<PAGE>
SEMIANNUAL REPORT
JUNE 30, 1999
SAFECO RESOURCE SERIES TRUST
----------
<TABLE>
<S> <C>
Equity Portfolio ......................................................... 2
Growth Portfolio ......................................................... 6
Northwest Portfolio ..................................................... 11
Small Company Portfolio ................................................. 15
Bond Portfolio .......................................................... 19
Money Market Portfolio .................................................. 23
</TABLE>
[SAFECO MUTUAL FUNDS LOGO]
<PAGE>
JUNE 30, 1999
- --------------------------------------------------------------------------------
INVESTMENT REVIEW
REPORT FROM EQUITY PORTFOLIO MANAGER
The SAFECO RST Equity Portfolio beat its Growth and Income Insurance
Portfolio peer group for the 12-months ended June 30, 1999, and was virtually
neck and neck for the year-to-date, according to Lipper, Inc.
The RST Equity Portfolio was up 20.40% and 10.14% for the 12 months just
ended and the year-to-date versus 15.66% and 11.74% for the peers.
The S&P 500 returned 22.76% for the twelve months and 12.38% for the
year-to-date.
Our performance could at best be described as consistent, and at worst,
boring. Our poorest performing stock was off 13.5% during the latest quarter and
no member of our portfolio had significant news that negatively impacted its
stock price. [PHOTO OF RICH MEAGLEY]
The market itself was far more interesting. Investor sentiment, not economic
or company fundamentals, shifted and market leadership took a turn. Big stocks
took a breather (after four years of outperformance) while smaller stocks and
more value-oriented stocks moved ahead.
Seven of our largest holdings at the beginning of the second quarter--Johnson
& Johnson, Microsoft, Procter & Gamble, Fannie Mae, Intel, General Electric, and
Merck--all lagged the S&P 500 over the second quarter. I am comfortable with
these stocks performing poorly on a short-term basis. In fact, it provides
buying opportunities for those of us who invest for the long-term.
It seemed our more value-oriented names outperformed. Praxair, a chemical
company, began the second quarter with value characteristics (low price to
earnings and price to book ratios) and ended it up 36%. Of our technology stocks
Motorola, Hewlett Packard and IBM, beat the growthier fellows, Microsoft and
Intel.
Washington Mutual took the 13.5% tumble. The bank's cost-cutting slowed as
did excitement from its recent acquisitions. I still like the company's
prospects.
Ninety percent of our assets are invested in what I believe to be
above-average-quality companies in industries with good long-term growth
prospects that I can hold for three to five years. The remaining 10% is invested
in special situations. These companies might be cyclicals or involved in
merger/acquisitions with major cost-cutting potential. They could be
restructuring or beginning a product cycle.
I stayed with what I've done in the past. I added to existing holdings when I
liked their price and sold parts of positions when they were on the high side.
Much of our add-on activity was in stocks that did not perform well: Abbott
Laboratories, Fannie Mae, Intel, Washington Mutual, and Procter & Gamble.
I trimmed American Home Products, Dover Corp., and Allied Signal and sold all
the Motorola and Willamette Industries when they reached our price objectives.
Selling Willamette decreased our exposure to an industry I think has
below-average, long-term prospects. I sold 40% of our Lockheed Martin because it
continues to struggle and the fixes don't look easy.
I added MCI Worldcom, which I think is well-positioned in data, voice and
internet services. The stock was not cheap, but should MCI deliver the solid
performance I expect it to, it will be worth it.
We ended the period with just over $662 million invested in 46 companies.
Turnover in the portfolio remained low and steady, at 31.33% (annualized). And,
the character we perceive in the Portfolio is unchanged: high quality companies
with predictable earnings growth.
Richard Meagley
- --------------------------------------------------------------------------------
Rich Meagley joined SAFECO in 1983. After advancing from analyst to Northwest
Fund Manager, he left the company. He re-joined in January 1995 as Equity
Portfolio Manager. He holds an M.B.A. from the University of Washington, and is
a Chartered Financial Analyst.
- 2 -
<PAGE>
SAFECO RESOURCE SERIES TRUST
- --------------------------------------------------------------------------------
INVESTMENT HIGHLIGHTS
AS OF JUNE 30, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
PERFORMANCE OVERVIEW
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED JUNE 30, 1999
<S> <C>
1 YEAR 20.40%
5 YEAR 24.34%
10 YEAR 18.82%
</TABLE>
INVESTMENT VALUE
SAFECO RST EQUITY PORTFOLIO: $56,102
S&P 500 INDEX: $55,878
<TABLE>
<CAPTION>
SAFECO
RST EQUITY S&P 500
PORTFOLIO INDEX
<S> <C> <C>
06/30/89 $10,000 $10,000
07/31/89 $10,876 $10,903
08/31/89 $10,995 $11,117
09/30/89 $10,935 $11,071
10/31/89 $10,714 $10,814
11/30/89 $10,927 $11,035
12/31/89 $11,241 $11,300
01/31/90 $10,340 $10,542
02/28/90 $10,385 $10,677
03/31/90 $10,777 $10,960
04/30/90 $10,385 $10,686
05/31/90 $11,296 $11,728
06/30/90 $11,332 $11,649
07/31/90 $11,359 $11,611
08/31/90 $10,358 $10,562
09/30/90 $ 9,894 $10,047
10/31/90 $ 9,785 $10,004
11/30/90 $10,340 $10,650
12/31/90 $10,655 $10,948
01/31/91 $11,114 $11,425
02/28/91 $11,807 $12,242
03/31/91 $12,097 $12,538
04/30/91 $12,471 $12,568
05/31/91 $12,958 $13,111
06/30/91 $12,247 $12,511
07/31/91 $13,052 $13,093
08/31/91 $13,212 $13,404
09/30/91 $12,931 $13,180
10/31/91 $13,043 $13,357
11/30/91 $12,322 $12,818
12/31/91 $13,515 $14,285
01/31/92 $14,197 $14,019
02/29/92 $14,549 $14,201
03/31/92 $13,756 $13,924
04/30/92 $13,876 $14,334
05/31/92 $13,736 $14,404
06/30/92 $12,884 $14,189
07/31/92 $13,365 $14,770
08/31/92 $12,924 $14,467
09/30/92 $12,974 $14,638
10/31/92 $13,435 $14,688
11/30/92 $14,257 $15,187
12/31/92 $14,605 $15,373
01/31/93 $14,965 $15,501
02/28/93 $14,944 $15,712
03/31/93 $15,582 $16,044
04/30/93 $15,263 $15,656
05/31/93 $16,466 $16,074
06/30/93 $16,518 $16,121
07/31/93 $16,332 $16,056
08/31/93 $17,217 $16,664
09/30/93 $17,731 $16,536
10/31/93 $18,194 $16,878
11/30/93 $18,318 $16,718
12/31/93 $18,681 $16,920
01/31/94 $19,867 $17,495
02/28/94 $19,362 $17,021
03/31/94 $18,583 $16,281
04/30/94 $19,110 $16,489
05/31/94 $19,581 $16,758
06/30/94 $18,879 $16,347
07/31/94 $19,319 $16,883
08/31/94 $20,581 $17,574
09/30/94 $20,372 $17,145
10/31/94 $20,822 $17,529
11/30/94 $20,405 $16,891
12/31/94 $20,351 $17,141
01/31/95 $20,520 $17,585
02/28/95 $21,052 $18,269
03/31/95 $21,355 $18,808
04/30/95 $21,911 $19,361
05/31/95 $22,467 $20,147
06/30/95 $23,181 $20,614
07/31/95 $23,531 $21,297
08/31/95 $24,221 $21,350
09/30/95 $25,164 $22,251
10/31/95 $25,139 $22,171
11/30/95 $25,877 $23,142
12/31/95 $26,178 $23,589
01/31/96 $26,913 $24,391
02/29/96 $27,063 $24,617
03/31/96 $27,403 $24,854
04/30/96 $27,974 $25,220
05/31/96 $28,627 $25,869
06/30/96 $29,145 $25,968
07/31/96 $28,015 $24,821
08/31/96 $28,273 $25,345
09/30/96 $29,987 $26,770
10/31/96 $30,940 $27,509
11/30/96 $33,321 $29,586
12/31/96 $32,667 $29,000
01/31/97 $34,589 $30,809
02/28/97 $34,770 $31,053
03/31/97 $33,298 $29,780
04/30/97 $34,364 $31,555
05/31/97 $36,677 $33,473
06/30/97 $38,209 $34,973
07/31/97 $40,837 $37,755
08/31/97 $38,705 $35,641
09/30/97 $40,117 $37,593
10/31/97 $38,840 $36,339
11/30/97 $40,086 $38,020
12/31/97 $40,783 $38,672
01/31/98 $41,415 $39,100
02/28/98 $44,703 $41,918
03/31/98 $46,193 $44,063
04/30/98 $46,290 $44,506
05/31/98 $45,432 $43,742
06/30/98 $46,598 $45,518
07/31/98 $46,031 $45,035
08/31/98 $40,087 $38,530
09/30/98 $42,889 $40,999
10/31/98 $46,695 $44,331
11/31/98 $49,708 $47,016
12/31/98 $50,935 $49,724
01/31/99 $51,768 $51,803
02/28/99 $50,698 $50,191
03/31/99 $52,295 $52,199
04/30/99 $55,575 $54,219
05/31/99 $54,436 $52,940
06/30/99 $56,102 $55,878
</TABLE>
PERFORMANCE REPRESENTS THE PERFORMANCE OF THE EQUITY
PORTFOLIO, BUT DOES NOT INCLUDE DEDUCTIONS FOR ADMINISTRATION
CHARGES, CONTINGENT DEFERRED SALES CHARGES, OR MORTALITY
AND EXPENSE RISK PREMIUMS.
THE PERFORMANCE OF THE PORTFOLIO ASSUMES THE
REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. THE STANDARD
& POOR'S 500 INDEX IS AN UNMANAGED INDEX OF 500 STOCKS
WEIGHTED BY MARKET CAPITALIZATION WITH DIVIDENDS REINVESTED.
MANAGEMENT FEES AND OTHER PORTFOLIO EXPENSES HAVE
BEEN APPLIED TO THE CALCULATION OF PORTFOLIO PERFORMANCE,
BUT NOT TO THE INDEX. IF PORTFOLIO EXPENSES HAD BEEN APPLIED
TO THE INDEX, THE INDEX VALUES WOULD HAVE BEEN LOWER.
INVESTMENT RETURNS ARE HISTORICAL AND NOT PREDICTIVE OF FUTURE
PERFORMANCE. PORTFOLIO SHARE PRICES AND INVESTMENT RETURNS
WILL FLUCTUATE.
HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
TEN LARGEST HOLDINGS NET ASSETS
- -------------------------------------------------------------------------
<S> <C>
Federal National Mortgage Association .............................. 3.5%
(Mortgage Loan Banker)
Procter & Gamble Co. ............................................... 3.4
(Household Products)
Intel Corp. ........................................................ 3.4
(Electronics--Semiconductors)
Abbott Laboratories ................................................. 3.3
(Health Care--Diversified Care Products)
Johnson & Johnson ................................................... 3.3
(Health Care--Diversified)
Kimberly-Clark Corp. ............................................... 3.1
(Manufacturing & Marketing Personal Care Products)
Microsoft Corp. .................................................... 3.1
(Computers--Software & Services)
Gannett Co., Inc. .................................................. 2.8
(Publishing)
Albertson's, Inc. .................................................. 2.7
(Retail--Food Chains)
General Electric Co. ............................................... 2.7
(Electrical Equipment)
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MARKET CAPITALIZATION
AS A PERCENTAGE OF NET ASSETS
<S> <C>
Large-Cap (over $4 billion) 98%
Mid-Cap ($1 billion-$4 billion) 0%
Small-Cap (under $1 billion) 0%
Cash & Other 2%
</TABLE>
- 3 -
<PAGE>
JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
EQUITY PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (000'S)
- -------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - 97.5%
AEROSPACE/DEFENSE - 1.1%
195,000 Lockheed Martin Corp. $7,264
BANKS (MAJOR REGIONAL) - 5.1%
170,000 Bank of America Corp. 12,463
315,000 Citigroup, Inc. 14,963
187,000 U.S. Bancorp 6,358
BANKS (MONEY CENTER) - 2.5%
190,000 Chase Manhattan Corp. 16,459
BEVERAGES (ALCOHOLIC) - 1.5%
143,000 Anheuser-Busch Co., Inc. 10,144
BEVERAGES (NON-ALCOHOLIC) - 2.0%
335,000 PepsiCo, Inc. 12,960
CHEMICALS - 4.1%
170,000 Du Pont (E.I.) de Nemours & Co. 11,613
314,400 Praxair, Inc. 15,386
COMPUTERS (HARDWARE) - 4.8%
172,000 Hewlett-Packard Co. 17,286
112,000 International Business Machines Corp. 14,476
COMPUTERS (NETWORKING) - 0.7%
165,000 *3Com Corp. 4,403
COMPUTERS (SOFTWARE & SERVICES) - 3.1%
230,000 *Microsoft Corp. 20,743
ELECTRICAL EQUIPMENT - 5.3%
275,000 Emerson Electric Co. 17,291
160,000 General Electric Co. 18,080
ELECTRONICS (SEMICONDUCTORS) - 3.4%
375,000 Intel Corp. 22,313
ENTERTAINMENT - 1.3%
285,000 The Walt Disney Co. 8,782
FINANCIAL (DIVERSIFIED) - 5.4%
226,000 Federal Home Loan Mortgage Corp. 13,108
335,000 Federal National Mortgage
Association 22,906
<CAPTION>
VALUE
SHARES (000'S)
- -------------------------------------------------------------------------
<C> <S> <C>
FOODS - 2.6%
345,000 Bestfoods $17,078
HEALTH CARE (DIVERSIFIED) - 10.8%
485,000 Abbott Laboratories 22,068
205,000 American Home Products Corp. 11,788
225,000 Bristol-Myers Squibb Co. 15,848
221,000 Johnson & Johnson 21,658
HEALTH CARE (MAJOR PHARMACEUTICALS) - 2.6%
230,000 Merck & Co., Inc. 17,020
HOUSEHOLD PRODUCTS (NON-DURABLES) - 6.5%
365,000 Kimberly-Clark Corp. 20,805
250,000 Procter & Gamble Co. 22,313
INSURANCE (MULTI-LINE) - 3.3%
112,000 American International Group, Inc. 13,111
150,000 Hartford Financial Services Group, Inc. 8,747
MANUFACTURING (DIVERSIFIED) - 4.3%
280,000 AlliedSignal, Inc. 17,640
315,600 Dover Corp. 11,046
OIL (DOMESTIC INTEGRATED) - 1.7%
112,000 Mobil Corp. 11,088
OIL (INTERNATIONAL INTEGRATED) - 3.0%
107,000 Exxon Corp. 8,252
195,000 Royal Dutch Petroleum Co. (ADR) 11,749
PERSONAL CARE - 1.0%
115,000 Avon Products, Inc. 6,383
PUBLISHING (NEWSPAPERS) - 2.8%
259,000 Gannett Co., Inc. 18,486
RAILROADS - 0.7%
151,100 Burlington Northern Santa Fe Corp. 4,684
RETAIL (DEPARTMENT STORES) - 2.1%
334,000 May Department Stores Co. 13,652
RETAIL (FOOD CHAINS) - 2.7%
352,250 Albertson's, Inc. 18,163
RETAIL (GENERAL MERCHANDISE) - 0.9%
130,000 Wal-Mart Stores, Inc. 6,273
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 4 -
<PAGE>
SAFECO RESOURCE SERIES TRUST
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
EQUITY PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (000'S)
- -------------------------------------------------------------------------
<C> <S> <C>
SAVINGS & LOANS - 2.6%
485,000 Washington Mutual, Inc. $17,157
SERVICES (DATA PROCESSING) - 1.1%
173,000 Automatic Data Processing, Inc. 7,612
TELECOMMUNICATIONS (LONG DISTANCE) - 2.1%
252,000 AT&T Corp. 14,065
TELEPHONE - 4.5%
250,000 Bell Atlantic Corp. 16,344
153,000 *MCI WorldCom, Inc. 13,196
TOBACCO - 1.9%
319,000 Philip Morris Cos., Inc. 12,820
-----------
TOTAL COMMON STOCKS 646,040
-----------
<CAPTION>
VALUE
SHARES (000'S)
- -------------------------------------------------------------------------
<C> <S> <C>
COMMERCIAL PAPER - 2.4%
FINANCIAL (DIVERSIFIED) - 2.4%
16,009,000 Associates First Capital Corp.
5.60%, due 7/01/99 $16,009
-----------
TOTAL COMMERCIAL PAPER 16,009
-----------
CASH EQUIVALENTS - 0.0%
INVESTMENT COMPANIES
76,258 SSgA Prime Money Market
Portfolio 76
-----------
TOTAL CASH EQUIVALENTS 76
-----------
TOTAL INVESTMENTS - 100.0% 662,125
Other Assets, less Liabilities 231
-----------
NET ASSETS $ 662,356
-----------
-----------
</TABLE>
* Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
- 5 -
<PAGE>
JUNE 30, 1999
- --------------------------------------------------------------------------------
INVESTMENT REVIEW
REPORT FROM GROWTH PORTFOLIO MANAGER
The SAFECO RST Growth Portfolio continued to struggle, returning -4.98% year
to date, and -17.72% for the 12-months ended June 30, 1999. The average Growth
Insurance Portfolio returned 12.69% and 20.54% for the same periods, according
to Lipper, Inc.
During the second quarter small company stocks began to return to favor. The
Russell 2000 (a small cap index) delivered 15.55%, while the S&P (broad market
indicator) returned 7.05% for the quarter. (For the 12 months ended June 30,
1999, the Russell 2000 returned 1.50% and the S&P 500 gained 22.76%.)
While the Portfolio still lags the broad market and peer group, we began to
outperform in the final days of the second quarter. As investors return to small
companies, which they did in the second quarter, they buy the larger ones first.
As confidence grows, I hope we will see more movement to our names, which are
among the smallest of the small.
[PHOTO OF THOMAS M. MAGUIRE]
The RST Growth Portfolio is loaded with what I believe to be statistically
underpriced companies with seemingly attractive fundamentals. Many of them are
very small (under $250 million market capitalization) and most of those are
selling for a share price that is a fraction of their growth rate. At June 30,
1999, many of them had yet to move and a few had hurt us.
Prison Realty Trust, Inc., the largest private owner and operator of prisons
(and formerly one of the RST Growth portfolio's largest positions) hurt us. It
fell 50% as management's "selective" disclosure brought shareholder class action
lawsuits charging fraud.
Rent-a-Center, Inc. suffered when the financial press took issue with its
accounting. After talking with analysts and Rent-a-Center's largest competitor
(Rent-Way, Inc., which we also own) I am comfortable holding and monitoring the
stock. Both companies provide furnishings and appliances to people who don't
have credit or enough cash.
Conseco, Inc. continued to produce good earnings and cash-flow and the market
continued to ignore it. Conseco provides insurance and financing to middle
America, and middle America is a huge market. In fact, Middle America is what
made Wal-Mart so successful.
Credit is another great force in the American economy. For that reason we own
NCO Group, Inc., a collection agency, and Creditrust Corp., the leading
purchaser of agent credit card receivables.
From a winning position, Family Golf Centers took too big a swing and hasn't
been able to bring the underperforming ice rinks and driving ranges it acquired
up to standard. I think they can.
Broadcasting remains our largest industry. Chancellor Media, our largest
holding, is the fastest growing company in this fast-growing industry and Emmis
is the cheapest. Both stocks are up as radio is benefiting from a strong U.S.
economy and gaining market share from other media.
With 70% of its sales in Japan, direct-marketer Nu Skin Enterprises should
benefit from the Japanese recovery. United Stationers is another great franchise
with a low valuation and great growth prospects.
I choose these stocks not to match a bogey, but for their value and
appreciation potential. Consequently, the RST Growth Portfolio's performance
diverges from its peers and the market, and I have hit peaks and valleys. It was
not too long ago that we were at a peak. We are working to get back there.
Finally, I want you to know I take this position seriously and am committed
to outperform. I ask, and thank you, for your patience. I hope to show you the
wait will be well worth it.
Tom Maguire
- --------------------------------------------------------------------------------
After completing his M.B.A. 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.
- 6 -
<PAGE>
SAFECO RESOURCE SERIES TRUST
- --------------------------------------------------------------------------------
INVESTMENT HIGHLIGHTS
AS OF JUNE 30, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
PERFORMANCE OVERVIEW
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED JUNE 30, 1999
<S> <C>
1 YEAR (17.72)%
5 YEAR 23.51%
SINCE INCEPTION* 23.76%
</TABLE>
INVESTMENT VALUE
SAFECO RST GROWTH PORTFOLIO: $39,273
S&P 500 INDEX: $36,047
<TABLE>
<CAPTION>
SAFECO
RST GROWTH S&P 500
PORTFOLIO INDEX
<S> <C> <C>
01/31/93 $10,000 $10,000
02/28/93 $ 9,475 $10,136
03/31/93 $10,059 $10,350
04/30/93 $ 9,683 $10,100
05/31/93 $10,535 $10,369
06/30/93 $10,891 $10,400
07/31/93 $11,297 $10,358
08/31/93 $12,198 $10,750
09/30/93 $12,822 $10,667
10/31/93 $13,386 $10,888
11/30/93 $12,792 $10,785
12/31/93 $13,473 $10,915
01/31/94 $14,381 $11,286
02/28/94 $13,861 $10,980
03/31/94 $13,352 $10,503
04/30/94 $13,750 $10,637
05/31/94 $14,093 $10,811
06/30/94 $13,662 $10,546
07/31/94 $14,215 $10,892
08/31/94 $14,715 $11,337
09/30/94 $14,626 $11,060
10/31/94 $15,169 $11,308
11/30/94 $14,936 $10,897
12/31/94 $15,078 $11,058
01/31/95 $15,148 $11,344
02/28/95 $15,695 $11,786
03/31/95 $15,672 $12,133
04/30/95 $15,973 $12,490
05/31/95 $16,670 $12,997
06/30/95 $17,728 $13,299
07/31/95 $18,506 $13,739
08/31/95 $18,587 $13,773
09/30/95 $19,645 $14,354
10/31/95 $19,819 $14,303
11/30/95 $20,666 $14,929
12/31/95 $21,261 $15,217
01/31/96 $21,475 $15,735
02/29/96 $22,051 $15,881
03/31/96 $22,654 $16,033
04/30/96 $24,059 $16,269
05/31/96 $25,519 $16,688
06/30/96 $24,608 $16,752
07/31/96 $22,440 $16,012
08/31/96 $24,381 $16,350
09/30/96 $25,827 $17,270
10/31/96 $26,322 $17,746
11/30/96 $26,898 $19,086
12/31/96 $28,078 $18,708
01/31/97 $29,769 $19,875
02/28/97 $28,529 $20,032
03/31/97 $27,480 $19,211
04/30/97 $26,255 $20,356
05/31/97 $30,395 $21,594
06/30/97 $32,757 $22,561
07/31/97 $34,987 $24,356
08/31/97 $36,430 $22,992
09/30/97 $39,419 $24,252
10/31/97 $38,340 $23,443
11/30/97 $40,178 $24,527
12/31/97 $40,587 $24,948
01/31/98 $40,796 $25,223
02/28/98 $45,019 $27,042
03/31/98 $48,391 $28,425
04/30/98 $50,147 $28,711
05/31/98 $47,592 $28,218
06/30/98 $47,731 $29,364
07/31/98 $44,950 $29,052
08/31/98 $34,364 $24,856
09/30/98 $35,425 $26,449
10/31/98 $37,928 $28,598
11/30/98 $39,510 $30,331
12/31/98 $41,329 $32,077
01/31/99 $42,396 $33,418
02/28/99 $37,273 $32,379
03/31/99 $36,964 $33,674
04/30/99 $37,740 $34,977
05/31/99 $37,837 $34,152
06/30/99 $39,273 $36,047
</TABLE>
*THE PORTFOLIO'S INCEPTION DATE WAS JANUARY 7, 1993.
PERFORMANCE INFORMATION BEGINS ON JANUARY 31, 1993.
PERFORMANCE REPRESENTS THE PERFORMANCE OF THE GROWTH
PORTFOLIO BUT DOES NOT INCLUDE ADMINISTRATION CHARGES,
CONTINGENT DEFERRED SALES CHARGES, OR MORTALITY AND EXPENSE
RISK PREMIUMS.
THE PERFORMANCE OF THE PORTFOLIO ASSUMES THE REINVESTMENT
OF ALL DIVIDENDS AND CAPITAL GAINS. THE STANDARD & POOR'S
500 INDEX IS AN UNMANAGED INDEX OF 500 STOCKS WEIGHTED BY
MARKET CAPITALIZATION WITH DIVIDENDS REINVESTED. INVESTMENT
MANAGEMENT FEES HAVE BEEN APPLIED TO THE CALCULATION OF
PORTFOLIO PERFORMANCE, BUT NOT TO THE INDEX. IF PORTFOLIO INVESTMENT
MANAGEMENT FEES HAD BEEN APPLIED TO THE INDEX, THE INDEX
VALUES WOULD HAVE BEEN LOWER.
INVESTMENT RETURNS ARE HISTORICAL AND NOT PREDICTIVE OF FUTURE
PERFORMANCE. PORTFOLIO SHARE PRICES AND INVESTMENT RETURNS
WILL FLUCTUATE.
HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
TEN LARGEST HOLDINGS NET ASSETS
- -------------------------------------------------------------------------
<S> <C>
Chancellor Media Corp. ............................................ 8.5%
(Broadcasting--Television, Radio & Cable)
Conseco, Inc. ...................................................... 7.6
(Insurance--Life-Health)
Nu Skin Enterprises (Class A) ....................................... 4.4
(Distributors--Food & Health)
Emmis Broadcasting Corp. (Class A) .................................. 4.1
(Broadcasting--Television, Radio & Cable)
United Stationers, Inc. ............................................ 3.5
(Office Equipment & Supplies)
Finova Group, Inc. ................................................. 3.3
(Financial--Diversified)
MICROS Systems, Inc. ............................................... 3.0
(Computer--Hardware)
Mail-Well, Inc. .................................................... 3.0
(Specialty Printing)
Creditrust Corp. ................................................... 2.9
(Consumer Finance)
Family Golf Centers ................................................. 2.7
(Leisure Time--Products)
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MARKET CAPITALIZATION
AS A PERCENTAGE OF NET ASSETS
<S> <C>
Large-Cap (over $4 billion) 17%
Mid-Cap ($1 billion-$4 billion) 9%
Small-Cap (under $1 billion) 74%
Cash & Other 0%
</TABLE>
- 7 -
<PAGE>
JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
GROWTH PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (000'S)
- -------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - 99.8%
AIR FREIGHT - 0.1%
74,000 *Dynamex, Inc. $ 213
AUTO PARTS & EQUIPMENT - 0.6%
608,500 *+Precision Auto Care, Inc. 1,864
BANKS (MAJOR REGIONAL) - 0.3%
40,495 Provident Bankshares Corp. 942
BIOTECHNOLOGY - 0.2%
45,000 *CryoLife, Inc. 551
BROADCASTING (TV, RADIO & CABLE) - 12.5%
507,554 *Chancellor Media Corp. 27,979
271,400 *Emmis Communications Corp. (Class A) 13,400
CHEMICALS (SPECIALTY) - 0.4%
132,600 *TETRA Technologies, Inc. 1,218
COMMUNICATION EQUIPMENT - 0.8%
132,000 *Research In Motion, Ltd. 2,673
COMPUTERS (HARDWARE) - 3.5%
48,300 *Equitrac Corp. 912
293,400 *MICROS Systems, Inc. 9,976
72,000 *Optimal Robotics Corp. 716
COMPUTERS (PERIPHERALS) - 0.7%
82,000 *Quantum Corp. 1,978
3,800 *WorldGate Communications, Inc. 195
COMPUTERS (SOFTWARE & SERVICES) - 2.9%
38,300 *Aspen Technology, Inc. 450
88,527 Autodesk, Inc. 2,617
90,000 *Cadence Design Systems, Inc. 1,148
130,600 *Cambridge Technology
Partners, Inc. 2,294
35,800 *Ciber, Inc. 685
2,500 *internet.com Corp. 31
340,000 *Phoenix International Ltd., Inc. 2,168
11,200 *topjobs.net, plc (ADR) 63
6,200 *TRO Learning, Inc. 38
<CAPTION>
VALUE
SHARES (000'S)
- -------------------------------------------------------------------------
<C> <S> <C>
CONSUMER FINANCE - 4.4%
349,250 Creditrust Corp. $ 9,692
171,000 Doral Financial Corp. 2,950
231,800 *Towne Services, Inc. 1,825
16,250 *Waterside Capital Corp. 112
DISTRIBUTORS (FOOD & HEALTH) - 4.9%
735,200 *Nu Skin Enterprises, Inc.
(Class A) 14,658
379,060 Weider Nutrition International,
Inc. 1,564
ELECTRICAL EQUIPMENT - 0.5%
96,700 *PCD, Inc. 1,064
117,600 *Ultrak, Inc. 691
ENTERTAINMENT - 0.6%
64,400 *Championship Auto Racing
Teams, Inc. 1,928
FINANCIAL (DIVERSIFIED) - 3.6%
124,400 *BNC Mortgage, Inc. 778
207,533 Finova Group, Inc. 10,921
96,900 *United Panam Financial Corp. 315
HEALTH CARE (DIVERSIFIED) - 1.7%
98,400 *Anesta Corp. 2,011
429,000 *Emisphere Technologies, Inc. 3,030
33,000 *OrthAlliance, Inc. (Class A) 243
80,000 *Synaptic Pharmaceutical Corp. 380
HEALTH CARE (DRUGS-GENERIC & OTHER) - 2.5%
362,000 *Dura Pharmaceuticals, Inc. 4,321
466,000 *+Nastech Pharmaceutical Co., Inc. 1,544
171,300 *PathoGenesis Corp. 2,430
HEALTH CARE (HOSPITAL MANAGEMENT) - 0.2%
103,917 *AmSurg Corp. (Class B) 792
HEALTH CARE (LONG-TERM CARE) - 0.1%
8,500 *Res-Care, Inc. 193
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 8 -
<PAGE>
SAFECO RESOURCE SERIES TRUST
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
GROWTH PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (000'S)
- -------------------------------------------------------------------------
<C> <S> <C>
HEALTH CARE (MAJOR PHARMACEUTICALS) - 5.8%
63,300 Alpharma, Inc. $ 2,251
216,800 Mylan Laboratories, Inc. 5,745
30,000 *PharmaPrint, Inc. 150
874,500 *Serologicals Corp. 7,105
45,000 *SuperGen, Inc. 689
51,881 Teva Pharmaceutical Industries,
Ltd. (ADR) 2,542
55,100 *Zonagen, Inc. 510
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 6.2%
140,400 *Datascope Corp. 4,510
51,100 *Haemonetics Corp. 1,025
231,000 *Lifeline Systems, Inc. 4,447
543,900 *+PolyMedica Industries, Inc. 5,439
597,900 *Quidel Corp. 1,906
79,700 *Senetek, plc (ADR) 115
150,000 *Ventana Medical Systems, Inc. 2,869
HEALTH CARE (SPECIALIZED SERVICES) - 1.0%
177,700 *American Healthcorp, Inc. 1,477
268,450 *Prime Medical Services, Inc. 1,980
HOUSEHOLD FURNISHINGS & APPLIANCES - 0.3%
81,100 *International Comfort Products Corp. 923
HOUSEHOLD PRODUCTS (NON-DURABLES) - 0.1%
117,500 *U.S. Home & Garden, Inc. 441
HOUSEWARES - 1.0%
117,800 First Years, Inc. 1,767
196,000 *Home Products International, Inc. 1,666
INSURANCE (LIFE & HEALTH) - 7.6%
823,637 Conseco, Inc. 25,069
LEISURE TIME (PRODUCTS) - 3.1%
165,300 *American Coin Merchandising, Inc. 1,075
1,175,025 *Family Golf Centers, Inc. 9,033
LODGING (HOTELS) - 2.4%
172,200 *ResortQuest International, Inc. 1,421
1,022,800 *+Suburban Lodges of America, Inc. 6,584
MACHINERY (DIVERSIFIED) - 0.4%
168,450 Chart Industries, Inc. 1,327
<CAPTION>
VALUE
SHARES (000'S)
- -------------------------------------------------------------------------
<C> <S> <C>
MANUFACTURING (DIVERSIFIED) - 1.6%
90,900 *Nortek, Inc. $ 2,846
104,900 *Recovery Engineering, Inc. 1,783
43,000 *SurModics, Inc. 704
MANUFACTURING (SPECIALIZED) - 0.6%
252,500 *Teardrop Golf Co. 663
30,000 *Zomax Optical Media, Inc. 1,320
OFFICE EQUIPMENT & SUPPLIES - 4.7%
331,900 *+Open Plan Systems, Inc. 747
491,950 *+TRM Copy Centers Corp. 3,228
518,400 *United Stationers, Inc. 11,405
PERSONAL CARE - 0.5%
211,700 *French Fragrances, Inc. 1,548
REAL ESTATE INVESTMENT TRUST - 0.1%
26,850 Prison Realty Corp. 263
RESTAURANTS - 0.3%
98,400 *Schlotzsky's, Inc. 1,076
RETAIL (DEPARTMENT STORES) - 0.8%
51,700 *Rainbow Rentals, Inc, 595
27,000 *Value City Department Stores, Inc. 331
66,700 *Whitehall Jewellers, Inc. 1,780
RETAIL (FOOD CHAINS) - 1.2%
266,800 *NPC International, Inc. 4,102
RETAIL (GENERAL MERCHANDISE) - 0.1%
43,200 *Central Garden & Pet Co. 443
RETAIL (HOME SHOPPING) - 1.0%
412,200 *+Damark International, Inc. 3,452
RETAIL (SPECIALTY) - 1.8%
40,700 *1-800 Contacts, Inc. 763
118,500 *Blue Rhino Corp. 1,089
165,100 *Funco, Inc. 3,044
80,500 *Travis Boats & Motors, Inc. 1,167
RETAIL (SPECIALTY-APPAREL) - 2.4%
435,200 *+Concepts Direct, Inc. 4,026
219,071 *Harold's Stores, Inc. 1,424
364,162 *Stage Stores, Inc. 2,367
SERVICES (ADVERTISING/MARKETING) - 0.2%
219,500 *APAC Teleservices, Inc. 713
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 9 -
<PAGE>
JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
GROWTH PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (000'S)
- -------------------------------------------------------------------------
<C> <S> <C>
SERVICES (COMMERCIAL & CONSUMER) - 10.1%
64,600 *Bluegreen Corp. $ 347
185,000 *Compass International Services
Corp. 1,295
278,500 *FirstService Corp. 4,247
454,900 *+IntelliQuest Information Group,
Inc. 3,412
169,800 *Iron Mountain, Inc. 4,861
51,600 *Navigant International, Inc. 406
194,475 *NCO Group, Inc. 7,390
152,100 *Protection One, Inc. 818
216,000 *Rent-A-Center, Inc. 5,184
145,800 *Rent-Way, Inc. 3,590
66,700 *Right Management Consultants,
Inc. 1,034
47,500 SunSource, Inc. 615
SERVICES (COMPUTER SYSTEMS) - 0.7%
170,600 *Computer Horizons Corp. 2,356
SERVICES (EMPLOYMENT) - 0.8%
17,600 *Alternative Resources Corp. 123
377,800 *Hall, Kinion & Associates, Inc. 2,645
SPECIALTY PRINTING - 3.0%
602,500 *Mail-Well, Inc. 9,753
<CAPTION>
VALUE
SHARES (000'S)
- -------------------------------------------------------------------------
<C> <S> <C>
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 0.6%
245,900 *CellStar Corp. $ 1,936
TELEPHONE - 0.8%
133,700 *Innotrac Corp. 2,707
-----------
TOTAL COMMON STOCKS 329,214
-----------
CASH EQUIVALENTS - 0.1%
INVESTMENT COMPANIES
210,624 SSgA Prime Money Market
Portfolio 211
-----------
TOTAL CASH EQUIVALENTS 211
-----------
TOTAL INVESTMENTS - 99.9% 329,425
Other Assets, less Liabilities 396
-----------
NET ASSETS $ 329,821
-----------
-----------
</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
- 10 -
<PAGE>
SAFECO RESOURCE SERIES TRUST
- --------------------------------------------------------------------------------
INVESTMENT REVIEW
REPORT FROM NORTHWEST PORTFOLIO MANAGER
The SAFECO RST Northwest Portfolio outpaced its Growth Portfolio peers and
the S&P 500 for the six months ended June 30, 1999; but still lags over the
12-month period.
SAFECO RST Northwest Portfolio returned 18.99% for the last six months while
the average Growth Insurance Portfolio returned 12.69% according to Lipper,
Inc., and the S&P returned 12.38%. For the year the Portfolio was up 15.02%,
while its peers returned 20.54% and the S&P gained 22.76%.
Northwest stocks have flourished over the last nine months as the market
anticipates renewed growth in Asian economies. In fact, the export companies
that hurt us so badly last year have helped us year-to-date.
However, it was a Seattle-based biotech that develops vaccines that made the
biggest contribution to our portfolio over the period. Corixa is gaining
investor visibility through partnerships and acquisitions.
[PHOTO OF BILL WHITLOW]
Helping us continue to outperform is our heavy weighting in technology
stocks. One aspect of my strategy regarding technology stocks is to buy
companies that enable Internet use, such as Microsoft, Intel, F5 Networks and
telecommunications providers.
F5 Networks is a company that went public on June 4, 1999 with a software
product that improves Internet efficiency. We sold our initial investment in F5
after it spiked 310%, but are retaining the rest at a 2.0% position. Visio Corp.
and Hewlett Packard Co., other members of our core technology pack, were other
big contributors during the latest quarter.
I reduced my position in two of our telecommunications holdings after they'd
done very well. Nextlink, a local exchange carrier, had gained 162% in first
half of '99 and Western Wireless of Issaquah, which was up 128%.
Microsoft--the largest company in terms of market value in the world, not
just the Northwest-- took a breather during the period. Microsoft now comprises
62% of the value of our universe of publicly-traded Northwest companies.
Conversely, Boeing is becoming less a part of the Northwest economy and it's
on the downside of its commercial aircraft cycle. We don't own it.
My overriding strategy is to buy and hold core growth stocks. Washington
Mutual, Microsoft, Costco, Starbucks and Expeditors International are stocks I
intend to keep in our portfolio, despite the vagaries of their short-term
performance. I'll cut their position size and take profits when these stocks are
trading richly; and I will add more shares when a fall from grace drops them
into our buy range.
I've over-weighted the Portfolio with technology and export-related
businesses, which I believe are the true long-term drivers of the Northwest
economy. I also try to take advantage of cyclical and sector opportunities as
they appear. Schnitzer Steel and Northwest Airlines are examples of two special
opportunities we're involved in because of their sensitivity to the unfolding
Asian recovery.
After the Asia crisis virtually scrapped Schnitzer Steel, I kept the stock as
a value play. Schnitzer has roughly half the West Coast market for scrap steel
with 30% of its business in Asia. Indeed, Schnitzer has come back nicely with
Asia.
Having concluded that Asia is improving, I initiated our position in
Northwest Airlines, which derives about one-third of its business from Asia.
Expeditors gives us Asian exposure as well. A high percentage of the freight it
handles originates or terminates in the Pacific Rim.
We expect growth in the Northwest economy, slowed by Boeing employment
reductions, to parallel the national economy through 2000. After that we expect
our regional economy, fueled by our Far East ties and our edge on technology, to
break away.
Bill 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 B.A. in chemistry from the U.
of Colorado and an M.B.A. from the U. of Calif. at Berkeley. He is a CFA and a
member of the Washington State Governor's Council of Economic Advisors.
- 11 -
<PAGE>
JUNE 30, 1999
- --------------------------------------------------------------------------------
INVESTMENT HIGHLIGHTS
AS OF JUNE 30, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
PERFORMANCE OVERVIEW
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED JUNE 30, 1999
<S> <C>
1 YEAR 15.02%
5 YEAR 15.04%
SINCE INCEPTION* 11.39%
</TABLE>
INVESTMENT VALUE
SAFECO RST NORTHWEST PORTFOLIO: $19,974
S&P 500 INDEX: $36,047
NW 50 INDEX: $35,914
<TABLE>
<CAPTION>
RST NORTHWEST S&P 500 NW 50
PORTFOLIO INDEX INDEX
<S> <C> <C> <C>
01/31/93 $10,000 $10,000 $10,000
02/28/93 $ 9,385 $10,136 $ 9,687
03/31/93 $ 9,633 $10,350 $10,086
04/30/93 $ 9,325 $10,100 $ 9,859
05/31/93 $ 9,563 $10,369 $10,103
06/30/93 $ 9,474 $10,400 $ 9,885
07/31/93 $ 9,425 $10,358 $ 9,531
08/31/93 $ 9,623 $10,750 $ 9,921
09/30/93 $ 9,722 $10,667 $ 9,698
10/31/93 $ 9,841 $10,888 $10,046
11/30/93 $ 9,901 $10,785 $10,262
12/31/93 $ 9,945 $10,915 $10,400
01/31/94 $10,146 $11,286 $10,714
02/28/94 $10,496 $10,980 $10,873
03/31/94 $10,216 $10,503 $10,490
04/30/94 $10,165 $10,637 $10,458
05/31/94 $10,055 $10,811 $10,616
06/30/94 $ 9,915 $10,546 $10,293
07/31/94 $10,086 $10,892 $10,374
08/31/94 $10,526 $11,337 $10,972
09/30/94 $10,535 $11,060 $10,553
10/31/94 $10,646 $11,308 $10,490
11/30/94 $10,396 $10,897 $10,302
12/31/94 $10,309 $11,058 $10,359
01/31/95 $10,097 $11,344 $10,314
02/28/95 $10,258 $11,786 $10,661
03/31/95 $10,661 $12,133 $10,999
04/30/95 $10,681 $12,490 $11,330
05/31/95 $10,812 $12,997 $11,331
06/30/95 $11,355 $13,299 $12,019
07/31/95 $12,040 $13,739 $12,474
08/31/95 $12,292 $13,773 $12,712
09/30/95 $12,071 $14,354 $13,179
10/31/95 $11,778 $14,303 $12,874
11/30/95 $11,516 $14,929 $13,066
12/31/95 $11,073 $15,217 $13,226
01/31/96 $11,043 $15,735 $13,663
02/29/96 $11,349 $15,881 $13,978
03/31/96 $11,972 $16,033 $13,904
04/30/96 $12,268 $16,269 $14,739
05/31/96 $12,452 $16,688 $14,978
06/30/96 $12,196 $16,752 $14,915
07/31/96 $11,707 $16,012 $14,186
08/31/96 $12,023 $16,350 $14,888
09/30/96 $12,207 $17,270 $15,274
10/31/96 $11,900 $17,746 $15,167
11/30/96 $12,391 $19,086 $16,263
12/31/96 $12,452 $18,708 $16,650
01/31/97 $13,315 $19,875 $17,395
02/28/97 $13,294 $20,032 $17,720
03/31/97 $12,749 $19,211 $17,234
04/30/97 $13,130 $20,356 $18,005
05/31/97 $13,962 $21,594 $19,479
06/30/97 $14,753 $22,561 $20,401
07/31/97 $16,057 $24,356 $22,261
08/31/97 $15,636 $22,992 $21,542
09/30/97 $16,417 $24,252 $23,050
10/31/97 $15,647 $23,443 $21,529
11/30/97 $16,438 $24,527 $22,838
12/31/97 $16,315 $24,948 $22,324
01/31/98 $16,121 $25,223 $22,237
02/28/98 $17,763 $27,042 $24,507
03/31/98 $17,892 $28,425 $25,676
04/30/98 $18,364 $28,711 $25,579
05/31/98 $17,001 $28,218 $24,343
06/30/98 $17,366 $29,364 $25,865
07/31/98 $16,336 $29,052 $24,284
08/31/98 $13,083 $24,856 $20,411
09/30/98 $13,835 $26,449 $21,372
10/31/98 $14,715 $28,598 $23,755
11/30/98 $16,003 $30,331 $26,471
12/31/98 $16,786 $32,077 $29,655
01/31/99 $17,828 $33,418 $31,158
02/28/99 $17,140 $32,379 $30,719
03/31/99 $17,366 $33,674 $32,894
04/30/99 $17,753 $34,977 $34,226
05/31/99 $18,547 $34,152 $34,298
06/30/99 $19,974 $36,047 $35,914
</TABLE>
*THE PORTFOLIO'S INCEPTION WAS JANUARY 7, 1993. PERFORMANCE
INFORMATION BEGINS ON JANUARY 31, 1993.
PERFORMANCE REPRESENTS THE PERFORMANCE OF THE NORTHWEST
PORTFOLIO, BUT DOES NOT INCLUDE DEDUCTIONS FOR ADMINISTRATION
CHARGES, CONTINGENT DEFERRED SALES CHARGES, OR MORTALITY AND
EXPENSE RISK PREMIUMS.
THE PERFORMANCE OF THE PORTFOLIO ASSUMES THE REINVESTMENT OF ALL
DIVIDENDS AND CAPITAL GAINS. THE STANDARD & POOR'S 500 INDEX IS AN
UNMANAGED INDEX OF 500 STOCKS WEIGHTED BY MARKET CAPITALIZATION
WITH DIVIDENDS REINVESTED. THE WM GROUP'S NORTHWEST 50
INDEX IS AN INDEX OF 50 NORTHWEST COMPANIES WEIGHTED BY THEIR REGIONAL
IMPACT. INVESTMENT MANAGEMENT FEES HAVE BEEN APPLIED TO THE
CALCULATION OF PORTFOLIO PERFORMANCE, BUT NOT TO THE INDEXES. IF
PORTFOLIO INVESTMENT MANAGEMENT FEES HAD BEEN APPLIED TO THE INDEXES,
THE INDEX VALUES WOULD HAVE BEEN LOWER. INVESTMENT RETURNS ARE
INVESTMENT RETURNS ARE HISTORICAL AND NOT PREDICTIVE OF FUTURE
PERFORMANCE. PORTFOLIO SHARE PRICES AND INVESTMENT RETURNS WILL
FLUCTUATE.
HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
TEN LARGEST HOLDINGS NET ASSETS
- -------------------------------------------------------------------------
<S> <C>
Microsoft Corp. ................................................... 6.7%
(Computer--Software & Services)
Visio Corp. ........................................................ 4.7
(Computer--Software & Services)
Costco Companies, Inc. ............................................. 3.8
(Retail--General Merchandise)
Hewlett-Packard Co. ................................................ 3.7
(Computer--Hardware)
Intel Corp. ........................................................ 3.6
(Electronics--Semiconductors)
Starbucks Corp. .................................................... 3.5
(Restaurants)
TJ International, Inc. ............................................. 3.4
(Building Materials)
Albertson's, Inc. .................................................. 3.4
(Retail--Food Chains)
Schnitzer Steel Industries .......................................... 3.3
(Iron & Steel)
Corixa Corp. ....................................................... 3.3
(Biotechnology)
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MARKET CAPITALIZATION
AS A PERCENTAGE OF NET ASSETS
<S> <C>
Large-Cap (over $4 billion) 36%
Mid-Cap ($1 billion-$4 billion) 18%
Small-Cap (under $1 billion) 44%
Cash & Other 2%
</TABLE>
- 12 -
<PAGE>
SAFECO RESOURCE SERIES TRUST
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
NORTHWEST PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (000'S)
- -------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - 98.0%
AIR FREIGHT - 2.9%
32,000 Expeditors International of Washington,
Inc. $ 872
AIRLINES - 1.6%
15,000 *Northwest Airlines Corp. 488
BANKS (MAJOR REGIONAL) - 4.4%
24,892 U.S. Bancorp 846
26,960 West Coast Bancorp, Inc. 472
BANKS (REGIONAL) - 2.0%
30,300 Heritage Financial Corp. 259
31,000 Washington Banking Co. 326
BIOTECHNOLOGY - 3.3%
55,000 *Corixa Corp. 980
BUILDING MATERIALS - 3.4%
32,500 TJ International, Inc. 1,008
CHEMICALS (DIVERSIFIED) - 3.0%
55,000 Penford Corp. 894
COMPUTERS (HARDWARE) - 4.2%
7,600 *Apex, Inc. 156
11,000 Hewlett-Packard Co. 1,106
COMPUTERS (SOFTWARE & SERVICES) - 14.9%
14,500 *F5 Networks, Inc. 595
22,200 *Microsoft Corp. 2,002
21,000 *ONYX Software Corp. 454
37,000 *Visio Corp. 1,408
ELECTRONICS (SEMICONDUCTORS) - 3.6%
18,000 Intel Corp. 1,071
ENGINEERING & CONSTRUCTION - 2.0%
57,000 *Morrison Knudsen Corp. 588
HEALTH CARE (DIVERSIFIED) - 1.7%
9,000 American Home Products Corp. 518
HEALTH CARE (DRUGS-GENERIC & OTHER) - 1.5%
30,500 *PathoGenesis Corp. 433
HEALTH CARE (LONG-TERM CARE) - 3.1%
104,000 *Assisted Living Concepts, Inc.
(illiquid) $ 299
62,000 *Emeritus Corp. 612
<CAPTION>
VALUE
SHARES (000'S)
- -------------------------------------------------------------------------
<C> <S> <C>
HEALTH CARE (MAJOR PHARMACEUTICALS) - 4.6%
34,000 Mylan Laboratories, Inc. 901
60,000 *Penwest Pharmaceuticals Co. 480
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 4.3%
91,500 *Protocol Systems, Inc. 795
28,000 *SonoSite, Inc. 476
INSURANCE (LIFE & HEALTH) - 3.0%
30,000 *StanCorp Financial Group, Inc. 900
IRON & STEEL - 3.3%
44,000 Schnitzer Steel Industries, Inc. 987
LEISURE TIME (PRODUCTS) - 2.9%
58,000 *Ambassadors International, Inc. 863
LODGING (HOTELS) - 1.9%
65,800 *Cavanaughs Hospitality Corp. 555
RESTAURANTS - 3.5%
27,500 *Starbucks Corp. 1,033
RETAIL (FOOD CHAINS) - 6.6%
19,500 Albertson's, Inc. 1,006
34,000 Kroger Co. 950
RETAIL (GENERAL MERCHANDISE) - 3.8%
14,000 *Costco Companies, Inc. 1,121
SAVINGS & LOANS - 4.1%
25,000 Riverview Bancorp, Inc. 281
27,000 Washington Mutual, Inc. 955
SERVICES (DATA PROCESSING) - 2.8%
100,000 *ARIS Corp. 831
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 2.9%
17,000 *VoiceStream Wireless Corp. 483
14,500 *Western Wireless Corp. (Class A) 392
TELEPHONE - 2.9%
11,500 *NEXTLINK Communications,
Inc. (Class A) 855
-----------
TOTAL COMMON STOCKS 29,249
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 13 -
<PAGE>
JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
NORTHWEST PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (000'S)
- -------------------------------------------------------------------------
<C> <S> <C>
CASH EQUIVALENTS - 1.2%
INVESTMENT COMPANIES
349,191 SSgA Prime Money Market
Portfolio $ 349
-----------
TOTAL CASH EQUIVALENTS 349
-----------
TOTAL INVESTMENTS - 99.2% 29,598
Other Assets, less Liabilities 237
-----------
NET ASSETS $ 29,835
-----------
-----------
</TABLE>
* Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
- 14 -
<PAGE>
SAFECO RESOURCE SERIES TRUST
- --------------------------------------------------------------------------------
INVESTMENT REVIEW
REPORT FROM SMALL COMPANY PORTFOLIO MANAGER
The SAFECO RST Small Company Portfolio's performance has been disappointing.
For the six and 12 months ended June 30, 1999, the Portfolio returned -6.38% and
- -36.28%, respectively. For the same periods the average Small Company Insurance
Portfolio returned 9.88% and 4.66% according to Lipper, Inc. The Russell 2000
returned 9.29% and 1.50%, respectively.
While a few of our stocks were punished for earnings disappointments, a
number of the Portfolio's holdings simply went unnoticed and continue to bear
very low valuations.
Over the past five quarters--as small cap value stocks grossly underperformed
the broad market--my strategy of purchasing stocks of sound businesses with low
valuations and improving prospects and earnings has failed to provide a
meaningful return. However, small cap stocks began to be recognized during the
second quarter. Unfortunately, our portfolio, with its $330 million weighted
average market capitalization, has yet to be affirmed.
[PHOTO OF GREG EISEN]
Still, I believe that other investors will ultimately recognize the value
that I perceive in our Portfolio and that recognition will result in a higher
share price.
One significant disappointment this period was in our largest holding,
Equitrac. Equitrac was slated to be bought out at $25 per share. With financing
in place and due diligence done, the buy-out investment firm renegotiated the
price to $21. That knocked 16% off the price of the buyout, turning the
anticipated gain into a loss.
I constantly reevaluate the Portfolio's holdings, asking if the reason I
purchased the stock in the first place still stands. While I eliminated
positions that failed on that account, such as Stage Stores and Platinum
Software, I'm holding those, such as Litchfield Financial Corp, which still make
sense.
Litchfield makes land and timeshare loans, which banks normally do not. The
high yields on these loans provide good return. In fact Litchfield has a long
record of 20% or better earnings growth, yet their stock is trading at 10 times
earnings. I have to believe patience here will ultimately be rewarded.
I'm also waiting on International Aircraft Investors, a microcap that leases
narrow body aircraft to passenger airlines. If they do nothing, their current
leases assure they'll earn $0.90 per share on what is now a $7 stock. Yet,
they've embarked on an expansion plan that could grow earnings 30%. I believe
this is a stock waiting to be "discovered".
I have been buying new names with "larger" capitalizations (greater than $500
Million) in order to raise the Portfolio's average capitalization. We bought
Central Parking and Rent-a-Center on price dips. Central Parking is the largest
operator of parking facilities in the country and has very good cash flow
characteristics.
Rent-a-Center is our second holding in the rent-to-own industry, the other
being Rent Way. Both companies are consolidators and can grow earnings by
bringing their acquired stores' level of profitability up to their existing
stores. These two stocks may stay under pressure until they show the earnings
improvements expected.
In the first quarter, I bought OfficeMax and Imax. Imax has an exclusive
engagement with Disney to screen Fantasia 2000.
Though our weighted average market capitalization grew to $330 million, the
Portfolio is still tilted towards a value style. At period end the Portfolio's
price/earnings ratio on year 1999 earnings estimates was 13 times. The
Portfolio's PEG ratio, which compares price/earnings to the company's forward
growth rate, was .50 times. It's an additional indication that the portfoilo is
inexpensively valued.
Going forward I'll be searching for more liquid stocks, with larger market
capitalizations, while adhering to my discipline of buying solid small company
stocks at attractive valuations.
Greg Eisen
- --------------------------------------------------------------------------------
Greg Eisen joined SAFECO in 1986. He holds a B.A. from Rutgers University and is
a certified public accountant and a Chartered Financial Analyst.
- 15 -
<PAGE>
JUNE 30, 1999
- --------------------------------------------------------------------------------
INVESTMENT HIGHLIGHTS
AS OF JUNE 30, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
PERFORMANCE OVERVIEW
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED JUNE 30, 1999
<S> <C>
1 YEAR (36.28)%
SINCE INCEPTION* (1.76)%
</TABLE>
INVESTMENT VALUE
SAFECO RST SMALL PORTFOLIO: $9,622
RUSSELL 2000: $13,733
<TABLE>
<CAPTION>
SAFECO
RST SMALL
PORTFOLIO RUSSELL 2000
<S> <C> <C>
04/30/97 $10,000 $10,000
05/31/97 $10,680 $11,113
06/30/97 $11,230 $11,590
07/31/97 $12,010 $12,131
08/31/97 $12,240 $12,404
09/30/97 $13,450 $13,310
10/31/97 $12,920 $12,718
11/30/97 $12,840 $12,631
12/31/97 $12,840 $12,858
01/31/98 $12,757 $12,662
02/28/98 $14,006 $13,612
03/31/98 $15,495 $14,184
04/30/98 $16,162 $14,262
05/31/98 $15,443 $13,497
06/30/98 $15,100 $13,535
07/31/98 $13,507 $12,430
08/31/98 $ 9,549 $10,020
09/30/98 $ 9,998 $10,796
10/31/98 $ 9,726 $11,238
11/30/98 $ 9,892 $11,832
12/31/98 $10,278 $12,571
01/31/99 $10,611 $12,734
02/28/99 $ 9,956 $11,702
03/31/99 $ 9,414 $11,885
04/30/99 $ 9,331 $12,950
05/31/99 $ 9,403 $13,139
06/30/99 $ 9,622 $13,733
</TABLE>
*THE PORTFOLIO'S INCEPTION WAS MAY 1, 1997. PERFORMANCE
INFORMATION BEGINS ON MAY 1, 1997.
PERFORMANCE REPRESENTS THE PERFORMANCE OF THE SMALL COMPANY
PORTFOLIO, BUT DOES NOT INCLUDE DEDUCTIONS FOR ADMINISTRATION
CHARGES, CONTINGENT DEFERRED SALES CHARGES, OR MORTALITY AND
EXPENSE RISK PREMIUMS.
THE PERFORMANCE OF THE PORTFOLIO ASSUMES THE REINVESTMENT OF ALL
DIVIDENDS AND CAPITAL GAINS. THE RUSSELL 2000 INDEX IS AN
UNMANAGED INDEX THAT IS REPRESENTATIVE OF THE SMALL CAP MARKET.
INVESTMENT MANAGEMENT FEES HAVE HAVE BEEN APPLIED TO THE
CALCULATION OF PORTFOLIO PERFORMANCE, BUT NOT TO THE INDEX.
IF PORTFOLIO INVESTMENT MANAGEMENT FEES HAD BEEN APPLIED TO THE
INDEX, THE INDEX VALUE WOULD HAVE BEEN LOWER.
INVESTMENT RETURNS ARE HISTORICAL AND NOT PREDICTIVE OF FUTURE
PERFORMANCE. PORTFOLIO SHARE PRICES AND INVESTMENT RETURNS WILL
FLUCTUATE.
HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
TEN LARGEST HOLDINGS NET ASSETS
- -------------------------------------------------------------------------
<S> <C>
Equitrac Corp. .................................................... 7.7%
(Computers--Hardware)
Litchfield Financial ................................................ 5.8
(Financial--Diversified)
Ingles Markets, Inc. ............................................... 4.8
(Retail--Food Chains)
International Aircraft Investors, Inc. ............................. 4.8
(Aerospace/Defense)
Rollins Truck Leasing Corp. ........................................ 4.2
(Trucking)
Timberline Software Corp. .......................................... 3.9
(Computers--Software & Services)
Imax Corp. ......................................................... 3.8
(Manufacturing Specialized)
Craig Corp. ........................................................ 3.5
(Entertainment)
MICROS Systems, Inc. ............................................... 3.4
(Computers--Hardware)
Vallen Corp. ....................................................... 3.3
(Health Care--Medical Products & Supplies)
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MARKET CAPITALIZATION
AS A PERCENTAGE OF NET ASSETS
<S> <C>
Large-Cap (over $4 billion) 0%
Mid-Cap ($1 billion-$4 billion) 6%
Small-Cap:
Large (over $750 million) 0%
Medium ($250-$750 million) 26%
Small (under $250 million) 56%
Cash & Other 12%
</TABLE>
- 16 -
<PAGE>
SAFECO RESOURCE SERIES TRUST
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SMALL COMPANY PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (000'S)
- -------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - 87.3%
AEROSPACE/DEFENSE - 4.8%
75,950 *International Aircraft Investors, Inc. $ 536
BANKS (REGIONAL) - 2.5%
18,149 *Hanmi Bank (Los Angeles, CA) 286
BROADCASTING (TV, RADIO & CABLE) - 2.0%
4,600 *Emmis Communications Corp.
(Class A) 227
COMPUTERS (HARDWARE) - 12.8%
3,300 *Apex, Inc. 68
45,700 *Equitrac Corp. 863
11,400 *MICROS Systems, Inc. 388
12,500 *Optimal Robotics Corp. 124
COMPUTERS (SOFTWARE & SERVICES) - 7.2%
10,300 *3Dfx Interactive, Inc. 161
8,000 *ITT Educational Services, Inc. 209
27,900 Timberline Software Corp. 439
ELECTRONICS (DEFENSE) - 0.8%
11,150 *Comptek Research, Inc. 90
FINANCIAL (DIVERSIFIED) - 11.1%
17,300 *Hawthorne Financial Corp. 281
38,300 Litchfield Financial Corp. 649
26,800 *Ragen MacKenzie Group, Inc. 318
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 4.8%
86,800 *InnerDyne, Inc. 174
23,100 *Vallen Corp. 370
INSURANCE (PROPERTY-CASUALTY) - 2.6%
34,400 *American Safety Insurance Group,
Ltd. 290
LODGING (HOTELS) - 0.7%
9,000 *ResortQuest International, Inc. 74
<CAPTION>
VALUE
SHARES (000'S)
- -------------------------------------------------------------------------
<C> <S> <C>
MANUFACTURING (DIVERSIFIED) - 3.3%
37,000 *Lancer Corp. $ 310
11,200 *Motorcar Parts & Accessories,
Inc. 60
MANUFACTURING (SPECIALIZED) - 3.8%
18,800 *Imax Corp. 423
PERSONAL CARE - 2.8%
15,200 *French Fragrances, Inc. 111
16,000 *Styling Technology Corp. 208
RESTAURANTS - 1.6%
17,200 *Taco Cabana, Inc. (Class A) 175
RETAIL (DEPARTMENT STORES) - 1.4%
18,000 *Musicland Stores Corp. 160
RETAIL (DISCOUNTERS) - 2.9%
27,000 *OfficeMax, Inc. 324
RETAIL (FOOD CHAINS) - 4.8%
35,500 Ingles Markets, Inc. 541
SERVICES (ADVERTISING/MARKETING) - 2.4%
26,900 *HA-LO Industries, Inc. 266
SERVICES (COMMERCIAL & CONSUMER) - 8.9%
10,700 Central Parking Corp. 366
14,222 *Monro Muffler Brake, Inc. 114
10,500 *Rent-A-Center, Inc. 252
10,800 *Rent-Way, Inc. 266
TEXTILES (HOME FURNISHINGS) - 2.2%
83,000 *Krause's Furniture, Inc. 244
TRUCKING - 4.2%
42,600 Rollins Truck Leasing Corp. 474
-----------
TOTAL COMMON STOCKS 9,840
-----------
PREFERRED STOCKS - 3.5%
ENTERTAINMENT - 3.5%
55,200 *Craig Corp. (Class A) 390
-----------
TOTAL PREFERRED STOCKS 390
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 17 -
<PAGE>
JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SMALL COMPANY PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (000'S)
- -------------------------------------------------------------------------
<C> <S> <C>
CASH EQUIVALENTS - 6.1%
INVESTMENT COMPANIES
557,196 SSgA Prime Money Market
Portfolio $ 557
131,636 SSgA U.S. Treasury Money
Market Portfolio 132
-----------
TOTAL CASH EQUIVALENTS 689
-----------
TOTAL INVESTMENTS - 96.8% 10,919
Other Assets, less Liabilities 356
-----------
NET ASSETS $ 11,275
-----------
-----------
</TABLE>
* Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
- 18 -
<PAGE>
SAFECO RESOURCE SERIES TRUST
- --------------------------------------------------------------------------------
INVESTMENT REVIEW
REPORT FROM BOND PORTFOLIO MANAGER
The SAFECO RST Bond Portfolio lagged the Lehman Brothers Government/Corporate
Index for the year-to-date and one-year with returns of -3.77% vs.-2.28 and
0.43% vs 2.70%. The Portfolio also trailed its Lipper, Inc. Insurance Portfolio
peer group, which returned -0.50% and 0.69% for the six and 12-month periods.
Paradoxically, the largest single factor contributing to this year's
under-performance is the Portfolio's conservative structure. Traditionally, the
Portfolio has maintained about half of its assets in intermediate-term bonds
with maturities between 5 to 10 years, invested primarily in U.S. Governments
and high-quality corporates. In this maturity range, the fixed-income investor
usually receives a generous yield premium and limited interest rate risk.
However, securities on this part of the yield curve have been punished so far
this year by fears of prolonged Federal Reserve interest rate hikes, massive new
issue supply and mortgage-backed securities hedging activity. As a result of the
high-quality intermediate-term securities underperformed the broader market
averages and so did our portfolio.
[PHOTO OF MICHAEL HUGHES]
Surprisingly robust economic growth during the second quarter fueled fears
that the Federal Reserve would embark on an extended series of interest rate
increases. As expected, the Fed did raise the fed funds rate by a quarter of a
point on June 30, 1999 citing concerns about inflation. Interest rates increased
by roughly 0.5%, with yields in the 5 to 10-year range increasing the most.
I continued to take steps to improve overall portfolio yield, quality, and
liquidity. For example, I sold bonds issued by The Tandy Corporation (Radio
Shack) and purchased paper issued by Sears. The Tandy bonds were part of a $150
million issue that rarely trades, while the Sears bonds were part of a $750
million issue that is very actively traded.
I believe the Portfolio is structured to perform very well on a relative
basis should economic or market conditions deteriorate. The Portfolio holds 66%
of its assets is in U.S. Government securities.
Going forward, the markets will agonize over each new piece of economic news.
It is unlikely we are going to see any concrete signs of economic moderation in
the near-term (six to eight weeks), and the market will continue to trade under
a cloud of potential Fed increases. In the fall, I think the Fed will be less
likely to raise rates for three reasons. One, the increases we've seen year to
date will have begun to slow the economy. Two, August through October are
historically bad months for the stock market and the Fed would be unlikely to
raise rates in the face of potential financial market dislocations. And, three,
with Y2K concerns casting a potentially dark shadow over the market, the Fed
will not want to do anything to make the situation worse.
Michael Hughes
- --------------------------------------------------------------------------------
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 University of Colorado in Boulder and holds an M.B.A. from the University
of Southern California in Los Angeles. He is a Chartered Financial Analyst.
- 19 -
<PAGE>
JUNE 30, 1999
- --------------------------------------------------------------------------------
INVESTMENT HIGHLIGHTS
AS OF JUNE 30, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
PERFORMANCE OVERVIEW
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED JUNE 30, 1999
<S> <C>
1 YEAR 0.43%
5 YEAR 6.33%
10 YEAR 6.81%
</TABLE>
INVESTMENT VALUE
SAFECO RST BOND PORTFOLIO: $19,516
LEHMAN G/C: $21,842
<TABLE>
<CAPTION>
SAFECO RST BOND LEHMAN G/C
PORTFOLIO INDEX
<S> <C> <C>
06/30/89 $10,000 $10,000
07/31/89 $10,209 $10,208
08/31/89 $10,095 $10,050
09/30/89 $10,124 $10,094
10/31/89 $10,304 $10,349
11/30/89 $10,381 $10,443
12/31/89 $10,409 $10,458
01/31/90 $10,338 $10,315
02/28/90 $10,379 $10,338
03/31/90 $10,409 $10,339
04/30/90 $10,359 $10,244
05/31/90 $10,573 $10,541
06/30/90 $10,696 $10,711
07/31/90 $10,829 $10,844
08/31/90 $10,788 $10,687
09/30/90 $10,808 $10,776
10/31/90 $10,901 $10,919
11/30/90 $11,034 $11,157
12/31/90 $11,093 $11,325
01/31/91 $11,171 $11,452
02/28/91 $11,270 $11,551
03/31/91 $11,347 $11,630
04/30/91 $11,478 $11,764
05/31/91 $11,566 $11,820
06/30/91 $11,534 $11,807
07/31/91 $11,676 $11,955
08/31/91 $11,896 $12,230
09/30/91 $12,072 $12,486
10/31/91 $12,215 $12,597
11/30/91 $12,325 $12,723
12/31/91 $12,645 $13,152
01/31/92 $12,563 $12,957
02/29/92 $12,563 $13,026
03/31/92 $12,481 $12,954
04/30/92 $12,574 $13,032
05/31/92 $12,785 $13,285
06/30/92 $12,973 $13,480
07/31/92 $13,277 $13,825
08/31/92 $13,371 $13,948
09/30/92 $13,640 $14,138
10/31/92 $13,371 $13,921
11/30/92 $13,288 $13,909
12/31/92 $13,507 $14,148
01/31/93 $13,807 $14,457
02/28/93 $14,107 $14,757
03/31/93 $14,182 $14,807
04/30/93 $14,294 $14,921
05/31/93 $14,270 $14,914
06/30/93 $14,531 $15,253
07/31/93 $14,594 $15,350
08/31/93 $14,931 $15,703
09/30/93 $15,018 $15,758
10/31/93 $15,093 $15,823
11/30/93 $14,856 $15,644
12/31/93 $14,932 $15,713
01/31/94 $15,147 $15,949
02/28/94 $14,771 $15,601
03/31/94 $14,462 $15,219
04/30/94 $14,368 $15,092
05/31/94 $14,368 $15,065
06/30/94 $14,355 $15,030
07/31/94 $14,529 $15,331
08/31/94 $14,583 $15,337
09/30/94 $14,449 $15,106
10/31/94 $14,449 $15,089
11/30/94 $14,435 $15,062
12/31/94 $14,494 $15,161
01/31/95 $14,694 $15,452
02/28/95 $14,935 $15,811
03/31/95 $15,020 $15,917
04/30/95 $15,219 $16,138
05/31/95 $15,787 $16,814
06/30/95 $15,915 $16,949
07/31/95 $15,801 $16,883
08/31/95 $16,015 $17,099
09/30/95 $16,185 $17,273
10/31/95 $16,456 $17,527
11/30/95 $16,782 $17,816
12/31/95 $17,085 $18,078
01/31/96 $17,130 $18,190
02/29/96 $16,722 $17,804
03/31/96 $16,556 $17,655
04/30/96 $16,541 $17,533
05/31/96 $16,571 $17,503
06/30/96 $16,692 $17,738
07/31/96 $16,737 $17,779
08/31/96 $16,767 $17,736
09/30/96 $16,934 $18,052
10/31/96 $17,130 $18,472
11/30/96 $17,342 $18,812
12/31/96 $17,177 $18,603
01/31/97 $17,225 $18,626
02/28/97 $17,177 $18,665
03/31/97 $16,970 $18,443
04/30/97 $17,177 $18,712
05/31/97 $17,305 $18,886
06/30/97 $17,513 $19,113
07/31/97 $18,008 $19,697
08/31/97 $17,800 $19,477
09/30/97 $18,087 $19,783
10/31/97 $18,376 $20,099
11/30/97 $18,392 $20,206
12/31/97 $18,621 $20,418
01/31/98 $18,942 $20,706
02/28/98 $18,874 $20,664
03/31/98 $18,925 $20,728
04/30/98 $18,992 $20,832
05/31/98 $19,228 $21,055
06/30/98 $19,432 $21,270
07/31/98 $19,415 $21,287
08/31/98 $19,870 $21,702
09/30/98 $20,392 $22,322
10/31/98 $20,173 $22,164
11/31/98 $20,207 $22,297
12/31/98 $20,279 $22,350
01/31/99 $20,387 $22,509
02/28/99 $19,835 $21,973
03/31/99 $19,907 $22,083
04/30/99 $19,942 $22,138
05/31/99 $19,657 $21,910
06/30/99 $19,516 $21,842
</TABLE>
PERFORMANCE REPRESENTS THE PERFORMANCE OF THE BOND
PORTFOLIO, BUT DOES NOT INCLUDE DEDUCTIONS FOR ADMINISTRATION
CHARGES, CONTINGENT DEFERRED SALES CHARGES, OR MORTALITY
AND EXPENSE RISK PREMIUMS.
THE PERFORMANCE OF THE PORTFOLIO ASSUMES THE REINVESTMENT
OF ALL DIVIDENDS AND CAPITAL GAINS. THE LEHMAN GOV'T/CORP.
INDEX IS A REPRESENTATIVE TOTAL RETURN BENCHMARK FOR THE
PORTFOLIO. INVESTMENT MANAGEMENT FEES HAVE BEEN APPLIED
TO THE CALCULATION OF PORTFOLIO PERFORMANCE, BUT NOT TO THE
INDEX. IF PORTFOLIO INVESTMENT MANAGEMENT FEES HAD BEEN
APPLIED TO THE INDEX, THE INDEX VALUES WOULD HAVE BEEN LOWER.
INVESTMENT RETURNS ARE HISTORICAL AND NOT PREDICTIVE OF FUTURE
PERFORMANCE. PORTFOLIO SHARE PRICES AND INVESTMENT RETURNS
WILL FLUCTUATE.
HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
TEN LARGEST HOLDINGS NET ASSETS
- -------------------------------------------------------------------------
<S> <C>
U.S. Treasury Note, 7.50%, due 11/15/16 ........................... 14.3%
U.S. Treasury Note, 6.50%, due 10/15/06 ............................. 8.3
U.S. Treasury Note, 5.375%, due 6/30/00 ............................. 7.9
FNMA Note, 6.375%, due 6/15/09 ...................................... 4.9
U.S. Treasury Note, 6.50%, due 8/15/05 .............................. 3.2
Nordstrom, Inc. 5.625%, due 1/15/09 ................................. 3.1
GNMA #467760, 7.00%, due 4/15/28 .................................... 3.1
Ford Motor Credit Co. 5.80%, due 1/12/09 ............................ 2.9
FNMA #313386, 7.00%, due 3/01/12 .................................... 2.9
FNMA #323602, 8.00%, due 2/15/29 .................................... 2.8
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MARKET CAPITALIZATION
AS A PERCENTAGE OF NET ASSETS
<S> <C>
AAA/U.S. Gov't/Agency 65%
AA 6%
A 21%
NR 3%
Cash and Other Assets 5%
</TABLE>
- 20 -
<PAGE>
SAFECO RESOURCE SERIES TRUST
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
BOND PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000'S) (000'S)
- -------------------------------------------------------------------------
<C> <S> <C>
ASSET BACKED SECURITIES - 8.3%
CONSUMER FINANCE - 2.9%
$900 MBNA Master Credit Card Trust
5.90%, due 8/15/11 $ 850
ELECTRIC COMPANIES - 1.6%
485 ComEd Transitional Funding
Trust 5.63%, due 6/25/09 459
FINANCIAL (DIVERSIFIED) - 4.0%
46 Chevy Chase Auto Receivables
Trust (Class A) 6.60%, due
12/15/02 46
888 Citicorp Mortgage Securities,
Inc. 6.50%, due 6/25/29 852
325 Heller Financial Commercial
Mortgage Asset Corp. 6.847%, due 5/15/31 323
-----------
TOTAL ASSET BACKED SECURITIES 2,530
-----------
CORPORATE BONDS - 27.3%
AIR FREIGHT - 2.6%
784 Federal Express Corp. 6.845%,
due 1/15/19 766
BANKS (MAJOR REGIONAL) - 1.5%
460 Bank of America Corp. 6.625%,
due 6/15/04 459
CANADIAN PROVINCES - 0.8%
250 Manitoba (Province) 7.75%, due
2/01/02 258
ENGINEERING & CONSTRUCTION - 1.0%
280 Halliburton Co. 6.75%, due
2/01/27 278
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000'S) (000'S)
- -------------------------------------------------------------------------
<C> <S> <C>
FINANCIAL (DIVERSIFIED) - 14.5%
$ 800 Aristar, Inc 7.25%, due 6/15/06 $ 803
725 CIT Group, Inc. 5.57%, due
12/08/03 692
980 Ford Motor Credit Co. 5.80%,
due 1/12/09 896
300 General Motors Acceptance Corp.
5.95%, due 3/14/03 293
755 Hertz Corp. 7.00%, due 7/01/04 761
335 Merrill Lynch & Co., Inc. 6.00%,
due 2/17/09 309
535 Sears Roebuck Acceptance Corp.
6.25%, due 5/01/09 503
NATURAL GAS - 2.9%
905 National Fuel Gas Co. 6.00%, due 3/01/09 842
RETAIL (DEPARTMENT STORES) - 3.4%
1,045 Nordstrom, Inc. 5.625%, due
1/15/09 952
RETAIL (GENERAL MERCHANDISE) - 0.9%
250 Dayton Hudson Corp. 9.40%,
due 2/15/01 261
TELEPHONE - 0.8%
115 AT&T Corp. 5.625%, due 3/15/04 111
145 AT&T Corp. 6.50%, due 3/15/29 130
-----------
TOTAL CORPORATE BONDS 8,314
-----------
MORTGAGE BACKED SECURITIES - 12.6%
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA) - 9.7%
242 6.00%, due 1/01/29 228
888 7.00%, due 3/01/12 892
833 8.00%, due 2/15/29 856
318 8.00%, due 4/01/08 330
553 9.50%, due 2/01/21 593
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA) - 3.2%
950 7.00%, due 4/15/28 939
-----------
TOTAL MORTGAGE BACKED SECURITIES
3,838
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 21 -
<PAGE>
JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
BOND PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000'S) (000'S)
- -------------------------------------------------------------------------
<C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS - 47.2%
U.S. FEDERAL AGENCY NOTES - 8.2%
$ 525 5.125%, due 2/13/04 $ 503
1,505 6.375%, due 6/15/09 1,489
500 6.875%, due 11/22/06 499
U.S. TREASURY NOTES - 40.4%
795 4.25%, due 11/15/03 750
2,390 5.375%, due 6/30/00 2,391
55 5.875%, due 6/30/00 55
445 6.375%, due 8/15/02 453
2,435 6.50%, due 10/15/06 2,513
950 6.50%, due 8/15/05 979
50 6.875%, due 3/31/00 51
310 7.25%, due 8/15/04 329
3,865 7.50%, due 11/15/16 4,345
-----------
TOTAL U.S. GOVERNMENT OBLIGATIONS
14,358
-----------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000'S) (000'S)
- -------------------------------------------------------------------------
<C> <S> <C>
CASH EQUIVALENTS - 3.5%
INVESTMENT COMPANIES
$1,074 SSgA Prime Money Market Portfolio $ 1,074
-----------
TOTAL CASH EQUIVALENTS 1,074
-----------
TOTAL INVESTMENTS - 98.9% 30,114
329
-----------
$ 30,443
-----------
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 22 -
<PAGE>
SAFECO RESOURCE SERIES TRUST
- --------------------------------------------------------------------------------
INVESTMENT REVIEW
REPORT FROM MONEY MARKET PORTFOLIO MANAGER
The SAFECO RST Money Market Portfolio returns slightly lagged the average
Money Market Insurance Portfolio for the six and 12 months ended June 30, 1999
according to Lipper, Inc. The Portfolio returned 2.17% and 4.72% respectively.
The Lipper averages for the same periods were 2.21% and 4.77%. The 12-month
return on the Portfolio was significantly higher than the 2.00% year-over-year
increase in the Consumer Price Index.
The average maturity of the Portfolio is 68 days, longer than the 61-day
average maturity of the other funds in my peer group according to IBC Financial
Data, Inc. This longer average maturity could hurt the Portfolio's performance
should short-term rates move further upward. I had adopted a longer maturity and
added one-year securities early in the second quarter before the interest-rate
outlook changed to increasing rates. The one-year pieces were issued by Goldman
Sachs, Heller Financial, and Homeside Lending.
I added new names after shareholders approved the increase in 144A paper
allowed in the Portfolio. This paper is about 5-10 basis points (5 to 10/100's
of 1%) cheaper than similarly rated public issues. New names include CC USA
Inc., Dorada Finance and Moat Funding. These are all asset-backed commercial
paper programs that commercial banks use to fund their loans. Creating and
selling commercial paper, the bank earns the spread between their loans and the
commercial paper rates. The banks work with the rating agencies to set up
diversification standards that result in top-tier short-term ratings. I hope to
approve additional 144A issuers.
[PHOTO OF NAOMI URATA]
Regarding the Portfolio's diversification, assets were diversified among
different industries so that no more than 25% of assets were invested in any one
sector. All the securities purchased had at least two ratings in the top
category, giving the Portfolio a Tier One status. The average maturity of the
Portfolio was no longer than 90 days at any point in time during the quarter and
the maturity of individual investments was no longer than 397 days.
Regarding the short-term fixed income market, rates held steady in the second
quarter until the middle of May. At that time, short-term rates rose sharply
from 4.90% to 5.20% in anticipation of the Federal Reserve's 0.25% increase in
the Fed Funds rate on June 30, 1999. The Fed announced a return to a neutral
bias after the meeting. Some economists believe that another rate hike could
occur in 1999 or 2000 due to the recovery of the global economy. On the other
hand, others believe that the Fed will not raise rates in order to ensure
liquidity for the banking system as we approach Y2K. In the meantime, I will
attempt to shorten my average maturity and look for more 144A issuers with
greater yields than traditional names.
Naomi Urata
- --------------------------------------------------------------------------------
Naomi Urata joined SAFECO in 1993 as a fixed-income analyst and began managing
the Money Market Portfolio in August of 1994. She holds a Master in Management
from Yale University and is a Chartered Financial Analyst.
- 23 -
<PAGE>
JUNE 30, 1999
- --------------------------------------------------------------------------------
INVESTMENT HIGHLIGHTS
AS OF JUNE 30, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
PERFORMANCE OVERVIEW
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED JUNE 30, 1999
<S> <C>
1 YEAR 4.72%
5 YEAR 4.98%
10 YEAR 5.08%
</TABLE>
INVESTMENT VALUE
SAFECO RST MONEY MARKET PORTFOLIO: $16,413
<TABLE>
<CAPTION>
SAFECO
RST MONEY MARKET
PORTFOLIO
<S> <C>
06/30/89 $10,000
07/31/89 $10,084
08/31/89 $10,159
09/30/89 $10,231
10/31/89 $10,371
11/30/89 $10,440
12/31/89 $10,506
01/31/90 $10,580
02/28/90 $10,643
03/31/90 $10,710
04/30/90 $10,779
05/31/90 $10,850
06/30/90 $10,917
07/31/90 $10,988
08/31/90 $11,057
09/30/90 $11,120
10/31/90 $11,192
11/30/90 $11,261
12/31/90 $11,331
01/31/91 $11,398
02/28/91 $11,455
03/31/91 $11,510
04/30/91 $11,571
05/31/91 $11,626
06/30/91 $11,671
07/31/91 $11,728
08/31/91 $11,782
09/30/91 $11,835
10/31/91 $11,884
11/30/91 $11,928
12/31/91 $11,974
01/31/92 $12,014
02/29/92 $12,046
03/31/92 $12,082
04/30/92 $12,116
05/31/92 $12,149
06/30/92 $12,186
07/31/92 $12,223
08/31/92 $12,253
09/30/92 $12,279
10/31/92 $12,305
11/30/92 $12,334
12/31/92 $12,364
01/31/93 $12,393
02/28/93 $12,417
03/31/93 $12,446
04/30/93 $12,472
05/31/93 $12,496
06/30/93 $12,526
07/31/93 $12,552
08/31/93 $12,581
09/30/93 $12,606
10/31/93 $12,631
11/30/93 $12,658
12/31/93 $12,687
01/31/94 $12,716
02/28/94 $12,741
03/31/94 $12,770
04/30/94 $12,800
05/31/94 $12,837
06/30/94 $12,875
07/31/94 $12,914
08/31/94 $12,961
09/30/94 $13,004
10/31/94 $13,051
11/30/94 $13,095
12/31/94 $13,150
01/31/95 $13,214
02/28/95 $13,271
03/31/95 $13,331
04/30/95 $13,392
05/31/95 $13,460
06/30/95 $13,520
07/31/95 $13,583
08/31/95 $13,640
09/30/95 $13,695
10/31/95 $13,765
11/30/95 $13,827
12/31/95 $13,881
01/31/96 $13,946
02/29/96 $13,996
03/31/96 $14,048
04/30/96 $14,104
05/31/96 $14,163
06/30/96 $14,214
07/31/96 $14,275
08/31/96 $14,332
09/30/96 $14,393
10/31/96 $14,447
11/30/96 $14,505
12/31/96 $14,566
01/31/97 $14,627
02/28/97 $14,678
03/31/97 $14,734
04/30/97 $14,798
05/31/97 $14,857
06/30/97 $14,922
07/31/97 $14,985
08/31/97 $15,043
09/30/97 $15,109
10/31/97 $15,176
11/30/97 $15,237
12/31/97 $15,307
01/31/98 $15,368
02/28/98 $15,426
03/31/98 $15,490
04/30/98 $15,550
05/31/98 $15,606
06/30/98 $15,673
07/31/98 $15,739
08/31/98 $15,796
09/30/98 $15,860
10/31/98 $15,930
11/31/98 $15,997
12/31/98 $16,064
01/31/99 $16,117
02/28/99 $16,177
03/31/99 $16,237
04/30/99 $16,297
05/31/99 $16,351
06/30/99 $16,413
</TABLE>
PERFORMANCE REPRESENTS THE PERFORMANCE OF THE MONEY
MARKET PORTFOLIO BUT DOES NOT INCLUDE DEDUCTIONS FOR
ADMINISTRATION CHARGES, CONTINGENT DEFERRED SALES CHARGES,
OR MORTALITY AND EXPENSE RISK PREMIUMS.
PERFORMANCE OF THE PORTFOLIO ASSUMES THE REINVESTMENT
OF ALL DIVIDENDS.
THE MONEY MARKET PORTFOLIO SEEKS TO MAINTAIN A
$1.00 PER SHARE NET ASSET VALUE. SHARES OF THE
MONEY MARKET PORTFOLIO ARE NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT. THERE IS NO
ASSURANCE THAT THE MONEY MARKET PORTFOLIO WILL
MAINTAIN A STABLE $1.00 PER SHARE NET ASSET VALUE.
- 24 -
<PAGE>
SAFECO RESOURCE SERIES TRUST
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (000'S)
- -------------------------------------------------------------------------
<C> <S> <C>
CERTIFICATES OF DEPOSIT - 7.4%
BANKS (FOREIGN) - 3.7%
$1,000,000 Societe Generale, NY
5.67%, due 8/06/99 $ 1,000
INVESTMENT BANKING & BROKERAGE - 3.7%
1,000,000 Credit Suisse First Boston
5.715%, due 7/19/99 1,000
-----------
TOTAL CERTIFICATES OF DEPOSIT 2,000
-----------
COMMERCIAL PAPER - 42.1%
AUTOMOBILES - 4.8%
1,300,000 Hyundai Motors
5.20%, due 7/06/99 1,299
CHEMICALS - 4.8%
1,300,000 Formosa Plastic
4.86%, due 7/21/99 1,296
FINANCIAL (DIVERSIFIED) - 23.8%
1,300,000 Countrywide Funding Corp.
4.98%, due 7/08/99 1,299
1,300,000 Dorada
5.02%, due 7/14/99 1,298
1,300,000 Homeside Lending
5.22%, due 7/20/99 1,296
1,200,000 Moat Funding LLC
5.07%, due 7/13/99 1,198
1,300,000 PHH Corporation
5.32%, due 7/02/99 1,300
INSURANCE (MULTI-LINE) - 4.8%
1,300,000 Prudential Funding Corp.
5.11%, due 7/07/99 1,299
TOBACCO - 3.8%
1,000,000 Philip Morris Cos., Inc.
9.25%, due 2/15/00 1,025
-----------
TOTAL COMMERCIAL PAPER 11,310
-----------
<CAPTION>
VALUE
SHARES (000'S)
- -------------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS - 36.7%
BANKS (MAJOR REGIONAL) - 3.7%
$1,000,000 Continental Bank Note
5.375%, due 5/18/00,
Put Date 8/18/99 $ 1,003
BANKS (REGIONAL) - 5.6%
1,500,000 American Express Centurion Bank
4.95%, due 4/24/00,
Put Date 7/24/99 1,500
FINANCIAL (DIVERSIFIED) - 9.8%
715,000 Associates Corp. of North America
7.25%, due 9/01/99 717
1,400,000 Finova Capital Corp.
8.00%, due 2/01/00 1,422
500,000 Heller Financial, Inc.
5.625%, due 3/15/00 501
INVESTMENT BANKING & BROKERAGE - 13.9%
500,000 #Goldman Sachs Group, L.P. (144A)
5.15%, due 4/19/00 500
1,000,000 Goldman Sachs Group, L.P.
5.08%, due 5/12/00
Put Date 7/15/99 1,000
900,000 Morgan Stanley Dean Witter Co.
5.142%, due 3/13/01
Put Date 9/13/99 900
1,330,000 Shearson Lehman Brothers
Holdings, Inc.
6.15%, due 3/15/00 1,335
RETAIL (GENERAL MERCHANDISE) - 3.7%
1,000,000 Racetrac Capital, L.L.C.
5.22%, due 4/01/18,
Put Date 7/01/99 1,000
-----------
TOTAL CORPORATE BONDS 9,878
-----------
CASH EQUIVALENTS - 8.3%
INVESTMENT COMPANIES - 8.3%
1,373,998 SSgA Prime Money Market Portfolio 1,374
856,087 SSgA U.S. Treasury Money Market
Portfolio 856
-----------
TOTAL CASH EQUIVALENTS 2,230
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 25 -
<PAGE>
JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
VALUE
SHARES (000'S)
- -------------------------------------------------------------------------
<C> <S> <C>
MUNICIPAL BONDS - 4.8%
MUNI'S (TAXABLE) - 4.8%
$1,300,000 Presbyterian Homes & Services
5.33%, due 12/01/28,
Put Date 7/02/99 $ 1,300
-----------
TOTAL MUNICIPAL BONDS 1,300
-----------
TOTAL INVESTMENTS - 99.4% 26,718
-----------
Other Assets, less Liabilities 167
-----------
NET ASSETS $ 26,885
-----------
-----------
</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 6/30/99. These rates change periodically based on
specified market rates 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 $500,000 and the
total value is 1.86% of net assets.
SEE NOTES TO FINANCIAL STATEMENTS
- 26 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
SAFECO Resource Series Trust
As of June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
PORTFOLIOS
(In Thousands, --------------------------------------------------------------
Except Per-Share Amounts) EQUITY GROWTH NORTHWEST SMALL CO. BOND
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at Cost $ 458,517 $ 358,942 $ 22,687 $ 11,095 $ 31,066
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Investments, at Value
Unaffiliated Issuers $ 662,125 $ 299,129 $ 29,598 $ 10,919 $ 30,114
Affiliated Issuers -- 30,296 -- -- --
---------- ---------- ---------- ---------- ----------
Total investments at value 662,125 329,425 29,598 10,919 30,114
Receivables:
Dividends and interest 670 173 9 9 356
Investment securities sold -- 1,399 280 297 --
From advisor -- -- -- 58 --
---------- ---------- ---------- ---------- ----------
Total assets 662,795 330,997 29,887 11,283 30,470
LIABILITIES:
Investment securities purchased -- 943 7 -- --
Investment advisory fees 393 195 17 8 18
Dividends payable -- -- -- -- --
Other 46 38 28 -- 9
---------- ---------- ---------- ---------- ----------
Total liabilities 439 1,176 52 8 27
---------- ---------- ---------- ---------- ----------
NET ASSETS $ 662,356 $ 329,821 $ 29,835 $ 11,275 $ 30,443
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Net Assets consist of:
Accumulated net investment income (loss) $ 2,684 $ (727) $ (31) $ (8) $ 779
Accumulated net realized gain (loss) on investment
transactions 20,074 13,645 1,924 (2,902) (701)
Net unrealized appreciation (depreciation) 203,608 (29,517) 6,910 (176) (952)
Paid in capital (par value $.001, unlimited shares
authorized) 435,990 346,420 21,032 14,361 31,317
---------- ---------- ---------- ---------- ----------
Net Assets $ 662,356 $ 329,821 $ 29,835 $ 11,275 $ 30,443
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
TRUST SHARES OUTSTANDING 20,063 16,293 1,603 1,221 2,772
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE PER SHARE
(Net assets divided by Trust shares outstanding) $ 33.01 $ 20.24 $ 18.61 $ 9.24 $ 10.98
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
<CAPTION>
(In Thousands,
Except Per-Share Amounts) MMKT
<S> <C>
- ------------------------------------------------------------
ASSETS:
Investments, at Cost $ 26,718
----------
----------
Investments, at Value
Unaffiliated Issuers $ 26,718
Affiliated Issuers --
----------
Total investments at value 26,718
Receivables:
Dividends and interest 302
Investment securities sold --
From advisor --
----------
Total assets 27,020
LIABILITIES:
Investment securities purchased --
Investment advisory fees 14
Dividends payable 101
Other 20
----------
Total liabilities 135
----------
NET ASSETS $ 26,885
----------
----------
Net Assets consist of:
Accumulated net investment income (loss) $ --
Accumulated net realized gain (loss) on investment
transactions --
Net unrealized appreciation (depreciation) --
Paid in capital (par value $.001, unlimited shares
authorized) 26,885
----------
Net Assets $ 26,885
----------
----------
TRUST SHARES OUTSTANDING 26,885
----------
----------
NET ASSET VALUE PER SHARE
(Net assets divided by Trust shares outstanding) $ 1.00
----------
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 27 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
SAFECO Resource Series Trust
For the Six-Month Period Ended June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
PORTFOLIOS
-----------------------------------------------------------------
(In Thousands) EQUITY GROWTH NORTHWEST SMALL CO. BOND MMKT
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 4,483 $ 504 $ 70 $ 28 $ -- $ --
Interest 477 19 12 16 911 710
------- -------- ----- ----------- --------- ------
Total investment income 4,960 523 82 44 911 710
EXPENSES:
Investment advisory fees 2,214 1,184 92 46 110 90
Legal and auditing fees 12 11 9 9 9 9
Custodian fees 16 13 2 3 3 3
Trustees' fees 4 3 3 3 3 3
Other 30 39 7 7 7 5
------- -------- ----- ----------- --------- ------
Total expenses before reimbursement 2,276 1,250 113 68 132 110
Expense reimbursement -- -- -- (16) -- --
------- -------- ----- ----------- --------- ------
Total expenses after reimbursement 2,276 1,250 113 52 132 110
------- -------- ----- ----------- --------- ------
NET INVESTMENT INCOME (LOSS) 2,684 (727) (31) (8) 779 600
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investment transactions 20,036 13,643 2,732 (1,894) (712) --
Net change in unrealized appreciation (depreciation) 37,152 (31,927) 1,967 1,141 (1,239) --
------- -------- ----- ----------- --------- ------
NET GAIN (LOSS) ON INVESTMENTS 57,188 (18,284) 4,699 (753) (1,951) --
------- -------- ----- ----------- --------- ------
Net change in net assets resulting from operations $59,872 $(19,011) $ 4,668 $ (761) $ (1,172) $ 600
------- -------- ----- ----------- --------- ------
------- -------- ----- ----------- --------- ------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 28 -
<PAGE>
This page left blank intentionally.
- 29 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
SAFECO Resource Series Trust
(Unaudited)
<TABLE>
<CAPTION>
PORTFOLIOS
---------------------------------------
EQUITY GROWTH
------------------- ------------------
SIX-MONTH YEAR SIX-MONTH YEAR
PERIOD ENDED PERIOD ENDED
ENDED DECEMBER ENDED DECEMBER
JUNE 30 31 JUNE 30 31
(In Thousands) 1999 1998 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 2,684 $ 4,486 $ (727) $ (1,507)
Net realized gain (loss) on
investment transactions 20,036 21,747 13,643 37,143
Net change in unrealized appreciation
(depreciation) 37,152 76,782 (31,927) (39,098)
-------- --------- -------- --------
Net change in net assets resulting
from operations 59,872 103,015 (19,011) (3,462)
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- (4,431) -- (35,629)
Net realized gain on investments -- (21,763) -- (1,507)
-------- --------- -------- --------
Total distributions -- (26,194) -- (37,136)
NET TRUST SHARE TRANSACTIONS 45,170 91,237 (7,575) 156,605
-------- --------- -------- --------
TOTAL CHANGE IN NET ASSETS 105,042 168,058 (26,586) 116,007
NET ASSETS AT BEGINNING OF PERIOD 557,314 389,256 356,407 240,400
-------- --------- -------- --------
NET ASSETS AT END OF PERIOD $662,356 $ 557,314 $329,821 $356,407
-------- --------- -------- --------
-------- --------- -------- --------
- --------------------------------------------------------------------------------
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES AND AMOUNTS
SHARES:
Sales 4,333 6,552 3,709 10,113
Reinvestments -- 874 -- 1,743
Redemptions (2,866) (4,291) (4,152) (5,418)
-------- --------- -------- --------
Net change 1,467 3,135 (443) 6,438
-------- --------- -------- --------
-------- --------- -------- --------
AMOUNTS:
Sales $135,130 $ 184,473 $ 73,957 $250,827
Reinvestments -- 26,194 -- 37,135
Redemptions (89,960) (119,430) (81,532) (131,357)
-------- --------- -------- --------
Net change $ 45,170 $ 91,237 $ (7,575) $156,605
-------- --------- -------- --------
-------- --------- -------- --------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 30 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIOS
-----------------------------------------------------------------------
SMALL
NORTHWEST CO. BOND MMKT
---------------- ---------------- ---------------- -----------------
SIX-MONTH YEAR SIX-MONTH YEAR SIX-MONTH YEAR SIX-MONTH YEAR
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
ENDED DECEMBER ENDED DECEMBER ENDED DECEMBER ENDED DECEMBER
JUNE 30 31 JUNE 30 31 JUNE 30 31 JUNE 30 31
1999 1998 1999 1998 1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ (31) $ (73) $ (8) $ (40) $ 779 $ 1,247 $ 600 $ 1,145
Net realized gain (loss) on
investment transactions 2,732 (809) (1,894) (1,008) (712) 836 -- --
Net change in unrealized appreciation
(depreciation) 1,967 1,145 1,141 (2,360) (1,239) (207) -- --
------- ------- ------- ------- ------- ------- ------- --------
Net change in net assets resulting
from operations 4,668 263 (761) (3,408) (1,172) 1,876 600 1,145
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- -- -- -- -- (1,248) (600) (1,145)
Net realized gain on investments -- -- -- -- -- (288) -- --
------- ------- ------- ------- ------- ------- ------- --------
Total distributions -- -- -- -- -- (1,536) (600) (1,145)
NET TRUST SHARE TRANSACTIONS 580 4,529 256 4,938 1,498 11,896 (738) 9,866
------- ------- ------- ------- ------- ------- ------- --------
TOTAL CHANGE IN NET ASSETS 5,248 4,792 (505) 1,530 326 12,236 (738) 9,866
NET ASSETS AT BEGINNING OF PERIOD 24,587 19,795 11,780 10,250 30,117 17,881 27,623 17,757
------- ------- ------- ------- ------- ------- ------- --------
NET ASSETS AT END OF PERIOD $24,835 $24,587 $11,275 $11,780 $30,443 $30,117 $26,885 $ 27,623
------- ------- ------- ------- ------- ------- ------- --------
------- ------- ------- ------- ------- ------- ------- --------
- ----------------------------------------------------------------------------------------------------------------
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES AND AMOUNTS
SHARES:
Sales 231 690 228 680 501 1,518 39,192 102,117
Reinvestments -- -- -- -- -- 135 616 1,028
Redemptions (200) (420) (201) (318) (368) (632) (40,546) (93,279)
------- ------- ------- ------- ------- ------- ------- --------
Net change 31 270 27 362 133 1,021 (738) 9,866
------- ------- ------- ------- ------- ------- ------- --------
------- ------- ------- ------- ------- ------- ------- --------
AMOUNTS:
Sales $ 3,832 $10,765 $ 2,125 $ 8,662 $ 5,627 $17,725 $39,192 $102,117
Reinvestments -- -- -- -- -- 1,536 616 1,028
Redemptions (3,252) (6,236) (1,869) (3,724) (4,129) (7,365) (40,546) (93,279)
------- ------- ------- ------- ------- ------- ------- --------
Net change $ 580 $ 4,529 $ 256 $ 4,938 $ 1,498 $11,896 $ (738) $ 9,866
------- ------- ------- ------- ------- ------- ------- --------
------- ------- ------- ------- ------- ------- ------- --------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 31 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. GENERAL
SAFECO Resource Series Trust (the Trust) is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The Trust is comprised of the Equity, Growth, Northwest,
Small Company Stock (SMALL Co.), Bond and Money Market (MMKT) Portfolios. Each
of the six Portfolios has different investment objectives. Shares of the Trust
Portfolios are available only as funding vehicles for certain variable annuity
and variable life products sold by SAFECO Life Insurance Company and other
insurance companies.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Portfolios in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
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 expense during the reporting
period. Actual results could differ from those estimates.
SECURITY VALUATION. Equity securities in the Equity, Growth, Northwest and
Small Company Portfolios traded on a national exchange or over-the-counter 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. Fixed income
securities in the Bond Portfolio are stated on the basis of valuations provided
by pricing service, which uses information with respect to transactions in
securities, quotations from securities dealers, market transactions in
comparable securities and various relationships between securities in
determining value. For the Money Market Portfolio, short-term securities
purchased at par are valued at cost. Other short-term securities are valued at
amortized cost. For all Portfolios, temporary investments in other mutual funds
are valued at net asset value.
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on investment transactions are determined using the
identified cost method.
INCOME RECOGNITION. Interest is accrued on Portfolios investments daily.
Dividend income, less foreign taxes withheld (if any), is recorded on the
ex-dividend date.
DIVIDENDS TO SHAREHOLDERS. In the Equity, Growth, Northwest, Small Company
Stock and Bond Portfolios, dividends to shareholders from net investment income
and realized gains are recorded on the last business day of December each year.
In the Money Market Portfolio, dividends to shareholders from net investment
income are declared as of the close of each business day and payment is made as
of the last business day of each month.
FEDERAL INCOME TAX. It is the Trust's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to its shareholders. Therefore, no federal
income or excise tax provision is required.
3. TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEES. SAFECO Asset Management Company receives investment
advisory fees from the Portfolios. For the Equity, Growth, Northwest and Bond
Portfolios, the fee is based on
- 32 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
average daily net assets at annual rate of .74%. For the Small Company Stock
Portfolio, the fee is based on average daily net assets at an annual rate of
.85%. For the Money Market Portfolio, the fee is based on average daily net
assets at an annual rate of .65%.
NOTES PAYABLE AND INTEREST EXPENSE. The Portfolios may borrow money for
temporary purposes from SAFECO Corporation or its affiliates at rates comparable
to commercial bank interest rates.
LINE OF CREDIT. The Trust, together with all other management investment
companies for which SAFECO Asset Management Company serves as investment
advisor, has line of credit arrangements with certain financial institutions.
Under these arrangements, $175 million is available to meet short-term financing
needs. No balance was outstanding under these arrangements at June 30, 1999.
AFFILIATE OWNERSHIP. At June 30, 1999, SAFECO Life Insurance Company owned
over 90% of the outstanding shares of the Equity Portfolio, 82% of the
outstanding shares of the Growth Portfolio, and 100% of the outstanding shares
in the Northwest, Small Company, Bond and Money Market Portfolios.
EXPENSE REIMBURSEMENT. For the Equity, Growth, Northwest, Bond and Money
Market Portfolios, SAFECO Life Insurance Company (SAFECO) has agreed to pay all
the expenses of the Portfolios except for investment advisory fees if net assets
of the Portfolio are below $20 million. For the Small Company Stock Portfolio,
SAFECO Asset Management Company pays all expenses other than investment advisory
fees in excess of .10% of the Portfolio's average annual net assets. When net
assets exceed $20 million, the Portfolio will be charged for all operating
expenses.
4. INVESTMENT TRANSACTIONS
<TABLE>
<CAPTION>
PORTFOLIOS
---------------------------------------------------------
(In Thousands) EQUITY GROWTH NORTHWEST SMALL CO. BOND
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
Purchases for the six-month period
ended June 30, 1999
(including $24,963 of U.S. Government
and Agency Securities in the Bond
Portfolio) $144,408 $ 85,805 $ 7,921 $ 5,157 $ 33,287
-------- -------- ----- ----- ---------
-------- -------- ----- ----- ---------
Sales for the six-month period ended
June 30, 1999
(including $23,826 of U.S. Government
and Agency Securities in the Bond
Portfolio) $ 90,307 $ 94,704 $ 7,683 $ 5,163 $ 31,815
-------- -------- ----- ----- ---------
-------- -------- ----- ----- ---------
- --------------------------------------------------------------------------------------------------
Purchases and sales amounts exclude
short-term investments which, at the
time of
purchase had a maturity of one year
or less.
</TABLE>
Unrealized appreciation (depreciation) at June 30, 1999:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aggregate gross unrealized appreciation
for investment securities in which
there is an excess of value over cost $211,989 $ 57,298 $ 9,250 $ 975 $ 50
Aggregate gross unrealized depreciation
for investment securities in which
there is an excess of cost over value (8,381) (86,815) (2,340) (1,151) (1,002)
-------- -------- ------- ------- ------------
Net unrealized appreciation
(depreciation) $203,608 $(29,517) $ 6,910 $ (176) $ (952)
-------- -------- ------- ------- ------------
-------- -------- ------- ------- ------------
</TABLE>
- 33 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
5. INVESTMENTS IN AFFILIATES
Each of the companies listed below is considered an affiliate because the
Growth Portfolio owned at least 5% of the company's voting securities during the
six-month period ended June 30, 1999:
<TABLE>
<CAPTION>
SHARES AT SHARES AT MARKET VALUE
BEGINNING END OF JUNE 30
(In Thousands) OF PERIOD ADDITIONS REDUCTIONS PERIOD DIVIDENDS 1999
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
Concepts Direct, Inc. 435 -- -- 435 None $ 4,026
Damark International, Inc. 412 -- -- 412 None 3,452
IntelliQuest Information Group, Inc. 455 -- -- 455 None 3,412
Nastech Pharmaceutical Co. 466 -- -- 466 None 1,544
Open Plan Systems, Inc. 332 -- -- 332 None 747
PolyMedica Industries, Inc. 544 -- -- 544 None 5,439
Precision Auto Care 609 -- -- 609 None 1,864
Suburban Lodges of America 1,023 -- -- 1,023 None 6,584
TRM Copy Centers Corp. 492 -- -- 492 None 3,228
------
$ 30,296
------
------
</TABLE>
6. CAPITAL LOSS CARRYFORWARD
The Small Company Portfolio had $1,008 thousand of accumulated undistributed
net realized loss on investment transactions as of December 31, 1998. The
Northwest Portfolio has $809 thousand of accumulated undistributed net realized
loss on investment transactions as December 31, 1998. For federal income tax
purpose, these represent capital loss carryforwards which will expire in 2006.
- 34 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
7. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
EQUITY PORTFOLIO
<TABLE>
<CAPTION>
SIX-MONTH
PERIOD ENDED YEAR ENDED DECEMBER 31
JUNE 30 ---------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE AT BEGINNING OF PERIOD $ 29.97 $ 25.18 $ 21.75 $ 19.24 $ 16.83
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.13 0.25 0.27 0.34 0.39
Net realized and unrealized gain on
investments 2.91 6.02 5.13 4.43 4.43
------- --------- --------- --------- ---------
Total from investment operations 3.04 6.27 5.40 4.77 4.82
LESS DISTRIBUTIONS:
Dividends from net investment income -- (0.25) (0.27) (0.34) (0.39)
Distributions from realized gains -- (1.23) (1.70) (1.92) (2.02)
------- --------- --------- --------- ---------
Total distributions -- (1.48) (1.97) (2.26) (2.41)
------- --------- --------- --------- ---------
NET ASSET VALUE AT END OF PERIOD $ 33.01 $ 29.97 $ 25.18 $ 21.75 $ 19.24
------- --------- --------- --------- ---------
------- --------- --------- --------- ---------
TOTAL RETURN 10.14%* 24.89% 24.85% 24.79% 28.63%
NET ASSETS AT END OF PERIOD (000'S
OMITTED) $ 662,356 $ 557,314 $ 389,256 $ 263,067 $ 169,479
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.76%** 0.78% 0.75% 0.72% 0.75%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS 0.90%** 0.96% 1.19% 1.72% 2.26%
PORTFOLIO TURNOVER RATE 31.33%** 31.57% 41.75% 56.99% 69.18%
</TABLE>
- --------------------------------------------------------------------------------
* Not annualized.
** Annualized.
- 35 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
7. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
GROWTH PORTFOLIO
<TABLE>
<CAPTION>
SIX-MONTH
PERIOD ENDED YEAR ENDED DECEMBER 31
JUNE 30 ---------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE AT BEGINNING OF PERIOD $ 21.30 $ 23.35 $ 19.26 $ 15.88 $ 12.98
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.04) (0.10) (0.04) (0.03) 0.06
Net realized and unrealized gain
(loss) on investments (1.02) 0.53 8.62 5.12 5.26
------- --------- --------- --------- ---------
Total from investment operations (1.06) 0.43 8.58 5.09 5.32
LESS DISTRIBUTIONS:
Dividends from net investment income -- -- -- -- (0.06)
Distributions from realized gains -- (2.38) (4.49) (1.71) (2.36)
Distributions from paid in capital -- (0.10) -- -- --
------- --------- --------- --------- ---------
Total distributions -- (2.48) (4.49) (1.71) (2.42)
------- --------- --------- --------- ---------
NET ASSET VALUE AT END OF PERIOD $ 20.24 $ 21.30 $ 23.35 $ 19.26 $ 15.88
------- --------- --------- --------- ---------
------- --------- --------- --------- ---------
TOTAL RETURN (4.98%)* 1.83% 44.55% 32.06% 41.00%(A)
NET ASSETS AT END OF PERIOD (000'S
OMITTED) $ 329,821 $ 356,407 $ 240,400 $ 109,491 $ 44,458
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.78%** 0.80% 0.77% 0.79% 0.79%
RATIO OF EXPENSES TO AVERAGE NET ASSETS
BEFORE EXPENSE REIMBURSEMENTS++ N/A N/A N/A N/A 0.84%
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET ASSETS (0.45%)** (0.48%) (0.25%) (0.28%) 0.55%
PORTFOLIO TURNOVER RATE 53.06%** 46.13% 88.99% 75.58% 111.70%
</TABLE>
- --------------------------------------------------------------------------------
++ See Note 3 of Notes to Financial Statements.
(A) The total return would have been lower had certain expenses not been
reduced during the periods shown (See Note 3 of Notes to Financial
Statements).
N/A Not applicable as no fund expenses were reimbursed.
* Not annualized.
** Annualized.
- 36 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
7. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
NORTHWEST PORTFOLIO
<TABLE>
<CAPTION>
SIX-MONTH
PERIOD ENDED YEAR ENDED DECEMBER 31
JUNE 30 ---------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AT BEGINNING OF PERIOD $ 15.64 $ 15.20 $ 12.12 $ 10.85 $ 10.24
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.02) (0.05) 0.03 0.08 0.08
Net realized and unrealized gain on
investments 2.99 0.49 3.73 1.27 0.68
------- --------- --------- --------- ---------
Total from investment operations 2.97 0.44 3.76 1.35 0.76
LESS DISTRIBUTIONS:
Dividends from net investment income -- -- (0.03) (0.08) (0.08)
Distributions from realized gains -- -- (0.65) -- (0.07)
------- --------- --------- --------- ---------
Total distributions -- -- (0.68) (0.08) (0.15)
------- --------- --------- --------- ---------
NET ASSET VALUE AT END OF PERIOD $ 18.61 $ 15.64 $ 15.20 $ 12.12 $ 10.85
------- --------- --------- --------- ---------
------- --------- --------- --------- ---------
TOTAL RETURN 18.99%* 2.89%(A) 31.02%(A) 12.44%(A) 7.42%(A)
NET ASSETS AT END OF PERIOD (000'S
OMITTED) $ 29,835 $ 24,587 $ 19,795 $ 9,541 $ 6,312
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.89%** 0.96% 0.73% 0.70% 0.71%
RATIO OF EXPENSES TO AVERAGE NET ASSETS
BEFORE EXPENSE REIMBURSEMENTS++ N/A 0.99% 0.94% 1.11% 1.18%
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET ASSETS (0.25%)** (0.32%) 0.27% 0.78% 0.81%
PORTFOLIO TURNOVER RATE 61.31%** 46.99% 47.85% 52.20% 21.30%
</TABLE>
- --------------------------------------------------------------------------------
++ See Note 3 of Notes to Financial Statements.
(A) The total return would have been lower had certain expenses not been
reduced during the periods shown (See Note 3 of Notes to Financial
Statements).
N/A Not applicable as no fund expenses were reimbursed.
* Not annualized.
** Annualized.
- 37 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
7. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SMALL COMPANY PORTFOLIO
<TABLE>
<CAPTION>
YEAR APRIL 30, 1997
SIX-MONTH ENDED (COMMENCEMENT OF
PERIOD ENDED DECEMBER OPERATIONS) TO
JUNE 30 31 DECEMBER 31
1999 1998 1997
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AT BEGINNING OF PERIOD $ 9.87 $ 12.33 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.01) (0.03) 0.01
Net realized and unrealized gain (loss) on investments (0.62) (2.43) 2.83
------- --------- -------
TOTAL FROM INVESTMENT OPERATIONS (0.63) (2.46) 2.84
LESS DISTRIBUTIONS:
Dividends from net investment income -- -- (0.01)
Distributions from realized gains -- -- (0.50)
------- --------- -------
Total distributions -- -- (0.51)
------- --------- -------
NET ASSET VALUE AT END OF PERIOD $ 9.24 $ 9.87 $ 12.33
------- --------- -------
------- --------- -------
TOTAL RETURN (A) (6.38%)* (19.95%) 28.40%*
NET ASSETS AT END OF PERIOD (000'S OMITTED) $ 11,275 $ 11,780 $ 10,250
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.95%** 0.95% 0.95%**
RATIO OF EXPENSES TO AVERAGE NET ASSETS BEFORE EXPENSE
REIMBURSEMENTS++ 1.23%** 1.15% 1.24%**
RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS (0.14%)** (0.32%) 0.19%**
PORTFOLIO TURNOVER RATE 99.72% 92.14% 47.91%**
</TABLE>
- --------------------------------------------------------------------------------
** Annualized.
* Not annualized.
++ See Note 3 of Notes to Financial Statements.
(A) The total return would have been lower had certain expenses not been
reduced during the periods shown.
- 38 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
7. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
BOND PORTFOLIO
<TABLE>
<CAPTION>
SIX-MONTH
PERIOD ENDED YEAR ENDED DECEMBER 31
JUNE 30 ---------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AT BEGINNING OF PERIOD $ 11.41 $ 11.04 $ 10.75 $ 11.31 $ 10.20
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.28 0.50 0.61 0.62 0.71
Net realized and unrealized gain
(loss) on investments (0.71) 0.49 0.29 (0.56) 1.11
------- --------- --------- --------- ---------
Total from investment operations (0.43) 0.99 0.90 0.06 1.82
LESS DISTRIBUTIONS:
Dividends from net investment income -- (0.50) (0.61) (0.62) (0.71)
Distributions from realized gains -- (0.12) -- -- --
------- --------- --------- --------- ---------
Total distributions -- (0.62) (0.61) (0.62) (0.71)
------- --------- --------- --------- ---------
NET ASSET VALUE AT END OF PERIOD $ 10.98 $ 11.41 $ 11.04 $ 10.75 $ 11.31
------- --------- --------- --------- ---------
------- --------- --------- --------- ---------
TOTAL RETURN (3.77%)* 8.90%(A) 8.41%(A) 0.54%(A) 17.87%(A)
NET ASSETS AT END OF PERIOD (000'S
OMITTED) $30,443 $30,117 $17,881 $15,991 $14,257
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.87%** 0.83% 0.74% 0.73% 0.72%
RATIO OF EXPENSES TO AVERAGE NET ASSETS
BEFORE EXPENSE REIMBURSEMENTS++ N/A 0.98% 0.90% 0.87% 0.94%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS 5.23%** 5.50% 5.75% 5.64% 6.50%
PORTFOLIO TURNOVER RATE 222.84%** 164.82% 151.43% 140.90% 77.93%
</TABLE>
- --------------------------------------------------------------------------------
++ See Note 3 of Notes to Financial Statements.
(A) The total return would have been lower had certain expenses not been
reduced during the periods shown (See Note 3 of Notes to Financial
Statements).
N/A Not applicable as no fund expenses were reimbursed.
** Annualized.
* Not annualized.
- 39 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
7. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
SIX-MONTH
PERIOD ENDED YEAR ENDED DECEMBER 31
JUNE 30 ---------------------------------------------------
1999 1998 1997 1996 1995
<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 0.02 0.04 0.05 0.05 0.05
LESS DISTRIBUTIONS:
Dividends from net investment income (0.02) (0.04) (0.05) (0.05) (0.05)
------- --------- --------- --------- ---------
NET ASSET VALUE AT END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- --------- --------- --------- ---------
------- --------- --------- --------- ---------
TOTAL RETURN 2.17%* 4.95%(A) 5.08%(A) 4.94%(A) 5.56%(A)
NET ASSETS AT END OF PERIOD (000'S
OMITTED) $ 26,885 $ 27,623 $ 17,757 $ 12,493 $ 8,719
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.78%** 0.81% 0.64% 0.62% 0.62%
RATIO OF EXPENSES TO AVERAGE NET ASSETS
BEFORE EXPENSE REIMBURSEMENTS++ N/A 0.89% 0.81% 0.90% 0.87%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS 4.34%** 4.87% 4.97% 4.86% 5.32%
</TABLE>
- --------------------------------------------------------------------------------
++ See Note 3 of Notes to Financial Statements.
(A) The total return would have been lower had certain expenses not been
reduced during the periods shown (See Note 3 of Notes to Financial
Statements).
N/A Not applicable as no fund expenses were reimbursed.
** Annualized.
* Not annualized.
- 40 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
YEAR 2000 READINESS
Preparing for Year 2000 is a high priority for SAFECO Asset Management and
its parent, SAFECO Corporation. A corporate-wide Year 2000 team has been active
for an extended period of time, and has devoted considerable resources to help
achieve Year 2000 readiness. SAFECO Asset Management Company does not anticipate
that Year 2000-related issued will have a material impact on its ability to
continue to provide the Funds with service at current levels. Although SAFECO
Asset Management has taken steps to prepare for Year 2000, it could be
negatively impacted by what its business partners have done or have failed to
do.
Likewise, Year 2000 poses risks to each of the companies in the Funds'
investment portfolio. Thus, portfolio managers consider Year 2000 readiness as
one of the many factors in making an investment decision. Year 2000 also poses
potential risks to worldwide markets and economies.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES
<PAGE>
SAFECO RESOURCE SERIES TRUST
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
Neal A. Fuller
Vice President and Controller
David H. Longhurst
Assistant Controller
INVESTMENT ADVISOR:
SAFECO Asset
Management Company
DISTRIBUTOR:
SAFECO Securities, Inc.
TRANSFER AGENT:
SAFECO Services Corporation
CUSTODIAN:
State Street Bank
RECYCLE LOGO Printed on Recycled Paper.
This report must be preceded or
accompanied by a current prospectus.
-Registered Trademark- A registered trademark of SAFECO
Corporation.
