<PAGE>
-------------- --------------
SAFECO Mutual Funds
Class A, B and C Shares
<TABLE>
<S> <C>
SAFECO Stock Funds
Growth Opportunities Fund........................................... 2
Equity Fund......................................................... 6
Dividend Income Fund................................................ 10
Northwest Fund...................................................... 14
International Stock Fund............................................ 18
Balanced Fund....................................................... 23
Small Company Value Fund............................................ 28
U.S. Value Fund..................................................... 32
SAFECO Bond Funds
High-Yield Bond Fund................................................ 36
Intermediate-Term U.S. Treasury Fund................................ 41
GNMA Fund........................................................... 43
Managed Bond Fund................................................... 45
SAFECO Tax-Exempt Bond Funds
Municipal Bond Market Overview...................................... 49
California Tax-Free Income Fund..................................... 50
Municipal Bond Fund................................................. 54
SAFECO Money Market Fund
Money Market Fund................................................... 60
</TABLE>
Semiannual Report
June 30, 2000
--------------------------------------------------------------------------------
[LOGO OF SAFECO]
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO Growth Opportunities Fund
June 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PHOTO]
THOMAS M. Over the course of the first half of 2000, the Growth
MAGUIRE Opportunities Fund moved from nicely ahead to behind its mid-cap
core peers. Reeling from the beating the market gave two of our
large holdings, The Fund finished the period behind the S&P 500
as well. However, it remains ahead of the broad market index for
the 12-month period.
MICROS and Ciber plummeted when they missed their earnings
estimates. These two are suffering from reductions in corporate
technology spending that have followed Y2K. A third tech
holding, S3, fell off its high. This company, which
manufactures the leading MP3 player and home networking devices, is
transforming itself into an Internet appliance company. To me it appears to
have great value and a great future.
I took some gains and trimmed the size of our Rent-Way position. Along with
Rent-A-Center, we own the number one and number two companies in the $4 billion
rental industry. These businesses generate great cash flow and demand for their
product is growing.
The rental companies and our collection company, NCO Group, are counter-
cyclical. That is, demand for their services increases as the economy declines.
NCO is growing very quickly.
I also trimmed back United Stationers which continues to gain as it builds
its e-fulfillment operations.
Iron Mountain climbed into our top ten holdings when it merged with Pierce
Leahy, which we also owned. This company picks up, stores, and retrieves
records, reducing a business' office space requirements. We continue to hold
Dura Pharmaceutical, which I think is the best value in the pharmaceutical
sector.
To me, our current portfolio, with both bricks and clicks, makes good sense
in ways that range from valuations to demographics, and from the old economy to
the new. I've always believed that good sense will prevail and I know that
while the Fund is down, it is not out.
Thomas M. Maguire
--------------------------------------------------------------------------------
After completing his MBA at the University of Washington, Thomas M. Maguire
joined the company as an equity analyst in 1981 and today is a Vice President.
From 1984 to 1989, he co-managed the SAFECO Equity Fund.
- 2 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PERFORMANCE GRAPH]
PERFORMANCE OVERVIEW - CLASS A, B AND C SHARES
Average Annual Total Return for the With Sales Charge
period ended June 30, 2000 Six-Months* 1 Year 5 Year 10 Year
--------------------------------------------------------------------------------
SAFECO Growth Opportunities Fund
Class A (7.71)% 1.02% 14.83% 12.74%
Class B (7.36)% 1.33% 15.27% 13.06%
Class C (3.46)% 5.33% 15.49% 13.06%
S&P 500 Index N/A N/A N/A N/A
Lipper, Inc. (Mid-Cap Core Funds) N/A N/A N/A N/A
Average Annual Total Return for the Without Sales Charge
period ended June 30, 2000 Six-Months* 1 Year 5 Year 10 Year
--------------------------------------------------------------------------------
SAFECO Growth Opportunities Fund
Class A (2.07)% 7.17% 16.20% 13.41%
Class B (2.48)% 6.33% 15.49% 13.06%
Class C (2.48)% 6.33% 15.49% 13.06%
S&P 500 Index (0.43)% 7.24% 23.79% 17.78%
Lipper, Inc. (Mid-Cap Core Funds) 11.15 % 37.70% 20.94% 16.63%
* Not Annualized
Investment Values
Class A Class B Class C S&P 500 Index
------- ------- ------- -------------
6/30/90 10,000 10,000 10,000 10,000
7/31/90 9,642 9,642 9,642 9,968
8/31/90 7,979 7,979 7,979 9,068
9/30/90 7,085 7,085 7,085 8,627
10/31/90 6,608 6,608 6,608 8,591
11/30/90 7,097 7,097 7,097 9,145
12/31/90 7,643 7,643 7,643 9,400
1/31/91 8,407 8,407 8,407 9,808
2/28/91 9,565 9,565 9,565 10,509
3/31/91 10,032 10,032 10,032 10,763
4/30/91 10,516 10,516 10,516 10,788
5/31/91 11,210 11,210 11,210 11,252
6/30/91 10,542 10,542 10,542 10,737
7/31/91 11,528 11,528 11,528 11,237
8/31/91 11,987 11,987 11,987 11,503
9/30/91 12,059 12,059 12,059 11,310
10/31/91 12,422 12,422 12,422 11,462
11/30/91 11,374 11,374 11,374 11,001
12/31/91 12,431 12,431 12,431 12,257
1/31/92 13,341 13,341 13,341 12,029
2/29/92 13,246 13,246 13,246 12,185
3/31/92 12,261 12,261 12,261 11,948
4/30/92 11,501 11,501 11,501 12,299
5/31/92 11,216 11,216 11,216 12,359
6/30/92 10,353 10,353 10,353 12,175
7/31/92 10,788 10,788 10,788 12,672
8/31/92 10,177 10,177 10,177 12,413
9/30/92 9,909 9,909 9,909 12,559
10/31/92 10,327 10,327 10,327 12,602
11/30/92 11,631 11,631 11,631 13,030
12/31/92 12,049 12,049 12,049 13,190
1/31/93 12,552 12,552 12,552 13,300
2/28/93 11,716 11,716 11,716 13,481
3/31/93 12,177 12,177 12,177 13,766
4/30/93 11,425 11,425 11,425 13,433
5/31/93 12,014 12,014 12,014 13,791
6/30/93 12,389 12,389 12,389 13,832
7/31/93 12,347 12,347 12,347 13,776
8/31/93 13,141 13,141 13,141 14,297
9/30/93 13,717 13,717 13,717 14,185
10/31/93 14,067 14,067 14,067 14,478
11/30/93 13,474 13,474 13,474 14,340
12/31/93 14,723 14,723 14,723 14,514
1/31/94 15,516 15,516 15,516 15,007
2/28/94 14,774 14,774 14,774 14,600
3/31/94 14,033 14,033 14,033 13,965
4/30/94 14,407 14,407 14,407 14,143
5/31/94 14,539 14,539 14,539 14,375
6/30/94 13,460 13,460 13,460 14,023
7/31/94 13,761 13,761 13,761 14,483
8/31/94 14,620 14,620 14,620 15,076
9/30/94 14,249 14,249 14,249 14,708
10/31/94 14,455 14,455 14,455 15,037
11/30/94 14,061 14,061 14,061 14,490
12/31/94 14,484 14,484 14,484 14,705
1/31/95 14,261 14,261 14,261 15,086
2/28/95 15,045 15,045 15,045 15,673
3/31/95 14,988 14,988 14,988 16,135
4/30/95 15,062 15,062 15,062 16,610
5/31/95 15,664 15,664 15,664 17,272
6/30/95 16,613 16,613 16,613 17,673
7/31/95 17,199 17,199 17,199 18,259
8/31/95 17,141 17,141 17,141 18,305
9/30/95 17,659 17,659 17,659 19,077
10/31/95 17,581 17,581 17,581 19,009
11/30/95 17,760 17,760 17,760 19,842
12/31/95 18,265 18,265 18,265 20,224
1/31/96 18,941 18,941 18,941 20,912
2/29/96 19,652 19,652 19,652 21,106
3/31/96 19,352 19,352 19,352 21,310
4/30/96 20,175 20,175 20,175 21,623
5/31/96 21,032 21,032 21,032 22,180
6/30/96 20,119 20,119 20,119 22,265
7/31/96 18,134 18,134 18,134 21,282
8/31/96 19,216 19,216 19,216 21,731
9/30/96 20,160 20,160 20,160 22,953
10/31/96 20,591 20,578 20,578 23,586
11/30/96 21,387 21,361 21,361 25,367
12/31/96 22,448 22,409 22,409 24,865
1/31/97 24,366 24,314 24,314 26,417
2/28/97 23,718 23,652 23,652 26,625
3/31/97 22,871 22,792 22,792 25,533
4/30/97 21,800 21,721 21,721 27,056
5/31/97 25,107 25,001 25,001 28,702
6/30/97 27,183 27,052 27,052 29,987
7/31/97 28,771 28,613 28,613 32,372
8/31/97 29,789 29,605 29,605 30,560
9/30/97 32,184 31,960 31,960 32,233
10/31/97 31,575 31,351 31,351 31,158
11/30/97 32,951 32,687 32,687 32,599
12/31/97 33,584 33,321 33,321 33,158
1/31/98 34,064 33,741 33,741 33,525
2/28/98 37,484 37,090 37,090 35,941
3/31/98 39,794 39,342 39,342 37,780
4/30/98 41,309 40,829 40,829 38,160
5/31/98 39,359 38,877 38,877 37,505
6/30/98 39,329 38,817 38,817 39,028
7/31/98 37,364 36,819 36,819 38,613
8/31/98 28,290 27,870 27,870 33,036
9/30/98 29,340 28,876 28,876 35,153
10/31/98 31,680 31,128 31,128 38,009
11/30/98 33,299 32,690 32,690 40,312
12/31/98 35,084 34,447 34,447 42,634
1/31/99 35,890 35,207 35,207 44,416
2/28/99 31,663 31,050 31,050 43,036
3/31/99 31,833 31,174 31,174 44,758
4/30/99 32,328 31,640 31,640 46,492
5/31/99 31,663 30,973 30,973 45,394
6/30/99 32,839 32,105 32,105 47,913
7/31/99 31,833 31,097 31,097 46,417
8/31/99 30,687 29,949 29,949 46,186
9/30/99 30,780 30,011 30,011 44,920
10/31/99 31,152 30,352 30,352 47,762
11/30/99 32,468 31,609 31,609 48,737
12/31/99 35,936 35,005 35,005 51,606
1/31/00 33,846 32,958 32,958 49,013
2/29/00 37,686 36,680 36,680 48,085
3/31/00 39,528 38,433 38,433 52,790
4/30/00 37,283 36,200 36,200 51,196
5/31/00 32,855 31,888 31,888 50,146
6/30/00 35,193 34,137 34,137 51,382
The performance graph compares a hypothetical $10,000 investment in Classes A,
B, and C of each Fund to a hypothetical investment in a relevant market index.
Fund performance is derived from the Fund's original class of shares and
reflects the maximum 5.75% sales charge for Class A shares, the maximum
contingent deferred sales charge of 5% in the first year, decreasing to 0% after
six years for Class B shares, and 1% in the first year for Class C shares. Fund
performance has not been restated to reflect Rule 12b-1 fees prior to September
30, 1996. Such fees will affect subsequent performance. 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>
<CAPTION>
Percent of
TOP TEN HOLDINGS Net Assets
--------------------------------------------------------------------------------
<S> <C>
Rent-A-Center, Inc...................................................... 7.0%
(Services--Commercial & Consumer)
NCO Group, Inc.......................................................... 6.3
(Services--Commercial & Consumer)
Rent-Way, Inc........................................................... 5.9
(Services--Commercial & Consumer)
PolyMedica Corp......................................................... 5.1
(Health Care--Medical Products & Supplies)
United Stationers, Inc.................................................. 4.5
(Office Equipment & Supplies)
Dura Pharmaceuticals, Inc............................................... 4.1
(Health Care--Drugs--Generic & Other)
Aspen Technology, Inc................................................... 3.8
(Computers--Software & Services)
S3, Inc................................................................. 3.3
(Computers--Peripherals)
MICROS Systems, Inc..................................................... 3.1
(Computers--Hardware)
Iron Mountain, Inc...................................................... 2.6
(Services--Commercial & Consumer)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES Cost
For the Period Ended June 30, 2000 (000's)
--------------------------------------------------------------------------------
<S> <C>
S3, Inc. ............................................................... $24,252
American Eagle Outfitters, Inc.......................................... 21,446
J.D. Edwards & Co....................................................... 20,441
NCO Group, Inc.......................................................... 18,050
Go2Net, Inc............................................................. 15,358
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SALES Proceeds
For the Period Ended June 30, 2000 (000's)
--------------------------------------------------------------------------------
<S> <C>
Emisphere Technologies, Inc............................................. $35,161
Research In Motion, Ltd................................................. 33,786
SFX Entertainment, Inc. (Class A)....................................... 27,150
Conseco, Inc............................................................ 25,817
PolyMedica Corp......................................................... 20,898
</TABLE>
<TABLE>
<CAPTION>
Percent of
TOP FIVE INDUSTRIES Net Assets
--------------------------------------------------------------------------------
<S> <C>
Services (Commercial & Consumer)........................................ 25%
Computers (Software & Services)......................................... 12
Health Care (Medical Products & Supplies)............................... 8
Computers (Peripherals)................................................. 6
Office Equipment & Supplies............................................. 5
</TABLE>
Weightings As a Percent of Net Assets
-------------------------------------------------------------------------------
[PIE CHART]
1 Small - Common Stocks: (Less than $1.5 Bil.) 85%
2 Medium - Common Stocks: ($1.5 Bil. - $4 Bil.) 10%
3 Cash & Other: 4%
4 Large - Common Stocks: ($4 Bil. and above) 1%
- 3 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Growth Opportunities Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE
AMOUNT (000'S)
--------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - 96.3%
Air Freight - 0.0%
611,000 *+Dynamex, Inc. (Illiquid) $ 244
Auto Parts & Equipment - 0.0%
437,400 *+Precision Auto Care, Inc. 301
Biotechnology - 0.7%
700,000 Novavax, Inc. 5,119
Broadcasting (TV, Radio & Cable) - 0.4%
301,900 * Salem Communications Corp. (Class A) 2,802
Communication Equipment - 1.3%
219,700 * PSi Technologies Holdings, Inc. (ADR) 4,559
112,300 * Research In Motion, Ltd. 5,082
Computers (Hardware) - 3.2%
1,251,628 *+MICROS Systems, Inc. 23,233
25,000 * NYFIX, Inc. 1,048
Computers (Peripherals) - 5.8%
307,400 * Go2Net, Inc. 15,466
75,000 * IntraNet Solutions, Inc. 2,878
1,649,200 * S3, Inc. 24,326
Computers (Software & Services) - 11.5%
724,700 * Aspen Technology, Inc. 27,901
325,641 Autodesk, Inc. 11,296
1,119,600 * Ciber, Inc. 14,835
140,500 * F5 Networks, Inc. 7,666
1,168,152 * J.D. Edwards & Co. 17,595
831,700 *+Phoenix International Ltd., Inc. 2,495
294,200 * TRO Learning, Inc. 4,045
Consumer Finance - 0.8%
397,535 Doral Financial Corp. 4,547
1,398,000 *+Towne Services, Inc. 1,311
Distributors (Food & Health) - 1.8%
2,166,100 *+Nu Skin Enterprises, Inc. (Class A) 12,455
331,540 Weider Nutrition International, Inc. 995
Engineering & Construction - 0.5%
156,600 * Tetra Tech, Inc. 3,582
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE
AMOUNT (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
Financial (Diversified) - 0.6%
417,300 *+BNC Mortgage, Inc. $ 4,043
403,700 * United PanAm Financial Corp. 404
Health Care (Diversified) - 2.2%
38,200 * Anesta Corp. 950
358,235 * Emisphere Technologies, Inc. 15,264
Health Care (Drugs - Generic & Other) - 4.9%
2,131,300 * Dura Pharmaceuticals, Inc. 30,637
580,000 * First Horizon Pharmaceutical Corp. 5,655
Health Care (Long-Term Care) - 0.9%
1,299,000 *+Res-Care, Inc. 6,982
Health Care (Major Pharmaceuticals) - 1.4%
2,064,756 *+Serologicals Corp. 10,324
Health Care (Managed Care) - 0.7%
1,144,300 * Matria Healthcare, Inc. 5,257
Health Care (Medical Products & Supplies) - 7.9%
117,200 DENTSPLY International, Inc. 3,611
560,550 *+Lifeline Systems, Inc. 7,848
870,200 *+PolyMedica Corp. 37,636
411,200 * STAAR Surgical Co. 4,600
306,300 * Virologic, Inc. 4,556
Health Care (Specialized Services) - 2.5%
680,000 * Aksys, Ltd. 5,823
552,600 *+American Healthways, Inc. 2,832
1,226,300 *+Prime Medical Services, Inc. 9,504
Housewares - 0.2%
369,900 *+Home Products International, Inc. 1,433
Leisure Time (Products) - 0.1%
297,400 * American Coin Merchandising, Inc. 743
Lodging (Hotels) - 0.7%
622,400 * ResortQuest International, Inc. 3,190
406,800 * Suburban Lodges of America, Inc. 2,314
Manufacturing (Diversified) - 2.1%
211,000 * GSI Lumonics, Inc. 7,411
402,400 * Nortek, Inc. 7,947
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 4 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Growth Opportunities Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE
AMOUNT (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
Office Equipment & Supplies - 5.0%
710,000 *+RM Copy Centers Corp. $ 3,816
1,039,700 * United Stationers, Inc. 33,660
Personal Care - 1.0%
925,000 *+French Fragrances, Inc. 7,573
Restaurants - 0.2%
244,400 * Schlotzsky's, Inc. 1,390
Retail (Department Stores) - 0.4%
233,700 * Rainbow Rentals, Inc, 2,629
Retail (Food Chains) - 0.4%
307,500 * NPC International, Inc. 2,758
Retail (General Merchandise) - 0.9%
360,000 Claire's Stores, Inc. 6,930
Retail (Home Shopping) - 1.9%
652,400 *+DAMARK International, Inc. 14,027
Retail (Specialty - Apparel) - 3.8%
907,300 * American Eagle Outfitters, Inc. 12,702
479,500 *+Concepts Direct, Inc. 4,765
542,213 *+Harold's Stores, Inc. 1,356
167,500 * Pacific Sunwear of California, Inc. 3,141
521,900 Wet Seal, Inc. (Class A) 6,850
Retail (Specialty) - 0.9%
598,600 *+Blue Rhino Corp. 4,826
271,000 *+Travis Boats & Motors, Inc. 1,491
Services (Commercial & Consumer) - 24.6%
783,100 * Bluegreen Corp. 2,154
498,200 Central Parking Corp. 11,801
495,600 * FirstService Corp. 5,947
554,720 * Iron Mountain, Inc. 18,860
2,015,735 *+NCO Group, Inc. 46,614
2,290,200 *+Rent-A-Center, Inc. 51,530
1,487,400 *+Rent-Way, Inc. 43,413
305,800 SunSource, Inc. 1,548
Services (Computer Systems) - 1.2%
650,800 * Computer Horizons Corp. 8,745
Services (Employment) - 2.0%
445,100 * Hall, Kinion & Associates, Inc. 14,827
Specialty Printing - 1.4%
1,221,900 * Mail-Well, Inc. 10,539
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE
AMOUNT (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
Telecommunications (Cellular/Wireless) - 2.0%
60,700 * Powertel, Inc. $ 4,306
88,200 * VoiceStream Wireless Corp. 10,257
Telephone - 0.3%
497,300 * Innotrac Corp. 2,549
---------
TOTAL COMMON STOCKS 713,749
---------
WARRANTS - 0.1%
Biotechnology - 0.1%
175,000 * Novavax, Inc. (Illiquid) 775
---------
TOTAL WARRANTS 775
---------
COMMERCIAL PAPER - 2.8%
Financial (Diversified) - 2.8%
20,832,000 PHH Corporation
7.25%, due 7/03/00 20,832
---------
TOTAL COMMERCIAL PAPER 20,832
---------
CASH EQUIVALENTS - 0.0%
Investment Companies
5,248 AIM Short-Term Investments Co. Liquid Assets Money
Market Portfolio (Institutional Shares) 5
---------
TOTAL CASH EQUIVALENTS 5
---------
TOTAL INVESTMENTS - 99.2% 735,361
Other Assets, less Liabilities 5,527
---------
NET ASSETS $ 740,888
=========
--------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
+ Affiliated issuer as defined by the Investment Company Act of 1940 (the Fund
controls 5% or more of the outstanding voting shares of the company).
SEE NOTES TO FINANCIAL STATEMENTS
- 5 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO Equity Fund
June 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PHOTO]
RICHARD The Fund's six-month and one-year underperformance of the S&P
MEAGLEY 500 and Lipper large-cap value peer group is a hangover from
being underweighted in technology and the first-quarter halving
of Procter & Gamble on missed earnings.
I rectified our tech problem by increasing our tech holdings
from 16% to 28.6% of net assets over the first quarter. From
there, for second quarter 2000, the Fund beat the S&P and its
peer funds.
When Microsoft declined on uncertainties surrounding its anti-trust case, I
added to it. This seemed a prudent way to further build our tech allocation,
which was 32% at June 30. All our tech positions meet our long-standing
criteria for admission to the portfolio: They are quality companies with more
predictable earnings, durable business franchises and strong core competencies.
Two major purchases I made in the first quarter--Washington Mutual for its
value and Pfizer for its earnings growth--gained handsomely in the second
quarter. The Fund is now slightly overweighted in financials due to 30% + gains
in Washington Mutual. Pfizer, one of the fastest-growing health-care companies
merged with Warner Lambert and gained over 20% in the second quarter.
I eliminated Anheuser-Busch and Bestfoods from the portfolio to reduce our
weighting in the slower-growing consumer staples sector.
On a housekeeping note, I replaced higher-cost shares of Procter & Gamble
and WorldCom with lower-cost shares. This loss-taking benefited shareholders in
taxable accounts without slighting our positions, or our shareholders in tax-
deferred accounts. Intending to make more of these trades, I purchased May
Department Stores and CenturyTel.
Our holdings now range from value to growth companies. Combining value and
reasonably-priced growth stocks makes sense to me. A "blended" portfolio can
reduce the whiplash caused when styles rotate, and provide more consistent
returns over the long run. Doing well over the long run is what investing is
all about.
Richard Meagley
--------------------------------------------------------------------------------
Richard Meagley joined SAFECO in 1983. After advancing from analyst to
Northwest Fund Manager, he left the company for two years, then he re-joined in
January 1995 as Equity Fund Manager. He holds an MBA from the University of
Washington, and is a Chartered Financial Analyst.
- 6 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PERFORMANCE GRAPH]
PERFORMANCE OVERVIEW - CLASS A, B AND C SHARES
Average Annual Total Return for the With Sales Charge
period ended June 30, 2000 Six-Months* 1 Year 5 Year 10 Year
--------------------------------------------------------------------------------
SAFECO Equity Fund
Class A (8.97)% (9.82)% 16.35% 15.76%
Class B (8.55)% (9.45)% 16.77% 16.07%
Class C (4.66)% (5.79)% 16.99% 16.08%
S&P 500 Index N/A N/A N/A N/A
Lipper, Inc. (Large-Cap Value Funds) N/A N/A N/A N/A
Average Annual Total Return for the Without Sales Charge
period ended June 30, 2000 Six-Months* 1 Year 5 Year 10 Year
--------------------------------------------------------------------------------
SAFECO Equity Fund
Class A (3.41)% (4.31)% 17.74% 16.45%
Class B (3.73)% (4.93)% 16.98% 16.07%
Class C (3.69)% (4.89)% 16.99% 16.08%
S&P 500 Index (0.43)% 7.24% 23.79% 17.78%
Lipper, Inc. (Large-Cap Value Funds) (1.65)% (3.93)% 18.19% 14.90%
* Not Annualized
Investment Values
Class A Class B Class C S&P 500 Index
------- ------- ------- -------------
6/30/90 10,000 10,000 10,000 10,000
7/31/90 9,821 9,821 9,821 9,968
8/31/90 8,784 8,784 8,784 9,068
9/30/90 8,356 8,356 8,356 8,627
10/31/90 8,178 8,178 8,178 8,591
11/30/90 8,624 8,624 8,624 9,145
12/31/90 8,959 8,959 8,959 9,400
1/31/91 9,418 9,418 9,418 9,808
2/28/91 9,978 9,978 9,978 10,509
3/31/91 10,259 10,259 10,259 10,763
4/30/91 10,470 10,470 10,470 10,788
5/31/91 10,891 10,891 10,891 11,252
6/30/91 10,191 10,191 10,191 10,737
7/31/91 10,875 10,875 10,875 11,237
8/31/91 11,046 11,046 11,046 11,503
9/30/91 10,896 10,896 10,896 11,310
10/31/91 11,074 11,074 11,074 11,462
11/30/91 10,381 10,381 10,381 11,001
12/31/91 11,459 11,459 11,459 12,257
1/31/92 12,141 12,141 12,141 12,029
2/29/92 12,347 12,347 12,347 12,185
3/31/92 11,792 11,792 11,792 11,948
4/30/92 11,889 11,889 11,889 12,299
5/31/92 11,781 11,781 11,781 12,359
6/30/92 10,930 10,930 10,930 12,175
7/31/92 11,377 11,377 11,377 12,672
8/31/92 10,909 10,909 10,909 12,413
9/30/92 10,940 10,940 10,940 12,559
10/31/92 11,468 11,468 11,468 12,602
11/30/92 12,226 12,226 12,226 13,030
12/31/92 12,521 12,521 12,521 13,190
1/31/93 12,936 12,936 12,936 13,300
2/28/93 12,947 12,947 12,947 13,481
3/31/93 13,643 13,643 13,643 13,766
4/30/93 13,331 13,331 13,331 13,433
5/31/93 14,428 14,428 14,428 13,791
6/30/93 14,487 14,487 14,487 13,832
7/31/93 14,290 14,290 14,290 13,776
8/31/93 15,090 15,090 15,090 14,297
9/30/93 15,510 15,510 15,510 14,185
10/31/93 15,918 15,918 15,918 14,478
11/30/93 16,005 16,005 16,005 14,340
12/31/93 16,391 16,391 16,391 14,514
1/31/94 17,373 17,373 17,373 15,007
2/28/94 16,938 16,938 16,938 14,600
3/31/94 16,288 16,288 16,288 13,965
4/30/94 16,812 16,812 16,812 14,143
5/31/94 17,299 17,299 17,299 14,375
6/30/94 16,676 16,676 16,676 14,023
7/31/94 17,102 17,102 17,102 14,483
8/31/94 18,143 18,143 18,143 15,076
9/30/94 18,071 18,071 18,071 14,708
10/31/94 18,410 18,410 18,410 15,037
11/30/94 18,045 18,045 18,045 14,490
12/31/94 18,019 18,019 18,019 14,705
1/31/95 18,151 18,151 18,151 15,086
2/28/95 18,625 18,625 18,625 15,673
3/31/95 18,777 18,777 18,777 16,135
4/30/95 19,280 19,280 19,280 16,610
5/31/95 19,771 19,771 19,771 17,272
6/30/95 20,261 20,261 20,261 17,673
7/31/95 20,581 20,581 20,581 18,259
8/31/95 21,154 21,154 21,154 18,305
9/30/95 21,972 21,972 21,972 19,077
10/31/95 21,700 21,700 21,700 19,009
11/30/95 22,403 22,403 22,403 19,842
12/31/95 22,571 22,571 22,571 20,224
1/31/96 23,174 23,174 23,174 20,912
2/29/96 23,381 23,381 23,381 21,106
3/31/96 23,621 23,621 23,621 21,310
4/30/96 24,123 24,123 24,123 21,623
5/31/96 24,685 24,685 24,685 22,180
6/30/96 25,142 25,142 25,142 22,265
7/31/96 24,177 24,177 24,177 21,282
8/31/96 24,429 24,429 24,429 21,731
9/30/96 25,936 25,936 25,936 22,953
10/31/96 26,770 26,737 26,737 23,586
11/30/96 28,783 28,734 28,734 25,367
12/31/96 28,213 28,141 28,141 24,865
1/31/97 29,826 29,752 29,752 26,417
2/28/97 29,945 29,854 29,854 26,625
3/31/97 28,735 28,625 28,625 25,533
4/30/97 29,551 29,422 29,422 27,056
5/31/97 31,508 31,355 31,355 28,702
6/30/97 32,760 32,603 32,603 29,987
7/31/97 34,977 34,791 34,791 32,372
8/31/97 33,135 32,959 32,959 30,560
9/30/97 34,317 34,123 34,123 32,233
10/31/97 33,207 32,986 32,986 31,158
11/30/97 34,265 34,021 34,021 32,599
12/31/97 34,860 34,594 34,594 33,158
1/31/98 35,377 35,001 35,001 33,525
2/28/98 38,194 37,744 37,744 35,941
3/31/98 39,476 38,965 38,965 37,780
4/30/98 39,530 39,000 39,000 38,160
5/31/98 38,797 38,222 38,222 37,505
6/30/98 39,790 39,177 39,177 39,028
7/31/98 39,307 38,664 38,664 38,613
8/31/98 34,224 33,639 33,639 33,036
9/30/98 36,638 35,992 35,992 35,153
10/31/98 39,904 39,142 39,142 38,009
11/30/98 42,434 41,584 41,584 40,312
12/31/98 43,496 42,607 42,607 42,634
1/31/99 44,206 43,269 43,269 44,416
2/28/99 43,309 42,368 42,368 43,036
3/31/99 44,690 43,674 43,674 44,758
4/30/99 47,481 46,343 46,343 46,492
5/31/99 46,488 45,349 45,349 45,394
6/30/99 47,916 46,693 46,693 47,913
7/31/99 46,940 45,699 45,699 46,417
8/31/99 46,472 45,202 45,202 46,186
9/30/99 44,681 43,435 43,435 44,920
10/31/99 47,910 46,545 46,545 47,762
11/30/99 47,084 45,736 45,736 48,737
12/31/99 47,469 46,113 46,113 51,606
1/31/00 45,496 44,178 44,178 49,013
2/29/00 42,753 41,488 41,488 48,085
3/31/00 46,881 45,474 45,474 52,790
4/30/00 45,637 44,255 44,255 51,196
5/31/00 45,361 43,946 43,946 50,146
6/30/00 45,850 44,391 44,410 51,382
The performance graph compares a hypothetical $10,000 investment in Classes A,
B, and C of each Fund to a hypothetical investment in a relevant market index.
Fund performance is derived from the Fund's original class of shares and
reflects the maximum 5.75% sales charge for Class A shares, the maximum
contingent deferred sales charge of 5% in the first year, decreasing to 0% after
six years for Class B shares, and 1% in the first year for Class C shares. Fund
performance has not been restated to reflect Rule 12b-1 fees prior to September
30, 1996. Such fees will affect subsequent performance. 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>
<CAPTION>
Percent of
TOP TEN HOLDINGS Net Assets
--------------------------------------------------------------------------------
<S> <C>
Washington Mutual, Inc................................................. 5.6%
(Savings & Loans)
General Electric Co.................................................... 5.3
(Electrical Equipment)
Microsoft Corp......................................................... 4.9
(Computers--Software & Services)
Intel Corp............................................................. 4.9
(Electronics--Semiconductors)
Johnson & Johnson...................................................... 3.4
(Health Care--Diversified)
Citigroup, Inc......................................................... 2.7
(Banks--Major Regional)
Pfizer, Inc............................................................ 2.7
(Health Care--Generic and Other Drugs)
Lucent Technologies, Inc............................................... 2.6
(Telecommunications--Equipment)
Exxon Mobil Corp....................................................... 2.6
(Oil--International Integrated)
American International Group, Inc...................................... 2.6
(Insurance--Multi-Line)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES Cost
For the Period Ended June 30, 2000 (000's)
--------------------------------------------------------------------------------
<S> <C>
Cisco Systems, Inc. .................................................... $38,227
Pfizer, Inc. ........................................................... 37,250
Dell Computer Corp. .................................................... 24,848
Sun Microsystems, Inc. ................................................. 24,575
Motorola, Inc. ......................................................... 22,276
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SALES Proceeds
For the Period Ended June 30, 2000 (000's)
--------------------------------------------------------------------------------
<S> <C>
Kimberly-Clark Corp. ................................................... $53,858
Bestfoods............................................................... 48,236
Albertson's, Inc. ...................................................... 40,454
Dover Corp. ............................................................ 34,265
Anheuser-Busch Co., Inc. ............................................... 32,006
</TABLE>
<TABLE>
<CAPTION>
Percent of
TOP FIVE INDUSTRIES Net Assets
--------------------------------------------------------------------------------
<S> <C>
Health Care (Diversified)............................................... 8%
Electrical Equipment.................................................... 8
Computers (Hardware).................................................... 7
Telephone............................................................... 6
Savings & Loans......................................................... 6
</TABLE>
Weightings As a Percent of Net Assets
--------------------------------------------------------------------------------
[PIE CHART]
1 Large - Common Stocks: ($4 Bil. and above) 97%
2 Cash & Other: 3%
- 7 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Equity Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE
AMOUNT (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - 97.4%
Banks (Major Regional) - 3.9%
500,000 Bank of America Corp. $ 21,500
800,000 Citigroup, Inc. 48,200
Banks (Money Center) - 1.4%
525,000 Chase Manhattan Corp. 24,183
Beverages (Non-Alcoholic) - 2.0%
800,000 PepsiCo, Inc. 35,550
Chemicals - 2.5%
505,000 Du Pont (E.I.) de Nemours & Co. 22,094
600,000 Praxair, Inc. 22,463
Communication Equipment - 2.9%
465,000 Motorola, Inc. 13,514
350,000 Nortel Networks Corp. 23,887
210,000 * Tellabs, Inc. 14,372
Computers (Hardware) - 7.2%
450,000 * Dell Computer Corp. 22,191
300,000 Hewlett-Packard Co. 37,462
400,000 International Business Machines Corp. 43,825
300,000 * Sun Microsystems, Inc. 27,281
Computers (Networking) - 2.5%
700,000 * Cisco Systems, Inc. 44,494
Computers (Peripherals) - 0.7%
250,000 * America Online, Inc. 13,187
Computers (Software & Services) - 5.5%
500,000 * Cadence Design Systems, Inc. 10,188
1,100,000 * Microsoft Corp. 88,000
Electrical Equipment - 7.8%
114,420 * Agilent Technologies, Inc. 8,438
600,000 Emerson Electric Co. 36,225
1,800,000 General Electric Co. 95,400
Electronics (Semiconductors) - 4.9%
650,000 Intel Corp. 86,897
Entertainment - 3.6%
700,000 The Walt Disney Co. 27,169
500,000 Time Warner, Inc. 38,000
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE
AMOUNT (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
Equipment (Semiconductor) - 0.8%
150,000 * Applied Materials, Inc. $ 13,594
Financial (Diversified) - 3.1%
500,000 Federal Home Loan Mortgage Corp. 20,250
700,000 Federal National Mortgage Association 36,531
Health Care (Diversified) - 8.1%
700,000 Abbott Laboratories 31,194
423,000 American Home Products Corp. 24,851
500,000 Bristol-Myers Squibb Co. 29,125
600,000 Johnson & Johnson 61,125
Health Care (Drugs - Generic & Other) - 2.7%
1,000,000 Pfizer, Inc. 48,000
Health Care (Major Pharmaceuticals) - 1.7%
400,000 Merck & Co., Inc. 30,650
Household Products (Non-Durables) - 1.9%
600,000 Procter & Gamble Co. 34,350
Insurance (Multi-Line) - 2.6%
400,000 American International Group, Inc. 47,000
Manufacturing (Diversified) - 1.1%
600,000 Honeywell International, Inc. 20,212
Office Equipment & Supplies - 0.5%
400,000 Xerox Corp. 8,300
Oil (International Integrated) - 5.1%
600,000 Exxon Mobil Corp. 47,100
725,000 Royal Dutch Petroleum Co. (ADR) 44,633
Publishing (Newspapers) - 1.7%
500,000 Gannett Co., Inc. 29,906
Retail (Department Stores) - 2.0%
1,500,000 May Department Stores Co. 36,000
Retail (Drug Stores) - 1.5%
650,000 CVS Corp. 26,000
Retail (Food Chains) - 1.3%
700,000 Albertson's, Inc. 23,275
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 8 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Equity Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE
AMOUNT (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
Retail (General Merchandise) - 1.5%
470,000 Wal-Mart Stores, Inc. $ 27,084
Savings & Loans - 5.6%
3,500,000 Washington Mutual, Inc. 101,062
Services (Data Processing) - 1.2%
400,000 Automatic Data Processing, Inc. 21,425
Telecommunications (Equipment) - 2.6%
800,000 Lucent Technologies, Inc. 47,400
Telecommunications (Long Distance) - 1.6%
900,000 AT&T Corp. 28,463
Telephone - 5.7%
700,000 Bell Atlantic Corp. 35,569
1,062,300 CenturyTel, Inc. 30,541
800,000 * MCI WorldCom, Inc. 36,700
---------
TOTAL COMMON STOCKS 1,744,860
---------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE
AMOUNT (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
COMMERCIAL PAPER - 2.7%
Trucks & Parts - 2.7%
48,631,000 Cooperative Association of
Tractor Dealers
7.05%, due 7/03/00 $ 48,631
----------
TOTAL COMMERCIAL PAPER 48,631
----------
CASH EQUIVALENTS - 0.0%
Investment Companies
4,087 AIM Short-Term Investments Co.
Liquid Assets Money Market Portfolio
(Institutional Shares) 4
----------
TOTAL CASH EQUIVALENTS 4
----------
TOTAL INVESTMENTS - 100.1% 1,793,495
Other Assets, less Liabilities (2,950)
----------
NET ASSETS $1,790,545
==========
--------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
- 9 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO Dividend Income Fund
June 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PHOTO]
THOMAS The SAFECO Dividend Income Fund's performance over the first
RATH half of 2000 was disappointing. Hit hard by the Y2K hangover,
the Fund is behind the Lipper average for equity-income funds
and the S&P 500. The trouble is information technology spending,
which was above trend, has remained below trend since the first
of the year. This has translated into disappointing revenue and
lower share prices for three of the Fund's largest holdings,
MICROS, Ciber and J.D. Edwards.
MICROS, which provides systems for the hotel/restaurant
industry, declined 70% in the second quarter. When spending does
resume, we are confident MICROS will get the business. It
dominates its industry and has new products to expand into the
fast food arena.
Ciber and J.D. Edwards slowed as we expected, however, their recoveries have
taken longer than we anticipated. J.D. Edwards provides resource planning
software systems for businesses. Ciber's information technology services range
from consulting and temporary staffing to software implementation and Web
design.
The good news is that hangovers are temporary. When this one passes, we will
be left with what I think is a robust portfolio.
Intel is taking new products into the higher-end server market. With its
manufacturing prowess, it should be able to rapidly capture share.
We are overweighted in drug stocks, bought cheap and with the belief that
demographics bode well for this sector. Indeed, in the second quarter, Abbott
Laboratories, Bristol-Myers, and Johnson & Johnson all outperformed within the
sector. Albertson's rallied nicely in first quarter and held its gains through
the second. We've made money in Lucent as well.
Through the first half of 2000, the market lacked consistent leadership. My
sense is that a transition to more reasoned investing is underway. This should
bode well for the Fund. As always, we try to be discriminating in terms of
price and growth potential.
Thomas Rath
--------------------------------------------------------------------------------
In addition to being an equity and convertible securities portfolio manager at
SAFECO, Rath has been an analyst and portfolio manager at First Interstate Bank
and a principal at Meridian Capital Management. He holds an MBA from the
University of Washington and is a Chartered Financial Analyst.
- 10 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PERFORMANCE GRAPH]
PERFORMANCE OVERVIEW - CLASS A, B AND C SHARES
Average Annual Total Return for the With Sales Charge
period ended June 30, 2000 Six-Months* 1 Year 5 Year 10 Year
--------------------------------------------------------------------------------
SAFECO Dividend Income Fund
Class A (13.25)% (13.88)% 10.22% 10.23%
Class B (12.86)% (13.65)% 10.74% 10.62%
Class C (9.12)% (10.10)% 11.02% 10.63%
S&P 500 Index N/A N/A N/A N/A
Lipper, Inc. (Equity Income Funds) N/A N/A N/A N/A
Average Annual Total Return for the Without Sales Charge
period ended June 30, 2000 Six-Months* 1 Year 5 Year 10 Year
--------------------------------------------------------------------------------
SAFECO Dividend Income Fund
Class A (7.97)% (8.62)% 11.53% 10.89%
Class B (8.29)% (9.31)% 11.00% 10.62%
Class C (8.20)% (9.23)% 11.02% 10.63%
S&P 500 Index (0.43)% 7.24% 23.79% 17.78%
Lipper, Inc. (Equity Income Funds) (1.86)% (6.63)% 13.68% 12.42%
* Not Annualized
Investment Values
Class A Class B Class C S&P 500 Index
------- ------- ------- -------------
6/30/90 10,000 10,000 10,000 10,000
7/31/90 9,821 9,821 9,821 9,968
8/31/90 9,094 9,094 9,094 9,068
9/30/90 8,720 8,720 8,720 8,627
10/31/90 8,511 8,511 8,511 8,591
11/30/90 9,031 9,031 9,031 9,145
12/31/90 9,203 9,203 9,203 9,400
1/31/91 9,561 9,561 9,561 9,808
2/28/91 10,111 10,111 10,111 10,509
3/31/91 10,265 10,265 10,265 10,763
4/30/91 10,376 10,376 10,376 10,788
5/31/91 10,690 10,690 10,690 11,252
6/30/91 10,421 10,421 10,421 10,737
7/31/91 10,717 10,717 10,717 11,237
8/31/91 11,042 11,042 11,042 11,503
9/30/91 11,025 11,025 11,025 11,310
10/31/91 11,140 11,140 11,140 11,462
11/30/91 10,680 10,680 10,680 11,001
12/31/91 11,343 11,343 11,343 12,257
1/31/92 11,430 11,430 11,430 12,029
2/29/92 11,466 11,466 11,466 12,185
3/31/92 11,356 11,356 11,356 11,948
4/30/92 11,687 11,687 11,687 12,299
5/31/92 11,798 11,798 11,798 12,359
6/30/92 11,841 11,841 11,841 12,175
7/31/92 12,281 12,281 12,281 12,672
8/31/92 12,191 12,191 12,191 12,413
9/30/92 12,321 12,321 12,321 12,559
10/31/92 12,094 12,094 12,094 12,602
11/30/92 12,404 12,404 12,404 13,030
12/31/92 12,644 12,644 12,644 13,190
1/31/93 12,919 12,919 12,919 13,300
2/28/93 13,165 13,165 13,165 13,481
3/31/93 13,611 13,611 13,611 13,766
4/30/93 13,425 13,425 13,425 13,433
5/31/93 13,603 13,603 13,603 13,791
6/30/93 13,673 13,673 13,673 13,832
7/31/93 13,603 13,603 13,603 13,776
8/31/93 14,050 14,050 14,050 14,297
9/30/93 14,089 14,089 14,089 14,185
10/31/93 14,334 14,334 14,334 14,478
11/30/93 14,160 14,160 14,160 14,340
12/31/93 14,230 14,230 14,230 14,514
1/31/94 14,695 14,695 14,695 15,007
2/28/94 14,367 14,367 14,367 14,600
3/31/94 13,865 13,865 13,865 13,965
4/30/94 14,027 14,027 14,027 14,143
5/31/94 14,035 14,035 14,035 14,375
6/30/94 13,830 13,830 13,830 14,023
7/31/94 14,256 14,256 14,256 14,483
8/31/94 14,707 14,707 14,707 15,076
9/30/94 14,508 14,508 14,508 14,708
10/31/94 14,483 14,483 14,483 15,037
11/30/94 13,970 13,970 13,970 14,490
12/31/94 14,075 14,075 14,075 14,705
1/31/95 14,432 14,432 14,432 15,086
2/28/95 14,883 14,883 14,883 15,673
3/31/95 15,305 15,305 15,305 16,135
4/30/95 15,632 15,632 15,632 16,610
5/31/95 16,089 16,089 16,089 17,272
6/30/95 16,288 16,288 16,288 17,673
7/31/95 16,923 16,923 16,923 18,259
8/31/95 17,045 17,045 17,045 18,305
9/30/95 17,561 17,561 17,561 19,077
10/31/95 17,368 17,368 17,368 19,009
11/30/95 17,975 17,975 17,975 19,842
12/31/95 18,348 18,348 18,348 20,224
1/31/96 18,934 18,934 18,934 20,912
2/29/96 18,981 18,981 18,981 21,106
3/31/96 19,206 19,206 19,206 21,310
4/30/96 19,282 19,282 19,282 21,623
5/31/96 19,920 19,920 19,920 22,180
6/30/96 20,169 20,169 20,169 22,265
7/31/96 19,601 19,601 19,601 21,282
8/31/96 19,970 19,970 19,970 21,731
9/30/96 20,894 20,894 20,894 22,953
10/31/96 21,665 21,645 21,645 23,586
11/30/96 22,802 22,771 22,771 25,367
12/31/96 22,743 22,690 22,690 24,865
1/31/97 23,646 23,592 23,592 26,417
2/28/97 23,678 23,614 23,614 26,625
3/31/97 22,789 22,719 22,719 25,533
4/30/97 23,114 23,021 23,021 27,056
5/31/97 24,768 24,650 24,650 28,702
6/30/97 25,789 25,643 25,643 29,987
7/31/97 27,181 27,009 27,009 32,372
8/31/97 26,757 26,587 26,587 30,560
9/30/97 27,956 27,751 27,751 32,233
10/31/97 27,017 26,805 26,805 31,158
11/30/97 27,989 27,751 27,751 32,599
12/31/97 28,691 28,442 28,442 33,158
1/31/98 29,038 28,893 28,893 33,525
2/28/98 30,662 30,496 30,496 35,941
3/31/98 31,920 31,722 31,722 37,780
4/30/98 32,160 31,936 31,936 38,160
5/31/98 31,452 31,210 31,210 37,505
6/30/98 32,071 31,813 31,813 39,028
7/31/98 30,687 30,418 30,418 38,613
8/31/98 25,979 25,730 25,730 33,036
9/30/98 26,439 26,175 26,175 35,153
10/31/98 28,013 27,719 27,719 38,009
11/30/98 29,538 29,204 29,204 40,312
12/31/98 30,234 29,872 29,872 42,634
1/31/99 30,697 30,316 30,316 44,416
2/28/99 28,565 28,187 28,187 43,036
3/31/99 29,215 28,825 28,825 44,758
4/30/99 30,263 29,832 29,832 46,492
5/31/99 29,939 29,475 29,475 45,394
6/30/99 30,755 30,264 30,264 47,913
7/31/99 29,666 29,167 29,167 46,417
8/31/99 28,200 27,699 27,699 46,186
9/30/99 27,401 26,907 26,907 44,920
10/31/99 29,329 28,787 28,787 47,762
11/30/99 29,290 28,710 28,710 48,737
12/31/99 30,540 29,927 29,927 51,606
1/31/00 28,560 27,974 27,974 49,013
2/29/00 27,502 26,925 26,925 48,085
3/31/00 29,623 28,981 28,981 52,790
4/30/00 28,656 28,023 28,023 51,196
5/31/00 28,424 27,770 27,783 50,146
6/30/00 28,106 27,447 27,472 51,382
The performance graph compares a hypothetical $10,000 investment in Classes A,
B, and C of each Fund to a hypothetical investment in a relevant market index.
Fund performance is derived from the Fund's original class of shares and
reflects the maximum 5.75% sales charge for Class A shares, the maximum
contingent deferred sales charge of 5% in the first year, decreasing to 0% after
six years for Class B shares, and 1% in the first year for Class C shares. Fund
performance has not been restated to reflect Rule 12b-1 fees prior to September
30, 1996. Such fees will affect subsequent performance. 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>
<CAPTION>
Percent of
TOP TEN HOLDINGS Net Assets
--------------------------------------------------------------------------------
<S> <C>
Merrill Lynch & Co. 7.875% Convertible.................................. 5.1%
(Computers--Software & Services)
Intel Corp. ............................................................ 3.7
(Electronics--Semiconductors)
Abbott Laboratories..................................................... 3.6
(Health Care--Diversified)
Johnson & Johnson....................................................... 3.3
(Health Care--Diversified)
Lucent Technologies, Inc. .............................................. 3.2
(Telecommunications--Equipment)
Bristol-Myers Squibb Co. ............................................... 3.1
(Health Care--Diversified)
Texaco, Inc. ........................................................... 3.0
(Oil--International Integrated)
Albertson's, Inc. ...................................................... 2.9
(Retail--Food Chains)
American Home Products Corp. ........................................... 2.8
(Health Care--Diversified)
S3, Inc. ............................................................... 2.8
(Computers--Peripherals)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES Cost
For the Period Ended June 30, 2000 (000's)
--------------------------------------------------------------------------------
<S> <C>
J.D. Edwards & Co. ..................................................... $11,479
S3, Inc. ............................................................... 6,919
Johnson & Johnson....................................................... 6,277
Lucent Technologies, Inc. .............................................. 4,170
AT&T Corp. ............................................................. 3,815
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SALES Proceeds
For the Period Ended June 30, 2000 (000's)
--------------------------------------------------------------------------------
<S> <C>
AMFM, Inc. .............................................................. $7,447
Merck & Co., Inc. ....................................................... 7,406
BEA Systems, Inc. ....................................................... 5,009
Iron Mountain, Inc. ..................................................... 4,900
Nortel Networks Corp. ................................................... 4,454
</TABLE>
<TABLE>
<CAPTION>
Percent of
TOP FIVE INDUSTRIES Net Assets
--------------------------------------------------------------------------------
<S> <C>
Health Care (Diversified................................................ 13%
Computers (Software & Services)......................................... 9
Oil (International Integrated).......................................... 7
Real Estate Investment Trust............................................ 6
Computers (Hardware).................................................... 5
</TABLE>
Weightings As a Percent of Net Assets
--------------------------------------------------------------------------------
[PIE CHART]
1 Large - Common Stocks: ($4 Bil. and above) 71%
2 Medium - Common Stocks: ($1.5 Bil. - $4 Bil.) 13%
3 Small - Common Stocks: (Less than $1.5 Bil.) 10%
4 Preferred Stock: 5%
5 Cash & Other: 1%
- 11 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Dividend Income Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE
AMOUNT (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - 94.3%
Airlines - 1.3%
101,400 * Northwest Airlines Corp. $ 3,086
Banks (Major Regional) - 1.3%
72,511 Bank of America Corp. 3,118
Banks (Money Center) - 1.6%
85,500 Chase Manhattan Corp. 3,938
Beverages (Non-Alcoholic) - 3.7%
130,000 PepsiCo, Inc. 5,777
54,500 The Coca-Cola Co. 3,130
Broadcasting (TV, Radio & Cable) - 1.0%
34,300 * AMFM, Inc. 2,367
Chemicals - 1.2%
64,000 Du Pont (E.I.) de Nemours & Co. 2,800
Communication Equipment - 0.9%
29,000 Scientific-Atlanta, Inc. 2,161
Computers (Hardware) - 5.1%
56,700 * Dell Computer Corp. 2,796
41,200 Hewlett-Packard Co. 5,145
231,000 * MICROS Systems, Inc. 4,288
Computers (Peripherals) - 3.4%
27,500 * Go2Net, Inc. 1,384
460,300 * S3, Inc. 6,789
Computers (Software & Services) - 4.0%
142,100 * Cadence Design Systems, Inc. 2,895
449,300 * J.D. Edwards & Co. 6,768
Electric Companies - 1.9%
250,000 NIPSCO Industries, Inc. 4,656
Electrical Equipment - 2.1%
97,200 General Electric Co. 5,152
Electronics (Semiconductors) - 3.7%
66,400 Intel Corp. 8,877
Financial (Diversified) - 1.7%
80,000 Federal National Mortgage Association 4,175
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE
AMOUNT (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
Foods - 1.1%
135,700 ConAgra, Inc. $ 2,587
Health Care (Diversified) - 12.8%
195,800 Abbott Laboratories 8,725
115,900 American Home Products Corp. 6,809
128,000 Bristol-Myers Squibb Co. 7,456
76,800 Johnson & Johnson 7,824
Household Products (Non-Durables) - 3.6%
104,000 Kimberly-Clark Corp. 5,967
44,300 Procter & Gamble Co. 2,536
Insurance (Multi-Line) - 1.7%
75,000 Hartford Financial Services Group, Inc. 4,195
Manufacturing (Diversified) - 2.7%
80,000 Minnesota Mining & Manufacturing Co. 6,600
Manufacturing (Specialized) - 1.0%
90,000 Diebold, Inc. 2,509
Office Equipment & Supplies - 1.2%
88,900 * United Stationers, Inc. 2,878
Oil (International Integrated) - 6.8%
59,406 Exxon Mobil Corp. 4,663
75,000 Royal Dutch Petroleum Co. (ADR) 4,617
135,000 Texaco, Inc. 7,189
Paper & Forest Products - 0.8%
47,300 Weyerhaeuser Co. 2,034
Railroads - 2.0%
138,600 GATX Corp. 4,712
Real Estate Investment Trust - 6.4%
100,000 Equity Residential Properties Trust 4,600
205,000 First Industrial Realty Trust, Inc. 6,047
185,000 Liberty Property Trust 4,798
Retail (Building Supplies) - 0.6%
30,600 Home Depot, Inc. 1,528
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 12 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Dividend Income Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE
AMOUNT (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
Retail (Drug Stores) - 2.0%
119,200 CVS Corp. $ 4,768
Retail (Food Chains) - 2.9%
206,700 Albertson's, Inc. 6,873
Retail (General Merchandise) - 0.5%
35,300 * Costco Wholesale Corp. 1,165
Savings & Loans - 2.1%
171,000 Washington Mutual, Inc. 4,938
Services (Commercial & Consumer) - 4.1%
124,700 Central Parking Corp. 2,954
79,500 * Iron Mountain, Inc. 2,703
72,300 United Parcel Service, Inc. (Class B) 4,266
Services (Data Processing) - 0.7%
33,300 Automatic Data Processing, Inc. 1,784
Telecommunications (Equipment) - 3.2%
129,200 Lucent Technologies, Inc. 7,655
Telecommunications (Long Distance) - 1.0%
73,000 AT&T Corp. 2,309
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE
AMOUNT (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
Telephone - 3.3%
67,000 GTE Corp. $ 4,171
82,950 * MCI WorldCom, Inc. 3,805
Waste Management - 0.8%
121,500 Landauer, Inc. 1,891
---------
TOTAL COMMON STOCKS 226,858
---------
PREFERRED STOCKS - 5.1%
Computers (Software & Services) - 5.1%
414,200 Merrill Lynch & Co.
7.875% Convertible 12,374
---------
TOTAL PREFERRED STOCKS 12,374
---------
CASH EQUIVALENTS - 0.4%
Investment Companies
886,192 AIM Short-Term Investments Co.
Liquid Assets Money Market
Portfolio (Institutional Shares) 886
---------
TOTAL CASH EQUIVALENTS 886
---------
TOTAL INVESTMENTS - 99.8% 240,118
Other Assets, less Liabilities 477
---------
NET ASSETS $ 240,595
=========
--------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
- 13 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO Northwest Fund
June 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PHOTO]
WILLIAM B. SAFECO Northwest Fund remained well ahead of the Lipper
WHITLOW average for multi-cap core funds and the S&P 500 for the six
months and year ended June 30, 2000.
While our heavy weighting in technology is responsible for
the Fund's outperformance over those periods, it caused the Fund
to lag in the second quarter. Still, I am pleased with the way
the portfolio weathered the storm April and May unleashed on the
technology sector. Our well-calculated, but aggressive, approach
to high tech enabled us to benefit in the red-hot speculative
market; while our balancing act kept us from getting burned.
We continue to take small positions in numerous companies that generally
enable, rather than use, the Internet. We balance our heavy weighting in
technology with "old economy" stocks. Indeed, our consumer staples, basic
industry and financial stocks--namely Albertson's, Washington Mutual,
Starbucks, Weyerhaeuser and Kroger--cushioned the Fund through the tech
correction.
Microsoft fell 33% over the first half of 2000 on concerns surrounding its
anti-trust case and I actually bought a little bit. I believe Microsoft will
come back no matter how its legal issues are resolved.
Still, many of the Internet stocks have yet to--and may never--regain their
highs. During the second quarter, we weeded N2H2 from our portfolio and added
to other positions when they came into our price range, including Internet
companies InterNap and Go2Net.
Demand for its commodity memory chips, primarily for PCs and cell phones,
powered Micron Technologies through the correction. It was the Fund's biggest
contributor, up 130% through June 30.
I have kept the Fund positioned to take advantage of what I think are the
drivers of the Northwest's economy. Going forward I will continue to manage in
a growth style, while remaining sensitive to value and risk.
William B. Whitlow
--------------------------------------------------------------------------------
William B. Whitlow began his career at SAFECO in 1976 and left in 1980. Before
re-joining SAFECO in April 1997 as Northwest Fund Manager, he was Director of
Research at Pacific Crest Securities. He holds a BA in chemistry from the
University of Colorado and an MBA from the University of California at
Berkeley. He is a CFA and a member of the Washington State Governor's Council
of Economic Advisors.
- 14 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PERFORMANCE GRAPH]
PERFORMANCE OVERVIEW - CLASS A, B AND C SHARES
Average Annual Total
Return for the period With Sales Charge
ended June 30, 2000 Six-Months* 1 Year 5 Year Since Inception**
--------------------------------------------------------------------------------
SAFECO Northwest Fund
Class A 0.94% 31.52% 20.07% 15.32%
Class B 1.79% 33.85% 20.75% 15.77%
Class C 5.79% 37.85% 20.94% 15.77%
WM Group NW 50 Index N/A N/A N/A N/A
S&P 500 Index N/A N/A N/A N/A
Lipper, Inc. (Milti-Cap Core
Funds) N/A N/A N/A N/A
Average Annual Total
Return for the period Without Sales Charge
ended June 30, 2000 Six-Months* 1 Year 5 Year Since Inception**
--------------------------------------------------------------------------------
SAFECO Northwest Fund
Class A 7.12% 39.57% 21.49% 16.05%
Class B 6.79% 38.85% 20.94% 15.77%
Class C 6.79% 38.85% 20.94% 15.77%
WM Group NW 50 Index (4.66)% 1.08% 23.60% 16.54%
S&P 500 Index (0.43)% 7.24% 23.79% 22.45%
Lipper, Inc. (Milti-Cap Core
Funds) 2.57% 11.60% 19.54% N/A
* Not Annualized
** Graph and average annual return comparison begins February 7, 1991,
inception date of the fund.
Investment Values
WM Group
Class A Class B Class C NW 50 Index S&P 500 Index
------- ------- ------- ----------- -------------
2/7/91 10,000 10,000 10,000 -- --
2/28/91 10,130 10,130 10,130 10,000 10,000
3/31/91 10,357 10,357 10,357 10,392 10,242
4/30/91 10,660 10,660 10,660 10,633 10,266
5/31/91 11,024 11,024 11,024 11,255 10,708
6/30/91 10,379 10,379 10,379 10,489 10,217
7/31/91 10,998 10,998 10,998 10,981 10,693
8/31/91 11,454 11,454 11,454 11,410 10,946
9/30/91 11,173 11,173 11,173 11,177 10,763
10/31/91 11,061 11,061 11,061 11,156 10,907
11/30/91 10,380 10,380 10,380 10,697 10,469
12/31/91 11,643 11,643 11,643 11,963 11,664
1/31/92 12,144 12,144 12,144 12,572 11,447
2/29/92 12,533 12,533 12,533 12,744 11,595
3/31/92 12,258 12,258 12,258 12,322 11,370
4/30/92 11,828 11,828 11,828 11,744 11,703
5/31/92 11,950 11,950 11,950 11,623 11,760
6/30/92 11,573 11,573 11,573 11,201 11,586
7/31/92 11,840 11,840 11,840 11,301 12,059
8/31/92 11,522 11,522 11,522 10,976 11,812
9/30/92 12,002 12,002 12,002 11,393 11,951
10/31/92 12,403 12,403 12,403 11,830 11,992
11/30/92 12,927 12,927 12,927 12,345 12,399
12/31/92 13,282 13,282 13,282 12,353 12,551
1/31/93 13,334 13,334 13,334 12,432 12,656
2/28/93 12,680 12,680 12,680 12,028 12,829
3/31/93 13,176 13,176 13,176 12,508 13,099
4/30/93 12,638 12,638 12,638 12,211 12,783
5/31/93 12,912 12,912 12,912 12,497 13,124
6/30/93 12,791 12,791 12,791 12,212 13,162
7/31/93 12,685 12,685 12,685 11,757 13,109
8/31/93 13,044 13,044 13,044 12,223 13,605
9/30/93 13,035 13,035 13,035 11,932 13,498
10/31/93 13,204 13,204 13,204 12,343 13,777
11/30/93 13,257 13,257 13,257 12,592 13,646
12/31/93 13,418 13,418 13,418 12,743 13,811
1/31/94 13,655 13,655 13,655 13,113 14,280
2/28/94 14,000 14,000 14,000 13,294 13,893
3/31/94 13,407 13,407 13,407 12,809 13,288
4/30/94 13,375 13,375 13,375 12,754 13,459
5/31/94 13,580 13,580 13,580 12,930 13,679
6/30/94 13,233 13,233 13,233 12,520 13,344
7/31/94 13,427 13,427 13,427 12,599 13,782
8/31/94 14,031 14,031 14,031 13,308 14,346
9/30/94 13,711 13,711 13,711 12,781 13,996
10/31/94 13,580 13,580 13,580 12,687 14,309
11/30/94 13,243 13,243 13,243 12,442 13,789
12/31/94 13,210 13,210 13,210 12,493 13,993
1/31/95 13,373 13,373 13,373 12,439 14,355
2/28/95 13,711 13,711 13,711 12,882 14,914
3/31/95 14,169 14,169 14,169 13,290 15,354
4/30/95 14,354 14,354 14,354 13,674 15,806
5/31/95 14,573 14,573 14,573 13,659 16,436
6/30/95 15,291 15,291 15,291 14,473 16,818
7/31/95 16,088 16,088 16,088 15,005 17,375
8/31/95 16,230 16,230 16,230 15,275 17,418
9/30/95 16,317 16,317 16,317 15,817 18,153
10/31/95 16,125 16,125 16,125 15,432 18,088
11/30/95 16,091 16,091 16,091 15,641 18,882
12/31/95 15,875 15,875 15,875 15,811 19,245
1/31/96 16,026 16,026 16,026 15,710 19,900
2/29/96 16,514 16,514 16,514 16,054 20,085
3/31/96 17,513 17,513 17,513 16,569 20,278
4/30/96 17,990 17,990 17,990 17,546 20,577
5/31/96 18,292 18,292 18,292 17,812 21,106
6/30/96 17,911 17,911 17,911 17,716 21,187
7/31/96 17,062 17,062 17,062 16,828 20,251
8/31/96 17,609 17,609 17,609 17,643 20,679
9/30/96 17,885 17,885 17,885 18,080 21,842
10/31/96 17,444 17,418 17,418 17,936 22,444
11/30/96 18,197 18,171 18,171 19,215 24,139
12/31/96 18,249 18,210 18,210 19,644 23,661
1/31/97 19,572 19,520 19,520 20,502 25,138
2/28/97 19,572 19,508 19,508 20,863 25,336
3/31/97 18,755 18,677 18,677 20,266 24,297
4/30/97 19,417 19,326 19,326 21,151 25,746
5/31/97 20,702 20,598 20,598 22,863 27,312
6/30/97 21,883 21,766 21,766 23,922 28,535
7/31/97 23,778 23,622 23,622 26,083 30,805
8/31/97 23,142 22,973 22,973 25,217 29,081
9/30/97 24,297 24,102 24,102 26,959 30,673
10/31/97 23,142 22,960 22,960 25,154 29,649
11/30/97 24,141 23,933 23,933 26,659 31,021
12/31/97 23,867 23,660 23,660 26,033 31,553
1/31/98 23,632 23,424 23,424 25,911 31,902
2/28/98 26,039 25,805 25,805 28,536 34,201
3/31/98 26,358 26,110 26,110 29,872 35,951
4/30/98 26,994 26,733 26,733 30,098 36,313
5/31/98 25,016 24,753 24,753 28,281 35,690
6/30/98 25,569 25,279 25,279 30,030 37,138
7/31/98 23,978 23,701 23,701 28,168 36,744
8/31/98 19,204 18,980 18,980 23,651 31,437
9/30/98 20,311 20,060 20,060 24,743 33,451
10/31/98 21,570 21,292 21,292 27,482 36,169
11/30/98 23,397 23,092 23,092 30,600 38,360
12/31/98 24,552 24,220 24,220 34,256 40,570
1/31/99 26,020 25,647 25,647 35,968 42,266
2/28/99 24,999 24,626 24,626 35,432 40,953
3/31/99 25,265 24,878 24,878 37,914 42,591
4/30/99 25,824 25,396 25,396 39,419 44,241
5/31/99 26,985 26,529 26,529 39,469 43,196
6/30/99 28,998 28,488 28,488 41,296 45,593
7/31/99 28,327 27,816 27,816 38,129 44,170
8/31/99 28,341 27,802 27,802 38,011 43,950
9/30/99 27,992 27,452 27,452 37,238 42,745
10/31/99 30,886 30,279 30,279 39,173 45,450
11/30/99 33,431 32,769 32,769 39,811 46,377
12/31/99 37,784 37,043 37,043 43,781 49,107
1/31/00 37,709 36,952 36,952 43,213 46,640
2/29/00 41,864 40,995 40,995 44,947 45,757
3/31/00 42,755 41,843 41,843 47,598 50,234
4/30/00 37,482 36,664 36,664 43,221 48,718
5/31/00 35,805 34,998 34,998 40,445 47,718
6/30/00 40,474 39,556 39,556 41,741 48,895
The performance graph compares a hypothetical $10,000 investment in Classes A,
B, and C of each Fund to a hypothetical investment in a relevant market index.
Fund performance is derived from the Fund's original class of shares and
reflects the maximum 5.75% sales charge for Class A shares, the maximum
contingent deferred sales charge of 5% in the first year, decreasing to 0% after
six years for Class B shares, and 1% in the first year for Class C shares. Fund
performance has not been restated to reflect Rule 12b-1 fees prior to September
30, 1996. Such fees will affect subsequent performance. 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>
<CAPTION>
Percent of
TOP TEN HOLDINGS Net Assets
--------------------------------------------------------------------------------
<S> <C>
Micron Technology, Inc. ................................................ 5.9%
(Electronics--Semiconductors)
Microsoft Corp. ........................................................ 5.6
(Computers--Software & Services)
Expeditors International of Washington, Inc. ........................... 5.0
(Air Freight)
NEXTLINK Communications, Inc. (Class A)................................. 4.9
(Telephone)
Western Wireless Corp. (Class A)........................................ 4.9
(Telecommunications--Cellular/Wireless)
VoiceStream Wireless Corp. ............................................. 4.5
(Telecommunications--Cellular/Wireless)
Hewlett-Packard Co. .................................................... 4.4
(Computers--Hardware)
Intel Corp. ............................................................ 4.3
(Electronics--Semiconductors)
Starbucks Corp. ........................................................ 4.1
(Restaurants)
Kroger Co. ............................................................. 3.9
(Retail--Food Chains)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES Cost
For the Period Ended June 30, 2000 (000's)
--------------------------------------------------------------------------------
<S> <C>
Western Wireless Corp. (Class A)......................................... $5,500
AVT Corp. ............................................................... 4,497
Micron Technology, Inc. ................................................. 3,753
Go2Net, Inc. ............................................................ 3,389
Weyerhaeuser Co. ........................................................ 3,382
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SALES Proceeds
For the Period Ended June 30, 2000 (000's)
--------------------------------------------------------------------------------
<S> <C>
TJ International, Inc. .................................................. $3,444
Mylan Laboratories, Inc. ................................................ 3,241
Alaska Air Group, Inc. .................................................. 2,749
Corixa Corp. ............................................................ 2,139
WatchGuard Technologies, Inc. ........................................... 1,589
</TABLE>
<TABLE>
<CAPTION>
Percent of
TOP FIVE INDUSTRIES Net Assets
--------------------------------------------------------------------------------
<S> <C>
Computers (Software & Services)......................................... 11%
Electronics (Semiconductors)............................................ 10
Telecommunications (Cellular/Wireless).................................. 9
Computers (Hardware).................................................... 7
Retail (Food Chains).................................................... 6
</TABLE>
Weightings As a Percent of Net Assets
--------------------------------------------------------------------------------
[PIE CHART]
1 Large - Common Stocks: ($4 Bil. and above) 54%
2 Small - Common Stocks: (Less than $1.5 Bil.) 32%
3 Medium - Common Stocks: ($1.5 Bil. - $4 Bil.) 14%
- 15 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Northwest Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE
AMOUNT (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - 99.6%
Air Freight - 5.0%
161,000 Expeditors International of Washington, Inc. $ 7,648
Airlines - 2.7%
136,000 *Northwest Airlines Corp. 4,140
Banks (Major Regional) - 1.4%
75,000 U.S. Bancorp 1,444
74,800 West Coast Bancorp, Inc. 748
Banks (Regional) - 0.4%
79,000 Washington Banking Co. 681
Biotechnology - 2.2%
80,000 *Corixa Corp. 3,435
Chemicals (Diversified) - 2.1%
152,000 Penford Corp. 3,268
Communication Equipment - 2.3%
484,000 *AVT Corp. 3,570
Computers (Hardware) - 7.2%
100,000 *Apex, Inc. 4,375
54,000 Hewlett-Packard Co. 6,743
Computers (Peripherals) - 5.9%
133,000 *click2learn.com, Inc. 2,344
49,000 *Go2Net, Inc. 2,465
78,000 *ImageX.com, Inc. 473
30,000 *Loudeye Technologies, Inc. 523
31,000 *Primus Knowledge Solutions, Inc. 1,395
36,000 *WatchGuard Technologies, Inc. 1,978
Computers (Software & Services) - 11.4%
27,000 *Digimarc Corp. 1,039
28,000 *F5 Networks, Inc. 1,528
41,000 *Internap Network Services Corp. 1,702
108,000 *Microsoft Corp. 8,640
95,000 *ONYX Software Corp. 2,820
48,000 *WebTrends Corp. 1,857
Electrical Equipment - 1.0%
20,595 *Agilent Technologies, Inc. 1,519
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE
AMOUNT (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
Electronics (Semiconductors) - 10.2%
50,000 Intel Corp. $ 6,684
104,000 *Micron Technology, Inc. 9,158
Hardware & Tools - 0.5%
141,000 *Jore Corporation 767
Health Care (Diversified) - 2.4%
62,000 American Home Products Corp. 3,642
Health Care (Drugs--Generic & Other) - 1.0%
59,000 *PathoGenesis Corp. 1,534
Health Care (Major Pharmaceuticals) - 1.2%
183,000 *Penwest Pharmaceuticals Co. 1,841
Health Care (Medical Products & Supplies) - 4.3%
229,000 *Protocol Systems, Inc. 3,650
100,000 *SonoSite, Inc. 2,881
Insurance (Life & Health) - 2.6%
126,500 StanCorp Financial Group, Inc. 4,064
Iron & Steel - 1.7%
161,000 Schnitzer Steel Industries, Inc. 2,556
Leisure Time (Products) - 1.0%
94,000 *Ambassadors International, Inc. 1,480
Paper & Forest Products - 1.9%
67,000 Weyerhaeuser Co. 2,881
Restaurants - 4.1%
164,000 *Starbucks Corp. 6,263
Retail (Food Chains) - 6.2%
109,000 Albertson's, Inc. 3,624
269,000 *Kroger Co. 5,935
Retail (General Merchandise) - 2.7%
124,000 *Costco Wholesale Corp. 4,092
Retail (Specialty) - 0.8%
33,000 *Amazon.com, Inc. 1,198
Savings & Loans - 2.8%
150,000 Washington Mutual, Inc. 4,331
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 16 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Northwest Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE
AMOUNT (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
Services (Data Processing) - 0.3%
171,500 *ARIS Corp. $ 472
Telecommunications (Cellular/Wireless) - 9.4%
60,000 *VoiceStream Wireless Corp. 6,978
139,000 *Western Wireless Corp. (Class A) 7,576
Telephone - 4.9%
200,000 * NEXTLINK Communications, Inc. (Class A) 7,588
---------
TOTAL COMMON STOCKS 153,530
---------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE
AMOUNT (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
CASH EQUIVALENTS - 0.4%
Investment Companies
681,028 AIM Short-Term Investments Co. Liquid Assets Money
Market Portfolio (Institutional Shares) $ 681
---------
TOTAL CASH EQUIVALENTS 681
---------
TOTAL INVESTMENTS - 100.0% 154,211
Other Assets, less Liabilities (31)
---------
NET ASSETS $ 154,180
=========
--------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
- 17 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO International Stock Fund
June 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
The portfolio has outperformed the EAFE index and the Lipper averages for
international funds through June 30, 2000.
The first half of the year was marked by changing investor sentiment. As
investors took profits and sent technology, telecom and media stocks from
leaders to laggards, "old economy" stocks benefited. We suffered less than
others from this volatility, having earlier trimmed our telecom and Japanese
technology stocks and re-invested the proceeds into lower-valued, more
attractive investments.
Financial and pharmaceutical stocks drove the Fund's outperformance.
Aventis' earnings growth accelerated on cost savings and increased drug sales.
Other contributing pharmaceuticals were Swiss-quoted Novartis and UK-quoted
AstraZeneca. Among the financial stocks, Netherlands-quoted ING Groep reduced
surplus capital by expanding its business through the acquisition of U.S. based
Reliastar. Paris-based AXA announced 33% revenue growth over the same period
last year.
Vodafone AirTouch, as well as other mobile operators fell on profit-taking
and concerns over continued network expansion costs. Meanwhile Alcatel profited
from exiting its low-growth and low-margin businesses to enter the surging
broadband equipment arena.
While economic data from the Eurozone is encouraging, growth in the UK has
slowed. In Japan, the economy is showing signs of economic recovery, but that
market declined, in part on investor impatience with the pace of reform. We
took profits in some of our better-performing Japanese investments and
redirected this money towards more value-orientated companies in Europe.
At this juncture--with profit warnings from high-profile technology
companies and aborted IPOs, we perceive a greater concern with company
fundamentals and have positioned the portfolio to benefit from a broadening of
the market into industry sectors largely ignored over the last two years.
Bank of Ireland
Asset Management (U.S.) Limited
--------------------------------------------------------------------------------
The Bank of Ireland Asset Management (U.S.) Limited (BIAM) investment committee
is comprised of senior analysts and economists and headed by the company's
chief financial officer. BIAM has managed international equities since 1966 and
began managing U.S. Funds in 1989.
- 18 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PERFORMANCE GRAPH]
PERFORMANCE OVERVIEW - CLASS A, B AND C SHARES
Average Annual Total Return for the With Sales Charge
period ended June 30, 2000 Six-Months* 1 Year Since Inception**
--------------------------------------------------------------------------------
SAFECO International Fund
Class A (7.70)% 12.59% 11.35%
Class B (7.35)% 13.49% 11.72%
Class C (3.51)% 17.42% 12.02%
EAFE Index N/A N/A N/A
Lipper, Inc. (International Funds) N/A N/A N/A
Average Annual Total Return for the Without Sales Charge
period ended June 30, 2000 Six-Months* 1 Year Since Inception**
--------------------------------------------------------------------------------
SAFECO International Fund
Class A (2.07)% 19.42% 12.85%
Class B (2.48)% 18.49% 12.03%
Class C (2.54)% 18.42% 12.02%
EAFE Index (4.63)% 15.72% 9.19%
Lipper, Inc. (International Funds) (4.55)% 24.48% N/A
* Not Annualized
** Graph and average annual return comparison begins January 31, 1996,
inception date of the fund.
Investment Values
Class A Class B Class C EAFE Index
------- ------- ------- ----------
1/31/96 10,000 10,000 10,000 10,000
2/29/96 9,930 9,930 9,930 10,021
3/31/96 10,040 10,040 10,040 10,220
4/30/96 10,290 10,290 10,290 10,504
5/31/96 10,250 10,250 10,250 10,298
6/30/96 10,240 10,240 10,240 10,342
7/31/96 9,840 9,840 9,840 10,026
8/31/96 10,240 10,240 10,240 10,035
9/30/96 10,454 10,454 10,454 10,288
10/31/96 10,575 10,565 10,565 10,169
11/30/96 11,239 11,229 11,229 10,560
12/31/96 11,415 11,391 11,391 10,410
1/31/97 11,374 11,340 11,340 10,033
2/28/97 11,526 11,482 11,482 10,183
3/31/97 11,445 11,411 11,411 10,207
4/30/97 11,496 11,451 11,451 10,247
5/31/97 12,022 11,966 11,966 10,900
6/30/97 12,386 12,320 12,320 11,488
7/31/97 12,820 12,744 12,744 11,660
8/31/97 11,728 11,643 11,643 10,776
9/30/97 12,517 12,421 12,421 11,366
10/31/97 11,476 11,381 11,381 10,478
11/30/97 11,546 11,441 11,441 10,358
12/31/97 11,906 11,788 11,788 10,435
1/31/98 12,154 12,033 12,033 10,899
2/28/98 12,958 12,820 12,820 11,584
3/31/98 13,463 13,311 13,311 11,926
4/30/98 13,535 13,352 13,352 12,007
5/31/98 13,648 13,464 13,464 11,934
6/30/98 13,782 13,587 13,587 12,010
7/31/98 13,927 13,720 13,720 12,118
8/31/98 12,112 11,920 11,920 10,602
9/30/98 11,381 11,195 11,195 10,263
10/31/98 12,236 12,023 12,023 11,318
11/30/98 13,174 12,933 12,933 11,883
12/31/98 13,535 13,280 13,280 12,337
1/31/99 13,566 13,301 13,301 12,286
2/28/99 13,473 13,209 13,209 11,979
3/31/99 13,824 13,546 13,546 12,464
4/30/99 14,494 14,190 14,190 12,955
5/31/99 13,793 13,464 13,464 12,273
6/30/99 14,277 13,935 13,935 12,737
7/31/99 14,525 14,159 14,159 13,100
8/31/99 14,566 14,180 14,180 13,133
9/30/99 14,545 14,149 14,149 13,251
10/31/99 15,071 14,650 14,650 13,732
11/30/99 15,865 15,437 15,437 14,194
12/31/99 17,411 16,930 16,930 15,454
1/31/00 16,380 15,918 15,918 14,458
2/29/00 16,957 16,460 16,460 14,833
3/31/00 17,586 17,063 17,063 15,394
4/30/00 16,679 16,173 16,173 14,570
5/31/00 16,483 15,969 15,959 14,199
6/30/00 17,050 16,511 16,501 14,739
The performance graph compares a hypothetical $10,000 investment in Classes A,
B, and C of each Fund to a hypothetical investment in a relevant market index.
Fund performance is derived from the Fund's original class of shares and
reflects the maximum 5.75% sales charge for Class A shares, the maximum
contingent deferred sales charge of 5% in the first year, decreasing to 0% after
six years for Class B shares, and 1% in the first year for Class C shares. Fund
performance has not been restated to reflect Rule 12b-1 fees prior to September
30, 1996. Such fees will affect subsequent performance. 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>
<CAPTION>
Percent of
TOP TEN HOLDINGS Net Assets
--------------------------------------------------------------------------------
<S> <C>
Vodafone AirTouch, plc................................................. 4.9%
(Telephone)
ING Groep NV........................................................... 3.4
(Banks--Foreign)
Canon, Inc............................................................. 2.5
(Office Equipment & Supplies)
Vivendi................................................................ 2.5
(Services--Commercial & Consumer)
Axa.................................................................... 2.4
(Insurance--Multi-Line)
Hitachi, Ltd........................................................... 2.4
(Electrical Equipment)
Telecom Italia SpA..................................................... 2.4
(Telephone)
Shell Transport & Trading Co., plc. ................................... 2.2
(Oil--International Integrated)
Total Fina Elf SA...................................................... 2.2
(Oil--International Integrated)
Nestle SA.............................................................. 2.2
(Foods)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES Cost
For the Period Ended June 30, 2000 (000's)
--------------------------------------------------------------------------------
<S> <C>
NEC Corp................................................................... $637
Hitachi, Ltd............................................................... 581
Koninklijke (Royal) Philips Electronics NV................................. 474
Marconi, plc............................................................... 456
Reuters Group, plc......................................................... 366
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SALES Proceeds
For the Period Ended June 30, 2000 (000's)
--------------------------------------------------------------------------------
<S> <C>
Vodafone AirTouch, plc..................................................... $789
Sony Corp. ................................................................ 749
NTT Mobile Communication Network, Inc. .................................... 637
Keyence Corp. ............................................................. 215
Pioneer Corp. ............................................................. 209
</TABLE>
<TABLE>
<CAPTION>
Percent of
TOP FIVE COUNTRIES Net Assets
--------------------------------------------------------------------------------
<S> <C>
United Kingdom.......................................................... 26%
Japan................................................................... 18
Netherlands............................................................. 12
France.................................................................. 11
Switzerland............................................................. 9
</TABLE>
- 19 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO International Stock Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - 97.1%
Australia - 3.6%
6,755 Brambles Industries, Ltd. $ 209
Services (Commercial & Consumer)
21,500 National Australia Bank, Ltd. 361
Banks (Foreign)
43,471 News Corp., Ltd. 601
Publishing
53,068 Telstra Corp., Ltd. 216
Telephone
26,977 Westpac Banking Corp., Ltd. 195
Banks (Foreign)
Denmark - 0.6%
3,780 Tele Danmark AS-B 255
Telephone
France - 11.2%
11,250 Alcatel 741
Telephone
11,334 Aventis SA 831
Chemicals
6,613 Axa 1,046
Insurance (Multi-Line)
5,005 Compagnie Generale des Etablissements Michelin 161
Auto Parts & Equipment
6,269 Total SA 965
Oil (International Integrated)
12,324 Vivendi 1,092
Services (Commercial & Consumer)
Germany - 3.6%
6,710 Bayerische HypoVereinsbank AG 438
Banks (Foreign)
16,132 Bayerische Motoren Werke AG 489
Automobiles
12,506 VEBA AG 616
Electric Companies
Hong Kong - 3.2%
26,000 Cheung Kong Holdings, Ltd. 288
Real Estate Investment Trust
42,000 China Telecom (Hong Kong), Ltd. 370
Telecommunications (Cellular/Wireless)
94,000 China Unicom, Ltd. 200
Telecommunications (Cellular/Wireless)
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
16,000 Hongkong Electric Holdings, Ltd. $ 52
Electric Companies
1,476,000 PetroChina Co., Ltd. 307
Oil & Gas (Exploration & Production)
24,000 Sun Hung Kai Properties, Ltd. 172
Real Estate Investment Trust
Italy - 3.1%
52,617 Ente Nazionale Idrocarburi SpA 305
Oil (International Integrated)
73,980 Telecom Italia SpA 1,021
Telephone
Japan - 18.3%
2,200 Acom Co., Ltd. 185
Consumer Finance
12,000 Bank of Tokyo--Mitsubishi, Ltd. 145
Banks (Foreign)
22,000 Canon, Inc. 1,098
Office Equipment & Supplies
11,000 Fuji Photo Film Co. 451
Office Equipment & Supplies
71,000 Hitachi, Ltd. 1,026
Electrical Equipment
5,000 Honda Motor Co., Ltd. 171
Automobiles
4,000 Hoya Corp. 359
Health Care (Medical Products & Supplies)
9,000 Kao Corp. 276
Personal Care
4,000 Murata Manufacturing Co., Ltd. 575
Electrical Equipment
27,000 NEC Corp. 849
Electronics (Semiconductors)
27 Nippon Telegraph & Telephone Corp. 360
Telephone
16 NTT Mobile Communication Network, Inc. 434
Telephone
1,600 Rohm Co., Ltd. 469
Electrical Equipment
9,000 Shiseido Co., Ltd. 139
Personal Care
4,500 Sony Corp. 421
Electrical Equipment
12,000 Takeda Chemical Industries 789
Health Care (Major Pharmaceuticals)
1,600 Takefuji Corp. 194
Consumer Finance
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 20 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO International Stock Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
Netherlands - 12.2%
21,548 ABN Amro Holdings NV $ 530
Banks (Foreign)
20,449 Elsevier NV 249
Publishing
6,450 Fortis NV 189
Financial (Diversified)
3,660 Heineken NV 224
Beverages (Alcoholic)
21,682 ING Groep NV 1,472
Banks (Foreign)
17,000 Koninkijke KPN NV 764
Telephone
10,930 Koninklijke (Royal) Philips Electonics NV 518
Electronics (Semiconductors)
15,595 Koninklijke Ahold NV 461
Retail (Food Chains)
7,525 Royal Dutch Petroleum Co. 470
Oil (International Integrated)
9,535 TNT Post Group NV 258
Shipping
2,955 VNU NV 153
Publishing
New Zealand - 0.1%
12,479 Telecom Corp of New Zealand, Ltd. 44
Telephone
Portugal - 0.3%
6,765 Electricidade de Portugal, SA 123
Electric Companies
Singapore - 1.3%
25,122 DBS Group Holdings Ltd. 323
Banks (Foreign)
15,500 Oversea Chinese Banking Corp. Ltd. 107
Banks (Foreign)
10,000 Singapore Press Holdings, Ltd. 156
Publishing
South Korea - 0.6%
3,175 #Korea Telecom Corp. (ADR) 154
Telephone
4,600 #Pohang Iron & Steel Co., Ltd. (ADR) 110
Iron & Steel
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
Spain - 2.4%
45,100 Banco Santander Central Hispano, SA $ 478
Banks (Foreign)
26,723 Telefonica SA 576
Telephone
Sweden - 1.1%
25,040 Telefonaktiebolaget LM Ericsson AB 498
Telecommunications (Long Distance)
Switzerland - 9.2%
233 Alusuisse Lonza Group AG 152
Manufacturing (Diversified)
63 Givaudan AG 19
Health Care (Specialized Services)
233 Lonza AG 122
Chemicals
475 Nestle SA 954
Foods
439 Novartis AG 698
Health Care (Major Pharmaceuticals)
63 Roche Holding AG 615
Health Care (Major Pharmaceuticals)
374 Schweizerische Rueckversicherungs - Gesellschaft 765
Insurance (Multi-Line)
4,380 UBS AG 644
Banks (Foreign)
United Kingdom - 26.4%
7,500 3I Group, plc 154
Investment Management
33,585 Allied Zurich, plc 396
Insurance (Multi-Line)
10,775 AstraZeneca Group, plc 503
Health Care (Medical Products & Supplies)
29,225 Barclays, plc 725
Banks (Foreign)
11,837 British American Tobacco, plc 79
Tobacco
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 21 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO International Stock Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
46,540 Cable & Wireless, plc $ 790
Telephone
49,110 Cadbury Schweppes, plc 322
Beverages (Non-Alcoholic)
54,098 Diageo, plc 484
Beverages (Alcoholic)
20,286 EMI Group, plc 188
Leisure Time (Products)
26,660 Glaxo Wellcome, plc 776
Health Care (Major Pharmaceuticals)
61,290 Granada Group, plc 603
Leisure Time (Products)
58,540 Hilton Group, plc 205
Lodging (Hotels)
95,119 Ivensys, plc 357
Manufacturing (Diversified)
55,132 Lloyds TSB Group, plc 522
Banks (Foreign)
37,050 Marconi, plc 481
Communication Equipment
9,150 Old Mutual, plc 20
Insurance (Multi-Line)
10,250 Pearson, plc 322
Publishing
48,880 Prudential, plc 716
Insurance (Multi-Line)
6,590 Railtrack Group, plc 102
Railroads
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
20,100 Reuters Group, plc $ 344
Services (Commercial & Consumer)
2,850 RMC Group, plc 37
Building Materials
115,604 Shell Transport & Trading Co., plc 972
Oil (International Integrated)
12,650 The Peninsular and Oriental Steam Navigation Co 108
Shipping
19,100 TI Group, plc 103
Manufacturing (Diversified)
523,944 Vodafone AirTouch, plc 2,124
Telephone
---------
TOTAL COMMON STOCKS 42,131
---------
TOTAL INVESTMENTS - 97.1% 42,131
Domestic Cash 942
Foreign Cash 176
Other Assets, less Liabilities 121
---------
1,239
---------
NET ASSETS $ 43,370
=========
--------------------------------------------------------------------------------
</TABLE>
# Security traded on NYSE and valued in USD.
<TABLE>
<CAPTION>
INDUSTRY Percent of
DIVERSIFICATION Net Assets
--------------------------------------------------------------------------------
<S> <C>
Telephone................................................................ 17.3%
Banks (Foreign).......................................................... 13.7
Insurance (Multi-Line)................................................... 6.8
Health Care (Major
Pharmaceuticals)........................................................ 6.6
Oil (International Integrated)........................................... 6.3
Electrical Equipment..................................................... 5.7
Services (Commercial & Consumer)......................................... 3.8
Office Equipment & Supplies.............................................. 3.6
Publishing............................................................... 3.4
Electronics (Semiconductors)............................................. 3.2
Foods.................................................................... 2.2
Chemicals................................................................ 2.2
Health Care (Medical Products
Supplies)............................................................... 2.0
Leisure Time (Products).................................................. 1.8
Electric Companies....................................................... 1.8
Beverages (Alcoholic).................................................... 1.6
Automobiles.............................................................. 1.5
Manufacturing (Diversified).............................................. 1.4
Telecommunication
(Cellular/Wirelss)...................................................... 1.3
</TABLE>
<TABLE>
<CAPTION>
INDUSTRY Percent of
DIVERSIFICATION Net Assets
--------------------------------------------------------------------------------
<S> <C>
Communication Equipment.................................................. 1.1%
Telecommunications (Long
Distance)............................................................... 1.1
Real Estate Investment Trust............................................. 1.1
Retail (Food Chains)..................................................... 1.1
Personal Care............................................................ 1.0
Consumer Finance......................................................... 0.9
Shipping................................................................. 0.8
Beverages (Non-Alcoholic)................................................ 0.7
Oil & Gas (Exploration &
Production)............................................................. 0.7
Lodging (Hotels)......................................................... 0.5
Financial (Diversified).................................................. 0.4
Auto Parts & Equipment................................................... 0.4
Investment Management.................................................... 0.3
Iron & Steel............................................................. 0.3
Railroads................................................................ 0.2
Tobacco.................................................................. 0.2
Building Materials....................................................... 0.1
----
97.1%
====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 22 -
<PAGE>
REPORT FROM THE FUND MANAGERS
SAFECO Balanced Fund
June 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PHOTO] For the six months ending June 30, the Fund remains behind
REX BENTLEY the Lipper Balanced Fund universe and its aggregate (60% S&P
500/40% Lehman Gov./Corp.) index. The underperformance came
early in the period, and is attributable to the year-to-date
underperformance of value versus growth investing. However,
Value investing shined long enough in the second quarter for the
Balanced Fund to enjoy its best relative performance against its
peers and benchmark index in some time.
Relative to the S&P 500, the Fund benefited by its
underweighting in the poor-performing technology sector and its
selections within that sector. Our holdings in Micron Technology
and Hewlett-Packard climbed while tech sold off.
We also benefited by our overweighting in healthcare, our REITs (Real Estate
Investment Trusts), insurance stocks, and our stake in Washington Mutual. It
advanced nearly 10% after having lagged for some time.
Costco dropped over 50% on an earnings shortfall. We added to
it, as well as Procter & Gamble and McDonalds; at what we
believe to be very attractive valuations. We added to Bank of
America and Washington Mutual after the Federal Reserve raised
interest rates. We eliminated Dean Foods, Mylan Labs, and
PeopleSoft as their outlooks deteriorated.
At June 30, based on this year's earnings forecast, the price
earnings ratio (P/E), a measure of stock price in relation to
company earnings, of the S&P 500 was 25.3; the Fund's P/E is [PHOTO]
16.2. MICHAEL HUGHES
The bond portion of the Balanced Fund has outperformed. In the first quarter,
as long-term Treasuries outperformed, we benefited by our underweighting in non-
Treasury securities. During the second quarter, we increased our allocation to
asset- and mortgage-backed credits, which were historically cheap, and the fund
outperformed as they recovered.
Yield premiums on non-Treasury securities remain extremely
generous and we believe these sectors will outperform over the
second half of the year. We will continue to overweight
mortgage- and asset-backed securities because of their minimal
credit risk.
[PHOTO] We are encouraged by the Fund's relative performance in the
LYNETTE D. latest quarter and believe that we have positioned the Fund to
SAGVOLD provide competitive, risk-adjusted returns in the future.
Rex Bentley
Michael Hughes
Lynette D. Sagvold
--------------------------------------------------------------------------------
Rex Bentley, an MBA from Brigham Young University and Chartered Financial
Analyst, has more than 20 years of investment experience.
Michael Hughes joined SAFECO as portfolio manager in January 1997. He began his
investment career in 1983. He graduated magna cum laude with a B.S. 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.
Lynette D. Sagvold holds a BA in business administration from the University of
Washington and is a Chartered Financial Analyst. She began her investment
career in 1981 at Kidder Peabody and was a trust officer for Key Trust and
First Interstate before joining SAFECO in 1995 as a portfolio manager and
insurance analyst.
- 23 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PERFORMANCE GRAPH]
PERFORMANCE OVERVIEW - CLASS A AND B SHARES
Average Annual Total Return for the With Sales Charge
period ended June 30, 2000 Six-Months* 1 Year Since Inception**
--------------------------------------------------------------------------------
SAFECO Balanced Fund
Class A (7.17)% (10.43)% 7.15%
Class B (6.71)% (10.15)% 7.54%
60% S&P 500/40% Lehman Brothers
Gov't/Corp. Index N/A N/A N/A
Lipper, Inc. (Balanced Funds) N/A N/A N/A
S&P 500 Index N/A N/A N/A
Average Annual Total Return for the Without Sales Charge
period ended June 30, 2000 Six-Months* 1 Year Since Inception**
--------------------------------------------------------------------------------
SAFECO Balanced Fund
Class A (1.54)% (4.97)% 8.60%
Class B (1.85)% (5.60)% 7.89%
60% S&P 500/40% Lehman Brothers
Gov't/Corp. Index 1.41% 6.07% 15.65%
Lipper, Inc. (Balanced Funds) 1.34% 4.40% N/A
S&P 500 Index (0.43)% 7.24% 2.47%
* Not Annualized
** Graph and average annual return comparison begins January 31, 1996,
inception date of the fund.
Investment Values
60% S&P 500/
40% Lehman
Brothers Gov't./
Class A Class B Corp. Index S&P 500 Index
------- ------- ---------------- -------------
1/31/96 10,000 10,000 10,000 10,000
2/29/96 9,950 9,950 9,971 10,093
3/31/96 10,017 10,017 9,996 10,190
4/30/96 10,077 10,077 10,060 10,340
5/31/96 10,218 10,218 10,213 10,607
6/30/96 10,345 10,345 10,289 10,647
7/31/96 10,112 10,112 10,016 10,177
8/31/96 10,243 10,243 10,135 10,392
9/30/96 10,599 10,599 10,555 10,976
10/31/96 10,813 10,803 10,829 11,279
11/30/96 11,272 11,252 11,415 12,131
12/31/96 11,136 11,112 11,225 11,890
1/31/97 11,469 11,434 11,675 12,633
2/28/97 11,563 11,517 11,743 12,732
3/31/97 11,157 11,111 11,381 12,210
4/30/97 11,408 11,351 11,877 12,938
5/31/97 11,880 11,810 12,388 13,725
6/30/97 12,185 12,096 12,807 14,340
7/31/97 12,881 12,777 13,620 15,480
8/31/97 12,386 12,274 13,051 14,614
9/30/97 12,721 12,607 13,598 15,414
10/31/97 12,583 12,460 13,360 14,900
11/30/97 12,795 12,660 13,796 15,589
12/31/97 12,949 12,803 14,004 15,856
1/31/98 13,039 12,880 14,172 16,031
2/28/98 13,608 13,432 14,856 17,187
3/31/98 13,911 13,726 15,398 18,066
4/30/98 13,832 13,627 15,530 18,248
5/31/98 13,697 13,494 15,391 17,935
6/30/98 13,738 13,528 15,875 18,663
7/31/98 13,433 13,217 15,760 18,465
8/31/98 12,531 12,318 14,251 15,798
9/30/98 13,201 12,979 14,995 16,810
10/31/98 13,893 13,658 15,780 18,176
11/30/98 14,324 14,059 16,469 19,277
12/31/98 14,511 14,250 17,147 20,387
1/31/99 14,523 14,238 17,694 21,240
2/28/99 14,072 13,784 17,180 20,580
3/31/99 14,273 13,973 17,698 21,403
4/30/99 14,894 14,580 18,208 22,232
5/31/99 14,882 14,557 17,842 21,707
6/30/99 15,146 14,814 18,550 22,912
7/31/99 14,835 14,497 18,108 22,196
8/31/99 14,487 14,146 18,038 22,086
9/30/99 14,148 13,799 17,718 21,481
10/31/99 14,569 14,210 18,546 22,840
11/30/99 14,521 14,175 18,822 23,306
12/31/99 14,619 14,248 19,616 24,678
1/31/00 14,028 13,670 18,867 23,433
2/29/00 13,412 13,056 18,662 22,991
3/31/00 14,424 14,037 20,081 25,239
4/30/00 14,386 14,001 19,600 24,477
5/31/00 14,473 14,074 19,294 23,975
6/30/00 14,394 13,984 19,749 24,567
The performance graph compares a hypothetical $10,000 investment in Class A
and Class B of the Fund to a hypothetical investment in a relevant market index.
Fund performance is derived from the Fund's original class of shares and
reflects the maximum 5.75% sales charge for Class A shares, and the maximum
contingent deferred sales charge (5% in the first year, decreasing to 0% after
six years) for Class B shares. Fund performance has not been restated to reflect
Rule 12b-1 fees prior to September 30, 1996 (initial public offering date of
Class A and Class B shares). Such fees will affect subsequent performance.
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>
<CAPTION>
Percent of
TOP TEN STOCK HOLDINGS Net Assets
--------------------------------------------------------------------------------
<S> <C>
Intel Corp. ............................................................ 2.0%
(Electronics--Semiconductors)
Lucent Technologies, Inc. .............................................. 1.9
(Telecommunications--Equipment)
Harford Financial Services Group, Inc. ................................. 1.8
(Insurance--Multi-Line)
Abbott Laboratories..................................................... 1.8
(Health Care--Diversified)
Johnson & Johnson....................................................... 1.7
(Health Care--Diversified)
Albertson's, Inc. ...................................................... 1.6
(Retail--Food Chains)
Washington Mutual, Inc. ................................................ 1.5
(Savings & Loans)
ALLTEL Corp. ........................................................... 1.5
(Telephone)
Exxon Mobil Corp. ...................................................... 1.5
(Oil--International Integrated)
The Gillette Co. ....................................................... 1.5
(Personal Care)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES (Common Stocks)
For the Period Ended June 30, 2000 Cost (000's)
--------------------------------------------------------------------------------
<S> <C>
The Gillette Co. .......................................................... $288
Procter & Gamble Co. ...................................................... 265
McDonald's Corp. .......................................................... 226
United Parcel Service, Inc. (Class B)...................................... 218
Diebold, Inc. ............................................................. 198
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SALES (Common Stocks)
For the Period Ended June 30, 2000 Proceeds (000's)
--------------------------------------------------------------------------------
<S> <C>
Kimberly-Clark Corp. ...................................................... $395
Nortel Networks Corp. ..................................................... 355
Mylan Laboratories, Inc. .................................................. 296
PepsiCo, Inc. ............................................................. 290
Hewlett-Packard Co. ....................................................... 230
</TABLE>
<TABLE>
<CAPTION>
Percent of
TOP FIVE INDUSTRIES (Common Stocks) Net Assets
--------------------------------------------------------------------------------
<S> <C>
Telephone............................................................... 7%
Health Care (Diversified)............................................... 6
Oil (International Integrated).......................................... 4
Electronics (Semiconductors)............................................ 3
Real Estate Investment Trust............................................ 3
</TABLE>
Weightings As a Percent of Net Assets
--------------------------------------------------------------------------------
[PIE CHART]
1 Large - Common Stocks: ($4 Bil. and above) 56%
2 Mortgage Backed Securities 12%
3 U.S. Government Securities 11%
4 Corporate Bonds 10%
5 Asset Backed Securities 5%
6 Medium - Common Stocks: ($1.5 Bil. - $4 Bil.) 3%
7 Small - Common Stocks: (Less than $1.5 Bil.) 2%
8 Cash & Other 1%
- 24 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Balanced Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE
AMOUNT (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - 61.6%
Banks (Major Regional) - 1.9%
5,500 Bank of America Corp. $ 236
7,800 KeyCorp 137
Banks (Money Center) - 1.3%
5,400 Chase Manhattan Corp. 249
Chemicals - 1.9%
3,400 Du Pont (E.I.) de Nemours & Co. 149
5,800 Praxair, Inc. 217
Computers (Hardware) - 2.3%
3,200 * Apple Computer, Inc. 168
2,100 Hewlett-Packard Co. 262
Computers (Software & Services) - 0.6%
5,400 * Cadence Design Systems, Inc. 110
Electric Companies - 1.1%
11,700 NIPSCO Industries, Inc. 218
Electrical Equipment - 1.7%
800 * Agilent Technologies, Inc. 59
4,500 Emerson Electric Co. 272
Electronics (Semiconductors) - 3.1%
2,800 Intel Corp. 374
2,300 * Micron Technology, Inc. 203
Entertainment - 1.1%
5,500 The Walt Disney Co. 213
Financial (Diversified) - 2.6%
4,300 American General Corp. 262
4,200 Federal National Mortgage Association 219
Foods - 0.7%
6,600 ConAgra, Inc. 126
Health Care (Diversified) - 6.0%
7,600 Abbott Laboratories 339
4,700 American Home Products Corp. 276
3,300 Bristol-Myers Squibb Co. 192
3,200 Johnson & Johnson 326
Household Products (Non-Durables) - 1.3%
4,400 Procter & Gamble Co. 252
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE
AMOUNT (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
Insurance (Life & Health) - 1.1%
10,700 UnumProvident Corp. $ 215
Insurance (Multi-Line) - 1.8%
6,100 Hartford Financial Services Group, Inc. 341
Manufacturing (Diversified) - 2.5%
10,900 Crane Co. 265
2,500 Minnesota Mining & Manufacturing Co. 206
Manufacturing (Specialized) - 1.1%
7,700 Diebold, Inc. 215
Office Equipment & Supplies - 1.2%
11,200 Xerox Corp. 232
Oil & Gas (Drilling & Equipment) - 0.9%
3,500 Halliburton Co. 165
Oil (International Integrated) - 3.8%
2,000 Chevron Corp. 170
3,588 Exxon Mobil Corp. 282
4,900 Texaco, Inc. 261
Paper & Forest Products - 0.8%
5,000 International Paper Co. 149
Personal Care - 1.5%
8,000 The Gillette Co. 279
Publishing (Newspapers) - 0.9%
4,100 New York Times Co. (Class A) 162
Real Estate Investment Trust - 2.7%
3,200 Equity Residential Properties Trust 147
6,800 First Industrial Realty Trust, Inc. 201
5,800 Liberty Property Trust 150
Restaurants - 1.0%
6,000 McDonald's Corp. 198
Retail (Department Stores) - 0.6%
4,650 May Department Stores Co. 112
Retail (Drug Stores) - 1.3%
6,400 CVS Corp. 256
Retail (Food Chains) - 1.6%
9,049 Albertson's, Inc. 301
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 25 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Balanced Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE
AMOUNT (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
Retail (General Merchandise) - 1.1%
6,500 *Costco Wholesale Corp. $ 214
Savings & Loans - 1.5%
10,100 Washington Mutual, Inc. 292
Services (Advertising/Marketing) - 1.2%
5,300 Interpublic Group Cos., Inc. 228
Services (Commercial & Consumer) - 1.1%
3,700 United Parcel Service, Inc. (Class B) 218
Telecommunications (Equipment) - 1.9%
6,200 Lucent Technologies, Inc. 367
Telephone - 6.5%
4,700 ALLTEL Corp. 291
9,000 CenturyTel, Inc. 259
3,700 GTE Corp. 230
5,400 *MCI WorldCom, Inc. 248
4,800 SBC Communications, Inc. 208
---------
TOTAL COMMON STOCKS 11,721
---------
CORPORATE BONDS - 10.4%
Banks (Money Center) - 0.9%
165,000 Bank of America Corp.
7.80%, due 2/15/10 164
Beverages (Alcoholic) - 0.7%
125,000 Anheuser-Busch Cos., Inc.
7.50%, due 3/15/12 125
Financial (Diversified) - 2.9%
155,000 Ford Motor Credit Co.
7.375%, due 10/28/09 150
150,000 General Motors Acceptance Corp.
5.95%, due 3/14/03 144
125,000 Hertz Corp.
7.00%, due 7/01/04 122
130,000 Newcourt Credit Group, Inc.
6.875%, due 2/16/05 125
Investment Banking & Brokerage - 0.9%
165,000 Morgan Stanley Dean Witter Co.
8.00%, due 6/15/10 167
Manufacturing (Diversified) - 1.0%
210,000 Tyco International Group SA
6.375%, due 6/15/05 198
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE
AMOUNT (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
Publishing (Newspapers) - 1.1%
210,000 Times-Mirror Co.
6.65%, due 10/15/01 $ 208
Retail (General Merchandise) - 1.4%
60,000 Sears Roebuck & Co.
6.25%, due 1/15/04 58
205,000 Wal-Mart Stores, Inc.
6.15%, due 8/10/01 203
Telecommunications (Cellular/Wireless) - 1.6%
110,000 TCI Communications, Inc.
8.00%, due 8/01/05 113
195,000 Worldcom, Inc.
8.00%, due 5/15/06 197
---------
TOTAL CORPORATE BONDS 1,974
---------
ASSET BACKED SECURITIES - 5.0%
Electric Companies - 0.8%
170,000 ComEd Transitional Funding Trust
5.63%, due 6/25/09 157
Financial (Diversified) - 4.1%
254,000 Citicorp Mortgage Securities, Inc.
6.50%, due 6/25/29 230
115,000 CNH Equipment Trust
7.34%, due 2/16/07 115
180,000 Fleet Credit Card Master
6.90%, due 4/16/07 178
265,000 Providian Master Trust
7.49%, due 8/17/09 268
---------
TOTAL ASSET BACKED SECURITIES 948
---------
MORTGAGE BACKED SECURITIES - 12.2%
Federal Home Loan Mortgage Corp. (FHLMC) - 1.0%
185,400 7.50%, due 10/01/29 183
Federal National Mortgage Association (FNMA) - 8.4%
283,255 6.00%, due 1/01/29 260
130,000 6.00%, due 6/01/30 119
156,386 6.50%, due 1/01/15 151
187,724 7.00%, due 3/01/12 185
299,027 8.00%, due 12/01/29 300
227,505 8.00%, due 2/01/30 229
171,730 8.00%, due 2/15/29 173
164,393 8.00%, due 4/01/20 166
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 26 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Balanced Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE
AMOUNT (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
Government National Mortgage Association
(GNMA) - 2.9%
23,486 6.00%, due 4/15/14 $ 22
132,741 6.00%, due 8/15/13 127
224,433 7.00%, due 4/15/28 218
57,127 7.00%, due 8/15/28 55
132,026 7.75%, due 10/15/29 132
---------
TOTAL MORTGAGE BACKED SECURITIES 2,320
---------
U.S. GOVERNMENT OBLIGATIONS -
10.8%
Federal National Mortgage Association
(FNMA) - 1.8%
340,000 Discount Note
0.00%, due 9/07/00 336
U.S. Federal Agency Notes - 3.2%
655,000 5.125%, due 2/13/04 615
U.S. Treasury Notes - 5.8%
975,000 7.50%, due 11/15/16 1,098
---------
TOTAL U.S. GOVERNMENT
OBLIGATIONS 2,049
---------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE
AMOUNT (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
CASH EQUIVALENTS - 0.4%
Investment Companies
69,126 AIM Short-Term Investments Co. Liquid Assets Money
Market Portfolio (Institutional Shares) $ 69
---------
TOTAL CASH EQUIVALENTS 69
---------
TOTAL INVESTMENTS - 100.4% 19,081
Other Assets, less Liabilities (62)
---------
NET ASSETS $ 19,019
=========
--------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
- 27 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO Small Company Value Fund
June 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PHOTO]
GREG EISEN The Small Company Value Fund's one-year total return is
double that of its peers. However, the Fund is behind the index
and Lipper small cap value group for the six months.
The Fund outperformed over the longer term by owning stocks
that moved into the growth mode and by participating in the
previously hot initial public offering market. The second
quarter underperformance is largely due to earnings shortfalls.
In each case, the setbacks appear temporary and I'm holding the
stocks.
MICROS fell 70% in the second quarter on disappointing sales and revenue. I
believe spending will resume, and MICROS, a proven leader in hospitality
software systems, will get the business.
A change in insurance regulation caused slower sales at Portamedic, Hooper
Holmes' largest subsidiary. This caused a second-quarter earnings shortfall. I
think this company is set to resume its historical growth rates in an expanded
marketplace. In addition to no debt and good cash flow, Portamedic has systems
in place to participate in Web-based distribution of life insurance.
S3's stock fell as the company divested its money-losing graphics-card
business to concentrate on Internet appliances, such as the MP3 Rio Player, and
its semiconductor business.
On the up side, GSI Lumonics flew into our top ten. I initiated the position
in the second quarter and it doubled in value. This company makes lasers for
three existing markets and is expanding into optical networking. Insight
Enterprises, a position I built in the first quarter is also up over 100%. It's
met great success telemarketing computer products to mid-size business.
BSQUARE, another strong performer, is a company of ex-Microsoft talent that
develops Windows CE operating systems for such devices as set-top boxes and
palm-size computers.
Going forward, I will continue to buy value in pursuit of growth.
Greg Eisen
--------------------------------------------------------------------------------
Greg Eisen joined SAFECO in 1986. He holds a BA from Rutgers University and is
a Certified Public Accountant and a Chartered Financial Analyst.
- 28 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PERFORMANCE GRAPH]
PERFORMANCE OVERVIEW - CLASS A AND B SHARES
Average Annual Total Return for the With Sales Charge
period ended June 30, 2000 Six-Months* 1 Year Since Inception**
--------------------------------------------------------------------------------
SAFECO Small Company Value Fund
Class A (7.81)% 13.28% 5.27%
Class B (7.49)% 14.12% 5.57%
Russell 2000 Index N/A N/A N/A
Lipper, Inc. (Small-Cap Value Funds) N/A N/A N/A
Average Annual Total Return for the
period ended June 30, 2000 Six-Months* 1 Year Since Inception**
--------------------------------------------------------------------------------
SAFECO Small Company Value Fund
Class A (2.15)% 20.16% 6.69%
Class B (2.62)% 19.12% 5.94%
Russell 2000 Index 3.08% 14.51% 13.66%
Lipper, Inc. (Small-Cap Value Funds) 6.54% 6.40% N/A
* Not Annualized
** Graph and average annual return comparison begins January 31, 1996,
inception date of the fund.
Investment Values
Class A Class B Russell 2000 Index
------- ------- ------------------
1/31/96 10,000 10,000 10,000
2/29/96 10,150 10,150 10,316
3/31/96 10,490 10,490 10,521
4/30/96 11,550 11,550 11,086
5/31/96 12,350 12,350 11,531
6/30/96 12,030 12,030 11,061
7/31/96 11,220 11,220 10,096
8/31/96 11,910 11,910 10,682
9/30/96 12,183 12,183 11,099
10/31/96 12,162 12,151 10,927
11/30/96 12,014 12,003 11,375
12/31/96 12,501 12,479 11,667
1/31/97 12,606 12,575 11,898
2/28/97 12,342 12,299 11,610
3/31/97 11,918 11,876 11,066
4/30/97 11,675 11,611 11,093
5/31/97 12,776 12,712 12,330
6/30/97 13,453 13,368 12,854
7/31/97 14,385 14,279 13,454
8/31/97 14,660 14,554 13,757
9/30/97 16,099 15,972 14,762
10/31/97 15,517 15,380 14,105
11/30/97 15,422 15,284 14,009
12/31/97 15,402 15,254 14,261
1/31/98 15,293 15,134 14,044
2/28/98 16,843 16,652 15,097
3/31/98 18,404 18,181 15,731
4/30/98 19,044 18,810 15,817
5/31/98 18,014 17,769 14,969
6/30/98 17,613 17,368 15,012
7/31/98 15,575 15,340 13,786
8/31/98 11,077 10,895 11,113
9/30/98 11,630 11,427 11,973
10/31/98 11,359 11,156 12,464
11/30/98 11,522 11,307 13,123
12/31/98 12,020 11,795 13,942
1/31/99 12,313 12,077 14,126
2/28/99 11,554 11,329 12,987
3/31/99 10,925 10,700 13,187
4/30/99 10,806 10,570 14,368
5/31/99 10,839 10,603 14,580
6/30/99 11,077 10,830 15,235
7/31/99 11,261 11,004 14,815
8/31/99 10,665 10,408 14,269
9/30/99 10,698 10,440 14,270
10/31/99 10,730 10,462 14,333
11/30/99 12,248 11,947 15,203
12/31/99 13,603 13,248 16,924
1/31/00 13,017 12,673 16,650
2/29/00 14,058 13,682 19,403
3/31/00 14,318 13,909 18,127
4/30/00 13,733 13,335 17,036
5/31/00 12,670 12,294 16,042
6/30/00 13,310 12,901 17,445
The performance graph compares a hypothetical $10,000 investment in Class A
and Class B of the Fund to a hypothetical investment in a relevant market index.
Fund performance is derived from the Fund's original class of shares and
reflects the maximum 5.75% sales charge for Class A shares, and the maximum
contingent deferred sales charge (5% in the first year, decreasing to 0% after
six years) for Class B shares. Fund performance has not been restated to reflect
Rule 12b-1 fees prior to September 30, 1996 (initial public offering date of
Class A and Class B shares). Such fees will affect subsequent performance.
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>
<CAPTION>
Percent of
TOP TEN HOLDINGS Net Assets
--------------------------------------------------------------------------------
<S> <C>
Optimal Robotics Corp. ................................................. 4.6%
(Computers--Hardware)
Rent-Way, Inc. ......................................................... 4.2
(Services--Commercial & Consumer)
Rent-A-Center, Inc. .................................................... 3.8
(Services--Commercial & Consumer)
ACT Manufacturing, Inc. ................................................ 3.8
(Electronics--Component Distributors)
Insight Enterprises, Inc. .............................................. 3.4
(Retail--Computers & Electronics)
International Aircraft Investors, Inc. ................................. 3.3
(Aerospace/Defense)
Landstar System, Inc. .................................................. 3.1
(Trucking)
GSI Lumonics, Inc. ..................................................... 3.1
(Manufacturing--Diversified)
BSQUARE Corp. .......................................................... 3.1
(Computers--Software & Services)
Astec Industries, Inc. ................................................. 3.0
(Engineering & Construction)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES Cost
For the Period Ended June 30, 2000 (000's)
--------------------------------------------------------------------------------
<S> <C>
Audiovox Corp. (Class A)................................................... $888
Hooper Holmes, Inc......................................................... 867
Wet Seal, Inc. (Class A)................................................... 829
Insight Enterprises, Inc. ................................................. 822
Alaska Air Group, Inc. .................................................... 802
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SALES Proceeds
For the Period Ended June 30, 2000 (000's)
--------------------------------------------------------------------------------
<S> <C>
U.S. Foodservice......................................................... $1,370
BEA Systems, Inc. ....................................................... 926
Vyyo, Inc. .............................................................. 846
Alaska Air Group, Inc. .................................................. 831
GRIC Communications, Inc. ............................................... 718
</TABLE>
<TABLE>
<CAPTION>
Percent of
TOP FIVE INDUSTRIES Net Assets
--------------------------------------------------------------------------------
<S> <C>
Services (Commercial & Consumer)........................................ 12%
Computers (Software & Services)......................................... 7
Trucking................................................................ 7
Computers (Hardware).................................................... 6
Oil & Gas (Drilling & Equipment)........................................ 6
</TABLE>
Weightings As a Percent of Net Assets
--------------------------------------------------------------------------------
[PIE CHART]
1 Medium - Common Stocks: ($250-$750 Mil.) 48%
2 Small-Cap Common Stocks: (Under $1 Bil.):
Small (Under $250 Mil.) 26%
Large (Under $750 Mil.) 11%
3 Mid-Cap Common Stocks: ($1 Bil. - $4 Bil.) 14%
4 Cash & Other 1%
- 29 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Small Company Value Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE
AMOUNT (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - 99.0%
Aerospace/Defense - 3.3%
186,950 *International Aircraft Investors, Inc. $ 981
Banks (Regional) - 2.0%
42,857 Hanmi Bank (Los Angeles, CA) 587
Communication Equipment - 4.7%
51,000 *Concurrent Computer Corp. 669
18,700 *SBS Technologies, Inc. 691
Computers (Hardware) - 6.1%
23,100 *MICROS Systems, Inc. 429
35,100 *Optimal Robotics Corp. 1,347
Computers (Peripherals) - 4.5%
32,000 *Integrated Measurement Systems, Inc. 504
51,700 *S3, Inc. 763
1,700 *Versata, Inc. 69
Computers (Software & Services) - 7.2%
40,700 *BSQUARE Corp. 913
27,500 *Ciber, Inc. 364
38,800 *ITT Educational Services, Inc. 681
34,000 *Smith-Gardner & Associates, Inc. 164
Electronics (Component Distributors) - 4.7%
23,700 *ACT Manufacturing, Inc. 1,101
13,800 *Audiovox Corp. (Class A) 304
Engineering & Construction - 3.0%
34,200 *Astec Industries, Inc. 868
Financial (Diversified) - 1.6%
24,000 Cash America International, Inc. 177
39,000 *Hawthorne Financial Corp. 302
Health Care (Medical Products & Supplies) - 4.6%
78,600 Hooper Holmes, Inc. 629
25,600 *SonoSite, Inc. 738
Insurance (Property-Casualty) - 1.0%
71,100 *American Safety Insurance Group, Ltd. 298
Manufacturing (Diversified) - 4.8%
30,000 Federal Signal Corp. 495
26,000 *GSI Lumonics, Inc. 913
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE
AMOUNT (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
Manufacturing (Specialized) - 2.0%
25,200 *Imax Corp. $ 573
Oil & Gas (Drilling & Equipment) - 6.0%
22,600 *Marine Drilling Cos., Inc. 633
22,600 *Patterson Energy, Inc. 644
12,000 *UTI Energy Corp. 481
Real Estate Investment Trust - 1.1%
9,700 Alexandria Real Estate Equities, Inc. 333
Restaurants - 2.0%
87,200 *Taco Cabana, Inc. (Class A) 578
Retail (Computers & Electronics) - 3.4%
17,000 *Insight Enterprises, Inc. 1,008
Retail (Department Stores) - 2.0%
79,500 *Musicland Stores Corp. 591
Retail (Food Chains) - 2.4%
68,900 Ingles Markets, Inc. (Class A) 719
Retail (General Merchandise) - 0.7%
15,400 Deb Shops, Inc. 192
Retail (Specialty-Apparel) - 4.3%
50,000 *Stein Mart, Inc. 512
58,200 Wet Seal, Inc. (Class A) 764
Retail (Specialty) - 2.0%
47,900 Regis Corp. 599
Services (Advertising/Marketing) - 1.5%
19,000 *Snyder Communications, Inc. 451
Services (Commercial & Consumer) - 12.1%
32,600 *Dollar Thrifty Automotive Group, Inc. 601
37,000 *Profit Recovery Group International, Inc. 615
49,850 *Rent-A-Center, Inc. 1,122
42,200 *Rent-Way, Inc. 1,232
Shipping - 1.2%
21,000 Nordic American Tanker Shipping, Ltd. 347
Telecommunications (Cellular/Wireless) - 1.3%
20,500 *Dobson Communications Corp. (Class A) 395
Textiles (Apparel) - 1.2%
42,800 *Cutter & Buck, Inc. 340
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 30 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO Small Company Value Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE
AMOUNT (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
Trucking - 6.6%
15,500 *Landstar System, Inc. $ 923
75,600 Rollins Truck Leasing Corp. 524
34,700 *Swift Transportation Co., Inc. 486
Waste Management - 1.5%
27,500 Landauer, Inc. 428
---------
TOTAL COMMON STOCKS 29,078
---------
PREFERRED STOCKS - 1.0%
Electric Companies - 1.0%
4,000 Massachusetts Electric Co. 286
---------
TOTAL PREFERRED STOCKS 286
---------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE
AMOUNT (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
CASH EQUIVALENTS - 3.9%
Investment Companies
1,156,634 AIM Short-Term Investments Co. $ 1,157
Liquid Assets Money Market
Portfolio (Institutional Shares)
---------
TOTAL CASH EQUIVALENTS 1,157
---------
TOTAL INVESTMENTS - 103.9% 30,521
Other Assets, less Liabilities (1,149)
---------
NET ASSETS $ 29,372
=========
--------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
- 31 -
<PAGE>
REPORT FROM THE FUND MANAGERS
SAFECO U.S. Value Fund
June 30, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PHOTO]
REX Value investing shined long enough in the second quarter for
BENTLEY the U.S. Value Fund to beat its peers and the S&P 500. The
Fund's six-month underperformance of the broad market index came
during the first quarter and is attributable to the year-to-date
underperformance of value versus growth investing.
Relative to the S&P 500, the Fund benefited by its
underweighting in the poor-performing technology sector and its
selections within that sector. Our holdings in Micron Technology
and Hewlett-Packard climbed while tech sold off.
The Fund also benefited by being overweighted in healthcare
stocks relative to most value indices and from good stock
selection in the communication sector, where our stocks declined
less than the overall sector.
The Fund's stock selections within the financial sector--
REITs (Real Estate Investment Trusts), insurance stocks, and
[PHOTO] Washington Mutual--helped our performance relative to the value
LYNETTE D. benchmarks. We added to Washington Mutual and Bank of America
SAGVOLD after the Federal Reserve raised interest rates. At June 30, the
Fund was overweighted in financials relative to the S&P 500, but
substantially underweighted compared to the value indices.
In the second quarter, Costco dropped over 50% on an earnings shortfall. We
added to it, as well as Procter & Gamble and McDonald's; at what we believe to
be very attractive valuations. We expect these stocks to perform well in a
slowing U.S. economy.
During the period we eliminated Dean Foods, Mylan Labs, and PeopleSoft as
our outlooks for them deteriorated.
At June 30, based on this year's earnings forecast, the price earnings ratio
(P/E), a measure of stock price in relation to company earnings, P/E of the S&P
500 was 25.3. The equities in the Balanced Fund were trading at a P/E of just
16.1.
We are encouraged by the bias for profitability and reasonable prices that
we are seeing in the market at this time, and we are pleased by the recent
relative performance of the U.S. Value Fund.
Rex Bentley
Lynette D. Sagvold
--------------------------------------------------------------------------------
Rex Bentley, an MBA from Brigham Young University and Chartered Financial
Analyst, has more than 20 years of investment experience.
Lynette D. Sagvold holds a BA in business administration from the University of
Washington and is a Chartered Financial Analyst. She began her investment
career in 1981 at Kidder Peabody and was a trust officer for Key Trust and
First Interstate before joining SAFECO in 1995 as a portfolio manager and
insurance analyst.
- 32 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PERFORMANCE GRAPH]
PERFORMANCE OVERVIEW - CLASS A AND B SHARES
Average Annual Total Return for the With Sales Charge
period ended June 30, 2000 Six-Months* 1 Year Since Inception**
--------------------------------------------------------------------------------
SAFECO U.S. Value Fund
Class A (10.40)% (14.66)% 6.76%
Class B (9.98)% (14.59)% 6.30%
S&P 500 Index N/A N/A N/A
Lipper, Inc. (Large-Cap Value Funds) N/A N/A N/A
Average Annual Total Return for the Without Sales Charge
period ended June 30, 2000 Six-Months* 1 Year Since Inception**
--------------------------------------------------------------------------------
SAFECO U.S. Value Fund
Class A (4.92)% (9.45)% 8.77%
Class B (5.20)% (10.07)% 8.05%
S&P 500 Index (0.43)% 7.24% 22.45%
Lipper, Inc. (Large-Cap Value Funds) (1.65)% (0.93)% N/A
* Not Annualized
** Graph and average annual return comparison begins April 30,1997,
inception date of the fund.
Investment Values
Class A Class B S&P 500 Index
------- ------- -------------
4/30/97 10,000 10,000 10,000
5/31/97 10,670 10,660 10,608
6/30/97 11,055 11,041 11,083
7/31/97 11,907 11,882 11,965
8/31/97 11,275 11,241 11,295
9/30/97 11,663 11,616 11,914
10/31/97 11,292 11,245 11,516
11/30/97 11,573 11,525 12,049
12/31/97 11,724 11,663 12,256
1/31/98 11,745 11,663 12,391
2/28/98 12,594 12,508 13,284
3/31/98 13,048 12,946 13,964
4/30/98 12,859 12,748 14,104
5/31/98 12,576 12,466 13,862
6/30/98 12,554 12,435 14,425
7/31/98 12,091 11,965 14,272
8/31/98 10,609 10,494 12,210
9/30/98 11,316 11,193 12,993
10/31/98 12,285 12,142 14,048
11/30/98 12,885 12,748 14,900
12/31/98 13,106 12,967 15,758
1/31/99 13,117 12,956 16,417
2/28/99 12,666 12,509 15,907
3/31/99 12,908 12,738 16,543
4/30/99 13,842 13,652 17,184
5/31/99 13,952 13,750 16,778
6/30/99 14,414 14,208 17,709
7/31/99 14,007 13,783 17,156
8/31/99 13,512 13,293 17,071
9/30/99 12,936 12,716 16,603
10/31/99 13,520 13,293 17,653
11/30/99 13,476 13,239 18,013
12/31/99 13,727 13,478 19,074
1/31/00 12,853 12,616 18,115
2/29/00 11,853 11,618 17,773
3/31/00 13,211 12,946 19,511
4/30/00 13,188 12,912 18,922
5/31/00 13,360 13,071 18,534
6/30/00 13,052 12,777 18,991
The performance graph compares a hypothetical $10,000 investment in Class A
and Class B of the Fund to a hypothetical investment in a relevant market index.
Fund performance is derived from the Fund's original class of shares and
reflects the maximum 5.75% sales charge for Class A shares, and the maximum
contingent deferred sales charge (5% in the first year, decreasing to 0% after
six years) for Class B shares. Fund performance has not been restated to reflect
Rule 12b-1 fees prior to September 30, 1996 (initial public offering date of
Class A and Class B shares). Such fees will affect subsequent performance.
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>
<CAPTION>
Percent of
TOP TEN HOLDINGS Net Assets
--------------------------------------------------------------------------------
<S> <C>
Abbott Laboratories..................................................... 3.6%
(Health Care--Diversified)
Hartford Financial Services Group, Inc. ................................ 3.2
(Insurance--Multi-Line)
Intel Corp. ............................................................ 3.0
(Electronics--Semiconductors)
Albertson's, Inc. ...................................................... 3.0
(Retail--Food Chains)
Exxon Mobil Corp. ...................................................... 3.0
(Oil--International Integrated)
Lucent Technologies, Inc. .............................................. 3.0
(Telecommunications--Equipment)
Crane Co. .............................................................. 2.6
(Manufacturing--Diversified)
Washington Mutual, Inc. ................................................ 2.6
(Savings & Loans)
Emerson Electric Co. ................................................... 2.5
(Electrical Equipment)
ALLTEL Corp. ........................................................... 2.5
(Telephone)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES Cost
For the Period Ended June 30, 2000 (000's)
--------------------------------------------------------------------------------
<S> <C>
Procter & Gamble Co. ...................................................... $213
McDonald's Corp. .......................................................... 203
The Gillette Co. .......................................................... 192
United Parcel Service, Inc. (Class B)...................................... 188
Diebold, Inc. ............................................................. 172
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SALES Proceeds
For the Period Ended June 30, 2000 (000's)
--------------------------------------------------------------------------------
<S> <C>
Kimberly-Clark Corp. ...................................................... $272
Nortel Networks Corp. ..................................................... 271
PepsiCo, Inc. ............................................................. 229
Hewlett-Packard Co. ....................................................... 182
Mylan Laboratories, Inc. .................................................. 179
</TABLE>
<TABLE>
<CAPTION>
Percent of
TOP FIVE INDUSTRIES Net Assets
--------------------------------------------------------------------------------
<S> <C>
Telephone............................................................... 11%
Health Care (Diversified)............................................... 10
Oil (International Integrated).......................................... 7
Electronics (Semiconductors)............................................ 5
Manufacturing (Diversified)............................................. 5
</TABLE>
Weightings As a Percent of Net Assets
--------------------------------------------------------------------------------
[PIE CHART]
1 Large - Common Stocks: ($4 Bil. and above) 94%
2 Medium - Common Stocks: ($1 Bil. - $4 Bil.) 5%
3 Small - Common Stocks: (Less than $1.5 Bil.) 4%
4 Cash & Other: -3%
- 33 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO U.S. Value Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE
AMOUNT (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - 103.6%
Banks (Major Regional) - 3.5%
4,800 Bank of America Corp. $ 206
7,000 KeyCorp 123
Banks (Money Center) - 2.2%
4,500 Chase Manhattan Corp. 207
Chemicals - 3.2%
3,100 Du Pont (E.I.) de Nemours & Co. 136
4,400 Praxair, Inc. 165
Computers (Hardware) - 3.7%
2,800 *Apple Computer, Inc. 147
1,600 Hewlett-Packard Co. 200
Computers (Software & Services) - 0.9%
4,100 *Cadence Design Systems, Inc. 84
Electric Companies - 1.8%
9,200 NIPSCO Industries, Inc. 171
Electrical Equipment - 3.0%
610 *Agilent Technologies, Inc. 45
3,800 Emerson Electric Co. 229
Electronics (Semiconductors) - 4.8%
2,100 Intel Corp. 281
1,900 *Micron Technology, Inc. 167
Entertainment - 2.0%
4,800 The Walt Disney Co. 186
Financial (Diversified) - 4.0%
3,300 American General Corp. 201
3,200 Federal National Mortgage Association 167
Foods - 1.7%
8,400 ConAgra, Inc. 160
Health Care (Diversified) - 9.9%
7,500 Abbott Laboratories 334
3,700 American Home Products Corp. 217
2,600 Bristol-Myers Squibb Co. 152
2,200 Johnson & Johnson 224
Household Products (Non-Durables) - 2.1%
3,500 Procter & Gamble Co. 200
Insurance (Life & Health) - 1.8%
8,400 UnumProvident Corp. 169
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE
AMOUNT (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
Insurance (Multi-Line) - 3.2%
5,400 Hartford Financial Services Group, Inc. $ 302
Manufacturing (Diversified) - 4.7%
10,150 Crane Co. 247
2,400 Minnesota Mining & Manufacturing Co. 198
Manufacturing (Specialized) - 2.0%
6,600 Diebold, Inc. 184
Office Equipment & Supplies - 1.7%
7,800 Xerox Corp. 162
Oil & Gas (Drilling & Equipment) - 2.1%
4,200 Halliburton Co. 198
Oil (International Integrated) - 6.6%
1,600 Chevron Corp. 136
3,564 Exxon Mobil Corp. 280
3,700 Texaco, Inc. 197
Paper & Forest Products - 1.2%
3,700 International Paper Co. 110
Personal Care - 2.0%
5,300 The Gillette Co. 185
Publishing (Newspapers) - 1.4%
3,400 New York Times Co. (Class A) 134
Real Estate Investment Trust - 4.0%
2,500 Equity Residential Properties Trust 115
5,100 First Industrial Realty Trust, Inc. 150
4,300 Liberty Property Trust 112
Restaurants - 1.9%
5,400 McDonald's Corp. 178
Retail (Department Stores) - 0.9%
3,550 May Department Stores Co. 85
Retail (Drug Stores) - 2.1%
5,000 CVS Corp. 200
Retail (Food Chains) - 3.0%
8,400 Albertson's, Inc. 281
Retail (General Merchandise) - 1.9%
5,400 *Costco Wholesale Corp. 178
Savings & Loans - 2.6%
8,300 Washington Mutual, Inc. 240
Services (Advertising/Marketing) - 1.9%
4,100 Interpublic Group Cos., Inc. 176
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 34 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO U.S. Value Fund
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE
AMOUNT (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
Services (Commercial & Consumer) - 2.0%
3,200 United Parcel Service, Inc. (Class B) $ 189
Telecommunications (Equipment) - 3.0%
4,700 Lucent Technologies, Inc. 279
Telephone - 10.7%
3,700 ALLTEL Corp. 229
7,300 CenturyTel, Inc. 210
3,400 GTE Corp. 212
4,300 *MCI WorldCom, Inc. 197
3,700 SBC Communications, Inc. 160
---------
TOTAL COMMON STOCKS 9,695
---------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE
AMOUNT (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
CASH EQUIVALENTS - 0.1%
Investment Companies
4,798 AIM Short-Term Investments Co. Liquid Assets Money
Market Portfolio (Institutional Shares) $ 5
---------
TOTAL CASH EQUIVALENTS 5
---------
TOTAL INVESTMENTS - 103.7% 9,700
Other Assets, less Liabilities (342)
---------
NET ASSETS $ 9,358
=========
--------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
- 35 -
<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.
- 36 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PERFORMANCE GRAPH]
PERFORMANCE OVERVIEW - CLASS A, B AND C SHARES
Average Annual Total Return for the With Sales Charge
period ended June 30, 2000 Six-Months* 1 Year 5 Year 10 Year
--------------------------------------------------------------------------------
SAFECO High-Yield Bond Fund
Class A (6.32)% (3.97)% 5.79% 8.29%
Class B (7.02)% (4.70)% 5.91% 8.49%
Class C (3.26)% (1.00)% 6.20% 8.49%
Merrill Lynch High-Yield Master II Index N/A N/A N/A N/A
Lipper, Inc. (High Current Yield Funds) N/A N/A N/A N/A
Average Annual Total Return for the Without Sales Charge
period ended June 30, 2000 Six-Months* 1 Year 5 Year 10 Year
--------------------------------------------------------------------------------
SAFECO High-Yield Bond Fund
Class A (1.96)% 0.53% 6.77% 8.78%
Class B (2.33)% (0.08)% 6.20% 8.49%
Class C (2.32)% (0.08)% 6.20% 8.49%
Merrill Lynch High-Yield Master II Index (1.67)% (0.97%) 7.03% 10.83%
Lipper, Inc. (High Current Yield Funds) (1.00)% (0.79)% 6.49% 9.78%
* Not Annualized
Investment Values
Merrill Lynch
High-Yield
Class A Class B Class C Master II Index
------- ------- ------- ---------------
6/30/90 10,000 10,000 10,000 10,000
7/31/90 10,229 10,229 10,229 10,251
8/31/90 9,916 9,916 9,916 9,783
9/30/90 9,546 9,546 9,546 9,380
10/31/90 9,239 9,239 9,239 9,105
11/30/90 9,341 9,341 9,341 9,201
12/31/90 9,436 9,436 9,436 9,341
1/31/91 9,386 9,386 9,386 9,532
2/28/91 9,773 9,773 9,773 10,359
3/31/91 10,118 10,118 10,118 10,872
4/30/91 10,427 10,427 10,427 11,248
5/31/91 10,552 10,552 10,552 11,291
6/30/91 10,666 10,666 10,666 11,548
7/31/91 10,902 10,902 10,902 11,858
8/31/91 11,114 11,114 11,114 12,131
9/30/91 11,281 11,281 11,281 12,302
10/31/91 11,542 11,542 11,542 12,719
11/30/91 11,686 11,686 11,686 12,856
12/31/91 11,728 11,728 11,728 13,000
1/31/92 12,054 12,054 12,054 13,439
2/29/92 12,263 12,263 12,263 13,778
3/31/92 12,395 12,395 12,395 13,972
4/30/92 12,388 12,388 12,388 14,045
5/31/92 12,555 12,555 12,555 14,252
6/30/92 12,717 12,717 12,717 14,417
7/31/92 12,936 12,936 12,936 14,697
8/31/92 13,096 13,096 13,096 14,884
9/30/92 13,258 13,258 13,258 15,042
10/31/92 12,997 12,997 12,997 14,848
11/30/92 13,217 13,217 13,217 15,076
12/31/92 13,355 13,355 13,355 15,267
1/31/93 13,720 13,720 13,720 15,632
2/28/93 13,992 13,992 13,992 15,911
3/31/93 14,230 14,230 14,230 16,181
4/30/93 14,333 14,333 14,333 16,292
5/31/93 14,550 14,550 14,550 16,504
6/30/93 14,825 14,825 14,825 16,812
7/31/93 14,999 14,999 14,999 16,981
8/31/93 15,101 15,101 15,101 17,136
9/30/93 15,152 15,152 15,152 17,212
10/31/93 15,367 15,367 15,367 17,540
11/30/93 15,485 15,485 15,485 17,631
12/31/93 15,613 15,613 15,613 17,817
1/31/94 15,908 15,908 15,908 18,201
2/28/94 15,830 15,830 15,830 18,075
3/31/94 15,270 15,270 15,270 17,491
4/30/94 15,147 15,147 15,147 17,273
5/31/94 15,285 15,285 15,285 17,236
6/30/94 15,352 15,352 15,352 17,314
7/31/94 15,346 15,346 15,346 17,428
8/31/94 15,403 15,403 15,403 17,557
9/30/94 15,397 15,397 15,397 17,554
10/31/94 15,335 15,335 15,335 17,599
11/30/94 15,134 15,134 15,134 17,448
12/31/94 15,262 15,262 15,262 17,632
1/31/95 15,441 15,441 15,441 17,879
2/28/95 15,766 15,766 15,766 18,452
3/31/95 15,910 15,910 15,910 18,702
4/30/95 16,211 16,211 16,211 19,186
5/31/95 16,636 16,636 16,636 19,777
6/30/95 16,720 16,720 16,720 19,911
7/31/95 16,942 16,942 16,942 20,170
8/31/95 16,950 16,950 16,950 20,276
9/30/95 17,157 17,157 17,157 20,516
10/31/95 17,394 17,394 17,394 20,685
11/30/95 17,423 17,423 17,423 20,890
12/31/95 17,649 17,649 17,649 21,240
1/31/96 17,871 17,871 17,871 21,595
2/29/96 18,043 18,043 18,043 21,661
3/31/96 17,984 17,984 17,984 21,572
4/30/96 18,020 18,020 18,020 21,603
5/31/96 18,133 18,133 18,133 21,758
6/30/96 18,179 18,179 18,179 21,855
7/31/96 18,369 18,369 18,369 21,988
8/31/96 18,629 18,629 18,629 22,262
9/30/96 19,007 19,007 19,007 22,780
10/31/96 19,080 19,080 19,080 22,977
11/30/96 19,363 19,363 19,363 23,439
12/31/96 19,482 19,482 19,482 23,633
1/31/97 19,645 19,645 19,645 23,811
2/28/97 20,005 19,993 19,993 24,178
3/31/97 19,585 19,561 19,561 23,845
4/30/97 19,711 19,675 19,675 24,151
5/31/97 20,271 20,221 20,221 24,659
6/30/97 20,556 20,492 20,492 25,040
7/31/97 21,082 21,005 21,005 25,704
8/31/97 21,089 21,002 21,002 25,673
9/30/97 21,448 21,348 21,348 26,135
10/31/97 21,428 21,316 21,316 26,268
11/30/97 21,648 21,524 21,524 26,514
12/31/97 21,915 21,775 21,775 26,769
1/31/98 22,370 22,216 22,216 27,195
2/28/98 22,489 22,317 22,317 27,306
3/31/98 22,728 22,538 22,538 27,565
4/30/98 22,671 22,467 22,467 27,684
5/31/98 22,769 22,546 22,546 27,850
6/30/98 22,838 22,598 22,598 27,994
7/31/98 23,157 22,895 22,895 28,172
8/31/98 21,710 21,448 21,448 26,750
9/30/98 22,096 21,811 21,811 26,820
10/31/98 21,815 21,516 21,516 26,247
11/30/98 22,755 22,427 22,427 27,609
12/31/98 22,861 22,513 22,513 27,559
1/31/99 23,147 22,779 22,779 27,931
2/28/99 23,138 22,755 22,755 27,741
3/31/99 23,474 23,068 23,068 28,064
4/30/99 23,923 23,492 23,492 28,577
5/31/99 23,263 22,828 22,828 28,315
6/30/99 23,081 22,608 22,608 28,245
7/31/99 23,115 22,628 22,628 28,283
8/31/99 22,966 22,494 22,494 27,984
9/30/99 22,868 22,384 22,384 27,872
10/31/99 22,940 22,442 22,442 27,720
11/30/99 23,355 22,836 22,836 28,082
12/31/99 23,656 23,118 23,118 28,252
1/31/00 23,334 22,789 22,789 28,143
2/29/00 23,240 22,683 22,683 28,203
3/31/00 22,810 22,222 22,222 27,789
4/30/00 22,937 22,359 22,355 27,790
5/31/00 22,636 22,052 22,079 27,440
6/30/00 23,203 22,589 22,591 27,970
The performance graph compares a hypothetical $10,000 investment in Classes A,
B, and C of each Fund to a hypothetical investment in a relevant market index.
Fund performance is derived from the Fund's original class of shares and
reflects the maximum 4.5% sales charge for Class A shares, the maximum
contingent deferred sales charge of 5% in the first year, decreasing to 0% after
six years for Class B shares, and 1% in the first year for Class C shares. Fund
performance has not been restated to reflect Rule 12b-1 fees prior to September
30, 1996. Such fees will affect subsequent performance. 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 B: 71%
2 BB: 13%
3 Cash & Other: 8%
4 Preferred Stock: 7%
5 Not Rated: 1%
- 37 -
<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
- 38 -
<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
- 39 -
<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
- 40 -
<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
--------------------------------------------------------------------------------
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>
- 41 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PERFORMANCE GRAPH]
PERFORMANCE OVERVIEW - CLASS A AND B SHARES
Average Annual Total Return for the With Sales Charge
period ended June 30, 2000 Six-Months* 1 Year 5 Year 10 Year
--------------------------------------------------------------------------------
SAFECO Intermediate-Term U.S. Treasury Fund
Class A (1.53)% (1.42)% 4.01% 6.02%
Class B (2.18)% (2.36)% 4.11% 6.25%
Merrill Lynch Intermediate-Term
Treasury Index N/A N/A N/A N/A
Lipper, Inc. (Intermediate U.S.
Treasury Funds) N/A N/A N/A N/A
Average Annual Total Return for the Without Sales Charge
period ended June 30, 2000 Six-Months* 1 Year 5 Year 10 Year
--------------------------------------------------------------------------------
SAFECO Intermediate-Term U.S. Treasury Fund
Class A 3.10% 3.19% 4.96% 6.51%
Class B 2.82% 2.54% 4.44% 6.25%
Merrill Lynch Intermediate-Term
Treasury Index 3.60% 4.73% 5.88% 7.18%
Lipper, Inc. (Intermediate U.S.
Treasury Funds) 4.07% 3.95% 5.47% 6.82%
* Not Annualized
Investment Values
Class A Class B Merrill Lynch
------- ------- -------------
6/30/90 10,000 10,000 10,000
7/31/90 10,134 10,134 10,143
8/31/90 10,098 10,098 10,099
9/30/90 10,137 10,137 10,192
10/31/90 10,218 10,218 10,334
11/30/90 10,324 10,324 10,488
12/31/90 10,453 10,453 10,636
1/31/91 10,500 10,500 10,744
2/28/91 10,582 10,582 10,800
3/31/91 10,657 10,657 10,859
4/30/91 10,776 10,776 10,971
5/31/91 10,832 10,832 11,034
6/30/91 10,845 10,845 11,046
7/31/91 10,980 10,980 11,165
8/31/91 11,165 11,165 11,373
9/30/91 11,333 11,333 11,567
10/31/91 11,455 11,455 11,697
11/30/91 11,573 11,573 11,835
12/31/91 11,867 11,867 12,123
1/31/92 11,731 11,731 12,001
2/29/92 11,745 11,745 12,047
3/31/92 11,703 11,703 11,998
4/30/92 11,792 11,792 12,107
5/31/92 11,962 11,962 12,280
6/30/92 12,149 12,149 12,458
7/31/92 12,451 12,451 12,689
8/31/92 12,549 12,549 12,836
9/30/92 12,782 12,782 13,013
10/31/92 12,548 12,548 12,853
11/30/92 12,470 12,470 12,796
12/31/92 12,646 12,646 12,965
1/31/93 12,971 12,971 13,207
2/28/93 13,258 13,258 13,405
3/31/93 13,312 13,312 13,455
4/30/93 13,407 13,407 13,562
5/31/93 13,363 13,363 13,521
6/30/93 13,687 13,687 13,715
7/31/93 13,708 13,708 13,744
8/31/93 14,046 14,046 13,954
9/30/93 14,125 14,125 14,014
10/31/93 14,156 14,156 14,038
11/30/93 13,929 13,929 13,971
12/31/93 14,016 14,016 14,025
1/31/94 14,198 14,198 14,165
2/28/94 13,823 13,823 13,964
3/31/94 13,532 13,532 13,768
4/30/94 13,436 13,436 13,675
5/31/94 13,441 13,441 13,689
6/30/94 13,416 13,416 13,699
7/31/94 13,594 13,594 13,868
8/31/94 13,629 13,629 13,912
9/30/94 13,480 13,480 13,800
10/31/94 13,485 13,485 13,803
11/30/94 13,458 13,458 13,734
12/31/94 13,510 13,510 13,786
1/31/95 13,665 13,665 14,015
2/28/95 13,869 13,869 14,283
3/31/95 13,940 13,940 14,361
4/30/95 14,111 14,111 14,526
5/31/95 14,651 14,651 14,941
6/30/95 14,749 14,749 15,039
7/31/95 14,634 14,634 15,049
8/31/95 14,809 14,809 15,173
9/30/95 14,973 14,973 15,274
10/31/95 15,200 15,200 15,446
11/30/95 15,509 15,509 15,639
12/31/95 15,773 15,773 15,798
1/31/96 15,824 15,824 15,933
2/29/96 15,438 15,438 15,755
3/31/96 15,276 15,276 15,679
4/30/96 15,245 15,245 15,630
5/31/96 15,242 15,242 15,621
6/30/96 15,352 15,352 15,774
7/31/96 15,400 15,400 15,823
8/31/96 15,399 15,399 15,840
9/30/96 15,571 15,571 16,041
10/31/96 15,760 15,750 16,302
11/30/96 15,959 15,956 16,502
12/31/96 15,824 15,813 16,413
1/31/97 15,868 15,834 16,474
2/28/97 15,838 15,797 16,493
3/31/97 15,640 15,593 16,408
4/30/97 15,835 15,784 16,592
5/31/97 15,946 15,894 16,719
6/30/97 16,116 16,055 16,863
7/31/97 16,573 16,504 17,180
8/31/97 16,368 16,291 17,107
9/30/97 16,613 16,522 17,296
10/31/97 16,887 16,782 17,497
11/30/97 16,894 16,777 17,537
12/31/97 17,095 16,963 17,686
1/31/98 17,364 17,208 17,924
2/28/98 17,283 17,130 17,900
3/31/98 17,311 17,150 17,960
4/30/98 17,367 17,199 18,040
5/31/98 17,510 17,332 18,162
6/30/98 17,668 17,463 18,288
7/31/98 17,679 17,483 18,360
8/31/98 18,124 17,898 18,727
9/30/98 18,744 18,501 19,169
10/31/98 18,662 18,407 19,212
11/30/98 18,572 18,307 19,141
12/31/98 18,647 18,370 19,212
1/31/99 18,644 18,357 19,304
2/28/99 18,343 18,051 19,007
3/31/99 18,434 18,130 19,147
4/30/99 18,441 18,124 19,205
5/31/99 18,242 17,917 19,077
6/30/99 18,210 17,873 19,110
7/31/99 18,162 17,831 19,131
8/31/99 18,166 17,805 19,168
9/30/99 18,317 17,942 19,321
10/31/99 18,325 17,936 19,350
11/30/99 18,314 17,915 19,362
12/31/99 18,221 17,820 19,317
1/31/00 18,156 17,745 19,260
2/29/00 18,288 17,864 19,411
3/31/00 18,608 18,165 19,653
4/30/00 18,522 18,069 19,651
5/31/00 18,558 18,093 19,730
6/30/00 18,791 18,327 20,013
The performance graph compares a hypothetical $10,000 investment in Class A
and Class B of the Fund to a hypothetical investment in a relevant market index.
Fund performance is derived from the Fund's original class of shares and
reflects the maximum 5.75% sales charge for Class A shares, and the maximum
contingent deferred sales charge (5% in the first year, decreasing to 0% after
six years) for Class B shares. Fund performance has not been restated to reflect
Rule 12b-1 fees prior to September 30, 1996 (initial public offering date of
Class A and Class B shares). Such fees will affect subsequent performance.
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>
- 42 -
<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-
[PHOTO] positioned the fund accordingly.
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>
- 43 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PERFORMANCE GRAPH]
PERFORMANCE OVERVIEW - CLASS A AND B SHARES
Average Annual Total Return for the With Sales Charge
period ended June 30, 2000 Six-Months* 1 Year 5 Year 10 Year
--------------------------------------------------------------------------------
SAFECO GNMA Fund
Class A (1.77)% (0.96)% 4.67% 6.25%
Class B (2.24)% (1.28)% 5.30% 6.72%
Merrill Lynch Intermediate-Term
Treasury Index N/A N/A N/A N/A
Lipper, Inc. (Intermediate U.S. Treasury
Funds) N/A N/A N/A N/A
Average Annual Total Return for the Without Sales Charge
period ended June 30, 2000 Six-Months* 1 Year 5 Year 10 Year
--------------------------------------------------------------------------------
SAFECO GNMA Fund
Class A 2.84% 3.72% 5.64% 6.74%
Class B 2.87% 3.59% 5.61% 6.72%
Merrill Lynch Intermediate-Term
Treasury Index 4.23% 5.72% 6.83% 8.11%
Lipper, Inc. (Intermediate U.S. Treasury
Funds) 3.72% 4.45% 5.67% 7.09%
* Not Annualized
Investment Values
Merrill Lynch
Intermediate-Term
Class A Class B Treasury Index
------- ------- -----------------
6/30/90 10,000 10,000 10,000
7/31/90 10,183 10,183 10,169
8/31/90 10,092 10,092 10,088
9/30/90 10,159 10,159 10,179
10/31/90 10,245 10,245 10,303
11/30/90 10,472 10,472 10,533
12/31/90 10,611 10,611 10,707
1/31/91 10,761 10,761 10,861
2/28/91 10,823 10,823 10,937
3/31/91 10,880 10,880 11,020
4/30/91 10,998 10,998 11,130
5/31/91 11,085 11,085 11,219
6/30/91 11,098 11,098 11,236
7/31/91 11,274 11,274 11,425
8/31/91 11,455 11,455 11,639
9/30/91 11,654 11,654 11,849
10/31/91 11,826 11,826 12,037
11/30/91 11,886 11,886 12,119
12/31/91 12,182 12,182 12,419
1/31/92 12,012 12,012 12,269
2/29/92 12,111 12,111 12,391
3/31/92 12,040 12,040 12,313
4/30/92 12,130 12,130 12,444
5/31/92 12,365 12,365 12,674
6/30/92 12,496 12,496 12,871
7/31/92 12,674 12,674 12,947
8/31/92 12,804 12,804 13,137
9/30/92 12,907 12,907 13,235
10/31/92 12,774 12,774 13,132
11/30/92 12,829 12,829 13,200
12/31/92 12,998 12,998 13,362
1/31/93 13,189 13,189 13,539
2/28/93 13,334 13,334 13,663
3/31/93 13,387 13,387 13,748
4/30/93 13,433 13,433 13,823
5/31/93 13,473 13,473 13,896
6/30/93 13,700 13,700 14,028
7/31/93 13,756 13,756 14,095
8/31/93 13,901 13,901 14,123
9/30/93 13,916 13,916 14,129
10/31/93 13,939 13,939 14,173
11/30/93 13,807 13,807 14,178
12/31/93 13,918 13,918 14,318
1/31/94 14,073 14,073 14,431
2/28/94 13,860 13,860 14,363
3/31/94 13,420 13,420 13,990
4/30/94 13,303 13,303 13,887
5/31/94 13,349 13,349 13,916
6/30/94 13,289 13,289 13,887
7/31/94 13,545 13,545 14,161
8/31/94 13,576 13,576 14,199
9/30/94 13,372 13,372 14,040
10/31/94 13,337 13,337 14,030
11/30/94 13,221 13,221 13,995
12/31/94 13,324 13,324 14,144
1/31/95 13,597 13,597 14,450
2/28/95 13,915 13,915 14,837
3/31/95 13,962 13,962 14,909
4/30/95 14,141 14,141 15,122
5/31/95 14,531 14,531 15,573
6/30/95 14,592 14,592 15,675
7/31/95 14,609 14,609 15,714
8/31/95 14,767 14,767 15,882
9/30/95 14,909 14,909 16,046
10/31/95 15,024 15,024 16,180
11/30/95 15,200 15,200 16,356
12/31/95 15,386 15,386 16,565
1/31/96 15,488 15,488 16,692
2/29/96 15,279 15,279 16,559
3/31/96 15,189 15,189 16,537
4/30/96 15,128 15,128 16,484
5/31/96 15,095 15,095 16,421
6/30/96 15,302 15,302 16,608
7/31/96 15,325 15,325 16,682
8/31/96 15,322 15,322 16,706
9/30/96 15,577 15,577 16,975
10/31/96 15,864 15,864 17,316
11/30/96 16,099 16,099 17,581
12/31/96 15,999 15,999 17,488
1/31/97 16,103 16,103 17,611
2/28/97 16,139 16,139 17,677
3/31/97 15,967 15,967 17,512
4/30/97 16,230 16,230 17,791
5/31/97 16,369 16,369 17,978
6/30/97 16,568 16,568 18,189
7/31/97 16,922 16,922 18,516
8/31/97 16,861 16,861 18,493
9/30/97 17,063 17,063 18,732
10/31/97 17,241 17,241 18,922
11/30/97 17,269 17,269 18,971
12/31/97 17,435 17,435 19,157
1/31/98 17,611 17,611 19,342
2/28/98 17,646 17,646 19,408
3/31/98 17,682 17,682 19,493
4/30/98 17,790 17,790 19,621
5/31/98 17,913 17,913 19,768
6/30/98 18,016 18,016 19,821
7/31/98 18,091 18,091 19,932
8/31/98 18,343 18,343 20,092
9/30/98 18,545 18,545 20,341
10/31/98 18,465 18,465 20,319
11/30/98 18,551 18,551 20,448
12/31/98 18,627 18,627 20,536
1/31/99 18,726 18,726 20,670
2/28/99 18,582 18,582 20,611
3/31/99 18,729 18,729 20,741
4/30/99 18,805 18,805 20,838
5/31/99 18,632 18,632 20,721
6/30/99 18,505 18,505 20,634
7/31/99 18,377 18,377 20,510
8/31/99 18,370 18,370 20,508
9/30/99 18,669 18,669 20,849
10/31/99 18,704 18,704 20,971
11/30/99 18,739 18,739 20,991
12/31/99 18,651 18,651 20,928
1/31/00 18,503 18,503 20,782
2/29/00 18,686 18,686 21,045
3/31/00 18,912 18,912 21,363
4/30/00 18,868 18,868 21,331
5/31/00 18,879 18,867 21,429
6/30/00 19,194 19,169 21,814
The performance graph compares a hypothetical $10,000 investment in Class A
and Class B of the Fund to a hypothetical investment in a relevant market index.
Fund performance is derived from the Fund's original class of shares and
reflects the maximum 5.75% sales charge for Class A shares, and the maximum
contingent deferred sales charge (5% in the first year, decreasing to 0% after
six years) for Class B shares. Fund performance has not been restated to reflect
Rule 12b-1 fees prior to September 30, 1996 (initial public offering date of
Class A and Class B shares). Such fees will affect subsequent performance.
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
250 6.50%, due 8/15/29 237
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000's) (000's)
--------------------------------------------------------------------------------
<C> <S> <C>
Government National Mortgage Association (GNMA) - 55.3% (continued)
$ 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>
- 44 -
<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.
- 45 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PERFORMANCE GRAPH]
PERFORMANCE OVERVIEW - CLASS A AND B SHARES
Average Annual Total
Return for the period With Sales Charge
ended June 30, 2000 Six-Months* 1 Year 5 Year Since Inception**
--------------------------------------------------------------------------------
SAFECO Managed Bond Fund
Class A (0.87)% (0.92)% 3.43% 3.67%
Class B (1.61)% (2.12)% 3.39% 3.89%
Lehman Brothers Gov't/Corp.
Bond Index N/A N/A N/A N/A
Lipper, Inc. (Intermediate
Investment-Grade Debt Funds) N/A N/A N/A N/A
Average Annual Total
Return for the period Without Sales Charge
ended June 30, 2000 Six-Months* 1 Year 5 Year Since Inception**
--------------------------------------------------------------------------------
SAFECO Managed Bond Fund
Class A 3.77% 3.72% 4.39% 4.43%
Class B 3.39% 2.78% 3.71% 3.89%
Lehman Brothers Gov't/Corp.
Bond Index 4.18% 4.32% 6.10% 6.16%
Lipper, Inc. (Intermediate
Investment-Grade Debt Funds) 3.06% 3.42% 5.36% N/A
* Not Annualized
** The Fund's inception was June 25, 1992. Graph and average annual return
comparison begins February 28, 1994.
Investment Values
Lehman Brother
Gov't/Corp.
Class A Class B Bond Index
------- ------- --------------
2/28/94 10,000 10,000 10,000
3/31/94 9,666 9,666 9,755
4/30/94 9,657 9,657 9,675
5/31/94 9,666 9,666 9,657
6/30/94 9,653 9,653 9,634
7/31/94 9,757 9,757 9,827
8/31/94 9,780 9,780 9,831
9/30/94 9,703 9,703 9,682
10/31/94 9,709 9,709 9,671
11/30/94 9,680 9,680 9,654
12/31/94 9,699 9,699 9,717
1/31/95 9,828 9,828 9,904
2/28/95 9,991 9,991 10,134
3/31/95 10,038 10,038 10,202
4/30/95 10,167 10,167 10,344
5/31/95 10,533 10,533 10,777
6/30/95 10,615 10,615 10,864
7/31/95 10,541 10,541 10,822
8/31/95 10,674 10,674 10,960
9/30/95 10,791 10,791 11,072
10/31/95 10,962 10,962 11,234
11/30/95 11,178 11,178 11,419
12/31/95 11,382 11,382 11,587
1/31/96 11,400 11,400 11,659
2/29/96 11,127 11,127 11,412
3/31/96 11,010 11,010 11,316
4/30/96 11,004 11,004 11,239
5/31/96 11,009 11,009 11,220
6/30/96 11,092 11,092 11,369
7/31/96 11,127 11,127 11,396
8/31/96 11,148 11,148 11,368
9/30/96 11,239 11,239 11,570
10/31/96 11,354 11,347 11,840
11/30/96 11,481 11,467 12,058
12/31/96 11,376 11,369 11,924
1/31/97 11,397 11,368 11,938
2/28/97 11,370 11,335 11,963
3/31/97 11,220 11,179 11,821
4/30/97 11,375 11,327 11,994
5/31/97 11,462 11,406 12,106
6/30/97 11,577 11,511 12,251
7/31/97 11,914 11,839 12,626
8/31/97 11,760 11,664 12,484
9/30/97 11,934 11,843 12,680
10/31/97 12,123 12,007 12,883
11/30/97 12,139 12,028 12,951
12/31/97 12,276 12,154 13,087
1/31/98 12,479 12,343 13,272
2/28/98 12,425 12,276 13,245
3/31/98 12,445 12,284 13,285
4/30/98 12,489 12,303 13,352
5/31/98 12,635 12,435 13,496
6/30/98 12,749 12,536 13,633
7/31/98 12,741 12,532 13,644
8/31/98 13,036 12,798 13,911
9/30/98 13,365 13,112 14,308
10/31/98 13,199 12,936 14,207
11/30/98 13,220 12,948 14,292
12/31/98 13,242 12,965 14,327
1/31/99 13,299 13,014 14,429
2/28/99 12,929 12,644 14,086
3/31/99 12,977 12,683 14,156
4/30/99 12,979 12,692 14,191
5/31/99 12,793 12,487 14,044
6/30/99 12,687 12,391 14,001
7/31/99 12,644 12,326 13,962
8/31/99 12,617 12,292 13,951
9/30/99 12,749 12,412 14,076
10/31/99 12,768 12,423 14,113
11/30/99 12,763 12,406 14,105
12/31/99 12,677 12,315 14,019
1/31/00 12,654 12,285 14,015
2/29/00 12,808 12,428 14,191
3/31/00 12,965 12,588 14,396
4/30/00 12,928 12,544 14,326
5/31/00 12,910 12,503 14,313
6/30/00 13,159 12,736 14,605
The performance graph compares a hypothetical $10,000 investment in Class A
and Class B of the Fund to a hypothetical investment in a relevant market index.
Fund performance is derived from the Fund's original class of shares and
reflects the maximum 5.75% sales charge for Class A shares, and the maximum
contingent deferred sales charge (5% in the first year, decreasing to 0% after
six years) for Class B shares. Fund performance has not been restated to reflect
Rule 12b-1 fees prior to September 30, 1996 (initial public offering date of
Class A and Class B shares). Such fees will affect subsequent performance.
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>
<TABLE>
<CAPTION>
Percent of
BONDS BY TYPE Net Assets
--------------------------------------------------------------------------------
<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 A 21%
3 AA 6%
4 Cash & Other 2%
- 46 -
<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
- 47 -
<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
- 48 -
<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.
- 49 -
<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.
- 50 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PERFORMANCE GRAPH]
PERFORMANCE OVERVIEW - CLASS A AND B SHARES
Average Annual Total Return for the With Sales Charge
period ended June 30, 2000 Six-Months* 1 Year 5 Year 10 Year
--------------------------------------------------------------------------------
SAFECO California Tax-Free Income Fund
Class A 2.54% (4.05)% 4.63% 6.33%
Class B 1.98% (5.05)% 4.68% 6.51%
Lehman Brothers Long Municipal Bond
Index N/A N/A N/A N/A
Lipper, Inc. (California Municipal
Bond Funds) N/A N/A N/A N/A
Average Annual Total Return for the Without Sales Charge
period ended June 30, 2000 Six-Months* 1 Year 5 Year 10 Year
--------------------------------------------------------------------------------
SAFECO California Tax-Free Income Fund
Class A 7.36% 0.47% 5.60% 6.81%
Class B 6.98% (0.26)% 5.01% 6.51%
Lehman Brothers Long Municipal Bond
Index 6.98% 0.89% 6.20% 7.55%
Lipper, Inc. (California Municipal
Bond Funds) 4.95% 1.35% 5.12% 6.40%
* Not Annualized
Investment Values
Lehman Brothers
Long Municipal Bond
Class A Class B Index
------- ------- -------------------
6/30/90 10,000 10,000 10,000
7/31/90 10,190 10,190 10,177
8/31/90 9,936 9,936 9,934
9/30/90 9,922 9,922 9,919
10/31/90 10,173 10,173 10,129
11/30/90 10,411 10,411 10,386
12/31/90 10,448 10,448 10,431
1/31/91 10,607 10,607 10,572
2/28/91 10,640 10,640 10,646
3/31/91 10,616 10,616 10,671
4/30/91 10,780 10,780 10,836
5/31/91 10,886 10,886 10,964
6/30/91 10,833 10,833 10,943
7/31/91 10,999 10,999 11,112
8/31/91 11,151 11,151 11,272
9/30/91 11,354 11,354 11,436
10/31/91 11,476 11,476 11,555
11/30/91 11,412 11,412 11,569
12/31/91 11,760 11,760 11,845
1/31/92 11,719 11,719 11,838
2/29/92 11,722 11,722 11,856
3/31/92 11,723 11,723 11,886
4/30/92 11,809 11,809 12,000
5/31/92 11,987 11,987 12,175
6/30/92 12,223 12,223 12,411
7/31/92 12,636 12,636 12,866
8/31/92 12,394 12,394 12,693
9/30/92 12,483 12,483 12,749
10/31/92 12,136 12,136 12,536
11/30/92 12,534 12,534 12,890
12/31/92 12,700 12,700 13,057
1/31/93 12,832 12,832 13,180
2/28/93 13,414 13,414 13,793
3/31/93 13,233 13,233 13,627
4/30/93 13,427 13,427 13,813
5/31/93 13,483 13,483 13,927
6/30/93 13,734 13,734 14,189
7/31/93 13,717 13,717 14,204
8/31/93 14,102 14,102 14,567
9/30/93 14,273 14,273 14,770
10/31/93 14,274 14,274 14,797
11/30/93 14,052 14,052 14,619
12/31/93 14,380 14,380 14,996
1/31/94 14,595 14,595 15,173
2/28/94 14,211 14,211 14,670
3/31/94 13,494 13,494 13,795
4/30/94 13,446 13,446 13,901
5/31/94 13,571 13,571 14,063
6/30/94 13,441 13,441 13,895
7/31/94 13,752 13,752 14,252
8/31/94 13,748 13,748 14,282
9/30/94 13,399 13,399 13,951
10/31/94 13,075 13,075 13,522
11/30/94 12,833 12,833 13,165
12/31/94 13,058 13,058 13,632
1/31/95 13,657 13,657 14,232
2/28/95 14,324 14,324 14,812
3/31/95 14,440 14,440 14,990
4/30/95 14,376 14,376 14,983
5/31/95 15,187 15,187 15,621
6/30/95 14,722 14,722 15,333
7/31/95 14,788 14,788 15,411
8/31/95 15,021 15,021 15,629
9/30/95 15,137 15,137 15,751
10/31/95 15,540 15,540 16,132
11/30/95 16,110 16,110 16,549
12/31/95 16,471 16,471 16,806
1/31/96 16,411 16,411 16,878
2/29/96 16,202 16,202 16,673
3/31/96 15,721 15,721 16,368
4/30/96 15,581 15,581 16,302
5/31/96 15,596 15,596 16,310
6/30/96 15,901 15,901 16,561
7/31/96 16,083 16,083 16,725
8/31/96 16,044 16,044 16,704
9/30/96 16,428 16,428 17,075
10/31/96 16,644 16,620 17,283
11/30/96 17,078 17,044 17,654
12/31/96 16,893 16,848 17,548
1/31/97 16,711 16,656 17,513
2/28/97 16,904 16,839 17,702
3/31/97 16,526 16,452 17,396
4/30/97 16,775 16,691 17,602
5/31/97 17,095 16,999 17,943
6/30/97 17,349 17,236 18,173
7/31/97 18,252 18,109 18,834
8/31/97 17,847 17,711 18,584
9/30/97 18,091 17,941 18,851
10/31/97 18,243 18,081 19,014
11/30/97 18,419 18,246 19,183
12/31/97 18,799 18,610 19,534
1/31/98 18,997 18,793 19,743
2/28/98 18,956 18,741 19,733
3/31/98 18,935 18,707 19,760
4/30/98 18,709 18,473 19,654
5/31/98 19,175 18,922 20,039
6/30/98 19,242 18,976 20,125
7/31/98 19,254 18,975 20,171
8/31/98 19,629 19,334 20,534
9/30/98 19,934 19,624 20,819
10/31/98 19,801 19,483 20,752
11/30/98 19,953 19,623 20,857
12/31/98 19,876 19,537 20,878
1/31/99 20,141 19,787 21,082
2/28/99 19,992 19,614 20,994
3/31/99 19,982 19,608 21,055
4/30/99 19,961 19,575 21,074
5/31/99 19,726 19,332 20,908
6/30/99 19,240 18,845 20,526
7/31/99 19,182 18,776 20,516
8/31/99 18,789 18,380 20,094
9/30/99 18,667 18,250 19,989
10/31/99 18,173 17,740 19,521
11/30/99 18,355 17,923 19,794
12/31/99 18,001 17,566 19,485
1/31/00 17,781 17,340 19,275
2/29/00 18,250 17,788 19,686
3/31/00 18,998 18,506 20,404
4/30/00 18,624 18,131 20,163
5/31/00 18,535 18,033 19,976
6/30/00 19,331 18,796 20,708
The performance graph compares a hypothetical $10,000 investment in Class A
and Class B of the Fund to a hypothetical investment in a relevant market index.
Fund performance is derived from the Fund's original class of shares and
reflects the maximum 5.75% sales charge for Class A shares, and the maximum
contingent deferred sales charge (5% in the first year, decreasing to 0% after
six years) for Class B shares. Fund performance has not been restated to reflect
Rule 12b-1 fees prior to September 30, 1996 (initial public offering date of
Class A and Class B shares). Such fees will affect subsequent performance.
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>
<TABLE>
<CAPTION>
Percent of
TOP FIVE TYPE OF BONDS Net Assets
--------------------------------------------------------------------------------
<S> <C>
Lease Rental............................................................ 20%
Local General Obligation (Limited Tax).................................. 16
Hospital................................................................ 13
Utilities (Sewer)....................................................... 8
Utilities (Water)....................................................... 7
</TABLE>
<TABLE>
<CAPTION>
Percent of
TOP FIVE HOLDINGS Net Assets
--------------------------------------------------------------------------------
<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 A: 17%
3 BBB: 14%
4 AA: 9%
5 Cash & Other: 6%
- 51 -
<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
- 52 -
<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
- 53 -
<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.
- 54 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[PERFORMANCE GRAPH]
PERFORMANCE OVERVIEW - CLASS A AND B SHARES
Average Annual Total Return for the With Sales Charge
period ended June 30, 2000 Six-Months* 1 Year 5 Year 10 Year
--------------------------------------------------------------------------------
SAFECO Municipal Bond Fund
Class A 0.74% (3.79)% 4.35% 6.26%
Class B 0.04% (4.89)% 4.43% 6.47%
Lehman Brothers Long Municipal
Bond Index N/A N/A N/A N/A
Lipper, Inc. (General Municipal
Bond Funds) N/A N/A N/A N/A
Average Annual Total Return for the Without Sales Charge
period ended June 30, 2000 Six-Months* 1 Year 5 Year 10 Year
--------------------------------------------------------------------------------
SAFECO Municipal Bond Fund
Class A 5.51% 0.72% 5.31% 6.74%
Class B 5.04% (0.10)% 4.76% 6.47%
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
Investment Values
Lehman Brothers Long
Class A Class B Municipal Bond Index
------- ------- --------------------
6/30/90 10,000 10,000 10,000
7/31/90 10,192 10,192 10,177
8/31/90 9,926 9,926 9,934
9/30/90 9,907 9,907 9,919
10/31/90 10,096 10,096 10,129
11/30/90 10,377 10,377 10,386
12/31/90 10,420 10,420 10,431
1/31/91 10,585 10,585 10,572
2/28/91 10,631 10,631 10,646
3/31/91 10,644 10,644 10,671
4/30/91 10,822 10,822 10,836
5/31/91 10,932 10,932 10,964
6/30/91 10,894 10,894 10,943
7/31/91 11,067 11,067 11,112
8/31/91 11,235 11,235 11,272
9/30/91 11,415 11,415 11,436
10/31/91 11,537 11,537 11,555
11/30/91 11,500 11,500 11,569
12/31/91 11,856 11,856 11,845
1/31/92 11,753 11,753 11,838
2/29/92 11,784 11,784 11,856
3/31/92 11,769 11,769 11,886
4/30/92 11,880 11,880 12,000
5/31/92 12,081 12,081 12,175
6/30/92 12,342 12,342 12,411
7/31/92 12,817 12,817 12,866
8/31/92 12,554 12,554 12,693
9/30/92 12,578 12,578 12,749
10/31/92 12,304 12,304 12,536
11/30/92 12,681 12,681 12,890
12/31/92 12,894 12,894 13,057
1/31/93 13,019 13,019 13,180
2/28/93 13,582 13,582 13,793
3/31/93 13,369 13,369 13,627
4/30/93 13,553 13,553 13,813
5/31/93 13,630 13,630 13,927
6/30/93 13,910 13,910 14,189
7/31/93 13,856 13,856 14,204
8/31/93 14,225 14,225 14,567
9/30/93 14,384 14,384 14,770
10/31/93 14,423 14,423 14,797
11/30/93 14,241 14,241 14,619
12/31/93 14,526 14,526 14,996
1/31/94 14,702 14,702 15,173
2/28/94 14,267 14,267 14,670
3/31/94 13,543 13,543 13,795
4/30/94 13,555 13,555 13,901
5/31/94 13,718 13,718 14,063
6/30/94 13,566 13,566 13,895
7/31/94 13,879 13,879 14,252
8/31/94 13,889 13,889 14,282
9/30/94 13,546 13,546 13,951
10/31/94 13,256 13,256 13,522
11/30/94 12,984 12,984 13,165
12/31/94 13,328 13,328 13,632
1/31/95 13,818 13,818 14,232
2/28/95 14,399 14,399 14,812
3/31/95 14,504 14,504 14,990
4/30/95 14,482 14,482 14,983
5/31/95 15,156 15,156 15,621
6/30/95 14,831 14,831 15,333
7/31/95 14,902 14,902 15,411
8/31/95 15,095 15,095 15,629
9/30/95 15,207 15,207 15,751
10/31/95 15,525 15,525 16,132
11/30/95 15,956 15,956 16,549
12/31/95 16,190 16,190 16,806
1/31/96 16,243 16,243 16,878
2/29/96 16,064 16,064 16,673
3/31/96 15,697 15,697 16,368
4/30/96 15,579 15,579 16,302
5/31/96 15,605 15,605 16,310
6/30/96 15,834 15,834 16,561
7/31/96 16,029 16,029 16,725
8/31/96 15,972 15,972 16,704
9/30/96 16,294 16,294 17,075
10/31/96 16,495 16,473 17,283
11/30/96 16,858 16,828 17,654
12/31/96 16,705 16,665 17,548
1/31/97 16,617 16,570 17,513
2/28/97 16,783 16,728 17,702
3/31/97 16,491 16,428 17,396
4/30/97 16,681 16,622 17,602
5/31/97 16,967 16,886 17,943
6/30/97 17,162 17,083 18,173
7/31/97 17,867 17,766 18,834
8/31/97 17,552 17,444 18,584
9/30/97 17,776 17,670 18,851
10/31/97 17,920 17,792 19,014
11/30/97 18,047 17,911 19,183
12/31/97 18,404 18,232 19,534
1/31/98 18,571 18,405 19,743
2/28/98 18,552 18,380 19,733
3/31/98 18,560 18,367 19,760
4/30/98 18,385 18,187 19,654
5/31/98 18,764 18,566 20,039
6/30/98 18,888 18,665 20,125
7/31/98 18,913 18,679 20,171
8/31/98 19,241 18,994 20,534
9/30/98 19,496 19,237 20,819
10/31/98 19,371 19,115 20,752
11/30/98 19,465 19,185 20,857
12/31/98 19,463 19,185 20,878
1/31/99 19,693 19,388 21,082
2/28/99 19,554 19,253 20,994
3/31/99 19,548 19,235 21,055
4/30/99 19,615 19,275 21,074
5/31/99 19,449 19,102 20,908
6/30/99 19,068 18,730 20,526
7/31/99 19,045 18,683 20,516
8/31/99 18,704 18,337 20,094
9/30/99 18,585 18,222 19,989
10/31/99 18,253 17,872 19,521
11/30/99 18,423 18,027 19,794
12/31/99 18,199 17,810 19,485
1/31/00 18,050 17,640 19,275
2/29/00 18,399 17,971 19,686
3/31/00 18,919 18,482 20,404
4/30/00 18,710 18,266 20,163
5/31/00 18,574 18,107 19,976
6/30/00 19,206 18,712 20,708
The performance graph compares a hypothetical $10,000 investment in Class A
and Class B of the Fund to a hypothetical investment in a relevant market index.
Fund performance is derived from the Fund's original class of shares and
reflects the maximum 5.75% sales charge for Class A shares, and the maximum
contingent deferred sales charge (5% in the first year, decreasing to 0% after
six years) for Class B shares. Fund performance has not been restated to reflect
Rule 12b-1 fees prior to September 30, 1996 (initial public offering date of
Class A and Class B shares). Such fees will affect subsequent performance.
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)........................................... 5.4%
Weighted Average Maturity........................................ 24.1 years
</TABLE>
<TABLE>
<CAPTION>
Percent of
TOP FIVE HOLDINGS Net Assets
--------------------------------------------------------------------------------
<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>
<TABLE>
<CAPTION>
Percent of
TOP FIVE STATES Net Assets
--------------------------------------------------------------------------------
<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 A: 19%
3 BBB: 18%
4 AA: 13%
5 Cash & Other: 2%
6 Not Rated: 2%
- 55 -
<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
- 56 -
<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
- 57 -
<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
- 58 -
<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
- 59 -
<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
Price Index.
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
[PHOTO] notes under 60 days. About 10% of the portfolio is invested in
NAOMI URATA 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
--------------------------------------------------------------------------------
Weighted Average Maturity 46 days
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
Class A 2.77% 5.32% 4.94% 4.63%
Class B 2.77% 5.36% 4.91% 4.61%
Class C 2.77% 5.36% 4.91% 4.61%
Lipper, Inc. (Money Market Funds) 2.66% 5.06% 4.92% 4.69%
* Not Annualized
Weighted Average Maturity 46 days
- 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
- 61 -
<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
- 62 -
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
- 63 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Statements of Assets and Liabilities
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
SAFECO
SAFECO GROWTH SAFECO DIVIDEND
(In Thousands, OPPORTUNITIES EQUITY INCOME
Except Per-Share Amounts) FUND FUND FUND
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments, at Cost $773,429 $1,262,379 $200,654
======== ========== ========
Investments, at Value
Unaffiliated Issuers $435,309 $1,793,495 $240,118
Affiliated Issuers 300,052 -- --
-------- ---------- --------
Total Investments at Value 735,361 1,793,495 240,118
Cash -- -- --
Receivables
Investment Securities Sold 6,693 -- 1,201
Trust Shares Sold 614 173 1
Dividends and Interest 40 765 470
From Advisor 8 9 1
Deferred Organization Expense -- -- --
-------- ---------- --------
Total Assets 742,716 1,794,442 241,791
Liabilities
Payables
Investment Securities Purchased 951 -- --
Trust Shares Redeemed 15 30 --
Notes Payable -- 10 --
Dividends -- 2,301 946
Investment Advisory Fees 430 971 152
Forward Currency Contracts Open, Net -- -- --
Other 432 585 98
-------- ---------- --------
Total Liabilities 1,828 3,897 1,196
-------- ---------- --------
Net Assets $740,888 $1,790,545 $240,595
======== ========== ========
No-Load Class:
Net Assets $699,427 $1,705,736 $237,502
Trust Shares Outstanding 30,620 73,565 11,602
-------- ---------- --------
Net Asset Value, Offering Price, and
Redemption Price Per Share $ 22.84 $ 23.19 $ 20.47
======== ========== ========
Class A:
Net Assets $ 28,017 $ 60,640 $ 1,261
Trust Shares Outstanding 1,232 2,611 61
-------- ---------- --------
Net Asset Value and Redemption Price Per
Share $ 22.73 $ 23.22 $ 20.57
======== ========== ========
Maximum Offering Price Per Share (Net Asset
Value Plus Sales Charge of 5.75%) $ 24.12 $ 24.64 $ 21.82
======== ========== ========
Class B:
Net Assets $ 13,339 $ 24,061 $ 1,734
Trust Shares Outstanding 606 1,049 84
-------- ---------- --------
Net Asset Value and Offering Price Per
Share* $ 22.01 $ 22.94 $ 20.60
======== ========== ========
Class C:
Net Assets $ 105 $ 108 $ 98
Trust Shares Outstanding 5 5 5
-------- ---------- --------
Net Asset Value and Offering Price Per
Share* $ 22.01 $ 22.95 $ 20.64
======== ========== ========
</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
- 64 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO SAFECO SAFECO
NORTHWEST INTERNATIONAL BALANCED SMALL COMPANY U.S. VALUE
FUND STOCK FUND FUND VALUE FUND FUND
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$100,214 $31,721 $18,567 $30,024 $9,294
======== ======= ======= ======= ======
$154,211 $42,131 $19,081 $30,521 $9,700
-- -- -- -- --
-------- ------- ------- ------- ------
154,211 42,131 19,081 30,521 9,700
-- 1,118 -- -- --
-- 158 -- -- --
117 -- -- 203 --
12 116 96 29 13
1 12 6 7 5
-- 2 4 2 7
-------- ------- ------- ------- ------
154,341 43,537 19,187 30,762 9,725
-- 70 -- 1,334 --
-- -- -- -- --
-- -- -- -- 310
-- -- 128 -- 24
91 39 12 19 6
-- 2 -- -- --
70 56 28 37 27
-------- ------- ------- ------- ------
161 167 168 1,390 367
-------- ------- ------- ------- ------
$154,180 $43,370 $19,019 $29,372 $9,358
======== ======= ======= ======= ======
$139,376 $40,056 $15,169 $27,262 $8,485
5,129 2,411 1,320 2,187 750
-------- ------- ------- ------- ------
$ 27.17 $ 16.61 $ 11.49 $ 12.47 $11.32
======== ======= ======= ======= ======
$ 7,304 $ 1,479 $ 1,970 $ 914 $ 310
273 90 171 74 27
-------- ------- ------- ------- ------
$ 26.79 $ 16.54 $ 11.53 $ 12.28 $11.31
======== ======= ======= ======= ======
$ 28.42 $ 17.55 $ 12.23 $ 13.03 $12.00
======== ======= ======= ======= ======
$ 7,378 $ 1,733 $ 1,880 $ 1,196 $ 563
282 107 164 101 50
-------- ------- ------- ------- ------
$ 26.12 $ 16.15 $ 11.50 $ 11.90 $11.26
======== ======= ======= ======= ======
$ 122 $ 102 -- -- --
5 6
-------- -------
$ 26.12 $ 16.14
======== =======
</TABLE>
--------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
- 65 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Statements of Assets and Liabilities
As of June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO
(In Thousands, HIGH-YIELD INTERMEDIATE-TERM GNMA
Except Per-Share Amounts) BOND FUND U.S. TREASURY FUND FUND
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments, at Cost $69,659 $19,310 $37,539
======= ======= =======
Investments, at Value $64,696 $19,311 $37,148
Receivables
Trust Shares Sold 1 -- --
Interest 1,271 293 263
Receivable From Advisor 5 5 4
------- ------- -------
Total Assets 65,973 19,609 37,415
Liabilities
Payables
Investment Securities Purchased 1,960 -- --
Notes Payable -- -- 65
Dividends 508 89 214
Investment Advisory Fees 35 9 18
Transfer Agent Fees 13 5 6
Other 22 16 16
------- ------- -------
Total Liabilities 2,538 119 319
------- ------- -------
Net Assets $63,435 $19,490 $37,096
======= ======= =======
No-Load Class:
Net Assets $61,056 $17,860 $36,894
Trust Shares Outstanding 7,758 1,780 4,072
------- ------- -------
Net Asset Value, Offering Price, and
Redemption Price Per Share $ 7.87 $ 10.03 $ 9.06
======= ======= =======
Class A:
Net Assets $ 1,220 $ 962 101
Trust Shares Outstanding 155 96 11
------- ------- -------
Net Asset Value and Redemption Price Per
Share $ 7.87 $ 10.04 $ 9.07
======= ======= =======
Maximum Offering Price Per Share (Net
Asset Value Plus Sales Charge of 4.5%) $ 8.24 $ 10.51 $ 9.50
======= ======= =======
Class B:
Net Assets $ 1,059 $ 668 $ 101
Trust Shares Outstanding 134 67 11
------- ------- -------
Net Asset Value and Offering Price Per
Share* $ 7.87 $ 10.04 $ 9.07
======= ======= =======
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
- 66 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO SAFECO
MANAGED CALIFORNIA TAX-FREE MUNICIPAL MONEY MARKET
BOND FUND INCOME FUND BOND FUND FUND
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$7,932 $87,022 $440,578 $226,116
====== ======= ======== ========
$7,838 $87,369 $462,439 $226,116
-- 200 -- --
88 1,381 8,556 1,292
4 -- -- 38
------ ------- -------- --------
7,930 88,950 470,995 227,446
-- -- --
-- -- -- --
41 375 2,179 1192
3 37 194 100
2 6 24 61
14 15 31 47
------ ------- -------- --------
60 433 2,428 1,400
------ ------- -------- --------
$7,870 $88,517 $468,567 $226,046
====== ======= ======== ========
$6,655 $86,790 $467,114 $222,031
835 7,503 35,225 222,031
------ ------- -------- --------
$ 7.97 $ 11.57 $ 13.26 $ 1.00
====== ======= ======== ========
$ 511 $ 693 $ 700 $ 3,104
64 60 53 3,104
------ ------- -------- --------
$ 7.97 $ 11.58 $ 13.27 $ 1.00
====== ======= ======== ========
$ 8.35 $ 12.13 $ 13.90 --
====== ======= ======== ========
$ 704 $ 1,034 $ 753 $ 811
88 89 57 811
------ ------- -------- --------
$ 7.96 $ 11.57 $ 13.24 $ 1.00
====== ======= ======== ========
-- -- -- $ 100
100
--------
$ 1.00
========
</TABLE>
--------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
- 67 -
<PAGE>
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Statements of Operations
For the Six-Month Period Ended June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
SAFECO
SAFECO GROWTH SAFECO DIVIDEND
OPPORTUNITIES EQUITY INCOME
(In Thousands) FUND FUND FUND
------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income
Dividends (Net of Foreign Taxes Withheld
of $61 in the International Fund) $ 915 $ 12,188 $ 3,473
Interest 184 1,492 55
-------- --------- --------
Total Investment Income 1,099 13,680 3,528
Expenses
Investment Advisory 2,626 5,761 914
Transfer Agent 1,196 1,977 300
Fund Accounting and Administration 149 259 96
Shareholder Service--Class A 36 74 2
--Class B 18 32 2
Distribution--Class B 53 95 7
Legal and Auditing 18 39 13
Custodian 26 77 13
Registration 40 54 18
Reports to Shareholders 131 179 21
Trustees 4 8 3
Loan Interest Expense 41 2 5
Other 64 115 18
-------- --------- --------
Total Expenses Before Reimbursement 4,402 8,672 1,412
Expense Reimbursement (43) (50) (4)
-------- --------- --------
Total Expenses After Reimbursement 4,359 8,622 1,408
-------- --------- --------
Net Investment Income (Loss) (3,260) 5,058 2,120
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency
Net Realized Gain from:
Investments in Unaffiliated Issuers 17,231 83,446 10,776
Investments in Affiliated Issuers 11,896 -- --
Foreign Currency Transactions -- -- --
-------- --------- --------
Total Net Realized Gain 29,127 83,446 10,776
Net Change in Unrealized Appreciation
(Depreciation) (38,076) (166,643) (35,914)
-------- --------- --------
Net Gain (Loss) on Investments and Foreign
Currency (8,949) (83,197) (25,138)
-------- --------- --------
Net Change in Net Assets Resulting from
Operations $(12,209) $ (78,139) $(23,018)
======== ========= ========
------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 68 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO SAFECO SAFECO
NORTHWEST INTERNATIONAL BALANCED SMALL COMPANY U.S. VALUE
FUND STOCK FUND FUND VALUE FUND FUND
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 304 $ 370 $ 129 $ 81 $ 101
96 47 260 39 4
------ ------- ----- ------- -----
400 417 389 120 105
481 210 70 112 35
162 61 31 45 13
62 19 9 14 4
8 2 3 1 --
8 2 3 2 1
24 6 8 5 2
11 10 9 9 9
5 33 3 4 2
16 12 10 10 12
10 6 6 9 2
3 3 3 3 3
-- -- -- -- --
6 6 4 5 3
------ ------- ----- ------- -----
796 370 159 219 86
(7) (65) (35) (39) (28)
------ ------- ----- ------- -----
789 305 124 180 58
------ ------- ----- ------- -----
(389) 112 265 (60) 47
3,346 1,698 37 2,909 229
-- -- -- -- --
-- 45 -- -- --
------ ------- ----- ------- -----
3,346 1,743 37 2,909 229
4,956 (2,108) (717) (3,447) (800)
------ ------- ----- ------- -----
8,302 (365) (680) (538) (571)
------ ------- ----- ------- -----
$7,913 $ (253) $(415) $ (598) $(524)
====== ======= ===== ======= =====
-----------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 69 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Statements of Operations
For the Six-Month Period Ended June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
SAFECO SAFECO
HIGH-YIELD INTERMEDIATE-TERM
(In Thousands) BOND FUND U.S. TREASURY FUND
-------------------------------------------------------------------------------
<S> <C> <C>
Investment Income
Interest $ 3,076 $638
Dividends 137 --
------- ----
Total Investment Income 3,213 638
Expenses
Investment Advisory 211 54
Transfer Agent 75 27
Fund Accounting and Administration 29 9
Shareholder Service--Class A 2 1
--Class B 2 1
Distribution--Class B 5 3
Legal and Auditing 10 9
Custodian 4 1
Registration 16 12
Reports to Shareholders 10 3
Trustees 3 3
Interest 2 --
Other 3 2
------- ----
Total Expenses Before Reimbursement 372 125
Expense Reimbursement (21) (28)
------- ----
Total Expenses After Reimbursement 351 97
------- ----
Net Investment Income 2,862 541
Net Realized and Unrealized Gain (Loss) on
Investments
Net Realized Gain (Loss) on Investments (1,949) (477)
Net Change in Unrealized Appreciation
(Depreciation) (2,286) 553
------- ----
Net Gain (Loss) on Investments (4,235) 76
------- ----
Net Change in Net Assets Resulting from
Operations $(1,373) $617
======= ====
-------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 70 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO SAFECO SAFECO
GNMA MANAGED CALIFORNIA TAX-FREE MUNICIPAL MONEY MARKET
FUND BOND FUND INCOME FUND BOND FUND FUND
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1,401 $269 $2,476 $13,967 $7,507
-- -- -- -- --
------ ---- ------ ------- ------
1,401 269 2,476 13,967 7,507
103 19 211 1,102 598
38 9 35 142 364
17 3 38 116 94
-- 1 1 1 --
-- 1 1 1 --
-- 3 3 3 --
11 9 10 13 11
3 2 4 14 10
10 13 3 21 43
4 1 5 16 32
3 3 3 4 4
-- -- -- 2 4
1 1 4 19 13
------ ---- ------ ------- ------
190 65 318 1,454 1,173
(11) (25) -- -- (211)
------ ---- ------ ------- ------
179 40 318 1,454 962
------ ---- ------ ------- ------
1,222 229 2,158 12,513 6,545
(737) (174) (1,609) (1,664) --
556 244 5,463 14,706 --
------ ---- ------ ------- ------
(181) 70 3,854 13,042 --
------ ---- ------ ------- ------
$1,041 $299 $6,012 $25,555 $6,545
====== ==== ====== ======= ======
</TABLE>
--------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
- 71 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Statements of Changes in Net Assets
(Unaudited)
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO
GROWTH OPPORTUNITIES EQUITY DIVIDEND INCOME
FUND FUND FUND
---------------------- ----------------------- ----------------------
Six-Month Six-Month
Period Six-Month Period
Ended Year Ended Period Year Ended Ended Year Ended
June 30 December 31 Ended June December 31 June 30 December 31
2000 1999 30 2000 1999 2000 1999
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operations
Net Investment
Income (Loss) $ (3,260) $ (6,033) $ 5,058 $ 16,109 $ 2,120 $ 7,467
Net Realized
Gain (Loss)
on
Investments
and Foreign
Currency
Transactions 29,127 (30,246) 83,446 108,654 10,776 11,161
Net Change in
Unrealized
Appreciation
(Depreciation) (38,076) 8,592 (166,643) 72,979 (35,914) (17,088)
--------- ---------- ---------- ---------- -------- --------
Net Change in
Net Assets
Resulting
from
Operations (12,209) (27,687) (78,139) 197,742 (23,018) 1,540
Dividends to
Shareholders
from
Net Investment
Income
No-Load Class -- -- (5,045) (15,806) (2,097) (7,391)
Class A -- -- (51) (255) (10) (42)
Class B -- -- -- -- (6) (25)
Class C -- -- -- -- -- --
Net Realized
Gain on
Investments
No-Load Class -- -- -- (104,376) -- (10,871)
Class A -- -- -- (2,993) -- (73)
Class B -- -- -- (1,372) -- (85)
Class C -- -- -- -- -- --
--------- ---------- ---------- ---------- -------- --------
Total -- -- (5,096) (124,802) (2,113) (18,487)
Net Trust Share
Transactions
No-Load Class (104,277) (551,458) (361,564) 51,436 (41,249) (79,020)
Class A 980 (6,151) 1,156 9,565 (634) 99
Class B (992) (935) (3,104) 10,780 (439) 288
Class C 111 -- 108 -- 100 --
--------- ---------- ---------- ---------- -------- --------
Total (104,178) (558,544) (363,404) 71,781 (42,222) (78,633)
--------- ---------- ---------- ---------- -------- --------
Total Change in
Net Assets (116,387) (586,231) (446,639) 144,721 (67,353) (95,580)
Net Assets at
Beginning of
Period 857,275 1,443,506 2,237,184 2,092,463 307,948 403,528
--------- ---------- ---------- ---------- -------- --------
Net Assets at
End of Period $ 740,888 $ 857,275 $1,790,545 $2,237,184 $240,595 $307,948
========= ========== ========== ========== ======== ========
-----------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 72 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SAFECO
SAFECO SAFECO SAFECO SMALL COMPANY SAFECO
NORTHWEST INTERNATIONAL BALANCED VALUE U.S. VALUE
FUND STOCK FUND FUND FUND FUND
---------------------- ---------------------- ------------------- ------------------- ----------------------
Six-Month Six-Month Six-Month Six-Month Six-Month
Period Period Period Year Period Year Period
Ended Year Ended Ended Year Ended Ended Ended Ended Ended Ended Year Ended
June 30 December 31 June 30 December 31 June 30 December June 30 December June 30 December 31
2000 1999 2000 1999 2000 31 1999 2000 31 1999 2000 1999
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ (389) $ (444) $ 112 $ 49 $ 265 $ 552 $ (60) $ (163) $ 47 $ 96
3,346 8,020 1,743 488 37 438 2,909 (5,990) 229 451
4,956 28,195 (2,108) 7,927 (717) (709) (3,447) 9,193 (800) (51)
-------- -------- ------- ------- ------- ------- ------- ------- ------- -------
7,913 35,771 (253) 8,464 (415) 281 (598) 3,040 (524) 496
-- -- -- -- (219) (481) -- -- (48) (93)
-- -- -- -- (27) (32) -- -- (1) (1)
-- -- -- -- (20) (37) -- -- -- --
-- -- -- -- -- -- -- -- -- --
-- (7,222) -- -- -- (344) -- -- -- (408)
-- (358) -- -- -- (49) -- -- -- (14)
-- (370) -- -- -- (49) -- -- -- (30)
-- -- -- -- -- -- -- -- -- --
-------- -------- ------- ------- ------- ------- ------- ------- ------- -------
-- (7,950) -- -- (266) (992) -- -- (47) (546)
34,707 8,418 3,286 6,926 (2,317) (547) (510) (9,618) (903) (70)
2,164 1,472 296 338 (521) 1,732 (129) (272) (4) 125
2,133 1,034 367 329 (596) 574 (51) 94 (147) 126
113 -- 100 -- -- -- -- -- -- --
-------- -------- ------- ------- ------- ------- ------- ------- ------- -------
39,117 10,924 4,049 7,593 (3,434) 1,759 (690) (9,796) (1,054) 181
-------- -------- ------- ------- ------- ------- ------- ------- ------- -------
47,030 38,745 3,796 16,057 (4,115) 1,048 (1,288) (6,756) (1,625) 131
107,150 68,405 39,574 23,517 23,134 22,086 30,660 37,416 10,983 10,852
-------- -------- ------- ------- ------- ------- ------- ------- ------- -------
$154,180 $107,150 $43,370 $39,574 $19,019 $23,134 $29,372 $30,660 $ 9,358 $10,983
======== ======== ======= ======= ======= ======= ======= ======= ======= =======
----------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 73 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Statements of Changes in Net Assets
(Unaudited)
<TABLE>
<CAPTION>
SAFECO SAFECO
HIGH-YIELD INTERMEDIATE-TERM SAFECO
BOND U.S. TREASURY GNMA
FUND FUND FUND
---------------------- ---------------------- ----------------------
Six-Month Six-Month Six-Month
Period Period Period
Ended Year Ended Ended Year Ended Ended Year Ended
June 30 December 31 June 30 December 31 June 30 December 31
(In Thousands) 2000 1999 2000 1999 2000 1999
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operations
Net Investment
Income $ 2,862 $ 6,781 $ 541 $ 1,157 $ 1,222 $ 2,513
Net Realized
Gain (Loss)
on
Investments (1,949) (1,769) (477) (33) (737) (857)
Net Change in
Unrealized
Appreciation
(Depreciation) (2,286) (2,107) 553 (1,619) 556 (1,604)
-------- ------- ------- ------- ------- -------
Net Change in
Net Assets
Resulting
from
Operations (1,373) 2,905 617 (495) 1,041 52
Dividends to
Shareholders
from
Net Investment
Income
No-Load Class (2,754) (6,470) (499) (1,077) (1,220) (2,513)
Class A (56) (178) (26) (44) (1) --
Class B (51) (133) (16) (36) (1) --
Class C (1) -- -- -- -- --
-------- ------- ------- ------- ------- -------
Total (2,862) (6,781) (541) (1,157) (1,222) (2,513)
Net Trust Share
Transactions
No-Load Class (7,889) (3,042) (1,302) (3,442) (2,372) (235)
Class A (276) (1,269) -- 188 100 --
Class B (451) 332 (120) 60 100 --
Class C 100 -- -- -- -- --
-------- ------- ------- ------- ------- -------
Total (8,516) (3,979) (1,422) (3,194) (2,172) (235)
-------- ------- ------- ------- ------- -------
Total Change in
Net Assets (12,751) (7,855) (1,346) (4,846) (2,353) (2,696)
Net Assets at
Beginning of
Period 76,186 84,041 20,836 25,682 39,449 42,145
-------- ------- ------- ------- ------- -------
Net Assets at
End of Period $ 63,435 $76,186 $19,490 $20,836 $37,096 $39,449
======== ======= ======= ======= ======= =======
----------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 74 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO SAFECO
MANAGED CALIFORNIA MUNICIPAL MONEY
BOND TAX-FREE INCOME BOND MARKET
FUND FUND FUND 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
2000 1999 2000 1999 2000 1999 2000 1999
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 229 $ 397 $ 2,158 $ 5,037 $ 12,513 $ 26,435 $ 6,545 $ 10,637
(174) (274) (1,609) (1,041) (1,664) (1,564) -- --
244 (441) 5,463 (14,076) 14,706 (57,414) -- --
------ ------ ------- -------- -------- -------- -------- --------
299 (318) 6,012 (10,080) 25,555 (32,543) 6,545 10,637
(194) (346) (2,124) (4,966) (12,473) (26,332) (6,434) (10,421)
(15) (19) (17) (38) (20) (46) (88) (168)
(20) (32) (17) (33) (20) (57) (22) (48)
-- -- -- -- -- -- (1) --
------ ------ ------- -------- -------- -------- -------- --------
(229) (397) (2,158) (5,037) (12,513) (26,435) (6,545) (10,637)
(184) 637 (2,775) (11,817) (16,150) (10,899) (13,894) 11,453
(65) 311 (79) 189 (252) 96 (450) 1,368
(229) 470 196 4 (591) 118 (169) 309
-- -- -- -- -- -- 100 --
------ ------ ------- -------- -------- -------- -------- --------
(478) 1,418 (2,658) (11,624) (16,993) (10,685) (14,413) 13,130
------ ------ ------- -------- -------- -------- -------- --------
(408) 703 1,196 (26,741) (3,951) (69,663) (14,413) 13,130
8,278 7,575 87,321 114,062 472,518 542,181 240,459 227,329
------ ------ ------- -------- -------- -------- -------- --------
$7,870 $8,278 $88,517 $ 87,321 $468,567 $472,518 $226,046 $240,459
====== ====== ======= ======== ======== ======== ======== ========
-----------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 75 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Growth Opportunities Fund
Class A
<TABLE>
<CAPTION>
Six-Month Three-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 $ 23.21 $ 22.66 $ 22.39 $ 16.97 $15.45
Income From Investment
Operations
Net Investment Income
(Loss) (0.12) (0.19) (0.05) (0.02) (0.02)
Net Realized and
Unrealized Gain (Loss)
on Investments (0.36) 0.74 1.05 8.44 1.77
------- ---------- ---------- --------- ------
Total from Investment
Operations (0.48) 0.55 1.00 8.42 1.75
Less Distributions
Distributions from
Realized Gains -- -- (0.73) (3.00) (0.23)
------- ---------- ---------- --------- ------
Net Asset Value at End
of Period $ 22.73 $ 23.21 $ 22.66 $ 22.39 $16.97
======= ========== ========== ========= ======
Total Return+ (2.07%)* 2.43% 4.47% 49.61% 11.35%*
Net Assets at End of
Period (000's) $28,017 $ 27,597 $ 33,712 $ 4,076 $ 187
Ratio of Gross Expenses
to Average Net Assets 1.54%** 1.34% 1.00% 1.06% 1.12%**
Ratio of Net Expenses to
Average Net Assets 1.31%** 1.23% 1.00% 1.06% 1.12%**
Ratio of Net Investment
Income (Loss) to
Average Net Assets (1.05%)** (0.80%) (0.40%) (.33%) (.58%)**
Portfolio Turnover Rate 61.48%** 38.32% 54.58% 82.57% 82.93%**
---------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 76 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Growth Opportunities Fund
Class B
<TABLE>
<CAPTION>
Six-Month Three-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 $ 22.57 $ 22.21 $ 22.19 $ 16.94 $15.45
Income From Investment
Operations
Net Investment Income
(Loss) (0.21) (0.35) (0.15) (0.08) (0.05)
Net Realized and
Unrealized Gain (Loss)
on Investments (0.35) 0.71 0.90 8.33 1.77
------- ---------- ---------- --------- ------
Total from Investment
Operations (0.56) 0.36 0.75 8.25 1.72
Less Distributions
Distributions from
Realized Gains -- -- (0.73) (3.00) (0.23)
------- ---------- ---------- --------- ------
Net Asset Value at End
of Period $ 22.01 $ 22.57 $ 22.21 $ 22.19 $16.94
======= ========== ========== ========= ======
Total Return+ (2.48%)* 1.62% 3.38% 48.70% 11.15%*
Net Assets at End of
Period (000's) $13,339 $ 14,637 $ 15,569 $ 1,402 $ 116
Ratio of Gross Expenses
to Average Net Assets 2.20%** 2.24% 1.91% 1.88% 1.87%**
Ratio of Net Expenses to
Average Net Assets 2.06%** 2.03% 1.91% 1.88% 1.87%**
Ratio of Net Investment
Income (Loss) to
Average Net Assets (1.81%)** (1.59%) (1.28%) (1.16%) (1.38%)**
Portfolio Turnover Rate 61.48%** 38.32% 54.58% 82.57% 82.93%**
</TABLE>
--------------------------------------------------------------------------------
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 77 -
<PAGE>
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Growth Opportunities Fund
Class C
<TABLE>
<CAPTION>
Two-Month
Period Ended
June 30++
------------
2000
-----------------------------------------------------------------------------
<S> <C>
Net Asset Value at Beginning of Period $23.34
Income From Investment Operations
Net Investment Income (Loss) (0.06)
Net Realized and Unrealized Gain (Loss) on Investments (1.27)
------
Total from Investment Operations (1.33)
Less Distributions
Distributions from Realized Gains --
------
Net Asset Value at End of Period $22.01
======
Total Return+ (5.70%)*
Net Assets at End of Period (000's) $ 105
Ratio of Expenses to Average Net Assets 1.72%**
Ratio of Net Investment Income (Loss) to Average Net Assets (1.64%)**
Portfolio Turnover Rate 61.48%**
-----------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
++ For the period from April 30, 2000 (initial issue date of Class C shares)
through June 30, 2000.
- 78 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Equity Fund
Class A
<TABLE>
<CAPTION>
Six-Month Three-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 $ 24.06 $ 23.27 $ 19.55 $ 16.62 $15.85
Income From Investment
Operations
Net Investment Income 0.02 0.11 0.18 0.14 0.04
Net Realized and
Unrealized Gain (Loss)
on Investments (0.84) 2.02 4.65 3.77 1.35
-------- ---------- ---------- ---------- ------
Total from Investment
Operations (0.82) 2.13 4.83 3.91 1.39
Less Distributions
Dividends from Net
Investment Income (0.02) (0.11) (0.18) (0.14) (0.04)
Distributions from
Realized Gains -- (1.23) (0.93) (0.84) (0.58)
-------- ---------- ---------- ---------- ------
Total Distributions (0.02) (1.34) (1.11) (0.98) (0.62)
-------- ---------- ---------- ---------- ------
Net Asset Value at End
of Period $ 23.22 $ 24.06 $ 23.27 $ 19.55 $16.62
======== ========== ========== ========== ======
Total Return+ (3.41%)* 9.13% 24.77% 23.56% 8.78%*
Net Assets at End of
Period (000's) $ 60,640 $ 61,625 $ 50,354 $ 7,247 $2,894
Ratio of Gross Expenses
to Average Net Assets 1.38%** 1.12% 0.88% 1.24% 0.97%**
Ratio of Net Expenses to
Average Net Assets 1.26%** 1.12% 0.88% 1.24% 0.97%**
Ratio of Net Investment
Income to Average Net
Assets 0.19%** 0.44% 0.89% 0.74% 1.38%**
Portfolio Turnover Rate 34.83%** 33.66% 32.94% 34.26% 59.34%**
</TABLE>
--------------------------------------------------------------------------------
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 79 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Equity Fund
Class B
<TABLE>
<CAPTION>
Six-Month Three-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 $ 23.83 $ 23.15 $ 19.55 $ 16.60 $15.85
Income From Investment
Operations
Net Investment Income
(Loss) (0.07) (0.07) (0.03) 0.02 0.02
Net Realized and
Unrealized Gain (Loss)
on Investments (0.82) 1.98 4.56 3.79 1.33
------- ---------- ---------- --------- ------
Total from Investment
Operations (0.89) 1.91 4.53 3.81 1.35
Less Distributions
Dividends from Net
Investment Income -- -- -- (0.02) (0.02)
Distributions from
Realized Gains -- (1.23) (0.93) (0.84) (0.58)
------- ---------- ---------- --------- ------
Total Distributions -- (1.23) (0.93) (0.86) (0.60)
------- ---------- ---------- --------- ------
Net Asset Value at End
of Period $ 22.94 $ 23.83 $ 23.15 $ 19.55 $16.60
======= ========== ========== ========= ======
Total Return+ (3.73%)* 8.18% 23.16% 22.93% 8.50%*
Net Assets at End of
Period (000's) $24,061 $ 28,260 $ 17,232 $ 3,565 $ 355
Ratio of Gross Expenses
to Average Net Assets 2.08%** 2.05% 1.94% 1.81% 1.75%**
Ratio of Net Expenses to
Average Net Assets 2.01%** 1.95% 1.94% 1.81% 1.75%**
Ratio of Net Investment
Income (Loss) to
Average Net Assets (0.56%)** (0.41%) (0.21%) 0.12% 0.51%**
Portfolio Turnover Rate 34.83%** 33.66% 32.94% 34.26% 59.34%**
-----------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 80 -
<PAGE>
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Equity Fund
Class C
<TABLE>
<CAPTION>
Two-Month
Period Ended
June 30++
------------
2000
-----------------------------------------------------------------------------
<S> <C>
Net Asset Value at Beginning of Period $22.87
Income From Investment Operations
Net Investment Income (Loss) (0.02)
Net Realized and Unrealized Gain on Investments 0.10
------
Total from Investment Operations 0.08
Less Distributions
Dividends from Net Investment Income --
Distributions from Realized Gains --
------
Total Distributions --
------
Net Asset Value at End of Period $22.95
======
Total Return+ 0.35%*
Net Assets at End of Period (000's) $ 108
Ratio of Expenses to Average Net Assets 1.65%**
Ratio of Net Investment Income (Loss) to Average Net Assets (0.45%)**
Portfolio Turnover Rate 34.83%**
-----------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
++ For the period from April 30, 2000 (initial issue date of Class C shares)
through June 30, 2000.
- 81 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Dividend Income Fund
Class A
<TABLE>
<CAPTION>
Six-Month Three-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 $22.52 $ 23.55 $ 24.02 $ 21.15 $20.03
Income From Investment
Operations
Net Investment Income 0.16 0.42 0.48 0.51 0.12
Net Realized and
Unrealized Gain (Loss)
on Investments (1.95) (0.20) 0.81 4.98 1.65
------ ---------- ---------- ---------- ------
Total from Investment
Operations (1.79) 0.22 1.29 5.49 1.77
Less Distributions
Dividends from Net
Investment Income (0.16) (0.42) (0.48) (0.51) (0.12)
Distributions from
Realized Gains -- (0.83) (1.28) (2.11) (0.53)
------ ---------- ---------- ---------- ------
Total Distributions (0.16) (1.25) (1.76) (2.62) (0.65)
------ ---------- ---------- ---------- ------
Net Asset Value at End
of Period $20.57 $ 22.52 $ 23.55 $ 24.02 $21.15
====== ========== ========== ========== ======
Total Return+ (7.97%)* 1.01% 5.38% 26.15% 8.85%*
Net Assets at End of
Period (000's) $1,261 $ 2,046 $ 2,073 $ 742 $ 193
Ratio of Gross Expenses
to Average Net Assets 1.64%** 1.47% 1.34% 1.14% 1.03%**
Ratio of Net Expenses to
Average Net Assets 1.35%** 1.31% 1.34% 1.14% 1.03%**
Ratio of Net Investment
Income to Average Net
Assets 1.38%** 1.84% 2.16% 2.50% 2.66%**
Portfolio Turnover Rate 45.92%* 42.25% 46.14% 52.14% 37.84%**
-----------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 82 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Dividend Income Fund
Class B
<TABLE>
<CAPTION>
Six-Month Three-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 $22.53 $23.57 $23.95 $21.12 $20.03
Income From Investment
Operations
Net Investment Income 0.06 0.25 0.30 0.38 0.10
Net Realized and
Unrealized Gain (Loss)
on Investments (1.93) (0.21) 0.90 4.94 1.62
------ ---------- ---------- ---------- ------
Total from Investment
Operations (1.87) 0.04 1.20 5.32 1.72
Less Distributions
Dividends from Net
Investment Income (0.06) (0.25) (0.30) (0.38) (0.10)
Distributions from
Realized Gains -- (0.83) (1.28) (2.11) (0.53)
------ ---------- ---------- ---------- ------
Total Distributions (0.06) (1.08) (1.58) (2.49) (0.63)
------ ---------- ---------- ---------- ------
Net Asset Value at End
of Period $20.60 $22.53 $23.57 $23.95 $21.12
====== ========== ========== ========== ======
Total Return+ (8.29%)* 0.18% 5.03% 25.35% 8.60%*
Net Assets at End of
Period (000's) $1,734 $2,365 $2,176 $798 $112
Ratio of Gross Expenses
to Average Net Assets 2.30%** 2.22% 2.08% 1.83% 1.79%**
Ratio of Net Expenses to
Average Net Assets 2.10%** 2.06% 2.08% 1.83% 1.79%**
Ratio of Net Investment
Income to Average Net
Assets 0.60%** 1.09% 1.45% 1.79% 1.99%**
Portfolio Turnover Rate 45.92%** 42.25% 46.14% 52.14% 37.84%**
-----------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 83 -
<PAGE>
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Dividend Income Fund
Class C
<TABLE>
<CAPTION>
Two-Month
Period Ended
June 30++
------------
2000
------------------------------------------------------------------------------
<S> <C>
Net Asset Value at Beginning of Period $21.06
Income From Investment Operations
Net Investment Income 0.01
Net Realized and Unrealized Gain (Loss) on Investments (0.42)
------
Total from Investment Operations (0.41)
Less Distributions
Dividends from Net Investment Income (0.01)
Distributions from Realized Gains --
------
Total Distributions (0.01)
------
Net Asset Value at End of Period $20.64
======
Total Return+ (1.97%)*
Net Assets at End of Period (000's) $ 98
Ratio of Expenses to Average Net Assets 1.80%**
Ratio of Net Investment Income to Average Net Assets 0.17%**
Portfolio Turnover Rate 45.92%**
------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
++ For the period from April 30, 2000 (initial issue date of Class C shares)
through June 30, 2000.
- 84 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Northwest Fund
Class A
<TABLE>
<CAPTION>
Six-Month Three-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 $25.01 $ 17.56 $ 17.25 $ 14.06 $13.78
Income From Investment
Operations
Net Investment Income
(Loss) (0.09) (0.12) (0.16) (0.06) (0.01)
Net Realized and
Unrealized Gain on
Investments 1.87 9.58 0.66 4.39 0.29
------ ---------- ---------- ---------- ------
Total from Investment
Operations 1.78 9.46 0.50 4.33 0.28
Less Distributions
Distributions from
Realized Gains -- (2.01) (0.19) (1.14) --
------ ---------- ---------- ---------- ------
Net Asset Value at End
of Period $26.79 $ 25.01 $ 17.56 $ 17.25 $14.06
====== ========== ========== ========== ======
Total Return+ 7.12%* 53.90% 2.87% 30.79% 2.03%*
Net Assets at End of
Period (000's) $7,304 $ 4,774 $ 2,208 $ 1,354 $ 369
Ratio of Gross Expenses
to Average Net Assets 1.44%** 1.56% 1.70% 1.42% 1.40%**
Ratio of Net Expenses to
Average Net Assets 1.35%** 1.36% 1.70% 1.42% 1.40%**
Ratio of Net Investment
Income (Loss) to
Average Net Assets (0.78%)** (0.81%) (1.06%) (0.61%) (0.39%)**
Portfolio Turnover Rate 34.74%** 48.52% 50.40% 55.42% 67.32%**
------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 85 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Northwest Fund
Class B
<TABLE>
<CAPTION>
Six-Month Three-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 $24.46 $ 17.31 $ 17.09 $ 14.03 $13.78
Income From Investment
Operations
Net Investment Income
(Loss) (0.17) (0.25) (0.23) (0.10) (0.03)
Net Realized and
Unrealized Gain on
Investments 1.83 9.41 0.64 4.30 0.28
------ ---------- ---------- ---------- ------
Total from Investment
Operations 1.66 9.16 0.41 4.20 0.25
Less Distributions
Distributions from
Realized Gains -- (2.01) (0.19) (1.14) --
------ ---------- ---------- ---------- ------
Net Asset Value at End
of Period $26.12 $ 24.46 $ 17.31 $ 17.09 $14.03
====== ========== ========== ========== ======
Total Return+ 6.79%* 52.57% 2.37% 29.93% 1.81%*
Net Assets at End of
Period (000's) $7,378 $4,842 $2,603 $1,204 $ 232
Ratio of Gross Expenses
to Average Net Assets 2.20%** 2.32% 2.30% 2.09% 2.18%**
Ratio of Net Expenses to
Average Net Assets 2.10%** 2.12% 2.30% 2.09% 2.18%**
Ratio of Net Investment
Income (Loss) to
Average Net Assets (1.53%)** (1.56%) (1.66%) (1.30%) (1.19%)**
Portfolio Turnover Rate 34.74%** 48.52% 50.40% 55.42% 67.32%**
------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 86 -
<PAGE>
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Northwest Fund
Class C
<TABLE>
<CAPTION>
Two-Month
Period Ended
June 30++
------------
2000
-----------------------------------------------------------------------------
<S> <C>
Net Asset Value at Beginning of Period $24.21
Income From Investment Operations
Net Investment Income (Loss) (0.05)
Net Realized and Unrealized Gain on Investments 1.96
------
Total from Investment Operations 1.91
Less Distributions
Distributions from Realized Gains --
------
Net Asset Value at End of Period $26.12
======
Total Return+ 7.89%*
Net Assets at End of Period (000's) $ 122
Ratio of Expenses to Average Net Assets 1.90%**
Ratio of Net Investment Income (Loss) to Average Net Assets (1.37%)**
Portfolio Turnover Rate 34.74%**
</TABLE>
-----------------------------------------------------------------------------
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
++ For the period from April 30, 2000 (initial issue date of Class C shares)
through June 30, 2000.
- 87 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO International Stock Fund
Class A
<TABLE>
<CAPTION>
Six-Month Three-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 $16.89 $ 13.13 $ 11.55 $ 11.29 $10.39
Income From Investment
Operations
Net Investment Income
(Loss) 0.03 (0.01) (0.04) 0.20 --
Net Realized and
Unrealized Gain (Loss)
on Investments and
Foreign Currency
Transactions (0.38) 3.77 1.62 0.29 0.95
------ ---------- ---------- ---------- ------
Total from Investment
Operations (0.35) 3.76 1.58 0.49 0.95
Less Distributions
Dividends from Net
Investment Income -- -- -- (0.21) (0.05)
Distributions from
Realized Gains -- -- -- (0.02) --
------ ---------- ---------- ---------- ------
Total Distributions -- -- -- (0.23) (0.05)
------ ---------- ---------- ---------- ------
Net Asset Value at End
of Period $16.54 $ 16.89 $ 13.13 $ 11.55 $11.29
====== ========== ========== ========== ======
Total Return+ (2.07%)* 28.64% 13.68% 4.30% 9.19%*
Net Assets at End of
Period (000's) $1,479 $ 1,215 $ 629 $ 295 $ 154
Ratio of Gross Expenses
to Average Net Assets 2.02%** 2.11% 2.31% 2.13% 1.72%**
Ratio of Net Expenses to
Average Net Assets 1.65%** 1.73% 2.14% 1.87% 1.41%**
Ratio of Net Investment
Income (Loss) to
Average Net Assets 0.35%** (0.06%) (0.47%) 0.26% (0.23%)**
Portfolio Turnover Rate 14.89%** 23.56% 25.62% 22.13% 18.51%**
-----------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 88 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO International Stock Fund
Class B
<TABLE>
<CAPTION>
Six-Month Three-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 $16.56 $ 12.99 $ 11.53 $ 11.28 $ 10.39
Income From Investment
Operations
Net Investment Income
(Loss) (0.03) (0.10) (0.11) 0.18 --
Net Realized and
Unrealized Gain (Loss)
on Investments and
Foreign Currency
Transactions (0.38) 3.67 1.57 0.22 0.93
------ ---------- ---------- ---------- -------
Total from Investment
Operations (0.41) 3.57 1.46 0.40 0.93
Less Distributions
Dividends from Net
Investment Income -- -- -- (0.13) (0.04)
Distributions from
Realized Gains -- -- -- (0.02) --
------ ---------- ---------- ---------- -------
Total Distributions -- -- -- (0.15) (0.04)
------ ---------- ---------- ---------- -------
Net Asset Value at End
of Period $16.15 $ 16.56 $ 12.99 $ 11.53 $ 11.28
====== ========== ========== ========== =======
Total Return+ (2.48%)* 27.48% 12.66% 3.48% 8.96%*
Net Assets at End of
Period (000's) $1,733 $ 1,392 $ 777 $ 331 $ 112
Ratio of Gross Expenses
to Average Net Assets 2.20%** 3.02% 3.19% 2.90% 2.47%**
Ratio of Net Expenses to
Average Net Assets 2.10%** 2.51% 3.02% 2.64% 2.17%**
Ratio of Net Investment
Income (Loss) to
Average Net Assets (0.41%)** (0.84%) (1.33%) 0.51% (1.15%)**
Portfolio Turnover Rate 14.89%** 23.56% 25.62% 22.13% 18.51%**
------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 89 -
<PAGE>
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO International Stock Fund
Class C
<TABLE>
<CAPTION>
Two-Month
Period Ended
June 30++
------------
2000
------------------------------------------------------------------------------
<S> <C>
Net Asset Value at Beginning of Period $15.82
Income From Investment Operations
Net Investment Income (Loss) 0.01
Net Realized and Unrealized Gain on Investments and Foreign
Currency Transactions 0.31
------
Total from Investment Operations 0.32
Less Distributions
Dividends from Net Investment Income --
Distributions from Realized Gains --
------
Total Distributions --
------
Net Asset Value at End of Period $16.14
======
Total Return+ 2.02%*
Net Assets at End of Period (000's) $ 102
Ratio of Gross Expenses to Average Net Assets 2.52%**
Ratio of Net Expenses to Average Net Assets 2.40%**
Ratio of Net Investment Income (Loss) to Average Net Assets 0.42%**
Portfolio Turnover Rate 14.89%**
------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
++ For the period from April 30, 2000 (initial issue date of Class C shares)
through June 30, 2000.
- 90 -
<PAGE>
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Balanced Fund
Class A
<TABLE>
<CAPTION>
Six-Month Three-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>
Net Asset Value at
Beginning of Period $11.87 $12.23 $11.60 $ 10.69 $10.38
Income From Investment
Operations
Net Investment Income 0.16 0.22 0.25 0.28 0.09
Net Realized and
Unrealized Gain (Loss)
on Investments (0.34) (0.13) 1.14 1.45 0.44
------ ------ ------ ------- ------
Total from Investment
Operations (0.18) 0.09 1.39 1.73 0.53
Less Distributions
Dividends from Net
Investment Income (0.16) (0.22) (0.25) (0.28) (0.09)
Distributions from
Realized Gains -- (0.23) (0.51) (0.54) (0.13)
------ ------ ------ ------- ------
Total Distributions (0.16) (0.45) (0.76) (0.82) (0.22)
------ ------ ------ ------- ------
Net Asset Value at End
of Period $11.53 $11.87 $12.23 $ 11.60 $10.69
====== ====== ====== ======= ======
Total Return+ (1.54%)* 0.75% 12.06% 16.29% 5.07%*
Net Assets at End of
Period (000's) $1,970 $2,573 $ 893 $ 205 $ 110
Ratio of Gross Expenses
to Average Net Assets 1.83%** 1.68% 1.67% 1.52% 1.70%**
Ratio of Net Expenses to
Average Net Assets 1.35%** 1.36% 1.67% 1.52% 1.35%**
Ratio of Net Investment
Income to Average Net
Assets 2.54%** 2.16% 2.23% 2.55% 3.01%**
Portfolio Turnover Rate 58.25%** 94.73% 74.76% 101.22% 36.10%**
------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 91 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Balanced Fund
Class B
<TABLE>
<CAPTION>
Six-Month Three-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 $ 11.83 $ 12.24 $ 11.60 $ 10.70 $ 10.38
Income From Investment
Operations
Net Investment Income 0.11 0.18 0.15 0.18 0.06
Net Realized and
Unrealized Gain (Loss)
on Investments (0.33) (0.18) 1.15 1.44 0.45
------- --------- --------- ---------- -------
Total from Investment
Operations (0.22) 0.00 1.30 1.62 0.51
Less Distributions
Dividends from Net
Investment Income (0.11) (0.18) (0.15) (0.18) (0.06)
Distributions from
Realized Gains -- (0.23) (0.51) (0.54) (0.13)
------- --------- --------- ---------- -------
Total Distributions (0.11) (0.41) (0.66) (0.72) (0.19)
------- --------- --------- ---------- -------
Net Asset Value at End
of Period $ 11.50 $ 11.83 $ 12.24 $ 11.60 $ 10.70
======= ========= ========= ========== =======
Total Return+ (1.85%)* (0.01%) 11.30% 15.21% 4.85%*
Net Assets at End of
Period (000's) $ 1,880 $ 2,553 $ 2,056 $ 331 $ 115
Ratio of Gross Expenses
to Average Net Assets 2.57%** 2.46% 2.34% 2.28% 2.46%**
Ratio of Net Expenses to
Average Net Assets 2.10%** 2.14% 2.34% 2.28% 1.52%**
Ratio of Net Investment
Income to Average Net
Assets 1.80%** 1.43% 1.55% 1.78% 2.23%**
Portfolio Turnover Rate 58.25%** 94.73% 74.76% 101.22% 36.10%**
---------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 92 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Small Company Value Fund
Class A
<TABLE>
<CAPTION>
Six-Month Three-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>
Net Asset Value at
Beginning of Period $ 12.55 $ 11.09 $ 14.21 $11.81 $11.51
Income From Investment
Operations
Net Investment Income
(Loss) (0.04) (0.09) (0.08) (0.06) (0.01)
Net Realized and
Unrealized Gain (Loss)
on Investments (0.23) 1.55 (3.04) 2.80 0.31
------- ------- ------- ------ ------
Total from Investment
Operations (0.27) 1.46 (3.12) 2.74 0.30
Less Distributions
Distributions from
Realized Gains -- -- -- (0.34) --
------- ------- ------- ------ ------
Total Distributions -- -- -- (0.34) --
------- ------- ------- ------ ------
Net Asset Value at End
of Period $ 12.28 $ 12.55 $ 11.09 $14.21 $11.81
======= ======= ======= ====== ======
Total Return+ (2.15%)* 13.17% (21.96%) 23.21% 2.61%*
Net Assets at End of
Period (000's) $ 914 $ 1,067 $ 1,220 $ 271 $ 135
Ratio of Gross Expenses
to Average Net Assets 1.90%** 1.97% 1.66% 1.52% 1.62%**
Ratio of Net Expenses to
Average Net Assets 1.40%** 1.47% 1.66% 1.52% 1.42%**
Ratio of Net Investment
Income (Loss) to
Average Net Assets (0.61%)** (0.79%) (0.99%) (0.60%) (0.50%)**
Portfolio Turnover Rate 118.65%** 116.58% 90.23% 60.81% 73.47%**
--------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 93 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Small Company Value Fund
Class B
<TABLE>
<CAPTION>
Six-Month Three-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 $ 12.22 $ 10.88 $ 14.07 $ 11.79 $11.51
Income From Investment
Operations
Net Investment Income
(Loss) (0.08) (0.16) (0.15) (0.10) (0.04)
Net Realized and
Unrealized Gain (Loss)
on Investments (0.24) 1.50 (3.04) 2.72 0.32
------- ---------- ---------- --------- ------
Total from Investment
Operations (0.32) 1.34 (3.19) 2.62 0.28
Less Distributions
Distributions from
Realized Gains -- -- -- (0.34) --
------- ---------- ---------- --------- ------
Total Distributions -- -- -- (0.34) --
------- ---------- ---------- --------- ------
Net Asset Value at End
of Period $ 11.90 $ 12.22 $ 10.88 $ 14.07 $11.79
======= ========== ========== ========= ======
Total Return+ (2.62%)* 12.32% (22.67%) 22.23% 2.43%*
Net Assets at End of
Period (000's) $ 1,196 $ 1,274 $ 1,034 $ 396 $ 103
Ratio of Gross Expenses
to Average Net Assets 2.67%** 2.75% 2.64% 2.29% 2.41%**
Ratio of Net Expenses to
Average Net Assets 2.15%** 2.21% 2.64% 2.29% 2.18%**
Ratio of Net Investment
Income (Loss)
to Average Net Assets (1.37%)** (1.55%) (1.91%) (1.35%) (1.28%)**
Portfolio Turnover Rate 118.65%** 116.58% 90.23% 60.81% 73.47%**
-----------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 94 -
<PAGE>
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO U.S. Value Fund
Class A
<TABLE>
<CAPTION>
April 30, 1997
Six-Month (Commencement
Period Ended For the Year of Operations)
June 30 Ended December 31 to December 31
------------------------------------------------
2000 1999 1998 1997
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value at Beginning
of Period $ 11.94 $ 11.93 $ 11.18 $10.00
Income From Investment
Operations
Net Investment Income 0.04 0.03 0.05 0.08
Net Realized and Unrealized
Gain (Loss)
on Investments (0.63) 0.54 1.27 1.65
------- -------- -------- ------
Total from Investment
Operations (0.59) 0.57 1.32 1.73
Less Distributions
Dividends from Net
Investment Income (0.04) (0.06) (0.05) (0.08)
Distributions from Realized
Gains -- (0.50) (0.52) (0.47)
------- -------- -------- ------
Total Distributions (0.04) (0.56) (0.57) (0.55)
------- -------- -------- ------
Net Asset Value at End of
Period $ 11.31 $ 11.94 $ 11.93 $11.18
======= ======== ======== ======
Total Return+ (4.92%)* 4.74% 11.79% 17.24%*
Net Assets at End of Period
(000's) $ 310 $ 331 $ 210 $ 133
Ratio of Gross Expenses to
Average Net Assets 2.19%** 2.02% 2.07% 1.48%**
Ratio of Net Expenses to
Average Net Assets 1.35%** 1.40% 2.07% 1.48%**
Ratio of Net Investment
Income to
Average Net Assets 0.78%** 0.66% 0.18% 1.03%**
Portfolio Turnover Rate 42.29%** 52.15% 55.15% 36.37%**
------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 95 -
<PAGE>
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO U.S. Value Fund
Class B
<TABLE>
<CAPTION>
April 30, 1997
Six-Month (Commencement
Period Ended For the Year Ended of Operations)
June 30 December 31 to December 31
--------------------------------------------------
2000 1999 1998 1997
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value at
Beginning of Period $11.88 $ 11.91 $ 11.18 $10.00
Income From Investment
Operations
Net Investment Income
(Loss) -- (0.01) (0.03) 0.02
Net Realized and
Unrealized Gain (Loss)
on Investments (0.62) 0.48 1.28 1.65
------ --------- --------- ------
Total from Investment
Operations (0.62) 0.47 1.25 1.67
Less Distributions
Dividends from Net
Investment Income -- -- -- (0.02)
Distributions from
Realized Gains -- (0.50) (0.52) (0.47)
------ --------- --------- ------
Total Distributions -- (0.50) (0.52) (0.49)
------ --------- --------- ------
Net Asset Value at End of
Period $11.26 $ 11.88 $ 11.91 $11.18
====== ========= ========= ======
Total Return+ (5.20%)* 3.92% 11.18% 16.63%*
Net Assets at End of
Period (000's) $ 563 $ 747 $ 628 $ 221
Ratio of Gross Expenses
to Average Net Assets 2.89%** 2.73% 2.59% 2.29%**
Ratio of Net Expenses to
Average Net Assets 2.10%** 2.18% 2.59% 2.29%**
Ratio of Net Investment
Income (Loss) to Average
Net Assets 0.04%** (0.10%) (0.35%) 0.20%**
Portfolio Turnover Rate 42.29%** 52.15% 55.15% 36.37%**
-----------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 96 -
<PAGE>
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO High-Yield Bond Fund
Class A
<TABLE>
<CAPTION>
Six-Month Eleven-Month
Period Ended For the Year Ended Period Ended
June 30 December 31 December 31++
--------------------------------------------------
2000 1999 1998 1997
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value at
Beginning of Period $ 8.38 $ 8.78 $ 9.12 $ 8.83
Income from Investment
Operations
Net Investment Income 0.34 0.69 0.72 0.69
Net Realized and
Unrealized Gain (Loss) on
Investments (0.51) (0.40) (0.34) 0.29
------ --------- --------- ------
Total from Investment
Operations (0.17) 0.29 0.38 0.98
Less Distributions
Dividends from Net
Investment Income (0.34) (0.69) (0.72) (0.69)
------ --------- --------- ------
Net Asset Value at End of
Period $ 7.87 $ 8.38 $ 8.78 $ 9.12
====== ========= ========= ======
Total Return+ (1.96%)* 3.52% 4.32% 12.49%*
Net Assets at End of Period
(000's) $1,220 $ 1,583 $ 2,964 $ 259
Ratio of Gross Expenses to
Average Net Assets 1.55%** 1.35% 1.12% 1.10%**
Ratio of Net Expenses to
Average Net Assets 1.30%** 1.18% 1.12% 1.10%**
Ratio of Net Investment
Income to Average Net
Assets 8.92%** 8.01% 8.11% 7.65%**
Portfolio Turnover Rate 49.57%** 70.65% 64.22% 85.06%**
------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
++ For the period from January 31, 1997 (initial issue date of Class A and
Class B shares) through December 31, 1997.
- 97 -
<PAGE>
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO High-Yield Bond Fund
Class B
<TABLE>
<CAPTION>
Six-Month Eleven-Month
Period Ended For the Year Ended Period Ended
June 30 December 31 December 31++
--------------------------------------------------
2000 1999 1998 1997
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value at
Beginning of Period $ 8.38 $ 8.78 $ 9.12 $ 8.83
Income from Investment
Operations
Net Investment Income 0.31 0.63 0.64 0.63
Net Realized and
Unrealized Gain (Loss) on
Investments (0.51) (0.40) (0.34) 0.29
------ --------- --------- ------
Total from Investment
Operations (0.20) 0.23 0.30 0.92
Less Distributions
Dividends from Net
Investment Income (0.31) (0.63) (0.64) (0.63)
------ --------- --------- ------
Net Asset Value at End of
Period $ 7.87 $ 8.38 $ 8.78 $ 9.12
====== ========= ========= ======
Total Return+ (2.33%)* 2.73% 3.39% 11.77%*
Net Assets at End of Period
(000's) $1,059 $ 1,599 $ 1,381 $ 355
Ratio of Gross Expenses to
Average Net Assets 2.41%** 2.19% 2.06% 1.81%**
Ratio of Net Expenses to
Average Net Assets 2.05%** 1.97% 2.06% 1.81%**
Ratio of Net Investment
Income to Average Net
Assets 7.92%** 7.34% 7.15% 6.87%**
Portfolio Turnover Rate 49.57%** 70.65% 64.22% 85.06%**
------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
++ For the period from January 31, 1997 (initial issue date of Class A and
Class B shares) through December 31, 1997.
- 98 -
<PAGE>
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO High-Yield Bond Fund
Class C
<TABLE>
<CAPTION>
Two-Month
Period Ended
June 30++
------------
2000
------------------------------------------------------------------------------
<S> <C>
Net Asset Value at Beginning of Period $ 7.90
Income from Investment Operations
Net Investment Income 0.11
Net Realized and Unrealized Gain (Loss) on Investments (0.03)
------
Total from Investment Operations 0.08
Less Distributions
Dividends from Net Investment Income (0.11)
------
Net Asset Value at End of Period $ 7.87
======
Total Return+ 1.06%*
Net Assets at End of Period (000's) $ 100
Ratio of Expenses to Average Net Assets 1.85%**
Ratio of Net Investment Income to Average Net Assets 8.29%**
Portfolio Turnover Rate 49.57%**
</TABLE>
------------------------------------------------------------------------------
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
++ For the period from April 30, 2000 (initial issue date of Class C shares)
through June 30, 2000.
- 99 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Intermediate-Term U.S. Treasury Fund
Class A
<TABLE>
<CAPTION>
Six-Month Three-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 $ 10.00 $ 10.75 $ 10.35 $ 10.11 $ 10.10
Income From Investment
Operations
Net Investment Income 0.26 0.51 0.52 0.55 0.15
Net Realized and
Unrealized Gain (Loss)
on Investments 0.04 (0.75) 0.40 0.24 0.01
------- ---------- ---------- ---------- -------
Total from Investment
Operations 0.30 (0.24) 0.92 0.79 0.16
Less Distributions
Dividends from Net
Investment Income (0.26) (0.51) (0.52) (0.55) (0.15)
------- ---------- ---------- ---------- -------
Net Asset Value at End
of Period $ 10.04 $ 10.00 $ 10.75 $ 10.35 $ 10.11
======= ========== ========== ========== =======
Total Return+ 3.10%* (2.26%) 9.08% 8.03% 1.63%*
Net Assets at End of
Period (000's) $ 962 $ 958 $ 833 $ 365 $ 704
Ratio of Gross Expenses
to Average Net Assets 1.57%** 1.49% 1.40% 1.32% 1.30%**
Ratio of Net Expenses to
Average Net Assets 1.20%** 1.21% 1.40% 1.32% 1.07%**
Ratio of Net Investment
Income to Average Net
Assets 5.40%** 4.97% 4.84% 5.36% 6.07%**
Portfolio Turnover Rate 217.51%** 13.93% 2.83% 82.36% 125.42%**
-----------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 100 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Intermediate-Term U.S. Treasury Fund
Class B
<TABLE>
<CAPTION>
Six-Month Three-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 $ 9.99 $ 10.74 $ 10.35 $ 10.12 $ 10.10
Income From Investment
Operations
Net Investment Income 0.23 0.43 0.45 0.48 0.14
Net Realized and
Unrealized Gain (Loss)
on Investments 0.05 (0.75) 0.39 0.23 0.02
------- ---------- ---------- ---------- -------
Total from Investment
Operations 0.28 (0.32) 0.84 0.71 0.16
Less Distributions
Dividends from Net
Investment Income (0.23) (0.43) (0.45) (0.48) (0.14)
------- ---------- ---------- ---------- -------
Net Asset Value at End
of Period $ 10.04 $ 9.99 $ 10.74 $ 10.35 $ 10.12
======= ========== ========== ========== =======
Total Return+ 2.82%* (2.97%) 8.30% 7.27% 1.55%*
Net Assets at End of
Period (000's) $ 668 $ 786 $ 788 $ 432 $ 223
Ratio of Gross Expenses
to Average Net Assets 2.38%** 2.27% 2.00% 1.87% 1.95%**
Ratio of Net Expenses to
Average Net Assets 1.95%** 1.96% 2.00% 1.87% 1.72%**
Ratio of Net Investment
Income to Average Net
Assets 4.63%** 4.20% 4.28% 4.78% 5.35%**
Portfolio Turnover Rate 217.51%** 13.93% 2.83% 82.36% 125.42%**
-----------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 101 -
<PAGE>
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO GNMA Fund
<TABLE>
<CAPTION>
Class A Class B
------------ ------------
Two-Month Two-Month
Period Ended Period Ended
June 30++ June 30++
------------ ------------
2000 2000
------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value at Beginning of Period $ 9.01 $ 9.01
Income From Investment Operations
Net Investment Income 0.09 0.08
Net Realized and Unrealized Gain on Investments 0.06 0.06
------- -------
Total from Investment Operations 0.15 0.14
Less Distributions
Dividends from Net Investment Income (0.09) (0.08)
------- -------
Net Asset Value at End of Period $ 9.07 $ 9.07
======= =======
Total Return+ 1.73%* 1.59%*
Net Assets at End of Period (000's) $ 101 $ 101
Ratio of Expenses to Average Net Assets 1.13%** 1.88%**
Ratio of Net Investment Income to Average Net
Assets 6.08%** 5.33%**
Portfolio Turnover Rate 217.51%** 217.51%**
------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
++ For the period from April 30, 2000 (initial issue date of Class A and Class
B shares) through June 30, 2000.
- 102 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Managed Bond Fund
Class A
<TABLE>
<CAPTION>
Six-Month Three-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 $ 7.90 $ 8.65 $ 8.60 $ 8.35 $ 8.35
Income From Investment
Operations
Net Investment Income 0.22 0.39 0.37 0.39 0.11
Net Realized and
Unrealized Gain (Loss)
on Investments 0.07 (0.75) 0.30 0.25 --
------- ---------- ---------- ---------- -------
Total from Investment
Operations 0.29 (0.36) 0.67 0.64 0.11
Less Distributions
Dividends from Net
Investment Income (0.22) (0.39) (0.37) (0.39) (0.11)
Distributions from
Realized Gains -- -- (0.25) -- --
------- ---------- ---------- ---------- -------
Total Distributions (0.22) (0.39) (0.62) (0.39) (0.11)
------- ---------- ---------- ---------- -------
Net Asset Value at End
of Period $ 7.97 $ 7.90 $ 8.65 $ 8.60 $ 8.35
======= ========== ========== ========== =======
Total Return+ 3.77%* (4.24%) 7.87% 7.78% 1.34%*
Net Assets at End of
Period (000's) $ 511 $ 573 $ 295 $ 146 $ 140
Ratio of Gross Expenses
to Average Net Assets 1.93%** 1.87% 1.86% 1.45% 1.30%**
Ratio of Net Expenses to
Average Net Assets 1.15%** 1.21% 1.86% 1.45% 1.30%**
Ratio of Net Investment
Income to Average Net
Assets 5.72%** 4.79% 4.09% 4.68% 5.22%**
Portfolio Turnover Rate 109.02%** 146.87% 132.76% 176.50% 136.29%**
-----------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 103 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Managed Bond Fund
Class B
<TABLE>
<CAPTION>
Six-Month Three-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 $ 7.89 $ 8.64 $ 8.60 $ 8.35 $ 8.35
Income From Investment
Operations
Net Investment Income 0.19 0.32 0.28 0.32 0.09
Net Realized and
Unrealized Gain (Loss)
on Investments 0.07 (0.75) 0.29 0.25 --
------- ---------- ---------- ---------- -------
Total from Investment
Operations 0.26 (0.43) 0.57 0.57 0.09
Less Distributions
Dividends from Net
Investment Income (0.19) (0.32) (0.28) (0.32) (0.09)
Distributions from
Realized Gains -- -- (0.25) -- --
------- ---------- ---------- ---------- -------
Total Distributions (0.19) (0.32) (0.53) (0.32) (0.09)
------- ---------- ---------- ---------- -------
Net Asset Value at End
of Period $ 7.96 $ 7.89 $ 8.64 $ 8.60 $ 8.35
======= ========== ========== ========== =======
Total Return+ 3.39%* (4.98%) 6.67% 6.91% 1.15%*
Net Assets at End of
Period (000's) $ 704 $ 924 $ 523 $ 120 $ 100
Ratio of Gross Expenses
to Average Net Assets 2.74%** 2.61% 2.89% 2.23% 2.07%**
Ratio of Net Expenses to
Average Net Assets 1.90%** 1.94% 2.89% 2.23% 2.07%**
Ratio of Net Investment
Income to Average Net
Assets 4.93%** 4.02% 3.07% 3.79% 4.45%**
Portfolio Turnover Rate 109.02%** 146.87% 132.76% 176.50% 136.29%**
-----------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 104 -
<PAGE>
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO California Tax-Free Income Fund
Class A
<TABLE>
<CAPTION>
Six-Month Three-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>
Net Asset Value at
Beginning of Period $11.05 $12.74 $12.94 $12.23 $12.07
Income From Investment
Operations
Net Investment Income 0.27 0.52 0.55 0.58 0.15
Net Realized and
Unrealized Gain (Loss)
on Investments 0.53 (1.69) 0.17 0.76 0.19
------ ------ ------ ------ ------
Total from Investment
Operations 0.80 (1.17) 0.72 1.34 0.34
Less Distributions
Dividends from Net
Investment Income (0.27) (0.52) (0.55) (0.58) (0.15)
Distributions from
Realized Gains -- -- (0.37) (0.05) (0.03)
------ ------ ------ ------ ------
Total Distributions (0.27) (0.52) (0.92) (0.63) (0.18)
------ ------ ------ ------ ------
Net Asset Value at End
of Period $11.58 $11.05 $12.74 $12.94 $12.23
====== ====== ====== ====== ======
Total Return+ 7.36%* (9.41%) 5.73% 11.29% 2.83%*
Net Assets at End of
Period (000's) $ 693 $ 740 $ 678 $ 460 $ 122
Ratio of Expenses to
Average Net Assets 1.01%** 1.07% 1.04% 0.91% 0.89%**
Ratio of Net Investment
Income to Average Net
Assets 4.91%** 4.36% 4.25% 4.52% 4.84%**
Portfolio Turnover Rate 40.15%** 24.66% 38.78% 9.83% 10.52%**
------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 105 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO California Tax-Free Income Fund
Class B
<TABLE>
<CAPTION>
Six-Month Three-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 $ 12.73 $ 12.93 $ 12.22 $12.07
Income From Investment
Operations
Net Investment Income 0.23 0.43 0.46 0.48 0.12
Net Realized and
Unrealized Gain (Loss)
on Investments 0.53 (1.69) 0.17 0.76 0.18
------ ---------- --------- --------- ------
Total from Investment
Operations 0.76 (1.26) 0.63 1.24 0.30
Less Distributions
Dividends from Net
Investment Income (0.23) (0.43) (0.46) (0.48) (0.12)
Distributions from
Realized Gains -- -- (0.37) (0.05) (0.03)
------ ---------- --------- --------- ------
Total Distributions (0.23) (0.43) (0.83) (0.53) (0.15)
------ ---------- --------- --------- ------
Net Asset Value at End
of Period $11.57 $ 11.04 $ 12.73 $ 12.93 $12.22
====== ========== ========= ========= ======
Total Return+ 6.98%* (10.07%) 4.98% 10.46% 2.56%*
Net Assets at End of
Period (000's) $1,034 $ 799 $ 927 $ 501 $ 101
Ratio of Expenses to
Average Net Assets 1.74%** 1.80% 1.76% 1.63% 1.64%**
Ratio of Net Investment
Income to Average Net
Assets 4.18%** 3.63% 3.45% 3.71% 4.08%**
Portfolio Turnover Rate 40.15%** 24.66% 38.78% 9.83% 10.52%**
--------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 106 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Municipal Bond Fund
Class A
<TABLE>
<CAPTION>
Six-Month Three-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 $12.90 $ 14.45 $ 14.53 $ 13.99 $13.82
Income From Investment
Operations
Net Investment Income 0.33 0.64 0.66 0.68 0.18
Net Realized and
Unrealized Gain (Loss)
on Investments 0.37 (1.55) 0.16 0.70 0.17
------ ---------- ---------- ---------- ------
Total from Investment
Operations 0.70 (0.91) 0.82 1.38 0.35
Less Distributions
Dividends from Net
Investment Income (0.33) (0.64) (0.66) (0.68) (0.18)
Distributions from
Realized Gains -- -- (0.24) (0.16) --
------ ---------- ---------- ---------- ------
Total Distributions (0.33) (0.64) (0.90) (0.84) (0.18)
------ ---------- ---------- ---------- ------
Net Asset Value at End
of Period $13.27 $ 12.90 $ 14.45 $ 14.53 $13.99
====== ========== ========== ========== ======
Total Return+ 5.51%* (6.47%) 5.75% 10.17% 2.52%*
Net Assets at End of
Period (000's) $ 700 $ 929 $ 946 $ 390 $ 311
Ratio of Expenses to
Average Net Assets 0.95%** 0.98% 0.98% 0.95% 0.82%**
Ratio of Net Investment
Income to Average Net
Assets 5.15%** 4.66% 4.51% 4.86% 5.04%**
Portfolio Turnover Rate 56.17%** 16.84% 20.80% 13.52% 6.66%**
----------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 107 -
<PAGE>
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Municipal Bond Fund
Class B
<TABLE>
<CAPTION>
Six-Month Three-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>
Net Asset Value at
Beginning of Period $12.88 $14.43 $14.52 $13.98 $13.82
Income From Investment
Operations
Net Investment Income 0.28 0.54 0.57 0.60 0.15
Net Realized and
Unrealized Gain (Loss)
on Investments 0.36 (1.55) 0.15 0.70 0.16
------ ------ ------ ------ ------
Total from Investment
Operations 0.64 (1.01) 0.72 1.30 0.31
Less Distributions
Dividends from Net
Investment Income (0.28) (0.54) (0.57) (0.60) (0.15)
Distributions from
Realized Gains -- -- (0.24) (0.16) --
------ ------ ------ ------ ------
Total Distributions (0.28) (0.54) (0.81) (0.76) (0.15)
------ ------ ------ ------ ------
Net Asset Value at End
of Period $13.24 $12.88 $14.43 $14.52 $13.98
====== ====== ====== ====== ======
Total Return+ 5.04%* (7.14%) 5.08% 9.56% 2.27%*
Net Assets at End of
Period (000's) $ 753 $1,322 $1,375 $ 502 $ 112
Ratio of Expenses to
Average Net Assets 1.70%** 1.70% 1.61% 1.53% 1.50%**
Ratio of Net Investment
Income to Average Net
Assets 4.37%** 3.94% 3.89% 4.22% 4.42%**
Portfolio Turnover Rate 56.17%** 16.84% 20.80% 13.52% 6.66%**
------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 108 -
<PAGE>
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Money Market Fund
Class A
<TABLE>
<CAPTION>
Six-Month Three-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>
Net Asset Value at
Beginning of Period $ 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 0.01
Less Distributions
Dividends from Net
Investment Income (0.03) (0.05) (0.05) (0.05) (0.01)
------ ------ ------ ----- -----
Net Asset Value at End of
Period $ 1.00 $ 1.00 $ 1.00 $1.00 $1.00
====== ====== ====== ===== =====
Total Return 2.77%* 4.64% 4.92% 4.97% 1.21%*
Net Assets at End of
Period (000's) $3,104 $3,554 $2,186 $ 537 $ 295
Ratio of Gross Expenses
to Average Net Assets 1.06%** 1.00% 0.92% 0.72% 0.55%**
Ratio of Net Expenses to
Average Net Assets 0.80%** 0.80% 0.92% 0.72% 0.55%**
Ratio of Net Investment
Income to Average Net
Assets 5.52%** 4.60% 4.87% 4.91% 5.01%**
------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
- 109 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Money Market Fund
Class B
<TABLE>
<CAPTION>
Six-Month Three-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 $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 0.01
Less Distributions
Dividends from Net
Investment Income (0.03) (0.05) (0.05) (0.05) (0.01)
----- --------- --------- ---------- -----
Net Asset Value at End
of Period $1.00 $ 1.00 $ 1.00 $ 1.00 $1.00
===== ========= ========= ========== =====
Total Return 2.77%* 4.65% 4.76% $ 4.94% 1.21%*
Net Assets at End of
Period (000's) $ 811 $ 979 $ 670 $ 414 $ 106
Ratio of Gross Expenses
to Average Net Assets 1.16%** 1.08% 1.05% 0.78% 0.54%**
Ratio of Net Expenses to
Average Net Assets 0.80%** 0.82% 1.05% 0.78% 0.54%**
Ratio of Net Investment
Income to Average Net
Assets 5.53%** 4.56% 4.71% 4.85% 4.96%**
---------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
- 110 -
<PAGE>
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Financial Highlights
(For a Share Outstanding Throughout the Period)
(Unaudited)
SAFECO Money Market Fund
Class C
<TABLE>
<CAPTION>
Two-Month
Period Ended
June 30+
------------
2000
------------------------------------------------------------------------------
<S> <C>
Net Asset Value at Beginning of Period $1.00
Income From Investment Operations
Net Investment Income 0.01
-----
Less Distributions
Dividends from Net Investment Income (0.01)
-----
Net Asset Value at End of Period $1.00
=====
Total Return 1.03%*
Net Assets at End of Period (000's) $ 100
Ratio of Expenses to Average Net Assets 0.67%**
Ratio of Net Investment Income to Average Net Assets 5.95%**
------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ For the period from April 30, 2000 (initial issue date of Class C shares)
through June 30, 2000.
- 111 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1.GENERAL
This financial report is on the 15 SAFECO Mutual Funds that issue Class A, B
and C shares. Each Fund is a series of one of the following trusts (each a
"Trust") listed below. Each Trust is registered under the Investment Company
Act of 1940, as amended, as a diversified, open-end management investment
company.
SAFECO Common Stock Trust
SAFECO Growth Opportunities Fund
SAFECO Equity Fund
SAFECO Dividend Income Fund
SAFECO Northwest Fund
SAFECO International Stock Fund
SAFECO Balanced Fund
SAFECO Small Company Value Fund
SAFECO U.S. Value Fund
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 Money Market Trust
SAFECO Money Market Fund
Effective May 1, 2000, the SAFECO Growth Opportunities Fund, SAFECO Equity
Fund, SAFECO Dividend Income Fund, SAFECO Northwest Fund, SAFECO International
Stock Fund, SAFECO High-Yield Fund, and SAFECO Money Market Fund began issuing
a new class of shares--Class C shares. Also effective May 1, 2000, the GNMA
Fund began issuing two new classes of shares--Class A and Class B shares. With
the addition of the new share classes, each of the Funds now offers up to four
classes of shares:
* No-Load shares--sold directly to shareholders with no associated sales
charges.
* Class A, Class B, and Class C shares--sold by financial advisors to
shareholders with associated sales and distribution charges.
Each class of shares represents an interest in the net assets of the fund.
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.
- 112 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
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. 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. 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.
Temporary investments are valued at amortized cost which approximates market.
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 for the Taxable Bond Trust, Managed Bond Trust and Tax-
Exempt Bond Trust 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. Dividend income less foreign taxes withheld (if any) for
the Common Stock Trust is recorded on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign securities. Bond
premiums and original issue discounts are amortized to either call or maturity
dates for the Managed Bond Trust, Tax-Exempt Bond Trust and Money Market Trust.
Market discount on bonds purchased after April 30, 1993 is recorded as taxable
income at disposition for the Tax-Exempt Bond Trust. Interest is accrued on
bonds and temporary investments daily.
Dividends and Distributions to Shareholders. For the Growth Opportunities,
Northwest, International Stock, and Small Company Value Funds, net investment
income (if any) is declared as a dividend to shareholders as of the last
business day (ex-dividend date) of December. For the Equity, Dividend Income,
Balanced, and U.S. Value Funds, net investment income (if any) is distributed
as of the last business day of March, June, September and December. Net
investment income for the Taxable Bond Trust, Managed Bond Trust, Tax-Exempt
Bond Trust and Money Market Trust is declared as a dividend to shareholders as
of the close of each business day and payment is made as of the last business
day of each month. Net realized gains on investments, 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
foreign exchange contracts and wash sale deferrals.
Undistributed/overdistributed net investment income may include temporary
financial reporting and tax basis differences which will reverse in the
subsequent year.
- 113 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
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 intends 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. In
addition, income which is derived from amortization on bonds purchased below
their issued price after April 30, 1993, is treated as ordinary income for
Federal income tax purposes.
Foreign Currency Translation. The accounting records of the International
Fund are maintained in U.S. dollars. All assets and liabilities initially
expressed in foreign currencies are converted into U.S. dollars at prevailing
exchange rates. Purchases and sales of investment securities, and dividend and
interest income, are translated at the rates of exchange prevailing on the
respective dates of such transactions. The International Fund does not isolate
that portion of the results of operations resulting from changes in foreign
exchange rates on investments from the fluctuations arising from changes in
market prices of securities held. Such fluctuations are included with the net
realized and unrealized gain or loss from investments. Reported net realized
gains or losses from foreign currency transactions arise from gains or losses
realized between the trade and settlement dates on securities transactions, the
difference between the amounts of dividends, interest, and foreign withholding
taxes recorded on the International Fund's books and the U.S. dollar equivalent
of the amounts actually received or paid. Net unrealized foreign exchange gains
and losses arise from changes in the value of assets and liabilities other than
investments in securities, resulting from changes in the exchange rate.
Foreign Exchange Contracts. The International Stock Fund may enter into
foreign currency exchange contracts as a way of managing foreign exchange rate
risk. The International Stock Fund may enter into these contracts for the
purchase or sale of a specific foreign currency at a fixed price on a future
date as a hedge or cross-hedge against either specific transactions or
portfolio positions. The objective of the International Stock Fund's foreign
currency hedging transactions is to reduce the risk that the U.S. dollar value
of the International Fund's foreign currency denominated securities will
decline in value due to changes in foreign currency exchange rates. All foreign
currency exchange contracts are "marked-to-market" daily at the applicable
translation rates resulting in unrealized gains or losses. Realized and
unrealized gains or losses on foreign currency contracts are recorded on
settlement date of the foreign currency exchange contract and are included in
the Statements of Assets and Liabilities and the Statement of Operations. Risks
may arise upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
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.
- 114 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
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>
Growth Opportunities Fund $240,937 $376,430
Equity Fund 324,440 703,562
Dividend Income Fund 59,695 99,899
Northwest Fund 61,468 23,381
International Stock Fund 9,833 5,390
Balanced Fund 6,350 9,766
Small Company Value Fund 17,310 17,304
U.S. Value Fund 2,077 2,752
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
--------------------------------------------------------------------------------
</TABLE>
Purchases include $1,352, $21,406, and $1,170 of U.S. Government securities for
Balanced, Intermediate-Term U.S. Treasury, and Managed Bond Funds,
respectively. Sales include $3,537, $22,783, and $2,847 of U.S. Government
securities for Balanced, Intermediate-Term U.S. Treasury, and Managed Bond
Funds, respectively.
4.COMMITMENTS
At June 30, 2000, the International Stock Fund had open forward foreign
currency exchange contracts obligating it to receive or deliver the following
foreign currencies:
<TABLE>
<CAPTION>
(In Thousands)
U.S. Dollar Unrealized
Currency to In Exchange Settlement Value as of Appreciation
be Delivered For Date June 30, 2000 (Depreciation)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
23,584 Japanese Yen $ 224 7/3/00 $ 223 $ 1
(23,584) Japanese Yen (225) 7/3/00 (223) (2)
35,739 Japanese Yen 343 7/18/00 339 4
21,662 Japanese Yen 208 7/28/00 206 2
19,669 Japanese Yen 184 8/9/00 187 (3)
36,428 Japanese Yen 345 8/21/00 347 (2)
30,844 Japanese Yen 291 8/30/00 295 (4)
23,184 Japanese Yen 224 9/5/00 222 2
------ ------ ---
$1,594 $1,596 $(2)
====== ====== ===
</TABLE>
- 115 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
5.TRUST SHARE TRANSACTIONS
Following is a summary of transactions in shares and the related amounts (in
thousands):
<TABLE>
<CAPTION>
No-Load Class A Class B Class C
------------------------- ------------------------- ------------------------- ------------
Six-Month Six- Month Six- Month Two-Month*
Period Ended Year Ended Period Ended Year Ended Period Ended Year Ended Period Ended
June 30 December 31 June 30 December 31 June 30 December 31 June 30
2000 1999 2000 1999 2000 1999 2000
------------------------------------------------------------------------------------------------------------
SAFECO GROWTH OPPORTUNITIES FUND
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares:
Sales 13,243 26,975 294 536 49 211 5
Reinvestments -- -- -- -- -- -- --
Redemptions (17,606) (53,419) (250) (835) (92) (264) --
--------- ----------- ------- -------- ------- ------- ----
Net Change (4,363) (26,444) 44 (299) (43) (53) 5
========= =========== ======= ======== ======= ======= ====
Amounts:
Sales $ 311,471 $ 571,275 $ 6,848 $ 11,412 $ 1,113 $ 4,371 $111
Reinvestments -- -- -- -- -- -- --
Redemptions (415,748) (1,122,733) (5,868) (17,563) (2,105) (5,306) --
--------- ----------- ------- -------- ------- ------- ----
Net Change $(104,277) $ (551,458) $ 980 $ (6,151) $ (992) $ (935) $111
========= =========== ======= ======== ======= ======= ====
------------------------------------------------------------------------------------------------------------
<CAPTION>
SAFECO EQUITY FUND
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares:
Sales 5,887 22,947 454 784 86 540 5
Reinvestments 110 4,755 1 132 -- 57 --
Redemptions (21,812) (25,424) (405) (518) (223) (156) --
--------- ----------- ------- -------- ------- ------- ----
Net Change (15,815) 2,278 50 398 (137) 441 5
========= =========== ======= ======== ======= ======= ====
Amounts:
Sales $ 136,430 $ 559,406 $10,451 $ 19,136 $ 1,968 $13,214 $108
Reinvestments 2,615 114,357 30 3,189 -- 1,359 --
Redemptions (500,609) (622,327) (9,325) (12,760) (5,072) (3,793) --
--------- ----------- ------- -------- ------- ------- ----
Net Change $(361,564) $ 51,436 $ 1,156 $ 9,565 $(3,104) $10,780 $108
========= =========== ======= ======== ======= ======= ====
------------------------------------------------------------------------------------------------------------
<CAPTION>
SAFECO DIVIDEND INCOME FUND
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares:
Sales 755 1,419 3 41 3 35 5
Reinvestments 52 717 1 4 1 4 --
Redemptions (2,761) (5,594) (33) (42) (24) (27) --
--------- ----------- ------- -------- ------- ------- ----
Net Change (1,954) (3,458) (29) 3 (20) 12 5
========= =========== ======= ======== ======= ======= ====
Amounts:
Sales $ 15,674 $ 32,738 $ 69 $ 951 $ 68 $ 808 $100
Reinvestments 1,122 16,035 5 92 3 98 --
Redemptions (58,045) (127,793) (708) (944) (510) (618) --
--------- ----------- ------- -------- ------- ------- ----
Net Change $ (41,249) $ (79,020) $ (634) $ 99 $ (439) $ 288 $100
========= =========== ======= ======== ======= ======= ====
------------------------------------------------------------------------------------------------------------
</TABLE>
* For the period from April 30, 2000 (initial issue date of Class C shares)
through June 30, 2000.
- 116 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
No-Load Class A Class B Class C
------------------------- ------------------------- ------------------------- ------------
Six-Month Six-Month Six-Month Two-Month*
Period Ended Year Ended Period Ended Year Ended Period Ended Year Ended Period Ended
June 30 December 31 June 30 December 31 June 30 December 31 June 30
2000 1999 2000 1999 2000 1999 2000
------------------------------------------------------------------------------------------------------------
SAFECO NORTHWEST FUND
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares:
Sales 2,188 1,370 96 78 98 49 5
Reinvestments -- 238 -- 13 -- 14 --
Redemptions (910) (1,343) (14) (26) (14) (16) --
-------- -------- ------ ------ ------ ------ ----
Net Change 1,278 265 82 65 84 47 5
======== ======== ====== ====== ====== ====== ====
Amounts:
Sales $ 58,511 $ 29,203 $2,526 $1,632 $2,476 $1,006 $113
Reinvestments -- 6,029 -- 331 -- 342 --
Redemptions (23,804) (26,814) (362) (491) (343) (314) --
-------- -------- ------ ------ ------ ------ ----
Net Change $ 34,707 $ 8,418 $2,164 $1,472 $2,133 $1,034 $113
======== ======== ====== ====== ====== ====== ====
------------------------------------------------------------------------------------------------------------
<CAPTION>
SAFECO INTERNATIONAL STOCK FUND
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares:
Sales 2,830 3,678 35 47 34 35 6
Reinvestments -- -- -- -- -- -- --
Redemptions (2,600) (3,179) (18) (23) (11) (11) --
-------- -------- ------ ------ ------ ------ ----
Net Change 230 499 17 24 23 24 6
======== ======== ====== ====== ====== ====== ====
Amounts:
Sales $ 46,232 $ 52,012 $ 593 $ 654 $ 539 $ 482 $100
Reinvestments -- -- -- -- -- -- --
Redemptions (42,946) (45,086) (297) (316) (172) (153) --
-------- -------- ------ ------ ------ ------ ----
Net Change $ 3,286 $ 6,926 $ 296 $ 338 $ 367 $ 329 $100
======== ======== ====== ====== ====== ====== ====
------------------------------------------------------------------------------------------------------------
<CAPTION>
SAFECO BALANCED FUND
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares:
Sales 96 453 19 176 13 93
Reinvestments 6 44 1 7 1 7
Redemptions (306) (539) (66) (39) (66) (52)
-------- -------- ------ ------ ------ ------
Net Change (204) (42) (46) 144 (52) 48
======== ======== ====== ====== ====== ======
Amounts:
Sales $ 1,099 $ 5,531 $ 221 $2,126 $ 146 $1,129
Reinvestments 66 527 13 75 10 81
Redemptions (3,482) (6,605) (755) (469) (752) (636)
-------- -------- ------ ------ ------ ------
Net Change $ (2,317) $ (547) $ (521) $1,732 $ (596) $ 574
======== ======== ====== ====== ====== ======
------------------------------------------------------------------------------------------------------------
</TABLE>
* For the period from April 30, 2000 (initial issue date of Class C shares)
through June 30, 2000.
- 117 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
No-Load Class A Class B
------------------------- ------------------------- -------------------------
Six-Month Six-Month Si- 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
---------------------------------------------------------------------------------------------------
SAFECO SMALL COMPANY VALUE FUND
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares:
Sales 811 3,426 10 33 23 40
Reinvestments -- -- -- -- -- --
Redemptions (849) (4,351) (20) (59) (27) (31)
-------- -------- ----- ----- ----- -----
Net Change (38) (925) (10) (26) (4) 9
======== ======== ===== ===== ===== =====
Amounts:
Sales $ 10,181 $ 36,187 $ 123 $ 347 $ 279 $ 405
Reinvestments -- -- -- -- -- --
Redemptions (10,691) (45,805) (252) (619) (330) (311)
-------- -------- ----- ----- ----- -----
Net Change $ (510) $ (9,618) $(129) $(272) $ (51) $ 94
======== ======== ===== ===== ===== =====
---------------------------------------------------------------------------------------------------
<CAPTION>
SAFECO U.S. VALUE FUND
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares:
Sales 35 163 5 15 4 16
Reinvestments 1 17 -- 1 -- 2
Redemptions (115) (189) (5) (5) (17) (8)
-------- -------- ----- ----- ----- -----
Net Change (79) (9) -- 11 (13) 10
======== ======== ===== ===== ===== =====
Amounts:
Sales $ 392 $ 2,043 $ 54 $ 179 $ 49 $ 196
Reinvestments 9 202 -- 9 -- 25
Redemptions (1,304) (2,315) (58) (63) (196) (95)
-------- -------- ----- ----- ----- -----
Net Change $ (903) $ (70) $ (4) $ 125 $(147) $ 126
======== ======== ===== ===== ===== =====
---------------------------------------------------------------------------------------------------
<CAPTION>
SAFECO INTERMEDIATE-TERM U.S. TREASURY FUND
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares:
Sales 85 666 15 58 2 55
Reinvestments 24 65 2 4 1 3
Redemptions (240) (1,059) (17) (43) (16) (53)
-------- -------- ----- ----- ----- -----
Net Change (131) (328) -- 19 (13) 5
======== ======== ===== ===== ===== =====
Amounts:
Sales $ 846 $ 6,902 $ 152 $ 599 $ 25 $ 574
Reinvestments 242 669 18 37 11 31
Redemptions (2,390) (11,013) (170) (448) (156) (545)
-------- -------- ----- ----- ----- -----
Net Change $ (1,302) $ (3,442) $ -- $ 188 $(120) $ 60
======== ======== ===== ===== ===== =====
</TABLE>
- 118 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
No-Load Class A Class B Class C
------------------------- ------------------------- ------------------------- ------------
Six-Month Six-Month Six-Month Two-Month*
Period Ended Year Ended Period Ended Year Ended Period Ended Year Ended Period Ended
June 30 December 31 June 30 December 31 June 30 December 31 June 30
2000 1999 2000 1999 2000 1999 2000
------------------------------------------------------------------------------------------------------------
SAFECO HIGH-YIELD BOND FUND
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares:
Sales 2,822 7,351 22 127 12 129 13
Reinvestments 185 523 4 14 5 15 --
Redemptions (3,960) (8,235) (60) (290) (73) (110) --
--------- --------- ------- ------- ----- ------- ----
Net Change (953) (361) (34) (149) (56) 34 13
========= ========= ======= ======= ===== ======= ====
Amounts:
Sales $ 22,469 $ 63,720 $ 178 $ 1,097 $ 96 $ 1,136 $100
Reinvestments 1,476 4,482 31 122 39 123 --
Redemptions (31,834) (71,244) (485) (2,488) (586) (927) --
--------- --------- ------- ------- ----- ------- ----
Net Change $ (7,889) $ (3,042) $ (276) $(1,269) $(451) $ 332 $100
========= ========= ======= ======= ===== ======= ====
------------------------------------------------------------------------------------------------------------
<CAPTION>
SAFECO MONEY MARKET FUND
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares:
Sales 278,977 468,818 1,809 8,404 535 2,303 100
Reinvestments 4,925 9,827 68 157 15 41 --
Redemptions (297,796) (467,192) (2,327) (7,193) (719) (2,035) --
--------- --------- ------- ------- ----- ------- ----
Net Change (13,894) 11,453 (450) 1,368 (169) 309 100
========= ========= ======= ======= ===== ======= ====
Amounts:
Sales $ 278,977 $ 468,818 $ 1,809 $ 8,404 $ 535 $ 2,303 $100
Reinvestments 4,925 9,827 68 157 15 41 --
Redemptions (297,796) (467,192) (2,327) (7,193) (719) (2,035) --
--------- --------- ------- ------- ----- ------- ----
Net Change $ (13,894) $ 11,453 $ (450) $ 1,368 $(169) $ 309 $100
========= ========= ======= ======= ===== ======= ====
------------------------------------------------------------------------------------------------------------
</TABLE>
<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 C shares)
through June 30, 2000.
- 119 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
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
-----------------------------------------------------------------------------------------------
SAFECO MANAGED BOND FUND
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares:
Sales 20 259 7 44 4 69
Reinvestments 9 19 1 2 2 3
Redemptions (53) (202) (17) (7) (34) (16)
-------- --------- ----- ----- ----- -----
Net Change (24) 76 (9) 39 (28) 56
======== ========= ===== ===== ===== =====
Amounts:
Sales $ 162 $ 2,143 $ 60 $ 355 $ 31 $ 578
Reinvestments 73 155 9 15 14 27
Redemptions (419) (1,661) (134) (58) (274) (136)
-------- --------- ----- ----- ----- -----
Net Change $ (184) $ 637 $ (65) $ 312 $(229) $ 469
======== ========= ===== ===== ===== =====
-----------------------------------------------------------------------------------------------
<CAPTION>
SAFECO CALIFORNIA TAX-FREE INCOME FUND
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares:
Sales 1,389 2,144 1 30 18 14
Reinvestments 117 321 1 3 1 2
Redemptions (1,774) (3,524) (9) (19) (2) (17)
-------- --------- ----- ----- ----- -----
Net Change (268) (1,059) (7) 14 17 (1)
======== ========= ===== ===== ===== =====
Amounts:
Sales $ 15,700 $ 26,624 $ 9 $ 384 $ 210 $ 176
Reinvestments 1,307 3,849 10 30 10 26
Redemptions (19,782) (42,290) (98) (225) (24) (198)
-------- --------- ----- ----- ----- -----
Net Change $ (2,775) $ (11,817) $ (79) $ 189 $ 196 $ 4
======== ========= ===== ===== ===== =====
-----------------------------------------------------------------------------------------------
<CAPTION>
SAFECO MUNICIPAL BOND FUND
-----------------------------------------------------------------------------------------------
<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>
- 120 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
6. COMPONENTS OF NET ASSETS
At June 30, 2000, the components of net assets were as follows:
<TABLE>
<CAPTION>
GROWTH OPPORTUNITIES EQUITY DIVIDEND INCOME NORTHWEST
(In Thousands) FUND FUND FUND FUND
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggregate Gross
Unrealized Appreciation
on Investments and
Forward Contracts in
Which There Is an
Excess of Value Over
Identified Cost $ 146,249 $ 621,200 $ 59,359 $ 63,266
Aggregate Gross
Unrealized Depreciation
on Investments and
Forward Contracts in
Which There is an
Excess of Identified
Cost Over Value (184,317) (90,084) (19,895) (9,269)
--------- ---------- -------- --------
Net Unrealized
Appreciation
(Depreciation) (38,068) 531,116 39,464 53,997
Accumulated Net
Investment Income
(Loss) (3,261) -- -- (389)
Accumulated Net Realized
Gain (Loss) on
Investments:
Wash Sale Deferral* (351) -- -- --
Other (2,021)** 83,388 10,773 3,346
Paid in Capital (Par
Value $.001, Unlimited
Shares Authorized) 784,589 1,176,041 190,358 97,226
--------- ---------- -------- --------
Net Assets at June 30,
2000 $ 740,888 $1,790,545 $240,595 $154,180
========= ========== ======== ========
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL BALANCED SMALL COMPANY U.S. VALUE
STOCK FUND FUND VALUE FUND FUND
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggregate Gross Unrealized
Appreciation on Investments
and Forward Contracts in
Which There Is an Excess of
Value Over Identified Cost $11,175 $ 1,745 $ 5,195 $1,300
Aggregate Gross Unrealized
Depreciation on Investments
and Forward Contracts in
Which There is an Excess of
Identified Cost Over Value (767) (1,231) (4,698) (894)
------- ------- ------- ------
Net Unrealized Appreciation 10,408 514 497 406
Accumulated Net Investment
Income (Loss) 112 -- (60) --
Accumulated Net Realized Gain
(Loss) on Investments:
Wash Sale Deferral* (30) (5) -- --
Other 1,583** 38 (7,253)** 229
Paid in Capital (Par Value
$.001, Unlimited Shares
Authorized) 31,297 18,472 36,188 8,723
------- ------- ------- ------
Net Assets at June 30, 2000 $43,370 $19,019 $29,372 $9,358
======= ======= ======= ======
-------------------------------------------------------------------------------
</TABLE>
- 121 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
SAFECO
INTERMEDIATE-TERM
SAFECO HIGH-YIELD U.S. TREASURY SAFECO GNMA SAFECO MANAGED
(In Thousands) BOND FUND FUND FUND BOND FUND
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggregate Gross Unrealized
Appreciation on Investments
in Which There Is an Excess
of Value Over Identified
Cost $ 439 $ 152 $ 186 $ 33
Aggregate Gross Unrealized
Depreciation on Investments
in Which There Is an Excess
of Identified Cost Over
Value (5,402) (151) (577) (127)
------- ------- ------- ------
Net Unrealized
Appreciation/(Depreciation) (4,963) 1 (391) (94)
Accumulated Net Realized
Gain (Loss) on Investments (4,115)** (759)** (3,178)** (26)
(422)**
Paid in Capital (Par Value
$.001, Unlimited Shares
Authorized) 72,513 20,248 40,665 8,412
------- ------- ------- ------
Net Assets at June 30, 2000 $63,435 $19,490 $37,096 $7,870
======= ======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
SAFECO CALIFORNIA SAFECO MUNICIPAL SAFECO MONEY
(In Thousands) TAX-FREE INCOME FUND BOND FUND MARKET FUND
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Aggregate Gross Unrealized
Appreciation on
Investments in Which There
Is an Excess of Value Over
Identified Cost $ 3,034 $ 29,931 $ --
Aggregate Gross Unrealized
Depreciation on
Investments in Which There
Is an Excess of Identified
Cost Over Value (2,687) (8,070) --
------- -------- --------
Net Unrealized Appreciation 347 21,861 --
Accumulated Net Realized
Gain (Loss) on
Investments:
Wash Sale Deferral* -- -- --
Other (2,650)** (3,228)** --
Paid in Capital (Par Value
$.001, Unlimited Shares
Authorized) 90,820 449,934 226,046
------- -------- --------
Net Assets at June 30, 2000 $88,517 $468,567 $226,046
======= ======== ========
-------------------------------------------------------------------------------
</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>
Growth Opportunities Fund $31,148 2006-2007
International Stock Fund 160 2006-2007
Small Company Value Fund 10,162 2006-2007
</TABLE>
- 122 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
6. COMPONENTS OF NET ASSETS (continued)
<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
</TABLE>
7. 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>
Growth Opportunities, Equity,
Dividend Income, Northwest,
Balanced and U.S. Value
Funds:
First $250 million .70%
Next $500 million .65
Next $500 million .60
Over $1.25 billion .55
</TABLE>
<TABLE>
<S> <C>
Small Company Value Fund:
First $250 million .75%
Next $500 million .70
Next $500 million .65
Over $1.25 billion .60
</TABLE>
<TABLE>
<S> <C>
Intermediate-Term U.S. Treasury
and GNMA Fund:
First $250 million .55%
Next $500 million .50
Next $500 million .45
Over $1.25 billion .40
</TABLE>
<TABLE>
<S> <C>
Municipal Bond and
California Tax-Free
Income Funds:
First $250 million .55%
Next $500 million .45
Over $750 million .40
</TABLE>
<TABLE>
<S> <C>
International Stock
Fund:
First $250 million 1.00%
Next $500 million .90
Over $750 million .80
</TABLE>
<TABLE>
<S> <C>
High-Yield Bond Fund:
First $250 million .65%
Next $500 million .55
Over $750 million .50
</TABLE>
<TABLE>
<S> <C>
Managed Bond Fund:
First $750 million .50%
Next $500 million .45
Over $1.25 billion .40
</TABLE>
<TABLE>
<S> <C>
Money Market Fund:
First $250 million .50%
Next $500 million .45
Next $500 million .40
Over $1.25 billion .35
</TABLE>
- 123 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
SAFECO Asset Management Company pays sub-advisory fees to Bank of Ireland
Asset Management Company (U.S.) Limited for providing investment research and
advice to the International Fund.
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>
<S> <C>
Fund Accounting:
First $200 million .04%
Over $200 million .01
</TABLE>
<TABLE>
<S> <C>
Fund Administration:
First $200 million .05%
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 Equity, U.S. Value, and
GNMA Funds had 6.63% notes payable to American States Economy (SAFECO
Affiliate) for $10,000, $310,000 and $65,000, respectively. The notes were
repaid on July 3, 2000.
Line of Credit. The Trusts, together with all other management investment
companies for which SAFECO Asset Management Company serves as investment
advisor, has a 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 450,000 shares (8% of outstanding shares) of the Northwest Fund, and
500,000 shares (26%) of the Intermediate-Term U.S. Treasury Fund. During the
same period SAFECO Asset Management Company owned 694,490 shares (27%) of the
International Stock Fund, 519,268 shares (31%) of the Balanced Fund, 500,000
shares (61%) of the U.S. Value Fund, and 452,103 shares (46%) of the Managed
Bond Fund.
Expense Reimbursement. Beginning May 1, 1999 through April 30, 2009, SAFECO
Asset Management Company agreed to reimburse the Funds for operating expenses
(i.e., all expenses except investment advisory, distribution, service fees, and
interest) which exceed, on an annual basis, 0.30% of the average daily net
assets for the Money Market Fund and 0.40% for all other Funds.
- 124 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Dealer Concessions. SAFECO Securities, Inc. retained the following amounts
in dealer commissions from sales of Class A Shares during the six-month period
ended June 30, 2000:
<TABLE>
<CAPTION>
Commissions
Retained
--------------------------------------------------------------------------------
<S> <C>
Growth Opportunities Fund $ 3,364
Equity Fund 15,393
Dividend Income Fund 216
Northwest Fund 2,523
International Stock Fund 259
Balanced Fund 546
Small Company Value Fund 156
U.S. Value Fund 153
High-Yield Bond Fund 666
Intermediate-Term U.S. Treasury Fund 242
Managed Bond Fund 10
California Tax-Free Income Fund 201
--------------------------------------------------------------------------------
</TABLE>
- 125 -
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. INVESTMENTS IN AFFILIATES
Each of the companies listed below is an affiliate of the Growth
Opportunities Fund because the Fund owned at least 5% of the company's voting
securities during the six-month period ended June 30, 2000.
<TABLE>
<CAPTION>
(In Thousands) Shares at Shares at Market Value
Beginning End June 30,
Security of Period Additions Reductions of Period Dividends 2000
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
*American Coin
Merchandising, Inc. 357 -- (60) 297 -- $ --
American Healthcorp,
Inc. 553 -- -- 553 -- 2,832
*Anesta Corp. 759 38 (759) 38 -- --
Blue Rhino Corp. 624 -- (25) 599 -- 4,826
BNC Mortgage, Inc. 417 -- -- 417 -- 4,043
Concepts Direct, Inc. 480 -- -- 480 -- 4,765
DAMARK International,
Inc. 715 -- (63) 652 -- 14,027
*Dura Pharmaceuticals,
Inc. 2,306 -- (175) 2,131 -- --
Dynamex, Inc. 611 -- -- 611 -- 244
*Emisphere Technologies,
Inc. 984 82 (708) 358 -- --
French Fragrances, Inc. 925 -- -- 925 -- 7,573
*Funco, Inc. 354 -- (354) -- -- --
*Hall, Kinion &
Associates, Inc. 805 -- (360) 445 -- --
Harold's Stores, Inc. 542 -- -- 542 -- 1,356
Home Products
International, Inc. 370 -- -- 370 -- 1,433
*Innotrac Corp. 1,013 -- (516) 497 -- --
Lifeline Systems, Inc. 561 -- -- 561 -- 7,848
MICROS Systems, Inc. 1,152 174 (74) 1,252 -- 23,233
NCO Group, Inc. 1,528 752 (264) 2,016 -- 46,614
*Nastech Pharmaceutical
Co., Inc. 495 -- (495) -- -- --
Nu Skin Enterprises,
Inc. (Class A) 2,348 -- (182) 2,166 -- 12,455
Phoenix International
Ltd., Inc. 832 -- -- 832 -- 2,495
PolyMedica Corp. 1,245 46 (421) 870 -- 37,636
Precision Auto Care,
Inc. 592 -- (155) 437 -- 301
Prime Medical Services,
Inc. 1,226 -- -- 1,226 -- 9,504
Rent-A-Center, Inc. 2,288 124 (122) 2,290 -- 51,530
Rent-Way, Inc. 1,706 428 (647) 1,487 -- 43,413
Res-Care, Inc. 735 564 -- 1,299 -- 6,982
Serologicals Corp. 2,347 -- (282) 2,065 -- 10,324
*Suburban Lodges of
America, Inc. 1,027 -- (620) 407 -- --
TRM Copy Centers Corp. 710 -- -- 710 -- 3,816
Towne Services, Inc. 1,435 -- (37) 1,398 -- 1,311
Travis Boats & Motors,
Inc. 271 -- -- 271 -- 1,491
*Weider Nutrition
International, Inc. 516 -- (184) 332 -- --
--------
$300,052
========
------------------------------------------------------------------------------------------
</TABLE>
* Company was not an affiliate at the end of the period.
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<PAGE>
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<PAGE>
SAFECO COMMON STOCK 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
Chase Manhattan Bank
(International Fund)
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 4068 8/00
This report must be preceded or accompanied by a current prospectus.
(R) A registered trademark of SAFECO Corporation.
