<PAGE>
FUND PROFILE
SAFECO Intermediate-Term U.S. Treasury Fund
SAFECO GNMA Fund
SAFECO High-Yield Bond Fund
SAFECO Managed Bond Fund
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
SAFECO Money Market Fund
SAFECO Tax-Free Money Market Fund
No-Load Class
This profile summarizes key information about SAFECO Fixed Income Funds that is
included in the Funds' prospectus. The Funds' prospectus includes additional
information about the Funds, including a more detailed description of the risks
associated with investing in the Funds that you may want to consider before you
invest. You may obtain the prospectus and other information about SAFECO Fixed
Income Funds at no cost by calling 1-800-624-5711. You may also obtain this
information by visiting our Web site at www.safecofunds.com, or sending an Email
request to [email protected].
July __, 1998
<PAGE>
INVESTMENT OBJECTIVE
SAFECO Intermediate-Term U.S. Treasury Fund seeks to provide as high a level of
current income as is consistent with the preservation of capital.
SAFECO GNMA Fund seeks to provide as high a level of current interest income as
is consistent with the preservation of capital through the purchase of U.S.
Government securities.
SAFECO High-Yield Bond Fund seeks to provide a high level of current interest
income through the purchase of high-yield, fixed-income securities.
SAFECO Managed Bond Fund seeks to provide as high a level of total return as is
consistent with the relative stability of capital through the purchase of
investment grade debt securities.
SAFECO Intermediate-Term Municipal Bond Fund seeks to provide as high a level of
current interest income exempt from federal income tax as is consistent with
prudent investment risk.
SAFECO Insured Municipal Bond Fund seeks to provide as high a level of current
interest income exempt from federal income tax as is consistent with prudent
investment risk.
SAFECO Municipal Bond Fund seeks to provide as high a level of current interest
income exempt from federal income tax as is consistent with the relative
stability of capital.
SAFECO California Tax-Free Income Fund seeks to provide as high a level of
current interest income exempt from federal income tax and California State
personal income tax as is consistent with the relative stability of capital.
SAFECO Washington State Municipal Bond Fund seeks to provide as high a level of
current interest income exempt from federal income tax as is consistent with
prudent investment risk.
SAFECO Money Market Fund seeks to provide as high a level of current income as
is consistent with the preservation of capital and liquidity through investment
in high-quality money market instruments maturing in thirteen months or less.
SAFECO Tax-Free Money Market Fund seeks to provide as high a level of current
income exempt from federal income tax as is consistent with a portfolio of
high-quality, short-term municipal obligations selected on the basis of
liquidity and preservation of capital.
<PAGE>
PRINCIPAL INVESTMENT STRATEGIES
SAFECO Intermediate-Term U.S. Treasury Fund invests primarily in U.S. Treasury
obligations with an average dollar-weighted maturity of 3 to 10 years. This Fund
is suitable for investors who want higher current income than a stable-priced
money market fund, but with greater price stability than a high-yielding,
long-term bond fund.
SAFECO GNMA Fund invests primarily in mortgage-backed securities issued by the
Government National Mortgage Association. This Fund is appropriate for investors
seeking higher current income than that provided by U.S. Treasury securities.
SAFECO High-Yield Bond Fund invests primarily in high-yield (junk) bonds.
Typically these include intermediate-term bonds rated BB and B with average
maturities between 5 and 15 years. This Fund is suitable for investors who can
tolerate greater risk in pursuit of higher total returns.
SAFECO Managed Bond Fund invests primarily in investment grade fixed-income
securities. The Fund seeks to maximize total returns and minimize interest rate
risk by adjusting the portfolio's average maturity in response to interest rate
changes. This Fund is appropriate for investors seeking high current income and
stability of capital.
SAFECO Intermediate-Term Municipal Bond Fund invests primarily in municipal
bonds with an average dollar-weighted maturity of 3 to 10 years. This Fund is
actively managed with a focus on long-term performance. It is suitable for
investors seeking federally tax-exempt income and who want greater price
stability than a fund consisting of longer term bonds.
SAFECO Insured Municipal Bond Fund invests primarily in municipal bonds that
have been insured by a private insurance company. Note: Insurance does not
guarantee the market value of insured municipal bonds or the share price of the
Insured Fund. This Fund is appropriate for investors seeking federally
tax-exempt income from a portfolio of securities insured as to the timely
payment of principal and interest.
SAFECO Municipal Bond Fund invests primarily in investment grade municipal bonds
whose interest is exempt from federal income tax. This Fund is actively managed
with a focus on long-term performance. It is suitable for investors seeking high
current tax-exempt income and relative stability of principal.
<PAGE>
SAFECO California Tax-Free Income Fund invests primarily in investment grade
municipal bonds issued by the State of California or its political subdivisions.
This Fund is appropriate for investors residing in the State of California who
wish to earn income that is free from both State and federal income tax.
SAFECO Washington State Municipal Bond Fund invests primarily in investment
grade municipal bonds issued by the State of Washington or its political
subdivisions. This Fund is suitable for investors seeking tax-exempt income from
a portfolio of Washington bonds.
SAFECO Money Market Fund invests in a portfolio of high-quality, short-term
securities such as U.S. Treasury bills and prime-rated commercial paper. The
Fund is appropriate for investors seeking maximum safety and stability of
principal.
SAFECO Tax-Free Money Market Fund invests in high-quality, short-term municipal
obligations. This Fund is suitable for investors seeking maximum safety and
stability of principal with federally tax-free income.
Additional information about each Fund's investments is available in the Fund's
annual and semi-annual reports to shareholders. In the annual report you will
find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during the last fiscal year. You
may obtain either or both of these reports at no cost by calling 1-800-624-5711.
RISKS
All securities transactions involve market risk. The major risk associated with
mutual funds is that the securities in the portfolio may decline in value,
causing your investment to be worth less than when you bought it.
All bond funds are subject to interest rate risk. The principal value of all
SAFECO Fixed Income Funds (except the Money Market Funds) will fluctuate
inversely with changes in interest rates. The timing and degree of fluctuation
will depend on the portfolio's average weighted maturity (shorter maturities
generally offer more stability) and the quality of the bonds in the portfolio
(insured or investment grade securities generally offer more stability than
lower quality bonds). Also, current income will vary over time as interest rates
change.
An investment in the Money Market Funds is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other governmental agency.
Although the Money Market Funds seek to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Money Market
Funds. The Money Market Funds' yield will fluctuate with general interest
rates.
<PAGE>
GNMA and other mortgage-backed securities are subject to prepayment fluctuations
during times of changing interest rates. This may cause the value of these
securities held in a Fund's portfolio, and subsequently the Fund's share price,
to decline
The High-Yield Bond Fund is subject to special risks associated with below
investment grade securities, sometimes referred to as "junk bonds." These
include greater volatility, reduced liquidity and a higher risk of default.
The California and Washington Funds each concentrate their investments in a
single state. Therefore, there is greater risk of fluctuation in the value of
their portfolio securities than with mutual funds whose portfolios are more
geographically diverse.
PERFORMANCE
The following bar charts show how each Fund has performed in each of the past 10
years (or since inception) assuming reinvestment of all distributions. The
tables show the average annual return for each Fund relative to the appropriate
broad-based market index. Performance is historical and may not be indicative of
future results. Total return and principal value will fluctuate.
<TABLE>
<CAPTION>
SAFECO INTERMEDIATE-TERM U.S. TREASURY FUND
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(%) 1.25 10.31 7.16 13.52 6.52 10.84 (3.61) 16.75 0.38 8.29
</TABLE>
The highest return reflected above was 5.91% for the quarter ended June 30,
1989; and the lowest return was -3.45% for the quarter ended March 31, 1994.
<TABLE>
<CAPTION>
SAFECO GNMA FUND
FOR THE YEAR ENDED DECEMBER 31,
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(%) 7.81 12.93 8.71 14.81 6.70 7.08 (4.27) 15.48 3.98 8.97
</TABLE>
The highest return reflected above was 6.77% for the quarter ended June 30,
1989; and the lowest return was -3.58% for the quarter ended March 31, 1994.
<TABLE>
<CAPTION>
SAFECO HIGH-YIELD BOND FUND
FOR
PERIOD
FROM
SEPT. 7
(INITIAL
PUBLIC
OFFERING)
TO DEC. 31
FOR THE YEAR ENDED DECEMBER 31,
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(%) 2.71 1.98 (3.60) 24.29 13.87 16.91 (2.25) 15.64 10.39 12.79
</TABLE>
The highest return reflected above was 7.23% for the quarter ended March 31,
1991; and the lowest return was -4.54% for the quarter ended September 30, 1990.
<TABLE>
<CAPTION>
SAFECO MANAGED BOND FUND
PERIOD FROM
FEBRUARY 28,
(INTITIAL PUBLIC
OFFERING) TO
DECEMBER 31, FOR THE YEAR ENDED DECEMBER 31
1994 1995 1996 1997
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
(%) (3.01) 17.35 0.82 8.23
</TABLE>
The highest return reflected above was 5.74% for the quarter ended June 30,
1995; and the lowest return was -3.27% for the quarter ended March 31, 1996.
<PAGE>
<TABLE>
<CAPTION>
SAFECO INTERMEDIATE-TERM MUNICIPAL BOND FUND
MARCH 18,
(INITIAL PUBLIC
OFFERING) TO
DEC. 31, FOR THE YEAR ENDED DECEMBER 31,
1993 1994 1995 1996 1997
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(%) 7.19 (5.62) 15.22 3.75 7.50
</TABLE>
The highest return reflected above was 6.25% for the quarter ended March 31,
1995; and the lowest return was -4.47% for the quarter ended March 31, 1994.
<TABLE>
<CAPTION>
SAFECO INSURED MUNICIPAL BOND FUND
MARCH 18,
(INITIAL PUBLIC
OFFERING) TO
DECEMBER 31, FOR THE YEAR ENDED DECEMBER 31,
1993 1994 1995 1996 1997
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(%) 7.64 (10.43) 24.37 2.56 10.70
</TABLE>
The highest return reflected above was 10.13% for the quarter ended March 31,
1995; and the lowest return was -9.14% for the quarter ended March 31, 1994.
<TABLE>
<CAPTION>
SAFECO MUNICIPAL BOND FUND
FOR THE YEAR ENDED DEC. 31,
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(%) 13.88 10.08 6.65 13.78 8.75 12.66 (8.25) 21.48 3.18 10.68
</TABLE>
The highest return reflected above was 8.82% for the quarter ended March 31,
1995; and the lowest return was -6.77% for the quarter ended March 31, 1994.
<TABLE>
<CAPTION>
SAFECO CALIFORNIA TAX-FREE INCOME FUND
FOR THE YEAR ENDED DECEMBER 31,
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(%) 12.79 9.91 6.97 12.55 8.00 13.23 (9.20) 26.14 2.53 11.55
</TABLE>
The highest return reflected above was 10.59% for the quarter ended March 31,
1995; and the lowest return was -6.16% for the quarter ended March 31, 1994.
<TABLE>
<CAPTION>
SAFECO WASHINGTON STATE MUNICIPAL BOND FUND
MARCH 18,
(INITIAL PUBLIC
OFFERING) TO
DECEMBER 31, FOR THE YEAR ENDED DECEMBER 31,
1993 1994 1995 1996 1997
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(%) 7.74 (8.65) 19.89 3.04 8.94
</TABLE>
The highest return reflected above was 8.58% for the quarter ended March 31,
1995; and the lowest return was -7.42% for the quarter ended March 31, 1994.
<TABLE>
<CAPTION>
SAFECO MONEY MARKET FUND
FOR THE YEAR ENDED DECEMBER 31,
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(%) 7.13 9.79 7.98 5.74 3.27 2.50 3.53 5.28 4.75 4.93
</TABLE>
The highest return reflected above was 3.13% for the quarter ended June 30,
1989; and the lowest return was 0.59% for the quarter ended June 30, 1993.
<TABLE>
<CAPTION>
SAFECO TAX-FREE MONEY MARKET FUND
FOR THE YEAR ENDED DECEMBER 31,
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(%) 4.79 6.57 5.64 4.34 2.73 2.02 2.45 3.54 3.07 3.12
</TABLE>
The highest return reflected above was 2.16% for the quarter ended June 30,
1989; and the lowest return was 0.47% for the quarter ended March 31, 1994.
<TABLE>
<CAPTION>
Average Annual Total Returns
As of 3/31/98
1 year 5 years 10 years
------ ------- --------
<S> <C> <C> <C>
Intermediate-Term 11.17% 5.50% 7.52%*
U.S. Treasury Fund
<PAGE>
Merrill Lynch Intermediate- 9.46% 5.94% 8.09%
Term Treasury Index**
GNMA Fund 10.74% 5.72% 7.97%
Merrill Lynch GNMA Index 11.32% 7.23% 9.32%
High-Yield Bond Fund 16.44% 9.89% 9.85%**
Merrill Lynch High- 15.60% 11.24% 12.05%
Yield Index
Managed Bond Fund 11.26% 5.62%***
Lehman Brothers 12.39% 7.21%
Gov't/Corp. Index
California Tax-Free 14.86% 7.49% 8.83%
Income Fund
Lehman Brothers Long 13.59% 7.70% 9.56%
Municipal Bond Index
Municipal Bond Fund 13.10% 6.91% 8.72%
Lehman Brothers Long 13.59% 7.70% 9.56%
Municipal Bond Index
Washington State 11.74% 6.07%^
Municipal Bond Fund
Lehman Brothers Long 13.59% 7.70%
Municipal Bond Index
Intermediate-Term 8.51% 5.53%^
Municipal Bond Fund
Lehman Brothers 7-Year 9.02% 6.18%
Municipal Bond Index
Insured Municipal 13.60% 6.48%^
Bond Fund
Lehman Brothers Insured 13.69% 7.54%
Municipal Bond Index
<CAPTION>
7-day
Yield
-----
<S> <C> <C> <C> <C>
Money Market Fund 4.98% 4.31% 5.42% 4.85%
Tax-Free Money 3.15% 2.88% 3.78% 3.13%
Market Fund
</TABLE>
* Since inception 9/88.
** The indexes are unmanaged, include dividends and are representative of
relevant U.S. securities markets. They do not include operating expenses
or transaction costs.
*** Since inception 6/92.
^ Since inception 3/93.
<PAGE>
FEES AND EXPENSES
Certain Funds offer multiple classes of shares. The No-Load Class of shares of
each SAFECO Fixed Income Fund is described in this Profile. This class is 100%
No-Load and has no initial or contingent deferred sales charges or Rule 12b-1
fees. There are no redemption fees (except a $10.00 wire charge) or exchange
fees.
The expenses each Fund pays before distributing net investment income to
shareholders are shown below. These expenses are stated as an annualized
percentage of average daily net assets. They are based on the actual expenses of
each Fund for the year ended December 31, 1997. The Funds' expenses for other
periods may vary.
<TABLE>
<CAPTION>
FUND MANAGEMENT 12b-1 OTHER TOTAL FUND
FEES FEES EXPENSES OPERATING
EXPENSES
<S> <C> <C> <C> <C>
Intermediate Treasury 0.55% None 0.37% 0.92%
GNMA 0.65% None 0.28% 0.93%
High-Yield 0.65% None 0.26% 0.91%
Managed 0.50% None 0.65% 1.15%
Intermediate Municipal 0.55% None 0.28% 0.83%
Insured Bond 0.65% None 0.27% 0.92%
Municipal 0.42% None 0.09% 0.51%
California 0.55% None 0.14% 0.69%
Washington 0.65% None 0.36% 1.01%
Money Market 0.50% None 0.28% 0.78%
Tax-Free Money Market 0.50% None 0.14% 0.64%
</TABLE>
EXAMPLE
This example is intended to help you compare the cost of investing in the Funds
with the cost of investing in other mutual funds.
This example assumes that you invest $10,000 in a Fund for the time period
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Funds' operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<PAGE>
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Intermediate Treasury $90 $290 $510 $1130
GNMA $100 $300 $520 $1150
High-Yield Bond $90 $290 $500 $1120
Managed Bond $120 $370 $630 $1400
Intermediate Municipal $80 $260 $460 $1030
Insured Bond $90 $290 $510 $1130
Municipal $50 $160 $290 $640
California $70 $220 $380 $860
Washington $100 $320 $560 $1240
Money Market $80 $250 $430 $970
Tax-Free Money Market $70 $200 $360 $800
</TABLE>
INVESTMENT ADVISER AND PORTFOLIO MANAGERS
INVESTMENT ADVISER
SAFECO Asset Management Company ("SAM") manages all SAFECO Funds. SAM is
headquartered in Seattle, Washington, and managed over $4.3 billion in mutual
fund assets as of December 31, 1997. SAM has been an adviser to mutual funds and
other investment portfolios since 1973; its predecessors have been advisers
since 1932.
PORTFOLIO MANAGERS
SAFECO Intermediate-Term U.S. Treasury Fund is managed by Ronald Spaulding,
Chairman of the Board, SAM. Mr. Spaulding has served in various capacities with
SAM and SAFECO Corporation since 1975.
SAFECO Managed Bond Fund has been managed by Michael Hughes, Assistant Vice
President, SAM, since 1997. Mr. Hughes was Vice President and a portfolio
manager at First Interstate Capital Management Company from 1995 to 1996 and
Vice President and a portfolio manager at First Interstate Bank of California
from 1988 to 1995.
SAFECO GNMA Fund is managed by Paul A. Stevenson, Vice President, SAM. Mr.
Stevenson has served as portfolio manager for the Fund since 1988. In addition,
he is an Assistant Vice President of the SAFECO Life Insurance Company.
SAFECO High-Yield Bond Fund is managed by Robert Kern, Assistant Vice President.
Mr. Kern has been managing the Fund since 1996. He has served as
<PAGE>
a securities analyst for SAM since 1994. From 1988 to 1994, he was engaged by
the SAFECO Insurance Companies in the Controller's Department.
SAFECO Intermediate-Term Municipal Bond Fund is managed by Mary Metastasio, Vice
President, SAM. Ms. Metastasio has been managing the Fund since 1996. She has
been the portfolio manager for another SAFECO mutual fund since 1987.
SAFECO Municipal Bond Fund, Insured Municipal Bond Fund, and California Tax-Free
Income Fund are managed by Stephen C. Bauer, President, SAM. Mr. Bauer has
served as portfolio manager for each of these funds since inception: 1981 for
the Municipal Fund, 1993 for the Insured Fund, and 1983 for the California Fund.
SAFECO Washington State Municipal Bond Fund is managed by Beverly Denny. Ms.
Denny has been managing the Fund since 1996. From 1991 to 1993, she was the
Marketing Director for SAFECO Mutual Funds. She has been an investment analyst
with SAM since 1993.
HOW TO PURCHASE SHARES
The minimum initial investment is $1,000 for regular accounts. For IRAs, Uniform
Gifts to Minors Act ("UGMA") and Uniform Transfers to Minors Act ("UTMA")
accounts, the minimum to open an account is $250. The minimum additional
investment is $100 ($50 for UGMA and UTMA accounts). You may buy shares by
completing an application and mailing it with your check to the address on the
back cover.
HOW TO REDEEM SHARES
You can sell your shares on any business day by calling (provided you have
selected the telephone redemption option) or sending a written request.
Redemption requests received before 1:00 p.m., Pacific time, will receive that
day's closing share price and the proceeds will normally be sent to you the next
business day. You can also redeem shares via our Web site once you have
completed the On-Line Transaction form and mailed it to the Funds.
DISTRIBUTIONS
Income dividends are declared every business day and paid monthly. Each Fund,
except the Money Market and Tax-Free Money Market Funds, distributes capital
gains on the last business day of the year. Dividends and capital gains
distributions are reinvested in additional shares of the distributing Fund
unless you elect to receive them in cash.
<PAGE>
Dividends are normally taxed as ordinary income (unless designated tax-exempt).
Capital gains distributions are taxed at capital gains rates; this rate will
depend on how long the Fund held the assets before they were sold.
The tax-exempt Funds may, from time to time, distribute income that is subject
to federal income tax.
CLIENT SERVICES
* 24-hour, toll-free, automated performance information and transaction
capabilities
* Automatic Investment Method ("AIM")
* Systematic Withdrawal Plan
* Telephone and Internet Exchange Privileges
<PAGE>
TO REQUEST A PROSPECTUS OR FOR CLIENT SERVICES*:
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
INTERNET: http://www.safecofunds.com
EMAIL: [email protected]
MAILING ADDRESS
REGULAR MAIL
SAFECO Mutual Funds
No-Load Class Shares
P.O. Box 34890
Seattle, WA 98124-1890
Express/Overnight Mail
EXPRESS/OVERNIGHT MAIL
SAFECO Mutual Funds
No-Load Class Shares
10865 Willows Road
Redmond, WA 98052
INVESTOR CENTERS
1409 Fifth Avenue, Seattle, Washington
4333 Brooklyn Avenue N.E., Seattle, Washington
Redmond Town Center, 7528 164th Avenue NE, Redmond, Washington
DISTRIBUTOR: SAFECO Securities, Inc.
