Net Assets 1.01%** 0.98% 0.94% 0.93% 1.01%** 1.03%
Ratio of Net Expenses to
Average Net Assets 0.95%** 0.94% 0.94% 0.93% 1.01%** 1.03%
Ratio of Net Investment
Income to Average
Net Assets 6.49%** 5.92% 5.90% 6.40% 6.43%** 6.42%
Portfolio Turnover Rate 213.93%** 132.51% 104.63% 82.70% 51.06%** 47.45%
------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
- 50 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Managed Bond Fund
No-Load Class
<TABLE>
<CAPTION>
Six-Month
Period Ended
June 30 For the Year Ended December 31
-------------------------------------------------
2000 1999 1998 1997 1996
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value at Beginning
of Period $ 7.90 $ 8.64 $ 8.60 $ 8.35 $ 8.77
Income from Investment
Operations
Net Investment Income 0.23 0.41 0.42 0.42 0.41
Net Realized and Unrealized
Gain (Loss) on Investments 0.07 (0.74) 0.29 0.25 (0.42)
------- ------- ------- ------- -------
Total from Investment
Operations 0.30 (0.33) 0.71 0.67 (0.01)
Less Distributions
Dividends from Net
Investment Income (0.23) (0.41) (0.42) (0.42) (0.41)
Distributions from Realized
Gains -- -- (0.25) -- --
------- ------- ------- ------- -------
Total Distributions (0.23) (0.41) (0.67) (0.42) (0.41)
------- ------- ------- ------- -------
Net Asset Value at End of
Period $ 7.97 $ 7.90 $ 8.64 $ 8.60 $ 8.35
======= ======= ======= ======= =======
Total Return 3.90%* (3.82%) 8.43% 8.23% 0.02%
Net Assets at End of Period
(000's) $ 6,655 $ 6,781 $ 6,757 $ 4,627 $ 4,215
Ratio of Gross Expenses to
Average Net Assets 1.50%** 1.41% 1.16% 1.15% 1.27%
Ratio of Net Expenses to
Average Net Assets 0.90%** 0.94% 1.16% 1.15% 1.27%
Ratio of Net Investment
Income to Average Net
Assets 5.97%** 5.10% 4.79% 4.98% 4.86%
Portfolio Turnover Rate 109.02%** 146.87% 132.76% 176.50% 136.29%
--------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
- 51 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO California Tax-Free Income Fund
No-Load Class
<TABLE>
<CAPTION>
Six-Month Nine-Month
Period Ended Period Ended
June 30 For the Year Ended December 31 December 31
-------------------------------------------------------------
2000 1999 1998 1997 1996
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value at
Beginning of Period $ 11.04 $ 12.74 $ 12.93 $ 12.22 $ 11.86
Income from Investment
Operations
Net Investment Income 0.29 0.56 0.60 0.60 0.47
Net Realized and
Unrealized Gain (Loss)
on Investments 0.53 (1.70) 0.18 0.76 0.39
------- --------- ---------- --------- -------
Total from Investment
Operations 0.82 (1.14) 0.78 1.36 0.86
Less Distributions
Dividends from Net
Investment Income (0.29) (0.56) (0.60) (0.60) (0.47)
Distributions from
Realized Gains -- -- (0.37) (0.05) (0.03)
------- --------- ---------- --------- -------
Total Distributions (0.29) (0.56) (0.97) (0.65) (0.50)
------- --------- ---------- --------- -------
Net Asset Value at End
of Period $ 11.57 $ 11.04 $ 12.74 $ 12.93 $ 12.22
======= ========= ========== ========= =======
Total Return 7.51%* (9.18%) 6.19% 11.55% 7.42%*
Net Assets at End of
Period (000's) $86,790 $ 85,782 $ 112,457 $ 88,379 $72,084
Ratio of Expenses to
Average Net Assets 0.74%** 0.74% 0.68% 0.68% 0.69%**
Ratio of Net Investment
Income to Average Net
Assets 5.17%** 4.66% 4.60% 4.88% 5.21%**
Portfolio Turnover Rate 40.15%** 24.66% 38.78% 9.83% 10.52%**
----------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
- 52 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Municipal Bond Fund
No-Load Class
<TABLE>
<CAPTION>
Six-Month Nine-Month
Period Ended For the Year Ended Period Ended
June 30 December 31 December 31
---------------------------------------------------------------
2000 1999 1998 1997 1996
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value at
Beginning of Period $ 12.89 $ 14.45 $ 14.52 $ 13.98 $ 13.69
Income from Investment
Operations
Net Investment Income 0.35 0.69 0.73 0.75 0.57
Net Realized and
Unrealized Gain (Loss)
on Investments 0.37 (1.56) 0.17 0.70 0.29
-------- -------- -------- -------- --------
Total from Investment
Operations 0.72 (0.87) 0.90 1.45 0.86
Less Distributions
Dividends from Net
Investment Income (0.35) (0.69) (0.73) (0.75) (0.57)
Distributions from
Realized Gains -- -- (0.24) (0.16) --
-------- -------- -------- -------- --------
Total Distributions (0.35) (0.69) (0.97) (0.91) (0.57)
-------- -------- -------- -------- --------
Net Asset Value at End
of Period $ 13.26 $ 12.89 $ 14.45 $ 14.52 $ 13.98
======== ======== ======== ======== ========
Total Return 5.68%* (6.18%) 6.35% 10.68% 6.42%*
Net Assets at End of
Period (000's) $467,114 $470,267 $539,860 $502,946 $480,970
Ratio of Expenses to
Average Net Assets 0.62%** 0.60% 0.51% 0.51% 0.53%**
Ratio of Net Investment
Income to Average Net
Assets 5.46%** 5.04% 5.01% 5.31% 5.53%**
Portfolio Turnover Rate 56.17%** 16.84% 20.80% 13.52% 6.66%**
----------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
- 53 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Intermediate-Term Municipal Bond Fund
No-Load Class
<TABLE>
<CAPTION>
Six-Month Nine-Month
Period Ended Period Ended
June 30 For the Year Ended December 31 December 31
---------------------------------------------------------------
2000 1999 1998 1997 1996
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value at
Beginning of Period $ 10.46 $ 11.02 $ 10.92 $ 10.61 $ 10.49
Income from Investment
Operations
Net Investment Income 0.23 0.45 0.47 0.47 0.35
Net Realized and
Unrealized Gain (Loss)
on Investments 0.03 (0.54) 0.10 0.31 0.12
------- ---------- ---------- ---------- -------
Total from Investment
Operations 0.26 (0.09) 0.57 0.78 0.47
Less Distributions
Dividends from Net
Investment Income (0.23) (0.45) (0.47) (0.47) (0.35)
Distributions from
Realized Gains -- (0.02) -- -- --
------- ---------- ---------- ---------- -------
Total Distributions (0.23) (0.47) (0.47) (0.47) (0.35)
------- ---------- ---------- ---------- -------
Net Asset Value at End
of Period $ 10.49 $ 10.46 $ 11.02 $ 10.92 $ 10.61
======= ========== ========== ========== =======
Total Return 2.49%* (0.84%) 5.33% 7.50% 4.53%*
Net Assets at End of
Period (000's) $13,530 $ 14,607 $ 15,487 $ 13,780 $14,172
Ratio of Gross Expenses
to Average Net Assets 0.95%** 0.92% 0.83% 0.83% 0.89%**
Ratio of Net Expenses to
Average Net Assets 0.90%** 0.86% 0.83% 0.83% 0.89%**
Ratio of Net Investment
Income to Average Net
Assets 4.40%** 4.18% 4.25% 4.37% 4.40%**
Portfolio Turnover Rate 7.18%** 10.51% 4.29% 10.52% 12.81%**
-------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
- 54 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Insured Municipal Bond Fund
No-Load Class
<TABLE>
<CAPTION>
Six-Month Nine-Month
Period Ended Period Ended
June 30 For the Year Ended December 31 December 31
---------------------------------------------------------------
2000 1999 1998 1997 1996
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value at
Beginning of Period $ 9.97 $ 11.33 $ 11.36 $ 10.74 $ 10.46
Income from Investment
Operations
Net Investment Income 0.25 0.48 0.49 0.50 0.37
Net Realized and
Unrealized Gain (Loss)
on Investments 0.42 (1.36) 0.17 0.62 0.28
------- ---------- ---------- ---------- -------
Total from Investment
Operations 0.67 (0.88) 0.66 1.12 0.65
Less Distributions
Dividends from Net
Investment Income (0.25) (0.48) (0.49) (0.50) (0.37)
Distributions from
Realized Gains -- -- (0.20) -- --
------- ---------- ---------- ---------- -------
Total Distributions (0.25) (0.48) (0.69) (0.50) (0.37)
------- ---------- ---------- ---------- -------
Net Asset Value at End
of Period $ 10.39 $ 9.97 $ 11.33 $ 11.36 $ 10.74
======= ========== ========== ========== =======
Total Return 6.77%* (7.99%) 5.90% 10.70% 6.31%*
Net Assets at End of
Period (000's) $19,391 $ 22,364 $ 24,998 $ 16,516 $13,187
Ratio of Gross Expenses
to Average Net Assets 0.90%** 0.91% 0.88% 0.92% 1.00%**
Ratio of Net Expenses to
Average Net Assets 0.90%** 0.88% 0.88% 0.92% 1.00%**
Ratio of Net Investment
Income to Average Net
Assets 4.92%** 4.45% 4.29% 4.56% 4.66%**
Portfolio Turnover Rate 74.30%** 32.78% 27.30% 13.02% 14.86%**
-------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
- 55 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Money Market Fund
No-Load Class
<TABLE>
<CAPTION>
Six-Month Nine-Month For the
Period Ended For the Year Ended Period Ended Year Ended
June 30 December 31 December 31 March 31
----------------------------------------------------------------------
2000 1999 1998 1997 1996 1996
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value at
Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment
Operations
Net Investment Income 0.03 0.05 0.05 0.05 0.03 0.05
Less Distributions
Dividends from Net
Investment Income (0.03) (0.05) (0.05) (0.05) (0.03) (0.05)
-------- -------- -------- -------- -------- --------
Net Asset Value at End
of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total Return 2.77%* 4.65% 5.08% 4.93% 3.54%* 5.15%
Net Assets at End of
Period (000's) $222,031 $240,459 $227,329 $176,623 $161,356 $165,122
Ratio of Gross Expenses
to Average Net Assets 0.98%** 0.95% 0.79% 0.78% 0.81%** 0.78%
Ratio of Net Expenses to
Average Net Assets 0.80%** 0.81% 0.79% 0.78% 0.81%** 0.78%
Ratio of Net Investment
Income to Average Net
Assets 5.52%** 4.55% 4.97% 4.82% 4.66%** 5.04%
-------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
- 56 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Tax-Free Money Market Fund
No-Load Class
<TABLE>
<CAPTION>
Six-Month Nine-Month For the
Period Ended Period Ended Year Ended
June 30 For the Year Ended December 31 December 31 March 31
------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1996
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value at
Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment
Operations
Net Investment Income 0.02 0.03 0.03 0.03 0.02 0.03
Less Distributions
Dividends from Net
Investment Income (0.02) (0.03) (0.03) (0.03) (0.02) (0.03)
------- ---------- ---------- ---------- ------- -------
Net Asset Value at End
of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ========== ========== ========== ======= =======
Total Return 1.69%* 2.77% 3.07% 3.12% 2.29%* 3.44%
Net Assets at End of
Period (000's) $73,140 $ 77,323 $ 77,457 $ 75,437 $73,164 $79,702
Ratio of Expenses to
Average Net Assets 0.70%**++ 0.66%+ 0.63% 0.63% 0.65%** 0.65%
Ratio of Net Investment
Income to Average Net
Assets 3.40%** 2.72% 3.04% 3.11% 3.03%** 3.40%
--------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Net of fee waiver by advisor. Absent the waiver, the ratio of expenses to
average net assets would have been 0.70% for the year ended December 31,
1999.
++ Net of fee waiver by advisor. Absent the waiver, the ratio of expenses to
average net assets would have been 0.74% for the six-month period ended
June 30, 2000. The fee waiver expired on April 30, 2000.
- 57 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. GENERAL
This financial report is on 10 of the SAFECO Mutual Funds. Each Fund is a
series of one of the following trusts listed below. Each trust is registered
under the Investment Company Act of 1940, as amended, as a diversified, open-
end management investment company.
SAFECO Taxable Bond Trust
SAFECO High-Yield Bond Fund
SAFECO Intermediate-Term U.S. Treasury Fund
SAFECO GNMA Fund
SAFECO Managed Bond Trust
SAFECO Managed Bond Fund
SAFECO Tax-Exempt Bond Trust
SAFECO California Tax-Free Income Fund
SAFECO Municipal Bond Fund
SAFECO Intermediate-Term Municipal Bond Fund
SAFECO Insured Municipal Bond Fund
SAFECO Money Market Trust
SAFECO Money Market Fund
SAFECO Tax-Free Money Market Fund
Effective May 1, 2000, the GNMA Fund began issuing two new classes of
shares--Class A and Class B shares. Also effective May 1, 2000, the High-Yield
Bond Fund and Money Market Fund began issuing one new class of shares--Class C
shares.
In connection with issuing Class A, B and C shares, the Funds have adopted a
Plan of Distribution (the "Plan"). Under the Plan, these classes pay a service
fee to the distributor, SAFECO Securities, Inc., for selling its shares at the
annual rate of 0.25% of the average daily net assets of each class. Class B and
Class C shares also pay the distributor a distribution fee at the annual rate
of 0.75% of the average daily net assets of each class. Under the plan, the
distributor uses the service fees primarily to compensate persons for selling
shares in each class and for providing ongoing services to shareholders. The
distributor uses the distribution fees primarily to offset commissions it pays
to financial advisors for selling these shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles.
Security Valuation. Bonds are stated on the basis of valuations provided by
a pricing service, which uses information with respect to transactions in
bonds, quotations from bond dealers, market transactions in comparable
securities and various relationships between securities in determining value.
When valuations are not readily available, securities are valued at fair value
as determined in good faith by the Board of Trustees. Investments in equity
securities are valued at the last reported sales price, unless there are no
transactions in which case they are valued at the last reported bid price.
Investments in the money market funds consist of short-term securities maturing
within
- 58 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
thirteen months from the date of purchase. Securities in the Tax-Free Money
Market Fund with maturities of more than thirteen months have floating rates
and/or demand features which qualify them as short-term securities. Securities
purchased at par are valued at cost. All other securities in the money market
funds are valued at amortized cost, which approximates market value. Other
temporary investments purchased at par are valued at cost.
Security Transactions. Security transactions are recorded on the trade date.
The cost of the portfolios is the same for financial statement and Federal
income tax purposes. Realized gains and losses from security transactions are
determined using the identified cost basis.
Securities Purchased on a When-Issued Basis. Securities purchased on a when-
issued or delayed basis may be settled a month or more after the trade date.
The securities purchased are carried in the portfolio at market and are subject
to market fluctuation during this period. These securities begin earning
interest on the settlement date. As commitments to purchase when-issued
securities become fixed, the Funds segregate liquid assets in an amount equal
to the total obligation.
Income Recognition. Bond premiums and original issue discounts are amortized
to either call or maturity dates. In the Tax-Exempt Bond Trust, market discount
on bonds purchased after April 30, 1993 is recorded as taxable income at
disposition. Interest is accrued on bonds and temporary investments daily. The
Managed Bond Fund has elected to amortize premiums on securities purchased
above par value. The funds in the Taxable Bond Trust have not elected to
amortize premiums on securities purchased above par value.
Dividends and Distributions to Shareholders. Net investment income is
declared as a dividend to shareholders of record as of the close of each
business day and payment is made as of the last business day of each month. Net
gains realized from security transactions, if any, are normally distributed to
shareholders at the end of December. Income dividends and capital gain
distributions are determined in accordance with income tax regulation which may
differ from generally accepted accounting principles. These differences are
primarily due to differing treatments for wash sale deferrals.
Undistributed/overdistributed net investment income may include temporary
financial reporting and tax basis differences which will reverse in the
subsequent year.
Federal Income and Excise Taxes. Each Fund intends to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies by distributing substantially all taxable income to their
shareholders in a manner which results in no tax to the Funds. Therefore, no
Federal income or excise tax provision is required. In addition, the Tax-Exempt
Bond Trust and the Tax-Free Money Market Fund intend to satisfy conditions
which will enable them to pay dividends which, for shareholders, are exempt
from Federal income taxes. Any portion of dividends representing net short-term
capital gains, however, is not exempt and is treated as taxable dividends for
Federal income tax purposes.
- 59 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
3. INVESTMENT TRANSACTIONS
Following is a summary of investment transactions (excluding short-term
securities) during the six-month period ended June 30, 2000:
<TABLE>
<CAPTION>
(In Thousands) Purchases Sales
---------------------------------------------------------
<S> <C> <C>
High-Yield Bond Fund $ 15,855 $ 29,910
Intermediate-Term U.S. Treasury Fund 21,406 22,783
GNMA Fund 39,987 41,700
Managed Bond Fund 4,375 4,624
California Tax-Free Income Fund 16,489 22,789
Municipal Bond Fund 127,828 138,273
Intermediate-Term Municipal Bond Fund 493 1,239
Insured Municipal Bond Fund 7,284 11,026
---------------------------------------------------------
</TABLE>
Purchases include $21,406 and $1,170 of U.S. Government securities in the
Intermediate-Term U.S. Treasury and Managed Bond Funds, respectively.
Sales include $22,783 and $2,847 of U.S. Government securities in the
Intermediate-Term U.S. Treasury and Managed Bond Funds, respectively.
- 60 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Money Market Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
----------------------------------------------------------------
COMMERCIAL PAPER - 43.0%
Asset Backed Securities - 9.7%
$11,000 Apreco, Inc.
6.60%, due 7/24/00 $ 10,950
6,000 Apreco, Inc.
6.56%, due 7/31/00 5,969
5,000 Apreco, Inc.
6.60%, due 7/24/00 4,981
6,000 Moat Funding LLC
6.18%, due 7/17/00 5,986
5,000 Moat Funding LLC
6.56%, due 7/28/00 4,977
Consumer Finance - 4.1%
6,000 Countrywide Funding Corp.
6.55%, due 7/05/00 5,998
3,300 Countrywide Funding Corp.
6.90%, due 7/07/00 3,297
Financial (Diversified) - 14.6%
6,000 Associates First Capital BV
6.58%, due 7/06/00 5,997
5,700 Associates First Capital BV
6.58%, due 7/13/00 5,690
5,000 Cafco
6.62%, due 8/04/00 4,971
5,000 Island Finance
6.60%, due 7/10/00 4,994
1,600 PHH Corporation
6.73%, due 7/07/00 1,599
6,000 PHH Corporation
6.77%, due 7/20/00 5,981
3,700 PHH Corporation
6.77%, due 7/21/00 3,687
Investment Banking & Brokerage - 6.1%
3,500 Goldman Sachs Group, LP
6.53%, due 7/11/00 3,495
4,200 Lehman Brothers Holdings, Inc.
6.19%, due 9/07/00 4,152
6,000 Salomon Smith Barney
6.52%, due 7/03/00 6,000
Photography/Imaging - 5.0%
5,000 Xerox Corp.
6.76%, due 7/05/00 4,998
6,380 Xerox Corp.
7.20%, due 7/05/00 6,377
Trucks & Parts - 3.5%
2,000 Cooperative Association of Tractor Dealers
6.57%, due 7/07/00 (MBIA) 1,998
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
----------------------------------------------------------------
$ 6,000 Cooperative Association of Tractor Dealers
6.57%, due 7/14/00 [MBIA] $ 5,988
--------
TOTAL COMMERCIAL PAPER 97,135
--------
CORPORATE BONDS - 37.5%
Banks (Major Regional) - 5.7%
5,000 First Union Corp.
5.625%, due 2/12/01 4,970
3,000 MBNA Corp.
7.22%, due 2/09/01 3,004
5,000 MBNA Corp.
7.425%, due 9/01/00
Put Date 9/01/00 5,001
Banks (Regional) - 4.8%
10,635 PNC Funding Corp.
9.875 %, due 3/01/01 10,820
Consumer Finance - 0.9%
1,630 Countrywide Funding Corp.
5.62%, due 10/16/00 1,626
500 Countrywide Funding Corp.
7.32%, due 8/15/00 501
Financial (Diversified) - 1.2%
2,625 Heller Financial, Inc.
5.875%, due 11/01/00 2,620
Health Care (Specialized Services) - 3.2%
7,300 Everett Clinic
6.72%, due 12/01/21
Put Date 7/06/00 7,300
Homebuilding - 3.1%
6,933 Summer Station Apartments, LLC
6.67%, due 6/01/19
Put Date 7/05/00 6,933
Insurance (Life & Health) - 4.9%
11,000 First Allamerica Financial
6.68%, due 8/05/04
Put Date 8/05/00 11,000
Investment Banking & Brokerage - 10.7%
8,000 # Goldman Sachs Group, Inc. (144A)
6.935%, due 7/13/01 8,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 35 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Money Market Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
-------------------------------------------------------------------------------
$8,000 Lehman Brothers Holdings, Inc.
6.775%, due 5/23/01
Put Date 9/07/00 $ 8,000
8,100 Morgan Stanley Dean Witter Co.
6.90%, due 3/13/01
Put Date 12/12/00 8,100
Telecommunications (Equipment) - 3.0%
6,870 AT&T Capital Corp.
6.25%, due 5/15/01 6,839
--------
TOTAL CORPORATE BONDS 84,714
--------
MUNICIPAL BONDS - 19.3%
Health Care (Diversified) - 3.7%
100 Bell County Health Facilities Development Revenue
7.05%, due 7/01/00
Put Date 7/06/00 100
150 Maury County Health and Educational Facilities Board
Healthcare Revenue
7.05%, due 12/01/00
Put Date 7/06/00 150
8,100 New Hampshire Business Finance Authority Revenue
7.50%, due 6/01/28
Put Date 7/06/00 8,100
Health Care (Long-Term Care) - 7.7%
3,150 Bowie Assisted Living
7.05%, due 7/01/23
Put Date 7/05/00 3,150
2,950 Maryland Health and Higher Education Facilities Authority
Revenue (University of Maryland Medical System)
7.00%, due 7/01/29
Put Date 7/05/00 2,950
6,185 Maryland Health and Higher Education Facilities Authority
Revenue
7.00%, due 1/01/28
Put Date 7/05/00 6,185
200 Maryland Health and Higher Education Facilities Authority
Revenue
7.00%, due 7/01/27
Put Date 7/06/00 200
4,900 Village Green Finance Co.
6.67%, due 11/01/22
Put Date 7/05/00 4,900
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
<C> <S> <C>
-------------------------------------------------------------------------
Homebuilding - 3.0%
$1,000 Breckenridge Terrace LLC Tax Revenue
6.73438%, due 5/01/39
Put Date 7/06/00 $ 1,000
2,000 Eagle County Colorado Housing Facilities Revenue
6.734%, due 5/01/39
Put Date 7/06/00 2,000
3,885 Tenderfoot Seasonal Housing Facilities Revenue
6.734%, due 7/01/35
Put Date 7/06/00 3,885
Muni's (Municipalities) - 0.5%
1,025 Allentown General Obligation Unlimited
5.80%, due 11/15/00 1,022
Retail (General Merchandise) - 3.5%
8,000 Racetrac Capital, LLC
6.67%, due 4/01/18
Put Date 7/05/00 8,000
Services (Commercial & Consumer) - 0.9%
2,000 Wake Forest University
6.67%, due 7/01/17
Put Date 7/05/00 2,000
--------
TOTAL MUNICIPAL BONDS 43,642
--------
CASH EQUIVALENTS - 0.3%
Investment Companies
625 AIM Short-Term Investments Co. Liquid Assets Money
Market Portfolio (Institutional Shares) 625
--------
TOTAL CASH EQUIVALENTS 625
--------
TOTAL INVESTMENTS - 100.1% 226,116
Other Assets, less Liabilities (70)
--------
NET ASSETS $226,046
========
-------------------------------------------------------------------------
</TABLE>
If a Put date is indicated, the Fund has a right to sell a specified underlying
security at an exercise price equal to the amortized cost of the underlying
security plus interest, if any, as of that date.
Securities with a maturity of more than thirteen months have variable rates
and/or demand features which qualify them as short-term securities. Rates shown
are those in effect on 6/30/00. These rates change periodically based on
specified market rate or indices.
# Securities are exempt from registration and restricted as to resale only to
dealers, or through a dealer to an "accredited investor" or a "qualified
institutional buyer." The total cost of such securities is $8,000,000 and the
total value is 3.5% of net assets.
SEE NOTES TO FINANCIAL STATEMENTS
- 36 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
SAFECO GNMA FUND
----------------------------------------------------------------
No-Load Class A Class B
------------------------------- ------------ ------------
Six-Month Two-Month* Two-Month*
Period Ended Year Ended Period Ended Period Ended
June 30 December 31 June 30 June 30
2000 1999 2000 2000
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares:
Sales 209 1,131 11 11
Reinvestments 83 200 -- --
Redemptions (555) (1,367) -- --
------- ------- ---- ----
Net Change (263) (36) 11 11
======= ======= ==== ====
Amounts:
Sales $ 1,880 $10,681 $100 $100
Reinvestments 749 1,869 -- --
Redemptions (5,001) (12,785) -- --
------- ------- ---- ----
Net Change $(2,372) $ (235) $100 $100
======= ======= ==== ====
---------------------------------------------------------------------------------
</TABLE>
* For the period from April 30, 2000 (initial issue date of Class A and Class
B shares) through June 30, 2000.
<TABLE>
<CAPTION>
SAFECO MUNICIPAL BOND FUND
-------------------------------------------------------------------------------
No-Load Class A Class B
------------------------- ------------------------- -------------------------
Six-Month Six-Month Six-Month
Period Ended Year Ended Period Ended Year Ended Period Ended Year Ended
June 30 December 31 June 30 December 31 June 30 December 31
2000 1999 2000 1999 2000 1999
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares:
Sales 4,164 6,634 -- 9 2 27
Reinvestments 504 1,231 1 1 1 3
Redemptions (5,915) (8,766) (20) (3) (49) (22)
-------- --------- ----- ---- ----- -----
Net Change (1,247) (901) (19) 7 (46) 8
======== ========= ===== ==== ===== =====
Amounts:
Sales $ 54,125 $ 92,371 $ -- $125 $ 26 $ 369
Reinvestments 6,529 16,926 8 18 11 43
Redemptions (76,804) (120,196) (260) (47) (628) (294)
-------- --------- ----- ---- ----- -----
Net Change $(16,150) $ (10,899) $(252) $ 96 $(591) $ 118
======== ========= ===== ==== ===== =====
</TABLE>
- 63 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
SAFECO INTERMEDIATE-TERM SAFECO INSURED SAFECO TAX-FREE
MUNICIPAL BOND FUND MUNICIPAL BOND FUND MONEY MARKET FUND
------------------------- ------------------------- -------------------------
No-Load No-Load No-Load
------------------------- ------------------------- -------------------------
Six-Month Six-Month Six-Month
Period Ended Year Ended Period Ended Year Ended Period Ended Year Ended
June 30 December 31 June 30 December 31 June 30 December 31
2000 1999 2000 1999 2000 1999
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares:
Sales 123 226 301 921 25,450 64,599
Reinvestments 14 35 20 51 935 1,944
Redemptions (243) (270) (698) (935) (30,568) (66,677)
------- ------- ------- -------- -------- --------
Net Change (106) (9) (377) 37 (4,183) (134)
======= ======= ======= ======== ======== ========
Amounts:
Sales $ 1,276 $ 2,434 $ 3,054 $ 9,799 $ 25,450 $ 64,599
Reinvestments 144 384 203 552 935 1,944
Redemptions (2,533) (2,921) (7,068) (10,058) (30,568) (66,677)
------- ------- ------- -------- -------- --------
Net Change $(1,113) $ (103) $(3,811) $ 293 $ (4,183) $ (134)
======= ======= ======= ======== ======== ========
</TABLE>
- 64 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
5. COMPONENTS OF NET ASSETS
At June 30, 2000, the components of net assets were as follows:
<TABLE>
<CAPTION>
SAFECO
SAFECO INTERMEDIATE-TERM
HIGH-YIELD U.S. TREASURY SAFECO
(In Thousands) BOND FUND FUND GNMA FUND
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Aggregate Gross Unrealized
Appreciation on Investments
in Which There is an Excess
of Value Over Identified
Cost $ 439 $ 152 $ 186
Aggregate Gross Unrealized
Depreciation on Investments
in Which There is an Excess
of Identified Cost Over
Value (5,402) (151) (577)
------- ------- -------
Net Unrealized
Appreciation/(Depreciation) (4,963) 1 (391)
Accumulated Net Realized
Gain (Loss) on Investments (4,115)** (759)** (3,178)**
Paid in Capital (Par Value
$.001, Unlimited Shares
Authorized) 72,513 20,248 40,665
------- ------- -------
Net Assets at June 30, 2000 $63,435 $19,490 $37,096
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
SAFECO
SAFECO CALIFORNIA SAFECO
MANAGED TAX-FREE MUNICIPAL
(In Thousands) BOND FUND INCOME FUND BOND FUND
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aggregate Gross
Unrealized Appreciation
on Investments in Which
There is an Excess of
Value Over Identified
Cost $ 33 $ 3,034 $ 29,931
Aggregate Gross
Unrealized Depreciation
on Investments in Which
There is an Excess of
Identified Cost Over
Value (127) (2,687) (8,070)
------ ------- --------
Net Unrealized
Appreciation
(Depreciation) (94) 347 21,861
Accumulated Net Realized
Gain (Loss) on
Investments:
Wash Sale Deferral* (26) -- --
Other (422)** (2,650)** (3,228)**
Paid in Capital (Par
Value $.001, Unlimited
Shares Authorized) 8,412 90,820 449,934
------ ------- --------
Net Assets at June 30,
2000 $7,870 $88,517 $468,567
====== ======= ========
-----------------------------------------------------------------------------------------
</TABLE>
*Represents accumulated realized losses not currently available to offset
future distributions.
** At December 31, 1999, these funds had the following amounts of accumulated
net realized losses on investment transactions that represented capital loss
carryforwards for federal income tax purposes, which expire as follows:
<TABLE>
<CAPTION>
Amounts Expiration Dates
------- ----------------
<S> <C> <C>
High-Yield Bond Fund $2,166 2004-2007
Intermediate-Term U.S. Treasury Fund 282 2001-2006
GNMA Fund 2,441 2001-2004
Managed Bond Fund 248 2007
California Tax-Free Income Fund 1,042 2007
Municipal Bond Fund 1,565 2007
</TABLE>
- 65 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
SAFECO SAFECO
INTERMEDIATE-TERM INSURED
MUNICIPAL MUNICIPAL
(In Thousands) BOND FUND BOND FUND
-----------------------------------------------------------------------------
<S> <C> <C>
Aggregate Gross Unrealized Appreciation on
Investments in Which There is an Excess of
Value Over Identified Cost $ 232 $ 523
Aggregate Gross Unrealized Depreciation on
Investments in Which There is an Excess of
Identified Cost Over Value (104) (511)
------- -------
Net Unrealized Appreciation 128 12
Accumulated Net Realized Gain (Loss) on
Investments 35 (726)
Paid in Capital (Par Value $.001, Unlimited
Shares Authorized) 13,367 20,105
------- -------
Net Assets at June 30, 2000 $13,530 $19,391
======= =======
</TABLE>
<TABLE>
<CAPTION>
SAFECO
SAFECO TAX-FREE
MONEY MARKET MONEY MARKET
(In Thousands) FUND FUND
-----------------------------------------------------------------------------
<S> <C> <C>
Aggregate Gross Unrealized Appreciation on
Investments in Which There Is an Excess of Value
Over Identified Cost $ -- $ --
Aggregate Gross Unrealized Depreciation on
Investments in Which There Is an Excess of
Identified Cost Over Value -- --
-------- -------
Net Unrealized Appreciation -- --
Paid in Capital (Par Value $.001, Unlimited Shares
Authorized) 226,046 73,140
-------- -------
Net Assets at June 30, 2000 $226,046 $73,140
======== =======
</TABLE>
6. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Advisory Fees. Effective May 1, 1999, shareholders approved an
amended and restated investment advisory contract with SAFECO Asset Management
Company. The fees paid by the Funds under the new contract are based on a
percentage of each day's net assets, which, on an annual basis, are as follows:
<TABLE>
<S> <C>
High-Yield Bond Fund:
First $250 million .65%
Next $500 million .55
Over $750 million .50
</TABLE>
<TABLE>
<S> <C>
Intermediate-Term U.S. Treasury
and GNMA Funds:
First $250 million .55%
Next $500 million .50
Next $500 million .45
Over $1.25 billion .40
</TABLE>
<TABLE>
<S> <C>
Managed Bond Fund:
First $750 million .50%
Next $500 million .45
Over $1.25 billion .40
</TABLE>
<TABLE>
<S> <C>
Intermediate-Term Municipal,
Municipal, California Tax-Free
Income and Insured Municipal
Funds:
First $250 million .50%
Next $500 million .45
Over $750 million .40
</TABLE>
- 66 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<S> <C>
Money Market and Tax-Free Money
Market Funds
First $250 million .50%
Next $500 million .45
Next $500 million .40
Over $1.25 billion .35
</TABLE>
Fund Accounting and Fund Administration Fees. Beginning May 1, 1999, SAFECO
Asset Management Company receives a fee for these services based on a
percentage of each day's net assets, which, on an annual basis is as follows:
<TABLE>
<CAPTION>
Fund Accounting: Fund Administration:
<S> <C> <C> <C>
First $200 million .04% First $200 million .05%
Over $200 million .01 Over $200 million .01
</TABLE>
Transfer Agent, Shareholder Service, and Distribution Fees. SAFECO Services
Corporation receives transfer agent fees. SAFECO Securities, Inc. receives
shareholder service and distribution fees.
Notes Payable and Interest Expense. The Funds may borrow money for temporary
purposes from SAFECO Corporation or its affiliates at rates equivalent to
commercial bank interest rates. At June 30, 2000, the GNMA and Tax-Free Money
Market Funds had 6.63% notes payable to American States Economy (SAFECO
Affiliate) for $65,000 and $130,000, respectively. The notes were repaid on
July 3, 2000.
Line of Credit. The Trust, together with all other management investment
companies for which SAFECO Asset Management Company serves as investment
advisor, has line of credit arrangements with certain financial institutions.
Under these arrangements, $200 million is available to meet short-term
financing needs. No balance was outstanding under these arrangements at June
30, 2000.
Affiliate Ownership. At June 30, 2000, SAFECO Insurance Company of America
owned 500,000 shares (or 26% of outstanding shares) of the Intermediate-Term
U.S. Treasury Fund, 397,434 shares (or 31%) of the Intermediate-Term Municipal
Bond Fund, and 605,644 shares (or 33%) of the Insured Bond Fund. SAFECO Asset
Management Company owned 452,103 shares (or 46%) of the Managed Bond Fund.
Expense Reimbursement. Beginning May 1, 1999 through April 30, 2009, SAFECO
Asset Management Company has agreed to reimburse the Funds for operating
expenses (i.e., all expenses except investment advisory, distribution,
shareholder service, and interest) which exceed, on an annual basis, 0.30% of
the average daily net assets for the Money Market and Tax-Free Money Market
Funds and 0.40% for all other Funds.
Dealer Concessions. SAFECO Securities, Inc. retained the following amounts
in dealer commissions from sales of Class A shares for the six-month period
ended June 30, 2000:
<TABLE>
<CAPTION>
Commissions
Retained
(000's)
-------------------------------------------------
<S> <C>
High-Yield Bond Fund $666
Intermediate-Term U.S. Treasury Fund 242
Managed Bond Fund 10
California Tax-Free Income Fund 201
-------------------------------------------------
</TABLE>
- 67 -
<PAGE>
SAFECO FIXED-INCOME FUNDS
BOARD OF TRUSTEES:
Boh A. Dickey, Chairman
Barbara J. Dingfield
David F. Hill
Richard W. Hubbard
Richard E. Lundgren
Larry L. Pinnt
John W. Schneider
OFFICERS:
David F. Hill, President
Ronald L. Spaulding Vice President and Treasurer
David H. Longhurst Vice President and Controller
INVESTMENT ADVISOR:
SAFECO Asset Management Company
DISTRIBUTOR:
SAFECO Securities, Inc.
TRANSFER AGENT:
SAFECO Services Corporation
CUSTODIAN:
State Street Bank
CLIENT SERVICES*:
Monday-Friday,
5:30am-7:00pm Pacific Time
Nationwide: 1-800-624-5711
Deaf and Hard of Hearing TTY/TDD Service: 1-800-438-8718
* All telephone calls are tape-recorded for your protection.
FOR 24-HOUR AUTOMATED PERFORMANCE INFORMATION AND TRANSACTIONS:
Nationwide: 1-800-835-4391
MAILING ADDRESS:
SAFECO Mutual Funds
P.O. Box 34890
Seattle, WA 98124-1890
INTERNET:
www.safecofunds.com
EMAIL: [email protected]
GMF 1055 8/00
This report must be preceded or accompanied by a current prospectus.
(R) A registered trademark of SAFECO Corporation.
