<PAGE> 1
SEMIANNUAL
REPORT
March 31, 1995
Mailing Address:
SAFECO Mutual Funds
P.O. Box 34890
Seattle, WA 98124-1890 SAFECO
TAXABLE
For Account Information BOND FUNDS
or Telephone Transactions:
Nationwide: 1-800-624-5711
Seattle: 545-7319
TTY/TDD: 1-800-438-8718
SAFECO
Intermediate-Term
U.S. Treasury Fund
SAFECO
GNMA Fund
SAFECO
High-Yield
Bond Fund
[SAFECO MUTUAL FUNDS LOGO]
<PAGE> 2
PERFORMANCE INFORMATION
For the Periods Ended March 31, 1995 (Unaudited)
The performance of the Funds assumes the reinvestment of all interest and
capital gains. Operating expenses have been applied to the Funds, but not to the
indices. If portfolio operating expenses had been applied to the indices, their
values would have been lower.
Investment returns are historical and not predictive of future performance. The
Merrill Lynch High-Yield Index, GNMA Mortgage Index and Intermediate-Term
Treasury Index are representative total return benchmarks for the respective
Funds.
<TABLE>
<CAPTION>
AVERAGE ANNUAL SINCE
TOTAL RETURN 1 YEAR 5 YEAR INCEPTION
- - ---------------------------------------------------------
<S> <C> <C> <C>
SAFECO High-Yield
Bond Fund 4.19% 10.54% 8.47%*
Merrill Lynch
High-Yield Index 6.93% 14.41% 11.75%
- - ---------------------------------------------------------
SAFECO GNMA Fund 4.04% 7.54% 7.13%*
Merrill Lynch GNMA
Mortgage Index 6.57% 9.14% 8.97%
- - ---------------------------------------------------------
SAFECO Intermediate-Term
U.S. Treasury Fund 3.01% 7.43% 7.36%*
Merrill Lynch Intermediate-
Term Treasury Index 4.31% 8.16% 8.46%
- - ---------------------------------------------------------
</TABLE>
*The SAFECO Intermediate-Term U.S. Treasury and High-Yield Bond Funds' inception
date was Sept. 7, 1988. The SAFECO GNMA Fund inception date was July 15, 1986.
SAFECO HIGH-YIELD BOND FUND
ILLUSTRATION OF A $10,000 INVESTMENT
[GRAPH]
Graph comparing a $10,000 investment in the SAFECO High-Yield Bond Fund
with the Merrill Lynch High-Yield Index as of March 31, 1995.
*The Fund's inception was September 7, 1988.
Index graph comparison begins September 30, 1988.
<TABLE>
<CAPTION>
Table of Contents
====================================================
<S> <C>
President's Letter 2
SAFECO High-Yield Bond Fund 3
SAFECO GNMA Fund 8
SAFECO Intermediate-Term U.S. Treasury Fund 10
Financial Statements 12
Notes to Financial Statements 15
</TABLE>
<PAGE> 3
SAFECO GNMA FUND
ILLUSTRATION OF A $10,000 INVESTMENT
[GRAPH]
Graph comparing a $10,000 investment in the SAFECO GNMA Fund
with the Merrill Lynch GNMA Mortgage Index as of March 31, 1995.
*The Fund's inception was July 15, 1986.
Index graph comparison begins July 31, 1986.
SAFECO INTERMEDIATE-TERM U.S. TREASURY FUND
ILLUSTRATION OF A $10,000 INVESTMENT
[GRAPH]
Graph comparing a $10,000 investment in the SAFECO Intermediate-Term
U.S. Treasury Fund with the Merrill Lynch Intermediate-Term Treasury Index
as of March 31, 1995.
*The Fund's inception was September 7, 1988.
Index graph comparison begins September 30, 1988.
- 1 -
<PAGE> 4
LETTER FROM THE PRESIDENT
May 1, 1995
DEAR SHAREHOLDERS:
Nineteen ninety-four proved to be a trying year for investors. The stock
market posted below-average returns, and the bond market suffered one of its
worst years in history. So far this year, we have seen an improved picture, as
both the stock and bond markets have shown renewed strength.
[PICTURE]
[David F. Hill]
A significant factor in last year's disappointing markets was the perceived
threat of inflation. Much of the strength we have seen this year is due to
optimism that inflation is in check. Our view is that while inflationary fears
are moderating, they are still present. Because of this, we suspect interest
rates will hold in a fairly narrow range for the remainder of 1995.
Inflationary pressures will continue to affect the stock market as well.
Corporate profits will also be a significant factor: stronger earnings will bode
well for stocks, weaker earnings may bring disappointments.
While we do not profess to know which direction the market will turn in the
short term, it is interesting to note that the gains the market experienced in
the first quarter -- as measured by the S&P 500's gain of 9.73% -- is nearly
equal to the stock market's long-term average annual gain.
As usual, we caution that predicting short-term trends and successfully
moving in and out of the markets is difficult, at best. While there is money to
be made in the bond and stock markets, we believe it is best made over the long
run. Indeed, the turns the markets have experienced these past 15 months
reinforces the notion that investors need to make decisions with a long-term
horizon: those who had charted an extended course, and stayed with it through
these difficult markets reaped the gains of the first quarter of 1995.
For those investors with shorter-term goals, there are money market funds
- - -- shorter-term, steadier investments which pay a respectable yield while aiming
for stability of principal. For those of you wishing to know more about our
basic philosophy of investing, we have prepared a small booklet, the SAFECO
Mutual Funds Personal Investment Guide. Call us at 1-800-426-6730 for your free
copy.
As always, we truly value your continued confidence in SAFECO Mutual Funds.
Sincerely,
/s/ David F. Hill
- - ------------------
David F. Hill
- 2 -
<PAGE> 5
REPORT FROM THE FUND MANAGER
SAFECO High-Yield Bond Fund
May 1, 1995
For the 12-month period ending March 31, 1995, the SAFECO High-Yield Bond
Fund posted a total return of 4.19%, outperforming the average return of 3.04%
calculated by Lipper Analytical Services for high-yield funds for the period.
(For the latest six-months the fund returned 3.33%.)
Our practice of holding higher quality credits helped your fund outperform
its peer group.
TWO DIFFERENT MARKETS
The six months ending March 31, 1995 presented two very different markets.
Posting a total return of .46% for the fourth quarter, the high-yield bond
market ended 1994 on a barely positive note. Then the market turned completely
to post a first quarter 1995 total return of 5.96% according to the Merrill
Lynch High-Yield Bond Index.
Cash flow drove the market. In the fourth quarter, investors withdrew from
high-yield mutual funds as interest rates increased and bond prices dropped.
Your Fund sold lower-yielding bonds and portions of larger holdings to meet
redemptions. No new securities were purchased in the fourth quarter.
As the market brightened, investors poured money into high-yield mutual
funds. This strong cash flow, a decline in new issue supply, and improving
corporate earnings and cash flows sparked a rally in high-yield bond prices that
lasted through the first quarter.
Net assets in the SAFECO High-Yield Fund increased 27% during the first
quarter of 1995. With the cash, the Fund purchased bonds in two categories: very
liquid, higher quality issues and, in anticipation of an economic slowdown,
bonds issued by companies that are not particularly sensitive to economic
cycles. Securities falling into the latter category included bonds issued by
Safeway, Coca-Cola Bottling Group (Southwest), Owens-Illinois and National
Medical Enterprises.
[PICTURE]
[Kurt Havnaer]
The number of issues held by the Fund increased from 57 on December 31,
1994 to 66 issues in 34 different industries on March 31, 1995.
OUTLOOK: STAYING THE HIGHER QUALITY COURSE
Recently released economic data suggest that economic growth is slowing and
that inflation remains subdued. In this environment, the outlook for the
high-yield market is mixed. If interest rates continue to decline in response to
a slowing economy and low inflation, investors, in an attempt to achieve higher
yields, may continue to pour money into the high-yield market. Barring a
significant increase in new issue supply, continued cash flows into high-yield
funds could lead to rising bond prices and favorable returns.
If, however, the economy slows more rapidly than currently anticipated,
corporate earnings and cash flows could decline leading to a deterioration in
credit quality. A decline in credit quality could negatively impact both
high-yield bond prices and high-yield returns.
Going forward, the Fund will continue purchasing higher quality "junk"
bonds to mitigate the potential damage declining credit quality could cause. In
addition, the Fund will diversify its holdings by both issuer
Continued on page 4
- 3 -
<PAGE> 6
HIGHLIGHTS
SAFECO HIGH-YIELD
BOND FUND
As of March 31, 1995 (Unaudited)
SAFECO HIGH-YIELD BOND FUND
S&P CREDIT RATING DISTRIBUTION
AS OF MARCH 31, 1995
[PIE CHART]
B: 59.3%
BB: 25.0%
BBB: 1.7%
CCC: 4.3%
D: 1.1%
Not Rated: 2.3%
Cash and Other Assets Less Liabilities: 6.3%
SAFECO HIGH-YIELD BOND FUND
TOP FIVE INDUSTRIES AS A PERCENT OF NET ASSETS
AS OF MARCH 31, 1995
[GRAPH]
Retail Grocers: 7.8%
Home Building: 5.9%
Oil & Gas: 4.6%
Hotels/Motels: 4.2%
Utilities: 4.0%
<TABLE>
<CAPTION>
CURRENT YIELD (30-DAY) 10.01%
=================================================
<S> <C>
WEIGHTED AVERAGE MATURITY (IN YEARS) 7.89
</TABLE>
Continued from page 3
and industry. In closing, I'd like to assure you that I took the helm of the
SAFECO High-Yield Fund in January 1995 with every intention of holding the
course Ron Spaulding set in 1988 -- buy better quality issues and diversify
rigorously.
/s/ Kurt Havnaer
- - -----------------
Kurt Havnaer
Kurt Havnaer joined SAFECO Asset Management in 1991 as a fixed income
securities analyst. He became fund manager in January 1995. Mr. Havnaer holds an
M.B.A. from Seattle University and a B.A. from the University of Washington. He
is a Certified Public Accountant as well as a Chartered Financial Analyst.
- 4 -
<PAGE> 7
<TABLE>
<CAPTION>
TOP FIVE INDUSTRIES PERCENT OF NET ASSETS
========================================================
<S> <C>
Retail - Grocers 7.8%
Home Building 5.9%
Oil & Gas 4.6%
Hotels/Motels 4.2%
Utilities 4.0%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS PERCENT OF NET ASSETS
=========================================================
<S> <C>
ADT Operations, Inc. 3.0%
(Electronic Security Systems)
Owens-Illinois, Inc. 3.0%
(Containers)
John Q. Hammons Hotels 2.9%
(Hotel Operator)
Southland Corp. 2.0%
(Retail Specialty Stores)
Weirton Steel Corp. 1.8%
(Steel Manufacturer)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PERFORMERS (SEPT. TO MARCH) PERCENT RETURN
========================================================
<S> <C>
Grand Union Co. 15.4%
(Grocery Stores)
Delta Air Lines Equipment Trust 12.2%
(Airlines)
Aztar Corp. 10.7%
(Gaming/Casinos)
Mesa Capital Corp. 8.8%
(Natural Gas & Oil Producer)
JPS Textile Group, Inc. 8.1%
(Diversified Textile Manufacturer)
</TABLE>
<TABLE>
<CAPTION>
BOTTOM FIVE PERFORMERS (SEPT. TO MARCH) PERCENT RETURN
=============================================================
<S> <C>
* Vendell Healthcare, Inc. -65.5%
(Medical-Hospital Management & Services)
Envirotest Systems Corp. -29.0%
(Vehicle Emissions Testing)
Parisian, Inc. -17.8%
(Retail Department Stores)
ANACOMP, Inc. -13.4%
(Micrographics Products and Services)
Foodmaker, Inc. -12.5%
(Restaurant/Food Services)
* Security sold, no longer in Portfolio.
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES (SEPT. TO MARCH) COST
========================================================
<S> <C>
National Medical Enterprises $1,000,000
Safeway, Inc. 987,500
Owens-Illinios, Inc. 970,000
ADT Operations, Inc. 955,000
Beazer Homes USA 589,655
</TABLE>
PORTFOLIO OF INVESTMENTS
SAFECO HIGH-YIELD BOND FUND
As of March 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT (000'S) MARKET VALUE (000'S)
=================================================================
<S> <C>
CORPORATE BONDS - 93.7%
ADVERTISING - 1.6%
$ 500 Heritage Media Corp. 11.00%, due 10/01/02 $523
AGRICULTURE/FERTILIZER PRODUCTS - 1.6%
500 Arcadian Partners, L.P. 10.75%, due 5/01/05 496
AUTOS - 3.2%
500 Exide Corp. 10.75%, due 12/15/02 498
500 / / Truck Components, Inc.
12.25%, due 6/30/01 521
BEVERAGE - 1.5%
500 / / Coca - Cola Bottling Group (Southwest), Inc.
9.00%, due 11/15/03 472
BROADCAST MEDIA - 4.0%
250 Cablevision Systems Corp.
10.75%, due 4/01/04 259
500 / / Century Communications Corp.
9.50%, due 3/01/05 483
500 / / Young Broadcasting, Inc.
11.75%, due 11/15/04 539
CHEMICALS - 3.1%
500 Atlantis Group, Inc. 11.00%, due 2/15/03 495
500 UCC Investors Holdings, Inc.
10.50%, due 5/01/02 503
CONGLOMERATES - 1.4%
500 Figgie International, Inc.
9.875%, due 10/01/99 462
CONTAINERS - 3.0%
1,000 / / Owens-Illinois, Inc. 9.75%, due 8/15/04 970
ELECTRONICS - 1.6%
500 / / Plantronics, Inc. 10.00%, due 1/15/01 500
</TABLE>
/ / New to Portfolio since last report.
See Notes to Financial Statements
- 5 -
<PAGE> 8
PORTFOLIO OF INVESTMENTS
SAFECO HIGH-YIELD BOND FUND (CONTINUED)
As of March 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT (000'S) MARKET VALUE (000'S)
=================================================================
<S> <C>
ENTERTAINMENT - 3.3%
$ 500 ACT III Theatres
11.875%, due 2/01/03 $520
500 / / AMC Entertainment, Inc.
12.625%, due 8/01/02 542
FINANCIAL - 3.1%
500 Comdata Network, Inc.
12.50%, due 12/15/99 530
500 / / Western Financial Savings Bank
8.50%, due 7/01/03 465
FOOD - 1.6%
500 Chiquita Brands International
10.50%, due 8/01/04 508
GAMING - 2.9%
500 Aztar Corp. 11.00%, due 10/15/02 485
500 Station Casinos, Inc. 9.625%, due 6/01/03 440
HOME BUILDING - 5.9%
500 Continental Homes Holding Corp.
12.00%, due 8/01/99 470
500 / / Beazer Homes USA, Inc. 9.00%, due 3/01/04 420
300 K. Hovnanian Enterprises
11.25%, due 4/15/02 263
250 Toll Brothers, Inc. 10.50%, due 3/15/02 243
500 USG Corp. 10.25%, due 12/15/02 506
HOSPITAL MANAGEMENT - 3.3%
500 / / National Medical Enterprises, Inc.
9.625%, due 9/01/02 512
500 ORNDA Healthcorp 12.25%, due 5/15/02 545
HOTELS/MOTELS - 4.2%
415 Host Marriott Corp. 11.25%, due 7/18/05 421
1,000 John Q. Hammons Hotels
8.875%, due 2/15/04 930
INSURANCE - 1.5%
$ 500 American Financial 9.75%, due 4/20/04 475
MACHINERY - 0.7%
500 International Semi-Tech Microelectronics, Inc.
0.00%/11.50%, due 8/15/03 220
MANUFACTURING - 1.8%
150 Calmar Spraying Systems, Inc.
14.00%, due 2/15/99 151
500 Plastic Specialties and Technologies, Inc.
11.25%, due 12/01/03 440
MISCELLANEOUS - 6.9%
1,000 ADT Operations, Inc. 9.25%, due 8/01/03974
365 Foamex, L.P. 9.50%, due 6/01/00 354
500 International Shipholding Corp.
9.00%, due 7/01/03 465
500 US Leather, Inc. 10.25%, due 7/31/03 405
OFFICE EQUIPMENT & SUPPLIES - 1.7%
ANACOMP, Inc.
250 15.00%, due 11/01/00 299
302 12.25%, due 10/26/97 240
OIL & GAS - 4.6%
500 Giant Industries, Inc. 9.75%, due 11/15/03 460
500 Mesa Capital Corp.
0.00%/12.75%, due 6/30/98 480
500 Nuevo Energy Co. 12.50%, due 6/15/02 523
PAPER & FOREST PRODUCTS - 1.6%
500 Stone Container Corp.
11.875%, due 12/01/98 526
POLLUTION CONTROL - 1.0%
500 Envirotest Systems Corp.
9.625%, due 4/01/03 325
</TABLE>
See Notes to Financial Statements
- 6 -
<PAGE> 9
PORTFOLIO OF INVESTMENTS
SAFECO HIGH-YIELD BOND FUND (CONTINUED)
As of March 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT (000'S) MARKET VALUE (000'S)
=================================================================
<S> <C>
REAL ESTATE - 1.5%
$ 500 Ryland Group 10.50%, due 7/15/02 $ 472
RESTAURANTS - 1.1%
500 Foodmaker, Inc. 9.75%, due 6/01/02 367
RETAIL - DEPARTMENT STORES - 1.8%
250 Loehmann's Holdings
13.75%, due 2/15/99 242
500 Parisian, Inc. 9.875%, due 7/15/03 347
RETAIL - GROCERS - 7.8%
350 * Grand Union Co. 11.25%, due 7/15/00 364
500 Penn Traffic Co. 9.625%, due 4/15/05 462
500 / / Safeway, Inc. 9.30%, due 2/01/07 533
1,000 Southland Corp. 4.50%, due 6/15/04 643
500 Ralph's Grocery Co. 10.25%, due 7/15/02 498
RETAIL - OTHER - 3.6%
Petroleum Heat & Power Co.
250 9.375%, due 2/01/06 217
500 / / 12.25%, due 2/01/05 520
500 Musicland Group 9.00%, due 6/15/03 427
STEEL - 3.3%
500 Armco, Inc. 9.375%, due 11/01/00 458
600 Weirton Steel Corp. 10.875%, due 10/15/99 590
TELECOMMUNICATIONS - 1.8%
583 Dial Page, Inc. 12.25%, due 2/15/00 589
TEXTILES - 1.8%
$ 500 Fieldcrest Mills, Inc. 11.25%, due 6/15/04 510
84 JPS Textile Group, Inc.
10.25%, due 6/01/99 67
TRANSPORTATION - 1.9%
483 Delta Air Lines, Inc. 9.875%, due 4/30/08 513
113 Worldcorp, Inc. 13.875%, due 8/15/97 111
UTILITIES - 4.0%
457 Beaver Valley Funding Corp.
8.625%, due 6/01/07 379
500 First PV Funding 10.15%, due 1/15/16 486
425 Midland Cogeneration Venture, L. P.
10.33%, due 7/23/02 420
-------
TOTAL CORPORATE BONDS 30,073
-------
SHORT-TERM INVESTMENTS - 4.6%
INVESTMENT COMPANIES:
1,498 Short-Term Investments Co.
(Prime Portfolio) 1,498
-------
TOTAL SHORT-TERM INVESTMENTS 1,498
-------
TOTAL INVESTMENTS - 98.3% 31,571
Other Assets, less Liabilities 535
-------
NET ASSETS $32,106
=======
</TABLE>
- - ---------------
* Non-income producing security. Company has suspended interest payments.
See Notes to Financial Statements
- 7 -
<PAGE> 10
REPORT FROM THE FUND MANAGER
SAFECO GNMA Fund
May 1, 1995
For the 12-months ended March 31, 1995, the SAFECO GNMA Fund returned 4.04%
while the average GNMA Fund returned 4.80%, according to Lipper Analytical
Services. (The Fund returned 4.41% for the six months since our last report.)
For most U.S. financial instruments, the last quarter of 1994 was marginal
and the first quarter of 1995 was very good. For the bond markets, significant
gains occurred during January and February, with March just hanging on.
For the most part, mortgage-backed securities outperformed U.S. Treasuries.
Longer bonds with greater call protection were the best performers. During the
first quarter rally, lower coupon (discount) GNMAs posted better returns than
their higher coupon (premium-priced) brethren because they are less likely to be
called and paid early. Of securities with similar coupons, the 15- and 30-year
GNMAs outperformed the 5- and 7-year balloons (partially amortized loans with
large final payments).
In the fourth quarter, the bond market was beset by weak demand, a
flattening yield curve and rising interest rates. Short to intermediate-term
securities were hardest hit. Your Fund, heavy with 7-year FNMA balloons and
15-year GNMA pass-throughs, did not fare as well in this environment.
The portfolio today is positioned to take advantage of further drops in
interest rates, and weather interest rate shocks should the Federal Reserve
resume its efforts to cool the economy and fight inflation.
I sold our intermediate positions in January after a significant run up in
value, and redeployed the proceeds into a "barbell", a structure that balances
very short maturities with longer-maturity assets. The Fund currently has
approximately 75% of net assets invested in 30-year GNMAs and 10% in longer
intermediate-term GNMA mobile home pass-throughs. The balance is invested in
very short U.S. Government agency-backed discount notes. The strategy here is to
stay out of the short to intermediate sectors (two to five-year maturity range)
which typically come under the greatest pressure when the Fed tightens. These
sectors also underperform when the bond market rallies as it did during January
and February of this year.
[PICTURE]
[Paul Stevenson]
Only during periods in which interest rates change very little, will a
barbell structure underperform the more traditional strategy of buying the most
current coupon, and holding it until maturity.
I intend to maintain the portfolio's duration and average life close to the
Merrill Lynch GNMA Index. At the end of the quarter, the SAFECO GNMA Fund's
effective duration and average life were 4.57 and 8.2 years, respectively,
versus 4.44 and 8.1 years for the index. The average coupon for the Fund was
approximately 71/2% versus 81/8% for the index, revealing my tendency to reduce
call risk by favoring lower coupon mortgage securities.
CHANGING ATTITUDES IMPROVE FORECAST
The fact that investors viewed the February interest rate hike as possibly
the last, and their apparent disregard for the falling dollar and rising trade
deficits,
- 8 -
<PAGE> 11
illustrates a change in attitude. Instead of doom and gloom, a rosy tone of
slowing real Gross Domestic Product (GDP) growth and a "soft landing" is
coloring economic outlooks.
Looking forward, I generally fall into the camp calling for economic growth
of 21/2% to 31/2% and for gradually rising, but benign, inflation. Although I
don't expect another tightening by the Fed near term, I don't rule out the
possibility. I fully believe they will keep a very close watch on the dollar,
consumer spending and other inflationary indicators.
It may be that much of the market's gains in 1995 have already been
garnered, and the remainder of this year's results will be driven by mixed
economic numbers: short-term supply and demand aberrations, the success of the
Republican party's "Contract with America" (e.g., tax cuts), and issues
surrounding the U.S. dollar and trade deficits. It sounds like a lot to ponder,
but I think when investors look back on these next six months they'll see a
rather tight trading range for bonds: narrow fluctuations in yields and
relatively steady principal.
Mortgage securities should do fairly well during this period, once again
outperforming Treasuries, and possibly corporate bonds.
/s/ Paul Stevenson
- - -------------------
Paul Stevenson
PORTFOLIO OF INVESTMENTS
SAFECO GMNA FUND
As of March 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT (000'S) MARKET VALUE (000'S)
================================================================
<S> <C>
U.S. GOVERNMENT AND AGENCY SECURITIES - 98.9%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) - 83.1%
$ 143 11.25%, due 12/15/02 $ 151
39 11.00%, due 9/15/15 42
89 10.25%, due 1/15/21 95
1,112 10.00%, due 8/15/05 1,154
1,846 9.50%, due 4/15/16 - 2/20/21 1,925
1,178 9.00%, due 8/15/11 - 9/15/11 1,206
6,719 8.50%, due 2/20/17 - 5/20/22 6,778
5,315 / / 8.00%, due 6/15/21 - 12/15/22 5,279
7,986 7.50%, due 9/15/22 - 4/20/23 7,689
11,580 7.00%, due 2/15/13 - 4/15/23 10,873
-------
U.S. AGENCY NOTES - 15.8%
6,750 / / Federal Farm Credit Bank
6.80%, due 5/02/95 6,718
-------
TOTAL U.S. GOVERNMENT AND
AGENCY SECURITIES 41,910
-------
SHORT-TERM INVESTMENTS - 2.4%
INVESTMENT COMPANIES:
1,007 Short-Term Investments Co.
(Prime Portfolio) 1,007
TOTAL SHORT-TERM INVESTMENTS 1,007
-------
TOTAL INVESTMENTS - 101.3% 42,917
Liabilities, less Other Assets (566)
-------
NET ASSETS $42,351
=======
</TABLE>
/ / New to Portfolio since last report.
See Notes to Financial Statements
- 9 -
<PAGE> 12
HIGHLIGHTS
As of March 31, 1995 (Unaudited)
SAFECO GNMA FUND
CURRENT 30-DAY YIELD
FOR THE YEAR ENDED MARCH 31, 1995
[GRAPH]
This graph depicts the average 30-day current yield at month-end for the SAFECO
GNMA FUND.
SAFECO INTERMEDIATE-TERM
U.S. TREASURY FUND
CURRENT 30-DAY YIELD
FOR THE YEAR ENDED MARCH 31, 1995
[GRAPH]
This graph depicts the average 30-day current yield a month-end for the SAFECO
Intermediate-Term U.S. Treasury fund.
These graphs represent historical data and are not predictive of future yields.
REPORT FROM THE FUND MANAGER
SAFECO INTERMEDIATE-TERM
U.S. TREASURY FUND
May 1, 1995
With a robust first quarter return of 4.98%, as measured by the Lehman
Brothers Government/ Corporate Bond Index, the general bond market more than
offset the 3.5% loss it posted in 1994.
The SAFECO Intermediate-term Treasury Fund returned 3.01% for the 12 months
ending March 31, 1995. The average return for intermediate-term treasury funds
for the period was 3.49% according to Lipper Analytical Service. (The Fund's
three- and six-month returns were 3.18% and 3.41%, respectively.)
When the market turned around in the first quarter, the conservative,
more-defensive posture we had adopted in 1994 to emphasize capital preservation
caused us to underperform our peer group. Since then, in response to the overall
improvement in the bond market, we have cautiously increased the Fund's average
maturity from 3.1 to 5.2 years.
DRAMATIC TURNAROUND
After rising relentlessly for 12 months, interest rates turned in late
1994. Today, in sharp contrast to the gloom that pervaded last year, market
sentiment is very bullish. This optimism has translated into significantly
higher prices for Treasury securities in all but the shortest maturities.
Enthusiasm reigns, despite the fact that the Federal Reserve Board is
continuing to drive short-term rates higher (most recently in February) and the
fact that economic indicators are mixed: Declining retail sales, sluggish home
sales and a slowdown in hiring suggest the economy is slowing; however dramatic
growth in lending, rising raw material prices and higher labor costs all raise
the specter of higher inflation.
- 10 -
<PAGE> 13
Adding to inflation concerns is the dollar's weakness against the currency of
two of our important trading partners, Germany and Japan. Increases in the
prices of imported goods add to the inflationary spiral.
[PICTURE]
[Michael C. Knebel]
Until a clear trend emerges, we expect interest rates to stay within a
fairly narrow range. In such an environment bond investors can expect reasonable
income from their portfolios with little significant change in bond values.
Although market sentiment is decidedly optimistic, we remain cautious.
While the average maturity of the Fund has been increased, it remains on the
short side: We are positioned to capture most of the potential gains from a
continuing bond rally. However, if the dollar weakens further, and rapid loan
growth and rising production costs begin to manifest themselves as higher
consumer prices, the current market rally may be short-lived. And, we will
adjust accordingly.
/s/ Michael C. Knebel
- - ----------------------
Michael C. Knebel
PORTFOLIO OF INVESTMENTS
SAFECO INTERMEDIATE-TERM U.S.
TREASURY FUND
As of March 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT (000's) MARKET VALUE (000's)
===============================================================
<S> <C>
U.S. GOVERNMENT SECURITIES - 97.2%
U.S. TREASURY NOTES - 97.2%
$1,000 8.50%, due 4/15/97 $ 1,032
1,925 7.75%, due 2/15/01 1,981
5,485 6.25%, due 2/15/03 5,164
2,170 6.00%, due 10/15/99 2,081
500 4.25%, due 12/31/95 492
1,660 / / 4.125%, due 5/31/95 1,655
--------
TOTAL U.S. GOVERNMENT SECURITIES 12,405
--------
SHORT-TERM INVESTMENTS - 1.3%
INVESTMENT COMPANIES:
161 Short-Term Investments Co.
(Prime Portfolio) 161
-------
TOTAL SHORT-TERM INVESTMENTS 161
-------
TOTAL INVESTMENTS - 98.5% 12,566
Other Assets, less Liabilities 192
-------
NET ASSETS $12,758
=======
/ / New to Portfolio since last report.
</TABLE>
See Notes to Financial Statements
- 11 -
<PAGE> 14
STATEMENTS OF ASSETS AND LIABILITIES
As of March 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
SAFECO SAFECO
HIGH-YIELD SAFECO INTERMEDIATE-TERM
(In Thousands, Except Per-Share Amounts) BOND FUND GNMA FUND U.S. TREASURY FUND
===================================================================================================
<S> <C> <C> <C>
ASSETS
Investments, at Value:
U.S. Government and Agency Obligations
(Identified Cost $42,289
and $12,595, respectively) $41,910 $12,405
Corporate Bonds (Identified Cost $30,995) $30,073 -- --
Short-Term Investments 1,498 1,007 161
------- ------- -------
Total Investments 31,571 42,917 12,566
Receivables
Investment Securities Sold 102 4,311 --
Interest 884 257 190
Capital Stock Sold -- -- 53
------- ------- -------
Total Assets 32,557 47,485 12,809
------- ------- -------
LIABILITIES
Payables
Investment Securities Purchased -- 4,939 --
Capital Stock Redeemed 314 83 --
Dividends 105 71 37
Investment Advisory Fees 18 23 6
Other 14 18 8
------- ------- -------
Total Liabilities 451 5,134 51
------- ------- -------
NET ASSETS $32,106 $42,351 $12,758
======= ======= =======
SHARES OUTSTANDING (Note 2) 3,819 4,631 1,301
======= ======= =======
NET ASSET VALUE PER SHARE
(Net Assets Divided by Shares Outstanding) $ 8.41 $ 9.14 $ 9.81
======= ======= =======
</TABLE>
See Notes to Financial Statements
- 12 -
<PAGE> 15
STATEMENTS OF OPERATIONS
For the Six Months Ended March 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
SAFECO SAFECO
HIGH-YIELD SAFECO INTERMEDIATE-TERM
(In Thousands) BOND FUND GNMA FUND U.S. TREASURY FUND
============================================================================================================
<S> <C> <C> <C>
INVESTMENT INCOME
Interest $1,496 $1,667 $394
EXPENSES
Investment Advisory Fees (Note 5) 88 138 34
Shareholder Servicing Costs (Note 5) 34 61 14
Legal and Auditing Fees 7 7 7
Custodian Fees 5 8 1
Loan Interest Expense 8 2 --
Reports to Shareholders 3 5 1
Directors' Fees 2 2 3
------ ------ ----
Total Expenses 147 223 60
------ ------ ----
NET INVESTMENT INCOME 1,349 1,444 334
------ ------ ----
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net Realized Gain (Loss) on Investment Transactions (251) (1,314) (13)
Net Change in Unrealized Appreciation (Note 4) (53) 1,687 92
------ ------ ----
NET GAIN (LOSS)ON INVESTMENTS (304) 373 79
------ ------ ----
NET CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $1,045 $1,817 $413
====== ====== ====
</TABLE>
See Notes to Financial Statements
- 13 -
<PAGE> 16
STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
<TABLE>
<CAPTION>
SAFECO SAFECO
HIGH-YIELD SAFECO INTERMEDIATE-TERM
BOND FUND GNMA FUND U.S. TREASURY FUND
------------------------ ------------------------ ------------------------
FOR THE SIX FOR THE FOR THE SIX FOR THE FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED MONTHS ENDED YEAR ENDED MONTHS ENDED YEAR ENDED
MARCH 31 SEPT. 30 MARCH 31 SEPT. 30 MARCH 31 SEPT. 30
(In Thousands) 1995 1994 1995 1994 1995 1994
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net Investment Income $ 1,349 $ 2,842 $ 1,444 $ 3,439 $ 334 $ 720
Net Realized Gain (Loss) on
Investment Transactions (251) (76) (1,314) (1,263) (13) (368)
Net Change in Unrealized
Appreciation (53) (2,053) 1,687 (4,476) 92 (1,044)
------- ------- ------- ------- ------- -------
Net Change in Net Assets
Resulting from Operations 1,045 713 1,817 (2,300) 413 (692)
DIVIDENDS TO SHAREHOLDERS FROM
Net Investment Income (1,349) (2,842) (1,444) (3,439) (334) (720)
Net Realized Gain on
Investment Transactions -- -- -- -- -- --
CAPITAL SHARE TRANSACTIONS
(Note 2) 5,198 1,050 (4,198) (10,805) (688) 73
------- ------- ------- ------- ------- -------
TOTAL CHANGE IN NET ASSETS 4,894 (1,079) (3,825) (16,544) (609) (1,339)
NET ASSETS AT BEGINNING OF PERIOD 27,212 28,291 46,176 62,720 13,367 14,706
------- ------- ------- ------- ------- -------
NET ASSETS AT END OF PERIOD $32,106 $27,212 $42,351 $46,176 $12,758 $13,367
======= ======= ======= ======= ======= =======
</TABLE>
See Notes to Financial Statements
- 14 -
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
SAFECO High-Yield Bond Fund, SAFECO GNMA Fund, and SAFECO Intermediate-Term
U.S. Treasury Fund (together "the Funds") are registered under the Investment
Company Act of 1940, as amended, as diversified, open-end management investment
companies. The following is a summary of significant accounting policies
consistently followed by each Fund in the preparation of its financial
statements. The policies are in conformity with generally accepted accounting
principles.
The SAFECO GNMA Fund was previously known as the SAFECO U.S. Government
Securities Fund. Effective January 31, 1994, the name of the Fund was changed to
the SAFECO GNMA Fund in order to more precisely describe the Fund and the type
of securities which it intends to primarily hold.
SECURITY VALUATION. Investment securities are stated on the basis of
valuations provided by a pricing service, which uses information with respect to
transactions in securities, quotations from securities dealers, market
transactions in comparable securities and various relationships between
securities in determining value. Short-term investments purchased at par are
valued at cost. All other short-term investments are valued at amortized cost
which approximates market value.
SECURITY TRANSACTIONS. Security transactions are recorded on the trade
date. The cost of the portfolio 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, a Fund establishes a segregated asset account equal to
the total obligation.
INCOME RECOGNITION. Interest is accrued on portfolio investments daily.
The Funds have not elected to amortize premium 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 September and December.
FEDERAL INCOME AND EXCISE TAXES. The Funds intend to continue 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.
- 15 -
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
2. TRUST SHARES
<TABLE>
<CAPTION>
SAFECO SAFECO
HIGH-YIELD SAFECO INTERMEDIATE-TERM
BOND FUND GNMA FUND U.S. TREASURY FUND
---------------------------- ----------------------------- -----------------------------
FOR THE SIX FOR THE FOR THE SIX FOR THE FOR THE SIX FOR THE
(In Thousands, MONTHS ENDED YEAR ENDED MONTHS ENDED YEAR ENDED MONTHS ENDED YEAR ENDED
Except Per-Share MARCH 31 SEPTEMBER 30 MARCH 31 SEPTEMBER 30 MARCH 31 SEPTEMBER 30
Amounts) 1995 1994 1995 1994 1995 1994
============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
SHARES
Sales 3,395 8,935 510 1,338 244 426
Reinvestments 83 167 112 259 18 39
--------- --------- --------- --------- --------- ---------
3,478 9,102 622 1,597 262 465
Redemptions (2,842) (8,987) (1,095) (2,745) (333) (462
--------- --------- --------- --------- --------- ---------
NET CHANGE 636 115 (473) (1,148) (71) 3
========= ========= ========= ========= ========= =========
AMOUNTS
Sales $ 28,277 $ 80,820 $ 4,635 $ 12,898 $ 2,370 $ 4,361
Reinvestments 696 1,499 1,005 2,466 176 402
--------- --------- --------- --------- --------- ---------
28,973 82,319 5,640 15,364 2,546 4,763
Redemptions (23,775) (81,269) (9,838) (26,169) (3,234) (4,690
--------- --------- --------- --------- --------- ---------
NET CHANGE $ 5,198 $ 1,050 $ (4,198) $ (10,805) $ (688) $ 73
========= ========= ========= ========= ========= =========
As of March 31, 1995
Shares Authorized Unlimited Unlimited Unlimited
Par Value Per Share $ .001 $ .001 $ .001
Paid in Capital $ 34,071 $ 46,392 $ 13,329
</TABLE>
3. ACCUMULATED UNDISTRIBUTED CAPITAL LOSS
The Funds had the following amounts of accumulated undistributed net
realized loss on investment transactions at March 31, 1995 (In Thousands):
<TABLE>
<S> <C>
SAFECO High-Yield Bond Fund $ (1,043)
SAFECO GNMA Fund (3,662)
SAFECO Intermediate-Term U.S. Treasury Fund (381)
</TABLE>
- 16 -
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
4. INVESTMENT TRANSACTIONS
For the Six Months Ended March 31
<TABLE>
<CAPTION>
SAFECO SAFECO
HIGH-YIELD SAFECO INTERMEDIATE-TERM
(IN THOUSANDS) BOND FUND GNMA FUND U.S. TREASURY FUND
====================================================================================================================
<S> <C> <C> <C>
PURCHASES FOR THE SIX MONTHS ENDED MARCH 31, 1995
(including $0, $24,142, and $10,434, respectively,
of U.S. Government obligations) $ 9,422 $ 24,142 $ 10,434
======== ======== ========
SALES FOR THE SIX MONTHS ENDED MARCH 31, 1995
(including $0, $27,430, and $11,092, respectively,
of U.S. Government obligations) $ 7,288 $ 27,430 $ 11,092
======== ======== ========
UNREALIZED APPRECIATION (DEPRECIATION) AT MARCH 31, 1995
Aggregate gross unrealized appreciation for investment securities
in which there is an excess of value over identified cost $ 510 $ 550 $ 12
Aggregate gross unrealized depreciation for investment securities
in which there is an excess of identified cost over value (1,432) (929) (202)
-------- -------- --------
NET UNREALIZED APPRECIATION/DEPRECIATION $ (922) $ (379) $ (190)
======== ======== ========
</TABLE>
5. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
SAFECO Asset Management Company receives investment advisory fees from the
Funds. For the SAFECO High-Yield Bond Fund and the SAFECO GNMA Fund the fee is
based on average daily net assets at the annual rate of 65/100 of one percent on
the first $250 million declining in three levels to 35/100 of one percent on net
assets over $750 million. For the SAFECO Intermediate-Term U.S. Treasury Fund
the fee is based on average daily net assets at the annual rate of 55/100 of one
percent on the first $250 million declining in three levels to 25/100 of one
percent on net assets over $750 million. SAFECO Services Corporation receives
shareholder servicing fees. At March 31, 1995, SAFECO Corporation owned 500,000
shares (or 13.1%) of the SAFECO High-Yield Bond Fund and SAFECO Insurance
Company of America owned 500,000 shares (or 38.4%) of the SAFECO
Intermediate-Term U.S. Treasury Fund. The Funds may borrow money for temporary
purposes from SAFECO Corporation or its affiliates at interest rates equivalent
to commerical bank interest rates.
- 17 -
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
6. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO HIGH-YIELD BOND FUND
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
MARCH 31 FOR THE YEAR ENDED SEPTEMBER 30
------------ ---------------------------------------------------------------
1995 1994 1993 1992 1991 1990
==============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 8.55 $ 9.22 $ 8.92 $ 8.35 $ 7.94 $ 9.33
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.41 0.82 0.91 0.83 0.93 1.04
Net Realized and Unrealized Gain (Loss)
on Investments (0.14) (0.67) 0.30 0.57 0.41 (1.39)
------- ------- ------- ------- ------- -------
Total from Investment Operations 0.27 0.15 1.21 1.40 1.34 (0.35)
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from Net Investment Income (0.41) (0.82) (0.91) (0.83) (0.93) (1.04)
------- ------- ------- ------- ------- -------
NET ASSET VALUE AT END OF PERIOD $ 8.41 $ 8.55 $ 9.22 $ 8.92 $ 8.35 $ 7.94
======= ======= ======= ======= ======= =======
TOTAL RETURN 3.30%* 1.61% 14.29% 17.52% 18.18% -4.04%
NET ASSETS AT END OF PERIOD (000'S) $32,106 $ 27,212 $28,291 $19,672 $ 11,931 $ 7,786
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.06%** 1.03% 1.09% 1.05% 1.11% 1.15%
RATIO OF NET INCOME TO AVERAGE NET ASSETS 9.69%** 9.26% 9.94% 9.66% 11.51% 11.90%
PORTFOLIO TURNOVER RATE 55.54%** 63.02% 50.27% 40.66% 32.46% 18.46%
- - ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- - ---------------
* Not Annualized.
** Annualized.
-18-
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
6. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO GNMA FUND
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
MARCH 31 FOR THE YEAR ENDED SEPTEMBER 30
------------ ---------------------------------------------------------------
1995 1994 1993 1992 1991 1990
==============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 9.05 $ 10.03 $ 9.95 $ 9.68 $ 9.16 $ 9.23
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.30 0.60 0.67 0.73 0.78 0.76
Net Realized and Unrealized Gain (Loss)
on Investments 0.09 (0.98) 0.08 0.27 0.52 (0.07)
------- ------- ------- ------- ------- -------
Total from Investment Operations 0.39 (0.38) 0.75 1.00 1.30 0.69
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from Net Investment Income (0.30) (0.60) (0.67) (0.73) (0.78) (0.76)
------- ------- ------- ------- ------- -------
NET ASSET VALUE AT END OF PERIOD $ 9.14 $ 9.05 $ 10.03 $ 9.95 $ 9.68 $ 9.16
======= ======= ======= ======= ======= =======
TOTAL RETURN 4.41%* -3.91% 7.81% 10.75% 14.72% 7.77%
NET ASSETS AT END OF PERIOD (000'S) $42,351 $ 46,176 $62,720 $56,474 $ 42,207 $ 28,587
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.03%** 0.95% 0.93% 0.94% 0.97% 0.99%
RATIO OF NET INCOME TO AVERAGE NET ASSETS 6.65%** 6.26% 6.71% 7.49% 8.23% 8.28%
PORTFOLIO TURNOVER RATE 94.23%** 55.12% 70.96% 24.66% 43.80% 90.19%
- - ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- - ---------------
* Not Annualized.
** Annualized.
-19-
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
6. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
<TABLE>
<CAPTION>
SAFECO INTERMEDIATE-TERM U.S. TREASURY FUND
FOR THE SIX
MONTHS ENDED
MARCH 31 FOR THE YEAR ENDED SEPTEMBER 30
------------ ----------------------------------------------------------------
1995 1994 1993 1992 1991 1990
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 9.74 $ 10.74 $ 10.69 $ 10.20 $ 9.83 $ 9.96
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.26 0.52 0.60 0.72 0.75 0.77
Net Realized and Unrealized Gain (Loss)
on Investments 0.07 (1.00) 0.49 0.54 0.37 (0.13)
-------- ------- -------- ------- ------- -------
Total from Investment Operations 0.33 (0.48) 1.09 1.26 1.12 0.64
-------- ------- -------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from Net Investment Income (0.26) (0.52) (0.60) (0.72) (0.75) (0.77)
Distributions from Capital Gains -- -- (0.44) (0.05) -- --
-------- ------- -------- ------- ------- -------
Total Distributions (0.26) (0.52) (1.04) (0.77) (0.75) (0.77)
-------- ------- -------- ------- ------- -------
Net Asset Value at End of Period $ 9.81 $ 9.74 $ 10.74 $ 10.69 $ 10.20 $ 9.83
======== ======= ======== ======= ======= =======
TOTAL RETURN 3.41%* -4.56% 10.51% 12.78% 11.80% 6.65%
NET ASSETS AT END OF PERIOD (000's) $12,758 $ 13,367 $14,706 $12,205 $9,458 6,916
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.95%** 0.90% 0.99% 0.98% 1.00% 1.00%
RATIO OF NET INCOME TO AVERAGE NET ASSETS 5.25%** 5.08% 5.52% 6.89% 7.45% 7.76%
PORTFOLIO TURNOVER RATE 167.65%** 75.46% 104.94% 37.19% 9.51% 24.17%
- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Not Annualized.
** Annualized.
-20-
<PAGE> 23
SAFECO FAMILY OF FUNDS
STABILITY OF PRINCIPAL
SAFECO Money Market Fund
SAFECO Tax-Free Money Market Fund
TAXABLE BOND INCOME
SAFECO Intermediate-Term U.S. Treasury Fund
SAFECO GNMA Fund
SAFECO High-Yield Bond Fund
TAX-FREE BOND INCOME
SAFECO Intermediate-Term Municipal Bond Fund
SAFECO Insured Municipal Bond Fund
SAFECO Municipal Bond Fund
SAFECO California Tax-Free Income Fund
SAFECO Washington State Municipal Bond Fund
HIGH CURRENT INCOME
WITH LONG-TERM GROWTH
SAFECO Income Fund
Long-Term Growth
SAFECO Growth Fund
SAFECO Equity Fund
SAFECO Northwest Fund
- - --------------------------------------------------------------------------------
For more complete information on any SAFECO Mutual Fund, including management
fees and expenses, call or write for a free Prospectus. Please read it carefully
before you invest or send money.
- 21 -
<PAGE> 24
SAFECO TAXABLE BOND FUNDS Bulk Rate
U.S. Postage
BOARD OF TRUSTEES PAID
Boh A. Dickey, Chairman Permit No. 2405
Barbara J. Dingfield Seattle, WA
Richard W. Hubbard
Richard E. Lundgren
L.D. McClean
Larry L. Pinnt
John W. Schneider
OFFICERS
David F. Hill, President
Ronald L. Spaulding,
Vice President and Treasurer
Neal A. Fuller,
Vice President and Controller
INVESTMENT ADVISER
SAFECO Asset
Management Company
DISTRIBUTOR
SAFECO Securities, Inc.
TRANSFER AGENT
SAFECO Services Corporation
CUSTODIAN
U.S. Bank of Washington, N.A.
GMF 660 5/95 This report must be preceded or
[LOGO] Printed on Recycled Paper accompanied by a current prospectus.
(R) Registered trademark of SAFECO Corporation.
