<PAGE>
June 30, 1997
[SAFECO LOGO]
SEMIANNUAL
REPORT
ADVISOR SHARES
----
<TABLE>
<S> <C>
SAFECO STOCK FUNDS
Growth Fund............................................................. 2
Equity Fund............................................................. 8
Income Fund............................................................. 13
Northwest Fund.......................................................... 19
Balanced Fund........................................................... 24
International Stock Fund................................................ 30
Small Company Stock Fund................................................ 36
U.S. Value Fund......................................................... 41
SAFECO BOND FUNDS
High-Yield Bond Fund.................................................... 46
Intermediate-Term U.S. Treasury Fund.................................... 53
Managed Bond Fund....................................................... 53
SAFECO TAX-EXEMPT BOND FUNDS
Municipal Bond Fund..................................................... 59
California Tax-Free Income Fund......................................... 59
Washington State Municipal Bond Fund.................................... 71
SAFECO MONEY MARKET FUND
Money Market Fund....................................................... 76
</TABLE>
[SAFECO MUTUAL FUNDS LOGO]
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO GROWTH FUND
June 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The SAFECO Growth Fund returned 35.12% for the Advisor Class A shares
and 34.46% for the the Advisor Class B shares (not including the effects
of sales charges), to beat the Lipper average for growth funds at 23.96% for the
year ended June 30, 1997.
We outperformed our peer group on pure stock picking. I've populated the
Growth Fund with companies I can comfortably own for a year--or five
years. [PHOTO OF THOMAS M. MAGUIRE]
Even though our stocks are generally unfollowed by Wall Street, my
research has convinced me they are good companies purchased at decent prices.
I'm willing to wait for them and I'm comfortable with any ensuing volatility.
So far in 1997, your Fund's volatility has been upward overall.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE OVERVIEW --
CLASS A AND CLASS B SHARES
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED JUNE 30, 1997
<S> <C> <C> <C> <C> <C> <C>
With Without
Sales Charge Sales Charge
1 Year 5 Year 10 Year 1 Year 5 Year 10 Year
SAFECO Growth Fund Class A 29.04% 20.18% 13.84% 35.12% 21.30% 14.36%
SAFECO Growth Fund Class B 29.46% 20.99% 14.31% 34.46% 21.18% 14.31%
Investment Value As of June 30, 1997
SAFECO Growth Fund Class A: $36,551
SAFECO Grwoth Fund Class B: $38,088
S&P 500 Index: $35,251
With Sales Charge
SAFECO SAFECO
Growth Fund Growth Fund
Class A Class B S&P 500 Index
$9,550 $10,000 $10,000
06/30/87 9,550 10,000 10,507
07/31/87 10,002 10,473 10,899
08/31/87 10,353 10,841 10,660
09/30/87 7,962 8,338 8,364
10/31/87 7,962 8,338 7,675
11/30/87 8,304 8,695 8,259
12/31/87 8,304 8,695 8,607
01/31/88 8,435 8,832 9,008
02/28/88 9,167 9,599 8,729
03/31/88 9,249 9,684 8,826
04/30/88 9,124 9,554 8,903
05/31/88 9,685 10,141 9,312
06/30/88 9,660 10,115 9,276
07/31/88 9,496 9,944 8,961
08/31/88 9,965 10,434 9,343
09/30/88 9,965 10,434 9,602
10/31/88 9,978 10,448 9,465
11/30/88 10,140 10,617 9,631
12/31/88 10,140 10,617 10,336
01/31/89 10,423 10,914 10,078
02/28/89 10,686 11,189 10,313
03/31/89 10,686 11,189 10,848
04/30/89 11,120 11,644 11,288
05/31/89 11,367 11,902 11,223
06/30/89 11,367 11,902 12,237
07/31/89 11,873 12,432 12,477
08/31/89 12,479 13,067 12,425
09/30/89 12,008 12,574 12,137
10/31/89 11,972 12,536 12,385
11/30/89 12,085 12,654 12,682
12/31/89 10,914 11,428 11,831
01/31/90 11,212 11,740 11,984
02/28/90 11,889 12,449 12,301
03/31/90 11,940 12,502 11,994
04/30/90 13,163 13,783 13,163
05/31/90 12,718 13,317 13,074
06/30/90 12,965 13,576 13,032
07/31/90 10,729 11,235 11,854
08/31/90 9,526 9,975 11,276
09/30/90 8,885 9,303 11,228
10/31/90 9,543 9,993 11,953
11/30/90 10,277 10,761 12,287
12/31/90 11,304 11,836 12,822
01/31/91 12,861 13,467 13,739
02/28/91 13,490 14,125 14,072
03/31/91 14,140 14,807 14,106
04/30/91 15,073 15,784 14,715
05/31/91 14,175 14,843 14,041
06/30/91 15,501 16,232 14,695
07/31/91 16,118 16,877 15,044
08/31/91 16,215 16,979 14,792
09/30/91 16,703 17,490 14,991
10/31/91 15,294 16,014 14,386
11/30/91 16,715 17,502 16,032
12/31/91 17,938 18,783 15,734
01/31/92 17,810 18,649 15,939
02/28/92 16,487 17,263 15,628
03/31/92 15,464 16,193 16,087
04/30/92 15,081 15,791 16,166
05/31/92 13,921 14,577 15,925
06/30/92 14,506 15,189 16,577
07/31/92 13,684 14,329 16,237
08/31/92 13,323 13,951 16,428
09/30/92 13,886 14,540 16,485
10/31/92 15,639 16,376 17,044
11/30/92 16,202 16,965 17,254
12/31/92 16,878 17,674 17,398
01/31/93 15,754 16,496 17,635
02/28/93 16,373 17,145 18,007
03/31/93 15,363 16,087 17,571
04/30/93 16,154 16,915 18,040
05/31/93 16,659 17,444 18,093
06/30/93 16,602 17,384 18,020
07/31/93 17,669 18,502 18,702
08/31/93 18,444 19,313 18,559
09/30/93 18,915 19,806 18,943
10/31/93 18,117 18,971 18,763
11/30/93 19,797 20,729 18,990
12/31/93 20,862 21,846 19,635
01/31/94 19,866 20,802 19,103
02/28/94 18,869 19,758 18,272
03/31/94 19,372 20,285 18,506
04/30/94 19,550 20,471 18,808
05/31/94 18,099 18,952 18,347
06/30/94 18,504 19,376 18,949
07/31/94 19,658 20,585 19,724
08/31/94 19,160 20,063 19,243
09/30/94 19,436 20,352 19,674
10/31/94 18,906 19,797 18,957
11/30/94 19,476 20,393 19,238
12/31/94 19,176 20,080 19,736
01/31/95 20,230 21,183 20,504
02/28/95 20,153 21,102 21,109
03/31/95 20,252 21,207 21,729
04/30/95 21,062 22,055 22,612
05/31/95 22,338 23,390 23,136
06/30/95 23,126 24,216 23,902
07/31/95 23,048 24,134 23,962
08/31/95 23,745 24,864 24,973
09/30/95 23,640 24,754 24,883
10/31/95 23,880 25,005 25,973
11/30/95 24,559 25,717 26,474
12/31/95 25,469 26,669 27,374
01/31/96 26,424 27,669 27,629
02/28/96 26,021 27,247 27,894
03/31/96 27,128 28,406 28,305
04/30/96 28,280 29,613 29,034
05/31/96 27,052 28,327 29,145
06/30/96 24,383 25,532 27,858
07/31/96 25,839 27,056 28,446
08/31/96 27,108 28,385 30,045
09/30/96 27,687 28,973 30,874
10/31/96 28,757 30,076 33,205
11/30/96 30,184 31,551 32,548
12/31/96 32,763 34,233 34,578
01/31/97 31,891 33,302 34,852
02/28/97 30,753 32,091 33,423
03/31/97 29,312 30,582 35,415
04/30/97 33,759 35,202 37,568
05/31/97 36,551 38,088 39,251
06/30/97
</TABLE>
The performance graph compares a hypothetical $10,000 investment in Class A
and Class B of each Fund to a hypothetical investment in a relevant market
index. Fund performance is derived from the Fund's original class of shares
and reflects the maximum 4.5% sales charge for Class A shares, and the maximum
contingent deferred sales charge (5% in the first year, decreasing to 0% after
six years) for Class B shares. Fund performance has not been restated to
reflect Rule 12b-1 fees prior to September 30, 1996 (initial public offering
date of Class A and Class B shares). Such fees will affect subsequent
performance.
The index is unmanaged and includes no operating expenses or transaction
costs. Past performance is not predictive of future results. Principal value
may fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
- 2 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
For example, our radio stocks really did well. I bought stock in SFX
Broadcasting, American Radio and Chancellor anticipating deregulation would
allow radio companies to own more stations in each market and with greater
market share become formidable contenders for advertising dollars.
Chancellor's gain was further enhanced when it agreed to merge with Evergreen
Media and to purchase Viacom's radio properties. Consummation of these deals
will make Chancellor America's premier radio company.
Our health care holdings are also able growers. No matter how you cut it
health care is a growth industry, and as such we have 19.2% of net assets
invested in drugs and hospital supplies.
Penederm is doing well with its toenail fungus drug. Nastech Pharmaceutical
is developing nasal drug delivery, a technique that is so far proving highly
efficient. And Datascope is a good company that seemed to be selling too
cheaply, I'm waiting for the day the market figures out it's priced wrong.
HIGHLIGHTS
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
TOP TEN HOLDINGS NET ASSETS
- -------------------------------------------------------------------------
<S> <C>
MICROS Systems, Inc. .............................................. 6.3%
(Specialty Software Company)
Chancellor Broadcasting Corp. (Class A) ............................. 6.3
(Radio Stations)
Weider Nutrition International, Inc. ................................ 4.9
(Nutritional Products Manufacturer)
American Buildings Co. ............................................. 4.3
(Construction Products Company)
Lifeline Systems, Inc. ............................................. 3.9
(Medical Instruments)
NPC International, Inc. ............................................ 3.7
(Restaurants)
Penederm, Inc. ..................................................... 3.7
(Drug Delivery System)
RJR Nabisco Holdings Corp. ......................................... 3.3
(Food & Tobacco Company)
Damark International, Inc. ......................................... 3.1
(Retail Marketer)
First Financial Caribbean Corp. (ADR) ............................... 3.1
(Mortgage Bank)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES
(Jan. to June) COST (000'S)
- ----------------------------------------------------------------------------
<S> <C>
Mobil Corp. ....................................................... $11,793
Chancellor Broadcasting Corp. (Class A) ............................. 11,602
Weider Nutrition International, Inc. ................................. 9,486
Ultrak, Inc. ........................................................ 9,123
RJR Nabisco Holdings Corp. .......................................... 8,274
<CAPTION>
TOP FIVE SALES PROCEEDS
(Jan. to June) (000'S)
- ----------------------------------------------------------------------------
<S> <C>
*Seagate Technology, Inc. ......................................... $18,358
Philip Morris Cos., Inc. ........................................... 17,139
*Mobil Corp. ....................................................... 11,518
*INBRAND Corp. ..................................................... 10,954
*Alternative Resources Corp. ........................................ 8,457
<CAPTION>
PERCENT OF
TOP FIVE INDUSTRIES NET ASSETS
- ----------------------------------------------------------------------------
<S> <C>
Broadcasting ........................................................... 10%
Health Care (Medical Products & Supplies) ............................... 10
Health Care (Drugs--Major Pharmaceuticals) ............................... 9
Restaurants .............................................................. 7
Computers (Hardware) ..................................................... 6
- ----------------------------------------------------------------------------
* Security sold, no longer in portfolio
</TABLE>
- 3 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPORT FROM THE GROWTH FUND MANAGER (Continued)
Waiting for MICROS Systems, the electronic ordering and inventory
control company, has been highly worthwhile. This specialty software
company serving the hospitality industry is doing extremely well.
MICROS has launched new products and logged new business, including Marriott
International. In short, MICROS is revolutionizing the cash register business.
Weider Nutrition, a leader in the nutritional supplement market and the
manufacturer of Tigermilk, is among our new positions. Benefiting by the
wellness movement's migration to main street USA, Weider's share price has moved
from $11 to $16 since we purchased it.
Other purchases include NPC, the holding company for Tony Romas and Pizza Hut
franchises, and Damark, a catalog company. Looking at our portfolio, it seems
that if people order pizza, take vitamins, turn on the radio and look at
catalogs, we should do well.
In all seriousness, I feel cautiously confident. We've attained
good performance holding small stocks, which as a group haven't
performed well, and hence, have plenty of room to move up.
I take relatively big positions in stocks I believe in. When one of our big
positions works, performance gets a boost, when one doesn't work, performance
may suffer. So, although the short-term results can be volatile, over the years,
Growth Fund's returns have proven quite competitive.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NET ASSET CAPITALIZATION
WEIGHTINGS
AS A PERCENT OF NET ASSETS
AT JUNE 30, 1997
<S> <C>
Large: ($4 Bil. and above) 5%
Medium: ($1 Bil. - $4 Bil.) 1%
Small: (Less than $1 Bil.) 93%
Cash and Other: 1%
</TABLE>
Yes, Growth Fund spurts, rather than putts along. But stay with it, because I
have your best interests at heart--that is, your interest in long-term capital
appreciation.
/s/ Thomas M. Maguire
Thomas M. Maguire,
Growth Fund Manager
- -------------------------------
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.
- 4 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO GROWTH FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
COMMON STOCKS - 99.4%
BIOTECHNOLOGY - 0.1%
55,000 *Quidel Corp. ....................................... $ 179
BROADCASTING (TELEVISION, RADIO & CABLE) - 10.5%
71,300 American Radio Systems Corp. ......................... 2,843
413,100 *Chancellor Broadcasting Corp. (Class A) ............ 16,524
191,100 *SFX Broadcasting, Inc. (Class A) .................... 8,062
BUILDING MATERIALS - 0.2%
18,200 *ABT Building Products Corp. ........................... 478
CHEMICALS - 1.3%
239,700 *Melamine Chemicals, Inc. ............................ 3,356
CHEMICALS (SPECIALTY) - 0.5%
110,300 Spartech Corp. ....................................... 1,434
COMPUTERS (HARDWARE) - 6.3%
393,914 *MICROS Systems, Inc. ............................... 16,544
COMPUTERS (NETWORKING) - 0.9%
167,000 *Vanstar Corp. ....................................... 2,359
COMPUTERS (SOFTWARE & SERVICES) - 2.0%
43,900 Computer Data Systems, Inc. .......................... 1,284
128,000 *Optimal Robotics Corp. ................................ 512
146,300 *Phoenix International Ltd., Inc. .................... 3,365
CONSUMER FINANCE - 0.9%
157,200 AmeriTrade Holding Corp. ............................. 2,476
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
DISTRIBUTORS (FOOD & HEALTH) - 4.9%
808,400 +Weider Nutrition International, Inc. .............. $12,833
ENGINEERING & CONSTRUCTION - 4.3%
415,500 *+American Buildings Co. ............................ 11,218
FINANCIAL (DIVERSIFIED) - 4.4%
274,475 *Credit Acceptance Corp. ............................. 3,534
247,600 First Financial Caribbean Corp. (ADR) ................ 8,078
GAMING, LOTTERY, & PARIMUTUEL COMPANIES - 2.1%
500,000 *+American Coin Merchandising, Inc. .................. 5,437
HEALTH CARE (DIVERSIFIED) - 3.4%
178,900 *Anesta Corp. ........................................ 3,399
139,000 *Res-Care, Inc. ...................................... 2,658
186,150 *Sano Corp. .......................................... 2,839
HEALTH CARE (DRUGS--MAJOR PHARMACEUTICALS) - 9.4%
160,800 *Andrx Corp. ......................................... 6,151
255,000 *Ethical Holdings, plc (ADR) ......................... 1,132
188,200 *Faulding, Inc. ...................................... 2,305
226,900 *Gensia, Inc. ........................................ 1,007
60,000 Mylan Laboratories, Inc. ............................... 885
327,900 *+Nastech Pharmaceutical Co., Inc. ................... 3,443
727,700 *+Penederm, Inc. ..................................... 9,824
HEALTH CARE (HOSPITAL MANAGEMENT) - 0.7%
130,000 *American Healthcorp, Inc. ........................... 1,430
98,000 *Laboratory Specialists of America, Inc. ............... 276
HEALTH CARE (MANAGED CARE) - 0.3%
47,000 *United Dental Care, Inc. .............................. 705
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 5 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (Continued)
SAFECO GROWTH FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 9.8%
359,600 *Datascope Corp. ................................... $ 7,057
34,500 Dentsply International, Inc. ......................... 1,690
202,000 *Haemonetics Corp. ................................... 3,863
524,850 *+Lifeline Systems, Inc. ............................ 10,103
28,700 *PolyMedica Industries, Inc. ........................... 251
92,400 *Prime Medical Services, Inc. .......................... 999
42,300 *ResMed, Inc. ........................................ 1,026
122,000 *UroQuest Medical Corp. ................................ 793
HOMEBUILDING - 0.3%
38,125 *American Homestar Corp. ............................... 815
HOUSEHOLD PRODUCTS (NON-DURABLES) - 1.7%
221,000 *Celebrity, Inc. ....................................... 691
122,800 *Diamond Home Services, Inc. ......................... 1,182
200,000 *Home Products International, Inc. ................... 1,975
150,000 *Media Arts Group, Inc. ................................ 619
HOUSEWARES - 1.2%
357,720 *Lifetime Hoan Corp. ................................. 3,130
INSURANCE (LIFE/HEALTH) - 0.9%
115,600 *Compdent Corp. ...................................... 2,435
LEISURE TIME (PRODUCTS) - 0.6%
68,350 *Family Golf Centers, Inc. ........................... 1,572
80,000 *Laser Storm, Inc. ...................................... 35
MANUFACTURING (DIVERSIFIED) - 0.4%
22,500 Furon Co. .............................................. 706
75,600 *ITC Learning Corp. .................................... 387
MANUFACTURING (SPECIALIZED) - 0.6%
137,660 *Intermagnetics General Corp. ........................ 1,471
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
OFFICE EQUIPMENT & SUPPLIES - 1.1%
138,000 Asia Pacific Wire & Cable Corp. Ltd. ................ $1,501
244,500 *+Open Plan Systems, Inc. .............................. 978
41,700 *TRM Copy Centers Corp. ................................ 443
RESTAURANTS - 6.5%
170,300 Apple South, Inc. .................................... 2,597
845,779 *NPC International, Inc. ............................. 9,832
92,400 *New York Bagel Enterprises ............................ 393
344,000 *Rare Hospitality International, Inc. ................ 4,257
RETAIL (HOME SHOPPING) - 3.1%
523,800 *+Damark International, Inc. ......................... 8,119
RETAIL (SPECIALTY) - 4.9%
71,200 *Alrenco, Inc. ......................................... 943
268,800 *Funco, Inc. ......................................... 4,973
358,000 *+Rent-Way, Inc. ..................................... 5,280
316,400 *West Coast Entertainment Corp. ...................... 1,661
RETAIL (SPECIALTY--APPAREL) - 5.0%
505,094 *+Harold's Stores, Inc. .............................. 4,483
269,835 *Stage Stores, Inc. .................................. 7,049
76,600 *The Dress Barn, Inc. ................................ 1,494
SERVICES (ADVERTISING/MARKETING) - 2.6%
183,400 *ACI Telecentrics, Inc. .............................. 1,055
184,000 *APAC Teleservices, Inc. ............................. 3,576
40,700 *IntelliQuest Information Group, Inc. .................. 916
96,950 LCS Industries, Inc. ................................. 1,400
SERVICES (COMMERCIAL & CONSUMER) - 2.8%
148,800 *Renter's Choice, Inc. ............................... 2,957
460,400 *Ultrak, Inc. ........................................ 4,086
18,600 *Youth Services International, Inc. .................... 226
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 6 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO GROWTH FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
SERVICES (DATA PROCESSING) - 0.2%
21,000 *NCO Group, Inc. ................................... $ 617
TOBACCO - 5.0%
98,000 Philip Morris Cos., Inc. ............................. 4,349
266,300 RJR Nabisco Holdings
Corp. ................................................ 8,788
WASTE MANAGEMENT - 0.5%
56,800 *Tetra Technologies, Inc. ............................ 1,406
------
TOTAL COMMON STOCKS ................................................. 260,749
------
WARRANTS - 0.0%
LEISURE TIME (PRODUCTS) - 0.0%
80,000 *Laser Storm, Inc. (Warrant) ............................ 20
------
TOTAL WARRANTS ........................................................... 20
------
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
TEMPORARY INVESTMENTS - 0.0%
INVESTMENT COMPANIES:
$1,800 SSgA Money Market Portfolio ......................... $ 2
------
TOTAL TEMPORARY INVESTMENTS ............................................... 2
------
TOTAL INVESTMENTS - 99.4% ........................................... 260,771
Other Assets, less Liabilities ........................................ 1,629
------
NET ASSETS ......................................................... $262,400
------
------
- -----------------------------------------------------------------------------
</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
- 7 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO EQUITY FUND
June 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SAFECO Equity Fund returned 30.30% for the Advisor Class A shares and
29.68% for the Advisor Class B shares, not including sales charges, for
the 12 months ended June 30, 1997; beating the Lipper Analytical Services
peer group at 28.07%, but lagging the S&P 500 at 34.68%.
Three stocks held us below the broad market indicator: Viacom, Advanta and
PacifiCare. However, far more of our stocks added to rather than detracted
from our performance. And for that reason, Equity Fund beat the growth and
income peer group average, which was 28.07% for the 12-month period,
according to Lipper. [PHOTO OF RICH MEAGLEY]
Within the Viacom organization, Blockbuster has been a bust. Competition for
leisure time attention has come from multiple fronts and, consequently, Viacom
will close some stores. Meanwhile, the MTV
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE OVERVIEW --
CLASS A AND CLASS B SHARES
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED JUNE 30, 1997
WITH WITHOUT
SALES CHARGE SALES CHARGE
1 YEAR 5 YEAR 10 YEAR 1 YEAR 5 YEAR 10 YEAR
<S> <C> <C> <C> <C> <C> <C>
SAFECO Equity Fund Class A 24.44% 23.41% 15.23% 30.30% 24.55% 15.76%
SAFECO Equity Fund Class B 24.68% 24.26% 15.71% 29.68% 24.43% 15.71%
Investment Value As of June 30, 1997
SAFECO Equity Fund Class A: $41,275
SAFECE Equity Fund Class B: $43,012
S&P 500 Index: $39,251
With Sales Charge
SAFECO SAFECO
Equity Fund Equity Fund
Class A Class B S&P 500 Index
06/30/87 $9,550 $10,000 $10,000
07/31/87 9,959 10,428 10,507
08/31/87 9,959 10,428 10,899
09/30/87 10,251 10,734 10,660
10/31/87 7,295 7,638 8,364
11/30/87 7,295 7,638 7,675
12/31/87 7,256 7,598 8,259
01/31/88 7,256 7,598 8,607
02/28/88 7,870 8,241 9,008
03/31/88 8,468 8,867 8,729
04/30/88 8,468 8,867 8,826
05/31/88 8,344 8,737 8,903
06/30/88 8,722 9,133 9,312
07/31/88 8,670 9,078 9,276
08/31/88 8,525 8,927 8,961
09/30/88 8,927 9,347 9,343
10/31/88 8,927 9,347 9,602
11/30/88 9,084 9,512 9,465
12/31/88 9,091 9,520 9,631
01/31/89 9,091 9,520 10,336
02/28/89 9,708 10,165 10,078
03/31/89 9,720 10,178 10,313
04/30/89 9,720 10,178 10,848
05/31/89 10,317 10,803 11,288
06/30/89 10,697 11,201 11,223
07/31/89 10,697 11,201 12,237
08/31/89 11,650 12,199 12,477
09/30/89 11,794 12,350 12,425
10/31/89 11,817 12,374 12,137
11/30/89 11,899 12,460 12,385
12/31/89 12,345 12,927 12,682
01/31/90 11,320 11,854 11,831
02/28/90 11,426 11,965 11,984
03/31/90 11,851 12,409 12,301
04/30/90 11,508 12,050 11,994
05/31/90 12,619 13,214 13,163
06/30/90 12,599 13,193 13,074
07/31/90 12,374 12,957 13,032
08/31/90 11,067 11,589 11,854
09/30/90 10,528 11,024 11,276
10/31/90 10,303 10,789 11,228
11/30/90 10,865 11,377 11,953
12/31/90 11,288 11,819 12,287
01/31/91 11,866 12,426 12,822
02/28/91 12,571 13,163 13,739
03/31/91 12,926 13,535 14,072
04/30/91 13,191 13,813 14,106
05/31/91 13,721 14,368 14,715
06/30/91 12,840 13,445 14,041
07/31/91 13,701 14,347 14,695
08/31/91 13,916 14,572 15,044
09/30/91 13,728 14,375 14,792
10/31/91 13,953 14,610 14,991
11/30/91 13,080 13,696 14,386
12/31/91 14,438 15,118 16,032
01/31/92 15,297 16,018 15,734
02/28/92 15,556 16,289 15,939
03/31/92 14,856 15,557 15,628
04/30/92 14,979 15,685 16,087
05/31/92 14,843 15,542 16,166
06/30/92 13,771 14,420 15,925
07/31/92 14,334 15,009 16,577
08/31/92 13,744 14,391 16,237
09/30/92 13,784 14,433 16,428
10/31/92 14,449 15,130 16,485
11/30/92 15,404 16,129 17,044
12/31/92 15,775 16,519 17,254
01/31/93 16,298 17,066 17,398
02/28/93 16,312 17,081 17,635
03/31/93 17,189 17,999 18,007
04/30/93 16,796 17,587 17,571
05/31/93 18,178 19,035 18,040
06/30/93 18,253 19,113 18,093
07/31/93 18,004 18,853 18,020
08/31/93 19,013 19,909 18,702
09/30/93 19,542 20,462 18,559
10/31/93 20,056 21,001 18,943
11/30/93 20,165 21,115 18,763
12/31/93 20,651 21,624 18,990
01/31/94 21,889 22,920 19,635
02/28/94 21,341 22,346 19,103
03/31/94 20,521 21,488 18,272
04/30/94 21,182 22,180 18,506
05/31/94 21,795 22,822 18,808
06/30/94 21,010 22,000 18,347
07/31/94 21,547 22,563 18,949
08/31/94 22,858 23,936 19,724
09/30/94 22,768 23,841 19,243
10/31/94 23,195 24,288 19,674
11/30/94 22,736 23,807 18,957
12/31/94 22,703 23,773 19,238
01/31/95 22,869 23,946 19,736
02/28/95 23,466 24,572 20,504
03/31/95 23,657 24,772 21,109
04/30/95 24,292 25,436 21,729
05/31/95 24,909 26,083 22,612
06/30/95 25,527 26,730 23,136
07/31/95 25,930 27,152 23,902
08/31/95 26,652 27,908 23,962
09/30/95 27,683 28,988 24,973
10/31/95 27,340 28,628 24,883
11/30/95 28,226 29,556 25,973
12/31/95 28,437 29,777 26,474
01/31/96 29,198 30,574 27,374
02/28/96 29,458 30,846 27,629
03/31/96 29,760 31,162 27,894
04/30/96 30,393 31,825 28,305
05/31/96 31,101 32,566 29,034
06/30/96 31,676 33,169 29,145
07/31/96 30,461 31,896 27,858
08/31/96 30,779 32,229 28,446
09/30/96 32,677 34,216 30,045
10/31/96 33,728 35,274 30,874
11/30/96 36,264 37,908 33,205
12/31/96 35,546 37,126 32,548
01/31/97 37,578 39,251 34,578
02/28/97 37,728 39,385 34,852
03/31/97 36,203 37,764 33,423
04/30/97 37,232 38,815 35,415
05/31/97 39,697 41,366 37,568
06/30/97 41,275 43,012 39,251
</TABLE>
The performance graph compares a hypothetical $10,000 investment in Class A
and Class B of each Fund to a hypothetical investment in a relevant market
index. Fund performance is derived from the Fund's original class of shares
and reflects the maximum 4.5% sales charge for Class A shares, and the maximum
contingent deferred sales charge (5% in the first year, decreasing to 0% after
six years) for Class B shares. Fund performance has not been restated to
reflect Rule 12b-1 fees prior to September 30, 1996 (initial public offering
date of Class A and Class B shares). Such fees will affect subsequent
performance.
The index is unmanaged and includes no operating expenses or transaction
costs. Past performance is not predictive of future results. Principal value
may fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
- 8 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
division is doing fine. We're holding our position.
PacifiCare discovered the HMO it acquired, FHP, was in worse financial shape
than anticipated. That news sent the stock reeling. Nonetheless the company's
long-term fundamentals remain unchanged and the merged company controls 25% of
the Medicare market. I bought more PacifiCare on what I perceive to be a
temporary setback.
Advanta was overly aggressive in its strategy to pursue market share with low
introductory rates. It now has $10 billion in credit card receivables issued to
what turned out to be higher risk users. We still own Advanta, but it's the
smallest position in our portfolio.
Other than the preceding stories, the past six months have been characterized
by quality companies, low turnover and more stocks that pleased than
disappointed.
Technology helped us outperform the peer group. Microsoft was one of our best
performing stocks. So was Seagate, which we sold before the stock fell in the
face of stiff competition and questions about overcapacity. Wal-Mart was another
stock that did well for us. We bought it late in 1995 when it was trading at a
price that underestimated its growth rate.
As always, I'm trying to slowly work the cliche buy low and sell high. I
added Hewlett Packard and 3Com because their price dipped and I like their
HIGHLIGHTS
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
TOP TEN HOLDINGS NET ASSETS
- -------------------------------------------------------------------------
<S> <C>
Chase Manhattan Corp. ............................................. 4.7%
(Bank)
Kimberly-Clark Corp. ............................................... 3.1
(Manufacturing & Marketing Personal Care Products)
American Stores Co. ................................................ 3.0
(Retail Store)
Hartford Financial Services Group, Inc. ............................ 3.0
(Insurance Company)
Burlington Northern Santa Fe ........................................ 2.8
(Railroad)
SmithKline Beecham, plc (ADR) ....................................... 2.5
(Pharmaceuticals)
Intel Corp. ........................................................ 2.5
(Microcomputer Components Manufacturer)
Lockheed Martin Corp. .............................................. 2.4
(Aerospace/Defense)
Mobil Corp. ........................................................ 2.4
(Oil/Gas Exploration & Production)
Bell Atlantic Corp. ................................................ 2.3
(Telephone Company)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES
(Jan. to June) COST (000'S)
- ----------------------------------------------------------------------------
<S> <C>
3Com Corp. ........................................................ $30,189
Lockheed Martin Corp. .............................................. 27,078
Columbia/HCA Healthcare Corp. ...................................... 26,538
Kimberly-Clark Corp. ............................................... 22,984
First Data Corp. ................................................... 22,951
<CAPTION>
TOP FIVE SALES PROCEEDS
(Jan. to June) (000'S)
- ----------------------------------------------------------------------------
<S> <C>
*ConAgra, Inc. .................................................... $20,181
*Colgate-Palmolive Co. ............................................. 19,340
*Seagate Technology, Inc. .......................................... 18,580
*Motorola, Inc. .................................................... 18,421
*Browning-Ferris Industries, Inc. .................................. 18,019
<CAPTION>
PERCENT OF
TOP FIVE INDUSTRIES NET ASSETS
- ----------------------------------------------------------------------------
<S> <C>
Oil (Domestic Integrated) ............................................... 7%
Health Care (Diversified) ................................................ 6
Computers (Software & Services) .......................................... 5
Retail (Food Chains) ..................................................... 5
Financial (Diversified) .................................................. 5
- ----------------------------------------------------------------------------
* Security sold, no longer in portfolio
</TABLE>
- 9 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPORT FROM THE EQUITY FUND MANAGER (Continued)
fundamentals. And I sold Browning Ferris, Seagate, ConAgra, Colgate
when they hit our price objective.
I've shifted our stake in the healthcare arena so that four of
our six healthcare holdings are in drugs and drugstore-type
products. Changes in medical practices, the aging of America, and the aid the
FDA is giving to drug development have created a favorable environment for drug
stocks. For example, we bought SmithKline Beecham because it had a good pipeline
(drugs enroute for FDA approval) and a valuation that was below its peers.
Indeed, SmithKline secured FDA approval for wider application of its hepatitis
drugs and moved up 65% over the last 12 months.
Chase Manhattan is still Equity Fund's largest holding, and the reason for
holding it remains the same: cost cutting.
Hartford Financial Services, Kimberly Clark, American Stores, Burlington
Northern are names that are new to the top ten--but not to the Fund. Again, the
main theme is cost cutting. The savings and earnings growth Kimberly and
Burlington Northern can reap through their respective mergers are pretty easy to
visualize. As well, we see Hartford, recently released from ITT, becoming leaner
and meaner.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NET ASSET CAPITALIZATION
WEIGHTINGS
AS A PERCENT OF NET ASSETS
AT JUNE 30, 1997
<S> <C>
Large: ($4 Bil. and above) 88%
Medium: ($1 Bil. - $4 Bil.) 6%
Small: (Less than $1 Bil.) 1%
Cash and Other: 5%
</TABLE>
American Stores has clearly laid plans to consolidate buying and
distribution, and bring its grocery and drugstore profit margins up
to industry levels. We bought the stock believing it could raise its
margins and, subsequently its stock price.
I've made Lockheed Martin a top-ten holding purely because it's a major
participant in the aerospace consolidation. And where there is consolidation
there can be cost cutting.
In summary, I think the market is expensive, and that perception has made me
a very cost-conscious manager. I also believe, in spite of the high prices,
there are values to be found and that you have hired me to find them. And so, I
will continue forward, knowing you have hired me to invest your money in stocks,
and making every effort not to pay too much for a stock in a market that seems
overpriced.
/s/ Rich Meagley
Rich Meagley,
Equity Fund Manager
- -------------------------------
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 Fund
Manager. He holds an M.B.A. from the University of Washington, and is a
Chartered Financial Analyst.
- 10 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO EQUITY FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
COMMON STOCKS - 95.4%
AEROSPACE/DEFENSE - 2.4%
300,000 Lockheed Martin Corp. .............................. $31,069
AUTO PARTS & EQUIPMENT - 2.0%
740,000 Echlin, Inc. ........................................ 26,640
BANKS (MAJOR REGIONAL) - 2.1%
420,000 NationsBank Corp. ................................... 27,090
BANKS (MONEY CENTER) - 4.7%
635,000 Chase Manhattan Corp. ............................... 61,635
BEVERAGES (NON-ALCOHOLIC) - 1.4%
500,000 PepsiCo, Inc. ....................................... 18,781
BROADCASTING (TELEVISION, RADIO & CABLE) - 2.1%
900,000 *Viacom, Inc. (Class B) ............................. 27,000
CHEMICALS - 1.6%
330,000 Du Pont (E.I.)
de Nemours & Co. .................................... 20,749
COMPUTERS (HARDWARE) - 2.2%
500,000 Hewlett-Packard Co. ................................. 28,000
COMPUTERS (NETWORKING) - 1.6%
475,000 *3Com Corp. ......................................... 21,375
COMPUTERS (SOFTWARE & SERVICES) - 5.5%
700,000 Electronic Data Systems Corp. ....................... 28,700
165,000 Microsoft Corp. ..................................... 20,852
400,000 Oracle Corp. ........................................ 20,150
ELECTRIC COMPANIES - 1.9%
1,150,000 Houston Industries, Inc. ............................ 24,653
ELECTRICAL EQUIPMENT - 3.6%
600,000 AMP, Inc. ........................................... 25,050
340,000 General Electric Co. ................................ 22,227
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
ELECTRONICS (SEMICONDUCTORS) - 2.5%
225,000 Intel Corp. ........................................ $31,908
ENTERTAINMENT - 1.6%
260,000 Walt Disney Co. ..................................... 20,865
FINANCIAL (DIVERSIFIED) - 4.9%
460,000 Advanta Corp. (Class B) ............................. 16,416
550,000 Federal Home Loan Mortgage Corp. .................... 18,906
650,000 Federal National Mortgage Association ............... 28,356
HEALTH CARE (DIVERSIFIED) - 5.7%
375,000 American Home Products Corp. ........................ 28,687
300,000 Bristol-Myers Squibb Co. ............................ 24,300
325,000 Johnson & Johnson ................................... 20,922
HEALTH CARE (DRUGS--MAJOR PHARMACEUTICALS) - 2.5%
350,000 SmithKline Beecham, plc (ADR) ....................... 32,069
HEALTH CARE (HOSPITAL MANAGEMENT) - 4.3%
760,000 Columbia/HCA Healthcare Corp. ....................... 29,878
400,000 *PacifiCare Health Systems, Inc. (Class B) .......... 25,550
HOUSEHOLD PRODUCTS (NON-DURABLES) - 3.1%
810,000 Kimberly-Clark Corp. ................................ 40,298
INSURANCE (MULTI-LINE) - 4.5%
130,000 American International Group, Inc. .................. 19,419
475,000 Hartford Financial Services Group, Inc. ............. 39,306
MANUFACTURING (DIVERSIFIED) - 3.9%
275,000 AlliedSignal, Inc. .................................. 23,100
450,000 Dover Corp. ......................................... 27,675
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 11 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (Continued)
SAFECO EQUITY FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
OIL (DOMESTIC INTEGRATED) - 6.7%
460,000 Exxon Corp. ........................................ $28,290
440,000 Mobil Corp. ......................................... 30,745
260,000 Texaco, Inc. ........................................ 28,275
OIL (INTERNATIONAL INTEGRATED) - 1.7%
400,000 Royal Dutch Petroleum Co. (ADR) ..................... 21,750
PAPER & FOREST PRODUCTS - 1.6%
300,000 Willamette Industries, Inc. ......................... 21,000
RAILROADS - 2.7%
400,000 Burlington Northern Santa Fe ........................ 35,950
RETAIL (DEPARTMENT STORES) - 1.9%
535,000 May Department Stores Co. ........................... 25,279
RETAIL (FOOD CHAINS) - 5.0%
700,000 Albertson's, Inc. ................................... 25,550
800,000 American Stores Co. ................................. 39,500
RETAIL (GENERAL MERCHANDISE) - 2.0%
785,000 Wal-Mart Stores, Inc. ............................... 26,543
SERVICES (DATA PROCESSING) - 2.1%
635,000 First Data Corp. .................................... 27,900
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
TELECOMMUNICATIONS (LONG DISTANCE) - 1.6%
575,000 AT&T Corp. ....................................... $ 20,161
TELEPHONE - 4.1%
400,000 Bell Atlantic Corp. ................................. 30,350
525,000 GTE Corp. ........................................... 23,034
TOBACCO - 1.9%
550,000 Philip Morris Cos., Inc. ............................ 24,406
-------
TOTAL COMMON STOCKS ............................................... 1,240,359
-------
TEMPORARY INVESTMENTS - 4.7%
FINANCIAL (DIVERSIFIED)
$61,445,000 Merrill Lynch & Co.
6.20%, due 7/01/97 .................................. 61,445
-------
TOTAL TEMPORARY INVESTMENTS .......................................... 61,445
-------
TOTAL INVESTMENTS - 100.1% ........................................ 1,301,804
Liabilities, less Other Assets ...................................... (1,276)
-------
NET ASSETS ....................................................... $1,300,528
-------
-------
- -----------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
- 12 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO INCOME FUND
June 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
For the year ended June 30, the Fund returned 27.86% for the Advisor
Class A shares and 27.14% for the Advisor Class B shares, not including
the effects of sales charges, versus 26.73%, the average for equity-income funds
calculated by Lipper Analytical Services.
During the most recent six months, SAFECO Income Fund returned 13.39% for
Advisor Class A shares and 13.02% for Advisor Class B shares (returns do
not include sales charges). While beating the peer group, the fund
underperformed as the first quarter was marked by a few companies which
disappointed investor expectations for revenues and earnings.
Most notably, 3Com lost value on fears of competition and Advanta's share
price sank as the company tried to grow its credit card business too fast.
[PHOTO OF THOMAS RATH]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE OVERVIEW --
CLASS A AND CLASS B SHARES
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED JUNE 30, 1997
<S> <C> <C> <C> <C> <C> <C>
With Without
Sales Charge Sales Charge
1 Year 5 Year 10 Year 1 Year 5 Year 10 Year
SAFECO Income Fund Class A 22.11% 15.77% 10.89% 27.86% 16.85% 11.40%
SAFECO Income Fund Class B 22.14% 16.50% 11.34% 27.14% 16.71% 11.34%
Investment Value As of June 30, 1997
SAFECO Income Fund Class A: $28,111
SAFECO Income Fund Class B: $29,269
S&P 500 Index: $39,251
With Sales Charge
SAFECO SAFECO
Income Fund Income Fund
Class A Class B S&P 500 Index
06/30/87 $9,550 $10,000 $10,000
07/31/87 9,817 10,280 10,507
08/31/87 9,817 10,280 10,899
09/30/87 10,114 10,591 10,660
10/31/87 7,964 8,339 8,364
11/30/87 7,964 8,339 7,675
12/31/87 7,924 8,297 8,259
01/31/88 7,924 8,297 8,607
02/28/88 8,413 8,809 9,008
03/31/88 8,716 9,127 8,729
04/30/88 8,716 9,127 8,826
05/31/88 8,811 9,227 8,903
06/30/88 9,232 9,667 9,312
07/31/88 9,252 9,688 9,276
08/31/88 9,097 9,526 8,961
09/30/88 9,359 9,800 9,343
10/31/88 9,359 9,800 9,602
11/30/88 9,502 9,950 9,465
12/31/88 9,428 9,872 9,631
01/31/89 9,428 9,872 10,336
02/28/89 9,852 10,316 10,078
03/31/89 9,894 10,361 10,313
04/30/89 9,894 10,361 10,848
05/31/89 10,270 10,754 11,288
06/30/89 10,591 11,090 11,223
07/31/89 10,591 11,090 12,237
08/31/89 11,230 11,760 12,477
09/30/89 11,324 11,858 12,425
10/31/89 10,897 11,411 12,137
11/30/89 11,021 11,541 12,385
12/31/89 11,240 11,769 12,682
01/31/90 10,672 11,175 11,831
02/28/90 10,721 11,226 11,984
03/31/90 10,802 11,311 12,301
04/30/90 10,397 10,887 11,994
05/31/90 10,944 11,460 13,163
06/30/90 10,900 11,414 13,074
07/31/90 10,706 11,210 13,032
08/31/90 9,913 10,380 11,854
09/30/90 9,505 9,953 11,276
10/31/90 9,277 9,714 11,228
11/30/90 9,844 10,308 11,953
12/31/90 10,031 10,504 12,287
01/31/91 10,421 10,912 12,822
02/28/91 11,021 11,541 13,739
03/31/91 11,189 11,716 14,072
04/30/91 11,310 11,843 14,106
05/31/91 11,652 12,201 14,715
06/30/91 11,359 11,894 14,041
07/31/91 11,682 12,232 14,695
08/31/91 12,036 12,603 15,044
09/30/91 12,018 12,584 14,792
10/31/91 12,143 12,715 14,991
11/30/91 11,642 12,190 14,386
12/31/91 12,364 12,946 16,032
01/31/92 12,459 13,046 15,734
02/28/92 12,498 13,087 15,939
03/31/92 12,378 12,961 15,628
04/30/92 12,739 13,340 16,087
05/31/92 12,860 13,466 16,166
06/30/92 12,906 13,515 15,925
07/31/92 13,386 14,017 16,577
08/31/92 13,289 13,915 16,237
09/30/92 13,430 14,063 16,428
10/31/92 13,182 13,804 16,485
11/30/92 13,521 14,158 17,044
12/31/92 13,782 14,431 17,254
01/31/93 14,082 14,746 17,398
02/28/93 14,350 15,026 17,635
03/31/93 14,836 15,535 18,007
04/30/93 14,633 15,323 17,571
05/31/93 14,827 15,526 18,040
06/30/93 14,904 15,607 18,093
07/31/93 14,827 15,526 18,020
08/31/93 15,314 16,036 18,702
09/30/93 15,357 16,081 18,559
10/31/93 15,625 16,361 18,943
11/30/93 15,435 16,162 18,763
12/31/93 15,511 16,242 18,990
01/31/94 16,018 16,773 19,635
02/28/94 15,660 16,398 19,103
03/31/94 15,113 15,826 18,272
04/30/94 15,290 16,011 18,506
05/31/94 15,299 16,020 18,808
06/30/94 15,075 15,785 18,347
07/31/94 15,539 16,272 18,949
08/31/94 16,031 16,787 19,724
09/30/94 15,814 16,559 19,243
10/31/94 15,786 16,530 19,674
11/30/94 15,227 15,945 18,957
12/31/94 15,342 16,065 19,238
01/31/95 15,731 16,473 19,736
02/28/95 16,223 16,987 20,504
03/31/95 16,683 17,469 21,109
04/30/95 17,040 17,843 21,729
05/31/95 17,537 18,363 22,612
06/30/95 17,754 18,590 23,136
07/31/95 18,446 19,316 23,902
08/31/95 18,579 19,455 23,962
09/30/95 19,142 20,044 24,973
10/31/95 18,932 19,824 24,883
11/30/95 19,593 20,516 25,973
12/31/95 19,999 20,942 26,474
01/31/96 20,639 21,611 27,374
02/28/96 20,690 21,665 27,629
03/31/96 20,935 21,922 27,894
04/30/96 21,017 22,008 28,305
05/31/96 21,713 22,736 29,034
06/30/96 21,985 23,021 29,145
07/31/96 21,365 22,372 27,858
08/31/96 21,768 22,794 28,446
09/30/96 22,774 23,847 30,045
10/31/96 23,604 24,705 30,874
11/30/96 24,855 25,990 33,205
12/31/96 24,790 25,898 32,548
01/31/97 25,775 26,928 34,578
02/28/97 25,810 26,952 34,852
03/31/97 24,841 25,931 33,423
04/30/97 25,194 26,275 35,415
05/31/97 26,997 28,135 37,568
06/30/97 28,111 29,269 39,251
</TABLE>
The performance graph compares a hypothetical $10,000 investment in Class A
and Class B of each Fund to a hypothetical investment in a relevant market
index. Fund performance is derived from the Fund's original class of shares
and reflects the maximum 4.5% sales charge for Class A shares, and the maximum
contingent deferred sales charge (5% in the first year, decreasing to 0% after
six years) for Class B shares. Fund performance has not been restated to
reflect Rule 12b-1 fees prior to September 30, 1996 (initial public offering
date of Class A and Class B shares). Such fees will affect subsequent
performance.
The index is unmanaged and includes no operating expenses or transaction
costs. Past performance is not predictive of future results. Principal value
may fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
- 13 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPORT FROM THE INCOME FUND MANAGER (Continued)
Of late, investors appear to be casting about from sector to sector in search
of strong relative earnings and, at the same time, driving a select group of
large, high-quality, consistent-growth companies to valuation extremes. It was a
period in which market leadership narrowed and larger company stocks
outperformed smaller company stocks.
As valuations have climbed to extreme levels relative to interest rates and
the earnings outlook, I have become increasingly cautious about the outlook for
the stock market. The strong rally we enjoyed in the second quarter was driven
in a large part by a fairly dramatic decline in long-term interest rates. I am
concerned that stock prices will suffer should interest rates reverse and move
higher.
In this environment, I have become more conservative in selecting companies
and securities for investment. There has been greater emphasis in the Fund on
current dividend yield and less emphasis on technology sector investments.
However, companies that provide computer-based services for others have
underperformed the market and look attractive at current prices. Hence, I'm
looking for good
HIGHLIGHTS
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
TOP TEN HOLDINGS NET ASSETS
- -------------------------------------------------------------------------
<S> <C>
Chancellor Broadcasting Co. 7.00% Convertible ...................... 3.4%
(Radio Stations)
First Financial Management
5.00%, due 12/15/99 ............................................... 3.2
(Information Processor)
American Home Products Corp. ....................................... 3.0
(Pharmaceuticals)
Philip Morris Cos., Inc. ........................................... 2.9
(Food, Beverage & Tobacco Company)
MICROS Systems, Inc. ............................................... 2.8
(Electronic Cash Register Manufacturer)
Mobil Corp. ........................................................ 2.8
(Oil/Gas Exploration & Production)
J.C. Penney Co., Inc. .............................................. 2.5
(Department Store)
Texaco, Inc. ....................................................... 2.5
(Oil Company)
Hartford Financial Services Group, Inc. ............................. 2.3
(Insurance Company)
Washington Mutual Savings Bank ...................................... 2.3
(Savings & Loan)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES
(Jan. to June) COST (000'S)
- ----------------------------------------------------------------------------
<S> <C>
Chancellor Broadcasting Co. 7.00% Convertible ....................... $8,770
Lockheed Martin Corp. ............................................... 6,569
Mobil Corp. ......................................................... 6,522
Unisource Worldwide, Inc. ........................................... 6,123
MICROS Systems, Inc. ................................................ 5,490
<CAPTION>
TOP FIVE SALES PROCEEDS
(Jan. to June) (000'S)
- ----------------------------------------------------------------------------
<S> <C>
*Seagate Technology, Inc. ......................................... $12,948
Philip Morris Cos., Inc. ............................................ 8,801
*Colgate-Palmolive Co. .............................................. 7,168
*Xilinx, Inc. 5.25% 11/1/02 (144A) ................................... 5,740
*American List Corp. ................................................ 4,870
<CAPTION>
PERCENT OF
TOP FIVE INDUSTRIES NET ASSETS
- ----------------------------------------------------------------------------
<S> <C>
Oil (Domestic Integrated) ............................................... 8%
Financial (Diversified) .................................................. 8
Tobacco .................................................................. 5
Health Care (Diversified) ................................................ 4
Telephone ................................................................ 4
- ----------------------------------------------------------------------------
* Security sold, no longer in portfolio
</TABLE>
- 14 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
things from our holdings in First Data Corporation, EDS and
Automatic Data Processing.
I continue to seek high-quality companies with dominant market
positions, strong balance sheets and cash flow, attractive earnings
growth prospects, and reasonable stock prices. I recently found
these traits-- and purchased them for the Fund--in First Industrial Realty
Trust, which specializes in industrial properties; Bristol-Myers Squibb, which
was cheap relative to other drug stocks and benefiting from new financial
leadership; Weyerhaeuser, because paper prices have been depressed and are ready
to recover; and Stage Stores, a small company that is finding success operating
department stores in smaller markets.
It seems the higher up the capitalization chain you go, the harder it is to
find value. In fact, I am finding small companies far more attractive than large
companies these days, and consequently about 21% of net assets are currently
invested in smaller companies. Our top ten holdings contain two small caps that
contributed significantly to returns: Chancellor Broadcasting, an owner of radio
stations, and MICROS Systems, a software company that serves the hospitality
industry.
SAFECO Income Fund invests in convertible securities for their
rich dividends. During the period, I initiated new convertible
positions in Adaptec, HMT Technologies, Chancellor Broadcasting,
Checkpoint systems and IKON Office Solutions. However, it has been
hard to find other high-yielding securities in which to invest. At
June 30, our cash had climbed to 6.7% of net assets. The remaining net assets
were 69.3% invested in common stocks, and 24.4% in convertible securities.
The Income Fund continues to be well diversified, representing all economic
sectors and companies with market capitalizations ranging from very large to
very small. Going forward, I will continue to position the Fund somewhat
defensively with high-quality, consistently growing companies.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NET ASSET CAPITALIZATION
WEIGHTINGS
AS A PERCENT OF NET ASSETS
AT JUNE 30, 1997
<S> <C>
Common Stocks
Large: ($4 Bil. and above) 52%
Medium: ($1 Bil. - $4 Bil.) 5%
Small: (Less than $1 Bil.) 12%
Preferred Stocks: 14%
Corporate Bonds: 10%
Cash and Other: 7%
</TABLE>
/s/ Thomas E. Rath
Thomas E. Rath,
Income Fund Manager
- -------------------------------
In addition to being an equity and convertible securities portfolio manager at
SAFECO, Rath has been an analyst and portfolio manager at First Interstate Bank
and a principal at Meridian Capital Management. He holds an MBA from the
University of Washington and is a Chartered Financial Analyst.
- 15 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO INCOME FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
COMMON STOCKS - 69.3%
AEROSPACE/DEFENSE - 2.2%
75,000 Lockheed Martin Corp. .............................. $ 7,767
BANKS (MAJOR REGIONAL) - 3.5%
45,674 NationsBank Corp. .................................... 2,946
46,100 Norwest Corp. ........................................ 2,593
105,000 US Bancorp ........................................... 6,733
BANKS (MONEY CENTER) - 1.9%
70,000 Chase Manhattan Corp. ................................ 6,794
COMPUTERS (HARDWARE) - 2.8%
234,100 *MICROS Systems, Inc. ................................ 9,832
COMPUTERS (SOFTWARE & SERVICES) - 0.8%
70,000 Electronic Data Systems Corp. ........................ 2,870
ELECTRIC COMPANIES - 2.8%
220,000 Houston Industries, Inc. ............................. 4,716
125,000 NIPSCO Industries, Inc. .............................. 5,164
ELECTRICAL EQUIPMENT - 3.0%
155,000 AMP, Inc. ............................................ 6,471
60,000 General Electric Co. ................................. 3,923
FINANCIAL (DIVERSIFIED) - 3.5%
140,000 Federal National Mortgage Association ................ 6,108
327,500 Medallion Financial Corp. ............................ 6,264
FOODS - 1.9%
12,400 CPC International, Inc. .............................. 1,145
85,000 ConAgra, Inc. ........................................ 5,451
HEALTH CARE (DIVERSIFIED) - 4.2%
140,000 American Home Products Corp. ........................ 10,710
50,000 Bristrol-Myers Squibb Co. ............................ 4,050
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
HEALTH CARE (DRUGS--MAJOR PHARMACEUTICALS) - 0.9%
30,000 Merck and Co., Inc. ................................. $3,105
HOUSEHOLD PRODUCTS (NON-DURABLES) - 1.9%
135,000 Kimberly-Clark Corp. ................................. 6,716
INSURANCE (MULTI-LINE) - 2.4%
100,000 Hartford Financial Services Group, Inc. .............. 8,275
MANUFACTURING (DIVERSIFIED) - 1.9%
65,000 Minnesota Mining & Manufacturing Co. ................. 6,630
NATURAL GAS - 1.0%
135,000 Northwest Natural Gas Co. ............................ 3,535
OFFICE EQUIPMENT & SUPPLIES - 1.8%
400,000 Unisource Worldwide, Inc. ............................ 6,400
OIL (DOMESTIC INTEGRATED) - 7.0%
100,000 Exxon Corp. .......................................... 6,150
140,000 Mobil Corp. .......................................... 9,783
80,000 Texaco, Inc. ......................................... 8,700
OIL (INTERNATIONAL INTEGRATED) - 1.5%
100,000 Royal Dutch Petroleum Co. (ADR) ...................... 5,438
OIL & GAS (EXPLORATION & PRODUCTION) - 0.3%
22,000 *Nuevo Energy Co. ...................................... 902
PAPER & FOREST PRODUCTS - 1.0%
70,000 Weyerhaeuser Co. ..................................... 3,640
PERSONAL CARE - 1.1%
74,600 International Flavors & Fragrances, Inc. ............. 3,767
RAILROADS - 2.1%
126,434 GATX Corp. ........................................... 7,302
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 16 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO INCOME FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
REAL ESTATE--NON-AFFILIATED - 2.3%
105,000 First Industrial Realty Trust, Inc. ................ $ 3,071
148,600 Omega Healthcare Investors, Inc. ..................... 4,857
RETAIL (DEPARTMENT STORES) - 2.5%
170,000 J.C. Penney Co., Inc. ................................ 8,872
RETAIL (FOOD CHAINS) - 1.0%
70,000 American Stores Co. .................................. 3,456
RETAIL (SPECIALTY--APPAREL) - 1.4%
191,400 Stage Stores, Inc. ................................... 5,000
SAVINGS & LOAN COMPANIES - 2.3%
136,642 Washington Mutual Savings Bank ....................... 8,164
SERVICES (COMMERCIAL & CONSUMER) - 0.7%
274,600 *Ultrak, Inc. ........................................ 2,437
TELECOMMUNICATIONS (LONG DISTANCE) - 0.9%
90,000 AT&T Corp. ........................................... 3,156
TELEPHONE - 2.0%
160,000 GTE Corp. ............................................ 7,020
TOBACCO - 4.9%
229,000 Philip Morris Cos., Inc. ............................ 10,162
215,000 RJR Nabisco Holdings Corp. ........................... 7,095
WASTE MANAGEMENT - 1.8%
275,900 Landauer, Inc. ....................................... 6,397
------
TOTAL COMMON STOCKS ................................................. 243,567
------
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
PREFERRED STOCKS - 14.1%
BROADCASTING (TELEVISION, RADIO & CABLE) - 3.4%
170,000 Chancellor Broadcasting Co. 7.00% Convertible ...... $11,815
COMPUTERS (NETWORKING) - 1.1%
100,000 #Vanstar Financing Trust 6.75% Convertible (144A) .... 3,950
CONTAINERS (METAL & GLASS) - 1.8%
125,000 Crown Cork & Seal 4.50% Convertible .................. 6,313
FINANCIAL (DIVERSIFIED) - 1.5%
150,000 Advanta Corp. Class B Series 95 SAILS ................ 5,137
INSURANCE (LIFE/HEALTH) - 1.1%
52,000 American Banks Insurance Series B Convertible ........ 3,744
OFFICE EQUIPMENT & SUPPLIES - 1.1%
60,000 IKON Office Solutions, Inc. 5.04% Convertible ........ 3,862
OIL & GAS (EXPLORATION & PRODUCTION) - 0.6%
44,800 Nuevo Energy Co. $2.875 Convertible .................. 2,140
TELEPHONE - 2.0%
115,400 Salomon, Inc. 6.25% Exchangeable Convertible to Cincinnati
Bell, Inc. ........................................... 7,371
WASTE MANAGEMENT - 1.5%
160,000 Browning Ferris Industries, Inc. 7.25% "ACES" ........ 5,320
------
TOTAL PREFERRED STOCKS ............................................... 49,652
------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 17 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (Continued)
SAFECO INCOME FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
CORPORATE BONDS - 10.3%
CONVERTIBLE SUBORDINATED DEBENTURES:
AIRLINES - 0.4%
$1,605,000 Alaska Air Group, Inc. 6.875%, due 6/15/14 ......... $ 1,585
BIOTECHNOLOGY - 0.8%
2,400,000 Bindley Western Industries, Inc. 6.50%, due
10/01/02 ............................................. 2,751
COMPUTERS (HARDWARE) - 1.1%
1,000,000 HMT Technology 5.75%, due 1/15/04 ...................... 825
3,500,000 #HMT Technology (144A) 5.75%, due 1/15/04 ............ 2,887
ELECTRONICS (SEMICONDUCTORS) - 0.8%
3,000,000 #Adaptec, Inc. (144A) 4.75%, due 2/01/04 ............. 2,966
FINANCIAL (DIVERSIFIED) - 3.2%
5,500,000 First Financial Management Convertible to First Data Corp.
5.00%, due 12/15/99 ................................. 11,172
OIL (DOMESTIC INTEGRATED) - 1.2%
2,500,000 Pennzoil Co. 6.50%, due 1/15/03 ...................... 4,375
PUBLISHING - 0.9%
3,000,000 #Thomas Nelson, Inc. (144A) 5.75%, due 11/30/99 ...... 3,075
RETAIL (BUILDING SUPPLIES) - 1.0%
3,000,000 Home Depot, Inc. 3.25%, due 10/01/01 ................. 3,390
SERVICES (COMMERCIAL & CONSUMER) - 0.9%
3,000,000 #Checkpoint Systems (144A) 5.25%, due 11/01/05 ....... 3,184
------
TOTAL CORPORATE BONDS ................................................ 36,210
------
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
TEMPORARY INVESTMENTS - 6.7%
INVESTMENT COMPANIES:
$17,666,842 SSgA Money Market Portfolio ....................... $ 17,667
6,067,107 SSgA U.S. Treasury Money Market Portfolio ............ 6,067
------
TOTAL TEMPORARY INVESTMENTS .......................................... 23,734
------
TOTAL INVESTMENTS - 100.4% .......................................... 353,163
Liabilities, less Other Assets ...................................... (1,513)
------
NET ASSETS ......................................................... $351,650
------
------
- -----------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
# 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". At June 30, 1997, such securities are HMT Technology
(144A) at 5.75%, acquired 1/14/97, due 1/15/04, Adaptec, Inc. (144A) at 4.75%,
acquired 6/11/97, due 2/01/04, Checkpoint Systems (144A) at 5.25%, acquired
3/12/97, due 11/01/05 and Thomas Nelson, Inc. (144A) at 5.75%, acquired
9/19/96, due 11/30/99. The cost of such securities is $12,755,625 and total
value is 3.6% of net assets.
SEE NOTES TO FINANCIAL STATEMENTS
- 18 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO NORTHWEST FUND
June 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Returning 22.18% for Advisor Class A shares and 21.52% for Advisor
Class B shares (not including sales charges), the SAFECO Northwest Fund
lagged the growth fund peer group at 23.96% for the year ended June 30,
according to Lipper Analytical Services.
[PHOTO OF BILL WHITLOW]
By migrating to larger companies, however, we've closed the performance gap:
For the quarter just ended, the fund returned 16.68% for Class A shares and
16.54% for Class B shares (not including sales charges), while the growth
peer group delivered 15.82% according to Lipper Analytical Services.
Clearly the quarter and year have belonged to large cap stocks. Since
becoming Fund Manager in April, I've jettisoned the small companies that held us
under the broad market and re-invested in larger capitalization companies.
Within the Northwest Universe, only 11 stocks are over $4 billion in market
capitalization
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE OVERVIEW --
<S> <C> <C> <C> <C> <C> <C>
Class A and Class B Shares
Average Annual Total Return
for the period ended June 30, 1997
With Without
Sales Charge Sales Charge
Since Since
1 Year 5 Year Inception 1 Year 5 Year Inception
SAFECO Northwest Fund Class A 16.68% 12.55% 12.24% 22.18% 13.59% 13.06%
SAFECO Northwest Fund Class B 16.52% 13.22% 12.96% 21.52% 13.47% 12.96%
Investment Value As of June 30, 1997
SAFECO Northwest Fund Class A: $20,773*
SAFECO Northwest Fund Class B: $21,636
S&P 500 Index: $28,568
Composite NW 50TM Index: $26,156
*The funds inception was February 7,
1991. Graph and average annual return
comparison begins February 28, 1991.
With Sales Charge
SAFECO SAFECO
Northwest Northwest Composite
Fund Fund NW 50
Class A Class B S&P 500 Index Index
02/28/91 $9,550 $10,000 $10,000 $10,000
03/31/91 9,832 10,295 10,242 10,409
04/30/91 10,120 10,597 10,267 10,666
05/31/91 10,465 10,958 10,710 11,305
06/30/91 9,853 10,317 10,220 10,552
07/31/91 10,440 10,932 10,696 11,063
08/31/91 10,873 11,385 10,949 11,510
09/30/91 10,606 11,106 10,766 11,292
10/31/91 10,500 10,995 10,911 11,285
11/30/91 9,854 10,318 10,471 10,836
12/31/91 11,052 11,573 11,669 12,133
01/31/92 11,529 12,072 11,452 12,767
02/28/92 11,898 12,459 11,601 12,958
03/31/92 11,637 12,185 11,375 12,545
04/30/92 11,228 11,757 11,709 11,973
05/31/92 11,345 11,879 11,766 11,865
06/30/92 10,987 11,504 11,591 11,450
07/31/92 11,240 11,769 12,065 11,567
08/31/92 10,938 11,453 11,818 11,250
09/30/92 11,394 11,931 11,957 11,693
10/31/92 11,774 12,329 11,998 12,156
11/30/92 12,272 12,850 12,406 12,701
12/31/92 12,608 13,202 12,558 12,725
01/31/93 12,658 13,255 12,663 12,821
02/28/93 12,037 12,605 12,835 12,420
03/31/93 12,508 13,097 13,106 12,932
04/30/93 11,997 12,563 12,789 12,641
05/31/93 12,258 12,835 13,130 12,953
06/30/93 12,143 12,715 13,169 12,675
07/31/93 12,042 12,610 13,116 12,220
08/31/93 12,383 12,966 13,612 12,721
09/30/93 12,374 12,957 13,508 12,434
10/31/93 12,534 13,125 13,787 12,881
11/30/93 12,585 13,178 13,656 13,158
12/31/93 12,738 13,338 13,821 13,334
01/31/94 12,963 13,574 14,291 13,737
02/28/94 13,290 13,917 13,904 13,941
03/31/94 12,728 13,327 13,299 13,449
04/30/94 12,697 13,295 13,470 13,409
05/31/94 12,892 13,499 13,689 13,611
06/30/94 12,562 13,154 13,354 13,198
07/31/94 12,746 13,347 13,792 13,300
08/31/94 13,320 13,948 14,356 14,068
09/30/94 13,016 13,629 14,005 13,530
10/31/94 12,892 13,499 14,319 13,449
11/30/94 12,571 13,164 13,798 13,209
12/31/94 12,540 13,131 14,002 13,281
01/31/95 12,695 13,294 14,365 13,224
02/28/95 13,016 13,629 14,924 13,668
03/31/95 13,451 14,085 15,364 14,102
04/30/95 13,627 14,269 15,816 14,526
05/31/95 13,834 14,486 16,458 14,528
06/30/95 14,516 15,200 16,840 15,409
07/31/95 15,273 15,992 17,397 15,993
08/31/95 15,407 16,133 17,440 16,299
09/30/95 15,490 16,220 18,176 16,897
10/31/95 15,307 16,029 18,111 16,507
11/30/95 15,275 15,995 18,904 16,753
12/31/95 15,070 15,780 19,269 16,957
01/31/96 15,213 15,930 19,924 17,518
02/28/96 15,677 16,415 20,110 17,921
03/31/96 16,625 17,409 20,303 17,826
04/30/96 17,078 17,882 20,602 18,898
05/31/96 17,365 18,183 21,132 19,204
06/30/96 17,003 17,804 21,213 19,123
07/31/96 16,197 16,960 20,276 18,188
08/31/96 16,716 17,503 20,704 19,088
09/30/96 16,978 17,778 21,868 19,583
10/31/96 16,547 17,314 22,471 19,446
11/30/96 17,274 18,062 24,168 20,852
12/31/96 17,323 18,101 23,689 21,348
01/31/97 18,580 19,404 25,168 22,302
02/28/97 18,580 19,391 25,366 22,719
03/31/97 17,804 18,565 24,326 22,097
04/30/97 18,432 19,211 25,776 23,084
05/31/97 19,652 20,475 27,343 24,975
06/30/97 20,773 21,636 28,568 26,156
</TABLE>
The performance graph compares a hypothetical $10,000 investment in Class A
and Class B of each Fund to a hypothetical investment in a relevant market
index. Fund performance is derived from the Fund's original class of shares
and reflects the maximum 4.5% sales charge for Class A shares, and the maximum
contingent deferred sales charge (5% in the first year, decreasing to 0% after
six years) for Class B shares. Fund performance has not been restated to
reflect Rule 12b-1 fees prior to September 30, 1996 (initial public offering
date of Class A and Class B shares). Such fees will affect subsequent
performance.
The index is unmanaged and includes no operating expenses or transaction
costs. Past performance is not predictive of future results. Principal value
may fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
- 19 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPORT FROM THE NORTHWEST FUND MANAGER (Continued)
and we now own seven of them. These large companies--especially Microsoft and
Washington Mutual--helped us outperform in the last three months.
Washington Mutual, aided by its acquisition of Great Western Savings,
significantly outperformed the S&P. Our overweighting in financials gave
performance a further boost as banks and savings and loans in general continued
to benefit by low interest rates, consolidation and a strong Northwest economy
during the period.
Managing the Northwest Fund, I won't be timing the market or making big
sector bets. I'll just work to pick good stocks. I'll do that using intuition
I've built on 21 years of experience, and the SAFECO research team.
Only one of my stock picking rules is hard and fast: I only buy companies
that I, or one of our researchers, has visited and know well. Other than that, I
favor companies with valuations that are low compared to their industry group or
their own historical range and that have good earnings outlooks.
I plan to hold 30 to 40 stocks of mid-to-large companies, giving the heaviest
weightings to industries that drive the Northwest economy. That'd be
export-related companies, technology and health-care. Indeed, the most
HIGHLIGHTS
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
TOP TEN HOLDINGS NET ASSETS
- -------------------------------------------------------------------------
<S> <C>
Microsoft Corp. ................................................... 6.3%
(Personal Computer Software)
Washington Mutual Savings Bank ...................................... 5.0
(Savings & Loan)
Schnitzer Steel Industries, Inc. ................................... 4.4
(Steel Manufacturing)
Boeing Co. ......................................................... 4.4
(Aerospace)
Costco Companies, Inc. ............................................. 4.0
(Wholesale Membership Warehouse)
Starbucks Corp. .................................................... 3.7
(Beverage Retailer)
Sterling Financial Corp. ........................................... 3.7
(Savings & Loan Holding Co.)
Albertson's, Inc. .................................................. 3.5
(Retail Grocer)
Alaska Air Group, Inc. ............................................. 3.2
(Airlines)
Emeritus Corp. ..................................................... 3.1
(Health Care)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES
(Jan. to June) COST (000'S)
- ----------------------------------------------------------------------------
<S> <C>
Alaska Air Group, Inc. ............................................. $1,652
Oregon Metallurgical Corp. .......................................... 1,617
PacifiCare Health Systems, Inc. (Class B) ............................ 1,573
Hewlett-Packard Co. ................................................. 1,553
Physio-Control International Corp. .................................. 1,490
<CAPTION>
TOP FIVE SALES PROCEEDS
(Jan. to June) (000'S)
- ----------------------------------------------------------------------------
<S> <C>
US Bancorp .......................................................... $1,750
*Monaco Coach Corp. ................................................. 1,208
Microsoft Corp. ..................................................... 1,177
*Flir Systems, Inc. ................................................. 1,095
*Airborne Freight Corp. ............................................... 828
<CAPTION>
PERCENT OF
TOP FIVE INDUSTRIES NET ASSETS
- ----------------------------------------------------------------------------
<S> <C>
Savings & Loan Companies ............................................... 12%
Banks (Major Regional) ................................................... 9
Iron & Steel ............................................................. 8
Computer (Software & Services) ........................................... 7
Aerospace/Defense ........................................................ 7
- ----------------------------------------------------------------------------
* Security sold, no longer in portfolio.
</TABLE>
- 20 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
substantial additions I've made were to technology and healthcare.
From computer hardware and software to biotech and
telecommunications, there is no doubt that developing technology is
this region's strong suit. For that reason, our largest position is
Microsoft. I don't think there's a more powerful company in the Northwest.
However, I bought more Hewlett Packard to further expose the Fund to this
growing sector.
And, after visiting, I added Physio-Control to our portfolio. Physio's
defibrillators are well-positioned in the marketplace and its stock price was
right. I also added Pacificare a health maintenance organization that controls
25% of the Medicare market. Pacificare's stock price slipped on disappointing
earnings, and it was simply a matter of "When bad things happen to good
companies, we buy them."
I also started a position in Alaska Airlines, a company I have followed for
two decades. Alaska is American's top rated airline and people on the West Coast
have money to fly it.
I added to our position in Expeditors International to capitalize on the
geographic advantage it has in international trade. Schnitzer Steel, even though
it lagged the broad market, is also an export play. Schnitzer will gain with
growth of scrap steel exports to the Pacific Rim.
Finally the requisite Boeing discussion: Boeing is not only at a
positive point in its business cycle, the company is reinventing
itself. Acquiring McDonnell Douglas and Rockwell and increasing its
airplane maintenance business, Boeing will achieve a better business
mix. The company stands to become less cyclical and even more formidable.
In addition to investing in areas where we expect growth, I'm investing only
in companies that we know. Such intimacy helps me know when to buy and when to
sell a stock. In general, I will sell when a stock has reached our price target,
the fundamentals have deteriorated, or to raise cash to invest in a better
opportunity.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NET ASSET CAPITALIZATION
WEIGHTINGS
AS A PERCENT OF NET ASSETS
AT JUNE 30, 1997
<S> <C>
Large: ($4 Bil. and above) 42%
Medium: ($1 Bil. - $4 Bil.) 14%
Small: (Less than $1 Bil.) 43%
Cash and Other: 1%
</TABLE>
Right now, I see the Northwest itself as a better opportunity. As far as the
economists' eyes can see, our regional economy is set to outperform the national
economy, which should benfit the Northwest Fund.
/s/ Bill Whitlow
Bill Whitlow,
Northwest Fund Manager
- -------------------------------
Bill Whitlow began his career at SAFECO in 1976 and left in 1980. Before
re-joining SAFECO in April 1997 as Northwest Fund Manager, he was Director of
Research at Pacific Crest Securities. He holds a BA in chemistry from the U. of
Colorado and an MBA from the U. of Calif. at Berkeley. He is a CFA and a member
of the Washington State Governor's Council of Economic Advisors.
- 21 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO NORTHWEST FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
COMMON STOCKS - 98.6%
AEROSPACE/DEFENSE - 6.7%
44,200 Boeing Co. .......................................... $2,345
21,000 Precision Castparts Corp. ............................ 1,252
AIR FREIGHT - 2.0%
37,200 Expeditors International of Washington, Inc. ......... 1,055
AIRLINES - 3.2%
67,000 *Alaska Air Group, Inc. .............................. 1,717
BANKS (MAJOR REGIONAL) - 8.6%
22,620 *Cascade Bancorp ....................................... 905
65,915 Northrim Bank .......................................... 725
25,000 US Bancorp ........................................... 1,603
43,975 West Coast Bancorp, Inc. ............................. 1,374
BEVERAGES (ALCOHOLIC) - 0.8%
58,200 *Redhook Ale Brewery, Inc. ............................. 407
BUILDING MATERIALS - 1.7%
40,000 TJ International, Inc. ................................. 940
CHEMICALS (DIVERSIFIED) - 1.0%
225,200 *Consep, Inc. .......................................... 563
COMPUTERS (HARDWARE) - 4.7%
30,000 Hewlett-Packard Co. .................................. 1,680
40,000 Sequent Computer Systems, Inc. ......................... 843
COMPUTERS (SOFTWARE & SERVICES) - 6.7%
27,500 *Mentor Graphics Corp. ................................. 254
26,600 *Microsoft Corp. ..................................... 3,362
ELECTRIC COMPANIES - 3.4%
62,600 Houston Industries, Inc. ............................. 1,342
12,000 Public Service Co. of Colorado ......................... 498
ELECTRICAL EQUIPMENT - 2.3%
29,000 AMP, Inc. ............................................ 1,211
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
ELECTRONICS (SEMICONDUCTORS) - 5.4%
11,200 *Intel Corp. ........................................ $1,588
23,000 *Lattice Semiconductor Corp. ......................... 1,300
FOOTWEAR - 2.2%
20,000 NIKE, Inc. ........................................... 1,167
HEALTH CARE (LONG TERM CARE) - 4.6%
29,200 *Assisted Living Concepts, Inc. ........................ 807
114,600 *Emeritus Corp. ...................................... 1,690
HEALTH CARE (HOSPITAL MANAGEMENT) - 2.7%
23,000 *PacifiCare Health Systems, Inc. (Class B) ........... 1,469
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 3.0%
107,000 *Physio-Control International Corp. .................. 1,605
IRON & STEEL - 7.9%
50,000 *Oregon Metallurgical Corp. .......................... 1,406
23,100 Oregon Steel Mills, Inc. ............................... 461
80,000 Schnitzer Steel Industries, Inc. ..................... 2,380
NATURAL GAS - 0.9%
30,400 Cascade Natural Gas Corp. .............................. 498
RAILROADS - 3.0%
18,000 Burlington Northern Santa Fe ......................... 1,618
RESTAURANTS - 3.7%
51,000 Starbucks Corp. ...................................... 1,986
RETAIL (DEPARTMENT STORES) - 1.4%
15,600 Nordstrom, Inc. ........................................ 765
RETAIL (FOOD CHAINS) - 3.7%
51,500 Albertson's, Inc. .................................... 1,880
2,284 *Quality Food Centers, Inc. ............................. 87
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 22 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO NORTHWEST FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
RETAIL (GENERAL MERCHANDISE) - 4.0%
65,600 Costco Companies, Inc. ............................. $ 2,157
RETAIL (SPECIALTY) - 3.1%
73,000 *Hollywood Entertainment Corp. ....................... 1,670
SAVINGS & LOAN COMPANIES - 11.9%
33,000 Interwest Savings Bank ............................... 1,304
106,000 *Sterling Financial Corp. ............................ 1,974
45,200 Washington Mutual Savings Bank ....................... 2,701
19,829 WesterFed Financial Corp. .............................. 406
-----
TOTAL COMMON STOCKS .................................................. 52,995
-----
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
TEMPORARY INVESTMENTS - 1.5%
INVESTMENT COMPANIES:
$834,138 SSgA Money Market Portfolio ......................... $ 834
-----
TOTAL TEMPORARY INVESTMENTS ............................................. 834
-----
TOTAL INVESTMENTS - 100.1% ........................................... 53,829
Liabilaties, less Other Assets ......................................... (72)
-----
NET ASSETS .......................................................... $53,757
-----
-----
- -----------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
- 23 -
<PAGE>
REPORT FROM THE FUND MANAGERS
SAFECO BALANCED FUND
June 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The SAFECO Balanced Fund returned 17.79% for Advisor Class A shares
and 16.93% for Advisor Class B shares (not including the effects of sales
charges) for the year ending June 30, 1997. The Fund slightly underperformed the
19.41% Lipper Analytical Service average for balanced funds. For the six months
the Fund returned 9.42% for Class A shares, and 9.42% for Class B shares,
while the peer group posted a 10.21% total return.
[PHOTO OF MICHAEL C. KNEBEL]
There are three main reasons the Balanced Fund lagged. The first is
asset allocation. For most of the past year, our allocation to equities was a
conservative 55%. In a 12-month period in which the S&P 500 returned 34.68% and
the Lehman Brothers Government Corporate Bond Index
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE OVERVIEW --
CLASS A AND CLASS B SHARES
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED JUNE 30, 1997
<S> <C> <C> <C> <C>
With Sales Charge Without Sales Charge
1 Year Since Inception 1 Year Since Inception
SAFECO Balanced Fund Class A 12.49% 11.29% 17.79% 14.97%
SAFECO Balanced Fund Class B 11.93% 11.69% 16.93% 14.38%
Investment Value As of June 30, 1997
SAFECO Balanced Fund Class A: $11,637*
SAFECO Balanced Fund Class B: $11,696
S&P 500 60% Lehman Brothers 40%: $12,691
With Sales Charge
SAFECO SAFECO
Balanced Fund Balanced Fund S&P 500 60%
Class A Class B Lehman Brothers 40%
01/30/96 $9,550 $10,000 $10,000
02/28/96 9,502 9,950 9,971
03/31/96 9,566 10,017 9,995
04/30/96 9,624 10,077 10,056
05/31/96 9,758 10,218 10,204
06/30/96 9,879 10,345 10,282
07/31/96 9,657 10,112 10,019
08/31/96 9,782 10,243 10,136
09/30/96 10,122 10,599 10,550
10/31/96 10,326 10,803 10,823
11/30/96 10,765 11,252 11,393
12/31/96 10,635 11,112 11,207
01/30/97 10,953 11,434 11,632
02/28/97 11,042 11,517 11,697
03/31/97 10,654 11,111 11,354
04/30/97 10,895 11,351 11,826
05/31/97 11,345 11,810 12,302
06/30/97 11,637 11,696 12,691
*Graph and average annual total return
data is measured from January 31, 1996,
inception date of the fund.
</TABLE>
The performance graph compares a hypothetical $10,000 investment in Class A
and Class B of each Fund to a hypothetical investment in a relevant market
index. Fund performance is derived from the Fund's original class of shares
and reflects the maximum 4.5% sales charge for Class A shares, and the maximum
contingent deferred sales charge (5% in the first year, decreasing to 0% after
six years) for Class B shares. Fund performance has not been restated to
reflect Rule 12b-1 fees prior to September 30, 1996 (initial public offering
date of Class A and Class B shares). Such fees will affect subsequent
performance.
The index is unmanaged and includes no operating expenses or transaction
costs. Past performance is not predictive of future results. Principal value
may fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
- 24 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
returned 7.75%, a higher commitment to stocks clearly would have been
better.
The second reason is that during the last quarter, growth stocks
performed much better than the value-oriented stocks we own. As measured by the
Russell 1000 Growth Index, stocks with high price to earnings ratios and strong
earnings growth returned 18.91%. Meanwhile, the Russell 1000 Value Index
returned 14.74%. It is well documented that the Growth and Value styles
alternate being in and out of favor. We remain confident that our turn
will come and that value investing will continue to offer excellent
returns at lower levels of risk over long periods of time.
[PHOTO OF REX BENTLEY]
The final reason that the Balanced Fund trailed over the past 12 months is
that the bond portion of the portfolio did poorly late last year. Rest assured,
we have made some adjustments to our fixed-income strategy and our
HIGHLIGHTS
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
TOP TEN STOCK HOLDINGS NET ASSETS
- -------------------------------------------------------------------------
<S> <C>
SmithKline Beecham, plc (ADR) ...................................... 1.8%
(Pharmaceuticals)
AMP, Inc. .......................................................... 1.7
(Electrical Equipment Manufacturer)
Chase Manhattan Corp. .............................................. 1.7
(Bank)
Hartford Financial Services Group, Inc. ............................. 1.7
(Insurance Company)
Bell Atlantic Corp. ................................................ 1.6
(Telephone Company)
NationsBank Corp. .................................................. 1.6
(Bank)
American Home Products Corp. ....................................... 1.5
(Pharmaceuticals)
May Department Stores Co. .......................................... 1.5
(Department Store)
Amoco Corp. ........................................................ 1.5
(Oil/Gas Exploration & Production)
J.C. Penney Co., Inc. .............................................. 1.5
(Department Store)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES
(COMMON STOCK)
(Jan. to June) COST (000'S)
- ----------------------------------------------------------------------------
<S> <C>
Unisource Worldwide, Inc. ............................................ $191
3Com Corp. ............................................................ 142
Baxter International, Inc. ............................................ 135
Burlington Northern Santa Fe ........................................... 125
B. F. Goodrich Co. .................................................... 124
<CAPTION>
TOP FIVE SALES
(COMMON STOCK) PROCEEDS
(Jan. to June) (000'S)
- ----------------------------------------------------------------------------
<S> <C>
*Colgate-Palmolive Co. ............................................... $116
*Household Finance Co. 9.00%, due 9/28/01 .............................. 107
*Browning-Ferris Industries, Inc. ..................................... 104
*Associates Corp. of North America
7.02%, due 5/15/01 ................................................... 100
*Walt Disney Co. 6.375%, due 3/30/01 .................................... 99
<CAPTION>
TOP FIVE INDUSTRIES PERCENT OF
(COMMON STOCK) NET ASSETS
- ----------------------------------------------------------------------------
<S> <C>
Oil (Domestic Integrated) ............................................... 4%
Manufacturing (Diversified) .............................................. 4
Electrical Equipment ..................................................... 3
Retail (Department Stores) ............................................... 3
Telephone ................................................................ 3
- ----------------------------------------------------------------------------
* Security sold, no longer in portfolio.
</TABLE>
- 25 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPORT FROM THE BALANCED FUND MANAGERS (Continued)
bond results improved relative to the bond indices. At June 30,
about two thirds of the Balanced Fund's fixed income portfolio were
Treasuries, and its duration (sensitivity to interest rates) is
about the same as the broad treasury market.
We increased the level of stocks in the portfolio to 60.7% of net assets at
June 30. (Bonds were 37.4% and cash 2.2%.) Stocks added during the quarter
included: American Stores, First Industrial Realty, and Baxter International.
American Stores is benefiting from its Delta (re-engineering) program
designed to improve its efficiencies in procurement, warehousing, and
merchandising.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NET ASSET CAPITALIZATION
WEIGHTINGS
AS A PERCENT OF NET ASSETS
AT JUNE 30, 1997
<S> <C>
Common Stocks
Large: ($4 Bil. and above) 48%
Medium: ($1 Bil. - $4 Bil.) 11%
Small: (Less than $1 Bil.) 2%
Corporate Bonds: 14%
U.S. Government Securities: 23%
Cash and Other: 2%
</TABLE>
First Industrial Realty is a REIT that specializes in bulk warehouse and
light industrial buildings primarily in major Midwest markets. Recently, First
Industrial had its debt rating upgraded to investment grade, but still sells at
a discount to its peers. We believe that the current valuation does
not fully reflect its increased financial and operational
flexibility. [PHOTO OF LYNETTE SAGVOLD]
Baxter is a leading medical technology manufacturer focusing on
cardiovascular, kidney dialysis, biotech, and intravenous systems.
Baxter has very attractive long-term earnings prospects and a strong research
and development pipeline.
We eliminated our positions in Colgate and Abbott as they reached our price
targets. We sold AT&T because of increased competition, the uncertain
regulatory environment and questions about its future growth. At this
time, we remain overweighted in capital goods, consumer cyclicals, and
consumer staples.
Most economic indicators appear to be leading down a path of slower growth
except one-- industrial sector activity is still advancing solidly, aided by a
better-than-expected trade performance. We expect GDP to grow
- 26 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
around 2.5% and inflation to increase a moderate 2-2.5% for the year. Businesses
continue to increase efficiency and productivity in order to expand their
markets. Competing in bigger markets affords them additional room for growth.
Our outlook of moderate economic growth, low inflation, and reasonable profit
growth should provide a good environment for financial assets. And our portfolio
is tuned to take full advantage of it.
/s/ Michael C. Knebel
Michael C. Knebel, Bonds
/s/ Rex Bentley
Rex Bentley, Stocks
/s/ Lynette Sagvold
Lynette D. Sagvold, Stocks
- -------------------------------
Michael Knebel oversees SAFECO Corporation's entire taxable bond operation. He
has 13 years investment experience, an MBA from the University of Minnesota and
is a Chartered Financial Analyst.
Rex Bentley, an MBA from Brigham Young University and Chartered Financial
Analyst, has more than 20 years of investment experience.
Lynette Sagvold holds a BA in business administration from the University of
Washington and is a chartered financial analyst. She began her investment career
in 1981 at Kidder Peabody and was a trust officer for Key Trust and First
Interstate before joining SAFECO as a portfolio manager and insurance analyst.
PORTFOLIO OF INVESTMENTS
SAFECO BALANCED FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
COMMON STOCKS - 60.7%
AEROSPACE/DEFENSE - 2.2%
3,000 B. F. Goodrich Co. .................................... $130
2,400 Raytheon Co. ........................................... 122
AUTO PARTS & EQUIPMENT - 1.4%
4,600 Echlin, Inc. ........................................... 166
BANKS (MAJOR REGIONAL) - 1.6%
2,800 NationsBank Corp. ...................................... 181
BANKS (MONEY CENTER) - 1.7%
2,000 Chase Manhattan Corp. .................................. 194
BEVERAGES (ALCOHOLIC) - 1.1%
3,000 Anheuser-Busch Companies, Inc. ......................... 126
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
BEVERAGES (NON-ALCOHOLIC) - 1.1%
3,400 PepsiCo, Inc. ......................................... $128
BUILDING MATERIALS - 1.5%
2,300 Armstrong World Industries, Inc. ....................... 169
CHEMICALS - 1.1%
3,400 Nalco Chemical Co. ..................................... 131
COMPUTERS (HARDWARE) - 1.2%
2,400 Hewlett-Packard Co. .................................... 134
COMPUTERS (NETWORKING) - 1.5%
3,700 *3Com Corp. ............................................ 166
COMPUTERS (PERIPHERALS) - 0.8%
2,500 Seagate Technology, Inc. ................................ 88
</TABLE>
- 27 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (Continued)
SAFECO BALANCED FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
COMPUTERS (SOFTWARE & SERVICES) - 1.3%
3,500 *Electronic Data Systems Corp. ........................ $143
ELECTRIC COMPANIES - 2.4%
6,100 Houston Industries, Inc. ............................... 131
3,600 NIPSCO Industries, Inc. ................................ 149
ELECTRICAL EQUIPMENT - 3.2%
4,700 AMP, Inc. .............................................. 196
2,600 General Electric Co. ................................... 170
FINANCIAL (DIVERSIFIED) - 2.3%
4,100 Advanta Corp. (Class B) ................................ 146
2,800 Federal National Mortgage Association .................. 122
FOODS - 2.5%
1,800 CPC International, Inc. ................................ 166
1,800 ConAgra, Inc. .......................................... 115
HEALTH CARE (DIVERSIFIED) - 2.4%
2,300 American Home Products Corp. ........................... 176
1,400 Bristol-Myers Squibb Co. ............................... 113
HEALTH CARE (DRUGS--MAJOR PHARMUCEUTICALS) - 1.8%
2,200 SmithKline Beecham, plc (ADR) .......................... 202
HEALTH CARE (HOSPITAL MANAGEMENT) - 1.3%
3,000 Schering-Plough Corp. .................................. 144
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 1.1%
2,500 Baxter International, Inc. ............................. 131
HOUSEHOLD PRODUCTS (NON-DURABLES) - 1.3%
2,900 Kimberly-Clark Corp. ................................... 144
INSURANCE (MULTI-LINE) - 1.6%
2,300 Hartford Financial Services Group, Inc. ................ 190
MANUFACTURING (DIVERSIFIED) - 4.4%
1,800 Briggs & Stratton Corp. ................................. 90
2,700 Corning, Inc. .......................................... 150
3,100 Crane Co. .............................................. 130
3,400 Harsco Corp. ........................................... 138
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
OFFICE EQUIPMENT & SUPPLIES - 1.4%
10,000 Unisource Worldwide, Inc. ............................. $160
OIL (DOMESTIC INTEGRATED) - 4.4%
2,000 Amoco Corp. ............................................ 174
2,400 Atlantic Richfield Co. ................................. 169
2,400 Mobil Corp. ............................................ 168
PERSONAL CARE - 2.2%
1,800 Avon Products, Inc. .................................... 127
2,600 International Flavors & Fragrances, Inc. ............... 131
RAILROADS - 1.2%
1,500 Burlington Northern
Santa Fe ............................................... 135
REAL ESTATE--NON-AFFILIATED - 0.5%
2,000 First Industrial Realty Trust, Inc. ..................... 59
RETAIL (DEPARTMENT STORES) - 2.9%
3,300 J.C. Penney Co., Inc. .................................. 172
3,700 May Department Stores Co. .............................. 175
RETAIL (FOOD CHAINS) - 2.4%
4,600 Albertson's, Inc. ...................................... 168
2,200 American Stores Co. .................................... 109
RETAIL (SPECIALTY) - 1.0%
3,200 Toys "R" Us, Inc. ...................................... 112
TELEPHONE - 3.0%
2,400 Bell Atlantic Corp. .................................... 182
3,700 GTE Corp. .............................................. 162
TOBACCO - 0.9%
2,200 Philip Morris Cos., Inc. ................................ 98
-----
TOTAL COMMON STOCKS ................................................... 6,982
-----
CORPORATE BONDS - 14.6%
AUTOMOBILES - 0.9%
$100,000 General Motors Acceptance Corp.
6.625%, due 10/01/02 .................................... 99
</TABLE>
- 28 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO BALANCED FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
BANKS (MONEY CENTER) - 1.9%
100,000 BankAmerica Corp.
9.50%, due 4/01/01 .................................... $109
100,000 Citicorp
7.625%, due 5/01/05 .................................... 103
BANKS (MAJOR REGIONAL) - 1.8%
65,000 ABN Amro Bank
7.125%, due 6/18/07 ..................................... 65
50,000 Banc One Corp.
7.60%, due 5/01/07 ...................................... 51
100,000 Norwest Corp. (MTN)
6.25%, due 3/15/01 ...................................... 99
BANKS--FOREIGN - 0.4%
50,000 Deutsche Bank Financial
7.50%, due 4/25/09 ...................................... 51
BUILDING MATERIALS - 0.5%
65,000 Hanson Overseas
6.75%, due 9/15/05 ...................................... 63
ENGINEERING & CONSTRUCTION - 0.7%
75,000 Halliburton Co.
6.75%, due 2/1/27 ....................................... 74
FINANCE--DIVERSIFIED - 0.7%
75,000 Student Loan Marketing Association
6.375%, due 2/11/00 ..................................... 74
FINANCE--MISC. - 4.9%
$95,000 Associates Corp. of North America
8.55%, due 7/15/09 ..................................... 106
100,000 Associates Corp. of North America
6.625%, due 5/15/01 .................................... 100
65,000 Lehman Brothers, Inc.
7.375%, due 5/15/04 ..................................... 66
100,000 Ford Motor Credit Co.
7.20%, due 6/15/07 ..................................... 100
95,000 McDonnel Douglas Finance Corp.
6.83%, due 5/21/01 ...................................... 95
100,000 Commercial Credit Co.
5.875%, due 1/15/03 ..................................... 96
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
PETROLEUM & PETROLEUM SERVICES - 0.8%
100,000 Texaco Capital, Inc.
6.19%, due 7/09/03 .................................. $ 96
RETAIL (DEPARTMENT STORES) - 0.5%
60,000 J.C. Penny Co., Inc.
7.60%, due 4/01/07 ...................................... 62
RETAIL (GENERAL MERCHANDISE) - 0.9%
100,000 Sears Roebuck Acceptance Corp.
6.90%, due 8/1/03 ...................................... 100
UTILITIES - 0.6%
75,000 Allegheny Generating Co.
6.90%, due 8/1/03 ....................................... 71
-----
TOTAL CORPORATE BONDS ................................................. 1,680
-----
U.S. GOVERNMENT SECURITIES - 22.8%
U.S TREASURY NOTES - 22.8%
$655,000 7.50%, due 11/15/16 .................................... 700
135,000 7.25%, due 8/15/04 ..................................... 141
275,000 6.875%, due 3/31/00 .................................... 279
265,000 6.50%, due 10/15/06 .................................... 264
455,000 6.375%, due 9/30/01 .................................... 455
790,000 5.75%, due 12/31/98 .................................... 788
-----
TOTAL U.S GOVERNMENT SECURITIES ....................................... 2,627
-----
TEMPORARY INVESTMENTS - 2.2%
INVESTMENT COMPANIES:
248,862 SSgA Money Market Portfolio ............................ 249
-----
TOTAL TEMPORARY INVESTMENTS ............................................. 249
-----
TOTAL INVESTMENTS - 100.3% ........................................... 11,538
Liabilities, less Other Assets ......................................... (28)
-----
NET ASSETS .......................................................... $11,510
-----
-----
</TABLE>
- 29 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO INTERNATIONAL FUND
June 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SAFECO International Fund beat its peer funds and benchmark Index for the
year ended June 30, 1997. The Fund delivered 20.95% for Advisor Class A shares
and 20.31% for Advisor Class B shares, while the Lipper Analytical Services
average return for international funds was 16.54% and the MSCI EAFE (Morgan
Stanley Capital International Europe, Australasia, Far East) index posted
11.07%.
During the early part of the year, no individual theme made a significant
contribution--either positive or negative--to overall performance, although
there were a number of good individual stock performances which helped the
portfolio, particularly in the Healthcare Needs and Positive Banking Environment
themes.
Themes directed at the developing markets in the Far East have disappointed
throughout 1997. Increased Consumer
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE OVERVIEW --
CLASS A & CLASS B SHARES
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED JUNE 30, 1997
<S> <C> <C> <C> <C>
With Without
Sales Charge Sales Charge
Since Since
1 Year Inception 1 Year Inception
SAFECO International Fund Class A 15.51% 12.58% 20.95% 16.30%
SAFECO International Fund Class B 15.31% 13.20% 20.31% 15.87%
Investment Value As of June 30, 1997
SAFECO International Fund Class A: $11,828*
SAFECO International Fund Class B: $11,920
EAFE: $11,686
With Sales Charge
SAFECO SAFECO
International Fund International Fund
Class A Class B EAFE
01/30/96 $9,550 $10,000 $10,000
02/28/96 9,493 9,940 10,036
03/31/96 9,588 10,040 10,252
04/30/96 9,827 10,290 10,553
05/31/96 9,789 10,250 10,361
06/30/96 9,779 10,240 10,422
07/31/96 9,397 9,840 10,120
08/31/96 9,779 10,240 10,145
09/30/96 9,984 10,454 10,417
10/31/96 10,099 10,565 10,313
11/30/96 10,733 11,229 10,725
12/31/96 10,901 11,391 10,590
01/30/97 10,863 11,340 10,206
02/28/97 11,007 11,482 10,359
03/31/97 10,930 11,411 10,383
04/30/97 10,978 11,451 10,424
05/31/97 11,481 11,966 11,088
06/30/97 11,828 11,920 11,686
*Graph and average annual total return
data is measured from January 31, 1996,
inception date of the fund.
</TABLE>
The performance graph compares a hypothetical $10,000 investment in Class A
and Class B of each Fund to a hypothetical investment in a relevant market
index. Fund performance is derived from the Fund's original class of shares
and reflects the maximum 4.5% sales charge for Class A shares, and the maximum
contingent deferred sales charge (5% in the first year, decreasing to 0% after
six years) for Class B shares. Fund performance has not been restated to
reflect Rule 12b-1 fees prior to September 30, 1996 (initial public offering
date of Class A and Class B shares). Such fees will affect subsequent
performance.
The index is unmanaged and includes no operating expenses or transaction
costs. Past performance is not predictive of future results. Principal value
may fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
- 30 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
Spending in the Pacific Basin and Infrastructural Development have had a
negative impact on the Fund.
With the notable exception of the developing markets in the Pacific Basin,
equity markets worldwide have thus far done well during 1997.
In the UK, strong corporate earnings, particularly from financial-services
sector, and the expectation of even more corporate restructuring by major
companies have been underpinning valuations. The initial actions of the
country's new Labour government have been a source of encouragement to the
market.
The weaknesses of the Deutschemark stimulated a recovery in Germany's
export-oriented manufacturing sector in the early part of the year and, during
the second quarter, foreign orders have increased at a steady pace. The domestic
economy remains in the doldrums, however.
Far Eastern markets performed poorly during the first three months due to
fears about the upward direction of U.S. interest rates and continued net
outflows by foreign investors.
HIGHLIGHTS
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
TOP TEN HOLDINGS NET ASSETS
- -------------------------------------------------------------------------
<S> <C>
Novartis AG ........................................................ 5.0%
(Pharmaceuticals)
National Australia Bank, Ltd. ...................................... 3.2
(Banking & Finance)
Canon, Inc. ........................................................ 2.7
(Office Equipment)
Lloyds Bank, plc .................................................... 2.6
(Banking & Finance)
B.A.T. Industries, plc .............................................. 2.6
(Tobacco)
Barclays, plc ....................................................... 2.6
(Banking & Finance)
Schweizerische Rueckversicherungs- Gesellschaft ..................... 2.5
(Insurance)
Internationale Nederlanden Groep NV ................................. 2.5
(Banking & Finance)
ABN Amro Holdings NV ................................................ 2.2
(Banking & Finance)
Development Bank of Singapore, Ltd. ................................ 2.1
(Banking & Finance)
</TABLE>
<TABLE>
<CAPTION>
PERCENT OF
TOP FIVE COUNTRIES NET ASSETS
- ----------------------------------------------------------------------------
<S> <C>
United Kingdom ......................................................... 32%
Switzerland ............................................................. 13
Netherlands ............................................................. 10
Australia ................................................................ 7
Singapore ................................................................ 7
<CAPTION>
TOP FIVE PURCHASES COST
(Jan. to June) (000'S)
- ----------------------------------------------------------------------------
<S> <C>
Nestle SA ............................................................. $230
VEBA AG ................................................................ 154
Barclays, plc .......................................................... 118
General Electric Co., plc .............................................. 113
HSBC Holdings, plc ..................................................... 100
<CAPTION>
TOP FIVE SALES PROCEEDS
(Jan. to June) (000'S)
- ----------------------------------------------------------------------------
<S> <C>
HSBC Holdings, plc .................................................... $102
*Iberdrola SA ........................................................... 95
*Thai Farmers Bank Public Co., Ltd. .................................... 73
Hoechst AG .............................................................. 59
*Guinness, plc .......................................................... 47
- ----------------------------------------------------------------------------
* Security sold, no longer in portfolio.
</TABLE>
- 31 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPORT FROM THE INTERNATIONAL FUND MANAGER (Continued)
During the second quarter in Malaysia, concern about strong consumer spending a
rising level of imports, high labor costs and a possible oversupply of property
all contributed to drive the market downwards. The ongoing financial crisis in
Thailand resulted in 25% decline in the market over the most recent three
months.
Although we didn't much participate, the Japanese market gained 22% during
the second quarter. Despite continued speculation that interest rates are set to
rise, and mixed prospects for economic growth, foreigners continue to increase
their investments in Japan. Little attention is being paid to the current paltry
state of the financial sector where banks are continuing to struggle under the
burden of their bad debts.
Our outlook for the remainder of the year remains the same. The low-growth,
low-inflationary environment will continue to provide a favorable backdrop for
equity investments. Nevertheless, the upward movement of most markets has driven
up valuations relative to earnings growth,
and this fact remains uppermost in our minds.
The July budget in the UK will be a key determining factor on how that market
fares for the remainder of the year. The ongoing uncertainty regarding European
Monetary Union will affect the performance of European markets over the coming
months.
We will continue to have a very selective approach to investments in the Far
East, although we feel that the bear market in the region, which commenced in
1993, is closer to the end than the beginning. We remain convinced that the
Japanese market is overvalued, although we continue to monitor companies there
in search of worthwhile investment opportunities.
We do not believe any significant change has taken place in the underlying
fundamentals of the portfolio and, accordingly, our strategy remains unaltered.
Bank of Ireland
Asset Management (U.S.) Limited.
- -------------------------------
The Bank of Ireland Asset Management (BIAM) investment committee is comprised of
senior analysts and economists and headed by the company's chief financial
officer. BIAM has managed international equities since 1966 and began managing
U.S. funds in 1989.
- 32 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO INTERNATIONAL FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
COMMON STOCKS - 95.2%
AUSTRALIA - 7.2%
16,000 Broken Hill Proprietary Co., Ltd. ..................... $234
(Metals & Mining)
32,000 National Australia Bank, Ltd. .......................... 455
(Banking & Finance)
43,600 News Corp., Ltd. ....................................... 208
(Television & Publishing)
22,100 WMC, Ltd. .............................................. 138
(Metals & Mining)
FINLAND - 0.6%
3,750 Kymmene Oy Corp. ........................................ 87
(Paper & Forest Products)
FRANCE - 2.0%
670 Elf Aquitaine ........................................... 72
(Oil & Gas)
2,400 Michelin "B" ........................................... 144
(Tire & Rubber)
710 Total SA ................................................ 72
(Oil & Gas)
GERMANY - 6.2%
5,055 Hoechst AG ............................................. 215
(Chemicals)
670 Mannesmann AG .......................................... 299
(Machinery & Engineering)
2,370 Siemens AG ............................................. 141
(Electrical Equipment & Electronics)
4,165 VEBA AG ................................................ 234
(Utilities - Electric)
HONG KONG - 1.5%
7,400 HSBC Holdings, plc ..................................... 223
(Banking & Finance)
INDONESIA - 3.1%
37,000 PT Gudang Garam ........................................ 155
(Tobacco)
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
38,000 PT Hanjaya Mandala Sampoerna .......................... $145
(Tobacco)
33,000 PT Indocement Tunggal Perkasa ........................... 51
(Building Materials)
56,500 PT Telekomunikasi Indonesia ............................. 92
(Telecommunications)
IRELAND - 1.5%
11,080 Allied Irish Bank, plc .................................. 85
(Banking & Finance)
42,900 Smurfit (Jefferson) Group .............................. 124
(Paper Products)
ITALY - 1.3%
32,460 Stet-Societa Finanz Telefon ............................ 189
(Telecommunications)
JAPAN - 2.6%
14,000 Canon, Inc. ............................................ 381
(Office Equipment)
MALAYSIA - 3.2%
16,000 Hume Industries Berhad .................................. 74
(Building Materials)
30,000 RHB Capital Berhad ...................................... 95
(Banking & Finance)
45,000 Sime Darby Berhad ...................................... 150
(Conglomerates)
19,000 United Engineers, Ltd. ................................. 137
(Construction)
MEXICO - 0.8%
42,000 Grupo Financiero Series B .............................. 110
(Banking & Finance)
NETHERLANDS - 10.3%
16,548 ABN Amro Holdings NV ................................... 309
(Banking & Finance)
840 DSM NV .................................................. 84
(Chemicals)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 33 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (Continued)
SAFECO INTERNATIONAL FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
14,150 Elsevier NV ........................................... $237
(Publishing)
7,682 Internationale Nederlanden Groep NV .................... 354
(Banking & Finance)
1,010 Nutricia Vereenigde Bedrijven NV ....................... 160
(Food-Processing)
2,880 Royal Dutch Petroleum Co. .............................. 150
(Oil & Gas)
4,560 Royal PTT Nederland NV ................................. 179
(Commercial Services)
PHILIPPINES - 0.6%
35,300 San Miguel Corp. (Class B) .............................. 93
(Wine & Spirits, Food)
SINGAPORE - 6.8%
27,000 City Developments, Ltd. ................................ 264
(Real Estate)
24,000 Development Bank of Singapore, Ltd. .................... 302
(Banking & Finance)
17,800 Fraser & Neave, Ltd. ................................... 127
(Beverages)
13,950 Singapore Press Holdings, Ltd. ......................... 281
(Publishing)
SPAIN - 1.2%
5,455 Banco Santander SA ..................................... 168
(Banking & Finance)
SWEDEN - 0.5%
2,000 Pharmacia & Upjohn, Inc. ................................ 68
(Pharmaceuticals)
SWITZERLAND - 12.7%
278 Alusuisse-Lonza Holding AG ............................. 288
(Holding Co. - Diversified)
188 Nestle SA .............................................. 248
(Food)
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
444 Novartis AG ........................................... $711
(Pharmaceuticals)
24 Roche Holding AG ....................................... 217
(Pharmaceuticals)
253 Schweizerische Rueckversicherungs-Gesellschaft ......... 358
(Insurance)
THAILAND - 0.7%
15,000 Bangkok Bank Public Co., Ltd. . 107
(Banking & Finance)
UNITED KINGDOM - 32.4%
41,230 B.A.T. Industries, plc ................................. 369
(Tobacco)
53,800 BTR, plc ............................................... 184
(Holding Co. - Diversified)
18,550 Barclays, plc .......................................... 368
(Banking & Finance)
15,850 Cable & Wireless, plc .................................. 146
(Telecommunications)
21,530 Cadbury Schweppes, plc ................................. 192
(Beverages)
9,195 EMI Group, plc ......................................... 165
(Leisure)
35,500 General Electric Co., plc .............................. 212
(Electronics)
12,500 Glaxo Wellcome, plc .................................... 258
(Pharmaceuticals)
17,900 Granada Group, plc ..................................... 235
(Leisure)
24,000 Grand Metropolitan, plc ................................ 232
(Wine & Spirits, Food)
5,900 Kingfisher, plc ......................................... 67
(Retail - Drug Store)
24,740 Ladbroke Group, plc ..................................... 97
(Hotels & Property Management)
36,240 Lloyds Bank, plc ....................................... 371
(Banking & Finance)
12,250 Premier Farnell, plc .................................... 95
(Electronics)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 34 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO INTERNATIONAL FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
24,020 Prudential Corp., plc ............................... $ 232
(Insurance)
26,410 Safeway, plc ........................................... 153
(Retail - Grocery)
20,290 Scottish Power, plc .................................... 132
(Utilities - Electric)
40,800 Shell Transport & Trading Co., plc ..................... 278
(Oil & Gas)
13,850 Siebe, plc ............................................. 234
(Industrial & Electronic Equipment)
20,700 TI Group, plc .......................................... 180
(Manufacturing)
34,260 Vodafone Group, plc .................................... 167
(Telecommunications)
4,600 Williams, plc ........................................... 25
(Diversified Operations)
7,995 Zeneca Group, plc ...................................... 264
-----
(Pharmaceuticals)
TOTAL COMMON STOCKS .................................................. 13,671
-----
PREFERRED STOCKS - 0.2%
AUSTRALIA - 0.2%
6,000 News Corp., Ltd. ........................................ 24
-----
(Television & Publishing)
TOTAL PREFERRED STOCKS ................................................... 24
-----
TOTAL INVESTMENTS - 95.4% ............................................ 13,695
-----
Domestic Cash .......................................... 780
Foreign Cash ............................................ 92
Liabilities, less
Other Assets ......................................... (212)
-----
660
-----
NET ASSETS .......................................................... $14,355
-----
-----
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION
PERCENT OF
NET ASSETS
- -----------------------------------------------------------------------------
<S> <C>
Banking & Finance 20.5%
Pharmaceuticals 10.6
Telecommunications 5.4
Holding Company - Diversified 5.3
Publishing 5.2
Food 5.1
Tobacco 4.7
Insurance 4.1
Oil & Gas 4.0
Leisure Time 3.5
Electrical Equipment & Electronics 3.1
Metals 2.6
Office Equipment & Supplies 2.6
Electric Utility 2.5
Building Materials 2.5
Beverages 2.2
Chemicals 2.1
Machinery - Diversified 2.1
Real Estate 1.8
Paper & Forest Products 1.5
Manufacturing 1.4
Retail - Grocers 1.1
Tire & Rubber 1.0
Retail - Drug Store 0.5
----
95.4%
----
----
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 35 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO SMALL COMPANY FUND
June 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
For the year ended June 30, the SAFECO Small Company Fund returned
11.83%, for Advisor Class A shares and 11.13% for Advisor Class B shares,
while the peer group of small capitalization funds averaged 13.71%,
according to Lipper Analytical Services. For the six months ended June
30, 1997, the SAFECO Small Company Stock Fund returned 7.62% for Advisor Class A
shares and 7.12% for Advisor Class B shares, versus the small company peer group
average which was 8.98%. [PHOTO OF GREG EISEN]
The first quarter of 1997 was marked by a 10% correction in the
Russell 2000 Index of small company stocks, and second quarter by a recovery. At
the end of both quarters, The Russell 2000 was up 10.20%. While the Fund avoided
losing as much as the average fund in the downturn, we did not keep up
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE OVERVIEW --
CLASS A AND CLASS B SHARES
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED JUNE 30, 1997
<S> <C> <C> <C> <C>
With Without
Sales Charge Sales Charge
Since Since
1 Year Inception 1 Year Inception
SAFECO Small Company Fund Class A 6.80 19.35 11.83 23.29
SAFECO Small Company Fund Class B 6.13 20.14 11.13 22.74
Investment Value As of June 30, 1997
SAFECO Small Company Fund Class A: $12,848*
SAFECO Small Company Fund Class B: $12,968
Russell 2000: $12,852
With Sales Charge
SAFECO SAFECO
Small Company Fund Small Company Fund
Class A Class B Russell 2000
01/30/96 $9,550 $10,000 $10,000
02/28/96 9,693 10,150 10,312
03/31/96 10,018 10,490 10,522
04/30/96 11,030 11,550 11,084
05/31/96 11,794 12,350 11,521
06/30/96 11,489 12,030 11,048
07/31/96 10,715 11,220 10,083
08/31/96 11,374 11,910 10,668
09/30/96 11,635 12,183 11,085
10/31/96 11,615 12,151 10,914
11/30/96 11,473 12,003 11,364
12/31/96 11,938 12,479 11,662
01/30/97 12,039 12,575 11,895
02/28/97 11,786 12,299 11,606
03/31/97 11,382 11,876 11,058
04/30/97 11,150 11,611 11,089
05/31/97 12,201 12,712 12,324
06/30/97 12,848 12,968 12,852
*Graph and average annual total return
data is measured from January 31, 1996,
inception date of the fund.
</TABLE>
The performance graph compares a hypothetical $10,000 investment in Class A
and Class B of each Fund to a hypothetical investment in a relevant market
index. Fund performance is derived from the Fund's original class of shares
and reflects the maximum 4.5% sales charge for Class A shares, and the maximum
contingent deferred sales charge (5% in the first year, decreasing to 0% after
six years) for Class B shares. Fund performance has not been restated to
reflect Rule 12b-1 fees prior to September 30, 1996 (initial public offering
date of Class A and Class B shares). Such fees will affect subsequent
performance.
The index is unmanaged and includes no operating expenses or transaction
costs. Past performance is not predictive of future results. Principal value
may fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
- 36 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
with the average fund in the recovery. The particular mix of stocks we had,
which has a smaller market cap than our peer group average, kept us from keeping
pace.
In review, it appears to me that the stocks in our portfolio are still
cheaply valued versus the overall small cap market, so I am optimistic that our
turn to deliver above-average performance is yet to come.
Regional banks are still the largest sector in the Fund. They continued to
perform well and so we bought two more: Southwest Bancorp is a small bank
providing Houston businesses a level of service the large banks in that market
are unwilling to provide. Independent Bankshares is also a Texas bank, serving
Abilene, Odessa, and Lubbock. These two stocks provide geographical
diversification to the Fund's bank holdings. We now own banks in Florida, Texas,
California, Illinois and Washington State.
Other stocks purchased during the quarter include: Hooper Holmes, Patina Oil
and Gas, Craig Corp preference shares, American Oilfield Divers and Ovid
Technologies.
HIGHLIGHTS
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
TOP TEN HOLDINGS NET ASSETS
- -------------------------------------------------------------------------
<S> <C>
Cole National Corp. (Class A) ...................................... 4.2%
(Specialty Retailer)
Lancer Corp. ....................................................... 3.9
(Beverage Equipment Manufacturer)
Stage Stores, Inc. ................................................. 3.9
(Retail Store)
Hooper Holmes, Inc. ................................................ 3.8
(Health Care Services)
Penederm, Inc. ..................................................... 3.7
(Drug Delivery System)
Tracor, Inc. ....................................................... 3.2
(Aerospace Electronics)
GATX Corp. ......................................................... 3.0
(Railway & Terminal Operator)
Hanmi Bank (Los Angeles, CA) ........................................ 2.9
(Bank)
Vallen Corp. ....................................................... 2.7
(Safety Products)
Patina Oil & Gas Corp. ............................................. 2.7
(Oil Company)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES
(Jan. to June) COST (000'S)
- ----------------------------------------------------------------------------
<S> <C>
Patina Oil & Gas Corp. ............................................... $556
Hooper Holmes, Inc. ................................................... 442
Mesa Air Group, Inc. .................................................. 439
Craig Corp. (Class A) .................................................. 425
American Oilfield Divers, Inc. ........................................ 320
<CAPTION>
TOP FIVE SALES PROCEEDS
(Jan. to June) (000'S)
- ----------------------------------------------------------------------------
<S> <C>
*American List Corp. ................................................. $477
*First Enterprise Financial Group, Inc. ............................... 384
*Fibreboard Corp. ..................................................... 372
*Tasty Baking Co. ..................................................... 274
*Imperial Bancorp ...................................................... 253
<CAPTION>
PERCENT OF
TOP FIVE INDUSTRIES NET ASSETS
- ----------------------------------------------------------------------------
<S> <C>
Banks (Major Regional) ................................................. 11%
Financial (Diversified) .................................................. 6
Services (Commercial & Consumer) ......................................... 5
Computers (Hardware) ..................................................... 5
Oil & Gas (Drilling & Equipment) ......................................... 5
- ----------------------------------------------------------------------------
* Security sold, no longer in portfolio.
</TABLE>
- 37 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPORT FROM THE SMALL COMPANY FUND MANAGER (Continued)
Hooper Holmes, through its subsidiary Portamedic, provides
information and specimen collection to the life insurance industry.
If you ever applied for life insurance, chances are Hooper's nurse
came to your house to interview you. The company is growing fast,
with new avenues of distribution opening up to them.
Patina Oil and Gas is a majority owned subsidiary of Snyder Oil. Snyder and
Patina have committed to removing the Patina stock from Snyder's ownership, and
the spin-off should attract attention to the cheaply valued Patina shares.
Craig Corp is another value stock. Craig's assets are primarily cash and
movie theaters in the US, Puerto Rico and Australia, some of which are operating
and some are under construction.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NET ASSET CAPITALIZATION
WEIGHTINGS
AS A PERCENT OF NET ASSETS
AT JUNE 30, 1997
<S> <C>
1 Mid-Cap: ($1 billion - $4
billion) 5%
2 Small-Cap: (under $1 billion) 89%
a Large: (over $750 million) 3%
b Medium: ($250 - $750 million) 28%
c Small: (under $250 million) 58%
3 Cash and Other: 6%
</TABLE>
American Oilfield Divers provides underwater construction services to the
offshore oil drilling industry, which is in a major upturn.
Ovid Technologies provides online access to research databases and full text
versions of articles to the biomedical research community. Their
product is sold directly to hospitals, research facilities, medical
schools, and pharmaceutical companies and delivered over the
internet.
In summary, the small capitalization stock sector has recovered
but continues to lag larger capitalization stocks. Because of that,
small company stocks look like a bargain. Even if we are still in the midst of a
market that benefits the largest capitalization stocks, I believe staying the
course with small caps that are good businesses at cheap prices will be
rewarding over the long haul.
The Fund will remain essentially fully invested across the broad range of
market sectors, in stocks that present the opportunity to provide better than
average returns.
/s/ Greg Eisen
Greg Eisen,
Small Company Fund Manager
- -------------------------------
Greg Eisen joined SAFECO in 1986. He holds a BA from Rutgers University and is a
certified public accountant and a Chartered Financial Analyst.
- 38 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO SMALL COMPANY FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
COMMON STOCKS - 91.5%
AIRLINES - 3.8%
7,000 Air Express International Corp. ....................... $278
65,000 *Mesa Air Group, Inc. .................................. 349
AUTO PARTS & EQUIPMENT - 1.3%
25,000 *Deflecta-Shield Corp. ................................. 219
BANKS (MAJOR REGIONAL) - 11.1%
25,000 1st United Bancorp ..................................... 438
16,800 Columbia Banking System, Inc. .......................... 338
27,475 *Hanmi Bank (Los Angeles, CA) .......................... 481
11,250 Independent Bankshares, Inc. ........................... 149
5,500 *Southwest Bancorp of Texas, Inc. ...................... 152
20,000 UnionBancorp, Inc. ..................................... 255
BUILDING MATERIALS - 2.3%
13,000 Zurn Industries, Inc. .................................. 374
COMPUTERS (HARDWARE) - 4.9%
10,500 *MICROS Systems, Inc. .................................. 441
45,500 *PC Service Source, Inc. ............................... 358
COMPUTERS (SOFTWARE & SERVICES) - 4.2%
35,000 *Optimal Robotics Corp. ................................ 140
4,000 *RadiSys Corp. ......................................... 159
13,500 *SPSS, Inc. ............................................ 392
CONSUMER FINANCE - 2.1%
6,950 *AmeriTrade Holding Corp. .............................. 109
7,000 *Ocwen Financial Corp. ................................. 228
ELECTRONICS (DEFENSE) - 3.2%
21,100 *Tracor, Inc. .......................................... 530
ENGINEERING & CONSTRUCTION - 2.0%
12,000 *American Buildings Co. ................................ 324
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
FINANCIAL (DIVERSIFIED) - 5.8%
8,600 First Financial Caribbean Corp. (ADR) ................. $281
24,675 Litchfield Financial Corp. ............................. 404
30,000 *Long Beach Financial Corp. ............................ 263
FOODS - 2.0%
11,600 *JP Foodservice, Inc. .................................. 333
GAMING, LOTTERY & PARIMUTUEL COMPANIES - 1.3%
15,000 Sodak Gaming, Inc. ..................................... 221
HEALTH CARE (DIVERSIFIED) - 3.8%
27,000 Hooper Holmes, Inc. .................................... 619
HEALTH CARE (DRUGS--MAJOR PHARMACEUTICALS) - 3.7%
45,000 *Penederm, Inc. ........................................ 607
HEALTH CARE (SPECIALIZED SERVICES) - 1.9%
30,000 *Ovid Technologies, Inc. ............................... 319
HOUSEHOLD PRODUCTS (NON-DURABLES) - 1.4%
24,500 *Guest Supply, Inc. .................................... 233
HOUSEWARES - 2.2%
40,810 *Lifetime Hoan Corp. ................................... 357
MANUFACTURING (DIVERSIFIED) - 3.9%
26,000 *Lancer Corp. .......................................... 643
OFFICE EQUIPMENT & SUPPLIES - 2.6%
9,000 *Asia Pacific Wire & Cable Corp. Ltd. ................... 98
20,000 Unisource Worldwide, Inc. .............................. 320
OIL (DOMESTIC INTEGRATED) - 2.7%
55,000 *Patina Oil & Gas Corp. ................................ 447
OIL & GAS (DRILLING & EQUIPMENT) - 4.7%
28,000 *American Oilfield Divers, Inc. ........................ 336
8,000 *Seitel, Inc. .......................................... 304
5,000 *Stolt Comex Seaway, S.A. .............................. 127
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 39 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (Continued)
SAFECO SMALL COMPANY FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
OIL & GAS (EXPLORATION & PRODUCTION) - 2.0%
14,000 *Swift Energy Co. ................................... $ 334
RAILROADS - 3.0%
8,600 GATX Corp. ............................................. 497
REAL ESTATE--NON-AFFILIATED - 2.2%
7,700 Alexandria Real Estate Equities, Inc. .................. 169
9,300 Ocwen Asset Investment Corp. ........................... 188
RETAIL (SPECIALTY) - 4.2%
15,500 *Cole National Corp.
(Class A) .............................................. 682
RETAIL (SPECIALTY--APPAREL) - 3.9%
24,200 *Stage Stores, Inc. .................................... 632
SERVICES (COMMERCIAL & CONSUMER) - 5.3%
24,500 *Vallen Corp. .......................................... 447
22,000 York Group, Inc. ....................................... 413
-----
TOTAL COMMON STOCKS .................................................. 14,988
-----
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
PREFERRED STOCK - 2.6%
CONSUMER FINANCE - 2.6%
27,000 *Craig Corp. (Class A) .............................. $ 425
-----
TOTAL PREFERRED STOCK ................................................... 425
-----
TEMPORARY INVESTMENTS - 5.9%
INVESTMENT COMPANIES:
$817,613 SSgA Money Market Portfolio ............................ 818
143,337 SSgA U.S. Treasury Money Market Portfolio .............. 143
-----
TOTAL TEMPORARY INVESTMENTS ............................................. 961
-----
TOTAL INVESTMENTS - 100.0% ........................................... 16,374
Other Assets, less Liabilities ............................................ 1
-----
NET ASSETS .......................................................... $16,375
-----
-----
- -----------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
- 40 -
<PAGE>
REPORT FROM THE FUND MANAGERS
SAFECO U.S. VALUE FUND
June 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The SAFECO U.S. Value Fund was launched April 30 1997. It was a
fortuitous time to begin investing because the stock market has advanced
significantly since that time. (In fact, the second quarter 1997 proved
to be the market's second best in a decade, as measured by the S&P.)
On June 30, 97.5% of the portfolio was invested in common stocks, with
the remaining 2.5% in cash equivalents. The Fund is invested in a
well-diversified group of stocks, and is managed using a value approach.
[PHOTO OF REX BENTLEY]
[PHOTO OF LYNETTE SAGVOLD]
Some of the characteristics that define our Value style of management include
a low price-earnings ratio and a high yield, relative to the S&P 500. At mid
year, the price earnings (PE) ratio on the stocks in our portfolio was 15.2
times 1998 estimated earnings, and the dividend yield was 2.4%. Comparable
numbers for the stocks comprising the S&P 500 were 18.9 times 1998 expected
earnings and a yield of 1.6%.
In other words, stocks in the U.S. Value Fund sell at a discount to
the market, and have a 50% higher current yield. Furthermore, we're
biased toward growth. We select our companies to generate better earnings
growth than the market.
Our top ten holdings are all large capitalization companies chosen for
the qualities described above:
SmithKline has one of the best new drug pipelines in the
pharmaceutical industry and is benefiting from a corporate restructuring.
AMP, the world's number one supplier of electronic connectors, is undertaking
steps to improve its asset utilization and improve overall efficiency.
We have a large position in Mobil because it has strong production
opportunities and is attractively priced relative to the other international
integrated oil companies.
Armstrong, known for its floor covering and building products, should perform
well in a low-interest rate environment which fosters home improvement and home
building.
Chase Manhattan and Nationsbank are both dominant
- 41 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPORT FROM THE U.S. VALUE FUND MANAGER (Continued)
players in the consolidating banking industry. Spun off from ITT,
Hartford is doing a good job expanding distribution of its insurance
products.
CPC International (whose brands include Skippy, Mazola and Knorr)
has good international exposure, good distribution, and is implementing a
restructuring designed to increase earnings predictability.
We think the retail group, having been out of favor for several
years is undervalued. To capture that value, we've invested in JC
Penney and May Department Stores.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NET ASSET CAPITALIZATION
WEIGHTINGS
AS A PERCENT OF NET ASSETS
AT JUNE 30, 1997
<S> <C>
Large: ($4 Bil. and above) 77%
Medium: ($1 Bil. - $4 Bil.) 18%
Small: (Less than $1 Bil.) 2%
Cash and Other: 3%
</TABLE>
In short, our goal is to find and buy companies with better than
average prospects that are selling at discounted prices. We intend to stay fully
invested in companies that will pay you, the shareholder, in
HIGHLIGHTS
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
TOP TEN HOLDINGS NET ASSETS
- -------------------------------------------------------------------------
<S> <C>
SmithKline Beecham, plc (ADR) ...................................... 3.4%
(Pharmaceuticals)
AMP, Inc. .......................................................... 3.1
(Electrical Equipment Manufacturer)
Mobil Corp. ........................................................ 3.0
(Oil/Gas Exploration & Production)
Armstrong World Industries, Inc. ................................... 2.9
(Construction Products Company)
Chase Manhattan Corp. .............................................. 2.8
(Bank)
Hartford Financial Services Group, Inc. ............................ 2.7
(Insurance Company)
CPC International, Inc. ............................................ 2.7
(Food Company)
NationsBank Corp. .................................................. 2.6
(Bank)
J.C. Penney Co., Inc. .............................................. 2.6
(Department Store)
May Department Stores Co. .......................................... 2.5
(Department Store)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES
(Jan. to June) COST (000'S)
- ----------------------------------------------------------------------------
<S> <C>
SmithKline Beecham, plc (ADR) ......................................... $247
Mobil Corp. ........................................................... 225
AMP, Inc. ............................................................. 221
Chase Manhattan Corp. ................................................. 215
GTE Corp. ............................................................. 208
<CAPTION>
SALES PROCEEDS
(Jan. to June) (000'S)
- ----------------------------------------------------------------------------
<S> <C>
*Colgate-Palmolive Co. ................................................ $81
*Abbott Laboratories .................................................... 78
Philip Morris Cos., Inc. ............................................... 44
Raytheon Co. ........................................................... 19
<CAPTION>
PERCENT OF
TOP FIVE INDUSTRIES NET ASSETS
- ----------------------------------------------------------------------------
<S> <C>
Oil (Domestic Integrated) ............................................... 8%
Manufacturing (Diversified) .............................................. 6
Electrical Equipment ..................................................... 5
Retail (Department Stores) ............................................... 5
Telephone ................................................................ 5
- ----------------------------------------------------------------------------
* Security sold, no longer in portfolio.
</TABLE>
- 42 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
dividends while we wait. We are confident that this approach will result in
superior investment performance over time, factoring in both risk and return.
/s/ Rex Bentley
Rex Bentley
/s/ Lynette Sagvold
Lynette Sagvold
- -------------------------------
Rex Bentley, an MBA from Brigham Young University and Chartered Financial
Analyst, has more than 20 years of investment experience.
Lynette Sagvold holds a BA in business administration from the University of
Washington and is a chartered financial analyst. She began her investment career
in 1981 at Kidder Peabody and was a trust officer for Key Trust and First
Interstate before joining SAFECO as a portfolio manager and insurance analyst.
- 43 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO U.S. VALUE FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
COMMON STOCKS - 97.5%
AEROSPACE/DEFENSE - 3.8%
3,300 BF Goodrich Co. ....................................... $143
3,100 Raytheon Co. ........................................... 158
AUTO PARTS & EQUIPMENT - 2.3%
5,200 Echlin, Inc. ........................................... 187
BANKS (MAJOR REGIONAL) - 2.6%
3,200 NationsBank Corp. ...................................... 206
BANKS (MONEY CENTER) - 2.8%
2,300 Chase Manhattan Corp. .................................. 223
BEVERAGES (ALCOHOLIC) - 2.0%
3,800 Anheuser-Busch Companies, Inc. ......................... 159
BEVERAGES (NON-ALCOHOLIC) - 1.6%
3,500 PepsiCo, Inc. .......................................... 132
BUILDING MATERIALS - 2.9%
3,100 Armstrong World Industries, Inc. ....................... 228
CHEMICALS - 2.0%
4,100 Nalco Chemical Co. ..................................... 158
COMPUTERS (HARDWARE) - 2.1%
3,000 Hewlett-Packard Co. .................................... 168
COMPUTERS (NETWORKING) - 2.2%
3,900 *3Com Corp. ............................................ 176
COMPUTERS (PERIPHERALS) - 0.9%
2,100 Seagate Technology, Inc. ................................ 74
COMPUTERS (SOFTWARE & SERVICES) - 1.9%
3,800 *Electronic Data Systems Corp. ......................... 156
ELECTRIC COMPANIES - 3.7%
5,600 Houston Industries, Inc. ............................... 120
4,200 NIPSCO Industries, Inc. ................................ 174
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
ELECTRICAL EQUIPMENT - 5.4%
5,900 AMP, Inc. ............................................. $246
2,800 General Electric Co. ................................... 183
FINANCIAL (DIVERSIFIED) - 3.5%
3,200 Advanta Corp. (Class B) ................................ 114
3,800 Federal National Mortgage Association .................. 166
FOODS - 4.0%
2,300 CPC International, Inc. ................................ 212
1,700 ConAgra, Inc. .......................................... 109
HEALTH CARE (DIVERSIFIED) - 3.5%
2,500 American Home Products Corp. ........................... 191
1,100 Bristol-Myers Squibb Co. ................................ 89
HEALTH CARE (DRUGS--MAJOR PHARMACEUTICALS) - 3.4%
3,000 SmithKline Beecham, plc (ADR) .......................... 275
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 2.0%
3,100 Baxter International, Inc. ............................. 162
HOUSEHOLD PRODUCTS (NON-DURABLES) - 2.3%
3,700 Kimberly-Clark Corp. ................................... 184
INSURANCE (MULTI-LINE) - 2.7%
2,600 Hartford Financial Services Group, Inc. ................ 215
MANUFACTURING (DIVERSIFIED) - 6.3%
3,100 Corning, Inc. .......................................... 173
3,900 Crane Co. .............................................. 163
4,100 Harsco Corp. ........................................... 166
OFFICE EQUIPMENT & SUPPLIES - 2.4%
12,100 Unisource Worldwide, Inc. .............................. 194
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 44 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO U.S. VALUE FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
OIL (DOMESTIC INTEGRATED) - 7.9%
2,300 Amoco Corp. ........................................... $200
2,700 Atlantic Richfield Co. ................................. 190
3,400 Mobil Corp. ............................................ 238
PERSONAL CARE - 3.8%
2,300 Avon Products, Inc. .................................... 162
2,800 International Flavors & Fragrances, Inc. ............... 141
RAILROADS - 2.3%
2,000 Burlington Northern
Santa Fe ............................................... 180
REAL ESTATE--NON-AFFILIATED - 1.1%
2,900 First Industrial Realty Trust, Inc. ..................... 85
RETAIL (DEPARTMENT STORES) - 5.1%
3,900 J.C. Penney Co., Inc. .................................. 204
4,300 May Department Stores Co. .............................. 203
RETAIL (FOOD CHAINS)--GROCERS - 4.1%
5,400 Albertson's, Inc. ...................................... 197
2,600 American Stores Co. .................................... 128
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
RETAIL (SPECIALTY) - 1.3%
3,000 Toys R Us, Inc. ...................................... $ 105
TELEPHONE - 4.6%
2,200 Bell Atlantic Corp. .................................... 167
4,600 GTE Corp. .............................................. 202
TOBACCO - 1.0%
1,800 Philip Morris Cos., Inc. ................................ 80
----
TOTAL COMMON STOCKS ................................................... 7,786
----
TEMPORARY INVESTMENTS - 3.0%
INVESTMENT COMPANIES:
$238,177 SSgA Money Market Portfolio ............................ 238
----
TOTAL TEMPORARY INVESTMENTS ............................................. 238
----
TOTAL INVESTMENTS - 100.5% ............................................ 8,024
Liabilities, less Other Assets ......................................... (40)
----
NET ASSETS ........................................................... $7,984
----
----
- -----------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
- 45 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO HIGH-YIELD BOND FUND
June 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
For the year ended June 30 1997, the SAFECO High-Yield Bond Fund
returned 13.08% for Advisor Class A shares and 12.73% for Advisor Class B
shares (returns not include the effect of sales charges), while the average
high-yield fund generated 14.77% for the year, according to Lipper Analytical
Services. The Merrill Lynch High-Yield Index posted a 12-month return of
14.57%. [PHOTO OF ROBERT KERN]
Our underperformance was primarily due to our higher weighting in
higher-quality junk bonds. Our more creditworthy bonds returned less than their
lower-rated cousins.
As of June 30, 1997, the Fund's $58.6 million in net assets were invested in
82 individual securities in 41 different industries.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE OVERVIEW --
CLASS A AND CLASS B SHARES
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED JUNE 30, 1997
<S> <C> <C> <C> <C> <C> <C>
With Without
Sales Charge Sales Charge
Since Since
1 Year 5 Year Inception 1 Year 5 Year Inception
SAFECO High-Yield Bond Fund Class A 7.99 9.07 8.85 13.08 10.08 9.43
SAFECO High-Yield Bond Fund Class B 7.73 9.74 9.39 12.73 10.01 9.39
Investment Value As of June 30, 1997
SAFECO High-Yield Bond Fund Class A: $21,008*
SAFECO High-Yield Bond Fund Class B: $21,931
Merrill Lynch High-Yield Index: $26,772
With Sales Charge
SAFECO SAFECO
High-Yield High-Yield Merrill Lynch
Bond Fund Bond Fund High-Yield
Class A Class B Index
09/30/88 $9,583 $10,000 $10,000
10/31/88 9,699 10,156 10,144
11/30/88 9,699 10,156 10,163
12/31/88 9,809 10,271 10,207
01/31/89 9,965 10,435 10,374
02/28/89 10,000 10,471 10,436
03/31/89 9,936 10,404 10,395
04/30/89 9,881 10,346 10,399
05/31/89 10,036 10,509 10,595
06/30/89 10,174 10,653 10,757
07/31/89 10,234 10,716 10,800
08/31/89 10,216 10,697 10,850
09/30/89 10,168 10,647 10,736
10/31/89 10,034 10,507 10,470
11/30/89 10,016 10,488 10,485
12/31/89 10,003 10,475 10,443
01/31/90 9,855 10,319 10,161
02/28/90 9,656 10,111 10,007
03/31/90 9,852 10,316 10,196
04/30/90 9,910 10,377 10,259
05/31/90 10,105 10,582 10,430
06/30/90 10,220 10,702 10,692
07/31/90 10,455 10,947 10,961
08/31/90 10,135 10,612 10,460
09/30/90 9,756 10,216 10,030
10/31/90 9,443 9,888 9,736
11/30/90 9,547 9,997 9,838
12/31/90 9,644 10,098 9,987
01/31/91 9,592 10,044 10,192
02/28/91 9,988 10,459 11,076
03/31/91 10,341 10,828 11,625
04/30/91 10,657 11,159 12,026
05/31/91 10,784 11,292 12,073
06/30/91 10,901 11,415 12,347
07/31/91 11,142 11,667 12,678
08/31/91 11,359 11,894 12,970
09/30/91 11,530 12,073 13,153
10/31/91 11,796 12,352 13,600
11/30/91 11,944 12,507 13,746
12/31/91 11,987 12,551 13,899
01/31/92 12,319 12,900 14,369
02/28/92 12,534 13,124 14,732
03/31/92 12,668 13,265 14,939
04/30/92 12,661 13,257 15,017
05/31/92 12,832 13,436 15,239
06/30/92 12,997 13,610 15,414
07/31/92 13,221 13,844 15,714
08/31/92 13,385 14,015 15,914
09/30/92 13,550 14,188 16,083
10/31/92 13,284 13,910 15,876
11/30/92 13,509 14,145 16,119
12/31/92 13,649 14,292 16,324
01/31/93 14,022 14,683 16,713
02/28/93 14,300 14,974 17,012
03/31/93 14,543 15,229 17,301
04/30/93 14,649 15,339 17,420
05/31/93 14,870 15,571 17,646
06/30/93 15,152 15,866 17,975
07/31/93 15,329 16,052 18,156
08/31/93 15,434 16,161 18,322
09/30/93 15,486 16,216 18,403
10/31/93 15,706 16,446 18,753
11/30/93 15,826 16,572 18,851
12/31/93 15,957 16,709 19,049
01/31/94 16,258 17,024 19,461
02/28/94 16,179 16,941 19,326
03/31/94 15,607 16,342 18,701
04/30/94 15,481 16,211 18,469
05/31/94 15,622 16,358 18,428
06/30/94 15,690 16,429 18,512
07/31/94 15,685 16,424 18,634
08/31/94 15,742 16,484 18,772
09/30/94 15,736 16,478 18,768
10/31/94 15,673 16,411 18,818
11/30/94 15,467 16,196 18,656
12/31/94 15,598 16,333 18,852
01/31/95 15,782 16,525 19,117
02/28/95 16,113 16,873 19,730
03/31/95 16,261 17,027 19,996
04/30/95 16,568 17,349 20,513
05/31/95 17,003 17,804 21,146
06/30/95 17,089 17,894 21,289
07/31/95 17,316 18,132 21,566
08/31/95 17,323 18,140 21,679
09/30/95 17,535 18,361 21,936
10/31/95 17,777 18,615 22,116
11/30/95 17,807 18,646 22,336
12/31/95 18,038 18,888 22,710
01/31/96 18,265 19,125 23,089
02/28/96 18,441 19,310 23,160
03/31/96 18,380 19,246 23,065
04/30/96 18,418 19,285 23,097
05/31/96 18,532 19,405 23,264
06/30/96 18,579 19,455 23,368
07/31/96 18,774 19,658 23,510
08/31/96 19,040 19,937 23,802
09/30/96 19,426 20,341 24,356
10/31/96 19,500 20,419 24,567
11/30/96 19,790 20,723 25,061
12/31/96 19,912 20,850 25,269
01/31/97 20,078 21,024 25,459
02/28/97 20,445 21,397 25,851
03/31/97 20,017 20,934 25,494
04/30/97 20,145 21,056 25,821
05/31/97 20,718 21,641 26,364
06/30/97 21,008 21,931 26,772
*The funds inception was September 7, 1988.
Graph and average annual return comparison
begins September 30, 1988.
</TABLE>
The performance graph compares a hypothetical $10,000 investment in Class A
and Class B of each Fund to a hypothetical investment in a relevant market
index. Fund performance is derived from the Fund's original class of shares
and reflects the maximum 4.5% sales charge for Class A shares, and the maximum
contingent deferred sales charge (5% in the first year, decreasing to 0% after
six years) for Class B shares. Fund performance has not been restated to
reflect Rule 12b-1 fees prior to September 30, 1996 (initial public offering
date of Class A and Class B shares). Such fees will affect subsequent
performance.
The index is unmanaged and includes no operating expenses or transaction
costs. Past performance is not predictive of future results. Principal value
may fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
- 46 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
We continued to emphasize investment in noncyclical companies with three
characteristics: Demonstrated good performance, the potential to outperform, and
a level of creditworthiness that provides a measure of protection to our
principal.
I also bought the preferred stock and convertible preferreds of such
companies. While adding appreciation potential, these securities have added some
fluctuation to our dividend stream as they pay dividends quarterly rather than
monthly.
Still they fit our strategy: Build and maintain a core portfolio structured
similarly to the high-yield market to keep the Fund in step with the market, and
supplement the core with securities that offer exceptional potential.
Our search for companies with the ability to improve revenue and cash-flow
growth led to the radio industry which is benefiting from relaxed regulation and
consolidation. Our radio holdings constitute 12.4% of net assets and have
delivered substantial gains. We continue to favor this sector.
HIGHLIGHTS
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
TOP FIVE HOLDINGS NET ASSETS
- -------------------------------------------------------------------------
<S> <C>
Specialty Equipment Companies, Inc ................................. 1.9%
(Machinery--Diversified)
Plastic Specialties & Technologies, Inc. ........................... 1.8
(Manufacturing--Diversified)
AMF Group, Inc. .................................................... 1.8
(Leisure Time Products)
Corporate Express, Inc. ............................................ 1.8
(Office Equipment & Supplies)
Commonwealth Aluminum Corporation ................................... 1.8
(Metals--Fabrications)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES
(Jan. to June) COST (000'S)
- ----------------------------------------------------------------------------
<S> <C>
Corporate Express, Inc. ............................................ $1,014
French Fragrance ..................................................... 1,000
Capstar Broadcasting Cvt. Pfd. ...................................... 1,000
United Refining ...................................................... 1,000
Sun World International .............................................. 1,000
<CAPTION>
TOP FIVE SALES PROCEEDS
(Jan. to June) (000'S)
- ----------------------------------------------------------------------------
<S> <C>
Affiliated Newspaper .................................................. $615
Smith's Food & Drug .................................................... 584
Scotsman Group, Inc. .................................................. 524
Universal Health Services .............................................. 522
Giant Industries, Inc. ................................................ 515
</TABLE>
<TABLE>
<CAPTION>
PERCENT OF
TOP FIVE INDUSTRIES NET ASSETS
- -------------------------------------------------------------------------
<S> <C>
Broadcast Media ..................................................... 12%
Food .................................................................. 5
Metals--Miscellaneous ................................................. 4
Leisure Time .......................................................... 4
Advertising ........................................................... 4
</TABLE>
CURRENT 30-DAY YIELD CLASS A ........................................... 7.71%
CURRENT 30-DAY YIELD CLASS B ........................................... 7.28%
WEIGHTED AVERAGE MATURITY ......................................... 7.92 YEARS
- 47 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPORT FROM THE HIGH-YIELD BOND FUND MANAGER (Continued)
We've dropped the home building sector, and for the moment, the
grocery store sector from our portfolio. A slowing economy (which
will dampen demand) and the high capital requirements of home
building, led us to sell our holdings here. We sold the Fund's
grocery holdings, Smith's Food and Drug, and Grand Union. Smith's was acquired
by Fred Meyer in mid-May, causing their bonds to trade up to near
investment-grade levels. We sold the position at a gain and reinvested to
increase the Fund's current yield. Grand Union stores continued to struggle in
the very competitive Northeast market. We exited the bonds around $97. On June
30, they were trading at $75.
At this time, the U.S. economy continues to perform exceptionally well.
Growth is moderating and inflation pressures are dormant. The high yield
market recovered from a tough first quarter 1997. It then responded
to this favorable environment by soaring to new highs at a speed
which gives one pause. Further contributing to the favorable
conditions, and high valuations are a low default rate and robust
cash inflows to the high yield market. As we go forward, I don't see much threat
to this pleasant status quo.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
S&P CREDIT RATING DISTRIBUTION
AS A PERCENT OF NET ASSETS
AT JUNE 30, 1997
<S> <C>
BB: 20%
B: 66%
Not Rated: 4%
Preferred Stock: 6%
Cash & Other Assets Less
Liabilities: 4%
</TABLE>
/s/ Robert Kern
Robert Kern,
SAFECO High-Yield Bond
Fund Manager
- -------------------------------
Robert Kern became sole manager of the SAFECO High-Yield Fund on June 30. He
joined SAFECO in 1988 with a B.S. degrees in business and accounting from the
Universities of Washington and Puget Sound respectively. Robert is a Certified
Public Accountant and a Chartered Financial Analyst
- 48 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO HIGH-YIELD BOND FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT (000'S) VALUE (000'S)
<C> <S>
- -----------------------------------------------------------------------------
CORPORATE BONDS - 90.2%
ADVERTISING - 4.4%
$1,000 Heritage Media Corp.
8.75%, due 2/15/06 .................................. $1,030
1,000 Lamar Advertising Co.
9.625%, due 12/01/06 ................................. 1,025
500 Universal Outdoor, Inc.
9.75%, due 10/15/06 .................................... 518
AGRICULTURE/FERTILIZER PRODUCTS - 1.8%
1,000 Sun World International
11.25%, due 4/15/04 .................................. 1,040
AUTOS & AUTO PARTS - 0.9%
500 Exide Corp.
10.75%, due 12/15/02 ................................... 526
BEVERAGES - 3.0%
750 Coca-Cola Bottling Group (Southwest), Inc.
9.00%, due 11/15/03 .................................... 776
1,000 Cott Corp.
8.50%, due 5/01/07 ..................................... 995
BROADCAST MEDIA - 6.9%
500 Cablevision Systems Corp.
9.875%, due 5/15/06 .................................... 534
Century Communications Corp.
500 9.50%, due 3/01/05 ..................................... 513
500 8.875%, due 1/15/07 .................................... 489
1,000 Jones Intercable, Inc.
8.875%, due 4/01/07 .................................. 1,010
500 Lenfest Communications, Inc.
8.375%, due 11/01/05 ................................... 492
1,000 Young Broadcasting, Inc.
9.00%, due 1/15/06 ..................................... 980
BUILDING MATERIALS - 0.9%
500 #Synthetic Industries (144A)
9.25%, due 2/15/07 (acquired 2/11/97) .................. 510
<CAPTION>
PRINCIPAL MARKET
AMOUNT (000'S) VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
CHEMICALS - 0.9%
$ 500 Atlantis Group, Inc.
11.00%, due 2/15/03 .................................. $ 512
COMPUTER SOFTWARE - 2.8%
1,000 Bell & Howell Holdings Co.
11.50%, due 3/01/00 Step Bond .......................... 805
1,000 #HMT Technology (144A)
5.75%, due 1/15/04 (acquired 1/21/97) .................. 825
CONTAINERS/PACKAGING - 2.6%
500 Applied Extrusion Technologies, Inc.
11.50%, due 4/01/02 .................................... 525
1,000 Owens-Illinois, Inc.
9.75%, due 8/15/04 ................................... 1,049
COSMETICS - 2.7%
500 Coty, Inc.
10.25%, due 5/01/05 .................................... 539
1,000 #French FragranceS (144A)
10.375%, due 5/15/07 (acquired 5/09/97) .............. 1,030
DRUGS - 2.9%
750 Chattem, Inc.
12.75%, due 6/15/04 .................................... 836
1,000 IVAX Corp.
6.50%, due 11/15/01 .................................... 889
ELECTRONICS - 0.9%
500 Plantronics, Inc.
10.00%, due 1/15/01 .................................... 520
ENTERTAINMENT - 0.9%
500 AMC Entertainment, Inc.
9.50%, due 3/15/09 ..................................... 510
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 49 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (Continued)
SAFECO HIGH-YIELD BOND FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT (000'S) VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
ENVIRONMENTAL - 2.0%
Allied Waste North America, Inc. (144A)
$1,000 #11.30%, due 6/01/02 Step Bond (acquired 5/15/97) .... $ 625
500 #10.25%, due 12/01/06 (acquired 12/05/96) .............. 535
FINANCIAL - 2.5%
1,000 #Americredit (144A)
9.25%, due 2/01/04 (acquired 2/04/97) .................. 980
500 DVI, Inc.
9.875%, due 2/01/04 .................................... 500
FOOD - 4.5%
500 Chiquita Brands International, Inc.
10.25%, due 11/01/06 ................................... 532
500 Curtice Burns Foods, Inc.
12.25%, due 2/01/05 .................................... 554
1,000 #Gorges/Quik-To-Fix Foods (144A)
11.50%, due 12/01/06 (acquired 11/25/96) ............. 1,030
500 International Home Foods, Inc.
10.375%, due 11/01/06 .................................. 515
GAMING - 2.7%
500 Aztar Corp.
13.75%, due 10/01/04 ................................... 570
500 Boyd Gaming Corporation
9.25%, due 10/01/03 .................................... 500
500 Station Casinos, Inc.
9.625%, due 6/01/03 .................................... 495
HARDWARE & TOOLS - 1.4%
750 Shop Vac Corp.
10.625%, due 9/01/03 ................................... 797
<CAPTION>
PRINCIPAL MARKET
AMOUNT (000'S) VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
HOSPITAL MANAGEMENT - 2.6%
$ 500 #Integrated Health (144A)
9.50%, due 9/15/07 (acquired 5/30/97) ................ $ 511
1,000 Quorum Health Group, Inc. 8.75%, due 11/01/05 ........ 1,028
HOTELS/MOTELS - 4.0%
500 HMH Properties, Inc.
9.50%, due 5/15/05 ..................................... 520
500 John Q. Hammons Hotels
8.875%, due 2/15/04 .................................... 505
500 Prime Hospitality Corp.
9.25%, due 1/15/06 ..................................... 515
750 Wyndham Hotel Corp.
10.50%, due 5/15/06 .................................... 836
HOUSEHOLD PRODUCTS - 0.9%
500 Ekco Group, Inc.
9.25%, due 4/01/06 ..................................... 505
INDUSTRIAL PRODUCT & SUPPLIER - 0.9%
500 Printpack, Inc.
10.625%, due 8/15/06 ................................... 532
LEISURE TIME - 4.4%
1,500 AMF Group, Inc.
12.25%, due 3/15/01 Step Bond ........................ 1,067
Cinemark USA, Inc.
500 9.625%, due 8/01/08 .................................... 508
500 #9.625%, due 8/01/08 (acquired 6/26/97) ................ 507
500 E & S Holdings Corp.
10.375%, due 10/01/06 .................................. 521
MACHINERY--DIVERSIFIED - 1.9%
1,000 Specialty Equipment Companies, Inc.
11.375%, due 12/01/03 ................................ 1,091
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 50 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO HIGH-YIELD BOND FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT (000'S) VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
MANUFACTURING - 1.8%
$1,000 Plastic Specialties and Technologies, Inc.
11.25%, due 12/01/03 ................................ $1,070
METALS - 4.5%
500 Armco, Inc.
9.375%, due 11/01/00 ................................... 512
1,000 Commonwealth Aluminum Corp.
10.75%, due 10/01/06 ................................. 1,055
500 Oregon Steel Mills, Inc.
11.00%, due 6/15/03 .................................... 539
500 #Wells Aluminum Corp. (144A)
10.125%, due 6/01/05 (acquired 5/28/97) ................ 514
OFFICE EQUIPMENT & SUPPLIES - 1.8%
1,200 Corporate Express, Inc.
4.50%, due 7/01/00 Convertible ....................... 1,065
OIL & GAS - 0.9%
500 Crown Central Petroleum Corp.
10.875%, due 2/01/05 ................................... 525
OIL SERVICES - 4.2%
500 #ICO, Inc. (144A)
10.375%, due 6/01/07 (acquired 6/09/97) ................ 514
1,000 Snyder Oil Corp.
8.75%, due 6/15/07 ..................................... 991
1,000 #United Refining Co. (144A)
10.75%, due 6/15/07 (acquired 6/09/97) ................. 985
PAPER & FOREST PRODUCTS - 2.6%
500 #The Fonda Group (144A)
9.50%, due 3/01/07 (acquired 2/27/97) .................. 478
500 Specialty Paper
9.375%, due 10/15/06 ................................... 505
500 Stone Container Corp.
11.875%, due 12/01/98 .................................. 526
<CAPTION>
PRINCIPAL MARKET
AMOUNT (000'S) VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
PETROLEUM & PETROLEUM SERVICES - 0.4%
$ 250 Vintage Petroleum, Inc.
8.625%, due 2/01/09 .................................. $ 249
RESTAURANTS - 1.8%
1,000 Apple South, Inc.
9.75%, due 6/01/06 ................................... 1,050
RETAIL - 0.8%
500 K-Mart Corp.
7.95%, due 2/01/23 ..................................... 450
RETAIL--GROCERS - 1.7%
1,000 #Quality Food Centers, Inc. (144A)
8.70%, due 3/15/07 (acquired 3/19/97) .................. 992
RETAIL--OTHER - 1.9%
Petroleum Heat & Power Co.
325 12.25%, due 2/01/05 .................................... 341
250 9.375%, due 2/01/06 .................................... 238
500 #Windy Hill Pet Food Co., Inc. (144A)
9.75%, due 5/15/07 (acquired 5/21/97) .................. 500
SAVINGS & LOAN--SAVINGS BANK - 0.9%
500 #First Nationwide Holdings, Inc. (144A)
10.625%, due 10/01/03 (acquired 9/13/96) ............... 552
TELECOMMUNICATIONS - 3.4%
1,000 Paging Network, Inc.
10.00%, due 10/15/08 ................................... 960
1,000 PhoneTel Technologies
12.00%, due 12/15/06 ................................. 1,010
TEXTILES - 0.9%
500 Dominion Textile (USA), Inc.
9.25%, due 4/01/06 ..................................... 521
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 51 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (Continued)
SAFECO HIGH-YIELD BOND FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT (000'S) VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
TRANSPORTATION - 1.8%
$1,000 International Shipholding Corp.
9.00%, due 7/01/03 .................................. $1,025
UTILITIES - 0.6%
342 Midland Cogeneration Venture, L.P.
10.33%, due 7/23/02 .................................... 374
UTILITIES--ELECTRIC DISTRIBUTION - 0.9%
500 El Paso Electric Co.
9.40%, due 5/01/11 ..................................... 544
-----
TOTAL CORPORATE BONDS ................................................ 52,842
-----
PREFERRED STOCK - 5.5%
BROADCAST MEDIA - 5.5%
5 #American Radio Systems Corp. (acquired 1/30/97) ....... 558
10 #Capstar Broadcast (acquired 6/17/97) ................ 1,010
5 #Chancellor Radio Broadcasting Co. (acquired 1/23/97) ...570
5 SFX Broadcasting, Inc. ................................. 540
5 Sinclair Broadcast Group, Inc. ......................... 529
-----
TOTAL PREFERRED STOCK ................................................. 3,207
-----
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT (000'S) VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
TEMPORARY INVESTMENTS - 3.2%
INVESTMENT COMPANIES:
$1,888 SSgA Money Market Portfolio ........................ $ 1,888
-----
TOTAL TEMPORARY INVESTMENTS ........................................... 1,888
-----
TOTAL INVESTMENTS - 98.9% ............................................ 57,937
Other Assets, less Liabilities .......................................... 624
-----
NET ASSETS .......................................................... $58,561
-----
-----
- -----------------------------------------------------------------------------
</TABLE>
# Securities are exempt from registration and restricted as to resale only to
dealers, or through a dealer to an "accredited investor" or a "qualified
institutional buyer". The total cost of such securities is $12,984,702 and the
total value is 22.56% of net assets.
SEE NOTES TO FINANCIAL STATEMENTS
- 52 -
<PAGE>
OVERVIEW OF THE
SAFECO INTERMEDIATE-TERM
U.S. TREASURY FUND
SAFECO MANAGED BOND FUND
June 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A very robust U.S. economy in the first quarter of 1997 prompted a
renewal of inflation fears among bond market participants. The Federal
Reserve added fuel to the fire in March by raising its benchmark Fed
Funds rate from 5 1/4 to 5 1/2%. Consequently, interest rates in general rose
throughout the first four months of the year. But as data began to appear that
suggested a significant slowing in second quarter economic activity, the market
rallied, and rates fell back to where they were when the year started. A new
year, the same old story: an extremely volatile--yet trendless--bond market.
[PHOTO OF MICHAEL C. KNEBEL]
This kind of environment has persisted throughout the last few years.
Consequently, our returns for both the Intermediate Term U.S. Treasury Fund and
the Managed Bond Fund have suffered, owing to our portfolios having a duration
that is either too short or too long whenever rates have changed course. We
expect these same market conditions to continue. Thus, this year we've made
several changes to our bond strategy, which should improve our performance in a
wider range of market conditions.
First, we have refined our technique for managing the Funds' sensitivity to
changes in interest rates. While we've retained our fundamental approach
of shortening the Funds' average maturity when rates rise (to protect
principal) and lengthening when rates fall (to capture capital gains), we
expect to limit the magnitude of such changes and to make them less frequently,
so that the average maturity of the Fund more closely reflects broad market
characteristics. In so doing, we hope to produce returns which track the market
more closely, while still offering down-side protection in bear markets.
Second, we are placing greater emphasis on sources of potential return other
than changes in interest rates, or duration. We will be more active in our
search for mispriced sectors of the markets and in managing our allocations to
those sectors.
Despite these enhancements, our strategy remains the same in two important
ways. We continue to emphasize high quality, intermediate bonds to capture broad
market returns. Therefore, the Funds' average maturity remains limited to ten
years or less. And, as always, changes to the Funds' average maturity are made
in response to, not in anticipation of, rate movements. We remain trend
followers, at least until a highly accurate, reliable method is discovered for
predicting future rates.
- 53 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO INTERMEDIATE-TERM
U.S. TREASURY FUND
June 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE SAFECO INTERMEDIATE TERM U.S. TREASURY FUND returned 1.84% for Advisor
Class A shares and 1.53% for Advisor Class B shares for the six-month period
ended June 30, 1997. For the year ended the same date, Advisor Class A shares
returned 4.97%, while Advisor Class B shares returned 4.58.%. (These returns do
not include sales charges.) On average, intermediate-term Treasury funds, as
measured by Lipper Analytical Services, had a six-month return of 2.17% and a
12-month return of 6.51%. The sector, as measured by the Merrill Lynch
Intermediate Treasury Index (which includes no operating expenses or transaction
costs), returned 6.91% for the year.
We bought high quality, U.S. government agency securities to increase the
Fund's yield. We've also adjusted the mix of Treasury holdings to maximize
yield, while maintaining a relatively short average maturity overall.
HIGHLIGHTS
- -------------------------------
CURRENT 30-DAY YIELD CLASS A ........................................... 5.18%
CURRENT 30-DAY YIELD CLASS B ........................................... 4.72%
WEIGHTED AVERAGE MATURITY ......................................... 5.90 YEARS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE OVERVIEW --
CLASS A AND CLASS B SHARES
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED JUNE 30, 1997
<S> <C> <C> <C> <C> <C> <C>
With Without
Sales Charge Sales Charge
Since Since
1 Year 5 Year Inception 1 Year 5 Year Inception
SAFECO Intermediate-Term
U.S. Treasury Fund Class A 0.25 4.84 6.69 4.97 5.81 7.25
SAFECO Intermediate-Term
U.S. Treasury Fund Class B (0.42) 5.41 7.21 4.58 5.73 7.21
Investment Value As of June 30, 1997
SAFECO Intermediate-Term
U.S. Treasury Fund Class A: $17,621*
SAFECO Intermediate-Term
U.S. Treasury Fund Class B: $18,382
Merrill Lynch Intermediate-Term
Treasury Index: $19,660
With Sales Charge
SAFECO SAFECO
Intermediate- Intermediate- Merrill Lynch
Term Term Intermediate-
U.S. Treasury U.S. Treasury Term
Fund Fund Treasury
Class A Class B Index
09/30/88 $9,605 $10,057 $10,000
10/31/88 9,734 10,192 10,136
11/30/88 9,658 10,113 10,048
12/31/88 9,669 10,125 10,057
01/31/89 9,727 10,185 10,156
02/28/89 9,677 10,133 10,114
03/31/89 9,694 10,151 10,164
04/30/89 9,865 10,330 10,351
05/31/89 10,038 10,511 10,569
06/30/89 10,267 10,751 10,839
07/31/89 10,447 10,939 11,060
08/31/89 10,350 10,837 10,906
09/30/89 10,392 10,882 10,961
10/31/89 10,567 11,065 11,186
11/30/89 10,644 11,146 11,295
12/31/89 10,666 11,169 11,324
01/31/90 10,603 11,102 11,259
02/28/90 10,656 11,158 11,288
03/31/90 10,650 11,152 11,310
04/30/90 10,623 11,123 11,270
05/31/90 10,824 11,334 11,509
06/30/90 10,934 11,449 11,658
07/31/90 11,081 11,603 11,826
08/31/90 11,041 11,561 11,774
09/30/90 11,084 11,606 11,882
10/31/90 11,172 11,699 12,047
11/30/90 11,288 11,820 12,227
12/31/90 11,430 11,968 12,400
01/31/91 11,481 12,022 12,526
02/28/91 11,571 12,116 12,591
03/31/91 11,653 12,202 12,660
04/30/91 11,782 12,337 12,791
05/31/91 11,844 12,402 12,864
06/30/91 11,858 12,417 12,877
07/31/91 12,006 12,572 13,016
08/31/91 12,208 12,783 13,259
09/30/91 12,392 12,976 13,485
10/31/91 12,525 13,115 13,637
11/30/91 12,654 13,250 13,797
12/31/91 12,975 13,586 14,134
01/31/92 12,827 13,431 13,991
02/28/92 12,843 13,448 14,044
03/31/92 12,796 13,399 13,987
04/30/92 12,894 13,501 14,115
05/31/92 13,079 13,695 14,316
06/30/92 13,284 13,909 14,524
07/31/92 13,614 14,256 14,793
08/31/92 13,721 14,367 14,964
09/30/92 13,976 14,634 15,171
10/31/92 13,720 14,366 14,985
11/30/92 13,635 14,277 14,918
12/31/92 13,827 14,478 15,115
01/31/93 14,183 14,851 15,397
02/28/93 14,496 15,179 15,628
03/31/93 14,555 15,241 15,686
04/30/93 14,659 15,350 15,810
05/31/93 14,611 15,299 15,763
06/30/93 14,965 15,670 15,990
07/31/93 14,988 15,694 16,022
08/31/93 15,358 16,081 16,267
09/30/93 15,444 16,172 16,337
10/31/93 15,478 16,208 16,366
11/30/93 15,231 15,948 16,287
12/31/93 15,326 16,048 16,351
01/31/94 15,525 16,256 16,514
02/28/94 15,114 15,826 16,279
03/31/94 14,796 15,493 16,051
04/30/94 14,691 15,383 15,942
05/31/94 14,697 15,390 15,959
06/30/94 14,669 15,361 15,970
07/31/94 14,864 15,564 16,168
08/31/94 14,902 15,604 16,219
09/30/94 14,739 15,434 16,088
10/31/94 14,745 15,440 16,092
11/30/94 14,715 15,408 16,012
12/31/94 14,772 15,468 16,072
01/31/95 14,941 15,645 16,339
02/28/95 15,165 15,879 16,652
03/31/95 15,242 15,960 16,743
04/30/95 15,430 16,157 16,935
05/31/95 16,019 16,774 17,419
06/30/95 16,126 16,886 17,533
07/31/95 16,001 16,755 17,545
08/31/95 16,192 16,955 17,689
09/30/95 16,371 17,142 17,808
10/31/95 16,620 17,403 18,008
11/30/95 16,958 17,757 18,232
12/31/95 17,246 18,059 18,418
01/31/96 17,302 18,117 18,576
02/28/96 16,880 17,676 18,368
03/31/96 16,703 17,490 18,280
04/30/96 16,668 17,454 18,222
05/31/96 16,665 17,451 18,212
06/30/96 16,786 17,577 18,390
07/31/96 16,839 17,632 18,447
08/31/96 16,837 17,631 18,467
09/30/96 17,025 17,828 18,701
10/31/96 17,232 18,033 19,006
11/30/96 17,450 18,269 19,240
12/31/96 17,302 18,104 19,135
01/31/97 17,350 18,129 19,206
02/28/97 17,317 18,087 19,227
03/31/97 17,100 17,853 19,129
04/30/97 17,314 18,071 19,343
05/31/97 17,435 18,198 19,492
06/30/97 17,621 18,382 19,660
*The funds inception was September 7,
1988. Graph and average annual return
comparison begins September 30, 1988.
</TABLE>
The performance graph compares a hypothetical $10,000 investment in Class
A and Class B of each Fund to a hypothetical investment in a relevant market
index. Fund performance is derived from the Fund's original class of shares
and reflects the maximum 4.5% sales charge for Class A shares, and the maximum
contingent deferred sales charge (5% in the first year, decreasing to 0% after
six years) for Class B shares. Fund performance has not been restated to
reflect Rule 12b-1 fees prior to September 30, 1996 (initial public offering
date of Class A and Class B shares). Such fees will affect subsequent
performance.
The index is unmanaged and includes no operating expenses or transaction
costs. Past performance is not predictive of future results. Principal value
may fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
- 54 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO MANAGED BOND FUND
June 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE SAFECO MANAGED BOND FUND returned 1.64% for Advisor Class A shares and
1.25% for Advisor Class B shares for the six-month period; and 4.37% for Advisor
Class A shares, and 3.78% for Advisor Class B shares for the year ended June 30,
1997. (These returns do not include sales charges). The sector as a whole, as
measured by the Lehman Brothers Government/Corporate Bond Index, returned 2.75%
for the period, and 7.75% for the year.
HIGHLIGHTS
- -------------------------------
<TABLE>
<CAPTION>
PERCENT OF
BONDS BY TYPE NET ASSETS
- -------------------------------------------------------------------------
<S> <C>
U.S. Treasury Securities ............................................ 76%
Financial & Banking .................................................. 12
Building Materials .................................................... 1
Retail ................................................................ 4
FHLMC ................................................................. 2
Cash, Temporary Investments
and Other ........................................................... 5
----
100%
----
----
</TABLE>
CURRENT 30-DAY YIELD CLASS A ........................................... 4.91%
CURRENT 30-DAY YIELD CLASS B ........................................... 4.27%
WEIGHTED AVERAGE MATURITY ......................................... 6.02 YEARS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE OVERVIEW --
CLASS A AND CLASS B SHARES
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED JUNE 30, 1997
<S> <C> <C> <C> <C>
With Without
Sales Charge Sales Charge
Since Since
1 Year Inception 1 Year Inception
SAFECO Managed Bond Fund Class A (0.33) 3.06 4.37 4.49
SAFECO Managed Bond Fund Class B (1.22) 3.49 3.78 4.31
Investment Value As of June 30, 1997
SAFECO Managed Bond Fund Class A: $11,056*
SAFECO Managed Bond Fund Class B: $11,211
Lehman Brothers Gov't/Corp. Index: $12,251
With Sales Charge
SAFECO SAFECO
Managed Managed
Bond Fund Bond Fund Lehman Brothers
Class A Class B Gov't/Corp. Index
02/28/94 $9,550 $10,000 $10,000
03/31/94 9,231 9,666 9,755
04/30/94 9,223 9,657 9,674
05/31/94 9,231 9,666 9,657
06/30/94 9,218 9,653 9,634
07/31/94 9,318 9,757 9,827
08/31/94 9,340 9,780 9,831
09/30/94 9,266 9,703 9,683
10/31/94 9,272 9,709 9,672
11/30/94 9,245 9,680 9,655
12/31/94 9,263 9,699 9,718
01/31/95 9,386 9,828 9,905
02/28/95 9,541 9,991 10,135
03/31/95 9,587 10,038 10,203
04/30/95 9,709 10,167 10,344
05/31/95 10,059 10,533 10,778
06/30/95 10,137 10,615 10,864
07/31/95 10,067 10,541 10,822
08/31/95 10,193 10,674 10,960
09/30/95 10,305 10,791 11,072
10/31/95 10,469 10,962 11,235
11/30/95 10,675 11,178 11,420
12/31/95 10,870 11,382 11,588
01/31/96 10,887 11,400 11,660
02/28/96 10,627 11,127 11,412
03/31/96 10,514 11,010 11,317
04/30/96 10,509 11,004 11,239
05/31/96 10,514 11,009 11,219
06/30/96 10,593 11,092 11,370
07/31/96 10,626 11,127 11,396
08/31/96 10,646 11,148 11,369
09/30/96 10,734 11,239 11,571
10/31/96 10,843 11,347 11,841
11/30/96 10,965 11,467 12,058
12/31/96 10,877 11,369 11,925
01/31/97 10,884 11,368 11,939
02/28/97 10,858 11,335 11,964
03/31/97 10,715 11,179 11,822
04/30/97 10,863 11,327 11,994
05/31/97 10,946 11,406 12,106
06/30/97 11,056 11,211 12,251
*Graph and average annual total return
date is measured from February 28, 1994
(initial public offering date).
</TABLE>
The performance graph compares a hypothetical $10,000 investment in Class
A and Class B of each Fund to a hypothetical investment in a relevant market
index. Fund performance is derived from the Fund's original class of shares
and reflects the maximum 4.5% sales charge for Class A shares, and the maximum
contingent deferred sales charge (5% in the first year, decreasing to 0% after
six years) for Class B shares. Fund performance has not been restated to
reflect Rule 12b-1 fees prior to September 30, 1996 (initial public offering
date of Class A and Class B shares). Such fees will affect subsequent
performance.
The index is unmanaged and includes no operating expenses or transaction
costs. Past performance is not predictive of future results. Principal value
may fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
- 55 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPORT FROM THE MANAGED BOND FUND MANAGER (Continued)
We reduced the Managed Bond Fund's overall allocation to
corporate bonds from 26% to 16% over the six-month period because of
the increasing risk that the difference between Treasury and
corporate yields would widen, causing corporate bond values to fall.
With our remaining corporate holdings, "we moved out the yield
curve" lengthening maturities and increasing the Fund's yield in the
process. To improve diversification, we reduced the average position
in a given company while increasing the number of different
companies whose bonds we hold.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
S&P CREDIT RATING DISTRIBUTION
AS A PERCENT OF NET ASSETS
AT JUNE 30, 1997
<S> <C>
AAA: 81%
AA: 1%
A: 13%
Cash & Other Assets, Less
Liabilities: 5%
</TABLE>
/s/ Michael C. Knebel
Michael C. Knebel
- -------------------------------
Michael Knebel oversees SAFECO Corporation's entire taxable bond operation. He
has 13 years investment experience, an MBA from the University of Minnesota and
is a Chartered Financial Analyst.
- 56 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO INTERMEDIATE-TERM U.S. TREASURY FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (000'S) VALUE (000'S)
<C> <S>
- -----------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES - 98.6%
U.S. FEDERAL AGENCY NOTES - 6.4%
$1,000 6.875%, due 11/22/06 ................................. $ 982
U.S. TREASURY NOTES - 86.6%
2,450 7.75%, due 2/15/01 ................................... 2,563
1,300 7.50%, due 11/15/01 .................................. 1,355
3,470 7.25%, due 8/15/04 ................................... 3,617
3,310 6.875%, due 3/31/00 .................................. 3,364
2,375 6.50%, due 10/15/06 .................................. 2,364
U.S. TREASURY PRINCIPAL STRIPS - 5.6%
1,625 0.00%, due 2/15/07 ..................................... 861
-----
TOTAL U.S. GOVERNMENT SECURITIES ..................................... 15,106
-----
<CAPTION>
PRINCIPAL
AMOUNT (000'S) VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
TEMPORARY INVESTMENTS - 0.2%
INVESTMENT COMPANIES:
$26 SSgA Money Market Portfolio ......................... $ 26
-----
TOTAL TEMPORARY INVESTMENTS .............................................. 26
-----
TOTAL INVESTMENTS - 98.8% ............................................ 15,132
Other Assets, less Liabilities .......................................... 180
-----
NET ASSETS .......................................................... $15,312
-----
-----
- -----------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 57 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO MANAGED BOND FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (000'S) VALUE (000'S)
<C> <S>
- -----------------------------------------------------------------------------
ASSET BACKED SECURITIES - 1.5%
FINANCIAL - 1.5%
$ 67 Chevy Chase Auto ABS Series 1996-1, Class A
6.60%, due 12/15/02 ................................... $ 67
----
TOTAL ASSET BACK SECURITIES .............................................. 67
----
CORPORATE BONDS - 18.0%
BANK--DOMESTIC - 1.1%
50 Banc One Corp.
7.60%, due 5/01/07 ...................................... 51
BANK--MAJOR REGION - 1.5%
75 ABN Amro Bank
7.125%, due 6/18/07 ..................................... 75
BUILDING MATERIALS - 1.5%
70 Hanson Overseas
6.75%, due 9/15/05 ...................................... 68
FINANCIAL--DIVERSIFIED - 3.7%
100 Federal Home Loan Mortgage Corp.
5.78%, due 10/22/03 ..................................... 95
75 Student Loan Marketing Association
6.375%, due 2/11/00 ..................................... 75
FINANCE--MISC. - 6.4%
110 Ford Motor Credit Co.
7.20%, due 6/15/07 ..................................... 110
70 Lehaman Brother Holdings, Inc.
7.375%, due 5/15/04 ..................................... 71
115 Smith Barney Holdings
6.625%, due 11/15/03 ................................... 113
<CAPTION>
PRINCIPAL
AMOUNT (000'S) VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
RETAIL - 1.6%
$75 Sears Roebuck Acceptance Corp.
6.75%, due 9/15/05 .................................... $ 74
RETAIL--DEPARTMENT STORES - 2.2%
100 J.C. Penney Co., Inc.
7.60%, due 4/01/07 ..................................... 104
----
TOTAL CORPORATE BONDS ................................................... 836
----
U.S. GOVERNMENT SECURITIES - 75.5%
U.S. TREASURY NOTES - 54.0%
305 7.25%, due 8/15/04 ..................................... 318
430 6.875%, due 3/31/00 .................................... 437
465 6.50%, due 10/15/06 .................................... 463
600 6.375%, due 9/30/01 .................................... 600
685 5.75%, due 12/31/98 .................................... 683
U.S. TREASURY PRINCIPAL STRIP - 21.5%
1,875 0.00%, due 2/15/07 ..................................... 993
----
TOTAL U.S. GOVERNMENT SECURITIES ...................................... 3,494
----
TEMPORARY INVESTMENTS - 4.6%
INVESTMENT COMPANIES:
213 SSgA Money Market Portfolio ............................ 213
----
TOTAL TEMPORARY INVESTMENTS ............................................. 213
----
TOTAL INVESTMENTS - 99.6% ............................................. 4,610
Other Assets, less Liabilities ........................................... 16
----
NET ASSETS ........................................................... $4,626
----
----
- -----------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 58 -
<PAGE>
OVERVIEW OF THE
SAFECO MUNICIPAL BOND FUND
AND CALIFORNIA MUNICIPAL BOND FUND
June 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The first half of 1997 was particularly uneventful for the municipal
bond markets. As measured by the Bond Buyer 40 Bond Index, long-term
municipal yields stayed within a narrow range, ending the period slightly
lower than where they began. Yields began the period at 5.78% on January 2, 1997
and ended at 5.69% on June 30, 1997. They ranged from a high of 6.01% on April
14 to a low of 5.58% on June 20.
[PHOTO OF STEPHEN C. BAUER]
Stable interest rates and contained inflation are the major factors holding
the market in a narrow, quiet range. In fact, falling long-term rates have
caused the yield curve to flatten, diminishing the difference in the yield
between shorter and longer-term bonds.
Meanwhile, low supply, strong demand (especially from high yield funds) and
price cutting by bond insurers has diminished the differences in yield between
high and low credit quality bonds.
It's been a difficult market in which to add value. There has been no bad
news to scare people into selling at fire sale prices. And the continued low
supply means there are no big imbalances to take advantage of.
My techniques of increasing yield--lowering credit quality, giving up
call protection, and extending maturities--have become increasingly
difficult to execute in recent weeks. Quality differentials have narrowed
so that a swap from Aaa to Baa now increases yield only 18 to 20 basis points
instead of 25 to 30 as was common several months ago. Flattening of the yield
curve (the difference in yield between various maturities) has reduced the
attractiveness of extending maturities. While the spread between bonds with
10-year calls and those with six-year calls is still attractive, we have few
10-year call holdings that we can use in that kind of swap.
I think it will take a market correction to reverse the narrowing spreads in
maturity and credit quality. Until that happens, my swapping activity will be
low. In the meantime I am going to pursue the possibilities of using more
premium bonds in the Funds to add yield.
Looking ahead, I don't see a market correction. I see continued stability.
It's hold and clip the coupons time. But really, income and stability are why
people should buy bonds anyway.
- 59 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO MUNICIPAL BOND FUND
June 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The SAFECO Municipal Bond Fund returned 2.74% for Advisor Class A shares and
2.51% for Advisor Class B shares (not including the effects of sales charges)
for the six months ended June 30, 1997. The peer group for all general municipal
bond funds returned 2.95%, according to Lipper Analytical Services. For the 12
months ended June 30, 1997 the Fund returned 8.38% for Advisor Class A shares
and 7.89% for Advisor Class B shares (not including the effects of sales
charges), compared to the Lipper average of 7.81%.
The Fund's above average performance did not beat the Lehman Brothers long
municipal Bond Index which returned 9.73% for the year. But then, it's very
difficult for an unleveraged bond fund to outperform an index in a rising market
because the index is a "portfolio on paper" with no cash, no call features and
no transaction expenses.
Your Fund does best when yields are falling and prices are
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE OVERVIEW --
CLASS A AND CLASS B SHARES
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED JUNE 30, 1997
<S> <C> <C> <C> <C> <C> <C>
With Without
Sales Charge Sales Charge
1 Year 5 Year 10 Year 1 Year 5 Year 10 Year
SAFECO Municipal Bond Fund Class A 3.50% 5.84% 7.87% 8.38% 6.82% 8.37%
SAFECO Municipal Bond Fund Class B 2.89% 6.41% 8.32% 7.89% 6.72% 8.32%
Investment Value As of June 30, 1997
SAFECO Municipal Bond Fund Class A: $21,338
SAFECO Municipal Bond Fund Class B: $22,241
Shearson Long Muni Bond Index: $24,128
With Sales Charge
SAFECO SAFECO
Municipal Municipal Shearson
Bond Fund Bond Fund Long Muni
Class A Class B Bond Index
06/30/87 $9,550 $10,000 $10,000
07/31/87 9,632 10,086 10,092
08/31/87 9,655 10,110 10,137
09/30/87 9,229 9,663 9,723
10/31/87 9,251 9,687 9,723
11/30/87 9,523 9,972 10,034
12/31/87 9,691 10,147 10,164
01/31/88 10,149 10,627 10,570
02/28/88 10,266 10,749 10,694
03/31/88 10,065 10,539 10,541
04/30/88 10,140 10,618 10,625
05/31/88 10,111 10,587 10,636
06/30/88 10,316 10,802 10,843
07/31/88 10,369 10,857 10,916
08/31/88 10,422 10,913 10,959
09/30/88 10,655 11,157 11,207
10/31/88 10,949 11,464 11,462
11/30/88 10,820 11,330 11,339
12/31/88 11,035 11,555 11,536
01/31/89 11,290 11,822 11,808
02/28/89 11,121 11,645 11,642
03/31/89 11,121 11,645 11,652
04/30/89 11,382 11,918 11,994
05/31/89 11,595 12,141 12,272
06/30/89 11,741 12,294 12,458
07/31/89 11,861 12,420 12,623
08/31/89 11,757 12,311 12,431
09/30/89 11,747 12,300 12,393
10/31/89 11,861 12,420 12,557
11/30/89 12,074 12,643 12,824
12/31/89 12,148 12,720 12,919
01/31/90 12,006 12,572 12,788
02/28/90 12,144 12,717 12,932
03/31/90 12,127 12,699 12,945
04/30/90 11,941 12,504 12,787
05/31/90 12,319 12,899 13,148
06/30/90 12,433 13,019 13,277
07/31/90 12,672 13,269 13,512
08/31/90 12,342 12,923 13,190
09/30/90 12,318 12,898 13,170
10/31/90 12,553 13,145 13,448
11/30/90 12,902 13,510 13,789
12/31/90 12,956 13,566 13,850
01/31/91 13,161 13,781 14,036
02/28/91 13,218 13,841 14,134
03/31/91 13,234 13,858 14,168
04/30/91 13,456 14,090 14,388
05/31/91 13,592 14,232 14,557
06/30/91 13,545 14,183 14,530
07/31/91 13,760 14,408 14,754
08/31/91 13,969 14,628 14,966
09/30/91 14,193 14,862 15,183
10/31/91 14,345 15,020 15,342
11/30/91 14,298 14,972 15,361
12/31/91 14,741 15,436 15,727
01/31/92 14,613 15,302 15,717
02/28/92 14,651 15,341 15,742
03/31/92 14,633 15,322 15,782
04/30/92 14,771 15,467 15,932
05/31/92 15,020 15,728 16,165
06/30/92 15,345 16,068 16,478
07/31/92 15,935 16,686 17,082
08/31/92 15,609 16,344 16,853
09/30/92 15,639 16,376 16,928
10/31/92 15,298 16,019 16,645
11/30/92 15,767 16,510 17,114
12/31/92 16,031 16,787 17,336
01/31/93 16,187 16,950 17,499
02/28/93 16,887 17,683 18,313
03/31/93 16,622 17,406 18,092
04/30/93 16,850 17,644 18,340
05/31/93 16,947 17,746 18,492
06/30/93 17,295 18,110 18,839
07/31/93 17,228 18,040 18,858
08/31/93 17,686 18,520 19,341
09/30/93 17,884 18,727 19,610
10/31/93 17,933 18,778 19,647
11/30/93 17,706 18,541 19,409
12/31/93 18,061 18,912 19,910
01/31/94 18,280 19,141 20,145
02/28/94 17,739 18,575 19,478
03/31/94 16,838 17,631 18,315
04/30/94 16,854 17,648 18,456
05/31/94 17,057 17,860 18,672
06/30/94 16,868 17,663 18,448
07/31/94 17,256 18,069 18,922
08/31/94 17,268 18,082 18,962
09/30/94 16,842 17,636 18,522
10/31/94 16,482 17,258 17,954
11/30/94 16,143 16,904 17,480
12/31/94 16,571 17,352 18,100
01/31/95 17,181 17,990 18,896
02/28/95 17,903 18,746 19,666
03/31/95 18,033 18,883 19,902
04/30/95 18,006 18,854 19,893
05/31/95 18,844 19,731 20,740
06/30/95 18,440 19,309 20,357
07/31/95 18,529 19,402 20,462
08/31/95 18,768 19,652 20,750
09/30/95 18,908 19,798 20,913
10/31/95 19,303 20,213 21,419
11/30/95 19,838 20,773 21,972
12/31/95 20,130 21,079 22,314
01/31/96 20,196 21,147 22,410
02/28/96 19,973 20,914 22,137
03/31/96 19,517 20,436 21,732
04/30/96 19,370 20,283 21,645
05/31/96 19,402 20,316 21,655
06/30/96 19,688 20,615 21,989
07/31/96 19,929 20,868 22,207
08/31/96 19,858 20,794 22,178
09/30/96 20,260 21,214 22,670
10/31/96 20,494 21,446 22,947
11/30/96 20,961 21,908 23,440
12/31/96 20,770 21,696 23,299
01/31/97 20,661 21,573 23,253
02/28/97 20,867 21,779 23,504
03/31/97 20,503 21,388 23,097
04/30/97 20,740 21,641 23,370
05/31/97 21,096 21,985 23,823
06/30/97 21,338 22,241 24,128
</TABLE>
The performance graph compares a hypothetical $10,000 investment in Class A
and Class B of each Fund to a hypothetical investment in a relevant market
index. Fund performance is derived from the Fund's original class of shares
and reflects the maximum 4.5% sales charge for Class A shares, and the maximum
contingent deferred sales charge (5% in the first year, decreasing to 0% after
six years) for Class B shares. Fund performance has not been restated to
reflect Rule 12b-1 fees prior to September 30, 1996 (initial public offering
date of Class A and Class B shares). Such fees will affect subsequent
performance.
The index is unmanaged and includes no operating expenses or transaction
costs. Past performance is not predictive of future results. Principal value
may fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
- 60 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
rising due primarily to three factors: Number one, the Fund stays
fully invested. Two, it has a relatively long average maturity. And
three, it has a high concentration of deep discount bonds which
perform well in bull markets because of excellent call protection.
All of the activity in the Municipal Bond Fund centered around
one theme: increase yield. In general, I increased yield by
extending maturities and lowering credit quality. However, I had one
amazing trade in which I picked up yield, improved credit and
extended call protection by selling Puerto Rico Highway (for a
ridiculously high price) and buying Valdez Alaska Marine Terminal.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
S&P CREDIT RATING DISTRIBUTION
AS A PERCENT OF NET ASSETS
AT JUNE 30, 1997
<S> <C>
AAA: 36%
AA: 21%
A: 27%
BBB: 8%
Not Rated: 7%
Cash & Other Assets, Less
Liabilities: 1%
</TABLE>
HIGHLIGHTS
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
TOP FIVE STATES NET ASSETS
- ----------------------------------------------------------------------------
<S> <C>
California ............................................................. 22%
Washington .............................................................. 13
Illinois ................................................................. 7
Texas .................................................................... 7
New York ................................................................. 7
</TABLE>
CURRENT 30-DAY YIELD CLASS A ........................................... 4.54%
CURRENT 30-DAY YIELD CLASS B ........................................... 4.12%
WEIGHTED AVERAGE MATURITY ......................................... 24.5 YEARS
<TABLE>
<CAPTION>
PERCENT OF
TOP FIVE HOLDINGS NET ASSETS
- ----------------------------------------------------------------------------
<S> <C>
San Joaquin Hills Transportation Corridor Agency ...................... 4.6%
Illinois Educational Facilities Authority .............................. 3.6
Austin Combined Utility System ......................................... 3.3
Alaska Housing Finance Corp. .......................................... 3.2
East Chicago (IN) Elementary School
Building Corp. ...................................................... 2.5
</TABLE>
- 61 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO CALIFORNIA TAX-FREE INCOME FUND
June 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The California Tax-Free Fund underperformed the Lipper Analytical Services
average for California Funds for the first six months of 1997, returning 2.70%
for Advisor Class A shares and 2.31% for Advisor Class B shares (not including
the effects of sales charges), versus 2.82% for Lipper. For the 12-month period
ended June 30, 1997, the Fund returned 9.10% for Advisor Class A shares and
8.39% for Advisor Class B shares (again, not including the effects of sales
charges), while the average California fund earned 8.07%.
The Lehman Brothers Long Municipal Bond Index returned 9.73% for the year. In
fact, it's very difficult for an unleveraged bond fund to outperform an index in
a rising market. The index is a "portfolio on paper" with no cash, no call
features and no transaction expenses.
The California Fund stays fully invested and has an even longer average
maturity and much more aggressive coupon
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE OVERVIEW --
CLASS A AND CLASS B SHARES
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED JUNE 30, 1997
<S> <C> <C> <C> <C> <C> <C>
With Without
Sales Charge Sales Charge
1 Year 5 Year 10 Year 1 Year 5 Year 10 Year
SAFECO California Tax-Free
Income Fund Class A 4.19 6.27 7.87 9.10 7.26 8.36
SAFECO California Tax-Free
Income Fund Class B 3.39 6.81 8.29 8.39 7.12 8.29
Investment Value As of June 30, 1997
SAFECO California Tax-Free
Income Fund Class A: $21,325
SAFECO California Tax-Free
Income Fund Class B: $22,184
Shearson Long Muni Bond Index: $24,128
With Sales Charge
SAFECO SAFECO
California California SAFECO
Tax-Free Tax-Free Shearson
Income Fund Income Fund Long Muni
Class A Class B Bond Index
06/30/87 9,550 10,000 10,000
07/31/87 9,622 10,076 10,092
08/31/87 9,635 10,089 10,137
09/30/87 9,112 9,541 9,723
10/31/87 9,097 9,526 9,723
11/30/87 9,470 9,917 10,034
12/31/87 9,685 10,141 10,164
01/31/88 10,161 10,640 10,570
02/28/88 10,311 10,797 10,694
03/31/88 10,008 10,480 10,541
04/30/88 10,064 10,538 10,625
05/31/88 9,976 10,446 10,636
06/30/88 10,232 10,714 10,843
07/31/88 10,260 10,743 10,916
08/31/88 10,306 10,792 10,959
09/30/88 10,548 11,045 11,207
10/31/88 10,861 11,372 11,462
11/30/88 10,697 11,201 11,339
12/31/88 10,923 11,438 11,536
01/31/89 11,185 11,712 11,808
02/28/89 11,024 11,544 11,642
03/31/89 11,018 11,538 11,652
04/30/89 11,274 11,805 11,994
05/31/89 11,504 12,046 12,272
06/30/89 11,627 12,175 12,458
07/31/89 11,761 12,315 12,623
08/31/89 11,618 12,165 12,431
09/30/89 11,614 12,161 12,393
10/31/89 11,727 12,279 12,557
11/30/89 11,936 12,498 12,824
12/31/89 12,006 12,571 12,919
01/31/90 11,873 12,432 12,788
02/28/90 12,018 12,584 12,932
03/31/90 11,996 12,561 12,945
04/30/90 11,813 12,370 12,787
05/31/90 12,175 12,749 13,148
06/30/90 12,292 12,871 13,277
07/31/90 12,526 13,116 13,512
08/31/90 12,214 12,789 13,190
09/30/90 12,196 12,771 13,170
10/31/90 12,504 13,093 13,448
11/30/90 12,796 13,399 13,789
12/31/90 12,843 13,448 13,850
01/31/91 13,038 13,652 14,036
02/28/91 13,078 13,694 14,134
03/31/91 13,049 13,663 14,168
04/30/91 13,251 13,875 14,388
05/31/91 13,380 14,011 14,557
06/30/91 13,315 13,943 14,530
07/31/91 13,520 14,157 14,754
08/31/91 13,706 14,352 14,966
09/30/91 13,955 14,613 15,183
10/31/91 14,106 14,771 15,342
11/30/91 14,027 14,688 15,361
12/31/91 14,455 15,136 15,727
01/31/92 14,405 15,084 15,717
02/28/92 14,409 15,087 15,742
03/31/92 14,410 15,089 15,782
04/30/92 14,515 15,199 15,932
05/31/92 14,735 15,429 16,165
06/30/92 15,024 15,732 16,478
07/31/92 15,532 16,263 17,082
08/31/92 15,234 15,951 16,853
09/30/92 15,343 16,066 16,928
10/31/92 14,917 15,620 16,645
11/30/92 15,407 16,133 17,114
12/31/92 15,611 16,346 17,336
01/31/93 15,773 16,516 17,499
02/28/93 16,488 17,265 18,313
03/31/93 16,266 17,032 18,092
04/30/93 16,504 17,282 18,340
05/31/93 16,572 17,353 18,492
06/30/93 16,882 17,677 18,839
07/31/93 16,860 17,654 18,858
08/31/93 17,334 18,151 19,341
09/30/93 17,544 18,371 19,610
10/31/93 17,545 18,371 19,647
11/30/93 17,272 18,086 19,409
12/31/93 17,676 18,508 19,910
01/31/94 17,939 18,785 20,145
02/28/94 17,468 18,291 19,478
03/31/94 16,586 17,368 18,315
04/30/94 16,527 17,306 18,456
05/31/94 16,681 17,467 18,672
06/30/94 16,521 17,299 18,448
07/31/94 16,904 17,700 18,922
08/31/94 16,899 17,695 18,962
09/30/94 16,470 17,246 18,522
10/31/94 16,071 16,829 17,954
11/30/94 15,774 16,518 17,480
12/31/94 16,050 16,806 18,100
01/31/95 16,787 17,578 18,896
02/28/95 17,607 18,437 19,666
03/31/95 17,749 18,586 19,902
04/30/95 17,670 18,503 19,893
05/31/95 18,667 19,547 20,740
06/30/95 18,096 18,949 20,357
07/31/95 18,177 19,034 20,462
08/31/95 18,463 19,333 20,750
09/30/95 18,606 19,483 20,913
10/31/95 19,101 20,001 21,419
11/30/95 19,802 20,735 21,972
12/31/95 20,245 21,199 22,314
01/31/96 20,172 21,123 22,410
02/28/96 19,916 20,854 22,137
03/31/96 19,324 20,235 21,732
04/30/96 19,152 20,054 21,645
05/31/96 19,170 20,073 21,655
06/30/96 19,545 20,466 21,989
07/31/96 19,769 20,701 22,207
08/31/96 19,720 20,649 22,178
09/30/96 20,192 21,144 22,670
10/31/96 20,441 21,391 22,947
11/30/96 20,992 21,937 23,440
12/31/96 20,764 21,684 23,299
01/31/97 20,541 21,438 23,253
02/28/97 20,777 21,673 23,504
03/31/97 20,313 21,175 23,097
04/30/97 20,620 21,483 23,370
05/31/97 21,012 21,879 23,823
06/30/97 21,325 22,184 24,128
</TABLE>
The performance graph compares a hypothetical $10,000 investment in Class A
and Class B of each Fund to a hypothetical investment in a relevant market
index. Fund performance is derived from the Fund's original class of shares
and reflects the maximum 4.5% sales charge for Class A shares, and the maximum
contingent deferred sales charge (5% in the first year, decreasing to 0% after
six years) for Class B shares. Fund performance has not been restated to
reflect Rule 12b-1 fees prior to September 30, 1996 (initial public offering
date of Class A and Class B shares). Such fees will affect subsequent
performance.
The index is unmanaged and includes no operating expenses or transaction
costs. Past performance is not predictive of future results. Principal value
may fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
- 62 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
structure than its peers. For example, on June 30 the average yield
for long municipal bonds was 5.69%, while the average coupon of our
portfolio was 5.16%. Because our bonds yield less, they sell at a
discount. This is an aggressive strategy because discount bonds tend
to be more volatile than bonds that trade at face value. Fortunately for us,
volatility is two-directional--swings go up as well as down.
I executed three swaps to increase the yield of the Fund. Selling East Bay
Regional Park District and buying San Bernardino County I was able to pick up
yield and gain call protection. In the other two swaps--out of Eldorado County
Public Agency Finance Authority and California Department of Water
Resources and into University of California Multi Purpose and Los
Angeles Convention--I gained yield by giving up three years of call
protection. However the bonds we bought were deeply discounted which
goes a long way toward making up for the nearer call date.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
S&P CREDIT RATING DISTRIBUTION
AS A PERCENT OF NET ASSETS
AT JUNE 30, 1997
<S> <C>
AAA: 49%
AA: 6%
A: 21%
BBB: 11%
Not Rated: 11%
Cash & Other: 2%
</TABLE>
/s/ Stephen C. Bauer
Stephen C. Bauer
- -------------------------------
Steve Bauer joined SAFECO in 1971 as a fixed-income analyst. He became a fund
manager with the inception of the SAFECO Municipal Bond Fund in 1981, and is
President of SAFECO Asset Management. Bauer holds a B.S. in microbiology and an
M.B.A. from the University of Washington.
HIGHLIGHTS
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
TOP FIVE TYPE OF BONDS NET ASSETS
- -------------------------------------------------------------------------
<S> <C>
Lease Rental ........................................................ 15%
Local General Obligation--Limited Tax ................................ 14
Electric Utilities--Combination ...................................... 11
Toll Road ............................................................ 11
Hospital ............................................................. 11
</TABLE>
CURRENT YIELD (30-DAY) CLASS A ......................................... 4.62%
CURRENT YIELD (30-DAY) CLASS B ......................................... 3.87%
WEIGHTED AVERAGE MATURITY ......................................... 25.2 YEARS
<TABLE>
<CAPTION>
PERCENT OF
TOP FIVE HOLDINGS NET ASSETS
- -------------------------------------------------------------------------
<S> <C>
San Joaquin Hills Transportation Corridor Agency ................... 6.0%
Los Angeles County Sanitation District Financing Authority .......... 5.7
San Gabriel Valley School Finance Authority Revenue Unified School
District .......................................................... 5.2
Pittsburg Redevelopment Agency ...................................... 5.2
Foothill/Eastern Transportation Corridor Agency ..................... 4.9
</TABLE>
- 63 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO MUNICIPAL BOND FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (000'S) VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
BONDS - 99.0%
ALABAMA - 0.5%
$ 1,310 *Board of Trustees Alabama Agriculture and Mechanical
University Revenue
5.50%, due 11/01/20 [MBIA] ......................... $ 1,288
1,000 Citronelle Industrial Development Board Pollution Control
Revenue
8.00%, due 12/01/12 .................................. 1,098
ALASKA - 4.3%
Alaska Housing Finance Corp. Veterans Mortgage Program
640 6.50%, due 6/01/31 ..................................... 650
17,000 5.00%, due 12/01/18 ................................. 15,267
5,000 City of Valdez, Alaska Marine Terminal Revenue Refunding
Bonds (BP Pipelines (Alaska) Inc. Project) Series 1993B
5.50%, due 10/01/28 .................................. 4,716
ARIZONA - 2.6%
Phoenix Civic Improvement Corp. Wastewater System Lease
Revenue
4,220 5.00%, due 7/01/18 [MBIA] ............................ 3,934
9,800 4.75%, due 7/01/23 [MBIA] ............................ 8,474
CALIFORNIA - 21.9%
1,500 Foothill/Eastern Transportation Corridor Agency Toll Road
Revenue
5.00%, due 1/01/35 ................................... 1,289
1,995 Los Angeles County Sanitation District Financing Authority
Revenue (Capital Projects)
5.25%, due 10/01/19 .................................. 1,880
2,500 Los Angeles County Certificates of Participation (Disney
Parking Project)
5.50%, due 9/01/21 ................................... 2,372
<CAPTION>
PRINCIPAL
AMOUNT (000'S) VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
CALIFORNIA (CONTINUED)
$13,000 Los Angeles Department of Water and Power Electric Plant
Revenue
5.25%, due 11/15/26 ................................ $12,048
Los Angeles Wastewater System Revenue
1,280 4.70%, due 11/01/17 [FGIC] ........................... 1,130
5,000 4.70%, due 11/01/19 [FGIC] ........................... 4,378
2,200 Metropolitan Water District of Southern California
Waterworks Revenue
5.75%, due 3/01/14 ................................... 2,222
5,250 Northern California Power Agency Geothermal Project Revenue
5.00%, due 7/01/09 ................................... 5,062
11,995 Pittsburg Redevelopment Agency Los Medanos Community
Development Project Tax Allocation
5.80%, due 8/01/34 [FSA] ............................ 12,224
6,400 4.625%, due 8/01/21 [AMBAC] .......................... 5,512
1,000 Redding Joint Powers Financing Solid Waste and Corporation
Yard Revenue
5.00%, due 1/01/23 ..................................... 885
8,750 Sacramento County Sanitation District Finance Authority
4.75%, due 12/01/23 .................................. 7,589
5,000 Sacramento Municipal Utility District Electric Revenue
6.00%, due 2/01/15 ................................... 5,001
3,600 San Francisco Airport Commission Sewer Revenue
6.00%, due 5/01/25 [FGIC] ............................ 3,712
1,700 San Francisco Redevelopment Financing Authority Tax
Allocation Revenue
4.75%, due 8/01/18 [FGIC] ............................ 1,507
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 64 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO MUNICIPAL BOND FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (000'S) VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
CALIFORNIA (CONTINUED)
$ 8,010 San Joaquin County Public Facilities Financing Corp.
Certificates of Participation Capital Facilities Project
4.75%, due 11/15/19 [MBIA] ......................... $ 7,017
25,000 San Joaquin Hills Transportation Corridor Agency Senior Lien
Toll Road Revenue
5.00%, due 1/01/33 .................................. 21,770
4,085 #Southern California Public Power Authority Power Project
Revenue (Multiple Projects)
5.50%, due 7/01/20 (Prerefunded 7/01/00 @ 100) ....... 4,240
3,165 5.50%, due 7/01/20 ................................... 3,057
2,200 Southern California Public Power Authority Power Project
Revenue (Palo Verde Project)
5.00%, due 7/01/17 ................................... 2,010
COLORADO - 0.3%
1,000 Colorado Housing Finance Authority Multi-Family Mortgage
Revenue
8.30%, due 10/01/23 .................................. 1,104
250 Colorado Housing Finance Authority Single Family Residential
Housing Revenue
8.75%, due 9/01/17 ..................................... 258
DELAWARE - 0.8%
4,500 Delaware River and Bay Authority Revenue
4.75%, due 1/01/24 [MBIA] ............................ 3,941
FLORIDA - 1.9%
Florida Board of Education General Obligation
1,000 5.00%, due 6/01/12 ..................................... 966
3,000 5.00%, due 6/01/24 ................................... 2,755
2,750 Mid-Bay Bridge Authority Revenue
6.10%, due 10/01/22 .................................. 2,776
<CAPTION>
PRINCIPAL
AMOUNT (000'S) VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
FLORIDA (CONTINUED)
$ 3,000 Orlando Utility Commission Water and Electric Revenue
5.00%, due 10/01/23 ................................ $ 2,738
GEORGIA - 3.1%
6,750 Atlanta Water and Sewerage Revenue
4.50%, due 1/01/18 ................................... 5,814
4,000 Cobb County Kennestone Hospital Authority Revenue
5.00%, due 4/01/24 [MBIA] ............................ 3,643
5,000 Municipal Electric Authority Project One Special Obligation
Fourth Crossover Series
6.50%, due 1/01/20 ................................... 5,538
ILLINOIS - 7.1%
5,500 Illinois Dedicated Tax Revenue (Civic Center)
7.00%, due 12/15/10 [AMBAC] .......................... 5,997
17,500 Illinois Educational Facilities Authority Adjustable Demand
Revenue (University of Chicago)
5.70%, due 12/01/25 ................................. 17,305
5,000 Metropolitan Pier and Exposition Authority McCormick Place
Convention Complex Hospitality Facilities Revenue
7.00%, due 7/01/26 ................................... 5,644
4,770 University of Illinois Auxiliary Facilities System Revenue
5.75%, due 4/01/22 ................................... 4,757
INDIANA - 5.5%
200 Beech Grove Economic Development Revenue (Westvaco Corp.)
8.75%, due 7/01/10 ..................................... 204
11,000 #East Chicago Elementary School Building Corp. First
Mortgage
7.00%, due 1/15/16 (Prerefunded 1/15/03 @ 102) ...... 12,461
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 65 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (Continued)
SAFECO MUNICIPAL BOND FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (000'S) VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
INDIANA (CONTINUED)
$7,715 Hammond Multi-School Building Corp. First Mortgage Revenue
6.20%, due 7/10/15 .................................. $8,034
6,450 Indianapolis Gas Utility System Revenue
4.00%, due 6/01/11 [FGIC] ............................ 5,620
MARYLAND - 1.9%
5,125 Baltimore Project and Revenue (Water Projects)
5.00%, due 7/01/24 [FGIC] ............................ 4,780
5,000 Maryland Health and Higher Educational Facilities Authority
Revenue (University of Maryland Medical System)
4.75%, due 7/01/23 [FGIC] ............................ 4,378
MASSACHUSETTS - 3.4%
5,140 Massachusetts Housing Finance Agency (Rental Housing and
Mortgage Revenue)
6.20%, due 7/01/38 [AMBAC] ........................... 5,246
Massachusetts Water Resources Authority General Revenue
4,500 6.00%, due 4/01/20 ................................... 4,518
5,000 4.75%, due 12/01/23 [MBIA] ........................... 4,361
2,500 4.75%, due 12/01/23 .................................. 2,150
MICHIGAN - 1.4%
5,250 Detroit Water Supply System Revenue
4.75%, due 7/01/19 [FGIC] ............................ 4,617
2,000 University of Michigan Hospital Revenue
6.375%, due 12/01/24 ................................. 2,059
MISSOURI - 1.1%
5,000 The Curators of the University of Missouri System Facilities
Revenue Bonds Series 1997
5.80%, due 11/01/27 .................................. 5,049
<CAPTION>
PRINCIPAL
AMOUNT (000'S) VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
NEW JERSEY - 0.4%
$1,465 #New Jersey Turnpike Authority Revenue
10.375%, due 1/01/03 (Escrowed to Maturity) ......... $1,727
NEW MEXICO - 0.5%
2,500 Farmington Collateralized Pollution Control Revenue (Tucson
Gas and Electric Co.)
6.10%, due 1/01/08 ................................... 2,476
NEW YORK - 7.1%
New York City Municipal
Water Finance Authority Water and Sewer System Revenue
2,205 6.00%, due 6/15/19 [FGIC] ............................ 2,216
2,100 5.00%, due 6/15/17 [FGIC] ............................ 1,962
New York Dormitory Authority State University Educational
Facilities Revenue
4,400 7.50%, due 5/15/11 ................................... 5,157
5,250 7.50%, due 5/15/13 ................................... 6,277
6,500 5.25%, due 5/15/15 ................................... 6,181
1,500 5.00%, due 7/01/15 ................................... 1,417
4,000 #New York Local Government Assistance Corp.
7.00%, due 4/01/21 (Prerefunded 4/01/01 @ 100) ....... 4,370
6,500 New York State Urban Development Corporation Correctional
Facilities Revenue Bonds Series 6
5.375%, due 1/01/25 .................................. 6,114
NORTH CAROLINA - 2.3%
11,000 North Carolina Eastern Municipal Power Agency Power System
Revenue
6.00%, due 1/01/22 .................................. 11,000
OKLAHOMA - 1.3%
5,590 McGee Creek Authority Water Revenue
6.00%, due 1/01/23 [MBIA] ............................ 5,995
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 66 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO MUNICIPAL BOND FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (000'S) VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
PENNSYLVANIA - 4.0%
$5,000 Centre County University Area Joint Authority Sewer Revenue
4.75%, due 11/01/20 [MBIA] .......................... $4,397
6,000 #Pennsylvania Intergovernmental Cooperative Authority
Special Tax Revenue (City of Philadelphia)
6.80%, due 6/15/22 (Prerefunded 6/15/02 @ 100) ....... 6,618
7,415 #Philadelphia Water and Sewer Revenue
7.00%, due 8/01/18 (Prerefunded 8/01/01 @100) ........ 8,134
SOUTH CAROLINA - 5.5%
10,250 Charleston County Hospital Facility Revenue
5.00%, due 10/01/22 [MBIA] ........................... 9,282
1,135 Charleston County Pollution Control Facilities Revenue
5.90%, due 8/01/03 ................................... 1,136
5,500 Pickens County and Richland County Hospital Revenue
5.75%, due 8/01/21 [AMBAC] ........................... 5,502
South Carolina Public Service Authority Power Supply Revenue
1,395 5.70%, due 7/01/08 ................................... 1,396
10,000 5.125%, due 1/01/32 .................................. 9,122
TEXAS - 7.1%
10,000 Austin Combined Utility System Revenue
12.50%, due 11/15/07 [MBIA] ......................... 15,876
Austin Water, Sewer and Electric Revenue
4,195 14.00%, due 11/15/01 ................................. 5,290
80 14.00%, due 11/15/01 .................................... 98
75 14.00%, due 11/15/01 .................................... 86
2,000 City of Houston, Texas Water and Sewer System Junior Lien
Revenue Bonds, Series 1997C
5.375%, due 12/01/27 [FGIC] .......................... 1,932
<CAPTION>
PRINCIPAL
AMOUNT (000'S) VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
TEXAS (CONTINUED)
$1,600 #Coastal Industrial Water Authority Water Revenue
5.50%, due 12/15/09 (Escrowed to Maturity) .......... $1,637
2,260 Texas Municipal Power Agency Revenue
5.50%, due 9/01/13 [FGIC] ............................ 2,260
7,500 Waco Texas Health Facilities Development Corp. Hospital
Revenue
5.00%, due 11/01/25 .................................. 6,824
UTAH - 1.1%
Intermountain Power Agency Special Obligation First
Crossover Series
1,900 6.00%, due 7/01/23 ................................... 1,901
2,750 5.00%, due 7/01/16 ................................... 2,516
1,000 #Salt Lake City Hospital Revenue (IHC Hospitals)
5.00%, due 6/01/15 (Escrowed to Maturity) .............. 961
VIRGINIA - 0.2%
1,110 #Richmond Metropolitan Expressway Authority Revenue
5.60%, due 1/15/13 (Escrowed to Maturity) ............ 1,129
WASHINGTON - 13.0%
7,000 CDP King County III Lease Revenue Bonds, 1997 (King Street
Center Project)
5.25%, due 6/01/26 [MBIA] ............................ 6,603
Douglas County Public Utility District #1 Wells
Hydroelectric Revenue
5,055 8.75%, due 9/01/18 ................................... 6,479
2,200 8.75%, due 9/01/18 ................................... 2,922
2,500 Everett School District #2 Snohomish County Unlimited Tax
General Obligation
6.20%, due 12/01/12 [MBIA] ........................... 2,694
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 67 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (Continued)
SAFECO MUNICIPAL BOND FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (000'S) VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
WASHINGTON (CONTINUED)
$2,200 King County Housing Authority Pooled Housing Refunding
Revenue
6.80%, due 3/01/26 .................................. $2,300
1,650 King County Limited Tax General Obligation (Various Purpose)
4.75%, due 1/01/19 ................................... 1,468
2,255 King County Public Hospital District #1 Hospital Facilities
Revenue (Valley Medical Center)
5.50%, due 9/01/17 [AMBAC] ........................... 2,183
4,800 Lewis County Public Utility District #1 Cowlitz Falls
Hydroelectric Project Revenue
6.00%, due 10/01/24 .................................. 4,803
4,000 Port of Seattle Revenue
6.00%, due 12/01/14 .................................. 4,068
2,944 Seattle Housing Authority Washington Low Income Housing
Revenue Mt Zion Project
6.60%, due 8/20/38 ................................... 3,147
3,000 Washington Health Care Facilities Authority Revenue (Fred
Hutchinson Cancer Research Center)
7.375%, due 1/01/18 .................................. 3,273
6,350 Washington Health Care Facilities Authority Revenue (Yakima
Valley Memorial Hospital Association)
7.25%, due 1/01/21 ................................... 7,030
8,500 Washington Public Power Supply System Nuclear Project #1
Revenue
6.00%, due 7/01/17 ................................... 8,509
4,000 Washington Public Power Supply System Nuclear Project #2
Revenue
6.30%, due 7/01/12 ................................... 4,304
<CAPTION>
PRINCIPAL
AMOUNT (000'S) VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
WASHINGTON (CONTINUED)
$2,610 Washington Public Power Supply System Nuclear Project #3
Revenue
5.50%, due 7/01/18 [AMBAC] .......................... $2,494
WEST VIRGINIA - 0.5%
2,155 West Virginia Water Development Authority Water Development
Revenue Bonds Loan Program II Series 1995B
5.25%, due 11/01/35 .................................. 2,004
155 West Virginia Housing Development Fund Single Family
Mortgage Revenue
6.125%, due 7/01/13 .................................... 155
WISCONSIN - 0.2%
1,000 Wisconsin Health and Education Facilities Authority Revenue
6.00%, due 10/01/12 [MBIA] ........................... 1,011
------
TOTAL BONDS ......................................................... 473,481
------
TOTAL INVESTMENTS - 99.0% ........................................... 473,481
Other Assets, less Liabilities ........................................ 4,727
------
NET ASSETS ......................................................... $478,208
------
------
- -----------------------------------------------------------------------------
</TABLE>
* The provider of the guarantee of timely payment of both principal and interest
is identified in the brackets at the end of each bond description. The
guarantors applicable to this portfolio and the percentage of the portfolio
they guarantee at the period end are as follows:
<TABLE>
<S> <C>
Municipal Bond Investors
Assurance Corp. [MBIA]............. 16.6%
Financial Guaranty Insurance Corp.
[FGIC]............................. 8.1
AMBAC Indemnity Corp. [AMBAC]...... 5.7
Financial Security Assurance, Inc.
[FSA].............................. 2.6
----
33.0%
----
----
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 68 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO CALIFORNIA TAX-FREE INCOME FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (000'S) VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
BONDS - 98.2%
$2,250 *California Department of Water Resources Central Valley
Project Water System Revenue
4.75%, due 07/01/19 [FGIC] .......................... $1,961
3,715 California Statewide Communities Development Authority
Certificates of Participation (Childrens Hospital of Los
Angeles)
4.75%, due 6/01/21 [MBIA] ............................ 3,218
2,750 California Statewide Communities Development Authority
Certificates of Participation (The Trustees Of The J. Paul
Getty Trust)
5.00%, due 10/01/23 ................................. 2,507
20 Concord Redevelopment Agency Tax Allocation Central Concord
Redevelopment Project
8.00%, due 7/01/18 [BIG] ................................ 21
3,750 Culver City Redevelopment Financing Authority Tax Allocation
Revenue
4.60%, due 11/01/20 [AMBAC] .......................... 3,225
4,195 Foothill/Eastern Transportation Corridor Agency Toll Road
Revenue
5.00%, due 1/01/35 ................................... 3,605
670 Inglewood Insured Hospital Revenue (Daniel Freeman Hospital)
6.75%, due 5/01/13 ..................................... 715
Los Angeles Convention and Exhibition Center Authority
Certificates of Participation
1,200 #9.00%, due 12/01/20
(Prerefunded 12/01/05 @ 100) ......................... 1,571
3,300 5.125%, due 8/15/21 [MBIA] ........................... 3,061
<CAPTION>
PRINCIPAL
AMOUNT (000'S) VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
$4,500 Los Angeles County Sanitation District Financing Authority
Revenue (Capital Projects)
5.25%, due 10/01/19 ................................. $4,241
3,800 Los Angeles Department of Water and Power Waterworks Revenue
4.75%, due 11/15/19 .................................. 3,351
2,000 Los Angeles Wastewater System Revenue
4.70%, due 11/01/17 [FGIC] ........................... 1,765
2,500 Northern California Power Agency Geothermal Project Revenue
5.00%, due 7/01/09 ................................... 2,410
2,350 Palomar Pomerado Health System California Insured Revenue
Service
4.75%, due 11/01/23 [MBIA] ........................... 2,022
4,435 Pittsburg Redevelopment Agency Los Medanos Community
Development Project Tax Allocation
4.625%, due 8/01/21 .................................. 3,820
Pleasanton Joint Powers Financing Authority Reassessment
Revenue
1,650 6.20%, due 9/02/17 ................................... 1,676
1,870 6.15%, due 9/02/12 ................................... 1,939
3,900 Redding Joint Powers Financing Authority Solid Waste and
Corporation Yard Revenue
5.00%, due 1/01/23 ................................... 3,450
2,000 Riverside County Certificates of Participation (Capital
Projects)
6.125%, due 11/01/21 ................................. 2,035
3,000 Sacramento Municipal Utility District Electric Revenue
4.75%, due 9/01/21 [MBIA] ............................ 2,632
2,500 San Bernardino County Certificates of Participation
5.50%, due 8/01/24 ................................... 2,365
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 69 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (Continued)
SAFECO CALIFORNIA TAX-FREE INCOME FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (000'S) VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
$1,750 San Diego Public Facilities Financing Authority Sewer
Revenue
5.25%, due 5/15/20 ................................. $ 1,642
4,000 San Gabriel Valley School Finance Authority Revenue Pamona
Unified School District
5.50%, due 2/01/24 ................................... 3,838
5,000 San Joaquin Hills Transportation Corridor Agency Senior Lien
Toll Road Revenue
5.00%, due 1/01/33 ................................... 4,354
4,000 San Jose Redevelopment Agency
4.75%, due 8/01/22 ................................... 3,434
Southern California Public Power Authority Power Project
Revenue (Multiple Projects)
2,665 #5.50%, due 7/01/20
(Prerefunded 7/01/00 @ 100) .......................... 2,766
1,335 5.50%, due 7/01/20 ................................... 1,289
1,000 Southern California Public Power Authority Power Project
Revenue (Transportation Project)
4.75%, due 7/01/23 ..................................... 873
940 Stanislaus Waste-to-Energy Financing Agency Solid Waste
Facility Revenue
7.625%, due 1/01/10 .................................. 1,007
1,940 University of California
5.00%, due 9/01/23 [AMBAC] ........................... 1,761
-----
TOTAL BONDS .......................................................... 72,554
-----
<CAPTION>
PRINCIPAL
AMOUNT (000'S) VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
TEMPORARY INVESTMENTS - 0.3%
INVESTMENT COMPANIES:
$185 SEI Tax Exempt Trust Institutional Tax Free
Portfolio ........................................... $ 185
-----
TOTAL TEMPORARY INVESTMENTS ............................................. 185
-----
TOTAL INVESTMENTS - 98.5% ............................................ 72,739
Other Assets, less Liabilities ........................................ 1,136
-----
NET ASSETS .......................................................... $73,875
-----
-----
- -----------------------------------------------------------------------------
</TABLE>
* The provider of the guarantee of timely payment of both principal and interest
is identified in the brackets at the end of each bond description. The
guarantors applicable to this portfolio and the percentage of the portfolios
they guarantee at the period end are as follows:
<TABLE>
<S> <C>
Municipal Bond Investors Assurance
Corp. [MBIA]....................... 19.9%
AMBAC Indemnity Corp. [AMBAC]...... 4.4
Financial Guaranty Insured Corp.
[FGIC]............................. 2.4
Bond Investors Guaranty Insurance
Co. [BIG].......................... 0.0
----
26.7%
----
----
</TABLE>
# Prerefunded bond are collateralized by securities (generally U.S. Treasury
securities) held in an irrevocable trust in an amount sufficient to pay
interest and principal.
SEE NOTES TO FINANCIAL STATEMENTS
- 70 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO WASHINGTON STATE
MUNICIPAL BOND FUND
June 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
For the year ended June 30, 1997, the SAFECO Washington State
Municipal Bond Fund returned 7.36% for Advisor Class A shares, and 6.82%
for Advisor Class B shares (returns do not include sales charges). Single
state bond funds, excluding California and New York, averaged 7.28% for
the year, according to Lipper Analytical Services, while the Merrill
Lynch Long Municipal Bond Index reported 9.73% for the year and 3.56% for the
six-month period ended June 30. During the period, the Fund returned 2.55% for
Advisor Class A shares and 2.04% for Advisor Class B shares.
[PHOTO OF BEVERLY R. DENNY]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE OVERVIEW --
CLASS A AND CLASS B SHARES
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED JUNE 30, 1997
<S> <C> <C> <C> <C>
With Sales Charge Without Sales Charge
Since Since
1 Year Inception 1 Year Inception
SAFECO Washington State
Muni Bond Fund Class A 2.53 4.21 7.36 5.34
SAFECO Washington State
Muni Bond Fund Class B 1.82 4.82 6.82 5.22
Investment Value As of June 30, 1997
SAFECO Washington State
Muni Bond Fund Class A: $11,915
SAFECO Washington State
Muni Bond Fund Class B: $12,214
Shearson Long Muni Bond Index: $13,336
With Sales Charge
SAFECO SAFECO
Washington State Washington State
Muni Bond Fund Muni Bond Fund Shearson Long
Class A Class B Muni Bond Index
03/31/93 $9,474 $9,921 $10,000
04/30/93 9,612 10,065 10,137
05/31/93 9,652 10,107 10,221
06/30/93 9,885 10,351 10,413
07/31/93 9,854 10,319 10,423
08/31/93 10,123 10,600 10,690
09/30/93 10,240 10,723 10,839
10/31/93 10,259 10,742 10,859
11/30/93 10,098 10,573 10,728
12/31/93 10,303 10,788 11,005
01/31/94 10,463 10,956 11,135
02/28/94 10,104 10,581 10,766
03/31/94 9,539 9,988 10,123
04/30/94 9,584 10,035 10,201
05/31/94 9,719 10,177 10,321
06/30/94 9,553 10,003 10,197
07/31/94 9,794 10,255 10,459
08/31/94 9,759 10,219 10,481
09/30/94 9,522 9,971 10,238
10/31/94 9,268 9,705 9,923
11/30/94 9,051 9,478 9,661
12/31/94 9,412 9,855 10,004
01/31/95 9,796 10,258 10,444
02/28/95 10,166 10,645 10,870
03/31/95 10,219 10,701 11,000
04/30/95 10,189 10,669 10,995
05/31/95 10,601 11,100 11,463
06/30/95 10,408 10,899 11,252
07/31/95 10,472 10,965 11,310
08/31/95 10,607 11,107 11,469
09/30/95 10,682 11,185 11,559
10/31/95 10,914 11,428 11,839
11/30/95 11,166 11,692 12,144
12/31/95 11,284 11,816 12,333
01/31/96 11,330 11,864 12,386
02/28/96 11,225 11,754 12,235
03/31/96 11,009 11,528 12,011
04/30/96 10,949 11,465 11,963
05/31/96 10,971 11,488 11,969
06/30/96 11,098 11,621 12,154
07/31/96 11,210 11,739 12,274
08/31/96 11,178 11,705 12,258
09/30/96 11,397 11,934 12,530
10/31/96 11,494 12,028 12,683
11/30/96 11,700 12,247 12,956
12/31/96 11,619 12,166 12,878
01/31/97 11,551 12,087 12,852
02/28/97 11,661 12,183 12,991
03/31/97 11,459 11,976 12,766
04/30/97 11,603 12,118 12,917
05/31/97 11,791 12,293 13,168
06/30/97 11,915 12,214 13,336
</TABLE>
The performance graph compares a hypothetical $10,000 investment in Class A
and Class B of each Fund to a hypothetical investment in a relevant market
index. Fund performance is derived from the Fund's original class of shares
and reflects the maximum 4.5% sales charge for Class A shares, and the maximum
contingent deferred sales charge (5% in the first year, decreasing to 0% after
six years) for Class B shares. Fund performance has not been restated to
reflect Rule 12b-1 fees prior to September 30, 1996 (initial public offering
date of Class A and Class B shares). Such fees will affect subsequent
performance.
The index is unmanaged and includes no operating expenses or transaction
costs. Past performance is not predictive of future results. Principal value
may fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
- 71 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPORT FROM THE WASHINGTON MUNICIPAL BOND FUND (Continued)
The Fund has a longer duration, which gives it greater
sensitivity to interest rates, and makes for greater volatility in
both up and down markets. The Fund is appropriate for long-term
investors who can withstand share price volatility in pursuit of the
higher long-term gains provided by longer-term bonds.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
S&P CREDIT RATING DISTRIBUTION
AS A PERCENT OF NET ASSETS
AT JUNE 30, 1997
<S> <C>
AAA: 54%
AA: 14%
A: 20%
Not Rated: 9%
Cash & Other: 3%
</TABLE>
During the first quarter, I purchased two issues: Washington State general
obligation (GO) bonds, with a 5.25% coupon maturing in 2019, and King County
Public Hospital District for Valley Medical Center, with a 5.25% coupon and 2015
maturity date. Both of these purchases were rather unusual. I generally don't
buy GO bonds or shorter maturity bonds (under 20 years) because of
their "rich" trading prices relative to revenue bonds and longer
term bonds. But both of these bonds appeared to be exceptionally
good values.
I also completed one swap to gain greater call protection for the
fund. I bought Seattle Drain & Wastewater 5.25% of 2025, and sold the same name
with a 5.75% coupon of 2022.
During the second quarter, I bought higher coupon issues such as Renton GO
Bonds 5.75% of 2017 and Seattle Housing Authority Low Income Housing 6.6% of
2038, yielding 5.85% and 6.2% respectively. Both are insured and rated AAA.
HIGHLIGHTS
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
TOP FIVE TYPES OF BONDS NET ASSETS
- ----------------------------------------------------------------------------
<S> <C>
Hospital ............................................................... 14%
Local General Obligation - Limited Tax .................................. 13
Housing - Uninsured ..................................................... 11
Utilities - Water ........................................................ 9
Local General Obligation - Unlimited Tax ................................. 8
</TABLE>
CURRENT 30-DAY YIELD CLASS A ........................................... 4.29%
CURRENT 30-DAY YIELD CLASS B ........................................... 3.68%
WEIGHTED AVERAGE MATURITY ........................................ 22.39 YEARS
<TABLE>
<CAPTION>
PERCENT OF
TOP FIVE HOLDINGS NET ASSETS
- ----------------------------------------------------------------------------
<S> <C>
City of Renton Limited Tax General Obligation Series B ................ 4.7%
Snohomish County Public Utility
District #1 .......................................................... 4.4
Snohomish County Unlimited Tax Obligation Everett School District #2 ... 4.3
Grant County Public Utility District #2 ................................ 4.2
King County Housing Authority .......................................... 4.1
</TABLE>
- 72 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
Although attractively-priced discount bonds continue to be scarce, I remain a
value investor, buying competitively-priced, long-term bonds with a bias towards
discount bonds.
/s/ Beverly Denny
Beverly Denny
- -------------------------------
Beverly Denny came to SAFECO from T. Rowe Price in 1991. She holds an MBA from
the University of Virginia and a B.S. in finance/ economics from Babson College.
- 73 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO WASHINGTON STATE MUNICIPAL BOND FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT (000'S) VALUE (000'S)
<C> <S>
- -----------------------------------------------------------------------------
BONDS - 97.2%
$350 City of Renton, Washington Limited Tax General Obligation
Bonds, 1997B
5.75%, due 12/01/17 [MBIA] ............................ $355
100 City of Tacoma, Washington Solid Waste Utilities Revenue
Refunding Bonds, 1997B
5.50%, due 12/01/19 [AMBAC] ............................. 97
315 Grant County Public Utility District #2 Wanapum
Hydroelectric Revenue
6.375%, due 1/01/23 .................................... 320
100 *Kent Limited Tax General Obligation
5.75%, due 12/01/26 [MBIA] ............................. 100
300 King County Housing Authority Pooled Housing Refunding
Revenue
6.80%, due 3/01/26 ..................................... 314
250 King County Limited Tax General Obligation (Various
Purposes)
4.75%, due 1/01/19 ..................................... 222
200 King County Public Hospital District #1 Hospital Facilities
Revenue (Valley Medical Center)
5.50%, due 9/01/17 [AMBAC] ............................. 194
200 King County Public Hospital District #1 Hospital Facilities
Revenue (Valley Medical Center)
5.25%, due 9/01/15 [AMBAC] ............................. 193
100 King County School District #415 (Kent) Unlimited Tax
General Obligation
6.45%, due 12/01/12 .................................... 107
200 Kitsap County School District #401 (Central Kitsap)
Unlimited Tax General Obligation
5.50%, due 12/01/11 .................................... 202
<CAPTION>
PRINCIPAL MARKET
AMOUNT (000'S) VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
$100 Kitsap County, Sewer Revenue
5.75%, due 7/01/16 [MBIA] ............................. $102
250 Klickitat County Public Utility District #1 Electric Revenue
5.75%, due 10/01/27 [FGIC] ............................. 250
100 Lewis County Public Utility District #1 Cowlitz Falls
Hydroelectric Project Revenue
6.00%, due 10/01/24 .................................... 100
100 Port of Seattle Revenue
6.00%, due 12/01/14 .................................... 102
300 Renton Water and Sewer Improvement Revenue
5.375%, due 4/01/13 [MBIA] ............................. 292
175 Seattle Drainage and Wastewater Utility Improvement Revenue
5.25%, due 12/01/25 [MBIA] ............................. 165
250 Seattle Housing Authority Low Income Housing Revenue (Mt.
Zion Project)
6.60%, due 8/20/38 ..................................... 267
200 Seattle Metro Municipality Limited General Obligation
5.65%, due 1/01/20 ..................................... 197
200 Seattle Metro Sewer Revenue
6.30%, due 1/01/33 [MBIA] .............................. 212
200 Seattle Water System Revenue
5.25%, due 12/01/23 .................................... 188
350 Snohomish County Public Utility District #1 Generation
System Revenue
5.50%, due 1/01/20 [FGIC] .............................. 336
300 Snohomish County Unlimited Tax General Obligation Everett
School District #2
6.20%, due 12/01/12 [MBIA] ............................. 323
250 Spokane Regional Solid Waste Management System Revenue
6.25%, due 12/01/11 [AMBAC] ............................ 268
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 74 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO WASHINGTON STATE MUNICIPAL BOND FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT (000'S) VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
$200 State of Washington Various Purpose General Obligation
Bonds, Series 1997C
5.25%, due 1/01/19 .................................... $193
250 Tacoma Water System Revenue
5.50%, due 12/01/13 .................................... 250
200 Tukwila Limited Tax General Obligation
5.90%, due 1/01/14 ..................................... 206
100 Washington Certificates of Participation (State Office
Building Project)
6.00%, due 4/01/12 ..................................... 101
200 Washington Health Care Facilities Authority Revenue
(Franciscan Health System/ St. Joseph Hospital and Health
Care Center, Tacoma)
5.625%, due 1/01/13 [MBIA] ............................. 201
150 Washington Health Care Facilities Authority Revenue (Grays
Harbor Medical Center)
5.90%, due 7/01/23 ..................................... 151
200 Washington Health Care Facilities Authority Revenue
(Northwest Hospital, Seattle)
5.75%, due 11/15/23 [AMBAC] ............................ 198
100 Washington Health Care Facilities Authority Revenue (Swedish
Hospital Medical Center)
6.30%, due 11/15/22 [AMBAC] ............................ 107
250 Washington Higher Education Facilities Authority Revenue and
Refunding Revenue (Pacific Lutheran University Project)
5.70%, due 11/01/26 .................................... 244
120 Washington Public Power Supply System Nuclear Project #3
Revenue
.50%, due 7/01/18 [AMBAC] .............................. 115
<CAPTION>
PRINCIPAL MARKET
AMOUNT (000'S) VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
$250 Washington State Housing Finance Commission Revenue (Horizon
House Project)
6.125%, due 7/01/27 [MBIA] ........................... $ 256
250 Whatcom County Limited Tax General Obligation
5.75%, due 12/01/12 .................................... 255
200 Yakima-Tieton Irrigation District Revenue
6.20%, due 6/01/19 [FSA] ............................... 212
----
TOTAL BONDS ........................................................... 7,395
----
TEMPORARY INVESTMENTS - 1.7%
130 Federated Tax-Exempt Money Market Fund, Inc. ........... 130
----
TOTAL TEMPORARY INVESTMENTS ............................................. 130
----
TOTAL INVESTMENTS - 98.9% ............................................. 7,525
Other Assets, less Liabilities ........................................... 84
----
NET ASSETS ........................................................... $7,609
----
----
- -----------------------------------------------------------------------------
</TABLE>
* The provider of the guarantee of timely payment of both principal and interest
is identified in the brackets at the end of each bond description. The
guarantors applicable to this portfolio and the percentage of the portfolios
they guarantee at period end are as follows:
<TABLE>
<S> <C>
Municipal Bond Investors
Assurance Corp. [MBIA]............. 27.1%
AMBAC Indemnity Corp. [AMBAC]...... 15.8
Financial Guaranty Insurance Corp.
[FGIC]............................. 7.9
Financial Security Assurance, Inc.
[FSA].............................. 2.9
----
53.7%
----
----
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 75 -
<PAGE>
REPORT FROM THE FUND MANAGER
SAFECO MONEY MARKET FUND
June 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In the twelve-month period ended June 30, 1997, the SAFECO Money
Market Fund's total return was 4.93% for Advisor Class A shares and 4.91%
for Advisor Class B shares. The seven-day current yield declined from 4.93% for
Advisor Class A shares and 4.94% for Advisor Class B shares, to a low of 4.73%
(Class A) on January 22, and 4.68% (Class B) on March 14, and recovered to 4.99%
(Class A), and 4.98% (Class B) by the end of June. The average money fund
seven-day yield as reported by IBC/Donoghue was 4.97% on
July 1. The Consumer Price Index, a broad inflation measure, rose 2.30%
for the twelve months ending June 30, 1997.
[PHOTO OF NAOMI URATA]
Ninety-day commercial paper rates started the year at 5.47% and traded in
that range until mid-March when they rose in anticipation of a rate hike by the
Federal Reserve. The Fed raised the Federal Funds on March 25 by 25 basis points
to 5.50%. Commercial paper rates ended the quarter at 5.63%. Thirty-to sixty-day
rates rose to nearly equal one-year rates. Rates are unusually flat as the
market sees very
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE WEEKLY YIELD FOR
SIX-MONTH PERIOD ENDED JUNE 30, 1997
SAFECO MONEY MARKET FUND IBC/DONOGHUE MONEY FUND AVERAGE
<S> <C> <C>
12/31/96 4.93 4.82
01/07 4.89 4.81
01/14 4.86 4.76
01/21 4.73 4.76
01/28 4.81 4.77
02/04 4.83 4.78
02/11 4.79 4.75
02/18 4.77 4.74
02/25 4.81 4.73
03/04 4.84 4.75
03/11 4.79 4.72
03/18 4.82 4.73
03/25 4.81 4.74
04/01 4.90 4.82
04/08 4.91 4.82
04/15 4.99 4.84
04/22 4.96 4.86
04/29 5.04 4.89
05/06 4.99 4.90
05/13 4.90 4.90
05/20 4.80 4.91
05/27 4.84 4.92
06/03 4.87 4.94
06/10 4.85 4.93
06/17 4.84 4.95
06/24 4.89 4.95
07/01/97 5.00 4.97
Yields for Class A and Class B shares
are substantially the same.
Yields are historical and not
predictive
of future performance.
</TABLE>
- 76 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
little risk of inflation and very steady rates going forward.
I extended the seven-day weighted average maturity of the Fund from 36 days
to 54 days by adding one-year securities to the portfolio. At June 30, this
average stood at 54 days.
I invested in U.S. agency securities, commercial paper issued by top-tier
corporations, bank certificates of deposits and notes, taxable municipal bonds,
and an asset-backed student loan trust. All of the securities had less than 13
months to maturity. Eight securities have a rate that floats in sync with
short-term rates.
I added the following new issuers to the approved list: Societe Generale, a
major French Bank; National Bank of Canada, a major Canadian Bank; PNC Student
Loan Trust, an issuer of asset backed securities; and the Everett Clinic, a
medical clinic that issued a taxable municipal bond with a letter of credit from
U.S. Bank of Washington. Each is rated in the top tier and offered an increased
yield relative to other choices.
I believe that the Federal Reserve will hold rates steady for the next
several months. Economic statistics reflect a tight labor market, often
associated with accelerating inflation. However, inflation has been low.
Economic growth has been slow compared to the 5.9% rate of the first quarter of
1997. It is unclear whether the slowdown is temporary, or if it is the beginning
of a long-term trend. I will maintain longer average maturities in spite of the
uncertainty.
/s/ Naomi Urata
Naomi Urata
- -------------------------------
Naomi Urata joined SAFECO in 1993 as a fixed-income analyst and began managing
the SAFECO Money Market Fund in August of 1994. She holds a Master in Management
from Yale University and is a Chartered Financial Analyst.
HIGHLIGHTS
- -------------------------------
7-DAY WEIGHTED AVERAGE MATURITY ...................................... 54 DAYS
TOTAL RETURN (1 YEAR) CLASS-A .......................................... 4.93%
TOTAL RETURN (1 YEAR) CLASS-B .......................................... 4.91%
- 77 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO MONEY MARKET FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (000'S) VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
COMMERCIAL PAPER AND FLOATING RATE NOTES* - 94.4%
AGRICULTURAL PRODUCTS - 2.0%
$3,485 Cargill, Inc.
6.10%, due 7/01/97 .................................. $3,485
ASSET BACKED - 4.7%
#Receivables Capital Corp. 4(2)
4,000 5.55%, due 7/02/97 (acquired 6/03/97) ................ 3,999
4,000 5.55%, due 7/25/97 (acquired 6/16/97) ................ 3,985
BANKS--DOMESTIC - 11.1%
4,000 Crestar Bank
5.50%, due 7/21/97 ................................... 4,000
8,000 *First Bank FSB, Fargo, ND BN
5.6575%, due 8/29/97 ................................. 7,999
7,000 *Key Bank of Wa. BN
5.5875%, due 12/10/97 ................................ 6,997
BANKS--FOREIGN - 8.1%
5,000 National Bank of Canada
6.15%, due 5/15/98 ................................... 4,999
5,000 Societe Generale, NY
6.35%, due 4/15/98 ................................... 5,002
4,000 Westpac Capital Corp.
5.55%, due 9/15/97 ................................... 3,953
CONGLOMERATES - 4.7%
B.A.T. Capital Corp.
4,000 5.60%, due 7/14/97 ................................... 3,992
4,000 5.55%, due 7/23/97 ................................... 3,986
<CAPTION>
PRINCIPAL
AMOUNT (000'S) VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
FINANCE--AUTO - 13.9%
$4,000 Ford Motor Credit Co.
5.57%, due 7/10/97 .................................. $3,994
General Motors Acceptance Corp.
4,000 5.77%, due 10/15/97 .................................. 3,932
4,000 5.64%, due 7/01/97 ................................... 4,000
Hyundia Motors
4,000 5.53%, due 7/07/97 ................................... 3,996
National Fleet Funding
4,000 5.58%, due 7/18/97 ................................... 3,989
4,000 5.57%, due 8/15/97 ................................... 3,972
FINANCE--CONSUMER - 4.7%
Commercial Credit Co.
4,000 5.61%, due 8/05/97 ................................... 3,978
4,000 5.54%, due 8/13/97 ................................... 3,974
FINANCE--DIVERSIFIED & BUSINESS - 7.0%
4,000 General Electric Capital Corp.
5.51%, due 7/03/97 ................................... 3,999
4,000 Heller Financial, Inc.
5.66%, due 7/08/97 ................................... 3,996
4,000 5.36%, due 8/11/97 ................................... 3,976
FINANCE--EQUIPMENT LEASE - 2.3%
4,000 International Lease Finance Corp.
5.56%, due 8/21/97 ................................... 3,968
FINANCE--MISCELLANEOUS - 9.3%
8,000 *PHH Corp.
6.6775%, due 6/11/98 ................................. 8,000
8,000 *PNC Student Loan Trust
5.65%, due 7/25/98 ................................... 8,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 78 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
SAFECO MONEY MARKET FUND
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (000'S) VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
FINANCIAL SERVICES--BROKERAGE - 12.0%
$8,500 *Dean Witter, Discover
5.6375%, due 8/08/97 ................................ $8,500
4,000 Merrill Lynch & Co., Inc.
5.43%, due 7/16/97 ................................... 3,991
Smith Barney Inc. CP
4,000 5.54%, due 7/29/97 ................................... 3,983
4,000 5.54%, due 7/31/97 ................................... 3,982
HEALTHCARE--SPECIAL SERVICES - 3.1%
5,373 *Everette Clinic
5.72%, due 12/01/18 .................................. 5,373
MACHINERY - 2.2%
3,800 Stanley Works
5.61%, due 8/06/97 ................................... 3,779
MISCELLANEOUS - 2.3%
4,000 Tasmanian Public Finance Corp.
5.66%, due 8/28/97 ................................... 3,964
STATE MUNICIPAL NOTE - 4.7%
4,100 *Chicago, Illinois GO Unlimited
5.65%, due 1/01/01 ................................... 4,100
4,100 *City of Olathe, Kansas
5.60%, due 3/01/27 ................................... 4,000
UTILITIES--ELECTRIC - 2.3%
4,000 AES Barbers Point, Inc.
5.56%, due 7/24/97 ................................... 3,986
------
TOTAL COMMERCIAL PAPER AND FLOATING RATE NOTES* ..................... 161,829
------
<CAPTION>
PRINCIPAL
AMOUNT (000'S) VALUE (000'S)
- -----------------------------------------------------------------------------
<C> <S>
U.S. GOVERNMENT AND AGENCY SECURITIES - 5.8%
FEDERAL NATIONAL MORTGAGE ASSOCIATION DISCOUNT NOTES - 2.9%
$5,000 5.71%, due 3/18/98 ................................. $ 4,993
STUDENT LOAN MARKETING ASSOCIATION - 2.9%
5,000 5.535%, due 2/25/98 .................................. 4,997
------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES ........................... 9,990
------
TOTAL INVESTMENTS - 100.2% .......................................... 171,819
Liabilities, less Other Assets ........................................ (312)
------
NET ASSETS ......................................................... $171,507
------
------
- -----------------------------------------------------------------------------
</TABLE>
# Securities are exempt from registration and restricted as to resale only to
dealers, or through a dealer to an "accredited investor" or a "qualified
institutional buyer." At June 30, 1997, such securities are issued by
Receivables Capital Corporation. The combined value of the two issues is
$7,984,583, or 4.7% of net assets.
* Securities have variable rates which change periodically based on specified
market rates or indices. Rates shown are those in effect on June 30, 1997. The
total market value of such securities are $52,968,902, or 31% of net assets.
SEE NOTES TO FINANCIAL STATEMENTS
- 79 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO
GROWTH EQUITY INCOME
(In Thousands, Except Per-Share Amounts) FUND FUND FUND
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments, at Cost $ 219,162 $ 1,033,906 $ 271,116
----------- ----------- -----------
----------- ----------- -----------
Investments, at Value
Unaffiliated Issuers $ 189,050 $ 1,301,804 $ 353,163
Affiliated Issuers 71,721 -- --
----------- ----------- -----------
Total Investments at Value 260,771 1,301,804 353,163
Cash -- -- --
Receivables
Investment Securities Sold 3,154 -- --
Trust Shares Sold 517 1,936 289
Dividends and Interest 194 1,429 1,185
Forward Currency Contracts Open, Net -- -- --
Deferred Organization Expense -- -- --
----------- ----------- -----------
Total Assets 264,636 1,305,169 354,637
LIABILITIES
Payables
Investment Securities Purchased 759 -- --
Dividends -- 3,786 2,708
Investment Advisory Fees 147 559 192
Notes Payable 1,260 -- --
Organization Expense -- -- --
Other 70 296 87
----------- ----------- -----------
Total Liabilities 2,236 4,641 2,987
----------- ----------- -----------
NET ASSETS $ 262,400 $ 1,300,528 $ 351,650
----------- ----------- -----------
----------- ----------- -----------
NO-LOAD CLASS:
Net Assets $ 261,662 $ 1,295,127 $ 351,034
Trust Shares Outstanding 12,709 67,430 14,859
----------- ----------- -----------
Net Asset Value, Offering Price,
and Redemption Price Per Share $ 20.59 $ 19.21 $ 23.62
----------- ----------- -----------
----------- ----------- -----------
CLASS A:
Net Assets $ 471 $ 4,044 $ 417
Trust Shares Outstanding 23 210 18
----------- ----------- -----------
Net Asset Value and Redemption
Price Per Share $ 20.55 $ 19.21 $ 23.72
----------- ----------- -----------
----------- ----------- -----------
Maximum Offering Price Per Share
(Net Asset Value Plus Sales
Charge of 4.5%) $ 21.52 $ 20.12 $ 24.84
----------- ----------- -----------
----------- ----------- -----------
CLASS B:
Net Assets $ 267 $ 1,357 $ 199
Trust Shares Outstanding 13 71 8
----------- ----------- -----------
Net Asset Value and Offering Price
Per Share* $ 20.45 $ 19.22 $ 23.65
----------- ----------- -----------
----------- ----------- -----------
- ---------------------------------------------------------------------------------
</TABLE>
* Redemption price per share is the net asset value less any applicable
contingent deferred sales charge.
SEE NOTES TO FINANCIAL STATEMENTS
- 80 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO SAFECO SAFECO
NORTHWEST BALANCED INTERNATIONAL SMALL COMPANY U.S. VALUE
FUND FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments, at Cost $ 35,860 $ 10,353 $ 11,691 $ 13,712 $ 7,447
----------- ---------------- --------------- --------------- -----------
----------- ---------------- --------------- --------------- -----------
Investments, at Value
Unaffiliated Issuers $ 53,829 $ 11,538 $ 13,697 $ 16,374 $ 8,023
Affiliated Issuers -- -- -- -- --
----------- ---------------- --------------- --------------- -----------
Total Investments at Value 53,829 11,538 13,697 16,374 8,023
Cash -- -- 872 -- --
Receivables
Investment Securities Sold -- -- -- 14 --
Trust Shares Sold 11 -- 3 20 2
Dividends and Interest 48 67 51 5 11
Forward Currency Contracts Open, Net -- -- 18 -- --
Deferred Organization Expense -- 14 14 14 19
----------- ---------------- --------------- --------------- -----------
Total Assets 53,888 11,619 14,655 16,427 8,055
LIABILITIES
Payables
Investment Securities Purchased 71 -- 245 12 26
Dividends -- 77 -- -- 16
Investment Advisory Fees 33 8 13 11 5
Notes Payable -- -- -- -- --
Organization Expense -- 14 14 14 19
Other 27 10 28 15 5
----------- ---------------- --------------- --------------- -----------
Total Liabilities 131 109 300 52 71
----------- ---------------- --------------- --------------- -----------
NET ASSETS $ 53,757 $ 11,510 $ 14,355 $ 16,375 $ 7,984
----------- ---------------- --------------- --------------- -----------
----------- ---------------- --------------- --------------- -----------
NO-LOAD CLASS:
Net Assets $ 52,835 $ 11,181 $ 13,884 $ 15,990 $ 7,737
Trust Shares Outstanding 3,127 966 1,132 1,258 701
----------- ---------------- --------------- --------------- -----------
Net Asset Value, Offering Price,
and Redemption Price Per Share $ 16.90 $ 11.57 $ 12.27 $ 12.72 $ 11.03
----------- ---------------- --------------- --------------- -----------
----------- ---------------- --------------- --------------- -----------
CLASS A:
Net Assets $ 581 $ 147 $ 232 $ 203 $ 118
Trust Shares Outstanding 35 13 19 16 11
----------- ---------------- --------------- --------------- -----------
Net Asset Value and Redemption
Price Per Share $ 16.86 $ 11.55 $ 12.25 $ 12.71 $ 11.03
----------- ---------------- --------------- --------------- -----------
----------- ---------------- --------------- --------------- -----------
Maximum Offering Price Per Share
(Net Asset Value Plus Sales
Charge of 4.5%) $ 17.65 $ 12.09 $ 12.83 $ 13.31 $ 11.55
----------- ---------------- --------------- --------------- -----------
----------- ---------------- --------------- --------------- -----------
CLASS B:
Net Assets $ 341 $ 182 $ 239 $ 182 $ 129
Trust Shares Outstanding 20 16 19 14 12
----------- ---------------- --------------- --------------- -----------
Net Asset Value and Offering Price
Per Share* $ 16.77 $ 11.55 $ 12.20 $ 12.63 $ 11.03
----------- ---------------- --------------- --------------- -----------
----------- ---------------- --------------- --------------- -----------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 81 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (Continued)
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO
HIGH-YIELD INTERMEDIATE-TERM MANAGED
(In Thousands, Except Per-Share Amounts) BOND FUND U.S TREASURY FUND BOND FUND
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments, at Cost $ 56,041 $ 15,171 $ 4,568
------------- ------- ----------
------------- ------- ----------
Investments, at Value
Unaffiliated Issuers $ 57,937 $ 15,132 $ 4,610
Affiliated Issuers -- -- --
------------- ------- ----------
Total Investments at Value 57,937 15,132 4,610
Cash -- -- --
Receivables
Investment Securities Sold -- -- --
Trust Shares Sold 14 -- --
Dividends and Interest 1,142 275 43
Forward Currency Contracts Open, Net -- -- --
Deferred Organization Expense -- -- 10
------------- ------- ----------
Total Assets 59,093 15,407 4,663
LIABILITIES
Payables
Investment Securities Purchased -- -- --
Dividends 485 72 19
Investment Advisory Fees 32 7 2
Notes Payable -- -- --
Organization Expense -- -- 10
Other 15 16 6
------------- ------- ----------
Total Liabilities 532 95 37
------------- ------- ----------
NET ASSETS $ 58,561 $ 15,312 $ 4,626
------------- ------- ----------
------------- ------- ----------
NO-LOAD CLASS:
Net Assets $ 58,338 $ 14,652 $ 4,286
Trust Shares Outstanding 6,551 1,462 517
------------- ------- ----------
Net Asset Value, Offering Price,
and Redemption Price Per Share $ 8.91 $ 10.02 $ 8.30
------------- ------- ----------
------------- ------- ----------
CLASS A:
Net Assets $ 122 $ 366 $ 140
Trust Shares Outstanding 14 37 17
------------- ------- ----------
Net Asset Value and Redemption
Price Per Share $ 8.90 $ 10.03 $ 8.30
------------- ------- ----------
------------- ------- ----------
Maximum Offering Price Per Share
(Net Asset Value Plus Sales
Charge of 4.5%) $ 9.32 $ 10.50 $ 8.69
------------- ------- ----------
------------- ------- ----------
CLASS B:
Net Assets $ 101 $ 294 $ 200
Trust Shares Outstanding 11 29 24
------------- ------- ----------
Net Asset Value and Offering Price
Per Share* $ 8.90 $ 10.03 $ 8.30
------------- ------- ----------
------------- ------- ----------
- ----------------------------------------------------------------------------------------
</TABLE>
* Redemption price per share is the net asset value less any applicable
contingent deferred sales charge.
** Also represents offering price per share.
SEE NOTES TO FINANCIAL STATEMENTS
- 82 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SAFECO SAFECO
SAFECO CALIFORNIA WASHINGTON STATE SAFECO
MUNICIPAL TAX-FREE MUNICIPAL BOND MONEY MARKET
BOND FUND INCOME FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments, at Cost $ 424,798 $ 66,739 $ 7,200 $ 171,819
---------- ------- ------ ---------------
---------- ------- ------ ---------------
Investments, at Value
Unaffiliated Issuers $ 473,481 $ 72,739 $ 7,525 $ 171,819
Affiliated Issuers -- -- -- --
---------- ------- ------ ---------------
Total Investments at Value 473,481 72,739 7,525 171,819
Cash 2 -- -- --
Receivables
Investment Securities Sold -- -- -- --
Trust Shares Sold -- 115 -- --
Dividends and Interest 8,565 1,389 125 540
Forward Currency Contracts Open, Net -- -- -- --
Deferred Organization Expense -- -- 1 --
---------- ------- ------ ---------------
Total Assets 482,048 74,243 7,651 172,359
LIABILITIES
Payables
Investment Securities Purchased -- -- -- --
Dividends 2,200 317 31 721
Investment Advisory Fees 173 35 4 73
Notes Payable 1,405 -- 1 --
Organization Expense -- -- -- --
Other 62 16 6 58
---------- ------- ------ ---------------
Total Liabilities 3,840 368 42 852
---------- ------- ------ ---------------
NET ASSETS $ 478,208 $ 73,875 $ 7,609 $ 171,507
---------- ------- ------ ---------------
---------- ------- ------ ---------------
NO-LOAD CLASS:
Net Assets $ 477,686 $ 73,377 $ 7,055 $ 171,173
Trust Shares Outstanding 34,081 5,988 668 171,173
---------- ------- ------ ---------------
Net Asset Value, Offering Price,
and Redemption Price Per Share $ 14.02 $ 12.25 $ 10.56 $ 1.00
---------- ------- ------ ---------------
---------- ------- ------ ---------------
CLASS A:
Net Assets $ 323 $ 122 $ 341 $ 171
Trust Shares Outstanding 23 10 33 171
---------- ------- ------ ---------------
Net Asset Value and Redemption
Price Per Share $ 14.02 $ 12.26 $ 10.56 $ 1.00**
---------- ------- ------ ---------------
---------- ------- ------ ---------------
Maximum Offering Price Per Share
(Net Asset Value Plus Sales
Charge of 4.5%) $ 14.68 $ 12.84 $ 11.06
---------- ------- ------ ---------------
---------- ------- ------ ---------------
CLASS B:
Net Assets $ 199 $ 376 $ 213 $ 163
Trust Shares Outstanding 14 30 20 163
---------- ------- ------ ---------------
Net Asset Value and Offering Price
Per Share* $ 14.02 $ 12.25 $ 10.57 $ 1.00
---------- ------- ------ ---------------
---------- ------- ------ ---------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 83 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Six-Month Period Ended June 30, 1997*
(Unaudited)
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO
GROWTH EQUITY INCOME
(In Thousands) FUND FUND FUND
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends (Net of Foreign Taxes
Withheld of $22 in the
International Fund) $ 559 $ 9,794 $ 4,849
Interest 93 1,025 1,319
---------- ---------- ----------
Total Investment Income 652 10,819 6,168
EXPENSES
Investment Advisory Fees 798 2,790 1,042
Transfer Agent Fees 216 944 269
Shareholder Service Fees - Class A 1 5 1
- Class B -- 1 --
Distribution Fees - Class B 1 3 1
Legal and Auditing Fees 8 14 9
Custodian Fees 13 12 7
Reports to Shareholders 21 92 26
Trustees' Fees 2 5 3
Loan Interest 20 -- --
Amortization of Organization Expenses -- -- --
---------- ---------- ----------
Total Expenses Before Reimbursement 1,080 3,866 1,358
Expense Reimbursement -- -- --
---------- ---------- ----------
Total Expenses After Reimbursement 1,080 3,866 1,358
---------- ---------- ----------
NET INVESTMENT INCOME (LOSS) (428) 6,953 4,810
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY
Net Realized Gain (Loss) from:
Investments in Unaffiliated Issuers 40,453 41,407 17,845
Investments in Affiliated Issuers 756 -- --
Foreign Currency Transactions -- -- --
---------- ---------- ----------
Total Net Realized Gain (Loss) 41,209 41,407 17,845
Net Change in Unrealized Appreciation
(Depreciation) on:
Investments 2,449 115,321 17,886
Foreign Currency Related
Transactions -- -- --
---------- ---------- ----------
NET GAIN ON INVESTMENTS AND FOREIGN
CURRENCY 43,658 156,728 35,731
---------- ---------- ----------
NET CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS $ 43,230 $ 163,681 $ 40,541
---------- ---------- ----------
---------- ---------- ----------
- ------------------------------------------------------------------------------
</TABLE>
* U.S. Value Fund--April 30, 1997 (Commencement of Operations) to June 30, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
- 84 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO SAFECO SAFECO
NORTHWEST BALANCED INTERNATIONAL SMALL COMPANY U.S. VALUE
FUND FUND FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends (Net of Foreign Taxes
Withheld of $22 in the
International Fund) $ 274 $ 70 $ 164 $ 40 $ 24
Interest 29 135 18 19 7
---------- ----- ------ ------ -----
Total Investment Income 303 205 182 59 31
EXPENSES
Investment Advisory Fees 175 37 69 60 8
Transfer Agent Fees 65 8 14 20 --
Shareholder Service Fees - Class A 1 -- 1 -- --
- Class B 1 -- -- -- --
Distribution Fees - Class B 1 1 1 1 --
Legal and Auditing Fees 7 7 7 7 2
Custodian Fees 5 5 19 5 2
Reports to Shareholders 7 -- 1 2 --
Trustees' Fees 2 2 2 2 1
Loan Interest 1 -- -- -- --
Amortization of Organization Expenses -- 2 2 2 1
---------- ----- ------ ------ -----
Total Expenses Before Reimbursement 265 62 116 99 14
Expense Reimbursement -- -- (18) -- --
---------- ----- ------ ------ -----
Total Expenses After Reimbursement 265 62 98 99 14
---------- ----- ------ ------ -----
NET INVESTMENT INCOME (LOSS) 38 143 84 (40) 17
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY
Net Realized Gain (Loss) from:
Investments in Unaffiliated Issuers 2,919 116 9 96 14
Investments in Affiliated Issuers -- -- -- -- --
Foreign Currency Transactions -- -- 171 -- --
---------- ----- ------ ------ -----
Total Net Realized Gain (Loss) 2,919 116 180 96 14
Net Change in Unrealized Appreciation
(Depreciation) on:
Investments 5,860 684 876 1,139 576
Foreign Currency Related
Transactions -- -- (18) -- --
---------- ----- ------ ------ -----
NET GAIN ON INVESTMENTS AND FOREIGN
CURRENCY 8,779 800 1,038 1,235 590
---------- ----- ------ ------ -----
NET CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS $ 8,817 $ 943 $ 1,122 $ 1,195 $ 607
---------- ----- ------ ------ -----
---------- ----- ------ ------ -----
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 85 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS (Continued)
For the Six-Month Period Ended June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO
HIGH-YIELD INTERMEDIATE-TERM MANAGED
(In Thousands) BOND FUND U.S TREASURY FUND BOND FUND
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends $ -- $ -- $ --
Interest 2,655 507 137
------ ----- -----
Total Investment Income 2,655 507 137
EXPENSES
Investment Advisory Fees 172 42 11
Transfer Agent Fees 38 12 --
Shareholder Service Fees - Class A -- 1 --
- Class B -- 1 --
Distribution Fees - Class B 1 1 1
Legal and Auditing Fees 8 7 7
Custodian Fees 10 2 3
Reports to Shareholders 8 4 --
Trustees' Fees 2 2 2
Loan Interest 4 -- --
Amortization of Organization Expenses -- -- 3
------ ----- -----
Total Expenses Before Reimbursement 243 72 27
Expense Reimbursement -- -- --
------ ----- -----
Total Expenses After Reimbursement 243 72 27
------ ----- -----
NET INVESTMENT INCOME (LOSS) 2,412 435 110
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY
Net Realized Gain (Loss) from:
Investments in Unaffiliated Issuers (24) (85) (73)
Investments in Affiliated Issuers -- -- --
Foreign Currency Transactions -- -- --
------ ----- -----
Total Net Realized Gain (Loss) (24) (85) (73)
Net Change in Unrealized Appreciation
(Depreciation) on:
Investments 663 (43) 45
Foreign Currency Related
Transactions -- -- --
------ ----- -----
NET GAIN ON INVESTMENTS AND FOREIGN
CURRENCY 639 (128) (28)
------ ----- -----
NET CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS $ 3,051 $ 307 $ 82
------ ----- -----
------ ----- -----
- ----------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 86 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SAFECO SAFECO
SAFECO CALIFORNIA WASHINGTON STATE SAFECO
MUNICIPAL TAX-FREE MUNICIPAL BOND MONEY MARKET
BOND FUND INCOME FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ -- $ -- $ -- $ --
Interest 14,066 2,077 210 4,743
---------- ------ ----- ------
Total Investment Income 14,066 2,077 210 4,743
EXPENSES
Investment Advisory Fees 996 197 23 426
Transfer Agent Fees 164 29 1 197
Shareholder Service Fees - Class A 1 -- 1 --
- Class B -- -- -- --
Distribution Fees - Class B 1 -- 1 --
Legal and Auditing Fees 11 8 7 9
Custodian Fees 7 3 3 9
Reports to Shareholders 17 3 -- 11
Trustees' Fees 3 2 2 2
Loan Interest 2 1 -- --
Amortization of Organization Expenses -- -- 1 --
---------- ------ ----- ------
Total Expenses Before Reimbursement 1,202 243 39 654
Expense Reimbursement -- -- -- --
---------- ------ ----- ------
Total Expenses After Reimbursement 1,202 243 39 654
---------- ------ ----- ------
NET INVESTMENT INCOME (LOSS) 12,864 1,834 171 4,089
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY
Net Realized Gain (Loss) from:
Investments in Unaffiliated Issuers 2,966 366 (9) --
Investments in Affiliated Issuers -- -- -- --
Foreign Currency Transactions -- -- -- --
---------- ------ ----- ------
Total Net Realized Gain (Loss) 2,966 366 (9) --
Net Change in Unrealized Appreciation
(Depreciation) on:
Investments (1,691) (119) 37 --
Foreign Currency Related
Transactions -- -- -- --
---------- ------ ----- ------
NET GAIN ON INVESTMENTS AND FOREIGN
CURRENCY 1,275 247 28 --
---------- ------ ----- ------
NET CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS $ 14,139 $ 2,081 $ 199 $ 4,089
---------- ------ ----- ------
---------- ------ ----- ------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 87 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
<TABLE>
<CAPTION>
SAFECO GROWTH FUND
------------------------------------
SIX-MONTH THREE-MONTH
PERIOD PERIOD
ENDED ENDED YEAR ENDED
JUNE 30 DEC. 31 SEPT. 30
(In Thousands) 1997 1996 1996
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS
Net Investment Income $ (428) $ (236) $ (252)
Net Realized Gain (Loss) from
Investments and Foreign
Currency Transactions 41,209 2,890 26,762
Net Change in Unrealized
Appreciation (Depreciation) 2,449 17,540 (1,973)
---------- ---------- ----------
Net Change in Net Assets
Resulting from Operations 43,230 20,194 24,537
DIVIDENDS TO SHAREHOLDERS FROM
Net Investment Income - No-Load Class -- -- (45)
- Class A -- -- --
- Class B -- -- --
Net Realized Gain on Investments
- No-Load Class -- (2,644) (26,481)
- Class A -- (3) --
- Class B -- (2) --
---------- ---------- ----------
Total -- (2,649) (26,526)
NET TRUST SHARE TRANSACTIONS
No-Load Class 22,785 (1,336) 5,080
Class A 209 74 100
Class B 113 6 100
---------- ---------- ----------
Total 23,107 (1,256) 5,280
---------- ---------- ----------
TOTAL CHANGE IN NET ASSETS 66,337 16,289 3,291
NET ASSETS AT BEGINNING OF PERIOD 196,063 179,774 176,483
---------- ---------- ----------
NET ASSETS AT END OF PERIOD $ 262,400 $ 196,063 $ 179,774
---------- ---------- ----------
---------- ---------- ----------
- ------------------------------------------------------------------------------
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES AND
AMOUNTS
SHARES:
Sales 7,792 1,572 22,451
Reinvestments -- 148 1,627
Redemptions (6,599) (1,807) (23,589)
---------- ---------- ----------
NET CHANGE 1,193 (87) 489
---------- ---------- ----------
---------- ---------- ----------
AMOUNTS:
Sales $ 142,715 $ 25,444 $ 372,215
Reinvestments -- 2,522 25,225
Redemptions (119,608) (29,222) (392,160)
---------- ---------- ----------
NET CHANGE $ 23,107 $ (1,256) $ 5,280
---------- ---------- ----------
---------- ---------- ----------
- ------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 88 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SAFECO EQUITY FUND SAFECO INCOME FUND
------------------------------------------- -------------------------------------------
SIX-MONTH THREE-MONTH SIX-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED YEAR ENDED
JUNE 30 DEC. 31 SEPT. 30 JUNE 30 DEC. 31 SEPT. 30
1997 1996 1996 1997 1996 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
NET INVESTMENT INCOME $ 6,953 $ 3,012 $ 11,183 $ 4,810 $ 2,032 $ 8,365
Net Realized Gain (Loss) from
Investments and Foreign
Currency Transactions 41,407 28,862 77,448 17,845 7,031 22,848
Net Change in Unrealized
Appreciation (Depreciation) 115,321 33,741 18,119 17,886 14,121 9,944
------------- ------------- ----------- ------------- ------------- -----------
NET CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS 163,681 65,615 106,750 40,541 23,184 41,157
DIVIDENDS TO SHAREHOLDERS FROM
Net Investment Income - No-Load Class (6,948) (3,006) (11,189) (4,796) (2,028) (8,374)
- Class A (16) (7) -- (4) (1) --
- Class B (1) -- -- (2) (1) --
Net Realized Gain on Investments
- No-Load Class -- (28,684) (77,500) -- (7,033) (22,837)
- Class A -- (98) -- -- (5) --
- Class B -- (12) -- -- (3) --
------------- ------------- ----------- ------------- ------------- -----------
TOTAL (6,965) (31,807) (88,689) (4,802) (9,071) (31,211)
NET TRUST SHARE TRANSACTIONS
NO-LOAD CLASS 289,338 90,300 109,137 25,379 15,846 32,207
Class A 506 2,742 100 191 85 100
Class B 888 250 100 68 6 100
------------- ------------- ----------- ------------- ------------- -----------
TOTAL 290,732 93,292 109,337 25,638 15,937 32,407
------------- ------------- ----------- ------------- ------------- -----------
TOTAL CHANGE IN NET ASSETS 447,448 127,100 127,398 61,377 30,050 42,353
NET ASSETS AT BEGINNING OF PERIOD 853,080 725,980 598,582 290,273 260,223 217,870
------------- ------------- ----------- ------------- ------------- -----------
NET ASSETS AT END OF PERIOD $ 1,300,528 $ 853,080 $ 725,980 $ 351,650 $ 290,273 $ 260,223
------------- ------------- ----------- ------------- ------------- -----------
------------- ------------- ----------- ------------- ------------- -----------
- -----------------------------------------------------------------------------------------------------------------------------------
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES AND
AMOUNTS
SHARES:
SALES 23,076 6,132 17,984 2,013 869 2,864
Reinvestments 176 1,800 5,249 87 385 1,374
Redemptions (6,920) (2,347) (16,536) (955) (503) (2,649)
------------- ------------- ----------- ------------- ------------- -----------
NET CHANGE 16,332 5,585 6,697 1,145 751 1,589
------------- ------------- ----------- ------------- ------------- -----------
------------- ------------- ----------- ------------- ------------- -----------
AMOUNTS:
SALES $ 402,877 $ 102,959 $ 289,961 $ 52,319 $ 18,394 $ 58,320
Reinvestments 2,959 29,886 82,876 1,823 8,140 27,638
Redemptions (115,104) (39,553) (263,500) (28,504) (10,597) (53,551)
------------- ------------- ----------- ------------- ------------- -----------
NET CHANGE $ 290,732 $ 93,292 $ 109,337 $ 25,638 $ 15,937 $ 32,407
------------- ------------- ----------- ------------- ------------- -----------
------------- ------------- ----------- ------------- ------------- -----------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 89 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
SAFECO NORTHWEST FUND
------------------------------------
SIX-MONTH THREE-MONTH
PERIOD PERIOD
ENDED ENDED YEAR ENDED
JUNE 30 DEC. 31 SEPT. 30
(In Thousands) 1997 1996 1996
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS
Net Investment Income $ 38 $ (34) $ 47
Net Realized Gain (Loss) from
Investments and Foreign
Currency Transactions 2,919 (2,374) 5,695
Net Change in Unrealized
Appreciation (Depreciation) 5,860 3,280 (1,961)
---------- ---------- ----------
Net Change in Net Assets
Resulting from Operations 8,817 872 3,781
DIVIDENDS TO SHAREHOLDERS FROM
Net Investment Income - No-Load Class -- -- (48)
- Class A -- -- --
- Class B -- -- --
Net Realized Gain on Investments
- No-Load Class -- -- (5,695)
- Class A -- -- --
- Class B -- -- --
---------- ---------- ----------
Total -- -- (5,743)
NET TRUST SHARE TRANSACTIONS
No-Load Class 806 (632) 4,950
Class A 129 254 100
Class B 59 124 100
---------- ---------- ----------
Total 994 (254) 5,150
---------- ---------- ----------
TOTAL CHANGE IN NET ASSETS 9,811 618 3,188
NET ASSETS AT BEGINNING OF PERIOD 43,946 43,328 40,140
---------- ---------- ----------
NET ASSETS AT END OF PERIOD $ 53,757 $ 43,946 $ 43,328
---------- ---------- ----------
---------- ---------- ----------
- ------------------------------------------------------------------------------
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES AND
AMOUNTS
SHARES:
Sales 563 196 1,209
Reinvestments -- -- 323
Redemptions (505) (215) (1,175)
---------- ---------- ----------
NET CHANGE 58 (19) 357
---------- ---------- ----------
---------- ---------- ----------
AMOUNTS:
Sales $ 7,818 $ 2,692 $ 17,755
Reinvestments -- -- 4,438
Redemptions (6,824) (2,946) (17,043)
---------- ---------- ----------
NET CHANGE $ 994 $ (254) $ 5,150
---------- ---------- ----------
---------- ---------- ----------
- ------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 90 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SAFECO BALANCED FUND SAFECO INTERNATIONAL FUND
------------------------------------------- -------------------------------------------
JAN. 31, 1996 JAN. 31, 1996
(COMMENCEMENT (COMMENCEMENT
OF OF
SIX-MONTH THREE-MONTH OPERATIONS) SIX-MONTH THREE-MONTH OPERATIONS)
PERIOD ENDED PERIOD ENDED TO PERIOD ENDED PERIOD ENDED TO
JUNE 30 DEC. 31 SEPT. 30 JUNE 30 DEC. 31 SEPT. 30
1997 1996 1996 1997 1996 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
NET INVESTMENT INCOME $ 143 $ 66 $ 146 $ 84 $ (5) $ 45
Net Realized Gain (Loss) from
Investments and Foreign
Currency Transactions 116 99 5 180 87 (11)
Net Change in Unrealized
Appreciation (Depreciation) 684 243 258 858 853 314
------------ ------ ------ ------------ ------------ -------------
NET CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS 943 408 409 1,122 935 348
DIVIDENDS TO SHAREHOLDERS FROM
Net Investment Income - No-Load Class (139) (64) (146) -- (62) (51)
- Class A (2) (1) -- -- (1) --
- Class B (1) (1) -- -- -- --
Net Realized Gain on Investments
- No-Load Class -- (97) (5) -- -- --
- Class A -- (1) -- -- -- --
- Class B -- (1) -- -- -- --
------------ ------ ------ ------------ ------------ -------------
TOTAL (142) (165) (151) -- (63) (51)
NET TRUST SHARE TRANSACTIONS
NO-LOAD CLASS 2,140 393 7,374 1,635 1,981 8,026
Class A 27 7 100 63 43 100
Class B 55 12 100 112 4 100
------------ ------ ------ ------------ ------------ -------------
TOTAL 2,222 412 7,574 1,810 2,028 8,226
------------ ------ ------ ------------ ------------ -------------
TOTAL CHANGE IN NET ASSETS 3,023 655 7,832 2,932 2,900 8,523
NET ASSETS AT BEGINNING OF PERIOD 8,487 7,832 -- 11,423 8,523 --
------------ ------ ------ ------------ ------------ -------------
NET ASSETS AT END OF PERIOD $ 11,510 $ 8,487 $ 7,832 $ 14,355 $ 11,423 $ 8,523
------------ ------ ------ ------------ ------------ -------------
------------ ------ ------ ------------ ------------ -------------
- -----------------------------------------------------------------------------------------------------------------------------------
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES AND
AMOUNTS
SHARES:
SALES 285 43 785 286 219 1,042
Reinvestments 2 5 3 -- 3 2
Redemptions (85) (9) (34) (128) (30) (224)
------------ ------ ------ ------------ ------------ -------------
NET CHANGE 202 39 754 158 192 820
------------ ------ ------ ------------ ------------ -------------
------------ ------ ------ ------------ ------------ -------------
AMOUNTS:
SALES $ 3,139 $ 459 $ 7,893 $ 3,291 $ 2,323 $ 10,466
Reinvestments 25 50 31 -- 29 18
Redemptions (942) (97) (350) (1,481) (324) (2,258)
------------ ------ ------ ------------ ------------ -------------
NET CHANGE $ 2,222 $ 412 $ 7,574 $ 1,810 $ 2,028 $ 8,226
------------ ------ ------ ------------ ------------ -------------
------------ ------ ------ ------------ ------------ -------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 91 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
SAFECO
U.S. VALUE
SAFECO SMALL COMPANY FUND FUND
------------------------------------- ----------
JAN. 31, APRIL 30,
SIX- THREE- 1996 1997
MONTH MONTH (COMMENCE- (COMMENCE-
PERIOD PERIOD MENT OF MENT OF
ENDED ENDED OPERATIONS) OPERATIONS)
JUNE 30 DEC. 31 TO SEPT. 30 TO JUNE 30
(In Thousands) 1997 1996 1996 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net Investment Income $ (40) $ (14) $ (15) $ 17
Net Realized Gain (Loss) from
Investments and Foreign
Currency Transactions 96 (278) 723 14
Net Change in Unrealized
Appreciation (Depreciation) 1,139 643 880 576
---------- ---------- ----------- ----------
Net Change in Net Assets
Resulting from Operations 1,195 351 1,588 607
DIVIDENDS TO SHAREHOLDERS FROM
Net Investment Income - No-Load Class -- -- -- (16)
- Class A -- -- -- (1)
- Class B -- -- -- --
Net Realized Gain on Investments
- No-Load Class -- -- (708) --
- Class A -- -- -- --
- Class B -- -- -- --
---------- ---------- ----------- ----------
Total -- -- (708) (17)
NET TRUST SHARE TRANSACTIONS
No-Load Class 1,650 272 11,672 7,167
Class A 57 31 100 108
Class B 66 1 100 119
---------- ---------- ----------- ----------
Total 1,773 304 11,872 7,394
---------- ---------- ----------- ----------
TOTAL CHANGE IN NET ASSETS 2,968 655 12,752 7,984
NET ASSETS AT BEGINNING OF PERIOD 13,407 12,752 -- --
---------- ---------- ----------- ----------
NET ASSETS AT END OF PERIOD $ 16,375 $ 13,407 $ 12,752 $ 7,984
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
- --------------------------------------------------------------------------------------------
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES AND
AMOUNTS
SHARES:
Sales 402 254 1,625 737
Reinvestments -- (1) 32 --
Redemptions (249) (226) (549) (13)
---------- ---------- ----------- ----------
NET CHANGE 153 27 1,108 724
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
AMOUNTS:
Sales $ 4,713 $ 2,918 $ 17,916 $ 7,534
Reinvestments -- (7) 373 --
Redemptions (2,940) (2,607) (6,417) (140)
---------- ---------- ----------- ----------
NET CHANGE $ 1,773 $ 304 $ 11,872 $ 7,394
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
- --------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 92 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SAFECO HIGH-YIELD BOND FUND SAFECO INTERMEDIATE-TERM U.S. TREASURY FUND
------------------------------------------- -------------------------------------------
SIX-MONTH THREE-MONTH SIX-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED YEAR ENDED
JUNE 30 DEC. 31 SEPT. 30 JUNE 30 DEC. 31 SEPT. 30
1997 1996 1996 1997 1996 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
NET INVESTMENT INCOME $ 2,412 $ 1,092 $ 3,696 $ 435 $ 242 $ 758
Net Realized Gain (Loss) from
Investments and Foreign
Currency Transactions (24) (426) 504 (85) (125) 290
Net Change in Unrealized
Appreciation (Depreciation) 663 597 46 (43) 144 (496)
------------ ------------ ------------- ------------ ------------ -------------
NET CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS 3,051 1,263 4,246 307 261 552
DIVIDENDS TO SHAREHOLDERS FROM
Net Investment Income - No-Load Class (2,404) (1,092) (3,696) (409) (232) (758)
- Class A (4) -- -- (20) (8) --
- Class B (4) -- -- (6) (2) --
Net Realized Gain on Investments
- No-Load Class -- -- -- -- -- --
- Class A -- -- -- -- -- --
- Class B -- -- -- -- -- --
------------ ------------ ------------- ------------ ------------ -------------
TOTAL (2,412) (1,092) (3,696) (435) (242) (758)
NET TRUST SHARE TRANSACTIONS
NO-LOAD CLASS 7,603 2,247 8,152 95 189 900
Class A 21 -- -- (333) 607 100
Class B -- -- -- 72 123 100
------------ ------------ ------------- ------------ ------------ -------------
TOTAL 7,624 2,247 8,152 (166) 919 1,100
------------ ------------ ------------- ------------ ------------ -------------
TOTAL CHANGE IN NET ASSETS 8,263 2,418 8,702 (294) 938 894
NET ASSETS AT BEGINNING OF PERIOD 50,298 47,880 39,178 15,606 14,668 13,774
------------ ------------ ------------- ------------ ------------ -------------
NET ASSETS AT END OF PERIOD $ 58,561 $ 50,298 $ 47,880 $ 15,312 $ 15,606 $ 14,668
------------ ------------ ------------- ------------ ------------ -------------
------------ ------------ ------------- ------------ ------------ -------------
- -----------------------------------------------------------------------------------------------------------------------------------
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES AND
AMOUNTS
SHARES:
SALES 8,725 1,190 6,549 193 149 1,516
Reinvestments 136 78 251 17 12 35
Redemptions (7,989) (1,013) (5,863) (226) (70) (1,444)
------------ ------------ ------------- ------------ ------------ -------------
NET CHANGE 872 255 937 (16) 91 107
------------ ------------ ------------- ------------ ------------ -------------
------------ ------------ ------------- ------------ ------------ -------------
AMOUNTS:
SALES $ 77,005 $ 10,466 $ 56,960 $ 1,924 $ 1,515 $ 18,860
Reinvestments 1,199 690 2,181 175 117 358
Redemptions (70,580) (8,909) (50,989) (2,265) (713) (18,118)
------------ ------------ ------------- ------------ ------------ -------------
NET CHANGE $ 7,624 $ 2,247 $ 8,152 $ (166) $ 919 $ 1,100
------------ ------------ ------------- ------------ ------------ -------------
------------ ------------ ------------- ------------ ------------ -------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 93 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
SAFECO MANAGED SAFECO MUNICIPAL
BOND FUND BOND FUND
--------------------------- ----------------------------
SIX-MONTH SIX-MONTH NINE-MONTH
PERIOD ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED
JUNE 30 DEC. 31 JUNE 30 DEC. 31
(In Thousands) 1997 1996 1997 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net Investment Income $ 110 $ 208 $ 12,864 $ 19,903
Net Realized Gain (Loss) from
Investments and Foreign
Currency Transactions (73) 2 2,966 2,341
Net Change in Unrealized
Appreciation (Depreciation) 45 (210) (1,691) 7,844
------ ------ ------------- ------------
Net Change in Net Assets
Resulting from Operations 82 -- 14,139 30,088
DIVIDENDS TO SHAREHOLDERS FROM
Net Investment Income - No-Load Class (105) (206) (12,853) (19,899)
- Class A (3) (1) (8) (3)
- Class B (2) (1) (3) (1)
Net Realized Gain on Investments
- No-Load Class -- (2) -- --
- Class A -- -- -- --
- Class B -- -- -- --
------ ------ ------------- ------------
Total (110) (210) (12,864) (19,903)
NET TRUST SHARE TRANSACTIONS
No-Load Class 98 (72) (4,557) (9,855)
Class A 1 140 11 309
Class B 100 100 86 111
------ ------ ------------- ------------
Total 199 168 (4,460) (9,435)
------ ------ ------------- ------------
TOTAL CHANGE IN NET ASSETS 171 (42) (3,185) 750
NET ASSETS AT BEGINNING OF PERIOD 4,455 4,497 481,393 480,643
------ ------ ------------- ------------
NET ASSETS AT END OF PERIOD $ 4,626 $ 4,455 $ 478,208 $ 481,393
------ ------ ------------- ------------
------ ------ ------------- ------------
- ----------------------------------------------------------------------------------------------------
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES AND
AMOUNTS
SHARES:
Sales 14 30 2,610 4,689
Reinvestments 10 24 477 908
Redemptions 0 (33) (3,401) (6,271)
------ ------ ------------- ------------
NET CHANGE 24 21 (314) (674)
------ ------ ------------- ------------
------ ------ ------------- ------------
AMOUNTS:
Sales $ 114 $ 246 $ 36,110 $ 63,875
Reinvestments 85 201 6,589 12,498
Redemptions 0 (279) (47,159) (85,808)
------ ------ ------------- ------------
NET CHANGE $ 199 $ 168 $ (4,460) $ (9,435)
------ ------ ------------- ------------
------ ------ ------------- ------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 94 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SAFECO CALIFORNIA SAFECO WASHINGTON SAFECO MONEY
TAX-FREE INCOME FUND STATE MUNICIPAL BOND FUND MARKET FUND
--------------------------- ---------------------------- ----------------------------
SIX-MONTH NINE-MONTH SIX-MONTH NINE-MONTH SIX-MONTH NINE-MONTH
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
JUNE 30 DEC. 31 JUNE 30 DEC. 31 JUNE 30 DEC. 31
1997 1996 1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
NET INVESTMENT INCOME $ 1,834 $ 2,766 $ 171 $ 238 $ 4,089 $ 5,795
Net Realized Gain (Loss) from
Investments and Foreign
Currency Transactions 366 197 (9) 4 -- --
Net Change in Unrealized
Appreciation (Depreciation) (119) 2,196 37 125 -- --
------------ ------------ ------ ------ ------------ -------------
NET CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS 2,081 5,159 199 367 4,089 5,795
DIVIDENDS TO SHAREHOLDERS FROM
Net Investment Income - No-Load Class (1,829) (2,764) (160) (234) (4,078) (5,792)
- Class A (3) (1) (7) (3) (8) (2)
- Class B (2) (1) (4) (1) (3) (1)
Net Realized Gain on Investments
- No-Load Class -- (200) -- (4) -- --
- Class A -- -- -- -- -- --
- Class B -- -- -- -- -- --
------------ ------------ ------ ------ ------------ -------------
TOTAL (1,834) (2,966) (171) (242) (4,089) (5,795)
NET TRUST SHARE TRANSACTIONS
NO-LOAD CLASS 1,048 (652) 470 (52) 9,817 (3,766)
Class A -- 120 4 334 (123) 295
Class B 273 100 2 209 56 106
------------ ------------ ------ ------ ------------ -------------
TOTAL 1,321 (432) 476 491 9,750 (3,365)
------------ ------------ ------ ------ ------------ -------------
TOTAL CHANGE IN NET ASSETS 1,568 1,761 504 616 9,750 (3,365)
NET ASSETS AT BEGINNING OF PERIOD 72,307 70,546 7,105 6,489 161,757 165,122
------------ ------------ ------ ------ ------------ -------------
NET ASSETS AT END OF PERIOD $ 73,875 $ 72,307 $ 7,609 $ 7,105 $ 171,507 $ 161,757
------------ ------------ ------ ------ ------------ -------------
------------ ------------ ------ ------ ------------ -------------
- -----------------------------------------------------------------------------------------------------------------------------------
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES AND
AMOUNTS
SHARES:
SALES 836 1,648 56 78 160,314 293,668
Reinvestments 85 168 3 4 3,123 5,293
Redemptions (808) (1,849) (13) (35) (153,687) (302,326)
------------ ------------ ------ ------ ------------ -------------
NET CHANGE 113 (33) 46 47 9,750 (3,365)
------------ ------------ ------ ------ ------------ -------------
------------ ------------ ------ ------ ------------ -------------
AMOUNTS:
SALES $ 10,058 $ 19,516 $ 586 $ 813 $ 160,314 $ 293,668
Reinvestments 1,021 2,025 29 38 3,123 5,293
Redemptions (9,758) (21,973) (139) (360) (153,687) (302,326)
------------ ------------ ------ ------ ------------ -------------
NET CHANGE $ 1,321 $ (432) $ 476 $ 491 $ 9,750 $ (3,365)
------------ ------------ ------ ------ ------------ -------------
------------ ------------ ------ ------ ------------ -------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- 95 -
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL
This financial report is on 15 of the SAFECO Mutual Funds. Each Fund is a
series of one of the following trusts (each a "Trust") listed below. Each Trust
is registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company:
SAFECO Common Stock Trust
SAFECO Growth Fund
SAFECO Equity Fund
SAFECO Income Fund
SAFECO Northwest Fund
SAFECO Balanced Fund
SAFECO International Stock Fund
SAFECO Small Company Stock Fund
SAFECO U.S. Value Fund
SAFECO Taxable Bond Trust
SAFECO High-Yield Bond Fund
SAFECO Intermediate-Term U.S. Treasury Fund
SAFECO Managed Bond Trust
SAFECO Managed Bond Fund
SAFECO Tax-Exempt Bond Trust
SAFECO Municipal Bond Fund
SAFECO California Tax-Free Income Fund
SAFECO Washington State Municipal Bond Fund
SAFECO Money Market Trust
SAFECO Money Market Fund
Effective September 30, 1996, each of the Funds (except the U.S. Value and
High-Yield Funds) began issuing two classes of shares-- Class A and Class B
shares (collectively, "Advisor Classes"). Effective January 31, 1997 and April
30, 1997, the High-Yield Bond and U.S. Value Funds, respectively, also began
issuing Advisor Classes. These classes of shares are sold by financial advisors
to shareholders and have associated sales and distribution charges, unlike the
no-load class of
- 96 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
shares (which are sold directly to the shareholder with no associated sales or
distribution charges). Each class of shares represents an interest in the net
assets of the fund.
In connection with issuing the Advisor Classes, the Funds adopted a Plan of
Distribution (the "Plan"). Under the Plan, each Advisor Class (with the
exception of the Money Market Fund Advisor Classes) pays the distributor, SAFECO
Securities Corp., for selling its shares at the annual rate of .25% of the
average daily net assets of the Advisor Class. Class B shares also pay the
distributor a distribution fee at the annual rate of .75% of the average daily
net assets of the Class B shares.
Under the Plans, the distributor uses the service fees primarily to
compensate persons selling Advisor Class shares for providing ongoing services
and the maintenance of shareholder accounts. The distributor uses the
distribution fees primarily to offset the commissions it pays to financial
advisors for selling Class B shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles, which
permits management to make certain estimates and assumptions at the date of the
financial statements.
SECURITY VALUATION. Investments in equity securities are valued at the last
reported sales price, unless there are no transactions in which case they are
valued at the last reported bid price. Bonds are stated on the basis of
valuations provided by a pricing service, which uses information with respect to
transactions in bonds, quotations from bond dealers, market transactions in
comparable securities and various relationships between securities in
determining value. When valuations are not readily available, securities are
valued at fair value as determined in good faith by the board of trustees. Money
Market instruments and temporary investments are valued at amortized cost which
approximates market.
(Continued on next page.)
- 97 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
The cost of the portfolios is the same for financial statement and federal
income tax purposes. Realized gains and losses from security transactions are
determined using the identified cost basis.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS. Securities purchased on a
when-issued or delayed basis for the Taxable Bond Trust, Managed Bond Trust and
Tax-Exempt Bond Trust may be settled a month or more after the trade date. The
securities purchased are carried in the portfolio at market and are subject to
market fluctuation during this period. These securities begin earning interest
on the settlement date. As commitments to purchase when-issued securities become
fixed, the Funds segregate liquid assets in an amount equal to the total
obligation.
INCOME RECOGNITION. Dividend income less foreign taxes withheld (if any) for
the Common Stock Trust is recorded on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign securities. Bond
premiums and original issue discounts are amortized to either call or maturity
dates for the Managed Bond Trust, Tax-Exempt Bond Trust and Money Market Trust.
Market discount on bonds purchased after April 30, 1993 is recorded as taxable
income at disposition for the Tax-Exempt Bond Trust. Interest is accrued on
bonds and temporary investments daily.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. For the Growth, Northwest,
International, and Small Company Funds, net investment income is declared as a
dividend to shareholders as of the last business day (ex-dividend date) of
December. For the Equity, Income, Balanced, and U.S. Value Funds, net investment
income (if any) is distributed as of the last business day of March, June,
September and December. For the Taxable Bond Trust, Managed Bond Trust,
Tax-Exempt Bond Trust and Money Market Trust, net investment income is declared
as a dividend to shareholders as of the close of each business day and payment
is made as of the last business day of each month. Net realized gains on
investments, if any, are normally distributed to shareholders at the end of
December.
FEDERAL INCOME AND EXCISE TAXES. Each Fund intends to comply with the
requirements of the Internal Revenue Code applicable to
- 98 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
regulated investment companies by distributing substantially all taxable income
to their shareholders in a manner which results in no tax to the Funds.
Therefore, no federal income or excise tax provision is required. In addition,
the Tax-Exempt Bond Trust intends to satisfy conditions which will enable them
to pay dividends which, for shareholders, are exempt from Federal income taxes.
Any portion of dividends representing net short-term capital gains, however, is
not exempt and is treated as taxable dividends for Federal income tax purposes.
In addition, income which is derived from amortization on bonds purchased below
their issued price after April 30, 1993, is treated as ordinary income for
Federal income tax purposes.
FOREIGN CURRENCY TRANSLATION. The accounting records of the International
Fund are maintained in U.S. dollars. All assets and liabilities initially
expressed in foreign currencies are converted into U.S. dollars at prevailing
exchange rates. Purchases and sales of investment securities, and dividend and
interest income, are translated at the rates of exchange prevailing on the
respective dates of such transactions. The International Fund does not isolate
that portion of the results of operations resulting from changes in foreign
exchange rates on investments from the fluctuations arising from changes in
market prices of securities held. Such fluctuations are included with the net
realized and unrealized gain or loss from investments. Reported net realized
gains or losses from foreign currency transactions arise from gains or losses
realized between the trade and settlement dates on securities transactions, the
difference between the amounts of dividends, interest, and foreign withholding
taxes recorded on the International Fund's books and the U.S. dollar equivalent
of the amounts actually received or paid. Net unrealized foreign exchange gains
and losses arise from changes in the value of assets and liabilities other than
investments in securities, resulting from changes in the exchange rate.
FOREIGN EXCHANGE CONTRACTS. The International Fund may enter into foreign
currency exchange contracts as a way of managing foreign exchange rate risk. The
International Fund may enter into these contracts for the purchase or sale of a
specific foreign currency at a fixed price on a future date as a hedge or
cross-hedge against either
- 99 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
specific transactions or portfolio positions. The objective of the International
Fund's foreign currency hedging transactions is to reduce the risk that the U.S.
dollar value of the International Fund's foreign currency denominated securities
will decline in value due to changes in foreign currency exchange rates. All
foreign currency exchange contracts are "marked-to-market" daily at the
applicable translation rates resulting in unrealized gains or losses. Realized
and unrealized gains or losses on foreign currency contracts are recorded on
settlement date of the foreign currency exchange contract and are included in
the Statements of Assets and Liabilities and the Statement of Operations. Risks
may arise upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
- 100 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. INVESTMENT TRANSACTIONS
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO SAFECO
GROWTH EQUITY INCOME NORTHWEST
(In Thousands) FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PURCHASES* FOR THE PERIOD ENDED
JUNE 30, 1997 $ 181,839 $ 429,963 $ 98,173 $ 13,848
---------- -------- ---------- -------------
---------- -------- ---------- -------------
SALES** FOR THE PERIOD ENDED
JUNE 30, 1997 $ 157,967 $ 166,376 $ 85,124 $ 11,854
---------- -------- ---------- -------------
---------- -------- ---------- -------------
</TABLE>
<TABLE>
<CAPTION>
SAFECO
SAFECO SAFECO SMALL SAFECO
BALANCED INTERNATIONAL COMPANY U.S. VALUE
(In Thousands) FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PURCHASES* FOR THE PERIOD ENDED
JUNE 30, 1997+ $ 8,441 $ 2,780 $ 5,428 $ 7,417
---------- -------- ---------- -------------
---------- -------- ---------- -------------
SALES** FOR THE PERIOD ENDED
JUNE 30, 1997+ $ 6,176 $ 741 $ 4,032 $ 222
---------- -------- ---------- -------------
---------- -------- ---------- -------------
</TABLE>
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO SAFECO
HIGH-YIELD INTERMEDIATE-TERM MANAGED MUNICIPAL
(In Thousands) BOND FUND U.S TREASURY FUND BOND FUND BOND FUND
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PURCHASES* FOR THE PERIOD ENDED
JUNE 30, 1997 $ 25,949 $ 8,965 $ 5,834 $ 39,786
---------- -------- ---------- -------------
---------- -------- ---------- -------------
SALES** FOR THE PERIOD ENDED
JUNE 30, 1997 $ 19,445 $ 9,118 $ 5,718 $ 46,044
---------- -------- ---------- -------------
---------- -------- ---------- -------------
</TABLE>
<TABLE>
<CAPTION>
SAFECO SAFECO
CALIFORNIA WASHINGTON
TAX-FREE STATE
INCOME MUNICIPAL
(In Thousands) FUND BOND FUND
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
PURCHASES* FOR THE PERIOD ENDED
JUNE 30, 1997 $ 9,561 $ 1,246
---------- -------------
---------- -------------
SALES** FOR THE PERIOD ENDED
JUNE 30, 1997 $ 7,216 $ 858
---------- -------------
---------- -------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
* Excludes short-term securities. Purchases include $5,169, $8,965, and $4,186
of U.S. Government obligations for Balanced, Intermediate-Term U.S. Treasury,
and Managed Bond Funds, respectively.
** Excludes short-term securities. Sales include $4,365, $9,118, and $4,486 of
U.S. Government obligations for Balanced, Intermediate-Term U.S. Treasury,
and Managed Bond Funds, respectively.
+ U.S. Value Fund--April 30, 1997 (Commencement of Operations) to June 30,
1997.
- 101 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
4. COMPONENTS OF NET ASSETS
At June 30, 1997, the components of net assets were as follows:
<TABLE>
<CAPTION>
GROWTH EQUITY INCOME NORTHWEST
(In Thousands) FUND FUND FUND FUND
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggregate Gross Unrealized Appreciation
on Investments and Forward Contracts
in Which There Is an Excess of Value
Over Identified Cost $ 61,803 $ 292,651 $ 87,996 $ 19,483
Aggregate Gross Unrealized Depreciation
on Investments and Forward Contracts
in Which There Is an Excess of
Identified Cost Over Value (20,194) (24,753) (5,949) (1,514)
----------- ----------------- ------------ ------------
NET UNREALIZED APPRECIATION
(DEPRECIATION) 41,609 267,898 82,047 17,969
ACCUMULATED NET INVESTMENT INCOME (LOSS) (428) -- -- 38
ACCUMULATED NET REALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS 41,210 41,453 17,848 545
PAID IN CAPITAL (PAR VALUE $.001,
UNLIMITED SHARES AUTHORIZED) 180,009 991,177 251,755 35,205
----------- ----------------- ------------ ------------
NET ASSETS AT JUNE 30, 1997 $ 262,400 $1,300,528 $ 351,650 $ 53,757
----------- ----------------- ------------ ------------
----------- ----------------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
SMALL
BALANCED INTERNATIONAL COMPANY U.S. VALUE
(In Thousands) FUND FUND FUND FUND
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggregate Gross Unrealized Appreciation
on Investments and Forward Contracts
in Which There Is an Excess of Value
Over Identified Cost $ 1,292 $ 2,536 $ 3,442 $ 629
Aggregate Gross Unrealized Depreciation
on Investments and Forward Contracts
in Which There Is an Excess of
Identified Cost Over Value (107) (512) (780) (53)
----------- ----------------- ------------ ------------
NET UNREALIZED APPRECIATION
(DEPRECIATION) 1,185 2,024 2,662 576
ACCUMULATED NET INVESTMENT INCOME (LOSS) -- 84 (40) --
ACCUMULATED NET REALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS 117 183 (181)* 14
PAID IN CAPITAL (PAR VALUE $.001,
UNLIMITED SHARES AUTHORIZED) 10,208 12,064 13,934 7,394
----------- ----------------- ------------ ------------
NET ASSETS AT JUNE 30, 1997 $ 11,510 $ 14,355 $ 16,375 $ 7,984
----------- ----------------- ------------ ------------
----------- ----------------- ------------ ------------
</TABLE>
- 102 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
HIGH YIELD INTERMEDIATE-TERM MANAGED MUNICIPAL
(In Thousands) BOND FUND U.S TREASURY FUND BOND FUND BOND FUND
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggregate Gross Unrealized Appreciation
on Investments and Forward Contracts
in Which There Is an Excess of Value
Over Identified Cost $ 2,132 $ 77 $ 43 $ 48,782
Aggregate Gross Unrealized Depreciation
on Investments and Forward Contracts
in Which There Is an Excess of
Identified Cost Over Value (236) (116) (1) (99)
----------- ----------------- ------------ ------------
NET UNREALIZED APPRECIATION
(DEPRECIATION) 1,896 (39) 42 48,683
ACCUMULATED NET INVESTMENT INCOME (LOSS) -- -- -- --
ACCUMULATED NET REALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS (1,317)* (281)* (73)* 1,681
PAID IN CAPITAL (PAR VALUE $.001,
UNLIMITED SHARES AUTHORIZED) 57,982 15,632 4,657 427,844
----------- ----------------- ------------ ------------
NET ASSETS AT JUNE 30, 1997 $ 58,561 $ 15,312 $ 4,626 $ 478,208
----------- ----------------- ------------ ------------
----------- ----------------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
WASHINGTON
CALIFORNIA STATE
TAX-FREE MUNICIPAL
(In Thousands) INCOME FUND BOND FUND
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aggregate Gross Unrealized Appreciation
on Investments and Forward Contracts
in Which There Is an Excess of Value
Over Identified Cost $ 6,058 $ 331
Aggregate Gross Unrealized Depreciation
on Investments and Forward Contracts
in Which There Is an Excess of
Identified Cost Over Value (58) (6)
------------ ------------
NET UNREALIZED APPRECIATION
(DEPRECIATION) 6,000 325
ACCUMULATED NET INVESTMENT INCOME (LOSS) -- --
ACCUMULATED NET REALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS 366 (9)*
PAID IN CAPITAL (PAR VALUE $.001,
UNLIMITED SHARES AUTHORIZED) 67,509 7,293
------------ ------------
NET ASSETS AT JUNE 30, 1997 $ 73,875 $ 7,609
------------ ------------
------------ ------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
* The above accumulated net realized losses on investment transactions will
represent capital loss carryforwards for Federal Income Tax purposes, which
expire as follows:
<TABLE>
<CAPTION>
EXPIRATION
AMOUNTS DATE
--------- --------------
<S> <C> <C>
Small Company Fund $ (181) 2005
High-Yield Bond Fund (1,317) 1997-2005
Intermediate-Term U.S. Treasury Fund (281) 2001-2005
Managed Bond Fund (73) 2005
Washington State Municipal Bond Fund (9) 2005
</TABLE>
- 103 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
5. INVESTMENT ADVISORY FEES AND OTHER
TRANSACTIONS WITH AFFILIATES
Investment Advisory Fees. SAFECO Asset Management Company receives investment
advisory fees from the Funds. These fees are based on a percentage of each day's
net assets, which, on an annual basis, are as follows:
<TABLE>
<S> <C>
EQUITY, INCOME AND GROWTH FUNDS: NORTHWEST FUND:
First $100 million .75% First $250 million .75%
Next $150 million .65 Next $250 million .65
Next $250 million .55 Next $250 million .55
Over $500 million .45 Over $750 million .45
BALANCED AND U.S. VALUE FUNDS: INTERNATIONAL FUND:
First $250 million .75% First $250 million 1.10%
Next $250 million .65 Next $250 million 1.00
Over $500 million .55 Over $500 million .90
SMALL COMPANY FUND: INTERMEDIATE-TERM U.S. TREASURY FUND:
First $250 million .85% First $250 million .55%
Next $250 million .75 Next $250 million .45
Over $500 million .65 Next $250 million .35
Over $750 million .25
HIGH-YIELD BOND FUND MANAGED BOND FUND:
First $250 million .65% First $100 million .50%
Next $250 million .55 Next $150 million .40
Next $250 million .45 Over $250 million .35
Over $750 million .35
MUNICIPAL AND CALIFORNIA FUNDS: MONEY MARKET FUND:
First $100 million .55% First $250 million .50%
Next $150 million .45 Next $250 million .40
Next $250 million .35 Next $250 million .30
Over $500 million .25 Over $750 million .25
</TABLE>
- 104 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
SAFECO Asset Management Company pays sub-advisory fees to Bank of Ireland
Asset Management Company for providing investment research and advice to the
International Fund.
TRANSFER AGENT FEES. SAFECO Services Corporation receives transfer agent
fees.
NOTES PAYABLE AND INTEREST EXPENSE. The Funds may borrow money for temporary
purposes from SAFECO Corporation or its affiliates. Interest rates equivalent to
commercial bank interest rates are charged on loans over $100,000. No interest
is charged on loans under $100,000. At June 30, 1997 the Growth Fund had a 5.66%
note payable of $1,260,000 to SAFECO Life Insurance Company of America. The
Municipal Bond Fund had a 5.66% note payable of $1,405,000 to SAFECO Life
Annuity Company of America. These notes were repaid on July 2, and July 1, 1997,
respectively.
AFFILIATE OWNERSHIP. At June 30, 1997, SAFECO Insurance Company of America,
owned 500,000 shares (16% of outstanding shares) of the Northwest Fund, 500,000
shares (33%) of the Intermediate-Term U.S. Treasury Fund and 502,372 shares
(70%) of the Washington Municipal Bond Fund; SAFECO Asset Management Company
owned 500,000 shares (44%) of the International Fund, 500,000 shares (52%) of
the Balanced Fund, 500,000 shares (69%) of the U.S. Value Fund, and 39,599
shares (7%) of the Managed Bond Fund; SAFECO Corporation owned 500,000 shares
(39%) of the Small Company Fund and 500,000 shares (8%) of the High Yield Bond
Fund.
DEFERRED ORGANIZATION EXPENSE. Costs related to the organization of the
Balanced, International, Small Company, U.S. Value, Managed Bond and Washington
Municipal Bond Funds have been deferred and are being amortized to operations
over a period of sixty months. These costs were advanced by the affiliates and
are being reimbursed by the Fund over a sixty-month period.
EXPENSE REIMBURSEMENT. During the six-month period ended June 30, 1997,
SAFECO Asset Management Company voluntarily reimbursed certain expenses of the
International Fund.
- 105 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
6. INVESTMENTS IN AFFILIATES
Each of the companies listed below is an affiliate of the Growth Fund because
the Fund owned at least 5% of the company's voting securities during the
six-month period ended June 30, 1997.
<TABLE>
<CAPTION>
(In Thousands) SHARES AT SHARES AT MARKET VALUE
BEGINNING END OF JUNE 30,
SECURITY OF PERIOD ADDITIONS REDUCTIONS PERIOD DIVIDENDS 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
American Building Co. 429 -- (13) 416 -- $ 11,219
American Coin
Merchandising, Inc. 500 -- -- 500 -- 5,438
Damark International, Inc. 659 22 (157) 524 -- 8,119
Harold's Stores, Inc. 379 126 -- 505 -- 4,483
Lifeline Systems, Inc. 504 21 -- 525 -- 10,103
Nastech Pharmaceutical
Co., Inc. -- 328 -- 328 -- 3,443
Open Plan Systems, Inc. 244 -- -- 244 -- 978
Penederm, Inc. 724 4 -- 728 -- 9,824
Rent-Way, Inc. 362 11 (15) 358 -- 5,281
Weider Nutrition
International, Inc. -- 808 -- 808 30 12,833
------
$ 71,721
------
------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
7. COMMITMENTS.
At June 30, 1997, the International Fund had open forward foreign currency
exchange contracts obligating it to receive or deliver the following foreign
currencies:
<TABLE>
<CAPTION>
U.S. DOLLAR UNREALIZED
CURRENCY IN EXCHANGE SETTLEMENT VALUE AS OF APPRECIATION
TO BE DELIVERED FOR DATE JUNE 30, 1997 (DEPRECIATION)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
400 British Pound $ 651 9/23/97 $ 664 $ (13)
314 Dutch Guilder 165 8/20/97 161 4
470 Dutch Guilder 244 7/16/97 240 4
537 Dutch Guilder 278 9/05/97 275 3
509 German Marks 303 9/12/97 294 9
416 Swiss Francs 290 7/23/97 286 4
435 Swiss Francs 307 8/13/97 300 7
---
$ 18
---
---
- ---------------------------------------------------------------------------------------
</TABLE>
- 106 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO GROWTH FUND
NO-LOAD CLASS
<TABLE>
<CAPTION>
SIX-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 FOR THE YEAR ENDED SEPTEMBER 30
-----------------------------------------------------------------------------------
1997 1996 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING OF PERIOD $ 16.97 $ 15.45 $ 15.83 $ 17.37 $ 19.20 $ 13.98
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.03) (0.02) (0.02) 0.07 (0.02) (0.02)
Net Realized and Unrealized Gain
(Loss) on Investments 3.65 1.77 2.24 4.07 0.78 5.39
------- ------- --------- --------- --------- ---------
Total from Investment Operations 3.62 1.75 2.22 4.14 0.76 5.37
LESS DISTRIBUTIONS
Dividends from
Net Investment Income -- -- -- (0.07) -- --
Distributions from Realized Gains -- (0.23) (2.60) (5.61) (2.59) (0.15)
------- ------- --------- --------- --------- ---------
Total Distributions -- (0.23) (2.60) (5.68) (2.59) (0.15)
------- ------- --------- --------- --------- ---------
NET ASSET VALUE AT END OF PERIOD $ 20.59 $ 16.97 $ 15.45 $ 15.83 $ 17.37 $ 19.20
------- ------- --------- --------- --------- ---------
------- ------- --------- --------- --------- ---------
TOTAL RETURN 21.33%* 11.35%* 14.16% 23.93% 3.88% 38.43%
NET ASSETS AT END OF PERIOD (000'S) $ 261,662 $ 195,760 $ 179,574 $ 176,483 $ 156,108 $ 158,723
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.93%** 0.99%** 1.02% 0.98% 0.95% 0.91%
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET
ASSETS -0.37%** -0.51%** -0.14% 0.34% -0.12% -0.10%
PORTFOLIO TURNOVER RATE 138.82%** 82.93%** 124.79% 110.44% 71.18% 57.19%
AVERAGE COMMISSION RATE PAID $ 0.0500 $ 0.0477 $ 0.0548 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
- 107 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO GROWTH FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------------- -----------------------------
SIX-MONTH THREE-MONTH SIX-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 JUNE 30 DECEMBER 31
-------------------------------------------------------------
1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 16.97 $ 15.45 $ 16.94 $ 15.45
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.04) (0.02) (0.10) (0.05)
Net Realized and Unrealized Gain on
Investments 3.62 1.77 3.61 1.77
------------- ------------- ------------- -------------
Total from Investment Operations 3.58 1.75 3.51 1.72
LESS DISTRIBUTIONS
Dividends from Net Investment Income -- -- -- --
Distributions from Realized Gains -- (0.23) -- (0.23)
------------- ------------- ------------- -------------
Total Distributions -- (0.23) -- (0.23)
------------- ------------- ------------- -------------
NET ASSET VALUE AT END OF PERIOD $ 20.55 $ 16.97 $ 20.45 $ 16.94
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
TOTAL RETURN+ 21.10%* 11.35%* 20.72%* 11.15%*
NET ASSETS AT END OF PERIOD (000'S) $ 471 $ 187 $ 267 $ 116
RATIO OF EXPENSES TO AVERAGE NET
ASSETS** 1.26% 1.12% 1.93% 1.87%
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET
ASSETS** -0.70% -0.58% -1.38% -1.38%
PORTFOLIO TURNOVER RATE** 138.82% 82.93% 138.82% 82.93%
AVERAGE COMMISSION RATE PAID $ 0.0500 $ 0.0477 $ 0.0500 $ 0.0477
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 108 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO EQUITY FUND
NO-LOAD CLASS
<TABLE>
<CAPTION>
SIX-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 FOR THE YEAR ENDED SEPTEMBER 30
-----------------------------------------------------------------------------------
1997 1996 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 16.60 $ 15.85 $ 15.31 $ 13.89 $ 12.54 $ 9.53
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.11 0.06 0.28 0.34 0.23 0.17
Net Realized and Unrealized Gain on
Investments 2.61 1.33 2.42 2.59 1.83 3.79
-------- ------- --------- --------- --------- ---------
Total from Investment Operations 2.72 1.39 2.70 2.93 2.06 3.96
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.11) (0.06) (0.28) (0.34) (0.23) (0.17)
Distributions from Realized Gains -- (0.58) (1.88) (1.17) (0.48) (0.78)
-------- ------- --------- --------- --------- ---------
Total Distributions (0.11) (0.64) (2.16) (1.51) (0.71) (0.95)
-------- ------- --------- --------- --------- ---------
NET ASSET VALUE AT END OF PERIOD $ 19.21 $ 16.60 $ 15.85 $ 15.31 $ 13.89 $ 12.54
-------- ------- --------- --------- --------- ---------
-------- ------- --------- --------- --------- ---------
TOTAL RETURN 16.42%* 8.79%* 18.04% 21.59% 16.51% 41.77%
NET ASSETS AT END OF PERIOD (000'S) $1,295,127 $ 849,831 $ 725,780 $ 598,582 $ 412,805 $ 148,894
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.73%** 0.78%** 0.79% 0.84% 0.85% 0.94%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET
ASSETS 1.32%** 1.48%** 1.74% 2.38% 1.72% 1.50%
PORTFOLIO TURNOVER RATE 32.84%** 59.34%** 74.07% 56.14% 33.33% 37.74%
AVERAGE COMMISSION RATE PAID $ 0.0579 $ 0.0571 $ 0.0587 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
- 109 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO EQUITY FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------------- -----------------------------
SIX-MONTH THREE-MONTH SIX-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 JUNE 30 DECEMBER 31
-------------------------------------------------------------
1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 16.62 $ 15.85 $ 16.60 $ 15.85
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.08 0.04 0.01 0.02
Net Realized and Unrealized Gain on
Investments 2.59 1.35 2.62 1.33
------------- ------------- ------------- -------------
Total from Investment Operations 2.67 1.39 2.63 1.35
LESS DISTRIBUTIONS
Dividends from Net Investment Income (0.08) (0.04) (0.01) (0.02)
Distributions from Realized Gains -- (0.58) -- (0.58)
------------- ------------- ------------- -------------
Total Distributions (0.08) (0.62) (0.01) (0.60)
------------- ------------- ------------- -------------
NET ASSET VALUE AT END OF PERIOD $ 19.21 $ 16.62 $ 19.22 $ 16.60
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
TOTAL RETURN+ 16.11%* 8.78%* 15.85%* 8.50%*
NET ASSETS AT END OF PERIOD (000'S) $ 4,044 $ 2,894 $ 1,357 $ 355
RATIO OF EXPENSES TO AVERAGE NET
ASSETS** 1.19% 0.97% 1.84% 1.75%
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET
ASSETS** 0.87% 1.38% 0.18% 0.51%
PORTFOLIO TURNOVER RATE** 32.84% 59.34% 32.84% 59.34%
AVERAGE COMMISSION RATE PAID $ 0.0579 $ 0.0571 $ 0.0579 $ 0.0571
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 110 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO INCOME FUND
NO-LOAD CLASS
<TABLE>
<CAPTION>
THREE-MONTH
SIX-MONTH PERIOD PERIOD ENDED
ENDED JUNE 30 DECEMBER 31 FOR THE YEAR ENDED SEPTEMBER 30
-----------------------------------------------------------------------------------
1997 1996 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING OF PERIOD $ 21.13 $ 20.03 $ 19.11 $ 17.25 $ 17.79 $ 16.27
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.33 0.15 0.73 0.82 0.81 0.78
Net Realized and Unrealized Gain on
Investments 2.49 1.63 2.84 2.71 (0.30) 1.52
------- ------- --------- --------- --------- ---------
Total from Investment Operations 2.82 1.78 3.57 3.53 0.51 2.30
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.33) (0.15) (0.73) (0.82) (0.81) (0.78)
Distributions from Realized Gains -- (0.53) (1.92) (0.85) (0.24) --
------- ------- --------- --------- --------- ---------
Total Distributions (0.33) (0.68) (2.65) (1.67) (1.05) (0.78)
------- ------- --------- --------- --------- ---------
NET ASSET VALUE AT END OF PERIOD $ 23.62 $ 21.13 $ 20.03 $ 19.11 $ 17.25 $ 17.79
------- ------- --------- --------- --------- ---------
------- ------- --------- --------- --------- ---------
TOTAL RETURN 13.41%* 8.89%* 18.98% 21.04% 2.98% 14.35%
NET ASSETS AT END OF PERIOD (000'S) $ 351,034 $ 289,968 $ 260,023 $ 217,870 $ 190,610 $ 203,019
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.86%** 0.89%** 0.86% 0.87% 0.86% 0.90%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET
ASSETS 3.04%** 2.89%** 3.56% 4.55% 4.59% 4.55%
PORTFOLIO TURNOVER RATE 57.54%** 37.84%** 50.11% 31.12% 19.30% 20.74%
AVERAGE COMMISSION RATE PAID $ 0.0581 $ 0.0573 $ 0.0591 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
- 111 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO INCOME FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------------- -----------------------------
SIX-MONTH THREE-MONTH SIX-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 JUNE 30 DECEMBER 31
-------------------------------------------------------------
1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 21.15 $ 20.03 $ 21.12 $ 20.03
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.25 0.12 0.21 0.10
Net Realized and Unrealized Gain on
Investments 2.57 1.65 2.53 1.62
------------- ------------- ------------- -------------
Total from Investment Operations 2.82 1.77 2.74 1.72
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.25) (0.12) (0.21) (0.10)
Distributions from Realized Gains -- (0.53) -- (0.53)
------------- ------------- ------------- -------------
Total Distributions (0.25) (0.65) (0.21) (0.63)
------------- ------------- ------------- -------------
NET ASSET VALUE AT END OF PERIOD $ 23.72 $ 21.15 $ 23.65 $ 21.12
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
TOTAL RETURN+ 13.39%* 8.85%* 13.02%* 8.60%*
NET ASSETS AT END OF PERIOD (000'S) $ 417 $ 193 $ 199 $ 112
RATIO OF EXPENSES TO AVERAGE NET
ASSETS** 1.11% 1.03% 1.87% 1.79%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET
ASSETS** 2.87% 2.66% 2.09% 1.99%
PORTFOLIO TURNOVER RATE** 57.54% 37.84% 57.54% 37.84%
AVERAGE COMMISSION RATE PAID $ 0.0581 $ 0.0573 $ 0.0581 $ 0.0573
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 112 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO NORTHWEST FUND
NO-LOAD CLASS
<TABLE>
<CAPTION>
THREE-MONTH NINE-MONTH
SIX-MONTH PERIOD PERIOD ENDED FOR THE YEAR ENDED PERIOD ENDED
ENDED JUNE 30 DECEMBER 31 SEPTEMBER 30 SEPTEMBER 30
------------------------------------------------------------------------------------------
1997 1996 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF
PERIOD $ 14.07 $ 13.78 $ 14.41 $ 12.59 $ 12.34 $ 12.59
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.01 (0.01) 0.02 0.04 0.04 0.02
Net Realized and Unrealized Gain
(Loss) on Investments 2.82 0.30 1.32 2.35 0.59 (0.25)
-------- -------- --------- --------- --------- --------
Total from Investment
Operations 2.83 0.29 1.34 2.39 0.63 (0.23)
LESS DISTRIBUTIONS
Dividends from
Net Investment Income -- -- (0.02) (0.04) (0.04) (0.02)
Distributions from Realized Gains -- -- (1.95) (0.53) (0.34) --
-------- -------- --------- --------- --------- --------
Total Distributions -- -- (1.97) (0.57) (0.38) (0.02)
-------- -------- --------- --------- --------- --------
NET ASSET VALUE AT END OF PERIOD $ 16.90 $ 14.07 $ 13.78 $ 14.41 $ 12.59 $ 12.34
-------- -------- --------- --------- --------- --------
-------- -------- --------- --------- --------- --------
TOTAL RETURN* 20.11%* 2.10%* 9.61% 19.01% 5.19% (1.86%)*
NET ASSETS AT END OF PERIOD (000'S) $ 52,835 $ 43,345 $ 43,128 $ 40,140 $ 36,383 $ 39,631
RATIO OF EXPENSES TO AVERAGE NET
ASSETS** 1.12%** 1.25%** 1.07% 1.09% 1.06% 1.11%**
RATIO OF NET INVESTMENT INCOME
(LOSS) TO AVERAGE NET
ASSETS** 0.17%** -0.31%** 0.11% 0.31% 0.33% 0.18%**
PORTFOLIO TURNOVER RATE** 51.37%** 67.32%** 35.69% 19.59% 18.46% 14.05%**
AVERAGE COMMISSION RATE PAID $ 0.0576 $ 0.0482 $ 0.0591 -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
- 113 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO NORTHWEST FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------------- -----------------------------
SIX-MONTH THREE-MONTH SIX-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 JUNE 30 DECEMBER 31
-------------------------------------------------------------
1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 14.06 $ 13.78 $ 14.03 $ 13.78
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.01) (0.01) (0.06) (0.03)
Net Realized and Unrealized Gain on
Investments 2.81 0.29 2.80 0.28
------------- ------------- ------------- -------------
Total from Investment Operations 2.80 0.28 2.74 0.25
LESS DISTRIBUTIONS
Dividends from
Net Investment Income -- -- -- --
Distributions from Realized Gains -- -- -- --
------------- ------------- ------------- -------------
Total Distributions -- -- -- --
------------- ------------- ------------- -------------
NET ASSET VALUE AT END OF PERIOD $ 16.86 $ 14.06 $ 16.77 $ 14.03
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
TOTAL RETURN+ 19.91%* 2.03%* 19.53%* 1.81%*
NET ASSETS AT END OF PERIOD (000'S) $ 581 $ 369 $ 341 $ 232
RATIO OF EXPENSES TO AVERAGE NET
ASSETS** 1.49% 1.40% 2.18% 2.18%
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET
ASSETS** -0.20% -0.39% -0.89% -1.19%
PORTFOLIO TURNOVER RATE** 51.37% 67.32% 51.37% 67.32%
AVERAGE COMMISSION RATE PAID $ 0.0576 $ 0.0482 $ 0.0576 $ 0.0482
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges.If sales charges were included, the
total return would be lower.
- 114 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO INTERNATIONAL FUND
NO-LOAD CLASS
<TABLE>
<CAPTION>
JANUARY 31, 1996
(COMMENCEMENT
SIX-MONTH THREE-MONTH OF OPERATIONS)
PERIOD ENDED PERIOD ENDED TO
JUNE 30 DECEMBER 31 SEPTEMBER 30
------------------------------------------------------
1997 1996 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 11.29 $ 10.39 $ 10.00
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.22 -- 0.06
Net Realized and Unrealized Gain on
Investments
and Foreign Currency Transactions 0.76 0.96 0.39
------- ------- -------
Total from Investment Operations 0.98 0.96 0.45
LESS DISTRIBUTIONS
Dividends from
Net Investment Income -- (0.06) (0.06)
Distributions from Realized Gains -- -- --
------- ------- -------
Total Distributions -- (0.06) (0.06)
------- ------- -------
NET ASSET VALUE AT END OF PERIOD $ 12.27 $ 11.29 $ 10.39
------- ------- -------
------- ------- -------
TOTAL RETURN* 8.68% 9.27% 4.54%
NET ASSETS AT END OF PERIOD (000'S) $ 13,884 $ 11,157 $ 8,323
RATIO OF EXPENSES TO AVERAGE NET
ASSETS** 1.53%+ 1.37%+ 2.36%
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET
ASSETS** 1.35% (0.19%) 0.93%
PORTFOLIO TURNOVER RATE** 12.55% 18.51% 15.73%
AVERAGE COMMISSION RATE PAID $ 0.0206 $ 0.0223 $ 0.0225
- ------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Net of reimbursements by advisor. Absent the reimbursements, the ratio of
expenses to average net assets would be 1.81% and 1.68% for the periods ended
June 30, 1997 and December 31, 1996, respectively.
- 115 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO INTERNATIONAL FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------------- -----------------------------
SIX-MONTH THREE-MONTH SIX-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 JUNE 30 DECEMBER 31
-------------------------------------------------------------
1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 11.29 $ 10.39 $ 11.28 $ 10.39
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.18 -- 0.14 --
Net Realized and Unrealized Gain on
Investments
and Foreign Currency Transactions 0.78 0.95 0.78 0.93
------------- ------------- ------------- -------------
Total from Investment Operations 0.96 0.95 0.92 0.93
LESS DISTRIBUTIONS
Dividends from
Net Investment Income -- (0.05) -- (0.04)
Distributions from Realized Gains -- -- -- --
------------- ------------- ------------- -------------
Total Distributions -- (0.05) -- (0.04)
------------- ------------- ------------- -------------
NET ASSET VALUE AT END OF PERIOD $ 12.25 $ 11.29 $ 12.20 $ 11.28
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
TOTAL RETURN* 8.50%+ 9.19%+ 8.16%+ 8.96%+
NET ASSETS AT END OF PERIOD (000'S) $ 232 $ 154 $ 239 $ 112
RATIO OF EXPENSES TO AVERAGE NET
ASSETS** 1.71%++ 1.41%++ 2.52%++ 2.17%++
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET
ASSETS** 1.20% (0.23%) 0.52% (1.15%)
PORTFOLIO TURNOVER RATE** 12.55% 18.51% 12.55% 18.51%
AVERAGE COMMISSION RATE PAID $ 0.0206 $ 0.0223 $ 0.0206 $ 0.0223
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
++ Net of reimbursements by advisor. Absent the reimbursements, the ratio of
expenses to average net assets would have been 1.99% and 1.72% for the
periods ended June 30, 1997 and December 31, 1996, respectively, for Class
A, and 2.80% and 2.47% for Class B.
- 116 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO BALANCED FUND
NO-LOAD CLASS
<TABLE>
<CAPTION>
JANUARY 31, 1996
(COMMENCEMENT
SIX-MONTH THREE-MONTH OF OPERATIONS)
PERIOD ENDED PERIOD ENDED TO
JUNE 30 DECEMBER 31 SEPTEMBER 30
------------------------------------------------------
1997 1996 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 10.70 $ 10.38 $ 10.00
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.15 0.08 0.21
Net Realized and Unrealized Gain on
Investments 0.87 0.45 0.39
------- ------- -------
Total from Investment Operations 1.02 0.53 0.60
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.15) (0.08) (0.21)
Distributions from Realized Gains -- (0.13) (0.01)
------- ------- -------
Total Distributions (0.15) (0.21) (0.22)
------- ------- -------
NET ASSET VALUE AT END OF PERIOD $ 11.57 $ 10.70 $ 10.38
------- ------- -------
------- ------- -------
TOTAL RETURN* 9.60% 5.11% 5.99%
NET ASSETS AT END OF PERIOD (000'S) $ 11,181 $ 8,262 $ 7,632
RATIO OF EXPENSES TO AVERAGE NET
ASSETS** 1.23% 1.16%+ 1.32%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET
ASSETS** 2.90% 3.19% 3.21%
PORTFOLIO TURNOVER RATE** 129.82% 36.10% 143.87%
AVERAGE COMMISSION RATE PAID $ 0.0499 $ 0.0548 $ 0.0560
- ------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Net of reimbursements by advisor. Absent the reimbursements, the ratio of
expenses to average net assets would be 1.68%.
- 117 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO BALANCED FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------------- -----------------------------
SIX-MONTH THREE-MONTH SIX-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 JUNE 30 DECEMBER 31
-------------------------------------------------------------
1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 10.69 $ 10.38 $ 10.70 $ 10.38
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.14 0.09 0.09 0.06
Net Realized and Unrealized Gain on
Investments 0.86 0.44 0.85 0.45
------------- ------------- ------------- -------------
Total from Investment Operations 1.00 0.53 0.94 0.51
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.14) (0.09) (0.09) (0.06)
Distributions from Realized Gains -- (0.13) -- (0.13)
------------- ------------- ------------- -------------
Total Distributions (0.14) (0.22) (0.09) (0.19)
------------- ------------- ------------- -------------
NET ASSET VALUE AT END OF PERIOD $ 11.55 $ 10.69 $ 11.55 $ 10.70
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
TOTAL RETURN* 9.42%+ 5.07%+ 8.85%+ 4.85%+
NET ASSETS AT END OF PERIOD (000'S) $ 147 $ 110 $ 182 $ 115
RATIO OF EXPENSES TO AVERAGE NET
ASSETS** 1.48% 1.35%++ 2.28% 2.11%++
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET
ASSETS** 2.66% 3.01% 1.85% 2.23%
PORTFOLIO TURNOVER RATE** 129.82% 36.10% 129.82% 36.10%
AVERAGE COMMISSION RATE PAID $ 0.0499 $ 0.0548 $ 0.0499 $ 0.0548
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
++ Net of reimbursements by advisor. Absent the reimbursements, the ratio of
expenses to average net assets would be 1.70% and 2.46% for Class A and
Class B, respectively.
- 118 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO SMALL COMPANY FUND
NO-LOAD CLASS
<TABLE>
<CAPTION>
JANUARY 31, 1996
(COMMENCEMENT
SIX-MONTH THREE-MONTH OF OPERATIONS)
PERIOD ENDED PERIOD ENDED TO
JUNE 30 DECEMBER 31 SEPTEMBER 30
------------------------------------------------------
1997 1996 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 11.81 $ 11.51 $ 10.00
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.03) (0.01) (0.01)
Net Realized and Unrealized Gain on
Investments 0.94 0.31 2.19
------- ------- -------
Total from Investment Operations 0.91 0.30 2.18
LESS DISTRIBUTIONS
Dividends from
Net Investment Income -- -- --
Distributions from Realized Gains -- -- (0.67)
------- ------- -------
Total Distributions -- -- (0.67)
------- ------- -------
NET ASSET VALUE AT END OF PERIOD $ 12.72 $ 11.81 $ 11.51
------- ------- -------
------- ------- -------
TOTAL RETURN* 7.71% 2.61% 21.83%
NET ASSETS AT END OF PERIOD (000'S) $ 15,990 $ 13,169 $ 12,552
RATIO OF EXPENSES TO AVERAGE NET
ASSETS** 1.38% 1.35%+ 1.49%
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET
ASSETS** -0.55% -0.44% -0.24%
PORTFOLIO TURNOVER RATE** 59.39% 73.47% 91.03%
AVERAGE COMMISSION RATE PAID $ 0.0526 $ 0.0496 $ 0.0510
- ------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Net of reimbursements by advisor. Absent the reimbursements, the ratio of
expenses to average net assets would be 1.68%.
- 119 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO SMALL COMPANY FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------------- -----------------------------
SIX-MONTH THREE-MONTH SIX-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 JUNE 30 DECEMBER 31
-------------------------------------------------------------
1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 11.81 $ 11.51 $ 11.79 $ 11.51
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.03) (0.01) (0.07) (0.04)
Net Realized and Unrealized Gain on
Investments 0.93 0.31 0.91 0.32
------------- ------------- ------------- -------------
Total from Investment Operations 0.90 0.30 0.84 0.28
LESS DISTRIBUTIONS
Dividends from
Net Investment Income -- -- -- --
Distributions from Realized Gains -- -- -- --
------------- ------------- ------------- -------------
Total Distributions -- -- -- --
------------- ------------- ------------- -------------
NET ASSET VALUE AT END OF PERIOD $ 12.71 $ 11.81 $ 12.63 $ 11.79
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
TOTAL RETURN* 7.62%+ 2.61%+ 7.12%+ 2.43%+
NET ASSETS AT END OF PERIOD (000'S) $ 203 $ 135 $ 182 $ 103
RATIO OF EXPENSES TO AVERAGE NET
ASSETS** 1.48% 1.42%++ 2.33% 2.18%++
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET
ASSETS** -0.66% -0.50% -1.50% -1.28%
PORTFOLIO TURNOVER RATE** 59.39% 73.47% 59.39% 73.47%
AVERAGE COMMISSION RATE PAID $ 0.0526 $ 0.0496 $ 0.0526 $ 0.0496
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
++ Net of reimbursements by advisor. Absent the reimbursements, the ratio of
expenses to average net assets would be 1.62% and 2.41% for Class A and Class
B, respectively.
- 120 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO U.S. VALUE FUND
<TABLE>
<CAPTION>
NO-LOAD CLASS A CLASS B
---------------- ---------------- ----------------
APRIL 30 APRIL 30, 1997 APRIL 30, 1997
(COMMENCEMENT (COMMENCEMENT (COMMENCEMENT
OF OPERATIONS) OF OPERATIONS) OF OPERATIONS)
TO TO TO
JUNE 30 JUNE 30 JUNE 30
------------------------------------------------------
1997 1997 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 10.00 $ 10.00 $ 10.00
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.02 0.03 0.01
Net Realized and Unrealized Gain on
Investments 1.03 1.03 1.03
------- ------- -------
Total from Investment Operations 1.05 1.06 1.04
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.02) (0.03) (0.01)
Distributions from Realized Gains -- -- --
------- ------- -------
Total Distributions (0.02) (0.03) (0.01)
------- ------- -------
NET ASSET VALUE AT END OF PERIOD $ 11.03 $ 11.03 $ 11.03
------- ------- -------
------- ------- -------
TOTAL RETURN* 10.53% 10.55%+ 10.41%+
NET ASSETS AT END OF PERIOD (000'S) $ 7,737 $ 118 $ 129
RATIO OF EXPENSES TO AVERAGE NET
ASSETS** 1.25% 1.50% 2.25%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET
ASSETS** 1.54% 1.46% 0.71%
PORTFOLIO TURNOVER RATE** 10.12% 10.12% 10.12%
AVERAGE COMMISSION RATE PAID $ 0.0239 $ 0.0239 $ 0.0239
- ------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 121 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO HIGH-YIELD BOND FUND
NO-LOAD CLASS
<TABLE>
<CAPTION>
SIX-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 FOR THE YEAR ENDED SEPTEMBER 30
-----------------------------------------------------------------------------------
1997 1996 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 8.82 $ 8.79 $ 8.68 $ 8.55 $ 9.22 $ 8.92
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.40 0.19 0.78 0.79 0.82 0.91
Net Realized and Unrealized Gain
(Loss) on Investments 0.09 0.03 0.11 0.13 (0.67) 0.30
------- ------- --------- --------- --------- ---------
Total from Investment Operations 0.49 0.22 0.89 0.92 0.15 1.21
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.40) (0.19) (0.78) (0.79) (0.82) (0.91)
Distributions from Realized Gains -- -- -- -- -- --
------- ------- --------- --------- --------- ---------
Total Distributions (0.40) (0.19) (0.78) (0.79) (0.82) (0.91)
------- ------- --------- --------- --------- ---------
NET ASSET VALUE AT END OF PERIOD $ 8.91 $ 8.82 $ 8.79 $ 8.68 $ 8.55 $ 9.22
------- ------- --------- --------- --------- ---------
------- ------- --------- --------- --------- ---------
TOTAL RETURN 5.67%* 2.50%* 10.79% 11.43% 1.61% 14.29%
NET ASSETS AT END OF PERIOD (000'S) $ 58,338 $ 50,298 $ 47,880 $ 39,178 $ 27,212 $ 28,291
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.91%** 0.90%** 0.94% 1.01% 1.03% 1.09%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET
ASSETS 9.10%** 8.56%** 8.99% 9.28% 9.26% 9.94%
PORTFOLIO TURNOVER RATE 77.84%** 35.01%** 92.65% 38.03% 63.02% 50.27%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
- 122 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO HIGH-YIELD BOND FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
------------- -------------
FIVE-MONTH FIVE-MONTH
PERIOD ENDED PERIOD ENDED
JUNE 30 JUNE 30
-----------------------------
1997 1997
- -----------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 8.83 $ 8.83
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.33 0.30
Net Realized and Unrealized Gain on
Investments 0.07 0.07
------------- -------------
Total from Investment Operations 0.40 0.37
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.33) (0.30)
Distributions from Realized Gains -- --
------------- -------------
Total Distributions (0.33) (0.30)
------------- -------------
NET ASSET VALUE AT END OF PERIOD $ 8.90 $ 8.90
------------- -------------
------------- -------------
TOTAL RETURN* 5.51%+ 10.64%+
NET ASSETS AT END OF PERIOD (000'S) $ 122 $ 101
RATIO OF EXPENSES TO AVERAGE NET
ASSETS** 1.03% 1.79%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET
ASSETS** 7.51% 6.93%
PORTFOLIO TURNOVER RATE** 77.84% 77.84%
- -----------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 123 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO INTERMEDIATE-TERM U.S. TREASURY FUND
NO-LOAD CLASS
<TABLE>
<CAPTION>
SIX-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 FOR THE YEAR ENDED SEPTEMBER 30
-----------------------------------------------------------------------------------
1997 1996 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 10.11 $ 10.10 $ 10.24 $ 9.74 $ 10.74 $ 10.69
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.29 0.16 0.54 0.55 0.52 0.60
Net Realized and Unrealized Gain
(Loss) on Investments (0.09) 0.01 (0.14) 0.50 (1.00) 0.49
------- ------- --------- --------- --------- ---------
Total from Investment Operations 0.20 0.17 0.40 1.05 (0.48) 1.09
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.29) (0.16) (0.54) (0.55) (0.52) (0.60)
Distributions from Realized Gains -- -- -- -- -- (0.44)
------- ------- --------- --------- --------- ---------
Total Distributions (0.29) (0.16) (0.54) (0.55) (0.52) (1.04)
------- ------- --------- --------- --------- ---------
NET ASSET VALUE AT END OF PERIOD $ 10.02 $ 10.11 $ 10.10 $ 10.24 $ 9.74 $ 10.74
------- ------- --------- --------- --------- ---------
------- ------- --------- --------- --------- ---------
TOTAL RETURN 1.99%* 1.68%* 4.00% 11.07% -4.56% 10.51%
NET ASSETS AT END OF PERIOD (000'S) $ 14,652 $ 14,679 $ 14,668 $ 13,774 $ 13,367 $ 14,706
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.91%** 0.85%**+ 1.01% 0.96% 0.90% 0.99%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET
ASSETS 5.80%** 6.30%** 5.30% 5.51% 5.08% 5.52%
PORTFOLIO TURNOVER RATE 119.98%** 125.42%** 294.25% 124.90% 75.46% 104.94%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Net of reimbursements by advisor. Absent the reimbursements, the ratio of
expenses to average net assets would be 1.07%.
- 124 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO INTERMEDIATE-TERM U.S. TREASURY FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------------- -----------------------------
SIX-MONTH THREE-MONTH SIX-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 JUNE 30 DECEMBER 31
-------------------------------------------------------------
1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 10.11 $ 10.10 $ 10.12 $ 10.10
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.26 0.15 0.24 0.14
Net Realized and Unrealized Gain
(Loss) on Investments (0.08) 0.01 (0.09) 0.02
------------- ------------- ------------- -------------
Total from Investment Operations 0.18 0.16 0.15 0.16
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.26) (0.15) (0.24) (0.14)
Distributions from Realized Gains -- -- -- --
------------- ------------- ------------- -------------
Total Distributions (0.26) (0.15) (0.24) (0.14)
------------- ------------- ------------- -------------
NET ASSET VALUE AT END OF PERIOD $ 10.03 $ 10.11 $ 10.03 $ 10.12
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
TOTAL RETURN* 1.84%+ 1.63%+ 1.53%+ 1.55%+
NET ASSETS AT END OF PERIOD (000'S) $ 366 $ 704 $ 294 $ 223
RATIO OF EXPENSES TO AVERAGE NET
ASSETS** 1.42% 1.07%++ 1.84% 1.72%++
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET
ASSETS** 5.29% 6.07% 4.87% 5.35%
PORTFOLIO TURNOVER RATE** 119.98% 125.42% 119.98% 125.42%
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
++ Net of reimbursements by advisor. Absent the reimbursements, the ratio of
expenses to average net assets would be 1.30% and 1.95% for Class A and Class
B shares, respectively.
- 125 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO MANAGED BOND FUND
NO-LOAD CLASS
<TABLE>
<CAPTION>
SIX-MONTH
PERIOD ENDED
JUNE 30 FOR THE YEAR ENDED DECEMBER 31
----------------------------------------------------------------
1997 1996 1995 1994 1993+
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 8.35 $ 8.77 $ 8.15 $ 9.08 $ 9.57
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.21 0.41 0.44 0.27 (0.62)
Net Realized and Unrealized Gain
(Loss) on Investments (0.05) (0.42) 0.94 (0.93) 0.15
------- --------- --------- --------- ---------
Total from Investment Operations 0.16 (0.01) 1.38 (0.66) (0.47)
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.21) (0.41) (0.44) (0.27) --
Distributions from Realized Gains -- -- (0.32) -- (0.02)
------- --------- --------- --------- ---------
Total Distributions (0.21) (0.41) (0.76) (0.27) (0.02)
------- --------- --------- --------- ---------
NET ASSET VALUE AT END OF PERIOD $ 8.30 $ 8.35 $ 8.77 $ 8.15 $ 9.08
------- --------- --------- --------- ---------
------- --------- --------- --------- ---------
TOTAL RETURN 1.91%* 0.02% 17.35% -3.01%# N/A
NET ASSETS AT END OF PERIOD (000'S) $ 4,286 $ 4,215 $ 4,497 $ 4,627 $ 91
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.18%** 1.27% 1.16% 1.37% 11.75%
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET
ASSETS 5.03%** 4.86% 5.14% 4.47% -6.75%
PORTFOLIO TURNOVER RATE 266.20%** 136.29% 78.78% 129.56% None
- ----------------------------------------------------------------------------------------------------------
</TABLE>
# Total return from February 28, 1994 (initial public offering) to December 31,
1994; not annualized.
* Not annualized.
** Annualized.
+ Financial highlights relate only to the performance of the initial seed
investment of SAFECO Asset Management Company. Trust shares were not yet
available to the public until 1994.
- 126 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO MANAGED BOND FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------------- -----------------------------
SIX-MONTH THREE-MONTH SIX-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 JUNE 30 DECEMBER 31
-------------------------------------------------------------
1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 8.35 $ 8.35 $ 8.35 $ 8.35
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.19 0.11 0.16 0.09
Net Realized and Unrealized Gain
(Loss) on Investments (0.05) -- (0.05) --
------------- ------------- ------------- -------------
Total from Investment Operations 0.14 0.11 0.11 0.09
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.19) (0.11) (0.16) (0.09)
Distributions from Realized Gains -- -- -- --
------------- ------------- ------------- -------------
Total Distributions (0.19) (0.11) (0.16) (0.09)
------------- ------------- ------------- -------------
NET ASSET VALUE AT END OF PERIOD $ 8.30 $ 8.35 $ 8.30 $ 8.35
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
TOTAL RETURN* 1.64%+ 1.34%+ 1.25%+ 1.15%+
NET ASSETS AT END OF PERIOD (000'S) $ 140 $ 140 $ 200 $ 100
RATIO OF EXPENSES TO AVERAGE NET
ASSETS** 1.47% 1.30% 2.17% 2.07%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET
ASSETS** 4.73% 5.22% 3.83% 4.45%
PORTFOLIO TURNOVER RATE** 266.20% 136.29% 266.20% 136.29%
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 127 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO MUNICIPAL BOND FUND
NO-LOAD CLASS
<TABLE>
<CAPTION>
SIX-MONTH NINE-MONTH
PERIOD ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 FOR THE YEAR ENDED MARCH 31
-----------------------------------------------------------------------
1997 1996 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 13.98 $ 13.69 $ 13.36 $ 13.27 $ 14.13
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.38 0.57 0.76 0.77 0.78
Net Realized and Unrealized Gain
(Loss) on Investments 0.04 0.29 0.33 0.12 (0.55)
------- ------- --------- --------- ---------
Total from Investment Operations 0.42 0.86 1.09 0.89 0.23
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.38) (0.57) (0.76) (0.77) (0.78)
Distributions from Realized Gains -- -- -- (0.03) (0.31)
------- ------- --------- --------- ---------
Total Distributions (0.38) (0.57) (0.76) (0.80) (1.09)
------- ------- --------- --------- ---------
NET ASSET VALUE AT END OF PERIOD $ 14.02 $ 13.98 $ 13.69 $ 13.36 $ 13.27
------- ------- --------- --------- ---------
------- ------- --------- --------- ---------
TOTAL RETURN 3.04%* 6.42%* 8.23% 7.10% 1.30%
NET ASSETS AT END OF PERIOD (000'S) $ 477,686 $ 480,970 $ 480,643 $ 472,569 $ 507,453
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.51%** 0.53%** 0.54% 0.56% 0.52%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET
ASSETS 5.47%** 5.53%** 5.47% 5.96% 5.49%
PORTFOLIO TURNOVER RATE 17.11%** 6.66%** 12.60% 26.96% 22.07%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
- 128 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------------- -----------------------------
SIX-MONTH THREE-MONTH SIX-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 JUNE 30 DECEMBER 31
-------------------------------------------------------------
1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 13.99 $ 13.82 $ 13.98 $ 13.82
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.35 0.18 0.30 0.15
Net Realized and Unrealized Gain on
Investments 0.03 0.17 0.04 0.16
------------- ------------- ------------- -------------
Total from Investment Operations 0.38 0.35 0.34 0.31
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.35) (0.18) (0.30) (0.15)
Distributions from Realized Gains -- -- -- --
------------- ------------- ------------- -------------
Total Distributions (0.35) (0.18) (0.30) (0.15)
------------- ------------- ------------- -------------
NET ASSET VALUE AT END OF PERIOD $ 14.02 $ 13.99 $ 14.02 $ 13.98
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
TOTAL RETURN* 2.74%+ 2.52%+ 2.51%+ 2.27%+
NET ASSETS AT END OF PERIOD (000'S) $ 323 $ 311 $ 199 $ 112
RATIO OF EXPENSES TO AVERAGE NET
ASSETS** 0.94% 0.82% 1.54% 1.50%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET
ASSETS** 5.03% 5.04% 4.40% 4.42%
PORTFOLIO TURNOVER RATE** 17.11% 6.66% 17.11% 6.66%
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 129 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO CALIFORNIA TAX-FREE INCOME FUND
NO-LOAD CLASS
<TABLE>
<CAPTION>
SIX-MONTH NINE-MONTH
PERIOD ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 FOR THE YEAR ENDED MARCH 31
-----------------------------------------------------------------------
1997 1996 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 12.22 $ 11.86 $ 11.54 $ 11.51 $ 12.23
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.31 0.47 0.62 0.63 0.66
Net Realized and Unrealized Gain
(Loss) on Investments 0.03 0.39 0.40 0.13 (0.38)
------- ------- --------- --------- ---------
Total from Investment Operations 0.34 0.86 1.02 0.76 0.28
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.31) (0.47) (0.62) (0.63) (0.66)
Distributions from Realized Gains -- (0.03) (0.08) (0.10) (0.34)
------- ------- --------- --------- ---------
Total Distributions (0.31) (0.50) (0.70) (0.73) (1.00)
------- ------- --------- --------- ---------
NET ASSET VALUE AT END OF PERIOD $ 12.25 $ 12.22 $ 11.86 $ 11.54 $ 11.51
------- ------- --------- --------- ---------
------- ------- --------- --------- ---------
TOTAL RETURN 2.83%* 7.42%* 8.87% 7.01% 1.97%
NET ASSETS AT END OF PERIOD (000'S) $ 73,377 $ 72,084 $ 70,546 $ 64,058 $ 77,056
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.68%** 0.69%** 0.68% 0.70% 0.68%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET
ASSETS 5.13%** 5.21%** 5.12% 5.65% 5.31%
PORTFOLIO TURNOVER RATE 20.91%** 10.52%** 16.25% 44.10% 32.58%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
- 130 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO CALIFORNIA TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------------- -----------------------------
SIX-MONTH THREE-MONTH SIX-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 JUNE 30 DECEMBER 31
-------------------------------------------------------------
1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 12.23 $ 12.07 $ 12.22 $ 12.07
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.29 0.15 0.24 0.12
Net Realized and Unrealized Gain on
Investments 0.03 0.19 0.03 0.18
------------- ------------- ------------- -------------
Total from Investment Operations 0.32 0.34 0.27 0.30
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.29) (0.15) (0.24) (0.12)
Distributions from Realized Gains -- (0.03) -- (0.03)
------------- ------------- ------------- -------------
Total Distributions (0.29) (0.18) (0.24) (0.15)
------------- ------------- ------------- -------------
NET ASSET VALUE AT END OF PERIOD $ 12.26 $ 12.23 $ 12.25 $ 12.22
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
TOTAL RETURN* 2.70%+ 2.83%+ 2.31%+ 2.56%+
NET ASSETS AT END OF PERIOD (000'S) $ 122 $ 122 $ 376 $ 101
RATIO OF EXPENSES TO AVERAGE NET
ASSETS** 0.92% 0.89% 1.57% 1.64%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET
ASSETS** 4.89% 4.84% 3.77% 4.08%
PORTFOLIO TURNOVER RATE** 20.91% 10.52% 20.91% 10.52%
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 131 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO WASHINGTON STATE MUNICIPAL BOND FUND
NO-LOAD CLASS
<TABLE>
<CAPTION>
SIX-MONTH NINE-MONTH
PERIOD ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 FOR THE YEAR ENDED MARCH 31
-----------------------------------------------------------------------
1997 1996 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 10.53 $ 10.34 $ 10.10 $ 9.91 $ 10.27
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.24 0.37 0.50 0.49 0.44
Net Realized and Unrealized Gain
(Loss) on Investments 0.03 0.20 0.27 0.19 (0.35)
------- ------- --------- --------- ---------
Total from Investment Operations 0.27 0.57 0.77 0.68 0.09
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.24) (0.37) (0.50) (0.49) (0.44)
Distributions from Realized Gains -- (0.01) (0.03) -- (0.01)
------- ------- --------- --------- ---------
Total Distributions (0.24) (0.38) (0.53) (0.49) (0.45)
------- ------- --------- --------- ---------
NET ASSET VALUE AT END OF PERIOD $ 10.56 $ 10.53 $ 10.34 $ 10.10 $ 9.91
------- ------- --------- --------- ---------
------- ------- --------- --------- ---------
TOTAL RETURN 2.68%* 5.61%* 7.73% 7.13% 0.68%
NET ASSETS AT END OF PERIOD (000'S) $ 7,055 $ 6,558 $ 6,489 $ 5,953 $ 2,908
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.04%** 1.10%** 1.07% 1.09% 1.44%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET
ASSETS 4.80%** 4.78%** 4.78% 5.06% 4.17%
PORTFOLIO TURNOVER RATE 24.34%** 15.96%** 20.86% 9.23% 17.26%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
- 132 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO WASHINGTON STATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------------- -----------------------------
SIX-MONTH THREE-MONTH SIX-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 JUNE 30 DECEMBER 31
-------------------------------------------------------------
1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 10.53 $ 10.45 $ 10.55 $ 10.45
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.23 0.12 0.19 0.10
Net Realized and Unrealized Gain on
Investments 0.03 0.09 0.02 0.11
------------- ------------- ------------- -------------
Total from Investment Operations 0.26 0.21 0.21 0.21
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.23) (0.12) (0.19) (0.10)
Distributions from Realized Gains -- (0.01) -- (0.01)
------------- ------------- ------------- -------------
Total Distributions (0.23) (0.13) (0.19) (0.11)
------------- ------------- ------------- -------------
NET ASSET VALUE AT END OF PERIOD $ 10.56 $ 10.53 $ 10.57 $ 10.55
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
TOTAL RETURN* 2.55%+ 1.94%+ 4.13%+ 1.94%+
NET ASSETS AT END OF PERIOD (000'S) $ 341 $ 336 $ 213 $ 211
RATIO OF EXPENSES TO AVERAGE NET
ASSETS** 1.33% 1.29% 2.14% 2.06%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET
ASSETS** 4.51% 4.49% 3.71% 3.71%
PORTFOLIO TURNOVER RATE** 24.34% 15.96% 24.34% 15.96%
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
+ Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
- 133 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO MONEY MARKET FUND
NO-LOAD CLASS
<TABLE>
<CAPTION>
SIX-MONTH NINE-MONTH
PERIOD ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 FOR THE YEAR ENDED MARCH 31
--------------------------------------------------------------------------------------------
1997 1996 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<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 0.03 0.05 0.04 0.02
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.02) (0.03) (0.05) (0.04) (0.02)
------- ------- ------- ------- -------
NET ASSET VALUE AT END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
------- ------- ------- ------- -------
TOTAL RETURN 2.40%* 3.54%* 5.15% 4.20% 2.48%
NET ASSETS AT END OF PERIOD (000'S) $ 171,173 $ 161,356 $ 165,122 $ 171,958 $ 186,312
RATIO OF EXPENSES TO AVERAGE NET
ASSETS 0.77%** 0.81%** 0.78% 0.78% 0.79%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET
ASSETS 4.79%** 4.66%** 5.04% 4.21% 2.47%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Not Annualized.
** Annualized
- 134 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO MONEY MARKET FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------------- -----------------------------
SIX-MONTH THREE-MONTH SIX-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
JUNE 30 DECEMBER 31 JUNE 30 DECEMBER 31
-------------------------------------------------------------
1997 1996 1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 0.02 0.01 0.02 0.01
LESS DISTRIBUTIONS
Dividends from
Net Investment Income (0.02) (0.01) (0.02) (0.01)
------------- ------------- ------------- -------------
NET ASSET VALUE AT END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
TOTAL RETURN* 2.44% 1.21% 2.42% 1.21%
NET ASSETS AT END OF PERIOD (000'S) $ 171 $ 295 $ 163 $ 106
RATIO OF EXPENSES TO AVERAGE NET
ASSETS** 0.66% 0.55% 0.73% 0.54%
RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET
ASSETS** 4.90% 5.01% 4.85% 4.96%
- --------------------------------------------------------------------------------------------------
</TABLE>
* Not Annualized.
** Annualized.
- 135 -
<PAGE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NOTES
<PAGE>
SAFECO MUTUAL FUNDS
BOARD OF TRUSTEES:
Boh A. Dickey, Chairman
Barbara J. Dingfield
David F. Hill
Richard W. Hubbard
Richard E. Lundgren
Larry L. Pinnt
John W. Schneider
OFFICERS:
David F. Hill, President
Ronald L. Spaulding
Vice President and Treasurer
Neal A. Fuller
Vice President and Controller
INVESTMENT ADVISOR:
SAFECO Asset
Management Company
DISTRIBUTOR:
SAFECO Securities, Inc.
TRANSFER AGENT:
SAFECO Services Corporation
CUSTODIAN:
State Street Bank
Chase Manhattan Bank
(International Fund)
AUDITOR:
Ernst & Young, LLP
FOR SHAREHOLDER SERVICE*:
Monday-Friday,
5:30am-7:00pm Pacific Time
NATIONWIDE: 1-800-463-8791
SEATTLE: (206) 545-6283
DEAF AND HARD OF HEARING
TTY/TDD SERVICE: 1-800-438-8718
*All telephone calls are tape-recorded
for your protection.
FOR 24-HOUR AUTOMATED
PERFORMANCE INFORMATION
AND TRANSACTIONS:
NATIONWIDE: 1-800-463-8794
SEATTLE: (206) 545-6295
MAILING ADDRESS:
SAFECO Mutual Funds
Advisor Class Shares
P.O. Box 34890
Seattle, WA 98124-1890
INTERNET:
http://www.safecofunds.com
E-MAIL: [email protected]
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accompanied by a current prospectus.
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